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Standard Chartered Bank (Hong Kong) Limited

For period ended30 June 2017

Supplementary Notes toCondensed Consolidated Interim Financial Statements (unaudited)

Standard Chartered Bank (Hong Kong) LimitedTable of Contents

Page

1 Keycapitalratiosdisclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2 Reconciliationbetweenaccountingandregulatorybalancesheets . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3 Detailedbreakdownofcapitalcomponents–Transitiondisclosurestemplate . . . . . . . . . . . . . . . . . . 8

4 Countercyclicalcapitalbuffer(CCyB)ratiostandarddisclosuretemplate . . . . . . . . . . . . . . . . . . . . . . 145 LeverageRatio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 LiquidityCoverageRatio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7 OverviewofriskmanagementandRWA(OVI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

8 Creditriskfornon-securitizationexposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

a . Creditqualityofexposures(CR1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

b . Changesindefaultedloansanddebtsecurities(CR2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

c . Overviewofrecognizedcreditriskmitigation(CR3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

d . Creditriskexposuresandeffectsofrecognizedcreditriskmitigation– forSTCapproach(CR4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

e . Creditriskexposuresbyassetclassesandbyriskweights– forSTCapproach(CR5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

f . CreditriskexposuresbyportfolioandPDranges–forIRBapproach(CR6) . . . . . . . . . . . . . . . . . 25

g . EffectsonRWAofrecognizedcreditderivativecontractsusedas recognizedcreditriskmitigation–forIRBapproach(CR7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

h . RWAflowstatementsofcreditriskexposuresunderIRBapproach(CR8) . . . . . . . . . . . . . . . . . . 30

i . Specializedlendingundersupervisoryslottingcriteriaapproach– forIRBapproach(CR10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

9 CounterpartyCreditrisk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

a . Analysisofcounterpartydefaultriskexposures(otherthanthosetoCCPs) byapproaches(CCR1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

b . CVAcapitalcharge(CCR2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

c . Counterpartydefaultriskexposures(otherthanthosetoCCPs)byassetclassesand byriskweights–forSTCapproach(CCR3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

d . Counterpartydefaultriskexposures(otherthanthosetoCCPs)byportfolioand PDrange–forIRBapproach(CCR4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34e . Compositionofcollateralforcounterpartydefaultriskexposures (includingthoseforcontractsortransactionsclearedthroughCCPs)(CCR5) . . . . . . . . . . . . . . . 36f . Credit-relatedderivativescontracts(CCR6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37g . ExposurestoCCPs(CCR8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

10Securitizationexposures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

a . Securitizationexposuresinbankingbook(SEC1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

b . Securitizationexposuresinbankingbookandassociatedcapitalrequirements– whereAIactsasinvestor(SEC4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

11Marketrisk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

a . MarketriskunderSTMapproach(MR1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40b . RWAflowstatementsofmarketriskexposuresunderIMMapproach(MR2) . . . . . . . . . . . . . . . . 40

12 Internationalclaims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

13Advancestocustomersanalysedbyindustrysector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

14Overdueadvancestocustomers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

15Rescheduledadvancestocustomers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

16MainlandActivities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

17Comparativefigures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

StandardCharteredBank(HongKong)Limited 1

Supplementary Notes to Condensed Consolidated Interim Financial Statement (unaudited)

Thesenotesaresupplementarytoandshouldbereadinconjunctionwiththe2017CondensedConsolidatedInterim Financial Statement (unaudited) (“consolidated financial statement”). The consolidated financialstatementandthissupplementarynotestocondensedconsolidatedinterimfinancialstatement(unaudited)taken together comply with the Banking (Disclosure) Rules (“Rules”) under section 60A of the BankingOrdinance.

1 Key capital ratios disclosures

(a) Basisofconsolidationandpreparation

TheconsolidatedcapitalratioswerecalculatedinaccordancewiththeBanking(Capital)RulesoftheHongKongBankingOrdinance.

ThebasisofconsolidationforaccountingpurposesisinaccordancewithHongKongFinancialReportingStandards.TheprincipalsubsidiariesoftheBankforaccountingpurposesareStandardCharteredAPRLimited,StandardCharteredLeasingGroupLimited,StandardCharteredSecurities(HongKong)LimitedandStandardCharteredTradeSupport(HK)Limited.

Thebasisandscopeofconsolidationforthecalculationofcapitalratiosforregulatorypurposesisdifferentfromthebasisandscopeofconsolidationforaccountingpurposes.

SubsidiariesincludedintheconsolidationforregulatorypurposesarespecifiedinanoticefromtheHKMAinaccordancewithsection3C(1)oftheBanking(Capital)rules.Subsidiariesnotincludedinconsolidationforregulatorypurposesarenon-financialcompaniesandthesecuritiescompaniesthatareauthorizedandsupervisedbyaregulatorandaresubjecttosupervisoryarrangementsregardingthemaintenanceofadequatecapitaltosupportbusinessactivitiescomparabletothoseprescribedforauthorizedinstitutionsundertheBanking(Capital)RulesandtheBankingOrdinance.

TheBank’sshareholdingsinthesesubsidiariesaredeductedfromitscapitalbasesubjecttothethresholdsandtransitionalarrangementsasdeterminedinaccordancewithPart3andSchedule4HoftheBanking(Capital)Rules.

TheBankoperatessubsidiariesinanumberofcountriesandterritorieswherecapitalisgovernedbylocalrulesandtheremayberestrictionsonthetransferofregulatorycapitalandfundsbetweenmembersofthebankinggroup.


1 Key capital ratios disclosures (continued)

(a) Basisofconsolidationandpreparation(continued)

Directlyheldsubsidiariesnot included in theconsolidationfor regulatorypurposesaresetoutbelow:

At30June2017Name of company Principal Activity Totalassets Totalequity

HK$’M HK$’M

StandardCharteredSecurities(HongKong)Limited

Equitycapitalmarkets,corporatefinanceandinstitutionalbrokerage 520 345

SCLearningLimited Provisionoflearningsolutionsinthebankingandfinanceindustry 38 (19)

StandardCharteredGlobalBusinessServicesCompanyLimited(FormerlyknownasSCOPEInternational(China)CompanyLimited)

Developmentandsalesofsoftware,dataprocessingandinformationtechnologyservices

424 247StandardCharteredInvestment

ServicesLimitedInvestmentmanagement

– –StandardCharteredTrust(HK)

LimitedTrusteeservices

7 7StandardCharteredNominees

(WesternSamoa)LimitedNomineesServices

– –HorsfordNomineesLimited NomineesServices – –StandardCharteredGlobal

TradingInvestmentLimitedNomineesServices

– –

989 580

TheBank’sshareholdingsintheabovedirectlyheldsubsidiariesaredeductedfromCET1capitalinaccordancewiththeBanking(Capital)Rules.ThereisnorelevantcapitalshortfallinanyoftheBank’s subsidiaries which are not included as part of the consolidation group for regulatorypurposes.

TheBankusestheadvancedinternalratingsbased(“IRB”)approachforboththemeasurementofcreditriskcapitalandthemanagementofcreditriskforthemajorityofitsportfolios.TheBankalsousesthestandardised(creditrisk)approachforcertaininsignificantportfoliosexemptedfromIRB.TheBankadoptstheIRB(securitization)approachtocalculateitscreditriskforsecuritizationexposures.

Formarketrisk,theBankusesaninternalmodelsapproachfortwoguaranteedfundsandthestandardized (market risk) approach for other exposures. In addition, the Bank adopts thestandardized(operationalrisk)approachforoperationalrisk.

TheBankappliestheInternalCapitalAdequacyAssessmentProcess(“ICAAP”)toassessitscapitaldemandonacurrent,plannedandstressedbasis.TheassessmentcoversthemajorrisksfacedbytheBank,inadditiontocredit,marketandoperationalrisksthatarecoveredundertheminimumcapital requirements. The ICAAP has been approved by the Asset and Liability ManagementCommittee(“ALCO”)andtheBoardofDirectors(“theBoard”).


1 Key capital ratios disclosures (continued)

(b) Capitaladequacyratioandcapitalbase

Consolidated

AtJune17

Common equity tier 1 (CET1) capital ratio 13.0%

Tier 1 capital ratio 14.0%

Total capital ratio 17.2%

Leverage ratio 5.3%

HK$’M

Capital base

CET1capital 51,592AdditionalTier1(“AT1”)capital 3,878

TotalTier1capital 55,470

Tier2capital 12,619

Total capital base 68,089

TotalRisk-weightedamount 395,544

Capital buffers

Capitalconservationbufferratio 1.3%Countercyclicalcapitalbufferratio 0.9%Higherlossabsorbencyratio 0.8%

Totalcapitalbuffers 3.0%

Leverageratioexposure 1,053,200


2 Reconciliation between accounting and regulatory balance sheets

A. Consolidated balance sheet as in published financial statements and under regulatory scope of consolidation

Consolidatedbalancesheet

asinpublishedfinancial

statements

Underregulatory

scopeofconsolidation

At30June2017 At30June2017HK$’M HK$’M

Assets Cashandbalanceswithbanks,centralbanksandother

financialinstitutions 8,154 8,148Placementswithbanksandotherfinancialinstitutions 175,987 175,936HongKongSARGovernmentcertificatesofindebtedness 41,081 41,081Tradingassets 12,546 12,546Financialassetsdesignatedatfairvalue 355 355Investmentsecurities 194,038 194,038Advancestocustomers 476,242 476,242Amountsduefromimmediateholdingcompany 35,389 35,254Amountsduefromfellowsubsidiaries 20,984 20,911AmountsduefromsubsidiariesoftheBank – 34InvestmentinsubsidiariesoftheBank – 394Interestsinassociates 10,389 4,316Property,plantandequipment 42,910 42,692Goodwillandintangibleassets 1,237 1,237Currenttaxassets 11 11Deferredtaxassets 426 402Otherassets 19,973 18,881

1,039,722 1,032,478

Liabilities HongKongSARcurrencynotesincirculation 41,081 41,081Depositsandbalancesofbanksandotherfinancialinstitutions 27,544 27,544Depositsfromcustomers 804,277 804,277Tradingliabilities 6,817 6,817Financialliabilitiesdesignatedatfairvalue 10,073 10,073Debtsecuritiesinissue 2,234 2,234Amountsduetoimmediateholdingcompany 43,740 43,740Amountsduetofellowsubsidiaries 2,851 2,851AmountsduetosubsidiariesoftheBank – 373Currenttaxliabilities 642 640Deferredtaxliabilities 397 397Otherliabilities 24,211 23,872Subordinatedliabilities 6,097 6,097

969,964 969,996

Equity Sharecapital 20,256 20,256Reserves 49,502 42,226

69,758 62,482

1,039,722 1,032,478


2 Reconciliation between accounting and regulatory balance sheets (continued)

B. Balance sheet under the regulatory scope of consolidation including components in the “Transition Disclosures Template” with cross references

At30June2017


asinpublished

financialstatements

Underregulatoryscopeofconsolidation

CrossreferencetoDefinitionof

CapitalComponents

HK$’M HK$’M HK$’M

Assets

Cashandbalanceswithbanks,centralbanksandotherfinancialinstitutions 8,154 8,148

Placementswithbanksandotherfinancialinstitutions 175,987 175,936

HongKongSARGovernmentcertificatesofindebtedness 41,081 41,081

Tradingassets 12,546 12,546

Financialassetsdesignatedatfairvalue 355 355

Investmentsecurities 194,038 194,038

Advancestocustomers 476,242 476,242

Amountsduefromimmediateholdingcompany 35,389 35,254

Amountsduefromfellowsubsidiaries 20,984 20,911

AmountsduefromsubsidiariesoftheBank – 34

–ofwhich:significantcapitalinvestmentsinfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation – (1)

InvestmentinsubsidiariesoftheBank – 394

–ofwhich:significantcapitalinvestmentsinfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation 281 (2)

Interestsinassociates 10,389 4,316

–ofwhich:significantcapitalinvestmentsinfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation 4,316 (3)

Property,plantandequipment 42,910 42,692

Goodwillandintangibleassets 1,237 1,237

–ofwhich:goodwill 729 (4)

–ofwhich:intangibleassets 508 (5)

Currenttaxassets 11 11

Deferredtaxassets 426 402

–ofwhich:deferredtaxliabilitiesrelatingtointangibleassets (53) (6)

–ofwhich:otherdeferredtaxassets 455 (7)

Otherassets 19,973 18,881

1,039,722 1,032,478


At30June2017


asinpublished

financialstatements



CapitalComponents


Liabilities

HongKongSARcurrencynotesincirculation 41,081 41,081

Depositsandbalancesofbanksandotherfinancialinstitutions 27,544 27,544

Depositfromcustomers 804,277 804,277

Tradingliabilities 6,817 6,817

–ofwhich:gainsorlossesduetochangesinowncreditrisk – (8)

Financialliabilitiesdesignatedatfairvalue 10,073 10,073

–ofwhich:gainsorlossesduetochangesinowncreditrisk 136 (9)

Debtsecuritiesinissue 2,234 2,234

Amountsduetoimmediateholdingcompany 43,740 43,740

–ofwhich:subordinatedliabilitieseligibleforinclusioninregulatorycapital 6,245 (10)

Amountsduetofellowsubsidiaries 2,851 2,851

AmountsduetosubsidiariesoftheBank – 373

Currenttaxliabilities 642 640

Deferredtaxliabilities 397 397

Otherliabilities 24,211 23,872

Subordinatedliabilities 6,097 6,097

–ofwhich:subordinatedliabilitieseligibleforinclusioninregulatorycapital(subjecttophaseoutarrangements) 3,939 (11)

969,964 969,996


B. Balance sheet under the regulatory scope of consolidation including components in the “Transition Disclosures Template” with cross references (continued)


At30June2017


asinpublished

financialstatements



CapitalComponents


Equity

Sharecapital 20,256 20,256

–ofwhich:directlyissuedqualifyingCET1capitalinstruments 16,378 (12)

–ofwhich:qualifyingAT1capitalinstruments 3,878 (13)

Reserves 49,502 42,226

–ofwhich:Cumulativecashflowhedgereservesthatrelatetothehedgingoffinancialinstrumentsthatarenotfairvaluedonthebalancesheet (94) (14)

–ofwhich:Cumulativecashflowhedgereservesthatrelatetothehedgingoffinancialinstrumentsthatarefairvaluedonthebalancesheet – (15)

–ofwhich:Available-for-saleinvestmentreserve (127) (16)

–ofwhich:Propertyrevaluationreserve – (17)

–ofwhich:Exchangereserve (3) (18)

–ofwhich:Shareoptionequityreserve 218 (19)

–ofwhich:Owncreditadjustmentreserve (136) (20)

–ofwhich:Retainedearnings 42,368 (21)

–ofwhich:cumulativefairvaluegainsarisingfromtherevaluationoflandandbuildings(audited) 439 (22)

–ofwhich:Regulatoryreserveforgeneralbankingrisks 4,871 (23)

69,758 62,482

1,039,722 1,032,478


B. Balance sheet under the regulatory scope of consolidation including components in the “Transition Disclosures Template” with cross references (continued)


3 Detailed breakdown of capital components – Transition disclosures template

At30June2017

HK$’M

Amounts subject to

pre-Basel IIItreatment*

HK$’M

Cross-referenced to

Note 2B

CET1 capital: instruments and reserves

1 DirectlyissuedqualifyingCET1capitalinstrumentsplusanyrelatedsharepremium 16,378 (12)

2 Retainedearnings 42,368 (21)

3 Disclosedreserves

(142)

(14)+(15)+(16)+(17)+(18)+(19)

+(20)

4 DirectlyissuedcapitalsubjecttophaseoutfromCET1capital(onlyapplicabletonon-jointstockcompanies) N/A

Publicsectorcapitalinjectionsgrandfathereduntil1January2018 N/A

5 MinorityinterestsarisingfromCET1capitalinstrumentsissuedbyconsolidatedbanksubsidiariesandheldbythirdparties(amountallowedinCET1capitaloftheconsolidationgroup) –

6 CET1 capital before regulatory deductions 58,604

CET1 capital: regulatory deductions

7 Valuationadjustments 293

8 Goodwill(netofassociateddeferredtaxliability) 729 (4)

9 Otherintangibleassets(netofassociateddeferredtaxliability) 455 – (5)+(6)

10 Deferredtaxassetsnetofdeferredtaxliabilities 455 (7)

11 Cashflowhedgereserve (94) (14)

12 ExcessoftotalELamountovertotaleligibleprovisionsundertheIRBapproach – –

13 Gain-on-salearisingfromsecuritizationtransactions –

14 Gainsandlossesduetochangesinowncreditriskonfairvaluedliabilities (136) – (8)+(9)

15 Definedbenefitpensionfundnetassets(netofassociateddeferredtaxliabilities) – –

16 InvestmentsinownCET1capitalinstruments(ifnotalreadynettedoffpaid-incapitalonreportedbalancesheet) – –

17 Reciprocalcross-holdingsinCET1capitalinstruments – –

18 InsignificantcapitalinvestmentsinCET1capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation(amountabove10%threshold) – –

19 SignificantcapitalinvestmentsinCET1capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation(amountabove10%threshold) – –

(2)+(3)-(24)-(25)-(26)

20 Mortgageservicingrights(amountabove10%threshold) N/A

21 Deferredtaxassetsarisingfromtemporarydifferences(amountabove10%threshold,netofrelatedtaxliability) N/A

22 Amountexceedingthe15%threshold N/A

23 –ofwhich:significantinvestmentsinthecommonstockoffinancialsectorentities N/A

24 –ofwhich:mortgageservicingrights N/A

25 –ofwhich:deferredtaxassetsarisingfromtemporarydifferences N/A

26 NationalspecificregulatoryadjustmentsappliedtoCET1capital 5,310

26a Cumulativefairvaluegainsarisingfromtherevaluationoflandandbuildings(own-useandinvestmentproperties) 439 (17)+(22)

26b Regulatoryreserveforgeneralbankingrisks 4,871 (23)

26c SecuritizationexposuresspecifiedinanoticegivenbytheMonetaryAuthority –

26d Cumulativelossesbelowdepreciatedcostarisingfromtheinstitution’sholdingsoflandandbuildings –

26e Capitalshortfallofregulatednon-banksubsidiaries – –

26f Capitalinvestmentinaconnectedcompanywhichisacommercialentity(amountabove15%ofthereportinginstitution’scapitalbase) – –

27 RegulatorydeductionsappliedtoCET1capitalduetoinsufficientAT1capitalandTier2capitaltocoverdeductions –

28 Total regulatory deductions to CET1 capital 7,012

29 CET1 capital 51,592

AT1 capital: instruments

30 QualifyingAT1capitalinstrumentsplusanyrelatedsharepremium 3,878 (13)

31 –ofwhich:classifiedasequityunderapplicableaccountingstandards –

32 –ofwhich:classifiedasliabilitiesunderapplicableaccountingstandards –

33 CapitalinstrumentssubjecttophaseoutarrangementsfromAT1capital –

34 AT1capitalinstrumentsissuedbyconsolidatedbanksubsidiariesandheldbythirdparties(amountallowedinAT1capitaloftheconsolidationgroup) –

35 –ofwhich:AT1capitalinstrumentsissuedbysubsidiariessubjecttophaseoutarrangements –

36 AT1 capital before regulatory deductions 3,878

AT1 capital: regulatory deductions


37 InvestmentsinownAT1capitalinstruments – –

38 Reciprocalcross-holdingsinAT1capitalinstruments – –

39 InsignificantcapitalinvestmentsinAT1capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation(amountabove10%threshold) – –

40 SignificantcapitalinvestmentsinAT1capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation – –

41 NationalspecificregulatoryadjustmentsappliedtoAT1capital –

41a Portionofdeductionsapplied50:50tocorecapitalandsupplementarycapitalbasedonpre-BaselIIItreatmentwhich,duringtransitionalperiod,remainsubjecttodeductionfromTier1capital – (27)

i –ofwhich:ExcessoftotalELamountovertotaleligibleprovisionsundertheIRBapproach –

ii –ofwhich:Capitalshortfallofregulatednon-banksubsidiaries –

iii –ofwhich:InvestmentsinownCET1capitalinstruments –

iv –ofwhich:ReciprocalcrossholdingsinCET1capitalinstrumentsissuedbyfinancialsectorentities –

v –ofwhich:Capitalinvestmentinaconnectedcompanywhichisacommercialentity(amountabove15%ofthereportinginstitution’scapitalbase) –

vi –ofwhich:InsignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation –

vii –ofwhich:SignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation – (24)

42 RegulatorydeductionsappliedtoAT1capitalduetoinsufficientTier2capitaltocoverdeductions –

43 Total regulatory deductions to AT1 capital –

44 AT1 capital 3,878

45 Tier 1 capital (Tier 1 = CET1 + AT1) 55,470

Tier 2 capital: instruments and provisions

46 QualifyingTier2capitalinstrumentsplusanyrelatedsharepremium 6,245 (10)

47 CapitalinstrumentssubjecttophaseoutarrangementsfromTier2capital 3,939 (11)

48 Tier2capitalinstrumentsissuedbyconsolidatedbanksubsidiariesandheldbythirdparties(amountallowedinTier2capitaloftheconsolidationgroup) –

49 –ofwhich:capitalinstrumentsissuedbysubsidiariessubjecttophaseoutarrangements –

50 CollectiveimpairmentallowancesandregulatoryreserveforgeneralbankingriskseligibleforinclusioninTier2capital 2,237 (28)+(29)

51 Tier 2 capital before regulatory deductions 12,421

Tier 2 capital: regulatory deductions

52 InvestmentsinownTier2capitalinstruments – –

53 Reciprocalcross-holdingsinTier2capitalinstruments – –

54 InsignificantcapitalinvestmentsinTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation(amountabove10%threshold) – –

55 SignificantcapitalinvestmentsinTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation – – (1)

56 NationalspecificregulatoryadjustmentsappliedtoTier2capital (198)

56a Addbackofcumulativefairvaluegainsarisingfromtherevaluationoflandandbuildings(own-useandinvestmentproperties)eligibleforinclusioninTier2capital (198)

[(17)+(22)]x45%

56b Portionofdeductionsapplied50:50tocorecapitalandsupplementarycapitalbasedonpre-BaselIIItreatmentwhich,duringtransitionalperiod,remainsubjecttodeductionfromTier2capital – (27)

i –ofwhich:ExcessoftotalELamountovertotaleligibleprovisionsundertheIRBapproach –

ii –ofwhich:Capitalshortfallofregulatednon-banksubsidiaries –

iii –ofwhich:InvestmentsinownCET1capitalinstruments –

iv –ofwhich:ReciprocalcrossholdingsinCET1capitalinstrumentsissuedbyfinancialsectorentities –

v –ofwhich:Capitalinvestmentinaconnectedcompanywhichisacommercialentity(amountabove15%ofthereportinginstitution’scapitalbase) –

vi –ofwhich:InsignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation –

3 Detailed breakdown of capital components – Transition disclosures template (continued)

At30June2017

HK$’M

Amounts subject to


HK$’M

Cross-referenced to

Note 2B


vii –ofwhich:SignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation – (25)

57 Total regulatory deductions to Tier 2 capital (198)

58 Tier 2 capital 12,619

59 Total capital (Total capital = Tier 1 + Tier 2) 68,089

59a DeductionitemsunderBaselIIIwhichduringtransitionalperiodremainsubjecttorisk-weighting,basedonpre-BaselIIItreatment

i –ofwhich:Mortgageservicingrights –

ii –ofwhich:Definedbenefitpensionfundnetassets –

iii –ofwhich:InvestmentsinownCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstruments –

iv –ofwhich:Capitalinvestmentinaconnectedcompanywhichisacommercialentity –

v –ofwhich:InsignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation –

vi –ofwhich:SignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation –

60 Total risk weighted assets 395,544

Capital ratios (as a percentage of risk weighted assets)

61 CET1 capital ratio 13.04%

62 Tier 1 capital ratio 14.02%

63 Total capital ratio 17.21%

64 Institution specific buffer requirement (minimum CET1 capital requirement as specified in s.3A, or s.3B, as the case requires, of the BCR plus capital conservation buffer plus countercyclical buffer requirements plus G-SIB or D-SIB requirements) 7.39%

65 –ofwhich:capitalconservationbufferrequirement 1 .25%

66 –ofwhich:Bankspecificcountercyclicalbufferrequirement 0 .89%

67 –ofwhich:G-SIBorD-SIBbufferrequirement 0 .75%

68 CET1 capital surplus over the minimum CET1 requirement and any CET1 capital used to meet the Tier 1 and Total capital requirement under s.3A, or s.3B, as the case requires, of the BCR 8.02%

National minima (if different from Basel 3 minimum)

69 NationalCET1minimumratio N/A

70 NationalTier1minimumratio N/A

71 NationalTotalcapitalminimumratio N/A

Amounts below the thresholds for deduction (before risk weighting)

72 InsignificantcapitalinvestmentsinCET1capitalinstruments,AT1capitalinstrumentsandTier2capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation 21

73 SignificantcapitalinvestmentsinCET1capitalinstrumentsissuedbyfinancialsectorentitiesthatareoutsidethescopeofregulatoryconsolidation 4,597 (26)

74 Mortgageservicingrights(netofrelatedtaxliability) N/A

75 Deferredtaxassetsarisingfromtemporarydifferences(netofrelatedtaxliability) N/A

Applicable caps on the inclusion of provisions in Tier 2 capital

76 ProvisionseligibleforinclusioninTier2inrespectofexposuressubjecttothebasicapproachandthestandardized(creditrisk)approach(priortoapplicationofcap) 750

77 CaponinclusionofprovisionsinTier2underthebasicapproachandthestandardized(creditrisk)approach 453 (28)

78 ProvisionseligibleforinclusioninTier2inrespectofexposuressubjecttotheIRBapproach(priortoapplicationofcap) 2,615

79 CapforinclusionofprovisionsinTier2undertheIRBapproach 1,784 (29)

Capital instruments subject to phase-out arrangements

80 CurrentcaponCET1capitalinstrumentssubjecttophaseoutarrangements N/A

81 AmountexcludedfromCET1duetocap(excessovercapafterredemptionsandmaturities) N/A

82 CurrentcaponAT1capitalinstrumentssubjecttophaseoutarrangements –

83 AmountexcludedfromAT1capitalduetocap(excessovercapafterredemptionsandmaturities) –

84 CurrentcaponTier2capitalinstrumentssubjecttophaseoutarrangements 3,939 (11)

85 AmountexcludedfromTier2capitalduetocap(excessovercapafterredemptionsandmaturities) 2,158

* ThisreferstothepositionundertheBanking(Capital)Rulesinforceon31December2012.


At30June2017

HK$’M

Amounts subject to


HK$’M

Cross-referenced to

Note 2B



Notes to the detailed breakdown of capital components – Transition disclosures template:

ElementswhereamoreconservativedefinitionhasbeenappliedintheBCRrelativetothatsetoutinBaselIIIcapitalstandards:

At30June2017

HongKong

basis

HK$’M

BaselIII

basis

HK$’M

9 Other intangible assets (net of associated deferred tax liability) 455 455

ExplanationAssetout inparagraph87of theBasel III text issuedby theBaselCommittee (December2010),mortgageservicingrights(MSRs)maybegivenlimitedrecognitioninCET1capital(andhencebeexcludedfromdeductionfromCET1capitaluptothespecifiedthreshold).InHongKong, anAI is required to follow the accounting treatmentof includingMSRsas part ofintangible assets reported in theAI’s financial statementsand todeductMSRs in full fromCET1capital.Therefore,theamounttobedeductedasreportedinrow9maybegreaterthanthatrequiredunderBaselIII.Theamountreportedunderthecolumn“BaselIIIbasis”inthisboxrepresentstheamountreportedinrow9(i.e.theamountreportedunderthe“HongKongbasis”)adjustedbyreducingtheamountofMSRstobedeductedtotheextentnotinexcessof the10% threshold set forMSRsand theaggregate15% threshold set forMSRs,DTAsarising from temporary differences and significant investments inCET1capital instrumentsissued by financial sector entities (excluding those that are loans, facilities or other creditexposurestoconnectedcompanies)underBaselIII.

At30June2017

HongKong

basis

HK$’M

BaselIII

basis

HK$’M

10 Deferred tax assets net of deferred tax liabilities 455 59

ExplanationAs set out inparagraphs69and87of the Basel III text issued by the Basel Committee(December2010),DTAs that relyon futureprofitabilityof theBank tobe realizedare tobededucted, whereas DTAs which relate to temporary differences may begiven limitedrecognitioninCET1capital(andhencebeexcludedfromdeductionfromCET1capitaluptothespecifiedthreshold).InHongKong,anAIisrequiredtodeductallDTAsinfull,irrespectiveoftheirorigin,fromCET1capital.Therefore,theamounttobedeductedasreportedinrow10maybegreaterthanthatrequiredunderBaselIII.

Theamount reportedunder thecolumn“Basel IIIbasis” in thisbox represents theamountreported in row10 (i.e. the amount reported under the “Hong Kong basis”) adjusted byreducing the amountofDTAs to bedeductedwhich relate to temporarydifferences to theextentnot inexcessof the10% thresholdset forDTAsarising from temporarydifferencesandtheaggregate15%thresholdsetforMSRs,DTAsarisingfromtemporarydifferencesandsignificant investments in CET1 capital instruments issued by financial sector entities(excludingthosethatareloans,facilitiesandothercreditexposurestoconnectedcompanies)underBaselIII.


At30June2017

HongKong

basis

HK$’M

BaselIII

basis

HK$’M

18 Insignificant capital investments in CET1 capital instruments issued by financial sector entities that are outside the scope of regulatory consolidation (amount above 10% threshold) – –

ExplanationForthepurposeofdeterminingthetotalamountofinsignificantcapitalinvestmentsinCET1capital instruments issuedby financial sector entities, anAI is required to aggregateanyamountof loans, facilitiesorother credit exposuresprovidedby it toanyof its connectedcompanies,where the connectedcompany is a financial sector entity, as if such loans,facilitiesorothercreditexposuresweredirectholdings,indirectholdingsorsyntheticholdingsof the AI in the capital instruments of the financial sector entity, except where the AIdemonstratestothesatisfactionoftheMonetaryAuthoritythatanysuchloanwasmade,anysuch facility was granted, or any such other credit exposure was incurred, in the ordinarycourseoftheAI’sbusiness.

Therefore,theamounttobedeductedasreportedinrow18maybegreaterthanthatrequiredunderBaselIII.Theamountreportedunderthecolumn“BaselIIIbasis”inthisboxrepresentsthe amount reported in row 18 (i.e. the amount reported under the “Hong Kong basis”)adjustedbyexcludingtheaggregateamountof loans,facilitiesorothercreditexposurestotheAI’s connectedcompanieswhichwere subject to deductionunder the HongKongapproach.

At30June2017

HongKong

basis

HK$’M

BaselIII

basis

HK$’M

19 Significant capital investments in CET1 capital instruments issued by financial sector entities that are outside the scope of regulatory consolidation (amount above 10% threshold) – –

ExplanationFor thepurposeofdetermining the totalamountof significantcapital investments inCET1capital instruments issuedby financial sector entities, anAI is required to aggregateanyamountof loans, facilitiesorother credit exposuresprovidedby it toanyof its connectedcompanies,where the connectedcompany is a financial sector entity, as if such loans,facilitiesorothercreditexposuresweredirectholdings,indirectholdingsorsyntheticholdingsof the AI in the capital instruments of the financial sector entity, except where the AIdemonstratestothesatisfactionoftheMonetaryAuthoritythatanysuchloanwasmade,anysuch facility was granted, or any such other credit exposure was incurred, in the ordinarycourseoftheAI’sbusiness.

Therefore,theamounttobedeductedasreportedinrow19maybegreaterthanthatrequiredunderBaselIII.Theamountreportedunderthecolumn“BaselIIIbasis”inthisboxrepresentsthe amount reported in row 19 (i.e. the amount reported under the “Hong Kong basis”)adjustedbyexcludingtheaggregateamountof loans,facilitiesorothercreditexposurestotheAI’s connectedcompanieswhichwere subject to deductionunder the HongKongapproach.



At30June2017

HongKong

basis

HK$’M

BaselIII

basis

HK$’M

39 Insignificant capital investments in AT1 capital instruments issued by financial sector entities thatare outside the scope of regulatory consolidation (amount above 10% threshold) – –

ExplanationTheeffectoftreatingloans,facilitiesorothercreditexposurestoconnectedcompanieswhichare financial sector entities asCET1capital instruments for thepurposeof consideringdeductions tobemade incalculating thecapitalbase (seenote re row18 to the templateabove)willmeantheheadroomwithinthethresholdavailablefortheexemptionfromcapitaldeductionofotherinsignificantcapitalinvestmentsinAT1capitalinstrumentsmaybesmaller.Therefore,theamounttobedeductedasreportedinrow39maybegreaterthanthatrequiredunderBaselIII.Theamountreportedunderthecolumn“BaselIIIbasis”inthisboxrepresentsthe amount reported in row 39 (i.e. the amount reported under the “Hong Kong basis”)adjustedbyexcludingtheaggregateamountof loans,facilitiesorothercreditexposurestotheAI’s connectedcompanieswhichwere subject to deductionunder the HongKongapproach.

At30June2017

HongKong

basis

HK$’M

BaselIII

basis

HK$’M

54 Insignificant capital investments in Tier 2 capital instruments issued by financial sector entities that are outside the scope of regulatory consolidation (amount above 10% threshold) – –

ExplanationTheeffectoftreatingloans,facilitiesorothercreditexposurestoconnectedcompanieswhichare financial sector entities asCET1capital instruments for thepurposeof consideringdeductions tobemade incalculating thecapitalbase (seenote re row18 to the templateabove)willmeantheheadroomwithinthethresholdavailablefortheexemptionfromcapitaldeductionof other insignificant capital investments in Tier 2 capital instrumentsmaybesmaller.Therefore,theamounttobedeductedasreportedinrow54maybegreaterthanthatrequiredunderBaselIII.Theamountreportedunderthecolumn“BaselIIIbasis”inthisboxrepresents theamount reported in row54 (i.e. theamount reportedunder the“HongKongbasis”) adjustedby excluding the aggregate amountof loans, facilitiesor other creditexposurestotheAI’sconnectedcompanieswhichweresubjecttodeductionundertheHongKongapproach.

Remarks:

Theamountofthe10%/15%thresholdsmentionedaboveiscalculatedbasedontheamountofCET1capitaldeterminedundertheBanking(Capital)Rules.

Note:Cross-references(1)to(23)arereferencedtoNote2‘Reconciliationbetweenaccountingandregulatorybalancesheets’.Cross-references (24) to (29) are referenced within Note 3 ‘Detailed breakdown of capitalcomponents–Transitiondisclosurestemplate’.



4 Countercyclical capital buffer (CCyB) ratio standard disclosure template

Geographicalbreakdownofrisk-weightedamounts(RWA)inrelationtoprivatesectorcreditexposures

At30June2017

Jurisdiction (J)

Applicable

JCCyB

ratioineffect

TotalRWA

usedin

computationof

CCyBratioofAI

HK$’M

HongKong 1.250% 203,507China – 16,536Argentina – 10Australia – 1,507Bahamas – 2Bahrain – 1,666Bangladesh – 1Belgium – 50Bermuda – 202Brunei – 4Canada – 190CaymanIsland – 933ChineseTaipei – 971Cyprus – 1Finland – 4France – 430Germany – 86Guernsey – 467Honduras – 2Hungary – 335India – 2,480Indonesia – 1,344Iraq – 4Ireland – 2,316Israel – 1Italy – 4Japan – 107Jersey – 349Luxembourg – 2,449Macau – 273Malaysia – 4,421Marshallislands – 101

Jurisdiction (J)

Applicable

JCCyB

ratioineffect

TotalRWA

usedin

computationof

CCyBratioofAI

HK$’M

Mauritius – 397Mexico – 1Mongolia – 3Netherland – 640NewZealand – 70Nigeria – 122Norway 1.500% 7Oman – 540Peru – 2Philippines – 31Poland – 141Qatar – 4,760Samoa – 42SaudiArabia – 2Scychelles – 47Singapore – 8,281SouthAfrica – 512SouthKorea – 2,813Spain – 1,594SriLanka – 3Sweden 2.000% 366Switzerland – 322Tanzania – 408Thailand – 374Turkey – 1,795Uganda – 201UnitedArabEmirates – 5,861UnitedKingdom – 3,390UnitedStates – 5,007Vietnam – 2,970WestIndiesUK – 4,771

Total RWA used in computation of CCyB ratio of AI 286,226CCyB ratio of AI 0.891%CCyB amount of AI 2,551


5 Leverage Ratio

Leverage Ratio Common Disclosure Template

Leverageratio

framework

At30June2017

HK$’M

On-balance sheet exposures1 On-balancesheetitems(excludingderivativesandSFTs,butincluding

collateral) 938,654

2 Less:AssetamountsdeductedindeterminingBaselIIITier1capital(reportedasnegativeamounts) (7,148)

3 Totalon-balancesheetexposures(excludingderivativesandSFTs)(sumoflines1and2) 931,506

Derivative exposures4 Replacementcostassociatedwithallderivativestransactions(i.e.netof

eligiblecashvariationmargin) 1,517

5 Add-onamountsforPFEassociatedwithallderivativestransactions 11,411

6 Gross-upforderivativescollateralprovidedwheredeductedfromthebalancesheetassetspursuanttotheoperativeaccountingframework –

7 Less:Deductionsofreceivablesassetsforcashvariationmarginprovidedinderivativestransactions(reportedasnegativeamounts) –

8 Less:ExemptedCCPlegofclient-clearedtradeexposures(reportedasnegativeamounts) –

9 Adjustedeffectivenotionalamountofwrittencreditderivatives 1,690

10 Less:Adjustedeffectivenotionaloffsetsandadd-ondeductionsforwrittencreditderivatives(reportedasnegativeamounts) (1,589)

11 Totalderivativeexposures(sumoflines4to10) 13,029

Securities financing transaction exposures12 GrossSFTassets(withnorecognitionofnetting),afteradjustingforsales

accountingtransactions 41,323

13 Less:NettedamountsofcashpayablesandcashreceivablesofgrossSFTassets(reportedasnegativeamounts) –

14 CCRexposureforSFTassets 260

15 Agenttransactionexposures –

16 Totalsecuritiesfinancingtransactionexposures(sumoflines12to15) 41,583

Other off-balance sheet exposures17 Off-balancesheetexposureatgrossnotionalamount 425,146

18 Less:Adjustmentsforconversiontocreditequivalentamounts(reportedasnegativeamounts) (358,064)

19 Off-balancesheetitems(sumoflines17and18) 67,082

Capital and total exposures20 Tier1capital 55,470

21 Totalexposures(sumoflines3,11,16and19) 1,053,200

Leverage ratio22 BaselIIIleverageratio 5.27%


5 Leverage Ratio (continued)

Leverage Ratio Summary Comparison Table

Leverageratio

framework

At30June2017

HK$’M

1 Totalconsolidatedassetsasperpublishedfinancialstatements 1,039,722

2 Adjustmentforinvestmentsinbanking,financial,insuranceorcommercialentitiesthatareconsolidatedforaccountingpurposesbutoutsidethescopeofregulatoryconsolidation (7,248)

3 Adjustmentforfiduciaryassetsrecognisedonthebalancesheetpursuanttotheoperativeaccountingframeworkbutexcludedfromtheleverageratioexposuremeasure –

4 Adjustmentsforderivativefinancialinstruments (1,951)

5 Adjustmentforsecuritiesfinancingtransactions(i.e.reposandsimilarsecuredlending) 3,253

6 Adjustmentforoff-balancesheetitems(i.e.conversiontocreditequivalentamountsofoff-balancesheetexposures) 67,082

7 Otheradjustments (47,658)

8 Leverage ratio exposure 1,053,200


6 Liquidity Coverage Ratio

Liquidity Coverage Ratio Current Period

Number of data points used in calculating the average value of the Liquidity Coverage Ratio (LCR) and related components set out in this Template for the quarter ending on 31 Mar 2016, 30 Jun 2016, 31 Mar 2017 and 30 Jun 2017 are 3, 3, 73 and 71.

Q22017Currency:(HK$’M)




Basis of disclosure: ConsolidatedUNWEIGHTED

AMOUNT(AverageValue)

WEIGHTEDAMOUNT

(AverageValue)

UNWEIGHTEDAMOUNT

(AverageValue)

WEIGHTEDAMOUNT

(AverageValue)

UNWEIGHTEDAMOUNT

(AverageValue)

WEIGHTEDAMOUNT

(AverageValue)

UNWEIGHTEDAMOUNT

(AverageValue)

WEIGHTEDAMOUNT

(AverageValue)

A. HIGH QUALITY LIQUID ASSETS

1Totalhighqualityliquidassets(HQLA) 175,318 184,656 187,902 216,860

B. CASH OUTFLOWS

2Retaildepositsandsmallbusinessfunding,ofwhich: 403,822 32,507 390,514 31,354 360,983 28,671 351,790 28,032

3

Stableretaildepositsandstablesmallbusinessfunding 105,936 5,297 102,372 5,119 95,676 4,784 95,037 4,752

4

Lessstableretaildepositsandlessstablesmallbusinessfunding 246,310 24,631 236,563 23,656 212,428 21,243 208,846 20,885

5Retailtermdepositsandsmallbusinesstermfunding 51,576 2,579 51,579 2,579 52,879 2,644 47,907 2,395

6

Unsecuredwholesalefunding(otherthansmallbusinessfunding)anddebtsecuritiesandprescribedinstrumentsissuedbytheinstitution,ofwhich: 380,592 170,511 373,329 171,279 365,340 166,711 384,088 171,862

7 Operationaldeposits 174,646 43,336 156,886 38,903 145,750 36,304 148,924 36,914

8

Unsecuredwholesalefunding(otherthansmallbusinessfunding)notcoveredinRow7 205,863 127,092 216,425 132,358 219,590 130,407 235,164 134,948

9

DebtsecuritiesandprescribedinstrumentsissuedbytheinstitutionandredeemablewithintheLCRperiod 83 83 18 18 – – – –

10

Securedfundingtransactions(includingsecuritiesswaptransactions) 0 0 0 0

11Additionalrequirements,ofwhich: 164,848 16,307 163,290 16,208 154,713 14,685 144,473 13,916

12

Cashoutflowsarisingfromderivativecontractsandothertransactions,andadditionalliquidityneedsarisingfromrelatedcollateralrequirements 5,070 5,069 4,497 4,498 8,652 5,235 7,544 4,856

13

Cashoutflowsarisingfromobligationsunderstructuredfinancingtransactionsandrepaymentoffundingobtainedfromsuchtransactions 286 286 139 139 305 305 155 155

14

Potentialdrawdownofundrawncommittedfacilities(includingcommittedcreditfacilitiesandcommittedliquidityfacilities) 159,492 10,952 158,654 11,571 145,757 9,145 136,773 8,905

15

Contractuallendingobligations(nototherwisecoveredinSectionB)andothercontractualcashoutflows 21,954 21,954 24,502 24,502 17,133 17,133 17,122 17,122

16

Othercontingentfundingobligations(whethercontractualornon-contractual) 239,110 1,343 228,908 1,069 222,870 977 233,712 903

17 TOTALCASHOUTFLOWS 242,622 244,412 228,177 231,835

C. CASH INFLOWS

18

Securedlendingtransactions(includingsecuritiesswaptransactions) 20,553 1,998 19,183 1,932 27,816 661 32,495 152

19

Securedandunsecuredloans(otherthansecuredlendingtransactionscoveredinRow18)andoperationaldepositsplacedatotherfinancialinstitutions 168,370 95,197 159,315 90,493 152,917 82,023 152,432 81,653

20 Othercashinflows 17,904 13,656 14,947 10,426 11,113 8,941 13,999 10,467

21 TOTALCASHINFLOWS 206,826 110,851 193,445 102,852 191,845 91,625 198,926 92,271

D. LIQUIDITY COVERAGE RATIO

ADJUSTEDVALUE

ADJUSTEDVALUE

ADJUSTEDVALUE

ADJUSTEDVALUE

22 TOTALHQLA 175,318 184,656 187,902 216,860

23 TOTALNETCASHOUTFLOWS 131,771 141,560 136,551 139,563

24 LCR(%) 133.8% 131.0% 137.8% 156.2%


6 Liquidity Coverage Ratio (continued)

Key Drivers

LiquidityCoverageRatio(LCR)measurestheshort-termresilienceoftheBank’sliquidityriskprofile,andissensitivetobalancesheetmovementandcomposition.Inthefirsthalfofthe2017,theBankhasmaintainedastrongliquiditypositionandwellabovetheregulatoryrequirementof80%.TheaverageLCRdecreasedfrom137.8%forthequarterending30June2016to133.8%forthequarterending30June2017mainlyasaresultofloweraverageHQLAholdings.

Composition of High Quality Liquid Asset (“HQLA”)

TheBankholdssignificant levelsofhighqualityunencumbered liquidassets thatcanbe liquefied,repo-edorusedascollateralintheeventofaliquiditystress.

The liquid assets consist predominately of Level 1 assets, including mainly cash and central bankreserves,HongKongexchangefundbillsandnotes,UStreasuriesandothermarketabledebtsecuritiesissuedorguaranteedbyothercentralbanksandgovernments.Inaddition,theBankalsoholdslevel2assetssuchashighqualitycoveredbonds,corporatebondsandbondsissuedbypublicsectorentities.

Concentration of Funding Sources

Ourassetsareprimarilyfundedbycustomerdeposits,largelymadeupoflowcostandstablecurrentandsavingsaccounts.ThisformsastablebasefortheBank’sfundingrequirement.Inaddition,wholesalefundingiswidelydiversifiedbyclienttypeandmaturitywhichhelpsmanagingliquiditymismatchesasrequired.

TheAssetandLiabilityManagementCommittee(“ALCO”)monitorstrendsinthebalancesheetandensuresthatanyconcernsthatmightimpactthestabilityofdepositsareaddressedinaneffectiveandtimelymanner.ALCOalsoreviewsbalancesheetplanstoensurethatprojectedassetgrowthismatchedbygrowthincustomerdeposits.

Derivatives Exposure

Theuseofderivativesforhedgingandsaletocustomersasriskmanagementproductsisanimportantpartof theBank’sbusinessactivities.These instrumentsarealsoused tomanage theBank’sownexposurestomarketrisk.TheprincipalderivativeinstrumentsusedbytheBankareforeignexchangerelatedandinterestraterelatedcontracts.Derivativepositionsaremark-to-marketonadailybasis.


6 Liquidity Coverage Ratio (continued)

Currency Mismatch on LCR

Customerassetsareasfaraspossiblefundedinthesamecurrency.Wheremismatchesarise,theyarecontrolledbylimitsontheamountofforeigncurrencythatcanbeswappedtolocalcurrencyandviceversa.Suchlimitsarethereforeameansofcontrollingrelianceonforeignexchangemarkets,whichminimizestheriskthatobligationscouldnotbemetintherequiredcurrencyintheeventthataccesstoforeignexchangemarketsbecomesrestricted.

Majorityof theBank’scustomerdepositsaredenominated inHKD,USDandCNY.TheBankholdshigherUSDandotherforeigncurrencydenominatedHQLAduetoitssignificantmarketdepthandeaseofconversionintheeventofliquiditystress.ThisisinlinewiththeAlternativeLiquidityApproachoptionprescribedbyHKMA.Duringthisperiod,theBankmaintainedanamountofHKD-denominatedlevel1assetswellabovetheregulatoryrequirementof20%ofitsHKD-denominatedtotalnetcashoutflows.

Liquidity management

Treasury-MarketsisresponsibleformanagingtheBank’sliquiditypositionwithintheapprovedliquidityandfundingrisklimitsandthresholds.OversightundertheliquidityandfundingframeworkresideswithALCO,supportedbyTreasury-Markets.TheBankwouldensureitoperateswithinpredefinedliquiditylimitsandremainincompliancewithGroupliquiditypoliciesandpractices,aswellaslocalregulatoryrequirements.

ItistheBank’spolicytomanageliquiditywithoutpresumptionoftheBank’sparentsupport.ALCOisresponsibleforensuringthattheBankisabletomaintainadequateliquidityatalltimesandbeinapositiontomeetallobligationsastheyfalldue;repaydepositorsandfulfilallcommitmentstolend.


7 Overview of risk management and RWA (OVI)

ThefollowingtablesetsoutanoverviewofcapitalrequirementsintermsofadetailedbreakdownsofRWAsforvariousrisks.

(a) (b) (c)

Consolidated

RWA1

Minimum

capital

requirements

AtJune17 AtMarch17 AtJune17


1 Creditriskfornon-securitizationexposures 299,799 293,600 25,307

2 –OfwhichSTCapproach 24,286 24,108 1,943

2a –OfwhichBSCapproach – – –

3 –OfwhichIRBapproach 275,513 269,492 23,364

4 Counterpartycreditrisk 6,713 5,201 554

5 –OfwhichSA-CCR – – –

5a –OfwhichCEM 6,713 5,201 554

6 –OfwhichIMM(CCR)approach – – –

7 Equityexposuresinbankingbookunderthe market-basedapproach – – –

8 CISexposures–LTA – – –

9 CISexposures–MBA – – –

10 CISexposures–FBA – – –

11 Settlementrisk 2 4 –

12 Securitizationexposuresinbankingbook 1,480 1,508 126

13 –OfwhichIRB(S)approach–ratings-basedmethod 1,480 1,508 126

14 –OfwhichIRB(S)approach–supervisoryformulamethod – – –

15 –OfwhichSTC(S)approach – – –

16 Marketrisk 17,564 17,719 1,405

17 –OfwhichSTMapproach 16,913 17,069 1,353

18 –OfwhichIMMapproach 651 650 52

19 Operationalrisk 42,205 42,583 3,376

20 –OfwhichBIAapproach – – –

21 –OfwhichSTOapproach 42,205 42,583 3,376

21 –OfwhichASAapproach – – –

22 –OfwhichAMAapproach N/A N/A N/A


(a) (b) (c)

Consolidated

RWA1

Minimum

capital

requirements

AtJune17 AtMarch17 AtJune17


23 Amountsbelowthethresholdsfordeduction (subjectto250%RW) 11,492 11,492 919

24 Capitalflooradjustment – – –

24a DeductiontoRWA 538 528 43

24b –OfwhichportionofregulatoryreserveforgeneralbankingrisksandcollectiveprovisionswhichisnotincludedinTier2Capital 297 287 24

24c –OfwhichportionofcumulativefairvaluegainsarisingfromtherevaluationoflandandbuildingswhichisnotincludedinTier2Capital 241 241 19

25 Total 378,717 371,579 31,644

1RWAsinthistablearebeforetheapplicationofthe1.06scalingfactor,whereapplicable,followingaclarificationfromtheHKMA.Comparativeshavebeenrestatedtoalignwithcurrentperiodpresentation.

7 Overview of risk management and RWA (OVI) (continued)


8 Credit risk for non-securitization exposures

a. Credit quality of exposures (CR1)

Thefollowingtablesetsoutanoverviewofthecreditqualityofon-andoff-balancesheetexposures.

(a) (b) (c) (d)Grosscarryingamountsof

Allowances/impairments Netvalues

At30June2017

Defaultedexposures

Non-defaultedexposures

HK$’M HK$’M HK$’M HK$’M

1 Loans 3,452 650,605 1,828 652,229

2 Debtsecurities - 205,469 - 205,469

3 Off-balancesheetexposures 2,191 422,955 - 425,146

4 Total 5,643 1,279,029 1,828 1,282,844

b. Changes in defaulted loans and debt securities (CR2)

Thefollowingtablesetsoutaninformationonthechangesindefaultedloansanddebtsecurities,includinganychangesintheamountofdefaultedexposures,movementsbetweennon-defaultedanddefaultedexposures,andreductionsinthedefaultedexposuresduetowrite-offs.

(a)HK$’M

1 Defaulted loans and debt securities at end of the previous reporting period (31 December 2016) 4,492

2 Loansanddebtsecuritiesthathavedefaultedsincethelastreportingperiod 1,003

3 Returnedtonon-defaultedstatus (15)

4 Amountswrittenoff (397)

5 Otherchanges* (1,631)

6 Defaulted loans and debt securities at end of the current reporting period (30 June 2017) 3,452

*Otherchangesincludedrepaymentandforeignexchangemovement.

c. Overview of recognized credit risk mitigation (CR3)

The following table sets out the extent of credit risk exposures covered by different types ofrecognizedCRM.

(a) (b1) (b) (d) (f)

At30June2017

Exposuresunsecured:

carryingamount

Exposurestobesecured

Exposuressecuredbyrecognized

collateral

Exposuressecuredbyrecognizedguarantees

Exposuressecuredbyrecognized

creditderivativecontracts

HK$’M HK$’M HK$’M HK$’M HK$’M

1 Loans 341,013 311,216 293,530 17,686 –

2 Debtsecurities 171,420 34,049 33,604 445 –

3 Total 512,433 345,265 327,134 18,131 –

4 –Ofwhichdefaulted 3,056 396 396 – –


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35,9

7615

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6474

3

Standard Chartered Bank (Hong Kong) Limited 28

8C

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8 Credit risk for non-securitization exposures (continued)

g. Effects on RWA of recognized credit derivative contracts used as recognized credit risk mitigation – for IRB approach (CR7)

ThefollowingtablesetsouttheeffectofrecognizedcreditderivativecontractsonthecalculationofcreditriskcapitalrequirementsundertheIRBapproach.ThehypotheticalRWAbeforetakingintoaccountthemitigationeffectofrecognizedcreditderivativecontracts(column(a)below)isdisclosed to evaluate the impact of recognized credit derivative contracts on RWA. This isirrespectiveoftheextentthatrecognizedCRMaretakenintoaccountincalculatingtheRWA.

(a) (b)

At30June2017

Pre-creditderivatives

RWA ActualRWAHK$’M HK$’M

1 Corporate–Specializedlendingundersupervisoryslottingcriteriaapproach(projectfinance) – –

2 Corporate–Specializedlendingundersupervisoryslottingcriteriaapproach(objectfinance) 2,357 2,357

3 Corporate–Specializedlendingundersupervisoryslottingcriteriaapproach(commoditiesfinance) – –

4 Corporate–Specializedlendingundersupervisoryslottingcriteriaapproach(income-producingrealestate) – –

5 Corporate–Specializedlending(high-volatilitycommercialrealestate) – –

6 Corporate–Small-and-mediumsizedcorporates 4,336 4,3367 Corporate–Othercorporates 112,416 112,4168 Sovereigns 6,742 6,7429 Sovereignforeignpublicsectorentities – –

10 Multilateraldevelopmentbanks – –11 Bankexposures–Banks 30,486 30,48612 Bankexposures–Securitiesfirms 2,910 2,91013 Bankexposures–Publicsectorentities(excludingsovereign

foreignpublicsectorentities) 609 60914 Retail–Smallbusinessretailexposures 2,530 2,53015 Retail–Residentialmortgagestoindividuals 33,800 33,80016 Retail–Residentialmortgagestoproperty-holdingshell

companies 2,176 2,17617 Retail–Qualifyingrevolvingretailexposures(QRRE) 11,121 11,12118 Retail–Otherretailexposurestoindividuals 20,680 20,68019 Equity–Equityexposuresundermarket-basedapproach

(simplerisk-weightmethod) – –20 Equity–Equityexposuresundermarket-basedapproach

(internalmodelsmethod) – –21 Equity–EquityexposuresunderPD/LGDapproach(publicly

tradedequityexposuresheldforlong-terminvestment) – –22 Equity–EquityexposuresunderPD/LGDapproach(privately

ownedequityexposuresheldforlong-terminvestment) – –23 Equity–EquityexposuresunderPD/LGDapproach(other

publiclytradedequityexposures) – –24 Equity–EquityexposuresunderPD/LGDapproach(other

equityexposures) – –25 Equity–Equityexposuresassociatedwithequityinvestments

infunds(CISexposures) – –26 Other–Cashitems 3 327 Other–Otheritems 48,821 48,821

28 Total (under the IRB calculation approaches) 278,987 278,987

ThereisnoeffectinRWAastheBankdoesnothavecreditderivativecontractsusedasrecognisedcreditriskmitigation.


8 Credit risk for non-securitization exposures (continued)

h. RWA flow statements of credit risk exposures under IRB approach (CR8)

The following table sets out a flow statement explaining variations in the RWA for credit riskdeterminedundertheIRBapproach.

(a)

Amount

HK$’M

1 RWA as at end of previous reporting period (31 March 2017)1 269,492

2 Assetsize 12,740

3 Assetquality (6,017)

4 Modelupdates (1,447)

5 Methodologyandpolicy –

6 Acquisitionsanddisposals –

7 Foreignexchangemovements 745

8 Other –

9 RWA as at end of reporting period (30 June 2017) 275,513

1ToalignwiththepresentationinNote7,RWAsinthistablenowexcludethe1.06scalingfactorandtheopeningpositionhasbeenrestated.


8 C

red

it r

isk

for

non-

secu

riti

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res

(co

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)

i. S

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At

30J

une

2017

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shee

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226

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226

––

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s51

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570

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512

––

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9

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790

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9 Counterparty Credit risk

a. Analysis of counterparty default risk exposures (other than those to CCPs) by approaches (CCR1)

Thefollowingtablesetsoutacomprehensivebreakdownofdefaultriskexposures(otherthanthosetoCCPs),RWAs,and,whereapplicable,mainparametersundertheapproachesusedtocalculatedefaultriskexposuresinrespectofderivativecontractsandSFTs.

(a) (b) (c) (d) (e) (f)

At30June2017

Replacement

cost(RC) PFE

Effective

EPE

Alpha(a)

usedfor

computing

defaultrisk

exposure

Defaultrisk

exposure

afterCRM RWA

HK$’M % HK$’M HK$’M

1 SA-CCR(forderivativecontracts) – – 1.4 – –

1a CEM 1,517 11,372 N/A 12,889 2,740

2 IMM(CCR)approach – –

3 SimpleApproach(forSFTs) – –

4 ComprehensiveApproach(forSFTs) 41,804 1,197

5 VaR(forSFTs) – –

6 Total 3,937

b. CVA capital charge (CCR2)

ThefollowingtablesetsoutaninformationonportfoliossubjecttotheCVAcapitalchargeandtheCVAcalculationsbasedonstandardizedCVAmethodandadvancedCVAmethod.

(a) (b)

At30June2017EADpostCRM RWA

HK$’M HK$’M

NettingsetsforwhichCVAcapitalchargeiscalculatedbytheadvancedCVAmethod – –

1 (i)VaR(afterapplicationofmultiplicationfactorifapplicable) –

2 (ii)StressedVaR(afterapplicationofmultiplicationfactorifapplicable) –

3 NettingsetsforwhichCVAcapitalchargeiscalculatedbythestandardizedCVAmethod 12,889 2,776

4 Total 12,889 2,776


9 C

oun

terp

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dit

ris

k (c

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unte

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lt r

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M

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(a)

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At

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une

2017

PDs

cale

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pos

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566.

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9 C

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4) (c

ont

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d)

(a)

(b)

(c)

(d)

(e)

(f)(g

)

At

30J

une

2017

PDs

cale

EAD

pos

t-C

RM

Ave

rage

PD

Num

bero

fobl

igor

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vera

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mat

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AR

WA

den

sity

HK

$’M

HK

$’M

%

Por

tfolio

(iii)

–C

orpo

rate

0.00

to<

0.1

570

00.

06%

1763

.78%

2.43

210

30.0

1%

0.15

to<

0.2

516

90.

22%

1270

.00%

1.01

8449

.96%

0.25

to<

0.5

017

0.39

%8

70.0

0%1.

8915

85.9

6%

0.50

to<

0.7

519

10.

66%

1969

.84%

1.77

205

107.

83%

0.75

to<

2.5

044

61.

54%

2670

.00%

1.32

744

166.

59%

2.50

to<

10.

0052

5.13

%14

70.0

0%1.

0510

920

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%

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00(D

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1.83

1,36

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.81%

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to th

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s)54

,138

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%15

112

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0.45

3,47

26.

41%


9 Counterparty Credit risk (continued)

e. Composition of collateral for counterparty default risk exposures (including those for contracts or transactions cleared through CCPs) (CCR5)

ThefollowingtablesetsoutabreakdownofalltypesofcollateralpostedorrecognizedcollateralreceivedtosupportorreducetheexposurestocounterpartydefaultriskexposuresinrespectofderivativecontractsorSFTsenteredinto,includingcontractsortransactionsclearedthroughaCCP.

(a) (b) (c) (d) (e) (f)

Derivativecontracts SFTs

Fairvalueof

recognized

collateral

received

Fairvalueof

posted

collateral

At30June2017 Fairvalueofrecognized

collateralreceived Fairvalueofpostedcollateral

Exposureclasses Segregated Unsegregated Segregated Unsegregated

HK$’M HK$’M HK$’M HK$’M HK$’M HK$’M

Cash–domesticcurrency – – – – – 5,629

Cash–othercurrencies – – – – 2,812 32,725

Domesticsovereigndebt – – – – – –

Othersovereigndebt – – – – 16,145 –

Governmentagencydebt – – – – 81 177

Corporatebonds – – – – 10,673 3,273

Equitysecurities – – – – 4,600 –

Othercollateral – – – – – –

Total – – – – 34,311 41,804


9 Counterparty Credit risk (continued)

f. Credit-related derivatives contracts (CCR6)

Thefollowingtablesetsouttheamountofcredit-relatedderivativecontracts,brokendownintocreditprotectionboughtandcreditprotectionsold.

(a) (b)

At30June2017

Protectionbought

Protectionsold

HK$’M HK$’M

Notional amountsSingle-namecreditdefaultswaps 8 8Indexcreditdefaultswaps – –Totalreturnswaps 283 1,690Credit-relatedoptions – –Othercredit-relatedderivativecontracts – –Total notional amounts 291 1,698

Fair valuesPositivefairvalue(asset) 244 147Negativefairvalue(liability) (124) –

g. Exposures to CCPs (CCR8)

The following tablesetsoutacomprehensivebreakdownofexposures tobothqualifyingandnon-qualifyingCCPsandtherespectiveRWAs,coveringalltypesofcreditriskexposures(includingdefaultriskexposurestotheCCPs,creditriskexposuresarisingfrominitialmarginsposted,anddefaultfundcontributionsmade,totheCCPs).

(a) (b)

At30June2017

ExposureafterCRM RWA

HK$’M HK$’M

1 Exposures of the AI as clearing member or client to qualifying CCPs (total) 0

2 DefaultriskexposurestoqualifyingCCPs(excludingitemsdisclosedinrows7to10),–ofwhich: – –

3 (i)OTCderivativetransactions – –4 (ii)Exchange-tradedderivativecontracts – –5 (iii)Securitiesfinancingtransactions – –6 (iv)Nettingsetssubjecttovalidcross-productnetting

agreements – –7 Segregatedinitialmargin –8 Unsegregatedinitialmargin – –9 Fundeddefaultfundcontributions 0 0

10 Unfundeddefaultfundcontributions – –11 Exposures of the AI as clearing member or client to

non-qualifying CCPs (total) –12 Defaultriskexposurestonon-qualifyingCCPs(excluding

itemsdisclosedinrows17to20),–ofwhich: – –13 (i)OTCderivativetransactions – –14 (ii)Exchange-tradedderivativecontracts – –15 (iii)Securitiesfinancingtransactions – –16 (iv)Nettingsetssubjecttovalidcross-productnetting

agreements – –17 Segregatedinitialmargin –18 Unsegregatedinitialmargin – –19 Fundeddefaultfundcontributions – –20 Unfundeddefaultfundcontributions – –


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11 Market risk

a. Market risk under STM approach (MR1)

Thefollowingtablesetsoutthecomponentsofthemarketriskcapitalrequirementscalculatedusingthestandardized(marketrisk)approach(STMapproach).

(a)

At30June2017RWA

HK$’M

Outrightproductexposures

1 Interestrateexposures(generalandspecificrisk) 15,147

2 Equityexposures(generalandspecificrisk) 7

3 Foreignexchange(includinggold)exposures 1,759

4 Commodityexposures –

Optionexposures

5 Simplifiedapproach –

6 Delta-plusapproach –

7 Otherapproach –

8 Securitizationexposures –

9 Total 16,913

b. RWA flow statements of market risk exposures under IMM approach (MR2)

The following tablesetsoutaflowstatementexplainingvariations in theRWAformarket riskdeterminedundertheIMMapproach.

(a) (b) (c) (d) (e) (f)

VaR StressedVaR IRC CRC Other TotalRWA

HK$’M HK$’M HK$’M HK$’M HK$’M HK$’M

1 RWA as at end of previous reporting period (31 March 2017) – – – – 650 650

2 Movementinrisklevels – – – – – –

3 Modelupdates/changes – – – – – –

4 Methodologyandpolicy – – – – – –

5 Acquisitionsanddisposals – – – – – –

6 Foreignexchangemovements – – – – – –

7 Other – – – – 1 1

8 RWA as at end of reporting period (30 June 2017) – – – – 651 651


12 International claims

Internationalclaimsareon-balancesheetexposuresofcounterpartiesbasedonthelocationofthosecounterpartiesaftertakingintoaccountthetransferofrisk.Recognizedrisktransferreferstothereductionofexposuretoaparticularcountrybyaneffectivetransferofcreditrisktoadifferentcountry.Foraclaimonthebranchofabankorotherfinancialinstitution,theriskwillbetransferredtothecountrywhereitsheadofficeissituated.

Internationalclaimsonindividualcountriesorsegments,afterrisktransfer,amountingto10%ormoreoftheaggregatedinternationalclaimsareshownasbelow:

At30June2017 Banks OfficialSector

Non-bank

Financial

institution

Non-financial

privatesector Total


Developedcountries 90,696 43,822 7,520 20,809 162,847

Offshorecentres 10,219 1,258 11,153 86,856 109,486–ofwhichHongKongSAR 5,751 1,258 10,236 63,174 80,419

DevelopingAsiaandPacific 176,691 17,829 7,603 31,097 233,220–ofwhichChina 123,467 2,764 2,324 22,399 150,954


13 Advances to customers analysed by industry sector

TheanalysisofgrossadvancestocustomersbyindustrysectorisbasedonthecategoriesusedbytheHKMA.

At

30June

2017

%of

advances

coveredby

collateralor

other

securities

HK$’M

GrossadvancesforuseinHongKong

Industrial,commercialandfinancial

–Propertydevelopment 15,740 26%–Propertyinvestment 28,483 80%–Financialconcerns 22,002 41%–Stockbrokers 7,967 74%–Wholesaleandretailtrade 15,830 30%–Manufacturing 20,416 13%–Transportandtransportequipment 6,601 26%–Recreationalactivities 374 44%–Informationtechnology 3,182 ––Others 29,845 5%

Individuals

–AdvancesforthepurchaseofflatsintheHomeOwnershipScheme,PrivateSectorParticipationSchemeandTenantsPurchaseScheme 461 100%

–Advancesforthepurchaseofotherresidentialproperties 209,283 100%–Creditcardadvances 17,156 ––Others 23,211 44%

TotalgrossadvancesforuseinHongKong 400,551Tradefinance 37,700 2%Tradebills 1,510 5%GrossadvancesforuseoutsideHongKong 38,309 13%

Grossadvancestocustomers 478,070 58%

Asat30June2017,approximately82percentoftheBank’sadvancestocustomerswereclassifiedunderHongKong.

ExceptforHongKong,noneoftheremaininggeographicalsegmentsrepresentsmorethan10%oftheBank’sgrossloansandadvancestocustomersaftertakingintoaccountthetransferofrisk.

Theabovebalancesdonotincludeinter-companyloansandadvances.


13 Advances to customers analysed by industry sector (continued)

Theamountofimpairedandoverdueadvancestocustomersandindividuallyandcollectivelyassessedimpairment provision for industry sectors which constitute not less than 10% of the Bank and itssubsidiaries’totaladvancestocustomersareasfollows:

Impaired

advances

tocustomers

Overdue

advances

tocustomers

Individually

assessed

impairment

provision

Collectively

assessed

impairment

provision

New

provision

charge


At30June2017

Advancesforthepurchaseofotherresidentialproperties 50 14 – 2 –

14 Overdue advances to customers

At30June2017

HK$’M

%of

advancesto

customers

Grossadvancestocustomerswhichhavebeenoverduewithrespecttoeitherprincipalorinterestforperiodsof:

6monthsorlessbutover3months 92 0.02%1yearorlessbutover6months 281 0.06%Over1year 1,107 0.23%

1,480 0.31%

At

30June

2017

HK$’M

Fairvalueofcollateralheldagainstthecoveredportionofoverdueadvancestocustomers 534

Coveredportionofoverdueadvancestocustomers 534Uncoveredportionofoverdueadvancestocustomers 946


14 Overdue advances to customers (continued)

Thecoveredportionofoverdueadvancestocustomersrepresentstheamountofcollateralheldagainstoutstandingbalances.Itdoesnotincludeanycollateralheldoverandaboveoutstandingexposures.

Thecollateralheldinrespectofoverdueadvancestocustomersconsistsofcash,properties,securitiesandgovernmentguarantee.

At

30June

2017

HK$’M

Individuallyassessedimpairmentprovisionagainstadvancestocustomersoverduemorethan3months 811

Asat30June2017and31December2016,therewerenooverdueadvancestobanksandotherfinancialinstitutions.

15 Rescheduled advances to customers

At30June2017

HK$’M

%of

advancesto

customers

Rescheduledadvancestocustomers 897 0.19%

Rescheduledadvancesarethoseadvances,whichhavebeenrestructuredorrenegotiatedbecauseofadeteriorationinthefinancialpositionoftheborrowers,ortheinabilityoftheborrowerstomeettheoriginal repaymentscheduleandforwhichtherevisedrepayment termsarenon-commercial to theBank.Rescheduledadvancestocustomersarestatednetofanyadvancesthathavesubsequentlybecomeoverdueforover3monthsandreportedasoverdueadvancesinnote14.

Asat30June2017,therewerenorescheduledadvancestobanksandotherfinancialinstitutions.


16 Mainland Activities

On-balance Off-balancesheet sheet

exposure exposure TotalHK$’M HK$’M HK$’M

At30June2017

(i) Centralgovernment,centralgovernment-ownedentitiesandtheirsubsidiariesandjointventures(“JVs”) 35,966 504 36,470

(ii) Localgovernments,localgovernment-ownedentitiesandtheirsubsidiariesandJVs 812 463 1,275

(iii) PRCnationalsresidinginMainlandChinaorotherentitiesincorporatedinMainlandChinaandtheirsubsidiariesandJVs 21,262 2,729 23,991

(iv) Otherentitiesofcentralgovernmentnotreportedinitem(i)above 1,636 217 1,853

(v) Otherentitiesoflocalgovernmentsnotreportedinitem(ii)above 2,347 144 2,491

(vi) PRCnationalsresidingoutsideMainlandChinaorentitiesincorporatedoutsideMainlandChinawherethecreditisgrantedforuseinMainlandChina 24,988 1,221 26,209

(vii)Othercounterpartieswheretheexposuresareconsideredbythereportinginstitutiontobenon-bankMainlandChinaexposures 20,128 5,833 25,961

Total 107,139 11,111 118,250

Totalassetsafterprovision 1,038,304

On-balancesheetexposuresaspercentageoftotalassets 10.32%

Theoff-balancesheetexposurerepresentstheamountatriskshouldthecontractbefullydrawnuponandtheclientdefaults.Asthefacilitiesmayexpirewithoutbeingdrawnupon,thecontractualamountsdonotrepresentexpectedfuturecashflows.

17 Comparative figures

Certaincomparativefigureshavebeenrestatedtoconformwiththecurrentyear’spresentation.


Acronyms

AI AuthorisedinstitutionAIRB Advanceinternalratings-based

approachALCO AssetandLiabilityManagement

CommitteeAMA AdvancedmeasurementapproachASA AlternativestandardisedapproachAT1 Additionaltier1Bank StandardCharteredBank(Hong

Kong)LimitedBCBS BaselCommitteeonBanking

SupervisionBCR Banking(Capital)RulesBDR Banking(Disclosure)RulesBIA BasicindicatorapproachBSC BasicapproachCCF CreditconversionfactorCCP CentralcounterpartyCCR CounterpartycreditriskCCyB CountercyclicalcapitalbufferCEM CurrentexposuremethodCET1 Commonequitytier1CF CommoditiesfinanceCIS CollectiveinvestmentschemeCRC ComprehensiveriskchargeCRM CreditriskmitigationCVA CreditvaluationadjustmentD-SIB Domesticsystematicallyimportant

authorisedinstitutionDTAs DeferredtaxassetsEAD ExposureatdefaultEL ExpectedlossEPE ExpectedpositiveexposureFBA Fall-backapproachG-SIB Globalsystematicallyimportant

authorisedinstitutionHKMA HongKongMonetaryAuthorityHVCRE High-volatilitycommercialrealestateHQLA HighqualityliquidassetsIMM InternalmodelsapproachIMM(CCR) Internalmodels(counterpartycredit

risk)approachICAAP InternalCapitalAdequacy

AssessmentProcessIPRE Income-producingrealestateIRB Internalratings-basedapproachIRB(S) Internalratings-based(securitisation)

approachIRC IncrementalriskchargeJCCyB Jurisdictionalcountercyclicalcapital

bufferJVs Jointventures

LCR LiquiditycoverageratioLGD LossgivendefaultLTA LookthroughapproachMBA Mandate-basedapproachMSRs MortgageservicingrightsN/A NotapplicableOF ObjectfinanceOTC Over-the-counterPD ProbabilityofdefaultPF ProjectfinancePFE PotentialfutureexposurePRC People’sRepublicofChinaPSE PublicsectorentityQRRE QualifyingrevolvingretailexposuresRC ReplacementcostRW Risk-weightRWA Risk-weightedasset/risk-weighted

amountS SecuritisationSA-CCR Standardisedapproachfor

counterpartycreditriskSFT SecuritiesfinancingtransactionSME SmallandMediumEnterprisesSRW Supervisoryrisk-weightedSTC Standardised(creditrisk)approachSTC(S) Standardised(securitisation)

approachSTM Standardised(marketrisk)approachSTO Standardised(operationalrisk)

approachVaR Valueatrisk

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