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Report of the Directors: Capital (continued)

Capital

HSBC HOLDINGS PLC

234

Composition of regulatory capital

(Audited)

At 31 December

2015 2014

Ref $m $m

Common equity tier 1 capital

Shareholders’ equity 160,664 166,617

–

shareholders’ equity per balance sheet8 a188,460 190,447

–

foreseeable interim dividend2 (3,717) (3,362)

–

preference share premium b(1,405) (1,405)

–

other equity instruments

(15,112) (11,532)

–

deconsolidation of special purpose entities9 a(91) (323)

–

deconsolidation of insurance entities a, h (7,471) (7,208)

Non-controlling interests 3,519 4,640

–

non-controlling interests per balance sheet d9,058 9,531

–

preference share non-controlling interests e(2,077) (2,127)

–

non-controlling interests transferred to tier 2 capital f

–

(473)

–

non-controlling interests in deconsolidated subsidiaries d(933) (851)

–

surplus non-controlling interests disallowed in CET1 (2,529) (1,440)

Regulatory adjustments to the accounting basis (4,556) (3,556)

–

own credit spread10 (159) 767

–

debit valuation adjustment (336) (197)

–

defined benefit pension fund adjustment g(4,009) (4,069)

–

cash flow hedging reserve (52) (57)

Deductions (28,764) (31,748)

–

goodwill and intangible assets h(20,650) (22,475)

–

deferred tax assets that rely on future profitability (excludes those arising from temporary

differences) n (1,204) (1,036)

–

additional valuation adjustment (referred to as PVA) (1,151) (1,341)

–

investments in own shares through the holding of composite products of which HSBC is a component

(exchange traded funds, derivatives and index stock) (839) (1,083)

–

negative amounts resulting from the calculation of expected loss amounts

(4,920) (5,813)

Common equity tier 1 capital on an end point basis 130,863 135,953

Tier 1 and tier 2 capital on a transitional basis

Common equity tier 1 capital on an end point basis 130,863 135,953

Transitional adjustments (2,753)

–

unrealised gains arising from revaluation of property (1,375)

–

unrealised gains in available-for-sale debt and equities (1,378)

Common equity tier 1 capital on a transitional basis 130,863 133,200

Additional tier 1 capital on a transitional basis

Other tier 1 capital before deductions 22,621 19,687

–

preference share premium b1,015 1,160

–

preference share non-controlling interests e1,711 1,955

–

allowable non-controlling interest in AT1 d1,546 884

–

Hybrid capital securities

18,349 15,688

Deductions (181) (148)

–

unconsolidated investments11 (121) (148)

–

holding of own additional tier 1 instruments (60)

–

Tier 1 capital on a transitional basis 153,303 152,739

Tier 2 capital on a transitional basis

Total qualifying tier 2 capital before deductions 36,852 38,213

–

allowable non-controlling interest in tier 2 d14 99

–

perpetual subordinated debt

1,941 2,218

–

term subordinated debt m34,897 35,656

–

non-controlling interests in tier 2 capital f

–

240

Total deductions other than from tier 1 capital (322) (222)

–

unconsolidated investments11 (282) (222)

–

holding of own tier 2 instruments (40)

–

Total regulatory capital on a transitional basis 189,833 190,730

For footnotes, see page 243.

The references (a) – (n) identify balance sheet components on page 236 which are used in the calculation of regulatory capital.