Pillar 3 Disclosures
31 December 2023
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Pillar 3 disclosures
Contents
1. Introduction | 1 |
1.1. Purpose | 1 |
1.2. Highlights | 1 |
1.3. Key prudential metrics | 2 |
1.4. Regulatory disclosure framework | 4 |
1.5. Risk management | 5 |
1.6. Accounting and regulatory consolidation | 7 |
1.7. Significant subsidiaries | 8 |
1.8. Comparison of accounting balance sheet | |
and exposure at default | 9 |
2. Capital | 14 |
2.1. Capital management | 14 |
2.2. Capital resources | 14 |
2.3. Minimum requirement for own funds | |
and eligible liabilities | 18 |
2.4. Countercyclical capital buffer | 26 |
2.5. Capital requirements | 28 |
2.6. Leverage ratio | 32 |
3. Credit risk | 35 |
3.1. Internal Ratings Based Approach to credit risk | 35 |
3.2. Standardised Approach to credit risk | 35 |
3.3. Internal Ratings Based models | 35 |
3.4. Credit risk quality | 58 |
3.5. Risk grade profile | 69 |
3.6. Credit risk mitigation | 86 |
3.7. Standardised risk weight profile | 87 |
3.8. Securitisation | 89 |
4. Traded risk | 101 |
4.1. Market risk | 101 |
4.2. Counterparty credit risk | 107 |
5. Operational risk | 118 |
6. Interest rate risk in the banking book | 119 |
7. Liquidity risk | 121 |
7.1. Encumbered and unencumbered assets | 127 |
8. Remuneration | 130 |
9. Forward looking statements | 136 |
Annex 1. Standard Chartered Significant Subsidiaries | 137 |
Acronyms | 171 |
Glossary | 172 |
Prudential disclosure reference table | 177 |
Summary of differences between the Pillar 3 Disclosures | |
and the Risk and capital review sections of the | |
Annual Report | 195 |
Standard Chartered Bank is headquartered in London where it is authorised by the UK's Prudential Regulation Authority (PRA), and Standard Chartered PLC Group and Standard Chartered Bank are regulated by the Financial Conduct Authority (FCA) and the PRA. Within this document 'the Group' refers to Standard Chartered PLC together with its subsidiary undertakings. Unless the context requires, within this document, 'China' refers to the People's Republic of China and, for the purposes of this document only, excludes Hong Kong Special Administrative Region (Hong Kong), Macau Special Administrative Region (Macau) and Taiwan. 'Korea' or 'South Korea' refers to the Republic of Korea. Greater China & North Asia (GCNA) includes China, Hong Kong, Japan, Korea, Macau and Taiwan; ASEAN & South Asia (ASA) includes Australia, Bangladesh, Brunei, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Philippines, Singapore, Sri Lanka, Thailand and Vietnam; and Africa & Middle East (AME) includes Bahrain, Egypt, Iraq, Jordan, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia and the United Arab Emirates (UAE). Throughout this document unless specified the disclosures are at Group level. Throughout this document, unless another currency is specified, the word 'dollar' or symbol $ means United States dollar. Throughout this document IRB refers to internal ratings based models. The Group does not use the Foundation IRB approach.
Standard Chartered - Pillar 3 Disclosures 2023
Tables
1. Key metrics template (UK KM1) | 2 |
2. Key metrics - TLAC requirements (KM2) | 3 |
3. Regulatory consolidation | 7 |
4. Outline of the differences in the scopes of consolidation | |
(UK LI3) | 7 |
5. Differences between accounting and regulatory scopes of consolidation and the mapping of financial statement
categories with regulatory risk categories (UK LI1) | 9 |
6. Main sources of differences between regulatory exposure amounts and carrying values in financial
statements (UK LI2) | 11 |
7. Prudent valuation adjustments (PVA) (UK PV1) | 12 |
8. Reconciliation between financial total equity and | |
regulatory CET1 before regulatory adjustments | 14 |
9. Composition of regulatory own funds (UK CC1) | 15 |
10. Reconciliation of regulatory own funds to balance sheet | |
in the audited financial statements (UK CC2) | 17 |
11. TLAC composition for G-SIBs (TLAC1) | 19 |
12. Resolution entity - creditor ranking at legal entity level | |
(TLAC3) | 20 |
13. Standard Chartered Bank - creditor ranking (TLAC2) | 21 |
14. Standard Chartered Bank (Hong Kong) Limited - | |
creditor ranking (TLAC2) | 22 |
15. Standard Chartered Bank Korea Limited - creditor | |
ranking (TLAC2) | 23 |
16. Standard Chartered Bank (Singapore) Limited - creditor | |
ranking (TLAC2) | 24 |
17. Standard Chartered Bank (China) Limited - creditor | |
ranking (TLAC2) | 25 |
18. Geographical distribution of credit exposures relevant | |
for the calculation of the countercyclical buffer (UK CCyB1) | 26 |
19. Amount of institution-specific countercyclical capital | |
buffer (UK CCyB2) | 27 |
20. Overview of risk weighted exposure amounts (UK OV1) | 28 |
21. Movement analysis for RWA | 29 |
22. RWEA flow statements of credit risk exposures under | |
the IRB approach (UK CR8) | 30 |
23. RWEA flow statements of CCR exposures under the | |
IMM (UK CCR7) | 30 |
24. RWA flow statements of market risk exposures under | |
the IMA (UK MR2-B) | 31 |
25. Leverage and CRR Leverage Ratio | 32 |
26. LRSum: Summary reconciliation of accounting assets | |
and leverage ratio exposures (UK LR1) | 32 |
27. LRCom: Leverage ratio common disclosure (UK LR2) | 33 |
28. LRSpl: Split-up of on balance sheet exposures (excluding | |
derivatives, SFTs and exempted exposures) (UK LR3) | 34 |
29. Corporate, Institutions and Commercial model results | 37 |
30. Retail model results | 37 |
31. IRB approach - Backtesting of PD per exposure class for central governments or central banks (fixed PD scale)
(UK CR9) | 38 |
32. IRB approach - Backtesting of PD per exposure class for | |
institutions (fixed PD scale) (UK CR9) | 39 |
33. IRB approach - Backtesting of PD per exposure class for | |
corporates - other (fixed PD scale) (UK CR9) | 40 |
34. IRB approach - Backtesting of PD per exposure class for | |
corporates - specialised lending (fixed PD scale) (UK CR9) | 41 |
35. IRB approach - Backtesting of PD per exposure class for | |
corporates - SME (fixed PD scale) (UK CR9) | 42 |
36. IRB approach - Backtesting of PD per exposure class for | |
retail other - non SME (fixed PD scale) (UK CR9) | 43 |
37. IRB approach - Backtesting of PD per exposure class for | |
retail other - SME (fixed PD scale) (UK CR9) | 44 |
38. IRB approach - Backtesting of PD per exposure class for retail - secured by real estate property - non SME (fixed PD
scale) (UK CR9) | 45 |
39. IRB approach - Backtesting of PD per exposure class for r retail - secured by real estate property - SME (fixed PD
scale) (UK CR9) | 46 |
40. IRB approach - Backtesting of PD per exposure class for | |
retail - qualifying revolving (fixed PD scale) (UK CR9) | 47 |
41. IRB - Backtesting of probability of default (PD) for central | |
governments or central banks (UK CR9.1) | 48 |
42. IRB - Backtesting of probability of default (PD) for | |
institutions (CR9.1) | 50 |
43. IRB - Backtesting of probability of default (PD) for | |
corporates (CR9.1) | 52 |
44. IRB - Backtesting of probability of default (PD) for | |
corporates - specialised lending (CR9.1) | 54 |
45. IRB - Backtesting of probability of default (PD) for | |
corporates - SME (CR9.1) | 56 |
46. Performing and non-performing exposures and related | |
provisions (UK CR1) | 58 |
47. Maturity of exposures (UK CR1-A) | 62 |
48. Changes in the stock of non-performing loans and | |
advances (UK CR2) | 62 |
49. Credit quality of forborne exposures (UK CQ1) | 63 |
50. Credit quality of performing and non-performing | |
exposures by past due days (UK CQ3) | 64 |
51. Quality of non-performing exposures by geography | |
(UK CQ4) | 66 |
52. Credit quality of loans and advances to non-financial | |
corporations by industry (UK CQ5) | 67 |
53. IRB - Credit risk exposures by exposure class | 70 |
54. Internal ratings mapping to external ratings | 72 |
55. IRB approach - Credit risk exposures by exposure class and PD range for central governments or central banks
(UK CR6) | 73 |
56. IRB approach - Credit risk exposures by exposure class | |
and PD range for institutions (UK CR6) | 74 |
57. IRB approach - Credit risk exposures by exposure class | |
and PD range for Corporates (UK CR6) | 75 |
58. IRB approach - Credit risk exposures by exposure class | |
and PD range for Corporates - other (UK CR6) | 76 |
59. IRB approach - Credit risk exposures by exposure class | |
and PD range for corporates - specialised lending (UK CR6) | 77 |
60. IRB approach - Credit risk exposures by exposure class | |
and PD range for corporates - SME (UK CR6) | 78 |
61. IRB approach - Credit risk exposures by exposure class | |
and PD range for retail (UK CR6) | 79 |
62. IRB approach - Credit risk exposures by exposure class and PD range for retail - secured by real estate property
- SME (UK CR6) | 80 |
63. IRB approach - Credit risk exposures by exposure class and PD range for retail - secured by real estate property -
Non SME (UK CR6) | 81 |
64. IRB approach - Credit risk exposures by exposure class | |
and PD range for retail - qualifying revolving (UK CR6) | 82 |
65. IRB approach - Credit risk exposures by exposure class | |
and PD range for retail - SME (UK CR6) | 83 |
Standard Chartered - Pillar 3 Disclosures 2023
Pillar 3 disclosures
66. IRB approach - Credit risk exposures by exposure class | |
and PD range for retail - Non SME (UK CR6) | 84 |
67. Scope of the use of IRB and SA approaches (UK CR6-A) | 85 |
68. CRM techniques overview: Disclosure of the use of credit | |
risk mitigation techniques (UK CR3) | 86 |
69. Standardised approach - Credit risk exposure and CRM | |
effects (UK CR4) | 87 |
70. Standardised approach (UK CR5) | 88 |
71. Securitisation exposures in the non-trading book | |
(UK-SEC1) | 92 |
72. Securitisation exposures in the trading book (UK-SEC2) | 94 |
- Securitisation exposures in the non-trading book and associated regulatory capital requirements - institution
acting as originator or as sponsor (UK-SEC3) | 96 |
74. Securitisation exposures in the non-trading book and associated regulatory capital requirements - institution
acting as investor (UK-SEC4) | 98 |
75. Exposures securitised by the institution - Exposures in | |
default and specific credit risk adjustments (UK-SEC5) | 100 |
76. Daily value at risk (VaR at 97.5%, one day) | 103 |
77. Daily value at risk (VaR at 97.5%, one day) by products | 103 |
78. Market risk regulatory capital requirements | 104 |
79. Market risk under standardised approach (UK MR1) | 104 |
80. IMA values for trading portfolios (UK MR3) | 105 |
81. Market risk under the internal Model Approach (IMA) | |
(UK MR2-A) | 105 |
82. 2023 Backtesting chart for Internal Model Approach regulatory trading book at Group level with hypothetical profit and loss (P&L) versus VaR (99 per cent, one day)
(MR4)) | 106 |
83. 2023 Backtesting chart for Internal Model Approach regulatory trading book at Group level with actual profit
and loss (P&L) versus VaR (99 per cent, one day) (MR4) | 106 |
84. Composition of collateral for CCR exposures (UK CCR5) | 108 |
85. Analysis of CCR exposure by approach (UK CCR1) | 109 |
86. Exposures to CCPs (UK CCR8) | 110 |
87. Credit derivatives exposures (UK CCR6) | 110 |
87. Transactions subject to own funds requirements for CVA | |
risk (UK CCR2) | 110 |
89. Standardised approach - CCR exposures by regulatory | |
exposure class and risk weights (UK CCR3) | 111 |
90. IRB - CCR exposures by exposure class | 112 |
91. IRB approach - CCR exposures by exposure class and PD | |
scale for central governments or central banks (UK CCR4) | 113 |
92. IRB approach - CCR exposures by exposure class and PD | |
scale for institutions (UK CCR4) | 114 |
93. IRB approach - CCR exposures by exposure class and PD | |
scale for corporates (UK CCR4) | 115 |
94. IRB approach - CCR exposures by exposure class and PD | |
scale for corporates - specialised lending (UK CCR4) | 116 |
95. IRB approach - CCR exposures by exposure class and PD | |
scale for corporates - SME (UK CCR4) | 117 |
96. Operational risk own funds requirements and risk- | |
weighted exposure amounts (UK OR1) | 118 |
97. Quantitative information on IRRBB (UK IRRBB1) | 120 |
98. Liquidity Coverage Ratio (LCR) (UK LIQ1) | 122 |
99. Net Stable Funding Ratio (UK LIQ2) | 124 |
100. Total eligible high-quality liquid assets (HQLA) | 126 |
101. Encumbered and unencumbered assets (UK AE1) | 127 |
102. Collateral received and own debt securities issued | |
(UK AE2) | 128 |
103. Sources of encumbrance (UK AE3) | 128 |
104. Remuneration awarded for the financial year | |
(UK REM1) | 131 |
105. Special payments to staff whose professional activities have a material impact on institutions' risk profile
(identified staff) (UK REM2) | 131 |
106. Deferred remuneration (UK REM3) | 132 |
107. Remuneration of 1 million EUR or more per year | |
(UK REM4) | 134 |
108. Information on remuneration of staff whose | |
professional activities have a material impact on | |
institutions' risk profile (identified staff) (UK REM5) | 135 |
Annex 1. Standard Chartered Significant Subsidiaries | |
109. Capital resources of significant subsidiaries | 137 |
110. Composition of regulatory own funds (UK CC1) - Solo | |
consolidation | 138 |
111. Reconciliation of regulatory own funds to balance sheet in the audited financial statements (UK CC2) - Solo
consolidation | 140 |
112. Geographical distribution of credit exposures relevant for the calculation of the countercyclical buffer (UK CCyB1)
- Solo consolidation | 141 |
113. Amount of institution-specific countercyclical capital | |
buffer (UK CCyB2) - Solo consolidation | 142 |
114. LRSum: Summary reconciliation of accounting assets | |
and leverage ratio exposures (UK LR1) - Solo consolidation | 143 |
115. LRCom: Leverage ratio common disclosure (UK LR2) - | |
Solo consolidation | 144 |
116. LRSpl: Split-up of on balance sheet exposures (excluding derivatives, SFTs and exempted exposures) (UK LR3) - Solo
consolidation | 145 |
117. Performing and non-performing exposures and related provisions (UK CR1) - Standard Chartered - Solo
Consolidation | 146 |
118. Maturity of exposures (UK CR1-A) - Solo Consolidation | 150 |
119. Changes in the stock of non-performing loans and | |
advances (UK CR2) - Solo Consolidation | 150 |
120. Credit quality of forborne exposures (UK CQ1) - Solo | |
Consolidation | 150 |
121. Credit quality of performing and non-performing | |
exposures by past due days (UK CQ3) - Solo Consolidation | 152 |
122. Quality of non-performing exposures by geography | |
(UK CQ4) - Solo Consolidation | 154 |
123. Credit quality of loans and advances to non-financial | |
corporations by industry (UK CQ5) - Solo Consolidation | 155 |
124. CRM techniques overview: Disclosure of the use of credit risk mitigation techniques (UK CR3) - Solo
Consolidation | 156 |
125. Standardised approach - Credit risk exposure and CRM | |
effects (UK CR4) - Solo consolidation | 157 |
126. Liquidity Coverage Ratio (LCR) (UK LIQ1) - Solo | |
consolidation | 158 |
127. Net Stable Funding Ratio (UK LIQ2) - Solo consolidation | 160 |
128. Remuneration awarded for the financial year | |
(UK REM1) - Solo Consolidation | 162 |
129. Special payments to staff whose professional activities have a material impact on institutions' risk profile
(identified staff) - Solo Consolidation (UK REM2) | 163 |
130. Deferred remuneration (UK REM3) - Solo Consolidation | 164 |
131. Remuneration of 1 million EUR or more per year | |
(UK REM4) - Solo Consolidation | 166 |
132. Information on remuneration of staff whose professional activities have a material impact on institutions' risk profile (identified staff) (UK REM5) - Solo
Consolidation | 167 |
133. Overview of RWA - Significant Subsidiaries | 168 |
134. Leverage ratio common disclosure - Significant | |
Subsidiaries | 170 |
135. Market risk regulatory capital requirements for | |
significant subsidiaries | 170 |
Standard Chartered - Pillar 3 Disclosures 2023
1. Introduction
Introduction
1.1 Purpose and basis of preparation
The Pillar 3 disclosures comprise information on the underlying drivers of risk-weighted assets (RWA), capital, leverage and liquidity ratios as at 31 December 2023 in accordance with the United Kingdom's (UK) onshored Capital Requirements Regulation (CRR) and the Prudential Regulation Authority's (PRA) Rulebook.
The disclosures have been prepared in line with the disclosure templates introduced by the PRA Policy Statement PS22/21 'Implementation of Basel standards: Final rules published in October 2021.
This report presents the annual Pillar 3 disclosures of Standard Chartered PLC ('the Group') as at 31 December 2023 and should be read in conjunction with the Group's Annual Report and Accounts.
The information presented in this Pillar 3 report is not required to be, and has not been, subjected to external audit.
1.2 Highlights
- The Group's capital and leverage position is managed within the Board-approved risk appetite. The Group is well capitalised with low leverage and high levels of loss-absorbing capacity
- The Group is well capitalised with a Common Equity Tier 1 (CET1) ratio of 14.1 per cent, well ahead of the current requirement of 10.5 per cent
- The Group is not highly leveraged and its leverage ratio of 4.7 per cent is well ahead of the current leverage requirement of 3.7 per cent
- The Group continues to manage its balance sheet proactively, with a particular focus on the efficient management of RWA
Capital base $million
51,741 | 53,151 | |
39,806 | 40,641 | |
34,314 | 34,157 | |
Total capital | ||
Tier 1 | ||
CET1 Capital | ||
2023 | 2022 |
Capital ratios %
21.2 | 21.7 | |
16.3 | 16.6 | |
14.1 | 14.0 | |
Total capital | ||
Tier 1 | ||
CET1 Capital | ||
2023 | 2022 |
RWA by risk type 2023 $million
Credit risk | 189,377 78% |
RWA by risk type 2022 $million
Credit risk | 194,976 80% | |
244,151 |
Credit valuation | 1% | |
adjustment risk | 2,046 | |
Operational risk | 27,861 | 11% |
Market risk | 24,867 | 10% |
244,711 |
Credit valuation | 1% | ||
adjustment risk | 1,879 | ||
Operational risk | 27,177 | 11% | |
Market risk | 20,679 | 8% | |
Standard Chartered - Pillar 3 Disclosures 2023 | 1 |
Pillar 3 disclosures | Introduction | |
1.3 Key prudential metrics
Table 1: Key metrics template (UK KM1)
31.12.23 | 30.09.23 | 30.06.23 | 31.03.23 | 31.12.22 | ||
$million | $million | $million | $million | $million | ||
Available own funds1 | ||||||
1 | Common Equity Tier 1 (CET1) capital | 34,314 | 33,569 | 34,896 | 34,402 | 34,157 |
Common Equity Tier 1 (CET1) capital as if IFRS 9 or analogous | 34,314 | |||||
ECLs transitional arrangements had not been applied | 33,569 | 34,896 | 34,402 | 34,051 | ||
2 | Tier 1 capital | 39,806 | 39,061 | 40,388 | 39,894 | 40,641 |
Tier 1 capital as if IFRS 9 or analogous ECLs transitional | 39,806 | |||||
arrangements had not been applied | 39,061 | 40,388 | 39,894 | 40,535 | ||
3 | Total capital | 51,741 | 51,112 | 52,669 | 52,318 | 53,151 |
Total capital as IFRS 9 or analogous ECLs transitional | 51,741 | |||||
arrangements had not been applied | 51,112 | 52,669 | 52,318 | 53,035 | ||
Risk-weighted exposure amounts1 | ||||||
4 | Total risk-weighted exposure amount | 244,151 | 241,506 | 249,117 | 250,893 | 244,711 |
Total risk-weighted exposure amount if IFRS 9 or analogous ECLs | 244,151 | |||||
transitional arrangements had not been applied | 241,506 | 249,117 | 250,893 | 244,766 | ||
Risk-based capital ratios as a percentage of RWA | ||||||
5 | Common Equity Tier 1 ratio | 14.1% | 13.9% | 14.0% | 13.7% | 14.0% |
Common Equity Tier 1 ratio as if IFRS 9 or analogous ECLs | 14.1% | |||||
transitional arrangements had not been applied | 13.9% | 14.0% | 13.7% | 13.9% | ||
6 | Tier 1 ratio | 16.3% | 16.2% | 16.2% | 15.9% | 16.6% |
Tier 1 ratio as if IFRS 9 or analogous ECLs transitional | 16.3% | |||||
arrangements had not been applied | 16.2% | 16.2% | 15.9% | 16.6% | ||
7 | Total capital ratio | 21.2% | 21.2% | 21.1% | 20.9% | 21.7% |
Total capital ratio as if IFRS 9 or analogous ECLs transitional | 21.2% | |||||
arrangements had not been applied | 21.2% | 21.1% | 20.9% | 21.7% | ||
Additional CET1 buffer requirements as a percentage of RWA1 | ||||||
8 | Capital conservation buffer | 2.50% | 2.50% | 2.50% | 2.50% | 2.50% |
9 | Institution specific countercyclical capital buffer | 0.39% | 0.37% | 0.29% | 0.28% | 0.27% |
10 | Global Systemically Important Institution buffer | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% |
11 | Combined buffer requirement | 3.89% | 3.87% | 3.79% | 3.78% | 3.77% |
UK 11a | Overall capital requirements | 10.51% | 10.48% | 10.39% | 10.38% | 10.37% |
12 | CET1 available after meeting the total SREP own funds | 7.43% | ||||
requirements | 7.29% | 7.40% | 7.09% | 7.35% | ||
UK leverage ratio | ||||||
13 | Leverage ratio total exposure measure | 847,142 | 823,546 | 844,979 | 857,214 | 854,311 |
14 | Leverage ratio | 4.7% | 4.7% | 4.8% | 4.7% | 4.8% |
Additional leverage ratio disclosure requirements | ||||||
14a | Fully loaded ECL accounting model leverage ratio excluding | 4.7% | ||||
claims on central banks (%) | 4.7% | 4.8% | 4.7% | 4.8% | ||
14b | Leverage ratio including claims on central banks (%) | 4.2% | 4.2% | 4.3% | 4.2% | 4.4% |
14c | Average leverage ratio excluding claims on central banks (%) | 4.6% | 4.7% | 4.7% | 4.6% | 4.7% |
14d | Average leverage ratio including claims on central banks (%) | 4.1% | 4.2% | 4.2% | 4.2% | 4.3% |
14e | Countercyclical leverage ratio buffer (%) | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% |
Liquidity Coverage Ratio | ||||||
15 | Total high-quality liquid assets (HQLA) (Weighted value | 185,986 | ||||
-average) | 181,663 | 177,767 | 178,289 | 178,203 | ||
UK 16a | Cash outflows - Total weighted value | 182,716 | 181,470 | 180,200 | 182,573 | 184,698 |
UK 16b | Cash inflows - Total weighted value | 66,652 | 66,418 | 66,341 | 64,371 | 62,294 |
16 | Total net cash outflows (adjusted value) | 116,064 | 115,052 | 113,859 | 118,202 | 122,404 |
17 | Liquidity coverage ratio | 160.4% | 158.0% | 156.2% | 151.2% | 145.9% |
Net Stable Funding Ratio | ||||||
18 | Total available stable funding | 403,238 | 400,424 | 396,309 | 392,258 | 389,120 |
19 | Total required stable funding | 296,467 | 296,235 | 296,814 | 298,838 | 300,340 |
20 | NSFR ratio (%) | 136.0% | 135.2% | 133.5% | 131.3% | 129.6% |
1 Capital requirements are presented using transitional provisions
2 Standard Chartered - Pillar 3 Disclosures 2023
1.3 Key prudential metrics continued
Standard Chartered applies regulatory transitional arrangements to accounting provisions recognised from 1 January 2018 under IFRS 9, as permitted by paragraph 4 of article 473a of the Capital Requirements Regulation, introduced by Regulation (EU) 2017/2395 and amended by Regulation (EU) 2020/873 of the European Parliament and of the Council.
Under this approach, the balance of expected credit loss (ECL) provisions in excess of the regulatory defined expected loss (EL) and additional ECL on standardised portfolios, net of
related tax, are phased into the CET1 capital base over five years. The proportion phased in for the increase in the balance on day one of IFRS 9 adoption, and any subsequent increase to 31 December 2019 is 2020, 30 per cent; 2021, 50 per cent; and 2022, 75 per cent. From 2023 onwards there is no transitional relief on these components. The proportion phased in for any increase in the balance from 1 January 2020 at each reporting date is 2020, 0 per cent; 2021, 0 per cent; 2022, 25 per cent; 2023, 50%; 2024, 75%. From 2025 there is no transitional relief.
Introduction
Table 2 shows information about the Group's total loss-absorbing capacity (TLAC) available, and TLAC requirements, applied at the resolution group level under a Single Point of Entry resolution strategy.
Table 2: Key metrics - TLAC requirements (KM2)
31.12.23 | 30.09.23 | 30.06.23 | 31.03.23 | 31.12.22 | ||
$million | $million | $million | $million | $million | ||
Resolution group | ||||||
Total loss-absorbing capacity (TLAC) available | 81,310 | 80,460 | 79,847 | 78,424 | 78,480 | |
Fully loaded ECL accounting model TLAC available | 81,310 | 80,460 | 79,847 | 78,424 | 78,374 | |
Total RWA at the level of the resolution group | 244,151 | 241,506 | 249,117 | 250,893 | 244,711 | |
TLAC as a percentage of RWA | 33.3% | 33.3% | 32.1% | 31.3% | 32.1% | |
Fully loaded ECL accounting model TLAC as a | ||||||
percentage of fully loaded ECL accounting model | 33.3% | |||||
RWA (%) | 33.3% | 32.1% | 31.3% | 32.0% | ||
UK Leverage ratio exposure measure at the level of the | 847,142 | |||||
resolution group | 823,546 | 844,979 | 857,214 | 854,311 | ||
TLAC as a percentage of UK Leverage exposure measure | 9.6% | 9.8% | 9.4% | 9.1% | 9.2% | |
Fully loaded ECL accounting model TLAC as a | ||||||
percentage of fully loaded ECL accounting model | 9.6% | |||||
UK Leverage exposure measure | 9.8% | 9.4% | 9.1% | 9.2% | ||
Does the subordination exemption in the | ||||||
antepenultimate paragraph of Section 11 of the | Yes | |||||
FSB TLAC Term Sheet apply? | Yes | Yes | Yes | Yes | ||
Does the subordination exemption in the penultimate | ||||||
paragraph of Section 11 of the FSB TLAC Term Sheet | No | |||||
apply? | No | No | No | No | ||
If the capped subordination exemption applies, the | ||||||
amount of funding issued that ranks pari passu with | ||||||
Excluded Liabilities and that is recognised as external | ||||||
TLAC, divided by funding issued that ranks pari passu | ||||||
with Excluded Liabilities and that would be recognised | N/A | |||||
as external TLAC if no cap was applied (%) | N/A | N/A | N/A | N/A |
Standard Chartered - Pillar 3 Disclosures 2023 | 3 |
Pillar 3 disclosures | Introduction | |
1.4 Regulatory disclosure framework
The Group complies with the Basel III framework as implemented in the United Kingdom. The Basel III framework is built on the three pillars of the Basel II framework.
Pillar 1: Sets the minimum capital requirements for credit risk, market risk and operational risk
Pillar 2: Considers through the Supervisory Review and Evaluation Process whether further capital is required in addition to Pillar 1 calculations
Pillar 3: Aims to provide a consistent and comprehensive disclosure framework that enhances comparability between banks and further promotes improvements in risk management. Pillar 3 requires all material risks to be disclosed, enabling a comprehensive view of the bank's risk profile
The Pillar 3 Disclosures 2023 comprise all information required to be included in the UK and are prepared at the Group consolidated level. Where disclosure has been withheld as proprietary or non-material, as permitted by the rules, appropriate comment has been included. It is the Group's intention that the Pillar 3 Disclosures be viewed as an integral, albeit separately reported, element of the Annual Report and Accounts. The Group considers a number of factors in determining where disclosure is made between the Annual Report and Accounts and Pillar 3, including International Financial Reporting Standards (IFRS), regulatory requirements and industry best practice. Pages 8 to 11 of this document provide a summary of differences and cross references between the Annual Report and Accounts and the Pillar 3 Disclosures.
Remuneration
The qualitative Pillar 3 remuneration disclosures for the 2023 performance year are set out on pages 182 to 207 of the Directors' remuneration report in the 2023 Annual Report and Accounts. Information is provided on the key components of our remuneration approach and how we develop our approach. The disclosures follow the requirements set out in Part 8 of the CRR and the Basel Committee on Banking Supervision (BCBS) standards issued in March 2017.
G-SIB
The Group has been identified as a Global Systemically Important Bank (G-SIB) by the Financial Stability Board (FSB) since November 2012. The Group's score from the BCBS's methodology for assessing and identifying G-SIBs has resulted in an additional loss-absorbency requirement of 1 per cent of CET1. Article 441 of chapter 4 of the 'Disclosure (CRR)' part of the PRA Rulebook requires the Group to publicly disclose the value of its Global Systemically Important Institution (G-SII) indicators on an annual basis. The terms 'G-SIB' and 'G-SII' are interchangeable - 'G-SIB' is used by the FSB and Basel Committee, whereas the PRA refers to 'G-SII'. The Standard Chartered PLC G-SII disclosure is published on: https://www. sc.com/en/investors/financial-results/.
Frequency
In accordance with Group policy the Pillar 3 Disclosures are made quarterly as at 31 March, 30 June, 30 September and
31 December in line with Article 432 of the CRR. Disclosures are published on the Standard Chartered PLC website aligning with the publication date of the Group's Interim, Half Year and Annual Report and Accounts.
Verification
Whilst the Pillar 3 Disclosures 2023 are not required to be externally audited, the document has been verified internally in accordance with the Group's policies on disclosure and its financial reporting and governance processes. Controls comparable to those for the 2023 Annual Report and Accounts have been applied to confirm compliance with PRA regulations.
- Items excluded on the grounds of materiality:
- Quantitative disclosures of specialised lending exposures where the simple risk-weight approach is used, non- deducted participations in insurance undertakings, composition of collateral for exposures to derivatives and securities financing transactions, off-balance sheet collateral received, effect on the RWAs of credit derivatives used as CRM techniques and Collateral obtained by taking possession and execution processes
- Qualitative and quantitative disclosures on exposures to equities not included in the trading book
4 Standard Chartered - Pillar 3 Disclosures 2023
1.5 Risk management
Effective risk management is essential in delivering consistent and sustainable performance for all our stakeholders and is a central part of the financial and operational management of the Group. One of the main risks we incur arises from extending credit to customers through our trading and lending operations. Beyond Credit Risk, we are also exposed to a range of other risk types such as Traded Risk, Treasury Risk, Operational & Technology Risk, Reputational & Sustainability,
Compliance Risk, Information and Cyber Security Risk, Financial Crime Risk, Model Risk.
In the Risk management approach section of the 2023 Annual Report and Accounts, we outline our approach and strategy for managing risk. We discuss our risk management practices, monitoring and mitigation, and governance in relation to our main activities and significant risks.
Introduction
Principal Risks
PRTs are risks inherent in our strategy and business model. These are formally defined in our ERMF, which provides a structure for monitoring and controlling these risks through the Risk Appetite Statement. We will not compromise compliance with our Risk Appetite in order to pursue revenue growth or higher returns.
The table below provides an overview of the Group's PRTs and their corresponding risk appetite statements.
Principal Risk Types | Risk Appetite Statement |
Credit Risk | The Group manages its credit exposures following the principle of diversification across products, |
geographies, client segments and industry sectors. (refer to section Credit risk in pages 320 to 322 of the | |
2023 Annual Report and Accounts) | |
Traded Risk | The Group should control its financial markets and activities to ensure that market and counterparty credit |
risk losses do not cause material damage to the Group's franchise. (refer to section Traded risk on pages | |
323 to 324 of the 2023 Annual Report and Accounts) | |
Treasury Risk | The Group should maintain sufficient capital, liquidity and funding to support its operations, and an |
interest rate profile ensuring that the reductions in earnings or value from movements in interest rates | |
impacting banking book items does not cause material damage to the Group's franchise. In addition, the | |
Group should ensure its Pension plans are adequately funded. (refer to section Treasury risk on pages 325 | |
to 326 of the 2023 Annual Report and Accounts) | |
Operational and | The Group aims to control operational and technology risks to ensure that operational losses (financial or |
Technology Risk | reputational), including those related to the conduct of business matters, do not cause material damage to |
the Group's franchise. (refer to section Operational and Technology risk on pages 327 to 328 of the 2023 | |
Annual Report and Accounts) | |
Financial Crime Risk | The Group has no appetite for breaches of laws and regulations related to Financial Crime, recognising |
that whilst incidents are unwanted, they cannot be entirely avoided. (refer to section Financial Crime risk on | |
page 329 of the 2023 Annual Report and Accounts) | |
Compliance Risk | The Group has no appetite for breaches of laws and regulations related to regulatory non-compliance; |
recognizing that whilst incidents are unwanted, they cannot be entirely avoided. (refer to section | |
Compliance risk on page 330 of the 2023 Annual Report and Accounts) | |
Information and Cyber | The Group aims to mitigate and control ICS risks to ensure that incidents do not cause the Bank material |
Security Risk | harm, business disruption, financial loss or reputational damage - recognising that whilst incidents are |
unwanted, they cannot be entirely avoided. (refer to section Information and Cyber Security risk on page | |
331 of the 2023 Annual Report and Accounts) | |
Reputational and | The Group aims to protect the franchise from material damage to its reputation by ensuring that any |
Sustainability Risk | business activity is satisfactorily assessed and managed with the appropriate level of management and |
governance oversight. This includes a potential failure to uphold responsible business conduct in striving to | |
do no significant environmental and social harm. (refer to section Reputational Sustainability risk on pages | |
332 to 333 of the 2023 Annual Report and Accounts) | |
Model Risk | The Group has no appetite for material adverse implications arising from misuse of models or errors in the |
development or implementation of models; whilst accepting some model uncertainty. (refer to section | |
Model risk on pages 334 to 335 of the 2023 Annual Report and Accounts) |
Credit Risk
Credit risk is the potential for loss due to the failure of a counterparty to meet its obligations to pay the Group. Credit exposures arise from both the banking and trading books.
Credit risk is managed through a framework that sets out policies and procedures covering the measurement and management of credit risk. The Credit Risk Function, as a second line control function, performs independent challenge, monitoring and oversight of the credit risk management practices of the Business and Functions engaged in or supporting revenue generating activities which constitute the First Line of defence. Risk appetite is defined by the Group and approved by the Board. It is the maximum amount and type of risk that the Group is willing to assume in pursuit of its strategies. Credit exposure limits are approved within a defined credit approval authority framework.
The Group manages its credit exposures following the principle of diversification across products, geographies, client segments and industry sectors.
The Group uses the Advanced Internal Ratings Based (IRB) approach to calculate credit risk capital requirements with the approval of our relevant regulators. This approach builds on the Group's risk management practices and is the result of a continuing investment in data warehouses and risk models.
For portfolios where the Group does not have IRB approval, or where the exposures are permanently exempt from the IRB approach, the Standardised Approach (SA) is used.
Refer to Credit Risk (pages 320 to 322) in the 2023 Annual Report and Accounts where we describe the main components of credit risk management, including our credit risk profile, credit risk measurement and policies set in line with risk appetite. For the scope and main content of reporting to senior management, refer to page 320 in the 2023 Annual Report and Accounts.
Standard Chartered - Pillar 3 Disclosures 2023 | 5 |
Pillar 3 disclosures | Introduction | |
1.5 Risk management continued
Traded Risk
Traded Risk is the potential for loss resulting from activities undertaken by the bank in financial markets. Under the Enterprise Risk Management Framework, the Traded Risk Framework brings together Market Risk, Counterparty Credit Risk and Algorithmic Trading. Traded Risk Management is the core risk management function supporting market-facing businesses, predominantly Financial Markets and Treasury Markets.
Market Risk is the potential for fair value loss due to adverse moves in financial markets. The Group's exposure to Market Risk arises predominantly from the following sources:
- Trading book:
- The Group provides clients access to financial markets, facilitation of which entails the Group taking moderate Market Risk positions. All trading teams support client activity. There are no proprietary trading teams. Hence, income earned from market risk-related activities is primarily driven by the volume of client activity rather than risk-taking
- Non-tradingbook:
- The Treasury Markets desk is required to hold a liquid assets buffer, much of which is held in high-quality marketable debt securities
- The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these are not hedged, the Group is subject to structural foreign exchange risk which is reflected in reserves
The primary categories of market risk for the Group are interest rate risk, foreign exchange rate risk, commodity risk, credit spread risk and equity risk.
We use a value at risk (VaR) model for the measurement of the market risk capital requirements for part of the trading book exposures where permission to use such model has been granted by the PRA. Where our market risk exposures are not approved for inclusion in a VaR model, the capital requirements are determined using the standard rules set by the regulatory framework.
Counterparty credit risk is the risk that a counterparty defaults before satisfying its obligations under a derivative, a securities financing transaction (SFT) or a similar contract.
Refer to Traded risk 323 to 324 in the 2023 Annual Report and Accounts where we describe the main components of traded risk management, including our traded risk profile.
6 Standard Chartered - Pillar 3 Disclosures 2023
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