Annual Financial Report - Part 7, 23 Feb 2021 16:30

23 February 2021, 16:30

Source - LSE Regulatory

RNS Number : 0675Q

HSBC Holdings PLC

23 February 2021

Group Remuneration Committee

The Group Remuneration Committee is responsible for setting the overarching principles, parameters and governance of the Group's remuneration framework for all employees, and the remuneration of executive Directors, the Group Chairman and other senior Group employees. The Committee regularly reviews the framework in the context of consistent and effective risk management, and the regulatory requirements of multiple jurisdictions.

No Directors are involved in deciding their own remuneration. All members of the Committee are independent non-executive Directors of HSBC Holdings. A copy of the Committee's terms of reference can be found on our website at www.hsbc.com/our-approach/corporate-governance/board-committees.

The Committee met five times during 2020. James Forese was appointed as a member of the Committee on 1 May 2020. David Nish stepped down as a member of the Committee on 23 February 2021. The following is a summary of the Committee's key activities during 2020.

Matters considered during 2020
	Jan	May	Jul	Sep	Dec
Remuneration framework and governance
Group variable pay pool, workforce performance and pay matters, Gender Pay Gap report, and employee surveys					
Executive Director remuneration policy implementation, scorecards and pay proposals					
Remuneration for other senior executives of the Group					
Non-executive Director compensation					
Shareholder consultation and proxy adviser views					
Directors' remuneration report					
Regulatory, risk and audit
Information on material risk and audit events, and performance and remuneration impacts for individuals involved					
Regulatory updates and filings, including approach and outcomes for the identification of Material Risk Takers					
Corporate governance briefings					
Principal subsidiaries
Matters from subsidiary committees					

Advisers

The Committee received input and advice from different advisers on specific topics during 2020. Deloitte LLP's engagement with the Committee was extended during 2020. The Committee's decision reflected the quality and objectivity of the independent advice that Deloitte had provided to the Committee on remuneration matters. Deloitte provided benchmarking data on remuneration policy matters and independent advice to the Committee. Deloitte also provided tax compliance and other advisory services to the Group.

The Committee also received advice from Willis Towers Watson on market data and remuneration trends for senior management. Willis Towers Watson was appointed as remuneration adviser by management after considering invited proposals from similar consultancy firms. It provides actuarial support to Global Finance and benchmarking data and services related to benefits administration for our Group employees. To ensure the advice from Deloitte and Willis Towers Watson was objective, the Committee required the advice to be independent and distinct from any internal review and analysis on remuneration policy matters. The Committee was satisfied the advice provided by Deloitte and Willis Towers Watson was objective and independent in 2020. Deloitte is a founding member of the Remuneration Consultants Group and voluntarily operates under the code of conduct in relation to executive remuneration consulting in the UK.

For 2020, total fees of £173,900 and £68,289 were incurred in relation to remuneration advice provided by Deloitte and Willis Towers Watson, respectively. This was based on pre-agreed fees and a time-and-materials basis.

Attendees and interaction with other Board committees

During the year, Noel Quinn as the Group Chief Executive provided regular briefings to the Committee. In addition, the Committee engaged with and received updates from the following:

• Mark Tucker, Group Chairman;

• Elaine Arden, Group Chief Human Resources Officer;

• Alexander Lowen, Group Head of Performance Management, Reward, Human Resources Transformation and People Analytics;

• Pam Kaur, Group Chief Risk Officer;

• Colin Bell, Group Chief Compliance Officer;

• Jonathan Calvert-Davies, Group Head of Audit; and

• Aileen Taylor, Group Company Secretary and Chief Governance Officer.

The Committee also received feedback and input from the Group Risk Committee and Group Audit Committee on risk, conduct and compliance-related matters relevant to remuneration.

Review of workforce remuneration and related policies

In light of the year's challenging circumstances, the Committee's review and approval of the workforce remuneration strategy was particularly focused on ensuring protection for our junior employees and delivering appropriate pay differentiation for those areas of the business that performed well.

The Committee also reviewed the results of remuneration outcomes across the Group to ensure they were in line with our pay principles (as set out on page 233). This included details of variable remuneration adjustments and information on reward outcomes by performance and behaviour ratings. The Committee uses this information to assess the effectiveness of our remuneration framework and whether our framework aligns employee rewards with our values.

We measure our employees' sentiment on performance and pay matters through our annual pay review surveys. In the first half of 2020, the Committee reviewed the results of the most recent survey. A significant proportion of the respondents' comments indicated improved sentiment towards our pay review process. The majority of employees believed their year-end ratings were a fair reflection of their performance and behaviour, and felt motivated to perform at their best following their performance review.

Committee effectiveness

The annual review of the effectiveness of the Board committees was internally facilitated during 2020. Overall, the review concluded that the Group Remuneration Committee continued to operate effectively, with a number of positive aspects of the operation and practices highlighted by the review. There were also areas of improvement identified, including the engagement dynamic with advisers. The Committee has considered and discussed the outcomes of the evaluation, and accepts the findings with a number of actions to address them already in progress. The outcomes of the evaluation have been reported to the Board and the Committee will track progress against the recommendations during 2021.

Our approach to workforce remuneration

Remuneration principles

Our performance and pay strategy aims to reward competitively the achievement of long-term sustainable performance by attracting, motivating and retaining the very best people, regardless of gender, ethnicity, age, disability or any other factor unrelated to performance or experience. It supports our people to perform their roles in the long-term interests of our stakeholders, which includes the customers and communities we serve, our shareholders and our regulators. The strategy is underpinned by:

• decisions that are fair, appropriate and free from bias;

• a culture supportive of continuous feedback through manager and employee empowerment;

• reward and recognition of sustainable performance and values-aligned behaviour; and

• a balanced, simple and transparent total reward package that supports employee well-being.

Spotlight on 2020: Our response to the Covid-19 outbreak

These principles were key to facilitating the agile approach we took to pay and performance in response to the Covid-19 outbreak. In response to the challenging circumstances our colleagues faced, we offered them increased practical support, recognised them for their exceptional response to our customers and each other, and helped to ensure fair and appropriate treatment.

Appropriate practical support for our colleagues

• We took a country-based approach to our response to ensure that what we provided to our employees was appropriate for the conditions and restrictions in place in their location.

• Our priority was to support the well-being of our employees using a range of initiatives focusing on:

- enabling employees to work flexibly to support additional caring responsibilities;

- ensuring employees could purchase the equipment they needed to work from home wherever possible;

- providing financial assistance to employees who may have incurred additional costs, for example where normal commuting or onsite catering services were disrupted; and

- supporting mental and physical well-being with employee assistance programmes, access to Covid-19-related private medical treatment and flu vaccination initiatives.

• More than 50% of our total employee population responded to our mid-year employee survey. Of those who responded, 86% of employees reported they were getting the support they needed from their line manager, and 83% said they believed HSBC valued their well-being.

Recognising the exceptional response

• We ran a 'Spotlight' campaign within our 'At Our Best Recognition' points programme that focused on recognising our Covid-19 Heroes.

• There were over 169,000 colleague recognitions made over a three-month period, a threefold increase in recognitions compared with previous Spotlight campaigns that we have run.

Helping managers to make fair decisions

• The majority of our people underwent a change in working pattern and/or location as a result of the Covid-19 outbreak. We wanted to ensure our people are always recognised against relevant and achievable objectives with allowance for barriers to performance outside of their control.

• In response to the Covid-19 outbreak, we issued specific guidance for managing performance under some of the most common scenarios our people found themselves in, to support our managers in continuing to make performance decisions.

Our approach to performance and pay in 2020 for the broader workforce was underpinned by our remuneration principles.

Fair, appropriate and free from bias

• Our communications to managers encouraged them to challenge their assessments by questioning whether they were objective and based on fact. Managers in similar roles then came together to complete fairness reviews of the performance and behaviour ratings of their team and make any necessary adjustments based on the review of the peer group to mitigate the risk of bias and take a broader view of team performance.

• We supported managers, particularly the less experienced ones, to make informed, consistent and fair pay decisions. Managers of 96% of our junior employees are supported by simplified or guided decision making.

• As part of our annual performance and pay review process, we undertook analytical reviews to check for and identify bias, and provide these reports to our senior management and Group Remuneration Committee as part of their review of annual pay review outcomes.

• We made pay and performance reporting tools available to our managers for the purpose of undertaking an analytical review of pay decisions for their team. We continue to enhance these based on manager feedback to make these tools useful and increase usage.

• We regularly review our pay practices and in 2020 worked with independent third parties to review equal pay.

• If pay differences are identified that are not due to an objective reason such as performance or skills and experience, we made adjustments.

A culture of continuous feedback through manager and employee empowerment

• We seek to create a culture where our people can fulfil their potential, gain new skills and develop their careers for the future.

• In 2020, we enhanced our continuous feedback culture, Everyday Performance and Development, which supported our people to have regular conversations with their line managers about items such as their performance, pay, development and well-being throughout the year.

• We launched our Continuous Performance Management tool, including on mobile, to make it easier for our people as team members and as managers to share activities, feedback, achievements and progress regularly to drive conversations.

• We encouraged colleagues to use our online career planning tools to help them with their thinking about future roles and the capabilities they require.

• Line managers were provided with clear guidance materials to support them in making fair and appropriate decisions at key stages in the performance and pay decision-making process. We were clear on the decisions that managers are empowered to own and provided them with principles to support such decision making.

• Employees also received notifications and guidance throughout the performance and pay review period to support their understanding of what is expected of them and what they can expect.

Reward and recognition of sustainable performance and values-aligned behaviour

• We have a robust performance management process that underpins our approach to reward and drives clear pay differentiation.

• Group and business unit performance is used in determining the Group variable pay pool and its allocation to each business unit. Where performance in a year is weak, as measured by both financial and non-financial metrics, this will impact the relevant pool, while the final pool also considers the external operating environment and expectation of our stakeholders.

• Assessment of individual performance is made with reference to a balanced scorecard of clear and relevant financial and non-financial objectives, including appropriate risk and compliance objectives.

• We believe it is important to recognise our people not just for results, but also for upholding our values. As such, subject to local law, employees receive a behaviour rating as well as a performance rating to ensure performance is assessed not only on what is achieved, but also on how it is achieved.

• We undertake analytical reviews to ensure there is clear pay differentiation across both performance and behaviour ratings, which are provided to senior management and the Group Remuneration Committee as part of their oversight of the remuneration outcomes for the Group's workforce.

• We recognise examples of exceptional positive conduct through an increase in variable pay, and apply a reduction in variable pay for misconduct or inappropriate behaviour that exposes us to financial, regulatory or reputational risk.

• Our global 'At Our Best' recognition programme allows our people to recognise their colleagues for demonstrating our values, with an award of recognition points that can be redeemed against a wide range of goods. Over one million peer-to-peer recognitions were made globally in 2020.

• We promote employee share ownership through variable pay deferral or voluntary enrolment in an all-employee share plan, which assists with incentivising long-term sustainable performance.

Balanced, simple and transparent total reward packages, which support employee well-being

• We maintain an appropriate balance between fixed pay, variable pay and employee benefits, taking into consideration an employee's seniority, role, individual performance and the market. We are informed, but not driven, by market position and practice.

• For the 2020 pay review process, we have prioritised fixed pay increases for our global career bands 6 to 8 population, where it represents a higher proportion of total compensation, and towards locations and business areas which are particularly integral to the execution of the Group's strategy.

• We are committed to employee well-being and offer employee benefits that support the mental, physical and financial health of a diverse workforce.

• All HSBC employees that work in a jurisdiction with a legal minimum wage are paid at or above this amount. In 2014, HSBC in the UK was formally accredited by the Living Wage Foundation for having adopted the 'Living Wage' and the 'London Living Wage'.

Our approach to Directors' remuneration

This section summarises our remuneration policy for executive and non-executive Directors. The policy was approved at the AGM on
12 April 2019 and is intended to apply for three performance years until the AGM in 2022. The full remuneration policy, including the policy on payment for loss of office, can be found on pages 175 to 184 of our Annual Report and Accounts 2018 and the Directors' Remuneration Policy Supplement, which is available under Group Results and Reporting in the Investor Relations section of www.hsbc.com.

Remuneration policy summary - executive Directors


Base salary¹	• Base salary is paid in cash on a monthly basis. • Other than in exceptional circumstances, the base salary for the current executive Directors will not increase by more than 15% above the level at the start of the policy period in total for the duration of the policy.	Base salary will be increased by 1.6% in line with the overall increase for Group employees. Base salary from 1 March 2021 will be as follows: • Noel Quinn: £1,291,000 • Ewen Stevenson: £753,000
To attract and retain key talent by being market competitive and rewarding ongoing contribution to role.
Fixed pay allowance ('FPA')¹	• The FPA is granted in instalments of immediately vested shares. • On vesting, shares equivalent to the net number of shares delivered (after those sold to cover any income tax and social security) are subject to a retention period and released annually on a pro-rata basis over five years, starting from the March immediately following the end of the financial year for which the shares are granted. • Dividends are paid on the vested shares held during the retention period.	FPA for 2021 will be as follows: • Noel Quinn: £1,700,000 • Ewen Stevenson: will increase from £950,000 to £1,085,000 from 1 March 2021
To deliver a level of fixed pay required to reflect the role, skills and experience of the Directors and to maintain a competitive total remuneration package for retention of key talent.
Cash in lieu of pension	• Cash in lieu of pension is paid on a monthly basis as 10% of base salary. • This allowance, as a percentage of salary, is not more than the maximum contribution rate, as a percentage of salary, that HSBC could make for a majority of employees who are defined contribution members of the HSBC Bank (UK) Pension Scheme.	• No change to percentage of base salary.
To attract and retain key talent by being market competitive.

Annual incentive	• The maximum opportunity is up to 215% of base salary. • Annual incentive performance is measured against an individual scorecard. • At least 50% of any award is delivered in shares, which are normally immediately vested. • On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators. • Awards will be subject to clawback (i.e. repayment or recoupment of paid vested awards) for a period of seven years from the date of award, extending to 10 years in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. Any unvested awards will be subject to malus (i.e. reduction and/or cancellation) during any applicable deferral period. • The Committee retains the discretion to: - apply a longer retention period; - increase the proportion of the award to be delivered in shares; and - defer the vesting of a portion of the award.	• See page 249 for details of performance measures.
To drive and reward performance against annual financial and non-financial objectives that are consistent with the strategy and align to shareholder interests.

Long-term incentive ('LTI')	• The maximum opportunity is up to 320% of base salary. • The LTI is granted if the Committee considers that there has been satisfactory performance over the prior year. • The LTI is subject to a forward-looking three-year performance period from the start of the financial year in which the awards are granted. • At the end of the performance period, awards will vest in five equal instalments, with the first vesting on or around the third anniversary of the grant date and the last instalment vesting on or around the seventh anniversary of the grant date. • On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators. • Awards are subject to malus provisions prior to vesting. Vested shares are subject to clawback for a period of seven years from the date of award, extending to 10 years in the event of an ongoing internal/regulatory investigation at the end of the seven-year period. • Awards may be entitled to dividend equivalents during the vesting period, paid on vesting. Where awards do not receive dividend equivalents, the number of shares awarded can be determined using the share price discounted for the expected dividend yield.	• See page 249 for further details.
To incentivise sustainable long-term performance and alignment with shareholder interests.

1 The executive Directors have made the personal decision to donate 100% of their increases to salaries and increases to their fixed pay allowances for 2021 to charity given the ongoing challenging external environment.

Remuneration policy summary - executive Directors


Benefits	• Benefits include the provision of medical insurance, accommodation, car, club membership, independent legal advice in relation to a matter arising out of the performance of employment duties for HSBC, tax return assistance or preparation and travel assistance (including any associated tax due, where applicable). • Additional benefits may also be provided when an executive is relocated or spends a substantial proportion of his/her time in more than one jurisdiction for business needs.	• Benefits to be provided as per policy. Details will be disclosed in the Annual Report and Accounts 2021 single figure of remuneration table.
To provide benefits in accordance with local market practice.

Shareholding guidelines	Executive Directors are expected to satisfy the following shareholding requirement as a percentage of base salary within five years from the date of their appointment: • Group Chief Executive: 400% • Group Chief Financial Officer: 300%	• No change to percentage of base salary.
To ensure appropriate alignment with the interest of our shareholders.
All-employee share plans	Executive Directors are eligible to participate in all-employee share plans, such as HSBC Sharesave, on the same basis as all other employees.	• Participation in any such plans will be disclosed in the Annual Report and Accounts 2021, as required.
To promote share ownership by all employees.

Illustration of release profile

The following chart provides an illustrative release profile of remuneration for executive Directors.

Illustration of release profile

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029



Fixed pay allowance

• Released in five equal annual instalments starting from March 2021.



Annual incentive

• Paid 50% in cash and 50% in immediately vested shares subject to a retention period of one year.

• Subject to clawback provisions for seven years from grant, which may be extended to 10 years in the event of an ongoing internal/regulatory investigation.

Perform-ance period

Retained shares



Clawback



Long-term incentive

• Award granted taking into consideration performance over the prior year and also subject to a three-year forward-looking performance period.

• Subject to performance outcome, awards will vest in five equal annual instalments starting from the third anniversary of the grant date¹.

• On vesting, shares are subject to a retention period of one year.

• Unvested awards subject to malus provisions.

• Subject to clawback provisions for seven years from grant, which may be extended to 10 years in the event of an ongoing internal/regulatory investigation.

Performance period

Vesting period



Retention period



Malus



Clawback



1 The seven-year vesting period and the one-year post-vesting retention period applied to shares granted under the LTI aligns with the minimum five-year holding period expected by shareholders and under the UK Corporate Governance Code as the share awards will be released over a period of eight years with a weighted-average holding period of six years.

The table below details how the Group Remuneration Committee addresses the principles set out in the UK Corporate Governance Code in respect of the Directors' remuneration policy.


Clarity	• The Committee regularly engages and consults with key shareholders to take into account shareholder feedback and to ensure there is transparency on our policy and its implementation. • Our employees were informed about the Directors' remuneration policy approved by our shareholders at our 2019 AGM. Details of our remuneration practices and our remuneration policy for Directors are published and available to all our employees.
Remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce.
Simplicity	• Our Directors' remuneration policy has been designed to achieve simplicity while complying with the provisions set out in the UK Corporate Governance Code and the remuneration rules of the UK's Prudential Regulation Authority and Financial Conduct Authority, as well as meeting the expectations of our shareholders. The objective of each remuneration element is explained and the amount paid in respect of each element of pay is clearly set out.
Remuneration structures should avoid complexity and their rationale and operation should be easy to understand.
Risk	• In line with regulatory requirements, our remuneration practices promote sound and effective risk management while supporting our business objectives (see page 252). • Risk and conduct considerations are taken into account in setting the variable pay pool, from which any executive Director variable pay is funded. • Executive Directors' annual and LTI scorecards include a mix of financial and non-financial measures. Financial measures in the scorecards are subject to a CET1 underpin to ensure CET1 remains within risk tolerance levels while achieving financial targets. In addition, the overall scorecard outcome is subject to a risk and compliance underpin. • The deferred portion of any awards granted to executive Directors is subject to a seven-year deferral period during which our malus policy can be applied. All variable pay awards that have vested are subject to our clawback policy for a period of up to seven years from the award date (extending to 10 years where an investigation is ongoing).
Remuneration structures should identify and mitigate against reputational and other risks from excessive rewards, as well as behavioural risks that can arise from target-based incentive plans.
Predictability	• The charts set out on page 7 of our Directors' remuneration policy show how the total value of remuneration and its composition vary under different performance scenarios for executive Directors. The Directors' remuneration policy can be found at www.hsbc.com/our-approach/corporate-governance/remuneration.
The range of possible values of rewards to individual Directors and any other limits or discretions should be identified and explained at the time of approving the policy.
Proportionality	• The annual incentive scorecard rewards achievement of our annual operating targets and the LTI scorecard rewards achievement of long-term financial and shareholder value creation targets. • The Committee retains the discretion to reduce (to zero if appropriate) the annual incentive and LTI payout based on the outcome of the relevant scorecards, if it considers that the payout determined does not appropriately reflect the overall position and performance of the Group during the performance period.
The link between individual awards, the delivery of strategy and the long-term performance of the Group should be clear and outcomes should not reward poor performance.
Alignment with culture	• In order for any annual incentive award to be made, each executive Director must achieve a required behaviour rating, which is assessed by reference to the HSBC Values. • Annual incentive and LTI scorecards contain non-financial measures linked to our wider social obligations. This includes measures related to reducing the environmental impact of our operations, improving customer satisfaction, diversity and employee engagement. • Annually, senior employees participate in a 360 degree survey which gathers feedback on values-aligned behaviours.
Incentive schemes should drive behaviours consistent with the Group's purpose, values and strategy.

Remuneration policy - non-executive Directors

Non-executive Directors are not employees. They receive base fees for their service and further fees for additional Board duties, including but not limited to chairmanship, membership of a committee, or acting as the Senior Independent Director and/or Deputy Chairman.

Non-executive Directors also receive a travel allowance of £4,000 towards the additional time commitment required for travel.

Any other taxable or other expenses incurred in performing their role are reimbursed, as well as any related tax cost on such reimbursement.

All non-executive Directors are expected to satisfy a shareholding guideline of 15,000 shares within five years of their appointment.

There have been no changes to the non-executive Directors' fees from the remuneration policy approved at the AGM in 2019, with the exception of a revised fee for the Senior Independent Director. This change was approved by the Committee following Sir Jonathan Symonds' retirement from the Board and as Deputy Group Chairman and Senior Independent Director in February 2020, when David Nish was appointed as Senior Independent Director.

In addition, and in light of the increasingly significant role of technology in the Group's strategy, operations and growth prospects, the Board approved the establishment of a Technology Governance Working Group for a period of 12 months. The working group has been tasked with developing recommendations to strengthen the Board's oversight of technology strategy, governance and emerging risks.

The working group will be jointly chaired by Eileen Murray and Steven Guggenheimer, given their expertise and experience in this area. Jackson Tai, the Group Risk Committee Chair, will be a member, with other non-executive Directors members from our US, UK, European and Asian principal subsidiaries.

The time commitment expected of the co-Chairs will be up to 30 days, reflective of the complexity and profile of the subject matter. As a result, the Group Remuneration Committee have determined a fee of £60,000. Members will not receive fees.

Accordingly, the following table sets out the fees for 2021.

		2021 fees
Position		£
Non-executive Group Chairman¹		1,500,000
Non-executive Director (base fee)		127,000
Senior Independent Director²		200,000
Group Risk Committee	Chair	150,000
	Member	40,000
Group Audit Committee and Group Remuneration Committee	Chair	75,000
	Member	40,000
Nomination & Corporate Governance Committee	Chair	--
	Member	33,000
Technology Governance Working Group	Co-Chair	60,000

1 The Group Chairman does not receive a base fee or any other fee in respect of chairing of the Nomination & Corporate Governance Committee.

2 For the period to 18 February 2020, a fee of £375,000 was paid in respect of the combined role of Deputy Group Chairman and Senior Independent Director.

Service contracts

Executive Directors

The length of service and notice periods of executive Directors are set at the discretion of the Committee, taking into account market practice, governance considerations, and the skills and experience of the particular candidate at that time.

	Contract date (rolling)	Notice period (Director and HSBC)
Noel Quinn	18 March 2020	12 months
Ewen Stevenson	1 December 2018	12 months

Service agreements for each executive Director are available for inspection at HSBC Holdings' registered office. Consistent with the best interests of the Group, the Committee will seek to minimise termination payments. Directors may be eligible for a payment in relation to statutory rights. The Directors' biographies

are set out on pages 198 to 203, and include those directorships provided for under the Capital Requirements Regulation II.

Non-executive Directors

Non-executive Directors are appointed for fixed terms not exceeding three years, which may be renewed subject to their re-election by shareholders at AGMs. Non-executive Directors do not have service contracts, but are bound by letters of appointment issued for and on behalf of HSBC Holdings, which are available for inspection at HSBC Holdings' registered office. There are no obligations in the non-executive Directors' letters of appointment that could give rise to remuneration payments or payments for loss of office.

Non-executive Directors' current terms of appointment will expire as follows:

2021 AGM	2022 AGM	2023 AGM
Mark Tucker	Irene Lee	David Nish
Heidi Miller	José Antonio Meade Kuribreña	Jackson Tai
Laura Cha	Pauline van der Meer Mohr
James Forese¹	Henri de Castries
Steven Guggenheimer¹
Eileen Murray¹

1 James Forese, Steven Guggenheimer and Eileen Murray were appointed following the 2020 AGM and therefore their initial three-year appointment terms are subject to approval of their election by shareholders at the 2021 AGM. Their initial three-year term of appointment will end at the conclusion of the 2024 AGM, subject to shareholders' approval at the relevant AGMs.

Annual report on remuneration

This section sets out how our approved Directors' remuneration policy was implemented during 2020.

Single figure of remuneration

(Audited)

The following table shows the single figure of total remuneration of each executive Director for 2020, together with comparative figures.

Single figure of remuneration

(£000)	2020	2019	2020	2019
Base salary²	1,266	503	738	719
Fixed pay allowance	1,700	695	950	950
Cash in lieu of pension	127	50	74	107
Taxable benefits³	186	41	12	16
Non-taxable benefits³	59	23	32	28
Total fixed	3,338	1,312	1,806	1,820
Annual incentive⁴	799	665	450	1,082
Notional returns⁵	17	-	-	-
Replacement award⁶	-	-	1,431	1,974
Total variable	816	665	1,881	3,056
Total fixed and variable	4,154	1,977	3,687	4,876

1 Noel Quinn succeeded John Flint as interim Group Chief Executive with effect from 5 August 2019 and was appointed permanently into the role on 17 March 2020. The remuneration included in the single figure table above for 2019 is in respect of his services provided as an executive Director for that year.

2 As outlined on page 230, the executive Directors each donated a quarter of their base salary for six months in 2020. The base salary shown in the single figure of remuneration is the gross salary before charitable donations.

3 Taxable benefits include the provision of medical insurance, accommodation, car and tax return assistance (including any associated tax due, where applicable). Non-taxable benefits include the provision of life assurance and other insurance cover.

4 Under the policy approved by shareholders, executive Directors can receive 50% of their annual incentive award in cash and the remaining 50% in immediately vested shares subject to a one-year retention period. As the executive Directors each decided not to take an annual cash bonus, the 2020 annual incentive is the amount after this waiver and will be delivered in immediately vested shares subject to a one-year retention period. The total annual incentives waived by the Group Chief Executive and Group Chief Financial Officer were £799,000 and £450,000, respectively.

5 'Notional returns' refers to the notional return on deferred cash for awards made in prior years. The deferred cash portion of the annual incentive granted in prior years includes a right to receive notional returns for the period between the grant date and vesting date, which is determined by reference to a rate of return specified at the time of grant. A payment of notional return is made annually and the amount is disclosed on a paid basis in the year in which the payment is made.

6 As set out in the 2018 Directors' remuneration report, in 2019 Ewen Stevenson was granted replacement awards to replace unvested awards, which were forfeited as a result of him joining HSBC. The awards, in general, match the performance, vesting and retention periods attached to the awards forfeited, and will be subject to any performance adjustments that would otherwise have been applied. The values included in the table for 2019 relate to Ewen Stevenson's 2015 and 2016 LTI awards granted by The Royal Bank of Scotland Group plc ('RBS') for performance years 2014 and 2015, respectively, and replaced with HSBC shares when Ewen Stevenson joined HSBC. These awards are not subject to further performance conditions and commenced vesting in March 2019. The total value is an aggregate of £1,121,308 for the 2015 LTI and £852,652 for the 2016 LTI. The 2016 LTI award value has been determined by applying the performance assessment outcome of 27.5% as disclosed in RBS's Annual Report and Accounts 2018 (page 70) to the maximum number of shares subject to performance conditions. Values in the table for 2020 relate to his 2017 LTI award granted by RBS for performance year 2016, which was determined by applying the performance assessment outcome of 56.25% as disclosed in RBS's Annual Report and Accounts 2019 (page 91) to the maximum number of shares subject to performance conditions. This resulted in a payout equivalent to 78.09% of the RBS award shares that were forfeited and replaced with HSBC shares. A total of 313,608 shares were granted in respect of his 2017 LTI replacement award at a share price of £6.643. The HSBC share price was £5.845 when the awards ceased to be subject to performance conditions, with no value attributable to share price appreciation.

Benefits

The values of the significant benefits in the single figure table are set out in the following table¹.


(£000)	2020	2019
Insurance benefit (non-taxable)	51	-
Car and driver (UK and Hong Kong)	139	-

1 The value of benefits provided to Noel Quinn in 2019 were not deemed significant. The insurance and car benefits for Ewen Stevenson are not included in the above table as they were not deemed significant.

Determining executive Directors' performance

(Audited)

Awards made to executive Directors reflected the Committee's assessment of performance against scorecard objectives which were developed with consideration for the Group's strategic priorities and risk appetite. The targets for financial measures were set at the start of the financial year. They were not revised for the significant economic impact of the Covid-19 outbreak due to the Committee's desire that reward for our executive Directors should reflect the experience of our shareholders in the year. For non-financial objectives, the performance assessment involved considering targets set in line with our disclosed commitments, such as carbon emissions reduction, diversity, survey results for employee experience and customer satisfaction measures, as detailed in the non-financial performance assessment table. Performance achieved against each measure was applied to the weighting of each objective to determine the outcome percentage. As part of this assessment, the Committee consulted the Group Risk Committee and took into consideration its feedback in determining outcomes for the executive Directors' risk and compliance measures. It also considered whether any discretion should be exercised with respect to the risk and compliance underpin.

As set out in the scorecard assessment table below, the target for profit before tax was not met. However, good progress was made against the targets set for RWA optimisation and cost-savings measures, and strong progress was made on the non-financial metrics, as our commitment to delivering responsibly for our stakeholders remained unchanged throughout the pandemic.

Overall, this level of performance resulted in a payout of 64.50% of the maximum for the Group Chief Executive and 63.75% for the Group Chief Financial Officer. The Committee reviewed these outcomes in the context of a number of internal and external

considerations to determine whether it should exercise its discretion to reduce the outcome, including:

• overall share price performance in the year, which was significantly impacted by both the Covid-19 outbreak and the impact of the regulator's request to suspend dividend payments;

• the impact of the bonus pool reduction on the total compensation for our wider workforce;

• profit before tax and RoTE performance; and

• the positive actions taken by the Board to support our customers, colleagues and communities in these difficult and uncertain times.

Taking the above into account, the Committee determined that the 2020 formulaic scorecard outcome appropriately rewards the executive Directors for their performance within the context of overall stakeholder experience. With the voluntary waiver of cash bonuses by the executive Directors, the effective payout was reduced to 32.25% of the maximum for the Group Chief Executive (2019: 66.40%) and 31.88% for the Group Chief Financial Officer (2019: 77.50%).

In order for any annual incentive award to be made, each executive Director must achieve a minimum behaviour rating, which is assessed by reference to the HSBC Values. For 2020, both executive Directors met this requirement.

The maximum 2020 annual incentive opportunity for Noel Quinn was set at 195% of salary and for Ewen Stevenson at 191% of salary.

Annual assessment
				Group Chief Executive			Group Chief Financial Officer
	Minimum (25% payout)	Maximum (100% payout)	Performance	Weighting (%)	Assessment (%)	Outcome (%)	Weighting (%)	Assessment (%)	Outcome (%)
Grow profit before tax¹ ($bn)	19.91	23.38	14.77	30.0	-	-	20.0	-	-
RWA optimisation² ($bn)	35.00	44.90	51.50	20.0	100.0	20.00	20.0	100.0	20.00
Cost savings ($bn)	1.00	1.60	1.04	-	-	-	10.0	30.0	3.00
Customer satisfaction	See following section for non-financial performance commentary			10.0	80.0	8.00	10.0	80.0	8.00
Employee experience				10.0	95.0	9.50	10.0	95.0	9.50
Environment				10.0	85.0	8.50	10.0	85.0	8.50
Risk and compliance				10.0	85.0	8.50	10.0	85.0	8.50
Personal objectives				10.0	100.0	10.00	10.0	62.5	6.25
Total				100.0		64.50	100.0		63.75
Maximum annual incentive opportunity (£000)						£2,478			£1,412
Annual incentive pre-cash waiver (£000)						£1,598			£900
Annual incentive post-cash waiver (£000)						£799			£450

1 Profit before tax, as defined for Group annual bonus pool calculation. This definition excludes business disposal gains and losses, debt valuation and goodwill adjustments and variable pay expense. However, it takes into account fines, penalties and costs of customer redress, including provisions, which are excluded from the adjusted profit before tax. Other significant items are included or excluded in line with the principles underpinning the definition. The adjusted profit before tax as per adjusted results is found on page 2.

2 As set out in our February 2020 business update, our objective is to reduce RWAs in low-return franchises (in particular the US and the non-ring-fenced bank in Europe and the UK) and redeploy capital in areas of faster growth and higher returns. Our target is to achieve a $100bn reduction by 2022, with a $35bn RWA reduction target for 2020. We achieved a reduction of $51.5bn during 2020, which included a reduction of $37.4bn in GBM, mainly in our non-ring-fenced bank and in the US, and $12.9bn in CMB, primarily in our ring-fenced bank.

Non-financial performance

Shared objectives for the Group Chief Executive and Group Chief Financial Officer

Customer satisfaction

Re-engineer the business with digital technology to improve customer service

• In our Wealth and Personal Banking business, our retail customer satisfaction scores in six of seven scale markets (excluding SABB) were ranked in the top three or improved at least two ranks against the benchmark, and three markets improved their digital satisfaction scores. Our private banking business did not meet either of its improvement targets.

• In our Commercial Banking business, four of seven scale markets (excluding SABB) improved their customer satisfaction scores and six improved their digital satisfaction scores.

• Our Global Banking and Markets business met the target of improving on its 2019 net promoter score of 38, with a global net promoter score of 48 (compared with a global competitor score of 40). The global digital satisfaction score of 64% also exceeded the global competitor digital satisfaction score of 36%.

• In Hong Kong, we launched a fully remote, digital account opening solution for business customers, while in the UK, we launched HSBC Kinetic, our new app-only digital banking offering for small and medium-sized business customers. In China, we launched Pinnacle, our new digital platform for wealth planning and insurance services.

• During the Covid-19 outbreak, we enhanced our digital capabilities to serve more customers remotely, with faster access and improved security. We also engaged with regulators to help customers gain better access to a broad range of banking products and services from their homes, including through remote consultations and sales.

• We maintained a high level of business continuity and customer support with 85% of colleagues equipped to work from home, all of our customer contact centres fully operational, and between 70% and 90% of our branches open for business.

• We worked with governments to support national schemes, granting over 720,000 payment holidays to our personal customers and 237,000 loans to our wholesale customers. We provided more than $26bn in customer relief to our personal customers during the initial stages of the pandemic and more than $52bn in lending to wholesale customers, many of whom still require our support.

• We helped our clients raise over $1.89tn in capital markets financing, and we retained a top-three position in green, social and sustainable finance bonds, according to Dealogic's rankings. Our Global Banking and Markets business helped arrange more than $125bn of financing for our clients through social and Covid-19 relief bonds.

Employee experience

Improve engagement, diversity and succession

Employee engagement

• Our Employee Engagement Index, which measures employee survey sentiment on pride, advocacy, intent to stay, motivation and feeling of accomplishment questions, increased by five percentage points to 72%, meeting our target to improve the metric.

• During the Covid-19 outbreak, extra steps were undertaken to maintain a healthy culture, including: a regular dialogue with our colleagues through regular leadership calls and communications; listening closely to their needs; and providing the support and flexibility to manage their lives during the pandemic. A culture of 'looking out for each other' was encouraged and employee networks held regular support calls for employees, specifically those experiencing mental health challenges and those with caring responsibilities.

• We ran a mid-year employee survey to determine how the Covid-19 outbreak was impacting our colleagues and how we could support them through this period. More than 50% of our total employee population responded, of which more than 89% said they were getting the information they needed from the organisation, 86% reported that they were getting the support they needed from their line manager, and 86% of the respondents reported they felt confident in leadership. In addition, 75% of employees that participated in our 2020 Snapshot survey said they believed HSBC values their well-being.

Diversity and inclusion

• We met our aspirational target of achieving at least 30% women holding senior leadership positions by 2020.

• Several components of the global diversity and inclusion strategy were reprioritised throughout 2020 in direct response to the Black Lives Matter movement and the Covid-19 outbreak. Good progress was made, with key achievements including the design and launch of the global ethnicity inclusion programme, progression of the global disability confidence programme and the appointment of new executive sponsors for the 'Embrace' and 'Balance' employee resource groups.

• We delivered phase one of the global diversity data project, which collected and reported employee ethnicity data in 21 countries and territories through a self-identification campaign.

Group Executive Committee succession planning

• Succession plans have been updated for all Group Executive Committee roles and approved by the Group Nomination & Corporate Governance Committee.

• The Group also identified a number of enterprise critical roles across the organisation and succession plans have also been updated for these roles with approval from the Group Executive Committee.

• The majority of 'ready now' and 'develop in role' successors on these plans have undergone leadership assessments with our third-party specialist provider, with all development plans documented. A global executive coaching panel is utilised and executive development solutions have been designed to be implemented in 2021.

Environment

Sustainable operations and sustainable finance

• We reduced our carbon emission tonnes to 1.76 per full-time equivalent employee ('FTE'), beating the target of 2.0 tonnes per FTE we had set for 2020. It was recognised that reduced travel and increased working from home due to the Covid-19 outbreak impacted this outcome, and as a result, the performance assessment for this metric was revised down.

• We exceeded our sustainable finance and investment target of $24bn by facilitating, financing and investing in the development of clean energy, lower-carbon technologies and projects that contribute to the delivery of the Paris Agreement and the UN Sustainable Development Goals.

• We were recognised as 'The World's Best Bank for Sustainable Finance' by Euromoney in its Awards for Excellence 2020.

• Awareness of climate change impacts across the organisation continued to increase, with 93% of relationship managers completing their required sustainability training modules.

Risk and compliance

Achieve effective management of non-financial risk Group-wide and fulfilment of regulatory obligations.

Achieve sustained delivery against the Global Conduct framework and effective financial crime risk management.

• In spite of the additional stress due to the operational challenges of the Covid-19 outbreak, enabled by the non-financial risk optimisation programme outcomes, the organisation maintained fair customer outcomes and a stable non-financial risk profile while implementing new products and adapting to significantly different ways of working.

• In 2020, we completed our financial crime risk operational effectiveness exercise programme, with all countries having passed the Global Standards exit criteria and assurance. While there was year-on-year improvement in performance against a number of specific financial crime risk metrics, it was recognised that some further work is still required. The executive Directors demonstrated strong commitment to the conduct framework, maintaining focus on fair outcomes for our customers and market integrity. In 2020, this included initiatives to minimise the impact of the Covid-19 crisis and protect the business with rapid introduction of initiatives and mitigation against unacceptable levels of conduct risk.

Personal measures for the Group Chief Executive and Group Chief Financial Officer

Group Chief Executive

Simplify the Group operating model

• As part of the Group transformation programme, we commenced work on 'organisation simplification and design' by defining roles with clear accountabilities and decision rights, simplifying and minimising matrix reporting and realising transformation objectives through the redesign of certain structures across businesses and functions.

• The programme successfully delivered all key milestones in 2020, including: the establishment of design principles to shape the future organisation model and structures; the creation of the Group Organisational Design Authority to drive consistent design thinking; the simplification of the Group Executive Committee and the introduction of a clear operating rhythm to increase discipline and focus on strategy and performance delivery; the redesign of the majority of top leadership structures; the definition of a consistent role taxonomy across business and functions; and the identification of reductions in FTEs and cost, principally at senior levels.

Group Chief Financial Officer

• Deploy Cloud technologies in Global Finance function

• Reduce Finance function costs and number of full-time equivalents

• The Finance on the Cloud programme will transform the way the Global Finance function operates by rationalising operational processes, automation of data production and providing faster delivery of comprehensive data to our internal and external stakeholders. The programme has progressed into the execution phase in 2020, with the programme design, scope and implementation approach approved.

• The first phase of implementation, which relates to the risk-weighted assets reporting process for our UK entities, was successfully implemented in November 2020. Execution plans are in place for the further extension of Cloud technologies within the UK pilot in 2021, followed by a global deployment.

• The target of reducing Finance function costs to $0.8bn was met, but the target number of full-time equivalent staff in the function was not achieved.

2017 long-term incentive performance

The 2017 LTI award was granted to Marc Moses (former Group Chief Risk Officer) and Iain Mackay (former Group Finance Director)¹.

Assessment of the LTI award in respect of 2017 (granted in 2018)

Average return on equity (with CET1 underpin)² (20%)	9.0%	10.0%	11.0%	7.3%	0.0%	0.00%
Cost-efficiency ratio (20%)	60.0%	58.0%	55.5%	62.4%	0.0%	0.00%
Relative total shareholder return³ (20%)	At median of peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	Rank 11th	0.0%	0.00%
Risk and compliance⁴ (25%) • Achieve and sustain compliance with Global Financial Crime Compliance policies and procedures. • Achieve a sustainable adoption of Group operation risk management framework, along with its policies and practices. • Achieve and sustain delivery of global conduct outcomes and compliance with conduct of business regulatory obligations.	Performance assessed by the Committee based on a number of qualitative and quantitative inputs such as Group Financial Crime Risk assessment against Financial Crime Compliance objectives, outcome of assurance and audit reviews, and achievement of long-term Group objectives and priorities during the performance period, with input and approval from the Group Risk Committee.			65.0%	65.0%	16.25%
Strategy (15%)
Sustainable finance ($bn)⁵	30.0	34.0	37.0	93.0	100.0%	5.00%
Employee confidence⁶	65.0%	67.0%	70.0%	62.0%	0.0%	0.00%
Customer (based on customer recommendation in top five markets by revenue)	Improvement in recommendation in three of top five markets for WPB, CMB and GBM.	Improvement in recommendation in four of top five markets for WPB, CMB and GBM.	Improvement in recommendation in all of top five markets for WPB, CMB and GBM.	Improvement in three of top five markets	25.0%	1.25%
Total⁷						22.50%

1 Based on the scorecard outcome, 29,655 shares will vest with Iain Mackay and 86,491 shares will vest with Marc Moses (determined by pro-rating their awards for time in employment during the performance period of 1 January 2018 to 31 December 2020). The awards will vest in five equal annual instalments commencing in March 2021. Using the average daily closing share prices over the three months to 31 December 2020 of £3.604 the value of awards to vest with Iain Mackay and Marc Moses is £106,877 and £311,714, respectively.

2 Significant items are excluded from the profit attributable to ordinary shareholders of the company for the purpose of computing adjusted return on equity.

3 The peer group for the 2017 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, JPMorgan Chase & Co., Lloyds Banking Group, Standard Chartered and UBS Group.

4 The performance outcome was reviewed and approved by the Group Risk Committee taking into account evidence of progress made during the three-year performance period. Specifically, it noted a steady improvement in financial crime risk related audit outcomes, a significant reduction of overdue and re-opened high and medium risk assurance issues and stabilisation of the global residual risk for anti-money laundering, sanctions, and anti-bribery and corruption. The non-financial risk optimisation programme made significant progress during 2020 to demonstrate operational risk management maturity in areas of focus. There was also a steady improvement in conduct ratings with significant improvement seen in Global Banking and Markets since 2018. The Group Risk Committee also noted the need for ongoing enhancements in certain areas and the need for further improvement in approach to conduct management.

5 Assessed based on cumulative financing and investment made to develop clean energy, lower-carbon technologies and projects that contribute to the delivery of the Paris Agreement and the UN Sustainable Development Goals.

6 Assessed based on results of the latest employee Snapshot survey question, 'I am seeing the positive impact of our strategy'.

7 Taking into consideration the overall performance of the Group using a number of internal and external measures, including profit before tax, RoTE, share price and total shareholder returns, the Committee considered that the scorecard outcomes reflected the performance achieved.

Long-term incentive awards

(Audited)

Long-term incentive in respect of 2020

After taking into account performance for 2020, the Committee decided to grant Noel Quinn and Ewen Stevenson LTI awards of £3,718,000 and £2,118,000, respectively. These awards will be subject to 'windfall gain' adjustments, as set out below. As the awards are not entitled to dividend equivalents in accordance with regulatory requirements, the number of shares to be awarded will be adjusted to reflect the expected dividend yield of the shares over the vesting period.

The 2020 LTI awards will have a three-year performance period starting 1 January 2021. During this period, performance will be assessed based on the 2020 LTI scorecard comprising four equally-weighted measures: two financial measures to incentivise value creation for our shareholders; a measure linked to our climate ambitions; and a measure for relative total shareholder return ('TSR').

RoTE was retained as a metric as it remains a key measure of our financial performance and how we generate returns that deliver value for our shareholders. Given the uncertainty from the economic impact of the Covid-19 outbreak, the Committee determined it was most appropriate to assess RoTE at the end of the performance period. This element of the award will continue to be subject to a CET1 underpin.

Capital reallocation to Asia was added as a new metric as this is one of the key levers of our strategy and business transformation plan. This measure will be assessed based on the share of Group tangible equity allocated to Asia at the end of the performance period and is also subject to the CET1 underpin.

The environment and sustainability scorecard measure was added to align to our new climate ambition. Announced in October 2020, we set out how we aim to bring carbon emissions in our own

operations to net zero by 2030 and support our customers in the transition to a more sustainable future with financing, facilitation and investments of $750bn to $1tn over the same time period. Scorecard targets are linked to this climate ambition and performance will be assessed based on the reduction in our carbon footprint and the financing we provide to our clients in their net zero transition.

Relative TSR was retained as a metric in the scorecard as it rewards executive Directors based on comparison of the total shareholder return performance of the Group and a relevant peer group. No changes were made to the peer group used for this purpose. Given the planned strategic shifts in our geographical and business mix, notably future growth investment in Asia and wealth business, we will review our peer group for any relative TSR measure to be used for the 2021 LTI scorecard. The updated peer group will be set out in the Annual Report and Accounts 2021.

The LTI continues to be subject to a risk and compliance modifier, which gives the Committee the discretion to adjust down the overall scorecard outcome to ensure that the Group operates soundly when achieving its financial targets. For this purpose, the Committee will receive information including any risk metrics outside of tolerance for a significant period of time and any risk management failures that have resulted in significant customer detriment, reputational damage and/or regulatory censure.

To the extent performance conditions are satisfied at the end of the three-year performance period, the awards will vest in five equal annual instalments commencing from around the third anniversary of the grant date. On vesting, shares equivalent to the net number of shares that have vested (after those sold to cover any income tax and social security payable) will be held for a retention period of up to one year, or such period as required by regulators.

Performance conditions for LTI awards in respect of 2020

RoTE (with CET1 underpin)¹		8.0%	9.0%	10.0%	25.0
Capital reallocation to Asia (with CET1 underpin)²		45.0%	47.0%	50.0%	25.0
Environment and sustainability³	Carbon reduction	42.0%	48.0%	51.0%	25.0
Environment and sustainability³	Sustainable finance and investment $bn	200.0	240.0	260.0	25.0
Relative TSR⁴		At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	25.0

1 To be assessed based on RoTE at the end of the performance period. The measure will also be subject to a CET1 underpin. If the CET1 ratio at the end of the performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for this measure will be reduced to nil.

2 To be assessed based on share of Group tangible equity (on a constant currency basis and excluding associates) allocated to Asia by 31 December 2023. This metric will be measured on an organic basis and will exclude changes in Group tangible equity allocation resulting from acquisitions and disposals (and also part-acquisitions or part-disposals) of businesses and is subject to the CET1 underpin outlined above.

3 Carbon reduction will be measured based on percentage reduction in total energy and travel emissions achieved by 31 December 2023 using 2019 as the baseline. A sustainable finance and investment metric will assess cumulative financing provided over the period commencing on
1 January 2020 and ending on 31 December 2023.

4 The peer group for the 2020 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.

5 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

2020 LTI grant size

The Committee is conscious of the external commentary on 'windfall gains' from LTI awards given the impact of the Covid-19 outbreak. The Committee is also aware that a number of investors have expressed their preference that, where executives may benefit from 'windfall gains', the Committee is proactive in considering award levels at the time of grant. Based on the above and discussions with investors and proxy voting agencies, the Committee agreed that the 2020 LTI awards should be subject to a 'windfall gain' adjustment at grant if the share price falls significantly relative to the grant price of the 2019 LTI. This is to ensure reward for our executive Directors aligns with the experience of our shareholders and is reflective of management performance over the performance period. While the share price to be used for the 2020 LTI award is not known at this stage, the Committee agreed that, in line with investor expectations, if the 2020 LTI grant share price experiences a greater than 30% decline since the previous grant, this would be considered a material fall in share price (based on review of historical share price volatility and the impact of significant external macroeconomic events). In such an event, an adjustment percentage equal to half the share price percentage decline will be applied to the awards to mitigate the potential for 'windfall gains'. This approach will apply to the 2020 LTI award to be granted in 2021.

2018 long-term incentive award

The LTI granted in respect of 2018 included an ESG measure based on our objective disclosed in the Strategy Update in June 2018 to achieve an 'Outperformer' rating from ratings provider Sustainalytics. Our 2018 Directors' remuneration report noted that in the event Sustainalytics changed its rating approach, the Committee retained the discretion to review and modify the assessment approach and targets to ensure the assessment approach achieved its original purpose.

Sustainalytics has since revised its methodology and replaced 'performer' ratings with low, medium and high risk ratings. In 2020, the Committee approved a revised assessment approach and targets that aim for HSBC to 'outperform' a set of peers using Sustainalytics' revised risk-based rating as detailed in the table below. The Committee is comfortable that the proposed targets are no more or less difficult to achieve than the original proposed targets.

Performance conditions for LTI awards in respect of 2018

Average RoTE (with CET1 underpin)¹	10.0%	11.0%	12.0%	75.0
Employer advocacy²	65.0%	70.0%	75.0%	12.5
Environmental, social and governance rank³	At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	12.5

1 If the CET1 ratio at the end of performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for this measure will be reduced to nil.

2 To be assessed based on results of the latest employee Snapshot survey question: 'I would recommend this company as a great place to work'.

3 Peer group (in line with TSR peer group for the 2017 LTI, including three additional peers): Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, Deutsche Bank, DBS Group Holdings, J.P. Morgan Chase & Co., Lloyds Banking Group, Standard Chartered, UBS Group, ICBC, Itau and Santander.

Scheme interests awarded during 2020

(Audited)

The table below sets out the scheme interests awarded to Directors in 2020, as disclosed in the 2019 Directors' remuneration

report. No non-executive Directors received scheme interests during the financial year.

Scheme awards in 2020
(Audited)
	Type of interest awarded	Basis on which award made	Date of award	Face value awarded¹ £000	Percentage receivable for minimum performance	Number of shares awarded	End of performance period
Ewen Stevenson	LTI deferred shares²	% of salary ²	24 February 2020	2,680	25	476,757	31 December 2022
Noel Quinn	Deferred shares ³	Annual incentive	24 February 2020	1,134	-	201,702	31 December 2019
Noel Quinn	Deferred cash ³	Annual incentive	24 February 2020	886	-	N/A	31 December 2019

1 The face value of the award has been computed using HSBC's closing share price of £5.622 taken on 21 February 2020. LTI awards are subject to a three-year forward-looking performance period and vest in five equal annual instalments, between the third and seventh anniversary of the award date, subject to performance achieved. On vesting, awards will be subject to a one-year retention period. Awards are subject to malus during the vesting period and clawback for a maximum period of 10 years from the date of the award.

2 In line with regulatory requirements, scheme interests awarded during 2020 were not eligible for dividend equivalents. In accordance with the remuneration policy approved by shareholders at the 2019 AGM, the LTI award was determined at 290% of salary for Ewen Stevenson and the number of shares to be granted was determined by taking into account a share price discounted based on HSBC's expected dividend yield of 5% per annum for the vesting period (i.e. £4.393). Noel Quinn did not receive the 2019 LTI award that was granted on 24 February 2020, as he was in the Group Chief Executive role in an interim capacity during 2019.

3 2019 annual incentive award received by Noel Quinn for his role as Chief Executive Officer of Commercial Banking and interim Group Chief Executive. As noted in the Annual Report and Accounts 2019, 60% of his annual incentive award was deferred and in line with regulatory requirements split between cash and shares. The awards will vest in five equal annual instalments between the third and seventh anniversary of the award date. On vesting, the deferred shares will be subject to a one-year retention period. As the deferred share awards are not eligible for dividend equivalents, the number of shares to be granted was determined by taking into account a share price discounted based on HSBC's expected dividend yield of 5% per annum for the vesting period (i.e. £4.393).

The above table does not include details of shares issued as part of the fixed pay allowance and shares issued as part of the 2020 annual incentive award that vested on grant and were not subject to any further service or performance conditions. Details of the performance measures and targets for the LTI award in respect of 2019 are set out on the following page.

Performance conditions for LTI awards in respect of 2019

RoTE (with CET1 underpin)^{1, 2}	10.0%	11.0%	12.0%	33.3
Relative TSR³	At median of the peer group	Straight-line vesting between minimum and maximum	At upper quartile of peer group	33.3
Customers	Performance will be assessed by the Committee taking into consideration: • customer satisfaction scores at the start and end of the three-year performance period for our global businesses in home and scale markets as per data provided by an independent third party on HSBC's performance across our products and services; and • progress against customer objectives linked to our strategy over the next three years.			33.3

1 To be assessed based on RoTE in the 2022 financial year. The measure will also be subject to a CET1 underpin. If the CET1 ratio at the end of performance period is below the CET1 risk tolerance level set in the risk appetite statement, then the assessment for this measure will be reduced to nil.

2 Awards will vest on a straight-line basis for performance between the minimum, target and maximum levels of performance set in this table.

3 The peer group for the 2019 award is: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse Group, DBS Group Holdings, Deutsche Bank, J.P. Morgan Chase & Co., Lloyds Banking Group, Morgan Stanley, Standard Chartered and UBS Group.

Executive Directors' interests in shares

(Audited)

The shareholdings of all persons who were executive Directors in 2020, including the shareholdings of their connected persons, at 31 December 2020 (or the date they stepped down from the Board, if earlier) are set out below. The following table shows the comparison of shareholdings with the company shareholding guidelines. There have been no changes in the shareholdings of the executive Directors from 31 December 2020 to the date of this report.

Individuals are given five years from their appointment date to build up the recommended levels of shareholding. Unvested share-based incentives are not normally taken into consideration in assessing whether the shareholding requirement has been met.

The Committee reviews compliance with the shareholding requirement and has full discretion in determining if any unvested shares should be taken into consideration for assessing compliance with this requirement, taking into account shareholder expectations and guidelines. The Committee also has full discretion in determining any penalties for non-compliance.

With regard to the post-employment shareholding requirement, we believe that our remuneration structure achieves the objective of ensuring there is ongoing alignment of executive Directors' interests with shareholder experience post-cessation of their

employment due to the following features of the policy:

• Shares delivered to executive Directors as part of the FPA have a five-year retention period, which continues to apply following a departure of an executive Director.

• Shares delivered as part of an annual incentive award are subject to a one-year retention period, which continues to apply following a departure of an executive Director.

• When an executive Director ceases employment as a good leaver under our policy, any LTI awards granted will continue to be released over a period of up to eight years, subject to the outcome of performance conditions.

An executive Director who ceases employment as a good leaver after a tenure of five years will have share interests not subject to further performance conditions equivalent in value to more than 400% of salary assuming they receive a target payout of 50% for LTI awards.

HSBC operates an anti-hedging policy under which individuals are not permitted to enter into any personal hedging strategies in relation to HSBC shares subject to a vesting and/or retention period.

Shares
(Audited)
	Shareholding guidelines (% of salary)	Shareholding at 31 Dec 2020² (% of salary)		At 31 Dec 2020
					Scheme interests
				Share interests (number of shares)	Share options³	Shares awarded subject to deferral¹
						without performance conditions⁴	with performance conditions⁵
Executive Directors
Noel Quinn⁶	400%	221	%	778,958	-	554,556	-
Ewen Stevenson⁶	300%	265	%	545,731	-	728,790	476,757
Group Managing Directors⁶	250%	n/a		n/a	n/a	n/a	n/a

1 The gross number of shares is disclosed. A portion of these shares will be sold at vesting to cover any income tax and social security that falls due at the time of vesting.

2 The value of the shareholding is calculated using an average of the daily closing share prices in the three months to 31 December 2020 (£3.604).

3 As at 31 December 2020, Noel Quinn and Ewen Stevenson did not hold any options under the HSBC Holdings Savings-Related Share Option Plan (UK).

4 The amount for Ewen Stevenson reflects the award granted in May 2019, replacing the 2015 to 2018 LTIs forfeited by the Royal Bank of Scotland Group plc ('RBS') and is subject to any performance adjustments assessed and disclosed in the relevant Annual Report and Accounts of RBS.

5 LTI awards granted in February 2020 are subject to the performance conditions as set out on page 244.

6 All Group Managing Directors and executive Directors are expected to meet their shareholding guidelines within five years of the date of their appointment (Noel Quinn and Ewen Stevenson were appointed on 5 August 2019 and 1 January 2019 respectively).The shareholding guidelines for Group Managing Directors have been updated from 250,000 shares to 250% of reference salary from 1 January 2019 to align with the approach used for executive Directors.

Summary of shareholder return and Group Chief Executive remuneration

The following graph shows HSBC TSR performance (based on the daily spot Return Index in sterling) against the FTSE 100 Total Return Index for the 10-year period ended 31 December 2020.

The FTSE 100 Total Return Index has been chosen as a recognised broad equity market index of which HSBC Holdings is a member. The single figure remuneration for the Group Chief Executive over the past 10 years, together with the outcomes of the respective annual incentive and LTI awards, are presented in the following table.

HSBC TSR and FTSE 100 Total Return Index

	2011	2012	2013	2014	2015	2016	2017	2018		2019		2020
Group Chief Executive	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	Stuart Gulliver	John Flint	John Flint	Noel Quinn	Noel Quinn
Total single figure £000	8,047	7,532	8,033	7,619	7,340	5,675	6,086	2,387	4,582	2,922	1,977	4,154
Annual incentive¹ (% of maximum)	58%	52%	49%	54%	45%	64%	80%	76%	76%	61%	66%	32%
Long-term incentive^1,2,3 (% of maximum)	50%	40%	49%	44%	41%	-%	-%	100%	-%	-%	-%	-	%

1 The 2012 annual incentive figure for Stuart Gulliver used for this table includes 60% of the annual incentive disclosed in the 2012 Directors' remuneration report, which was deferred for five years and subject to service conditions and satisfactory completion of the five-year deferred prosecution agreement with the US Department of Justice, entered into in December 2012 ('AML DPA') as determined by the Committee. The AML DPA performance condition was met and the award vested in 2018. The value of the award at vesting was included in the 2018 single figure of remuneration and included as long-term incentive for 2018.

2 Long-term incentive awards are included in the single figure for the year in which the performance period is deemed to be substantially completed. For Group Performance Share Plan ('GPSP') awards, this is the end of the financial year preceding the date of grant. GPSP awards shown in 2011 to 2015 are therefore related to awards granted in 2012 to 2016.

3 The GPSP was replaced by the LTI in 2016 and the value for GPSP is nil for 2016 as no GPSP award was made for 2016. LTI awards have a three-year performance period and the first LTI award was made in February 2017. The value of the LTI awards expected to vest will be included in the total single figure of remuneration of the year in which the performance period ends. Noel Quinn did not receive the 2017 LTI award that had a performance period ended on 31 December 2020.

Comparison of Directors' and employees' pay

The following table compares the changes in each Director's pay with changes in employee pay between 2019 and 2020.

Annual percentage change in remuneration


Executive Directors¹
Noel Quinn¹	151.7%	353.7%	20.2%
Ewen Stevenson	2.6%	-25.0%	-58.4%
Non-executive Directors²
Kathleen Casey (retired on 24 April 2020)	-65.0%	200.0%	-
Laura Cha	97.0%	-	-
Henri de Castries	4.1%	-75.0%	-
James Forese	-	-	-
Steven Guggenheimer	-	-	-
Irene Lee	20.3%	-100.0%	-
José Antonio Meade Kuribreña	28.7%	100.0%	-
Heidi Miller	1.1%	-100.0%	-
Eileen Murray	-	-	-
David Nish	108.7%	-50.0%	-
Sir Jonathan Symonds (retired on 18 February 2020)	-86.5%	-4.8%	-
Jackson Tai	-10.8%	-78.9%	-
Mark Tucker	-%	-77.5%	-
Pauline van der Meer Mohr	17.7%	-75.0%	-
Employee group³	2.0%	2.3%	-20.0%

1 Noel Quinn succeeded John Flint as interim Group Chief Executive with effect from 5 August 2019 and was appointed permanently into the role on 17 March 2020. The annual percentage change for Noel Quinn is based on remuneration reported in his 2019 single figure of remuneration (for the period 5 August 2019 to 31 December 2019) and his 2020 single figure of remuneration (for the period 1 January 2020 to 31 December 2020). Based on his annualised 2019 compensation as an executive Director, his percentage change in salary, benefits and annual incentive is 2.1%, 85.2% and -50.9%, respectively.

2 In some instances, non-executive Directors may have served only part of the year resulting in large year-on-year percentage changes in fees and/or benefits. Page 248 provides the underlying single figure of remuneration for non-executive Directors used to calculate the figures above.

3 Employee group consists of individuals employed by HSBC Group Management Services Ltd, the employing entity of the executive Directors, as no individuals are employed directly by HSBC Holdings.

Pay ratio

The following table shows the ratio between the total pay of the Group Chief Executive and the lower quartile, median and upper quartile pay of our UK employees.

Total pay ratio

2020	A	139:1	85:1	43:1
2019	A	169:1	105:1	52:1

Total pay and benefits amounts used to calculate the ratio


2020	A	29,833	23,264	48,703	36,972	96,386	75,000
2019	A	28,920	24,235	46,593	41,905	93,365	72,840

Our ratios have been calculated using the option 'A' methodology prescribed under the UK Companies (Miscellaneous Reporting) Regulations 2018. Under this option, the ratios are computed using full-time equivalent pay and benefits of all employees providing services in the UK at 31 December 2020. We believe this approach provides accurate information and representation of the ratios. The ratio has been computed taking into account the pay and benefits of over 40,000 UK employees, other than the individual performing the role of Group Chief Executive. We calculated our lower quartile, median and upper quartile pay and benefits information for our UK employees using:

• full-time equivalent annualised fixed pay, which includes salary and allowances, at 31 December 2020;

• variable pay awards for 2020, including notional returns paid during 2020;

• gains realised from exercising awards from taxable employee share plans; and

• full-time equivalent value of taxable benefits and pension contributions.

For this purpose, full-time equivalent fixed pay and benefits for each employee have been computed by using each employee's fixed pay and benefits at 31 December 2020. Where an employee works part-time, fixed pay and benefits are grossed up, where appropriate, to full-time equivalent. One-off benefits provided on a temporary basis to employees on secondment to the UK have not been included in calculating the ratios above as these are not permanent in nature and in some cases, depending on individual circumstances, may not truly reflect a benefit to the employee.

Total pay and benefits for the Group Chief Executive used for this purpose is the total remuneration for Noel Quinn as reported in the single figure of remuneration table. Total remuneration does not include an LTI as he has not received an LTI award with a performance period that ended during 2020. In a year in which a value of an LTI is included in the single figure table of remuneration, the above ratios could be higher.

Given the different business mix, size of the business, methodologies for computing pay ratios, estimates and assumptions used by other companies to calculate their respective pay ratios, as well as differences in employment and compensation practices between companies, the ratios reported above may not be comparable to those reported by other listed peers on the FTSE 100 and our international peers.

The decrease in median ratio is primarily driven by the lower annual incentive award for the Group Chief Executive, reflecting the lower scorecard outcome and the voluntary waiver of the cash portion of the award. Without this waiver, the median ratio is 102:1.

While total compensation for the Group Chief Executive declined compared with 2019, total pay and benefits for the median employee for 2020 was 5% higher at £48,703 compared with 2019.

Our UK workforce comprises a diverse mix of employees across different businesses and levels of seniority, from junior cashiers in our retail branches to senior executives managing our global business units. We aim to deliver market-competitive pay for each role, taking into consideration the skills and experience required for the business. Our approach to pay is designed to attract and motivate the very best people, regardless of gender, ethnicity, age, disability or any other factor unrelated to performance or experience. We actively promote learning and development opportunities for our employees to provide them a framework to develop their career. As an individual progresses in their career we would expect their total compensation opportunity to also increase, reflecting their role and responsibilities.

Pay structure varies across roles in order to deliver an appropriate mix of fixed and variable pay. Junior employees have a greater portion of their pay delivered in a fixed component, which does not vary with performance and allows them to predictably meet their day-to-day needs. Our senior management, including executive Directors, generally have a higher portion of their total compensation opportunity structured as variable pay and linked to the performance of the Group, given their role and ability to influence the strategy and performance of the Group. Executive Directors also have a higher proportion of their variable pay delivered in shares, which vest over a period of seven years with a post-vesting retention period of one year. During this deferral and retention period, the awards are linked to the share price so the value of award realised by them after the vesting and retention period will be aligned to the performance of the Group.

We are satisfied that the median pay ratio is consistent with the pay, reward and progression policies for our UK workforce, taking into account the diverse mix of our UK employees, the compensation structure mix applicable to each role and our objective of delivering market competitive pay for each role subject to Group, business and individual performance.

Relative importance of spend on pay

The following chart shows the change in:

• total staff pay between 2019 and 2020; and

• dividends in respect of 2019 and 2020.

In 2019, we returned a total of $1bn to ordinary shareholders through share buy-backs.

Relative importance of spend on pay

	
(56.7)%	0.4%

Return to shareholder		Employee pay
	Dividends

	Share buy-back

1 The fourth interim dividend of 2020, of $0.15 per ordinary share, is an approximation of the amount payable on 29 April 2021.

2 The fourth interim dividend of 2019, of $0.21 per ordinary share, was cancelled in response to a written request from the UK's Prudential Regulation Authority ('PRA'). The 2019 dividends have been re-presented accordingly.

Non-executive Directors

(Audited)

The following table shows the total fees and benefits of non-executive Directors for 2020, together with comparative figures for 2019.

Fees and benefits
(Audited)		Fees¹		Benefits²		Total
(£000)	Footnotes	2020	2019	2020	2019	2020	2019
Kathleen Casey (retired on 24 April 2020)	3,4	78	223	27	9	105	232
Laura Cha	5	587	298	-	-	587	298
Henri de Castries		202	194	1	4	203	198
James Forese	6	160	-	-	-	160	-
Steven Guggenheimer	7	134	-	-	-	134	-
Irene Lee	8	546	454	-	3	546	457
José Antonio Meade Kuribreña		202	157	4	2	206	159
Heidi Miller	9	632	625	7	2	639	627
Eileen Murray	10	120	-	-	-	120	-
David Nish	11	480	230	8	16	488	246
Sir Jonathan Symonds (retired on 18 February 2020)		86	638	20	21	106	659
Jackson Tai	12	355	398	12	57	367	455
Mark Tucker	13	1,500	1,500	52	231	1,552	1,731
Pauline van der Meer Mohr	14	312	265	2	8	314	273
Total (£000)		5,394	4,982	133	353	5,527	5,335
Total ($000)		6,919	6,390	171	453	7,090	6,843

1 The Directors' remuneration policy was approved at the 2019 AGM and the new fees became effective from 13 April 2019. Fees include a travel allowance of £4,000 for non-UK based non-executive Directors and for all non-executive Directors effective from 1 June 2019. Given the travel restrictions in place, the Board was unable to travel to attend meetings in person. Therefore, the travel allowance available to all non-executive Directors was pro-rated to reflect the travel required of the Board during 2020.

2 Benefits include taxable expenses such as accommodation, travel and subsistence relating to attendance at Board and other meetings at HSBC Holdings' registered offices. Amounts disclosed have been grossed up using a tax rate of 45%, where relevant.

3 Appointed as a member of the Group Risk Committee on 17 January 2020.

4 Stepped down as a member of the Financial System Vulnerabilities Committee on 17 January 2020 when the Committee was demised.

5 Includes fees of £423,800 (2019: £104,000) for her role as non-executive Chair and member of the Nomination Committee of The Hongkong and Shanghai Banking Corporation. Following approval of the non-executive Chair fee by the Group Remuneration Committee in 2020, Laura also received a pro-rated additional Chair fee of HK$201,639 paid in respect of the period from 6 December to 31 December 2019.

6 Appointed to the Board and a member of the Group Audit Committee, Group Remuneration Committee and Nomination & Corporate Governance Committee on 1 May 2020.

7 Appointed to the Board and as a member of the Group Risk Committee and Nomination & Corporate Governance Committee on 1 May 2020.

8 Includes fees of £344,000 (2019: £260,000) in relation to her roles as a Director, Remuneration Committee Chair, Audit Committee member and Risk Committee member of The Hongkong and Shanghai Banking Corporation Limited. Fees in relation to her role as a Director, Risk Committee Chair and Audit Committee member, and from 28 December 2020 as a member of the Nomination Committee, of Hang Seng Bank Limited.

9 Includes fees of £430,000 (2019: £431,000) in relation to her role as Chair of HSBC North America Holdings Inc.

10 Appointed to the Board and as member of the Group Audit Committee, Group Risk Committee and Nomination & Corporate Governance Committee on 1 July 2020.

11 Appointed as Senior Independent Director, Chair of the Group Audit Committee and member of the Group Risk Committee on 18 February 2020.

12 Stepped down as Chair of the Financial System Vulnerabilities Committee on 17 January 2020 when the Committee was demised.

13 The Group Chairman donated 100% of his 2020 fee to charities in the UK and Hong Kong supporting vulnerable people and in the local response to Covid-19.

14 Appointed as a member of the Group Audit Committee on 19 February 2020.

Non-executive Directors' interests in shares

(Audited)

The shareholdings of persons who were non-executive Directors in 2020, including the shareholdings of their connected persons, at
31 December 2020, or date of cessation as a Director if earlier, are set out below. Non-executive Directors are expected to meet the

shareholding guidelines within five years of the date of their appointment. All non-executive Directors who had been appointed for five years or more at 31 December 2020 met the guidelines except Irene Lee, who has committed to acquiring the remaining shares as soon as possible, and no later than the conclusion of the 2021 AGM.

Shares
	Shareholding guidelines (number of shares)	Share interests (number of shares)
Kathleen Casey (retired on 24 April 2020)	15,000	15,125
Laura Cha	15,000	16,200
Henri de Castries	15,000	19,251
James Forese (appointed to the Board on 1 May 2020)	15,000	115,000
Steven Guggenheimer (appointed to the Board on 1 May 2020)	15,000	15,000
Irene Lee	15,000	11,904
José Antonio Meade Kuribreña	15,000	15,000
Heidi Miller	15,000	15,700
Eileen Murray (appointed to the Board on 1 July 2020)	15,000	75,000
David Nish	15,000	50,000
Sir Jonathan Symonds (retired on 18 February 2020)	15,000	43,821
Jackson Tai	15,000	66,515
Mark Tucker	15,000	307,352
Pauline van der Meer Mohr	15,000	15,000

Voting results from Annual General Meeting

2020 Annual General Meeting voting results
	For		Against		Withheld
Remuneration report (votes cast)	96.47	%	3.53	%	--
	8,842,653,970		323,238,790		36,605,397
Remuneration policy (2019) (votes cast)	97.36%		2.64%		--
	9,525,856,097		258,383,075		47,468,297

2021 annual incentive scorecards

The 2021 annual incentive scorecard measures for our executive Directors have been set against the backdrop of the continuing impact of the Covid-19 outbreak on the global economy; geopolitical risks, particularly those relating to trade and other tensions; and expectations that global interest rates will remain lower for longer. In this context, the Committee determined the scorecard measures should incentivise adapting our business model to a protracted, low interest-rate environment; reducing our operating costs; and transforming the Group.

Therefore, the 2021 annual incentive scorecard includes financial measures linked to the reduction of the Group's cost base, the reduction of assets in low-return areas and the creation of opportunities in our high-growth areas. The scorecard also includes non-financial measures linked to delivering against our customer and employee objectives.

The Committee will continue to retain discretion to adjust down the formulaic outcomes of scorecards, taking into account factors such as Group profits, wider business performance and

stakeholder experience, to ensure alignment between executive reward and the broader stakeholder experience.

The weightings and performance measures for the 2021 annual incentive award for executive Directors are disclosed below. The performance targets are commercially sensitive and it would be detrimental to the Group's interests to disclose them at the start of the financial year. Subject to commercial sensitivity, we will disclose the targets for a given year in the Annual Report and Accounts for that year in the Directors' remuneration report.

Executive Directors will be eligible for an annual incentive award of up to 215% of base salary.

The 2021 annual incentive scorecards for our Group Managing Directors include similar measures as the executive Directors to drive performance in each of our businesses, functions and regions that contribute to the overall success of the Group. Their annual incentive scorecards will also include RoTE and environmental measures, which are aligned with achieving the three-year forward-looking performance targets in the 2020 LTI.

2021 annual incentive scorecards measures and weightings
	Group Chief Executive	Group Chief Financial Officer
Measures	%	%
Adjusted costs	20.0	20.0
Revenue growth in Asia	20.0	15.0
RWA reduction in legacy assets/low-return areas	20.0	15.0
Customer satisfaction	15.0	15.0
Employee experience	15.0	15.0
Personal objectives¹	10.0	20.0
Total	100.0	100.0

1 For the Group Chief Executive, this includes the launch of our refreshed purpose and values, and the delivery of strategy at pace (equally weighted at 5% each). For the Group Chief Financial Officer, this includes Finance Cloud deployment, resolvability assessment framework attestation, climate stress tests, and Group Finance costs and FTE (equally weighted at 5% each).

The 2021 annual incentive scorecard is subject to a risk and compliance modifier, which allows the Committee the discretion to adjust down the overall scorecard outcome to ensure that the Group operates soundly when achieving its financial targets. For this purpose, the Committee will receive information including any risk thresholds outside of tolerance for a significant period of time and any risk management failures that have resulted in significant customer detriment, reputational damage and/or regulatory censure.

2021 long-term incentives

Details of the performance measures and targets for LTI awards to be made in 2021, in respect of 2020, are provided on page 243.

The performance measures and targets for awards to be made in respect of 2021, granted in 2022, will be provided in the Annual Report and Accounts 2021.

Total pension entitlements

(Audited)

No employees who served as executive Directors during the year have a right to amounts under any HSBC final salary pension scheme for their services as executive Directors or are entitled to additional benefits in the event of early retirement. There is no retirement age set for Directors, but the normal retirement age for employees is 65.

Payments to past Directors

(Audited)

Details of the 2017 LTI outcome, in which Marc Moses (former Group Chief Risk Officer) and Iain Mackay (former Group Finance Director) participated, are outlined on page 242. No payments were made to, or in respect of, former Directors in the year in excess of the minimum threshold of £50,000 set for this purpose.

Payments for loss of office

(Audited)

No payments for loss of office were made to, or in respect of, former or current Directors in the year.

External appointments

During 2020, executive Directors did not receive any fees from external appointments.

Remuneration structure for our Group employees

Total compensation, which comprises fixed and variable pay, is the key focus of our remuneration framework, with variable pay differentiated by performance and adherence to the HSBC Values.

We set out below the key features and design characteristics of our remuneration framework, which apply on a Group-wide basis, subject to compliance with local laws:

Overview of remuneration structure for employees

Fixed pay

Attract and retain employees by paying market competitive pay for the role, skills and experience required for the business.

• Fixed pay may include salary, fixed pay allowance, cash in lieu of pension and other cash allowances in accordance with local market practices. These pay elements are based on predetermined criteria, are non-discretionary, are transparent and are not reduced based on performance.

• Fixed pay represents a higher proportion of total compensation for more junior employees.

• Elements of fixed pay may change to reflect an individual's position, role or grade, cost of living in the country, individual skills, competencies, capabilities and experience.

• Fixed pay is generally delivered in cash on a monthly basis.

Benefits

Provided in accordance with local market practice.

• Benefits may include, but are not limited to, the provision of a pension, medical insurance, life insurance, health assessment and relocation support.

Annual incentive¹

Incentivise and reward performance based on annual financial and non-financial measures consistent with the medium- to long-term strategy, stakeholder interests and adherence to HSBC Values.

• All employees are eligible to be considered for a discretionary variable pay award. Individual awards are determined against a balanced scorecard for performance in excess of that required to fulfil an employee's job description.

• Annual incentives represent a higher proportion of total compensation for more senior employees and will be more closely aligned to Group and business performance as seniority increases.

• Variable pay awards for all Group employees identified as Material Risk Takers ('MRTs') under European Union Regulatory Technical Standard ('RTS') 604/2014 are limited to 200% of fixed pay.²

• Awards are generally paid in cash and shares. For MRTs, at least 50% of the awards are in shares and/or where required by regulations, in units linked to asset management funds.

• A portion of the annual incentive award may be deferred and vest over a period of three to eight years.

Deferral

Alignment with the medium- to long-term strategy, stakeholder interests and adherence to the HSBC Values.

• A Group-wide deferral approach is applicable to all employees. A portion of annual incentive awards above a specified threshold is deferred in shares vesting annually over a three-year period with 33% vesting on the first and second anniversaries of grant and 34% on the third anniversary. Local employees in France are granted deferred awards that vest 66% on the second anniversary and 34% on the third anniversary.

• For MRTs identified in accordance with the UK's PRA and FCA remuneration rules, awards are generally subject to a minimum 40% deferral (60% for awards of £500,000 or more) over a minimum period of three years³. A longer deferral period is applied for certain MRTs as follows:

- five years for individuals identified in a risk-manager MRT role under the PRA and FCA remuneration rules. This reflects the deferral period prescribed by both the PRA and the European Banking Authority for individuals performing key senior roles with the Group; or

- seven years for individuals in PRA-designated senior management functions, being the deferral period mandated by the PRA as reflecting the typical business cycle period.

• Individuals based outside the UK who have not been identified at the Group level as an MRT, but who are identified as MRTs under local regulations, are generally subject to a three-year deferral period. In Germany, a deferral period of up to eight years is applied for members of the local management board and individuals in managerial roles reporting into the management board. In Malta, a five-year deferral period is applied for executive committee members. In Australia, local MRTs are subject to a four-year deferral period in respect of deferred cash awards. Local MRTs are also subject to the minimum deferral rates discussed above, except in China (where a minimum deferral rate of 50% is applied for the Chief Executive Officer), Germany (where a minimum deferral rate of 60% is applied for members of the local management board and individuals in managerial roles reporting into the management board) and Oman (where a minimum deferral rate of 45% is applied).

• Where an employee is subject to more than one regulation, the requirement that is specific to the sector and/or country in which the individual is working is applied, subject to meeting the minimum requirements applicable under each regulation.

• All deferred awards are subject to malus provisions, subject to compliance with local laws. Awards granted to MRTs on or after 1 January 2015 are also subject to clawback.

• HSBC operates an anti-hedging policy for all employees, which prohibits employees from entering into any personal hedging strategies in respect of HSBC securities.

Deferral instruments

Alignment with the medium- to long-term strategy, stakeholder interests and adherence to the HSBC Values.

• Generally, the underlying instrument for all deferred awards is HSBC shares to ensure alignment between the long-term interest of our employees and shareholders.

• For Group and local MRTs, excluding executive Directors where deferral is typically in the form of shares only, a minimum of 50% of the deferred awards is in HSBC shares and the balance is deferred into cash. In accordance with local regulatory requirements, for local MRTs in Brazil and Oman 100% of the deferred amount is delivered in shares or linked to the value of shares.

• For some employees in our asset management business, where required by the regulations applicable to asset management entities within the Group, at least 50% of the deferred award is linked to fund units reflective of funds managed by those entities, with the remaining portion of deferred awards being in the form of deferred cash awards.

Overview of remuneration structure for employees (continued)

Post-vesting retention period

Ensure appropriate alignment with shareholders.

• Variable pay awards made in HSBC shares or linked to relevant fund units granted to MRTs are generally subject to a one-year retention period post-vesting. Local MRTs (except those in Brazil, France, Oman and Russia) are also generally subject to a one-year retention period post-vesting. For local MRTs in Brazil, France and Russia, a six-month retention period is applied. No retention period is applied for local MRTs in Oman.

• MRTs who are subject to a five-year deferral period, except senior management or individuals in PRA- and FCA-designated senior management functions, have a six-month retention period applied to their awards.

Buy-out awards

Support recruitment of talent.

• Buy-out awards may be offered if an individual holds any outstanding unvested awards that are forfeited on resignation from the previous employer.

• The terms of the buy-out awards will not be more generous than the terms attached to the awards forfeited on cessation of employment with the previous employer.

Guaranteed variable remuneration

Support recruitment of talent.

• Guaranteed variable remuneration is awarded in exceptional circumstances for new hires, and is limited to the individual's first year of employment only.

• The exceptional circumstances where HSBC would offer guaranteed variable remuneration would typically involve a critical new hire and would also depend on factors such as the seniority of the individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance year.

Severance payments

Adhere to contractual agreements with involuntary leavers.

• Where an individual's employment is terminated involuntarily for gross misconduct then, subject to compliance with local laws, the Group's policy is not to make any severance payment in such cases. For such individuals, all outstanding unvested awards are forfeited.

• For other cases of involuntary termination of employment the determination of any severance will take into consideration the performance of the individual, contractual notice period, applicable local laws and circumstances of the case.

• Generally, all outstanding unvested awards will normally continue to vest in line with the applicable vesting dates. Where relevant, any performance conditions attached to the awards, and malus and clawback provisions, will remain applicable to those awards.

• Severance amounts awarded to MRTs are not considered as variable pay for the purpose of application of the deferral and variable pay cap rules under the PRA and FCA remuneration rules where such amounts include: (i) payments of fixed remuneration that would have been payable during the notice and/or consultation period; (ii) statutory severance payments; (iii) payments determined in accordance with any approach applicable in the relevant jurisdictions; and (iv) payments made to settle a potential or actual dispute.

1 Executive Directors are also eligible to be considered for a long-term incentive award. See details on page 235.

2 Shareholders approved the increase in the maximum ratio between the fixed and variable components of total remuneration from 1:1 to 1:2 at the 2014 AGM held on 23 May 2014 (98% in favour). The Group has not used the EBA discount rate for the purpose of computing the ratio between fixed and variable components of 2020 total remuneration.

3 In accordance with the terms of the PRA and FCA remuneration rules, and subject to compliance with local regulations, the deferral requirement for MRTs is not applied to individuals where their total compensation is £500,000 or less and variable pay is not more than 33% of total compensation. For these individuals, the Group standard deferral applies.

Link between risk, performance and reward

Our remuneration practices promote sound and effective risk management while supporting our business objectives.

We set out below the key features of our remuneration framework, which help enable us to achieve alignment between risk, performance and reward, subject to compliance with local laws and regulations:

Alignment between risk and reward

Variable pay pool and individual performance scorecard	The Group variable pay pool is expected to move in line with Group performance. We also use a countercyclical funding methodology, with both a floor and a ceiling, with the payout ratio generally reducing as performance increases to avoid pro-cyclicality. The floor recognises that even in challenging times, remaining competitive is important. The ceiling recognises that at higher levels of performance it is not always necessary to continue to increase the variable pay pool, thereby limiting the risk of inappropriate behaviour to drive financial performance. The main quantitative and qualitative performance and risk metrics used for assessment of performance include: • Group and business unit financial performance, including capital requirements; • current and future risks, taking into consideration performance against the risk appetite statement ('RAS'), annual operating plan and global conduct outcomes; • fines, penalties and provisions for customer redress, which are automatically included in the Committee's definition of profit; and • assessment of individual performance with reference to a balanced scorecard of clear and relevant objectives. Objectives included in the performance scorecards of senior management take into account appropriate measures linked to sustainability risks, such as: reduction in carbon footprint; facilitating financing to help clients with their transition to net zero; employee diversity targets; and risk and compliance measures. A mandatory global risk objective is included in the scorecard of all other employees. All employees receive a behaviour rating as well as a performance rating, which ensures performance is assessed not only on what is achieved but also on how it is achieved.
Remuneration for control function staff	• The performance and reward of individuals in control functions, including risk and compliance employees, are assessed according to a balanced scorecard of objectives specific to the functional role they undertake. This is to ensure their remuneration is determined independent of the performance of the business areas they oversee. • The Committee is responsible for approving the remuneration recommendations for the Group Chief Risk Officer and senior management in control functions. • Group policy is for control functions staff to report into their respective function. Remuneration decisions for senior functional roles are led by, and must carry the approval of, the global function head. • Remuneration is carefully benchmarked with the market and internally to ensure it is set at an appropriate level.
Variable pay adjustments and conduct recognition	• Variable pay awards may be adjusted downwards in circumstances including: - detrimental conduct, including conduct that brings HSBC into disrepute; - involvement in events resulting in significant operational losses, or events that have caused or have the potential to cause significant harm to HSBC; and - non-compliance with the HSBC Values and other mandatory requirements or policies. • Rewarding positive conduct may take the form of use of our global recognition programme, At Our Best, or positive adjustments to variable pay awards.
Malus	Malus can be applied to unvested deferred awards granted in prior years in circumstances including: • detrimental conduct, including conduct that brings the business into disrepute; • past performance being materially worse than originally reported; • restatement, correction or amendment of any financial statements; and • improper or inadequate risk management.
Clawback	Clawback can be applied to vested or paid awards granted to MRTs on or after 1 January 2015 for a period of seven years, extended to 10 years for employees under the PRA's Senior Managers Regime in the event of ongoing internal/regulatory investigation at the end of the seven-year period. Clawback may be applied in circumstances including: • participation in, or responsibility for, conduct that results in significant losses; • failing to meet appropriate standards and propriety; • reasonable evidence of misconduct or material error that would justify, or would have justified, summary termination of a contract of employment; and • a material failure of risk management suffered by HSBC or a business unit in the context of Group risk-management standards, policies and procedures.
Sales incentives	• We generally do not operate commission-based sales plans.
Identification of MRTs	• We identify individuals as MRTs based on the qualitative and quantitative criteria set out in the RTS. We also identify MRTs based on additional criteria developed internally. The following key principles underpin HSBC's identification process: - MRTs are identified at Group, HSBC Bank (consolidated) and HSBC UK Bank level. - MRTs are also identified at other solo regulated entity level as required by the regulations. - When identifying an MRT, HSBC considers an employee's role within its matrix management structure. The global business and function that an individual works within takes precedence, followed by the geographical location in which they work. • In addition to applying the qualitative and quantitative criteria specified in the RTS, we also identify additional MRTs based on our own internal criteria, which include compensation thresholds and individuals in certain roles and grades who otherwise would not be identified as MRTs under the criteria prescribed in the RTS. • The list of MRTs, and any exclusions from it, is reviewed by chief risk officers and chief operating officers of the relevant global businesses and functions. The overall results are reviewed by the Group Chief Risk Officer. • The Group Remuneration Committee reviews the methodology, key decisions regarding identification, and the results of the identification exercise, including proposed MRT exclusions.

Additional remuneration disclosures

This section provides disclosures required under the Hong Kong Ordinances, Hong Kong Listing Rules and the Pillar 3 remuneration disclosures.

For the purpose of the Pillar 3 remuneration disclosures, executive Directors and non-executive Directors are considered to be members of the management body. Members of the Group Executive Committee other than the executive Directors are considered as senior management.

MRT remuneration disclosures

The following tables set out the remuneration disclosures for individuals identified as MRTs for HSBC Holdings. Remuneration information for individuals who are only identified as MRTs at HSBC Bank plc, HSBC UK Bank plc or other solo-regulated entity levels is included, where relevant, in those entities' disclosures.

The 2020 variable pay information included in the following tables is based on the market value of awards. For share awards, the market value is based on HSBC Holdings' share price at the date of grant (unless indicated otherwise). For cash awards, it is the value of awards expected to be paid to the individual over the deferral period.

Remuneration - fixed and variable amounts (REM1)
		Fixed ($m)			Variable² ($m)							Total ($m)
	Number of MRTs	Cash-based¹	Share-based	Total	Cash-based	Of which: deferred	Share-based³	Of which: deferred	Other forms	Of which: deferred	Total	Total ($m)
Executive Directors	2	2.8	3.4	6.2	-	-	11.2	9.6	-	-	11.2	17.4
Non-executive Directors	12	7.0	-	7.0	-	-	-	-	-	-	-	7.0
Senior management	15	32.9	-	32.9	17.1	10.3	19.6	12.8	-	-	36.7	69.6
Investment banking	541	342.4	-	342.4	130.6	65.7	138.6	74.6	-	-	269.2	611.6
Retail banking	194	104.2	-	104.2	34.8	15.2	34.8	17.5	-	-	69.6	173.8
Asset management	33	20.5	-	20.5	8.1	3.8	5.7	3.0	2.7	1.8	16.5	37.0
Corporate functions	124	69.9	-	69.9	22.5	10.4	23.2	11.9	-	-	45.7	115.6
Independent control functions	145	67.6	1.2	68.8	18.0	6.1	14.9	7.6	-	-	32.9	101.7
All other	83	64.3	1.3	65.6	17.7	9.0	18.5	10.3	-	-	36.2	101.8
Total	1,149	711.6	5.9	717.5	248.8	120.5	266.5	147.3	2.7	1.8	518.0	1,235.5

1 Cash-based fixed remuneration is paid immediately.

2 Variable pay awarded in respect of 2020. In accordance with shareholder approval received on 23 May 2014 (98% in favour), for each MRT the variable component of remuneration for any one year is limited to 200% of fixed component of the total remuneration.

3 In general, share-based awards are made in HSBC shares. Vested shares are subject to a retention period of up to one year.

Guaranteed bonus, sign-on and severance payments (REM2)
	Guaranteed bonus and sign-on payments¹		Severance payments²
	Made during year ($m)	Number of beneficiaries	Awarded during year ($m)	Number of beneficiaries	Highest such award to a single person ($m)	Paid during year ($m)	Number of beneficiaries
Executive Directors	-	-	-	-	-	-	-
Senior management	-	-	-	-	-	-	-
Investment banking	0.5	1	36.6	38	7.3	35.0	37
Retail banking	0.9	1	5.3	11	1.8	4.6	11
Asset management	-	-	1.9	4	1.0	1.9	4
Corporate functions	1.0	1	5.8	12	2.0	5.8	12
Independent control functions	-	-	4.2	10	0.7	3.6	9
All other	-	-	4.4	6	1.3	4.4	6
Total	2.4	3	58.2	81	-	55.3	79

1 No sign-on payments were made in 2020. A guaranteed bonus is awarded in exceptional circumstances for new hires, and in the first year only. The circumstances where HSBC would offer a guaranteed bonus would typically involve a critical new hire, and would also depend on factors such as the seniority of the individual, whether the new hire candidate has any competing offers and the timing of the hire during the performance year.

2 Includes payments such as payment in lieu of notice, statutory severance, outplacement service, legal fees, ex-gratia payments and settlements (excludes pre-existing benefit entitlements triggered on terminations).

Deferred remuneration at 31 December¹ (REM3)
$m	Total outstanding²	Of which: unvested	Of which: total outstanding deferred and retained exposed to ex post explicit and/or implicit adjustment	Total amount of amendment during the year due to ex post implicit adjustment	Total amount of amendment during the year due to ex post explicit adjustment³	Total amount of deferred paid out in the financial year⁴
Cash
Executive Directors	3.6	3.6	3.6	-	-	0.1
Senior management	27.4	27.4	27.4	-	-	5.1
Investment banking	195.0	195.0	195.0	-	-	62.7
Retail banking	41.9	41.9	41.9	-	-	10.2
Asset management	8.1	8.1	8.1	-	-	3.4
Corporate functions	35.0	35.0	35.0	-	-	9.7
Independent control functions	23.6	23.6	23.6	-	-	4.5
All other	30.2	30.2	30.2	-	-	8.7
Shares
Executive Directors	9.7	9.1	9.7	(5.4)	-	2.5
Senior management	25.7	22.4	25.7	(12.7)	-	11.6
Investment banking	183.3	146.0	183.3	(90.5)	-	130.6
Retail banking	45.9	38.1	45.9	(22.6)	-	29.1
Asset management	5.6	4.2	5.6	(2.7)	-	4.3
Corporate functions	39.5	31.5	39.5	(19.6)	-	26.5
Independent control functions	28.8	26.2	28.8	(14.5)	-	18.0
All other	35.2	27.7	35.2	(17.4)	-	20.4
Other forms
Executive Directors	-	-	-	-	-	-
Senior management	-	-	-	-	-	-
Investment banking	-	-	-	-	-	-
Retail banking	-	-	-	-	-	-
Asset management	7.0	5.6	7.0	0.3	-	1.7
Corporate functions	0.8	0.7	0.8	0.1	-	0.3
Independent control functions	0.2	0.1	0.2	-	-	0.1
All other	-	-	-	-	-	-

1 This table provides details of balances and movements during performance year 2020. For details of variable pay awards granted for 2020, refer to the 'Remuneration - fixed and variable amounts' table. Deferred remuneration is made in cash and/or shares. Share-based awards are made in HSBC shares.

2 Includes unvested deferred awards and vested deferred awards subject to retention period at 31 December 2020.

3 Includes any amendments due to malus or clawback.

4 Shares are considered as paid when they vest. Vested shares are valued using the sale price or the closing share price on the business day immediately preceding the vesting day.

MRTs' remuneration by band¹
	Management body	All other	Total
€0 - 1,000,000	11	814	825
€1,000,000 - 1,500,000	-	179	179
€1,500,000 - 2,000,000	1	76	77
€2,000,000 - 2,500,000	-	27	27
€2,500,000 - 3,000,000	-	13	13
€3,000,000 - 3,500,000	-	11	11
€3,500,000 - 4,000,000	-	7	7
€4,000,000 - 4,500,000	-	1	1
€4,500,000 - 5,000,000	-	1	1
€5,000,000 - 6,000,000	1	3	4
€6,000,000 - 7,000,000	-	3	3
€7,000,000 - 8,000,000	-	-	-
€8,000,000 - 9,000,000	-	-	-
€9,000,000 - 10,000,000	1	-	1

1 Table prepared in euros in accordance with Article 450 of the European Union Capital Requirements Regulation, using the exchange rates published by the European Commission for financial programming and budget for December of the reported year as published on its website.

Directors' emoluments

The details of compensation paid to executive and non-executive Directors for the year ended 31 December 2020 are set out below.

Emoluments
	Noel Quinn		Ewen Stevenson		Non-executive Directors
	2020	2019	2020	2019	2020	2019
	£000	£000	£000	£000	£000	£000
Basic salaries, allowances and benefits in kind	3,338	1,312	1,806	1,820	5,527	5,335
Pension contributions	-	-	-	-	-	-
Performance-related pay paid or receivable¹	4,517	665	2,568	3,176	-	-
Inducements to join paid or receivable	-	-	1,431	1,974	-	-
Compensation for loss of office	-	-	-	-	-	-
Notional return on deferred cash	17	-	-	-	-	-
Total	7,872	1,977	5,805	6,970	5,527	5,335
Total ($000)	10,097	2,522	7,446	8,890	7,090	6,843

1 Includes the value of the deferred and LTI awards at grant.

The aggregate amount of Directors' emoluments (including both executive Directors and non-executive Directors) for the year ended 31 December 2020 was $24,624,520. As per our policy, benefits in kind may include, but are not limited to, the provision of medical insurance, income protection insurance, health assessment, life assurance, club membership, tax assistance, car benefit, travel assistance, provision of company owned-accommodation and relocation costs (including any tax due on these benefits, where applicable). Post-employment medical insurance benefit was provided to former Directors, including Douglas Flint valued at £5,859 ($7,515), Stuart Gulliver valued at £5,859 ($7,515) and John Flint valued at £4,784 ($6,136). Tax support fees of £460 ($590) were also provided to Stuart Gulliver, giving a total aggregate value of £16,962 ($21,756) for benefits provided to past directors. The aggregate value of Director retirement benefits for current Directors is nil. Amounts are converted into US dollars based on the average year-to-date exchange rates for the respective year.

There were payments under retirement benefit arrangements with two former Directors of $413,160. The provision at 31 December 2020 in respect of unfunded pension obligations to former Directors amounted to $7,821,639.

Emoluments of senior management and five highest paid employees

The following tables set out the details of emoluments paid to senior management, which in this case comprises executive Directors and members of the Group Executive Committee, for the year ended 31 December 2020, or for the period of appointment in 2020 as a Director or member of the Group Executive Committee. Details of the remuneration paid to the five highest paid employees, comprising one executive Director and four Group Managing Directors, for the year ended 31 December 2020, are also presented.

Emoluments
£000s	Five highest paid employees	Senior management
Basic salaries, allowances and benefits in kind	13,319	36,831
Pension contributions	15	57
Performance-related pay paid or receivable¹	17,310	34,431
Inducements to join paid or receivable	-	1,308
Compensation for loss of office	-	848
Total	30,644	73,475
Total ($000)	39,307	94,247

1 Includes the value of deferred shares awards at grant.

Emoluments by bands
Hong Kong dollars	US dollars	Number of highest paid employees	Number of senior management
$1,500,001 - $2,000,000	$193,397 - $257,863	-	1
$4,500,001 - $5,000,000	$580,191 - $644,657	-	1
$9,000,001 - $9,500,000	$1,160,382 - $1,224,848	-	1
$9,500,001 - $10,000,000	$1,224,848 - $1,289,313	-	1
$10,000,001 - $10,500,000	$1,289,314 - $1,353,779	-	1
$13,500,001 - $14,000,000	$1,740,573 - $1,805,039	-	1
$15,000,001 - $15,500,000	$1,933,970 - $1,998,436	-	1
$24,500,001 - $25,000,000	$3,158,818 - $3,223,284	-	1
$27,000,001 - $27,500,000	$3,481,146 - $3,545,612	-	1
$28,000,001 - $28,500,000	$3,610,078 - $3,674,543	-	1
$28,500,001 - $29,000,000	$3,674,543 - $3,739,009	-	1
$29,000,001 - $29,500,000	$3,739,009 - $3,803,475	-	2
$30,000,001 - $30,500,000	$3,867,940 - $3,932,406	-	1
$41,000,001 - $41,500,000	$5,286,185 - $5,350,651	-	1
$43,500,001 - $44,000,000	$5,608,514 - $5,672,979	-	1
$44,000,001 - $44,500,000	$5,672,979 - $5,737,445	-	1
$44,500,001 - $45,000,000	$5,737,445 - $5,801,910	-	1
$48,500,001 - $49,000,000	$6,253,170 - $6,317,636	-	1
$49,000,001 - $49,500,000	$6,317,636 - $6,382,101	-	1
$50,500,001 - $51,000,000	$6,511,033 - $6,575,499	1	1
$54,500,001 - $55,000,000	$7,026,758 - $7,091,224	2	-
$66,500,001 - $67,000,000	$8,573,934 - $8,638,400	1	1
$78,000,001 - $78,500,000	$10,056,645 - $10,121,110	1	1

Share capital and other related disclosures

Share buy-back programme

HSBC Holdings did not announce a share buy-back to purchase its ordinary shares of $0.50 each during the year.

Dividends

Dividends for 2020

On 31 March 2020, HSBC announced that, in response to a written request from the Bank of England through the Prudential Regulation Authority ('PRA'), the Board had cancelled the fourth interim dividend for 2019. Similar requests were also made to other UK incorporated banking groups. We also announced that until the end of 2020 we would make no quarterly or interim dividend payments or accruals in respect of ordinary shares.

In December 2020, the PRA announced a temporary approach to shareholder distributions for 2020 in which it set out a framework for board decisions on dividends. On 23 February 2021, after considering the requirements of the temporary approach, the Directors approved an interim dividend for 2020 of $0.15 per ordinary share. The interim dividend will be payable on 29 April 2021 in cash in US dollars, or in sterling or Hong Kong dollars at exchange rates to be determined on 19 April 2021.

The 2020 interim dividend will be paid in cash with no scrip alternative. The Group has decided to discontinue the scrip dividend option as it is dilutive, including to dividend per share progression over time.

As the interim dividend for 2020 was approved after 31 December 2020, it has not been included in the balance sheet of HSBC as a liability. The distributable reserves of HSBC Holdings at
31 December 2020 were $31.3bn.

A quarterly dividend of $15.50 per 6.20% non-cumulative US dollar preference share, Series A ('Series A dollar preference share'), (equivalent to a dividend of $0.3875 per Series A American Depositary Share ('ADS'), each of which represents 1/40th of a Series A dollar preference share), and £0.01 per Series A sterling preference share was paid on 16 March, 16 June, 15 September and 15 December 2020. The Series A dollar preference shares were redeemed on 13 January 2021.

Dividends for 2021

In December 2020, the PRA also announced that it intends to transition back to its standard approach to capital setting and shareholder distributions through 2021. In the meantime, for 2021 dividends the PRA is content for appropriately prudent dividends to be accrued but not paid out. The PRA aims to provide a further update ahead of the 2021 half-year results of large UK banks.

The Group will not pay quarterly dividends during 2021 but will consider whether to announce an interim dividend at the 2021 half-year results in August.

The Group will review whether to revert to paying quarterly dividends at or ahead of its 2021 results announcement in February 2022.

A dividend of £0.01 per Series A sterling preference share was approved on 23 February 2021 for payment on 15 March 2021.

Share capital

Issued share capital

The nominal value of HSBC Holdings' issued share capital paid up at 31 December 2020 was $10,346,810,550 divided into 20,693,621,100 ordinary shares of $0.50 each, 1,450,000 non-cumulative preference shares of $0.01 each and one non-cumulative preference share of £0.01, representing approximately 100.00%, 0.00%, and 0.00% respectively of the nominal value of HSBC Holdings' total issued share capital paid up at 31 December 2020. The 1,450,000 non-cumulative preference shares of $0.01 each were redeemed on 13 January 2021.

Rights, obligations and restrictions attaching to shares

The rights and obligations attaching to each class of ordinary and non-cumulative preference shares in our share capital are set out in full in our Articles of Association. The Articles of Association may be amended by special resolution of the shareholders and can be found on our website at www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities.

Ordinary shares

HSBC Holdings has one class of ordinary share, which carries no right to fixed income. There are no voting restrictions on the issued ordinary shares, all of which are fully paid. On a show of hands, each member present has the right to one vote at general meetings. On a poll, each member present or voting by proxy is entitled to one vote for every $0.50 nominal value of share capital held. There are no specific restrictions on transfers of ordinary shares, which are governed by the general provisions of the Articles of Association and prevailing legislation.

Information on the policy adopted by the Board for paying interim dividends on the ordinary shares may be found in the 'Shareholder information' section on page 371.

Dividend waivers

HSBC Holdings' employee benefit trusts, which hold shares in HSBC Holdings in connection with the operation of its share plans, have lodged standing instructions to waive dividends on shares held by them that have not been allocated to employees. There were no dividends waived during 2020 as there were no dividends paid on ordinary shares during 2020.

Preference shares

The preference shares, which have preferential rights to income and capital, do not, in general, confer a right to attend and vote at general meetings.

There are three classes of preference shares in the share capital of HSBC Holdings: non-cumulative US dollar preference shares of $0.01 each ('dollar preference shares'); non-cumulative preference shares of £0.01 each ('sterling preference shares'); and non-cumulative preference shares of €0.01 ('euro preference shares'). The sterling preference share in issue is a Series A sterling preference share. There are no dollar preference shares or euro preference shares in issue.

Information on dividends approved for 2020 and 2021 may be found in Note 8 on the financial statements on page 309.

Further details of the rights and obligations attaching to the HSBC Holdings' issued share capital may be found in Note 31 on the financial statements.

Compliance with Hong Kong Listing Rule 13.25A(2)

HSBC Holdings has been granted a waiver from strict compliance with Rule 13.25A(2) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong.

Under this waiver, HSBC's obligation to file a Next Day Return following the issue of new shares, pursuant to the vesting of share awards granted under its share plans to persons who are not Directors, would only be triggered where it falls within one of the circumstances set out under Rule 13.25A(3).

Share capital changes in 2020

The following events occurred during the year in relation to the ordinary share capital of HSBC Holdings:

Scrip dividends

There were no scrip dividends issued during the year.

All-employee share plans
	Number	Aggregate nominal value	Exercise price
			from	to
		$	£	£
HSBC Holdings Savings-Related Share Option Plan (UK)
HSBC ordinary shares issued in £	1,387,599	693,800	2.6270	5.9640
Options over HSBC ordinary shares lapsed	44,189,936	22,094,968
Options over HSBC ordinary shares granted in response to approximately 29,048 applications from HSBC employees in the UK on 24 September 2020	111,469,393	55,734.697

	HSBC Holdings ordinary shares issued	Aggregate nominal value	Market value per share
			from	to
		$	£	£
HSBC International Employee Share Purchase Plan	679,640	339,820	3.0855	5.9140

HSBC share plans
	HSBC Holdings ordinary shares issued	Aggregate nominal value	Market value per share
			from	to
		$	£	£
Vesting of awards under the HSBC Share Plan 2011	53,029,316	26,514,658	3.2290	5.6220

Authorities to allot and to purchase shares and
pre-emption rights

At the AGM in 2020, shareholders renewed the general authority for the Directors to allot new shares up to 13,554,626,552 ordinary shares, 15,000,000 non-cumulative preference shares of £0.01 each, 15,000,000 non-cumulative preference shares of $0.01 each and 15,000,000 non-cumulative preference shares of €0.01 each. Shareholders also renewed the authority for the Directors to make market purchases of up to 2,033,193,983 ordinary shares, which was not exercised during the year.

In addition, shareholders gave authority for the Directors to grant rights to subscribe for, or to convert any security into, no more than 4,066,387,966 ordinary shares in relation to any issue by HSBC Holdings or any member of the Group of contingent convertible securities that automatically convert into or are exchanged for ordinary shares in HSBC Holdings in prescribed circumstances. For further details on the issue of contingent convertible securities, see Note 31 on the financial statements.

Other than as disclosed in the tables above headed 'Share capital changes in 2020', the Directors did not allot any shares during 2020.

Debt securities

In 2020, HSBC Holdings issued the equivalent of $15.95bn of debt securities in the public capital markets in a range of currencies and maturities in the form of senior securities to ensure it meets the current and proposed regulatory rules, including those relating to the availability of adequate total loss-absorbing capacity. For further details of capital instruments and bail-inable debt, see Notes 28 and 31 on pages 344 and 353.

Treasury shares

In accordance with the terms of a waiver granted by the Hong Kong Stock Exchange on 19 December 2005, HSBC Holdings will comply with the applicable law and regulation in the UK in relation to the holding of any shares in treasury and with the conditions of the waiver in connection with any shares it may hold in treasury. At 31 December 2020, pursuant to Chapter 6 of the UK Companies Act 2006, 325,273,407 ordinary shares were held in treasury. This was the maximum number of shares held at any time during 2020, representing 1.57% of the shares in issue as at 31 December 2020. The nominal value of shares held in treasury was $162,636,704.

Notifiable interests in share capital

At 31 December 2020, HSBC Holdings had received the following notification of major holdings of voting rights pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules:

• BlackRock, Inc. gave notice on 3 March 2020 that on
2 March 2020 it had the following: an indirect interest in HSBC Holdings ordinary shares of 1,235,558,490; qualifying financial instruments with 7,294,459 voting rights that may be acquired if the instruments are exercised or converted; and financial instruments with a similar economic effect to qualifying financial instruments, which refer to 2,441,397 voting rights, representing 6.07%, 0.03% and 0.01%, respectively, of the total voting rights at 2 March 2020.

No further notifications had been received pursuant to the requirements of Rule 5 of the Disclosure, Guidance and Transparency Rules between 31 December 2020 and 15 February 2021.

At 31 December 2020, according to the register maintained by HSBC Holdings pursuant to section 336 of the Securities and Futures Ordinance of Hong Kong:

• BlackRock, Inc. gave notice on 1 September 2020 that on
27 August 2020 it had the following interests in HSBC Holdings ordinary shares: a long position of 1,477,023,361 shares and a short position of 38,760,188 shares, representing 7.14% and 0.19%, respectively, of the ordinary shares in issue at that date.

• Ping An Asset Management Co., Ltd, gave notice on
25 September 2020 that on 23 September 2020 it had a long position of 1,655,479,531 in HSBC Holdings ordinary shares, representing 8.00% of the ordinary shares in issue at that date.

Sufficiency of float

In compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, at least 25% of the total issued share capital has been held by the public at all times during 2020 and up to the date of this report.

Dealings in HSBC Holdings listed securities

The Group has policies and procedures that, except where permitted by statute and regulation, prohibit specified transactions in respect of its securities listed on The Stock Exchange of Hong Kong Limited. Except for dealings as intermediaries or as trustees by subsidiaries of HSBC Holdings, neither HSBC Holdings nor any of its subsidiaries has purchased, sold or redeemed any of its securities listed on The Stock Exchange of Hong Kong Limited during the year ended 31 December 2020.

Directors' interests

Pursuant to the requirements of the UK Listing Rules and according to the register of Directors' interests maintained by HSBC Holdings pursuant to section 352 of the Securities and Futures Ordinance of Hong Kong, the Directors of HSBC Holdings at 31 December 2020 had certain interests, all beneficial unless otherwise stated, in the shares or debentures of HSBC Holdings and its associated corporations. Save as stated in the following table, no further interests were held by Directors, and no Directors or their connected persons were awarded or exercised any right to subscribe for any shares or debentures in any HSBC corporation during the year.

No Directors held any short position as defined in the Securities and Futures Ordinance of Hong Kong in the shares or debentures of HSBC Holdings and its associated corporations.

Directors' interests - shares and debentures
			At 31 Dec 2020 or date of cessation, if earlier
	Footnotes	At 1 Jan 2020, or date of appointment, if later	Beneficial owner	Child under 18 or spouse	Jointly with another person	Trustee	Total interests
HSBC Holdings ordinary shares
Kathleen Casey (retired on 24 April 2020)	1	15,125	15,125	-	-	-	15,125
Laura Cha		16,200	16,200	-	-	-	16,200
Henri de Castries		19,251	19,251	-	-	-	19,251
James Forese (appointed to the Board on 1 May 2020)	1	-	115,000	-	-	-	115,000
Steven Guggenheimer (appointed to the Board on 1 May 2020)	1,4	-	-	-	15,000	-	15,000
Irene Lee		11,904	11,904	-	-	-	11,904
José Antonio Meade Kuribreña	1	-	15,000	-	-	-	15,000
Heidi Miller	1	15,700	15,700	-	-	-	15,700
Eileen Murray (appointed to the Board on 1 July 2020)	1	-	75,000				75,000
David Nish		50,000	-	50,000	-	-	50,000
Noel Quinn	2	441,925	778,958	-	-	-	778,958
Ewen Stevenson	2	233,972	545,731	-	-	-	545,731
Sir Jonathan Symonds (retired on 18 February 2020)		43,821	38,823	4,998			43,821
Jackson Tai	1, 3	66,515	32,800	11,965	21,750	-	66,515
Mark Tucker		307,352	307,352	-	-	-	307,352
Pauline van der Meer Mohr		15,000	15,000	-	-	-	15,000

1 Kathleen Casey has an interest in 3,025, James Forese has an interest in 23,000, Steven Guggenheimer has an interest in 3,000, José Antonio Meade Kuribreña has an interest in 3,000, Heidi Miller has an interest in 3,140, Eileen Murray has an interest in 15,000 and Jackson Tai has an interest in 13,303 listed ADS, which are categorised as equity derivatives under Part XV of the Securities and Futures Ordinance of Hong Kong. Each ADS represents five HSBC Holdings ordinary shares.

2 Executive Directors' other interests in HSBC Holdings ordinary shares arising from the HSBC Holdings Savings-Related Share Option Plan (UK) and the HSBC Share Plan 2011 are set out in the Scheme interests in the Directors' remuneration report on page 229. At 31 December 2020, the aggregate interests under the Securities and Futures Ordinance of Hong Kong in HSBC Holdings ordinary shares, including interests arising through employee share plans and the interests above were: Noel Quinn - 1,333,514; and Ewen Stevenson - 1,751,278. Each Director's total interests represents less than 0.01% of the shares in issue and 0.01% of the shares in issue excluding treasury shares.

3 Jackson Tai has a non-beneficial interest in 11,965 shares of which he is custodian.

4 On 19 May 2020, Steven Guggenheimer reported to HSBC that he had acquired 5,000 shares on 1 May 2020. Prior clearance was not obtained as required pursuant to the standards set out in the Hong Kong Model Code for Securities Transactions by Directors of Listed Issuers. Enhancements have been made to the Directors' onboarding process, along with communication throughout the year, to highlight share dealing obligations.

There have been no changes in the shares or debentures of the Directors from 31 December 2020 to the date of this report.

Listing Rule 9.8.4 and other disclosures

This section of the Annual Report and Accounts 2020 forms part of and includes certain disclosures required in the Report of the Directors incorporated by cross-reference, including under Listing Rule 9.8.4 and otherwise as applicable by law.


Long-term incentives	243
Dividend waivers	256
Dividends	256
Change of control	260
Emissions	46
Energy efficiency	53, 55
Section 172 and stakeholder engagement	22
Principal activities of HSBC	12, 30, 85, 335
Business review and future developments	12-41, 43, 109, 118, 362

Directors' governance

Appointment and re-election

A rigorous selection process is followed for the appointment of Directors. Appointments are made on merit and candidates are considered against objective criteria, having regard to the benefits of a diverse Board. Appointments are made in accordance with HSBC Holdings' Articles of Association. The Nomination & Corporate Governance Committee report sets out further detail on the Board selection process. The number of Directors (other than any alternate Directors) must not be fewer than five nor exceed 25. The Board may at any time appoint any person as a Director, either to fill a vacancy or as an addition to the existing Board. The Board may appoint any Director to hold any employment or executive office, and may revoke or terminate any such appointment.

Non-executive Directors are appointed for an initial three-year term and, subject to continued satisfactory performance based upon an assessment by the Group Chairman and the Nomination & Corporate Governance Committee, are proposed for re-election by shareholders at each AGM. They typically serve two three-year terms. The Board may invite a Director to serve additional periods but any term beyond six years is subject to review with an explanation to be provided in the Annual Report and Accounts.

Shareholders vote at each AGM on whether to elect and re-elect individual Directors. All Directors that stood for election and re-election at the 2020 AGM were elected and re-elected by shareholders.

None of the Directors who retired during the year or who are not offering themselves for re-election at the 2021 AGM have raised concerns about the operation of the Board or the management of the company.

No executive Director is involved in deciding their own remuneration outcome.

Commitments

The terms and conditions of the appointments of non-executive Directors are set out in a letter of appointment, which includes the expectations of them and the estimated time required to perform their role. Letters of appointment of each non-executive Director are available for inspection at the registered office of HSBC Holdings. The current anticipated time commitment, which is subject to periodic review, is 75 days per year. Non-executive Directors who chair a Board committee are expected to devote up to 100 days per year to the Group. The Chair of the Group Risk Committee is expected to commit up to 150 days per year, reflecting the complexity of the role and responsibilities of this committee. All non-executive Directors confirm that they can meet this requirement, taking into account any other commitments they have.

Board approval is required for any non-executive Directors' external commitments, with consideration given to time commitments and conflicts of interest.

Conflicts of interest

The Board has an established policy and set of procedures to ensure that the Board's management of the Directors' conflicts of interest policy operates effectively. The Board has the power to authorise conflicts where they arise, in accordance with the Companies Act 2006 and HSBC Holdings' Articles of Association. Details of all Directors' conflicts of interest are recorded in the register of conflicts, which is maintained by the Group Company Secretary and Chief Governance Officer's office. Upon appointment, new Directors are advised of the policy and procedures for managing conflicts. Directors are required to notify the Board of any actual or potential conflicts of interest and to update the Board with any changes to the facts and circumstances surrounding such conflicts. The Board has considered, and authorised (with or without conditions) where appropriate, potential conflicts as they have arisen during the year in accordance with the said policy and procedures.

Directors' indemnity

The Articles of Association of HSBC Holdings contain a qualifying third-party indemnity provision, which entitles Directors and other officers to be indemnified out of the assets of HSBC Holdings against claims from third parties in respect of certain liabilities.

HSBC Holdings has granted, by way of deed poll, indemnities to the Directors, including former Directors who retired during the year, against certain liabilities arising in connection with their position as a Director of HSBC Holdings or of any Group company. Directors are indemnified to the maximum extent permitted by law.

The indemnities that constitute a 'qualifying third-party indemnity provision', as defined by section 234 of the Companies Act 2006, remained in force for the whole of the financial year (or, in the case of Directors appointed during 2020, from the date of their appointment). The deed poll is available for inspection at the registered office of HSBC Holdings.

Additionally, Directors have the benefit of Directors' and officers' liability insurance.

Qualifying pension scheme indemnities have also been granted to the Trustees of the Group's pension schemes, which were in force for the whole of the financial year and remain in force as at the date of this report.

Contracts of significance

During 2020, none of the Directors had a material interest, directly or indirectly, in any contract of significance with any HSBC company. During the year, all Directors were reminded of their obligations in respect of transacting in HSBC securities and following specific enquiry all Directors have confirmed that they have complied with their obligations.

Additional non-financial disclosures

Additional non-financial disclosures detailing HSBC's policies and practices in relation to the workforce, environment, social matters, human rights, and anti-corruption and anti-bribery matters are included in other sections of this Annual Report and Accounts 2020.

Shareholder engagement

The Board is directly accountable to, and gives high priority to communicating with, HSBC's shareholders. Information about HSBC and its activities is provided to shareholders in its Interim Reports and the Annual Report and Accounts as well as on www.hsbc.com.

To complement regular publications, there is continual dialogue between members of the Board and institutional investors throughout the year. For examples of such engagement see the Group Chairman's letter on page 196 and the Remuneration Committee Chair's letter on page 229.

Directors are encouraged to develop an understanding of the views of shareholders. Enquiries from individuals on matters relating to their shareholdings and HSBC's business are welcomed.

Any individual or institutional investor can make an enquiry by contacting the investor relations team, Group Chairman, Group Chief Executive, Group Chief Financial Officer and Group Company Secretary and Chief Governance Officer. Our Senior Independent Director is also available to shareholders if they have concerns that cannot be resolved or for which the normal channels would not be appropriate. He can be contacted via the Group Company Secretary and Chief Governance Officer at 8 Canada Square, London E14 5HQ.

Annual General Meeting

The AGM in 2021 is planned to be held in London at 11:00am on Friday, 28 May 2021. Information on how to participate, both in advance and on the day, can be found in the Notice of the 2021 AGM, which will be sent to shareholders on 24 March 2021 and be available on www.hsbc.com/agm. A live webcast will be available on www.hsbc.com. A recording of the proceedings will be available on www.hsbc.com shortly after the conclusion of the AGM. Due to the current environment these arrangements may change. Shareholders should monitor our website and announcements for any updates. Shareholders may send enquiries to the Board in writing via the Group Company Secretary and Chief Governance Officer, HSBC Holdings plc, 8 Canada Square, London E14 5HQ or by sending an email to shareholderquestions@hsbc.com.

General meetings and resolutions

Shareholders may require the Directors to call a general meeting other than an AGM, as provided by the UK Companies Act 2006. A valid request to call a general meeting may be made by members representing at least 5% of the paid-up capital of HSBC Holdings as carries the right of voting at its general meetings (excluding any paid-up capital held as treasury shares). A request must state the general nature of the business to be dealt with at the meeting and may include the text of a resolution that may properly be moved and is intended to be moved at the meeting. At any general meeting convened on such request, no business may be transacted except that stated by the requisition or proposed by the Board.

Shareholders may request the Directors to send a resolution to shareholders for consideration at an AGM, as provided by the UK Companies Act 2006. A valid request must be made by (i) members representing at least 5% of the paid-up capital of HSBC Holdings as carries the right of voting at its general meetings (excluding any paid-up capital held as treasury shares), or (ii) at least 100 members who have a right to vote on the resolution at the AGM in question and hold shares in HSBC Holdings on which there has been paid up an average sum, per member, of at least £100. The request must be received by the company not later than (i) six weeks before the AGM in question; or (ii) if later, the time at which the notice of AGM is published.

A request may be in hard copy form or in electronic form, and must be authenticated by the person or persons making it. A request may be made in writing to HSBC Holdings at its UK address, referred to in the paragraph above or by sending an email to shareholderquestions@hsbc.com.

Events after the balance sheet date

For details of events after the balance sheet date, see Note 36 on the financial statements.

Change of control

The Group is not party to any significant agreements that take effect, alter or terminate following a change of control of the Group. The Group does not have agreements with any Director or employee that would provide compensation for loss of office or employment resulting from a takeover bid.

Branches

The Group provides a wide range of banking and financial services through branches and offices in the UK and overseas.

Research and development activities

During the ordinary course of business the Group develops new products and services within the global businesses.

Political donations

HSBC does not make any political donations or incur political expenditure within the ordinary meaning of those words. We have no intention of altering this policy. However, the definitions of political donations, political parties, political organisations and political expenditure used in the UK Companies Act 2006 are very wide. As a result, they may cover routine activities that form part of the normal business activities of the Group and are an accepted part of engaging with stakeholders. To ensure that neither the Group nor any of its subsidiaries inadvertently breaches the UK Companies Act 2006, authority is sought from shareholders at the AGM to make political donations.

HSBC provides administrative support to two political action committees ('PACs') in the US funded by voluntary political contributions by eligible employees. We do not control the PACs, and all decisions regarding the amounts and recipients of contributions are directed by the respective steering committee of each PAC, which are comprised of eligible employees. The PACs recorded combined political donations of $100,750 during 2020 (2019: $119,600).

Charitable contributions

For details of charitable contributions, see page 50.

Internal control

The Board is responsible for maintaining and reviewing the effectiveness of risk management and internal control systems, and for determining the aggregate level and types of risks the Group is willing to take in achieving its strategic objectives.

To meet this requirement and to discharge its obligations under the FCA Handbook and the PRA Handbook, procedures have been designed: for safeguarding assets against unauthorised use or disposal; for maintaining proper accounting records; and for ensuring the reliability and usefulness of financial information used within the business or for publication.

These procedures provide reasonable assurance against material misstatement, errors, losses or fraud. They are designed to provide effective internal control within the Group and accord with the Financial Reporting Council's guidance for Directors issued in 2014, on risk management, internal control and related financial and business reporting. The procedures have been in place throughout the year and up to 23 February 2021, the date of approval of this Annual Report and Accounts 2020.

The key risk management and internal control procedures include the following:

Global principles

The Group's Global Principles set an overarching standard for all other policies and procedures and are fundamental to the Group's risk management structure. They inform and connect our purpose, values, strategy and risk management principles, guiding us to do the right thing and treat our customers and our colleagues fairly at all times.

Risk management framework

The risk management framework provides an effective and efficient approach to how we govern and oversee the organisation as well as how we monitor and mitigate risks to the delivery of our strategy. It applies to all categories of risk, covering core governance, standards and principles that bring together all of the Group's risk management practices into an integrated structure.

Delegation of authority within limits set by the Board

Subject to certain matters reserved for the Board, the Group Chief Executive has been delegated authority limits and powers within which to manage the day-to-day affairs of the Group, including the right to sub-delegate those limits and powers. Each relevant Group Executive Committee member or executive Director has delegated authority within which to manage the day-to-day affairs of the business or function for which he or she is accountable.

Delegation of authority from the Board requires those individuals to maintain a clear and appropriate apportionment of significant responsibilities and to oversee the establishment and maintenance of systems of control that are appropriate to their business or function. Authorities to enter into credit and market risk exposures are delegated with limits to line management of Group companies. However, credit proposals with specified higher-risk characteristics require the concurrence of the appropriate global function. Credit and market risks are measured and reported at subsidiary company level and aggregated for risk concentration analysis on a Group-wide basis.

Risk identification and monitoring

Systems and procedures are in place to identify, assess, control and monitor the material risk types facing HSBC as set out in the risk management framework. The Group's risk measurement and reporting systems are designed to help ensure that material risks are captured with all the attributes necessary to support well-founded decisions, that those attributes are accurately assessed and that information is delivered in a timely manner for those risks to be successfully managed and mitigated.

Changes in market conditions/practices

Processes are in place to identify new risks arising from changes in market conditions/practices or customer behaviours, which could expose the Group to heightened risk of loss or reputational damage. The Group employs a top and emerging risks framework, which contains an aggregate of all current and forward-looking risks and enables it to take action that either prevents them materialising or limits their impact.

During 2020 unprecedented global economic events led to banks playing an expanded role to support society and customers. The Covid-19 outbreak and its impact on the global economy have impacted many of our customers' business models and income, requiring significant levels of support from both governments and banks.

To meet the additional challenges, we supplemented our existing approach to risk management with additional tools and practices. We increased our focus on the quality and timeliness of the data used to inform management decisions, through measures such as early warning indicators, prudent active risk management of our risk appetite, and ensuring regular communication with our Board and other key stakeholders.

Responsibility for risk management

All employees are responsible for identifying and managing risk within the scope of their role as part of the three lines of defence model. This is an activity-based model to delineate management accountabilities and responsibilities for risk management and the control environment. The second line of defence sets the policy and guidelines for managing specific risk areas, provides advice and guidance in relation to the risk, and challenges the first line of defence (the risk owners) on effective risk management.

The Board delegated authority to the Group Audit Committee ('GAC') and it reviewed the independence, autonomy and effectiveness of the Group's policies and procedures on whistleblowing, including the procedures for the protection of staff who raise concerns of detrimental treatment.

Strategic plans

Strategic plans are prepared for global businesses, global functions and geographical regions within the framework of the Group's overall strategy. Annual operating plans, informed by detailed analysis of risk appetite describing the types and quantum of risk that the Group is prepared to take in executing its strategy, are prepared and adopted by all major Group operating companies and set out the key business initiatives and the likely financial effects of those initiatives.

The effectiveness of the Group's system of risk management and internal control is reviewed regularly by the Board, the Group Risk Committee ('GRC') and the GAC.

During 2020, the Group continued to focus on operational resilience and invest in the non-financial risk infrastructure. There was a particular focus on material and emerging risks and areas undergoing strategic growth.

The GRC and the GAC received confirmation that executive management has taken or is taking the necessary actions to remedy any failings or weaknesses identified through the operation of the Group's framework of controls. In response to the Covid-19 outbreak, our business continuity responses have been successfully implemented and the majority of service level agreements continue to be maintained.

Internal control over financial reporting

HSBC is required to comply with section 404 of the US Sarbanes-Oxley Act of 2002 and assess its effectiveness of internal control over financial reporting at 31 December 2020. In 2014, the GAC endorsed the adoption of the COSO 2013 framework for the monitoring of risk management and internal control systems to satisfy the requirements of section 404 of the Sarbanes-Oxley Act.

The key risk management and internal control procedures over financial reporting include the following:

Entity level controls

The primary mechanism through which comfort over risk management and internal control systems is achieved is through assessments of the effectiveness of controls to manage risk, and the reporting of issues on a regular basis through the various risk management and risk governance forums. Entity level controls are a defined suite of internal controls that have a pervasive influence over the entity as a whole and meet the principles of the Committee of Sponsoring Organizations of the Treadway Commission ('COSO') framework. They include controls related to the control environment, such as the Group's values and ethics, the promotion of effective risk management and the overarching governance exercised by the Board and its non-executive committees. The design and operational effectiveness of entity level controls are assessed annually as part of the assessment of the effectiveness of internal controls over financial reporting. If issues are significant to the Group, they are escalated to the GRC and also to the GAC, if concerning financial reporting matters. The suite of entity level controls was updated in 2020 to simplify and align with the Group's refreshed risk management framework.

Process level transactional controls

Key process level controls that mitigate the risk of financial misstatement are identified, recorded and monitored in accordance with the risk framework. This includes the identification and assessment of relevant control issues against which action plans are tracked through to remediation. Further details on HSBC's approach to risk management can be found on page 107. The GAC has continued to receive regular updates on HSBC's ongoing activities for improving the effective oversight of end-to-end business processes and management continued to identify opportunities for enhancing key controls, such as through the use of automation technologies.

Financial reporting

The Group's financial reporting process is controlled using documented accounting policies and reporting formats, supported by detailed instructions and guidance on reporting requirements, issued to all reporting entities within the Group in advance of each reporting period end. The submission of financial information from each reporting entity is supported by a certification by the responsible financial officer and analytical review procedures at reporting entity and Group levels.

Disclosure Committee

Chaired by the Group Chief Financial Officer, the Disclosure Committee supports the discharge of the Group's obligations under relevant legislation and regulation including the UK and Hong Kong listing rules, the UK Market Abuse Regulation and US Securities and Exchange Commission rules. In so doing, the Disclosure Committee is empowered to determine whether a new event or circumstance should be disclosed, including the form and timing of such disclosure, and review certain material disclosures made or to be made by the Group. The membership of the Disclosure Committee consists of senior management, including the Group Chief Financial Officer, Group Chief Legal Officer and Group Company Secretary and Chief Governance Officer. The Group's brokers, external auditors and its external legal counsel also attend as required. The integrity of disclosures is underpinned by structures and processes within the Global Finance and Global Risk functions that support rigorous analytical review of financial reporting and the maintenance of proper accounting records. As required by the Sarbanes-Oxley Act, the Group Chief Executive and the Group Chief Financial Officer have certified that the Group's disclosure controls and procedures were effective as at the end of the period covered by this Annual Report and Accounts 2020.

The annual review of the effectiveness of the Group's system of risk management and internal control over financial reporting was conducted with reference to the COSO 2013 framework. Based on the assessment performed, the Directors concluded that for the year ended 31 December 2020, the Group's internal control over financial reporting was effective.

PwC has audited the effectiveness of HSBC's internal control over financial reporting and has given an unqualified opinion.

Going concern

The Board, having made appropriate enquiries, is satisfied that the Group as a whole has adequate resources to continue operations for a period of at least 12 months from the date of this report, and it therefore continues to adopt the going concern basis in preparing the financial statements. For further details, see page 41.

Employees

At 31 December 2020, HSBC had a total workforce equivalent to 226,000 full-time employees compared with 235,000 at the end of 2019 and 229,000 at the end of 2018. Our main centres of employment were the UK with approximately 40,000 employees, India with 39,000, Hong Kong with 29,000, mainland China with 27,000, Mexico with 15,000, the US with 8,000 and France with 7,000.

Our people span many cultures, communities and continents. By focusing on employee well-being, diversity, inclusion and engagement, as well as building our peoples' skills and capabilities for now and for the future, we aim to create an environment where our people can fulfil their potential. We use confidential surveys to assess progress and make changes. We want to have an open culture where our people feel connected, supported to speak up and where our leaders encourage feedback. Where we make organisational changes, we support our people throughout the change and in particular where there are job losses.

Employee relations

We consult with and, where appropriate, negotiate with employee representative bodies where we have them. It is our policy to maintain well-developed communications and consultation programmes with all employee representative bodies. There have been no material disruptions to our operations from labour disputes during the past five years.

We are committed to complying with the applicable employment laws and regulations in the jurisdictions in which we operate. HSBC's global employment practices and relations policy provides the framework and controls through which we seek to uphold that commitment.

Diversity and inclusion

Our customers, suppliers and communities span many cultures and continents. We believe this diversity makes us stronger, and we are dedicated to building a diverse and connected workforce where everyone feels a sense of belonging.

Our Group People Committee, which is made up of Group Executive Committee members, governs our diversity and inclusion agenda. It meets regularly to agree actions to improve diverse representation and build a more inclusive culture where our colleagues can bring the best of themselves to work and deliver more equal outcomes for our stakeholders. Members of our Group Executive Committee are held to account for the actions they take on diversity via aspirational targets contained within their performance scorecards. Our people managers also have a component of their performance assessed on the degree to which they create team environments that are inclusive, motivating and nurturing. Every colleague at HSBC must treat each other with dignity and respect, creating an inclusive environment. Our policies make clear we do not tolerate unlawful discrimination, bullying or harassment on any grounds.

To align our approach to inclusion best practice, we participate in global diversity benchmarks, which help us to identify improvement opportunities. We also track a large number of diversity and inclusion metrics, which enable us to pinpoint inclusion barriers and take action where required.

Our gender diversity statistics are set out on page 64.

Further details of our diversity and inclusion activity, together with our Gender and Ethnicity UK Pay Gap Report 2020, can be found at www.hsbc.com/diversitycommitments.

Employment of people with a disability

We believe in providing equal opportunities for all employees. The employment of people with a disability is included in this commitment. The recruitment, training, career development and promotion of people with a disability are based on the aptitudes and abilities of the individual. Should employees become disabled during their employment with us, efforts are made to continue their employment and, if necessary, appropriate training and reasonable equipment and facilities are provided.

Employee development

A workforce capable of meeting the challenges of today and tomorrow requires significant support to develop the right skills. Whatever our colleagues' career paths, we have a range of tools and resources to help them.

A rapid shift to virtual learning

The Covid-19 outbreak resulted in a halt to classroom training and rapid expansion in virtual learning. We prioritised the transition to remote working and helping people manage their well-being. The shift from physical classroom training to shorter virtual equivalents and online resources resulted in a total of 5.2 million hours and 2.9 days per FTE in training in 2020. For further details on training hours and days by gender, region and seniority, see the ESG Data Pack at www.hsbc.com/esg.

We converted or rebuilt technical, professional and personal classroom programmes to deliver online. New joiners to HSBC experienced an immersive virtual induction programme and virtual internships. Our global graduate induction programme moved entirely online with more than 100 leaders and graduate alumni welcoming approximately 650 graduates.

Supporting self-development

We have a range of tools and resources to help colleagues take ownership of their development and career.

• HSBC University is our one-stop shop for learning delivered via an online portal, network of global training centres and third-party providers.

• Our My HSBC Career portal offers career development resources and information on managing change and on giving back to the organisation and the communities in which we operate. Over 100,000 of our colleagues made use of it in 2020.

• We launched a global mentoring system in 2020 to enable colleagues to match with a mentor or mentee. At 31 December 2020, we had in excess of 6,800 mentors and mentees in 58 countries and territories.

Developing core skills

Our managers are the critical link in supporting our colleagues. In 2020, we redesigned our suite of training and resources for managers so they can focus on the most important skills including leading and supporting teams through change.

Risk management remains central to development and is part of our mandatory training. Those at higher risk of exposure to financial wrongdoing experience more in-depth training on financial risks, such as money laundering, sanctions, bribery and corruption. Other programmes and resources address specific areas of risk, like management of third-party suppliers.

Our Cyber Hub brings together training, insights, events and campaigns on how to combat cyber-crime. We are also supporting those who develop models and senior leaders with training to help them understand and apply our Principles on the Ethical Use of Big Data and Artificial Intelligence.

A learning and feedback culture

We want our colleagues to be well prepared for changing workplace requirements and so have developed a flagship Future Skills programme to support them. We identified nine key behaviours we believe are necessary future skills for colleagues and built a curriculum of resources to support learners to develop these.

More than 1,000 colleagues now act as Future Skills Influencers, supporting their businesses and teams to invest in learning. In November 2020, we ran a week-long MySkills festival, which helped colleagues explore future skills through virtual events, interactive workshops and online resources. Demand to join sessions surpassed our expectations with more than 45,000 registrations for events.

Senior succession planning

Developing future leaders is critical to our long-term success. The Group Executive Committee dedicates time to articulate the current and future capabilities required to deliver the business strategy, and identify successors for our most critical roles.

Successors undergo robust assessment and participate in executive development. Potential successors for senior roles also benefit from coaching and mentoring and are moved into roles that build their skills and capabilities.

Health and safety

We are committed to providing a safe and healthy working environment for everyone. We strive to ensure we adopt best health and safety management practices across the organisation and aim for standards that reflect our core values.

Chief operating officers have overall responsibility for ensuring that global policies, procedures and safeguards are put into practice locally, and that all legal requirements are met.

To put our commitment into practice, we delivered a range of programmes in 2020 to help us understand and manage effectively the risks we face and improve the buildings in which we operate:

• Based on expert medical advice, we created safe workplaces globally, designed to protect our employees, contractors and customers from the risks of Covid-19. We carried out approximately 1,700 Covid-19-related workplace enhancements globally, with measures involving: enhanced cleaning; training and awareness; public hygiene; and track and trace.

• We updated our advice on working from home, providing more awareness and best practices on good ergonomics and well-being to be adopted during these unprecedented times.

• We delivered an improved health and safety training and awareness programme to 245,000 of our employees and contractors globally, ensuring roles and responsibilities were clear and understood.

• We completed the annual safety inspection on all of our buildings globally, subject to local Covid-19 restrictions, to ensure we were meeting our standards and continuously improving our safety performance.

• We continued to focus on enhancing the safety culture in our supply chain through our SAFER Together programme, covering the five key elements of best practice safety culture, including speaking up about safety, and recognising excellence. Our 2020 safety climate survey results showed a continued year-on-year increase in safety culture, and significantly above the industry average.

• Our Eat Well Live Well programme continued through educating and informing our colleagues on how to make healthy food and drink choices. We enhanced the programme to provide digital educational and information resources, including a suite of videos and recipe ideas. The programme was runner up in the 2020 Global Healthy Workplace Awards.

• We put in place effective storm preparation controls and processes to ensure the protection of our people and operations. In 2020, there were 41 named storms, which passed over 2,316 of our buildings and resulted in no injuries or business impact.

•

Employee health and safety
	Footnotes	2020	2019	2018
Number of workplace fatalities		-	1	1
Number of major injuries to employees	1	15	29	27
All injury rate per 100,000 employees		88	189	189

1 Fractures, dislocation, concussion, loss of consciousness, overnight admission to hospital.

Remuneration

HSBC's pay and performance strategy is designed to reward competitively the achievement of long-term sustainable performance and attract and motivate the very best people, regardless of gender, ethnicity, age, disability or any other factor

unrelated to performance or experience with the Group, while performing their role in the long-term interests of our stakeholders.

For further details of the Group's approach to remuneration, see page 233.

Employee share plans

Share options and discretionary awards of shares granted under HSBC share plans align the interests of employees with the creation of shareholder value. The following table sets out the particulars of outstanding options, including those held by employees working under employment contracts that are regarded as 'continuous contracts' for the purposes of the Hong Kong Employment Ordinance. The options were granted at nil consideration. No options have been granted to substantial shareholders and suppliers of goods or services, nor in excess of the individual limit for each share plan. No options were cancelled by HSBC during the year.

A summary for each plan of the total number of the options that were granted, exercised or lapsed during 2020 is shown in the following table. Further details required to be disclosed pursuant to Chapter 17 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited are available on our website at www.hsbc.com/who-we-are/leadership-and-governance/remuneration and on the website of The Stock Exchange of Hong Kong Limited at www.hkex.com.hk, or can be obtained upon request from the Group Company Secretary and Chief Governance Officer, 8 Canada Square, London E14 5HQ.

Particulars of options held by Directors of HSBC Holdings are set out on
page 245.

Note 5 on the financial statements gives details of share-based payments, including discretionary awards of shares granted under HSBC share plans.

All-employee share plans

HSBC operates all-employee share option plans under which options are granted over HSBC ordinary shares. Subject to leaver provisions, options are normally exercisable after three or five years. During 2020, options were granted by reference to the average market value of HSBC Holdings ordinary shares on the five business days immediately preceding the invitation date, then applying a discount of 20%. The closing price for HSBC Holdings ordinary shares quoted on the London Stock Exchange on
23 September 2020, the day before the options were granted and as derived from the Daily Official List, was £2.9025.

The HSBC Holdings Savings-Related Share Option Plan (UK) will expire on 24 April 2030, by which time the plan may be extended with approval from shareholders, unless the Directors resolve to terminate the plan at an earlier date.

The HSBC International Employee Share Purchase Plan was introduced in 2013 and now includes employees based in 27 jurisdictions, although no options are granted under this plan.

During 2020, approximately 171,000 employees were offered participation in these plans.

HSBC Holdings Savings-Related Share Option Plan (UK)

HSBC Holdings ordinary shares

Dates of awards

Exercise price

Usually exercisable

Granted

Exercised

Lapsed

from

Footnotes

1 Jan 2020

during year

31 Dec 2020

(£)

20 Sep 2013

24 Sep 2020

2.6270

5.9640

1 Nov 2018

30 Apr 2026

65,060,681

111,469,393

1,387,599

44,189,936

130,952,539

1 The weighted average closing price of the shares immediately before the dates on which options were exercised was £5.2014.

Statement of compliance

The statement of corporate governance practices set out on pages 195 to 265 and the information referred to therein constitutes the 'Corporate governance report' and 'Report of the Directors' of HSBC Holdings. The websites referred to do not form part of this report.

Relevant corporate governance codes, role profiles and policies
UK Corporate Governance Code	www.frc.org.uk
Hong Kong Corporate Governance Code (set out in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited)	www.hkex.com.hk
Descriptions of the roles and responsibilities of the: - Group Chairman - Group Chief Executive - Senior Independent Director - Board	www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities
Board and senior management	www.hsbc.com/who-we-are/leadership-and-governance
Roles and responsibilities of the Board's committees	www.hsbc.com/who-we-are/leadership-and-governance/board-committees
Board's policies on: - diversity and inclusion - shareholder communication - human rights - remuneration practices and governance	www.hsbc.com/who-we-are/leadership-and-governance/board-responsibilities
Global Internal Audit Charter	www.hsbc.com/who-we-are/leadership-and-governance/corporate-governance-codes/internal-control

HSBC is subject to corporate governance requirements in both the UK and Hong Kong. During 2020, save to the extent referred to below, HSBC complied with the provisions and requirements of both the UK and Hong Kong Corporate Governance Codes.

Following the UK Government's introduction of social distancing measures and prohibition on non-essential travel and public gatherings, it was not possible for shareholders to attend the 2020 Annual General Meeting ('AGM') in person. The Board was fully informed of all relevant AGM and shareholder matters but only a limited number of Directors and essential personnel attended the AGM to ensure the meeting was quorate and to enable the business of the meeting to be conducted. Shareholders were advised to vote by submitting a proxy in advance of the AGM and that they should only appoint the Chairman of the AGM to act as their proxy. To ensure that shareholders did not lose the opportunity to raise questions, shareholders were encouraged to submit questions for the Board via email in advance of the AGM. Responses to the most frequent questions across key themes were published on the HSBC website after due consideration by the Board. None of the questions submitted covered a topic that required consideration by the auditor. Given these measures, not all of the persons set out in paragraphs A.6.7 and E.1.2 of the Hong Kong Corporate Governance Code were able to attend the AGM.

Under the Hong Kong Code, the audit committee should be responsible for the oversight of all risk management and internal control systems. HSBC's Group Risk Committee is responsible for oversight of internal control, other than internal control over financial reporting, and risk management systems. This is permitted under the UK Corporate Governance Code.

Notwithstanding that Laura Cha has served on the Board for more than nine years, the Board has determined that she continues to be independent when taking into consideration all other relevant circumstances that are likely to impair, or could appear to impair, independence. Laura will not be standing for re-election at the 2021 AGM.

HSBC Holdings has codified obligations for transactions in Group securities in accordance with the requirements of the UK Market Abuse Regulation and the rules governing the listing of securities on HKEx, save that the HKEx has granted waivers from strict compliance with the rules that take into account accepted practices in the UK, particularly in respect of employee share plans. During the year, all Directors were reminded of their obligations in respect of transacting in HSBC Group securities and, except as disclosed on page 258, following specific enquiry all Directors have confirmed that they have complied with their obligations.

On behalf of the Board

Mark E Tucker

Group Chairman

HSBC Holdings plc

Registered number 617987

23 February 2021

Directors' responsibility statement

The Directors are responsible for preparing the Annual Report and Accounts 2020, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the parent company ('Company') and Group financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union. In preparing these financial statements, the Directors have also elected to comply with IFRSs, issued by the International Accounting Standards Board ('IASB'). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and Group, and of the profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable IFRSs as adopted by the European Union and IFRSs issued by IASB have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company and Group will continue in business.

The Directors are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, and disclose with reasonable accuracy at any time the financial position of the Company and the Group enabling them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

The Directors are responsible for the maintenance and integrity of the Annual Report and Accounts 2020 as they appear on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Accounts 2020, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the 'Report of the Directors: Corporate governance report' on pages 198 to 201 of the Annual Report and Accounts 2020, confirms that, to the best of their knowledge:

• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group; and

• the management report represented by the Report of the Directors includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

The Group Audit Committee has responsibility, delegated to it from the Board, for overseeing all matters relating to external financial reporting. The Group Audit Committee report on page 216 sets out how the Group Audit Committee discharges its responsibilities.

Disclosure of information to auditors

In accordance with section 418 of the Companies Act 2006, the Directors' report includes a statement, in the case of each Director in office as at the date the Report of the Directors is approved, that:

• so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

• they have taken all the steps they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

On behalf of the Board

Mark E Tucker

Group Chairman

HSBC Holdings plc

Registered number 617987

23 February 2021

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END

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