Standard Chartered PLC

Standard Chartered Bank Limited RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 RILFO74KP1CM8P6PCT96 2023-01-01 2023-12-31 RILFO74KP1CM8P6PCT96 2022-12-31 RILFO74KP1CM8P6PCT96 2023-12-31 RILFO74KP1CM8P6PCT96 2021-12-31 RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 stan:ShareCapitalAndSharePremiumMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 stan:CapitalAndMergerReserveMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 stan:OwnCreditAdjustmentReserveMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 stan:FairValueThroughOtherComprehensiveIncomeReserveDebtMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 stan:FairValueThroughOtherComprehensiveIncomeReserveEquityMember RILFO74KP1CM8P6PCT96 2022-01-01 2022-12-31 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RILFO74KP1CM8P6PCT96 2023-12-31 stan:ShareCapitalAndSharePremiumMember RILFO74KP1CM8P6PCT96 2023-12-31 stan:CapitalAndMergerReserveMember RILFO74KP1CM8P6PCT96 2023-12-31 stan:OwnCreditAdjustmentReserveMember RILFO74KP1CM8P6PCT96 2023-12-31 stan:FairValueThroughOtherComprehensiveIncomeReserveDebtMember RILFO74KP1CM8P6PCT96 2023-12-31 stan:FairValueThroughOtherComprehensiveIncomeReserveEquityMember RILFO74KP1CM8P6PCT96 2023-12-31 ifrs-full:ReserveOfCashFlowHedgesMember RILFO74KP1CM8P6PCT96 2023-12-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember RILFO74KP1CM8P6PCT96 2023-12-31 ifrs-full:RetainedEarningsMember RILFO74KP1CM8P6PCT96 2023-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember RILFO74KP1CM8P6PCT96 2023-12-31 ifrs-full:OtherEquityInterestMember RILFO74KP1CM8P6PCT96 2023-12-31 ifrs-full:NoncontrollingInterestsMember iso4217:USD Standard Chartered Bank Reference Number ZC18 Directors’ Report and Financ ial Statements 31 December 2023 Incorporated in England with lim ited l iab il ity by Royal Charter 1853 Princ ipal Ofﬁce: 1 Bas inghall Avenue, London, EC2V 5DD, England Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 Contents Page Strategic report 01–50 Key performance ind icators 02 Our business 03 Who we are and what we do 04 Where we operate 07 Market environment 08 Business model 11 Our strategy 14 Client segment reviews 17 Regional reviews 18 Financ ial rev iew 20 Underlying versus reported results reconcil iat ions 25 Risk review 32 Stakeholders and responsib il it ies 38 Directors’ report 51-56 Statement of directors’ responsib il it ies 57 Risk review and Capital review 58-145 Financ ial Statements and Notes 146-307 Independent auditors’ report 146 Consolidated income statement 160 Consolidated statement of comprehensive income 161 Consolidated Balance sheet 162 Consolidated statement of changes in equity 163 Cash ﬂow statements 164 Company statement of changes in equity 165 Notes to the ﬁnancial statements 166-307 Supplementary 308-314 Glossary 315-324 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 1 Strategic report We are a leading internat ional cross-border bank Standard Chartered connects the world’s most dynamic markets, serving the businesses that are the engines of global growth and supporting people to meet their ambit ions. Every day, we help cl ients to manage and invest their ﬁnances safely and seamlessly, and grow their businesses and wealth with conﬁdence. Over our 170 year history, and across a unique geographical footprint that connects Asia, Africa and the Middle East to each other and the world, we’ve built a bank like no other, with diverse capabil it ies and partnerships that set us apart. Inspired by our brand promise, here for good. The following are company designat ions as descr ibed in the document: Standard Chartered Bank Group (Group) – being Standard Chartered Bank and its subsid iar ies Standard Chartered PLC Group (PLC Group) – being the ultimate parent and its subsid iar ies Standard Chartered Bank (Company) – being the standalone Bank legal entity Standard Chartered PLC (PLC) – being the standalone legal entity of the ultimate parent About this report Sustainab il ity reporting – We adopt an integrated approach to corporate reporting, embedding non-ﬁnanc ial informat ion throughout our Annual Report. Alternative performance measures – The Group uses a number of alternative performance measures in the discuss ion of its performance. These measures exclude certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. They provide the reader with ins ight into how management measures the performance of the business. For more informat ion on Standard Chartered please v is it sc.com linked in.com/company/standard-chartered-bank facebook.com/standardchartered Unless another currency is specif ied, the word ‘dollar’ or symbol ‘$’ in this document means US dollar and the word ‘cent’ or symbol ‘c’ means one-hundredth of one US dollar. All disclosures in the Strategic Report, Directors’ Report, Risk Review and Capital Review and Supplementary Information are unaudited unless otherwise stated. Unless the context requires, with in th is document, ‘China’ refers to the People’s Republic of China and, for the purposes of this document only, excludes Hong Kong Special Admin istrat ive Region (Hong Kong), Macau Special Admin istrat ive Region (Macau) and Taiwan. ‘Korea’ or ‘South Korea’ refers to the Republic of Korea. Greater China & North Asia (GCNA) includes Mainland China, Hong Kong, Japan, Korea, Macau and Taiwan; ASEAN & South Asia (ASA) includes Australia, Bangladesh, Brunei, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Phil ipp ines, Singapore, Sri Lanka, Thailand and Vietnam; and Africa & Middle East (AME) includes Bahrain, Botswana, Cote d’Ivoire, Egypt, Ghana, Iraq, Kenya, Maurit ius, N iger ia, Oman, Pak istan, Qatar, Saudi Arabia, South Africa, Tanzania, the United Arab Emirates (UAE), Uganda, and Zambia and Europe & Americas (EA) includes Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Israel, Jersey, Poland, Sweden, Türkiye, the UK and the US. With in the tables in this report, blank spaces ind icate that the number is not disclosed, dashes ind icate that the number is zero and nm stands for not meaningful. Standard Chartered Bank is incorporated in England and Wales with lim ited l iab il ity and is headquartered in London. The Group’s head ofﬁce provides guidance on governance and regulatory standards. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 2 Strategic report continued Key performance ind icators We measure ourselves against Group key performance ind icators (KPIs) as deta iled below. FINANCIAL KPIs AND MEASURES 1,2 Underlying basis Reported basis Return on tangible equity 12.9% 400bps Read more on (page 21) Return on tangible equity 12.5% 370bps Read more on (page 29) Operating income $11,408m 14% Read more on (page 21) Operating income $11,549m 13% Read more on (page 28) Proﬁt before tax $4,541m 29% Read more on (page 21) Proﬁt before tax $4,414m 27% Read more on (page 28) CAPITAL KPIs Common Equity Tier 1 ratio 13.2% 50bps Read more on (page 24) NON-FINANCIAL KPIs Divers ity and inclus ion: Women in senior roles ³ 29.2% 0.9ppt 1 Basis point (bps) and percentage movements are in relation to 31 December 2022, with brackets representing negative movements 2 Reconcil iat ions from underlying to reported and deﬁn it ions of alternative performance measures can be found on pages 25 to 29 3 Senior leadership is deﬁned as Managing Directors and Band 4 roles (includ ing Management Team) Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 3 Strategic report continued Our business Standard Chartered Bank is authorised by the Prudential Regulation Authority (PRA) and regulated by the PRA and by the Financ ial Conduct Author ity (FCA). The PRA is the consolidated supervisor in respect of the Group (of which PLC is the ultimate parent). Standard Chartered Bank is a material subsid iary of the PLC Group for the purposes of the Bank of England-led s ingle point of entry preferred resolution strategy for the PLC Group. The Group is a core part of, and crit ical prov ider of essential services to the PLC Group and is fundamental to the delivery of the PLC Group’s purpose, franchise and strategy. Clients • The Group remains the largest CCIB orig inat ion hub supporting a sign iﬁcant part of CCIB revenues and is key to the global network proposit ion • The Group is the relationsh ip hub for the majority of key CCIB cl ients, particularly Organisat ion for Econom ic Co-operation and Development (OECD) clients • The Group holds the majority of the PLC Group’s corporate and ﬁnancial inst itut ions deposits, a sign iﬁcant part of the PLC Group’s USD funding base Capabil it ies • The Group holds key licenses and hosts infrastructure vital for the global franchise such as global USD & EUR clearing • The Group is the main Financ ial Markets (FM) book ing centre supporting the major ity of global FM revenues • The Group remains a main access point to high quality USD funding Crit ical infrastructure • The Group is the key liqu id ity management centre: holding the major ity of the PLC Group’s h igh-quality liqu id assets for regulatory purposes • The Group provides functional support on a global basis • The Group operates global business services hubs for the beneﬁt of the PLC Group includ ing shared serv ice centres and centres of excellence Investors • The Group’s UK domic ile underp ins a unique investor proposit ion: emerg ing markets access from a UK regulated platform • A sign iﬁcant number of PLC Group’s equ ity and debt investors are based in the Group’s footprint Recovery and resolution • Standard Chartered Bank is the largest material subsid iary for the purposes of m in imum requ irement for own funds and elig ible l iab il it ies (MREL) and total loss-absorb ing capital (TLAC) • The Group is crit ical to the del ivery of capital and liqu id ity generating management actions in PLC Group’s recovery planning • The Group houses various crit ical serv ices and crit ical funct ions in resolution and resolution management The Group’s Credit Ratings The Group remains a highly rated inst itut ion (in both absolute and relative terms) with the following long and short-term issuer ratings all with a stable outlook. S&P Moody’s Fitch Long Term A+ A1 A+ Short Term A-1 P-1 F1 Outlook Stable Stable Stable Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 4 Who we are and what we do Who we are and what we do Our Purpose is to drive commerce and prosperity through our unique divers ity. We serve three cl ient segments in three regions, supported by eight global functions. Our client segments Corporate, Commercial & Institut ional Bank ing Corporate, Commercial and Institut ional Bank ing supports clients with their transaction banking, ﬁnanc ial markets, corporate ﬁnance and borrowing needs across our markets. We provide solutions to our clients in some of the world’s fastest-growing economies and most active trade corridors. Operating income $7,972m $8,032m Underlying basis Reported basis Consumer, Private & Business Banking Consumer, Private and Business Banking serves ind iv iduals and small businesses, with a focus on afﬂuent and emerging afﬂuent in many of the world’s fastest growing cit ies. Operating income $3,456m $3,501m Underlying basis Reported basis Ventures Ventures promotes innovat ion, invests in disrupt ive ﬁnancial technology and explores alternat ive business models. Operating income $137m $137m Underlying basis Reported basis Central and other items Operating income $(157)m $(121)m Underlying basis Reported basis Total operating income Operating income $11,408m $11,549m Underlying basis Reported basis Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 5 Our regions Asia Our largest markets by income are Singapore and India. Operating income $5,331m $5,316m Underlying basis Reported basis Europe & Americas Centred in London, with a growing presence across continental Europe, and New York, we operate in both North America and several markets in Latin America. Operating income $1,682m $1,696m Underlying basis Reported basis Africa & the Middle East We have a presence in 18 markets of which the most sizeable by income are UAE, Pakistan, Kenya, Niger ia, South Africa and Ghana Operating income $2,764m $2,894m Underlying basis Reported basis Central & other items (region) Operating income $1,631m $1,643m Underlying basis Reported basis Total operating income Operating income $11,408m $11,549m Underlying basis Reported basis Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 6 Global functions Our client-facing businesses are supported by our global functions, which work together to ensure the Group’s operations run smoothly and consistently. Conduct, Financ ial Cr ime and Compliance Partners internally and externally to achieve the highest standards in conduct and compliance to enable a sustainable business and to ﬁght ﬁnanc ial cr ime. Corporate Affairs, Brand and Marketing Manages the Group’s marketing communicat ions and engagement w ith stakeholders to promote and protect the Group’s reputation, brand and services. Group Chief Financ ial Ofﬁcer Comprises seven support functions: Finance, Treasury, Strategy, Investor Relations, Corporate Development, Supply Chain Management and Property. The leaders of these functions report directly to the Group Chief Financ ial Ofﬁcer. Group Internal Audit An independent function whose primary role is to help the Court and Management team protect the assets, reputation and sustainab il ity of the Group. Human Resources Maxim ises the value of our investment in people through recruitment, development and employee engagement. Legal Provides legal advice and support to the Group to manage legal risks and issues. Risk Responsible for the overall second-line-of-defence responsib il it ies related to r isk management, which involves oversight and challenge of risk management actions of the ﬁrst line. Transformation, Technology & Operations Responsible for leading bank-wide transformation and for reshaping the Group’s systems and technology platforms to ensure we provide robust, responsive, and innovat ive technology and d ig ital solut ions. Also manages all client operations, seeking to provide an optimal client service and experience across the board. Valued behaviours Our valued behaviours are the guid ing pr inc iples for how we work together, and the way we do bus iness, every day. Never settle • Continuously improve and innovate • Simpl ify • Learn from your successes and failures Better together • See more in others • “How can I help?” • Build for the long term Do the right thing • Live with integr ity • Think client • Be brave, be the change Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 7 Strategic report continued Where we operate We operate in the world’s most dynamic markets which set the pace for global growth and prosperity. Our unique geographic footprint connects high-growth and emerging markets in Asia, Africa and the Middle East with more established economies in Europe and the Americas, allowing us to channel capital where it’s needed most. For more than 170 years we have used the power of our network to maxim ise opportun it ies for people and bus inesses who trade, operate, or invest in these regions. Our diverse experience, capabil it ies and culture sets us apart. We are present in 50 markets. Asia We have a long-standing and deep franchise in some of the world’s fastest-growing economies. The two markets contribut ing the h ighest income are Singapore and India . Australia Laos Singapore Bangladesh Macau Sri Lanka Brunei Mainland China Taiwan Cambodia Malaysia Thailand India Myanmar Vietnam Indonesia Nepal Japan Phil ipp ines Africa & the Middle East We have a deep-rooted heritage in Africa & Middle East and have been present in the region for more than 170 years. The United Arab Emirates, Pakistan, Kenya, Niger ia, South Afr ica, and Ghana are our largest markets by income. Bahrain Niger ia Uganda Botswana Oman Zambia Cote d’Ivoire Pakistan Egypt Qatar Ghana Saudi Arabia Iraq South Africa Kenya Tanzania Maurit ius UAE Europe & Americas We support clients in Europe & Americas through hubs in London and New York and have a strong presence in several European and Latin American markets. Argentina Germany Sweden Brazil Israel Türkiye Colombia Jersey UK Falkland Islands Poland US France Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 8 Market environment Macroeconomic factors affecting the global landscape Trends in 2023 • Global GDP growth continued to slow in 2023, likely to 3.1 per cent, from 3.5 per cent in 2022, as central banks continue to tighten policy and the boost from post pandemic reopening of economies faded. • Asia was the best-performing region, recording growth of 5.1 per cent, on strong momentum in India and favourable base effects in China. Sub-Saharan Africa likely saw growth of 3 per cent in 2023, nearly unchanged from 2022, supported by domestic reform momentum in key economies. • Among the majors, despite a banking-sector cris is in the ﬁrst half of the year, the United States likely recorded annual growth of 2.5 per cent on the back of resil ient domest ic demand, while growth likely slowed sharply in the UK to 0.1 per cent. • The euro-area economy likely grew by 0.5 per cent in 2023 following 3.4 per cent growth in 2022, supported by household demand and a posit ive contr ibut ion from exports in H1. • In most majors, labour markets remained strong, with low unemployment rates that helped support consumer conﬁdence. • Major central banks like the Federal Reserve and European Central Bank (ECB) continued to tighten monetary policy in the ﬁrst three quarters of 2023 with a view to bring ing inﬂat ion back to target levels. F iscal policy remained accommodative as governments tried to shield consumers and businesses from still elevated prices. Outlook for 2024 • Global growth is likely to stay below-trend at 2.9 per cent in 2024 as high interest rates drag on consumers as well as investment spending. • Asia will likely be the fastest-growing region and will continue to drive global growth, expanding by 4.9 per cent. Among the majors, the United States is expected to experience below-trend growth of 1.8 per cent in 2024, the UK will grow just 0.1%, while the euro area is likely to see an overall modest expansion of 0.6 per cent. • Easing inﬂat ion is likely to allow major central banks to start cutting rates from Q2 2024, with a focus on supporting softening economic activ ity. • Unfavourable global liqu id ity condit ions are l ikely to make it diff icult for some emerg ing markets to access internat ional ﬁnancing, forc ing them to seek multilateral support. • Downside risks to this outlook include a sharper than expected slowdown in major economies, sustained inﬂat ionary pressures, a sluggish housing market in China, and another ﬂare-up of geopolit ical tens ions. Medium-term and long-term view High interest rate environment • Trade fragmentation and heightened geopolit ical r isks and related supply disrupt ions together w ith still resil ient labour markets have the potential to see inﬂat ion elevated over the med ium-term. • Concerns about stagﬂation are likely to see central banks adopting a cautious approach to monetary easing, with the risk that rates stay elevated for an extended period of time. • Fiscal policy might also turn from a tailw ind to a headw ind for growth. High public debt and government deﬁc its also mean that most economies are looking to tighten ﬁscal policy over the medium term. • There may be adverse environmental, agricultural, and economic consequences of a severe El Niño weather cycle. South Asia and Sub-Saharan Africa economies are most at risk from the impact on agricultural production; and although El Niño has varying impacts on GDP growth, it is inﬂat ionary for most econom ies. • Growing trade fragmentation could undermine the resil ience of global isat ion, dr iv ing up consumer pr ices, and slowing the pace of economic convergence for emerging markets. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 9 Strategic report continued Broader global trends • The world economy could see a permanent loss of economic output or ‘scarring’ due to the recession following the pandemic. This would make it harder for emerging markets to catch up with developed markets. • Long-term growth in the developed world is constrained by ageing populations and high levels of debt, exacerbated by the policy response to COVID-19. • Ris ing nat ional ism, ant i-globalisat ion and protect ion ism are threats to long-term growth prospects in emerging markets. • However, there are potential offsets. Higher capex to meet sustainab il ity targets and moves towards dig ital isat ion could boost productiv ity growth, prov ing an antidote to economic scarring concerns. With in emerg ing markets, countries in Asia are best placed to take advantage of dig ital isat ion, includ ing generat ive artif ic ial intell igence (AI). • Relatively younger populations, and the adoption of dig ital technology, w ill allow emerging markets to become increas ingly important to global growth. • In order to meet net zero targets, energy-related spending will have to increase sign iﬁcantly; headw inds include insuff ic ient funds across emerging markets, labour shortages and supply chain constraints. Regional outlooks Actual and projected growth by country in 2023 and 2024 2024 2023 Asia China 4.8 per cent 5.2 per cent Hong Kong 2.9 per cent 3.2 per cent India 6.3 per cent 6.8 per cent Indonesia 5.2 per cent 5.1 per cent Singapore 2.6 per cent 1.0 per cent Africa & Middle East Niger ia 3.5 per cent 2.7 per cent UAE 4.0 per cent 2.7 per cent Europe & Americas UK 0.1 per cent 0.1 per cent US 1.8 per cent 2.5 per cent Trends and outlook for our three regions Asia • China’s economic activ ity rema ins below potential, leaving room for further recovery. We forecast 2024 growth at 4.8 per cent. The post-COVID recovery has been disappo int ing, due to continu ing contract ion of the property sector, negative contribut ion from fore ign trade, and a lack of conﬁdence on the part of consumers and private businesses. While GDP growth picked up to 5.2 per cent in 2023 on the reopening boost, policy support and a favourable base, economic activ ity is currently 2-3ppt below trend according to our estimate. We expect the government to set a growth target of around 5 per cent in 2024, the same as in 2023, to narrow the negative output gap and prevent deﬂation expectation from getting entrenched. • While housing market adjustment will likely continue, we expect it to exert less of a drag on growth next year. The authorit ies have turned more support ive of the sector since the July Politburo meeting, relaxing purchase restrict ions, lowering mortgage rates, accelerating renovation of urban villages, and pledging to meet reasonable ﬁnanc ing need from elig ible property developers. Consumpt ion is likely to remain the key driver of the economy, with consumers showing renewed will ingness to draw on the ir excess savings. The easing bias of macro polic ies is likely to remain to consolidate the recovery. We expect the PBoC to increas ingly rely on expans ion of its balance sheet to inject ample liqu id ity, keeping the credit condit ion relat ively easy. The ofﬁc ial budget deﬁcit may exceed the impl ic it ceil ing of 3 per cent of GDP, w ith the central government more will ing to share the debt burden. However, the ups ide is likely to be capped by private sector’s hesitat ion to expand investment. • Hong Kong’s outlook remains challenging. We expect growth to slow to 2.9 per cent in 2024 from 3.2 per cent in 2023, a reﬂection of still cautious household and business sentiment. The posit ive factors, includ ing a cont inued normalisat ion in tourist arrivals and a persistently tight labour market, may not be sufﬁc ient to offset a weak property market and elevated US interest rates that keep weigh ing on investment appetite. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 10 Strategic report continued • In India, we expect FY25 (year beginn ing Apr il 2024) GDP growth to likely moderate to 6.3 per cent vs 6.8 per cent for FY24 amid slower global growth, higher interest rates and slowing consumer demand. However the growth dynamics are likely to stay strong. Ris ing real wages are l ikely to support rural demand and we expect private capex recovery post national elections in April/May 2024; the current ruling party is widely expected to return to power. Meanwhile, inﬂat ion pressures are expected to ease slightly to 5 per cent in FY25 vs 5.4 per cent in FY24. Hence we see a shallow rate cut cycle of 50 bps starting June 2024 amid easing global rates. Ample foreign exchange (FX) reserves, yet another year of balance of payment surplus led by index inclus ion related inﬂows remain a strong buffer for the economy and are likely to lim it FX market volatil ity. The key r isks to our view can emanate from higher oil prices and or tighter global ﬁnanc ial cond it ions. • While global demand may remain soft in 2024, we expect the external drag on externally-oriented economies in Associat ion of South East As ian Nations (ASEAN), includ ing S ingapore, Vietnam, Malaysia and Thailand, to be more moderate due to favourable base effects. In addit ion, a bottom ing of the global electronics cycle may help these economies, though we do not expect a sign iﬁcant recovery g iven weak external demand and uncertainty. Domestic activ ity may see consumpt ion and investment sentiment partly affected by higher interest rates and still-high inﬂat ion earlier in the year. But potential rate cuts and easing inﬂat ion in H2 and likely stable labour markets should provide support. Election spending in Indonesia may also provide a boost to consumption earlier in the year. Tourism recovery may continue to bolster growth in 2024 but the support may be fading. Inﬂation is expected to moderate in 2024 on favourable base effects and tighter monetary polic ies but ups ide risks arise from potentially higher food and energy prices, especially with the latest developments in the Middle East. • Monetary policy in the region may remain tight for longer given upside risks to inﬂat ion and th is poses a downside risk to economic growth but some easing is expected in H2 which will help support growth sentiment. On balance, growth may remain somewhat subdued and sim ilar to 2023, but lower inﬂat ion and rate cuts in H2 may help offset a weaker H1. Africa and the Middle East • For Sub-Saharan Africa, external factors remain a key headwind. Constrained or more expensive access to external ﬁnancing is a challenge, especially given a concentration of external debt maturit ies in the years ahead. Scaled-up multilateral support for emerging and frontier economies is likely to be a partial mit igant. Whether the US can avo id a hard landing will be key to risk appetite. FX liqu id ity remains an issue, although encouragingly FX reforms are now underway in key markets. Higher oil prices may increase pressures. Common Framework debt restructuring progress in Zambia and Ghana remains key to economic prospects, as they look to build resil ience to further shocks. • In Niger ia, w ith a new cabinet and central bank leadership in place, we expect fuel subsidy and FX reforms to be completed in 2024. New investment in LNG production and a scaling up of domestic reﬁn ing capac ity should add to economic resil ience. In South Afr ica, while load shedding has improved, port and rail bottlenecks may hold back growth. In Kenya, increased concessional ﬁnanc ing and a part ial reﬁnanc ing of the 2024 Eurobond have eased external l iqu id ity concerns but ﬁscal consolidat ion w ill be key to stabil is ing high debt levels. • Higher for longer rates, higher commodity prices and elevated regional tensions highl ight the d ivergence between MENAP oil exporting and oil import ing econom ies. The Gulf Cooperation Council (GCC) is likely to continue using oil windfalls to reverse the deteriorat ion in government balance sheets stemming from the late-2014 and 2020 oil price shocks. The UAE, Oman and Qatar have committed to de-leveraging alongside the rebuild ing of external buffers. In Saud i Arabia, drawdowns at the Central Bank continue to support growing Public Investment Fund assets; robust domestic investment and execution of giga-projects aim to expand potential in the non-oil economy. Headline growth in Saudi Arabia may be modest, given extension of oil output cuts. However, GCC non-oil growth remains robust against external headwinds, aided by relatively lower levels of domestic inﬂat ion. Europe & Americas • The US economy has been resil ient in the face of sustained monetary policy tighten ing. But as cred it growth slows, housing affordabil ity weakens and del inquenc ies r ise as higher rates feed through to the real economy and we expect a slowdown in growth over the course of 2024. In the euro area, we expect growth to be elusive until rate cuts start in Q2, before pick ing up modestly in H2. • Headline inﬂat ion has fallen sharply for both the US and Euro area, but core inﬂat ion st ill remains off target. Central banks will remain alert to any signs of renewed upside risks to inﬂat ion, stemm ing from ongoing tight labour markets and geopolit ical tens ions. • The Fed and ECB have likely completed their rate hik ing cycles. Lower inﬂat ion leaves room for cuts from both central banks beginn ing in Q2; we expect the Fed to deliver 100bps and the ECB to deliver 125bps by end-2024. • There is likely to be less of a tailw ind to growth in Europe from ﬁscal policy as new ﬁscal rules and higher interest rates force consolidat ion of budget deﬁcit, and programmes introduced during the 2022-2023 energy cris is come to an end. The US economy has beneﬁtted from ﬁscal support for infrastructure investment, but this impulse is likely to fade in 2024. • In Latin America, weakening domestic demand and a downtrend in inﬂat ion should support further monetary eas ing by the region’s central banks most of which have already started rate cuts. Lower interest rates are likely to support better recovery in H2-2024, although sluggish external demand and tight global ﬁnanc ial cond it ions could be headw inds. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 11 Business model We help corporates and ﬁnancial inst itut ions connect and maxim ise opportun it ies across our global network, and we support ind iv iduals and local businesses in growing their wealth. Our business Corporate, Commercial and Institut ional Bank ing (CCIB) We support large corporates and ﬁnancial inst itut ions across the world’s most dynamic markets, helping unlock growth opportunit ies and create susta inable value Consumer, Private and Business Banking (CPBB) We support small and medium-sized enterprises and ind iv iduals, from Mass Retail clients to Afﬂuent includ ing h igh-net-worth ind iv iduals, both dig itally and in person. Ventures We promote innovat ion, invest in disrupt ive ﬁnancial technology and explore alternat ive business models. Ventures includes our market leading dig ital bank in Singapore. Our products and services Financ ial Markets • Macro, commodit ies and cred it trading • Financ ing and secur it ies serv ices • Sales and structuring • Debt capital markets and leveraged ﬁnances • Project and export ﬁnance Transaction Banking • Cash management • Trade ﬁnance • Working capital Wealth Management • Investments • Insurance • Wealth advice • Portfolio management Retail Products • Deposits • Mortgages • Credit cards • Personal loans How we generate returns We earn net interest on the margin for loans and deposit products, fee income on ﬁnanc ing solut ions, advisory and other services, and trading income from provid ing r isk management in ﬁnanc ial markets. Income • Net interest income • Fee income • Trading income Proﬁts • Income gained from provid ing our products and serv ices minus expenses, impa irments and taxes Return on tangible equity • Proﬁt after tax generated relative to tangible equity invested Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 12 Strategic report continued What makes us different Our Purpose is to drive commerce and prosperity through our unique divers ity – th is is underpinned by our brand promise, here for good. Our Stands – aimed at tackling the world’s biggest issues – Accelerating Zero, Lift ing Part ic ipat ion and Resetting Globalisat ion (see pages 15 to 16 for more), challenge us to use our un ique posit ion art iculated below. Client focus Our clients are our business. We build long-term client relationsh ips through trusted adv ice, expertise and best-in-class capabil it ies. Dist inct propos it ion Our understanding of the markets and our extensive internat ional network allow us to offer a ta ilored proposit ion to our clients, combin ing global expert ise and local knowledge. Robust risk management We are here for the long-term. Effective risk management allows us to grow a sustainable business. Sustainable and responsible business We are committed to sustainable social and economic development across our business, operations and communit ies. The sources of value we rely on We aim to use resources in a sustainable way, to achieve the goals of our strategy. Human Capital Divers ity d ifferent iates us. Del iver ing our Purpose rests on how we cont inue to invest in our people, the employee experience we further enhance and the culture we strengthen. How we’re enhancing our resources • Upskill ing and resk ill ing our people cont inues to be a prior ity –colleagues are undertak ing learning to build future-ready skills, includ ing in sustainable ﬁnance, data and analytics, dig ital, cyber secur ity, and leadership. • We continue to strengthen a work environment that supports inclus ion, innovat ion, and h igh performance, with an ongoing focus on wellbeing. This includes further embedding ﬂexible working across our markets, provid ing enhanced beneﬁts, and build ing the capab il it ies of our people leaders. International network Our network is our unique competit ive advantage and connects compan ies, inst itut ions and ind iv iduals to, and in, some of the world’s fastest-growing and most dynamic regions. How we’re enhancing our resources • Across our internat ional network, we are invest ing in capabil it ies such as dig ital channels and cl ient experiences to access new high-growth segments, grow our share of wallet with exist ing cl ients and create new business model opportunit ies. • We are strengthening our Transaction Banking, Financ ial Markets, Susta inable Finance solutions in CCIB and Wealth Management offerings in CPBB to meet the needs of our cross-border clients across our network. Local expertise We are deeply rooted in our markets with a strong understanding of key economic drivers, offering us ins ights that help our clients achieve their ambit ions. How we’re enhancing our resources • We continue to enhance our product, advisory and dig ital capab il it ies to serve our ind iv idual clients. In 2023, our PLC Group launched more than 20 new dig ital wealth capab il it ies, made our Signature Chief Investment Ofﬁce (CIO) funds available in 12 markets and launched new dig ital loan partnersh ips. • In Business Banking, we continued to support the growth of small and medium-sized-enterprises by making dig ital loan orig inat ion available in more markets and expanding the SC Women’s International Network, our offering for women entrepreneurs. Brand recognit ion We are a leading internat ional bank ing group with 170 years of history. In many of our markets we are a household name. How we’re enhancing our resources • In 2023 we continued to invest in our brand through our ‘Possib il it ies are Everywhere’ global advert is ing campa ign, highl ight ing our dist inct ive brand promise to be here for good and showcasing how we help people, companies and communit ies grow and prosper across our internat ional network. • We have been successful in leveraging brand and ins ights to support bus iness growth. Media sentiment towards the PLC Group continued to exceed the average for the banking sector and ranked top three in most of our key markets over 2023. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 13 Strategic report continued Financ ial strength With $539 bill ion in assets on our balance sheet, we are a strong, trusted partner for our clients. How we’re enhancing our resources • Our capital posit ion rema ins strong, with our Common Equity Tier 1 (CET1) ratio of 13.2 per cent above the Group target of 12 per cent. Technology Our strong dig ital foundat ions and leading technological capabil it ies continue to enable a data-driven dig ital bank that delivers world class client service. How we’re enhancing our resources • We are mainta in ing momentum on simpl iﬁcation and harmon isat ion of our technology estate, integrat ing platforms us ing the cloud where appropriate, and invest ing in our engineer ing capab il it ies and best-in-class tools to provide secure and resil ient technology. • We are accelerating automation to optim ise our technology stack and enhanc ing the end-to-end delivery of requirements to deployment via a new, single platform that enables our colleagues to collaborate on technology projects in a consistent and efﬁcient manner. • We have continued deliver ing value to our cl ients by improv ing speed to market, as enabled by more efﬁcient and scalable technology development and delivery processes. The value we create We aim to create long-term value for a broad range of stakeholders in a sustainable way Clients We deliver banking solutions for our clients across our network, both dig itally and in person. We help ind iv iduals grow their wealth while connecting corporates and ﬁnanc ial inst itut ions to opportunit ies across our network. Employees We believe great employee experience drives great client experience. We want all our people to pursue their ambit ions, deliver with purpose and have a rewarding career enabled by great people leaders. Society We strive to operate as a sustainable and responsible company, working with local partners to promote social and economic development. Suppliers We engage diverse suppliers, both locally and globally, to provide efﬁc ient and susta inable goods and services for our business. Regulators and governments We play our part in supporting the effective function ing of the ﬁnancial system and the broader economy by proact ively engaging with public authorit ies and by pay ing our taxes. Investors We aim to deliver robust returns and long-term sustainable value for our investors. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 14 Our strategy To become a leader in global ﬁnance Over the past year, we have executed well against our strategy, with a considerable uplift in our Return on ordinary shareholders’ Tangible Equity (RoTE) delivered. We will continue to focus on: • Four strategic prior it ies: Network business, Afﬂuent client business, Mass Retail business and Sustainab il ity • Three crit ical enables: People and Culture, Ways of Work ing and Innovation While the macroeconomic and industry environments continue to evolve, we believe the strategy remains ﬁt for the Bank. Our strategic prior it ies and enablers will continue to be supported by our three Stands: Accelerating Zero, Lift ing Part ic ipat ion and Resetting Globalisat ion (please ﬁnd more deta ils of our Stands on page 15 to 16). Strategic prior it ies Network business Through our unique network, we enable global trade and investment through ﬁnanc ing, payments, asset or ig inat ion and risk management, with an increas ing focus on Susta inable Finance. Our on-the-ground presence and capabil it ies in our markets give us an advantage in advice and deal execution for corporates and ﬁnancial inst itut ions by: • Helping our clients seize opportunit ies in shift ing supply cha ins, tapping into exist ing and emerg ing trade and investment corridors such as intra-Asia, and supporting our European and American clients’ access to emerging markets assets • Continuously improv ing cl ient experience with market-leading dig ital platforms that allow seamless onboard ing, client servic ing and appl icat ion programm ing interface (API) connectiv ity • Developing different iated propos it ions in high-returning, high-growth sectors such as Technology, Media & Telecom (TMT), Healthcare, Cleantech and Electric Vehicles Afﬂuent client business We offer comprehensive solutions, personalised advice, and exceptional client experiences to help our Afﬂuent clients manage and grow their wealth, at home and abroad. As a leading internat ional wealth manager, we are strengthen ing our competit ive advantage by: • Unlocking the value of our network, leveraging our wealth hubs in Singapore, Hong Kong, UAE, and Jersey to deliver a seamless global proposit ion and cl ient experience by enhancing our dig ital, wealth and adv isory capabil it ies • Maxim is ing synergies across our client portfolios and the bank by nurturing clients up the Afﬂuent client continuum via our deep local expertise and different iated propos it ions, and by partner ing with CCIB to offer corporate solutions like real estate and acquis it ion ﬁnanc ing to ultra-h igh-net-worth clients • Deliver ing expert adv ice and dig ital-ﬁrst wealth solut ions via an open architecture approach, supported by investments in innovat ion and scalable platforms. Mass retail business Mass Retail is strategically important to our client continuum. It demonstrates our deep local expertise, commitment to and relevance in the markets where we operate. Besides provid ing a cont inuous stream of clients who become more afﬂuent over time, Mass Retail underscores our commitment to lift ing part ic ipat ion in the communit ies we serve. Our focus is on: • Continu ing the p ivot towards a dig ital-ﬁrst model to become more personal ised, relevant and real-time • Sharpening our onboarding and engagement capabil it ies through dig ital sales and market ing, advanced analytics capabil it ies and straight-through self-service • Launching and developing new business models with leading global and regional partners to leverage synergies in distr ibut ion, dig ital capab il it ies, and risk management to serve customers at scale Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 15 Sustainab il ity We aim to support the sustainable economic and social development of our markets, helping people to thrive long-term. In line with our Stands, we are committed to accelerating the transit ion to net zero, l ift ing part ic ipat ion in the economy and resetting globalisat ion. Our focus includes: • Continu ing to scale our susta inable and transit ion ﬁnance bus iness by integrat ing susta inab il ity as a core component of our value proposit ion and enhanc ing our suite of Sustainable Finance products and solutions across CCIB and CPBB • Progressing on our pathway to achieve net zero ﬁnanced emiss ions by 2050, includ ing sett ing inter im 2030 targets for addit ional h igh-emitt ing sectors and enhanc ing our exist ing Cl imate Risk governance and management processes • Contribut ing our sk ills, experience and networks to global partnerships and in it iat ives that enhance standards and further develop the global sustainab il ity ecosystem • Seeking to partner with our clients and communit ies to mob il ise soc ial capital and drive economic inclus ion and entrepreneurship through our Futuremakers global in it iat ive Crit ical enablers People and culture We invest in our people by build ing future-ready sk ills, provid ing a d ifferent iated employee exper ience, and strengthening our inclus ive and innovat ive culture. We do th is by: • Embedding our refreshed approach to performance, reward and recognit ion that puts greater focus on outperformance through collaboration and innovat ion • Increasing re-skill ing and upsk ill ing opportun it ies towards future roles and work, al igned with the business strategy and workforce’s aspirat ions • Strengthening leadership capabil ity through modern ised development programmes and measurement platforms • Focusing on wellbeing to enhance resil ience, product iv ity and performance as well as offer ing progressive, purpose-led beneﬁts • Further embedding ﬂexible working across our footprint Ways of working We drive client-centric ity w ith a focus on speed to value for our clients. We are improv ing our operat ing rhythm and organisat ional ag il ity wh ile empowering our people to continuously improve the way we work. We continue to progress on: • Simpl ify ing and transforming the way we invest, operate and execute • Harnessing operational efﬁc ienc ies to help us continue the drive of commerce and prosperity in our markets • Enhancing the way we deliver and manage change across the Bank, anchored around simpl ify ing our processes end-to-end Innovation We embed innovat ion through d ig it is ing our core, leverag ing partnerships to drive scale and extended reach, and build ing new business models through ventures. We continue to focus on: • Modernis ing and strengthen ing our technology estate and data management • Exploring and experiment ing to enhance cl ient experience, develop new platforms and improve operational resil ience • Leveraging partnerships to access new clients and strengthen our capabil it ies • Build ing, launch ing and scaling innovat ive ventures wh ile driv ing ventures’ collaborat ion with the broader Bank and its clients Our Stands Climate change, stark inequal ity and the unfa ir aspects of globalisat ion impact us all. We’re taking a stand by setting long-term ambit ions on these issues where they matter most. This works in unison with our strategy, stretching our think ing, our action and our leadership to accelerate our growth. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 16 Strategic report continued Accelerating Zero The world must reach net zero carbon emiss ions by 2050 to l im it the worst effects of cl imate change. This will require efforts across stakeholder groups to accelerate the transit ion to a low-carbon, cl imate-resil ient economy. Pol icymakers, corporates and ﬁnancial inst itut ions must play a substantial part in this to ensure that ﬁnance is an enabler of change. The need for a just transit ion that addresses env ironmental challenges, while ensuring inclus ive econom ic and social development in the footprint markets where we operate, is a prior ity for the Group. Lift ing Part ic ipat ion Inequality, along with gaps in economic inclus ion, mean that many young people, women, and small bus inesses struggle to gain access to the ﬁnanc ial system to save for the ir futures and to grow their businesses. We want to increase access to ﬁnancial serv ices and make them available at low cost. We strive to expand the reach and scale of accessible banking and to connect clients and our wider communit ies to the sk ills and educational opportunit ies that promote and susta in access to ﬁnance and economic opportunity. Resetting Globalisat ion Globalisat ion has l ifted mill ions out of poverty but left many beh ind. We advocate for a new model of globalisat ion based on transparency to build trust, renew conﬁdence and promote dialogue and innovat ion. We connect the cap ital, expertise and ideas needed to drive new standards and create innovat ive solut ions for sustainable growth. We work across our markets to shape a new understanding of growth, one that is based on inclus iv ity, sustainab il ity and our ambit ion to support people and communit ies for the long term. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 17 Client segment reviews Corporate, Commercial & Institut ional Bank ing Proﬁt before taxation $3,987m $3,886m Underlying basis Reported basis Segment overview Corporate, Commercial & Institut ional Bank ing supports local and large corporations, governments, banks and investors with their transaction banking, ﬁnanc ial markets and borrow ing needs. We provide solutions to clients in some of the world’s fastest-growing economies and most active trade corridors. Our strong and deep local presence enables us to help co-create bespoke ﬁnancing solut ions and connect our clients multilaterally to investors, suppliers, buyers and sellers, enabling them to move capital, manage risk and invest to create wealth. Our clients represent a large and important part of the economies we serve. Corporate, Commercial and Institut ional Banking is at the heart of the Group’s shared Purpose to drive commerce and prosperity through our unique divers ity. We are also committed to promote sustainable ﬁnance in our markets and channeling capital to where the impact will be greatest. We are deliver ing on our amb it ion to support susta inable economic growth, increas ing support and fund ing for ﬁnancial offer ings that have a posit ive impact on our communit ies and env ironment. Performance highl ights • Underlying operating proﬁt before taxation of $3,987 mill ion up 19 per cent, pr imar ily dr iven by higher income partly offset by higher expenses. • Underlying operating income of $7,972 mill ion was up 15 per cent pr imar ily due to h igher Transaction Banking income (primar ily cash) on account of h igher interest margins, partly offset by lower Financ ial Markets performance on the back of reduced market volatil ity. • Credit impa irment is a net writeback, due to sign iﬁcant releases in Stage 3 with in the AME reg ion. Consumer, Private & Business Banking Proﬁt before taxation $1,335m $1,304m Underlying basis Reported basis Segment overview Consumer, Private and Business Banking serves ind iv iduals and small businesses, with a focus on afﬂuent and emerging afﬂuent in many of the world’s fastest-growing cit ies. We prov ide dig ital bank ing services with a human touch to our clients, with services spanning across deposits, payments, ﬁnanc ing products and Wealth Management. We also support our cl ients with their business banking needs. Private Banking offers a full range of investment, credit and wealth planning products to grow, and protect, the wealth of high net-worth ind iv iduals. We also support our small businesses clients with their business banking needs. We are closely integrated with the Group’s other client segments; for example, we offer employee banking services to Corporate, Commercial & Institut ional Bank ing clients, and Consumer, Private and Business Banking also provides a source of high-quality liqu id ity for the Group. Increasing levels of wealth across Asia, Africa and the Middle East support our opportunity to grow the business sustainably. We aim to continuously uplift client experience and improve productiv ity by dr iv ing end-to-end d ig ital isat ion and process simpl iﬁcation. Performance highl ights • Underlying proﬁt before taxation of $1,335 mill ion up 43 per cent dr iven by higher income. • Underlying operating income of $3,456 mill ion was up 22 per cent, dr iven by strong performance in Retail deposits on the back of improved interest margins and recovery in Wealth Management income, partly offset by Mortgages. • Expenses were up 6 per cent year-on-year due to higher staff costs. • Credit impa irment increased $110m due to higher charge-offs in unsecured lending portfolios in India, Malaysia and Singapore. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 18 Strategic report continued Ventures Proﬁt before taxation $(253)m $(257)m Underlying basis Reported basis Segment overview Ventures is comprised of Trust Bank, which is Singapore’s ﬁrst cloud-native bank launched in September 2022 and aims to become the fourth largest dig ital reta il bank in Singapore by the end of 2024. To achieve this, it will scale through its partner ecosystem and deepen its customer relationsh ips w ith the mass and mass afﬂuent customer segments. Performance highl ights • Underlying loss before tax of $253 mill ion was dr iven by continued investment in our dig ital bank, Trust, in Singapore Regional reviews Asia Proﬁt before taxation $2,416m $2,351m Underlying basis Reported basis Region overview The Asia region has a long-standing and deep franchise across the markets and some of the world’s fastest-growing economies. The region generated 47 per cent of the Group’s income beneﬁtt ing from our extens ive network of markets. Of these, Singapore and India contributed the highest income, underpinned by a divers iﬁed franch ise and deeply rooted presence. The region is highly interconnected, with China’s economy at its core. Our global footprint and strong regional presence, dist inct ive proposit ion and cont inued investment posit ion us strongly to capture opportun it ies as they ar ise from the continu ing open ing up of China’s economy. The region is beneﬁt ing from r is ing trade ﬂows, cont inued strong investment, and a ris ing m iddle class which is driv ing consumption growth and improv ing d ig ital connect iv ity. Performance highl ights • Underlying operating proﬁt before tax of $2,416 mill ion was up 20 per cent due to h igher income. • Underlying operating income of $5,331 mill ion up 16 per cent, due to h igher Transaction Banking and Retail Products income beneﬁting from interest rate rises, partially offset by lower Financ ial Markets income. • Credit impa irment up $124m ill ion, due to h igher charge offs in unsecured lending portfolio with in CPBB. • Total assets and liab il it ies up 6 per cent and 10 per cent respect ively since 31 December 2022. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 19 Strategic report continued Africa & Middle East Proﬁt before taxation $1,243m $1,267m Underlying basis Reported basis Region overview We have a deep-rooted heritage in Africa & Middle East (AME) and are present in 18 markets, of which the UAE, Niger ia, Pakistan, Kenya, South Africa and Ghana are the largest by income. A rich history, deep client relationsh ips and a un ique footprint in the region, as well as across centres in Asia, Europe and the Americas enable us to seamlessly support our clients. AME is an important element of global trade and investment corridors and we are well placed to facil itate these ﬂows. Gulf Cooperation Council (GCC) markets are expected to outpace global growth on the back of oil price recovery, higher government spend and bilateral trade negotiat ions. The macro-econom ic risk remains elevated in Pakistan and some markets in Africa due to a high level of sovereign debt and FX liqu id ity challenges. Overall, AME’s medium and long-term attractiveness remains compelling and intact, and it is an important part of our global network proposit ion for our cl ients. Performance highl ights • Underlying operating proﬁt before tax of $1,243 mill ion was up 62 per cent dr iven by higher income and lower credit impa irments, partly offset by h igher cost • Underlying operating income of $2,764 mill ion was up 14 per cent ma inly due to growth in Transaction Banking and Retail Deposits, partly offset by lower Financ ial Markets income. • Total assets was largely ﬂat from 31 December 2022 due to de-risk ing in markets with elevated macro-economic risk. Europe & Americas Proﬁt before taxation $15m $(3)m Underlying basis Reported basis Region overview The Group supports clients in Europe & Americas through hubs in London, Frankfurt and New York as well as a presence in several other markets in Europe and Latin America. Our expertise in Asia, Africa and the Middle East allows us to offer our clients in the region unique network and product capabil it ies. The region generates sign iﬁcant income for the Group’s Corporate, Commercial & Institut ional Bank ing business. In addit ion to be ing a key orig inat ion centre for CCIB, the region offers local, on-the-ground expertise and solutions to help internat ionally m inded clients grow across Europe and Americas. The region is home to the Group’s two biggest payment clearing centres and the largest trading ﬂoor, with sign iﬁcant amount of the reg ion’s income orig inat ing from Financ ial Markets and Transaction Banking products. Our European CPBB focuses on serving clients with links to our footprint markets. Performance highl ights • Underlying operating proﬁt before taxation of $15mill ion reduced 99 per cent dr iven by lower income, primar ily on account of increased cost of hedges with in Treasury, as well as h igher expenses • Underlying operating income of $1,682 mill ion was down 35 per cent largely due to drag from structural and short-term hedges and lower Financ ial Markets income, moderated by higher Cash income from improved interest margins • Expenses increased 14 per cent due to higher staff cost • Total assets and liab il it ies reduced 5 per cent and 15 percent from 31 December 2022, dr iven by Financ ial Markets Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 20 Financ ial rev iew Summary of ﬁnancial performance 2023 $mill ion 2022 1 $mill ion Change % Underlying Net Interest income 3 5,637 4,703 20 Underlying Non NII 3 5,771 5,314 9 Underlying operating income 11,408 10,017 14 Other underlying expenses (6,758) (6,331) (7) UK bank levy (111) (102) (9) Underlying operating expenses (6,869) (6,433) (7) Underlying operating proﬁt before impa irment and taxat ion 4,539 3,584 27 Credit impa irment 46 25 84 Other impa irment (40) (85) 53 Loss from associates and jo int ventures (4) (13) 69 Underlying proﬁt before taxation 4,541 3,511 29 Restructuring (117) (80) (46) Goodwill and Other impa irment – (10) 100 DVA 27 33 (18) Other Items (37) 20 nm 5 Reported proﬁt before taxation 4,414 3,474 27 Taxation (1,177) (1,122) (5) Proﬁt for the year 3,237 2,352 38 Underlying return on tangible equity (%) 2 12.9 8.9 400 Common Equity Tier 1 (%) 2,4 13.2 12.7 50 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Change is the basis points (bps) difference between the two periods rather than the percentage change 3 To be consistent with how we compute Net Interest Margin (NIM), and to align with the way we manage our business, we have changed our deﬁn it ion of Underlying Net Interest Income (NII) and Underlying Non NII. The adjustments made to NIM, includ ing interest expense relating to funding our trading book, will now be shown against Underlying Non NII rather than Underlying NII. Prior periods have been restated. There is no impact on total income 4 The 2022 comparatives have been restated to correctly reﬂect credit risk mit igat ion 5 Not meaningful Reported ﬁnancial performance summary 2023 $mill ion 2022 $mill ion Change % Net Interest income 4,607 4,451 4 Non NII 6,942 5,783 20 Reported operating income 11,549 10,234 13 Reported operating expenses (7,147) (6,662) (7) Reported operating proﬁt before impa irment and taxat ion 4,402 3,572 23 Credit impa irment 58 22 164 Goodwill and other impa irment (42) (107) 61 Loss from associates and jo int ventures (4) (13) 69 Reported proﬁt before taxation 4,414 3,474 27 Taxation (1,177) (1,122) (5) Proﬁt for the year 3,237 2,352 38 Reported return on tangible equity (%) 1 12.5 8.8 370 1 Change is the basis points (bps) difference between the two periods rather than the percentage change Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 21 Strategic report continued The commentaries below are on an underlying basis unless otherwise stated Operating income increased 14 per cent and was driven by growth in both net interest income and non net interest income, on the back of higher net interest margins and a one off gain from a subsid iary d isposal. Net interest income increased 20 per cent, driven by higher net interest margins, partially offset by short-term and structural hedge losses. Net interest margin averaged 160 basis points and is 23 basis points higher year-on-year beneﬁt ing from r is ing interest rates. Non NII increased 9 per cent, due to gain on disposal of a subsid iary, partly offset by lower F inanc ial Markets income. Operating expenses excluding the UK bank levy are up 7 per cent primar ily reﬂect ing the impact of a high-inﬂat ion environment, includ ing salary increases, headcount growth, addit ional investment in transformational dig ital capab il it ies and post-covid normalisat ion of cost l ines. The cost-to-income ratio (excluding the UK bank levy) decreased 4 percentage points to 59 per cent, with posit ive jaws of 7 per cent. Credit impa irment is a net credit of $46 mill ion dr iven by sign iﬁcant releases in Stage 3 from corporate clients, partly offset by higher charges with in the unsecured lend ing portfolio Other impa irment is a net charge of $40m and primar ily relates to software. The Group’s underlying proﬁt before taxation no longer includes movement in the debit valuation adjustment (DVA), the markets and businesses it is exit ing in Africa and Middle East (AME) and the Aviat ion F inance business and now reports these with in restructur ing and other items. Restructuring is a loss of $117 mill ion pr imar ily reﬂect ing reﬂects the impact of actions to transform the organisat ion to improve productiv ity, pr imar ily redundancy related charges and the AME market ex its, while loss of $37 mill ion in other items is in relation to a sale of a portfolio of Aviat ion loans. Taxation of $1,177 mill ion for the year represents an effect ive tax rate of 27 per cent against prior year effective tax rate of 32%, primar ily due to a change in the mix of proﬁts across jur isd ict ions and d isposals and restructuring of our businesses Underlying Return on tangible equity increased by 400 basis points to 12.9 per cent driven by higher proﬁts on account of strong income growth and lower impa irments Underlying proﬁt/(loss) before tax by client segment and geographic region 2023 $mill ion 2022¹ $mill ion Change % Corporate, Commercial & Institut ional Bank ing 1 3,987 3,339 19 Consumer, Private & Business Banking 1 1,335 931 43 Ventures (253) (277) (12) Central & other items (segment) (528) (482) 2 Underlying proﬁt before taxation 4,541 3,511 29 Asia 2,416 2,017 20 Africa & Middle East 1,243 766 62 Europe & Americas 15 1,213 (99) Central & other items (region) 867 (485) 279 Underlying proﬁt before taxation 4,541 3,511 29 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 22 Strategic report continued Adjusted net interest income and margin 2023 $mill ion 2022 $mill ion Change¹ % Adjusted net interest income 2 5,694 4,695 21 Average interest-earning assets 356,450 343,947 4 Average interest-bearing liab il it ies 322,422 316,964 2 Gross yield (%) 3 5.16 2.84 232 Rate paid (%) 3 3.93 1.60 233 Net interest margin (%) 3,4 1.60 1.37 23 1 Variance is better/(worse) other than assets and liab il it ies wh ich is increase/(decrease) 2 Adjusted net interest income is reported net interest income less funding costs for the trading book and ﬁnanc ial guarantee fees on interest earning asset 3 Change in the basis points (bps) difference between two periods rather than the percentage change 4 Net interest margin is calculated as Adjusted net interest income div ided by average interest-earning assets, annualised Adjusted net interest income increased 21 per cent driven by higher net interest margin which increased 23 basis point year-on-year, beneﬁtting from an increase in interest rates across many of our markets. Average interest-earning assets increased 4 per cent driven by higher Treasury Markets assets, partially offset by lower lending assets on the back of optim isat ion in it iat ives. Gross y ields increased 232 basis points compared to the average in same period of 2022, reﬂecting the impact of increase of key interest rates. Average interest-bearing liab il it ies increased 2 per cent driven by growth in customer accounts, with rate paid on liab il it ies increas ing by 233 bas is points year-on-year reﬂecting impact of interest rate rises. Credit quality Balance Sheet 2023 $mill ion 2022 $mill ion Change 1 % Gross loans and advances to customers 2 159,552 162,158 (2) Of which stage 1 146,718 148,213 (1) Of which stage 2 7,657 7,743 (1) Of which stage 3 5,177 6,202 (17) Expected credit loss provis ions (3,409) (4,032) (15) Of which stage 1 (198) (268) (26) Of which stage 2 (193) (187) 3 Of which stage 3 (3,018) (3,577) (16) Net loans and advances to customers 156,143 158,126 (1) Of which stage 1 146,520 147,945 (1) Of which stage 2 7,464 7,556 (1) Of which stage 3 2,159 2,625 (18) Cover ratio of stage 3 before/after collateral (%) 3 58 / 73 58 / 74 0 / (1) Credit grade 12 accounts ($mill ion) 2,117 1,282 65 Early alerts ($mill ion) 3,791 3,143 21 Investment grade corporate exposures (%) 3 75 79 (4) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting period 2 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $13,827 mill ion at 31 December 2023 (2022: $15,586 m ill ion) 3 Change is the percentage points difference between the two points rather than the percentage change Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 23 Strategic report continued Asset quality remained resil ient, reﬂected in lower year-on-year credit impa irment charges. The Group cont inues to actively manage the credit portfolio whilst remain ing alert to a volat ile and challenging external environment includ ing increased geopolit ical tens ions which has led to id iosyncrat ic stress in a select number of markets and industry sectors. Credit impa irment was a net release of $46 m ill ion, reﬂect ing the impact of sign iﬁcant releases in stage 3 with in CCIB , partly offset by higher charge-offs in unsecured lending portfolio. Gross stage 3 loans and advances to customers of $5.2 bill ion were 17 per cent lower year-on-year as repayments, cl ient upgrades and write-offs more than offset new inﬂows Credit grade 12 balances have increased by 65 per cent to $2.1 bill ion substant ially from a change in composit ion of an exist ing sovere ign exposure. Restructuring, goodwill impa irment and other items 2023 $mill ion 2022¹ $mill ion Restructuring Goodwill and Other Impairment DVA Other items 2 Restructuring Goodwill and Other impa irment DVA Other items Operating income 151 – 27 (37) 164 – 33 20 Operating expenses (278) – – – (229) – – – Credit impa irment 12 – – – (3) – – – Other impa irment (2) – – – (12) (10) – – (Loss)/proﬁt before taxation (117) – 27 (37) (80) (10) 33 20 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Other items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans The Group’s reported performance is adjusted for proﬁts or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are sign iﬁcant or mater ial in the context of the Group’s normal business earnings for the period and items which management and investors would ordinar ily ident ify separately when assess ing underlying performance period-by period. Effective 1st January 2023, the Group no longer includes the seven exit markets or the two CPBB business exits in the AME region and the Aviat ion F inance business with in the Group’s underly ing operating proﬁt before taxation but will report them with in restructur ing. The sale of one of the exit markets, Jordan was completed in August 2023 and the $8 mill ion ga in is included in operating income in restructuring. The remain ing ex its in the AME region are expected to complete in 2024. The Group is also reclassify ing movements in the debit valuation adjustment (DVA) out of its underlying operating proﬁt before taxation and into other items. To aid comparisons with prior periods the Group has removed the exit markets, Aviat ion F inance business and DVA from its underlying operating proﬁt before taxation for 2022. Restructuring charges of $117 mill ion reﬂects the impact of actions to transform the organisat ion to improve productiv ity, primar ily redundancy related charges. DVA was a posit ive $27 m ill ion movement dr iven by the widen ing of the Group’s asset swap spreads on der ivat ive liab il ity exposures. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 24 Strategic report continued Balance sheet and liqu id ity 2023 $mill ion 2022 $mill ion Assets Loans and advances to banks 22,803 27,383 Loans and advances to customers 156,143 158,126 Other assets 359,633 365,225 Total assets 538,579 550,734 Liab il it ies Deposits by banks 23,616 24,150 Customer accounts 237,902 243,075 Other liab il it ies 243,117 249,366 Total liab il it ies 504,635 516,591 Equity 33,944 34,143 Total equity and liab il it ies 538,579 550,734 Advances-to-deposits ratio (%)¹ 50.5% 50.4% Standard Chartered Bank is not regulated for Liqu id ity Coverage Ratio (LCR), however, the bank and material subsid iar ies in the consolidat ion have standalone LCR rat ios above 100 per cent. 1 The Group now excludes $20,710 mill ion held w ith central banks (2022: $20,798 mill ion) that have been conﬁrmed as repayable at the po int of stress. Advances exclude repurchase agreements and other sim ilar secured lend ing of $13,827 mill ion and include loans and advances to customers held at fair value through proﬁt or loss of $3,188 mill ion. Depos its include customer accounts held at fair value through proﬁt or loss of $9,166 mill ion The Group’s balance sheet is strong, highly liqu id and d ivers iﬁed. Loans and advances to customers decreased 1 per cent since December 2022 to $156 bill ion dr iven mainly by risk-weighted asset optim isat ion actions undertaken by CCIB. Customer accounts of $238 bill ion decreased by 2 per cent s ince December 2022 driven by lower ﬁnanc ial markets volume, partly offset by higher cash volumes in transaction banking and increase in retail term deposits The advances-to-deposits ratio was broadly ﬂat. Capital base and ratios 2023 $mill ion 2022 $mill ion ¹ CET1 capital 21,794 21,746 Addit ional T ier 1 capital (AT1) 5,453 5,403 Tier 1 capital 27,247 27,149 Tier 2 capital 11,607 12,439 Total capital 38,854 39,588 CET1 capital ratio (%) 13.2% 12.7% Total capital ratio (%) 23.5% 23.1% Leverage ratio (%) 5.0% 4.8% 1 The 2022 comparatives have been restated to correctly reﬂect credit risk mit igat ion. Standard Chartered Bank is authorised by the PRA and regulated by the Financ ial Conduct Author ity and the PRA as Standard Chartered Bank. Standard Chartered Bank continues to operate through its branches and a number of subsid iar ies, all of which remain well capital ised in line with their applicable Court-approved Risk Appetites which takes into account local regulations, Pillar 1 and 2 requirements and regulatory and management buffers as applicable. The Group’s CET1 capital ratio remained strong at 13.2 per cent at FY2023 with leverage at 5.0 per cent. The Group mainta ins high levels of loss absorbing capacity. Compared to 31 December 2022, the Group’s CET1 ratio increased by approximately 50 bps to 13.2 per cent. RWAs decreased by $6.1 bill ion to $165.6 b ill ion. CET1 cap ital remained largely ﬂat at $21.8 bill ion as proﬁts of $3.2 bill ion and movement in other comprehensive income of $0.4 bill ion were offset by d istr ibut ions of $3.0 bill ion, a foreign currency translation impact of $0.5 bill ion and an increase in intang ible assets of $0.1 b ill ion. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 25 Strategic report continued Underlying versus reported reconcil iat ions Underlying versus reported reconcil iat ions Reconcil iat ions between underlying and reported results are set out in the tables below: Operating income by client segment 2023 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Other Items (Segment) $mill ion Total $mill ion Underlying operating income 7,972 3,456 137 (157) 11,408 Restructuring 70 45 – 36 151 DVA 27 – – – 27 Other items 2 (37) – – – (37) Reported operating income 8,032 3,501 137 (121) 11,549 2022¹ Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Other Items (Segment) $mill ion Total $mill ion Underlying operating income 6,917 2,828 3 269 10,017 Restructuring 93 47 – 24 164 DVA 33 – – – 33 Other items – – – 20 20 Reported operating income 7,043 2,875 3 313 10,234 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Other items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans Operating income by region 2023 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Central & Other Items (Region) $mill ion Total $mill ion Underlying operating income 5,331 2,764 1,682 1,631 11,408 Restructuring 5 122 12 12 151 DVA (6) 26 7 – 27 Other items 2 (14) (18) (5) – (37) Reported operating income 5,316 2,894 1,696 1,643 11,549 2022 ¹ Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Central & Other Items (Region) $mill ion Total $mill ion Underlying operating income 4,614 2,431 2,579 393 10,017 Restructuring 27 145 (7) (1) 164 DVA 11 8 14 – 33 Other items – – – 20 20 Reported operating income 4,652 2,584 2,586 412 10,234 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Other items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 26 Strategic report continued Proﬁt before taxation (PBT) 2023 Underlying $mill ion Restructuring $mill ion DVA $mill ion Net gain on businesses disposed off 1 $mill ion Goodwill and Other impa irment $mill ion Reported $mill ion Operating income 11,408 151 27 (37) – 11,549 Operating expenses (6,869) (278) – – – (7,147) Operating proﬁt/(loss) before impa irment losses and taxation 4,539 (127) 27 (37) – 4,402 Credit impa irment 46 12 – – – 58 Other impa irment (40) (2) – – – (42) Loss from associates and jo int ventures (4) – – – – (4) Proﬁt/(loss) before taxation 4,541 (117) 27 (37) – 4,414 2022 2 Underlying $mill ion Restructuring $mill ion DVA $mill ion Net gain on businesses disposed off $mill ion Goodwill and Other impa irment $mill ion Reported $mill ion Operating income 10,017 164 33 20 – 10,234 Operating expenses (6,433) (229) – – – (6,662) Operating proﬁt/(loss) before impa irment losses and taxation 3,584 (65) 33 20 – 3,572 Credit impa irment 25 (3) – – – 22 Other impa irment (85) (12) – – (10) (107) Loss from associates and jo int ventures (13) – – – – (13) Proﬁt/(loss) before taxation 3,511 (80) 33 20 (10) 3,474 1 Net gain on businesses disposed of for sale includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 27 Strategic report continued Proﬁt before taxation (PBT) by client segment 2023 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Other Items (Segment) $mill ion Total $mill ion Operating income 7,972 3,456 137 (157) 11,408 External 6,026 2,124 138 3,120 11,408 Inter-segment 1,946 1,332 (1) (3,277) – Operating expenses (4,103) (1,989) (329) (448) (6,869) Operating proﬁt/(loss) before impa irment losses and taxat ion 3,869 1,467 (192) (605) 4,539 Credit impa irment 153 (128) (13) 34 46 Other impa irment release/(charge) (35) (4) (24) 23 (40) (Loss)/proﬁt from associates and jo int ventures – – (24) 20 (4) Underlying proﬁt/(loss) before taxation 3,987 1,335 (253) (528) 4,541 Restructuring (91) (31) (4) 9 (117) Goodwill and other impa irment – – – – – DVA 27 – – – 27 Other Items 1 (37) – – – (37) Reported proﬁt/(loss) before taxation 3,886 1,304 (257) (519) 4,414 2022 ² Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Other Items (Segment) $mill ion Total $mill ion Operating income 6,917 2,828 3 269 10,017 External 6,321 2,274 3 1,419 10,017 Inter-segment 596 554 – (1,150) – Operating expenses (3,755) (1,873) (242) (563) (6,433) Operating proﬁt/(loss) before impa irment losses and taxat ion 3,162 955 (239) (294) 3,584 Credit impa irment 186 (18) (2) (141) 25 Other impa irment (9) (6) (20) (50) (85) (Loss)/proﬁt from associates and jo int ventures – – (16) 3 (13) Underlying proﬁt/(loss) before taxation 3,339 931 (277) (482) 3,511 Restructuring (26) (31) (1) (22) (80) Goodwill and other impa irment – – – (10) (10) DVA 33 – – – 33 Other Items – – – 20 20 Reported proﬁt/(loss) before taxation 3,346 900 (278) (494) 3,474 1 Other Items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 28 Strategic report continued Proﬁt before taxation (PBT) by region 2023 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Central & Other Items (Region) $mill ion Total $mill ion Operating income 5,331 2,764 1,682 1,631 11,408 Operating expenses (2,812) (1,597) (1,659) (801) (6,869) Operating proﬁt before impa irment losses and taxat ion 2,519 1,167 23 830 4,539 Credit impa irment (64) 91 28 (9) 46 Other impa irment (39) (15) (12) 26 (40) (Loss)/proﬁt from associates and jo int ventures – – (24) 20 (4) Underlying proﬁt before taxation 2,416 1,243 15 867 4,541 Restructuring (45) 16 (20) (68) (117) Goodwill and other impa irment – – – – – DVA (6) 26 7 – 27 Other Items 1 (14) (18) (5) – (37) Reported proﬁt/(loss) before taxation 2,351 1,267 (3) 799 4,414 2022 2 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Central & Other Items (Region) $mill ion Total $mill ion Operating income 4,614 2,431 2,579 393 10,017 Operating expenses (2,653) (1,552) (1,456) (772) (6,433) Operating proﬁt/(loss) before impa irment losses and taxat ion 1,961 879 1,123 (379) 3,584 Credit impa irment 60 (115) 88 (8) 25 Other impa irment (4) 2 2 (85) (85) Loss from associates and jo int ventures – – – (13) (13) Underlying proﬁt/(loss) before taxation 2,017 766 1,213 (485) 3,511 Restructuring (4) 25 (35) (66) (80) Goodwill and other impa irment – – – (10) (10) DVA 11 8 14 – 33 Other items – – – 20 20 Reported proﬁt/(loss) before taxation 2,024 799 1,192 (541) 3,474 1 Other items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 29 Strategic report continued Return on tangible equity (RoTE) 2023 $mill ion 2022¹ $mill ion Average parent company Shareholders’ Equity 2 27,889 28,858 Less Average preference share capital and share premium (1,031) (1,500) Less Average intang ible assets (4,042) (3,847) Average Ordinary Shareholders’ Tangible Equity 22,816 23,511 Proﬁt for the period attributable to equity holders 3,237 2,352 Non-controlling interests (29) 18 Div idend payable on preference shares and AT1 class if ied as equ ity (363) (311) Proﬁt for the year attributable to ordinary shareholders 2,845 2,059 Items normalised: Restructuring 127 47 Goodwill and other Impairment – 10 Net gains on sale of Businesses – (20) Tax on normalised items (21) – Underlying proﬁt for the year attributable to ordinary shareholders 2,951 2,096 Underlying return on tangible equity 12.9% 8.9% Reported return on tangible equity 12.5% 8.8% 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Excludes other equity instruments includ ing AT1s FY’23 % FY’22 % Underlying RoTE 12.9 8.9 Restructuring Of which: Income 0.5 0.7 Of which: Expenses (1.2) (1.0) Of which: Credit impa irment 0.1 (0.0) Of which: Other impa irment (0.0) (0.1) DVA 0.1 0.1 Net gains on disposal of available for sale instruments – 0.1 Tax on normalised items 0.1 – Reported RoTE 12.5 8.8 Net charge-off ratio 2023 2022 Credit impa irment (charge)/ release for the year/ period $mill ion Net average exposure $mill ion Net Charge- off Ratio % Credit impa irment (charge)/ release for the year/ period $mill ion Net average exposure 1 $mill ion Net Charge-off Ratio 1 % Stage 1 32 169,013 (0.02)% 68 165,791 (0.04)% Stage 2 (132) 7,154 1.85% (7) 8,811 0.08% Stage 3 45 2,358 (1.91)% 57 2,444 (2.33)% Total exposure (55) 178,525 0.03% 118 177,046 (0.07)% 1 Prior year has been restated Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 30 Strategic report continued Alternative performance measures An alternative performance measure is a ﬁnanc ial measure of h istor ical or future ﬁnancial performance, ﬁnancial pos it ion, or cash ﬂows, other than a ﬁnancial measure deﬁned or spec if ied in the applicable ﬁnanc ial report ing framework. The following are key alternative performance measures used by the Group to assess ﬁnanc ial performance and ﬁnancial pos it ion. Measure Deﬁnit ion Advances-to- deposits/customer advances-to-deposits (ADR) ratio The ratio of total loans and advances to customers relative to total customer accounts, excluding approved balances held with central banks, conﬁrmed as repayable at the point of stress. A low advances-to-deposits ratio demonstrates that customer accounts exceed customer loans resulting from emphasis placed on generating a high level of stable funding from customers. Average interest earning balance Daily average of the interest earning assets and interest bearing liab il it ies balances exclud ing the daily average cash collateral balances in other assets and other liab il it ies that are related to the F inanc ial Markets trad ing book. Constant currency basis A performance measure on a constant currency basis (ccy) is presented such that comparative periods are adjusted for the current year’s functional currency rate. The following balances are presented on a constant currency basis when described as such: • Operating income • Operating expenses • Proﬁt before tax • RWAs or Risk-weighted assets Cost-to-income ratio The proportion of total operating expenses to total operating income Cover ratio The ratio of impa irment prov is ions for each stage to the gross loan exposure for each stage. Cover ratio after collateral / cover ratio includ ing collateral The ratio of impa irment prov is ions for Stage 3 loans and real isable value of collateral held against these non-performing loan exposures to the gross loan exposure of Stage 3 loans. Gross yield Reported interest income div ided by average interest earning assets. Jaws The difference between the rates of change in revenue and operating expenses. Posit ive jaws occurs when the percentage change in revenue is higher than, or less negative than, the corresponding rate for operating expenses. Loan loss rate Total credit impa irment for loans and advances to customers over average loans and advances to customers. Net charge-off ratio Net credit impa irment charge or release to average outstand ing net exposures NIM or Net interest margin Reported net interest income adjusted for interest expense incurred on amortised cost liab il it ies used to fund the Financ ial Markets bus iness and ﬁnanc ial guarantee fees on interest earning assets, div ided by average interest- earning assets excluding ﬁnanc ial assets measured at fa ir value through proﬁt or loss. Net tangible asset value per share Ratio of net tangible assets (total tangible assets less total liab il it ies) to the number of ord inary shares outstanding at the end of a reporting period. Net yield Gross yield on average assets less rate paid on average liab il it ies. RAR per FTE or Risk adjusted revenue per full-time equivalent Risk adjusted revenue (RAR) is deﬁned as underlying operating income less underlying impa irment over the past 12 months. RAR is then div ided by the 12 month roll ing average full-time equivalent (FTE) to determine RAR per FTE. Rate paid Reported interest expense adjusted for interest expense incurred on amortised cost liab il it ies used to fund ﬁnancial instruments held at fair value through proﬁt or loss, div ided by average interest bearing liab il it ies. RoE or Return on equity The ratio of the current year’s proﬁt available for distr ibut ion to ordinary shareholders to the weighted average ordinary shareholders’ equity for the reporting period. RoTE or Return on ordinary shareholders’ tangible equity The ratio of the current year’s proﬁt available for distr ibut ion to ordinary shareholders, to the average tangible equity, being ordinary shareholders’ equity less the average intang ible assets for the report ing period. Where a target RoTE is stated, this is based on proﬁt and equity expectations for future periods. TSR or Total shareholder return The total return of the Group’s equity (share price growth and div idends) to investors. Underlying net interest income Reported net interest income normalised to an underlying basis adjusted for interest expense incurred on amortised cost liab il it ies used to fund the F inanc ial Markets bus iness and ﬁnanc ial guarantee fees on interest earning assets. Underlying Non NII Reported Non NII normalised to an underlying basis adjusted for interest expense incurred on amortised cost liab il it ies used to fund the F inanc ial Markets bus iness and ﬁnanc ial guarantee fees on interest earning assets. In prior periods Underlying Non NII was described as underlying other income. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 31 Strategic report continued Measure Deﬁnit ion Underlying/ Normalised A performance measure is described as underlying/normalised if the reported result has been adjusted for restructuring and other items representing proﬁts or losses of a capital nature; amounts consequent to investment transactions driven by strategic intent, excluding amounts consequent to Ventures transactions, as these are considered part of the Group’s ordinary course of business; and other infrequent and/or exceptional transactions that are sign iﬁcant or mater ial in the context of the Group’s normal business earnings for the period, and items which management and investors would ordinar ily ident ify separately when assess ing performance period-by period. Restructuring includes impacts to proﬁt or loss from businesses that have been disclosed as no longer part of the Group’s ongoing business, redundancy costs, costs of closure or relocation of business locations, impa irments of assets and other costs wh ich are not related to the Group’s ongoing business. Restructuring in this context is not the same as a restructuring provis ion as deﬁned in IAS 37 A reconcil iat ion between underlying/normalised and reported performance is contained in Note 2 to the ﬁnanc ial statements. The following balances and measures are presented on an underlying basis when described as such: • Operating income • Operating expense • Proﬁt before tax • Cost-to-income ratio • Jaws • RoTE or Return on tangible equity Underlying ROTE The ratio of the current year’s proﬁt for distr ibut ion to ordinary shareholders plus fair value on OCI equity movement relating to Ventures segment to the weighted average ordinary shareholders’ equity for the reporting period Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 32 Risk review An update on our risk management approach Our Risk Management Framework (RMF) outlines how we manage risk enterprise wide. It gives us the structure to manage exist ing r isks effectively in line with our Risk Appetite, as well as allowing for holist ic r isk ident iﬁcation. The RMF also sets out the roles and responsib il it ies and m in imum governance requ irements for the management of Princ ipal R isks. In revis ions made in the RMF in 2023, effective 1 January 2024, the concepts of Integrated Risk Types (IRTs) and IRT Owner roles were discont inued. Overs ight on exist ing IRTs, i.e. Climate Risk, Dig ital Asset and Th ird Party Risk, is achieved through the Risk Type Frameworks (RTFs) and dedicated polic ies. The Subject Matter Experts (SME) as the pol icy owner for these risks provide overall governance and ensure a holist ic v iew of how risks are monitored and managed across the Princ ipal R isk Types (PRTs). Princ ipal R isk Types PRTs are risks inherent in our strategy and business model. These are formally deﬁned in our RMF, which provides a structure for monitor ing and controll ing these risks through the Court-approved Risk Appetite Statement. We will not compromise compliance with our Risk Appetite in order to pursue revenue growth or higher returns. The table below provides an overview of Risk Appetite statement for the PRTs: Risk Types Risk Appetite Statements Credit Risk The Group manages its credit exposures following the princ iple of d ivers iﬁcation across products, geograph ies, client segments and industry sectors. Traded Risk The Group should control its ﬁnanc ial markets and act iv it ies to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Treasury Risk Indiv idual regulated ent it ies w ith in the Group should ma inta in sufﬁcient cap ital, liqu id ity and funding to support its operations, and an interest rate proﬁle ensuring that the reductions in earnings or value from movements in interest rates impact ing bank ing book items does not cause material damage to their franchise. In addit ion, they should ensure that their pension plans are adequately funded. Operational and Technology Risk The Group aims to control operational and technology risks to ensure that operational losses (ﬁnanc ial or reputational), includ ing any related to the conduct of bus iness matters, do not cause material damage to the Group’s or PLC Group’s franchise. Financ ial Cr ime Risk The Group has no appetite for breaches in laws and regulations related to Financ ial Cr ime, recognis ing that wh ilst inc idents are unwanted, they cannot be ent irely avoided. Compliance Risk The Group has no appetite for breaches in laws and regulations related to regulatory non-compliance; recognis ing that wh ilst inc idents are unwanted, they cannot be ent irely avoided. Information and Cyber Security Risk The Group aims to mit igate and control ICS r isks to ensure that inc idents do not cause the Bank mater ial harm, business disrupt ion, ﬁnancial loss or reputat ional damage – recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Reputational and Sustainab il ity Risk The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activ ity is satisfactor ily assessed and managed w ith the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striv ing to do no s ign iﬁcant environmental and social harm. Model Risk The Group has no appetite for material adverse impl icat ions aris ing from m isuse of models or errors in the development or implementat ion of models; wh ilst accepting some model uncertainty. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 33 Topical and Emerging Risks (TERs) Emerging Risks refer to unpredictable and uncontrollable outcomes from certain events which may have the potential to adversely impact our business. Topical Risks refer to themes that may have emerged but are still evolving rapidly. As part of our continuous risk ident iﬁcation process, we have updated the Group’s TERs from those d isclosed in the 2022 Annual Report and 2023 Half-Year Report; these remain applicable, with nuances in their evolution noted where pertinent. Below is a summary of the TERs, and the mit igat ing actions we are taking based on our current knowledge and assumptions. This reﬂects the latest internal assessment as performed by senior management. The TER list is not exhaustive and there may be addit ional r isks which could have an adverse effect on the Group. There are some horizon risks that, although not highly likely at present, could evolve into a threat in the future and we are therefore monitor ing them. These include future pandemics and the world’s preparedness for them, and other potential cross-border conﬂicts. Our mit igat ion approach for these risks may not elim inate them but demonstrates the Group’s awareness and attempt to reduce or manage the risks. As certain risks develop and material ise over t ime, management will take appropriate steps to mit igate them based on the ir material ity on the Group. Macroeconomic and geopolit ical cons iderat ions There is interconnectedness between risks due to the importance of US Dollar ﬁnanc ing cond it ions for global markets, the global or concentrated nature of key supply chains for energy, food, semi-conductors and rare metals, and the direct inﬂuence of geopolit ics on geoeconom ics. The Group is exposed to these risks directly through investments, infrastructure and staff, and also ind irectly through its clients. Whilst the main impacts are ﬁnanc ial, other ram if icat ions may exist such as reputational, compliance or operational considerat ions. Expanding array of global tensions and new geopolit ical order Global power dynamics have shifted, with different polit ical and econom ic alliances beginn ing to create a mult ipolar power system. This has been accelerated by the war in Ukraine and conﬂicts in the Middle East. Whilst the Group has lim ited d irect exposure to Russia, Ukraine or Israel, it may be impacted by second order effects on its clients and markets for agricultural commodit ies, o il or gas. The posit ion ing of ‘middle powers’ is complex and evolving, and could tip the geopolit ical scales. The negot iat ing power of exporters of energy and other natural resources has expanded and can shape global markets, as they can use global div is ions to raise their own proﬁle. One such example is the envisaged expansion of BRICS to seek a counterweight to Western power axes. US-China tensions remain, with protection ist measures imposed by both sides. Tariffs, embargos, sanctions, new taxes such as that on carbon, and restrict ions on technology exports and investments, are being used to achieve goals beyond just economic. Further economic or polit ical act ions could escalate distrust and accelerate the decoupling of trade links, leading to increas ingly ineff ic ient production and inﬂat ion pressures. Despite attempts to become more pragmatic, a number of potential ﬂashpoints remain. A push by China to increase RMB trade and establish RMB as a secondary global reserve currency presents new business opportunit ies but also potent ial disrupt ion to the balance of power. With many elections due across the world in the next twelve months, there is uncertainty over the polit ical d irect ion of domestic and foreign policy. There is a risk of short-term polit ical exped iency taking precedence over long-term strategic decis ion mak ing. The malic ious use of AI-enabled d is informat ion could also cause disrupt ion and underm ine trust in the polit ical process. There is an ongoing threat of terrorism, with unpredictab il ity exacerbated by the wider range of ideolog ies at play. Cyber warfare by state related actors could also be used to disrupt infrastructure or inst itut ions in rival countries. A more complex and less integrated global polit ical and econom ic landscape has the potential to challenge cross border business models, but also provides new business opportunit ies. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 34 Persistent high inﬂat ion and interest rates Although rate cuts have been signaled by the Federal Reserve, global rates could remain elevated for longer. Structurally higher spending and continued supply disrupt ions increase the probabil ity of inﬂat ion rema in ing st icky. During 2023, the International Monetary Fund (IMF) and World Trade Organisat ion lowered the ir in it ial forecasts for trade growth and increased that of inﬂat ion in 2024, suggesting that several economies will walk a ﬁne line between recession and stagﬂation. Concern for the credit environment spans both commercial and retail lending, with price inﬂat ion and the cl iff effects of energy, mortgage and debt re-pric ing ult imately leading to higher defaults. This is vis ible in bond markets with yields widen ing markedly and prone to h igh volatil ity. Drives to de-risk supply chains combined with no obvious resolution to ongoing conﬂicts continue to disrupt supply chains. This complicates efforts to combat inﬂat ion as supply constra ined markets dent the effectiveness of monetary policy. Some sectors are particularly sensit ive to h igh rates, notably commercial real estate, non-bank ﬁnanc ial inst itut ions (NBFI) and leveraged ﬁnance due to their reliance on the availab il ity of cheap ﬁnanc ing. Bank fa ilures in Q1 2023 highl ighted challenges in managing liqu id ity, credit, reﬁnanc ing and market r isks. They also raised questions of competence and conﬁdence in the ﬁnance industry. Economic slowdown in China Whilst China’s exit from COVID restrict ions has had an overall pos it ive impact, it has failed to deliver a sustained boost to the global economy as the country contends with strain in several sectors such as real estate. There has also been a change in the corporate operating environment, with reduced clarity on the economic outlook. Given China’s importance to global trade a slowdown would have wider impl icat ions across the supply chain, especially for its trading partners, as well as to countries which rely on it for investment, such as those in Africa. However, opportunit ies arise from the divers iﬁcation of intra-Asia trade and other global trade routes, and growth acceleration in South Asia, especially India. Sovereign risk Credit fundamentals have been eroding across both emerging and advanced economies due to persistently high interest rates, food and energy prices. Emerging markets will also be affected by weakness in local currencies versus the US Dollar and the resultant cost of reﬁnancing ex ist ing debt, or ava ilab il ity of hard currency liqu id ity. Issues and challenges have already been observed across several of the Group’s footprint markets, includ ing the recent default of Ghana, pol it ical instab il ity in Pakistan, high inﬂat ion in Turkey, economic turmoil in Sri Lanka, and coups in Africa. For some countries there is a heightened risk of failure to manage social demands, which might culminate in increased polit ical vulnerab il ity. Furthermore, food secur ity exacerbated by the inﬂuences of armed conﬂict and climate change, and energy security challenges have the potential to drive social unrest. Debt moratoria and reﬁnanc ing in it iat ives are compl icated by larger number of ﬁnanc iers, w ith much ﬁnanc ing done on a bilateral basis outside of the Paris Club. Whilst the Global Sovereign Debt Roundtable has made some progress on coordinat ing approaches between the Par is Club and other lenders their interests do not always match. This can lead to delays in negotiat ions on debt resolut ions for developing nations. Supply chain issues and material shortages Demand and supply imbalances in global supply chains are increas ingly becom ing structural in nature and affect a wide range of commodit ies includ ing food, energy, m inerals and raw materials, plus targeted restrict ions on certa in industry sectors. There is growing polit ical awareness around the need for key component and resource secur ity at national level. Countries are enacting rules to “de-risk” by reducing reliance on rivals or concentrated suppliers (for example semiconductors) and look to either re-industr ial ise or make use of near-shoring and friend-shoring production. The growing need for minerals and rare earth metals to power green energy technologies could increase the geopolit ical standing of the main reﬁners, such as China, Indonesia and some African nations. However, there are also environmental and social costs to rapidly increas ing extract ion. A desire to avoid dependence may slow down the move by some nations towards the transit ion. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 35 How these risks are mit igated/next steps • We remain vig ilant in monitor ing r isk and assessing impacts from geopolit ical and macroeconom ic risks to portfolio concentrations. • We conduct thematic stress tests and portfolio reviews at the Group, country, and business level, with regular reviews on vulnerable sectors, and undertake any necessary mit igat ing actions. • We mainta in a d ivers iﬁed portfol io across products and geographies, with specif ic r isk appetite metrics to monitor concentrations. • Increased scrutiny is applied when onboarding clients and in ensuring compliance with sanctions. • Collateral and credit insurance are used to manage concentrations. • We track the partic ipat ion of our footprint countries in the G20’s Common Framework Agreement and Debt Service Suspension Init iat ive for Debt Treatments and the associated exposure. • Our NBFI exposure is closely monitored in terms of both lim its, products and counterpart ies. Regulatory considerat ions Changing regulatory environment Given notable bank failures in 2023 (and the response of resolution authorit ies to those fa ilures), the regulatory framework for banks remains subject to continued change in addit ion to the implementat ion of Basel 3.1 in various jur isd ict ions. Add it ionally, the differ ing pace and scale of regulatory adopt ion between jur isd ict ions, along w ith increas ing extraterr itor ial reach and prescript iveness, can make it challenging for multinat ional groups to manage the ir business. Implementation timel ines are a focus. The scale of upcoming regulatory change in 2024 and 2025 is sign iﬁcant w ith major regime changes in capital and operational resil ience due to take effect. How these risks are mit igated/next steps • We actively monitor regulatory developments, includ ing those related to susta inable ﬁnance and ESG, and respond to consultations either bilaterally or through well-established industry bodies. ESG considerat ions ESG stakeholder expectations Organisat ions across the corporate and ﬁnancial sectors are sett ing ambit ious susta inab il ity goals and net zero targets with many embedding them in their business models. This has prompted increased attention from various stakeholders in ensuring that net zero targets are being met with credible action plans. Stakeholder scrutiny around greenwashing risk relating to ESG focused ﬁnanc ial products, as well as compan ies’ commitments, transpires in the various regulatory developments and early enforcement actions taken by several key regulators. Fragmentation in the pace and scale of adoption of ESG regulations around the world remains, particularly around taxonomies and disclosure requirements, which may lead to unintended consequences includ ing m isallocat ion of cap ital, increased implementat ion costs and l it igat ion risks. The Group’s net zero aspirat ions may be impacted by governments or corporates scaling back their sustainab il ity targets, especially as economic condit ions rema in challenging, and budgets are constrained. There have been examples in developed nations, such as the UK revis it ing its electric vehicle transit ion t imel ine. A slower trans it ion from key cl ients may also weigh reputational pressure on the Group’s roadmap. Higher frequencies of extreme weather-related events such as wildf ires, ﬂoods and fam ines may lead to physical climate risk and the cost of managing it becoming a heavier burden on global economies. This will be particularly impactful to developing markets. Alongside climate change, biod ivers ity loss, pollution, and depletion of key resources, such as water, pose incremental risks to food and health systems, energy security and contribute to the disrupt ion of supply cha ins. Human rights concerns are increas ingly in focus, with the scope expanding beyond direct abuses to cover other areas such as technological advancement and supply chains. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 36 Strategic report continued How these risks are mit igated/next steps • We update our environmental and social standards for provid ing ﬁnancial serv ices to clients every two years, with a new version scheduled for 2024. • We focus on embedding our values through our Posit ion Statements for sens it ive sectors and a l ist of prohib ited act iv it ies. • We integrate the management of greenwashing risks into our Reputational and Sustainab il ity Risk Framework and polic ies. • Green, Sustainable and Transit ion F inance labels for products reﬂect the standards set out in our sustainable product framework which are regularly reviewed. We obtain external verif icat ion on the Sustainable Finance asset pool. • We assess our clients and suppliers against various internat ional human r ights princ iples, as well as through our social safeguards and supplier charter. + More details can be found in our Modern Slavery Statement and Human Rights Posit ion Statement • Detailed portfolio reviews and stress tests are conducted to test resil ience to cl imate-related risks and enhance modelling capabil it ies to understand the ﬁnanc ial r isks and opportunit ies from cl imate change. • Work is underway to embed Climate Risk considerat ions across all relevant PRTs. Th is includes client-level Climate Risk assessments, includ ing sett ing adequate mit igants or controls as part of dec is ion mak ing and portfolio management activ it ies. Technological considerat ions Data and dig ital The Group’s dig ital footpr int will expand as more services and products are dig it ised and made more accessible. Scale in operations and interact ions w ith dig ital systems w ill further reduce the tolerance for errors and outages. The risk of data breaches is amplif ied by h ighly organised actors, with threats such as ‘Ransomware as a Service’ and affordable, sophist icated AI systems help ing to facil itate attacks on organ isat ions and ind iv iduals. Data regulation continues to be ﬂuid and fragmented. Geopolit ical tens ions have accelerated the implementat ion of data sovereignty laws, includ ing data local isat ion requ irements and cross-border access restrict ions. These regulat ions often have an extraterritor ial reach wh ich could increase operating costs sign iﬁcantly, and also impact cross-border business models. Stakeholder expectations on data management have also increased, particularly relating to quality, integr ity, record keep ing, privacy, sovereignty, the ethical use of data and applicat ion of AI. The sophist icat ion and adoption of AI solutions are growing exponentially and will increase exposure to exist ing r isks such as model, fraud, ﬁnancial cr ime, compliance and Information and Cyber Security (ICS) risks. In response, regulation is accelerating, particularly around the ethical applicat ion of AI in decis ion-mak ing, necessitat ing robust governance measures. The Group needs to ensure that it develops sufﬁc ient in-house subject matter expertise. New business structures, channels and competit ion Failure to harness new technologies and new business models would place banks at a competit ive d isadvantage. The continued exploration of partnerships, alliances, dig ital assets, generat ive AI and nascent technologies, such as quantum computing, provides both opportunit ies and un ique challenges. This is increas ingly important as dig ital assets and distr ibuted ledger technology become progress ively prevalent and interconnected with the ﬁnanc ial ecosystem. Supply chains are becoming more complex, interconnected and dig ital. H ighly extended enterprises expand opportunit ies ava ilable for malic ious actors, w ith risk cascading further down supply chains beyond just direct and third party risks. These innovat ions requ ire special ist in-house expertise, new operating models and adapting risk frameworks to perform robust risk assessment and management of new threats. There is also growing regulatory attention in many of these areas. Balancing resil ience and ag il ity is essential given the global nature of new technologies alongside the maintenance of exist ing systems. It is imperat ive to establ ish clear ownership, frameworks, and oversight of the use of emerging technologies. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 37 How these risks are mit igated/next steps • We monitor emerging trends, opportunit ies and developments in technology as well as emerging business models that may have impl icat ions for the banking sector. • We invest in our capabil it ies, to better prepare and protect ourselves against possible disrupt ion and new r isks. • We track the evolving regulatory landscape affecting key areas such as data management, dig ital assets and AI, includ ing country-specif ic requ irements, and actively collaborate with regulators to support important in it iat ives. • We have established enhanced governance for novel areas through the Dig ital Asset R isk Committee and Responsible AI Council, which considers emerging regulatory guidance. • We manage data risks through our Compliance Risk Type Framework and informat ion secur ity risks through our ICS Risk Type Framework. • We have developed a Group Data Strategy, to strengthen ownership of related data risks. • We mainta in a ded icated Data Compliance Policy with globally applicable standards. These standards undergo regular review to ensure alignment with evolving regulations and industry best practice. • We mainta in programmes to enhance our data r isk management capabil it ies and controls, includ ing compl iance with BCBS239 requirements on effective risk data aggregation, with progress tracked at executive level risk governance committees. • The Group has implemented a ‘defence-in-depth’ ICS control environment strategy to protect, detect and respond to known and emerging ICS threats. • New risks aris ing from partnersh ips, alliances, dig ital assets and generat ive technologies are ident iﬁed through the New Init iat ives Risk Assessment and Third Party Risk Management Policy and Standards. Demographic considerat ions Talent pools of the future The expectations of the workforce, especially skilled workers, continue to evolve. The COVID pandemic accelerated changes on how people work, connect and collaborate, with expectations on hybrid working now a given. The focus is increas ingly on ‘what’ work people do and ‘how’ they get to deliver it, which are becoming different iators in the war for future talents. There is greater desire to seek meaning and personal fulﬁlment at work that is aligned to ind iv idual purpose. These trends are even more dist inct among M illenn ials and Generat ion Z who make up an increas ing proport ion of the global talent pool, and as dig ital nat ives possess the attributes and skills we seek to pursue our strategy. To sustainably attract, grow and retain talent, we must continue to invest in and further strengthen our Employee Value Proposit ion (EVP) and here for good our brand prom ise, through both ﬁrm-wide intervent ions as well as targeted act ion. Demographic trends Divergent demographic trends across developed and emerging markets create contrasting challenges. Developed markets’ state budgets could be strained by ageing and shrink ing populat ions, whilst polit ical stances reduce the ab il ity to ﬁll sk ills gaps through imm igrat ion. Conversely emerging markets are experienc ing fast-grow ing, younger workforces. Whilst it is an opportunity to develop talent, population growth will put pressure on key resources such as food, water, education and health, as well as government budgets. Population displacement, whether as a result of climate events, lack of key resources, polit ical issues or war, may increase the fragil ity of soc ietal structures in vulnerable centres. Large scale movement could cause social unrest, as well as propagate disease transmiss ion and accelerate the spread of future pandem ics. How these risks are mit igated/next steps • Our culture and EVP work aims to address the emerging expectations of the diverse talent we seek. The Brand and Culture Dashboard monitors our divers ity and inclus ion, colleagues’ percept ions of our EVP, and whether we are liv ing our Valued Behaviours. Management teams discuss many of these metrics (includ ing employee survey responses) to ident ify act ions. • We are undertaking a multi-year journey of developing future-skills amongst our colleagues by focusing on continuous learning, to balance appropriately between ‘build ing’ and ‘ induct ing’ sk ills into the Group. • Our internal Talent Marketplace provides colleagues with opportunit ies to learn through exper ience by sign ing up for cross-functional (or even cross-geography) projects. • Our ﬂexible working programme is currently live. We continue to enhance support and resources to People Leaders and colleagues to help balance productiv ity, collaborat ion and wellbeing. • Our Stands continue to be operational ised through our strategy, and help address the talent pool’s increased expectations of us being purpose-led. Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 38 Strategic report continued Stakeholders and responsib il it ies As an internat ional bank operat ing in 50 markets, stakeholder engagement is crucial in ensuring we understand local, regional and global perspectives and trends that inform how we do business. This section forms our Section 172 disclosure, describ ing how the d irectors considered the matters set out in section 172(1)(a) to (f) of the Companies Act 2006. It also forms the directors’ statement required under section 414CZA of the Act. See the following pages for: • How we engage stakeholders to understand their interests. See pages 38 to 40 • How we engage employees and respond to their interests. See pages 43 to 45 • How we respond to stakeholder interests through sustainable and responsible business. See pages 46 to 47 Detailed informat ion about how the Court engages d irectly with stakeholders and shareholders can be found in the Director’s report on pages 51 to 56. An example of the Court’s Princ ipal dec is ion is included in this section. This section also forms our key non-ﬁnanc ial d isclosures in relation to sections 414CA and 414CB of the Companies Act. Our non-ﬁnanc ial informat ion statement can be found at the end of this section. Princ ipal Court dec is ions – market entr ies and exits In 2023 the Court approved the sale of our aviat ion ﬁnance leas ing business with this transaction completing in November 2023. In making this decis ion the Court cons idered the potential challenges and the resulting impact on stakeholders, having particular regard to the clients and employees of the aviat ion bus iness. Following on from the announcement in 2022 of the intent ion to ex it onshore operations in seven markets in AME and exit its CPBB business in a further two markets, the Court approved a series of four transactions covering the sales of (i) our Jordan branch (completed in August 2023), (i i) our Z imbabwe business, (i i i) a CPBB portfolio in Côte d’Ivoire and (iv) our businesses in Angola, Cameroon, Gambia and Sierra Leone, and a CPBB portfolio in Tanzania. The focus will now be solely on the CCIB business in Côte d’Ivoire and Tanzania. These strategic exits were undertaken in order to focus resources with in the AME reg ion to those areas where we have the greatest scale and growth potential, for the beneﬁt of our shareholders, employees and customers. In assessing each of the sale transactions, the Court considered the potential challenges and the resulting impact on the key stakeholders, particularly the employees, as well as our local and wider regulatory relationsh ips. The Court cont inues to receive regular progress updates on these transactions. Engaging stakeholders Listen ing and respond ing to stakeholder prior it ies and concerns is crit ical to ach iev ing our Purpose and del iver ing on our brand promise, here for good. We strive to mainta in open and construct ive relationsh ips w ith a wide range of stakeholders includ ing regulators, lawmakers, cl ients, investors, civ il soc iety, and community groups. In 2023, we made improvements to some of our feedback processes, so relationsh ip managers could address cl ient needs as they emerged. Our engagement took many forms, includ ing one-to-one sess ions using online channels and calls, virtual roundtables, written responses and targeted surveys. These conversations, and the issues that underpin them, help inform our business strategy and support us to operate as a responsible and sustainable business. Stakeholder feedback, where appropriate, is communicated internally to senior management through the relevant forums and governing committees such as the PLC Group’s Sustainab il ity Forum, and to the PLC Board’s Culture and Sustainab il ity Committee (CSC) which oversees the PLC Group’s approach to its main relationsh ips w ith stakeholders. We communicate progress regularly with external stakeholders through channels such as sc.com, established social media platforms and this report. More detailed informat ion on mater ial sustainab il ity topics can be found in our Sustainab il ity section of pages 15 to 16. Clients How we create value We want to deliver easy, everyday banking solutions to our clients in a simple and cost-effective way with a great customer experience. We enable ind iv iduals to grow and protect their wealth; we help businesses trade, transact, invest and expand; and we help a variety of ﬁnanc ial inst itut ions, includ ing banks, publ ic sector and development organisat ions, w ith their banking needs. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 39 Strategic report continued How we serve and engage Our presence in high-growth markets – and ongoing roll out of dig ital platforms – helps connect our cl ients to the global engines of trade and innovat ion. As part of our PLC Group’s a im to reach net zero carbon emiss ions by 2050, our trans it ion ﬁnance team have been working closely with our clients in hard-to-abate sectors on their own transit ions. Th is is in addit ion to our PLC Group’s plan to mobil ise $300 b ill ion of Susta inable Finance between 2021 and 2030. Across the bank, we have processes and controls to mit igate greenwash ing risks, and to support transparency we publish the details of what constitutes our sustainable products and investments universe externally. We work closely with third-party Environmental, Social and Governance (ESG) data providers to support the development of product ideas, and due dil igence is conducted by our in-house team on our high convict ion su ite of sustainable funds. Our push for a best-in-class client experience is underpinned by innovat ive products and d ig ital stra ight-through services. This includes build ing capab il ity to protect our cl ients against evolving risks in the ecosystem, like fraud and cyber security, and comes with education and increased client communicat ion. To act in the best interests of our clients, we use our ins ights gathered from our data alongs ide robust polic ies, procedures and the Group’s risk appetite to design and offer products and services that meet client needs, regulatory requirements and Group performance targets, while contribut ing to a susta inable and resil ient env ironment. Fees and charges are disclosed to clients in line with regulatory requirements and industry best practice, and where available, benchmarked against competitors. For Personal and Business Banking products, agreed interest rates, fees and other charges as billed to clients are monitored and assessed locally, with global oversight. Triggers for outlier fees and charges are deﬁned and subject to annual review. Complaints are reviewed on an ongoing basis and are one of the factors that are taken into account prior to amendments to annual interest, fees and charges. We also assess our product portfolio for new risks to ensure they remain appropriate for client needs and aligned to emerging regulation. These quantitat ive and qual itat ive assessments, includ ing Per iod ic Product Rev iews, are intended to provide a complete view of whether to continue, enhance, grow or retire products. Train ing is provided to frontline staff across our branches, contact centres and dig ital channels to ident ify and support vulnerable clients, and we have also implemented an educational train ing programme for those cl ients who require assistance in navigat ing onl ine and mobile channels. Throughout 2023, we mainta ined our sharp focus on improv ing the cl ient experience across the Bank. We engaged with clients to show them the opportunit ies trade corr idors could bring and how using our network could help them ﬂourish. Consumer, Private and Business Banking In Consumer, Private and Business Banking (CPBB), 2023 saw sign iﬁcant improvements in dig ital wealth w ith the delivery of new capabil it ies across our markets. This includes client DIY Wealth Lending for Funds in the UAE and MyInsure in India where relationsh ip managers can leverage a d ig ital tool to perform comprehens ive insurance needs analysis and portfolio reviews for clients. Our focus on partnerships continues to show results with the growth of our exist ing partnersh ips business in Vietnam, Indonesia, and Singapore, and we have expanded the partnership business to Malaysia. In 2023, the Bank launched partnerships with SeaMoney in Indonesia, and Atome in Singapore and Malaysia. Addit ionally, we made s ign iﬁcant progress in our advisory business with the launch of SC Wealth Select in several markets. SC Wealth Select aims to bring a portfolio approach to client conversations and is supported by our dig ital adv isory tool MyWealth Advisor. Across CPBB, a number of colleagues have completed the SC Wealth Select e-learning train ing wh ile some frontline colleagues have completed or are undertaking the Standard Chartered INSEAD Wealth Academy Advisory programme. Importantly, we leverage our cross-border scale by using the same technology and open architecture product platform in different markets to offer competit ive products and solut ions globally. Examples of this include our series of Signature CIO Funds and Wealth Saver, an innovat ive sav ings product. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 40 Corporate, Commercial and Institut ional Bank ing In 2023, Corporate, Commercial and Institut ional Bank ing (CCIB) strengthened its annual feedback process by capturing how clients feel about what we offer - includ ing adv ice, customer service and dig ital channels. CCIB also focused on bu ild ing a consistent dig ital exper ience and accelerated delivery through Cash, Trade, Financ ial Markets and Data Solut ions. Reﬁning our processes through cont inuous improvement has enabled us to achieve beneﬁts in revenue and cost savings by creating capacity and reducing client wait ing t imes. We are transforming our bank-wide processes by taking a client- focused, data-driven dig ital bank approach that w ill enable us to serve the needs of our clients better and faster and reduce the amount of frict ion and complex ity in our network. We have set in place processes and guidel ines spec if ic to our cl ient businesses for us to better understand and promptly address issues. We implemented self-serve dig ital tools and capab il it ies such as chatbot, our mobile banking app, applicat ion programm ing interface (API) connectiv ity and data analyt ics. These have reduced operational costs and enhanced the overall client experience. Agile ways of working accelerated our decis ion-mak ing processes and change delivery to create great experiences and make it easier for our clients to bank with us. We continue to engage in partnerships that help us offer enhanced services to customers. Collaborations with Linklog is and Taulia, which is part of SAP, aid clients with supply chain ﬁnanc ing through blockcha in and dynamic discount ing; our work with the Partior platform allows us to deliver the speed, efﬁc iency and v is ib il ity of domest ic settlement systems to cross- border payments and settlements networks to absolve sign iﬁcant wholesale cross border payment fr ict ions and del iver instant, 24/7 settlement of dig ital assets on the blockcha in. Our work with dig ital trade transact ion portal Trade Track-It integrates DHL’s tracking system and Lloyd’s List Intelligence vessel tracking system through API, to offer clients end-to-end vis ib il ity of the ir trade transaction status globally. Across both CCIB and CPBB, throughout 2024, we will continue to listen and respond to stakeholder prior it ies and concerns, addressing feedback as it emerges, strengthen our dig ital transformat ion and innovat ion capab il it ies, and support our clients as they transit ion to net zero. Their interests • Different iated product and serv ice offering • Dig itally enabled and pos it ive exper ience • Sustainable ﬁnance • Access to internat ional markets Regulators and Governments How we create value We engage with public authorit ies to play our part in supporting the effective function ing of the ﬁnancial system and the broader economy. How we serve and engage We actively engage with governments, regulators and policymakers at a global, regional and national level to share ins ights and support the development of best practice, and adoption of consistent approaches, across our markets. In 2023, we engaged with regulators, government ofﬁc ials and trade assoc iat ions on a broad range of top ics that included internat ional trade, susta inab il ity, data, cyber security, dig ital adopt ion, and innovat ion. We also engaged w ith ofﬁc ials on the ﬁnancial serv ices regulatory environment, in particular on prudential, ﬁnanc ial markets, conduct and ﬁnancial cr ime frameworks. Our PLC Group Public and Regulatory Affairs team supports most engagements while Conduct, Financ ial Cr ime & Compliance, Risk, Legal and Finance ident ify and analyse relevant pol ic ies, leg islat ion and regulat ion. This work is overseen by various governance forums with in the Bank, wh ich comprise senior executives representing business and control functions to support alignment between advocacy and business strategies. Their interests • Strong capital base and liqu id ity posit ion • Robust standards for conduct and ﬁnancial cr ime • Healthy economies, trade ﬂows and competit ive markets • Sustainable Finance and net zero transit ion • Dig ital innovat ion in ﬁnanc ial serv ices • Operational resil ience • Customer protection • Financ ial stab il ity Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 41 Strategic report continued Investors How we create value We aim to deliver robust returns and long-term sustainable value for our investors. How we serve and engage We rely on capital from debt and equity investors to execute our business model. Whether they have short or long-term investment horizons, we provide our investors with informat ion about progress aga inst our strategic and ﬁnanc ial frameworks. Through our PLC Group’s footprint and the execution of our sustainab il ity agenda, we provide our investors with exposure to opportunit ies in emerging markets. We believe that our integrated approach to ESG issues, as well as a strong risk and compliance culture, are key different iators. Regular and transparent engagement with our investors, and the wider market, helps us understand investors’ needs and tailor our public informat ion accord ingly. In addit ion to d irect engagement from our Investor Relations team, we communicate through quarterly, half and full year results, conferences, roadshows, investor days and media releases. We continued to expand our use of virtual meetings during the year, coupled with a growing number of face-to-face interact ions. Our PLC Group hosted two cap ital markets days, focusing on our Asia region and the Sustainab il ity opportunity in May and November respectively. Key investor feedback, recommendations and requests are considered by our PLC Board, whose members keep abreast of current topics of interest. Our PLC Group’s Annual General Meeting (AGM) in May was open to shareholders to attend either in person or electronically where they were provided a platform to view a live video feed of the meeting. All partic ipants were provided with the opportunity to submit their votes and ask the PLC Board questions. Sim ilarly, our PLC Group Cha irman, alongside some members of the PLC Board, hosted a ‘hybrid’ stewardship event for inst itut ional investors in November which provided a platform for shareholders to receive an update on a number of topics, includ ing susta inab il ity, net zero and governance matters. The event included an open question-and-answer session across a range of key issues. We continue to respond to growing interest from a wide range of stakeholders on ESG matters, includ ing investors. Our PLC Group sought shareholder endorsement for our net zero roadmap at the PLC Group’s AGM, intended as a means by which we will measure progress, engage and gather views. We also work with sustainab il ity analysts and partic ipate in sustainab il ity ind ices that benchmark our performance, includ ing the Carbon D isclosure Product (CDP) Climate Change survey and Workforce Disclosure Init iat ive. In 2024, we will continue to engage with investors on progress against our strategic prior it ies and actions, as well as our ﬁnancial framework as we progress towards our returns target. Their interests • Safe, strong and sustainable ﬁnanc ial performance • Facil itat ion of sustainable ﬁnance to meet the United Nations (UN) Sustainable Development Goals • Progress on ESG matters, includ ing advanc ing our net zero roadmap Suppliers How we create value We are dedicated to engaging with suppliers who offer value-adding goods and services across our network, and we work closely with them to support global environmental and social standards. Our suppliers are expected to be ethical, respect human rights, divers ity and inclus ion, and the env ironment to support our colleagues, clients, and communit ies. How we serve and engage We must effectively manage, monitor, and mit igate r isks in our supply chain. We do this through our Third-Party Risk Management Policy. This, in conjunct ion w ith the Princ ipal R isk Type Polic ies and Standards, set out the Group’s m in imum control requirements for the ident iﬁcation, m it igat ion and management of risks aris ing from the use of suppl iers. Our PLC Group’s Supplier Charter sets out our princ iples in relation to ethics, human rights, divers ity and inclus ion, and environmental performance. All newly onboarded suppliers are expected to agree with these princ iples. We seek to re inforce this through the terms of our standard contract templates, where possible, and we further encourage alignment by sending an annual letter to all active suppliers. This includes guidance regarding our stance on ethics and conduct, sustainab il ity aspirat ions, payment processes and other relevant pr inc iples such as Ant i-Bribery and Corruption. The Charter covers all geographies and categories of suppliers, and our PLC Group plan to refresh the Charter in 2024. Supporting our suppliers to achieve net zero Our supply chain is crit ical to ach iev ing the Group’s susta inab il ity aspirat ions, and we cont inue to make good progress. We encourage our suppliers to set science-based emiss ions reduct ion targets and by 2028 our PLC Group plans to direct 70 per cent of total PLC Group’s expenditure to suppliers who have set or committed to setting science-based emiss ion reduct ion targets. In 2023, our PLC Group held group sessions with our suppliers to support them reduce their emiss ions, d iscuss progress and next steps. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 42 Strategic report continued Supporting a diverse and inclus ive supply cha in We recognise the value of supply chain divers ity to our bus iness and society. In 2023, our PLC Group continued to integrate supplier divers ity into our business strategy and make efforts to include diverse suppliers in sourcing activ it ies and improve spending levels with diverse suppliers as appropriate. To do this we have continued to collaborate with non-governmental organisat ions (NGOs), bus iness incubators and others to help build and develop our diverse and talented supplier pool. In 2023, our PLC Group joined member-buyer events, local procurement network ing activ it ies and best practice sharing events with partners like WEConnect International – a global network supporting women-owned businesses to connect with larger companies. We have continued to build capacity with our own colleagues through online train ing on suppl ier divers ity and inclus ion. Highl ight ing our commitment, our PLC Group has been awarded the Chartered Institute of Procurement and Supply Asia Excellence in Procurement Award for outstanding Divers ity and Inclus ion practices in procurement teams and Best Init iat ive to Build a Diverse Supplier Base. Their interests • Open, transparent and consistent tendering process • Accurate and on-time payments • Will ingness to adopt suppl ier-driven innovat ions • Obtain guidance on implementat ion of susta inab il ity matters Society How we create value We strive to operate as a sustainable and responsible company, working with local partners to promote social and economic development. How we serve and engage We engage with a wide range of civ il soc iety, internat ional and local NGOs, from those focused on env ironmental and public policy issues to partners deliver ing our commun ity programmes. To shape our strategy, we aim for constructive dialogue that helps us to understand alternative perspectives and ensure that our approach to doing business is understood. This includes working with NGOs that approach us about a specif ic cl ient, transaction or policy. In 2023, climate change, our net zero roadmap, human rights and nature continued to underpin many of our conversations. Our PLC Group primar ily rece ived NGO feedback via our public inbox and responded to queries in line with our standards. For complex issues such as climate change, our PLC Group held bilateral virtual meetings with NGOs to exchange perspectives in greater depth. In 2023, together with the Standard Chartered Foundation, our PLC Group continued to engage with NGOs, charit ies and other organisat ions to empower the next generat ion to learn, earn and grow through Futuremakers by Standard Chartered, our PLC Group’s global community in it iat ive to tackle inequal ity by promot ing greater economic inclus ion. To close the gender gap and promote access to ﬁnance, our PLC Group piloted ﬁnanc ing fac il it ies to support women-led microbus inesses w ith green and social ambit ions. At the UN Cl imate Change Conference, COP 28, our PLC Group held a Futuremakers Youth Panel in Dubai, and online in Nairob i to generate ins ights on scal ing tech solutions for a green and inclus ive economy. In 2024, we w ill conduct a study on our social return on investment to assess the impact of Futuremakers. By offering three days paid volunteering leave, we inst illed a strong culture of volunteer ing. In 2024, we will increase our skills-based activ it ies leveraging our colleagues’ skills to deepen our impact. Their interests • Climate change and decarbonisat ion • Nature • Human rights • Financ ial inclus ion • Economic empowerment • Gender equity • Community impact Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 43 Strategic report continued Employees How we create value We recognise that our workforce is key to driv ing our performance and product iv ity and that the d ivers ity of our people, cultures and network sets us apart. To lead the way in addressing the evolving needs of our clients and advances in technology, we are developing a workforce that is future-ready and are co-creating with our employees to build an inclus ive, innovat ive and cl ient-centric culture that drives ambit ion, act ion and accountabil ity. How we serve and engage By engaging employees and fostering a posit ive exper ience for them, we can better serve our clients and deliver on our Purpose. A culture of inclus ion and amb it ion enables us to unlock innovat ion, make better dec is ions, del iver our business strategy, live our valued behaviours and embody our brand promise. We proactively assess and manage people-related risks, such as, capacity, capabil ity and culture, as part of our PLC Group R isk Management Framework. Our People Strategy, which was approved by the PLC Board, stays relevant and future-focused, with external events having accelerated many of the future of work trends which inform our approach. Their interests Translating our here for good brand promise and Purpose of ‘Driv ing commerce and prosper ity through our unique divers ity’ into our colleagues’ day to day experience is crit ical to cont inue to be an employer of choice across our footprint. The research we have on our Employee Value Proposit ion (EVP) tells us that our employees, or potent ial employees, want to: have interest ing and impactful jobs; innovate with in a d iverse set of markets and for a spectrum of clients; cultivate a brand that sustainably drives commerce and offers enrich ing careers and development; and be supported by great people leaders. They want these elements to be anchored in competit ive rewards and a pos it ive work–l ife balance. The employment proposit ion is a key input to our People Strategy which supports the delivery of our business strategy. Listen ing to employees Frequent feedback from employee surveys helps us ident ify and close gaps between colleagues’ expectat ions and their experience. In addit ion to our annual survey, colleague sent iment is captured more frequently, through a rolling culture survey and through surveys at key moments for our employees, such as when they join us, when they leave, and when they return to work after parental leave. In addit ion to leverag ing inputs from employee surveys, the Court and Management also engage with and listen to the views of colleagues through interact ive sess ions. In 2023, our annual My Voice survey was conducted in May and June. Key measures of employee satisfact ion have cont inued to improve year on year, with a 12.1 point increase in our employee Net Promoter Score (NPS) (which measures whether employees would recommend working for us) as well as a 5 percentage point increase in our employee engagement index. 87 per cent say that the bank meets or exceeds their expectations. It is also encouraging to see that 97 per cent of employees feel committed to doing what is required to help the bank succeed and 91 per cent feel proud about working for the bank. The consistent increase in scores ind icate that we are cont inu ing to improve as a place to work. Externally our PLC Group Glassdoor rating (out of ﬁve) has increased from 3.7 in 2019 to 3.9 in 2023, and 77 per cent would recommend working with us to friends. We also continue to be recognised as an employer of choice and details of our accolades can be found on sc.com/awards All of this is ind icat ive of our progress in further strengthening our employee value proposit ion to attract, reta in and grow the skills and talent that are crit ical to del iver ing our strategy and outcomes for cl ients. Strengthening our culture of high-performance As the bank transforms to achieve our strategic ambit ions, we cont inue to embed our refreshed approach to managing, recognis ing and reward ing performance. We are strengthening a culture of ambit ion, act ion and accountabil ity by increas ing the frequency of performance and development conversations and emphasis ing the importance of two-way feedback. We are placing greater focus on recognis ing outperformance that is driven by collaboration and innovat ion and are encourag ing more aspirat ion dur ing goal-setting and ﬂexib il ity in reward decis ions (supported by the removal of formula ic performance decis ions start ing 2022). Behavioural changes are vis ible. Colleagues across PLC Group are tell ing us that they are having more regular performance check-ins with their leaders and exchanging more feedback. We know that recognit ion is also an important enabler of high performance, and we have launched a dig ital platform in January 2024 to encourage democratised, peer-to-peer recognit ion for all colleagues. The wellbeing of our colleagues is crit ical to susta inable high-performance, and supporting their health, safety, and resil ience continues to be a key prior ity. In 2023, levels of h igh work-related stress felt by employees continued to drop. Employees felt more supported with their mental, physical, social and ﬁnanc ial wellbe ing needs, and their satisfact ion w ith work-personal life balance continued to increase. Globally, colleagues are provided access to wide-ranging support and tools to manage their wellbeing, includ ing several progress ive beneﬁts, a mental health app, an employee assistance programme, wellbeing toolkits and network of trained Mental Health First Aiders. We continue to tackle the drivers of work-related stress, which includes insert ing wellbe ing skills-build ing into learning intervent ions. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 44 Strategic report continued We have been embedding the ﬂexible working model that we in it iated in 2021, combin ing ﬂex ib il ity in working patterns and locations, to enhance both the productiv ity and exper ience of our workforce. Our model consciously balances client needs and business prior it ies with ind iv idual choice, allowing us to be inclus ive of the d iverse needs of our workforce. Colleagues continue to adopt ways of working that balance the beneﬁts of remote working with face-to-face interact ions. Toolk its and guidance are being provided to people leaders and ind iv iduals to help navigate ﬂexible working. These include support on organis ing team and ind iv idual work to enhance productiv ity and wellbe ing; on leading in key moments such as onboarding new team members, returning from parental leave and during performance conversations; and on strengthening connections in ﬂexible work environments. We also continue to re-imag ine our phys ical workspaces with the relevant infrastructure and technology to provide hubs for teamwork, collaboration and learning. As a result of these ongoing intervent ions, employees who are work ing ﬂexibly express greater satisfact ion w ith overall employee experience and work-life balance in comparison to employees working fully remotely or fully in the ofﬁce. Also, over 85 per cent colleagues expressed in the 2023 My Voice survey that ﬂexible working has had a posit ive impact on their abil ity to get work done and to collaborate as well as their sense of belonging and social connection with others. > Read more about our approach to ﬂexible working at sc.com/ﬂexiblework ing Build ing leadersh ip capabil it ies Exceptional performance needs exceptional leadership, and it is encouraging to see manager NPS continues to increase to 36 points in 2023 (up 7.6 points year-on-year). Engaging, developing, and measuring our people leaders continues to be a crit ical enabler of our performance and culture. Our Leadersh ip Agreement sets out clear expectations from our leaders to Aspire, Inspire and Execute. It also forms the foundation of a modernised leadership development curriculum through which we are helping our people leaders build new skills and habits across different leadership stages – includ ing sk ills on coaching, performance management in business-specif ic contexts, lead ing for transformation and leading through ambigu ity. In addit ion to face-to-face leadersh ip programmes during the year for our People Leaders, leadership skill build ing is also made accessible to all colleagues to build the capabil ity deeper into the organisat ion such as through our 60-day Leadersh ip Health journey of regular micro-learning activ it ies, monthly Leadership Insights newsletter, leadership sessions during our annual Global Learning Week and the Leadership Academy on diSCover. People leaders continue to receive feedback through our ‘always on’ feedback tool available to all colleagues as well as through the structured 360-degree feedback tool that is available to mid-to-senior people leaders. Leaders are also provided a consolidated view of the environment they are creating for their teams, and feedback on their leadership skills, as part of their Leadership Dashboard. The dashboard has been designed to bring transparency to performance and development conversations, and to highl ight the value we place on leadersh ip. > Read our Leadership Agreement at sc.com/leadershipagreement Developing skills of future strategic value and enabling careers To keep pace with technological innovat ion, evolv ing customer expectations and the changing world of work, we are adopting a ‘skills-led’ approach - accelerating the development of future skills amongst our workforce and bring ing in greater agil ity to how sk ills are deployed to areas of opportunity. We are helping employees build the skills needed for high performance today, to reskill and upskill for tomorrow and to be global cit izens who understand the chang ing nature of the world in which we operate. This includes helping them strengthen a combinat ion of human and techn ical skills, as well as build ing a culture of cont inuous learning that empowers them to grow and follow their aspirat ions. Learning in classrooms is balanced with learning through our online learning platform diSCover, which is also accessible via a mobile app. Colleagues are using our Future Skills to build skills around Data & Analytics, Dig ital, Cyber, Cl ient Advisory, Sustainable Finance and Leadership, amongst others. Employees are also build ing and pract ic ing new sk ills on the job by sign ing up for projects (often cross-funct ional and cross-location) through our AI-enabled internal Talent Marketplace platform. By combin ing such project opportun it ies w ith purposeful internal talent moves we continue to enhance the career experience of colleagues. The Marketplace also acts as a platform to connect employees to mentors across PLC Group. The 2023 My Voice scores ind icate that our efforts are in the right direct ion, as employee sat isfact ion w ith development and growth opportunit ies increased compared to previous years, and also highl ight that th is is an area we must continue to focus on. We continue to expand targeted learning journeys to upskill colleagues towards crit ical ‘future’ roles where our strateg ic workforce planning analysis has predicted an increas ing need for talent, includ ing un iversal banker, data translator, cloud security engineer, product owner/ scrum master and cyber security analyst roles. At the same time, we have been strengthening and scaling the proposit ion to support colleagues in build ing system ic skills, in areas such as sustainab il ity, innovat ion, data, d ig ital and leadersh ip which an increas ing populat ion of the workforce is antic ipated to need to keep pace with the changes happening in the sector. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 45 Strategic report continued We are also embedding a focus on skills across our talent management processes. Our refreshed approach to ident ify ing the future potential of our workforce focuses on their abil ity aga inst a range of skills, along with their aspirat ion to put these sk ills into action by taking on complex responsib il it ies (thus, in turn moving away from the tradit ional emphas is on past performance being a primary ind icator of future potent ial). Through this approach we are placing strong emphasis on learning agil ity to ident ify the talent that we want to accelerate as well as deploy in areas of highest impact for clients and the business. Creating an inclus ive workplace We believe that inclus ion is what enables our diverse talent to truly deliver impact and drive business success. Through our annual My Voice survey and supplemented by qualitat ive feedback gathered, we a im to better understand the lived experiences of our colleagues, and then act to make targeted and meaningful changes to further drive inclus ion and enhance their experience. Our progress in this space is reﬂected in the 83.7 per cent of employees who shared posit ive sent iments around our culture of inclus ion in the 2023 survey. This has been enabled by continued efforts towards increas ing awareness around d ivers ity and inclus ion pr inc iples, unconsc ious bias and micro behaviours as well as emphasis ing the importance of creating an inclus ive environment – aspects that are covered in the ‘When we’re all included’ learning programme. Further, the ‘Respect at Work’ e-learning programme that helps understand what constitutes harassment, bullying, discr im inat ion and v ict im isat ion, is now mandatory for all employees. Leadership commitment is core to our approach on Divers ity and Inclus ion (D&I). Our Global D&I Council is chaired by our CEO, CCIB and Europe & Americas and comprises of enterprise-wide leaders representing various business, functions and geographies from across the PLC Group. The Council is responsible for our overall PLC Group D&I strategy, direct ion sett ing, and overseeing the implementat ion of susta inable and measurable improvements. We aim to further strengthen our inclus ive culture, where all our people feel that the ir ident ity is understood and recognised for its uniqueness and anyone with the capabil ity to excel can do so. Employees are prov ided, where legally permiss ible, w ith the abil ity to share the ir ident ity data through our internal employee portal. We are focused on in it iat ives that encourage and increase self-declaration, so that we can further improve colleague experience by introduc ing pol ic ies and intervent ions that are representat ive of the needs of our diverse workforce Our continued partnership with Purple Tuesday is one of the many in it iat ives through wh ich we are creating a work environment where colleagues are encouraged bring their whole selves to work. The partnership is helping increase the vis ib il ity of role models and careers for those w ith disab il it ies. It is also helping to drive an ongoing conversation, to build awareness and break down myths and stereotypes when engaging with clients and colleagues with disab il it ies. The SC Out Pride Leadership Summit this year saw Employee Resource Group leads, allies and advocates come together to deﬁne our approach for further build ing a respectful, support ive, and safe work environment for our LGBT+ colleagues. We also recognise six key D&I dates 1 across the year and use these as focal points to facil itate open d ialogue on inclus ion internally and externally. Through these global campaigns we engage and strengthen relationsh ips w ith clients and external stakeholders, collectively rais ing awareness, promot ing best practices and committ ing to take pract ical steps to advance the D&I overall agenda in our communit ies. Our gender divers ity cont inues to grow with more women leaders moving up to senior roles. Women currently represent 54 per cent of the Court, and representation of women in senior leadership roles increased to 29.2 per cent at the end of 2023. We are committed to continuous improvement in this area and aspire to have 35 per cent representation of women at a senior level across PLC Group by 2025. We remain focused on build ing a workforce that is truly representative of our client base and footprint. We continue to develop strategic partnerships and experiment with programmes to widen our talent pools (such as the Spring Insights Programme in 2023 that provided a multi-day immers ive exper ience to Black, African American, Hispan ic and Lat inx students in New York and London to learn about our CCIB business, and access internsh ip opportun it ies). In 2023, as a result of our listen ing exerc ises and data ins ights, we also establ ished a Black and African Talent Steering Committee and Working Group, and appointed PLC Group Management Team and Global D&I Council sponsors to advocate for leadership action in focus areas ident iﬁed, such as career progress ion and the internat ional mob il ity exper ience. As we work towards achiev ing our 2025 UK and US ethnic ity sen ior leadership aspirat ions, we are also focused on nurtur ing local talent in markets across Asia, Africa and the Middle East. > Read more about our approach towards strengthening divers ity and inclus ion at sc.com/divers ityfa irpayreport 1 International Day Against Homophobia, Transphobia and Biphob ia, Internat ional Day of Persons with Disab il it ies, Internat ional Men’s Day, International Women’s Day, and World Day for Cultural Divers ity for D ialogue and Development, World Mental Health Day Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 46 Strategic report continued Driv ing a susta inable future We are committed to the sustainable economic and social development , helping people in our footprint markets to thrive long-term. With a long-standing presence in parts of the world where sustainable ﬁnance can have a sign iﬁcant impact, we facil itate the movement of cap ital to where it is needed most. We apply our expertise to create ﬁnanc ial solut ions that help to address challenges and support sustainable growth. The work we do to accelerate the transit ion to net zero, l ift partic ipat ion in the economy and reset globalisat ion is fundamental to our business. These three areas of focus are known as our Stands and inform our overall strategy, includ ing our approach to susta inab il ity, our advocacy efforts on behalf of our markets and engagement with our employees and society. Our approach to sustainab il ity Embedding sustainab il ity across our business is a strategic prior ity for the PLC Group. To accelerate our Susta inab il ity agenda, the PLC Group’s inaugural Chief Sustainab il ity Ofﬁcer (CSO) was appointed in 2022. Since then, our dedicated CSO organisat ion – wh ich houses our Sustainable Finance, Strategic Init iat ives, Sustainab il ity Strategy, Net Zero Delivery, and Environmental and Social (E&S) Risk Management teams – acts as a centre of excellence and a catalyst for the execution of the PLC Group-wide sustainab il ity strategy, includ ing the ach ievement of our net zero roadmap. We focus on deliver ing both our long-term susta inab il ity goals – our Sustainab il ity Aspirat ions – as well as our short-term targets and immed iate pr ior it ies – our Sustainab il ity Strategic Pillars . Approach to sustainab il ity Sustainab il ity Aspirat ions: our long-term goals Aspirat ion 1: Mob il ise $300 b ill ion of Susta inable Finance by 2030 Aspirat ion 2: Operat ional ise our inter im 2023 ﬁnanced em iss ions targets to meet our 2050 net zero ambit ion Aspirat ion 3: Enhance and deepen the susta inab il ity ecosystem Aspirat ion 4: Dr ive social impact with our clients and communit ies Sustainab il ity Strategic Pillars: our short-term targets and immed iate pr ior it ies Pillar 1: Scale Sustainable Finance income Pillar 2: Further embed sustainab il ity across the organisat ion Pillar 3: Deliver on the annual milestones with in our net zero roadmap Pillar 4: Leverage our innovat ion hubs Measuring what matters most - understanding our material ity Material ity is considered to be the threshold of sign iﬁcance for report ing sustainab il ity-related risks and opportunit ies for users of ﬁnancial statements: investors and wider stakeholders. We consider guidance provided by the IFRS Foundation, which focuses on meeting the sustainab il ity data and informat ion needs of our investors. Determin ing mater ial ity for sustainab il ity-related risks and opportunit ies should cons ider both quantitat ive and qual itat ive aspects related to sustainable social and economic development. Our approach to sustainab il ity reporting will continue to evolve subject to regulatory and voluntary standards across our list ing locat ions and footprint markets. Our disclosures are guided by internat ional standards, frameworks and pr inc iples to the extent relevant to our business. We publish an ESG Reporting Index against the disclosures captured in the Global Reporting Init iat ive (GRI) Universal and select Topic Standards, relevant metrics from sector-specif ic SASB Standards and the World Economic Forum (WEF) Stakeholder Capital ism Metr ics framework. Sustainab il ity Aspirat ions: our long-term goals Since 2016, the PLC Group’s approach to sustainab il ity has been underpinned by a suite of Sustainab il ity Aspirat ions. Dur ing 2023, we refreshed and consolidated our Sustainab il ity Aspirat ions into four overarching long-term goals, each supported by key performance ind icators. Aspirat ion 1: Mob il ise $300 b ill ion of Susta inable Finance Across our markets, many clients are at the early phase of evaluating the risks and opportunit ies assoc iated with their transit ion to a low carbon economy. We leverage a full su ite of sustainable ﬁnance solutions – includ ing loans, bonds, trade ﬁnance and carbon trading - to support their transit ion. These are underpinned by our sustainable ﬁnance frameworks that outline how we apply the ‘green’, ‘sustainable’ or ‘transit ion’ labels across products and transact ions. We also work with corporate, retail and wealth clients to mobil ise d iverse sources of capital in support of social outcomes. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 47 Strategic report continued Aspirat ion 2: Operat ional ise our inter im 2023 ﬁnanced em iss ions targets to meet our 2050 net zero amb it ion We aim to reach net zero in our ﬁnanced emiss ions by 2050 and in our operations by 2025. To date, the PLC Group has set and disclosed science-based inter im 2030 ﬁnanced em iss ions targets for eleven h igh-emitt ing sectors, in line with guidance from the Net-Zero Banking Alliance (NZBA). We are working across our businesses and functions, and alongside our clients to deliver these targets, notwithstand ing the challenges presented by a mater ial portion of our markets not having a commitment to achieve net zero by 2050. Aspirat ion 3: Enhance and deepen the susta inab il ity ecosystem We are util is ing our expertise and networks to actively contribute to global partnerships and in it iat ives that enhance the sustainab il ity ecosystem. These range from those which support the mobil isat ion and scaling of Sustainable Finance, to furthering the development of the voluntary carbon markets and fostering innovat ive solut ions in the arena of conservation ﬁnance, through to supporting the advancement of social topics underpinn ing the UN Susta inable Development Goals (SDGs). Aspirat ion 4: Dr ive social impact with our clients and communit ies We seek to partner with our clients and communit ies to mob il ise soc ial capital and drive economic inclus ion as well as entrepreneurship through our Futuremakers in it iat ive. Our Employee Volunteer ing programme encourages employees to volunteer and organise activ it ies, such as fundrais ing, that al ign to the PLC Group’s community strategy or respond to local issues. Strategic Pillars: our short-term targets and immed iate pr ior it ies Our four Sustainab il ity Strategic Pillars represent our near-term strategic focus. Each member of the PLC Group Management Team (MT) is responsible for strategically driv ing cl imate and sustainab il ity considerat ions w ith in the ir geography, business segment or function in line with the PLC Group’s net zero roadmap. Selected sustainab il ity-related targets, includ ing those with a climate-related dimens ion, are incorporated into the annual PLC Group Scorecard which informs variable remuneration for all colleagues under the Target Total Variable Compensation plan, includ ing the MT. Pillar 1: Scale Sustainable Finance income We are build ing a scalable Susta inable Finance (SF) franchise, supporting our clients on their transit ion journeys by developing customised solutions that speak to their needs and ambit ions. Pillar 2: Further embed sustainab il ity across the organisat ion The CSO organisat ion’s a im is to act as a catalyst for change and a centre of excellence to partners across the PLC Group. It fosters collaboration internally to embed sustainab il ity across our business operations and functions, and externally with clients and other stakeholders who are aligned with our miss ion to dr ive change. This is achieved by: • People – Rolling out an expanding curriculum of sustainab il ity and climate-related train ing across the PLC Group. • Processes – Integrating our 2030 sectoral net zero targets into our credit risk appetite and capital allocation processes allowing us to track, monitor and continually assess progress against our targets. • Technology – Investing to build a robust single-source data architecture to facil itate engagement w ith our clients, includ ing automated or semi-automated tools that will support decis ion-mak ing and analysis of the expected impact of a transaction on the PLC Group’s ﬁnanced emiss ions. Pillar 3: Deliver on the annual milestones with in our net zero roadmap We aim to reach net zero GHG emiss ions in our ﬁnanced emiss ions by 2050 and in our own operations by 2025. Since 2018 we have been working on align ing our d irect and ind irect em iss ions to the Par is Agreement’s goal of well below two degrees Celsius of global warming by the end of the century. Pillar 4: Leverage our innovat ion hubs Announced in 2023, the four thematic innovat ion hubs – Adaptat ion Finance, Blended Finance, Carbon Markets and Nature Posit ive Solut ions – focus on emerging sectors of sustainab il ity aligned to areas where the PLC Group has a core competency and are particularly suited to our clients in our footprint markets. By being deliberate in demonstrating leadership to advance the ecosystem in these emerging thematic areas, the PLC Group’s Sustainable Finance franchise will be well posit ioned to take advantage of the sign iﬁcant and d ifferent iated revenue potent ial that will result from maturation of these hubs in the future. Each hub is transversal, run by senior leaders in the CSO organisat ion and a ims to ident ify opportun it ies for future returns outside of our core range of tradit ional products and serv ices. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 48 Strategic report continued Education and Train ing Our focus in 2023 was to reinforce the tiered learning curriculum through reﬁnement of the on-demand foundation program and establish ing a pract it ioner-level learn ing program for colleagues in leadership and key front-line roles. Course Descript ion Sustainab il ity Foundation Programme We encourage all employees across our global footprint to increase their understanding of sustainab il ity and climate: how we embed it into our business, operations and communit ies, and how they can act ively play their part in this journey. Since launching our “Understanding Sustainab il ity” online learning in April 2022, more than 15,067 (18 per cent) of colleagues voluntarily completed this learning programme up to October 2023. It was refreshed as part of the Sustainab il ity Foundation Programme and reﬂects the ﬁrst level in our tiered learning curriculum, through which we aim to tailor content to different needs from foundational to practit ioner. Climate-related ﬁnancial and non-ﬁnancial risk train ing The PLC Group has provided bespoke classroom train ing for colleagues across CCIB, CPBB, R isk and Audit teams. This covered a broad range of topics, from how physical and transit ion r isks may manifest, to special ised top ics around how climate stress tests are conducted and how we embed Climate Risk into ﬁrst and second-line credit risk processes. We also partnered with Imperial College London on a seven-hour detailed online train ing programme that focused on the latest developments with in academ ia, industry, and the regulatory landscape. Starting in Q4 2023, a targeted practit ioner-level tra in ing programme was rolled out in phases to Relationsh ip Managers, Global Credit Markets bankers, Credit and Climate Analysts and Credit Ofﬁcers. This programme focuses on all climate and net zero-related learning requirements. The PLC Board also received train ing on cl imate scenarios, includ ing a focus on regulatory expectat ions, key features of industry-level climate scenarios, in-house base and tail risk scenarios and key second-order impacts from climate change. Sustainable Finance (SF) and Environmental and Social Risk Management (ESRM) train ing In 2023, the practit ioner-level learn ing of the tiered Sustainable Finance curriculum was launched. This level aims to build detailed knowledge of concepts related to sustainab il ity and how these are embedded throughout our processes and ﬁnancing. The Sustainable Finance Practit ioner Cert if icate is a 15-week programme jo intly developed in partnership with Imperial College Business School. It is our practit ioner-level learn ing targeted at our Global Account Managers and select Relationsh ip Managers across CCIB and CPBB. Th is program helps develop the core knowledge required to support our clients on their sustainab il ity journey covering topics such as net zero, climate risk, adaptation ﬁnance, biod ivers ity, energy transit ion, products and solut ions, and blended ﬁnance. Addit ionally in 2023, over a hundred country and regional CEOs and Heads of Business jo ined targeted tra in ing covering the energy transit ion and related ﬁnancing opportun it ies, clean technology, and susta inab il ity-related risks and regulation. There were also over forty ad-hoc train ing courses held throughout the year that reached over 3,200 employees covering specif ic learn ing needs and topics e.g., the PLC Group’s progress related to sectoral net zero target setting, sector-specif ic voluntary carbon markets or SF products and related governance. We cont inue to upskill our Relationsh ip Managers and Cred it Ofﬁcers in assessing Environmental & Social (E&S) risk, as well as having access to detailed online resources. 2,606 colleagues received E&S risk-related train ing in 2023. In 2024, we plan to further reﬁne the programmes to target specif ic roles in the PLC Group and further build knowledge and expertise in SF and ESRM. Mit igat ing Environmental and Social Risk We seek to proactively manage Environmental and Social (E&S) Risks and impacts aris ing from the PLC Group’s cl ient relationsh ips and transact ions. For over 20 years, our cross-sector Environmental and Social Risk Management (ESRM) Framework has helped us apply internat ional standards and best pract ices across all our markets. In the front line, our ESRM team with in the Ch ief Sustainab il ity Ofﬁcer (CSO) organisat ion oversees the management of E&S R isks associated with our client relationsh ips. Our approach is embedded directly into our credit approval process and supports us to work with our stakeholders to ident ify, manage and mon itor the potential impacts that stem from our ﬁnanc ing dec is ions. Managing Climate Risk We have designed an approach that begins to embed Climate Risk with impacted Princ ipal R isk Types (PRTs) with in our central Enterprise Risk Management Framework based around two princ iples: 1. Treat Climate Risk like a tradit ional r isk type. Climate Risk may lead to ﬁnanc ial losses and non-ﬁnancial detr iments, much like Credit Risk, and should be managed as such to lim it the PLC Group’s exposure to these detr iments. This means embedding Climate Risk considerat ions into exist ing r isk ident iﬁcation and management processes, governance, report ing, scenario analysis, strategy, and ﬁnanc ial plann ing. 2. Recognise and build for where Climate Risk is different. Climate Risk is likely to crystallise over much longer time horizons and is inherently diff icult to quant ify. Its unique features and a need for granular forward-looking measurements require the use and development of new tools and methodologies to quantify and analyse the impl icat ions. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 49 Strategic report continued Integrity, conduct and ethics We aim to live our valued behaviours, which are ‘Never settle’, ‘Better together’ and ‘Do the right thing’ through our actions, decis ions and interact ions day-to-day w ith colleagues and clients. • The Code of Conduct and Ethics (the Code) remains the primary tool through which we set our conduct expectations. In October 2023, we launched the refreshed Code to improve alignment with our Stands, strengthen the link between ethics, culture, conduct, and the Group’s strategy. • Our Speaking Up programme provides a safe, independent and conﬁdent ial way to report known or suspected concerns. It helps build and mainta in a strong eth ical culture, with integr ity, trust, and transparency. The early d isclosure of concerns reduces the risk of ﬁnanc ial and reputat ional loss caused by misconduct. • Our ambit ion is to help tackle ﬁnanc ial cr ime by making the ﬁnanc ial system a host ile environment for crim inals and terrorists. We have no appetite for breaches in laws and regulations related to ﬁnanc ial cr ime. Our Conduct, Financ ial Crime & Compliance (CFCC) team sets our ﬁnanc ial cr ime risk management framework. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 50 Non-ﬁnancial and susta inab il ity informat ion statement This table sets out where shareholders and stakeholders of the Group can ﬁnd informat ion about key non-ﬁnancial and sustainab il ity matters in this report. As the Company is a subsid iary undertak ing of PLC and included with in PLC Group, compliance with the non-ﬁnanc ial and susta inab il ity reporting requirements contained in sections 414CA and 414 CB of the Companies Act 2006 is achieved by reference to PLC Group activ it ies where relevant and to the PLC Group report available at sc.com. Further disclosures are available via sc.com/sustainab il ityhub Reporting requirement Where to read more in this report about polic ies, impact (includ ing r isks, policy embedding, due dil igence and outcomes) Business model Pages 11 to 13 Risk Review (princ ipal r isks) Pages 126 to 143 Environment • Sustainable & Responsible Business Pages 45 to 49 • Directors Report Pages 51 to 56 Employees Pages 43 to 45 Human rights Page 36 Social matters Page 42 Anti-corruption and anti-bribery Page 135 Authority The strategic report up to page 50 has been issued by order of the Court. Bill Winters Director 23 February 2024 Company Reference Number: ZC18 Strategic report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 51 The directors present their report and the audited ﬁnanc ial statements of Standard Chartered Bank and its subsid iar ies (the ‘Group’) and Standard Chartered Bank (the ‘Company’) for the year ended 31 December 2023. The Company has chosen in accordance with Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (the Regulations), to include certain matters in its Strategic report (see pages 1 - 50) that would otherwise be disclosed in this Directors’ report as required by paragraphs 2,6,10,11,12 of the Regulations. Activ it ies The activ it ies of the Group are banking and provid ing other ﬁnancial serv ices. The Group comprises a network of branches and outlets in 50 markets. The Financ ial Rev iew on pages 20 to 24 contains a review of the business during 2023. Key stakeholders The long-term success of the Group is dependent on its relationsh ips w ith its key stakeholders. On pages 40 to 49 we outline the ways in which we have engaged with key stakeholders, the material issues that they have raised with us, and how these issues have been taken into account in the Court’s decis ion-mak ing processes. Results and div idends The results for the year are given in the income statement on page 160. Div idends of $2,167 m ill ion were pa id during the year to ordinary shareholders (2022: $575 mill ion). Share capital Details of the Company’s share capital includ ing the part iculars of any share buy-backs are given in Note 27 to the accounts. Loan capital Details of the loan capital are given in Note 26 to the accounts. Property, plant and equipment Details of the property, plant and equipment of the Company are given in Note 17 to the accounts. Financ ial instruments Details of ﬁnanc ial instruments are given in Note 12 to the accounts. Details of exposure to credit, traded, liqu id ity and funding risk can be found in the Risk Proﬁle section of the accounts. Post balance sheet events Details of post balance sheet events are given in Note 40 to the accounts. Research and development During the year, the PLC Group invested $2.01 bill ion (2022: $1.98 b ill ion) in research and development, of which $0.99 bill ion (2022: $0.94 bill ion) was recogn ised as an expense. The research and development investment primar ily related to the planning, analysis, design, development, testing, integrat ion, deployment and in it ial support of technology systems. Future developments in the business of the Group An ind icat ion of likely future developments in the business of the Group is provided in the Strategic report on pages 1 to 40 . Directors and their interests The directors of the Company during the year were as follows: Mr A N Halford Mr W T Winters, CBE Mrs C M Hodgson, CBE (Resigned 31 January 2023) Ms J Hunt Ms G Huey Evans, CBE Ms R Lawther, CBE Mr D Tang Dr J Viñals Ms J M Whitbread (Resigned 3 May 2023) Mr P Rivett Ms M Ramos Ms A McFadyen Ms S Ricke (Appointed 24 February 2023) Mr S Apte (Appointed 1 January 2023) Dr L Yueh, CBE (Appointed 1 January 2023) Directors’ Report Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 52 Directors’ Report continued Mr Halford resigned from the Company on 2 January 2024 and Mr D De Giorg i was appo inted a director of the Company on 3 January 2024. None of the directors have a beneﬁc ial or non-beneﬁcial interest in the shares of the Company or in any of its subsid iary undertakings. Details of directors’ pay and beneﬁts are disclosed in Note 37 to the accounts. All of the directors as at 31 December 2023, except Ms McFadyen and Ms Ricke are directors of the Company’s ultimate holding company, Standard Chartered PLC. Mrs Hodgson, CBE stepped down from the Group on 31 January 2023. Director train ing The induct ion programmes of Court d irectors are undertaken as part of Group level in it iat ives, wh ich includes ongoing train ing and development and is tailored depending on their roles and responsib il it ies. Going concern Having made appropriate enquir ies, the Court is satisf ied that the Company and the Group as a whole have adequate resources to continue in operation and meet its liab il it ies as they fall due for a per iod of at least 12 months from 23 February 2024 and therefore continues to adopt the going concern basis in preparing the ﬁnanc ial statements. Polit ical donat ions The Group has a policy in place which prohib its donat ions being made that would: (i) improperly inﬂuence legislat ion or regulation, (i i) promote pol it ical v iews or ideolog ies, ( i i i) fund polit ical causes. In al ignment to this, no polit ical donat ions were made in the year ended 31 December 2023. Qualify ing Th ird Party Indemnit ies The Company has granted indemn it ies to all of its directors on terms consistent with the applicable statutory provis ions. Qualify ing th ird-party indemn ity prov is ions for the purposes of sect ion 234 of the Companies Act 2006 were accordingly in force during the course of the ﬁnanc ial year ended 31 December 2023 and rema in in force at the date of this report. Qualify ing Pens ion Scheme Indemnit ies Qualify ing pens ion scheme indemn ity prov is ions (as deﬁned by sect ion 235 of the Companies Act 2006) were in force during the course of the ﬁnancial year ended 31 December 2023 for the beneﬁt of the d irectors of the UK’s pension fund corporate trustee (Standard Chartered Trustees (UK) Lim ited) and rema in in force at the date of this report. Areas of operation The Company operates through branches and subsid iar ies in 50 markets across Asia, the Middle East, Africa, Europe and the Americas. Related party transactions Details of transactions with directors and ofﬁcers and other related parties are set out in Note 35 to the ﬁnanc ial statements. Corporate Governance Statement Countries in the Asia Hub, which include the Greater China and North Asia Hub and the ASEAN and South Asia Hub, operate under the Asia governance model. As the Group continues to cover the vast major ity of PLC Group’s total footpr int, the governance arrangements of the Company and PLC sim ilarly reﬂect th is overlap and is represented by a predominately mirrored board structure between PLC and the Company. As a wholly-owned subsid iary of a l isted PLC and its governance structure as a company established by Royal Charter, the Company complies with expectations set for premium listed companies with respect to board leadership, responsib il it ies, composit ion ( includ ing success ion and evaluation) to ensure that the Group is well managed, with appropriate oversight and control. Certain matters, such as remuneration, values, and external audit, are set at PLC Group level and considered or approved, if appropriate, by the Court. It is considered more appropriate for the purposes of Group wide consistency that princ iples are set at PLC Board level and then d issem inated through the Group to be approved by subs id iary boards. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 53 Directors’ Report continued The Court is supported by 4 primary committees: Audit Committee; Risk Committee; Nominat ion Comm ittee; and US Risk Committee. Each of the primary committees and the Court have implemented clear lines of responsib il ity and polic ies to support the Court in its effective decis ion mak ing. The Court also has a Standing Committee with a remit to approve matters, on behalf of the Court, where a formal resolution is required for legal and regulatory purposes. The Court, and its Audit and Risk Committees have sim ilar membersh ip as the Board of PLC and its Audit and Risk Committees, with the appropriate balance, skills, background and experience to make a valued contribut ion. For further informat ion on how the Aud it Committee and Risk Committee operate (includ ing in respect of their compliance with the Code), please see pages 164 to 169 and 170 to 175 of PLC’s 2023 Annual Report. The Court, together with the PLC Group, are committed to high standards of engagement with employees, suppliers and other stakeholders. For a descript ion of how the d irectors engaged with stakeholders, includ ing as to how such engagement has been considered in the Court’s decis ion mak ing, please refer to page 38. A copy of the UK Corporate Governance Code can be found at frc.org.uk Employee polic ies and engagement We work hard to ensure that our employees are kept informed about matters affecting or of interest to them, and more importantly that they have the opportunit ies to prov ide feedback and engage in a dialogue. We strive to listen and act on feedback from colleagues to ensure internal communicat ions are t imely, informat ive, meaningful, and in support of our strategy and transformation. In November 2023 we launched our new employee communicat ions platform – Pulse. Pulse w ill become our primary internal communicat ions channel that w ill allow colleagues to receive key dynamic updates that are personalised by role and location, sign up for events, provide feedback, and navigate to other internal platforms. In addit ion to targeted d ig ital commun icat ions, we also deploy aud io and video calls, virtual and face-to-face townhalls, and other employee engagement and recognit ion events. To cont inue to improve the way we communicate and ensure our employee communicat ions rema in relevant, we also period ically analyse and measure the impact of our communicat ions through a range of survey and feedback tools. Our sen ior leaders and people leaders play a crit ical role in engaging our teams across the network, ensuring that they are kept up to date on key business developments related to our performance and strategy. We offer addit ional support to our people leaders w ith specif ic calls and communicat ions packs to help them prov ide context and guidance to their team members to better understand their role in executing and deliver ing our strategy. Across the organisat ion, regular team meet ings with people leaders, one-to-one conversations and various management meetings provide an important platform for colleagues to discuss and clarify key issues. Regular performance conversations provide the opportunity to discuss how ind iv iduals, the team and the business area have contributed to our overall performance and how any recognit ion and reward relate to th is. Senior leadership also regularly share global, business, function, region and market updates on performance, strategy, structural changes, HR programmes, community involvement and other campaigns. The Court also engages with and listens to the views of the workforce through several sources, includ ing through interact ive engagement sess ions. Employees, past, present and future can follow our progress through the PLC Group’s LinkedIn network and Facebook page, as well as other social network channels includ ing Instagram, wh ich collectively have over 2.7 mill ion followers. The d iverse range of internal and external communicat ion tools and channels we have put in place aim to ensure that all colleagues receive timely and relevant informat ion to support the ir effectiveness. The wellbeing of our employees is central to our think ing about beneﬁts and support, so that they can thr ive at work and in their personal lives. Our PLC Group min imum standards prov ide employees with a range of ﬂexible working options, in relation to both location and working patterns. In terms of leave, employees are provided with at least thirty days’ leave (through annual leave and public holidays), and new parents are provided a min imum of twenty calendar weeks’ fully pa id leave irrespect ive of gender, relat ionsh ip status or how a ch ild comes to permanently jo in a fam ily. These are above the International Labour Organisat ion’s (ILO) m in imum standards. We seek to build productive and enduring partnerships with various employee representative bodies (includ ing un ions and work councils). In our recognit ion and interact ions, we are heav ily inﬂuenced by the 1948 United Nations Universal Declaration of Human Rights (UDHR), and several ILO conventions includ ing the R ight to Organise and Collective Bargain ing Convent ion, 1949 (No. 98) and the Freedom of Associat ion and Protect ion of the Right to Organise Convention, 1948 (No. 87). Divers ity and Inclus ion Our PLC Group Divers ity and Inclus ion Standard has been developed to ensure a respectful workplace, with fair and equal treatment, divers ity and inclus ion, and the prov is ion of opportun it ies for employees to part ic ipate fully and reach the ir full potential in an appropriate working environment. The Group aims to provide equality of opportunity for all, protect the dign ity of employees and promote respect at work. All ind iv iduals are entitled to be treated with dign ity and respect, and to be free from harassment, bullying, discr im inat ion and v ict im isat ion. Th is helps to support productive working condit ions, decreased employee attrit ion, pos it ive employee morale and engagement, ma inta ins employee wellbe ing, and reduces people-related risk. All colleagues are responsible for fostering an inclus ive culture where ind iv idual ity and d iffer ing sk ills, capabil it ies and experience are understood, respected and valued. All colleagues, consultants, contractors, volunteers, interns, casual workers and agency workers are required to comply with the Standard, includ ing conduct ing themselves in a manner that demonstrates appropriate, non-discr im inatory behaviours. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 54 Directors’ Report continued We do not accept unlawful discr im inat ion in our recruitment or employment practices on any grounds includ ing but not lim ited to: sex, race, colour, nat ional ity, ethn ic ity, nat ional or ind igenous or ig in, d isab il ity, age, marital or civ il partner status, pregnancy or maternity, sexual orientat ion, gender ident ity, express ion or reassignment, parental status, mil itary and veterans status, ﬂexib il ity of working arrangements, relig ion or bel ief. We are committed to provide equal opportunit ies and fair treatment in recruitment, appraisals, pay and condit ions, tra in ing, development, success ion planning, promotion, grievance/disc ipl inary procedures and employment terminat ion pract ices, that are inclus ive and access ible; and that do not directly or ind irectly d iscr im inate. Recruitment, employment, train ing, development and promot ion decis ions are based on the skills, knowledge and behaviour required to perform the role to the Group’s standards. Implied in all employment terms is the commitment to equal pay for equal work. We also endeavour to make reasonable workplace adjustments (includ ing dur ing the hir ing process) to ensure all ind iv iduals feel supported and are able to partic ipate fully and reach the ir potential. If employees become disabled, we will aim to support them with appropriate train ing and workplace adjustments where possible and to support their continued employment. Director Train ing The induct ion programmes of Court d irectors are undertaken as part of Group level in it iat ives and are ta ilored depending on their roles and responsib il it ies. Dur ing the year, train ing and development included areas such as dig ital assets and cl imate risk train ing. Where it is recognised that the Court or ind iv idual directors need further train ing development in key areas, addit ional sess ions are arranged with subject matter experts. Health, Safety and Wellbeing Our Health, Safety and Wellbeing (HSW) vis ion is to support employee productiv ity through a healthy and res il ient workforce, and our miss ion is to deliver every day in a safe, secure and resil ient way. Our corporate HSW programme covers both mental and physical health and wellbeing. The Group complies with both external regulatory requirements and internal policy and standards for HSW in all markets. It is Group policy to ensure that the more stringent of the two requirements is always met, ensuring our HSW practices meet or exceed the regulatory min imum. Compl iance rates are reported at least biannually to each country’s Management Team. We follow the International Labour Organisat ion (ILO) code of pract ice on recording and notif icat ion of occupational accidents and diseases and guidance published by UK Health and Safety Executive (HSE), and ensure that we meet all local Health and Safety (H&S) regulatory reporting requirements. We record and report all work-related illness and injuries, includ ing from sub-contractors, v is itors and cl ients. HSW performance and risks are reported annually to the PLC Group Risk Committee and Court Risk Committee. We use a H&S management system and local regulatory compliance tracker across all countries to ensure a consistently high level of H&S reporting and compliance for all our colleagues and clients. The PLC Group sponsors medical and healthcare services for all employees, except in markets where cover is provided through State-mandated healthcare, which represent less than 0.6 per cent of the PLC Group’s employees. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 55 Directors’ Report continued Across the Group, support for employee mental wellbeing is available. All employees have access to professional counselling via our Employee Assistance Program, as well as to more proactive mental health support through our holist ic wellbe ing app and wellbeing platform. Our global Mental Health First Aid (MHFA) program offers help to anyone developing a mental health problem, experienc ing a worsen ing of an exist ing mental illness or a mental health cris is. The mental health support is given until appropriate professional help is received, or the cris is resolved. To date we have tra ined over 500 mental health ﬁrst aiders in 43 markets. In 2023, we recorded two work-related fatalit ies. A contractor was trag ically and fatally injured while crossing a road on her way to work in Niger ia. An employee was trag ically and fatally injured in a road accident in India. Ma jor in juries (per the UK HSE deﬁnit ion) decreased from 20 in 2022 to 16, with fractures the most common type of major in jury (75 per cent). Overall, reported injuries increased by 28 per cent, with ‘slips/trips/falls’ and ‘transport/commuting’ remain ing the most common causes of injury. The overall increase in reported injuries was a post COVID result, with all markets moving into the new normal in 2023. Our injury rates remain aligned to, or better than industry benchmarks. Hazards and near miss reports decreased 4 per cent between 2022 and 2023. In 2023, we ran a back-to-basics programme to re-establish commitment and responsib il ity in safety & security at all levels, and address post pandemic and new normal practices. All premises are inspected at least annually to ident ify any hazards, risks, and inc idences of non-compl iance. HSW communicat ion is provided through mandatory train ings for all new joiners, along with annual refreshers. In 2023, we also created a pathway in the Group’s learning platform using engaging bite-sized video content to help educate colleagues on their responsib il it ies to keep the Group safe. The Group celebrated World Day for Safety and Health at Work in April with the theme “Safety is Everyone’s Responsib il ity” in line with the back – to – basics intent. One hundred and ﬁfty-eight (158) build ings, wh ich covers more than 90 per cent of our employees, were certif ied w ith the WELL Health & Safety Rating; an evidence-based, third-party certif icat ion that validates our efforts to address the hygiene and safety of our workspaces. Four major head ofﬁce projects also obtained the broader WELL certif icat ion. Our regular Ofﬁce and Home Working Experience survey, conducted across 49 markets, demonstrated continued high scores around wellbeing with 80 per cent of respondents agreeing that the workplace has a posit ive impact on their wellbeing and 87 per cent saying they are able to be physically active and mainta in a healthy work l ife balance. In 2023, all Standard Chartered markets saw relaxation of COVID restrict ions w ith business moving to new normal, and continued uptake of the Group’s Future Work Now (ﬂexible working) programme. An ergonomic online assessment tool is available for employees to assess their home working area for hazards, with a virtual assessment of the ind iv idual’s work environment, and a workplace adjustment procedure available for employees who require support based on personal circumstances. Our work injury insurance covers all employees working from home. Business travel returned to pre-pandemic levels in 2023, and we put together a Travel Risk Management Framework aligned to ISO 31030:2021 Travel Risk Management Standards and supported by external travel risk and security advisors at International SOS to support travellers. Supply Chain Management To support the operation of our businesses we source a variety of goods and services governed through a third-party risk management framework which ensures that we follow the highest standards in terms of vendor selection, due dil igence, and contract management. For informat ion about how the PLC Group engages w ith suppliers on environmental and social matters, please see our Supplier Charter and Supplier Divers ity and Inclus ion Standard. > Our Supplier Charter and Supplier Divers ity and Inclus ion standard can be viewed at sc.com/suppliercharter and sc.com/supplierd ivers ity Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 56 Directors’ Report continued Product responsib il ity The PLC Group has in place a risk framework, compris ing pol ic ies, standards and controls to support these objectives in alignment with our Conduct Risk Framework. The Framework covers sales practices, client communicat ions, appropr iateness and suitab il ity, and post-sales practice. There are controls across all activ it ies above and the controls are tested on a regular basis to provide assurance on the Framework. As part of this, we ensure products sold are suitable for clients and comply with relevant laws and regulations. We also review our products on a period ic bas is and reﬁne them to keep them relevant to the changing needs of clients and to meet regulatory obligat ions. We have processes and guidel ines spec if ic to each of our cl ient businesses, to promptly resolve client complaints, understand and respond to client issues. Conduct considerat ions are g iven sign iﬁcant we ight ing in front-line incent ive structures to dr ive the right behaviours. For more informat ion on our approach to product des ign, product pric ing, treat ing customers fairly and protecting vulnerable customers, and incent iv is ing our frontl ine employees, see pages 38 to 39 and 45 to 47. For more informat ion on fraud ident iﬁcation see page 131 of PLC’s 2023 Annual Report . Environmental impact of our operations The PLC Group aims to min im ise the environmental impact of its operations as part of its commitment to be a responsible company. The PLC Group reports on energy, water and non-hazardous waste data and the targets the PLC Group has set to reduce its operational emiss ions and waste consumpt ion. The PLC Group’s reporting methodology is based upon the “The Greenhouse Gas Protocol – A Corporate Accounting and Reporting Standard (Revised Edit ion)”. Information on the princ iples and methodolog ies used to calculate the GHG emiss ions of the PLC Group can be found in our Environmental Reporting Criter ia document at sc.com/environmentalcr iter ia Reporting period The reporting period of our Scope 1 and 2, emiss ions is from 1 October 2022 to 30 September 2023. This allows sufﬁc ient t ime for independent assurance to be completed on our Scope 1 and Scope 2 emiss ions pr ior to the publicat ion of the PLC Annual Report. Accordingly, the operating income used in this inventory corresponds to the same time period rather than the calendar year used in ﬁnanc ial report ing. Summary of Activ it ies of the Company’s Jersey Branch Standard Chartered Bank Jersey Branch’s private banking activ it ies include deposit taking, lending and investment business in accordance with Jersey laws and regulations. Auditor The Audit Committee reviews the appointment of the Group statutory auditor, its effectiveness and its relationsh ip w ith the Group, which includes monitor ing our use of the aud itors for non-audit services and the balance of audit and non-audit fees paid. Each director believes that there is no relevant informat ion of wh ich our Group statutory auditor is unaware. Each has taken all reasonable steps necessary as a director to be aware of any relevant audit informat ion and to establ ish that Ernst & Young LLP (EY) is made aware of any pertinent informat ion. A resolut ion to re-appoint EY as auditor will be proposed at the 2024 PLC Annual General Meeting. By order of the Court Bill Winters Director 23 February 2024 Company Reference Number: ZC18 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 57 Statement of directors’ responsib il it ies The directors are responsible for preparing the Directors’ Report and the Group and Company Financ ial Statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and Company ﬁnanc ial statements for each ﬁnancial year. Under that law they are required to prepare the Group ﬁnanc ial statements in accordance with internat ional account ing standards in conformity with the requirements of the Companies Act 2006 and with International Financ ial Report ing Standards as adopted by the European Union (EU IFRS) and applicable law, and the Company ﬁnanc ial statements in accordance with internat ional account ing standards in conformity with the requirements of the Companies Act 2006. Under company law the directors must not approve the ﬁnanc ial statements unless they are sat isf ied that they g ive a true and fair view of the state of affairs of the Group and Company and of their proﬁt or loss for that period. In preparing each of the Group and Company ﬁnancial statements, the d irectors are required to: • Select suitable accounting polic ies and then apply them cons istently; • Make judgements and estimates that are reasonable, relevant and reliable; • State whether they have been prepared in accordance internat ional account ing standards in conformity with the requirements of the Companies Act 2006 and with EU IFRS; • Assess the Group and the Company’s abil ity to cont inue as a going concern, disclos ing, as appl icable, matters related to going concern; and • Use the going concern basis of accounting unless they either intend to liqu idate the Group or the Company or to cease operations or have no realist ic alternat ive but to do so. The directors are responsible for keeping adequate accounting records that are sufﬁc ient to show and expla in the Company’s transactions and disclose with reasonable accuracy at any time the ﬁnanc ial pos it ion of the Company and enable them to ensure that its ﬁnanc ial statements comply w ith the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of ﬁnanc ial statements that are free from mater ial misstatement, whether due to fraud or error, and have general responsib il ity for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregular it ies. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and Directors’ Report that complies with that law and those regulations. Responsib il ity statement of the directors in respect of the Directors’ Report and Financ ial Statements We conﬁrm that to the best of our knowledge: • The ﬁnancial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liab il it ies, ﬁnancial pos it ion and proﬁt or loss of the Company and the undertak ings included in the consolidat ion taken as a whole; and • The Strategic Report includes a fair review of the development and performance of the business and the posit ion of the Company and the undertakings included in the consolidat ion taken as a whole, together w ith a descript ion of the emerging risks and uncertaint ies that they face. We consider the Directors’ Report and Financ ial Statements, taken as a whole, is fair, balanced and understandable and provides the informat ion necessary to assess the Group’s pos it ion and performance, bus iness model and strategy. By order of the Court Diego De Giorg i Director 23 February 2024 Directors’ Report continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 58 Risk review and Capital review The following parts of the Risk review and Capital review form part of these ﬁnanc ial statements – • a) Risk review: Disclosures marked as ‘audited’ from the start of Credit Risk section (page 60) to the end of other princ ipal risks in the same section (page 120); and • b) Capital review: Tables marked as ‘audited’ from the start of ‘Capital base’ to the end of ‘Total capital’ (page 145). Risk Index Annual Report and Accounts Risk proﬁle Credit risk 60 Basis of preparation 60 Credit risk overview 60 Impairment model 60 Staging of ﬁnanc ial instruments 60 IFRS 9 expected credit loss princ iples and approaches 60 Summary of Performance in 2023 61 Maximum exposure to Credit risk 62 Analysis of ﬁnanc ial instrument by stage 65 Credit quality analysis 69 • Credit quality by client segment 69 Movement in gross exposures and credit impa irment for loans and advances, debt secur it ies, undrawn commitments and ﬁnanc ial guarantees 74 Movement of debt securit ies, alternat ive Tier 1 and other elig ible b ills 77 Credit impa irment charge 81 Problem credit management and provis ion ing 81 • Forborne and other modif ied loans by cl ient segment 81 Credit risk mit igat ion 84 • Collateral 84 • Collateral held on loans and advances 85 • Collateral – Corporate, Commercial and Institut ional Bank ing 87 • Collateral – Consumer, Private and Business Banking 88 • Mortgage loan-to-value ratios by geography 88 • Collateral and other credit enhancements possessed or called upon 89 • Other Credit risk mit igat ion 89 Other portfolio analysis 90 • Contractual maturity analysis of loans and advances by client segment 90 • Credit quality by industry 92 • Debt securit ies and other el ig ible b ills 96 IFRS 9 expected credit loss methodology 98 Traded risk 107 Market Risk changes 107 Counterparty Credit risk 109 Derivat ive ﬁnancial instruments Credit risk mit igat ion 110 Liqu id ity and Funding risk 110 Liqu id ity and Funding risk metrics 110 Liqu id ity analysis of the Group’s balance sheet 112 Interest Rate risk in the Banking Book 118 Operational and Technology risk 119 Operational and Technology risk proﬁle 119 Operational and Technology risk events and losses 120 Other princ ipal r isks 120 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 59 Risk Index Annual Report and Accounts Risk management approach Risk Management Framework 121 Princ ipal R isks 126 Capital Capital Summary 144 Capital ratios 144 Capital base 145 Risk-weighted asset 145 Leverage ratio 145 Risk review and Capital review continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 60 Credit Risk Basis of preparation Unless otherwise stated the balance sheet and income statement informat ion presented w ith in th is section is based on the Group’s management view. This is princ ipally the locat ion from which a client relationsh ip is managed, which may differ from where it is ﬁnanc ially booked and may be shared between bus inesses and/or regions. This view reﬂects how the client segments and regions are managed internally. Loans and advances to customers and banks held at amortised cost in this Risk proﬁle section include reverse repurchase agreement balances held at amortised cost, per Note 15 Reverse repurchase and repurchase agreements includ ing other sim ilar secured lend ing and borrowing. Credit risk overview Credit Risk is the potential for loss due to the failure of a counterparty to meet its obligat ions to pay the Group. Cred it exposures arise from both the banking and trading books. Impairment model IFRS 9 requires an impa irment model that requ ires the recognit ion of expected cred it losses (ECL) on all ﬁnanc ial debt instruments held at amortised cost, fair value through other comprehensive income (FVOCI), undrawn loan commitments and ﬁnancial guarantees. Staging of ﬁnanc ial instruments Financ ial instruments that are not already credit-impa ired are or ig inated into stage 1 and a 12-month expected credit loss provis ion is recognised. Instruments will remain in stage 1 until they are repaid, unless they experience sign iﬁcant cred it deteriorat ion (stage 2) or they become credit-impa ired (stage 3). Instruments will transfer to stage 2 and a lifet ime expected cred it loss provis ion recogn ised when there has been a sign iﬁcant change in the credit risk compared to what was expected at orig inat ion. The framework used to determine a sign iﬁcant increase in credit risk is set out below. Stage 1 Stage 2 Stage 3 • 12-month ECL • Performing • Lifet ime expected cred it loss • Performing but has exhib ited s ign iﬁcant increase in credit risk (SICR) • Credit-impa ired • Non-performing IFRS 9 expected credit loss princ iples and approaches The main methodology princ iples and approach adopted by the Group are set out in the following table. Title Supplementary informat ion Page Approach to determin ing expected credit losses IFRS 9 methodology Determin ing l ifet ime expected cred it loss for revolving products 98 Incorporation of forward- looking informat ion Incorporation of forward-looking informat ion Forecast of key macroeconomic variables underlying the expected credit loss calculation Management overlay and sensit iv ity to macroeconomic variables 99 Sign iﬁcant increase in Credit Risk (SICR) Quantitat ive cr iter ia Sign iﬁcant increase in credit risk thresholds Specif ic qual itat ive and quant itat ive cr iter ia per segment: Corporate, Commercial & Institut ional Bank ing (CCIB) clients Consumer and Business Banking clients Private Banking clients Debt securit ies 103 Assessment of credit- impa ired ﬁnancial assets Consumer and Business Banking clients CCIB and Private Banking clients 105 Transfers between stages Movement in loan exposures and expected credit losses 74 Modif ied ﬁnancial assets Forbearance and other modif ied loans 81 Governance and applicat ion of expert credit judgement in respect of expected credit losses PLC Group Credit Model Assessment Committee IFRS 9 Impairment Committee 106 Risk proﬁle Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 61 Risk proﬁle continued Summary of performance in 2023 Loans and Advances 92 per cent (31 December 2022: 91 per cent) of the Group’s gross loans and advances to customers remain in stage 1 at $146.7 bill ion (31 December 2022: $148.2 b ill ion) reﬂect ing our continued focus on high-quality orig inat ion. Stage 1 loans decreased by $1.5 bill ion to $146.7 b ill ion (31 December 2022: $148.2 b ill ion). Stage 1 balances for Corporate, Commercial and Institut ional Bank ing (CCIB) decreased by $1.5 bill ion to $77.5 b ill ion (31 December 2022: $79 b ill ion) due to exposure reductions mainly in the ﬁnanc ing, insurance and non-banking sectors. This was offset by a $1.3 bill ion increase in Consumer and Private Business Banking (CPBB) Credit Cards and Secured Wealth products. Stage 1 cover ratio remained stable at 0.1 per cent (31 December 2022: 0.2 per cent). Stage 2 gross loans and advances to customers were broadly stable at $7.7 bill ion (31 December 2022: $7.7 b ill ion). Th is was due to $1.1 bill ion of CCIB exposure reduct ions in the Transport, Telecom and Util it ies and Commercial Real Estate (CRE) sector, which was offset by a $1 bill ion increase in Central and other items. CPBB exposures were broadly stable at $1 bill ion (31 December 2022: $1 bill ion). H igher risk exposure net increase of $1 bill ion from Central and other items, was due to a short-term exposure to a Central Bank in the Africa and Middle East region, which was partly offset by exposure reductions and transfers to stage 3 in CCIB. Stage 2 cover ratio increased by 0.1 per cent to 2.5 per cent (31 December 2022: 2.4 per cent). CCIB cover ratio increased by 0.3 per cent to 2.3 per cent (31 December 2022: 2 per cent) due to higher coverage on 'higher risk accounts. CPBB stage 2 cover ratio was broadly stable at 5.9 per cent (31 December 2022: 5.4 per cent). Stage 3 loans decreased by $1 bill ion to $5.2 b ill ion (31 December 2022: $6.2 b ill ion) pr imar ily in the CCIB segment, which was driven by repayments and write offs. The CCIB stage 3 cover ratio increased by 1 per cent to 61 per cent (31 December 2022: 60 per cent) due to exposure reductions. CPBB stage 3 loans was stable at $1.1 bill ion (31 December 2022: $1.1 b ill ion) and the cover ratio also remained stable at 60 per cent (31 December 2022: 60 per cent). Ventures stage 3 exposures increased by $2 mill ion to $2 mill ion (31 December 2022: n il) due to portfolio growth in Trust Bank Singapore. The cover ratio after collateral decreased to 73 per cent (31 December 2022: 74 per cent) > Further details can be found in the ‘Analysis of ﬁnanc ial instruments by stage’ section in pages 65 to 68; ‘Credit quality by client segment’ section in pages 69 to 73; ‘Credit quality by industry’ section in pages 92 to 95. Stage 3 cover ratio is also disclosed in the ‘Stage 3 cover ratio’ section in page 83. Maximum exposure The Group’s on-balance sheet maximum exposure to Credit Risk decreased by $8 bill ion to $517 b ill ion (31 December 2022: $525 bill ion). Cash at central bank increased by $13.7 bill ion to $64 b ill ion (31 December 2022: $51 b ill ion) due to depos its placed with the US Federal Reserve. Fair Value through proﬁt and loss increased by $15 bill ion to $96 b ill ion (31 December 2022: $81 bill ion), largely due to $9 b ill ion increase in debt securit ies and $6 b ill ion increase in reverse repos. This was partly offset by a $12 bill ion decrease in Derivat ive ﬁnancial instruments to $52.6 bill ion, a $4.6 b ill ion decrease in loans to banks to $22.8 bill ion, and a $2 b ill ion decrease in loans and advances to customers to $156 bill ion (31 December 2022: $158 b ill ion). Out of the $2 bill ion decrease in loans and advances to customers, a $1.8 bill ion reduct ion relates to reverse repos. Amortised cost debt securit ies decreased by $10.4 b ill ion to $102 b ill ion (31 December 2022: $112 b ill ion) as part of the Group’s l iqu id ity management actions. Other assets decreased by $6.5 bill ion to $21 b ill ion (31 December 2022: $27 b ill ion). Off-balance sheet instruments increased by $23 bill ion to $179 b ill ion (31 December 2022: $156 b ill ion), wh ich was driven by new businesses. > Further details can be found in the ‘Maximum exposure to Credit Risk’ section in pages 62 to 64. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 62 Risk proﬁle continued Credit impa irment charges The ongoing credit impa irment was a net release of $46 m ill ion (31 December 2022: release of $25 m ill ion). For CCIB, stage 1 and 2 impa irment charges increased by $73 mill ion to $2 m ill ion (31 December 2022: release of $71 m ill ion), as 2022 included a $94 mill ion full release of COVID-19 overlay, wh ich was partly offset by Pakistan Sovereign downgrades. In 2023, $3 mill ion impa irment charges was due to portfol io movements includ ing impa irments on Pak istan Sovereign clients, which was offset by a $10 mill ion release from model methodology updates. CCIB stage 3 impa irment charges decreased by $40 m ill ion to a net release of $155 m ill ion (31 December 2022: $115 m ill ion). This was largely driven by sign iﬁcant releases in the Africa and Middle East region, which was partly offset by $12 mill ion net increase in Niger ia due to fore ign exchange availab il ity. For CPBB, stage 1 and 2 impa irment charges increased by $70 mill ion to $51 m ill ion (31 December 2022: release of $19 m ill ion). This was due to normal ﬂows largely from unsecured portfolios in India, Malaysia and Singapore. This was partly offset by a $21 mill ion full release of COVID-19 overlay, and $18 m ill ion release from non-l inear ity post model adjustment. 2022 included $93 mill ion of COVID-19 and operat ing environment overlay releases, as well as releases from model methodology updates largely in the Asia region. CPBB stage 3 impa irment charges increased by $40 mill ion to $77 m ill ion (31 December 2022: $37 m ill ion) as 2023 included charge offs primar ily dr iven by India, Malaysia and Singapore, and higher bankruptcy related write-offs. For Ventures, stage 1 and 2 impa irment charges increased by $5 mill ion to $7 m ill ion (31 December 2022: $2 m ill ion). Stage 3 impa irment charge increased by $6 mill ion to $6 m ill ion (31 December 2022: n il), due to portfolio growth in Trust Bank Singapore. For Central and other items, stage 1 and 2 impa irment charges decreased by $146 m ill ion to a net release of $42 m ill ion (31 December 2022: $104 mill ion), as 2022 included Pakistan Sovereign CG12 downgrades. In 2023, the decrease was driven by exposure reductions and shortening tenors of balances to the Pakistan Sovereign, which was partly offset by a $8 mill ion charge due to Kenya Sovereign downgrade. Central and other items stage 3 impa irment charge decreased by $29 m ill ion to $8 m ill ion (31 December 2022: $37 m ill ion), as Sri Lanka and Ghana exposures were downgraded to Stage 3 in 2022. > Further details can be found in the ‘Credit impa irment charge’ sect ion in page 81. Management adjustments Given the evolving nature of risks in the China commercial real estate sector, a management overlay of $11 mill ion (31 December 2022: nil) has been taken in CCIB. Overlays of $5 mill ion (31 December 2022: $16 m ill ion) have been appl ied in CPBB to capture macroeconomic environment challenges caused by sovereign defaults. An overlay of $17 mill ion (31 December 2022: nil) was also applied in Central and other items, due to a temporary market dislocat ion in Africa and Middle East. > Further details can be found in the ‘Judgemental management overlays’ section in page 101. Maximum exposure to Credit risk (audited) The table below presents the Group’s maximum exposure to Credit risk for its on-balance sheet and off-balance sheet ﬁnancial instruments as at 31 December 2023, before and after taking into account any collateral held or other Credit risk mit igat ion. > Further details can be found in the ‘Summary of performance in 2023’ in pages 61 to 62. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 63 Risk proﬁle continued Group 2023 2022 Maximum exposure $mill ion Credit risk management Net Exposure $mill ion Maximum exposure $mill ion Credit risk management Net exposure $mill ion Collateral 8 $mill ion Master netting agreements $mill ion Collateral 8 $mill ion Master netting agreements $mill ion On-balance sheet Cash and balances at central banks 64,198 64,198 50,531 50,531 Loans and advances to banks 1 22,803 1,653 21,150 27,383 878 26,505 of which – reverse repurchase agreements and other sim ilar secured lending 7 1,653 1,653 – 878 878 – Loans and advances to customers 1 156,143 51,985 104,158 158,126 52,699 105,427 of which – reverse repurchase agreements and other sim ilar secured lending 7 13,827 13,827 – 15,586 15,586 – Investment securit ies – Debt secur it ies and other elig ible b ills 2 102,040 102,040 112,425 112,425 Fair value through proﬁt or loss 3, 7 95,658 68,149 – 27,509 80,668 62,333 – 18,335 Loans and advances to banks 2,265 2,265 859 859 Loans and advances to customers 3,188 3,188 4,065 4,065 Reverse repurchase agreements and other sim ilar lend ing 7 68,149 68,149 – 62,333 62,333 – Investment securit ies – Debt secur it ies and other elig ible b ills 2 22,056 22,056 13,411 13,411 Derivat ive ﬁnancial instruments 4, 7 52,554 7,960 43,684 910 65,050 8,304 52,827 3,919 Accrued income 1,768 1,768 1,858 1,858 Assets held for sale 9 693 693 1,388 1,388 Other assets 5 20,714 20,714 27,210 27,210 Total balance sheet 516,571 129,747 43,684 343,140 524,639 124,214 52,827 347,598 Off-balance sheet 6 Undrawn Commitments 117,899 2,296 115,603 107,885 2,250 105,635 Financ ial Guarantees and other equivalents 60,707 2,139 58,568 47,799 2,229 45,570 Total off-balance sheet 178,606 4,435 – 174,171 155,684 4,479 – 151,205 Total 695,177 134,182 43,684 517,311 680,323 128,693 52,827 498,803 1 Net of credit impa irment. An analys is of credit quality is set out in the credit quality analysis section (page 69). Further details of collateral held by client segment and stage are set out in the collateral analysis section (page 84) 2 Excludes equity and other investments of $434 mill ion (31 December 2022: $603 m ill ion). Further deta ils are set out in Note 12 Financ ial instruments 3 Excludes equity and other investments of $1,442 mill ion (31 December 2022: $1,886 m ill ion). Further deta ils are set out in Note 12 Financ ial instruments 4 The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negat ive mark-to-market values of applicable derivat ive transact ions 5 Other assets include cash collateral, and acceptances, in addit ion to unsettled trades and other ﬁnancial assets 6 Excludes ECL allowances which are reported under Provis ions for l iab il it ies and charges 7 Collateral capped at maximum exposure (over-collateralised) 8 Adjusted for over-collateralisat ion, wh ich has been determined with reference to the drawn and undrawn component as this best reﬂects the effect on the amount aris ing from expected cred it losses. Loans and advances to customers collateral now re-presented between on and off -balance sheet as it also includes guarantees 9 The amount is after ECL. Further details are set out in Note 20 Assets held for sale and associated liab il it ies Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 64 Risk proﬁle continued Company 2023 2022 Maximum exposure $mill ion Credit risk management Net Exposure $mill ion Maximum exposure $mill ion Credit risk management Net exposure $mill ion Collateral 8 $mill ion Master netting agreements $mill ion Collateral 8 $mill ion Master netting agreements $mill ion On-balance sheet Cash and balances at central banks 52,758 52,758 38,867 38,867 Loans and advances to banks 1 10,135 554 9,581 18,548 184 18,364 of which – reverse repurchase agreements and other sim ilar secured lending 7 554 554 – 184 184 – Loans and advances to customers 1 75,883 23,157 52,726 80,611 26,889 53,722 of which – reverse repurchase agreements and other sim ilar secured lending 7 12,212 12,212 – 15,071 15,071 – Investment securit ies – Debt secur it ies and other elig ible b ills 2 92,362 92,362 95,049 95,049 Fair value through proﬁt or loss 3, 7 85,097 64,804 – 20,293 74,051 59,057 – 14,994 Loans and advances to banks 2,244 2,244 837 837 Loans and advances to customers 2,622 2,622 3,196 3,196 Reverse repurchase agreements and other sim ilar lend ing 7 64,804 64,804 – 59,057 59,057 – Investment securit ies – Debt secur it ies and other elig ible b ills 2 15,427 15,427 10,961 10,961 Derivat ive ﬁnancial instruments 4, 7 53,221 7,289 45,556 376 65,481 7,710 53,810 3,961 Accrued income 1,151 1,151 1,342 1,342 Assets held for sale 9 52 52 544 544 Other assets 5 16,990 16,990 23,625 23,625 Total balance sheet 387,649 95,804 45,556 246,289 398,118 93,840 53,810 250,468 Off-balance sheet 6 Undrawn Commitments 69,007 1,387 67,620 64,005 1,373 62,632 Financ ial Guarantees and other equivalents 49,586 1,836 47,750 37,890 1,965 35,925 Total off-balance sheet 118,593 3,223 – 115,370 101,895 3,338 – 98,557 Total 506,242 99,027 45,556 361,659 500,013 97,178 53,810 349,025 1 Net of credit impa irment. An analys is of credit quality is set out in the credit quality analysis section (page 69). Further details of collateral held by client segment and stage are set out in the collateral analysis section (page 84) 2 Excludes equity and other investments of $409 mill ion (31 December 2022: $323 m ill ion). Further deta ils are set out in Note 12 Financ ial instruments 3 Excludes equity and other investments of $1,315 mill ion (31 December 2022: $1,741 m ill ion). Further deta ils are set out in Note 12 Financ ial instruments 4 The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negat ive mark-to-market values of applicable derivat ive transact ions 5 Other assets include cash collateral, and acceptances, in addit ion to unsettled trades and other ﬁnancial assets 6 Excludes ECL allowances which are reported under Provis ions for l iab il it ies and charges 7 Collateral capped at maximum exposure (over-collateralised) 8 Adjusted for over-collateralisat ion, wh ich has been determined with reference to the drawn and undrawn component as this best reﬂects the effect on the amount aris ing from expected cred it losses. Loans and advances to customers collateral now re-presented between on and off -balance sheet as it also includes guarantees 9 The amount is after ECL. Further details are set out in Note 20 Assets held for sale and associated liab il it ies Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 65 Risk proﬁle continued Analysis of ﬁnanc ial instrument by stage (audited) This table shows ﬁnanc ial instruments and off-balance sheet commitments by stage, along with the total credit impa irment loss provis ion aga inst each class of ﬁnanc ial instrument. > Further details can be found in the ‘Summary of performance in 2023’ in pages 61 to 62. Group 2023 Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Cash and balances at central banks 63,606 – 63,606 207 (7) 200 404 (12) 392 64,217 (19) 64,198 Loans and advances to banks (amortised cost) 22,210 (3) 22,207 537 (9) 528 74 (6) 68 22,821 (18) 22,803 Loans and advances to customers (amortised cost) 146,718 (198) 146,520 7,657 (193) 7,464 5,177 (3,018) 2,159 159,552 (3,409) 156,143 Debt securit ies and other elig ible bills 5 100,092 (26) 1,861 (34) 165 (61) 102,118 (121) Amortised cost 39,774 (19) 39,755 103 (2) 101 121 (57) 64 39,998 (78) 39,920 FVOCI 2 60,318 (7) 1,758 (32) 44 (4) 62,120 (43) Accrued income (amortised cost) 4 1,768 – 1,768 – – – – – – 1,768 – 1,768 Assets held for sale 654 (34) 620 76 (4) 72 1 – 1 731 (38) 693 Other assets 20,714 – 20,714 – – – 3 (3) – 20,717 (3) 20,714 Undrawn commitments 3 113,301 (20) 4,596 (27) 2 – 117,899 (47) Financ ial guarantees, trade credits and irrevocable letter of credits 3 57,505 (8) 2,530 (13) 672 (112) 60,707 (133) Total 526,568 (289) 17,464 (287) 6,498 (3,212) 550,530 (3,788) 1 Gross carrying amount for off-balance sheet refers to notional values 2 These instruments are held at fair value on the balance sheet. The ECL provis ion in respect of debt securit ies measured at FVOCI is held with in the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a ﬁnanc ial l iab il ity and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liab il ity provis ions to the extent that the drawn and undrawn components of loan exposures can be separately ident iﬁed. Otherw ise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $80 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13 mill ion) Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 66 Risk proﬁle continued 2022 Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Cash and balances at central banks 49,911 – 49,911 333 (8) 325 295 – 295 50,539 (8) 50,531 Loans and advances to banks (amortised cost) 27,084 (7) 27,077 275 (3) 272 35 (1) 34 27,394 (11) 27,383 Loans and advances to customers (amortised cost) 148,213 (268) 147,945 7,743 (187) 7,556 6,202 (3,577) 2,625 162,158 (4,032) 158,126 Debt securit ies and other elig ible bills 5 106,886 (20) 5,455 (90) 144 (106) 112,485 (216) Amortised cost 41,512 (7) 41,505 271 (2) 269 78 (51) 27 41,861 (60) 41,801 FVOCI 2 65,374 (13) 5,184 (88) 66 (55) 70,624 (156) Accrued income (amortised cost) 4 1,858 – 1,858 – – – – – – 1,858 – 1,858 Assets held for sale 4 1,083 (6) 1,077 262 (4) 258 120 (67) 53 1,465 (77) 1,388 Other assets 27,213 (3) 27,210 – – – 3 (3) – 27,216 (6) 27,210 Undrawn commitments 3 103,644 (26) 4,113 (42) 128 – 107,885 (68) Financ ial guarantees, trade credits and irrevocable letter of credits 3 44,252 (9) 2,883 (27) 664 (147) 47,799 (183) Total 510,144 (339) 21,064 (361) 7,591 (3,901) 538,799 (4,601) 1 Gross carrying amount for off-balance sheet refers to notional values 2 These instruments are held at fair value on the balance sheet. The ECL provis ion in respect of debt securit ies measured at FVOCI is held with in the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a ﬁnanc ial l iab il ity and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liab il ity provis ions to the extent that the drawn and undrawn components of loan exposures can be separately ident iﬁed. Otherw ise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $28 mill ion or ig inated cred it-impa ired debt secur it ies and $13 m ill ion impa irment Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 67 Risk proﬁle continued Company 2023 Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Cash and balances at central banks 52,756 – 52,756 2 – 2 – – – 52,758 – 52,758 Loans and advances to banks (amortised cost) 9,849 (1) 9,848 286 (1) 285 6 (4) 2 10,141 (6) 10,135 Loans and advances to customers (amortised cost) 70,343 (89) 70,254 4,077 (80) 3,997 3,761 (2,129) 1,632 78,181 (2,298) 75,883 Debt securit ies and other elig ible bills 5 92,038 (23) 315 – 76 (56) 92,429 (79) Amortised cost 38,053 (11) 38,042 – – – 76 (56) 20 38,129 (67) 38,062 FVOCI 2 53,985 (11) 315 – – – 54,300 (11) Accrued income (amortised cost) 4 1,151 – 1,151 – – – – – – 1,151 – 1,151 Assets held for sale 52 – 52 – – – – – – 52 – 52 Other assets 16,990 – 16,990 – – – – – – 16,990 – 16,990 Undrawn commitments 3 65,255 (15) 3,752 (18) – – 69,007 (33) Financ ial guarantees, trade credits and irrevocable letter of credits 3 47,186 (4) 1,886 (8) 514 (87) 49,586 (99) Total 6 355,620 (132) 10,318 (107) 4,357 (2,276) 370,295 (2,515) 1 Gross carrying amount for off-balance sheet refers to notional values 2 These instruments are held at fair value on the balance sheet. The ECL provis ion in respect of debt securit ies measured at FVOCI is held with in the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a ﬁnanc ial l iab il ity and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liab il ity provis ions to the extent that the drawn and undrawn components of loan exposures can be separately ident iﬁed. Otherw ise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $25 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13 mill ion) 6 Excludes 'Amounts due from subsid iary undertak ings and other related parties' of $10,053 mill ion. The amounts are held w ith in stage 1 and rated as 'strong' at 31 December 2023 and is net of an expected credit loss of $20.4 mill ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 68 Risk proﬁle continued 2022 Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa irment $mill ion Net carrying value $mill ion Cash and balances at central banks 38,847 – 38,847 10 – 10 10 – 10 38,867 – 38,867 Loans and advances to banks (amortised cost) 18,423 (3) 18,420 128 (1) 127 1 – 1 18,552 (4) 18,548 Loans and advances to customers (amortised cost) 73,476 (148) 73,328 5,296 (77) 5,219 4,685 (2,621) 2,064 83,457 (2,846) 80,611 Debt securit ies and other elig ible bills 5 93,243 (20) 1,785 (1) 78 (50) 95,106 (71) Amortised cost 38,011 (6) 38,005 10 (1) 9 78 (50) 28 38,099 (57) 38,042 FVOCI 2 55,232 (14) 1,775 – – – 57,007 (14) Accrued income (amortised cost) 4 1,342 – 1,342 – – – – – – 1,342 – 1,342 Assets held for sale 4 412 (1) 411 132 (2) 130 30 (27) 3 574 (30) 544 Other assets 23,625 – 23,625 – – – – – – 23,625 – 23,625 Undrawn commitments 3 60,727 (18) 3,150 (24) 128 – 64,005 (42) Financ ial guarantees, trade credits and irrevocable letter of credits 3 34,894 (6) 2,453 (17) 543 (118) 37,890 (141) Total 6 344,989 (196) 12,954 (122) 5,475 (2,816) 363,418 (3,134) 1 Gross carrying amount for off-balance sheet refers to notional values 2 These instruments are held at fair value on the balance sheet. The ECL provis ion in respect of debt securit ies measured at FVOCI is held with in the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a ﬁnanc ial l iab il ity and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liab il ity provis ions to the extent that the drawn and undrawn components of loan exposures can be separately ident iﬁed. Otherw ise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $28 mill ion or ig inated cred it-impa ired debt secur it ies and $13 m ill ion impa irment 6 Excludes 'Amounts due from subsid iary undertak ings and other related parties' of $13,214 mill ion. The amounts are held w ith in stage 1 and rated as 'strong' at 31 December 2022 and is net of an expected credit loss of $5 mill ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 69 Risk proﬁle continued Credit quality analysis (audited) Credit quality by client segment For the CCIB portfolios, exposures are analysed by credit grade (CG), which plays a central role in the quality assessment and monitor ing of r isk. All loans are assigned a CG, which is reviewed period ically and amended in light of changes in the borrower’s circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and stage 2 (performing) clients or accounts, while CGs 13 and 14 are assigned to stage 3 (credit-impa ired) cl ients. The mapping of credit quality is as follows. Mapping of credit quality The Group uses the following internal risk mapping to determine the credit quality for loans. Credit quality descript ion Corporate, Commercial & Institut ional Bank ing Private Banking 1 Consumer and Business Banking 5 Internal grade mapping S&P external ratings equivalent Regulatory PD range (%) Internal ratings Number of days past due Strong 1A to 5B AAA/AA+ to BBB-/ BB+ 2 0 to 0.425 Class I and Class IV Current loans (no past dues nor impa ired) Satisfactory 6A to 11C BB+/BB to B-/CCC+ 3 0.426 to 15.75 Class II and Class III Loans past due till 29 days Higher risk Grade 12 CCC+/C 4 15.751 to 99.999 Stressed Assets Group (SAG) Managed Past due loans 30 days and over till 90 days 1 For Private Banking, classes of risk represent the type of collateral held. Class I represents facil it ies with liqu id collateral, such as cash and marketable secur it ies. Class II represents unsecured/partially secured facil it ies and those with ill iqu id collateral, such as equity in private enterprises. Class III represents facil it ies with resident ial or Commercial real estate collateral. Class IV covers margin trading facil it ies 2 Banks’ rating: AAA/AA+ to BB+. Sovereign’s rating: AAA to BB+ 3 Banks’ rating: BB to “CCC+ to C”. Sovereigns’ rating: BB+/BB to B-/CCC+ 4 Banks’ rating: CCC+ to C. Sovereigns’ rating: CCC+ to “CCC+ to C” 5 Medium enterprise clients with in Bus iness Banking are managed using the same internal credit grades as CCIB The table below sets out the gross loans and advances held at amortised cost, expected credit loss provis ions and expected credit loss coverage by business segment and stage. Expected credit loss coverage represents the expected credit loss reported for each segment and stage as a proportion of the gross loan balance for each segment and stage. > Further details can be found in the ‘Summary of performance in 2023’ in pages 61 to 62. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 70 Risk proﬁle continued Loans and advances by client segment (audited) Group Amortised cost 2023 Banks $mill ion Customers Undrawn commitments $mill ion Financ ial Guarantees $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & other items $mill ion Customer Total $mill ion Stage 1 22,210 77,513 46,378 235 22,592 146,718 113,301 57,505 • Strong 14,756 55,407 42,362 232 22,254 120,255 104,198 37,642 • Satisfactory 7,454 22,106 4,016 3 338 26,463 9,103 19,863 Stage 2 537 5,696 994 2 965 7,657 4,596 2,530 • Strong 53 862 659 – – 1,521 947 801 • Satisfactory 211 3,955 100 – – 4,055 3,168 1,472 • Higher risk 273 879 235 2 965 2,081 481 257 Of which (stage 2): • Less than 30 days past due – 78 100 – – 178 – – • More than 30 days past due – 10 235 2 – 247 – – Stage 3, credit-impa ired ﬁnancial assets 74 3,887 1,064 2 224 5,177 2 672 Gross balance¹ 22,821 87,096 48,436 239 23,781 159,552 117,899 60,707 Stage 1 (3) (68) (123) (7) – (198) (20) (8) • Strong (2) (26) (80) (7) – (113) (8) (1) • Satisfactory (1) (42) (43) – – (85) (12) (7) Stage 2 (9) (133) (59) – (1) (193) (27) (13) • Strong – (11) (22) – – (33) (3) – • Satisfactory (2) (64) (7) – – (71) (15) (6) • Higher risk (7) (58) (30) – (1) (89) (9) (7) Of which (stage 2): • Less than 30 days past due – (1) (7) – – (8) – – • More than 30 days past due – (1) (30) – – (31) – – Stage 3, credit-impa ired ﬁnancial assets (6) (2,362) (639) (2) (15) (3,018) – (112) Total credit impa irment (18) (2,563) (821) (9) (16) (3,409) (47) (133) Net carrying value 22,803 84,533 47,615 230 23,765 156,143 Stage 1 0.0% 0.1% 0.3% 3.0% 0.0% 0.1% 0.0% 0.0% • Strong 0.0% 0.0% 0.2% 3.0% 0.0% 0.1% 0.0% 0.0% • Satisfactory 0.0% 0.2% 1.1% 0.0% 0.0% 0.3% 0.1% 0.0% Stage 2 1.7% 2.3% 5.9% 0.0% 0.1% 2.5% 0.6% 0.5% • Strong 0.0% 1.3% 3.3% 0.0% 0.0% 2.2% 0.3% 0.0% • Satisfactory 0.9% 1.6% 7.0% 0.0% 0.0% 1.8% 0.5% 0.4% • Higher risk 2.6% 6.6% 12.8% 0.0% 0.1% 4.3% 1.9% 2.7% Of which (stage 2): • Less than 30 days past due 0.0% 1.3% 7.0% 0.0% 0.0% 4.5% 0.0% 0.0% • More than 30 days past due 0.0% 10.0% 12.8% 0.0% 0.0% 12.6% 0.0% 0.0% Stage 3, credit-impa ired ﬁnancial assets 8.1% 60.8% 60.1% 100.0% 6.7% 58.3% 0.0% 16.7% Cover ratio 0.1% 2.9% 1.7% 3.8% 0.1% 2.1% 0.0% 0.2% Fair value through proﬁt or loss Performing 28,318 45,266 – – – 45,266 – – • Strong 23,954 27,667 – – – 27,667 – – • Satisfactory 4,364 17,536 – – – 17,536 – – • Higher risk – 63 – – – 63 – – Defaulted (CG13-14) – 18 – – – 18 – – Gross balance (FVTPL) 2 28,318 45,284 – – – 45,284 – – Net carrying value (incl FVTPL) 51,121 129,817 47,615 230 23,765 201,427 – – 1 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $13,827 mill ion under Customers and of $1,653 m ill ion under Banks, held at amortised cost 2 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $42,096 mill ion under Customers and of $26,053 m ill ion under Banks, held at fair value through proﬁt or loss Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 71 Risk proﬁle continued Group Amortised cost 2022 Banks $mill ion Customers Undrawn commitments $mill ion Financ ial Guarantees $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & other items $mill ion Customer Total $mill ion Stage 1 27,084 78,983 44,825 65 24,340 148,213 103,644 44,252 • Strong 16,722 56,167 41,683 63 24,340 122,253 92,418 29,973 • Satisfactory 10,362 22,816 3,142 2 – 25,960 11,226 14,279 Stage 2 275 6,762 980 1 – 7,743 4,113 2,883 • Strong 86 1,070 691 – – 1,761 986 501 • Satisfactory 119 4,480 73 – – 4,553 2,487 1,977 • Higher risk 70 1,212 216 1 – 1,429 640 405 Of which (stage 2): • Less than 30 days past due 5 100 75 – – 175 – – • More than 30 days past due 6 22 217 1 – 240 – – Stage 3, credit-impa ired ﬁnancial assets 35 4,859 1,095 – 248 6,202 128 664 Gross balance 1 27,394 90,604 46,900 66 24,588 162,158 107,885 47,799 Stage 1 (7) (87) (179) (2) – (268) (26) (9) • Strong (2) (29) (117) (2) – (148) (16) (2) • Satisfactory (5) (58) (62) – – (120) (10) (7) Stage 2 (3) (134) (53) – – (187) (42) (27) • Strong – (11) (21) – – (32) (2) – • Satisfactory (2) (74) (6) – – (80) (35) (14) • Higher risk (1) (49) (26) – – (75) (5) (13) Of which (stage 2): • Less than 30 days past due – (1) (11) – – (12) – – • More than 30 days past due – (1) (26) – – (27) – – Stage 3, credit-impa ired ﬁnancial assets (1) (2,904) (655) – (18) (3,577) – (147) Total credit impa irment (11) (3,125) (887) (2) (18) (4,032) (68) (183) Net carrying value 27,383 87,479 46,013 65 24,570 158,126 Stage 1 0.0% 0.1% 0.4% 3.1% 0.0% 0.2% 0.0% 0.0% • Strong 0.0% 0.1% 0.3% 3.2% 0.0% 0.1% 0.0% 0.0% • Satisfactory 0.0% 0.3% 2.0% 0.0% 0.0% 0.5% 0.1% 0.0% Stage 2 1.1% 2.0% 5.4% 0.0% 0.0% 2.4% 1.0% 0.9% • Strong 0.0% 1.0% 3.0% 0.0% 0.0% 1.8% 0.2% 0.0% • Satisfactory 1.7% 1.7% 8.2% 0.0% 0.0% 1.8% 1.4% 0.7% • Higher risk 1.4% 4.0% 12.0% 0.0% 0.0% 5.2% 0.8% 3.2% Of which (stage 2): • Less than 30 days past due 0.0% 1.0% 14.7% 0.0% 0.0% 6.9% 0.0% 0.0% • More than 30 days past due 0.0% 4.5% 12.0% 0.0% 0.0% 11.3% 0.0% 0.0% Stage 3, credit-impa ired ﬁnancial assets 2.9% 59.8% 59.8% 0.0% 7.3% 57.7% 0.0% 22.1% Cover ratio 0.0% 3.4% 1.9% 3.0% 0.1% 2.5% 0.1% 0.4% Fair value through proﬁt or loss Performing 24,135 40,562 – – 2,557 43,119 – – • Strong 20,656 33,256 – – 2,409 35,665 – – • Satisfactory 3,479 7,306 – – 148 7,454 – – • Higher risk – – – – – – – – Defaulted (CG13-14) – 3 – – – 3 – – Gross balance (FVTPL) 2 24,135 40,565 – – 2,557 43,122 – – Net carrying value (incl FVTPL) 51,518 128,044 46,013 64 27,127 201,248 – – 1 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $15,586 mill ion under Customers and of $878 m ill ion under Banks, held at amortised cost 2 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $39,057 mill ion under Customers and of $23,276 m ill ion under Banks, held at fair value through proﬁt and loss. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 72 Risk proﬁle continued Loans and advances by client segment (audited) Company Amortised cost 2023 Banks $mill ion Customers Undrawn commitments $mill ion Financ ial Guarantees $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Central & other items $mill ion Customer Total $mill ion Stage 1 9,849 57,077 12,096 1,170 70,343 65,255 47,186 • Strong 5,987 42,254 9,812 867 52,933 58,451 30,160 • Satisfactory 3,862 14,823 2,284 303 17,410 6,804 17,026 Stage 2 286 3,819 258 – 4,077 3,752 1,886 • Strong 54 437 119 – 556 700 679 • Satisfactory 201 2,954 50 – 3,004 2,690 1,098 • Higher risk 31 428 89 – 517 362 109 Of which (stage 2): • Less than 30 days past due – 69 50 – 119 – – • More than 30 days past due – 8 89 – 97 – – Stage 3, credit-impa ired ﬁnancial assets 6 2,907 630 224 3,761 – 514 Gross balance¹ 10,141 63,803 12,984 1,394 78,181 69,007 49,586 Stage 1 (1) (35) (54) – (89) (15) (4) • Strong (1) (17) (35) – (52) (6) – • Satisfactory – (18) (19) – (37) (9) (4) Stage 2 (1) (52) (28) – (80) (18) (8) • Strong (1) (3) (3) – (6) (2) – • Satisfactory – (29) (2) – (31) (11) (6) • Higher risk – (20) (23) – (43) (5) (2) Of which (stage 2): • Less than 30 days past due – – (2) – (2) – – • More than 30 days past due – (1) (23) – (24) – – Stage 3, credit-impa ired ﬁnancial assets (4) (1,715) (399) (15) (2,129) – (87) Total credit impa irment (6) (1,802) (481) (15) (2,298) (33) (99) Net carrying value 10,135 62,001 12,503 1,379 75,883 Stage 1 0.0% 0.1% 0.4% 0.0% 0.1% 0.0% 0.0% • Strong 0.0% 0.0% 0.4% 0.0% 0.1% 0.0% 0.0% • Satisfactory 0.0% 0.1% 0.8% 0.0% 0.2% 0.1% 0.0% Stage 2 0.3% 1.4% 10.9% 0.0% 2.0% 0.5% 0.4% • Strong 1.9% 0.7% 2.5% 0.0% 1.1% 0.3% 0.0% • Satisfactory 0.0% 1.0% 4.0% 0.0% 1.0% 0.4% 0.5% • Higher risk 0.0% 4.7% 25.8% 0.0% 8.3% 1.4% 1.8% Of which (stage 2): • Less than 30 days past due 0.0% 0.0% 4.0% 0.0% 1.7% 0.0% 0.0% • More than 30 days past due 0.0% 12.5% 25.8% 0.0% 24.7% 0.0% 0.0% Stage 3, credit-impa ired ﬁnancial assets 66.7% 59.0% 63.3% 6.7% 56.6% 0.0% 16.9% Cover ratio 0.1% 2.8% 3.7% 1.1% 2.9% 0.0% 0.2% Fair value through proﬁt or loss Performing 25,655 44,013 – – 44,013 – – • Strong 21,448 26,803 – – 26,803 – – • Satisfactory 4,207 17,210 – – 17,210 – – • Higher risk – – – – – – – Defaulted (CG13-14) – 2 – – 2 – – Gross balance (FVTPL) 2 25,655 44,015 – – 44,015 – – Net carrying value (incl FVTPL) 35,790 106,016 12,503 1,379 119,898 – – 1 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing for $12,212 mill ion under Customers and for $554 m ill ion under Banks, held at amortised cost 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing for $41,393 mill ion under Customers and for $23,411 m ill ion under Banks, held at fair value through proﬁt and loss Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 73 Company Amortised cost 2022 Banks $mill ion Customers Undrawn commitments $mill ion Financ ial Guarantees $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Central & other items $mill ion Customer Total $mill ion Stage 1 18,423 59,561 11,115 2,800 73,476 60,727 34,894 • Strong 10,989 44,313 9,188 2,800 56,301 51,980 23,117 • Satisfactory 7,434 15,248 1,927 – 17,175 8,747 11,777 Stage 2 128 4,852 444 – 5,296 3,150 2,453 • Strong 4 763 294 – 1,057 532 446 • Satisfactory 96 3,392 55 – 3,447 2,023 1,666 • Higher risk 28 697 95 – 792 595 341 Of which (stage 2): • Less than 30 days past due – 85 56 – 141 – – • More than 30 days past due 4 13 95 – 108 – – Stage 3, credit-impa ired ﬁnancial assets 1 3,810 627 248 4,685 128 543 Gross balance¹ 18,552 68,223 12,186 3,048 83,457 64,005 37,890 Stage 1 (3) (51) (97) – (148) (18) (6) • Strong (1) (28) (77) – (105) (10) (1) • Satisfactory (2) (23) (20) – (43) (8) (5) Stage 2 (1) (51) (26) – (77) (24) (17) • Strong – (10) (4) – (14) (2) – • Satisfactory (1) (22) (8) – (30) (18) (9) • Higher risk – (19) (14) – (33) (4) (8) Of which (stage 2): • Less than 30 days past due – (1) (8) – (9) – – • More than 30 days past due – – (14) – (14) – – Stage 3, credit-impa ired ﬁnancial assets – (2,201) (402) (18) (2,621) – (118) Total credit impa irment (4) (2,303) (525) (18) (2,846) (42) (141) Net carrying value 18,548 65,920 11,661 3,030 80,611 Stage 1 0.0% 0.1% 0.9% 0.0% 0.2% 0.0% 0.0% • Strong 0.0% 0.1% 0.8% 0.0% 0.2% 0.0% 0.0% • Satisfactory 0.0% 0.2% 1.0% 0.0% 0.3% 0.1% 0.0% Stage 2 0.8% 1.1% 5.9% 0.0% 1.5% 0.8% 0.7% • Strong 0.0% 1.3% 1.4% 0.0% 1.3% 0.4% 0.0% • Satisfactory 1.0% 0.6% 14.5% 0.0% 0.9% 0.9% 0.5% • Higher risk 0.0% 2.7% 14.7% 0.0% 4.2% 0.7% 2.3% Of which (stage 2): • Less than 30 days past due 0.0% 1.2% 14.3% 0.0% 6.4% 0.0% 0.0% • More than 30 days past due 0.0% 0.0% 14.7% 0.0% 13.0% 0.0% 0.0% Stage 3, credit-impa ired ﬁnancial assets 0.0% 57.8% 64.1% 7.3% 55.9% 0.0% 21.7% Cover ratio 0.0% 3.4% 4.3% 0.6% 3.4% 0.1% 0.4% Fair value through proﬁt or loss Performing 22,036 38,642 – 2,410 41,052 – – • Strong 18,558 32,000 – 2,409 34,409 – – • Satisfactory 3,478 6,642 – 1 6,643 – – • Higher risk – – – – – – – Defaulted (CG13-14) – 2 – – 2 – – Gross balance (FVTPL) 2 22,036 38,644 – 2,410 41,054 – – Net carrying value (incl FVTPL) 40,584 104,564 11,661 5,440 121,665 – – 1 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $15,071 mill ion under Customers and of $184 m ill ion under Banks, held at amortised cost 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $37,858 mill ion under Customers and of $21,199 m ill ion under Banks, held at fair value through proﬁt and loss Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 74 Movement in gross exposures and credit impa irment for loans and advances, debt secur it ies, undrawn commitments and ﬁnanc ial guarantees (aud ited) The tables overleaf set out the movement in gross exposures and credit impa irment by stage in respect of amortised cost loans to banks and customers, undrawn commitments, ﬁnanc ial guarantees and debt secur it ies class if ied at amort ised cost and FVOCI. The tables are presented for the Group and debt securit ies and other el ig ible b ills. Methodology The movement lines with in the tables are an aggregat ion of monthly movements over the year and will therefore reﬂect the accumulation of multiple trades during the year. The credit impa irment charge in the income statement comprises the amounts with in the boxes in the table below less recoveries of amounts previously written off. Discount unwind is reported in net interest income and related to stage 3 ﬁnanc ial instruments only. The approach for determin ing the key l ine items in the tables is set out below. • Transfers – transfers between stages are deemed to occur at the beginn ing of a month based on pr ior month closing balances. • Net remeasurement from stage changes – the remeasurement of credit impa irment prov is ions ar is ing from a change in stage is reported with in the stage that the assets are transferred to. For example, assets transferred into stage 2 are remeasured from a 12 month to a lifet ime expected cred it loss, with the effect of remeasurement reported in stage 2. For stage 3, this represents the in it ial remeasurement from specif ic prov is ions recogn ised on ind iv idual assets transferred into stage 3 in the year. • Net changes in exposures – new business written less repayments in the year. With in stage 1, new bus iness written will attract up to 12 months of expected credit loss charges. Repayments of non-amortis ing loans (pr imar ily w ith in CCIB) w ill have low amounts of expected credit loss provis ions attr ibuted to them, due to the release of provis ions over the term to maturity. In stages 2 and 3, the net change in exposures reﬂect repayments although stage 2 may include new facil it ies where clients are on non-purely precautionary early alert, are a credit grade 12, or when non-investment grade debt securit ies are acqu ired. • Changes in risk parameters – for stages 1 and 2, this reﬂects changes in the PD, LGD and EAD of assets during the year, which includes the impact of releasing provis ions over the term to matur ity. It also includes the effect of changes in forecasts of macroeconomic variables during the year and movements in management overlays. In stage 3, this line represents addit ional spec if ic prov is ions recogn ised on exposures held with in stage 3. • Interest due but not paid – change in contractual amount of interest due in stage 3 ﬁnanc ial instruments but not paid, being the net of accruals, repayments and write-offs, together with the corresponding change in credit impa irment. Changes to ECL models, which incorporates changes to model approaches and methodologies, is not reported as a separate line item as it has an impact over a number of lines and stages. Movements during the year Stage 1 gross exposures increased by $9.7 bill ion to $440 b ill ion (31 December 2022: $430 b ill ion). CCIB exposure increased by $13.7 bill ion to $238 b ill ion (31 December 2022: $224 b ill ion) due to an increase in off-balance sheet exposures from new business. CPBB exposure increased by $3.2 bill ion to $78 b ill ion (31 December 2022: $75 b ill ion). Debt secur it ies decreased by $6.8 bill ion to $100 b ill ion (31 December 2022: $107 b ill ion) due to act ions taken to manage liqu id ity. Stage 1 provis ions decreased by $75 m ill ion to $255 m ill ion (31 December 2022: $330 m ill ion). CCIB decreased by $33 m ill ion to $91 mill ion (31 December 2022: $124 m ill ion) due to exposure reduct ions, which was partly offset by model updates. CPBB decreased by $55 mill ion to $129 m ill ion (31 December 2022: $184 m ill ion), due to the release of the judgemental non-l inear ity post model adjustment and the full release of the remain ing COVID-19 overlays, both of wh ich are reported in ‘Changes in risk parameters‘. Stage 2 gross exposures decreased by $3 bill ion to $17 b ill ion (31 December 2022: $20 b ill ion), dr iven by CCIB. Debt securit ies decreased by $3.6 bill ion to $1.9 b ill ion (31 December 2022: $5.5 b ill ion) due to the cont inued management of Pakistan Sovereign exposures following its sovereign rating downgrade. Stage 2 provis ions decreased by $73 m ill ion to $276 m ill ion (31 December 2022: $349 m ill ion). CPBB prov is ions decreased by $1 mill ion to $55 m ill ion (31 December 2022: $56 m ill ion). Debt secur it ies prov is ions decreased by $56 m ill ion to $34 m ill ion (31 December 2022: $90 mill ion) largely dr iven by exposure reductions and shorter tenor for Pakistan Sovereign exposures. CCIB decreased by $22 mill ion to $186 m ill ion (31 December 2022: $208 m ill ion) due to portfol io movements, and model updates. This was partly offset by clients downgrades, as a result of a further Pakistan Sovereign rating downgrade during the year. The impact of model and methodology updates in 2023 reduced stage 1 and 2 provis ions by $11 m ill ion in CCIB, $9 mill ion in Central and other items, and $2 mill ion in CPBB. Stage 3 exposures decreased by $1.1 bill ion to $6 b ill ion (31 December 2022: $7 bill ion), wh ich was primar ily dr iven by repayments and write-offs in CCIB. Stage 3 provis ions decreased by $0.6 b ill ion to $3 bill ion (31 December 2022: $4 b ill ion), wh ich were also due to repayments and write-offs in CCIB. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 75 All segments – Group (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 5 Total Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion As at 1 January 2022 395,848 (370) 395,478 27,655 (501) 27,154 7,882 (4,499) 3,383 431,385 (5,370) 426,015 Transfers to stage 1 18,477 (407) 18,070 (18,445) 407 (18,038) (32) – (32) – – – Transfers to stage 2 (35,697) 180 (35,517) 36,198 (198) 36,000 (501) 18 (483) – – – Transfers to stage 3 (80) – (80) (2,554) 205 (2,349) 2,634 (205) 2,429 – – – Net change in exposures 66,022 (102) 65,920 (20,488) 73 (20,415) (1,396) 300 (1,096) 44,138 271 44,409 Net remeasurement from stage changes – 40 40 – (90) (90) – (81) (81) – (131) (131) Changes in risk parameters – 140 140 – (79) (79) – (355) (355) – (294) (294) Write-offs – – – – – – (633) 633 – (633) 633 – Interest due but unpaid – – – – – – (168) 168 – (168) 168 – Discount unwind – – – – – – – 119 119 – 119 119 Exchange translation differences and other movements¹ (14,491) 189 (14,302) (1,897) (166) (2,063) (613) 71 (542) (17,001) 94 (16,907) As at 31 December 2022² 430,079 (330) 429,749 20,469 (349) 20,120 7,173 (3,831) 3,342 457,721 (4,510) 453,211 Income statement ECL (charge)/ release 3 78 (96) (136) (154) Recoveries of amounts previously written off – – 175 175 Total credit impa irment (charge)/ release 78 (96) 39 21 Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 76 Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 5 Total Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion As at 1 January 2023 430,079 (330) 429,749 20,469 (349) 20,120 7,173 (3,831) 3,342 457,721 (4,510) 453,211 Transfers to stage 1 11,184 (515) 10,669 (11,174) 515 (10,659) (10) – (10) – – – Transfers to stage 2 (26,645) 130 (26,515) 26,784 (138) 26,646 (139) 8 (131) – – – Transfers to stage 3 (19) 1 (18) (1,523) 132 (1,391) 1,542 (133) 1,409 – – – Net change in exposures 20,964 (150) 20,814 (14,050) 19 (14,031) (1,476) 460 (1,016) 5,438 329 5,767 Net remeasurement from stage changes – 48 48 – (153) (153) – (61) (61) – (166) (166) Changes in risk parameters – 160 160 – 53 53 – (503) (503) – (290) (290) Write-offs – – – – – – (666) 666 – (666) 666 – Interest due but unpaid – – – – – – (19) 19 – (19) 19 – Discount unwind – – – – – – – 139 139 – 139 139 Exchange translation differences and other movements¹ 4,263 401 4,664 (3,325) (355) (3,680) (315) 39 (276) 623 85 708 As at 31 December 2023² 439,826 (255) 439,571 17,181 (276) 16,905 6,090 (3,197) 2,893 463,097 (3,728) 459,369 Income statement ECL (charge)/ release 3 58 (81) (104) (127) Recoveries of amounts previously written off – – 185 185 Total credit impa irment (charge)/ release 4 58 (81) 81 58 1 Includes fair value adjustments and amortisat ion on debt secur it ies 2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets gross balance of $87,433 mill ion (31 December 2022: $81,078 mill ion) and total cred it impa irment of $60 m ill ion (31 December 2022: $91 m ill ion) 3 Does not include release relating to Other assets (31 December 2022: $1 mill ion) 4 Reported basis 5 Stage 3 gross includes $80 mill ion (31 December 2022: $28 m ill ion) and ECL $14 m ill ion (31 December 2022: $13 m ill ion) or ig inated cred it-impa ired debt secur it ies 6 The gross balance includes the notional amount of off balance sheet instruments Risk proﬁle continued All segments – Group (audited) continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 77 Of which movement of debt securit ies, alternat ive Tier 1 and other elig ible b ills (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 2 Total Gross balance $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net 3 $mill ion As at 1 January 2022 96,350 (58) 96,292 5,315 (42) 5,273 113 (66) 47 101,778 (166) 101,612 Transfers to stage 1 2,296 (22) 2,274 (2,296) 22 (2,274) – – – – – – Transfers to stage 2 (3,942) 38 (3,904) 3,942 (38) 3,904 – – – – – – Transfers to stage 3 – – – (66) 42 (24) 66 (42) 24 – – – Net change in exposures 19,290 (44) 19,246 (752) 1 (751) – 1 1 18,538 (42) 18,496 Net remeasurement from stage changes – 11 11 – (4) (4) – (23) (23) – (16) (16) Changes in risk parameters – 39 39 – (94) (94) – (13) (13) – (68) (68) Write-offs – – – – – – (30) 30 – (30) 30 – Interest due but unpaid – – – – – – – – – – – – Exchange translation differences and other movements 1 (7,108) 16 (7,092) (688) 23 (665) (5) 7 2 (7,801) 46 (7,755) As at 31 December 2022 106,886 (20) 106,866 5,455 (90) 5,365 144 (106) 38 112,485 (216) 112,269 Income statement ECL (charge)/release 1 6 (97) (35) (126) Recoveries of amounts previously written off – – – – Total credit impa irment (charge)/ release 6 (97) (35) (126) As at 1 January 2023 106,886 (20) 106,866 5,455 (90) 5,365 144 (106) 38 112,485 (216) 112,269 Transfers to stage 1 371 (65) 306 (371) 65 (306) – – – – – – Transfers to stage 2 (884) 14 (870) 884 (14) 870 – – – – – – Transfers to stage 3 – – – (16) – (16) 16 – 16 – – – Net change in exposures (10,326) (20) (10,346) (1,899) (43) (1,942) 7 – 7 (12,218) (63) (12,281) Net remeasurement from stage changes – 5 5 – (10) (10) – – – – (5) (5) Changes in risk parameters – 32 32 – 90 90 – (4) (4) – 118 118 Write-offs – – – – – – – – – – – – Interest due but unpaid – – – – – – – – – – – – Exchange translation differences and other movements 1 4,045 28 4,073 (2,192) (32) (2,224) (2) 49 47 1,851 45 1,896 As at 31 December 2023 100,092 (26) 100,066 1,861 (34) 1,827 165 (61) 104 102,118 (121) 101,997 Income statement ECL (charge)/release 17 37 (4) 50 Recoveries of amounts previously written off – – – – Total credit impa irment (charge)/ release 17 37 (4) 50 1 Includes fair value adjustments and amortisat ion on debt secur it ies 2 Stage 3 gross includes $80 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13 mill ion) 3 FVOCI instrument are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount is $102,040 mill ion (31 December 2022: $112,425 mill ion). Refer to the Analys is of ﬁnanc ial instrument by stage table on page 65 Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 78 All segments – Company (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 5 Total Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion As at 1 January 2022 254,531 (210) 254,321 20,578 (311) 20,267 5,810 (3,238) 2,572 280,919 (3,759) 277,160 fresh 13,424 (240) 13,184 (13,394) 240 (13,154) (30) – (30) – – – Transfers to stage 2 (22,222) 126 (22,096) 22,653 (109) 22,544 (431) (17) (448) – – – Transfers to stage 3 – – – (1,873) (32) (1,905) 1,873 32 1,905 – – – Net change in exposures 47,019 (33) 46,986 (14,167) 54 (14,113) (988) 190 (798) 31,864 211 32,075 Net remeasurement from stage changes – 7 7 – (12) (12) – (49) (49) – (54) (54) Changes in risk parameters – 80 80 – 44 44 – (166) (166) – (42) (42) Write-offs – – – – – – (369) 369 – (369) 369 – Interest due but unpaid – – – – – – (130) 130 – (130) 130 – Discount unwind – – – – – – – 74 74 – 74 74 Exchange translation differences and other movements¹ (11,989) 75 (11,914) (985) 6 (979) (300) (114) (414) (13,274) (33) (13,307) As at 31 December 2022² 280,763 (195) 280,568 12,812 (120) 12,692 5,435 (2,789) 2,646 299,010 (3,104) 295,906 Income statement ECL (charge)/ release 54 86 (25) 115 Recoveries of amounts previously written off – – 67 67 Total credit impa irment (charge)/release 54 86 42 182 Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 79 Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 5 Total Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance 6 $mill ion Total credit impa irment $mill ion Net $mill ion As at 1 January 2023 280,763 (195) 280,568 12,812 (120) 12,692 5,435 (2,789) 2,646 299,010 (3,104) 295,906 Transfers to stage 1 8,709 (222) 8,487 (8,699) 222 (8,477) (10) – (10) – – – Transfers to stage 2 (17,712) 43 (17,669) 17,784 (48) 17,736 (72) 5 (67) – – – Transfers to stage 3 – – – (767) 117 (650) 767 (117) 650 – – – Net change in exposures 8,702 (56) 8,646 (9,095) 12 (9,083) (1,088) 273 (815) (1,481) 229 (1,252) Net remeasurement from stage changes – – – – (16) (16) – (32) (32) – (48) (48) Changes in risk parameters – 64 64 – 93 93 – (330) (330) – (173) (173) Write-offs – – – – – – (435) 435 – (435) 435 – Interest due but unpaid – – – – – – (154) 154 – (154) 154 – Discount unwind – – – – – – – 139 139 – 139 139 Exchange translation differences and other movements¹ 4,209 234 4,443 (1,719) (367) (2,086) (86) (14) (100) 2,404 (147) 2,257 As at 31 December 2023² 284,671 (132) 284,539 10,316 (107) 10,209 4,357 (2,276) 2,081 299,344 (2,515) 296,829 Income statement ECL (charge)/ release 3 8 89 (89) 8 Recoveries of amounts previously written off – – 73 73 Total credit impa irment (charge)/release 4 8 89 (16) 81 1 Includes fair value adjustments and amortisat ion on debt secur it ies 2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets gross balance of $70,951 mill ion (31 December 2022: $61,408 mill ion) and total cred it impa irment (31 December 2022: $30 m ill ion) 3 Does not include release relating to Other assets (31 December 2022: $1 mill ion) 4 Reported basis 5 Stage 3 gross includes $25 mill ion (31 December 2022: $28 m ill ion) and ECL $14 m ill ion (31 December 2022: $13 m ill ion) or ig inated cred it-impa ired debt secur it ies 6 The gross balance includes the notional amount of off balance sheet instruments Risk proﬁle continued All segments – Company (audited) continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 80 Of which movement of debt securit ies, alternat ive tier one and other elig ible b ills – Company (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 2 Total Gross balance $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net 3 $mill ion As at 1 January 2022 82,388 (32) 82,356 3,603 (21) 3,582 82 (36) 46 86,073 (89) 85,984 Transfers to stage 1 1,604 (21) 1,583 (1,604) 21 (1,583) – – – – – – Transfers to stage 2 (424) 3 (421) 424 (3) 421 – – – – – – Transfers to stage 3 – – – – – – – – – – – – Net change in exposures 15,757 (11) 15,746 (173) 2 (171) – 1 1 15,584 (8) 15,576 Net remeasurement from stage changes – 2 2 – 7 7 – – – – 9 9 Changes in risk parameters – 16 16 – 8 8 – (13) (13) – 11 11 Write-offs – – – – – – – – – – – – Interest due but unpaid – – – – – – – – – – – – Exchange translation differences and other movements 1 (6,082) 23 (6,059) (465) (15) (480) (4) (2) (6) (6,551) 6 (6,545) As at 31 December 2022 93,243 (20) 93,223 1,785 (1) 1,784 78 (50) 28 95,106 (71) 95,035 Income statement ECL (charge)/release 7 17 (12) 12 Recoveries of amounts previously written off – – – – Total credit impa irment (charge)/release 7 17 (12) 12 As at 1 January 2023 93,243 (20) 93,223 1,785 (1) 1,784 78 (50) 28 95,106 (71) 95,035 Transfers to stage 1 277 (8) 269 (277) 7 (270) – – – – (1) (1) Transfers to stage 2 (316) – (316) 316 – 316 – – – – – – Transfers to stage 3 – – – – – – – – – – – – Net change in exposures (5,315) (12) (5,327) (10) – (10) – – – (5,325) (12) (5,337) Net remeasurement from stage changes – – – – 2 2 – – – – 2 2 Changes in risk parameters – 14 14 – 1 1 – – – – 15 15 Write-offs – 1 1 – – – – – – – 1 1 Interest due but unpaid – – – – – – – – – – – – Exchange translation differences and other movements 1 4,149 2 4,151 (1,499) (9) (1,508) (2) (6) (8) 2,648 (13) 2,635 As at 31 December 2023 92,038 (23) 92,015 315 – 315 76 (56) 20 92,429 (79) 92,350 Income statement ECL (charge)/release 2 3 – 5 Recoveries of amounts previously written off – – – – Total credit impa irment (charge)/release 2 3 – 5 1 Includes fair value adjustments and amortisat ion on debt secur it ies 2 Stage 3 gross includes $25 mill ion (31 December 2022: $28 m ill ion) and ECL $14 m ill ion (31 December 2022: $13 m ill ion) or ig inated cred it-impa ired debt secur it ies 3 FVOCI instrument are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount is $92,362 mill ion (31 December 2022: $95,049 mill ion). Refer to the Analys is of ﬁnanc ial instrument by stage table on page 67 Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 81 Credit impa irment charge (aud ited) The table below analyses credit impa irment charges or releases of the ongo ing business portfolio and restructuring business portfolio for the year ended 31 December 2023. > Further details can be found in the ‘Summary of performance in 2023’ in pages 61 to 62. 2023 2022 1 Stage 1 & 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 & 2 $mill ion Stage 3 $mill ion Total $mill ion Ongoing business portfolio Corporate, Commercial & Institut ional Bank ing 2 (155) (153) (71) (115) (186) Consumer, Private & Business Banking 51 77 128 (19) 37 18 Ventures 7 6 13 2 – 2 Central & other items (42) 8 (34) 104 37 141 Credit impa irment charge/(release) 18 (64) (46) 16 (41) (25) Restructuring business portfolio Others 5 (17) (12) – 3 3 Credit impa irment charge/(release) 5 (17) (12) – 3 3 Total credit impa irment charge/(release) 23 (81) (58) 16 (38) (22) 1 Underlying credit impa irment has been restated for the removal of ( i) exit markets and businesses in AME and (i i) Av iat ion F inance. No change to reported credit impa irment Problem credit management and provis ion ing Forborne and other modif ied loans by cl ient segment (audited) A forborne loan arises when a concession has been made to the contractual terms of a loan in response to a customer’s ﬁnancial d iff icult ies. Net forborne loans decreased by $302 mill ion to $570 m ill ion (31 December 2022: $872 m ill ion) largely due to repayments. Net non-performing forborne loans decreased by $191 mill ion to $539 m ill ion (31 December 2022: $730 m ill ion) wh ile performing forborne loans reduced by $111 mill ion to $31 m ill ion (31 December 2022: $142 m ill ion). The table below presents loans with forbearance measures by segment. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 82 Group Amortised cost 2023 2022 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Total $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Total $mill ion All loans with forbearance measures 1,218 194 – 1,412 1,596 279 – 1,875 Credit impa irment (stage 1 and 2) – (2) – (2) (2) – – (2) Credit impa irment (stage 3) (755) (85) – (840) (870) (131) – (1,001) Net carrying value 463 107 – 570 724 148 – 872 Included with in the above table Gross performing forborne loans – 33 – 33 90 54 – 144 Modif icat ion of terms and condit ions 1 – 33 – 33 90 54 – 144 Reﬁnancing 2 – – – – – – – – Impairment provis ions – (2) – (2) (2) – – (2) Modif icat ion of terms and condit ions 1 – (2) – (2) (2) – – (2) Reﬁnancing 2 – – – – – – – – Net performing forborne loans – 31 – 31 88 54 – 142 Collateral – 31 – 31 7 56 – 63 Gross non-performing forborne loans 1,218 161 – 1,379 1,506 225 – 1,731 Modif icat ion of terms and condit ions 1 1,210 161 – 1,371 1,463 225 – 1,688 Reﬁnancing 2 8 – – 8 43 – – 43 Impairment provis ions (755) (85) – (840) (870) (131) – (1,001) Modif icat ion of terms and condit ions 1 (747) (85) – (832) (827) (131) – (958) Reﬁnancing 2 (8) – – (8) (43) – – (43) Net non-performing forborne loans 463 76 – 539 636 94 – 730 Collateral 153 42 – 195 204 53 – 257 1 Modif icat ion of terms is any contractual change apart from reﬁnanc ing, as a result of cred it stress of the counterparty, i.e. interest reductions, loan covenant waivers 2 Reﬁnancing is a new contract to a borrower in credit stress, such that they are reﬁnanced and can pay other debt contracts that they were unable to honour Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 83 Risk proﬁle continued Company Amortised cost 2023 2022 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Total $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Total $mill ion All loans with forbearance measures 904 25 929 1,186 36 1,222 Credit impa irment (stage 1 and 2) – (1) (1) (1) – (1) Credit impa irment (stage 3) (549) (3) (552) (629) (2) (631) Net carrying value 355 21 376 556 34 590 Included with in the above table Gross performing forborne loans – 17 17 81 23 104 Modif icat ion of terms and condit ions 1 – 17 17 81 23 104 Reﬁnancing 2 – – – – – – Impairment provis ions – (1) (1) (1) – (1) Modif icat ion of terms and condit ions 1 – (1) (1) (1) – (1) Reﬁnancing 2 – – – – – – Net performing forborne loans – 16 16 80 23 103 Collateral – 18 18 7 24 31 Gross non-performing forborne loans 904 8 912 1,105 13 1,118 Modif icat ion of terms and condit ions 1 897 8 905 1,064 13 1,077 Reﬁnancing 2 7 – 7 41 – 41 Impairment provis ions (549) (3) (552) (629) (2) (631) Modif icat ion of terms and condit ions 1 (542) (3) (545) (588) (2) (590) Reﬁnancing 2 (7) – (7) (41) – (41) Net non-performing forborne loans 355 5 360 476 11 487 Collateral 124 3 127 148 7 155 1 Modif icat ion of terms is any contractual change apart from reﬁnanc ing, as a result of cred it stress of the counterparty, i.e. interest reductions, loan covenant waivers 2 Reﬁnancing is a new contract to a borrower in credit stress, such that they are reﬁnanced and can pay other debt contracts that they were unable to honour Stage 3 cover ratio (audited) The stage 3 cover ratio measures the proportion of stage 3 impa irment prov is ions to gross stage 3 loans, and is a metric commonly used in consider ing impa irment trends. Th is metric does not allow for variat ions in the composit ion of stage 3 loans and should be used in conjunct ion w ith other Credit Risk informat ion prov ided, includ ing the level of collateral cover. The balance of stage 3 loans not covered by stage 3 impa irment prov is ions represents the adjusted value of collateral held and the net outcome of any workout or recovery strategies. Collateral provides risk mit igat ion to some degree in all client segments and supports the credit quality and cover ratio assessments post impa irment prov is ions. Further informat ion on collateral is provided in the Credit Risk mit igat ion section. > Further informat ion on collateral is provided in the 'Credit Risk mit igat ion' section in pages 84 to 88. > Further details on stage 3 loans and advances and cover ratio can be found in the ‘Summary of performance in 2023’ in pages 61 to 62. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 84 Risk proﬁle continued Group Amortised cost 2023 2022 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Others $mill ion Total $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Others $mill ion Total $mill ion Gross credit-impa ired 3,887 1,064 2 224 5,177 4,859 1,095 – 248 6,202 Credit impa irment provis ions (2,362) (639) (2) (15) (3,018) (2,904) (655) – (18) (3,577) Net credit-impa ired 1,525 425 – 209 2,159 1,955 440 – 230 2,625 Cover ratio 61% 60% 100% 7% 58% 60% 60% – 7% 58% Collateral ($ mill ion) 352 393 – – 745 628 411 – – 1,039 Cover ratio (after collateral) 70% 97% 100% 7% 73% 73% 97% – 7% 74% Company Amortised cost 2023 2022 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Central & Others $mill ion Total $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Central & Others $mill ion Total $mill ion Gross credit-impa ired 2,907 630 224 3,761 3,810 627 248 4,685 Credit impa irment provis ions (1,715) (399) (15) (2,129) (2,201) (402) (18) (2,621) Net credit-impa ired 1,192 231 209 1,632 1,609 225 230 2,064 Cover ratio 59% 63% 7% 57% 58% 64% 7% 56% Collateral ($ mill ion) 293 217 – 510 480 209 – 689 Cover ratio (after collateral) 69% 98% 7% 70% 70% 97% 7% 71% Credit risk mit igat ion Potential credit losses from any given account, customer or portfolio are mit igated us ing a range of tools such as collateral, netting arrangements, credit insurance and credit derivat ives, tak ing into account expected volatil ity and guarantees. The reliance that can be placed on these mit igants is carefully assessed in light of issues such as legal certainty and enforceabil ity, market valuat ion correlation and counterparty risk of the guarantor. Collateral (audited) The requirement for collateral is not a substitute for the abil ity to repay, wh ich is the primary considerat ion for any lend ing decis ions. The collateral values in the table below (which covers loans and advances to banks and customers, excluding those held at fair value through proﬁt or loss) are adjusted where appropriate in accordance with our risk mit igat ion policy and for the effect of over-collateralisat ion. The extent of over-collateral isat ion has been determ ined with reference to both the drawn and undrawn components of exposure as this best reﬂects the effect of collateral and other credit enhancements on the amounts aris ing from expected cred it losses. We have remained prudent in the way we assess the value of collateral, which is calibrated for a severe downturn and backtested against our prior experience. On average, across all types of non-cash collateral, the value ascribed is approximately half of its current market value. In the CPBB segments, a secured loan is one where the borrower pledges an asset as collateral of which the Group is able to take possession in the event that the borrower defaults. CCIB collateral decreased by $2 bill ion to $25.7 b ill ion (31 December 2022: $27.8 b ill ion) and CPBB collateral increased by $2 bill ion to $30 b ill ion (31 December 2022: $28 b ill ion). Total collateral for Central and other items remained stable at $2.4 bill ion (31 December 2022: $2.3 b ill ion). However, collateral for stage 2 Central and other items increased by $1 bill ion (31 December 2022: nil) due to short term reverse repo with a Central Bank in the Africa and Middle East region. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 85 Risk proﬁle continued Collateral held on loans and advances (audited) The table below details collateral held against exposures, separately disclos ing stage 2 and stage 3 exposure and corresponding collateral. Group Amortised cost 2023 Net amount outstanding Collateral Net exposure Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total 2 $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Corporate, Commercial & Institut ional Bank ing 1 107,336 6,091 1,593 25,744 2,043 352 81,592 4,048 1,241 Consumer, Private & Business Banking 47,615 935 425 29,960 619 393 17,655 316 32 Ventures 230 2 – – – – 230 2 – Central & other items 23,765 964 209 2,369 964 – 21,396 – 209 Total 178,946 7,992 2,227 58,073 3,626 745 120,873 4,366 1,482 Amortised cost 2022 Net amount outstanding Collateral Net exposure Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total 2 $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Corporate, Commercial & Institut ional Bank ing 1 114,862 6,900 1,989 27,754 2,286 628 87,108 4614 1,361 Consumer, Private & Business Banking 46,013 927 440 28,015 661 411 17,998 266 29 Ventures 64 1 – – – – 64 1 – Central & other items 24,570 – 230 2,287 – – 22,283 0 230 Total 185,509 7,828 2,659 58,056 2,947 1,039 127,453 4,881 1,620 1 Includes loans and advances to banks 2 Adjusted for over-collateralisat ion based on the drawn and undrawn components of exposures Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 86 Risk proﬁle continued Company Amortised cost 2023 Net amount outstanding Collateral Net exposure Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total 2 $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Corporate, Commercial & Institut ional Bank ing 1 72,136 4,052 1,194 19,783 1,343 293 52,353 2,709 901 Consumer, Private & Business Banking 12,503 230 231 6,401 94 217 6,102 136 14 Central & other items 1,379 – 209 750 – – 629 – 209 Total 86,018 4,282 1,634 26,934 1,437 510 59,084 2,845 1,124 Amortised cost 2022 Net amount outstanding Collateral Net exposure Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total 2 $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Corporate, Commercial & Institut ional Bank ing 1 84,468 4,928 1,610 23,245 1,822 480 61,223 3106 1,130 Consumer, Private & Business Banking 11,661 418 225 5,394 281 209 6,267 137 16 Central & other items 3,030 – 230 1,772 – – 1,258 0 230 Total 99,159 5,346 2,065 30,411 2,103 689 68,748 3,243 1,376 1 Includes loans and advances to banks 2 Adjusted for over-collateralisat ion based on the drawn and undrawn components of exposures Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 87 Risk proﬁle continued Collateral – CCIB (audited) Our underwrit ing standards encourage tak ing specif ic charges on assets and we cons istently seek high-quality, investment- grade collateral. 82 per cent (31 December 2022: 78 per cent) of tangible collateral excluding reverse repurchase agreements and ﬁnanc ial guarantees held comprises physical assets or is property based, with the remainder held in cash. Overall collateral decreased by $2 bill ion to $26 b ill ion (31 December 2022: $28 b ill ion) ma inly due to a decrease in reverse repos. Non-tangible collateral, such as guarantees and standby letters of credit, is also held against corporate exposures, although the ﬁnancial effect of th is type of collateral is less sign iﬁcant in terms of recoveries. However, this is considered when determin ing the probab il ity of default and other cred it-related factors. Collateral is also held against off balance sheet exposures, includ ing undrawn comm itments and trade-related instruments. The following table provides an analysis of the types of collateral held against CCIB loan exposures. Group Corporate, Commercial & Institut ional Bank ing Amortised cost 2023 $mill ion 2022 $mill ion Maximum exposure 107,336 114,862 Property 3,486 3,276 Plant, machinery and other stock 896 1,141 Cash 1,497 1,959 Reverse repos 13,127 14,213 AA- to AA+ 2 395 – A- to A+ 2 10,548 10,459 BBB- to BBB+ 855 1,485 Lower than BBB- 169 – Unrated 1,160 2,269 Financ ial guarantees and insurance 4,169 4,492 Commodit ies 5 38 Ships and aircraft 2,564 2,635 Total value of collateral 1 25,744 27,754 Net exposure 81,592 87,108 Company Corporate, Commercial & Institut ional Bank ing Amortised cost 2023 $mill ion 2022 $mill ion Maximum exposure 72,136 84,468 Property 2,186 2,143 Plant, machinery and other stock 602 801 Cash 953 1,355 Reverse repos 12,016 13,504 AA- to AA+ 2 395 – A- to A+ 2 10,548 10,459 BBB- to BBB+ 21 822 Unrated 1,052 2,223 Financ ial guarantees and insurance 2,916 3,687 Commodit ies 2 29 Ships and aircraft 1,108 1,726 Total value of collateral 1 19,783 23,245 Net exposure 52,353 61,223 1 Adjusted for over-collateralisat ion based on the drawn and undrawn components of exposures 2 Prior year has been represented to provide granular credit ratings Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 88 Risk proﬁle continued Group Collateral – CPBB – Group (audited) In CPBB, fully secured products remained stable at 85 per cent of the total portfolio (31 December 2022: 86 per cent). The following table presents an analysis of loans to ind iv iduals by product; split between fully secured, partially secured and unsecured: Amortised cost 2023 2022 Fully secured $mill ion Partially secured $mill ion Unsecured $mill ion Total $mill ion Fully secured $mill ion Partially secured $mill ion Unsecured $mill ion Total $mill ion Maximum exposure 40,483 198 6,934 47,615 39,493 160 6,360 46,013 Loans to ind iv iduals Mortgages 24,750 – – 24,750 24,695 – – 24,695 CCPL 370 – 6,334 6,704 205 – 5,929 6,134 Auto 312 – – 312 502 – – 502 Secured wealth products 15,009 – – 15,009 14,024 – – 14,024 Other 42 198 600 840 67 160 431 658 Total collateral 1 29,960 28,015 Net exposure 2 17,655 17,998 Percentage of total loans 85% 0% 15% 86% 0% 14% 1 Collateral values are adjusted where appropriate in accordance with our risk mit igat ion policy and for the effect of over-collateralisat ion 2 Amounts net of ECL Company Collateral – CPBB (audited) In CPBB, $9.5 bill ion wh ich equates to 76 per cent of the portfolio is fully secured (31 December 2022: 77 per cent). The following table presents an analysis of loans to ind iv iduals by product; split between fully secured, partially secured and unsecured: Amortised cost 2023 2022 Fully secured $mill ion Partially secured $mill ion Unsecured $mill ion Total $mill ion Fully secured $mill ion Partially secured $mill ion Unsecured $mill ion Total $mill ion Maximum exposure 9,531 156 2,816 12,503 8,940 131 2,590 11,661 Loans to ind iv iduals Mortgages 5,345 – – 5,345 4,848 – – 4,848 CCPL 369 – 2,460 2,829 205 – 2,317 2,522 Auto 15 – – 15 26 – – 26 Secured wealth products 3,786 – – 3,786 3,857 – – 3,857 Other 16 156 356 528 4 131 273 408 Total collateral 1 6,401 5,394 Net exposure 2 6,102 6,267 Percentage of total loans 76% 1% 23% 77% 1% 22% 1 Collateral values are adjusted where appropriate in accordance with our risk mit igat ion policy and for the effect of over-collateralisat ion 2 Amounts net of ECL Mortgage loan-to-value ratios by geography (audited) Loan-to-value (LTV) ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties on which they are secured. In mortgages, the value of property held as security sign iﬁcantly exceeds the value of mortgage loans. The average LTV of the overall mortgage portfolio is low at 45.8 per cent (31 December 2022: 45.8 per cent). Singapore, which represents 65.8 per cent of the resident ial mortgage portfol io as at 31 December 2023, has an average LTV of 43.0 per cent. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 89 Risk proﬁle continued An analysis of LTV ratios by geography for the mortgage portfolio is presented in the table below. Amortised cost 2023 Asia % Gross Africa & Middle East % Gross Europe & Americas % Gross Total % Gross Less than 50 per cent 51.2 51.1 31.0 49.6 50 per cent to 59 per cent 22.2 14.7 17.4 21.4 60 per cent to 69 per cent 15.0 13.7 33.9 16.4 70 per cent to 79 per cent 9.2 12.8 14.4 9.8 80 per cent to 89 per cent 2.1 3.9 2.5 2.2 90 per cent to 99 per cent 0.2 2.1 0.6 0.3 100 per cent and greater 0.2 1.7 0.3 0.3 Average portfolio loan-to-value 44.6 51.1 56.0 45.8 Loans to ind iv iduals – mortgages ($mill ion) 21,324 1,183 2,243 24,750 Amortised cost 2022 Asia % Gross Africa & Middle East % Gross Europe & Americas % Gross Total % Gross Less than 50 per cent 50.0 43.0 32.2 48.2 50 per cent to 59 per cent 20.2 18.2 19.2 20.0 60 per cent to 69 per cent 19.5 16.8 31.3 20.1 70 per cent to 79 per cent 7.5 12.8 14.8 8.3 80 per cent to 89 per cent 2.6 5.1 1.1 2.6 90 per cent to 99 per cent 0.2 2.0 – 0.3 100 per cent and greater 0.1 2.2 1.3 0.4 Average portfolio loan-to-value 44.4 54.3 56.6 45.8 Loans to ind iv iduals – mortgages ($mill ion) 21,435 1,388 1,872 24,695 Collateral and other credit enhancements possessed or called upon The Group obtains assets by taking possession of collateral or calling upon other credit enhancements (such as guarantees). Repossessed properties are sold in an orderly fashion. Where the proceeds are in excess of the outstanding loan balance the excess is returned to the borrower. Certain equity securit ies acqu ired may be held by the Group for investment purposes and are classif ied as fa ir value through proﬁt or loss, and the related loan written off. The carrying value of collateral possessed and held by the Group as at 31 December 2023 is $16.5 mill ion (31 December 2022: $14.9 m ill ion). 2023 $mill ion 2022 $mill ion Property, plant and equipment 10.5 9.6 Guarantees 6.0 5.3 Total 16.5 14.9 Other Credit Risk mit igat ion (audited) Other forms of Credit Risk mit igat ion are set out below. Credit default swaps The Group has entered into credit default swaps for portfolio management purposes, referencing loan assets with a notional value of $3.5 bill ion (31 December 2022: $5.1 b ill ion). These cred it default swaps are accounted for as ﬁnanc ial guarantees as per IFRS 9 as they will only reimburse the holder for an incurred loss on an underlying debt instrument. The Group continues to hold the underlying assets referenced in the credit default swaps and it continues to be exposed to related Credit and Foreign Exchange Risk on these assets. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 90 Risk proﬁle continued Credit linked notes The Group has issued credit linked notes for portfolio management purposes, referencing loan assets with a notional value of $22.5 bill ion (31 December 2022: $13.5 b ill ion). The Group cont inues to hold the underlying assets for which the credit linked notes provide mit igat ion. The credit linked notes are recognised as a ﬁnanc ial l iab il ity at amortised cost on the balance sheet. Derivat ive ﬁnancial instruments The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negat ive mark-to-market values of applicable derivat ive transactions. These are also set out under the Derivat ive ﬁnancial instruments Credit Risk mit igat ion section (page 110). Off-balance sheet exposures For certain types of exposures, such as letters of credit and guarantees, the Group obtains collateral such as cash depending on internal Credit Risk assessments, as well as in the case of letters of credit holding legal title to the underlying assets should a default take place. Other portfolio analysis This section provides maturity analysis of loans and advances by business segment. Contractual maturity analysis of loans and advances by client segment (audited) Loans and advances to the CCIB segment remain predominantly short-term, with $56 bill ion (31 December 2022: $62 b ill ion) maturing in less than one year. 97 per cent (31 December 2022: 95 per cent) of loans to banks mature in less than one year. Shorter maturit ies g ive us the ﬂexib il ity to respond promptly to events and rebalance or reduce our exposure to clients or sectors that are facing increased pressure or uncertainty. The CPBB loan book continues to be longer-term in nature with 49 per cent (31 December 2022: 52 per cent) of the loans maturing over ﬁve years, as mortgages constitute the major ity of th is portfolio. Group Amortised cost 2023 One year or less $mill ion One to ﬁve years $mill ion Over ﬁve years $mill ion Total $mill ion Corporate, Commercial & Institut ional Bank ing 55,898 21,194 10,004 87,096 Consumer, Private & Business Banking 20,078 4,767 23,591 48,436 Ventures 198 41 – 239 Central & other items 23,725 56 – 23,781 Gross loans and advances to customers 99,899 26,058 33,595 159,552 Impairment provis ions (3,245) (101) (63) (3,409) Net loans and advances to customers 96,654 25,957 33,532 156,143 Net loans and advances to banks 22,029 773 1 22,803 Amortised cost 2022 One year or less $mill ion One to ﬁve years $mill ion Over ﬁve years $mill ion Total $mill ion Corporate, Commercial & Institut ional Bank ing 61,972 20,863 7,769 90,604 Consumer, Private & Business Banking 17,045 5,402 24,453 46,900 Ventures 66 – – 66 Central & other items 24,584 – 4 24,588 Gross loans and advances to customers 103,667 26,265 32,226 162,158 Impairment provis ions (3,558) (404) (70) (4,032) Net loans and advances to customers 100,109 25,861 32,156 158,126 Net loans and advances to banks 26,097 1,134 152 27,383 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 91 Risk proﬁle continued Company Amortised cost 2023 One year or less $mill ion One to ﬁve years $mill ion Over ﬁve years $mill ion Total $mill ion Corporate, Commercial & Institut ional Bank ing 42,803 13,828 7,172 63,803 Consumer, Private & Business Banking 5,692 2,762 4,530 12,984 Central & other items 1,349 45 – 1,394 Gross loans and advances to customers 49,844 16,635 11,702 78,181 Impairment provis ions (2,202) (54) (42) (2,298) Net loans and advances to customers 47,642 16,581 11,660 75,883 Net loans and advances to banks 9,439 695 1 10,135 Amortised cost 2022 One year or less $mill ion One to ﬁve years $mill ion Over ﬁve years $mill ion Total $mill ion Corporate, Commercial & Institut ional Bank ing 47,258 14,840 6,125 68,223 Consumer, Private & Business Banking 5,357 2,594 4,235 12,186 Central & other items 3,048 – – 3,048 Gross loans and advances to customers 55,663 17,434 10,360 83,457 Impairment provis ions (2,458) (336) (52) (2,846) Net loans and advances to customers 53,205 17,098 10,308 80,611 Net loans and advances to banks 17,403 992 153 18,548 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 92 Risk proﬁle continued Credit quality by industry Loans and advances This section provides an analysis of the Group’s amortised cost portfolio by industry on a gross, total credit impa irment and net basis. Group Amortised cost 2023 Stage 1 Stage 2 Stage 3 Total Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Industry: Energy 8,064 (9) 8,055 648 (22) 626 933 (527) 406 9,645 (558) 9,087 Manufacturing 10,639 (6) 10,633 491 (13) 478 541 (329) 212 11,671 (348) 11,323 Financ ing, insurance and non-banking 24,376 (10) 24,366 169 (1) 168 79 (76) 3 24,624 (87) 24,537 Transport, telecom and util it ies 8,846 (6) 8,840 1,583 (32) 1,551 481 (178) 303 10,910 (216) 10,694 Food and household products 5,853 (15) 5,838 323 (7) 316 354 (261) 93 6,530 (283) 6,247 Commercial real estate 5,917 (9) 5,908 705 (13) 692 282 (170) 112 6,904 (192) 6,712 Min ing and quarry ing 3,795 (3) 3,792 132 (10) 122 147 (81) 66 4,074 (94) 3,980 Consumer durables 2,363 (2) 2,361 221 (20) 201 290 (271) 19 2,874 (293) 2,581 Construction 1,520 (1) 1,519 480 (8) 472 358 (326) 32 2,358 (335) 2,023 Trading companies & distr ibutors 355 – 355 10 – 10 102 (55) 47 467 (55) 412 Government 26,209 (4) 26,205 1,768 (5) 1,763 357 (33) 324 28,334 (42) 28,292 Other 2,168 (3) 2,165 131 (3) 128 187 (70) 117 2,486 (76) 2,410 Retail Products: Mortgage 24,008 (7) 24,001 509 (3) 506 353 (110) 243 24,870 (120) 24,750 Credit Cards 3,310 (57) 3,253 120 (25) 95 42 (29) 13 3,472 (111) 3,361 Personal loans and other unsecured lending 3,500 (48) 3,452 65 (19) 46 180 (105) 75 3,745 (172) 3,573 Auto 310 – 310 1 – 1 1 – 1 312 – 312 Secured wealth products 14,663 (14) 14,649 258 (8) 250 435 (325) 110 15,356 (347) 15,009 Other 822 (4) 818 43 (4) 39 55 (72) (17) 920 (80) 840 Net carrying value (customers)¹ 146,718 (198)146,520 7,657 (193) 7,464 5,177 (3,018) 2,159 159,552 (3,409) 156,143 1 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $13,827 mill ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 93 Risk proﬁle continued Amortised cost 2022 Stage 1 Stage 2 Stage 3 Total Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Industry: Energy 8,569 (8) 8,561 786 (9) 777 1,318 (612) 706 10,673 (629) 10,044 Manufacturing 10,839 (19) 10,820 645 (26) 619 649 (409) 240 12,133 (454) 11,679 Financ ing, insurance and non-banking 26,667 (7) 26,660 276 (2) 274 193 (174) 19 27,136 (183) 26,953 Transport, telecom and util it ies 8,677 (18) 8,659 1,819 (34) 1,785 651 (219) 432 11,147 (271) 10,876 Food and household products 6,410 (20) 6,390 624 (20) 604 411 (252) 159 7,445 (292) 7,153 Commercial real estate 5,229 (4) 5,225 847 (12) 835 232 (160) 72 6,308 (176) 6,132 Min ing and quarry ing 3,598 (3) 3,595 380 (5) 375 241 (168) 73 4,219 (176) 4,043 Consumer durables 2,492 (3) 2,489 328 (15) 313 320 (289) 31 3,140 (307) 2,833 Construction 1,340 (1) 1,339 371 (5) 366 495 (410) 85 2,206 (416) 1,790 Trading companies & distr ibutors 466 – 466 12 (1) 11 120 (77) 43 598 (78) 520 Government 26,566 (1) 26,565 533 (1) 532 168 (15) 153 27,267 (17) 27,250 Other 2,470 (3) 2,467 141 (4) 137 309 (137) 172 2,920 (144) 2,776 Retail Products: Mortgage 23,893 (10) 23,883 563 (6) 557 418 (163) 255 24,874 (179) 24,695 Credit Cards 2,925 (53) 2,872 88 (25) 63 40 (31) 9 3,053 (109) 2,944 Personal loans and other unsecured lending 3,213 (89) 3,124 80 (14) 66 167 (103) 64 3,460 (206) 3,254 Auto 501 – 501 1 – 1 – – – 502 – 502 Secured wealth products 13,749 (27) 13,722 219 (7) 212 380 (290) 90 14,348 (324) 14,024 Other 609 (2) 607 30 (1) 29 90 (68) 22 729 (71) 658 Net carrying value (customers)¹ 148,213 (268) 147,945 7,743 (187) 7,556 6,202 (3,577) 2,625 162,158 (4,032) 158,126 1 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $15,586 mill ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 94 Risk proﬁle continued Company Amortised cost 2023 Stage 1 Stage 2 Stage 3 Total Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Industry: Energy 5,560 (4) 5,556 475 (3) 472 648 (276) 372 6,683 (283) 6,400 Manufacturing 6,907 (3) 6,904 275 (4) 271 426 (283) 143 7,608 (290) 7,318 Financ ing, insurance and non-banking 21,533 (4) 21,529 85 (1) 84 29 (26) 3 21,647 (31) 21,616 Transport, telecom and util it ies 4,915 (4) 4,911 1,288 (18) 1,270 367 (110) 257 6,570 (132) 6,438 Food and household products 3,640 (3) 3,637 58 (1) 57 190 (149) 41 3,888 (153) 3,735 Commercial real estate 4,560 (7) 4,553 288 (1) 287 257 (165) 92 5,105 (173) 4,932 Min ing and quarry ing 2,968 (1) 2,967 76 (7) 69 77 (73) 4 3,121 (81) 3,040 Consumer durables 1,811 (2) 1,809 95 (7) 88 260 (244) 16 2,166 (253) 1,913 Construction 1,127 (1) 1,126 305 (5) 300 293 (269) 24 1,725 (275) 1,450 Trading companies & distr ibutors 163 – 163 7 – 7 78 (38) 40 248 (38) 210 Government 3,688 (4) 3,684 794 (3) 791 357 (33) 324 4,839 (40) 4,799 Other 1,375 (2) 1,373 73 (2) 71 149 (64) 85 1,597 (68) 1,529 Retail Products: Mortgage 5,160 (4) 5,156 72 (1) 71 191 (73) 118 5,423 (78) 5,345 Credit Cards 634 (14) 620 62 (11) 51 11 (8) 3 707 (33) 674 Personal loans and other unsecured lending 2,125 (26) 2,099 41 (11) 30 38 (12) 26 2,204 (49) 2,155 Auto 15 – 15 – – – – – – 15 – 15 Secured wealth products 3,649 (7) 3,642 70 (3) 67 368 (291) 77 4,087 (301) 3,786 Other 513 (3) 510 13 (2) 11 22 (15) 7 548 (20) 528 Net carrying value (customers)¹ 70,343 (89) 70,254 4,077 (80) 3,997 3,761 (2,129) 1,632 78,181 (2,298) 75,883 1 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $12,212 mill ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 95 Risk proﬁle continued Amortised cost 2022 Stage 1 Stage 2 Stage 3 Total Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa irment $mill ion Net carrying amount $mill ion Industry: Energy 5,513 (4) 5,509 671 (1) 670 1,050 (360) 690 7,234 (365) 6,869 Manufacturing 7,076 (11) 7,065 364 (5) 359 527 (336) 191 7,967 (352) 7,615 Financ ing, insurance and non-banking 24,308 (3) 24,305 198 (2) 196 150 (132) 18 24,656 (137) 24,519 Transport, telecom and util it ies 5,790 (14) 5,776 1,409 (20) 1,389 457 (117) 340 7,656 (151) 7,505 Food and household products 3,898 (7) 3,891 279 (2) 277 266 (157) 109 4,443 (166) 4,277 Commercial real estate 3,732 (3) 3,729 617 (4) 613 224 (156) 68 4,573 (163) 4,410 Min ing and quarry ing 2,799 (2) 2,797 223 (3) 220 158 (152) 6 3,180 (157) 3,023 Consumer durables 1,723 (3) 1,720 139 (9) 130 284 (254) 30 2,146 (266) 1,880 Construction 1,131 (1) 1,130 315 (3) 312 402 (345) 57 1,848 (349) 1,499 Trading companies & distr ibutors 173 – 173 4 – 4 98 (65) 33 275 (65) 210 Government 4,635 (1) 4,634 524 (1) 523 168 (15) 153 5,327 (17) 5,310 Other 1,584 (2) 1,582 107 (1) 106 274 (130) 144 1,965 (133) 1,832 Retail Products: Mortgage 4,511 (6) 4,505 226 (3) 223 232 (112) 120 4,969 (121) 4,848 Credit Cards 619 (18) 601 53 (11) 42 11 (7) 4 683 (36) 647 Personal loans and other unsecured lending 1,875 (60) 1,815 60 (8) 52 23 (14) 9 1,958 (82) 1,876 Auto 26 – 26 – – – – – – 26 – 26 Secured wealth products 3,718 (12) 3,706 90 (3) 87 320 (256) 64 4,128 (271) 3,857 Other 365 (1) 364 17 (1) 16 41 (13) 28 423 (15) 408 Net carrying value (customers)¹ 73,476 (148) 73,328 5,296 (77) 5,219 4,685 (2,621) 2,064 83,457 (2,846) 80,611 1 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $15,071 mill ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 96 Risk proﬁle continued Debt securit ies and other el ig ible b ills (audited) This section provides further detail on gross debt securit ies and treasury b ills. The standard credit ratings used by the Group are those used by Standard & Poor’s or its equivalent. Debt securit ies held that have a short-term rating are reported against the long-term rating of the issuer. For securit ies that are unrated, the Group applies an internal credit rating, as described under the credit rating and measurement section on page 127. Total gross debt securit ies and other el ig ible b ills decreased by $10.4 bill ion to $102.1 b ill ion (31 December 2022: $112.5 b ill ion). Stage 1 gross balance decreased by $6.8 bill ion to $100.1 b ill ion (31 December 2022: $106.9 b ill ion), of wh ich $3.4 bill ion of the decrease was from unrated. Stage 2 gross balance decreased by $3.6 bill ion to $1.9 b ill ion (31 December 2022: $5.5 b ill ion). Stage 3 gross balance was broadly stable at $0.2 bill ion (31 December 2022: $0.1 b ill ion). Group Amortised cost and FVOCI 2023 2022 Gross $mill ion ECL $mill ion Net 2 $mill ion Gross $mill ion ECL $mill ion Net 2 $mill ion Stage 1 100,092 (26) 100,066 106,886 (20) 106,866 AAA 56,555 (8) 56,547 65,729 (7) 65,722 AA- to AA+ 11,386 (1) 11,385 14,767 (3) 14,764 A- to A+ 9,155 (1) 9,154 6,311 (2) 6,309 BBB- to BBB+ 13,100 (6) 13,094 7,387 (1) 7,386 Lower than BBB- 1,611 (2) 1,609 1,047 (2) 1,045 Unrated 8,285 (8) 8,277 11,645 (5) 11,640 – Strong 7,150 (7) 7,143 11,484 (1) 11,483 – Satisfactory 1,135 (1) 1,134 161 (4) 157 Stage 2 1,861 (34) 1,827 5,455 (90) 5,365 AAA 98 – 98 21 – 21 AA- to AA+ 22 – 22 40 – 40 A- to A+ 81 – 81 17 (1) 16 BBB- to BBB+ 500 (7) 493 2,605 (15) 2,590 Lower than BBB- 893 (26) 867 2,485 (71) 2,414 Unrated 267 (1) 266 287 (3) 284 – Strong 217 – 217 26 (2) 24 – Satisfactory 50 (1) 49 – – – – Higher risk – – – 262 (1) 261 Stage 3 165 (61) 104 144 (106) 38 Lower than BBB- 73 (5) 68 66 (55) 11 Unrated 92 (56) 36 78 (51) 27 Gross balance¹ 102,118 (121) 101,997 112,485 (216) 112,269 1 Stage 3 gross includes $80 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13mill ion) 2 FVOCI instrument are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount is $102,040 mill ion (31 December 2022: $112,425 mill ion). Refer to the Analys is of ﬁnanc ial instrument by stage table on page 65 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 97 Risk proﬁle continued Company Amortised cost and FVOCI 2023 2022 Gross $mill ion ECL $mill ion Net 2 $mill ion Gross $mill ion ECL $mill ion Net 2 $mill ion Stage 1 92,038 (23) 92,015 93,243 (20) 93,223 AAA 55,008 (7) 55,001 63,232 (7) 63,225 AA- to AA+ 11,198 (1) 11,197 14,447 (3) 14,444 A- to A+ 5,968 (1) 5,967 4,275 (2) 4,273 BBB- to BBB+ 11,377 (5) 11,372 5,841 (5) 5,836 Lower than BBB- 1,431 (2) 1,429 1,047 (2) 1,045 Unrated 7,056 (7) 7,049 4,401 (1) 4,400 – Strong 6,508 (7) 6,501 4,331 – 4,331 – Satisfactory 548 – 548 70 (1) 69 Stage 2 315 – 315 1,785 (1) 1,784 AAA 98 – 98 21 – 21 AA- to AA+ – – – 40 – 40 A- to A+ – – – 17 (1) 16 BBB- to BBB+ – – – 1,504 – 1,504 Lower than BBB- – – – 203 – 203 Unrated 217 – 217 – – – – Strong 217 – 217 – – – – Satisfactory – – – – – – – Higher risk – – – – – – Stage 3 76 (56) 20 78 (50) 28 Lower than BBB- – – – – – – Unrated 76 (56) 20 78 (50) 28 Gross balance¹ 92,429 (79) 92,350 95,106 (71) 95,035 1 Stage 3 gross includes $25 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13mill ion) 2 FVOCI instrument are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount is $92,362 mill ion (31 December 2022: $95,049 mill ion). Refer to the Analys is of ﬁnanc ial instrument by stage table on page 67 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 98 Risk proﬁle continued IFRS 9 expected credit loss methodology (audited) Approach for determin ing expected cred it losses Credit loss terminology Component Deﬁnit ion Probabil ity of default (PD) The probabil ity that a counterparty w ill default, over the next 12 months from the reporting date (stage 1) or over the lifet ime of the product (stage 2), incorporating the impact of forward-looking economic assumptions that have an effect on Credit Risk, such as unemployment rates and GDP forecasts. The PD estimates will Fluctuate in line with the economic cycle. The lifet ime (or term structure) PDs are based on statist ical models, cal ibrated using histor ical data and adjusted to incorporate forward-looking economic assumptions. Loss given default (LGD) The loss that is expected to arise on default, incorporating the impact of forward-looking economic assumptions where relevant, which represents the difference between the contractual cashFlows due and those that the bank expects to receive. The Group estimates LGD based on the history of recovery rates and considers the recovery of any collateral that is integral to the ﬁnanc ial asset, tak ing into account forward-looking economic assumptions where relevant. Exposure at default (EAD) The expected balance sheet exposure at the time of default, taking into account expected changes over the lifet ime of the exposure. Th is incorporates the impact of drawdowns of facil it ies with lim its, pr inc ipal and repayments of interest and amortisat ion. To determine the expected credit loss, these components are multipl ied together: PD for the reference per iod (up to 12 months or lifet ime) x LGD x EAD and d iscounted to the balance sheet date using the effective interest rate as the discount rate. IFRS 9 expected credit loss models have been developed for the CCIB business on a global basis, in line with their respective portfolios. However, for some of the key countries, country-specif ic models have also been developed. The cal ibrat ion of forward-looking informat ion is assessed at a country or region level to take into account local macroeconomic condit ions. Retail expected credit loss models are country and product specif ic g iven the local nature of the retail business. For less material retail portfolios, the Group has adopted less sophist icated approaches based on h istor ical roll rates or loss rates: • For medium-sized retail portfolios, a roll rate model is applied, which uses a matrix that gives the average loan migrat ion rate between delinquency states from period to period. A matrix multipl icat ion is then performed to generate the ﬁnal PDs by delinquency bucket over different time horizons. • For smaller retail portfolios, loss rate models are applied. These use an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances. • While the loss rate models do not incorporate forward looking informat ion, to the extent that there are s ign iﬁcant changes in the macroeconomic forecasts an assessment will be completed on whether an adjustment to the modelled output is required. For a lim ited number of exposures, proxy parameters or approaches are used where the data is not available to calculate the orig inat ion PDs for the purpose of applying the SICR criter ia; or for some reta il portfolios where a full history of LGD data is not available, estimates based on the loss experience from sim ilar portfol ios are used. The use of proxies is monitored and will reduce over time. The following processes are in place to assess the ongoing performance of the models: • Quarterly model monitor ing that uses recent data to compare the d ifferences between model predict ions and actual outcomes against approved thresholds. • Annual independent validat ions of the performance of mater ial models by Group Model Valuation (GMV); an abridged validat ion is completed for non-material models. Applicat ion of l ifet ime Expected credit loss is estimated based on the period over which the Group is exposed to Credit Risk. For the major ity of exposures this equates to the maximum contractual period. For retail credit cards and corporate overdraft facil it ies, however, the Group does not typically enforce the contractual period, which can be as short as one day. As a result, the period over which the Group is exposed to Credit Risk for these instruments reﬂects their behavioural life, which incorporates expectations of customer behaviour and the extent to which Credit Risk management actions curtail the period of that exposure. The average behavioural life for retail credit cards is between 3 and 6 years across our footprint markets. The behavioural life for corporate overdraft facil it ies is 24 months. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 99 Risk proﬁle continued Key assumptions and judgements in determin ing expected cred it loss Incorporation of forward-looking informat ion The evolving economic environment is a key determinant of the abil ity of a bank’s cl ients to meet their obligat ions as they fall due. It is a fundamental princ iple of IFRS 9 that the prov is ions banks hold aga inst potential future credit risk losses should depend not just on the health of the economy today but should also take into account potential changes to the economic environment. For example, if a bank were to antic ipate a sharp slowdown in the world economy over the coming year, it should hold more provis ions today to absorb the cred it losses likely to occur in the near future. To capture the effect of changes to the economic environment, the PDs and LGDs used to calculate ECL incorporate forward- looking informat ion in the form of forecasts of the values of economic variables and asset prices that are likely to have an effect on the repayment abil ity of the Group’s cl ients. The ‘Base Forecast’ of the economic variables and asset prices is based on management’s view of the ﬁve-year outlook, supported by projections from the Group’s in-house research team and outputs from a third-party model that project specif ic economic variables and asset prices. The research team takes consensus views into considerat ion and sen ior management reviews project ions for some core country var iables against consensus when forming their view of the outlook. For the period beyond ﬁve years, management util ises the in-house research view and third-party model outputs, which allow for a reversion to long-term growth rates or norms. All project ions are updated on a quarterly bas is. Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linear ity In the Base Forecast – management’s view of the most likely outcome –the pace of growth of the world economy is expected to slow marginally in the near term. Global GDP is forecast to grow by just below 3 per cent in 2024. World GDP growth averaged 3.7 per cent for the 10 years prior to COVID-19 (between 2010 and 2019). The world economy should be able to achieve a soft landing after the most aggressive monetary tighten ing cycle in years, although risks abound. The lagged impact of aggressive central bank tighten ing is likely to be felt most acutely in developed economies. Linger ing inﬂat ion and geopol it ical developments are r isks to the global soft-landing scenario. The ongoing war in Ukraine, conﬂicts in the Middle East, ongoing US-China tensions, and the November 2024 US election are key sources of geopolit ical and polit ical r isk; they come against a backdrop of increas ing global fragmentat ion. On the inﬂat ion front, it is unclear whether it can slow on a sustained basis. Core inﬂat ion has rema ined sticky in some markets, signall ing pers istent underlying pressures. Structural factors – includ ing h igher ﬁscal deﬁc its, the cost of the cl imate transit ion and recent under- investment in fossil fuels – could keep inﬂat ion h igher than during the pre-COVID period. Oil prices and geopolit ical conﬂ ict are also sources of upside inﬂat ion r isk. While the quarterly Base Forecasts inform the Group’s strategic plan, one key requirement of IFRS 9 is that the assessment of provis ions should cons ider multiple future economic environments. For example, the global economy may grow more quickly or more slowly than the Base Forecast, and these variat ions would have d ifferent impl icat ions for the provis ions that the Group should hold today. As the negative impact of an economic downturn on credit losses tends to be greater than the posit ive impact of an economic upturn, if the Group sets provis ions only on the ECL under the Base Forecast it might mainta in a level of provis ions that does not appropr iately capture the range of potential outcomes. To address the inherent uncertainty in economic forecast, and the property of skewness (or non-linear ity), IFRS 9 requ ires reported ECL to be a probabil ity-we ighted ECL calculated over a range of possible outcomes. To assess the range of possible outcomes the Group simulates a set of 50 scenarios around the Base Forecast, calculates the ECL under each of them and assigns an equal weight of 2 per cent to each scenario outcome. These scenarios are generated by a Monte Carlo simulat ion, wh ich addresses the challenges of crafting many realist ic alternat ive scenarios in the many countries in which the Group operates by means of a model, which produces these alternative scenarios while consider ing the degree of histor ical uncerta inty (or volatil ity) observed from Q1 1990 to Q3 2023 around econom ic outcomes, the trends in each macroeconomic variable modelled and the correlation in the unexplained movements around these trends. This naturally means that each of the 50 scenarios do not have a specif ic narrat ive, although collectively they explore a range of hypothetical alternative outcomes for the global economy, includ ing scenar ios that turn out better than expected and scenarios that amplify antic ipated stresses. The tables on page 100 provide a summary of the Group’s Base Forecast for key markets. The peak/trough amounts in the tables show the highest and lowest points with in the Base Forecast. China’s GDP growth is expected to ease to 4.8 per cent in 2024 from over 5 per cent in 2023. This reﬂects a continued contraction in the property sector, a negative contribut ion from fore ign trade, and low consumer and business conﬁdence. Growth in India is expected to ease to 6 per cent from 6.7 per cent in 2023 due to impact from pre-election uncertaint ies, tighter lending condit ions and global recess ion concerns. Growth in the US is expected to slow on tighter ﬁnanc ial and cred it condit ions and as the impact of previous interest rate increases by the central bank feed through to the economy. For sim ilar reasons Eurozone growth is expected to remain weak in 2024. The uncertainty over the ongoing war in Ukraine, conﬂicts in the Middle East, has hit global investor and business conﬁdence. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 100 Risk proﬁle continued In contrast, GDP growth for Singapore is expected to accelerate to just over 2.5 per cent in 2024 from 0.8 per cent last year. Favourable base effects may boost exports, despite the soft global growth outlook. The global electronics and semiconductor industry is showing signs of bottoming out. Although a strong rebound is not expected, inventory restocking may provide a small boost to Singapore’s electronics sector. GDP growth for the UAE is also expected to improve and to around 4 per cent from just below 3 per cent in 2023. Non-oil sectors are expected to hold up despite regional and global headwinds. Growth in Abu Dhabi, in particular, will be supported by the rapid expansion in the ﬁnanc ial sector. Brent crude oil prices are expected to average around $90 in 2024 compared to around $84 in 2022. Robust demand, in particular from Asia, and decelerating non-OPEC supply growth should support prices at higher levels. They are expected to remain elevated beyond this year. The ﬁve-year average oil price is $88. 2023 year-end forecasts⁷ China ⁵ UAE Singapore⁶ India 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 GDP growth (YoY%) 4.3 5.7/3.8 0.6 7.7 3.4 4.3/2.4 (1.3) 8.8 2.9 3.8/1.9 (2.4) 8.5 6.2 9.1/4.4 2.1 10.5 Unemployment (%) 4.0 4.1/3.8 3.3 4.4 NA NA NA NA 2.8 2.9/2.8 1.7 3.8 NA NA NA NA 3 month interest rates (%) 2.1 2.5/1.7 0.8 3.8 3.8 5.3/2.7 0.4 7.8 2.9 4.1/2.3 0.6 5.9 6.2 6.3/5.8 2.7 9.9 House prices (YoY%) 4.6 7.2/1.5 (1.5) 12.0 2.6 8.4/1.9 (15.3) 19.1 2.2 3.9/(0.7) (16.2) 19.2 6.1 6.5/4.7 (0.5) 13.8 2022 year-end forecasts China 5 UAE Singapore⁶ India 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 5 yr average base forecast Base forecast quarterly peak/ trough Low 2 High 3 GDP growth (YoY%) 5.1 7.9/4.5 1.1 9.6 3.6 5.4/2.1 (1.5) 8.8 2.7 3.7/1.7 (3.4) 8.6 6.4 7.7/3.2 1.5 12.1 Unemployment (%) 3.9 4.1/3.8 3.4 4.3 NA NA NA NA 3.0 3.2/3.0 2.1 4.5 NA NA NA NA 3 month interest rates (%) 2.3 3.0/1.4 0.6 4.4 3.5 5.2/2.8 (0.4) 8.5 3.1 4.7/2.4 0.8 5.6 5.6 6.3/5.3 1.9 9.5 House prices (YoY%) 3.6 5.0/0.0 (3.4) 10.0 1.8 2.0/1.1 (14.7) 17.6 2.8 4.7/(2.4) (15.9) 20.4 5.7 7.2/1.6 (1.1) 13.0 2023 year-end forecasts 2022 year-end forecasts 5 yr average base forecast Base forecast peak/trough Low 2 High 3 5 yr average base forecast Base forecast peak/trough Low 2 High 3 Brent Crude, $ pb 88.2 93.8/82.8 46.0 137.8 106.6 118.8/88.0 42.4 204.2 1 N/A – Not available 2 Represents the 10th percentile in the range of economic scenarios used to determine non-linear ity 3 Represents the 90th percentile in the range of economic scenarios used to determine non-linear ity 4 Base forecasts are evaluated from Q1 2024 to Q4 2028. The forward-looking simulat ion starts from Q1 2024. 5 A judgemental management adjustment is held in respect of the China commercial real estate sector as discussed below. 6 Singapore unemployment rate covers the resident unemployment rate, which refers to cit izens and permanent res idents. 7 Data presented are those used in the calculation of ECL. These may differ slightly to forecasts presented elsewhere in the Financ ial statements as they are ﬁnalised before the period end. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 101 Risk proﬁle continued Judgemental adjustments As at 31 December 2023, the Group held $33 mill ion (31 December 2022: $41 m ill ion) of judgemental management overlays, $11 mill ion (31 December 2022: $9 m ill ion) of wh ich relates to CCIB, $5 mill ion (31 December 2022: $32 m ill ion) to CPBB and $17 mill ion (31 December 2022: n il) to Central & Other. As at 31 December 2023, judgemental post model adjustments to reduce ECL by a net $1 mill ion (31 December 2022: $16 mill ion increase in ECL) have been applied to certain CPBB models, primar ily to adjust for temporary factors impact ing modelled outputs. These will be released when these factors normalise. Judgemental adjustments are re-assessed quarterly, are reviewed and approved by the IFRS 9 Impairment Committee and will be released when the risks are no longer relevant. Judgemental management overlays Given the evolving nature of the risks in the China commercial real estate sector, a management overlay of $11 mill ion (31 December 2022: nil) has been taken in CCIB by estimat ing the impact of further deteriorat ion to exposures in this sector. Overlays of $5 mill ion (31 December 2022: $16 m ill ion) have also been appl ied in CPBB to capture macroeconomic environment challenges caused by sovereign defaults, the impact of which is not fully captured in the modelled outcomes. An overlay of $17 mill ion (31 December 2022: n il) was applied in Central & Other due to a temporary market dislocat ion in the Africa and Middle East region. The remain ing COVID-19 overlay in CPBB of $21 mill ion that was held at 31 December 2022 has been fully released in 2023. The stage 3 overlay in CCIB of $9 mill ion that was held at 31 December 2022 follow ing the Sri Lanka Sovereign default was also fully released in 2023. Stage 3 assets Credit-impa ired assets managed by Stressed Asset R isk incorporate forward-looking economic assumptions in respect of the recovery outcomes ident iﬁed, and are ass igned ind iv idual probabil ity we ight ings. These assumpt ions are not based on a Monte Carlo simulat ion but are informed by the Base Forecast. Sensit iv ity of expected credit loss calculation to macroeconomic variables The ECL calculation relies on multiple variables and is inherently non-linear and portfolio-dependent, which impl ies that no single analysis can fully demonstrate the sensit iv ity of the ECL to changes in the macroeconomic variables. The Group has conducted a series of analyses with the aim of ident ify ing the macroeconomic variables which might have the greatest impact on overall ECL. These encompassed single variable and multi-variable exercises, using simple up/down variat ion and extracts from actual calculation data, as well as bespoke scenario design and assessments. The primary conclusion of these exercises is that no ind iv idual macroeconomic variable is materially inﬂuent ial. The Group believes this is plausible as the number of variables used in the ECL calculation is large. This does not mean that macroeconomic variables are uninﬂuent ial; rather, that the Group bel ieves that considerat ion of macroeconom ics should involve whole scenarios, as this aligns with the multi-variable nature of the calculation. The Group faces downside risks in the operating environment related to the uncertaint ies surround ing the macroeconomic outlook. To explore this, a sensit iv ity analysis of ECL was undertaken to explore the effect of slower economic recoveries across the Group’s footprint markets. Two downside scenarios were considered in particular to explore the current uncertaint ies over commod ity prices. The ﬁrst scenario explores a temporary spike (relative to base) in commodity prices, inﬂat ion and interest rates in the near term from escalating tensions in Ukraine and the Middle East. The second more severe scenario is based on the Bank of England’s most recent Annual Cyclical Scenario (ACS), which explores a persistent rise in commodity prices, inﬂat ion and interest rates. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 102 Risk proﬁle continued Baseline Global Stagﬂation ACS Five year average Peak/Trough Five year average Peak/Trough Five year average Peak/Trough China GDP 4.3 5.7 / 3.8 3.7 6.2 / (0.8) 2.2 3.9 / (3.4) China unemployment 4.0 4.1 / 3.8 5.3 6.4 / 3.8 5.3 5.7 / 4.6 China property prices 4.6 7.2 / 1.5 4.4 15.9 / (17.5) (5.5) 9.2 / (16.3) UAE GDP 3.4 4.3 / 2.4 3.1 3.8 / 2.4 1.9 3.4 / (1.3) UAE property prices 2.6 8.4 / 1.9 2.2 7.4 / 1.4 (4.6) 8.3 / (15.8) US GDP 1.7 2.3 / 0.8 1.4 2.7 / (1.3) 0.1 1.5 / (4.8) Singapore GDP 2.9 3.8 / 1.9 2.7 5.0 / (1.6) 1.2 5.9 / (8.7) India GDP 6.2 9.1 / 4.4 4.9 6.6 / 0.6 4.2 7.3 / (0.7) Crude oil 88.2 93.8 / 82.8 95.3 152.9 / 82.8 118 147.9 / 83.6 The total reported stage 1 and 2 ECL provis ions ( includ ing both on and off-balance sheet instruments) would be approximately $70 mill ion h igher under the Global Stagﬂation scenario and $263 mill ion h igher under the ACS scenario than the baseline ECL provis ions (wh ich excluded the impact of multiple economic scenarios and management overlays which may already capture some of the risks in these scenarios). The proportion of stage 2 assets would increase from 4.0 per cent in the base case to 4.2 per cent and 7.2 per cent respectively under the Global Stagﬂation and ACS scenarios. This includes the impact of exposures transferring to stage 2 from stage 1 but does not consider an increase in stage 3 defaults. Under both scenarios the major ity of the increase in CCIB came from the main corporate and project ﬁnance portfolios booked in the Singapore. For the CPBB portfolios most of the increases came from the unsecured retail portfolios with Singapore credit cards most impacted. There was no material change in modelled stage 3 provis ions as these pr imar ily relate to unsecured reta il exposures for which the LGD is not sensit ive to changes in the macroeconomic forecasts. There is also no material change for non- modelled stage 3 exposures as these are more sensit ive to cl ient specif ic factors than to alternat ive macroeconomic scenarios. The actual outcome of any scenario may be materially different due to, among other factors, the effect of management actions to mit igate potent ial increases in risk and changes in the underlying portfolio. Modelled provis ions Increase in ECL ECL Global Stagﬂation $mill ion ECL ACS $mill ion Stage 1 Corporate, Commercial & Institut ional Bank ing 11 33 Consumer, Private & Business Banking 19 77 Ventures – – Central & Others 2 4 Total increase in stage 1 ECL 32 114 Stage 2 Corporate, Commercial & Institut ional Bank ing 25 79 Consumer, Private & Business Banking 13 70 Ventures – – Central & Others – – Total increase in stage 2 ECL 38 149 Total Stage 1 & 2 Corporate, Commercial & Institut ional Bank ing 36 112 Consumer, Private & Business Banking 32 147 Ventures – – Central & Others 2 4 Total increase in stage 1 & 2 ECL 70 263 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 103 Risk proﬁle continued Sign iﬁcant increase in credit risk (SICR) Quantitat ive cr iter ia SICR is assessed by comparing the risk of default at the reporting date to the risk of default at orig inat ion. Whether a change in the risk of default is sign iﬁcant or not is assessed using quantitat ive and qual itat ive cr iter ia. These cr iter ia have been separately deﬁned for each business and where meaningful are consistently applied across business lines. Assets are considered to have experienced SICR if they have breached both relative and absolute thresholds for the change in the average annualised IFRS 9 lifet ime probab il ity of default (IFRS 9 PD) over the res idual term of the exposure. The absolute measure of increase in credit risk is used to capture instances where the IFRS 9 PDs on exposures are relatively low at in it ial recognit ion as these may increase by several multiples without representing a sign iﬁcant increase in credit risk. Where IFRS 9 PDs are relatively high at in it ial recognit ion, a relat ive measure is more appropriate in assessing whether there is a sign iﬁcant increase in credit risk, as the IFRS 9 PDs increase more quickly. The SICR thresholds have been calibrated based on the following princ iples: • Stabil ity – The thresholds are set to ach ieve a stable stage 2 population at a portfolio level, trying to min im ise the number of accounts moving back and forth between stage 1 and stage 2 in a short period of time • Accuracy – The thresholds are set such that there is a materially higher propensity for stage 2 exposures to eventually default than is the case for stage 1 exposures • Dependency from backstops – The thresholds are stringent enough such that a high proportion of accounts transfer to stage 2 due to movements in forward-looking IFRS 9 PDs rather than relying on backward-looking backstops such as arrears • Relationsh ip w ith business and product risk proﬁles – The thresholds reﬂect the relative risk differences between different products, and are aligned to business processes For CCIB clients, the quantitat ive thresholds are a relat ive 100 per cent increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 50 and 100 bps. For Consumer and Business Banking clients, portfolio specif ic quant itat ive thresholds in Singapore, Malaysia and UAE are used to determine SICR. The thresholds include relative and absolute increases in IFRS 9 PD with average lifet ime IFRS 9 PD cut-offs for those exposures that are with in a range of customer ut il isat ion lim its and d ifferent iate between exposures that are current and those that are 1-29 days past due. The range of thresholds applied are: Portfolio Relative IFRS9 PD increase (%) Absolute IFRS9 PD increase (%) Customer util isat ion (%) Average IFRS9 PD (lifet ime) Credit cards – Current 50%–150% 3.5%–9.3% 15%–85% 4.15%–11.6% Credit cards – 1-29 days past due 100%–180% 3.5%–6.1% 25%–47% 3.5%–18.5% For all other Consumer and Business Banking portfolios, the quantitat ive SICR thresholds appl ied are a relative threshold of 100 per cent increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 100 and 350 bps depending on the product. Private Banking clients are assessed qualitat ively, based on a del inquency measure relating to collateral top-ups or sell-downs. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 104 Risk proﬁle continued Qualitat ive cr iter ia Qualitat ive factors that ind icate that there has been a s ign iﬁcant increase in credit risk include processes linked to current risk management, such as placing loans on non-purely precautionary early alert. Backstop Across all portfolios, accounts that are 30 or more days past due (30 DPD) on contractual payments of princ ipal and/or interest that have not been captured by the criter ia above are cons idered to have experienced a sign iﬁcant increase in credit risk. Expert credit judgement may be applied in assessing SICR to the extent that certain risks may not have been captured by the models or through the above criter ia. Such instances are expected to be rare, for example due to events and material uncertaint ies ar is ing close to the report ing date. CCIB clients Quantitat ive cr iter ia Exposures are assessed based on both the absolute and the relative movement in the IFRS 9 PD from orig inat ion to the reporting date as described above. To account for the fact that the mapping between internal credit grades (used in the orig inat ion process) and IFRS 9 PDs is non-linear (e.g. a one-notch downgrade in the investment grade universe results in a much smaller IFRS 9 PD increase than in the sub-investment grade universe), the absolute thresholds have been different iated by cred it quality at orig inat ion, as measured by internal credit grades being investment grade or sub-investment grade. Qualitat ive cr iter ia All assets of clients that have been placed on early alert (for non-purely precautionary reasons) are deemed to have experienced a sign iﬁcant increase in credit risk. An account is placed on non-purely precautionary early alert if it exhib its r isk or potential weaknesses of a material nature requir ing closer mon itor ing, superv is ion or attent ion by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deteriorat ion of repayment prospects and the l ikel ihood of be ing downgraded. Indicators could include a rapid erosion of posit ion w ith in the industry, concerns over management’s abil ity to manage operat ions, weak/ deteriorat ing operat ing results, liqu id ity strain and overdue balances, among other factors. All client assets that have been assigned a CG12 rating, equivalent to ‘higher risk’, are deemed to have experienced a sign iﬁcant increase in credit risk. Accounts rated CG12 are primar ily managed by relat ionsh ip managers in the CCIB unit with support from SAG for certain accounts. All CCIB clients are placed in CG12 when they are 30 DPD unless they are granted a waiver through a strict governance process. Consumer and Business Banking clients Quantitat ive cr iter ia Material portfolios (deﬁned as a combinat ion of country and product) for wh ich a statist ical model has been bu ilt, are assessed based on both the absolute and relative movement in the IFRS 9 PD from orig inat ion to the reporting date as described previously (page 98). For these portfolios, the orig inal l ifet ime IFRS 9 PD term structure is determined based on the orig inal Appl icat ion Score or R isk Segment of the client. Qualitat ive and backstop cr iter ia Accounts that are 30 DPD that have not been captured by the quantitat ive cr iter ia are cons idered to have experienced a sign iﬁcant increase in credit risk. For less material portfolios, which are modelled based on a roll-rate or loss-rate approach, SICR is primar ily assessed through the 30 DPD tr igger. In addit ion, SICR is also assessed where specif ic r isk elevation events have occurred in a market that are not yet reﬂected in modelled outcomes or in other metrics. This is applied collectively either to impacted specif ic products/customer cohorts or across the overall consumer bank ing portfolio in the affected market. Private Banking clients For Private Banking clients, SICR is assessed by referencing the nature and the level of collateral against which credit is extended (known as ‘Classes of Risk’). Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 105 Risk proﬁle continued Qualitat ive cr iter ia For all Private Banking classes, in line with risk management practice, an increase in credit risk is deemed to have occurred where margin ing or loan-to-value covenants have been breached. For Class I assets (lending against divers iﬁed l iqu id collateral), if these margin ing requ irements have not been met with in 30 days of a trigger, a sign iﬁcant increase in credit risk is assumed to have occurred. For Class I and Class III assets (real-estate lending), a sign iﬁcant increase in credit risk is assumed to have occurred where the bank is unable to ‘sell down’ the applicable assets to meet revised collateral requirements with in ﬁve days of a tr igger. Class II assets are typically unsecured or partially secured, or secured against ill iqu id collateral such as shares in private companies. Sign iﬁcant cred it deteriorat ion of these assets is deemed to have occurred when any early alert trigger has been breached. Debt securit ies Quantitat ive cr iter ia For debt securit ies or ig inated before 1 January 2018, the bank is util is ing the low credit risk simpl iﬁed approach, where debt securit ies w ith an internal credit rating mapped to an investment grade equivalent are allocated to stage 1 and all other debt securit ies are allocated to stage 2. Debt secur it ies or ig inated after 1 January 2018 are assessed based on the absolute and relative movements in IFRS 9 PD from orig inat ion to the reporting date using the same thresholds as for CCIB clients. Qualitat ive cr iter ia Debt securit ies ut il ise the same qual itat ive cr iter ia as the CCIB cl ient segments, includ ing be ing placed on non-purely precautionary early alert or being classif ied as CG12. Assessment of credit-impa ired ﬁnancial assets Consumer and Business Banking clients The core components in determin ing cred it-impa ired expected cred it loss provis ions are the value of gross charge off and recoveries. Gross charge off and/or loss provis ions are recogn ised when it is established that the account is unlikely to pay through the normal process. Recovery of unsecured debt post credit impa irment is recognised based on actual cash collected, either directly from clients or through the sale of defaulted loans to third-party inst itut ions. Release of credit impa irment prov is ions for secured loans is recognised if the loan outstanding is paid in full (release of full provis ion), or the provis ion is higher than the loan outstanding (release of the excess provis ion). CCIB, and Private Banking clients Credit-impa ired accounts are managed by the Group’s spec ial ist recovery un it, Stress Asset Risk (SAR), which is independent from its main businesses. Where any amount is considered irrecoverable, a stage 3 credit impa irment prov is ion is raised. This stage 3 provis ion is the difference between the loan-carrying amount and the probabil ity-we ighted present value of estimated future cash ﬂows, reﬂecting a range of scenarios (typically the best, worst and most likely recovery outcomes). Where the cash ﬂows include realisable collateral, the values used will incorporate the impact of forward-looking economic informat ion. The ind iv idual circumstances of each client are considered when SAR estimates future cash ﬂows and the tim ing of future recoveries which involves sign iﬁcant judgement. All ava ilable sources, such as cash ﬂow aris ing from operat ions, selling assets or subsid iar ies, realis ing collateral or payments under guarantees are cons idered. In any decis ion relat ing to the rais ing of provis ions, the Group attempts to balance econom ic condit ions, local knowledge and exper ience, and the results of independent asset reviews. Write-offs Where it is considered that there is no realist ic prospect of recover ing a portion of an exposure against which an impa irment provis ion has been ra ised, that amount will be written off. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 106 Risk proﬁle continued Governance and applicat ion of expert cred it judgement in respect of expected credit losses The Group applies PLC Group’s Credit Policy and Standards framework which details the requirements for continuous monitor ing to ident ify any changes in credit quality and resultant ratings, as well as ensuring a consistent approach to monitor ing, manag ing and mit igat ing credit risks. The framework aligns with the governance of ECL estimat ion through the early recognit ion of s ign iﬁcant deter iorat ions in ratings which drive stage 2 and 3 ECL. The Group relies on the PLC Group committees for the assessment of ECL. The models used in determin ing expected cred it losses are reviewed and approved by the PLC Group Credit Model Assessment Committee (CMAC), which is appointed by the PLC Group Model Risk Committee. CMAC has the responsib il ity to assess and approve the use of models and to review all IFRS 9 interpretat ions related to models. CMAC also prov ides oversight on operational matters related to model development, performance monitor ing and model val idat ion act iv it ies, includ ing standards and regulatory matters. Prior to submiss ion to CMAC for approval, the models are val idated by Group Model Validat ion (GMV), a funct ion which is independent of the business and the model developers. GMV’s analysis comprises review of model documentation, model design and methodology, data validat ion, rev iew of the model development and calibrat ion process, out-of-sample performance testing, and assessment of compliance review against IFRS 9 rules and internal standards. A quarterly model monitor ing process is in place that uses recent data to compare the differences between model predict ions and actual outcomes aga inst approved thresholds. Where a model’s performance breaches the monitor ing thresholds an assessment of whether a post model adjustment (PMA) is required to correct for the ident iﬁed model issue is completed. Key inputs into the calculation and resulting expected credit loss provis ions are subject to rev iew and approval by the IFRS 9 Impairment Committee (IIC), which is appointed by the PLC Group Risk Committee. The IIC consists of senior representatives from Risk, Finance, and Group Economic Research. It meets at least twice every quarter; once before the models are run to approve key inputs into the calculation, and once after the models are run to approve the expected credit loss provis ions and any judgemental overrides that may be necessary. The IFRS 9 Impairment Committee: • Oversees the appropriateness of all Business Model Assessment and Solely Payments of Princ ipal and Interest (SPPI) tests; • Reviews and approves expected credit loss for ﬁnanc ial assets class if ied as stages 1, 2 and 3 for each ﬁnancial report ing period; • Reviews and approves stage allocation rules and thresholds; • Approves material adjustments in relation to expected credit loss for fair value through other comprehensive income (FVOCI) and amortised cost ﬁnanc ial assets; • Reviews, challenges and approves base macroeconomic forecasts and the multiple macroeconomic scenarios approach that are util ised in the forward-looking expected credit loss calculations The IFRS 9 Impairment Committee is supported by an Expert Panel which also reviews and challenges the base case projections and mult iple macroeconomic scenarios. The Expert Panel consists of members of Enterprise Risk Management (which includes the Scenario Design team), Finance, Group Economic Research and country representatives of major jurisd ict ions. PMAs may be applied to account for ident iﬁed weaknesses in model estimates. The processes for ident ify ing the need for, calculating the level of, and approving PMAs are prescribed in the Credit Risk IFRS 9 ECL Model Family Standards, which are approved by the Global Head, Model Risk Management. PMA calculation methodologies are reviewed by GMV and submitted to CMAC as the model approver or the IIC. All PMAs have a remediat ion plan to ﬁx the ident iﬁed model weakness, and these plans are reported to and tracked at CMAC. In addit ion, judgemental management adjustments account for events that are not captured in the Base Case Forecast or the resulting ECL calculated by the models. All judgemental management adjustments must be approved by the IIC having considered the nature of the event, why the risk is not captured in the model, and the basis on which the quantum of the overlay has been calculated. Judgemental management adjustments are subject to quarterly review and re-approval by the IIC and will be released when the risks are no longer relevant. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 107 Risk proﬁle continued Traded Risk Traded Risk is the potential for loss resulting from activ it ies undertaken by the Group in Financ ial markets. The PLC Group’s Traded Risk Type Framework, which is adopted by the Company through an addendum, brings together Market Risk, Counterparty Credit Risk and Algorithm ic Trad ing. Traded Risk Management is the core risk management function supporting market-facing businesses, predominantly Financ ial Markets and Treasury Markets. Market Risk (audited) Market Risk is the potential for fair value loss due to adverse moves in ﬁnanc ial markets. The Group’s exposure to Market R isk arises predominantly from the following sources: • Trading book: The Group provides clients with access to ﬁnanc ial markets, fac il itat ion of which entails the Group taking moderate Market Risk posit ions. All trad ing teams support client activ ity; there are no propr ietary trading teams. Hence, income earned from Market Risk-related activ it ies is primar ily dr iven by the volume of client activ ity rather than r isk-taking. • Non-trading book: – The Treasury Markets desk is required to hold a liqu id assets buffer, much of wh ich is held in high-quality marketable debt securit ies – The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these income streams are not hedged, the Group is subject to Structural Foreign Exchange Risk which is reﬂected in reserves A summary of our current polic ies and pract ices regarding Market Risk management is provided in the Princ ipal R isks section (page 129). The primary categories of Market Risk for the Group are: • Interest Rate Risk: aris ing from changes in yield curves and impl ied volat il it ies on interest rate options • Foreign Exchange Rate Risk: aris ing from changes in currency exchange rates and impl ied volat il it ies on foreign exchange options • Commodity Risk: aris ing from changes in commodity prices and impl ied volat il it ies on commodity options; covering energy, precious metals, base metals and agriculture • Credit Spread Risk: aris ing from changes in the price of debt instruments and credit-linked derivat ives, dr iven by factors other than the level of risk-free interest rates • Equity Risk: aris ing from changes in the prices of equit ies, equ ity ind ices, equ ity baskets and impl ied volat il it ies on related options Market risk changes (audited) Value-at Risk (VaR) allows the Group to manage market risk across the trading book and most of the fair valued non-trading books. The average level of total trading and non-trading VaR in 2023 was $41.1 mill ion, 1.2 per cent h igher than in 2022 ($40.6 mill ion). The year end level of total trad ing and non-trading VaR in 2023 was $32.2 mill ion, 29.7 per cent lower than in 2022 ($45.8 mill ion), due to a reduct ion in non-trading posit ions. Daily value at risk (VaR at 97.5%, one day) (audited) Trading 1 and non-trading 2 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Interest Rate Risk 26.3 38.8 16.8 17.2 21.2 31.9 15.9 18.5 Credit Spread Risk 27.9 43.9 20.9 26.0 27.3 39.7 15.0 25.9 Foreign Exchange Risk 6.6 10.0 3.6 6.3 6.4 9.5 4.7 7.4 Commodity Risk 5.6 9.4 3.4 4.6 6.9 12.1 3.5 7.9 Equity Risk 0.1 0.4 0.0 0.0 0.1 1.4 – 0.1 Divers iﬁcation effect (25.4) N/A N/A (21.9) (21.3) N/A N/A (14.0) Total 41.1 55.3 30.3 32.2 40.6 51.8 29.8 45.8 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 108 Risk proﬁle continued Trading 1 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Interest Rate Risk 10.8 14.8 6.3 6.3 8.1 12.7 5.3 10.2 Credit Spread Risk 6.9 9.7 5.7 6.9 6.8 12.2 3.4 6.2 Foreign Exchange Risk 6.6 10.0 3.6 6.3 6.4 9.5 4.7 7.4 Commodity Risk 5.6 9.4 3.4 4.5 6.9 12.1 3.5 7.9 Equity Risk – – – – – – – – Divers iﬁcation effect (11.9) N/A N/A (9.8) (12.2) N/A N/A (12.7) Total 18.0 25.3 13.0 14.2 16 21.3 10.5 19 Non-trading 2 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Interest Rate Risk 22.9 31.0 13.4 14.3 20.5 31.5 14.6 16.4 Credit Spread Risk 24.1 37.8 17.6 20.1 23.5 31.9 14.0 23.9 Equity Risk 4 0.1 0.4 0.0 0.0 0.1 1.4 0.0 0.1 Divers iﬁcation effect (13.1) N/A N/A (8.6) (8.6) N/A N/A (6.6) Total 34.0 43.1 23.6 25.8 35.5 41.1 28.4 33.8 The following table sets out how trading and non-trading VaR is distr ibuted across the Group’s products: 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Trading 1 and non-trading 2 41.0 55.3 30.3 32.2 40.6 51.8 29.8 45.8 Trading 1 Global Credit 11.1 15.7 7.2 7.6 9.7 14.6 4.1 8.5 Macro Trading 3 11.6 16.0 7.6 9.6 11.5 14.7 8.9 14.7 XVA 5.8 7.8 4.1 5.6 4.5 6.4 2.8 5.5 Divers iﬁcation effect (10.5) N/A N/A (8.6) (9.7) N/A N/A (9.7) Total 18.0 25.3 13.0 14.2 16.0 21.3 10.5 19.0 Non-trading 2 Treasury 4 33.0 40.9 22.2 25.5 29.8 22.7 24 28.6 Global Credit 3.7 14.0 1.9 3.7 12.7 22.7 8.4 19.9 Listed Private Equity 0.1 0.4 0.0 0.0 0.1 1.4 0.0 0.1 Divers iﬁcation effect (2.9) N/A N/A (3.4) (7.1) N/A N/A (14.8) Total 34.0 43.1 23.6 25.8 35.5 41.1 28.4 33.8 1 The trading book for Market Risk is deﬁned in accordance with the UK onshored Capital Requirements Regulation Part 3 Title I Chapter 3, which restricts the posit ions permitted in the trading book. 2 The non-trading book VaR does not include syndicated loans 3 Macro Trading comprises the Rates, FX and Commodit ies bus inesses 4 Treasury comprises Treasury Markets and Treasury Capital Management businesses Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 109 Risk proﬁle continued Average daily income earned from Market Risk-related activ it ies ¹ Trading 2023 $mill ion 2022 $mill ion Interest Rate Risk 3.0 2.8 Credit Spread Risk 0.7 1.0 Foreign Exchange Risk 3.7 4.6 Commodity Risk 0.4 0.9 Equity Risk – – Total 7.8 9.3 Non-trading $mill ion $mill ion Interest Rate Risk (0.1) 0.1 Credit Spread Risk (0.5) 0.1 Equity Risk 0.1 – Total (0.6) 0.2 1 Reﬂects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and non funded income which are generated from Market Risk-related activ it ies. Rates, XVA and Treasury income are included under Interest Rate Risk whilst Credit Trading income is included under Credit Spread Risk Structural foreign exchange exposures The table below sets out the princ ipal structural fore ign exchange exposures (net of investment hedges) of the Group. 2023 $mill ion 2022¹ $mill ion Indian rupee 3,291 4,396 Singapore dollar 2,370 1,891 Malaysian ringg it 1,540 1,571 Euro 1,125 893 Bangladeshi Taka 1,007 832 Thai baht 782 782 UAE dirham 696 664 Pakistan i rupee 306 352 Indonesian rupiah 293 261 Renminb i 52 46 Taiwanese dollar 44 46 Other 3,204 3,212 14,710 14,946 1 Prior year has been represented to provide granular currency details As at 31 December 2023, the Group had taken net investment hedges using derivat ive ﬁnancial instruments to partly cover its exposure to the Indian rupee of $1,809 mill ion (31 December 2022: $621 m ill ion), UAE d irham of $1,470 mill ion (31 December 2022: $1,334 mill ion), S ingapore dollar of $1,047 mill ion (31 December 2022: $1,608 m ill ion) and South Afr ican rand of $64 mill ion (31 December 2022: $nil mill ion). An analys is has been performed on these exposures to assess the impact of a 1 per cent fall in the US dollar exchange rates, adjusted to incorporate the impacts of correlations of these currencies to the US dollar. The impact on the posit ions above would be an increase of $146 mill ion (31 December 2022: $179 m ill ion). Changes in the valuation of these posit ions are taken to reserves. For analysis of the Group’s capital posit ion and requ irements, refer to the Capital Review (page 144). Counterparty credit risk Counterparty Credit Risk is the potential for loss in the event of the default of a derivat ive counterparty, after tak ing into account the value of elig ible collaterals and r isk mit igat ion techniques. The Group’s counterparty credit exposures are included in the Credit Risk section. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 110 Risk proﬁle continued Derivat ive ﬁnancial instruments credit risk mit igat ion The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negat ive mark-to-market values of applicable derivat ive transactions. In addit ion, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mit igant to the exposure. Cash collateral includes collateral called under a variat ion marg in process from counterparties if total uncollateralised mark-to-market exposure exceeds the threshold and min imum transfer amount specif ied in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to- market values of posit ions are in the counterparty’s favour and exceed an agreed threshold. Liqu id ity and Funding risk Liqu id ity and Funding Risk is the risk that the Group may not have sufﬁc ient stable or d iverse sources of funding to meet its obligat ions as they fall due. The Group follows the PLC Group’s Liqu id ity and Funding Risk framework, which requires each country to ensure that it operates with in predeﬁned l iqu id ity lim its and rema ins in compliance with PLC Group’s liqu id ity polic ies and pract ices, as well as local regulatory requirements. The table below shows the composit ion of l iab il it ies in which customer deposits make up 55 per cent of total liab il it ies and equity as at 31 December 2023, the major ity of wh ich are current accounts, savings accounts and time deposits. 89 per cent of the Group customer deposit base by geography is evenly distr ibuted in Asia and Europe & Americas. Composit ion of l iab il it ies and equ ity Percentage Geographic distr ibut ion of customer accounts balances Percentage Equity 6.3% Asia 44.5% Subordinated liab il it ies and other borrowed funds 2.1% Africa & Middle East 11.0% Debt securit ies in issue 8.6% Europe & Americas 44.5% Derivat ive ﬁnancial instruments 10.2% Total 100.0% Customer accounts 54.5% Deposit by banks 5.6% Other liab il it ies 12.7% Total 100.0% Liqu id ity and Funding risk metrics The Group monitors key liqu id ity metrics regularly on a country basis. The following liqu id ity and funding Board Risk Appetite metrics deﬁne the maximum amount and type of risk that the Group is will ing to assume in pursuit of its strategy: liqu id ity coverage ratio (LCR), recovery capacity and net stable funding ratio (NSFR). In addit ion to the Board R isk Appetite, there are further lim its that apply at Group and country level such as external wholesale borrowing (WBE) and cross currency lim its. Liqu id ity coverage ratio (LCR) The LCR aims to ensure that a bank has sufﬁc ient unencumbered h igh-quality liqu id assets to meet its liqu id ity needs in a 30-calendar-day liqu id ity stress scenario. Standard Chartered Bank is not regulated for LCR, however, the bank and material subsid iar ies in the consolidat ion have standalone LCR rat ios above 100 per cent at 31 December 2023, calculated under the Liqu id ity Coverage Ratio per PRA rulebook. Stress coverage Stress testing and scenario analysis are used to assess the ﬁnanc ial and management capab il ity to cont inue to operate effectively under extreme, but plausible, operating condit ions and to understand the potent ial threats to the PLC Group’s liqu id ity and other ﬁnanc ial resources. The PLC Group’s internal liqu id ity stress testing framework covers the following stress scenarios: • Standard Chartered-specif ic – Captures the l iqu id ity impact from an id iosyncrat ic event affecting Standard Chartered only, with the rest of the market assumed to be operating normally; • Market wide – Captures the liqu id ity impact from a market wide cris is affect ing all partic ipants in a country, region or globally, and; • Combined – Assumes both Standard Chartered-specif ic and Market-w ide events affect the PLC Group simultaneously and hence is the most severe scenario. All scenarios include, but are not lim ited to, modelled outﬂows for reta il and wholesale funding, off-balance sheet funding risk, cross currency funding risk, intraday risk, franchise risk and risks associated with a deteriorat ion of a ﬁrm’s cred it rating. Concentration risk approach has been enhanced to capture single name and industry concentration. As of 31 December 2023, all entit ies w ith in the Group follow a cons istent approach and met their ind iv idual stress test requirements with in r isk appetite, and as a result, ensure Group has surplus liqu id ity on a consolidated basis. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 111 Risk proﬁle continued External wholesale borrowing This metric seeks to monitor and prevent excessive reliance on wholesale borrowing. Lim its and targets are appl ied to branches and operating subsid iar ies in the Group. Advances-to-deposits ratio This is deﬁned as the ratio of total loans and advances to customers relative to total customer accounts. An advances-to- deposits ratio of below 100 per cent demonstrates that customer deposits exceed customer loans as a result of the emphasis placed on generating a high level of funding from customers. Lim its and targets are appl ied to all branches and operating subsid iar ies in the Group. Advances-to-deposits ratio has remained broadly ﬂat with a minor reduction in loans and advances and deposits from corporate customers. 2023 $mill ion 2022 $mill ion Total loans and advances to customers 1,2 124,794 125,807 Total customer accounts 3 247,068 249,630 Advances-to-deposits ratio 50.5% 50.4% 1 Excludes reverse repurchase agreement and other sim ilar secured lend ing of $13,827 mill ion and includes loans and advances to customers held at fair value through proﬁt and loss of $3,188 mill ion 2 Loans and advances to customers for the purpose of the advances-to-deposits ratio excludes $20,710 mill ion of approved balances held w ith central banks, conﬁrmed as repayable at the point of stress. 3 Includes customer accounts held at fair value through proﬁt or loss of $9,166 mill ion (31 December 2022: $6,555 m ill ion) Net stable funding ratio (NSFR) The NSFR is a balance sheet metric which requires inst itut ions to mainta in a stable fund ing proﬁle in relation to an assumed duration of their assets and off-balance sheet activ it ies over a one-year horizon. It is the ratio between the amount of available stable funding (ASF) and the amount of required stable funding (RSF). ASF factors are applied to balance sheet liab il it ies and cap ital, based on their perceived stabil ity and the amount of stable fund ing they provide. Likew ise, RSF factors are applied to assets and off-balance sheet exposures according to the amount of stable funding they require. Standard Chartered Bank is not regulated for NSFR, however the bank and material subsid iar ies in the consolidat ion have standalone NSFR ratios above 100 per cent at 31 December 2023. Liqu id ity pool The liqu id ity value of the Group’s LCR elig ible l iqu id ity pool at the reporting date was $136 bill ion. The ﬁgures in the below table account for haircuts, currency convertib il ity and portabil ity constra ints, and therefore are not directly comparable with the consolidated balance sheet. A liqu id ity pool is held to offset stress outﬂows as deﬁned in the LCR per PRA rulebook. Group 2023 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Level 1 securit ies Cash and balances at central banks 28,859 2,456 46,715 78,030 Central banks, governments/public sector entit ies 17,998 1,363 15,219 34,580 Multilateral development banks and internat ional organ isat ions 127 961 10,754 11,842 Other 126 – 1,161 1,287 Total Level 1 securit ies 47,110 4,780 73,849 125,739 Level 2A securit ies 1,972 128 6,946 9,046 Level 2B securit ies 348 – 376 724 Total LCR elig ible assets 49,430 4,908 81,171 135,509 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 112 Risk proﬁle continued 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Level 1 securit ies Cash and balances at central banks 28,551 1,066 36,522 66,139 Central Banks, governments/public sector entit ies 13,811 2,712 23,680 40,203 Multilateral development banks and internat ional organ isat ions 334 837 10,843 12,014 Other 37 7 1,430 1,474 Total Level 1 securit ies 42,733 4,622 72,475 119,830 Level 2A securit ies 4,044 139 6,033 10,216 Level 2B securit ies 71 21 1,103 1,195 Total LCR elig ible assets 46,848 4,782 79,611 131,241 Company 2023 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Level 1 securit ies Cash and balances at central banks 6,915 2,087 41,492 50,494 Central banks, governments/public sector entit ies 6,880 1,197 15,219 23,296 Multilateral development banks and internat ional organ isat ions – 961 10,754 11,715 Other – – 1,161 1,161 Total Level 1 securit ies 13,795 4,245 68,626 86,666 Level 2A securit ies 102 128 6,946 7,176 Level 2B securit ies – – 376 376 Total LCR elig ible assets 13,897 4,373 75,948 94,218 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Level 1 securit ies Cash and balances at central banks 6,181 630 31,235 38,046 Central Banks, governments/public sector entit ies 4,618 2,507 23,680 30,805 Multilateral development banks and internat ional organ isat ions – 837 10,843 11,680 Other – 7 1,430 1,437 Total Level 1 securit ies 10,799 3,981 67,188 81,968 Level 2A securit ies 2,271 139 6,033 8,443 Level 2B securit ies – 21 1,103 1,124 Total LCR elig ible assets 13,070 4,141 74,324 91,535 Liqu id ity analysis of the Group’s balance sheet (audited) Contractual maturity of assets and liab il it ies The following table presents assets and liab il it ies by matur ity groupings based on the remain ing per iod to the contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturit ies do not necessar ily reﬂect actual repayments or cashﬂows. With in the tables below, cash and balances w ith central banks, interbank placements and investment securit ies that are fa ir valued through other comprehensive income are used by the Group princ ipally for l iqu id ity management purposes. As at the reporting date, assets remain predominantly short-dated, with 68 per cent maturing in one year. The less than one year cumulative net funding posit ion has improved by $12 bill ion as of 31 December 2023 compared to 31 December 2022, largely due to the Group focus on improv ing the qual ity of its deposit base. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 113 Risk proﬁle continued Group 2023 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Assets Cash and balances at central banks 61,147 – – – – – – 3,051 64,198 Derivat ive ﬁnancial instruments 19,240 9,324 6,132 3,098 2,548 3,997 5,208 3,007 52,554 Loans and advances to banks 1,2 17,521 14,057 7,166 3,563 4,104 1,488 2,124 1,098 51,121 Loans and advances to customers 1,2 61,802 40,058 18,856 8,866 8,234 13,212 15,950 34,449 201,427 Investment securit ies 1 6,246 12,824 9,487 8,350 7,274 12,020 31,708 38,063 125,972 Other assets 9,071 20,691 1,088 408 528 65 93 5,697 37,641 Due from subsid iary undertakings and other related parties 5,666 – – – – – – – 5,666 Total assets 180,693 96,954 42,729 24,285 22,688 30,782 55,083 85,365 538,579 Liab il it ies Deposits by banks 1,3 21,993 1,637 1,086 503 594 1,243 2,845 4 29,905 Customer accounts 1,4 220,227 34,561 17,476 7,681 6,031 4,916 2,446 227 293,565 Derivat ive ﬁnancial instruments 18,540 11,042 5,836 3,299 2,438 4,125 5,952 3,941 55,173 Senior debt 5 45 992 1,353 758 536 3,742 5,897 4,301 17,624 Other debt securit ies in issue 1 3,063 5,257 5,247 3,182 2,153 1,827 3,191 4,787 28,707 Due to parent companies and other related undertakings 31,166 – – – – – – – 31,166 Other liab il it ies 9,437 20,040 213 20 62 1,687 1,556 4,026 37,041 Subordinated liab il it ies and other borrowed funds – – 11 – 11 21 73 11,338 11,454 Total liab il it ies 304,471 73,529 31,222 15,443 11,825 17,561 21,960 28,624 504,635 Net liqu id ity gap (123,778) 23,425 11,507 8,842 10,863 13,221 33,123 56,741 33,944 1 Loans and advances, investment securit ies, depos its by banks, customer accounts and debt securit ies in issue include ﬁnanc ial instruments held at fair value through proﬁt or loss, see Note 12 Financ ial instruments 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $83.6 bill ion 3 Deposits by banks include repurchase agreements and other sim ilar secured borrow ing of $5.0 bill ion 4 Customer accounts include repurchase agreements and other sim ilar secured borrow ing of $46.5 bill ion 5 Senior debt maturity proﬁles are based upon contractual maturity, which may be later than call options over the debt held by the Group Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 114 Risk proﬁle continued 2022 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Assets Cash and balances at central banks 47,025 – – – – – – 3,506 50,531 Derivat ive ﬁnancial instruments 24,108 9,640 7,304 3,704 2,830 5,225 7,495 4,744 65,050 Loans and advances to banks 1,2 18,066 12,200 9,227 4,253 3,588 2,577 972 635 51,518 Loans and advances to customers 1,2 59,599 44,981 20,247 6,999 7,248 9,746 19,212 33,216 201,248 Investment securit ies¹ 6,620 13,802 12,948 6,868 5,624 10,726 29,709 42,028 128,325 Other assets 12,388 28,182 1,066 170 529 89 23 5,228 47,675 Due from subsid iary undertakings and other related parties 6,387 – – – – – – – 6,387 Total assets 174,193 108,805 50,792 21,994 19,819 28,363 57,411 89,357 550,734 Liab il it ies Deposits by banks 1,3 24,747 1,858 2,163 821 329 1,236 112 6 31,272 Customer accounts 1,4 216,605 39,600 17,394 8,766 6,107 5,510 1,350 155 295,487 Derivat ive ﬁnancial instruments 22,946 13,624 7,310 4,059 3,085 5,880 6,689 5,265 68,858 Senior debt⁵ 96 308 234 395 399 2,481 5,050 3,704 12,667 Other debt securit ies in issue 1 2,686 4,870 7,369 6,297 2,710 342 4,413 3,191 31,878 Due to parent companies and other related undertakings 28,102 – – – – – – – 28,102 Other liab il it ies 12,243 19,257 581 63 46 212 792 1,864 35,058 Subordinated liab il it ies and other borrowed funds 2,000 – 9 – 11 21 55 11,173 13,269 Total liab il it ies 309,425 79,517 35,060 20,401 12,687 15,682 18,461 25,358 516,591 Net liqu id ity gap (135,232) 29,288 15,732 1,593 7,132 12,681 38,950 63,999 34,143 1 Loans and advances, investment securit ies, depos its by banks, customer accounts and debt securit ies in issue include ﬁnanc ial instruments held at fair value through proﬁt or loss, see Note 12 Financ ial instruments 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $78.8 bill ion 3 Deposits by banks include repurchase agreements and other sim ilar secured borrow ing of $6.5 bill ion 4 Customer accounts include repurchase agreements and other sim ilar secured borrow ing of $45.8 bill ion 5 Senior debt maturity proﬁles are based upon contractual maturity, which may be later than call options over the debt held by the Group Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 115 Risk proﬁle continued Company 2023 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between ix months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Assets Cash and balances at central banks 51,446 – – – – – – 1,312 52,758 Derivat ive ﬁnancial instruments 12,441 10,666 6,527 3,491 2,867 4,842 7,113 5,274 53,221 Loans and advances to banks 1,2 12,528 10,389 4,157 2,431 1,675 1,431 2,082 1,097 35,790 Loans and advances to customers 1,2 39,724 18,061 16,415 7,159 6,593 9,930 9,456 12,560 119,898 Investment securit ies 1 3,575 9,204 8,090 7,419 7,179 10,918 27,202 35,926 109,513 Investment in subsid iary undertaking – – – – – – – 10,066 10,066 Other assets 7,634 15,125 615 183 253 12 35 2,993 26,850 Due from subsid iary undertakings and other related parties 10,053 – – – – – – – 10,053 Total assets 137,401 63,445 35,804 20,683 18,567 27,133 45,888 69,228 418,149 Liab il it ies Deposits by banks 1,3 17,512 1,140 1,035 500 571 1,179 2,488 – 24,425 Customer accounts 1,4 129,023 22,499 11,447 4,496 3,020 3,905 2,221 216 176,827 Derivat ive ﬁnancial instruments 12,638 11,984 6,225 3,710 2,969 5,207 7,506 5,292 55,531 Senior debt 5 44 990 1,214 758 448 3,711 5,851 4,284 17,300 Other debt securit ies in issue 1 2,876 4,813 4,810 2,921 1,754 1,688 3,191 4,941 26,994 Due to parent companies and other related undertakings 47,317 – – – – – – – 47,317 Other liab il it ies 10,851 13,610 168 6 23 1,535 1,323 690 28,206 Subordinated liab il it ies and other borrowed funds – 12 28 4 28 93 214 10,517 10,896 Total liab il it ies 220,261 55,048 24,927 12,395 8,813 17,318 22,794 25,940 387,496 Net liqu id ity gap (82,860) 8,397 10,877 8,288 9,754 9,815 23,094 43,288 30,653 1 Loans and advances, investment securit ies, depos its by banks, customer accounts and debt securit ies in issue include ﬁnanc ial instruments held at fair value through proﬁt or loss, see Note 12 Financ ial instruments 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $77.6 bill ion 3 Deposits by banks include repurchase agreements and other sim ilar secured borrow ing of $4.8 bill ion 4 Customer accounts include repurchase agreements and other sim ilar secured borrow ing of $46.3 bill ion 5 Senior debt maturity proﬁles are based upon contractual maturity, which may be later than call options over the debt held by the Group Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 116 Risk proﬁle continued 2022 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Assets Cash and balances at central banks 37,547 – – – – – – 1,320 38,867 Derivat ive ﬁnancial instruments 15,479 11,486 7,889 4,292 3,242 6,339 9,639 7,115 65,481 Loans and advances to banks 1,2 13,015 9,713 7,658 3,566 2,940 2,192 865 635 40,584 Loans and advances to customers 1,2 42,655 21,176 16,742 5,804 4,208 7,421 12,292 11,367 121,665 Investment securit ies¹ 3,894 7,049 10,294 6,204 4,393 8,883 26,789 40,568 108,074 Investment in subsid iary undertaking – – – – – – – 10,300 10,300 Other assets 11,274 22,523 550 49 350 86 15 2,693 37,540 Due from subsid iary undertakings and other related parties 13,214 – – – – – – – 13,214 Total assets 137,078 71,947 43,133 19,915 15,133 24,921 49,600 73,998 435,725 Liab il it ies Deposits by banks 1,3 18,814 1,472 2,108 818 302 1,063 106 5 24,688 Customer accounts 1,4 135,238 28,308 13,749 5,195 2,426 3,287 1,087 144 189,434 Derivat ive ﬁnancial instruments 15,644 15,056 7,836 4,502 3,516 7,065 8,827 6,757 69,203 Senior debt⁵ 45 228 80 360 338 2,272 4,992 3,685 12,000 Other debt securit ies in issue 1 2,633 4,332 7,184 6,297 2,544 342 4,413 2,518 30,263 Due to parent companies and other related undertakings 39,933 – – – – – – – 39,933 Other liab il it ies 10,604 13,856 563 56 42 128 442 813 26,504 Subordinated liab il it ies and other borrowed funds 2,000 – 9 – 11 21 55 10,633 12,729 Total liab il it ies 224,911 63,252 31,529 17,228 9,179 14,178 19,922 24,555 404,754 Net liqu id ity gap (87,833) 8,695 11,604 2,687 5,954 10,743 29,678 49,443 30,971 1 Loans and advances, investment securit ies, depos its by banks, customer accounts and debt securit ies in issue include ﬁnanc ial instruments held at fair value through proﬁt or loss, see Note 12 Financ ial instruments 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $74.3 bill ion 3 Deposits by banks include repurchase agreements and other sim ilar secured borrow ing of $6.2 bill ion 4 Customer accounts include repurchase agreements and other sim ilar secured borrow ing of $45.7 bill ion 5 Senior debt maturity proﬁles are based upon contractual maturity, which may be later than call options over the debt held by the Group Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 117 Risk proﬁle continued Behavioural maturity of ﬁnanc ial assets and l iab il it ies The cashﬂows presented in the previous section reﬂect the cashﬂows that will be contractually payable over the residual maturity of the instruments. However, contractual maturit ies do not necessar ily reﬂect the tim ing of actual repayments or cashﬂow. In practice, certain assets and liab il it ies behave d ifferently from their contractual terms, especially for short-term customer accounts, credit card balances and overdrafts, which extend to a longer period than their contractual maturity. On the other hand, mortgage balances tend to have a shorter repayment period than their contractual maturity date. Expected customer behaviour is assessed and managed on a country basis using qualitat ive and quant itat ive techn iques, includ ing analysis of observed customer behaviour over time. Maturity of ﬁnanc ial l iab il it ies on an und iscounted basis The following table analyses the contractual cashﬂows payable for the Group’s ﬁnanc ial l iab il it ies by rema in ing contractual maturit ies on an und iscounted basis. The ﬁnanc ial l iab il ity balances in the table below will not agree to the balances reported in the consolidated balance sheet as the table incorporates all contractual cashﬂows, on an undiscounted basis, relating to both princ ipal and interest payments. Derivat ives not treated as hedg ing derivat ives are included in the ‘On demand’ time bucket and not by contractual maturity. With in the ‘More than ﬁve years and undated’ matur ity band are undated ﬁnanc ial l iab il it ies, the majority of wh ich relate to subordinated debt, on which interest payments are not included as this informat ion would not be mean ingful, given the instruments are undated. Interest payments on these instruments are included with in the relevant matur it ies up to ﬁve years. Group 2023 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Deposits by banks 21,997 1,643 1,102 512 604 1,245 2,845 4 29,952 Customer accounts 220,861 34,791 17,728 7,905 6,238 5,100 2,663 248 295,534 Derivat ive ﬁnancial instruments 53,511 487 11 2 48 90 438 586 55,173 Debt securit ies in issue 3,148 6,277 6,727 4,034 2,795 5,408 9,802 8,553 46,744 Due to parent companies and other related undertakings 31,166 – – – – – – – 31,166 Subordinated liab il it ies and other borrowed funds 47 79 146 154 146 572 1,743 17,558 20,445 Other liab il it ies 7,613 19,995 213 21 66 1,689 1,556 2,786 33,939 Total liab il it ies 338,343 63,272 25,927 12,628 9,897 14,104 19,047 29,735 512,953 2022 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Deposits by banks 24,752 1,864 2,192 825 342 1,258 112 8 31,353 Customer accounts 216,983 39,828 17,625 8,934 6,297 5,585 1,396 158 296,806 Derivat ive ﬁnancial instruments 66,772 28 5 6 6 763 547 731 68,858 Debt securit ies in issue 2,801 5,204 7,811 6,836 3,257 2,329 10,072 11,544 49,854 Due to parent companies and other related undertakings 28,102 – – – – – – – 28,102 Subordinated liab il it ies and other borrowed funds 2,074 64 127 135 127 499 1,496 16,038 20,560 Other liab il it ies 10,961 20,402 577 61 44 203 650 954 33,852 Total liab il it ies 352,445 67,390 28,337 16,797 10,073 10,637 14,273 29,433 529,385 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 118 Risk proﬁle continued Company 2023 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Deposits by banks 17,515 1,143 1,049 509 581 1,181 2,487 – 24,465 Customer accounts 129,577 22,647 11,602 4,637 3,128 4,081 2,426 230 178,328 Derivat ive ﬁnancial instruments 53,886 487 11 2 48 89 422 586 55,531 Debt securit ies in issue 2,961 5,830 6,145 3,770 2,301 6,021 9,755 9,383 46,166 Due to parent companies and other related undertakings 47,317 – – – – – – – 47,317 Subordinated liab il it ies and other borrowed funds 47 79 146 154 146 572 1,717 15,920 18,781 Other liab il it ies 6,425 13,573 168 6 23 1,535 1,323 2,343 25,396 Total liab il it ies 257,728 43,759 19,121 9,078 6,227 13,479 18,130 28,462 395,984 2022 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Deposits by banks 18,818 1,477 2,137 822 314 1,086 106 5 24,765 Customer accounts 135,456 28,477 13,933 5,309 2,532 3,349 1,122 139 190,317 Derivat ive ﬁnancial instruments 67,115 28 5 6 6 763 543 737 69,203 Debt securit ies in issue 2,696 4,586 7,467 6,799 3,026 2,904 10,014 6,348 43,840 Due to parent companies and other related undertakings 39,933 – – – – – – – 39,933 Subordinated liab il it ies and other borrowed funds 2,074 64 127 135 127 499 1,496 15,498 20,020 Other liab il it ies 10,174 14,183 563 56 42 128 442 520 26,108 Total liab il it ies 276,266 48,815 24,232 13,127 6,047 8,729 13,723 23,247 414,186 Interest Rate Risk in the Banking Book The following table provides the estimated impact to a hypothetical base case project ion of the Group’s earn ings under the following scenarios: • A 50 basis point parallel interest rate shock (up and down) to the current market-impl ied path of rates, across all yield curves • A 100 basis point parallel interest rate shock (up and down) to the current market-impl ied path of rates, across all yield curves These interest rate shock scenarios assume all other economic variables remain constant. The sensit iv it ies shown represent the estimated change to a hypothetical base case projected net interest income (NII), plus the change in interest rate impl ied income and expense from FX swaps used to manage banking book currency posit ions, under the d ifferent interest rate shock scenarios. The base case projected NII is based on the current market-impl ied path of rates and forward rate expectat ions. The NII sensit iv it ies below stress th is base case by a further 50 or 100bps. Actual observed interest rate changes will lag behind market expectation. Accordingly, the shocked NII sensit iv ity does not represent a forecast of the Group’s net interest income. The interest rate sensit iv it ies are ind icat ive stress tests and based on simpl iﬁed scenar ios, estimat ing the aggregate impact of an unantic ipated, instantaneous parallel shock across all yield curves over a one-year horizon, includ ing the t ime taken to implement changes to pric ing before becom ing effective. The assessment assumes that the size and mix of the balance sheet remain constant and that there are no specif ic management act ions in response to the change in rates. No assumptions are made in relation to the impact on credit spreads in a changing rate environment. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 119 Risk proﬁle continued Sign iﬁcant modell ing and behavioural assumptions are made regarding scenario simpl iﬁcation, market compet it ion, pass- through rates, asset and liab il ity re-pric ing tenors, and pr ice ﬂooring. In particular, the assumptions that interest rates of all currencies and maturit ies sh ift by the same amount concurrently, and that no actions are taken to mit igate the impacts aris ing from th is are considered unlikely. Reported sensit iv it ies w ill vary over time due to a number of factors includ ing changes in balance sheet composit ion, market cond it ions, customer behav iour and risk management strategy. Therefore, while the NII sensit iv it ies are a relevant measure of the Group’s interest rate exposure, they should not be considered an income or proﬁt forecast. Estimated one-year impact to earnings from a parallel shift in yield curves at the beginn ing of the per iod of: 2023 USD bloc $mill ion SGD bloc $mill ion Other currency bloc $mill ion Total $mill ion + 50 basis points 70 50 140 260 - 50 basis points (100) (50) (150) (300) + 100 basis points 150 100 260 510 - 100 basis points (190) (100) (290) (580) Estimated one-year impact to earnings from a parallel shift in yield curves at the beginn ing of the per iod of: 2022 USD bloc $mill ion SGD bloc $mill ion Other currency bloc $mill ion Total $mill ion + 50 basis points 70 40 120 230 - 50 basis points (70) (40) (110) (220) + 100 basis points 130 90 240 460 As at 31 December 2023, the Group estimates the one-year impact of an instantaneous, parallel increase across all yield curves of 50 basis points to increase projected NII by $260 mill ion. The equ ivalent impact from a parallel decrease of 50 basis points would result in a reduction in projected NII of $300 mill ion. The Group est imates the one-year impact of an instantaneous, parallel increase across all yield curves of 100 basis points to increase projected NII by $510 mill ion. The equivalent impact from a parallel decrease of 100 basis points would result in a reduction in projected NII of $580 mill ion. The beneﬁt from ris ing interest rates is primar ily from re invest ing at h igher yields and from assets re-pric ing faster and to a greater extent than deposits. NII sensit iv ity in falling rate scenarios has increased versus 31 December 2022, due to changes in modelling assumptions to reﬂect expected re-pric ing act iv ity on Reta il and Transaction Banking current accounts and savings accounts in the current interest rate environment. Operational and Technology Risk The Bank deﬁnes Operational and Technology risk as the potential for loss from inadequate or failed internal processes, technology events, human error, or from the impact of external events (includ ing legal r isks). Operational and Technology risk may occur anywhere in the Bank, includ ing th ird-party processes. Operational and Technology risk proﬁle Risk management practices help the business grow safely and ensure governance and management of Operational and Technology risk through the delivery and embedding of effective frameworks and polic ies, together w ith continuous oversight and assurance. Managing Operational and Technology risk makes the Bank more efﬁc ient and enables it to offer better, sustainable service to its customers. The Bank’s Operational and Technology Risk Type Framework (‘O&T RTF’) is designed to enable the Bank to govern, ident ify, measure, mon itor and test, manage and report on its Operational and Technology risks. The Bank continues to ensure the O&T RTF supports the business and functions in effectively managing risk and controls with in r isk appetite to meet their strategic object ives. The Bank has demonstrated progress on ensuring vis ib il ity of r isks and risk management through implementat ion of a standardised risk taxonomy. Standardis ing the r isk taxonomy enables improved risk aggregation and reporting and provides opportunit ies for s impl ify ing the process of risk ident iﬁcation and assessment. A rev ised Process Universe along with taxonomies for causes and controls have been designed and will be implemented in 2024, with control categories supporting the streamlin ing and removal of dupl icate controls, reducing complexity, and improv ing r isk and control management. Macro processes will provide a client-centric view and enable clearer accountabil ity for del ivery as well as management of risks in line with business object ives. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 120 Risk proﬁle continued Operational and Technology risk is elevated in areas such as Information and Cyber Security, Data Management and Transaction Processing. Other key areas of focus are Change, Systems Health/Technology risk, Third Party risk, Resil ience and Regulatory Compliance. Management has focused on addressing these areas, improv ing the susta inable operating environment and has in it iated a number of programmes to enhance the control environment. The Bank continues to monitor and manage Operational and Technology risks associated with the external environment such as geopolit ical factors and the increas ing r isk of cyber-attacks. Dig ital isat ion and inappropr iate use of Art if ic ial Intelligence, various regulatory expectations across our footprint and the changing technology landscape remain key emerging areas to manage, allowing the Bank to keep pace with new business developments, whilst ensuring that risk and control frameworks evolve accordingly. The Bank continues to strengthen its risk management to understand the full spectrum of risks in the operating environment, enhance its defences and improve resil ience. Operational and Technology risk events and losses Operational losses are one ind icator of the effect iveness and robustness of the non-ﬁnanc ial r isk control environment. The Bank’s proﬁle of operational loss events in 2023 and 2022 is summarised in the table below, which shows the distr ibut ion of gross operational losses by Basel business line. Distr ibut ion of Operational Losses by Basel business line % Loss 2023 2022 1 Agency Services 1.1% 3.5% Asset Management 0.0% 0.9% Commercial Banking 9.0% 10.3% Corporate Finance 8.7% 1.4% Corporate Items 43.7% 3.1% Payment and Settlements 12.0% 50.4% Retail Banking 15.2% 12.1% Retail Brokerage 0.0% 0.0% Trading and Sales 10.2% 18.3% 1 Losses in 2022 have been restated to include incremental events recognised in 2023 The Bank’s proﬁle of operational loss events in 2023 and 2022 is also summarised by Basel event type in the table below. It shows the distr ibut ion of gross operational losses by Basel event type. Distr ibut ion of Operational Losses by Basel event type % Loss 2023 2022 1 Business disrupt ion and system fa ilures 7.1% 3.1% Clients’ products and business practices 1.3% 6.6% Damage to physical assets 0.0% 0.0% Employment practices and workplace safety 0.0% 0.2% Execution delivery and process management 78.8% 84.1% External fraud 12.5% 4.9% Internal fraud 0.2% 1.1% 1 Losses in 2022 have been restated to include incremental events recognised in 2023 Other princ ipal r isks Losses aris ing from operat ional failures for other princ ipal and integrated risks are reported as operational losses. Operational losses do not include operational risk-related credit impa irments. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 121 Risk proﬁle continued Risk Management Framework Risk management is at the heart of banking, it is what we do. Managing risk effectively is how we drive commerce and prosperity for our clients and our communit ies, and it is how we grow sustainably and proﬁtably as an organisat ion. Effective risk management is essential in deliver ing cons istent and sustainable performance for all our stakeholders and is a central part of the ﬁnancial and operat ional management of the Group. The Group adds value to clients and the communit ies in which they operate by balancing risk and reward to generate returns for shareholders. The Risk Management Framework (RMF) enables the Group to manage enterprise-wide risks, with the object ive of maxim is ing risk-adjusted returns while remain ing w ith in our R isk Appetite (RA). The RMF has been designed in accordance with the PLC Group’s Enterprise Risk Management Framework (ERMF), and is reviewed annually. The latest version is effective from January 2024. Annual review In the 2023 review, the concepts of Integrated Risk Types (IRTs) and IRT Owner roles were discont inued. Overs ight on IRTs, i.e. Climate Risk, Dig ital Assets and Th ird Party Risk, is provided through the Risk Type Frameworks (RTFs) and relevant dedicated polic ies. The subject matter experts as pol icy owners for these risks provide overall governance and a holist ic v iew of how risks are monitored and managed across the Princ ipal R isk Types (PRTs). Risk culture Risk culture encompasses our general awareness, attitudes, and behaviours towards risk, as well as how risk is managed at enterprise level. A healthy risk culture is one in which everyone takes personal responsib il ity to ident ify and assess, openly d iscuss, and take prompt action to address exist ing and emerg ing risks. We expect those in our control functions to provide oversight and challenge constructively, collaboratively, and in a timely manner. This effort is reﬂected in our valued behaviours, underpinned by our Code of Conduct and Ethics, and reinforced by how we hire, develop, reward our people, serve our clients, and contribute to communit ies around the world. The risks we face constantly evolve, and we must always look for ways to manage them as effectively as possible. While unfavourable outcomes will occur from time to time, a healthy risk culture means that we react quickly and transparently. We can then take the opportunity to learn from our experience and improve our framework and processes. Strategic risk management The Group’s approach to strategic risk management includes the following: • Risk ident iﬁcation: impact analyses of risks that arise from the Group’s growth plans, strategic in it iat ives, and bus iness model vulnerabil it ies are reviewed. This assesses how exist ing r isks have evolved in terms of relative importance or whether new risks have emerged. • Risk Appetite: impact analysis is performed to assess if strategic in it iat ives can be ach ieved with in RA and h ighl ight areas where addit ional RA should be cons idered. • Stress Testing: the risks highl ighted dur ing the strategy review and other risk ident iﬁcation processes are used to develop scenarios for enterprise stress tests. In order to ensure that the Group’s Strategy remains with in the approved RA, the Group Chief Risk Ofﬁcer (GCRO) and Group Chief Financ ial Ofﬁcer (GCFO) recommend strateg ic actions based on the stress test results. Roles and responsib il it ies Senior Managers Regime 1 Roles and responsib il it ies under the RMF are al igned to the object ives of the Sen ior Managers Regime (SMR). The GCRO is responsible for the overall development and maintenance of the Group’s RMF and for ident ify ing material risks which the Group may be exposed to. The GCRO delegates effective implementat ion of the RTFs to R isk Framework Owners (RFO) who provide second line of defence oversight for their respective PRTs. In addit ion, the GCRO is the senior manager responsible for the development of the Group’s Dig ital Assets R isk Assessment Approach, and management of Climate Risk. 1 Senior managers refers to ind iv iduals designated as senior management functions under the FCA and PRA Senior Managers Regime. 1 Senior managers refer to ind iv iduals designated as senior management functions under the FCA and PRA Senior Managers Regime (SMR). Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 122 Risk proﬁle continued The Risk function The Risk function provides oversight and challenge on the Group’s risk management, ensuring that business is conducted in line with regulatory expectations. The GCRO directly manages the Risk function, which is independent from the orig inat ion, trading, and sales functions of the businesses. The Risk function is responsible for: • Determin ing the RA for approval by Group’s Management Team (GMT) and the Court. • Mainta in ing the ERMF, ensuring that it remains relevant and appropriate to the Group’s business activ it ies, and is effectively communicated and implemented across the Group. • Upholding the overall integr ity of the Group’s r isk and return decis ions ensur ing that the risks are properly assessed, risk and return decis ions are transparently and that r isks are controlled in accordance with the PLC Group’s standards and RA. • Overseeing and challenging the management of PRTs under the ERMF. • Ensuring that the necessary balance in making risk and return decis ions is not compromised by short-term pressures to generate revenues through the independence of the Risk function. In addit ion, the R isk function provides special ist capab il it ies relevant to risk management processes in the broader organisat ion. The Risk function supports the Group’s strategy by build ing a susta inable RMF that places regulatory and compliance standards, together with culture of appropriate conduct, at the forefront of the Group’s agenda. Our Conduct, Financ ial Cr ime and Compliance (CFCC) function works alongside the Risk function with in the RMF to del iver a unif ied second l ine of defence. Three lines of defence model The Group applies a three line of defence model to its day-to-day activ it ies for effective risk management, and to reinforce a strong governance and control environment. Typically: • The businesses and functions engaged in or supporting revenue generating activ it ies that own and manage the risks constitute the ﬁrst line of defence. • The control functions, independent of the ﬁrst line of defence, that provide oversight and challenge of risk management activ it ies act as the second line of defence. • Internal Audit acts as the third line of defence provid ing independent assurance on the effectiveness of controls supporting the activ it ies of the ﬁrst and second line of defence functions. Risk Appetite and proﬁle The Group recognises the following constraints which determine the risks that we are will ing to take in pursuit of our strategy and the development of a sustainable business: • Risk capacity is the maximum level of risk the Group can assume, given its current capabil it ies and resources, before breaching constraints determined by capital and liqu id ity requirements or the internal operational environment, or otherwise fail ing to meet the expectat ions of regulator and law enforcement agencies. • RA is deﬁned by the Group and approved by the Court. It is the boundary for the risk that the Group is will ing to undertake to achieve its strategic object ives and Corporate Plan. The Court is responsible for approving the RA Statements, which are underpinned by a set of ﬁnanc ial and operat ional control parameters known as RA metrics and their associated thresholds. These directly constrain the aggregate risk exposures that can be taken across the Group. The Group RA is reviewed at least annually to ensure that it is ﬁt for purpose and aligned with strategy, with focus given to new or emerging risks. Risk Appetite framework The RA is deﬁned in accordance with risk management princ iples that inform our overall approach to risk management and our risk culture. We set RA to enable us to grow sustainably whilst managing our risks, giv ing conﬁdence to our stakeholders. The RA is supplemented by risk control tools such as granular-level lim its, pol ic ies, standards, and other operat ional control parameters that are used to mainta in the Group’s r isk proﬁle with in approved RA. Risk Appetite statement “The Group will not compromise adherence to its Risk Appetite in order to pursue revenue growth or higher returns”. See Table 1 for the set of RA statements. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 123 Risk proﬁle continued Risk ident iﬁcation and assessment Identif icat ion and assessment of potentially adverse risk events is an essential ﬁrst step in managing the risks of any business or activ ity. To ensure cons istency in communicat ion, we use PRTs to class ify our risk exposures. We also recognise the need to mainta in a hol ist ic perspect ive since: • a single transaction or activ ity may g ive rise to multiple types of risk exposure; • risk concentrations may arise from multiple exposures that are closely correlated; and • a given risk exposure may change its form from one risk type to another. There are also sources of risk that arise beyond our own operations, such as the Group’s dependency on suppliers for the provis ion of serv ices and technology. As the Group remains accountable for risks aris ing from the act ions of such third parties, failure to adequately monitor and manage these relationsh ips could mater ially impact the Group’s abil ity to operate. The Group leverages the PLC Group’s dynamic risk-scanning process with inputs on the internal and external risk environment, as well as potential threats and opportunit ies from the bus iness and client perspectives. The Group mainta ins a taxonomy of the PRTs, and risk sub-types; as well as the Topical and Emerging Risks (TERs) inventory that includes near-term as well as longer-term uncertaint ies. R isk assessments of planned growth and strategic in it iat ives aga inst the Group’s RA is undertaken annually. The GCRO and the Standard Chartered Bank (SCB ERC) regularly review reports on the risk proﬁle for the PRTs, adherence to Group RA and the Group risk inventory, includ ing TERs. They use th is informat ion to escalate mater ial developments and make recommendations to the Court annually on any potential changes to our Corporate Plan. Stress testing The objective of stress test ing is to support the PLC Group in assessing that it: • does not have a portfolio with excessive risk concentration that could produce unacceptably high losses under severe but plausible scenarios; • has sufﬁcient ﬁnancial resources to w ithstand severe but plausible scenarios; • has the ﬁnancial ﬂex ib il ity to respond to extreme but plausible scenarios; • understands key business model risks and considers what kind of event might crystallise those risks – even if extreme and with a low likel ihood of occurr ing; • Identify, as required, actions to mit igate the l ikel ihood or impact of those events; • considers how the outcome of plausible stress events, includ ing TERs, may impact availab il ity of liqu id ity and regulatory capital; and • has set RA metrics at appropriate levels. The PLC Group enterprise stress tests incorporate Capital and Liqu id ity Adequacy Stress Tests, includ ing recovery and resolution, as well as reverse stress tests. Stress tests are performed at PLC Group, Solo, country, business, and portfolio level under a wide range of risks and at varying degrees of severity. Based on the stress test results, the GCFO and GCRO can recommend strategic actions to the Court to ensure that the Group’s strategy remains with in RA. In addit ion, analys is is run at PRT level to assess specif ic r isks and concentrations that the Group may be exposed to. These include qualitat ive assessments such as stress ing of credit sectors or portfolios, measures such as Value at Risk (VaR) and multi-factor scenarios in Traded Risk and internal stressed liqu id ity metrics. Non-ﬁnanc ial r isk types are also stressed to assess the necessary capital requirements under the Operational & Technology RTF. The PLC Group has also undertaken a number of Climate Risk stress tests, both those mandated by regulators as well as management scenarios. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 124 Risk proﬁle continued Princ ipal R isk Types PRTs are those risks that are inherent in our strategy and business model and have been formally deﬁned in the Group’s RMF. These risks are managed in line with the PLC Group’s RTFs which are cascaded to the Group. The PRTs and associated RA Statements are approved by the Court, and reviewed annually. The table below shows the Group’s current PRTs. Table 1: Princ ipal R isk Types Deﬁn it ion and RA Statement Princ ipal R isk Types Deﬁnit ion Risk Appetite Statement Credit Risk Potential for loss due to failure of a counterparty to meet its agreed obligat ions to pay the Group. The Group manages its credit exposures following the princ iple of d ivers iﬁcation across products, geograph ies, client segments and industry sectors. Traded Risk Potential for loss resulting from activ it ies undertaken by the Group in ﬁnanc ial markets. The Group should control its ﬁnanc ial markets and act iv it ies to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Treasury Risk Potential for insuff ic ient capital, liqu id ity, or funding to support our operations, the risk of reductions in earnings or value from movements in interest rates impact ing bank ing book items and the potential for losses from a shortfall in the Group’s pension plans. Indiv idual regulated ent it ies w ith in the Group should mainta in sufﬁcient cap ital, liqu id ity and funding to support its operations, and an interest rate proﬁle ensuring that the reductions in earnings or value from movements in interest rates impact ing bank ing book items does not cause material damage to their franchise. In addit ion, they should ensure that their pension plans are adequately funded. Operational and Technology Risk Potential for loss resulting from inadequate or failed internal processes, technology events, human error, or from the impact of external events (includ ing legal risks). The Group aims to control operational and technology risks to ensure that operational losses (ﬁnanc ial or reputat ional), includ ing any related to conduct of bus iness matters, do not cause material damage to the Group’s or PLC Group’s franchise. Financ ial Cr ime Risk 1 Potential for legal or regulatory penalties, material ﬁnancial loss or reputat ional damage resulting from the failure to comply with applicable laws and regulations relating to internat ional sanct ions, anti-money laundering and anti-bribery and corruption, and fraud. The Group has no appetite for breaches in laws and regulations related to Financ ial Cr ime, recognis ing that whilst inc idents are unwanted, they cannot be ent irely avoided. Compliance Risk Potential for penalties or loss to the Group or for an adverse impact to our clients, stakeholders or to the integr ity of the markets we operate in through a failure on our part to comply with laws, or regulations. The Group has no appetite for breaches in laws and regulations related to regulatory non-compliance; recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Information and Cyber Security Risk Risk to the Group’s assets, operations, and ind iv iduals due to the potential for unauthorised access, use, disclosure, disrupt ion, mod if icat ion, or destruction of informat ion assets and/or informat ion systems. The Group aims to mit igate and control ICS r isks to ensure that inc idents do not cause the Bank mater ial harm, business disrupt ion, ﬁnancial loss or reputat ional damage – recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Reputational and Sustainab il ity Risk Potential for damage to the franchise (such as loss of trust, earnings or market capital isat ion), because of stakeholders taking a negative view of the Group through actual or perceived actions or inact ions, includ ing a fa ilure to uphold responsible business conduct as we strive to do no sign iﬁcant environmental and social harm through our client, third party relationsh ips, or our own operat ions. The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activ ity is satisfactor ily assessed and managed w ith the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striv ing to do no s ign iﬁcant environmental and social harm. Model Risk Potential loss that may occur because of decis ions or the risk of mis-estimat ion that could be pr inc ipally based on the output of models, due to errors in the development, implementat ion, or use of such models. The Group has no appetite for material adverse impl icat ions aris ing from m isuse of models or errors in the development or implementat ion of models; wh ilst accepting some model uncertainty. 1 Fraud forms part of the Financ ial Cr ime RA Statement but in line with market practice does not apply a zero-tolerance approach In addit ion, there is a RA statement for Climate Risk: “The Group aims to measure and manage ﬁnanc ial and non-ﬁnancial risks aris ing from cl imate change, and reduce emiss ions related to our own act iv it ies and those related to the ﬁnanc ing of clients in alignment with the Paris Agreement.” Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 125 Risk proﬁle continued RMF effectiveness reviews Effectiveness review of the RMF is managed as part of the PLC Group ERMF effectiveness review. At Group level, a self- assessment is conducted to assess the overall effectiveness of the RMF, and the results are taken into considerat ion in the ERMF effectiveness review. The GCRO is responsible for annually afﬁrm ing the effect iveness of the RMF to the Court Risk Committee (CRC). The ERMF effectiveness review enables measurement of year-on-year progress. Ongoing effectiveness reviews allow for a structured approach to ident ify improvement opportunit ies and bu ild plans to address them. In 2024, the Group aims to further strengthen its risk management practices by improv ing the management of non-ﬁnancial risks with in its businesses, functions and across our footprint. Executive and Court risk oversight Overview The Court comprises of the major ity of the independent non-executive directors from the PLC Board, executive directors from the PLC Board as well as an executive director and non-executive director who are appointed solely to the Court with the specif ic purpose of prov id ing independent decis ion mak ing at the Court meetings. Court and Executive level risk committee governance structure The Committee governance structure below presents the view as of 2023. COURT COURT LEVEL COMMITTEES¹ Court Risk Committee Court Audit Committee Combined United States Operations and Risk Committee (US Risk Committee) Court Nominat ion Committee 1 The Court also has a Standing Committee with a remit to approve matters, on behalf of the Court, where a formal resolution is required for legal and regulatory purposes Court Risk Committee: The CRC is concerned with the oversight and review of princ ipal r isks. Court Audit Committee: The Court Audit Committee is concerned with the oversight and review of ﬁnanc ial, aud it, internal control and non-ﬁnanc ial crime issues. Combined United States Operations and Risk Committee (US Risk Committee): The US Risk Committee is required to meet the requirements of the Dodd-Frank Act Section 165 Enhanced Prudential Standard Final Rules as released by the Federal Reserve Bank. It has prescribed responsib il it ies in relation to overseeing the United States ERMF, approving and overseeing the implementat ion of the r isk management polic ies and also spec if ic rev iew and approval responsib il it ies in relation to liqu id ity risk management. Membership of the Committee is comprised of directors of the Company or PLC Group, includ ing at least one independent non-executive director and one with sign iﬁcant r isk management experience. The Group has two management level committees, namely the Standard Chartered Bank Executive Risk Committee (SCB ERC) and Solo & Standard Chartered Bank UK (Branch) Asset and Liab il ity Management Committee (Solo & SCB ALCO). Standard Chartered Bank Executive Risk Committee SCB ERC is responsible for ensuring the effective management of risk throughout the Group in support of the Group’s strategy. The GCRO chairs the Committee, whose members are drawn from the GMT. The Committee oversees the implementat ion of the Standard Chartered Bank RMF, includ ing the delegat ion of any part of its authorit ies to appropr iate ind iv iduals or properly constituted sub-committees. SCB ERC relies on jo int meet ings with the PLC Group Risk Committee and its sub- committees to provide oversight of the PRTs across clients, businesses, products and functions. The Committee requests and receives relevant informat ion to fulﬁl its governance mandates relating to the risks to which the Group is exposed, and alerts Senior/Executive management when risk reports do not meet its requirements. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 126 Risk proﬁle continued Solo & Standard Chartered Bank UK (Branch) Asset and Liab il ity Management Committee Solo & SCB ALCO is chaired by the Chief Executive Ofﬁcer (CEO), Corporate, Commercial and Institut ional Bank ing (CCIB), Europe & Americas. The Committee is responsible for determin ing the Group’s approach to balance sheet management and ensuring that, in executing the Group’s strategy, the Group operates with in the internally approved RA and external requirements relating to capital, loss-absorbing capacity, liqu id ity, leverage, Interest Rate Risk in the Banking Book (IRRBB), Banking Book Basis Risk and Structural Foreign Exchange Risk as well as monitor ing the structural impact of decis ions around sustainable ﬁnance, Net Zero and Climate Risk. The Committee is also responsible for ensuring that internal and external recovery planning requirements are met. The SCB ERC and Solo & SCB ALCO receive reports that include informat ion on r isk measures, RA metrics and thresholds, risk concentrations, forward-looking assessments, updates on specif ic r isk situat ions and act ions agreed by these committees to reduce or manage risk. Princ ipal R isks We manage and control our PRTs in line with the PLC Group RTFs, polic ies and RA. Credit Risk The Group deﬁnes Credit Risk as the potential for loss due to failure of a counterparty to meet its agreed obligat ions to pay the Group. Risk Appetite Statement The Group manages its credit exposures following the princ iple of d ivers iﬁcation across products, geograph ies, client segments and industry sectors. Roles and responsib il it ies The Company addenda to the Credit RTF for the Group are set and owned by the Chief Risk Ofﬁcers (CROs) for the respective business segments. The Credit Risk control function is the second line of defence responsible for independent challenge, monitor ing and overs ight of the Credit Risk management practices of the ﬁrst line of defence. In addit ion, they ensure that cred it risks are properly assessed and transparent; and that credit decis ions are controlled in accordance with the Group’s RA, PLC Group’s credit polic ies and standards. Mit igat ion We apply segment-specif ic PLC Group pol ic ies for CCIB and Consumer, Pr ivate and Business Banking (CPBB) for the management of Credit Risk. The Credit Policy for CCIB Client Coverage sets the princ iples that must be followed for the end-to-end credit process, includ ing cred it in it iat ion, cred it grading, credit assessment, product structuring, credit risk mit igat ion, monitor ing and control, and documentat ion. The CPBB Credit Risk Management Policy sets the princ iples for the management of CPBB segments, for end-to-end cred it process includ ing cred it in it iat ion, cred it assessment, documentation and monitor ing for lend ing to these segments. In addit ion, there are other PLC Group-w ide polic ies integral to Credit Risk management such as those relating to RA, Model Risk, Stress Testing, and Impairment Provis ion ing. We also apply the PLC Group standards for the elig ib il ity, enforceab il ity, and effect iveness of Credit Risk mit igat ion arrangements. Potential credit losses from a given account, client or portfolio are mit igated us ing a range of tools, such as collateral, netting agreements, credit insurance, credit derivat ives and guarantees. Risk mit igants are also carefully assessed for the ir market value, legal enforceabil ity, correlat ion, and counterparty risk of the protection provider. Collateral is valued prior to drawdown and regularly thereafter as required, to reﬂect current market condit ions, the probabil ity of recovery and the per iod of time to realise the collateral in the event of liqu idat ion. We also seek to divers ify its collateral holdings across asset classes and markets. Where guarantees, credit insurance, standby letters of credit or credit derivat ives are used as Cred it Risk mit igat ion, the creditworth iness of the protect ion provider is assessed and monitored using the same credit approval process applied to the obligor. Governance committee oversight At Court level, the CRC oversees the effective management of Credit Risk. At the executive level, the SCB ERC is responsible for the management of all risk types includ ing Cred it Risk for the Group, and relies on other key PLC Group committees – in particular the CCIB Risk Committee, CPBB Risk Committee, Asia Risk Committee, and Africa and Middle East Risk Committee. These committees are responsible for overseeing all risk proﬁles includ ing Cred it Risk of the Group with in the respect ive business areas and regions. Meetings are held regularly, and the committees monitor all material Credit Risk exposures, as well as key internal developments and external trends, ensuring that appropriate action is taken where necessary. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 127 Risk proﬁle continued Decis ion-mak ing authorit ies and delegat ion The Credit RTF is the formal mechanism of delegating Credit Risk authorit ies cascad ing from the GCRO, as the Senior Manager of the Credit Risk PRT. The delegation is to ind iv iduals such as the business segments’ CROs. Further delegation of credit authorit ies to ind iv idual credit ofﬁcers may be undertaken based on risk-adjusted scales by customer type or portfolio. The decis ion-mak ing authorit ies and delegat ions are set out at the Group level via the Company addenda to the Credit RTF. Credit Risk authorit ies are rev iewed at least annually to ensure that they remain appropriate. In CCIB Client Coverage, the ind iv iduals delegating the Credit Risk authorit ies perform overs ight by review ing a sample of the l im it appl icat ions approved by the delegated credit ofﬁcers period ically. In CPBB, where cred it decis ion systems and tools (e.g. appl icat ion scorecards) are used for credit decis ion ing, such risk models are subject to performance monitor ing and per iod ic val idat ion. Where manual or discret ionary cred it decis ions are appl ied, the ind iv iduals delegating the Credit Risk authorit ies perform per iod ic qual ity control assessments and assurance checks. Monitor ing We regularly monitor credit exposures, portfolio performance, external trends and emerging risks that may impact risk management outcomes. Internal risk management reports that are presented to risk committees contain informat ion on key polit ical and econom ic trends across major portfolios and countries, portfolio delinquency and loan impa irment performance. In CCIB Client Coverage, clients and portfolios are subject to addit ional rev iew when they display signs of actual or potential weakness; for example, where there is a decline in the client’s posit ion w ith in the industry, ﬁnanc ial deter iorat ion, a breach of covenants, or non-performance of an obligat ion w ith in the st ipulated period. Such accounts are subject to a dedicated process overseen by the Credit Issues Committee in the relevant countries where client account strategies and credit grades are re-evaluated. In addit ion, remed ial actions, includ ing plac ing accounts on early alert for increased scrutiny, exposure reduction, security enhancement or exit ing the account could be undertaken. Certa in accounts could also be transferred into the control management of the Stressed Assets Group (SAG), which is our special ist recovery un it for CCIB Client Coverage that operates independently from our main business. On an annual basis, senior members from Business and Risk partic ipate in a more extensive portfolio review for certain corporate industry groups. In addit ion to a rev iew of the portfolio informat ion, th is enhanced review (known as the industry portfolio review) incorporates industry outlook, key elements of business strategy, RA, credit proﬁle and emerging/horizon risks. A condensed version of these industry portfolio reviews will also be shared with the CCIB Risk Committee. Any material in-country developments that may impact sovereign ratings are monitored closely by the Country Risk Team. The Country Risk Early Warning system, a triage-based risk ident iﬁcation system, categor ises countries based on a forward- looking view of possible downgrades and the potential incremental risk-weighted assets (RWA) impact. For CPBB, exposures and collateral monitor ing are performed at the counterparty and/or portfol io level across different client segments to ensure transactions and portfolio exposures remain with in RA. Portfol io delinquency trends are also monitored. Accounts that are past due (or perceived as high risk but not yet past due) are subject to collections or recovery processes managed by a special ist independent function. In some countries, aspects of collections and recovery activ it ies are outsourced. For discret ionary lend ing portfolios, sim ilar processes to those of CCIB cl ient coverage are followed. In addit ion, an independent Credit Risk Review team (part of ERM function), performs judgement-based assessments of the Credit Risk proﬁles at various portfolio levels. They focus on selected countries and segments through deep dives, comparative analysis, and review and challenge of the basis of credit approvals. The review ensures that the evolving Credit Risk proﬁles of CCIB and CPBB are well managed with in RA and pol ic ies, through forward-look ing mit igat ing actions where necessary. Credit rating and measurement All credit proposals are subject to a robust credit risk assessment. It includes a comprehensive evaluation of the client’s credit quality, includ ing w ill ingness, ab il ity, and capac ity to repay. The primary lending considerat ion is based on the client’s credit quality and the repayment capacity from operating cashﬂows for counterparties, and personal income or wealth for ind iv idual borrowers. The risk assessment gives due considerat ion to the cl ient’s liqu id ity and leverage posit ion. Where applicable, the assessment includes a detailed analysis of the Credit Risk mit igat ion arrangements to determine the level of reliance on such arrangements as the secondary source of repayment in the event of a sign iﬁcant deter iorat ion in a client’s credit quality leading to default. Client income, net worth, and the liqu id ity of asset by class are considered for overall risk assessment for wealth lending. The availab il ity of Wealth Lending credit lim its is subject to the availab il ity of qualif ied collateral. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 128 Risk measurement plays a central role, along with judgement and experience, in inform ing r isk-taking and portfolio management decis ions. We adopt the Advanced Internal Rat ings Based (AIRB) approach under the Basel regulatory framework to calculate Credit Risk capital requirements. The Group has also established a global programme to assess capital requirements necessary to be implemented to meet the latest revised Basel III ﬁnal isat ion (referred to as Basel 3.1 or Basel IV) regulations. A standard alphanumeric Credit Risk grade system is used for CCIB Client Coverage. The numeric grades run from 1 to 14 and some of the grades are further sub-classif ied. Lower numer ic credit grades are ind icat ive of a lower likel ihood of default. Credit grades 1 to 12 are assigned to performing customers, while credit grades 13 and 14 are assigned to non-performing or defaulted customers. CPBB internal ratings-based portfolios use applicat ion and behav ioural credit scores that are calibrated to generate a probabil ity of default. The R isk Decis ion Framework uses a cred it rating system to deﬁne the portfolio/new booking segmentation, shape and decis ion cr iter ia for the unsecured consumer bus iness segment. AIRB models cover a substantial major ity of our exposures and are used in assessing risks at a customer and portfolio level, setting strategy, and optim is ing our risk-return decis ions. The PLC Group Model R isk Committee approves material internal ratings-based risk measurement models. Prior to review and approval, all internal ratings-based models are validated in detail by an independent model validat ion team. Rev iews are also triggered if the performance of a model deteriorates materially against predetermined thresholds during the ongoing model performance monitor ing process, wh ich takes place between the annual validat ions. Credit Concentration Risk Credit Concentration Risk may arise from a single large exposure to a counterparty or a group of connected counterparties, or from multiple exposures across the portfolio that are closely correlated. Large exposure Concentration Risk is managed through concentration lim its set for a counterparty or a group of connected counterpart ies based on control and economic dependence criter ia. RA metr ics are set at portfolio level and monitored to control concentrations, where appropriate, by industry, products, tenor, collateralisat ion level, top cl ients, and exposure to holding companies. Single name credit concentration thresholds are set by client group depending on credit grade, and by customer segment. For concentrations that are material at a Group level, breaches and potential breaches are monitored by the SCB ERC and CRC. Credit impa irment ECL is determined for all ﬁnanc ial assets that are class if ied as amort ised cost or fair value through other comprehensive income. ECL is computed as an unbiased, probabil ity-we ighted provis ion determ ined by evaluating a range of plausible outcomes, the time value of money, and forward-looking informat ion such as cr it ical global or country-spec if ic macroeconomic variables. For more detailed informat ion on macroeconom ic data feeding into IFRS 9 ECL calculations, please refer to the Risk proﬁle section (pages 98 to 106). At the time of orig inat ion or purchase of a non-credit impa ired ﬁnancial asset (Stage 1), ECL represents cash shortfalls ar is ing from possible default events up to 12 months into the future from the balance sheet date. ECL continues to be determined on this basis until there is a sign iﬁcant increase in the Credit Risk of the asset (Stage 2), in which case ECL is recognised for default events that may occur over the lifet ime of the asset. If there is observed object ive ev idence of credit impa irment or default (Stage 3), ECL continues to be measured on a lifet ime bas is. For CCIB, in line with the regulatory guidel ines, Stage 3 ECL is considered when an obligor is more than 90 days past due on any amount payable to the Group, or the obligor has symptoms of unlikel iness to pay its credit obligat ions in full as they fall due. These credit-impa ired accounts are managed by SAG. In CPBB, loans to ind iv iduals and small businesses are considered credit impa ired as soon as any payment of interest or princ ipal is 90 days overdue or they meet other object ive ev idence of impa irment, such as bankruptcy, debt restructur ing, fraud, or death. Financ ial assets are wr itten off, in the amount that is determined to be irrecoverable, when they meet condit ions set such that emp ir ical ev idence suggests the client is unlikely to meet their contractual obligat ions, or a loss of princ ipal is reasonably expected. Estimat ing the amount and t im ing of future recover ies involves sign iﬁcant judgement and cons iders the assessment of matters such as future economic condit ions and the value of collateral, for wh ich there may not be a readily accessible market. The total amount of the Group’s impa irment prov is ion is inherently uncertain, being sensit ive to changes in economic and credit condit ions across the reg ions in which the Group operates. For further details on sensit iv ity analysis of ECL under IFRS 9, please refer to the Risk proﬁle section (page 101). Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 129 Risk proﬁle continued Traded Risk The Group deﬁnes Traded Risk as the potential for loss resulting from activ it ies undertaken by the Group in ﬁnanc ial markets. Risk Appetite Statement The Group should control its ﬁnanc ial markets and act iv it ies to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Roles and responsib il it ies The addendum to the Traded RTF, which sets the roles and responsib il it ies in respect of Traded Risk for the Group, is owned by the Global Head, Traded Risk Management (TRM). The business, acting as ﬁrst line of defence, is responsible for the effective management of risks with in the scope of its direct organisat ional respons ib il it ies set by the Court. TRM is the second line control function that performs independent challenge, monitor ing and overs ight of the Traded Risk management practices of the ﬁrst line of defence, predominantly Financ ial Markets and Treasury Markets. Mit igat ion The Country addendum to the Traded RTF requires that Traded Risk lim its be deﬁned at a level appropr iate to ensure that the Group remains with in RA. All bus inesses incurr ing Traded R isk must comply with the Traded RTF. The Traded Risk Policy sets the princ iples that must be followed for the end-to-end traded r isk management process, includ ing l im it sett ing, risk capture and measurement, lim it mon itor ing and escalat ion, risk mit igat ion and stress testing. Polic ies and standards ensure that these Traded Risk lim its are implemented. Polic ies are rev iewed and approved by the Global Head, TRM period ically to ensure their ongoing effectiveness. Governance committee oversight At Court level, the CRC oversees the effective management of Traded Risk. At the executive level, the SCB ERC is responsible for the governance and oversight of Traded Risk for the Group, and relies on other key PLC Group committees for the management of Traded Risk – in particular CCIB Risk Committee, the Underwrit ing Comm ittee and the Model Risk Committee. For subsid iar ies, the authority for setting Traded Risk lim its is delegated from the local board to the local risk committee, Country CRO and Traded Risk managers. Meetings are held regularly, and the committees monitor all material Traded Risk exposures, as well as key internal developments and external trends, and ensure that appropriate action is taken. Decis ion-mak ing authorit ies and delegat ion The Traded RTF is the formal mechanism which delegates Traded Risk authorit ies cascad ing from the GCRO, as the Senior Manager of the Traded Risk Type, to the Global Head, TRM who further delegates authorit ies to named ind iv iduals. Traded Risk authorit ies are rev iewed at least annually to ensure that they remain appropriate and to assess the quality of decis ions taken by the author ised person. Key risk-taking decis ions are made only by certa in ind iv iduals with the skills, judgement, and perspective to ensure that the Group’s control standards and risk-return object ives are met. Market Risk The Group uses a VaR model to measure the risk of losses aris ing from future potent ial adverse movements in market rates, prices, and volatil it ies. VaR is a quantitat ive measure of Market R isk that applies recent histor ical market cond it ions to estimate the potential future loss in market value that will not be exceeded in a set time period at a set statist ical conﬁdence level. VaR provides a consistent measure that can be applied across trading businesses and products over time and can be set against actual daily trading proﬁt and loss outcomes. For day-to-day risk management, VaR is calculated as at the close of business, generally at UK time for expected market movements over one business day and to a conﬁdence level of 97.5 per cent. Intra-day risk levels may vary from those reported at the end of the day. The Group applies two VaR methodologies: • Histor ical s imulat ion: th is involves the revaluation of all exist ing pos it ions to reﬂect the effect of h istor ically observed changes in Market Risk factors on the valuation of the current portfolio. This approach is applied for general Market Risk factors and the majority of spec if ic (cred it spread) risk VaR. • Monte Carlo simulat ion: th is methodology is sim ilar to h istor ical s imulat ion but w ith considerably more input risk factor observations. These are generated by random sampling techniques, but the results retain the essential variab il ity and correlations of histor ically observed r isk factor changes. This approach is applied for some of the specif ic (cred it spread) risk VaR in relation to id iosyncrat ic exposures in credit markets. A one-year histor ical observat ion period is applied in both methods. As an input to regulatory capital, trading book VaR is calculated for expected movements over 10 business days and to a conﬁdence level of 99 per cent. Some types of Market Risk are not captured in the regulatory VaR measure, and these Risks not in VaR are subject to capital add-ons. An analysis of VaR results in 2023 is available in the Risk proﬁle section (pages 107 to 108). Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 130 Counterparty Credit Risk The Group uses a Potential Future Exposure (PFE) model to measure the credit exposure aris ing from the pos it ive mark-to- market of traded products and future potential movements in market rates, prices, and volatil it ies. PFE is a quantitat ive measure of Counterparty Credit Risk that applies recent histor ical market cond it ions to est imate the potential future credit exposure that will not be exceeded in a set time period at a conﬁdence level of 97.5 per cent. PFE is calculated for expected market movements over different time horizons based on the tenor of the transactions. The Group applies two PFE methodologies: simulat ion based, wh ich is predominantly used, and an add-on based PFE methodology. Underwrit ing The underwrit ing of secur it ies and loans is in scope of the RA set by the Group for Traded Risk. Addit ional l im its approved by the GCRO are set on the sectoral concentration, and the maximum holding period. The Underwrit ing Comm ittee, under the authority of the GCRO, approves ind iv idual proposals to underwrite new security issues and loans for our clients. Monitor ing TRM monitors the overall portfolio risk and ensures that it is with in spec if ied l im its and therefore RA. L im its are typ ically reviewed twice a year. Most of the Traded Risk exposures are monitored daily against approved lim its. Traded R isk lim its apply at all times unless separate intra-day lim its have been set. L im it excess approval dec is ions are based on an assessment of the circumstances driv ing the excess and of the proposed remed iat ion plan. L im its and excesses can only be approved by a Traded Risk manager with the appropriate delegated authority. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 131 Risk proﬁle continued Treasury Risk The Group deﬁnes Treasury Risk as the potential for insuff ic ient capital, liqu id ity, or funding to support our operations, the risk of reductions in earnings or value from movements in interest rates impact ing bank ing book items and the potential for losses from a shortfall in the Group’s pension plans. Risk Appetite Statement Indiv idual regulated ent it ies w ith in the Group should ma inta in sufﬁcient cap ital, liqu id ity and funding to support its operations, and an interest rate proﬁle ensuring that the reductions in earnings or value from movements in interest rates impact ing bank ing book items does not cause material damage to their franchise. In addit ion, they should ensure that the ir pension plans are adequately funded. Roles and responsib il it ies The Global Head, ERM is the RFO for Treasury Risk under the RMF. The Company addendum to the Treasury RTF sets the roles and responsib il it ies in respect of Treasury Risk, and it is owned by the Global Head, Enterprise Risk Management. The Group Treasurer is supported by teams in Treasury and Finance to implement the Treasury RTF as the ﬁrst line of defence and is responsible for managing Treasury Risk. Treasury CROs for Treasury Risk (except Pension Risk) and Head of Pensions (for Pension Risk) are responsible for overseeing and challenging the ﬁrst line of defence. Mit igat ion We apply the PLC Group polic ies for the management of mater ial Treasury Risks and closely monitor our risk proﬁle through RA metrics set at Solo and country level. Capital Risk In order to manage Capital Risk, strategic business, and capital plans (Corporate Plan) are drawn up covering a ﬁve-year horizon which are approved by the Court annually. The plan ensures that adequate levels of capital, includ ing loss absorb ing capacity, and an efﬁc ient m ix of the different components of capital are mainta ined to support our strategy and bus iness plans. Treasury is responsible for the ongoing assessment of the demand for capital and the updating of the Solo’s capital plan. Solo level RA metrics includ ing cap ital, leverage and Min imum Requ irement for own funds and Elig ible L iab il ity (MREL) are assessed with in the Corporate Plan to ensure that the strategy can be ach ieved with in r isk tolerances. Structural Foreign Exchange (FX) Risk The Group’s structural FX posit ion results from the Company’s non-US dollar investment in the share capital and reserves of subsid iar ies and branches. The FX translation gains, or losses, are recorded in the Company’s translation reserves with a direct impact on the PLC Group’s and Solo’s Common Equity Tier 1 ratio. Hedges are contracted across PLC Group and Solo to manage its structural FX posit ion in accordance with the RA, and as a result net investment hedges to partially cover its exposure to certain non-US dollar currencies to mit igate the FX impact of such posit ions on its capital ratios. Liqu id ity and Funding Risk At Solo and country level we implement various RA metrics and monitor these against lim its and management act ion triggers. In addit ion to these, where relevant, mon itor ing metr ics are also set against specif ic r isks. This ensures that the Group mainta ins an adequate and well-d ivers iﬁed l iqu id ity buffer, as well as a stable funding base, and that it meets its liqu id ity and funding regulatory requirements. Interest Rate Risk in the Banking Book At Solo level, we implement RA for Economic Value of Equity and Annual Earnings at Risk and monitor these against lim its and management action triggers. IRRBB arises from differences in the repric ing proﬁle, interest rate basis, and optional ity of banking book assets, liab il it ies and off-balance sheet items. IRRBB represents an economic and commercial risk to the Group and its capital adequacy. Pension Risk Pension Risk is the potential for loss due to having to meet an actuarially assessed shortfall in the Group’s pension plans. Pension obligat ion r isk to a ﬁrm arises from its contractual or other liab il it ies to or w ith respect to an occupational pension plan or other long-term beneﬁt obligat ion. For a funded plan it represents the risk that addit ional contr ibut ions w ill need to be made because of a future shortfall in the funding of the plan. Or, for unfunded obligat ions, it represents the risk that the cost of meeting future beneﬁt payments is greater than currently antic ipated. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 132 Recovery and Resolution Planning In line with PRA requirements, the PLC Group mainta ins a Recovery Plan wh ich is a live document to be used by management in the event of stress in order to restore the PLC Group to a stable and sustainable posit ion. The Recovery Plan includes a set of recovery ind icators, an escalat ion framework, and a set of management actions capable of being implemented during a stress. A Recovery Plan is also mainta ined w ith in each major ent ity includ ing those under Solo, and all recovery plans are subject to period ic ﬁre-dr ill testing. The Group follows the PLC Group’s Recovery Plan. As the UK resolution authority, the Bank of England (BoE) is required to set a preferred resolution strategy for the PLC Group. The BoE’s preferred resolution strategy is whole PLC Group single point of entry bail-in at the ultimate holding company level (Standard Chartered PLC) and would be led by the BoE. In support of this strategy, the PLC Group has been developing a set of capabil it ies, arrangements, and resources to achieve the required outcomes. Following the BoE’s ﬁrst resolvabil ity assessment and public disclosure for major UK ﬁrms in 2022, the second Resolvabil ity Assessment Framework cycle is under way. The PLC Group submitted its Resolvabil ity Assessment Report to the BoE and PRA on 6 October 2023 and is due to publish its resolvabil ity publ ic disclosure in June 2024. Governance committee oversight At the Court level, the CRC oversees the effective management of Treasury Risk. At the executive level, Solo & SCB ALCO ensures the effective management of risk throughout the Group in support of the Group’s strategy, guides the Group’s strategy on balance sheet optim isat ion and ensures that the Group operates with in the RA and other internal and external requirements relating to Treasury Risk (except Pension Risk). The Group relies on the PLC Group Risk Committee and Regional Risk Committees for management of Pension Risk. Regional and country oversight resides with regional and country Asset and Liab il ity Committees. Regions and countries must ensure that they remain in compliance with PLC Group Treasury polic ies and pract ices, as well as local regulatory requirements. Decis ion-mak ing authorit ies and delegat ion The GCFO has responsib il ity for capital, funding, and liqu id ity under the SMR. The GCRO has delegated the RFO responsib il it ies assoc iated with Treasury Risk to the Global Head, ERM. The Global Head, ERM delegates second line of defence oversight and challenge responsib il it ies to the Treasury CRO and Country CROs for Cap ital Risk, Liqu id ity and Funding Risk and IRRBB, and to Head of Pensions for Pension Risk. Monitor ing On a day-to-day basis, Treasury Risk is managed by Treasury, Finance and Country CEOs. The Group regularly reports and monitors Treasury Risk inherent in its business activ it ies and those that arise from internal and external events. Internal risk management reports covering the balance sheet and the capital and liqu id ity posit ion are presented to the Solo & SCB ALCO. The reports contain key informat ion on balance sheet trends, exposures aga inst RA and supporting risk measures which enable members to make informed decis ions around the overall management of the balance sheet. In addit ion, an independent Treasury CRO as part of ERM reviews the prudency and effectiveness of Treasury Risk management. Pension Risk is actively managed by the Head of Pensions and monitored by the Head of Country Risk, Scenario Analysis, Insurable and Pension Risk. The Head of Pensions ensures that accurate, complete, and timely updates on Pension Risk are shared with the Head of Country Risk, Scenario Analysis and Pension Risk, the Treasury CRO and the Global Head, ERM on a period ic bas is. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 133 Risk proﬁle continued Operational and Technology Risk The Group deﬁnes Operational and Technology risk as the potential for loss resulting from inadequate or failed internal processes, technology events, human error, or from the impact of external events (includ ing legal r isks). Changes to Third Party Risk With effect from January 2024, the Group has removed the IRT classif icat ion and formally included Third Party Risk as a sub risk under OTR. Third Party Risk is deﬁned as the potential for loss or adverse impact due to the failure to manage the onboarding, lifecycle and exit strategy of a third party. The PLC Group’s Third Party Risk Management Policy and Standard, in conjunction w ith the respective PRT polic ies and standards, hol ist ically set out the Group’s m in imum controls requ irements for the ident iﬁcation, m it igat ion and management of risks aris ing from the use of Th ird Parties. Risk Appetite Statement The Group aims to control operational and technology risks to ensure that operational losses (ﬁnanc ial or reputat ional), includ ing any related to conduct of bus iness matters, do not cause material damage to the Group’s or PLC Group’s franchise. Roles and responsib il it ies The Company addendum to the Operational and Technology RTF sets the roles and responsib il it ies in respect of Operational and Technology risk for the Group. The Operational and Technology RTF deﬁnes the Group’s Operational and Technology risk sub-types and sets standards for the ident iﬁcation, control, mon itor ing and treatment of r isks. These standards are applicable across all PRTs and risk sub-types in the Operational and Technology RTF. The list of Operational and Technology risk sub-types includes Execution Capabil ity, Governance, Report ing and Obligat ions, Legal Enforceab il ity, and Operat ional Resil ience ( includ ing cl ient service, change management, people management, safety and security, and technology risk). The Operational and Technology RTF reinforces clear accountabil ity for manag ing risk throughout the PLC Group and delegates second line of defence responsib il it ies to ident iﬁed SMEs. For each r isk sub-type, the subject matter expert sets polic ies and standards for the organ isat ion to comply w ith, and provides guidance, oversight, and challenge over the activ it ies of the PLC Group. They ensure that key risk decis ions are only taken by ind iv iduals with the requis ite sk ills, judgement, and perspective to ensure that the PLC Group’s risk-return object ives are met. Mit igat ion The Company addendum to the Operational and Technology RTF sets out the Group’s overall approach to the management of Operational and Technology risk in line with the Group’s Operational and Technology RA. This is supported by the Risk and Control Self-Assessment (RCSA) which deﬁnes roles and responsib il it ies for the ident iﬁcation, control, and mon itor ing of r isks (applicable to all PRTs, risk sub-types and IRTs). The RCSA is used to determine the design strength and reliab il ity of each process, and requires: • the recording of processes run by client segments, products, and functions into a process universe; • the ident iﬁcation of potent ial failures in these processes and the related risks of such failures; • an assessment of the impact of the ident iﬁed r isks based on a consistent scale; • the design and monitor ing of controls to m it igate pr ior it ised risks; and • assessments of residual risk and timely actions for elevated risks. Risks that exceed the Group’s Operational and Technology RA require treatment plans to address underlying causes. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 134 Governance committee oversight At Court level, the CRC oversees the effective management of Operational and Technology risk. At the executive level, the SCB ERC is responsible for the governance and oversight of Operational and Technology risk for the Group. The SCB ERC, supported by the PLC Group Non-Financ ial R isk Committee (GNFRC), monitors the Group’s Operational and Technology RA and relies on other key committees for the management of Operational and Technology risk. Regional business segments and functional committees also provide governance oversight of their respective processes and related Operational and Technology risk. In addit ion, Country Non-F inanc ial R isk Committees (CNFRCs) oversee the management of Operational and Technology Risk at the country (or entity) level. In smaller countries, the responsib il it ies of the CNFRC may be exercised directly by the Country Risk Committee (for branches) or Executive Risk Committee (for subsid iar ies). Decis ion-mak ing authorit ies and delegat ion The GCRO has delegated the RFO responsib il it ies assoc iated with the Operational and Technology RTF to the Global Head of Risk, Functions and Operational Risk (GHRFOR). The Company addendum to the Operational and Technology RTF is the formal mechanism through which the delegation of Operational and Technology Risk authorit ies is made. The GHRFOR places reliance on the respective SMEs for second line of defence oversight of the relevant Operational and Technology risk sub-types through this Company addendum. Monitor ing To deliver services to clients and to partic ipate in the ﬁnanc ial serv ices sector, the Group runs processes which are exposed to Operational and Technology risks. The Group prior it ises and manages risks which are sign iﬁcant to cl ients and to the ﬁnancial serv ices sectors. Control ind icators are regularly mon itored to determine the Group’s exposure to residual risk. The residual risk assessments and reporting of events form the Group’s Operational and Technology Risk proﬁle. The completeness of the Operational and Technology Risk proﬁle ensures appropriate prior it isat ion and t imel iness of r isk decis ions, includ ing r isk acceptances with treatment plans for risks that exceed acceptable thresholds. The Court Risk Committee is informed on adherence to Operational and Technology RA through metrics reported for selected risks. These metrics are monitored, and escalation thresholds are devised based on the material ity and s ign iﬁcance of the risk. These Operational and Technology RA metrics are consolidated on a regular basis and reported to the SCB ERC and CRC. This provides senior management with the relevant informat ion to inform their risk decis ions. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 135 Risk proﬁle continued Financ ial Cr ime Risk The Group deﬁnes Financ ial Cr ime Risk as the potential for legal or regulatory penalties, material ﬁnanc ial loss or reputat ional damage resulting from the failure to comply with applicable laws and regulations relating to internat ional sanct ions, anti-money laundering and anti-bribery and corruption, and fraud. Risk Appetite Statement The Group has no appetite for breaches in laws and regulations related to ﬁnanc ial cr ime, recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Roles and responsib il it ies The Group Head, CFCC has overall responsib il ity for Financ ial Cr ime Risk and is responsible for the establishment and maintenance of effective systems and controls to meet legal and regulatory obligat ions in respect of Financ ial Cr ime Risk. The Group Head, CFCC is the Group’s Compliance and Money-Laundering Reporting Ofﬁcer and performs the Financ ial Conduct Authority (FCA) controlled function and senior management function in accordance with the requirements set out by the FCA, includ ing those set out in their handbook on systems and controls. As the ﬁrst line of defence, the business process owners have responsib il ity for the applicat ion of pol icy controls and the ident iﬁcation and measurement of r isks relating to ﬁnancial cr ime. The business must communicate risks and any policy non-compliance to the second line of defence for review and approval following the model for delegation of authority. Mit igat ion There are four PLC Group polic ies in support of the Financ ial Cr ime RTF: • Group Anti-Bribery and Corruption Policy • Group Anti-Money Laundering and Counter Terrorist Financ ing Pol icy • Group Sanctions Policy • Group Fraud Risk Management Policy The PLC Group operates risk-based assessments and controls in support of its Financ ial Cr ime Risk programme, includ ing (but not lim ited to): • Group Risk Assessment: the PLC Group monitors enterprise-wide Financ ial Cr ime Risks through the CFCC Risk Assessment process consist ing of F inanc ial Cr ime Risk and Compliance Risk assessments. The Financ ial Cr ime Risk assessment is a PLC Group-wide risk assessment undertaken annually to assess the inherent Financ ial Cr ime Risk exposures and the associated processes and controls by which these exposures are mit igated. • Financ ial Cr ime Surveillance: risk-based systems and processes to prevent and detect ﬁnanc ial cr ime. The strength of controls is tested and assessed through the PLC Group’s Operational and Technology RTF, in addit ion to oversight by CFCC Assurance. Governance committee oversight At Court level, the CRC oversees the effective management of Financ ial Cr ime Risk. At the executive level, the SCB ERC is responsible for the governance and oversight of Financ ial Cr ime Risk for the Group, and relies on other key PLC Group committees for the management of Financ ial Cr ime Risk. In particular, it relies on the PLC Group Financ ial Cr ime Risk Committee and the PLC GNFRC for Fraud Risk. Both committees are responsible for ensuring effective oversight of Operational Risk relating to Financ ial Cr ime Risk and Fraud Risk, respectively, throughout the PLC Group. Decis ion-mak ing authorit ies and delegat ion The Company addendum to the PLC Group Financ ial Cr ime RTF is the formal mechanism through which the delegation of Financ ial Cr ime Risk authorit ies is made. The Group Head, CFCC is the RFO for Financ ial Cr ime Risk under the Group’s RMF. Certain aspects of Financ ial Cr ime Compliance, second line of defence oversight and challenge, are delegated with in the CFCC function. Approval frameworks are in place to allow for risk-based decis ions on cl ient onboarding, potential breaches of sanctions regulation or policy, situat ions of potent ial money laundering (and terrorist ﬁnanc ing), br ibery and corruption or internal and external fraud. Monitor ing The Group monitors Financ ial Cr ime Risk compliance against a set of RA metrics. These metrics are reviewed period ically and reported to the SCB ERC, CRC and relevant Court Risk Committees. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 136 Compliance Risk The Group deﬁnes Compliance Risk as the potential for penalties or loss to the Group, or for an adverse impact to our clients, stakeholders or to the integr ity of the markets we operate in through a failure on our part to comply with laws or regulations. Risk Appetite Statement The Group has no appetite for breaches in laws and regulations related to regulatory non-compliance; recognis ing that whilst inc idents are unwanted, they cannot be ent irely avoided. Roles and responsib il it ies The Group Head, CFCC as RFO for Compliance Risk provides support to senior management on regulatory and compliance matters by: • provid ing interpretat ion and adv ice on CFCC regulatory requirements and their impact on the Group; and • setting enterprise-wide standards for management of compliance risks through the establishment and maintenance of the Compliance RTF. The Group Head, CFCC also performs the FCA controlled function and senior management function of Compliance Risk oversight in accordance with the requirements set out by the FCA. All activ it ies that the Group engages in must be designed to comply with the applicable laws and regulations in the countries in which we operate. The CFCC function provides second line of defence oversight and challenge of the ﬁrst line of defence risk management activ it ies that relate to Compliance Risk. Where Compliance Risk arises, or could arise, from failure to manage another PRT or sub-type, the Compliance RTF outlines that the responsib il ity rests with the respective RFO or control function to ensure that effective oversight and challenge of the ﬁrst line of defence can be provided by the appropriate second line of defence function. Each of the assigned second line of defence functions have responsib il it ies, includ ing mon itor ing relevant regulatory developments from Non-Financ ial Serv ices regulators at both Group and country levels, policy development, implementat ion, and val idat ion as well as overs ight and challenge of ﬁrst line of defence processes and controls. In addit ion, the remit of CFCC has been further clarif ied in 2023 in relation to Compliance risk and the boundary of responsib il it ies w ith other PRTs. Mit igat ion We apply the PLC Group’s polic ies for management of Compl iance Risk. The CFCC function is responsible for the establishment and maintenance of polic ies, standards and controls to ensure cont inued legal and regulatory compliance, and the mit igat ion of Compliance Risk. In this, the requirements of the Operational and Technology RTF are followed to ensure a consistent approach to the management of processes and controls. The deployment of technological solutions to improve efﬁc ienc ies and simpl ify processes has cont inued in 2023. These include launch of a new Regulatory Change Management System for Group regulatory obligat ions management, and further enhancement of the Ask Compliance platform. Governance committee oversight At a management level, the SCB ERC is responsible for the governance and oversight of Compliance Risk, and relies on other key PLC Group level committees for the management of Compliance Risk – in particular, the PLC GNFRC and the Risk and CFCC Non-Financ ial R isk Committee. Both Compliance Risk and the risk of non-compliance with laws and regulations resulting from failed processes and controls are reported at the respective country, business, product, function, Risk and CFCC Non-Financ ial R isk Committees. Relevant matters, as required, are further escalated to the PLC GNFRC and SCB ERC. At Court level, oversight of Compliance Risk is primar ily prov ided by the Audit Committee, and by the CRC for relevant issues. Whilst not a formal governance committee, the CFCC Oversight Group provides oversight of CFCC risks includ ing the effective implementat ion of the Compl iance RTF. The Regulatory Change Oversight Forum provides vis ib il ity and overs ight of material and/or complex large-scale regulatory change emanating from Financ ial Serv ices regulators impact ing Non- Financ ial R isks. The CFCC Policy Council provides oversight, challenge and direct ion to Compl iance and FCC Policy Owners on material changes and posit ions taken in CFCC-owned polic ies, includ ing issues relating to regulatory interpretat ion and Group’s CFCC RA. Decis ion-mak ing authorit ies and delegat ion The Company addendum to the Compliance RTF is the formal mechanism through which the delegation of Compliance Risk authorit ies is made. The Group Head, CFCC has the authority to delegate second line of defence responsib il it ies w ith in the CFCC function to relevant and suitably qualif ied ind iv iduals. Monitor ing The monitor ing of controls des igned to mit igate the r isk of regulatory non-compliance in processes is governed in line with the Operational and Technology RTF. The Group has a monitor ing and report ing process in place for Compliance Risk, which includes escalation and reporting to Risk and CFCC Non-Financ ial R isk Committee, PLC GNFRC, SCB ERC, CRC and Court Risk Committees. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 137 Risk proﬁle continued Information and Cyber Security (ICS) Risk The Group deﬁnes ICS Risk as the risk to the Group’s assets, operations, and ind iv iduals due to the potential for unauthorised access, use, disclosure, disrupt ion, mod if icat ion, or destruction of informat ion assets and/or informat ion systems. Risk Appetite Statement The Group aims to mit igate and control ICS r isks to ensure that inc idents do not cause the Bank mater ial harm, business disrupt ion, ﬁnancial loss or reputat ional damage - recognis ing that wh ilst inc idents are unwanted, they cannot be ent irely avoided. Roles and responsib il it ies The Group’s ICS RTF deﬁnes the roles and responsib il it ies of the ﬁrst and second l ines of defence in managing and governing ICS Risk across the Group. It emphasises business ownership and ind iv idual accountabil ity. The Group Chief Transformation, Technology & Operations Ofﬁcer has the ﬁrst line of defence responsib il ity for ICS Risk and is accountable for the Group’s ICS strategy. The Group Chief Information Security Ofﬁcer (CISO) leads the development and execution of the ICS strategy. The ﬁrst line of defence also manages all key ICS Risks, breaches and risk treatment plans. ICS Risk proﬁle, RA breaches and remediat ion status are reported at the Court and Execut ive committees, alongside business, function and country governance committees. The Chief Information Risk Security Ofﬁcer (CISRO) function with in Group R isk is the second line of defence and sets the framework, policy, standards, and methodology for assessing, scoring, and prior it is ing ICS R isks across the Group. The ICS Policy and standards are aligned to industry best practice models includ ing the Nat ional Institute of Standards and Technology Cyber Security Framework and ISO 27001. This function has the responsib il ity for governance, oversight, and independent challenge of ﬁrst line of defence’s pursuit of the ICS strategy. Group ICS Risk Framework Strategy remains the responsib il ity of the ICS RFO, delegated from the GCRO to the Group CISRO. Mit igat ion ICS Risk is managed through the ICS RTF, compris ing a r isk assessment methodology and supporting policy, standards, and methodologies. These are aligned to industry recommended practice. We undertake an annual ICS Effectiveness Review to evaluate ICS Risk management practices in alignment with the ERMF. Governance committee oversight At Court level, the CRC oversees the effective management of ICS Risk. The SCB ERC is responsible for the governance and oversight of ICS Risk for the Group, and relies on other key PLC Group Committees and fora to ensure effective implementat ion of the ICS RTF - in particular, the PLC GNFRC and the Cyber Security Advisory Forum. The SBC ERC and PLC GNFRC are responsible for oversight of ICS Risk proﬁle and RA breaches. Sub-committees of the PLC GNFRC have oversight of ICS Risk management aris ing from the bus inesses, countries and functions. Decis ion-mak ing authorit ies and delegat ion The ICS RTF deﬁnes how the Group manages ICS Risk. The Group CISRO delegates authority to designated ind iv iduals through the ICS RTF, includ ing at a bus iness, function, region and country level. The Group CISO is responsible for implement ing ICS R isk Management with in the Group, and to cascade ICS r isk management into the businesses, functions and countries to comply with the ICS RTF, policy, and standards. Monitor ing Group CISO performs a threat-led risk assessment to ident ify key threats, in-scope applicat ions and key controls requ ired to ensure the Group remains with in RA. The ICS Risk proﬁles of all businesses, functions and countries are consolidated to present a holist ic Group-level ICS R isk proﬁle for ongoing monitor ing. Mandatory ICS learn ing, phish ing exerc ises and role-specif ic tra in ing support colleagues to mon itor and manage this risk. During these reviews, the status of each risk is assessed against the Group’s controls to ident ify any changes to impact and likel ihood, wh ich affects the overall risk rating. Group CISO and Group CISRO monitor the ICS Risk proﬁle and ensure that breaches of RA are escalated to the appropriate governance committee or authority levels for remediat ion and track ing. A dedicated Group CISRO team supports this work by executing offensive security testing exercises, includ ing vulnerab il ity assessments and penetrat ion tests, which show a wider picture of the Group’s risk proﬁle, leading to better vis ib il ity on potent ial ‘in ﬂight’ risks. The Group also tracks remediat ion of secur ity matters ident iﬁed by external rev iews such as the BoE CBEST Threat Intelligence-Led Assessment and the Hong Kong Monetary Authority’s (HKMA) Intelligence-led Cyber Attack Simulat ion Test ing (iCAST). Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 138 Reputational and Sustainab il ity Risk The Group deﬁnes Reputational and Sustainab il ity Risk as the potential for damage to the franchise (such as loss of trust, earnings, or market capital isat ion), because of stakeholders taking a negative view of the Group through actual or perceived actions or inact ions, includ ing a fa ilure to uphold responsible business conduct as we strive to do no sign iﬁcant env ironmental and social harm through our clients, third party relationsh ips or our own operat ions. Risk Appetite Statement The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activ ity is satisfactor ily assessed and managed w ith the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striv ing to do no s ign iﬁcant env ironmental and social harm. Roles and responsib il it ies The Global Head, ERM is responsible as RFO for Reputational and Sustainab il ity Risk under the Group’s RMF. The PLC Group’s Reputational and Sustainab il ity RTF allocates responsib il it ies in a manner consistent with the three lines of defence model. In the ﬁrst line of defence, the PLC Group’s Chief Sustainab il ity Ofﬁcer (CSO) manages the overall Group Sustainab il ity strategy and engagements. A dedicated Sustainable Finance solutions team is responsible for sustainable ﬁnance products and frameworks to help ident ify green and susta inable ﬁnance, and transit ion ﬁnance opportun it ies to a id our clients on their sustainab il ity journey. The CSO team works with businesses to launch various sustainable ﬁnance products. Furthermore, the Environmental and Social Risk Management (ESRM) team provides dedicated advisory and challenge to businesses on the management of environmental and social risks and impacts aris ing from the Group’s cl ient relationsh ips and transact ions. In the second line of defence, the responsib il ity for Reputational and Sustainab il ity Risk management is delegated to the PLC Group Environmental, Social, and Corporate Governance (ESG) and Reputational Risk team, as well as CROs at region, country and client-business levels. They constitute the second line responsible to oversee and challenge the ﬁrst line, which resides with the CEOs, business heads, product heads and function heads. The PLC Group ESG and Reputational Risk team is responsible for establish ing RA, framework and pol ic ies for manag ing Reputational and Sustainab il ity risk, in line with emerging regulatory expectations across our markets. Mit igat ion In line with the princ iples of Respons ible Business Conduct and Do No Sign iﬁcant Harm, the Group deems Reputat ional and Sustainab il ity Risk to be driven by: • negative shifts in stakeholder perceptions, includ ing sh ifts as a result of greenwashing claims, due to decis ions related to clients, products, transactions, third parties and strategic coverage; • potential material harm or degradation to the natural environment (environmental) through actions/inact ions of the Group; and • potential material harm to ind iv iduals or communit ies (soc ial) risks through actions/inact ions of the Group. We apply the PLC Group’s polic ies for management of Reputat ional and Sustainab il ity Risk. The PLC Group’s Reputational Risk policy sets out the princ ipal sources of Reputat ional Risk driven by negative shifts in stakeholder perceptions as well as responsib il it ies, control and overs ight standards for ident ify ing, assessing, escalating and effectively managing Reputational Risk. The assessment of risks associated with how ind iv idual client, transaction, product and strategic coverage decis ions may affect percept ions of the organisat ion and its activ it ies is based on explic it pr inc iples includ ing, but not l im ited to, human r ights and climate change. The assessment of stakeholder perception risk considers a variety of factors. Whenever potential for stakeholder concerns is ident iﬁed, issues are subject to review and decis ion by both ﬁrst and second lines of defence. The PLC Group’s Sustainab il ity Risk policy sets out the requirements and responsib il it ies for manag ing environmental and social risks for the Group’s clients, third parties and in our own operations. This includes management of greenwashing risks through the ongoing monitor ing of Susta inable Finance products and transactions and clients throughout their lifecycle, from labelling to disclosures in line with emerging local and internat ional regulatory obl igat ions. • Clients are expected to adhere to the min imum regulatory and compl iance requirements, includ ing cr iter ia from the PLC Group’s Posit ion Statements to sens it ive sectors where env ironmental and social risks are heightened. The Group also deﬁnes the approach to certain special ist sectors where there are conﬂ ict ing stakeholder v iews. • Third parties such as suppliers must comply with the PLC Group’s Supplier Charter ,which sets out the PLC Group’s expectations on ethics, anti-bribery and corruption, human rights, environmental, health and safety standards, labour and protection of the environment. The PLC Group is committed to respecting universal human rights, and we assess our clients and suppliers against various internat ional pr inc iples, as well as through our soc ial safeguards. • With in our operat ions, the PLC Group seeks to min im ise its impact on the environment and have targets to reduce energy, water and waste. We are committed to becoming Net Zero in our own operations by 2025. • The PLC Group relies on the frameworks to help the labelling of Sustainable Finance Use of Proceeds products and transactions as well as the classif icat ion of pureplay clients. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 139 Risk proﬁle continued Reputational and Sustainab il ity Risk polic ies and standards are appl icable to all PLC Group entit ies. However, where local regulators impose addit ional requ irements, these are complied with in addit ion to ex ist ing PLC Group requ irements. Governance committee oversight The PLC Group’s Culture and Sustainab il ity Committee oversight across PLC Group for our Sustainab il ity strategy while the CRC oversees Reputational and Sustainab il ity Risk as part of the RMF. The SCB ERC provides executive level committee oversight and relies on other key PLC Group committees for the effective management of Reputational and Sustainab il ity Risk in particular the PLC Group Responsib il ity and Reputational Risk Committee (GRRRC), the Sustainable Finance Governance Committee and the PLC GNFRC. The PLC GRRRC’s remit is to: • Challenge, constrain and, if required, stop business activ it ies where Reputational and Sustainab il ity risks are not aligned with the PLC Group’s RA; • Make decis ions on Reputat ional and Sustainab il ity Risk matters assessed as high or very high based on the PLC Group’s Reputational and Sustainab il ity Risk Material ity Assessment Matr ix, and matters escalated from the regions or client businesses; • Provide oversight of material Reputational and Sustainab il ity Risk and/or thematic issues aris ing from the potent ial failure of other risk types; • Identify TERs, as part of a dynamic risk scanning process; • Monitor exist ing or new regulatory pr ior it ies. The Sustainable Finance Governance Committee, appointed by the PLC GRRRC, provides leadership, governance, and oversight for deliver ing the PLC Group’s susta inable ﬁnance offering. This includes: • Review ing and support ing the Group’s frameworks for Green and Sustainable Products, and Transit ion F inance for approval of PLC GRRRC. These frameworks set out the guidel ines for approval of products and transact ions which carry the sustainable ﬁnance and/or transit ion ﬁnance label. • Decis ion-mak ing authority on the elig ib il ity of a susta inable asset for any RWA relief; • Approving sustainable ﬁnance and transit ion ﬁnance labels for products in addit ion to regular product management and governance; • Review ing the reputat ional risks aris ing from greenwash ing claims related to Sustainable Finance products and services The GNFRC has oversight of the control environment and effective management of Reputational Risk incurred when there are negative shifts in stakeholder perceptions of the PLC Group due to failure of other PRTs. The regional and client-business risk committees provide oversight on the Reputational and Sustainab il ity Risk proﬁle with in the ir remit. The CNFRC provides oversight of the Reputational and Sustainab il ity Risk proﬁle at a country level. Decis ion-mak ing authorit ies and delegat ion The Global Head, ERM delegates risk acceptance authorit ies for stakeholder percept ion risks to designated ind iv iduals in the ﬁrst line and second line or to committees such as the GRRRC via risk authority matrices. These risk authority matrices are tiered at country, regional, business segment or Group levels and are established for risks incurred in strategic coverage, clients, products, or transactions. For environmental and social risks, the ESRM team reviews and supports the risk assessments for clients and transactions and escalates to the PLC Group ESG and Reputational Risk team as required. Monitor ing Exposure to stakeholder perception risks aris ing from transact ions, clients, products and strategic coverage is monitored through established triggers to prompt the right levels of appropriate risk-based considerat ion and assessment by the ﬁrst line and escalations to the second line where necessary. Risk acceptance decis ions and themat ic trends are also being reviewed on a period ic bas is. Exposure to Sustainab il ity Risk is monitored through triggers embedded with in the ﬁrst l ine of defence processes. The environmental and social risks are considered for clients and transactions via the Environmental and Social Risk Assessments and for vendors in our supply chain through the Modern Slavery questionna ires. Furthermore, monitor ing and report ing on the RA metrics ensures that there is appropriate oversight by the MT and the Court over performance and breaches of thresholds across key metrics. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 140 Model Risk The Group deﬁnes Model Risk as potential loss that may occur because of decis ions or the r isk of mis-estimat ion that could be princ ipally based on the output of models due to errors in the development, implementat ion, or use of such models. Risk Appetite Statement The Group has no appetite for material adverse impl icat ions aris ing from m isuse of models or errors in the development or implementat ion of models; wh ilst accepting some model uncertainty. Roles and responsib il it ies The Global Head, ERM is the RFO for Model Risk under the Group’s RMF. Responsib il ity for the oversight and implementat ion of the Model RTF is delegated to the Global Head, Model Risk Management. The PLC Group’s Model Risk Framework sets out clear accountabil ity and roles for Model R isk management through the three lines of defence model. First line of defence ownership of Model Risk resides with Model Sponsors, who are business or function heads and assign a Model Owner and provide oversight of Model Owner activ it ies. Model Owners are accountable for the model development process, represent model users, are responsible for the overall model design process, coordinate the submiss ion of models for val idat ion and approval, and ensure appropr iate implementat ion and use. Model Developers are responsible for the development of models and are responsible for documenting and testing the model in accordance with Policy requirements, and for engaging with Model Users. Second line of defence oversight is provided by Model Risk Management, which comprises Group Model Validat ion (GMV) to independently review and grade models, and the Model Risk Policy and Governance team, which provides oversight of model risk activ it ies and reports to senior management via respective committees. The PLC Group adopts an industry standard model deﬁn it ion as specif ied in the PLC Group Model Risk Policy, together with a scope of applicab il ity represented by deﬁned model family types as detailed with in the PLC Group’s Model R isk Framework. Model Owners are accountable for ensuring that all models under their purview have been independently validated by GMV. Models are validated before use and then on an ongoing basis, with schedule determined by the perceived level of model risk associated with the model, or more frequently if there are specif ic regulatory requ irements. The Model RTF is cascaded to in-scope countries by way of local addendum or local framework documentation, along with specif ic respons ib il it ies of the Country Model RFO. In-scope countr ies are selected with reference to regulatory capital requirements with credit risk (AIRB), counterparty credit risk Internal Model Method (IMM), or market risk Internal Model Approach (IMA) permiss ions for use of models for regulatory cap ital calculations; and countries where regulators have stipulated specif ic model r isk requirements. Addit ional cr iter ia, includ ing ﬁnancial mater ial ity, regulatory importance, presence of important business services or crit ical econom ic functions are also considered. The main responsib il it ies of Country Model RFO are to ensure model usage is correctly ident iﬁed, a su itable local governance process is established, and fundamental model risk train ing is provided for respective country stakeholders. Based on respective levels of regulatory expectations regarding Model Risk, a tier ing approach is adopted to provide appropriate risk-based levels of depth and rigour of the associated requirements. Mit igat ion We apply the PLC Group polic ies for Model R isk Management. The Model Risk policy and standards deﬁne requirements for model development and validat ion act iv it ies, includ ing regular model performance mon itor ing. Any model issues or deﬁcienc ies ident iﬁed through the val idat ion process are m it igated through model mon itor ing, model overlays and/or a model redevelopment plan, which undergoes robust review, challenge, and approval. Operational controls govern all Model Risk-related processes, with regular risk assessments performed to assess appropriateness and effectiveness of those controls, in line with the Operational and Technology RTF, with remediat ion plans implemented where necessary. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 141 Risk proﬁle continued Governance committee oversight At Court level, the CRC exercises oversight of Model Risk with in the Group. At the execut ive level, the SCB ERC is responsible for the governance and oversight of Model Risk for the PLC Group and relies on other PLC Group committees to ensure effective measurement and management of Model Risk. Sub-committees such as the Credit Model Assessment Committee, Traded Risk Model Assessment Committee and Financ ial Cr ime Compliance Model Assessment Committee oversee their respective in-scope models and escalate material Model Risks to the Model Risk Committee. In parallel, business and function-level risk committees provide governance oversight of the models used in their respective processes. Decis ion-mak ing authorit ies and delegat ion The Company addendum to the PLC Group Model RTF is the formal mechanism through which the delegation of Model Risk authorit ies is made. The Global Head, ERM delegates authorit ies to des ignated ind iv iduals or Policy Owners through the Model RTF. The second line of defence ownership for Model Risk at country level is delegated to Country CROs at the applicable branches and subsid iar ies. The Model Risk Committee is responsible for approving models for use. Model approval authority is also delegated to the Credit Model Assessment Committee, Traded Risk Model Assessment Committee, Financ ial Cr ime Compliance Model Assessment Committee, and ind iv idual designated model approvers for less material models. Monitor ing The Group monitors Model Risk via a set of RA metrics. Adherence to Model RA and any threshold breaches are reported to the CRC, SCB ERC and PLC Model Risk Committee. These metrics and thresholds are reviewed twice per year to ensure that threshold calibrat ion rema ins appropriate, and the themes adequately cover the current risks. Models undergo regular monitor ing based on the ir level of perceived Model Risk, with monitor ing results and breaches presented to Model Risk Management and delegated model approvers. Model Risk Management produces Model Risk reports covering the model landscape, which include performance metrics, ident iﬁed model issues and remediat ion plans. These are presented for d iscuss ion at the Model R isk governance committees on a regular basis. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 142 Climate Risk (Oversight has moved to Reputational and Sustainab il ity Risk with effect from January 2024) With effect from January 2024, the Group has removed the IRT classif icat ion. Climate Risk is deﬁned as the potential for ﬁnancial loss and non-ﬁnancial detr iments aris ing from cl imate change and society’s response to it. We are developing methodologies to ident ify, measure and manage the phys ical and transit ion r isks that we are exposed to through our own operations, our suppliers, our clients, and the markets we operate in. Risk Appetite Statement The Group aims to measure and manage ﬁnanc ial and non-ﬁnancial r isks aris ing from cl imate change, and reduce emiss ions related to our own activ it ies and those related to the ﬁnanc ing of cl ients in alignment with the Paris Agreement. Roles and responsib il it ies The GCRO has the ultimate second line of defence and responsib il ity for Climate Risk, with support by the Global Head, ERM who has day-today oversight and central responsib il ity for second line of defence Climate Risk activ it ies. As Climate Risk is embedded into the relevant PRTs, second line of defence responsib il it ies l ie with those RFOs (at Group, regional and country level), with SME support from the central Climate Risk team. Mit igat ion We have completed c.4,100 Climate Risk Assessments in 2023 (c.85 - 90 per cent of the CCIB corporate portfolio lim its), wh ich measures transit ion r isk of our clients. Concentration of Black and Red rated clients remain with in proposed RA levels at 6 per cent. Linkages to Credit Underwrit ing Pr inc iples have been ﬁnalised for four sectors (O il and Gas (O&G), Shipp ing, Commercial Real Estate CRE and Min ing), includ ing improved climate-related analysis, portfolio-level caps and addit ional data gathering measures. A key focus area going forward is to embed Climate Risk and net zero targets into business and credit decis ions. To enable th is, we have established a Net Zero Climate Risk Working Forum to facil itate d iscuss ions on account plans for high Climate Risk and net zero divergent clients. As of September 2023, we have assessed physical risk for 79 per cent and transit ion r isk for 54 per cent of our CPBB book. The focus for Operational and Technology Risk has been to assess physical risks for our properties and data centres, as well as third parties. Concentration of top corporate liqu id ity providers to high transit ion r isk and low levels of mit igat ion is being monitored. Governance committee oversight Court level oversight is exercised through the CRC, with regular updates on Climate Risk. At an executive level, the PLC Group Risk Committee has appointed the Climate Risk Management Committee, which meets at least six times a year to oversee the implementat ion of Cl imate Risk workplans and monitor ing the Group’s Cl imate Risk proﬁle. In 2023, The PLC Group has strengthened country and regional governance oversight for the Climate Risk proﬁle across our key markets by cascading ident iﬁed RA metr ics, and rolling out climate risk management informat ion. Decis ion-mak ing authorit ies and delegat ion The Global Head, ERM is supported by a Climate Risk team with in the ERM funct ion. The Global Head, ESG and Reputational Risk is responsible for executing the delivery of the Climate Risk workplan which will deﬁne decis ion-mak ing authorit ies and delegations across the PLC Group. Monitor ing The Climate RA Statement is approved and reviewed annually by the Court, following the recommendation of the CRC. The PLC Group has developed its ﬁrst-generation Climate Risk reporting and Board/MT Level RA metrics and these will continue to be enhanced in 2024. Management informat ion and RA metr ics are also being progressively rolled out at the regional and country level. Management informat ion is reviewed at a quarterly frequency and any breaches in RA are reported to the GRC and BRC. Risk proﬁle continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 143 Risk proﬁle continued Dig ital Assets R isk With effect from January 2024, the Group has removed the IRT classif icat ion. The Group recognises Dig ital Assets (DA) as an asset class which is managed under the RMF. DA Risk is deﬁned as the potential for regulatory penalties, ﬁnanc ial loss and/or reputational damage to the Group resulting from DA-related activ it ies aris ing from the Group’s bus inesses across clients, products, investments and projects. Risk Appetite Statement As DA Risk manifests through the various PRTs, the ind iv idual RA statements for each PRT take account of the risks specif ic to DAs. Roles and responsib il it ies Senior managers with in the ﬁrst l ine of defence are responsible for the overall management of DA risks, in it iat ives and exposures that may arise with in the ir business segments. The GCRO has the second line of defence responsib il ity for deﬁn ing the Group’s framework for manag ing DA-related risks, through the Dig ital Assets R isk Management Approach (DARMA). The GCRO is supported by the Global Head, ERM and the Global Head, DA Risk Management, who have day-to-day responsib il ity for second line of defence oversight of the DARMA. As DA Risk management is embedded into the relevant PRTs, RFOs and dedicated SMEs across the PRTs have second line of defence responsib il it ies of DA R isks for their respective PRTs. Mit igat ion The Group deploys a DA Risk management policy (DA Policy) to deﬁne the incremental risk management requirements for DA-related activ it ies under the DARMA. The respective PRTs then include specif ic r isk mit igat ion requirements with in the relevant processes, polic ies and standards for the ir PRTs. DA Risk Assessments are conducted on certain higher-risk DA- related projects and products. These risk assessments detail the specif ic inherent risks, residual risks, controls and mit igants across the PRTs, and are reviewed and supported by the respective businesses, RFOs and DA SMEs. Governance committee oversight Court level oversight is exercised through the CRC, and DA Risk updates are provided to the Court and CRC, as requested. At the executive level, the SC Bank ERC oversees the risk management of DA. The GCRO has also appointed a dedicated DA Risk Committee (DRC) consist ing of sen ior business representatives, RFOs and DA SMEs across the Group. The DRC meets a min imum of four t imes per year to review and assess the risk assessments related to DA Projects and Products, discuss development and implementat ion of the DARMA, and to prov ide structured governance around DA Risk. Decis ion-mak ing authorit ies and delegat ion The Global Head, ERM is supported by a centralised DA Risk team with in the ERM Funct ion and is responsible for the design and maintenance of the DARMA. Decis ion-mak ing authorit ies and delegat ion are deﬁned in the DA Policy, outlin ing the incremental responsib il it ies and the embedd ing of risk management with in assoc iated polic ies and r isk artefacts. The businesses are responsible for implementat ion of the DARMA and ut il ise dec is ion-mak ing authorit ies granted to them by their respective Businesses, PRTs or in ind iv idual capacit ies to assess and approve DA act iv it ies and exposures that may give rise to risk. DA Risk follows prescribed robust risk management practices across the PRTs, with specif ic expert ise applied from DA experts. Risk management practices are informed by the “Dear CEO” letters published by the PRA and the FCA in June 2018, with updated notices in June 2022. Further guidance from the recent publicat ion of the BCBS d545 on the prudent ial treatment of crypto assets, which will be in effect from January 2025, has reﬁned the risk management approach. DA is a developing area which will continue to mature and stabil ise over t ime as the technology, together with its use in ﬁnanc ial serv ices and associated research, become more established. Monitor ing DA Risks are monitored through the exist ing Group RA metr ics across the PRTs. In addit ion, spec if ic DA R isk Management Monitor ing level metr ics are reviewed and monitored by the relevant ind iv idual PRTs. DA risk decis ions relat ing to other PRTs are taken with in the author it ies for the respect ive PRT. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 144 Capital management and governance The Group’s capital and leverage posit ion is managed with in the Court-approved R isk Appetite framework. Further detail is provided with in the R isk Management Framework section on page 121. Standard Chartered Bank is authorised by the PRA and regulated by the Financ ial Conduct Author ity and the PRA as Standard Chartered Bank. Standard Chartered Bank continues to operate through its branches and a number of subsid iar ies, all of which remain well capital ised in line with their applicable Court-approved Risk Appetites which takes into account local regulations, Pillar 1 and 2 requirements and regulatory and management buffers as applicable. The Group’s CET1 ratio remained strong at 13.2 per cent at FY2023 with leverage at 5.0 per cent. The Group mainta ins h igh levels of loss absorbing capacity. Compared to 31 December 2022, the Group’s CET1 ratio increased by approximately 50 bps to 13.2 per cent. RWAs decreased by $6.1 bill ion to $165.6 b ill ion. CET1 cap ital remained largely ﬂat at $21.8bn as proﬁts of $3.2 bill ion and movement in other comprehensive income of $0.4 bill ion were offset by d istr ibut ions of $3.0 bill ion, a fore ign currency translation impact of $0.5 bill ion and an increase in intang ible assets of $0.1 b ill ion. Capital ratios 2023 2022¹ CET1 capital 13.2% 12.7% Tier 1 capital 16.5% 15.8% Total capital 23.5% 23.1% 1 The 2022 comparatives have been restated to correctly reﬂect in line with adjustment posted for credit risk mit igat ion Capital review Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 145 Capital review continued Capital base 1 (audited) 2023 $mill ion 2022 $mill ion CET1 capital instruments and reserves Capital instruments and the related share premium accounts 20,893 20,893 Of which: share premium accounts 296 296 Retained earnings 2 9,687 10,467 Accumulated other comprehensive income (and other reserves) (6,508) (6,965) Non-controlling interests (amount allowed in consolidated CET1) 162 145 Independently audited year-end proﬁts 3,208 2,410 Foreseeable div idends (166) (189) CET1 capital before regulatory adjustments 27,276 26,761 CET1 regulatory adjustments Addit ional value adjustments (prudent ial valuation adjustments) (534) (626) Intangible assets (net of related tax liab il ity) (4,115) (4,002) Deferred tax assets that rely on future proﬁtabil ity (excludes those aris ing from temporary differences) (23) (66) Fair value reserves related to net losses on cash ﬂow hedges 13 513 Deduction of amounts resulting from the calculation of excess expected loss (566) (627) Net gains on liab il it ies at fa ir value resulting from changes in own credit risk (47) 26 Deﬁned-beneﬁt pension fund assets (75) (69) Fair value gains aris ing from the inst itut ion’s own credit risk related to derivat ive l iab il it ies (107) (74) Exposure amounts which could qualify for risk weight ing of 1250% (28) (61) Other regulatory adjustments to CET1 capital 3 – (29) Total regulatory adjustments to CET1 (5,482) (5,015) CET1 capital 21,794 21,746 Addit ional T ier 1 capital (AT1) instruments 5,473 5,423 AT1 regulatory adjustments (20) (20) Tier 1 capital 27,247 27,149 Tier 2 capital instruments 11,637 12,469 Tier 2 regulatory adjustments (30) (30) Tier 2 capital 11,607 12,439 Total capital 38,854 39,588 Total risk-weighted assets (unaudited) ⁴ 165,623 171,723 1 Capital base is prepared on the regulatory scope of consolidat ion 2 Retained earnings include IFRS9 capital relief (Transit ional) of n il (2022: $106 mill ion) 3 Other regulatory adjustments to CET1 capital includes Insufﬁc ient coverage for non-perform ing exposures of nil (2022: $(29) mill ion) 4 The 2022 comparatives have been restated to correctly reﬂect in line with adjustment posted for credit risk mit igat ion Leverage ratio Capital and total exposures 2023 $mill ion 2022 1 $mill ion Tier 1 capital 27,247 27,149 Total leverage ratio exposures 544,061 562,076 Leverage ratio 5.0% 4.8% 1 The 2022 comparatives have been restated to correctly reﬂect in line with adjustment posted for credit risk mit igat ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 146 Independent Auditor’s report to the members of Standard Chartered Bank Opin ion In our opin ion: • the ﬁnancial statements of Standard Chartered Bank (the ‘Company’ or the ‘Parent Company’) and its subsid iar ies (together with the Company, the ‘Group’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2023 and of the Group’s proﬁt for the year then ended; • the Group ﬁnancial statements have been properly prepared in accordance with UK adopted International Accounting Standards (IAS) and International Financ ial Report ing Standards (IFRS) as adopted by the European Union (EU IFRS); • the Company ﬁnancial statements have been properly prepared in accordance with UK adopted IAS as applied in accordance with section 408 of the Companies Act 2006; and • the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the ﬁnanc ial statements of the Group and the Company for the year ended 31 December 2023 which comprise: Group Company Consolidated income statement for the year ended 31 December 2023; Balance sheet as at 31 December 2023; Consolidated statement of comprehensive income for the year ended; Cash ﬂow statement for the year then ended; Consolidated balance sheet as at 31 December 2023; Statement of changes in equity for the year ended 31 December 2023; and Consolidated statement of changes in equity for the year then ended; Related notes 1 to 40, where relevant to the ﬁnancial statements, includ ing mater ial accounting policy informat ion. Consolidated Cash ﬂow statement for the year then ended; Related notes 1 to 40 to the ﬁnancial statements, includ ing mater ial accounting policy informat ion; and Risk and capital disclosures marked as ‘audited’. The ﬁnancial report ing framework that has been applied in their preparation is applicable law and UK adopted IAS and EU IFRS; and as regards the Parent Company ﬁnancial statements, UK adopted IAS as appl ied in accordance with section 408 of the Companies Act 2006. Basis for opin ion We conducted our audit in accordance with International Standards on Audit ing (UK) (ISAs (UK)) and appl icable law. Our responsib il it ies under those standards are further descr ibed in the Auditor’s responsib il it ies for the aud it of the ﬁnanc ial statements section of our report. We believe that the audit evidence we have obtained is sufﬁc ient and appropr iate to provide a basis for our opin ion. Independence We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the ﬁnanc ial statements in the UK, includ ing the FRC’s Eth ical Standard as applied to listed public interest entit ies, and we have fulﬁlled our other ethical responsib il it ies in accordance with these requirements. The non-audit services prohib ited by the FRC’s Eth ical Standard were not provided to the Group or the Company and we remain independent of the Group and the Company in conducting the audit. Conclusions relating to going concern In audit ing the ﬁnancial statements, we have concluded that the d irectors’ use of the going concern basis of accounting in the preparation of the ﬁnanc ial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s abil ity to cont inue to adopt the going concern basis of accounting included: • Performing a risk assessment to ident ify factors that could impact the going concern basis of accounting, includ ing the impact of external risks such as geopolit ical r isk. • Assessing the directors' going concern assessment includ ing the Group’s forecast cap ital, liqu id ity, and leverage ratios over the period of twelve months from 23 February 2024 to evaluate the headroom against the min imum regulatory requirements and the risk appetite set by the directors. • Engaging internal valuation and economic special ists to assess and challenge the reasonableness of assumpt ions used to develop the forecasts in the Corporate Plan and evaluating the accuracy of histor ical forecast ing. • Assessing the Group’s funding plan and repayment plan for funding instruments maturing over the period of twelve months from 23 February 2024. • Understanding and evaluating credit rating agency ratings and actions. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 147 Independent Auditor’s report to the members of Standard Chartered Bank continued • Engaging internal prudential regulatory special ists to assess the results of management’s stress test ing, includ ing considerat ion of pr inc ipal and emerg ing risks, on funding, liqu id ity, and regulatory capital. • Review ing correspondence w ith prudential regulators and authorit ies for matters that may impact the going concern assessment; and • Evaluating the going concern disclosure included in note 1 to the ﬁnanc ial statements in order to assess that the disclosures were appropriate and in conformity with the reporting standards. Based on the work we have performed, we have not ident iﬁed any mater ial uncertaint ies relat ing to events or condit ions that, ind iv idually or collectively, may cast sign iﬁcant doubt on the Group and Company’s ab il ity to cont inue as a going concern for a period of twelve months from 23 February 2024. In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the ﬁnanc ial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsib il it ies and the respons ib il it ies of the d irectors with respect to going concern are described in the relevant sections of this report. However, because not all future events or condit ions can be pred icted, this statement is not a guarantee as to the Group and Parent Company’s abil ity to cont inue as a going concern. Overview of our audit approach Audit scope • We performed an audit of the complete ﬁnanc ial informat ion of 6 components in 5 countries and audit procedures on specif ic balances for a further 14 components in 13 countries. • In addit ion to the above, the Pr imary Audit Team also performed full-scope audit procedures on components related to the Group consolidat ion process • The components where we performed full or specif ic aud it procedures accounted for 77% of the absolute proﬁt before tax (PBT), 82% of absolute operating income and 92% of Total assets. Key audit matters • Credit impa irment • Priv ileged Access Management • Impairment of goodwill and investments in subsid iary undertak ings • Valuation of ﬁnanc ial instruments held at fair value with higher risk characterist ics Material ity • Overall group material ity of $221m wh ich represents 5% of Adjusted PBT. An overview of the scope of the parent company and group audits Tailor ing the scope Our assessment of audit risk, our evaluation of material ity and our allocat ion of performance material ity determ ine our audit scope for each component with in the Group. Taken together, th is enables us to form an opin ion on the consol idated ﬁnancial statements. We took into account the size, risk proﬁle, the organisat ion of the Group and effect iveness of control environment, changes in the business environment, and other factors such as the level of issues and misstatements noted in prior period when assessing the level of work to be performed at each component. In assessing the risk of material misstatement to the Group ﬁnanc ial statements, and to ensure we had adequate quantitat ive coverage of s ign iﬁcant accounts in the ﬁnanc ial statements, of the 219 report ing units of the Group, we selected 24 reporting units which represent 20 components in 17 countries: Bahrain, Bangladesh, India, Indonesia, Jersey, Japan, Kenya, Malaysia, Niger ia, Pak istan, Singapore, Sri Lanka, Taiwan, United Arab Emirates, United Kingdom, United States of America, and Zambia. The deﬁnit ion of a component is aligned with the structure of the Group’s consolidat ion system, typ ically these are either a branch, group of branches, group of subsid iar ies (or associates), or a subsid iary. We took a centralised approach to audit ing certa in processes and controls, as well as the substantive testing of specif ic balances. This included audit work over Group’s Global Business Services shared services centre (SSC), Commercial, Corporate and Institut ional Bank ing SSC, Credit Impairment SSC and Technology, as well as certain other matters audited centrally by the Primary Audit Team. Of the 20 components selected in 17 countries, we performed an audit of the complete ﬁnanc ial informat ion of 6 components (“full scope components”) which were selected based on their size or risk characterist ics. For 11 components (“spec if ic scope components”) we performed audit procedures on specif ic accounts w ith in that component that we cons idered had the potential for the greatest impact on the sign iﬁcant accounts in the Group ﬁnanc ial statements e ither because of the size of certain aspects of credit impa irment r isk of these accounts or their risk proﬁle. We also instructed 3 locations to perform specif ied procedures over certa in aspects of credit impa irment r isk. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 148 Independent Auditor’s report to the members of Standard Chartered Bank continued Group's Absolute PBT Group's Total assets Group's Absolute Operating Income 2023 2022 2023 2022 2023 2022 Full scope components 57% 63% 84% 80% 62% 68% Specif ic scope components 18% 13% 8% 12% 18% 15% Specif ied procedures 2% 0% 0.40% 0% 2% 0% Total 77% 76% 92% 92% 82% 83% Of the remain ing report ing units that together represent 23% of the Group’s absolute PBT, none are ind iv idually greater than 3% of the Group’s absolute PBT. For the components represented by these reporting units, we performed other procedures at the Group level which included: performing analytical reviews at the Group ﬁnanc ial statement l ine item level, evaluating entity level controls, performing audit procedures on the centralised shared service centres, testing of consolidat ion journals and intercompany elim inat ions, inqu ir ing with selected overseas EY teams on the outcome of prior year local statutory audits (where audited by EY) to ident ify any potent ial risks of material misstatement to the Group ﬁnanc ial statements. The charts below illustrate the coverage obtained from the work performed by our audit teams. Absolute Proﬁt before tax 57% Full scope components (2022: 63%) 18% Specif ic scope components (2022: 13%) 2% Specif ied procedures (2022: 0%) 23% Other procedures (2022: 24%) Total assets Absolute operating income 84% Full scope components (2022: 80%) 8% Specif ic scope components (2022: 12%) 0.4% Specif ied procedures (2022: 0%) 8% Other procedures (2022: 8%) 62% Full scope components (2022: 68%) 18% Specif ic scope components (2022: 15%) 2% Specif ied procedures (2022: 0%) 18% Other procedures (2022: 17%) Changes from the prior year We assessed our 2023 audit scope with considerat ion of h istory or expectation of unusual or complex transactions and potential for material misstatements. We also kept our audit scope under review throughout the year. Two components in Cameroon and South Africa, which were included in prior year audit scope and assigned specif ic scope, were excluded from the Group audit scope in the current year based on our updated risk assessment. These components represent ind iv idually no more than 0.2% of Group absolute PBT, 0.7% of the Group’s absolute operating income and 0.4% of the Group’s Total assets respectively in the current year. No component which was full scope in the prior year, has been excluded from Group audit scope for the 2023 audit. For Germany, Australia, Ghana and Cameroon, the Primary Audit Team performed certain procedures centrally over the cash balances as at 31 December 2023. Malaysia, Indonesia, Pakistan and Kenya were full scope components in the prior year but were designated as specif ic scope components in the current year based on our updated risk assessment. In 2023, we assigned a specif ic scope to Bahra in and United Kingdom (Jersey) components that are sign iﬁcant based on r isk, and specif ied procedures to Ta iwan (Taipe i Branch). These components were not in-scope in the prior year. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 149 Independent Auditor’s report to the members of Standard Chartered Bank continued Involvement with component teams In establish ing our overall approach to the Group aud it, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team (the "Primary Audit Team"), or by component auditors from other ﬁrms operating under our instruct ion. All of the d irect components of the Group (full, specif ic or spec if ied procedures) were audited by EY global network ﬁrms. Of the 6 full scope components, audit procedures were performed on 2 of these (includ ing the aud it of the Company) directly by the Primary Audit Team (EY London) in the United Kingdom. For 1 specif ic scope component, the aud it procedures were performed by the Primary Audit Team. Where components were audited by the Primary Audit Team, this was under the direct ion and superv is ion of the Sen ior Statutory Auditor. For the 13 remain ing components, where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufﬁc ient aud it evidence had been obtained as a basis for our opin ion on the Group as a whole. In addit ion, the Group has central ised processes and controls over key areas in its shared service centres. Members of the Primary Audit Team undertook direct oversight, review and coordinat ion of our shared serv ice centre audits. The Primary Audit Team continued to follow a programme of planned vis its to component teams and shared serv ice centres. During the current year’s audit cycle, vis its were undertaken by the Pr imary Audit Team to the component teams in the following locations: • Bangladesh • India (includ ing the shared serv ices centre) • Indonesia • Malaysia (includ ing the shared serv ices centre) • Pakistan • Singapore (includ ing the shared serv ices centre) • United Arab Emirates • United States of America These vis its involved oversight of work undertaken at those locations, discuss ion of the aud it approach and any issues aris ing from their work, meeting with local management, and review ing relevant aud it working papers on key risk areas. In addit ion to the s ite vis its, the Pr imary Audit Team interacted regularly with the component and SSC audit teams where appropriate during various stages of the audit, reviewed relevant working papers and deliverables to the Primary Audit Team, and were responsible for the scope and direct ion of the aud it process. The Primary Audit Team also undertook video conference meetings with component and SSC audit teams and management. These virtual meetings involved discuss ing the aud it approach and any issues aris ing from the ir work, as well as performing remote reviews of key audit workpapers. This, together with the procedures performed at Group level, gave us appropriate evidence for our opin ion on the Group and Company ﬁnancial statements. Climate change Stakeholders are increas ingly interested in how climate change will impact the economy, includ ing the bank ing sector, and further how this may consequently impact the valuation of assets and liab il it ies held on bank balance sheets. The Group manages climate risk according to the characterist ics of the impacted risk types and is embedding climate-risk considerat ions into relevant frameworks, includ ing pr inc ipal r isk type frameworks, and processes. The assessment of the risk by the Group is explained on page 142 in the “Risk proﬁle: Climate Risk” section and in the Strategic Report, where the Group has also explained their climate commitments. All of these disclosures form part of the “Other informat ion”, rather than the aud ited ﬁnanc ial statements. Our procedures on these unaudited disclosures therefore consisted solely of consider ing whether they are mater ially incons istent w ith the ﬁnancial statements, or our knowledge obta ined in the course of the audit or otherwise appear to be materially misstated, in line with our responsib il it ies on “Other informat ion”. In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material impact on its ﬁnanc ial statements. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 150 Independent Auditor’s report to the members of Standard Chartered Bank continued The Group has explained in the strategic report, includ ing by reference to the Annual Report of Standard Chartered PLC, how they have reﬂected the impact of climate change in their ﬁnanc ial statements, includ ing how th is aligns with their commitment to the aspirat ions of the Par is Agreement to achieve net zero emiss ions by 2050. S ign iﬁcant judgements and estimates relating to climate change are included in the section “Climate impact on the Group’s balance sheet” of note 1 to the ﬁnancial statements. As stated in these disclosures, the Group has considered Climate to be an area of sign iﬁcant accounting estimate and judgement through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liab il it ies. The Group has concluded that wh ilst it is not currently quantitat ively mater ial, it considers climate to be qualitat ively mater ial. Our audit effort in consider ing the impact of climate change on the ﬁnanc ial statements was focused on evaluat ing whether management’s assessment of the impact of climate risk, physical and transit ion, and the ir climate commitments have been appropriately reﬂected in the valuation of assets and liab il it ies, where these can be rel iably measured, following the currently effective requirements of UK adopted IAS and EU IFRS. This was in the context of the Group’s process being lim ited, g iven that this is an emerging area, as a result of lim itat ions in the data available and the availab il ity of sophist icated models, and as the Group considers how it further embeds its climate ambit ions into the planning process. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal special ists, to determine the risks of material misstatement in the ﬁnanc ial statements from cl imate change which needed to be considered in our audit. We also challenged the Directors’ considerat ions of cl imate change risks in their assessment of going concern, and the associated disclosures. Where considerat ions of cl imate change were relevant to our assessment of going concern, these are covered by the procedures described above. Based on our work, we have considered the impact of climate change on the ﬁnanc ial statements to impact certain key audit matters. Details of our procedures and ﬁnd ings are included in our explanation of key audit matters below. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most sign iﬁcance in our audit of the ﬁnanc ial statements of the current period and include the most sign iﬁcant assessed r isks of material misstatement (whether or not due to fraud) that we ident iﬁed. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and direct ing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnanc ial statements as a whole, and in our opin ion thereon, and we do not prov ide a separate opin ion on these matters. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 151 Independent Auditor’s report to the members of Standard Chartered Bank continued Risk Our response to the risk Key observations communicated to the Audit Committee Credit Impairment Refer to the Accounting polic ies (page 180); Note 8 of the ﬁnancial statements; and relevant cred it risk disclosures (includ ing pages 65 and 67) At 31 December 2023, the Group reported total credit impa irment balance sheet prov is ion of $3,788 mill ion (2022: $4,601 m ill ion). Management’s judgements and estimates are highly subject ive as a result of the s ign iﬁcant uncertainty associated with the estimat ion of expected future credit losses that are dependent upon several hard to estimate factors. Assumptions with increased complexity in respect of the tim ing and measurement of expected credit losses (ECL) include: • Staging – the determinat ion of what constitutes sign iﬁcant increase in credit risk and consequent timely allocation of qualify ing assets to the appropriate stage in accordance with IFRS 9; • Model output and adjustments - Accounting interpretat ions, modell ing assumptions and data used to build and run the models that calculate the ECL, includ ing the appropriateness, completeness and valuation of post-model adjustments applied to model output to address ident iﬁed model deﬁcienc ies or risks not fully captured by the models; • Economic scenarios – Sign iﬁcant judgements involved in the determinat ion of the appropriateness of economic variables, the future forecasting of these variables and the parameters used in the Monte Carlo Simulat ion. The assessment of non-l inear ity produced by the Monte Carlo simulat ion, the benchmarking of the output and the evaluation of the need for any Post Model adjustments; • Management overlays – Appropriateness, completeness and valuation of risk event overlays to capture risks not ident iﬁed by the credit impa irment models, includ ing the considerat ion of the r isk of management override; and • Indiv idually assessed ECL allowances – Measurement of ind iv idual provis ions includ ing the assessment of probabil ity we ighted recovery scenarios, exit strategies, collateral valuations, expected future cashﬂows and the tim ing of these cashﬂows In 2023, the most material factors impact ing the ECL were in relation to sovereign downgrades impacted by dollar availab il ity, the continu ing impact of higher interest rates and inﬂat ion and geopolit ical uncerta inty. In addit ion, where relevant we considered the impact of climate on the impa irment prov is ions. Overall, these factors were prevalent in the prior year, and consequently the risk of a material misstatement to the ECL remained consistent with that of the prior year. We evaluated the design of controls relevant to the Group’s systems and processes over material ECL balances, includ ing the judgements and est imates noted, involv ing EY special ists to ass ist us in performing our procedures where relevant. Based on our evaluation we selected the controls upon which we intended to rely and tested those for operating effectiveness. We increased the extent of our reliance on controls over model governance and in certain locations of the stage 3 exposures. We performed an overall stand-back assessment of the ECL allowance in total and by stage to determine if the ECL was reasonable. We considered the overall credit quality of the Group’s portfolios, risk proﬁle and the impact of sovereign downgrades. We performed peer benchmarking to the extent that this was considered relevant and invest igated and sought explanations for any areas noted as being outliers. Our assessment also included the evaluation of the macroeconomic environment by consider ing trends in the economies and countries to which the Group is exposed. Staging – We evaluated the criter ia used to determ ine sign iﬁcant increase in credit risk includ ing quant itat ive backstops with the resultant allocation of ﬁnanc ial assets to stage 1, 2 or 3 in accordance with IFRS 9. We reperformed the staging distr ibut ion for a sample of ﬁnanc ial assets and assessed the reasonableness of staging downgrades applied by management. To test the completeness of the ident iﬁcation of s ign iﬁcant increase in credit risk, we challenged the risk ratings (includ ing appropr iate operation of quantitat ive backstops) for a sample of performing accounts and other accounts exhib it ing risk characterist ics such as ﬁnancial d iff icult ies, deferment of payment, late payment and watchlist. We also considered the vulnerable and cyclical sectors (as deﬁned by the PLC Group) resulted in a sign iﬁcant increase in credit risk at a sector level. Modelled output and adjustments – We performed a risk assessment on models involved in the ECL calculation using EY independently determined quantitat ive and qual itat ive criter ia to select a sample of models to test. Based on th is risk assessment, we engaged our modelling special ists to evaluate a sample of ECL models by assessing the reasonableness of underpinn ing assumpt ions, inputs and formulae used. This included a combinat ion of assess ing the appropriateness of model design, formulae and algorithms, alternative modelling techniques and recalculating the Probabil ity of Default, Loss G iven Default and Exposure at Default parameters. Together with our modelling special ists, we also assessed material post-model adjustments which were applied as a response to risks not fully captured by the models or for known model deﬁcienc ies. This included the completeness and appropriateness of these adjustments. In response to new or enhanced models implemented this year to address known weaknesses in previous models, we performed substantive testing procedures as deﬁned by our model inherent risk assessment process, includ ing code review and implementat ion test ing. We did not rely on controls over model monitor ing and therefore adopted a substantive approach compris ing reperformance of model monitor ing procedures for models classif ied as h igher risk in accordance with our EY independent risk assessment. To evaluate data quality, we agreed a sample of ECL calculation data points to source systems, includ ing, among other data points, balance sheet data used to run the models. We also tested a sample of the ECL data points from the calculation engine through to the general ledger and disclosures. We highl ighted the following matters to the Audit Committee: • We increased the extent of our reliance of controls over model governance and stage 3 exposures in certain locations; • Our evaluation of the appropriateness of the sign iﬁcant increase in credit risk triggers, and the results of our sensit iv ity analysis and recalculation of the staging • our assessment of the assumptions used to determine the Stage 3 ECL; • Our assessment of the completeness and measurement of post model adjustments and overlays; • Our assessment of the quantum of the non-linear ity adjustment produced by the Monte Carlo model includ ing the comparison to the non-linear ity produced by running narrative discrete scenarios; • Our assessment of the appropriateness of the Group’s models to generate the ECL and staging outcomes includ ing the appropriateness and valid ity of the data used in the models and to generate the staging and consequent ECL. • Our evaluation of management’s enhanced modelling approach to the assessment of the potential impact on ECL from climate change; Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 152 Independent Auditor’s report to the members of Standard Chartered Bank continued Risk Our response to the risk Key observations communicated to the Audit Committee Credit Impairment (continued) Economic scenarios – In collaboration with our economists and modelling special ists, we challenged the completeness and appropriateness of the macroeconomic variables used as inputs to the ECL models. Addit ionally, we involved our economic special ists to ass ist us in evaluating the reasonableness of the base forecast for sample of macroeconomic variables most relevant for the Group’s ECL calculation inﬂuenced by the above assessment. Procedures performed included benchmarking the forecast for a sample of macroeconomic variables to a variety of global external sources. We reviewed and challenged the appropriateness of the underlying coding and assumptions used in the Monte Carlo simulat ion. We assessed the reasonableness of the non-linear ity impact on ECL allowances. We engaged our economists and modelling special ists, to assess and challenge the Group’s choice of discrete scenarios to benchmark the output from the Monte Carlo model and determine the sensit iv ity analysis as set out on page 101 in the annual report. This challenge included the choice of narrative scenarios and we independently challenged the output from these scenarios using independently determined EY weights for each scenario. We also performed a stand- back assessment by benchmarking the resulting non-linear ity upl ift and overall ECL charge and provis ion coverage to peers. Management overlays – We challenged the completeness and appropriateness of overlays used for risks not captured by the models. We focussed our challenge on sovereign risks and the sustained impact of higher interest rates and inﬂat ion. Our procedures included assessing the need for management overlays, and evaluating the assumptions and judgments used to determine each overlay taking current market condit ions into account. Indiv idually assessed ECL allowances - Our procedures included challenging management's forward-looking economic assumptions of the recovery outcomes ident iﬁed, cashﬂow proﬁle and tim ing, ind iv idual probabil ity weight ings for each scenar io, and recalculating a sample of ind iv idually assessed provis ions. We also engaged our valuation special ists to test the value of the collateral used in management’s calculations. Our sample was based on quantitat ive thresholds and qualitat ive factors, includ ing exposure to vulnerable sectors. We also considered whether planned exit strategies were viable. We concluded that management’s methodology, judgements and assumptions used in calculating credit impa irment are materially in accordance with the accounting standard. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 153 Independent Auditor’s report to the members of Standard Chartered Bank continued Risk Our response to the risk Key observations communicated to the Audit Committee Impairment assessment of goodwill and investments in subsid iary undertak ings a) Impairment of Goodwill: Accounting polic ies (page 249); and Note 16 of the ﬁnancial statements. b) Impairment of investments in subsid iary undertakings: Accounting polic ies (page 283); and Note 31 of the ﬁnancial statements. At 31 December 2023, the Group reported Goodwill balance of $1,299 mill ion (2022: $1,323 mill ion). In the Parent Company ﬁnancial statements, investment in subsid iary undertak ings balance comprised $10,066 mill ion (2022: $10,300 mill ion). Dur ing the year there were no impa irment of Goodwill recognised (2022: $10mill ion), and in the Parent Company ﬁnancial statements, recognised an impa irment of investment of investments in subsid iar ies of $298 mill ion net of reversals (2022: reversal of impa irment of $249 mill ion). On an annual basis, management is required to perform an impa irment assessment for goodw ill, and to assess for ind icators of impa irment in respect of investments in subsid iary undertak ings. Where ind icators of impa irment are ident iﬁed, the recoverable amount of the investment should be estimated. The impa irment assessment of goodw ill is performed by calculating a value in use (‘VIU’) as the recoverable amount of the related cash generating unit (‘CGU’). The Group ident iﬁed ind icators of impa irment of investments in subsid iary undertak ings, includ ing macroeconomic and geopolit ical factors wh ich have an impact on the ﬁnanc ial pos it ion and performance of the subsid iar ies. In assessing for ind icators of impa irment, among other procedures, management compares the Net Asset Value (‘NAV’) of the subsid iary to the carrying value of each direct subsid iary of the Parent Company. Where the net assets did not support the carrying value, the recoverable amount is estimated by determin ing the h igher of the VIU or fair value less cost to sell. Where the recoverable amount is based on the VIU, this is modelled by reference to future cashﬂow forecasts (proﬁt forecast includ ing a regulatory capital haircut adjustment), discount rates and macroeconomic assumptions such as long-term growth rates. There is a risk that if the judgements and assumptions underpinn ing the impa irment assessments are inappropr iate, then the goodw ill and investments in subsid iar ies balances may be misstated. The level of risk remains consistent with the prior year. We obtained an understanding of management’s process and evaluated the design of controls. Our audit strategy was fully substantive. We assessed the appropriateness of the Group’s methodology for testing the impa irment of goodw ill and investments in subsid iary undertak ings for compliance with the accounting standards. For goodwill, we assessed the appropriateness of the cash-generating units ident iﬁed by management. We agreed the inputs in the VIU model with their source and tested the mathematical accuracy of the VIU model. We engaged EY special ists to support the aud it team in assessing reasonableness of the regulatory haircut adjustment to future proﬁtabil ity forecasts and calculating an independent range for assumptions underlying the VIU calculations, such as the discount rate and long-term growth rate for each cash generating unit. We also reconciled the future proﬁtab il ity forecasts of each CGU to the Group’s approved Corporate Plan (‘the Plan’). We engaged our special ist team to determ ine the reasonableness of the forward macroeconomic inputs used in the Plan. We performed audit procedures to assess the reasonableness of the forecasts by understanding the Group Strategy, challenging key assumptions underpinn ing the Plan, assessing the feasib il ity of management actions necessary to achieve the Plan and testing the reliab il ity of the Group’s histor ical forecast ing by comparing with the actual performance. We performed a stand back assessment to evaluate the appropriateness of the audit evidence obtained and our conclusion in relation to these estimates. We agreed the NAV of the subsid iar ies against their carrying value to conﬁrm impa irment or reversal of impa irment recogn ised in the Parent`s Company ﬁnancial results. We assessed the appropriateness of goodwill and investments in subsid iary undertak ings impa irment disclosures in accordance with IAS 36. We concluded that the goodwill balance as at 31 December 2023 and the related disclosures, are not materially misstated. We also concluded that the investments in subsid iary undertak ings balance reported in the Parent Company ﬁnancial statements and the associated disclosures, are not materially misstated as at 31 December 2023. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 154 Independent Auditor’s report to the members of Standard Chartered Bank continued Risk Our response to the risk Key observations communicated to the Audit Committee Valuation of ﬁnanc ial instruments held at fair value with higher risk characterist ics Refer to the accounting polic ies (page 192) and Note 12 to the ﬁnancial statements. At 31 December 2023, the Group reported ﬁnancial assets measured at fa ir value of $212,208 mill ion (2022: $218,831 m ill ion), and ﬁnancial l iab il it ies at fa ir value of $120,992 mill ion (2022: $136,266 mill ion), of wh ich ﬁnanc ial assets of $4,234 mill ion (2022: $4,744 m ill ion) and ﬁnancial l iab il it ies of $1,591 m ill ion (2022: $888 mill ion) are class if ied as Level 3 in the fair value hierarchy. The fair value of ﬁnanc ial instruments with higher risk characterist ics involves the use of management judgement in the selection of valuation models and techniques, pric ing inputs and assumptions and fair value adjustments. A higher level of estimat ion uncerta inty is involved for ﬁnanc ial instruments valued using complex models, pric ing inputs that have lim ited observabil ity, and fa ir value adjustments, includ ing the Cred it Valuation Adjustment, Funding Valuation Adjustment, Debit Valuation Adjustment and Own Credit Adjustment. We considered the following portfolios presented a higher level of estimat ion uncertainty: • Level 3 derivat ives and debt secur it ies in issue and a portfolio of Level 2 ﬁnanc ial instruments whose valuation involves the use of complex models, and • Unlisted equity investments, loans at fair value, debt and other ﬁnancial instruments classif ied in Level 3 with unobservable pric ing inputs. The level of risk remains consistent with the prior year. We evaluated the design and operating effectiveness of controls relating to the valuation of ﬁnanc ial instruments, includ ing independent price verif icat ion, model validat ion and approval, fair value adjustments, income statement analysis and reporting. Among other procedures, we engaged our valuation special ists to ass ist the audit team in performing the following testing on a risk-assessed sample basis: Test complex model-dependent valuations by independently revaluing Level 3 and complex Level 2 derivat ive ﬁnancial instruments and debt securit ies in issue, in order to assess the appropriateness of models and the adequacy of assumptions and inputs used by the Group; Test valuations of other ﬁnanc ial instruments with higher estimat ion uncerta inty, such as unlisted equity investments, Level 3 loans at fair value, Level 3 debt and other ﬁnanc ial instruments. We compared management’s valuation to our own independently developed range, where appropriate; Assessed the appropriateness of pric ing inputs as part of the Independent Price Verif icat ion process; and Compared the methodology used for fair value adjustments to current market practice. We revalued a sample of valuation adjustments, compared funding and credit spreads to third party data and challenged the basis for determin ing ill iqu id credit spreads. Where differences between our independent valuation and management’s valuation were outside our thresholds, we performed addit ional test ing to assess the impact on the valuation of ﬁnanc ial instruments. Throughout our audit procedures we considered the continu ing uncerta inty aris ing from the current macroeconomic environment. In addit ion, we assessed whether there were any ind icators of aggregate b ias in ﬁnancial instrument marking and methodology assumptions. We concluded that assumptions used by management to estimate the fair value of ﬁnancial instruments with higher risk characterist ics and the recognit ion of related income were reasonable. We highl ighted the following matters to the Audit Committee: • We did not ident ify material differences aris ing from our independent testing of complex model- dependent valuations; • Fair values of derivat ive transactions, debt securit ies in issue, unlisted equity investments, Level 3 loans, Level 3 debt and other ﬁnancial instruments valued using pric ing informat ion w ith lim ited observab il ity were not materially misstated as at 31 December 2023, based on the output of our independent calculations; and • Valuation adjustments in respect of credit, funding, own credit and other risks applied to derivat ive portfol ios and debt securit ies in issue were appropriate, based on our analysis of market data and benchmarking of pric ing informat ion. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 155 Independent Auditor’s report to the members of Standard Chartered Bank continued Risk Our response to the risk Key observations communicated to the Audit Committee Priv ileged Access Management IT General Controls (ITGCs) support the continuous operation of the automated and other IT dependent controls with in the bus iness processes related to ﬁnancial report ing. Effective IT general controls are needed to ensure that IT applicat ions process bus iness data as expected and that changes are made in an appropriate manner. During the 2020, 2021 and 2022 audits, a number of sign iﬁcant infrastructure priv ileged access management control deﬁcienc ies were ident iﬁed by us. Sim ilar deﬁcienc ies were ident iﬁed by Group Internal Audit (GIA) and the predecessor auditor in 2018 and 2019. The possib il ity of users gain ing access pr iv ileges beyond those necessary to perform their assigned duties may result in breaches in segregation of duties, includ ing inappropr iate manual intervent ion, unauthor ised changes to systems or programmes. The risk has decreased in comparison to prior year due to management’s remediat ion program. We evaluated the results of management’s remediat ion program and risk assessment for applicat ions in our audit scope. We also tested IT controls (includ ing IT compensat ing controls) where possible, and also performed addit ional IT substantive procedures to assess the impact of risks associated with the reported deﬁc ienc ies, on the ﬁnanc ial statements. We assessed the impact of the results of the above on our audit procedures over the ﬁnanc ial statements for the year ended 31 December 2023. We communicated the results of our audit procedures to the Audit Committee throughout the audit, in respect of the effectiveness of priv ileged access management controls and explained the results of the addit ional audit procedures performed and noted an overall improvement in the control environment during the course of the year. As a result of the procedures performed, we have reduced the risk that our audit has not ident iﬁed a mater ial error in the ﬁnanc ial statements, related to infrastructure priv ileged access management, to an appropriate level. The key audit matters remain consistent from prior year. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 156 Our applicat ion of mater ial ity We apply the concept of material ity in planning and performing the audit, in evaluating the effect of ident iﬁed misstatements on the audit and in forming our audit opin ion. Material ity The magnitude of an omiss ion or m isstatement that, ind iv idually or in the aggregate, could reasonably be expected to inﬂuence the economic decis ions of the users of the ﬁnancial statements. Mater ial ity prov ides a basis for determin ing the nature and extent of our audit procedures. We determined material ity for the Group to be $221 m ill ion (2022: $178 m ill ion), wh ich is 5% (2022: 5%) of adjusted PBT. This reﬂects actual PBT adjusted for non-recurring items relating to restructuring. We believe that adjusted PBT provides us with most appropriate measure for the users of the ﬁnanc ial statements, g iven the Group is proﬁt making, it is consistent with the wider industry, it is the standard for listed and regulated entit ies and we bel ieve it reﬂects the most relevant measure for users of the ﬁnancial statements. We also bel ieve that the adjustments are appropriate as they relate to material non-recurring items. During our audit, we performed a reassessment of our in it ial material ity. Th is assessment resulted in higher ﬁnal material ity calculated based on the actual ﬁnancial performance of the Group for the year. There were no changes to the bas is for material ity calculat ion from the planning stage. • Reported proﬁt before tax – $4,414m • Add restructuring items – $0.6m Starting basis Adjustments • Total 4,415m Adjusted PBT • Material ity of $221m (5% of Adjusted PBT) Material ity We determined material ity for the Company to be $155 m ill ion (2022: $178 m ill ion), wh ich is 5% of adjusted PBT (2022: was aligned to the material ity of the Group). We bel ieve that adjusted PBT provides us with most appropriate measure for the users of the ﬁnancial statements, g iven the Company is proﬁt making, it is consistent with the wider industry, it is the standard for regulated entit ies and we bel ieve it reﬂects the most relevant measure for users of the ﬁnanc ial statements. Performance material ity The applicat ion of mater ial ity at the ind iv idual account or balance level. It is set at an amount to reduce to an appropriately low level the probabil ity that the aggregate of uncorrected and undetected m isstatements exceeds material ity. On the basis of our risk assessment, together with our evaluation of the Group’s overall control environment, our judgement was that performance material ity was 50% (2022: 50%) of our plann ing material ity, namely $111m (2022: $89m). We have set performance material ity at th is percentage based on a variety of risk assessment factors such as the expectation of misstatements, internal control environment considerat ions and other factors such as the global complex ity of the Group. Audit work at component locations for the purpose of obtain ing aud it coverage over sign iﬁcant ﬁnancial statement accounts is undertaken based on a percentage of total performance material ity. The performance mater ial ity set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance material ity allocated to components was $11.4m mill ion to $22.8m m ill ion (2022: $8.8 m ill ion to $34.1 m ill ion). Independent Auditor’s report to the members of Standard Chartered Bank continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 157 Independent Auditor’s report to the members of Standard Chartered Bank continued Reporting threshold An amount below which ident iﬁed m isstatements are considered as being clearly triv ial. We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $11 mill ion (2022: $8 mill ion), wh ich is set at 5% of planning material ity, as well as d ifferences below that threshold that, in our view, warranted reporting on qualitat ive grounds. We evaluate any uncorrected misstatements against both the quantitat ive measures of mater ial ity d iscussed above and in light of other relevant qualitat ive cons iderat ions in forming our opin ion. Other informat ion The other informat ion compr ises the informat ion included in the Annual Report and Accounts, includ ing: the Strateg ic Report, Directors’ Report, Statement of Directors’ Responsib il it ies, R isk Review and Capital Review (other than those sections marked as audited), Supplementary informat ion and Glossary, other than the ﬁnancial statements and our aud itor’s report thereon. The directors are responsible for the other informat ion conta ined with in the annual report. Our opin ion on the ﬁnancial statements does not cover the other informat ion and, except to the extent otherw ise explic itly stated in this report, we do not express any form of assurance conclusion thereon. Our responsib il ity is to read the other informat ion and, in doing so, consider whether the other informat ion is materially incons istent w ith the ﬁnanc ial statements or our knowledge obta ined in the course of the audit, or otherwise appears to be materially misstated. If we ident ify such mater ial incons istenc ies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the ﬁnanc ial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other informat ion, we are requ ired to report that fact. We have nothing to report in this regard. Opin ions on other matters prescr ibed by the Companies Act 2006 In our opin ion, based on the work undertaken in the course of the audit: • the informat ion g iven in the strategic report and the directors’ report for the ﬁnanc ial year for wh ich the ﬁnanc ial statements are prepared is consistent with the ﬁnanc ial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not ident iﬁed mater ial misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opin ion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not vis ited by us; or • the Parent Company ﬁnancial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specif ied by law are not made; or • we have not received all the informat ion and explanat ions we require for our audit. Responsib il it ies of d irectors As explained more fully in the directors’ responsib il it ies statement set out on page 57, the d irectors are responsible for the preparation of the ﬁnanc ial statements and for be ing satisf ied that they g ive a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of ﬁnanc ial statements that are free from mater ial misstatement, whether due to fraud or error. In preparing the ﬁnanc ial statements, the d irectors are responsible for assessing the Group and Parent Company’s abil ity to continue as a going concern, disclos ing, as appl icable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liqu idate the Group or the Parent Company or to cease operat ions, or have no realist ic alternat ive but to do so. Auditor’s responsib il it ies for the aud it of the ﬁnanc ial statements Our objectives are to obta in reasonable assurance about whether the ﬁnanc ial statements as a whole are free from mater ial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opin ion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, ind iv idually or in the aggregate, they could reasonably be expected to inﬂuence the economic decis ions of users taken on the bas is of these ﬁnancial statements. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 158 Explanation as to what extent the audit was considered capable of detecting irregular it ies, includ ing fraud Irregularit ies, includ ing fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsib il it ies, outl ined above, to detect irregular it ies, includ ing fraud. The r isk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intent ional m isrepresentat ions, or through collus ion. The extent to which our procedures are capable of detecting irregular it ies, includ ing fraud is detailed below. However, the primary responsib il ity for the prevention and detection of fraud rests with both those charged with governance of the Company and management. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most sign iﬁcant are those that relate to the report ing framework (UK-adopted IAS and EU IFRS, the Companies Act 2006), regulations and supervisory requirements of the Prudential Regulation Authority (PRA), FRC, Financ ial Conduct Authority (FCA) and other overseas regulatory requirements, includ ing but not l im ited to regulat ions in its major markets such as India, Singapore, the United Arab Emirates and the United States of America, and the relevant tax compliance regulations in the jur isd ict ions in which the Group operates. In addit ion, we concluded that there are certa in sign iﬁcant laws and regulations that may have an effect on the determinat ion of the amounts and d isclosures in the ﬁnanc ial statements and those laws and regulations relating to regulatory capital and liqu id ity, conduct, ﬁnanc ial cr ime includ ing ant i-money laundering, sanctions and market abuse recognis ing the ﬁnancial and regulated nature of the Group’s act iv it ies. • We understood how the Group is complying with those frameworks by performing a combinat ion of inqu ir ies of senior management and those charged with governance as required by audit ing standards, rev iew of board and certain committee meeting minutes, gain ing an understand ing of the Group’s approach to governance, inspect ion of regulatory correspondence in the year and engaging with internal and external legal counsel. We also engaged EY ﬁnanc ial cr ime and forensics special ists to perform procedures on areas relat ing to anti-money laundering, whistleblow ing, and sanct ions compliance. Through these procedures, we became aware of actual or suspected non-compliance. The ident iﬁed actual or suspected non-compliance was not sufﬁc iently s ign iﬁcant to our aud it that it would have resulted in it being ident iﬁed as a key audit matter. • We assessed the susceptib il ity of the Group’s ﬁnanc ial statements to mater ial misstatement, includ ing how fraud m ight occur by consider ing the controls that the Group has establ ished to address risks ident iﬁed by the ent ity, or that otherwise seek to prevent, deter or detect fraud. Our procedures to address the risks ident iﬁed also included incorporation of unpredictab il ity into the nature, tim ing and/or extent of our test ing, challenging assumptions and judgements made by management in their sign iﬁcant account ing estimates and journal entry testing. • Based on this understanding, we designed our audit procedures to ident ify non-compl iance with such laws and regulations. Our procedures involved inqu ir ies of the Group’s internal and external legal counsel, money laundering reporting ofﬁcer, internal audit, certain senior management executives and focused testing on a sample basis, includ ing journal entry testing. We also performed inspect ion of key regulatory correspondence from the pr inc ipal regulatory authorit ies as well as rev iew of board and committee minutes. • For instances of actual or suspected non-compliance with laws and regulations, which have a material impact on the ﬁnancial statements, these were commun icated by management to the Group audit engagement team and component teams (where applicable) who performed audit procedures such as inqu ir ies with management, sending conﬁrmat ions to external legal counsel, substantive testing and meeting with regulators. Where appropriate, we involved special ists from our ﬁrm to support the audit team. • The Group is authorised to provide banking, insurance, mortgages and home ﬁnance, consumer credit, pensions, investments and other activ it ies. The Group operates in the banking industry which is a highly regulated environment. As such, the Senior Statutory Auditor considered the experience and expertise of the Group audit engagement team, the component teams and the shared service centre teams to ensure that the team had the appropriate competence and capabil it ies, which included the use of special ists where appropr iate. A further descript ion of our respons ib il it ies for the aud it of the ﬁnanc ial statements is located on the Financ ial Report ing Council’s website at https://www.frc.org.uk/auditorsrespons ib il it ies. This descript ion forms part of our aud itor’s report. Independent Auditor’s report to the members of Standard Chartered Bank continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 159 Other matters we are required to address • Following the recommendation from the Audit Committee, we were re-appointed by the Company at the Annual General Meeting on 3 May 2023 to audit the ﬁnanc ial statements for the year end ing 31 December 2023 and subsequent ﬁnanc ial periods. • The period of total uninterrupted engagement is four years, covering the years ended 31 December 2020 to 31 December 2023. • The audit opin ion is consistent with the addit ional report to the Aud it Committee. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsib il ity to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opin ions we have formed. David Canning-Jones (Senior statutory auditor) For and on behalf of Ernst & Young LLP, Statutory Auditor London 23 February 2024 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 160 Consolidated income statement For the year ended 31 December 2023 Notes 2023 $mill ion 2022 $mill ion Interest income 18,380 9,765 Interest expense (13,773) (5,314) Net interest income 3 4,607 4,451 Fees and commiss ion income 3,094 2,863 Fees and commiss ion expense (656) (709) Net fees and commiss ion income 4 2,438 2,154 Net trading income 5 4,100 3,743 Other operating income 6 404 (114) Operating income 11,549 10,234 Staff costs (6,286) (5,748) Premises costs (241) (228) General admin istrat ive expenses 27 (75) Depreciat ion and amort isat ion (647) (611) Operating expenses 7 (7,147) (6,662) Operating proﬁt before impa irment losses and taxat ion 4,402 3,572 Credit impa irment 8 58 22 Goodwill, property, plant and equipment and other impa irment 9 (42) (107) Loss from associates and jo int ventures 31 (4) (13) Proﬁt before taxation 4,414 3,474 Taxation 10 (1,177) (1,122) Proﬁt for the year 3,237 2,352 Proﬁt attributable to: Non-controlling interests 28 29 (18) Parent company shareholders 3,208 2,370 Proﬁt for the year 3,237 2,352 The notes on pages 167 to 305 form an integral part of these ﬁnanc ial statements. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 161 Consolidated statement of comprehensive income For the year ended 31 December 2023 Notes 2023 $mill ion 2022 $mill ion Proﬁt for the year 3,237 2,352 Other comprehensive income/(loss) Items that will not be reclassif ied to income statement: 107 (27) Own credit gains/(losses) on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss 99 (26) Equity instruments at fair value through other comprehensive income 110 (41) Actuarial (losses)/gains on retirement beneﬁt obligat ions 29 (27) 23 Taxation relating to components of other comprehensive income 10 (75) 17 Items that may be reclassif ied subsequently to income statement: 255 (2,739) Exchange differences on translation of foreign operations: Net losses taken to equity (563) (1,328) Net (losses)/gains on net investment hedges 13 (18) 54 Debt instruments at fair value through other comprehensive income: Net valuation gains/(losses) taken to equity 300 (1,285) Reclassif ied to income statement 6 92 157 Net impact of expected credit loss (48) 120 Cash ﬂow hedges: Net movements in cash ﬂow hedge reserve 13 583 (592) Taxation relating to components of other comprehensive income 10 (91) 135 Other comprehensive gain/(loss) for the year, net of taxation 362 (2,766) Total comprehensive income/(loss) for the year 3,599 (414) Total comprehensive income/(loss) attributable to: Non-controlling interests 28 (2) (56) Parent company shareholders 3,601 (358) Total comprehensive income/(loss) for the year 3,599 (414) Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 162 Consolidated balance sheet As at 31 December 2023 Notes Group Company 2023 $mill ion 2022 $mill ion 2023 $mill ion 2022 $mill ion Assets Cash and balances at central banks 12,34 64,198 50,531 52,758 38,867 Financ ial assets held at fa ir value through proﬁt or loss 12 97,100 82,554 86,412 75,792 Derivat ive ﬁnancial instruments 12,13 52,554 65,050 53,221 65,481 Loans and advances to banks 12,14 22,803 27,383 10,135 18,548 Loans and advances to customers 12,14 156,143 158,126 75,883 80,611 Investment securit ies 12 102,474 113,028 92,771 95,372 Other assets 19 28,507 37,641 21,742 31,715 Due from subsid iary undertak ings and other related parties 5,666 6,387 10,053 13,214 Current tax assets 10 484 446 395 347 Prepayments and accrued income 2,072 2,172 1,386 1,598 Interests in associates and jo int ventures 31 81 143 – – Investments in subsid iary undertak ings 31 – – 10,066 10,300 Goodwill and intang ible assets 16 4,210 4,052 2,359 2,279 Property, plant and equipment 17 1,030 994 521 430 Deferred tax assets 10 502 741 379 579 Assets classif ied as held for sale 20 755 1,486 68 592 Total assets 538,579 550,734 418,149 435,725 Liab il it ies Deposits by banks 12 23,616 24,150 18,280 17,900 Customer accounts 12 237,902 243,075 121,648 137,422 Repurchase agreements and other sim ilar secured borrow ing 12,15 12,033 1,991 11,977 1,723 Financ ial l iab il it ies held at fa ir value through proﬁt or loss 12 65,819 67,408 64,467 66,189 Derivat ive ﬁnancial instruments 12,13 55,173 68,858 55,531 69,203 Debt securit ies in issue 12,21 36,481 36,982 34,740 34,992 Other liab il it ies 22 24,477 25,925 19,213 20,990 Due to parent companies, subsid iary undertak ings & other related parties 31,166 28,102 47,317 39,933 Current tax liab il it ies 10 445 556 188 329 Accruals and deferred income 4,288 3,890 2,453 2,140 Subordinated liab il it ies and other borrowed funds 12,26 11,454 13,269 10,896 12,729 Deferred tax liab il it ies 10 582 577 477 486 Provis ions for l iab il it ies and charges 23 235 335 171 249 Retirement beneﬁt obligat ions 29 177 166 133 124 Liab il it ies included in disposal groups held for sale 20 787 1,307 5 345 Total liab il it ies 504,635 516,591 387,496 404,754 Equity Share capital and share premium account 27 21,643 22,393 21,643 22,393 Other reserves (6,509) (6,965) (3,403) (4,252) Retained earnings 12,988 12,801 7,671 8,080 Total parent company shareholders’ equity 28,122 28,229 25,911 26,221 Other equity instruments 27 4,742 4,750 4,742 4,750 Total equity excluding non-controlling interests 32,864 32,979 30,653 30,971 Non-controlling interests 28 1,080 1,164 – – Total equity 33,944 34,143 30,653 30,971 Total equity and liab il it ies 538,579 550,734 418,149 435,725 The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its ind iv idual statement of comprehensive income and related notes that form a part of these ﬁnanc ial statements. The Company proﬁt for the year after tax is $2,585 mill ion (2022: Proﬁt after tax $2,372 m ill ion). The notes on pages 167 to 305 form an integral part of these ﬁnanc ial statements These ﬁnancial statements were approved by the Court of D irectors and authorised for issue on 23 February 2024 and signed on its behalf by: Bill Winters , Director Diego De Giorg i , Director Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 163 Consolidated statement of changes in equity For the year ended 31 December 2023 Share capital and share premium account $mill ion Capital and merger reserves 1 $mill ion Own credit adjustment reserve $mill ion Fair value through other comprehensive income reserve – debt $mill ion Fair value through other comprehensive income reserve – equity $mill ion Cash ﬂow hedge reserve $mill ion Translation reserve $mill ion Retained earnings $mill ion Parent company shareholders' equity $mill ion Other equity instruments $mill ion Non- controlling interests $mill ion Total $mill ion As at 1 January 2022 22,393 40 (3) 112 175 (11) (4,544) 11,278 29,440 4,749 1,248 35,437 Proﬁt/(loss) for the year – – – – – – – 2,370 2,370 – (18) 2,352 Other comprehensive (loss)/income⁹ – – (23) (963) (9) (502) (1,249) 18 2 (2,728) – (38) (2,766) Distr ibut ions – – – – – – – – – – (87) (87) Other equity instruments issued, net of expenses – – – – – – – – – 1,000 – 1,000 Redemption of other equity instruments – – – – – – – – – (999) – (999) Share option expenses – – – – – – – 152 152 – – 152 Div idends on ord inary shares – – – – – – – (575) (575) – – (575) Div idends on preference shares and AT1 securit ies – – – – – – – (311) (311) – – (311) Deemed distr ibut ion to parent 3 – – – – – – – (159) (159) – – (159) Other movements – – – – – – 12 4 28 5 40 – 59 6 99 As at 31 December 2022 22,393 40 (26) (851) 166 (513) (5,781) 12,801 28,229 4,750 1,164 34,143 Proﬁt for the year – – – – – – – 3,208 3,208 – 29 3,237 Other comprehensive income/(loss)⁹ – – 73 337 66 500 (550) (33) 2 393 – (31) 362 Distr ibut ions – – – – – – – – – – (103) (103) Other equity instruments issued, net of expenses – – – – – – – – – 992 – 992 Redemption of other equity instruments – – – – – – – – – (1,000) – (1,000) Share option expenses – – – – – – – 174 174 – – 174 Div idends on ord inary shares – – – – – – – (2,599) (2,599) – – (2,599) Div idends on preference shares and AT1 securit ies – – – – – – – (363) (363) – – (363) Deemed distr ibut ion to parent 3 – – – – – – – (174) (174) – – (174) Share buyback¹⁰ (750) – – – – – – – (750) – – (750) Other movements 7 – – – – (41) – 71 4 (26) 4 – 21 8 25 As at 31 December 2023 21,643 40 47 (514) 191 (13) (6,260) 12,988 28,122 4,742 1,080 33,944 1 Includes capital reserve of $35 mill ion, cap ital redemption reserve of $5 mill ion 2 Comprises actuarial gain/(loss) on Group deﬁned beneﬁt schemes 3 Relates to deemed distr ibut ion to parent company aris ing from share-based payment net of taxat ion of $174 mill ion (2022: $159 m ill ion) 4 Movement related to Translation adjustment 5 Movement relating to $21 mill ion NCI on Power2SME Pte. Ltd. and $8 m ill ion on CurrencyFa ir Lim ited 6 Movements related to non-controlling interest from Trust Bank Singapore Lim ited ($47 m ill ion), Power2SME Pte. Ltd. ($9 m ill ion) and Zod ia Markets Holdings Lim ited ($3 mill ion) 7 Movements in Reserves relating to Ventures Group due to change in ownership 8 Movement from non-controlling interest of $28 mill ion pr imar ily from Trust Bank S ingapore offset by release of non-controlling interest relating to Venture group ($7 mill ion) due to change in ownership 9 All the amounts are net of tax 10 At an Extraordinary General Meeting of the Company duly convened and held at 1 Basinghall Avenue, London, EC2V 5DD on 26 June 2023, the capital of the Company was reduced by (i) cancelling and extingu ish ing 7,500 7.014% non-cumulative preference shares of US$5 each in the capital of the Company (the “Preference Shares”) and (i i) reduc ing the amount standing to the credit of the Company’s share premium account by US$749,962,500, and a repayment of capital of US$750,000,000 be paid to the holder of the Preference Shares. Note 27 includes a descript ion of each reserve. The notes on pages 167 to 305 form an integral part of these ﬁnanc ial statements Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 164 Notes Group Company 2023 $mill ion 2022 (Restated)¹ $mill ion 2023 $mill ion 2022 (Restated)¹ $mill ion Cash ﬂows from operating activ it ies: Proﬁt before taxation 4,414 3,474 3,088 2,996 Adjustments for non-cash items and other adjustments included with in income statement 33 (107) 1,900 (790) 381 Change in operating assets¹ 33 4,406 7,630 23,104 (2,793) Change in operating liab il it ies 33 (4,503) 6,954 (13,891) 4,521 Contribut ions to deﬁned beneﬁt schemes 29 (60) (46) (46) (36) UK and overseas taxes paid 10 (1,229) (782) (658) (359) Net cash from operating activ it ies 2,921 19,130 10,807 4,710 Cash ﬂows from invest ing act iv it ies: Internally generated capital ised software 16 (649) (761) (378) (501) Purchase of property, plant and equipment 17 (100) (139) (53) (59) Disposal of property, plant and equipment 17 15 30 1 14 Acquis it ion of investment in subsid iar ies, associates and joint ventures 31 (1) (25) – – Div idends rece ived from subsid iar ies, associates and joint ventures 31 4 6 2,060 1,046 Disposal of subsid iar ies, associates and jo int ventures 486 – – – Disposal of assets held for sale and associated liab il it ies 108 – 108 – Purchase of investment securit ies (124,780) (156,905) (91,970) (114,671) Disposal and maturity of investment securit ies 136,837 138,165 97,216 98,999 Net cash from/(used in) from invest ing act iv it ies 11,920 (19,629) 6,984 (15,172) Cash ﬂows from ﬁnancing act iv it ies: Cancellation of shares includ ing share buyback 27 (750) – (750) – Premises and equipment lease liab il ity princ ipal payment (97) (129) (45) (78) Issue of Addit ional T ier 1 capital, net of expenses 27 992 1,000 992 1,000 Redemption of Tier 1 capital 27 (1,000) (999) (1,000) (999) Gross proceeds from issue of subordinated liab il it ies 33 18 750 – 750 Interest paid on subordinated liab il it ies 33 (714) (424) (583) (378) Repayment of subordinated liab il it ies 33 (2,160) (1,008) (2,160) (1,008) Proceeds from issue of senior debts 33 5,597 5,316 4,820 4,091 Repayment of senior debts 33 (2,546) (1,490) (1,806) (298) Interest paid on senior debts 33 (235) (1) (235) (1) Net cash inﬂow from non-controlling interests 28 21 59 – – Distr ibut ions and Div idends pa id to non-controlling interests, preference shareholders and AT1 securit ies 11,28 (466) (398) (363) (311) Div idends pa id to ordinary shareholders 11 (2,599) (575) (2,599) (575) Net cash (used in)/from ﬁnanc ing act iv it ies (3,939) 2,101 (3,729) 2,193 Net increase/(decrease) in cash and cash equivalents 10,902 1,602 14,062 (8,269) Cash and cash equivalents at beginn ing of the year¹ 78,255 78,824 40,264 49,394 Effect of exchange rate movements on cash and cash equivalents (797) (2,171) (338) (861) Cash and cash equivalents at end of the year¹ 34 88,360 78,255 53,988 40,264 1 Refer to note 33 and 34 for details of the restatement For Bank Group, Interest received was $18,174 mill ion (31 December 2022: $8,897 m ill ion) , interest paid was $13,773 mill ion (31 December 2022: $4,356 mill ion). For Bank Company Interest received was $12,518 mill ion (31 December 2022: $5,355 m ill ion), interest paid was $10,787 mill ion (31 December 2022: $3,394 mill ion). Cash ﬂow statement For the year ended 31 December 2023 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 165 Company statement of changes in equity For the year ended 31 December 2023 Share capital and share premium account $mill ion Capital and merger reserves 1 $mill ion Own credit adjustment reserve $mill ion Fair value through other comprehensive income reserve – debt $mill ion Fair value through other comprehensive income reserve – equity $mill ion Cash ﬂow hedge reserve $mill ion Translation reserve $mill ion Retained earnings $mill ion Parent company shareholders' equity $mill ion Other equity instruments $mill ion Total $mill ion As at 1 January 2022 22,393 40 1 (90) 148 (39) (2,149) 6,594 26,898 4,749 31,647 Proﬁt for the year – – – – – – – 2,372 2,372 – 2,372 Other comprehensive (loss)/income⁴ – – (25) (950) (1) (483) (704) 6 2 (2,157) – (2,157) Shares issued, net of expenses – – – – – – – – – – – Other equity instruments issued, net of expenses – – – – – – – – – 1,000 1,000 Redemption of other equity instruments – – – – – – – – – (999) (999) Share option expenses – – – – – – – 98 98 – 98 Div idends on ord inary shares – – – – – – – (575) (575) – (575) Div idends on preference shares and AT1 securit ies – – – – – – – (311) (311) – (311) Deemed distr ibut ion to parent 3 – – – – – – – (104) (104) – (104) Other movements – – – – – – – – – – – As at 31 December 2022 22,393 40 (24) (1,040) 147 (522) (2,853) 8,080 26,221 4,750 30,971 Proﬁt for the year – – – – – – – 2,585 2,585 – 2,585 Other comprehensive income/(loss)⁴ – – 73 324 67 471 (86) (21) 2 828 – 828 Other equity instruments issued, net of expenses – – – – – – – – – 992 992 Redemption of other equity instruments – – – – – – – – – (1,000) (1,000) Share option expenses – – – – – – – 114 114 – 114 Div idends on ord inary shares – – – – – – – (2,599) (2,599) – (2,599) Div idends on preference shares and AT1 securit ies – – – – – – – (363) (363) – (363) Deemed distr ibut ion to parent 3 – – – – – – – (113) (113) – (113) Share buyback⁵ (750) – – – – – – – (750) – (750) Other movements – – – – – – – (12) (12) – (12) As at 31 December 2023 21,643 40 49 (716) 214 (51) (2,939) 7,671 25,911 4,742 30,653 1 Includes capital reserve of $35 mill ion, cap ital redemption reserve of $5 mill ion 2 Comprises actuarial gain/(loss) on Group deﬁned beneﬁt schemes 3 Relates to deemed distr ibut ion to parent company aris ing from share-based payment net of taxat ion of $113 mill ion (31 December 2022: $104 m ill ion) 4 All the amounts are net of tax 5 At an Extraordinary General Meeting of the Company duly convened and held at 1 Basinghall Avenue, London, EC2V 5DD on 26 June 2023, the capital of the Company was reduced by (i) cancelling and extingu ish ing 7,500 7.014% non-cumulative preference shares of US$5 each in the capital of the Company (the “Preference Shares”) and (i i) reduc ing the amount standing to the credit of the Company’s share premium account by US$749,962,500, and a repayment of capital of US$750,000,000 be paid to the holder of the Preference Shares. Note 27 includes a descript ion of each reserve. The notes on pages 167 to 305 form an integral part of these ﬁnanc ial statements. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 166 Section Note Page Basis of preparation 1 Accounting polic ies 167 Performance/return 2 Segmental informat ion 169 3 Net interest income 175 4 Net fees and commiss ion 176 5 Net trading income 178 6 Other operating income 178 7 Operating expenses 179 8 Credit impa irment 180 9 Goodwill, property, plant and equipment and other impa irment 184 10 Taxation 185 11 Div idends 191 Assets and liab il it ies held at fa ir value 12 Financ ial instruments 192 13 Derivat ive ﬁnancial instruments 231 Financ ial instruments held at amortised cost 14 Loans and advances to banks and customers 246 15 Reverse repurchase and repurchase agreements includ ing other sim ilar lend ing and borrowing 246 Other assets and investments 16 Goodwill and intang ible assets 249 17 Property, plant and equipment 252 18 Leased assets 255 19 Other assets 256 20 Assets held for sale and associated liab il it ies 257 Funding, accruals, provis ions, cont ingent liab il it ies and legal proceed ings 21 Debt securit ies in issue 259 22 Other liab il it ies 260 23 Provis ions for l iab il it ies and charges 261 24 Contingent liab il it ies and comm itments 262 25 Legal and regulatory matters 263 Capital instruments, equity and reserves 26 Subordinated liab il it ies and other borrowed funds 264 27 Share capital, other equity instruments and reserves 265 28 Non-controlling interests 267 Employee beneﬁts 29 Retirement beneﬁt obligat ions 268 30 Share-based payments 278 Scope of consolidat ion 31 Investments in subsid iary undertak ings, jo int ventures and assoc iates 283 32 Structured entit ies 286 Cash ﬂow statement 33 Cash ﬂow statement 288 34 Cash and cash equivalents 289 Other disclosure matters 35 Related party transactions 290 36 Auditor’s remuneration 293 37 Remuneration of directors 293 38 Related undertakings of the Group 295 39 Group Reorganisat ion 307 40 Post Balance Sheet events 307 Contents – Notes to the ﬁnancial statements Notes to the ﬁnancial statements Standard Chartered Bank 167 Directors’ Report and Financ ial Statements 2023 1. Accounting polic ies Statement of compliance The Group ﬁnancial statements consol idate Standard Chartered Bank (the Company) and its subsid iar ies (together referred to as the Group) and equity account the Group’s interests in associates and jo intly controlled ent it ies. The parent company ﬁnancial statements present informat ion about the Company as a separate ent ity. The Group ﬁnancial statements have been prepared and approved by the d irectors in accordance with UK- adopted internat ional account ing standards in conformity with the requirements of the Companies Act 2006 and with internat ional ﬁnancial report ing standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU IFRS). There are no sign iﬁcant d ifferences between UK-adopted internat ional account ing standards and EU IFRS. The Company ﬁnancial statements have been prepared in accordance with UK-adopted internat ional account ing standards as applied in conformity with section 408 of the Companies Act 2006. The following parts of the Risk review and Capital review form part of these ﬁnanc ial statements: a) Risk review: Disclosures from the start of Risk proﬁle section (page 60) to the end of other princ ipal r isks in the same section (page 120) excluding: • Liqu id ity coverage ratio (LCR), (page 110) • Stressed coverage, (page 110) • Net stable funding ratio (NSFR), (page 111) • Liqu id ity pool, (page 111) • Interest Rate Risk in the Banking Book, (page 118) • Operational risk, (page 119) • Other princ ipal r isks, (page 120) b) Capital review: from the start of ‘Capital Requirements Direct ive (CRD) cap ital base’ to the end of ‘movement in total capital’, excluding capital ratios and risk-weighted assets (RWA) Basis of preparation The consolidated and Company ﬁnanc ial statements have been prepared on a go ing concern basis and under the histor ical cost convention, as modif ied by the revaluat ion of cash-settled share-based payments, fair value through other comprehensive income, and ﬁnanc ial assets and l iab il it ies ( includ ing der ivat ives) at fa ir value through proﬁt or loss. The consolidated ﬁnanc ial statements are presented in United States dollars ($), being the presentation currency of the Group and functional currency of the Company, and all values are rounded to the nearest mill ion dollars, except when otherwise ind icated. Sign iﬁcant and other account ing estimates and judgement In determin ing the carry ing amounts of certain assets and liab il it ies, the Group makes assumpt ions of the effects of uncertain future events on those assets and liab il it ies at the balance sheet date. The Group’s est imates and assumptions are based on histor ical exper ience and expectation of future events and are reviewed period ically. Further informat ion about key assumptions concerning the future, and other key sources of estimat ion uncerta inty and judgement, are set out in the relevant disclosure notes for the areas set out under the relevant headings below: Sign iﬁcant account ing estimates and crit ical judgements Sign iﬁcant account ing estimates and judgements represent those items which have a sign iﬁcant r isk of causing a material adjustment to the carrying amounts of assets and liab il it ies w ith in the next year. S ign iﬁcant account ing estimates and judgements are: • Expected credit loss calculations (Note 8) • Financ ial instruments measured at fair value (Note 12) • Investments in subsid iary undertak ings (Note31) Other areas of accounting estimate and judgement Other areas of accounting estimate and judgement do not meet the deﬁn it ion under IAS 1 of sign iﬁcant account ing estimates or crit ical account ing judgements, but the recognit ion of certa in material assets and liab il it ies are based on assumptions and/or are subject to long-term uncertaint ies. The other areas of account ing estimate and judgement are: • Taxation (Note 10) • Goodwill impa irment (Note 16) • Retirement beneﬁt obligat ions (Note 29) • Share-based payments (Note 30) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 168 Directors’ Report and Financ ial Statements 2023 1. Accounting polic ies cont inued Climate impact on the Group’s balance sheet Climate, and the impact of climate on the Group’s balance sheet is considered as an area of sign iﬁcant account ing estimate and judgment through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liab il it ies. It is noted that although not currently quantitat ively mater ial, the Group considers climate to be qualitat ively material to the Group. The PLC Group has assessed the impact of climate risk on the ﬁnanc ial report. Th is is set out with in the Susta inab il ity Review chapter in the PLC Annual Report which incorporates the Group’s Climate-related Financ ial D isclosures which align with the recommendations from the Task Force for Climate related Financ ial D isclosures (TCFD). Further risk disclosure has been provided in the Princ ipal R isks and Uncertaint ies sect ion of the Annual Report where the Group has described how it manages climate risk as an Integrated Risk Type. The areas of impact where judgements and the use of estimates have been applied were credit risk and the impact on lending portfolios; ESG features with in issued loans and bonds; physical risk on our mortgage lending portfolio; and, the corporate plan, in respect of which forward looking cash ﬂows impact the recoverabil ity of certa in assets, includ ing of goodwill, deferred tax assets and investments in subsid iary undertak ings. This assessment on the corporate loan portfolio was undertaken by consider ing the matur ity proﬁle of the loan portfolio which is major ity shorter term. Trans it ion r isk, as our clients move to lower carbon emitt ing revenues, (e ither by virtue of legislat ion or chang ing end customer preference) is considered with reference to client transit ion pathways and man ifests over a longer term than the maturity of the loan book (up to 2050). At PLC Group level, the setting of net zero targets for our high carbon sectors, which as of this annual report covers 11 of the 12 high carbon sectors as mandated by the Net Zero Banking Alliance, manages transit ion r isk. Net zero targets enable the portfolio managers to work with our clients on their transit ion, deploy cap ital to those clients which are engaged and have adequate transit ion pathways, and ex it clients that refuse to work with the Group on moving from a high carbon present to a low carbon future. All of these actions manage the Group’s transit ion r isk and engage clients before transit ion r isk manifests itself into credit losses. Physical risk is already included with in the majority of our mortgage lend ing decis ions, and we have appl ied scenario analysis against the pathways of different temperature addit ions and country pol icy scenarios. We also assess the impact of climate risk on the classif icat ion of ﬁnanc ial instruments under IFRS 9, when Environmental, Sustainab il ity or Governance (ESG) triggers may affect the cash ﬂows received by the Group under the contractual terms of the instrument. The PLC Group Climate Risk team have performed a quantitat ive assessment of the impact of climate risk on the IFRS 9 ECL provis ion. Th is assessment has been performed across both the CCIB and CPBB portfolios. The Climate risk impact assessment on IFRS 9 business as usual ECL has been conducted based on newly developed internal climate risk models for four Corporate sectors (Oil and Gas, Power, Steel and Min ing) and Sovere igns, whilst the top-down approach developed in 2022 was used for the remain ing portfol ios. The impact assessment resulted in a marginal ECL increase across CCIB and CPBB, which will not be recorded as an overlay for the Group or the PLC Group at the 2023 year end. The PLC Group’s corporate plan has a 5 year outlook and considers the high carbon sectors the Group ﬁnances. The major ity of the PLC Group high carbon sector targets are production/physical intens it ies which allow continued levels of lending as long as the products the client produce have a decreasing carbon cost. For Coal Min ing and O il and Gas, these sectors have absolute targets which represent a decreasing carbon budget. Coal Min ing is an immater ial book, wh ilst for Oil and Gas lending is being actively monitored towards lower carbon counterparties and technologies. The corporate plan is shorter term than many of the climate scenario outlooks but seeks to capture the nearer term performance as required by recoverabil ity models. The PLC Group has for the second t ime in the 2024 corporate plan included antic ipated ECL charges linked to climate for four sectors (Oil and Gas, Metals and Min ing, Power and Transport exclud ing Aviat ion) over the 5 years. This addit ion of ECL has not in itself, impacted the recoverabil ity of assets supported by d iscounted cash ﬂow models (such as Value in Use) which util ise the Corporate plan. The PLC Group has further progressively strengthened its scenario analysis capabil it ies with the modelling of Climate Risk impact over a 30-year period across multiple dimens ions includ ing scenar io data and pathways. This has been lim ited by availab il ity of client-specif ic data, and modell ing lim itat ions which have required judgements to be made around scenarios chosen, regression and proxies used. Notwithstand ing these challenges, our work to date, us ing certain assumptions and proxies, ind icates that our bus iness is resil ient to all Network of Central Banks and Superv isors for Greening the Financ ial System (NGFS) and bespoke scenarios that were explored. The Group, although acknowledging the lim itat ions of current data available, increas ing soph ist icat ion of models evolving and nascent nature of climate impacts on internal and client assets, considers Climate Risk to have lim ited quant itat ive impact in the immed iate term and as a longer-term r isk will be addressed through its business strategy and ﬁnanc ial planning as the Group implements its net zero journey. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 169 Directors’ Report and Financ ial Statements 2023 1. Accounting polic ies cont inued Comparatives Certain comparatives have been represented in line with current year disclosures. Details of these changes are set out in the relevant sections and notes below: • Cash ﬂow statement • Note 2 Segmental informat ion • Note 33 Cash ﬂow statement • Note 34 Cash and cash equivalents New accounting standards adopted by the Group There were no new accounting standards or interpretat ions that had a mater ial effect on the Group’s Financ ial Statements in 2023. New accounting standards in issue but not yet effective IAS 21 Amendment - Lack of Exchangeabil ity The IAS 21 amendment was issued in August 2023 and is effective for annual reporting periods beginn ing on or after January 1, 2025. This amendment is not yet endorsed for use in the United Kingdom. The amendment provides guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not. The amendment requires disclosure of informat ion that enables users of ﬁnancial statements to understand the impact of a currency not being exchangeable. The Group will apply the IAS 21 Amendment for annual reporting periods beginn ing on January 1, 2025 and is currently assessing the impact on the Group’s ﬁnanc ial statements but do not expect th is to be material. Going concern These ﬁnancial statements were approved by the Court of d irectors on 23 February 2024. The directors have made an assessment of the Group’s abil ity to cont inue as a going concern. This assessment has been made having considered the current macroeconomic and geopolit ical headw inds, includ ing: • A review of the Group Strategy and Corporate plan • An assessment of the actual performance to date, loan book quality, credit impa irment, legal, regulatory and compl iance matters, and the updated annual revised budget. • Considerat ion of stress test ing performed, includ ing the PCL Group’s Recovery Plan (RP) wh ich include the applicat ion of stressed scenarios. Under the tests and through the range of scenarios, the results of these exercises and the RP demonstrate that the Group has sufﬁcient cap ital and liqu id ity to continue as a going concern and meet min imum regulatory capital and liqu id ity requirements • Analysis of the capital, funding and liqu id ity posit ion of the PLC Group, includ ing the cap ital and leverage ratios, and ICAAP which summarises the PLC Group’s capital and risk assessment processes, assesses its capital requirements and the adequacy of resources to meet them. Further, PLC Group’s funding and liqu id ity was considered in the context of the risk appetite metrics, includ ing the PLC Group’s LCR rat io • The PLC Group’s Internal Liqu id ity Adequacy Assessment Process (ILAAP), which considers the Group’s liqu id ity posit ion, its framework and whether sufﬁcient l iqu id ity resources are being mainta ined to meet l iab il it ies as they fall due, was also reviewed • The level of PLC Group’s debt in issue, includ ing redempt ions and issuances during the year, debt falling due for repayment in the next 12 months and further planned debt issuances, includ ing the appet ite in the market for the PLC Group’s debt • A detailed review of all PLC Group’s princ ipal and emerg ing risks Based on the analysis performed, the directors conﬁrm they are satisf ied that the Group has adequate resources to cont inue in business for a period of at least 12 months from 23 February 2024. For this reason, the Group continues to adopt the going concern basis of accounting for preparing the ﬁnanc ial statements. Changes in accounting polic ies The Group has changed its accounting policy regarding the determinat ion of the cost of its portfolio of Investment Securit ies held at amortised cost and Debt securit ies and other el ig ible b ills, other than those included with in ﬁnancial instruments held at fair value through proﬁt or loss. Refer to Note 12 Financ ial Instruments. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 170 Directors’ Report and Financ ial Statements 2023 2. Segmental informat ion Basis of preparation The analysis reﬂects how the client segments and geographic regions are managed internally. This is described as the Management View (on an underlying basis) and is princ ipally the locat ion from which a client relationsh ip is managed, which may differ from where it is ﬁnanc ially booked and may be shared between bus inesses and/or regions. In certain instances this approach is not appropriate and a Financ ial V iew is disclosed, that is, the location in which the transaction or balance was booked. Typically, the Financ ial V iew is used in areas such as the Market and Liqu id ity Risk reviews where actual booking location is more important for an assessment. Segmental informat ion is therefore on a Management View unless otherwise stated. Segments and regions The Group’s segmental reporting is in accordance with IFRS 8 Operating Segments and is reported consistently with the internal performance framework and as presented to the Group’s Management Team. Restructuring items excluded from underlying results The Group’s reported IFRS performance is adjusted for certain items to arrive at alternative performance measures. These items include proﬁts or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are sign iﬁcant or mater ial in the context of the Group’s normal business earnings for the period and items which management and investors would ordinar ily ident ify separately when assess ing consistent performance period-by period. The alternative performance measures are not with in the scope of IFRS and not a substitute for IFRS measures. These adjustments are set out below Restructuring loss of $117 mill ion pr imar ily relates to the ex its in AME. The Group is also reclassify ing the movement in Debit Valuation Adjustment (DVA) into restructuring and other items. Reconcil iat ions between underlying and reported results are set out in the tables below: Proﬁt before taxation (PBT) 2023 Net gain on Goodwill and businesses Other Underlying Restructuring DVA disposed off 1 impa irment Reported $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 11,408 151 27 (37) – 11,549 Operating expenses (6,869) (278) – – – (7,147) Operating proﬁt/(loss) before impa irment losses and taxation 4,539 (127) 27 (37) – 4,402 Credit impa irment 46 12 – – – 58 Other impa irment (40) (2) – – – (42) Loss from associates and jo int ventures (4) – – – – (4) Proﬁt/(loss) before taxation 4,541 (117) 27 (37) – 4,414 2022 2 Net gain on Goodwill and business Other Underlying Restructuring DVA disposed off impa irment Reported $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 10,017 164 33 20 – 10,234 Operating expenses (6,433) (229) – – – (6,662) Operating proﬁt/(loss) before impa irment losses and taxation 3,584 (65) 33 20 – 3,572 Credit impa irment 25 (3) – – – 22 Other impa irment (85) (12) – – (10) (107) Loss from associates and jo int ventures (13) – – – – (13) Proﬁt/(loss) before taxation 3,511 (80) 33 20 (10) 3,474 1 Net gain on businesses disposed of for sale includes a loss of $37mill ion in relation to a sale of a portfolio of Aviat ion loans 2 Restructuring, DVA and other items for relevant periods in 2022 have been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA from underlying operating performance Notes to the ﬁnancial statements cont inued Standard Chartered Bank 171 Directors’ Report and Financ ial Statements 2023 2. Segmental informat ion cont inued Underlying performance by client segment 2023 Corporate, Consumer Commercial& Private & Central & Institut ional Business Other Items Banking Banking Ventures (Segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 7,972 3,456 137 (157) 11,408 External 6,026 2,124 138 3,120 11,408 Inter-segment 1,946 1,332 (1) (3,277) – Operating expenses (4,103) (1,989) (329) (448) (6,869) Operating proﬁt/(loss) before impa irment losses and taxat ion 3,869 1,467 (192) (605) 4,539 Credit impa irment 153 (128) (13) 34 46 Other impa irment (35) (4) (24) 23 (40) (Loss)/proﬁt from associates and jo int ventures – – (24) 20 (4) Underlying proﬁt/(loss) before taxation 3,987 1,335 (253) (528) 4,541 Restructuring (91) (31) (4) 9 (117) Goodwill and other impa irment – – – – – DVA 27 – – – 27 Other Items 1 (37) – – – (37) Reported proﬁt/(loss) before taxation 3,886 1,304 (257) (519) 4,414 Total assets 285,036 49,137 2,208 202,198 538,579 Total liab il it ies 330,747 70,953 1,535 101,400 504,635 2022² Corporate, Consumer Commercial& Private & Central & Institut ional Business Other Items Banking Banking Ventures (Segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 6,917 2,828 3 269 10,017 External 6,321 2,274 3 1,419 10,017 Inter-segment 596 554 – (1,150) – Operating expenses (3,755) (1,873) (242) (563) (6,433) Operating proﬁt/(loss) before impa irment losses and taxat ion 3,162 955 (239) (294) 3,584 Credit impa irment 186 (18) (2) (141) 25 Other impa irment (9) (6) (20) (50) (85) (Loss)/proﬁt from associates and jo int ventures – – (16) 3 (13) Underlying proﬁt/(loss) before taxation 3,339 931 (277) (482) 3,511 Restructuring (26) (31) (1) (22) (80) Goodwill and other impa irment – – – (10) (10) DVA 33 – – – 33 Other Items – – – 20 20 Reported proﬁt/(loss) before taxation 3,346 900 (278) (494) 3,474 Total assets 299,628 47,435 900 202,771 550,734 Total liab il it ies 348,587 66,777 517 100,710 516,591 1 Other items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Notes to the ﬁnancial statements cont inued Standard Chartered Bank 172 Directors’ Report and Financ ial Statements 2023 2. Segmental informat ion cont inued Operating income by client segment 2023 Corporate, Consumer Commercial& Private & Central & Institut ional Business Other Items Banking Banking Ventures (Segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 7,972 3,456 137 (157) 11,408 Restructuring 70 45 – 36 151 Other items 1 (37) – – – (37) DVA 27 – – – 27 Reported operating income 8,032 3,501 137 (121) 11,549 2022² Corporate, Consumer Commercial& Private & Central & Institut ional Business Other Items Banking Banking Ventures (Segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 6,917 2,828 3 269 10,017 Restructuring 93 47 – 24 164 Other items – – – 20 20 DVA 33 – – – 33 Reported operating income 7,043 2,875 3 313 10,234 1 Other items includes loss of $37 mill ion in relation to the sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Underlying performance by region 2023 Central & Africa & Europe & Other Items Asia Middle East Americas (Region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 5,331 2,764 1,682 1,631 11,408 Operating expenses (2,812) (1,597) (1,659) (801) (6,869) Operating proﬁt before impa irment losses and taxat ion 2,519 1,167 23 830 4,539 Credit impa irment (64) 91 28 (9) 46 Other impa irment (39) (15) (12) 26 (40) (Loss)/proﬁt from associates and jo int ventures – – (24) 20 (4) Underlying proﬁt before taxation 2,416 1,243 15 867 4,541 Restructuring (45) 16 (20) (68) (117) Goodwill and other impa irment – – – – – DVA (6) 26 7 – 27 Other Items 1 (14) (18) (5) – (37) Reported proﬁt/(loss) before taxation 2,351 1,267 (3) 799 4,414 Total assets 162,185 37,408 308,279 30,707 538,579 Total liab il it ies 148,595 37,288 217,279 101,473 504,635 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 173 Directors’ Report and Financ ial Statements 2023 2. Segmental informat ion cont inued 2022² Central & Africa & Europe & Other Items Asia Middle East Americas (Region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 4,614 2,431 2,579 393 10,017 Operating expenses (2,653) (1,552) (1,456) (772) (6,433) Operating proﬁt/(loss) before impa irment losses and taxat ion 1,961 879 1,123 (379) 3,584 Credit impa irment 60 (115) 88 (8) 25 Other impa irment (4) 2 2 (85) (85) Loss from associates and jo int ventures – – – (13) (13) Underlying proﬁt/(loss) before taxation 2,017 766 1,213 (485) 3,511 Restructuring (4) 25 (35) (66) (80) Goodwill and other impa irment – – – (10) (10) DVA 11 8 14 – 33 Other Items – – – 20 20 Reported proﬁt/(loss) before taxation 2,024 799 1,192 (541) 3,474 Total assets 152,356 37,515 324,039 36,824 550,734 Total liab il it ies 134,639 37,912 256,031 88,009 516,591 1 Other items includes loss of $37 mill ion in relation to a sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Operating income by region 2023 Central & Africa & Europe & Other Items Asia Middle East Americas (Region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 5,331 2,764 1,682 1,631 11,408 Restructuring 5 122 12 12 151 Other items 1 (14) (18) (5) – (37) DVA (6) 26 7 – 27 Reported operating income 5,316 2,894 1,696 1,643 11,549 2022 2 Central & Africa & Europe & Other Items Asia Middle East Americas (Region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 4,614 2,431 2,579 393 10,017 Restructuring 27 145 (7) (1) 164 Other items – – – 20 20 DVA 11 8 14 – 33 Reported operating income 4,652 2,584 2,586 412 10,234 1 Other items includes loss of $37mill ion in relation to a sale of a portfolio of Aviat ion loans 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance Notes to the ﬁnancial statements cont inued Standard Chartered Bank 174 Directors’ Report and Financ ial Statements 2023 2. Segmental informat ion cont inued Addit ional segmental informat ion (reported) 2023 Corporate, Consumer Commercial& Private & Central & Institut ional Business Other Items Banking Banking Ventures (Segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 3,259 2,346 9 (1,007) 4,607 Net fees and commiss ion income 1,397 876 40 125 2,438 Net trading and other income 3,376 279 88 761 4,504 Operating income 8,032 3,501 137 (121) 11,549 2022 Corporate, Consumer Commercial& Private & Central & Institut ional Business Other Items Banking Banking Ventures (Segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 2,428 1,773 3 247 4,451 Net fees and commiss ion income 1,310 944 2 (102) 2,154 Net trading and other income 3,305 158 (2) 168 3,629 Operating income 7,043 2,875 3 313 10,234 Operating income by Region 2023 Central & Africa & Europe & Other Items Asia Middle East Americas (Region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 2,551 1,578 (516) 994 4,607 Net fees and commiss ion income 1,070 493 566 309 2,438 Net trading and other income 1,695 823 1,646 340 4,504 Operating income 5,316 2,894 1,696 1,643 11,549 2022 Central & Africa & Europe & Other Items Asia Middle East Americas (Region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 2,416 1,292 273 470 4,451 Net fees and commiss ion income 1,063 517 567 7 2,154 Net trading and other income 1,173 775 1,746 (65) 3,629 Operating income 4,652 2,584 2,586 412 10,234 Operating income by Key Countries 2023 Singapore India Indonesia UAE UK US $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 1,156 934 152 510 (760) 176 Net fees and commiss ion income 658 181 34 175 363 409 Net trading and other income 879 313 82 481 1,513 67 Operating income 2,693 1,428 268 1,166 1,116 652 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 175 Directors’ Report and Financ ial Statements 2023 2. Segmental informat ion cont inued 2022 Singapore India Indonesia UAE UK US $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 1,093 765 106 330 (79) 340 Net fees and commiss ion income 715 188 34 204 110 369 Net trading and other income 336 369 76 315 1,577 102 Operating income 2,144 1,322 216 849 1,608 811 3. Net interest income Accounting Policy Interest income for ﬁnanc ial assets held at e ither fair value through other comprehensive income or amortised cost, and interest expense on all ﬁnanc ial l iab il it ies held at amort ised cost is recognised in proﬁt or loss using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the ﬁnancial instrument or, when appropriate, a shorter period, to the net carrying amount of the ﬁnanc ial asset or ﬁnancial liab il ity. When calculating the effective interest rate, the Group estimates cash ﬂows consider ing all contractual terms of the ﬁnancial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. For ﬂoating-rate ﬁnanc ial instruments, period ic re-est imat ion of cash ﬂows that reﬂect the movements in the market rates of interest alters the effective interest rate. Where the estimates of cash ﬂows have been revised, the carrying amount of the ﬁnanc ial asset or l iab il ity is adjusted to reﬂect the actual and revised cash ﬂows, discounted at the instruments orig inal effect ive interest rate. The adjustment is recognised as interest income or expense in the period in which the revis ion is made as long as the change in estimates is not due to credit issues. Interest income for ﬁnanc ial assets that are e ither held at fair value through other comprehensive income or amortised cost that have become credit-impa ired subsequent to in it ial recognit ion (stage 3) and have had amounts wr itten off, is recognised using the credit adjusted effective interest rate. This rate is calculated in the same manner as the effective interest rate except that expected credit losses are included in the expected cash ﬂows. Interest income is therefore recognised on the amortised cost of the ﬁnanc ial asset includ ing expected cred it losses. Should the credit risk on a stage 3 ﬁnanc ial asset improve such that the ﬁnanc ial asset is no longer considered credit-impa ired, interest income recognit ion reverts to a computation based on the rehabil itated gross carry ing value of the ﬁnanc ial asset. 2023 2022 $mill ion $mill ion Balances at central banks 2,813 745 Loans and advances to banks 1,175 635 Loans and advances to customers 9,399 5,756 Debt securit ies 3,650 2,037 Other elig ible b ills 1,204 518 Accrued on impa ired assets (d iscount unwind) 139 74 Interest income 18,380 9,765 Of which: ﬁnanc ial instruments held at fair value through other comprehensive income 2,550 1,508 Deposits by banks 626 358 Customer accounts 10,739 3,999 Debt securit ies in issue 1,771 367 Subordinated liab il it ies and other borrowed funds 602 562 Interest expense on IFRS 16 lease liab il it ies 35 28 Interest expense 13,773 5,314 Net interest income 4,607 4,451 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 176 Directors’ Report and Financ ial Statements 2023 4. Net fees and commiss ion Accounting policy The Group can act as trustee or in other ﬁduc iary capac it ies that result in the holding or placing of assets on behalf of ind iv iduals, trusts, retirement beneﬁt plans and other inst itut ions. The assets and income aris ing thereon are excluded from these ﬁnancial statements, as they are not assets and income of the Group. The Group applies the following practical expedients: • informat ion on amounts of transact ion price allocated to unsatisf ied (or part ially unsatisf ied) performance obl igat ions at the end of the reporting period is not disclosed as almost all fee-earning contracts have an expected duration of less than one year • promised considerat ion is not adjusted for the effects of a sign iﬁcant ﬁnancing component as the per iod between the Group provid ing a serv ice and the customer paying for it is expected to be less than one year • incremental costs of obtain ing a fee-earn ing contract are recognised upfront in ‘Fees and commiss ion expense’ rather than amortised, if the expected term of the contract is less than one year The determinat ion of the serv ices performed for the customer, the transaction price, and when the services are completed depends on the nature of the product with the customer. The main considerat ions on income recognit ion by product are as follows: Transaction Banking The Group recognises fee income associated with transactional trade and cash management at the point in time the service is provided. The Group recognises income associated with trade contingent risk exposures (such as letters of credit and guarantees) over the period in which the service is provided. Payment of fees is usually received at the same time the service is provided. In some cases, letters of credit and guarantees issued by the Group have annual upfront premiums, which are amortised on a straight-line basis to fee income over the year. Financ ial Markets The Group recognises fee income at the point in time the service is provided. Fee income is recognised for a sign iﬁcant nonlending service when the transaction has been completed and the terms of the contract with the customer entitle the Group to the fee. Fees are usually received shortly after the service is provided. Syndicat ion fees are recogn ised when the syndicat ion is complete. Fees are generally received before completion of the syndicat ion, or w ith in 12 months of the transact ion date. Securit ies serv ices include custody services, fund accounting and admin istrat ion, and broker clearing. Fees are recognised over the period the custody or fund management services are provided, or as and when broker services are requested. Wealth Management Upfront considerat ion on bancassurance agreements is amortised straight-line over the contractual term. Commiss ions for bancassurance activ it ies are recorded as they are earned through sales of third-party insurance products to Customers. These commiss ions are rece ived with in a short t ime frame of the commiss ion be ing earned. Target-linked fees are accrued based on percentage of the target achieved, provided it is assessed as highly probable that the target will be met. Cash payment is received at a contractually specif ied date after ach ievement of a target has been conﬁrmed. Upfront and trail ing comm iss ions for managed investment placements are recorded as they are conﬁrmed. Income from these activ it ies is relatively even throughout the period, and cash is usually received with in a short t ime frame after the commiss ion is earned. Retail Products The Group recognises most income at the point in time the Group is entitled to the fee, since most services are provided at the time of the customer’s request. Credit card annual fees are recognised at the time the fee is received since in most of our retail markets there are contractual circumstances under which fees are waived, so income recognit ion is constrained until the uncertaint ies assoc iated with the annual fee are resolved. The Group defers the fair value of reward points on its credit card reward programmes, and recognises income and costs associated with fulﬁll ing the reward at the t ime of redemption. Upfront bancassurance considerat ion amounts are amort ised on a straight-line basis over the contractual period to which the considerat ion relates. Notes to the ﬁnancial statements cont inued 4. Net fees and commiss ion cont inued Standard Chartered Bank 177 Directors’ Report and Financ ial Statements 2023 2023 2022 $mill ion $mill ion Fees and commiss ions income 3,094 2,863 Of which: Financ ial instruments that are not fair valued through proﬁt or loss 1,139 1,013 Trust and other ﬁduciary act iv it ies 239 243 Fees and commiss ions expense (656) (709) Of which: Financ ial instruments that are not fair valued through proﬁt or loss (84) (225) Trust and other ﬁduciary act iv it ies (17) (14) Net fees and commiss ion 2,438 2,154 2023 Corporate, Consumer Commercial& Private & Institut ional Business Central & Banking Banking Ventures other items Total $mill ion $mill ion $mill ion $mill ion $mill ion Transaction Banking 1,196 22 – – 1,218 Trade 694 17 – – 711 Cash Management 502 5 – – 507 Financ ial Markets 658 – – – 658 Lending and Portfolio Management 118 5 – – 123 Princ ipal F inance (1) – – – (1) Wealth Management – 678 – – 678 Retail Products – 382 23 – 405 Treasury – – – 4 4 Others – (12) 32 (11) 9 Net fees and commiss ion income 1,971 1,075 55 (7) 3,094 Net fees and commiss ion expense (574) (199) (15) 132 (656) Net fees and commiss ion 1,397 876 40 125 2,438 2022 Corporate, Consumer Commercial& Private & Institut ional Business Central & Banking Banking Ventures other items Total $mill ion $mill ion $mill ion $mill ion $mill ion Transaction Banking 1,021 21 – – 1,042 Trade 501 16 – – 517 Cash Management 520 5 – – 525 Financ ial Markets 717 – – – 717 Lending and Portfolio Management 104 4 – – 108 Princ ipal F inance – – – – – Wealth Management – 711 – – 711 Retail Products – 337 3 – 340 Treasury – – – 1 1 Others 7 (40) 13 (36) (56) Net fees and commiss ion income 1,849 1,033 16 (35) 2,863 Net fees and commiss ion expense (539) (89) (14) (67) (709) Net fees and commiss ion 1,310 944 2 (102) 2,154 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 178 Directors’ Report and Financ ial Statements 2023 4. Net fees and commiss ion cont inued Upfront bancassurance considerat ion amounts are amort ised on a straight-line basis over the contractual period to which the considerat ion relates. Deferred income on the balance sheet in respect of these activ it ies is $ 474 mill ion (31 December 2022: $549 mill ion). Follow ing renegotiat ion of the contract in 2023, the life of the contract was extended for a further 3 years. Accordingly, the income will be earned evenly over a longer period for the next 8.5 years (31 December 2022: 6.5 years). For the twelve months ended 31 December 2023, $60 mill ion of fee income was released from deferred income (31 December 2022: $66 mill ion). 5. Net trading income Accounting policy Gains and losses aris ing from changes in the fair value of ﬁnanc ial instruments held at fair value through proﬁt or loss are recorded in net trading income in the period in which they arise. This includes contractual interest receivable or payable. When the in it ial fair value of a ﬁnanc ial instrument held at fair value through proﬁt or loss relies on unobservable inputs, the difference between the in it ial valuation and the transaction price is amortised to net trading income as the inputs become observable or over the life of the instrument, whichever is shorter. Any unamortised ‘day one’ gain is released to net trading income if the transaction is terminated. Income is recognised from the sale and purchase of trading posit ions, marg ins on market making and customer business and fair value changes. 2023 2022 $mill ion $mill ion Net trading income 4,100 3,743 Sign iﬁcant items with in net trad ing income include: Gains on instruments held for trading¹ 2,762 3,489 Gains on ﬁnanc ial assets mandator ily at fair value through proﬁt or loss 3,976 951 Gains on ﬁnanc ial assets des ignated at fair value through proﬁt or loss 2 – Losses on ﬁnancial l iab il it ies des ignated at fair value through proﬁt or loss (2,445) (726) 1 Includes $104 mill ion loss (31 December 2022 $202 m ill ion loss) from the transact ion of foreign currency monetary assets and liab il it ies 6. Other operating income 2023 2022 $mill ion $mill ion Other operating income includes: Rental income from operating lease assets 4 5 Net loss on disposal of fair value through other comprehensive income debt instruments (92) (157) Net (loss)/gain on disposal of amortised cost ﬁnanc ial assets 1 (86) 3 Net gain/(loss) on sale of businesses 2 448 (1) Div idend income 10 11 Others³ 120 25 Other operating income 404 (114) 1 Includes $37 mill ion loss on d isposal of debt ﬁnance portfolio 2 2023 includes gain of $416 mill ion on d isposal from sale of subsid iary SC Ventures Hold ing Lim ited to a fellow group undertak ing of Standard Chartered PLC, $18 mill ion on disposal of associate (Metaco SA), $8 mill ion ga in from the sale of one of the AME region exit markets, Jordan and $7 mill ion ga in on sale of subsid iary (Kozag i) 3 2023 mainly includes $59 mill ion of Research & Development expend iture credits relating to prior years. $16 mill ion interest income from tax refund in India and $12 mill ion ga in on disposal of premises Notes to the ﬁnancial statements cont inued Standard Chartered Bank 179 Directors’ Report and Financ ial Statements 2023 7. Operating expenses 2023 2022 $mill ion $mill ion Staff costs: Wages and salaries 4,926 4,562 Social security costs 172 150 Other pension costs (Note 29) 312 275 Share-based payment costs (Note 30) 175 156 Other staff costs 701 605 6,286 5,748 Other staff costs include redundancy expenses of $81 mill ion (31 December 2022: $26 m ill ion). Further costs in this category include train ing, travel costs and other staff related costs. Details of directors’ pay, beneﬁts, pensions and beneﬁts and interests in shares are disclosed in Note 37 Remuneration of Directors’ (page 293). Transactions with directors, ofﬁcers and other related parties are disclosed in Note 35. 2023 2022 $mill ion $mill ion Premises and equipment expenses 241 228 General admin istrat ive expenses: UK bank levy 111 102 Provis ion for regulatory matters – 14 Other general admin istrat ive expenses (138) (41) (27) 75 Depreciat ion and amort isat ion: Property, plant and equipment: Premises 131 140 Equipment 72 86 203 226 Intangibles: Software 440 379 Acquired on business combinat ions 4 6 647 611 Total operating expenses 7,147 6,662 Operating expenses include research expenditure of $687 mill ion (31 December 2022: $689 m ill ion), wh ich was recognized as an expense in the year. The UK bank levy is applied to chargeable equity and liab il it ies on the balance sheet of UK operat ions. Key exclusions from chargeable equity and liab il it ies include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liab il it ies subject to nett ing. The rates are 0.10 per cent for short-term liab il it ies and 0.05 per cent for long-term liab il it ies. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 180 Directors’ Report and Financ ial Statements 2023 8. Credit impa irment Accounting policy Sign iﬁcant account ing estimates and judgements The Group’s expected credit loss (ECL) calculations are outputs of complex models with a number of underlying assumptions. The sign iﬁcant judgements in determin ing expected cred it loss include: • The Group’s criter ia for assess ing if there has been a sign iﬁcant increase in credit risk; • Development of expected credit loss models, includ ing the cho ice of inputs relating to macroeconomic variables; • Determin ing est imates of forward looking macroeconomic forecasts; • Evaluation of management overlays and post-model adjustments; • Determinat ion of probab il ity we ight ings for Stage 3 ind iv idually assessed provis ions The calculation of credit impa irment prov is ions also involves expert credit judgement to be applied by the credit risk management team based upon counterparty informat ion they rece ive from various sources includ ing relat ionsh ip managers and on external market informat ion. Deta ils on the approach for determin ing expected cred it loss can be found in the credit risk section, under IFRS 9 Methodology (page 98). Estimates of forecasts of key macroeconomic variables underlying the expected credit loss calculation can be found with in the Risk review, Key assumptions and judgements in determin ing expected cred it loss (page 99). Expected credit losses An ECL represents the present value of expected cash shortfalls over the residual term of a ﬁnanc ial asset, undrawn commitment or ﬁnanc ial guarantee. A cash shortfall is the difference between the cash ﬂows that are due in accordance with the contractual terms of the instrument and the cash ﬂows that the Group expects to receive over the contractual life of the instrument. Measurement ECL are computed as unbiased, probabil ity-we ighted amounts which are determined by evaluating a range of reasonably possible outcomes, the time value of money, and consider ing all reasonable and supportable informat ion includ ing that which is forward-looking. For material portfolios, the estimate of expected cash shortfalls is determined by multiply ing the probab il ity of default (PD) with the loss given default (LGD) with the expected exposure at the time of default (EAD). There may be multiple default events over the lifet ime of an instrument. Further details on the components of PD, LGD and EAD are disclosed in the Credit risk section. For less material Retail Banking loan portfolios, the Group has adopted less sophist icated approaches based on histor ical roll rates or loss rates. Forward-looking economic assumptions are incorporated into the PD, LGD and EAD where relevant and where they inﬂuence credit risk, such as GDP growth rates, interest rates, house price ind ices and commod ity prices among others. These assumptions are incorporated using the Group’s most likely forecast for a range of macroeconomic assumptions. These forecasts are determined using all reasonable and supportable informat ion, wh ich includes both internally developed forecasts and those available externally, and are consistent with those used for budgeting, forecasting and capital planning. To account for the potential non-linear ity in credit losses, multiple forward-looking scenarios are incorporated into the range of reasonably possible outcomes for all material portfolios. For example, where there is a greater risk of downside credit losses than upside gains, multiple forward-looking economic scenarios are incorporated into the range of reasonably possible outcomes, both in respect of determin ing the PD (and where relevant, the LGD and EAD) and in determin ing the overall expected credit loss amounts. These scenarios are determined using a Monte Carlo approach centred around the Group’s most likely forecast of macroeconomic assumptions. The period over which cash shortfalls are determined is generally lim ited to the max imum contractual period for which the Group is exposed to credit risk. However, for certain revolving credit facil it ies, which include credit cards or overdrafts, the Group’s exposure to credit risk is not lim ited to the contractual per iod. For these instruments, the Group estimates an appropriate life based on the period that the Group is exposed to credit risk, which includes the effect of credit risk management actions such as the withdrawal of undrawn facil it ies. For credit-impa ired ﬁnancial instruments, the estimate of cash shortfalls may require the use of expert credit judgement. The estimate of expected cash shortfalls on a collateralised ﬁnanc ial instrument reﬂects the amount and tim ing of cash ﬂows that are expected from foreclosure on the collateral less the costs of obtain ing and sell ing the collateral, regardless of whether foreclosure is deemed probable. Cash ﬂows from unfunded credit enhancements held are included with in the measurement of expected cred it losses if they are part of, or integral to, the contractual terms of the instrument (this includes ﬁnanc ial guarantees, unfunded r isk partic ipat ions and other non-derivat ive cred it insurance). Although non-integral credit enhancements do not impact the measurement of expected credit losses, a reimbursement asset is recognised to the extent of the expected credit losses recorded. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 181 Directors’ Report and Financ ial Statements 2023 8. Credit impa irment cont inued Cash shortfalls are discounted using the effective interest rate (or credit-adjusted effective interest rate for purchased or orig inated cred it-impa ired instruments (POCI)) on the ﬁnanc ial instrument as calculated at in it ial recognit ion or if the instrument has a variable interest rate, the current effective interest rate determined under the contract. Instruments Location of expected credit loss provis ions Financ ial assets held at amort ised cost Loss provis ions: netted aga inst gross carrying value 1 Financ ial assets held FVOCI – Debt instruments Other comprehensive income (FVOCI expected credit loss reserve) 2 Loan commitments Provis ions for l iab il it ies and charges 3 Financ ial guarantees Provis ions for l iab il it ies and charges 3 1 Purchased or orig inated cred it-impa ired assets do not attract an expected cred it loss provis ion on in it ial recognit ion. An expected cred it loss provis ion w ill be recognised only if there is an increase in expected credit losses from that considered at in it ial recognit ion 2 Debt and treasury securit ies class if ied as fa ir value through other comprehensive income (FVOCI) are held at fair value on the face of the balance sheet. The expected credit loss attributed to these instruments is held as a separate reserve with in other comprehens ive income (OCI) and is recycled to the proﬁt and loss account along with any fair value measurement gains or losses held with in FVOCI when the appl icable instruments are derecognised 3 Expected credit loss on loan commitments and ﬁnanc ial guarantees is recognised as a liab il ity provis ion. Where a ﬁnancial instrument includes both a loan (i.e. ﬁnancial asset component) and an undrawn comm itment (i.e. loan commitment component), and it is not possible to separately ident ify the expected cred it loss on these components, expected credit loss amounts on the loan commitment are recognised together with expected credit loss amounts on the ﬁnanc ial asset. To the extent the combined expected credit loss exceeds the gross carrying amount of the ﬁnanc ial asset, the expected cred it loss is recognised as a liab il ity provis ion Recognit ion 12 months expected credit losses (stage 1) Expected credit losses are recognised at the time of in it ial recognit ion of a ﬁnancial instrument and represent the lifet ime cash shortfalls aris ing from poss ible default events up to 12 months into the future from the balance sheet date. Expected credit losses continue to be determined on this basis until there is either a sign iﬁcant increase in the credit risk of an instrument or the instrument becomes credit-impa ired. If an instrument is no longer considered to exhib it a s ign iﬁcant increase in credit risk, expected credit losses will revert to being determined on a 12-month basis. Sign iﬁcant increase in credit risk (Stage 2) Sign iﬁcant increase in credit risk is assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at orig inat ion (after taking into account the passage of time). Sign iﬁcant does not mean stat ist ically s ign iﬁcant nor is it assessed in the context of changes in expected credit loss. Whether a change in the risk of default is sign iﬁcant or not is assessed using a number of quantitat ive and qual itat ive factors, the we ight of which depends on the type of product and counterparty. Financ ial assets that are 30 or more days past due and not cred it-impa ired w ill always be considered to have experienced a sign iﬁcant increase in credit risk. For less material portfolios where a loss rate or roll rate approach is applied to compute expected credit loss, sign iﬁcant increase in credit risk is primar ily based on 30 days past due. Quantitat ive factors include an assessment of whether there has been sign iﬁcant increase in the forward-looking probabil ity of default (PD) since orig inat ion. A forward-looking PD is one that is adjusted for future economic condit ions to the extent these are correlated to changes in credit risk. We compare the residual lifet ime PD at the balance sheet date to the res idual lifet ime PD that was expected at the t ime of orig inat ion for the same point in the term structure and determine whether both the absolute and relative change between the two exceeds predetermined thresholds. To the extent that the differences between the measures of default outlined exceed the deﬁned thresholds, the instrument is considered to have experienced a sign iﬁcant increase in credit risk (see page 103 to 105). Qualitat ive factors assessed include those linked to current credit risk management processes, such as lending placed on non-purely precautionary early alert (and subject to closer monitor ing). A non-purely precautionary early alert account is one which exhib its r isk or potential weaknesses of a material nature requir ing closer mon itor ing, superv is ion, or attent ion by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deteriorat ion of repayment prospects and the l ikel ihood of be ing downgraded. Indicators could include a rapid erosion of posit ion w ith in the industry, concerns over management’s abil ity to manage operat ions, weak/ deteriorat ing operat ing results, liqu id ity strain and overdue balances among other factors. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 182 Directors’ Report and Financ ial Statements 2023 8. Credit impa irment cont inued Credit-impa ired (or defaulted) exposures (Stage 3) Financ ial assets that are cred it-impa ired (or in default) represent those that are at least 90 days past due in respect of princ ipal and/or interest. Financ ial assets are also cons idered to be credit-impa ired where the obl igors are unlikely to pay on the occurrence of one or more observable events that have a detrimental impact on the estimated future cash ﬂows of the ﬁnancial asset. It may not be poss ible to ident ify a s ingle discrete event but instead the combined effect of several events may cause ﬁnancial assets to become cred it-impa ired. • Evidence that a ﬁnanc ial asset is credit-impa ired includes observable data about the following events: • Sign iﬁcant ﬁnancial d iff iculty of the issuer or borrower; • Breach of contract such as default or a past due event; • For economic or contractual reasons relating to the borrower’s ﬁnanc ial d iff iculty, the lenders of the borrower have granted the borrower concession/s that lenders would not otherwise consider. This would include forbearance actions (page 81); • Pending or actual bankruptcy or other ﬁnanc ial reorgan isat ion to avo id or delay discharge of the borrower’s obligat ion/s; • The disappearance of an active market for the applicable ﬁnanc ial asset due to ﬁnancial d iff icult ies of the borrower; • Purchase or orig inat ion of a ﬁnanc ial asset at a deep d iscount that reﬂects incurred credit losses Lending commitments to a credit-impa ired obl igor that have not yet been drawn down are included to the extent that the commitment cannot be withdrawn. Loss provis ions aga inst credit-impa ired ﬁnancial assets are determ ined based on an assessment of the present value of expected cash shortfalls (discounted at the instrument’s orig inal effect ive interest rate) under a range of scenarios, includ ing the real isat ion of any collateral held where appropr iate. The Group’s deﬁnit ion of default is aligned with the regulatory deﬁn it ion of default as set out in the UK’s onshored Capital Requirements Regulation (Article 178) and related guidel ines Expert credit judgement For Corporate, Commercial & Institut ional Bank ing, Consumer, Private and Business Banking, borrowers are graded by credit risk management on a credit grading (CG) scale from CG1 to CG14. Once a borrower starts to exhib it cred it deteriorat ion, it will move along the credit grading scale in the performing book and when it is classif ied as CG12 (wh ich is a qualitat ive tr igger for sign iﬁcant increase in credit risk- see page 104), the credit assessment and oversight of the loan will normally be performed by Stressed Assets Group (SAG). Borrowers graded CG12 exhib it well-deﬁned weaknesses in areas such as management and/or performance but there is no current expectation of a loss of princ ipal or interest. Where the impa irment assessment ind icates that there w ill be a loss of princ ipal on a loan, the borrower is graded a CG14 while borrowers of other credit-impa ired loans are graded CG13. Instruments graded CG13 or CG14 are regarded as stage 3. For ind iv idually sign iﬁcant ﬁnancial assets w ith in stage 3, SAG w ill consider all judgements that have an impact on the expected future cash ﬂows of the asset. These include: the business prospects, industry and geo polit ical cl imate of the customer, quality of realisable value of collateral, the Group’s legal posit ion relat ive to other claimants and any renegotiat ion/ forbearance/ modif icat ion options. The future cash ﬂow calculation involves sign iﬁcant judgements and est imates. As new informat ion becomes ava ilable and further negotiat ions/ forbearance measures are taken the est imates of the future cash ﬂows will be revised, and will have an impact on the future cash ﬂow analysis. For ﬁnancial assets wh ich are not ind iv idually sign iﬁcant, such as the Reta il Banking portfolio or small business loans, which comprise a large number of homogenous loans that share sim ilar character ist ics, stat ist ical est imates and techniques are used, as well as credit scoring analysis. Consumer and Business Banking clients are considered credit-impa ired where they are more 90 days past due, or if the borrower ﬁles for bankruptcy or other forbearance programme, the borrower is deceased or the business is closed in the case of a small business, or if the borrower surrenders the collateral, or there is an ident iﬁed fraud on the account. Add it ionally, if the account is unsecured and the borrower has other credit accounts with the Group that are considered credit-impa ired, the account may be also be credit-impa ired. Techniques used to compute impa irment amounts use models wh ich analyse histor ical repayment and default rates over a time horizon. Where various models are used, judgement is required to analyse the available informat ion prov ided and select the appropriate model or combinat ion of models to use. Expert credit judgement is also applied to determine whether any post-model adjustments are required for credit risk elements which are not captured by the models. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 183 Directors’ Report and Financ ial Statements 2023 8. Credit impa irment cont inued Modif ied ﬁnancial instruments Where the orig inal contractual terms of a ﬁnancial asset have been mod if ied for cred it reasons and the instrument has not been derecognised (an instrument is derecognised when a modif icat ion results in a change in cash ﬂows that the Group would consider substantial), the resulting modif icat ion loss is recognised with in cred it impa irment in the income statement with a corresponding decrease in the gross carrying value of the asset. If the modif icat ion involved a concession that the bank would not otherwise consider, the instrument is considered to be credit-impa ired and is considered forborne. Expected credit loss for modif ied ﬁnancial assets that have not been derecogn ised and are not considered to be credit- impa ired w ill be recognised on a 12-month basis, or a lifet ime bas is, if there is a sign iﬁcant increase in credit risk. These assets are assessed (by comparison to the orig inat ion date) to determine whether there has been a sign iﬁcant increase in credit risk subsequent to the modif icat ion. Although loans may be modif ied for non-cred it reasons, a sign iﬁcant increase in credit risk may occur. In addit ion to the recogn it ion of mod if icat ion gains and losses, the revised carrying value of modif ied ﬁnancial assets will impact the calculation of expected credit losses, with any increase or decrease in expected credit loss recognised with in impa irment. Forborne loans Forborne loans are those loans that have been modif ied in response to a customer’s ﬁnanc ial d iff icult ies. Forbearance strategies assist clients who are temporarily in ﬁnanc ial d istress and are unable to meet their orig inal contractual repayment terms. Forbearance can be in it iated by the client, the Group or a third-party includ ing government sponsored programmes or a conglomerate of credit inst itut ions. Forbearance may include debt restructuring such as new repayment schedules, payment deferrals, tenor extensions, interest only payments, lower interest rates, forgiveness of princ ipal, interest or fees, or relaxation of loan covenants. Forborne loans that have been modif ied (and not derecogn ised) on terms that are not consistent with those readily available in the market and/or where we have granted a concession compared to the orig inal terms of the loans are cons idered credit-impa ired if there is a detrimental impact on cash ﬂows. The modif icat ion loss (see Classif icat ion and measurement – Modif icat ions) is recognised in the proﬁt or loss with in cred it impa irment and the gross carry ing value of the loan reduced by the same amount. The modif ied loan is disclosed as ‘Loans subject to forbearance – credit-impa ired’. Loans that have been subject to a forbearance modif icat ion, but which are not considered credit-impa ired (not class if ied as CG13 or CG14), are disclosed as ‘Forborne – not credit-impa ired’. Th is may include amendments to covenants with in the contractual terms. Write-offs of credit-impa ired instruments and reversal of impa irment To the extent a ﬁnancial debt instrument is considered irrecoverable, the applicable portion of the gross carrying value is written off against the related loan provis ion. Such loans are wr itten off after all the necessary procedures have been completed, it is decided that there is no realist ic probab il ity of recovery and the amount of the loss has been determ ined. Subsequent recoveries of amounts previously written off decrease the amount of the provis ion for cred it impa irment in the income statement. Loss provis ions on purchased or or ig inated cred it-impa ired instruments (POCI) The Group measures expected credit loss on a lifet ime bas is for POCI instruments throughout the life of the instrument. However, expected credit loss is not recognised in a separate loss provis ion on in it ial recognit ion for POCI instruments as the lifet ime expected cred it loss is inherent with in the gross carry ing amount of the instruments. The Group recognises the change in lifet ime expected cred it losses aris ing subsequent to in it ial recognit ion in the income statement and the cumulative change as a loss provis ion. Where l ifet ime expected cred it losses on POCI instruments are less than those at in it ial recognit ion, then the favourable d ifferences are recognised as impa irment ga ins in the income statement (and as impa irment loss where the expected cred it losses are greater). Improvement in credit risk/curing For ﬁnancial assets that are cred it-impa ired (stage 3), a transfer to stage 2 or stage 1 is only permitted where the instrument is no longer considered to be credit-impa ired. An instrument will no longer be considered credit-impa ired when there is no shortfall of cash ﬂows compared to the orig inal contractual terms. For ﬁnancial assets w ith in stage 2, these can only be transferred to stage 1 when they are no longer cons idered to have experienced a sign iﬁcant increase in credit risk. Where sign iﬁcant increase in credit risk was determined using quantitat ive measures, the instruments will automatically transfer back to stage 1 when the orig inal PD based transfer cr iter ia are no longer met. Where instruments were transferred to stage 2 due to an assessment of qualitat ive factors, the issues that led to the reclassif icat ion must be cured before the instruments can be reclassif ied to stage 1. Th is includes instances where management actions led to instruments being classif ied as stage 2, requ ir ing that act ion to be resolved before loans are reclassif ied to stage 1. A forborne loan can only be removed from being disclosed as forborne if the loan is performing (stage 1 or 2) and a further two-year probation period is met. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 184 Directors’ Report and Financ ial Statements 2023 8. Credit impa irment cont inued In order for a forborne loan to become performing, the following criter ia have to be sat isf ied: • At least a year has passed with no default based upon the forborne contract terms • The customer is likely to repay its obligat ions in full without realis ing secur ity • The customer has no accumulated impa irment aga inst amount outstanding (except for ECL) Subsequent to the criter ia above, a further two-year probat ion period has to be fulﬁlled, whereby regular payments are made by the customer and none of the exposures to the customer are more than 30 days past due. 2023 2022 $mill ion $mill ion Net credit impa irment on loans and advances to banks and customers 55 (118) Net credit impa irment aga inst proﬁt or loss during the year relating to debt securit ies 1 (50) 126 Net credit impa irment relat ing to ﬁnanc ial guarantees and loan comm itments (63) (29) Net credit impa irment relat ing to other ﬁnanc ial assets – (1) Credit impa irment 1 (58) (22) 1 Includes impa irment of $1 m ill ion (31 December 2022: $13 m ill ion) on or ig inated cred it-impa ired debt secur it ies 9. Goodwill, property, plant and equipment and other impa irment Accounting policy Refer to the below referenced notes for the relevant accounting policy 2023 2022 $mill ion $mill ion Impairment of goodwill (Note 16) – 10 Impairment of property, plant and equipment (Note 17) (1) 5 Impairment of other intang ible assets (Note 16) 35 57 Other 8 35 Property, plant and equipment and other impa irment 42 97 Goodwill, property, plant and equipment and other impa irment 42 107 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 185 Directors’ Report and Financ ial Statements 2023 10. Taxation Accounting policy Income tax payable on proﬁts is based on the applicable tax law in each jur isd ict ion and is recognised as an expense in the period in which proﬁts arise. Deferred tax is provided on temporary differences aris ing between the tax bases of assets and l iab il it ies and the ir carrying amounts in the consolidated ﬁnanc ial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted as at the balance sheet date, and that are expected to apply when the related deferred tax asset is realised or the deferred income tax liab il ity is settled. Deferred tax assets are recognised where it is probable that future taxable proﬁt will be available against which the temporary differences can be util ised. Where perm itted, deferred tax assets and liab il it ies are offset on an ent ity basis and not by component of deferred taxation. Current and deferred tax relating to items which are charged or credited directly to equity, is credited or charged directly to equity and is subsequently recognised in the income statement together with the current or deferred gain or loss. Other accounting estimates and judgements Determin ing the Group’s tax charge for the year involves estimat ion and judgement, wh ich includes an interpretat ion of local tax laws and an assessment of whether the tax authorit ies w ill accept the posit ion taken. These judgements take account of external advice where appropriate, and the Group’s view on settling with the relevant tax authorit ies. The Group provides for current tax liab il it ies at the best est imate of the amount that is expected to be paid to the tax authorit ies where an outﬂow is probable. In making its estimates, the Group assumes that the tax authorit ies w ill examine all the amounts reported to them and have full knowledge of all relevant informat ion. The recoverabil ity of the Group’s deferred tax assets is based on management’s judgement of the availab il ity of future taxable proﬁts against which the deferred tax assets will be util ised. In prepar ing management forecasts the effect of applicable laws and regulations relevant to the util isat ion of future taxable proﬁts have been considered. The following table provides analysis of taxation charge in the year: 2023 2022 $mill ion $mill ion The charge for taxation based upon the proﬁt for the year comprises: Current tax: United Kingdom corporation tax at 23.5 per cent (2022: 19 per cent): Current tax charge on income for the year (111) 111 Adjustments in respect of prior years (includ ing double tax rel ief) 16 – Foreign tax: Current tax charge on income for the year 1,200 1,036 Adjustments in respect of prior years 6 11 1,111 1,158 Deferred tax: Orig inat ion/reversal of temporary differences 76 (11) Adjustments in respect of prior years (10) (25) 66 (36) Tax on proﬁts on ordinary activ it ies 1,177 1,122 Effective tax rate 26.7% 32.3% The tax charge for the year of $1,177 mill ion (31 December 2022: $1,122 m ill ion) on a proﬁt before tax of $4,414 m ill ion (31 December 2022: $3,474 mill ion) reﬂects the impact of non-deductible expenses, non-creditable withhold ing taxes and other taxes, and countries with tax rates higher or lower than the UK, the most sign iﬁcant of wh ich is India. These are partly offset by tax exempt gain on disposal of subsid iar ies as part of internal restructuring. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 186 Directors’ Report and Financ ial Statements 2023 10. Taxation continued Tax rate: The tax charge for the year is higher than the charge at the rate of corporation tax in the UK, 23.5 per cent. The differences are explained below: 2023 2022 $mill ion % $mill ion % Proﬁt on ordinary activ it ies before tax 4,414 3,474 Tax at 23.5 per cent (2022: 19 per cent) 1,037 23.5 660 19.0 Lower tax rates on overseas earnings (264) (6.0) (116) (3.3) Higher tax rates on overseas earnings 302 6.8 390 11.2 Tax at domestic rates applicable where proﬁts earned 1,075 24.3 934 26.9 Non-creditable withhold ing taxes and other taxes 1 70 1.6 150 4.3 Tax exempt income (20) (0.5) (3) (0.1) Non-deductible expenses 146 3.3 53 1.5 Bank levy 26 0.6 19 0.5 Non-taxable (gains)/losses on investments (98) (2.2) 1 – Payments on ﬁnancial instruments in reserves (65) (1.5) (43) (1.2) Goodwill impa irment – – 2 0.1 Deferred tax not recognised 34 0.8 30 0.9 Deferred tax rate changes (3) – (11) (0.3) Adjustments to tax charge in respect of prior years 12 0.3 (14) (0.4) Other items 1 – – 4 0.1 Tax on proﬁt on ordinary activ it ies 1,177 26.7 1,122 32.3 1 The comparatives have been reclassif ied by mov ing the effect of other taxes from Other items to Non-creditable withhold ing taxes and other taxes in order to provide more clarity to the reader. The 2022 comparatives have been reclassif ied as follows to al ign with the presentation in the current period: Non-creditable withhold ing taxes and other taxes from $70 mill ion to $150 m ill ion and Other items from $84 mill ion to $4 m ill ion. Factors affecting the tax charge in future years: the Group’s tax charge, and effective tax rate in future years could be affected by several factors includ ing acqu is it ions, disposals and restructuring of our businesses, the mix of proﬁts across jurisd ict ions w ith different reported tax rates, changes in tax legislat ion and tax rates and resolut ion of uncertain tax posit ions. The evaluation of uncertain tax posit ions involves an interpretat ion of local tax laws wh ich could be subject to challenge by a tax authority, and an assessment of whether the tax authorit ies w ill accept the posit ion taken. The Group does not currently consider that assumptions or judgements made in assessing tax liab il it ies have a s ign iﬁcant r isk of resulting in a material adjustment with in the next ﬁnancial year. 2023 2022 Current tax Deferred tax Total Current tax Deferred tax Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Tax recognised in other comprehensive income Items that will not be reclassif ied to income statement – (75) (75) – 17 17 Own credit adjustment – (26) (26) – 2 2 Equity instruments at fair value through other comprehensive income – (56) (56) – 27 27 Retirement beneﬁt obligat ions – 7 7 – (12) (12) Items that may be reclassed subsequently to income statement – (91) (91) – 135 135 Debt instruments at fair value through other comprehensive income – (8) (8) – 44 44 Cashﬂow hedges – (83) (83) – 91 91 Total tax credit/(charge) recognised in equity – (166) (166) – 152 152 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 187 Directors’ Report and Financ ial Statements 2023 10. Taxation continued Current tax: The following are the movements in current tax during the year: Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Current tax comprises: Current tax assets 446 648 347 487 Current tax liab il it ies (556) (336) (329) (168) Net current tax opening balance (110) 312 18 319 Movements in income statement (1,111) (1,158) (487) (633) Movements in other comprehensive income – – – – Taxes paid 1,229 782 658 359 Other movements 31 (46) 18 (27) Net current tax balance as at 31 December 39 (110) 207 18 Current tax assets 484 446 395 347 Current tax liab il it ies (445) (556) (188) (329) Total 39 (110) 207 18 Deferred tax: The following are the major deferred tax liab il it ies and assets recogn ised by the Group and movements thereon during the year: Group Exchange & (Charge)/ At 31 At 1 January other (Charge)/ credit to December 2023 adjustments credit to proﬁt equity 2023 $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (306) (4) (8) – (318) Impairment provis ions on loans and advances 222 (19) – – 203 Tax losses carried forward 89 32 (51) – 70 Equity instruments at fair value through other comprehensive income (74) 4 – (56) (126) Debt instruments at fair value through other comprehensive income 53 (14) (3) (8) 28 Cashﬂow hedges 88 (2) – (83) 3 Own credit adjustment – (26) – (26) (52) Retirement beneﬁt obligat ions 2 2 (9) 7 2 Share-based payments 26 – 4 – 30 Other temporary differences 64 15 1 – 80 Net deferred tax assets/liab il it ies 164 (12) (66) (166) (80) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 188 Directors’ Report and Financ ial Statements 2023 10. Taxation continued Exchange & (Charge)/ At 31 At 1 January other (Charge)/ credit to December 2022 adjustments credit to proﬁt equity 2022 $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (275) (8) (23) – (306) Impairment provis ions on loans and advances 243 (35) 14 – 222 Tax losses carried forward 149 16 (76) – 89 Equity instruments at fair value through other comprehensive income 1 (97) (5) 1 27 (74) Debt instruments at fair value through other comprehensive income 1 (19) 5 23 44 53 Cashﬂow hedges (2) (1) – 91 88 Own credit adjustment (3) 1 – 2 – Retirement beneﬁt obligat ions 18 (3) (1) (12) 2 Share-based payments 25 – 1 – 26 Other temporary differences (27) (6) 97 – 64 Net deferred tax assets/liab il it ies 12 (36) 36 152 164 1 2022 has been reclassif ied to separately d isclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance Deferred tax comprises assets and liab il it ies as follows: 2023 2022 Total Asset Liab il ity Total Asset Liab il ity $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (318) 12 (330) (306) 12 (318) Impairment provis ions on loans and advances 203 192 11 222 244 (22) Tax losses carried forward 70 22 48 89 70 19 Equity instruments at fair value through other comprehensive income 1 (126) (1) (125) (74) – (74) Debt instruments at fair value through other comprehensive income 1 28 28 – 53 42 11 Cashﬂow hedges 3 12 (9) 88 86 2 Own credit adjustment (52) – (52) – – – Retirement beneﬁt obligat ions 2 9 (7) 2 15 (13) Share-based payments 30 3 27 26 – 26 Other temporary differences 80 225 (145) 64 272 (208) (80) 502 (582) 164 741 (577) 1 2022 has been reclassif ied to separately d isclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance Notes to the ﬁnancial statements cont inued Standard Chartered Bank 189 Directors’ Report and Financ ial Statements 2023 10. Taxation continued Deferred tax: The following are the major deferred tax liab il it ies and assets recogn ised by the Company and movements thereon during the year: Company Exchange & (Charge)/ At 31 At 1 January other (Charge)/ credit to December 2023 adjustments credit to proﬁt equity 2023 $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (270) (3) 9 – (264) Impairment provis ions on loans and advances 135 (2) (12) – 121 Tax losses carried forward 67 32 (29) – 70 Equity instruments at fair value through other comprehensive income (65) (4) – (54) (123) Debt instruments at fair value through other comprehensive income 61 – – (12) 49 Cashﬂow hedges 86 (2) – (79) 5 Own credit adjustment – (25) – (27) (52) Retirement beneﬁt obligat ions 1 1 (11) 4 (5) Share-based payments 10 – 1 – 11 Other temporary differences 68 (3) 25 – 90 Net deferred tax assets/liab il it ies 93 (6) (17) (168) (98) Exchange & (Charge)/ At 31 At 1 January other (Charge)/ credit to December 2022 adjustments credit to proﬁt equity 2022 $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (254) (6) (10) – (270) Impairment provis ions on loans and advances 176 (21) (20) – 135 Tax losses carried forward 114 17 (64) – 67 Equity instruments at fair value through other comprehensive income 1 (79) (4) 1 17 (65) Debt instruments at fair value through other comprehensive income 1 (7) (1) 2 67 61 Cashﬂow hedges (3) – – 89 86 Own credit adjustment (3) – – 3 – Retirement beneﬁt obligat ions 14 (3) (1) (9) 1 Share-based payments 9 1 – – 10 Other temporary differences (42) 10 100 – 68 Net deferred tax assets/liab il it ies (75) (7) 8 167 93 1 2022 has been reclassif ied to separately d isclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance Notes to the ﬁnancial statements cont inued Standard Chartered Bank 190 Directors’ Report and Financ ial Statements 2023 10. Taxation continued Deferred tax comprises assets and liab il it ies as follows: 2023 2022 Total Asset Liab il ity Total Asset Liab il ity $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (264) 12 (276) (270) 6 (276) Impairment provis ions on loans and advances 121 113 8 135 180 (45) Tax losses carried forward 70 22 48 67 51 16 Equity instruments at fair value through other comprehensive income 1 (123) (1) (122) (65) – (65) Debt instruments at fair value through other comprehensive income 1 49 50 (1) 61 47 14 Cashﬂow hedges 5 12 (7) 86 86 – Own credit adjustment (52) – (52) – – – Retirement beneﬁt obligat ions (5) 4 (9) 1 14 (13) Share-based payments 11 3 8 10 – 10 Other temporary differences 90 164 (74) 68 195 (127) (98) 379 (477) 93 579 (486) 1 2022 has been reclassif ied to separately d isclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance Group The recoverabil ity of the Group’s deferred tax assets is based on management’s judgement of the availab il ity of future taxable proﬁts against which the deferred tax assets will be util ised. The Group’s total deferred tax assets include $70 mill ion relating to tax losses carried forward, of which $48 mill ion ar ises in legal entit ies w ith offsetting deferred tax liab il it ies. The remain ing deferred tax assets on losses of $22 m ill ion are forecast to be recovered before exp iry and with in ﬁve years. Company The recoverabil ity of the Company’s deferred tax assets is based on management’s judgement of the availab il ity of future taxable proﬁts against which the deferred tax assets will be util ised. The Company’s total deferred tax assets include $70 mill ion relat ing to tax losses carried forward, of which $48 mill ion ar ises in legal entit ies w ith offsetting deferred tax liab il it ies. The remain ing deferred tax assets on losses of $22 m ill ion are forecast to be recovered before exp iry and with in ﬁve years. Unrecognised deferred tax Net Gross Net Gross 2023 2023 2022 2022 Group $mill ion $mill ion $mill ion $mill ion No account has been taken of the following potential deferred tax assets/(liab il it ies): Withhold ing tax on unrem itted earnings from overseas subsid iar ies and associates (347) (2,634) (227) (1,841) Tax losses 920 3,683 936 3,727 Held over gains on incorporation of overseas branches (174) (621) (164) (587) Other temporary differences 377 1,436 451 1,702 Net Gross Net Gross 2023 2023 2022 2022 Company $mill ion $mill ion $mill ion $mill ion No account has been taken of the following potential deferred tax assets/(liab il it ies): Withhold ing tax on unrem itted earnings from overseas subsid iar ies and associates (241) (1,694) (128) (978) Tax losses 827 3,215 862 3,352 Held over gains on incorporation of overseas branches (174) (621) (164) (587) Other temporary differences 369 1,397 450 1,697 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 191 Directors’ Report and Financ ial Statements 2023 11. Div idends Accounting policy The Court considers a number of factors which include the rate of recovery in the Group’s ﬁnanc ial performance, the macroeconomic environment, and opportunit ies to further invest in our business and grow proﬁtably in our markets. Ordinary equity shares 2023 2022 Cents Cents per share $mill ion per share $mill ion 2022 ﬁnal div idend declared and pa id during the year 8 1,661 – – 2023/2022 inter im d iv idend declared and pa id during the year 5 938 3 575 Div idends on ord inary equity shares are recorded in the year in which they are declared and, in respect of the ﬁnal div idend, have been approved by the shareholders. Preference shares and Addit ional T ier 1 securit ies Div idends on these preference shares and secur it ies class if ied as equ ity are recorded in the period in which they are declared 2023 2022 $mill ion $mill ion Non-cumulative redeemable preference shares: 7.014 per cent preference shares of $5 each 45 53 Floating rate preference shares of $5 each¹ 50 20 95 73 Addit ional T ier 1 securit ies: F ixed rate resetting perpetual subordinated contingent convertible securit ies 268 238 363 311 1 Floating rate is based on Secured Overnight Financ ing Rate (SOFR), average rate pa id for ﬂoating preference shares is 6.62% (2022: 2.71%) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 192 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments Classif icat ion and measurement Accounting policy Financ ial assets held at amort ised cost and fair value through other comprehensive income Debt instruments held at amortised cost or held at FVOCI have contractual terms that give rise to cash ﬂows that are solely payments of princ ipal and interest (SPPI) characterist ics. In assessing whether the contractual cash ﬂows have SPPI characterist ics, the Group cons iders the contractual terms of the instrument. This includes assessing whether the ﬁnanc ial asset conta ins a contractual term that could change the tim ing or amount of contractual cash ﬂows such that it would not meet this condit ion. In mak ing the assessment, the Group considers: • Contingent events that would change the amount and tim ing of cash ﬂows • Leverage features • Prepayment and extension terms • Terms that lim it the Group’s cla im to cash ﬂows from specif ied assets (e.g. non-recourse asset arrangements) • Features that modify considerat ion of the t ime value of money – e.g. period ical reset of interest rates. Whether ﬁnancial assets are held at amort ised cost or at FVOCI depends on the object ives of the bus iness models under which the assets are held. A business model refers to how the Group manages ﬁnanc ial assets to generate cash ﬂows. The Group makes an assessment of the objective of a bus iness model in which an asset is held at the ind iv idual product business line, and where applicable with in bus iness lines depending on the way the business is managed and informat ion is provided to management. Factors considered include: • How the performance of the product business line is evaluated and reported to the Group’s management • How managers of the business model are compensated, includ ing whether management is compensated based on the fair value of assets or the contractual cash ﬂows collected • The risks that affect the performance of the business model and how those risks are managed • The frequency, volume and tim ing of sales in prior periods, the reasons for such sales and expectations about future sales activ ity. The Group’s business model assessment is as follows: Business model Business object ive Characterist ics Businesses Products Hold to collect Intent is to orig inate ﬁnancial • Provid ing ﬁnancing and or ig inat ing • Corporate Lending • Loans and assets and hold them to assets to earn interest income as • Financ ial Markets advances maturity, collecting the primary income stream • Transaction • Debt securit ies contractual cash ﬂows over • Performing credit risk management Banking the term of the instrument activ it ies • Retail Lending • Costs include funding costs, • Treasury Markets transaction costs and impa irment (Loans and losses Borrowings) Hold to collect Business object ive met • Portfolios held for liqu id ity needs; or • Treasury Markets • Debt securit ies and sell through both hold to collect where a certain interest yield proﬁle and by selling ﬁnanc ial assets is mainta ined; or that are normally rebalanced to achieve matching of duration of assets and liab il it ies • Income streams come from interest income, fair value changes, and impa irment losses Fair value through All other business object ives, • Assets held for trading • Financ ial Markets • Derivat ives proﬁt or loss includ ing trad ing and • Assets that are orig inated, • All other business • Equity shares managing ﬁnanc ial assets on purchased, and sold for proﬁt taking lines • Trading portfolios a fair value basis or underwrit ing act iv ity • Financ ial Markets • Performance of the portfolio is reverse repos evaluated on a fair value basis • Financ ial Markets • Income streams are from fair value (FM Bond and Loan changes or trading gains or losses Syndicat ion) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 193 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Financ ial assets wh ich have SPPI characterist ics and that are held w ith in a bus iness model whose object ive is to hold ﬁnanc ial assets to collect contractual cashﬂows (hold to collect) are recorded at amortised cost. Conversely, ﬁnanc ial assets wh ich have SPPI characterist ics but are held w ith in a bus iness model whose object ive is achieved by both collecting contractual cashﬂows and selling ﬁnanc ial assets (Hold to collect and sell) are class if ied as held at FVOCI. Both hold to collect and hold to collect and sell business models involve holding ﬁnanc ial assets to collect the contractual cashﬂows. However, the bus iness models are dist inct by reference to the frequency and s ign iﬁcance that asset sales play in meeting the object ive under wh ich a particular group of ﬁnanc ial assets is managed. Hold to collect business models are characterised by asset sales that are inc idental to meet ing the object ives under wh ich a group of assets is managed. Sales of assets under a hold to collect business model can be made to manage increases in the credit risk of ﬁnanc ial assets but sales for other reasons should be infrequent or ins ign if icant. Cashﬂows from the sale of ﬁnancial assets under a hold to collect and sell bus iness model by contrast are integral to achiev ing the objectives under wh ich a particular group of ﬁnanc ial assets are managed. Th is may be the case where frequent sales of ﬁnancial assets are requ ired to manage the Group’s daily liqu id ity requirements or to meet regulatory requirements to demonstrate liqu id ity of ﬁnanc ial instruments. Sales of assets under hold to collect and sell business models are therefore both more frequent and more sign iﬁcant in value than those under the hold to collect model. Equity instruments designated as held at FVOCI Non-trading equity instruments acquired for strategic purposes rather than capital gain may be irrevocably designated at in it ial recognit ion as held at FVOCI on an instrument-by-instrument basis. Div idends rece ived are recognised in proﬁt or loss. Gains and losses aris ing from changes in the fair value of these instruments, includ ing fore ign exchange gains and losses, are recognised directly in equity and are never reclassif ied to proﬁt or loss even on derecogn it ion. Mandatorily classif ied at fa ir value through proﬁt or loss Financ ial assets and l iab il it ies wh ich are mandatorily held at fair value through proﬁt or loss are split between two subcategories as follows: Trading, includ ing: • Financ ial assets and l iab il it ies held for trad ing, which are those acquired princ ipally for the purpose of sell ing in the short- term • Derivat ives Non-trading mandatorily at fair value through proﬁt or loss, includ ing: • Instruments in a business which has a fair value business model (see the Group’s business model assessment) which are not trading or derivat ives • Hybrid ﬁnanc ial assets that conta in one or more embedded derivat ives • Financ ial assets that would otherw ise be measured at amortised cost or FVOCI but which do not have SPPI characterist ics • Equity instruments that have not been designated as held at FVOCI • Financ ial l iab il it ies that const itute contingent considerat ion in a business combinat ion Designated at fair value through proﬁt or loss Financ ial assets and l iab il it ies may be des ignated at fair value through proﬁt or loss when the designat ion el im inates or sign iﬁcantly reduces a measurement or recogn it ion incons istency that would otherw ise arise from measuring assets or liab il it ies on a d ifferent basis (‘accounting mismatch’). Financ ial l iab il it ies may also be des ignated at fair value through proﬁt or loss where they are managed on a fair value basis or have an embedded derivat ive where the Group is not able to bifurcate and separately value the embedded derivat ive component. Financ ial l iab il it ies held at amort ised cost Financ ial l iab il it ies that are not ﬁnancial guarantees or loan comm itments and that are not classif ied as ﬁnancial l iab il it ies held at fair value through proﬁt or loss are classif ied as ﬁnancial l iab il it ies held at amort ised cost. Preference shares which carry a mandatory coupon that represents a market rate of interest at the issue date, or which are redeemable on a specif ic date or at the opt ion of the shareholder are classif ied as ﬁnancial l iab il it ies and are presented in other borrowed funds. The div idends on these preference shares are recogn ised in the income statement as interest expense on an amortised cost basis using the effective interest method. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 194 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Financ ial guarantee contracts and loan comm itments The Group issues ﬁnanc ial guarantee contracts and loan comm itments in return for fees. Financ ial guarantee contracts and any loan commitments issued at below-market interest rates are in it ially recognised at their fair value as a ﬁnanc ial l iab il ity, and subsequently measured at the higher of the in it ial value less the cumulative amount of income recognised in accordance with the princ iples of IFRS 15 Revenue from Contracts w ith Customers and their expected credit loss provis ion. Loan commitments may be designated at fair value through proﬁt or loss where that is the business model under which such contracts are held. Fair value of ﬁnanc ial assets and l iab il it ies The fair value of ﬁnanc ial instruments is generally measured on the basis of the ind iv idual ﬁnanc ial instrument. However, when a group of ﬁnancial assets and ﬁnancial l iab il it ies is managed on the basis of its net exposure to either market risk or credit risk, the fair value of the group of ﬁnanc ial instruments is measured on a net basis. The fair values of quoted ﬁnanc ial assets and l iab il it ies in active markets are based on current prices. A market is regarded as active if transactions for the asset or liab il ity take place with sufﬁc ient frequency and volume to prov ide pric ing informat ion on an ongoing basis. If the market for a ﬁnanc ial instrument, and for unlisted securit ies, is not active, the Group establishes fair value by using valuation techniques. Init ial recogn it ion Regular way purchases and sales of ﬁnancial assets held at fa ir value through proﬁt or loss, and held at fair value through other comprehensive income are in it ially recognised on the trade date (the date on which the Group commits to purchase or sell the asset). Loans and advances and other ﬁnancial assets held at amort ised cost are recognised on the settlement date (the date on which cash is advanced to the borrowers). All ﬁnancial instruments are in it ially recognised at fair value, which is normally the transaction price, plus directly attributable transaction costs for ﬁnanc ial assets and l iab il it ies wh ich are not subsequently measured at fair value through proﬁt or loss. In certain circumstances, the in it ial fair value may be based on a valuation technique which may lead to the recognit ion of proﬁts or losses at the time of in it ial recognit ion. However, these proﬁts or losses can only be recogn ised when the valuation technique used is based solely on observable market data. Where the in it ially recognised fair value is based on a valuation model that uses unobservable inputs, the difference between the transaction price and the valuation model is not recognised immed iately in the income statement but following the passage of time, or as the inputs become observable, or the transaction matures or is terminated. Subsequent measurement Financ ial assets and ﬁnancial l iab il it ies held at amort ised cost Financ ial assets and ﬁnancial l iab il it ies held at amort ised cost are subsequently carried at amortised cost using the effective interest method (see 'Interest income and expense'). Foreign exchange gains and losses are recognised in the income statement. Where a ﬁnancial instrument carried at amortised cost is the hedged item in a qualify ing fa ir value hedge relationsh ip, its carrying value is adjusted by the fair value gain or loss attributable to the hedged risk. Financ ial assets held at FVOCI Debt instruments held at FVOCI are subsequently carried at fair value, with all unrealised gains and losses aris ing from changes in fair value (includ ing any related fore ign exchange gains or losses) recognised in other comprehensive income and accumulated in a separate component of equity. Foreign exchange gains and losses on the amortised cost are recognised in income. Changes in expected credit losses are recognised in the proﬁt or loss and are accumulated in equity. On derecognit ion, the cumulat ive fair value gains or losses, net of the cumulative expected credit loss reserve, are transferred to the proﬁt or loss. Equity investments designated at FVOCI are subsequently carried at fair value with all unrealised gains and losses aris ing from changes in fair value (includ ing any related fore ign exchange gains or losses) recognised in other comprehensive income and accumulated in a separate component of equity. On derecognit ion, the cumulat ive reserve is transferred to retained earnings and is not recycled to proﬁt or loss. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 195 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Financ ial assets and l iab il it ies held at fa ir value through proﬁt or loss Gains and losses aris ing from changes in fair value, includ ing contractual interest income or expense, recorded in the net trading income line in the proﬁt or loss unless the instrument is part of a cash ﬂow hedging relationsh ip. Derecognit ion of ﬁnancial instruments Financ ial assets wh ich are subject to commercial reﬁnanc ing where the loan is priced to the market with no payment related concessions regardless of form of legal documentation or nature of lending will be derecognised. Where the Group’s rights to the cash ﬂows under the orig inal contract have exp ired, the old loan is derecognised and the new loan is recognised at fair value. For all other modif icat ions for example forborne loans or restructuring, whether or not a change in the cash ﬂows is 'substantially different' is judgemental and will be considered on a case-by-case basis, taking into account all the relevant facts and circumstances. On derecognit ion of a ﬁnancial asset, the d ifference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of the considerat ion rece ived (includ ing any new asset obtained less any new liab il ity assumed) and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in proﬁt or loss except for equity instruments elected FVOCI (see above) and cumulative fair value adjustments attributable to the credit risk of a liab il ity, that are held in other comprehensive income. Financ ial l iab il it ies are derecogn ised when they are extingu ished. A ﬁnancial l iab il ity is extingu ished when the obl igat ion is discharged, cancelled or expires and this is evaluated both qualitat ively and quant itat ively. However, where a ﬁnancial liab il ity has been modif ied, it is derecognised if the difference between the modif ied cash ﬂows and the or ig inal cash ﬂows is more than 10 per cent, or if less than 10 per cent, the Group will perform a qualitat ive assessment to determ ine whether the terms of the two instruments are substantially different. If the Group purchases its own debt, it is derecognised and the difference between the carrying amount of the liab il ity and the considerat ion pa id is included in 'Non funded income' except for the cumulative fair value adjustments attributable to the credit risk of a liab il ity that are held in Other comprehensive income, which are never recycled to the proﬁt or loss. Modif ied ﬁnancial instruments Financ ial assets and ﬁnancial l iab il it ies whose or ig inal contractual terms have been mod if ied, includ ing those loans subject to forbearance strategies, are considered to be modif ied instruments. Modif icat ions may include changes to the tenor, cash ﬂows and or interest rates among other factors. Where derecognit ion of ﬁnancial assets is appropriate (see Derecognit ion), the newly recogn ised residual loans are assessed to determine whether the assets should be classif ied as purchased or or ig inated cred it-impa ired assets (POCI). Where derecognit ion is not appropriate, the gross carrying amount of the applicable instruments is recalculated as the present value of the renegotiated or modif ied contractual cash ﬂows d iscounted at the orig inal effect ive interest rate (or credit adjusted effective interest rate for POCI ﬁnanc ial assets). The d ifference between the recalculated values and the pre-modif ied gross carry ing values of the instruments are recorded as a modif icat ion gain or loss in the proﬁt or loss. Gains and losses aris ing from mod if icat ions for credit reasons are recorded as part of ‘Credit Impairment’ (see Credit Impairment policy). Modif icat ion gains and losses aris ing from non-cred it reasons are recognised either as part of 'Credit Impairment' or with in income depending on whether there has been a change in the credit risk on the ﬁnanc ial asset subsequent to the modif icat ion. Modif icat ion gains and losses aris ing on ﬁnancial l iab il it ies are recogn ised with in income. The movements in the applicable expected credit loss loan posit ions are d isclosed in further detail in Risk Review. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 196 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued The Group’s classif icat ion of its ﬁnanc ial assets and l iab il it ies is summarised in the following tables. Group Assets at fair value Non-trading Designated mandatorily at fair value Fair value Total Assets held Derivat ives at fair value through through other ﬁnancial at held for through proﬁt or comprehensive assets at amortised Trading hedging proﬁt or loss loss income fair value cost Total Assets Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks¹ – – – – – – 64,198 64,198 Financ ial assets held at fa ir value through proﬁt or loss Loans and advances to banks² 2,265 – – – – 2,265 – 2,265 Loans and advances to customers² 3,001 – 187 – – 3,188 – 3,188 Reverse repurchase agreements and other sim ilar secured lend ing 15 185 – 67,964 – – 68,149 – 68,149 Debt securit ies, alternat ive tier one and other elig ible bills 21,452 – 604 – – 22,056 – 22,056 Equity shares 1,322 – 120 – – 1,442 – 1,442 28,225 – 68,875 – – 97,100 – 97,100 Derivat ive ﬁnancial instruments 13 50,883 1,671 – – – 52,554 – 52,554 Loans and advances to banks² 14 – – – – – – 22,803 22,803 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 1,653 1,653 Loans and advances to customers² 14 – – – – – – 156,143 156,143 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 13,827 13,827 Investment securit ies Debt securit ies, alternat ive tier one and other elig ible bills – – – – 62,120 62,120 39,920 102,040 Equity shares – – – – 434 434 – 434 – – – – 62,554 62,554 39,920 102,474 Other assets 19 – – – – – – 20,714 20,714 Assets held for sale 20 – – – – – – 693 693 Total at 31 December 2023 79,108 1,671 68,875 – 62,554 212,208 304,471 516,679 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 58 to 145) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 197 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Assets at fair value Non-trading mandatorily Designated Fair value Total Assets held Derivat ives at fair value at fair value through other ﬁnancial at held for through through comprehensive assets at amortised Trading hedging proﬁt or loss proﬁt or loss income fair value cost Total Assets Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks¹ – – – – – – 50,531 50,531 Financ ial assets held at fa ir value through proﬁt or loss Loans and advances to banks² 859 – – – – 859 – 859 Loans and advances to customers² 3,531 – 534 – – 4,065 – 4,065 Reverse repurchase agreements and other sim ilar secured lend ing 15 – – 62,333 – – 62,333 – 62,333 Debt securit ies, alternat ive tier one and other elig ible bills 12,619 – 792 – – 13,411 – 13,411 Equity shares 1,743 – 143 – – 1,886 – 1,886 18,752 – 63,802 – – 82,554 – 82,554 Derivat ive ﬁnancial instruments 13 62,840 2,210 – – – 65,050 – 65,050 Loans and advances to banks² 14 – – – – – – 27,383 27,383 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 878 878 Loans and advances to customers² 14 – – – – – – 158,126 158,126 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 15,586 15,586 Investment securit ies Debt securit ies, alternat ive tier one and other elig ible bills – – – – 70,624 70,624 41,801 112,425 Equity shares – – – – 603 603 – 603 – – – – 71,227 71,227 41,801 113,028 Other assets 19 – – – – – – 27,210 27,210 Assets held for sale 20 – – – 2 – 2 1,388 1,390 Total at 31 December 2022 81,592 2,210 63,802 2 71,227 218,833 306,439 525,272 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 58 to 145) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 198 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company Assets at fair value Non-trading Designated mandatorily at fair value Fair value Total Assets held Derivat ives at fair value through through other ﬁnancial at held for through proﬁt or comprehensive assets at amortised Trading hedging proﬁt or loss loss income fair value cost Total Assets Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks¹ – – – – – – 52,758 52,758 Financ ial assets held at fa ir value through proﬁt or loss Loans and advances to banks² 2,244 – – – – 2,244 – 2,244 Loans and advances to customers² 2,566 – 56 – – 2,622 – 2,622 Reverse repurchase agreements and other sim ilar secured lend ing 15 185 – 64,619 – – 64,804 – 64,804 Debt securit ies, alternat ive tier one and other elig ible bills 13,713 – 1,714 – – 15,427 – 15,427 Equity shares 1,312 – 3 – – 1,315 – 1,315 20,020 – 66,392 – – 86,412 – 86,412 Derivat ive ﬁnancial instruments 13 51,627 1,594 – – – 53,221 – 53,221 Loans and advances to banks² 14 – – – – – – 10,135 10,135 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 554 554 Loans and advances to customers² 14 – – – – – – 75,883 75,883 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 12,212 12,212 Investment securit ies Debt securit ies, alternat ive tier one and other elig ible bills – – – – 54,300 54,300 38,062 92,362 Equity shares – – – – 409 409 – 409 – – – – 54,709 54,709 38,062 92,771 Other assets 19 – – – – – – 16,990 16,990 Assets held for sale 20 – – – – – – 52 52 Total at 31 December 2023 71,647 1,594 66,392 – 54,709 194,342 193,880 388,222 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 58 to 145) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 199 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Assets at fair value Non-trading mandatorily Designated Fair value Total Assets held Derivat ives at fair value at fair value through other ﬁnancial at held for through through comprehensive assets at amortised Trading hedging proﬁt or loss proﬁt or loss income fair value cost Total Assets Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks¹ – – – – – – 38,867 38,867 Financ ial assets held at fa ir value through proﬁt or loss Loans and advances to banks² 837 – – – – 837 – 837 Loans and advances to customers² 3,113 – 83 – – 3,196 – 3,196 Reverse repurchase agreements and other sim ilar secured lend ing 15 – – 59,057 – – 59,057 – 59,057 Debt securit ies, alternat ive tier one and other elig ible bills 9,282 – 1,679 – – 10,961 – 10,961 Equity shares 1,738 – 3 – – 1,741 – 1,741 14,970 – 60,822 – – 75,792 – 75,792 Derivat ive ﬁnancial instruments 13 63,355 2,126 – – – 65,481 – 65,481 Loans and advances to banks² 14 – – – – – – 18,548 18,548 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 184 184 Loans and advances to customers² 14 – – – – – – 80,611 80,611 of which – reverse repurchase agreements and other sim ilar secured lending 15 – – – – – – 15,071 15,071 Investment securit ies Debt securit ies, alternat ive tier one and other elig ible bills – – – – 57,007 57,007 38,042 95,049 Equity shares – – – – 323 323 – 323 – – – – 57,330 57,330 38,042 95,372 Other assets 19 – – – – – – 23,625 23,625 Assets held for sale 20 – – – 2 – 2 544 546 Total at 31 December 2022 78,325 2,126 60,822 2 57,330 198,605 200,237 398,842 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 58 to 145) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 200 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Group Liab il it ies at fa ir value Designated at Derivat ives fair value Total ﬁnancial held for through proﬁt liab il it ies at Amortised Trading hedging or loss fair value cost Total Liab il it ies Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial l iab il it ies held at fa ir value through proﬁt or loss Deposits by banks – – 1,321 1,321 – 1,321 Customer accounts 39 – 9,127 9,166 – 9,166 Repurchase agreements and other sim ilar secured borrow ing 15 1,438 – 37,994 39,432 – 39,432 Debt securit ies in issue 21 – – 9,850 9,850 – 9,850 Short posit ions 6,050 – – 6,050 – 6,050 7,527 – 58,292 65,819 – 65,819 Derivat ive ﬁnancial instruments 13 53,209 1,964 – 55,173 – 55,173 Deposits by banks – – – – 23,616 23,616 Customer accounts – – – – 237,902 237,902 Repurchase agreements and other sim ilar secured borrow ing 15 – – – – 12,033 12,033 Debt securit ies in issue 21 – – – – 36,481 36,481 Other liab il it ies 22 – – – – 24,109 24,109 Subordinated liab il it ies and other borrowed funds 26 – – – – 11,454 11,454 Liab il it ies included in disposal groups held for sale 20 – – – – 726 726 Total at 31 December 2023 60,736 1,964 58,292 120,992 346,321 467,313 Liab il it ies at fa ir value Designated at Derivat ives fair value Total ﬁnancial held for through proﬁt liab il it ies at Amortised Trading hedging or loss fair value cost Total Liab il it ies Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial l iab il it ies held at fa ir value through proﬁt or loss Deposits by banks – – 586 586 – 586 Customer accounts 29 – 6,526 6,555 – 6,555 Repurchase agreements and other sim ilar secured borrow ing 15 – – 50,402 50,402 – 50,402 Debt securit ies in issue 21 – – 7,563 7,563 – 7,563 Short posit ions 2,302 – – 2,302 – 2,302 2,331 – 65,077 67,408 – 67,408 Derivat ive ﬁnancial instruments 13 66,283 2,575 – 68,858 – 68,858 Deposits by banks – – – – 24,150 24,150 Customer accounts – – – – 243,075 243,075 Repurchase agreements and other sim ilar secured borrow ing 15 – – – – 1,991 1,991 Debt securit ies in issue 21 – – – – 36,982 36,982 Other liab il it ies 22 – – – – 25,567 25,567 Subordinated liab il it ies and other borrowed funds 26 – – – – 13,269 13,269 Liab il it ies included in disposal groups held for sale 20 – – 5 5 1,230 1,235 Total at 31 December 2022 68,614 2,575 65,082 136,271 346,264 482,535 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 201 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company Liab il it ies at fa ir value Designated at Derivat ives fair value Total ﬁnancial held for through proﬁt liab il it ies at Amortised Trading hedging or loss fair value cost Total Liab il it ies Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial l iab il it ies held at fa ir value through proﬁt or loss Deposits by banks – – 1,321 1,321 – 1,321 Customer accounts – – 8,852 8,852 – 8,852 Repurchase agreements and other sim ilar secured borrow ing 15 1,438 – 37,736 39,174 – 39,174 Debt securit ies in issue 21 – – 9,554 9,554 – 9,554 Short posit ions 5,566 – – 5,566 – 5,566 7,004 – 57,463 64,467 – 64,467 Derivat ive ﬁnancial instruments 13 53,614 1,917 – 55,531 – 55,531 Deposits by banks – – – – 18,280 18,280 Customer accounts – – – – 121,648 121,648 Repurchase agreements and other sim ilar secured borrow ing 15 – – – – 11,977 11,977 Debt securit ies in issue 21 – – – – 34,740 34,740 Other liab il it ies 22 – – – – 18,879 18,879 Subordinated liab il it ies and other borrowed funds 26 – – – – 10,896 10,896 Liab il it ies included in disposal groups held for sale 20 – – – – – – Total at 31 December 2023 60,618 1,917 57,463 119,998 216,420 336,418 Liab il it ies at fa ir value Designated at Derivat ives fair value Total ﬁnancial held for through proﬁt liab il it ies at Amortised Trading hedging or loss fair value cost Total Liab il it ies Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial l iab il it ies held at fa ir value through proﬁt or loss Deposits by banks – – 573 573 – 573 Customer accounts – – 6,325 6,325 – 6,325 Repurchase agreements and other sim ilar secured borrow ing 15 – – 50,179 50,179 – 50,179 Debt securit ies in issue 21 – – 7,271 7,271 – 7,271 Short posit ions 1,841 – – 1,841 – 1,841 1,841 – 64,348 66,189 – 66,189 Derivat ive ﬁnancial instruments 13 66,729 2,474 – 69,203 – 69,203 Deposits by banks – – – – 17,900 17,900 Customer accounts – – – – 137,422 137,422 Repurchase agreements and other sim ilar secured borrow ing 15 – – – – 1,723 1,723 Debt securit ies in issue 21 – – – – 34,992 34,992 Other liab il it ies 22 – – – – 20,661 20,661 Subordinated liab il it ies and other borrowed funds 26 – – – – 12,729 12,729 Liab il it ies included in disposal groups held for sale 20 – – – – 335 335 Total at 31 December 2022 68,570 2,474 64,348 135,392 225,762 361,154 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 202 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Interest rate benchmark reform During 2023, sign iﬁcant progress was made in support of LIBOR transit ion. New LIBOR-referencing business had ceased and a full suite of Risk Free Rate-referencing derivat ive and cash products were standard offerings across the Group. Having completed the remediat ion of all non-USD LIBOR exposures at the end of 2021 w ith no reliance on synthetic rates, the Programme focused on remediat ing legacy USD LIBOR stock ahead of the USD LIBOR cessat ion date (30 June 2023). The Group made sign iﬁcant progress towards complet ing its remediat ion of legacy exposures over the course of 2023. Cl ients with legacy USD LIBOR loans were engaged to remediate their contracts via active conversion to alternative rates, or other suitable transit ion mechan isms such as the inclus ion of robust fallbacks. For der ivat ives, the Group adhered to the International Swaps and Derivat ives Assoc iat ion (ISDA) 2020 IBOR Fallbacks Protocol for all its trading entit ies and cont inued to engage clients to do the same or to negotiate remediat ion b ilaterally. The Group also successfully partic ipated in CCP conversion events, includ ing both tranches of the London Clear ing House (LCH) conversions for USD LIBOR and also the SGD/ THB conversion, as well as the CME Eurodollar futures and the Hong Kong Exchanges and Clearing (HKEX) USD LIBOR events. This sign iﬁcantly reduced our overall not ional exposure to USD LIBOR, as centrally cleared derivat ives and b ilateral derivat ives w ith fallbacks represented a substantial portion of the Group’s overall USD LIBOR notional exposure. As of 31 December 2023, a number of contracts remain subject to remediat ion but these are cons idered immater ial for the Group. The largest population of remain ing exposures are synd icated loans, either on a standalone basis, or where the loans have been hedged with derivat ives. These contracts currently operate under a synthet ic USD LIBOR rate. Risks which the Group is exposed to due to LIBOR transit ion The Group has largely mit igated all mater ial adverse outcomes associated with the cessation of IBOR benchmarks, and these have not required a change to the Group’s risk management strategy. However, the Group will continue to focus on the un-remediated contracts, and manage the risks of the transit ion unt il fully complete. Particular attention will continue to be paid to: legal risk of any contracts that may remain outstanding after the end of synthetic LIBOR (currently scheduled for end of September 2024); conduct risk aris ing from cont inued remediat ion; ﬁnancial and accounting risk in terms of the ﬁnanc ial impact of IBOR transit ion for the outstand ing contracts, and also ﬁnanc ial instruments that may be affected by accounting issues such as accounting for contractual changes due to IBOR reform, fair value measurement and hedge accounting, as well as other risks inherent in the reform. At 31 December 2022 the Group had the following notional princ ipal exposures to interest rate benchmarks that were subject to interest rate benchmark reform. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 203 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Group USD LIBOR GBP LIBOR SGD SOR THB FIX Other IBOR Total IBOR IBOR exposures by benchmark at 31 December 2022 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Loans and advances to banks 610 – – – – 610 Loans and advances to customers 16,537 – – – – 16,537 Debt securit ies, AT1 and other el ig ible b ills 1,591 – 16 – – 1,607 18,738 – 16 – – 18,754 Liab il it ies Deposits by banks 4,194 – 6 – – 4,200 Customer accounts 3,062 – – 34 – 3,096 Repurchase agreements and other secured borrowing 671 – – – – 671 Debt securit ies in issue 259 – – – – 259 Subordinated liab il it ies and other borrowed funds – – – – – – 8,186 – 6 34 – 8,226 Derivat ives – Fore ign exchange contracts Currency swaps and options 159,088 – 3,941 958 – 163,987 Derivat ives – Interest rate contracts – – – – – Swaps 739,704 – 10,823 11,614 – 762,141 Forward rate agreements and options 22,148 1 – 9 – 22,158 Exchange traded futures and options 31,758 – – – – 31,758 Equity and stock index options 49 – – – – 49 Credit derivat ive contracts 5,085 – 78 72 – 5,235 Total IBOR derivat ive exposure 957,832 1 14,842 12,653 – 985,328 Total IBOR exposure 984,756 1 14,864 12,687 – 1,012,308 Loan commitments off balance sheet 2,375 – 14 – – 2,389 Company USD LIBOR GBP LIBOR SGD SOR THB FIX Other IBOR Total IBOR IBOR exposures by benchmark at 31 December 2022 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Loans and advances to banks 610 – – – – 610 Loans and advances to customers 15,958 – – – – 15,958 Debt securit ies, AT1 and other el ig ible b ills 1,577 – 16 – – 1,593 18,145 – 16 – – 18,161 Liab il it ies Deposits by banks 3,930 – 6 – – 3,936 Customer accounts 2,285 – – 34 – 2,319 Repurchase agreements and other secured borrowing 471 – – – – 471 Debt securit ies in issue 254 – – – – 254 Subordinated liab il it ies – – – – – – 6,940 – 6 34 – 6,980 Derivat ives – Fore ign exchange contracts Currency swaps and options 152,394 – 3,132 919 – 156,445 Derivat ives – Interest rate contracts – – – – – – Swaps 704,546 – 9,535 10,910 – 724,991 Forward rate agreements and options 18,814 – – 9 – 18,823 Exchange traded futures and options 31,216 – – – – 31,216 Equity and stock index options 49 – – – – 49 Credit derivat ive contracts 4,782 – 78 72 – 4,932 Total IBOR derivat ive exposure 911,801 – 12,745 11,910 – 936,456 Total IBOR exposure 936,886 – 12,767 11,944 – 961,597 Loans commitments off balance sheet 2,167 – – – – 2,167 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 204 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Offsetting of ﬁnanc ial instruments Financ ial assets and l iab il it ies are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intent ion to settle on a net bas is, or to realise the asset and settle the liab il ity simultaneously. In practice, for credit mit igat ion, the Group is able to offset assets and liab il it ies wh ich do not meet the IAS 32 netting criter ia set out below. Such arrangements include master netting arrangements for derivat ives and global master repurchase agreements for repurchase and reverse repurchase transactions. These agreements generally allow that all outstanding transactions with a particular counterparty can be offset but only in the event of default or other predetermined events. In addit ion, the Group also rece ives and pledges readily realisable collateral for derivat ive transact ions to cover net exposure in the event of a default. Under repurchase and reverse repurchase agreements the Group pledges (legally sells) and obtains (legally purchases) respectively, highly liqu id assets wh ich can be sold in the event of a default. The following tables set out the impact of netting on the balance sheet. This comprises derivat ive transact ions settled through an enforceable netting agreement where we have the intent and abil ity to settle net and wh ich are offset on the balance sheet. Group 2023 Net amounts Related amount not offset Gross of ﬁnancial in the balance sheet amounts of instruments recognised Impact of presented in ﬁnancial offset in the the balance Financ ial Financ ial instruments balance sheet sheet instruments collateral Net amount $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 100,321 (47,767) 52,554 (43,684) (7,960) 910 Reverse repurchase agreements and other sim ilar secured lending 95,461 (11,832) 83,629 – (83,629) – At 31 December 2023 195,782 (59,599) 136,183 (43,684) (91,589) 910 Liab il it ies Derivat ive ﬁnancial instruments 102,940 (47,767) 55,173 (43,684) (8,378) 3,111 Repurchase agreements and other sim ilar secured borrowing 63,297 (11,832) 51,465 – (51,465) – At 31 December 2023 166,237 (59,599) 106,638 (43,684) (59,843) 3,111 2022 Net amounts Related amount not offset Gross of ﬁnancial in the balance sheet amounts of instruments recognised Impact of presented in ﬁnancial offset in the the balance Financ ial Financ ial instruments balance sheet sheet instruments collateral Net amount $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 119,241 (54,191) 65,050 (52,827) (8,304) 3,919 Reverse repurchase agreements and other sim ilar secured lending 94,352 (15,555) 78,797 – (78,797) – At 31 December 2022 213,593 (69,746) 143,847 (52,827) (87,101) 3,919 Liab il it ies Derivat ive ﬁnancial instruments 123,049 (54,191) 68,858 (52,827) (11,372) 4,659 Repurchase agreements and other sim ilar secured borrowing 67,948 (15,555) 52,393 – (52,393) – At 31 December 2022 190,997 (69,746) 121,251 (52,827) (63,765) 4,659 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 205 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company 2023 Net amounts Related amount not offset Gross of ﬁnancial in the balance sheet amounts of instruments recognised Impact of presented in ﬁnancial offset in the the balance Financ ial Financ ial instruments balance sheet sheet instruments collateral Net amount $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 100,988 (47,767) 53,221 (45,556) (7,289) 376 Reverse repurchase agreements and other sim ilar secured lending 89,402 (11,832) 77,570 – (77,570) – At 31 December 2023 190,390 (59,599) 130,791 (45,556) (84,859) 376 Liab il it ies Derivat ive ﬁnancial instruments 103,298 (47,767) 55,531 (45,556) (7,505) 2,470 Repurchase agreements and other sim ilar secured borrowing 62,983 (11,832) 51,151 – (51,151) – At 31 December 2023 166,281 (59,599) 106,682 (45,556) (58,656) 2,470 2022 Net amounts Related amount not offset in Gross of ﬁnancial the balance sheet amounts of instruments recognised Impact of presented in ﬁnancial offset in the the balance Financ ial Financ ial instruments balance sheet sheet instruments collateral Net amount $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 119,672 (54,191) 65,481 (53,810) (7,710) 3,961 Reverse repurchase agreements and other sim ilar secured lending 89,867 (15,555) 74,312 – (74,312) – At 31 December 2022 209,539 (69,746) 139,793 (53,810) (82,022) 3,961 Liab il it ies Derivat ive ﬁnancial instruments 123,394 (54,191) 69,203 (53,810) (10,231) 5,162 Repurchase agreements and other sim ilar secured borrowing 67,457 (15,555) 51,902 – (51,902) – At 31 December 2022 190,851 (69,746) 121,105 (53,810) (62,133) 5,162 Related amounts not offset in the balance sheet comprises: • Financ ial instruments not offset in the balance sheet but covered by an enforceable netting arrangement. This comprises master netting arrangements held against derivat ive ﬁnancial instruments and excludes the effect of over-collateralisat ion • Financ ial instruments where a legal opin ion ev idenc ing enforceab il ity the r ight of offset may not have sought, or may have been unable to obtain • Financ ial collateral compr ises cash collateral pledged and received for derivat ive ﬁnancial instruments and collateral bought and sold for reverse repurchase and repurchase agreements respectively and excludes the effect of over- collateralisat ion Financ ial l iab il it ies des ignated at fair value through proﬁt or loss 2023 2022 $mill ion $mill ion Carrying balance aggregate fair value 58,292 65,077 Amount contractually obliged to repay at maturity 59,576 66,138 Difference between aggregate fair value and contractually obliged to repay at maturity (1,284) (1,061) Cumulative change in fair value accredited to credit risk difference 87 (31) The net fair value loss on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss was $2,445 mill ion for the year (31 December 2022: net loss of $726 mill ion). Further details of the Group’s own credit adjustment (OCA) valuation technique is described later in this note. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 206 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Valuation of ﬁnanc ial instruments The Valuation Methodology function is responsible for independent price verif icat ion, oversight of fair value and appropriate value adjustments and escalation of valuation issues. Independent price verif icat ion is the process of determin ing that the valuations incorporated into the ﬁnanc ial statements are val idated independent of the business area responsible for the product. The Valuation Methodology function has oversight of the fair value adjustments to ensure the ﬁnanc ial instruments are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the ﬁnanc ial statements. The market data used for price verif icat ion may include data sourced from recent trade data involv ing external counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pric ing prov iders. Valuation Methodology performs an ongoing review of the market data sources that are used as part of the PV and fair value processes which are formally documented on a semi-annual basis detail ing of the su itab il ity of the market data used for price testing. Price verif icat ion uses independently sourced data that is deemed most representative of the market the instruments trade in. To determine the quality of the market data inputs, factors such as independence, relevance, reliab il ity, availab il ity of multiple data sources and methodology employed by the pric ing prov ider are taken into considerat ion. The Valuation and Benchmarks Committee (VBC) is the valuation governance forum consist ing of representat ives from Group Market Risk, Product Control, Valuation Methodology and the business, which meets monthly to discuss and approve the independent valuations of the inventory. For Princ ipal F inance, the Investment Committee meeting is held on a quarterly basis to review investments and valuations. Sign iﬁcant account ing estimates and judgements The Group evaluates the sign iﬁcance of ﬁnancial instruments and material accuracy of the valuations incorporated in the ﬁnancial statements as they involve a high degree of judgement and estimat ion uncerta inty in determin ing the carry ing values of ﬁnancial assets and l iab il it ies at the balance sheet date. • Fair value of ﬁnanc ial instruments is determined using valuation techniques and estimates (see below) which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Changes in the observabil ity of sign iﬁcant valuat ion inputs can materially affect the fair values of ﬁnanc ial instruments. • When establish ing the ex it price of a ﬁnanc ial instrument using a valuation technique, the Group estimates valuation adjustments in determin ing the fa ir value (page 207). • In determin ing the valuat ion of ﬁnanc ial instruments, the Group makes judgements on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 assets, and the sign iﬁcant valuat ion judgements in respect of Level 3 instruments (page 218). • Where the estimated measurement of fair value is more judgemental in respect of Level 3 assets, these are valued based on models that use a sign iﬁcant degree of non-market-based unobservable inputs. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 207 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Valuation techniques Refer to the fair value hierarchy explanation – Level 1, 2 and 3 (page 210) • Financ ial instruments held at fair value – Debt securit ies – asset-backed secur it ies: Asset-backed securit ies are valued based on external pr ices obtained from consensus pric ing prov iders, broker quotes, recent trades, arrangers’ quotes, etc. Where an observable price is available for a given security, it is classif ied as Level 2. In instances where third-party prices are not available or reliable, the security is classif ied as Level 3. The fa ir value of Level 3 securit ies is estimated using market standard cash ﬂow models with input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securit ies w ith sim ilar v intage, collateral type, and credit ratings. – Debt securit ies in issue: These debt securit ies relate to structured notes issued by the Group. Where independent market data is available through pric ing vendors and broker sources these pos it ions are class if ied as Level 2. Where such l iqu id external prices are not available, valuations of these debt securit ies are impl ied us ing input parameters such as bond spreads and credit spreads, and are classif ied as Level 3. These input parameters are determined with reference to the same issuer (if available) or proxies from comparable issuers or assets . – Derivat ives: Derivat ive products are class if ied as Level 2 if the valuation of the product is based upon input parameters which are observable from independent and reliable market data sources. Derivat ive products are class if ied as Level 3 if there are sign iﬁcant valuat ion input parameters which are unobservable in the market, such as products where the performance is linked to more than one underlying variable. Examples are foreign exchange basket options, equity options based on the performance of two or more underlying ind ices and interest rate products with quanto payouts. In most cases these unobservable correlation parameters cannot be impl ied from the market, and methods such as histor ical analys is and comparison with histor ical levels or other benchmark data must be employed. – Equity shares – private equity: The majority of pr ivate equity unlisted investments are valued based on earning multiples - Price-to-Earnings (P/E) or enterprise value to earnings before income tax, depreciat ion and amort isat ion (EV/EBITDA) ratios - of comparable listed companies. The two primary inputs for the valuation of these investments are the actual or forecast earnings of the investee companies and earning multiples for the comparable listed companies. To ensure comparabil ity between these unquoted investments and the comparable listed companies, appropriate adjustments are also applied (for example, liqu id ity and size) in the valuation. In circumstances where an investment does not have direct comparables or where the multiples for the comparable companies cannot be sourced from reliable external sources, alternative valuation techniques (for example, discounted cash ﬂow model or net asset value ('NAV') or option pric ing model), wh ich use predominantly unobservable inputs or Level 3 inputs, may be applied. Even though earning multiples for the comparable listed companies can be sourced from third-party sources (for example, Bloomberg), and those inputs can be deemed Level 2 inputs, all unlisted investments (excluding those where observable inputs are available, for example, over-the-counter (OTC) prices) are classif ied as Level 3 on the bas is that the valuation methods involve judgements ranging from determin ing comparable compan ies to discount rates where the discounted cash ﬂow method is applied. – Loans and advances: These primar ily include loans in the FM Bond and Loan Syndicat ion bus iness which were not syndicated as of the balance sheet date and other ﬁnanc ing transact ions with in F inanc ial Markets and loans and advances includ ing reverse repurchase agreements that do not have SPPI cash ﬂows or are managed on a fa ir value basis. These loans are generally bilateral in nature and, where available, their valuation is based on observable clean sales transactions prices or market observable spreads. If observable credit spreads are not available, proxy spreads based on comparable loans with sim ilar cred it grade, sector and region, are used. Where observable credit spreads and market standard proxy methods are available, these loans are classif ied as Level 2. Where there are no recent transactions or comparable loans, these loans are classif ied as Level 3. – Other debt securit ies: These debt securit ies include convertible bonds, corporate bonds, credit and structured notes. Where quoted prices are available through pric ing vendors, brokers or observable trad ing activ it ies from liqu id markets, these are classif ied as Level 2 and valued us ing such quotes. Where there are sign iﬁcant valuat ion inputs which are unobservable in the market, due to ill iqu id trading or the complexity of the product, these are classif ied as Level 3. The valuations of these debt securit ies are impl ied us ing input parameters such as bond spreads and credit spreads. These input parameters are determined with reference to the same issuer (if available) or proxied from comparable issuers or assets. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 208 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued • Financ ial instruments held at amortised cost The following sets out the Group’s basis for establish ing fa ir values of amortised cost ﬁnanc ial instruments and their classif icat ion between Levels 1, 2 and 3. As certain categories of ﬁnanc ial instruments are not actively traded, there is a sign iﬁcant level of management judgement involved in calculating the fair values: – Cash and balances at central banks: The fair value of cash and balances at central banks is their carrying amounts – Debt securit ies in issue, subordinated liab il it ies and other borrowed funds: The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash ﬂow model is used based on a current market related yield curve appropriate for the remain ing term to matur ity – Deposits and borrowings: The estimated fair value of deposits with no stated maturity is the amount repayable on demand. The estimated fair value of ﬁxed interest-bearing deposits and other borrowings without quoted market prices is based on discounted cash ﬂows using the prevail ing market rates for debts w ith a sim ilar Cred it Risk and remain ing maturity – Investment securit ies: For investment securit ies that do not have d irectly observable market values, the Group util ises a number of valuation techniques to determine fair value. Where available, securit ies are valued us ing input proxies from the same or closely related underlying (for example, bond spreads from the same or closely related issuer) or input proxies from a different underlying (for example, a sim ilar bond but us ing spreads for a particular sector and rating). Certain instruments cannot be proxies as set out above, and in such cases the posit ions are valued us ing non-market observable inputs. This includes those instruments held at amortised cost and predominantly relates to asset-backed securit ies. The fair value for such instruments is usually derived from proxy from internal assessments of the underlying cash ﬂows – Loans and advances to banks and customers: For loans and advances to banks, the fair value of ﬂoating rate placements and overnight deposits is their carrying amounts. The estimated fair value of ﬁxed interest-bearing deposits is based on discounted cash ﬂows using the prevail ing money market rates for debts w ith a sim ilar Cred it Risk and remain ing matur ity. The Group’s loans and advances to customers’ portfolio is well divers iﬁed by geography and industry. Approximately a quarter of the portfolio re-prices with in one month, and approx imately half re-prices with in 12 months. Loans and advances are presented net of provis ions for impa irment. The fa ir value of loans and advances to customers with a residual maturity of less than one year generally approximates the carrying value. The estimated fair value of loans and advances with a residual maturity of more than one year represents the discounted amount of future cash ﬂows expected to be received, includ ing assumpt ions relating to prepayment rates and Credit Risk. Expected cash ﬂows are discounted at current market rates to determine fair value. The Group has a wide range of ind iv idual instruments with in its loans and advances portfolio and as a result provid ing quant if icat ion of the key assumptions used to value such instruments is impract ical – Other assets: Other assets comprise primar ily cash collateral and trades pend ing settlement. The carrying amount of these ﬁnancial instruments is considered to be a reasonable approximat ion of fa ir value as they are either short term in nature or re-price to current market rates frequently. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 209 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Fair value adjustments When establish ing the ex it price of a ﬁnanc ial instrument using a valuation technique, the Group considers adjustments to the modelled price which market partic ipants would make when pr ic ing that instrument. The main valuation adjustments (described further below) in determin ing fa ir value for ﬁnanc ial assets and ﬁnancial l iab il it ies are as follows: Movement Movement during the during the 01.01.23 year 31.12.23 01.01.22 year 31.12.22 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Bid-offer valuation adjustment 89 2 91 87 2 89 Credit Valuation adjustment 135 (37) 98 6 129 135 Debit Valuation adjustment (91) (27) (118) – (91) (91) Model valuation adjustment 3 1 4 3 – 3 Funding Valuation adjustment 44 (8) 36 – 44 44 Other fair value adjustments 19 1 20 13 6 19 Total 199 (68) 131 109 90 199 Income deferrals Day 1 and other deferrals 160 (97) 63 84 76 160 Total 160 (97) 63 84 76 160 Note: Bracket represents an asset and credit to the income statement • Bid-offer valuation adjustment: Generally, market parameters are marked on a mid-market basis in the revaluation systems, and a bid-offer valuation adjustment is required to quantify the expected cost of neutralis ing the bus iness’ posit ions through deal ing away in the market, thereby bring ing long pos it ions to b id and short posit ions to offer. The methodology to calculate the bid-offer adjustment for a derivat ive portfol io involves netting between long and short posit ions and the group ing of risk by strike and tenor based on the hedging strategy where long posit ions are marked to bid and short posit ions marked to offer in the systems. • Credit valuation adjustment (CVA): The Group accounts for CVA against the fair value of derivat ive products. CVA is an adjustment to the fair value of the transactions to reﬂect the possib il ity that our counterparties may default and we may not receive the full market value of the outstanding transactions. It represents an estimate of the adjustment a market partic ipant would include when deriv ing a purchase pr ice to acquire our exposures. CVA is calculated for each subsid iary, and with in each ent ity for each counterparty to which the entity has exposure and takes account of any collateral we may hold. The Group calculates the CVA by using estimates of future posit ive exposure, market- impl ied probab il ity of default (PD) and recovery rates. Where market-impl ied data is not readily available, we use market-based proxies to estimate the PD. Wrong-way risk occurs when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty, and the Group has implemented a model to capture this impact for key wrong-way exposures. The Group also captures the uncertaint ies assoc iated with wrong-way risk in the Group’s Prudential Valuation Adjustments framework • Debit valuation adjustment (DVA): The Group calculates DVA adjustments on its derivat ive l iab il it ies to reﬂect changes in its own credit standing. The Group’s DVA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. For derivat ive l iab il it ies, a DVA adjustment is determined by applying the Group’s probabil ity of default to the Group’s negative expected exposure against the counterparty. The Group’s probabil ity of default and loss expected in the event of default is derived based on bond and CDS spreads associated with the Group’s issuances and market standard recovery levels. The expected exposure is modelled based on the simulat ion of the underly ing risk factors over the expected life of the deal. This simulat ion methodology incorporates the collateral posted by the Group and the effects of master netting agreements. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 210 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued • Model valuation adjustment: Valuation models may have pric ing deﬁcienc ies or lim itat ions that require a valuation adjustment. These pric ing deﬁcienc ies or lim itat ions arise due to the choice, implementat ion and cal ibrat ion of the pr ic ing model. • Funding valuation adjustment (FVA): The Group makes FVA adjustments against derivat ive products. FVA reﬂects an estimate of the adjustment to its fair value that a market partic ipant would make to incorporate funding costs or beneﬁts that could arise in relation to the exposure. FVA is calculated by determin ing the net expected exposure at a counterparty level and then applying a funding rate to those exposures that reﬂect the market cost of funding. The FVA for uncollateralised (includ ing part ially collateralised) derivat ives incorporates the estimated present value of the market funding cost or beneﬁt associated with funding these transactions. • Other fair value adjustments: The Group calculates the fair value on the interest rate callable products by calibrat ing to a set of market prices with differ ing matur ity, expiry and strike of the trades. • Day one and other deferrals: In certain circumstances the in it ial fair value is based on a valuation technique which differs to the transaction price at the time of in it ial recognit ion. However, these ga ins can only be recognised when the valuation technique used is based primar ily on observable market data. In those cases where the in it ially recognised fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immed iately in the income statement. The difference is amortised to the income statement until the inputs become observable, or the transaction matures or is terminated. Other deferrals primar ily represent adjustments taken to reﬂect the spec if ic terms and cond it ions of certa in derivat ive contracts which affect the terminat ion value at the measurement date. In addit ion, the Group calculates own cred it adjustment (OCA) on its issued debt designated at fair value, includ ing structured notes, in order to reﬂect changes in its own credit standing. Issued debt is discounted util is ing the spread at which sim ilar instruments would be issued or bought back at the measurement date as this reﬂects the value from the perspective of a market partic ipant who holds the ident ical item as an asset. OCA measures the difference between the fair value of issued debt as of reporting date and theoretical fair values of issued debt adjusted up or down for changes in own credit spreads from incept ion date to the measurement date. Under IFRS 9 the change in the OCA component is reported under other comprehensive income. The Group’s OCA reserve will increase if its credit standing worsens in comparison with the incept ion of the trade and, conversely, decrease if its credit standing improves. The Group’s OCA reserve will reverse over time as its liab il it ies mature. Fair value hierarchy – ﬁnanc ial instruments held at fair value The fair values of quoted ﬁnanc ial assets and l iab il it ies in active markets are based on current prices. A market is regarded as active if transactions for the asset or liab il ity take place with sufﬁc ient frequency and volume to prov ide pric ing informat ion on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for ident ical instruments held by the Group. Where quoted market prices are not available, or are unreliable because of poor liqu id ity, fair values have been determined using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Valuation techniques used include discounted cash ﬂow analysis and pric ing models and, where appropr iate, comparison with instruments that have characterist ics s im ilar to those of the instruments held by the Group. Assets and liab il it ies carr ied at fair value or for which fair values are disclosed have been classif ied into three levels according to the observabil ity of the s ign iﬁcant inputs used to determine the fair values. Changes in the observabil ity of s ign iﬁcant valuation inputs during the reporting period may result in a transfer of assets and liab il it ies w ith in the fa ir value hierarchy. The Group recognises transfers between levels of the fair value hierarchy when there is a sign iﬁcant change in either its princ ipal market or the level of observabil ity of the inputs to the valuation techniques as at the end of the reporting period. • Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for ident ical assets or liab il it ies. • Level 2: Fair value measurements are those with quoted prices for sim ilar instruments in active markets or quoted prices for ident ical or s im ilar instruments in inact ive markets and ﬁnancial instruments valued using models where all sign iﬁcant inputs are observable. • Level 3: Fair value measurements are those where inputs which could have a sign iﬁcant effect on the instrument’s valuation are not based on observable market data. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 211 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued The following tables show the classif icat ion of ﬁnanc ial instruments held at fair value into the valuation hierarchy: Group Level 1 Level 2 Level 3 Total Assets $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value through proﬁt or loss Loans and advances to banks – 2,265 – 2,265 Loans and advances to customers – 2,016 1,172 3,188 Reverse repurchase agreements and other sim ilar secured lend ing – 66,784 1,365 68,149 Debt securit ies and other el ig ible b ills 11,626 9,210 1,220 22,056 Of which: Issued by central banks & governments 11,178 5,994 – 17,172 Issued by corporates other than ﬁnancial inst itut ions 1 – 927 318 1,245 Issued by ﬁnancial inst itut ions¹ 448 2,289 902 3,639 Equity shares 1,243 114 85 1,442 Derivat ive ﬁnancial instruments 940 51,538 76 52,554 Of which: Foreign exchange 114 45,585 24 45,723 Interest rate 37 5,426 3 5,466 Credit – 405 47 452 Equity and stock index options – 47 2 49 Commodity 789 75 – 864 Investment securit ies Debt securit ies and other el ig ible b ills 25,288 36,761 71 62,120 Of which: Issued by central banks & governments 19,475 14,530 51 34,056 Issued by corporates other than ﬁnancial inst itut ions 1 – 1,019 – 1,019 Issued by ﬁnancial inst itut ions 1 5,813 21,212 20 27,045 Equity shares 183 6 245 434 Total ﬁnancial assets at 31 December 2023 39,280 168,694 4,234 212,208 Liab il it ies Financ ial instruments held at fair value through proﬁt or loss Deposits by banks – 1,253 68 1,321 Customer accounts – 8,934 232 9,166 Repurchase agreements and other sim ilar secured borrow ing – 39,432 – 39,432 Debt securit ies in issue – 8,824 1,026 9,850 Short posit ions 2,151 3,796 103 6,050 Derivat ive ﬁnancial instruments 740 54,271 162 55,173 Of which: Foreign exchange 113 46,304 12 46,429 Interest rate 46 7,107 5 7,158 Credit – 448 126 574 Equity and stock index options – 108 19 127 Commodity 581 304 – 885 Other liab il it ies – – – – Total ﬁnancial l iab il it ies at 31 December 2023 2,891 116,510 1,591 120,992 1 Includes covered bonds of $6,377 mill ion, secur it ies issued by Multilateral Development Banks/International Organisat ions of $6,300 m ill ion and State-owned agenc ies and development banks of $3,186 mill ion The fair value of ﬁnanc ial assets and ﬁnancial l iab il it ies class if ied as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $707 mill ion and $125 m ill ion respect ively. There were no sign iﬁcant changes to valuat ion or levelling approaches in 2023. There were no sign iﬁcant transfers of ﬁnancial assets and l iab il it ies measured at fa ir value between Level 1 and Level 2 during the year. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 212 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Level 1 Level 2 Level 3 Total Assets $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value through proﬁt or loss Loans and advances to banks – 838 21 859 Loans and advances to customers – 2,757 1,308 4,065 Reverse repurchase agreements and other sim ilar secured lend ing – 60,345 1,988 62,333 Debt securit ies and other el ig ible b ills 6,363 6,241 807 13,411 Of which: Issued by central banks & governments 6,101 3,082 – 9,183 Issued by corporates other than ﬁnancial inst itut ions 1 86 1,009 416 1,511 Issued by ﬁnancial inst itut ions¹ 176 2,150 391 2,717 Equity shares 1,770 24 92 1,886 Derivat ive ﬁnancial instruments 889 64,117 44 65,050 Of which: Foreign exchange 136 56,425 17 56,578 Interest rate 32 6,612 24 6,668 Credit – 405 1 406 Equity and stock index options – 84 2 86 Commodity 721 591 – 1,312 Investment securit ies Debt securit ies and other el ig ible b ills 31,993 38,631 – 70,624 Of which: Issued by central banks & governments 22,467 15,056 – 37,523 Issued by corporates other than ﬁnancial inst itut ions 1 899 1,215 – 2,114 Issued by ﬁnancial inst itut ions 1 8,627 22,360 – 30,987 Equity shares 112 7 484 603 Total ﬁnancial assets at 31 December 2022 2 41,127 172,960 4,744 218,831 Liab il it ies Financ ial instruments held at fair value through proﬁt or loss Deposits by banks – 453 133 586 Customer accounts – 6,385 170 6,555 Repurchase agreements and other sim ilar secured borrow ing – 50,402 – 50,402 Debt securit ies in issue – 7,136 427 7,563 Short posit ions 251 2,011 40 2,302 ive ﬁnancial Derivat instruments 637 68,103 118 68,858 Of which: Foreign exchange 96 57,641 14 57,751 Interest rate 29 8,988 12 9,029 Credit – 396 37 433 Equity and stock index options – 103 55 158 Commodity 512 975 – 1,487 Other liab il it ies – – – – Total ﬁnancial l iab il it ies at 31 December 2022 2 888 134,490 888 136,266 1 Includes covered bonds of $6,082 mill ion, secur it ies issued by Multilateral Development Banks/International Organisat ions of $8,563 m ill ion and State-owned agenc ies and development banks of $5,578 mill ion 2 The above table does not include held for sale assets of $3 mill ion and l iab il it ies of $5 m ill ion. These are reported in Note 20 together with their fair value hierarchy The fair value of ﬁnanc ial assets and ﬁnancial l iab il it ies class if ied as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $554 mill ion and $26 m ill ion respect ively. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 213 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company Level 1 Level 2 Level 3 Total Assets $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value through proﬁt or loss Loans and advances to banks – 2,244 – 2,244 Loans and advances to customers – 1,598 1,024 2,622 Reverse repurchase agreements and other sim ilar secured lend ing – 63,712 1,092 64,804 Debt securit ies and other el ig ible b ills 8,376 6,937 114 15,427 Of which: Issued by central banks & governments 7,951 3,850 – 11,801 Issued by corporates other than ﬁnancial inst itut ions 1 – 427 20 447 Issued by ﬁnancial inst itut ions 1 425 2,660 94 3,179 Equity shares 1,203 112 – 1,315 Derivat ive ﬁnancial instruments 932 52,217 72 53,221 Of which: Foreign exchange 107 41,092 21 41,220 Interest rate 37 10,478 2 10,517 Credit – 432 47 479 Equity and stock index options – 21 2 23 Commodity 788 194 – 982 Investment securit ies Debt securit ies and other el ig ible b ills 21,960 32,340 – 54,300 Of which: Issued by central banks & governments 16,376 9,855 – 26,231 Issued by corporates other than ﬁnancial inst itut ions 1 – 1,001 – 1,001 Issued by ﬁnancial inst itut ions 1 5,584 21,484 – 27,068 Equity shares 182 1 226 409 Total ﬁnancial assets at 31 December 2023 32,653 159,161 2,528 194,342 Liab il it ies Financ ial instruments held at fair value through proﬁt or loss Deposits by banks – 1,253 68 1,321 Customer accounts – 8,722 130 8,852 Repurchase agreements and other sim ilar secured borrow ing – 39,174 – 39,174 Debt securit ies in issue – 8,693 861 9,554 Short posit ions 1,956 3,507 103 5,566 Derivat ive ﬁnancial instruments 737 54,732 62 55,531 Of which: Foreign exchange 110 42,525 16 42,651 Interest rate 46 11,161 5 11,212 Credit – 525 32 557 Equity and stock index options – 64 9 73 Commodity 581 457 – 1,038 Other liab il it ies – – – – Total ﬁnancial l iab il it ies at 31 December 2023 2,693 116,081 1,224 119,998 1 Includes covered bonds of $6,149 mill ion, secur it ies issued by Multilateral Development Banks/International Organisat ions of $6,118 m ill ion and State-owned agenc ies and development banks of $3,153 mill ion. The fair value of ﬁnanc ial assets and ﬁnancial l iab il it ies class if ied as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $489 mill ion and $68 m ill ion respect ively. There were no sign iﬁcant changes to valuat ion or levelling approaches in 2023. There were no sign iﬁcant transfers of ﬁnancial assets and l iab il it ies measured at fa ir value between Level 1 and Level 2 during the year. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 214 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Level 1 Level 2 Level 3 Total Assets $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value through proﬁt or loss Loans and advances to banks – 837 – 837 Loans and advances to customers – 2,297 899 3,196 Reverse repurchase agreements and other sim ilar secured lend ing – 57,069 1,988 59,057 Debt securit ies and other el ig ible b ills 5,703 4,789 469 10,961 Of which: Issued by central banks & governments 5,475 1,838 – 7,313 Issued by corporates other than ﬁnancial inst itut ions 1 86 417 100 603 Issued by ﬁnancial inst itut ions 1 142 2,534 369 3,045 Equity shares 1,738 3 – 1,741 Derivat ive ﬁnancial instruments 883 64,559 39 65,481 Of which: Foreign exchange 131 51,427 16 51,574 Interest rate 32 11,980 21 12,033 Credit – 351 1 352 Equity and stock index options – 68 1 69 Commodity 720 733 – 1,453 Investment securit ies Debt securit ies and other el ig ible b ills 24,485 32,522 – 57,007 Of which: Issued by central banks & governments 16,239 10,441 – 26,680 Issued by corporates other than ﬁnancial inst itut ions 1 – 1,064 – 1,064 Issued by ﬁnancial inst itut ions 1 8,246 21,017 – 29,263 Equity shares 101 2 220 323 Total ﬁnancial assets at 31 December 2022 2 32,910 162,078 3,615 198,603 Liab il it ies Financ ial instruments held at fair value through proﬁt or loss Deposits by banks – 454 119 573 Customer accounts – 6,258 67 6,325 Repurchase agreements and other sim ilar secured borrow ing – 50,179 – 50,179 Debt securit ies in issue – 7,009 262 7,271 Short posit ions 141 1,660 40 1,841 Derivat ive ﬁnancial instruments 636 68,457 110 69,203 Of which: Foreign exchange 95 53,146 25 53,266 Interest rate 29 13,696 9 13,734 Credit – 412 25 437 Equity and stock index options – 75 51 126 Commodity 512 1,128 – 1,640 Other liab il it ies – – – – Total ﬁnancial l iab il it ies at 31 December 2022 2 777 134,017 598 135,392 1 Includes covered bonds of $6,468 mill ion, secur it ies issued by Multilateral Development Banks/International Organisat ions of $9,199 m ill ion and State-owned agenc ies and development banks of $5,503 mill ion. 2 The above table does not include held for sale assets of $2 mill ion and l iab il it ies of $n il. These are reported in Note 20 together with their fair value hierarchy The fair value of ﬁnanc ial assets and ﬁnancial l iab il it ies class if ied as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $398 mill ion and $48 m ill ion respect ively. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 215 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Fair value hierarchy – ﬁnanc ial instruments measured at amortised cost The following table shows the carrying amounts and incorporates the Group's estimate of fair values of those ﬁnanc ial assets and liab il it ies not presented on the Group’s balance sheet at fa ir value. These fair values may be different from the actual amount that will be received or paid on the settlement or maturity of the ﬁnanc ial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available. Group Fair value Carrying value Level 1 Level 2 Level 3 Total $mill ion $mill ion $mill ion $mill ion $mill ion Assets Cash and balances at central banks¹ 64,198 – 64,198 – 64,198 Loans and advances to banks 22,803 – 22,746 – 22,746 of which – reverse repurchase agreements and other sim ilar secured lending 1,653 – 1,653 – 1,653 Loans and advances to customers 156,143 – 47,454 106,336 153,790 of which – reverse repurchase agreements and other sim ilar secured lending 13,827 – 13,827 – 13,827 Investment securit ies 2 39,920 – 37,795 33 37,828 Other assets¹ 20,714 – 20,714 – 20,714 Assets held for sale 693 101 541 51 693 At 31 December 2023 304,471 101 193,448 106,420 299,969 Liab il it ies Deposits by banks 23,616 – 23,671 – 23,671 Customer accounts 237,902 – 234,937 – 234,937 Repurchase agreements and other sim ilar secured borrow ing 12,033 – 12,033 – 12,033 Debt securit ies in issue 36,481 – 36,355 – 36,355 Subordinated liab il it ies and other borrowed funds 11,454 – 12,545 – 12,545 Other liab il it ies¹ 24,109 – 24,109 – 24,109 Liab il it ies held for sale 726 54 672 – 726 At 31 December 2023 346,321 54 344,322 – 344,376 Fair value Carrying value Level 1 Level 2 Level 3 Total $mill ion $mill ion $mill ion $mill ion $mill ion Assets Cash and balances at central banks¹ 50,531 – 50,531 – 50,531 Loans and advances to banks 27,383 – 27,383 – 27,383 of which – reverse repurchase agreements and other sim ilar secured lending 878 – 833 – 833 Loans and advances to customers 158,126 – 58,045 100,025 158,070 of which – reverse repurchase agreements and other sim ilar secured lending 15,586 – 15,727 – 15,727 Investment securit ies 2 41,801 – 39,704 25 39,729 Other assets¹ 27,210 – 27,210 – 27,210 Assets held for sale 1,388 344 946 98 1,388 At 31 December 2022 306,439 344 203,819 100,148 304,311 Liab il it ies Deposits by banks 24,150 – 24,175 – 24,175 Customer accounts 243,075 – 243,160 – 243,160 Repurchase agreements and other sim ilar secured borrow ing 1,991 – 1,991 – 1,991 Debt securit ies in issue 36,982 – 36,982 – 36,982 Subordinated liab il it ies and other borrowed funds 13,269 – 13,215 – 13,215 Other liab il it ies 1 25,567 – 25,566 1 25,567 Liab il it ies held for sale 1,230 398 832 – 1,230 At 31 December 2022 346,264 398 345,921 1 346,320 1 The carrying amount of these ﬁnanc ial instruments is considered to be a reasonable approximat ion of fa ir value as they are short-term in nature or reprice to current market rates frequently 2 Includes Government bonds and Treasury bills of $12,667 mill ion at 31 December 2023 and $13,781 m ill ion at 31 December 2022 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 216 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company Fair value Carrying value Level 1 Level 2 Level 3 Total $mill ion $mill ion $mill ion $mill ion $mill ion Assets Cash and balances at central banks¹ 52,758 – 52,758 – 52,758 Loans and advances to banks 10,135 – 10,104 – 10,104 of which – reverse repurchase agreements and other sim ilar secured lending 554 – 554 – 554 Loans and advances to customers 75,883 – 21,435 52,113 73,548 of which – reverse repurchase agreements and other sim ilar secured lending 12,212 – 12,212 – 12,212 Investment securit ies 2 38,062 – 35,872 33 35,905 Other assets¹ 16,990 – 16,990 – 16,990 Assets held for sale 52 – – 52 52 At 31 December 2023 193,880 – 137,159 52,198 189,357 Liab il it ies Deposits by banks 18,280 – 18,335 – 18,335 Customer accounts 121,648 – 121,525 – 121,525 Repurchase agreements and other sim ilar secured borrow ing 11,977 – 11,977 – 11,977 Debt securit ies in issue 34,740 – 34,976 – 34,976 Subordinated liab il it ies and other borrowed funds 10,896 – 11,457 – 11,457 Other liab il it ies¹ 18,879 – 18,879 – 18,879 Liab il it ies held for sale – – – – – At 31 December 2023 216,420 – 217,149 – 217,149 Fair value Carrying value Level 1 Level 2 Level 3 Total $mill ion $mill ion $mill ion $mill ion $mill ion Assets Cash and balances at central banks¹ 38,867 – 38,867 – 38,867 Loans and advances to banks 18,548 – 18,548 – 18,548 of which – reverse repurchase agreements and other sim ilar secured lending 184 – 184 – 184 Loans and advances to customers 80,611 – 33,590 47,064 80,654 of which – reverse repurchase agreements and other sim ilar secured lending 15,071 – 15,071 – 15,071 Investment securit ies 2 38,042 – 35,944 25 35,969 Other assets¹ 23,625 – 23,625 – 23,625 Assets held for sale 544 – – 544 544 At 31 December 2022 200,237 – 150,574 47,633 198,207 Liab il it ies Deposits by banks 17,900 – 17,925 – 17,925 Customer accounts 137,422 – 137,394 – 137,394 Repurchase agreements and other sim ilar secured borrow ing 1,723 – 1,723 – 1,723 Debt securit ies in issue 34,992 – 34,997 – 34,997 Subordinated liab il it ies and other borrowed funds 12,729 – 12,675 – 12,675 Other liab il it ies 1 20,661 – 20,661 – 20,661 Liab il it ies held for sale 335 – – 335 335 At 31 December 2022 225,762 – 225,375 335 225,710 1 The carrying amount of these ﬁnanc ial instruments is considered to be a reasonable approximat ion of fa ir value as they are short-term in nature or reprice to current market rates frequently 2 Includes Government bonds and Treasury bills of $11,991 mill ion as at 31 December 2023 and $12,321 m ill ion as at 31 December 2022 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 217 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued The Group has changed its method of determin ing the cost of its portfolio of Investment Securit ies held at amort ised cost and Debt securit ies and other el ig ible b ills, other than those included with in ﬁnancial instruments held at fair value through proﬁt or loss, from the weighted average cost method to the ﬁrst-in-ﬁrst-out method. This change in accounting policy will affect the calculation of gains or losses on derecognit ion of such instruments and the determinat ion of the in it ial credit risk of these instruments, to better align with the IFRS 9 requirements for recognis ing and measur ing impa irment losses. The change was made prospectively for certain but not all securit ies and transact ions. It is impract icable for the Group to determ ine the impact of this approach for each security and each transaction that was executed in previous periods. Loans and advances to customers by client segment ¹ Group 2023 Carrying value Fair value Stage 1 and Stage 1 and Stage 3 stage 2 Total Stage 3 stage 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Corporate, Commercial & Institut ional Bank ing 1,525 83,008 84,533 1,513 80,659 82,172 Consumer, Private & Business Banking 425 47,190 47,615 426 47,197 47,623 Ventures – 230 230 – 230 230 Central & other items 209 23,556 23,765 209 23,556 23,765 At 31 December 2023 2,159 153,984 156,143 2,148 151,642 153,790 2022 Carrying value Fair value Stage 1 and Stage 1 and Stage 3 stage 2 Total Stage 3 stage 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Corporate, Commercial & Institut ional Bank ing 1,955 85,524 87,479 1,998 85,382 87,380 Consumer, Private & Business Banking 440 45,573 46,013 448 45,608 46,056 Ventures – 64 64 – 63 63 Central & other items 230 24,340 24,570 230 24,341 24,571 At 31 December 2022 2,625 155,501 158,126 2,676 155,394 158,070 1 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing: carrying value $13,827mill ion and fa ir value $13,827mill ion (31 December 2022: $15,586 mill ion and fa ir value $15,727mill ion) Company 2023 Carrying value Fair value Stage 1 and Stage 1 and Stage 3 stage 2 Total Stage 3 stage 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Corporate, Commercial & Institut ional Bank ing 1,192 60,809 62,001 1,192 58,543 59,735 Consumer, Private & Business Banking 231 12,272 12,503 231 12,203 12,434 Central & other items 209 1,170 1,379 209 1,170 1,379 At 31 December 2023 1,632 74,251 75,883 1,632 71,916 73,548 2022 Carrying value Fair value Stage 1 and Stage 1 and Stage 3 stage 2 Total Stage 3 stage 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Corporate, Commercial & Institut ional Bank ing 1,609 64,311 65,920 1,652 64,311 65,963 Consumer, Private & Business Banking 225 11,436 11,661 231 11,430 11,661 Central & other items 230 2,800 3,030 230 2,800 3,030 At 31 December 2022 2,064 78,547 80,611 2,113 78,541 80,654 1 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing: carrying value $12,212mill ion and fa ir value $12,212 mill ion (31 December 2022: $15,071 mill ion and fa ir value $15,071 mill ion) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 218 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Fair value of ﬁnanc ial instruments Level 3 Summary and sign iﬁcant unobservable inputs The following table presents the Group’s primary Level 3 ﬁnanc ial instruments which are held at fair value. The table also presents the valuation techniques used to measure the fair value of those ﬁnanc ial instruments, the sign iﬁcant unobservable inputs, the range of values for those inputs and the weighted average of those inputs: Group Value as at 31 December 2023 Assets Liab il it ies Sign iﬁcant unobservable Weighted average 2 Instrument $mill ion $mill ion Princ ipal valuat ion technique inputs Range 1 Loans and advances to 1,172 – Discounted cash ﬂows Price/yield 1.7% - 100% 14.0% customers Credit spreads 0.1% - 0.8% 0.6% Reverse repurchase agreements 1,365 – Discounted cash ﬂows Repo curve 5.1% - 7.6% 6.3% and other sim ilar secured lend ing Price/yield (2.75)% - 10.3% (1.2)% Debt securit ies, alternat ive tier 1,240 – Discounted cash ﬂow Price/yield (14.1)% - 25.8% 10.1% one and other elig ible secur it ies Recovery rates 0.1% - 1.0% 0.2% Internal pric ing model Equity-Equity correlation 44.1% - 100% 80.7% Equity-FX correlation (35.9)% - 45.5% 14.2% Government bonds and treasury 51 – Discounted cash ﬂows Price/yield 17.7% - 21.8% 20.6% bills Equity shares (includes private 330 – Comparable pric ing/y ield EV/Revenue multiples 9.3x - 30.9x 15.8x equity investments) P/E multiples 13.2x - 51.8x 44.8x P/B multiples 0.5x - 2.7x 2.6x P/S multiples 1.5x - 1.6x 1.5x Liqu id ity discount 20.0% - 20.0% 20.0% Discounted cash ﬂows Discount rates 9.2% - 35.6% 22.2% Option pric ing model Equity value based on 8.4x - 42.5x 27.5x EV/Revenue multiples Equity value based on 3.1x - 3.1x 3.1x EV/EBITDA multiples Equity value based on 50.0% - 65.0% 61.9% volatil ity Derivat ive ﬁnancial instruments of which: Foreign exchange 24 12 Option pric ing model Foreign exchange option 0.5% - 51% 24.5% impl ied volat il ity Discounted cash ﬂows Interest rate curves 3.6% - 5.8% 3.8% Foreign exchange curves 0.6% - 64.2% 12.7% Interest rate 3 5 Discounted cash ﬂows Interest rate curves 3.6% - 8.5% 5.2% Credit 47 126 Discounted cash ﬂows Price/yield 1.8% - 16.3% 8.7% Equity and stock index 2 19 Internal pric ing model Equity-Equity correlation 44.1% - 100% 55.0% Equity-FX correlation (35.9)% - 45.4% 13.3% Deposits by banks – 68 Discounted cash ﬂows Credit spreads 0.6% - 3.4% 2.0% Customer accounts – 232 Discounted cash ﬂows Interest rate curves 2.9% - 8.6% 6.1% Price/yield 6.3% - 15.1% 10.5% Internal pric ing model Equity-Equity correlation 44.1% - 100% 80.7% Equity-FX correlation (35.9)% - 45.5% 14.2% Debt securit ies in issue – 1,026 Discounted cash ﬂows Price/yield 6.6% - 20.9% 17.9% Interest rate curves 2.9% - 5.3% 4.4% Equity-Equity correlation 44.1% - 100% 80.7% Internal pric ing model Bond option impl ied 2.9% - 5.3% 4.4% volatil ity Equity-FX correlation (35.9)% - 45.5% 14.2% Short posit ions – 103 Discounted cash ﬂows Price/yield 7.1% - 7.1% 7.1% Total 4,234 1,591 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group’s Level 3 ﬁnanc ial instruments as at 31 December 2023. The ranges of values used are reﬂective of the underlying characterist ics of these Level 3 ﬁnancial instruments based on the market condit ions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 ﬁnanc ial instruments 2 Weighted average for non-derivat ive ﬁnancial instruments has been calculated by weight ing inputs by the relative fair value. Weighted average for derivat ives has been provided by weight ing inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful ind icator Notes to the ﬁnancial statements cont inued Standard Chartered Bank 219 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Value as at 31 December 2022 Assets Liab il it ies Sign iﬁcant unobservable Weighted Instrument $mill ion $mill ion Princ ipal valuat ion technique inputs Range 1 average 2 Loans and advances to banks 21 – Discounted cash ﬂows Credit spreads 2.9% 2.9% Loans and advances to customers 1,308 – Discounted cash ﬂows Price/yield 0.3% - 18.2% 5.4% Recovery rates 5.0% - 100% 91.3% Reverse repurchase agreements 1,988 – Discounted cash ﬂows Repo curve 2.3% - 8.0% 6.2% and other sim ilar secured lend ing Price/yield 1.9% - 7.2% 4.7% Debt securit ies, alternat ive tier one 807 – Discounted cash ﬂows Price/yield 5.5% - 48.5% 8.3% and other elig ible secur it ies Recovery rates 0.0% - 1.0% 0.2%. Equity shares (includes private 576 – Comparable pric ing/y ield EV/EBITDA multiples N/A N/A equity investments) P/E Revenue multiples 8.2x - 23.2x 12.9X P/E multiples 13.4x - 29.7x 14.5X P/B multiples 0.3x - 3.3x 1.2X P/S multiples 2.1x-2.2x 2.2X Liqu id ity discount 20.0% 20.0% Discounted cash ﬂows Discount rates 7.5% - 16.4% 8.0% Option pric ing model Equity value based on 4.8x - 76.1x 32.9x EV/Revenue multiples Equity value based on 2.6x 2.6x EV/EBITDA multiples Equity value based on 60.0% 60.0% volatil ity Derivat ive ﬁnancial instruments of which: Foreign exchange 17 14 Option pric ing model Foreign exchange option (21.0)% - 21% (2.7)% impl ied volat il ity Discounted cash ﬂows Foreign exchange curves (4.6)% - 81.8% 19.8% Interest rate 24 12 Discounted cash ﬂows Interest rate curves (2.1)% - 50.2% 10.6% Option pric ing model Bond option impl ied N/A N/A volatil ity Credit 1 37 Discounted cash ﬂows Credit spreads 0.1% - 2.3% 1.2% Price/yield 7.2% - 9.7% 7.4% Equity and stock index 2 55 Internal pric ing model Equity-Equity correlation 30.0% - 96.0% 67.0% Equity-FX correlation (70.0)% 37.0% - 85.0% Deposits by banks – 133 Discounted cash ﬂows Credit spreads 0.9% - 3.4% 2.0% Price/yield 6.0% 6.0% Customer accounts – 170 Discounted cash ﬂows Credit spreads 5.5% - 19.1% 11.4% Price/yield 22.8%-22.9% 22.9% Debt securit ies in issue – 427 Discounted cash ﬂows Credit spreads 2.0% - 7.0% 5.3% Price/yield 6.8% - 12.4% 9.1% Internal pric ing model Equity-Equity correlation 30.0% - 96.0% 67.0% Equity-FX correlation (70.0)% 37.0% - 85.0% Short posit ions – 40 Discounted cash ﬂows Price/yield 6.8% 6.8% Total 4,744 888 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group’s Level 3 ﬁnanc ial instruments as at 31 December 2022. The ranges of values used are reﬂective of the underlying characterist ics of these Level 3 ﬁnancial instruments based on the market condit ions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 ﬁnanc ial instruments 2 Weighted average for non-derivat ive ﬁnancial instruments has been calculated by weight ing inputs by the relative fair value. Weighted average for derivat ives has been provided by weight ing inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful ind icator Notes to the ﬁnancial statements cont inued Standard Chartered Bank 220 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company Value as at 31 December 2023 Assets Liab il it ies Princ ipal valuat ion Sign iﬁcant unobservable Weighted Instrument $mill ion $mill ion technique inputs Range 1 average 2 Loans and advances to customers 1,024 – Discounted cash ﬂows Price/yield 1.7% - 100% 14.3% Credit spreads 0.1% - 0.8% 0.6% Reverse repurchase agreements 1,092 – Discounted cash ﬂows Repo curve 5.1% - 7.6% 6.5% and other sim ilar secured lend ing Price/yield (2.7)% - 10.3% (1.2)% Debt securit ies, alternat ive tier one 114 – Discounted cash ﬂows Price/yield (2.8)% - 25.8% 10.0% and other elig ible secur it ies Recovery rates 0.1% - 0.1% 0.1% Equity shares (includes private 226 – Comparable pric ing/ P/E multiples 51.8x 43.1x equity investments) yield P/B multiples 0.6x - 2.7x 2.6x P/S multiples N/A N/A Liqu id ity discount 20.0% - 20.0% 20.0% Discounted cash ﬂows Discount rates 12.6% - 18.5% 16.9% Option pric ing model Equity value based on 10.7x 10.7x EV/Revenue multiples Equity value based on N/A N/A EV/EBITDA multiples Equity value based on N/A N/A volatil ity Derivat ive ﬁnancial instruments of which: Foreign exchange 21 16 Option pric ing model Foreign exchange option 0.5% - 51% 35.2% impl ied volat il ity Discounted cash ﬂows Interest rate curves 3.6% - 5.8% 3.8% Foreign exchange curves 0.6% - 64.2% 20.7% Interest rate 2 5 Discounted cash ﬂows Interest rate curves 3.6% - 7.5% 5.0% Credit 47 32 Discounted cash ﬂows Price/yield 1.8% - 16.3% 8.9% Equity and stock index 2 9 Internal pric ing model Equity-Equity correlation 44.1% - 100% 80.7% Equity-FX correlation (35.9)% 14.2% - 45.5% Deposits by banks – 68 Discounted cash ﬂows Credit spreads 0.6% - 3.4% 2.0% Customer accounts – 130 Discounted cash ﬂows Interest rate curves 6.4% - 8.6% 7.1% Price/yield 6.3% - 15.1% 9.7% Debt securit ies in issue – 861 Discounted cash ﬂows Price/yield 6.6% - 18.2% 18.0% Interest rate curves 2.9% - 5.3% 4.4% Internal pric ing model Equity-Equity correlation 44.1% - 100% 80.7% Equity-FX correlation (35.9)% 14.2% - 45.5% Bond option impl ied 2.9% - 5.3% 4.4% volatil ity Short posit ions – 103 Discounted cash ﬂows Price/yield 7.1% - 7.1% 7.1% Total 2,528 1,224 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group’s Level 3 ﬁnanc ial instruments as at 31 December 2023. The ranges of values used are reﬂective of the underlying characterist ics of these Level 3 ﬁnancial instruments based on the market condit ions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 ﬁnanc ial instruments 2 Weighted average for non-derivat ive ﬁnancial instruments has been calculated by weight ing inputs by the relative fair value. Weighted average for derivat ives has been provided by weight ing inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful ind icator Notes to the ﬁnancial statements cont inued Standard Chartered Bank 221 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Value as at 31 December 2022 Assets Liab il it ies Sign iﬁcant unobservable Weighted Instrument $mill ion $mill ion Princ ipal valuat ion technique inputs Range 1 average 2 Loans and advances to 899 – Discounted cash ﬂows Price/yield 2.8% - 11.5% 4.9% customers Recovery rates 26.5% - 100% 93.0% Reverse repurchase 1,988 – Discounted cash ﬂows Repo curve 2.3% - 8.0% 6.2% agreements and other sim ilar secured lend ing Price/yield 1.9%.-7.2% 4.7% Debt securit ies, 469 – Discounted cash ﬂows Price/yield 6.8% - 48.5% 8.5% alternative tier one and Recovery rates 0.0% - 1.0% 0.2% other elig ible secur it ies Equity shares (includes 220 – Comparable pric ing/y ield EV/EBITDA multiples N/A N/A private equity EV/Revenue multiples N/A N/A investments) P/E multiples N/A N/A P/B multiples 0.7x - 2.3x 1.2x P/S multiples N/A N/A Liqu id ity discount 20.0% 20.0% Discounted cash ﬂows Discount rates 7.5% - 16.4% 7.9% Option pric ing model Equity value based on 12.2x 12.2x EV/ Revenue multiples Equity value based on N/A N/A EV/EBITDA multiples Equity value based on N/A N/A volatil ity Derivat ive ﬁnancial instruments of which: Foreign exchange 16 25 Option pric ing model Foreign exchange option (21.0)% - 21.0% (3.6)% impl ied volat il ity Discounted cash ﬂows Foreign exchange curves (4.6)% - 81.8% 15.8% Interest rate 21 9 Discounted cash ﬂows Interest rate curves (2.1)% - 50.2% 7.8% Option pric ing model Bond option impl ied N/A N/A volatil ity Credit 1 25 Discounted cash ﬂows Credit spreads 0.1% - 2.3% 1.2% Price/yield 7.2% - 9.7% 8.5% Equity and stock 1 51 Internal pric ing model Equity-Equity correlation 30.0% - 96.0% 67.0% index Equity-FX correlation (70.0)% - 85.0% 37.0% Deposits by banks – 119 Discounted cash ﬂows Credit spreads 0.9% - 3.4% 2.0% Price/yield 6.0% 6.0% Customer accounts – 67 Discounted cash ﬂows Price/yield 22.8% - 22.9% 22.9% Debt securit ies in issue – 262 Discounted cash ﬂows Credit spreads 2.0% 2.0% Internal pric ing model Equity-Equity correlation 30.0% - 96.0% 67.0% Equity-FX correlation (70.0)% - 85.0% 37.0% Short posit ions – 40 Discounted cash ﬂows Price/yield 6.8% 6.8% Total 3,615 598 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group’s Level 3 ﬁnanc ial instruments as at 31 December 2022. The ranges of values used are reﬂective of the underlying characterist ics of these Level 3 ﬁnancial instruments based on the market condit ions at the balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 ﬁnanc ial instruments 2 Weighted average for non-derivat ive ﬁnancial instruments has been calculated by weight ing inputs by the relative fair value. Weighted average for derivat ives has been provided by weight ing inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful ind icator Notes to the ﬁnancial statements cont inued Standard Chartered Bank 222 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued The following section describes the sign iﬁcant unobservable inputs ident iﬁed in the valuation technique table: • Comparable price/yield is a valuation methodology in which the price of a comparable instrument is used to estimate the fair value where there are no direct observable prices. Yield is the interest rate that is used to discount the future cash ﬂows in a discounted cash ﬂow model. Valuation using comparable instruments can be done by calculating an impl ied y ield (or spread over a liqu id benchmark) from the pr ice of a comparable instrument, then adjust ing that y ield (or spread) to derive a value for the instrument. The adjustment should account for relevant differences in the ﬁnanc ial instruments such as maturity and/or credit quality. Alternatively, a price-to-price basis can be assumed between the comparable instrument and the instrument being valued in order to establish the value of the instrument (for example, deriv ing a fa ir value for a junior unsecured bond from the pr ice of a senior secured bond). An increase in price, in isolat ion, would result in a favourable movement in the fair value of the asset. An increase in yield, in isolat ion, would result in an unfavourable movement in the fair value of the asset • Correlation is the measure of how movement in one variable inﬂuences the movement in another variable. An equity correlation is the correlation between two equity instruments while an interest rate correlation refers to the correlation between two swap rates • Credit spread represents the addit ional y ield that a market partic ipant would demand for tak ing exposure to the Credit Risk of an instrument • Discount rate refers to the rate of return used to convert expected cash ﬂows into present value • Equity-FX correlation is the correlation between equity instrument and foreign exchange instrument • EV/EBITDA multiple is the ratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciat ion and Amort isat ion (EBITDA). EV is the aggregate market capital isat ion and debt minus the cash and cash equivalents. An increase in EV/ EBITDA multiples, will result in a favourable movement in the fair value of the unlisted ﬁrm • EV/Revenue multiple is the ratio of Enterprise Value (EV) to Revenue. An increase in EV/Revenue multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Foreign exchange curves is the term structure for forward rates and swap rates between currency pairs over a specif ied period • Net asset value (NAV) is the value of an entity's assets after deducting any liab il it ies. • Interest rate curves is the term structure of interest rates and measure of future interest rates at a particular point in time • Liqu id ity discounts in the valuation of unlisted investments primar ily appl ied to the valuation of unlisted ﬁrms’ investments to reﬂect the fact that these stocks are not actively traded. An increase in liqu id ity discount will result an unfavourable movement in the fair value of the unlisted ﬁrm • Price-Earnings (P/E) multiples is the ratio of the market value of equity to the net income after tax. An increase in P/E multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Price-Book (P/B) multiple is the ratio of the market value of equity to the book value of equity. An increase in P/B multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Price-Sales (P/S) multiple is the ratio of the market value of equity to sales. An increase in P/S multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Recovery rates are the expectation of the rate of return resulting from the liqu idat ion of a particular loan. As the probabil ity of default increases for a given instrument, the valuation of that instrument will increas ingly reﬂect its expected recovery level assuming default. An increase in the recovery rate, in isolat ion, would result in a favourable movement in the fair value of the loan • Repo curve is the term structure of repo rates on repos and reverse repos at a particular point in time. • Volatil ity represents an est imate of how much a particular instrument, parameter or index will change in value over time. Generally, the higher the volatil ity, the more expens ive the option will be. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 223 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Level 3 movement tables – ﬁnancial assets The table below analyses movements in Level 3 ﬁnanc ial assets carr ied at fair value. Group Held at fair value through proﬁt or loss Investment securit ies Reverse Debt Debt repurchase securit ies, securit ies, agreements alternative alternative Loans and and other tier one tier one Loans and advances sim ilar and other Derivat ive and other advances to secured elig ible Equity ﬁnancial elig ible Equity to banks customers lending bills shares instruments bills shares Total Assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2023 21 1,308 1,988 807 92 44 – 484 4,744 Total (losses)/gains recognised in income statement – (15) (49) (260) (8) 13 – – (319) Net trading income – (15) (49) (272) (8) 13 – – (331) Other operating income – – – 12 – – – – 12 Total gains recognised in other comprehensive income (OCI) – – – – – – 1 42 43 Fair value through OCI reserve – – – – – – – 43 43 Exchange difference – – – – – – 1 (1) – Purchases 22 1,046 4,838 1,051 1 189 21 1 7,169 Sales (22) (1,133) (3,943) (516) – (118) (23) (5) (5,760) Settlements – (16) (1,469) – – (25) – – (1,510) Transfers out 1 (21) (224) – (6) – (27) (5) (284) (567) Transfers in 2 – 206 – 144 – – 77 7 434 At 31 December 2023 – 1,172 1,365 1,220 85 76 71 245 4,234 Total unrealised (losses)/gains recognised in the income statement, with in net trad ing income, relating to change in fair value of assets held at 31 December 2023 – (3) 3 (3) (8) (11) – – (22) 1 Transfers out includes debt securit ies, alternat ive tier one and other elig ible b ills , equity shares, derivat ive ﬁnancial instruments and loans and advances where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2. 2 Transfers in primar ily relates to debt secur it ies, alternat ive tier one and other elig ible b ills, equity shares and loans and advances where the valuation parameters became unobservable during the year Notes to the ﬁnancial statements cont inued Standard Chartered Bank 224 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued The table below analyses movements in Level 3 ﬁnanc ial assets carr ied at fair value. Held at fair value through proﬁt or loss Investment securit ies Reverse Debt Debt repurchase securit ies, securit ies, agreements alternative alternative Loans and and other tier one tier one Loans and advances sim ilar and other Derivat ive and other advances to secured elig ible Equity ﬁnancial elig ible Equity to banks customers lending bills shares instruments bills shares Total Assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 9 410 1,555 312 98 67 40 392 2,883 Total (losses)/gains recognised in income statement (16) (79) 2 18 (6) 23 – – (58) Net trading income (16) (79) 2 18 (6) 23 – – (58) Other operating income – – – – – – – – – Total (losses)/gains recognised in other comprehensive income (OCI) – – – – – – (1) 5 4 Fair value through OCI reserve – – – – – – – 7 7 Exchange difference – – – – – – (1) (2) (3) Purchases 37 1,149 6,416 743 10 121 – 84 8,560 Sales (30) (237) (5,485) (342) (2) (74) – (6) (6,176) Settlements – (58) (500) (1) – (76) (39) – (674) Transfers out 1 – (106) – – (8) (29) – – (143) Transfers in 2 21 229 – 77 – 12 – 9 348 At 31 December 2022 21 1,308 1,988 807 92 44 – 484 4,744 Total unrealised losses recognised in the income statement, with in net trading income, relating to change in fair value of assets held at 31 December 2022 – – – – (6) (8) – – (14) 1 Transfers out includes equity shares, derivat ive ﬁnancial instruments and loans and advances where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2. 2 Transfers in primar ily relates to debt secur it ies, alternat ive tier one and other elig ible b ills, derivat ive ﬁnancial instruments and loans and advances where the valuation parameters became unobservable during the year Notes to the ﬁnancial statements cont inued Standard Chartered Bank 225 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Level 3 movement tables – ﬁnancial assets The table below analyses movements in Level 3 ﬁnanc ial assets carr ied at fair value. Company Held at fair value through proﬁt or loss Investment securit ies Reverse repurchase Debt Debt agreements securit ies, securit ies, and other alternative alternative Loans and Loans and sim ilar tier one and Derivat ive tier one and advances to advances to secured other elig ible ﬁnancial other elig ible banks customers lending bills instruments bills Equity shares Total Assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2023 – 899 1,988 469 39 – 220 3,615 Total (losses)/gains recognised in income statement – (4) (52) (267) 13 – – (310) Net trading income – (4) (52) (267) 13 – – (310) Other operating income – – – – – – – – Total gains recognised in other comprehensive income (OCI) – – – – – – 42 42 Fair value through OCI reserve – – – – – – 42 42 Exchange difference – – – – – – – – Purchases – 957 4,568 208 171 – 1 5,905 Sales – (798) (3,943) (289) (111) – (5) (5,146) Settlements – (9) (1,469) – (17) – – (1,495) Transfers out 1 – (216) – (8) (23) – (32) (279) Transfers in 2 – 195 – 1 – – – 196 At 31 December 2023 – 1,024 1,092 114 72 – 226 2,528 Total unrealised losses recognised in the income statement, with in net trading income, relating to change in fair value of assets held at 31 December 2023 – – – – (9) – – (9) 1 Transfers out includes debt securit ies, alternat ive tier one and other elig ible b ills, derivat ive ﬁnancial instruments, equity shares and loans and advances where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2. 2 Transfers in primar ily relates to debt secur it ies, alternat ive tier one and other elig ible b ills and loans and advances where the valuation parameters became unobservable during the year Notes to the ﬁnancial statements cont inued Standard Chartered Bank 226 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Held at fair value through proﬁt or loss Investment securit ies Reverse repurchase agreements Debt Debt and other securit ies, securit ies, Loans and Loans and sim ilar alternative tier Derivat ive alternative tier advances to advances to secured one and other ﬁnancial one and other banks customers lending elig ible b ills instruments elig ible b ills Equity shares Total Assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 9 82 1,555 203 69 286 208 2,412 Total (losses)/gains recognised in income statement (16) (45) 2 75 23 – – 39 Net trading income (16) (45) 2 75 23 – – 39 Other operating income – – – – – – – – Total gains recognised in other comprehensive income (OCI) – – – – – – 19 19 Fair value through OCI reserve – – – – – – 20 20 Exchange difference – – – – – – (1) (1) Purchases 37 823 6,416 297 99 295 1 7,968 Sales (30) (85) (5,485) (107) (61) – (8) (5,776) Settlements – (6) (500) – (73) (15) – (594) Transfers out 1 – (99) – – (28) (566) – (693) Transfers in 2 – 229 – 1 10 – – 240 At 31 December 2022 – 899 1,988 469 39 – 220 3,615 Total unrealised losses recognised in the income statement, with in net trading income, relating to change in fair value of assets held at 31 December 2022 – – – – (7) – – (7) 1 Transfers out includes derivat ive ﬁnancial instruments, debt securit ies, alternat ive tier one and other elig ible b ills and loans and advances where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2. 2 Transfers in primar ily relates to debt secur it ies, alternat ive tier one and other elig ible b ills, derivat ive ﬁnancial instruments and loans and advances where the valuation parameters became unobservable during the year Notes to the ﬁnancial statements cont inued Standard Chartered Bank 227 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Level 3 movement tables – ﬁnancial l iab il it ies Group 2023 Derivat ive Deposits by Customer Debt securit ies ﬁnancial Short banks accounts in issue instruments posit ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2023 133 170 427 118 40 888 Total (gains)/losses recognised in income statement – net trading income – (20) 32 (53) 3 (38) Issues 293 509 1,466 404 100 2,772 Settlements (353) (442) (1,178) (297) (40) (2,310) Transfers out 1 (5) (9) (85) (13) – (112) Transfers in 2 – 24 364 3 – 391 At 31 December 2023 68 232 1,026 162 103 1,591 Total unrealised (gains)/losses recognised in the income statement, with in net trad ing income, relating to change in fair value of liab il it ies held at 31 December 2023 – (21) 6 (47) – (62) 2022 Derivat ive Deposits by Customer Debt securit ies ﬁnancial Short banks Accounts in issue instruments posit ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 22 365 781 96 – 1,264 Total (gains)/losses recognised in income statement – net trading income (11) (50) (148) 155 (3) (57) Issues 144 906 737 174 140 2,101 Settlements (22) (1,099) (981) (291) (97) (2,490) Transfers out 1 – – (38) (23) – (61) Transfers in 2 – 48 76 7 – 131 At 31 December 2022 133 170 427 118 40 888 Total unrealised gains recognised in the income statement, with in net trad ing income, relating to change in fair value of liab il it ies held at 31 December 2022 (1) (17) (7) (3) – (28) 1 Transfers out during the year primar ily relates to debt secur it ies in issue, bank deposits, customer accounts and derivat ive ﬁnancial instruments where the valuation parameters became observable during the year and were transferred to Level 2 ﬁnanc ial l iab il it ies 2 Transfers in during the year primar ily relates to customer accounts, debt secur it ies in issue and derivat ive ﬁnancial instruments where the valuation parameters became unobservable during the year Notes to the ﬁnancial statements cont inued Standard Chartered Bank 228 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company 2023 Derivat ive Deposits by Customer Debt securit ies ﬁnancial banks accounts in issue instruments Short posit ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2023 119 67 262 110 40 598 Total losses/(gains) recognised in income statement – net trading income – 2 26 (16) 3 15 Issues 281 260 993 154 100 1,788 Settlements (327) (203) (699) (177) (40) (1,446) Transfers out 1 (5) – (85) (9) – (99) Transfers in 2 – 4 364 – – 368 At 31 December 2023 68 130 861 62 103 1,224 Total unrealised gains recognised in the income statement, with in net trad ing income, relating to change in fair value of liab il it ies held at 31 December 2023 – – – (10) – (10) 2022 Derivat ive Deposits by Customer Debt securit ies ﬁnancial banks Accounts in issue instruments Short posit ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 22 292 614 105 – 1,033 Total (gains)/losses recognised in income statement – net trading income (11) (33) (137) 153 – (28) Issues 130 612 263 146 40 1,191 Settlements (22) (804) (517) (280) – (1,623) Transfers out 1 – – (38) (20) – (58) Transfers in 2 – – 77 6 – 83 At 31 December 2022 119 67 262 110 40 598 Total unrealised gains recognised in the income statement, with in net trad ing income, relating to change in fair value of liab il it ies held at 31 December 2022 – – – (4) – (4) 1 Transfers out during the year primar ily relates to debt secur it ies in issue, bank deposits and derivat ive ﬁnancial instruments where the valuation parameters became observable during the year and were transferred to Level 2 ﬁnanc ial l iab il it ies 2 Transfers in during the year primar ily relates to debt secur it ies in issue and customer accounts where the valuation parameters became unobservable during the year Sensit iv it ies in respect of the fair values of Level 3 assets and liab il it ies Sensit iv ity analysis is performed on products with sign iﬁcant unobservable inputs. The Group applies a 10 per cent increase or decrease on the values of these unobservable inputs, to generate a range of reasonably possible alternative valuations. The percentage shift is determined by statist ical analys is performed on a set of reference prices based on the composit ion of the Group’s Level 3 inventory as the measurement date. Favourable and unfavourable changes (which show the balance adjusted for input change) are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. The Level 3 sensit iv ity analysis assumes a one-way market move and does not consider offsets for hedges. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 229 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Group Held at fair value through other Held at fair value through proﬁt or loss comprehensive income Favourable Unfavourable Favourable Unfavourable Net exposure changes changes Net exposure changes changes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value Loans and advances 1,172 1,186 1,140 – – – Reverse repurchase agreements and other sim ilar secured lend ing 1,365 1,367 1,362 – – – Debt securit ies, alternat ive tier one and other elig ible b ills 1,220 1,265 1,153 71 77 65 Equity shares 85 94 77 245 270 221 Derivat ive ﬁnancial instruments (86) (44) (127) – – – Customers accounts (232) (218) (246) – – – Deposits by banks (68) (68) (68) – – – Short posit ions (103) (101) (105) – – – Debt securit ies in issue (1,026) (951) (1,100) – – – At 31 December 2023 2,327 2,530 2,086 316 347 286 Financ ial instruments held at fair value Loans and advances 1,329 1,348 1,268 – – – Reverse repurchase agreements and other sim ilar secured lend ing 1,988 2,003 1,969 – – – Debt securit ies, alternat ive tier one and other elig ible b ills 807 818 783 – – – Equity shares 92 101 83 484 528 441 Derivat ive ﬁnancial instruments (74) (41) (107) – – – Customers accounts (170) (164) (176) – – – Deposits by banks (133) (128) (138) – – – Short posit ions (40) (39) (41) – – – Debt securit ies in issue (427) (395) (458) – – – At 31 December 2022 3,372 3,503 3,183 484 528 441 The reasonably possible alternatives could have increased or decreased the fair values of ﬁnanc ial instruments held at fair value through proﬁt or loss and those classif ied as fa ir value through other comprehensive income by the amounts disclosed below. 2023 2022 Financ ial instruments Fair value changes $mill ion $mill ion Held at fair value through proﬁt or loss Possible increase 203 131 Possible decrease (241) (189) Fair value through other comprehensive income Possible increase 31 44 Possible decrease (30) (43) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 230 Directors’ Report and Financ ial Statements 2023 12. Financ ial instruments continued Company Held at fair value through other Held at fair value through proﬁt or loss comprehensive income Favourable Unfavourable Favourable Unfavourable Net exposure changes changes Net exposure changes changes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value Loans and advances 1,024 1,037 999 – – – Reverse repurchase agreements and other sim ilar secured lend ing 1,092 1,094 1,090 – – – Debt securit ies, alternat ive tier one and other elig ible b ills 114 118 110 – – – Equity shares – – – 226 249 203 Derivat ive ﬁnancial instruments 10 15 5 – – – Customers accounts (130) (122) (138) – – – Deposits by banks (68) (68) (68) – – – Short posit ions (103) (101) (105) – – – Debt securit ies in issue (861) (788) (934) – – – At 31 December 2023 1,078 1,185 959 226 249 203 Financ ial instruments held at fair value Loans and advances 899 913 872 – – – Reverse repurchase agreements and other sim ilar secured lend ing 1,988 2,003 1,969 – – – Debt securit ies, alternat ive tier one and other elig ible b ills 469 471 454 – – – Equity shares – – – 220 239 201 Derivat ive ﬁnancial instruments (71) (34) (107) – – – Customers accounts (67) (66) (68) – – – Deposits by banks (119) (116) (122) – – – Short posit ions (40) (39) (41) – – – Debt securit ies in issue (262) (236) (288) – – – At 31 December 2022 2,797 2,896 2,669 220 239 201 The reasonably possible alternatives could have increased or decreased the fair values of ﬁnanc ial instruments held at fair value through proﬁt or loss and those classif ied as fa ir value through other comprehensive income by the amounts disclosed below. 2023 2022 Financ ial instruments Fair value changes $mill ion $mill ion Held at fair value through proﬁt or loss Possible increase 107 99 Possible decrease (119) (128) Fair value through other comprehensive income Possible increase 23 19 Possible decrease (23) (19) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 231 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments Accounting policy Fair values may be obtained from quoted market prices in active markets, recent market transactions, and valuation techniques, includ ing d iscounted cash ﬂow models and option pric ing models, as appropr iate. Where the in it ially recognised fair value of a derivat ive contract is based on a valuation model that uses inputs which are not observable in the market, it follows the same in it ial recognit ion account ing policy as for other ﬁnanc ial assets and l iab il it ies. All der ivat ives are carr ied as assets when fair value is posit ive and as l iab il it ies when fa ir value is negative. Hedge accounting Under certain condit ions, the Group may des ignate a recognised asset or liab il ity, a ﬁrm commitment, highly probable forecast transaction or net investment of a foreign operation into a formal hedge accounting relationsh ip w ith a derivat ive that has been entered to manage interest rate and/or foreign exchange risks present in the hedged item. The Group applied the ‘Phase 1’ hedge accounting requirements of IAS 39 Financ ial Instruments: Recogn it ion and Measurement, and the ‘Phase 2’ amendments to IFRS in respect of interest rate benchmark reform. There are three categories of hedge relationsh ips: • Fair value hedge: to manage the fair value of interest rate and/or foreign currency risks of recognised assets or liab il it ies or ﬁrm commitments • Cash ﬂow hedge: to manage interest rate or foreign exchange risk of highly probable future cash ﬂows attributable to a recognised asset or liab il ity, or a forecasted transaction • Net investment hedge: to manage the structural foreign exchange risk of an investment in a foreign operation. The Group assesses, both at hedge incept ion and on a quarterly bas is, whether the derivat ives des ignated in hedge relationsh ips are h ighly effective in offsetting changes in fair values or cash ﬂows of hedged items. Hedges are considered to be highly effective if all the following criter ia are met: • At incept ion of the hedge and throughout its life, the hedge is prospectively expected to be highly effective in achiev ing offsetting changes in fair value or cash ﬂows attributable to the hedged risk • Prospective and retrospective effectiveness of the hedge should be with in a range of 80–125%. Th is is tested using regression analysis • The regression co-efﬁc ient (R squared), wh ich measures the correlation between the variables in the regression, is at least 80%. In the case of the hedge of a forecast transaction, the transaction must have a high probabil ity of occurr ing and must present an exposure to variat ions in cash ﬂows that are expected to affect reported proﬁt or loss. Fair value hedge Changes in the fair value of derivat ives that are des ignated and qualify as fair value hedging instruments are recorded in net trading income, together with any changes in the fair value of the hedged asset or liab il ity that are attributable to the hedged risk. If the hedge no longer meets the criter ia for hedge account ing, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to the income statement over the remain ing term to maturity of the hedged item. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immed iately in the income statement. For ﬁnanc ial assets class if ied as fa ir value through other comprehensive income, the hedge accounting adjustment attributable to the hedged risk is included in net trading income to match the hedging derivat ive. Cash ﬂow hedge The effective portion of changes in the fair value of derivat ives that are des ignated and qualify as cash ﬂow hedging instruments are in it ially recognised in other comprehensive income, accumulating in the cash ﬂow hedge reserve with in equity. These amounts are subsequently recycled to the income statement in the periods when the hedged item affects proﬁt or loss. Both the derivat ive fa ir value movement and any recycled amount are recorded in the ‘Cashﬂow hedges’ line item in other comprehensive income. The Group assesses hedge effectiveness using the hypothetical derivat ive method, wh ich creates a derivat ive instrument to serve as a proxy for the hedged transaction. The terms of the hypothetical derivat ive match the cr it ical terms of the hedged item and it has a fair value of zero at incept ion. The hypothet ical derivat ive and the actual der ivat ive are regressed to establish the statist ical s ign iﬁcance of the hedge relat ionsh ip. Any ineffect ive port ion of the gain or loss on the hedging instrument is recognised in the net trading income immed iately. If a cash ﬂow hedge is discont inued, the amount accumulated in the cash ﬂow hedge reserve is released to the income statement as and when the hedged item affects the income statement. Should the Group consider the hedged future cash ﬂows are no longer expected to occur due to reasons, the cumulative gain or loss will be immed iately reclass if ied to proﬁt or loss. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 232 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Net investment hedge Hedges of net investments are accounted for in a sim ilar manner to cash ﬂow hedges, w ith gains and losses aris ing on the effective portion of the hedges recorded in the line ‘Exchange differences on translation of foreign operations’ in other comprehensive income, accumulating in the translation reserve with in equ ity. These amounts remain in equity until the net investment is disposed of. The ineffect ive port ion of the hedges is recognised in the net trading income immed iately. The tables below analyse the notional princ ipal amounts and the pos it ive and negat ive fair values of derivat ive ﬁnancial instruments. Notional princ ipal amounts are the amounts of pr inc ipal underly ing the contract at the reporting date. Derivat ives Group 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies Derivat ives $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Foreign exchange derivat ive contracts: Forward foreign exchange contracts 3,315,302 36,523 36,348 2,901,200 45,187 45,162 Currency swaps and options 967,868 9,200 10,081 999,374 11,391 12,589 4,283,170 45,723 46,429 3,900,574 56,578 57,751 Interest rate derivat ive contracts: Swaps 4,412,137 51,193 52,496 3,213,891 58,440 60,124 Forward rate agreements and options 309,630 2,001 2,382 95,480 2,140 2,838 4,721,767 53,194 54,878 3,309,371 60,580 62,962 Exchange traded futures and options 321,138 39 47 324,225 279 258 Credit derivat ive contracts 272,695 452 574 246,802 406 433 Equity and stock index options 6,771 49 127 4,912 86 158 Commodity derivat ive contracts 112,846 864 885 83,738 1,312 1,487 Gross total derivat ives 9,718,387 100,321 102,940 7,869,622 119,241 123,049 Offset – (47,767) (47,767) – (54,191) (54,191) Total derivat ives 9,718,387 52,554 55,173 7,869,622 65,050 68,858 Company 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies Derivat ives $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Foreign exchange derivat ive contracts: Forward foreign exchange contracts 3,857,570 31,658 31,966 3,322,275 39,464 40,402 Currency swaps and options 1,001,366 9,562 10,685 1,027,838 12,110 12,864 4,858,936 41,220 42,651 4,350,113 51,574 53,266 Interest rate derivat ive contracts: Swaps 4,979,421 56,121 56,504 3,548,036 63,668 64,723 Forward rate agreements and options 312,356 2,124 2,428 98,617 2,277 2,944 5,291,777 58,245 58,932 3,646,653 65,945 67,667 Exchange traded futures and options 321,138 39 47 324,225 279 258 Credit derivat ive contracts 278,156 479 557 246,922 352 437 Equity and stock index options 4,486 23 73 3,223 69 126 Commodity derivat ive contracts 117,875 982 1,038 89,095 1,453 1,640 Gross total derivat ives 10,872,368 100,988 103,298 8,660,231 119,672 123,394 Offset – (47,767) (47,767) – (54,191) (54,191) Total derivat ives 10,872,368 53,221 55,531 8,660,231 65,481 69,203 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 233 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued The Group lim its exposure to cred it losses in the event of default by entering into master netting agreements with certain market counterparties. As required by IAS 32, exposures are only presented net in these accounts where they are subject to legal right of offset and intended to be settled net in the ordinary course of business. The Group applies balance sheet offsetting only in the instance where we are able to demonstrate legal enforceabil ity of the right to offset (e.g. via legal opin ion) and the ab il ity and intent ion to settle on a net bas is (e.g. via operational practice). The Group may enter into economic hedges that do not qualify for IAS 39 hedge accounting treatment, includ ing der ivat ives such as interest rate swaps, interest rate futures and cross-currency swaps to manage interest rate and currency risks of the Group. These derivat ives are measured at fa ir value, with fair value changes recognised in net trading income: refer to Market Risk (page 107). The Derivat ives and Hedg ing sections of the Risk review and Capital review (page 110) explain the Group’s risk management of derivat ive contracts and appl icat ion of hedg ing. Derivat ives held for hedg ing The Group enters into derivat ive contracts for the purpose of hedg ing interest rate, currency and structural foreign exchange risks inherent in assets, liab il it ies and forecast transact ions. The table below summarises the notional princ ipal amounts and carrying values of derivat ives des ignated in hedge accounting relationsh ips at the report ing date. Group 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ives des ignated as fair value hedges: Interest rate swaps 47,257 1,115 1,224 56,127 2,052 1,509 Currency swaps 115 10 6 114 14 4 47,372 1,125 1,230 56,241 2,066 1,513 Derivat ives des ignated as cash ﬂow hedges: Interest rate swaps 35,467 99 535 22,820 25 576 Forward foreign exchange contracts 11,862 416 183 11,889 97 385 Currency swaps 1,007 21 4 1,336 5 50 48,336 536 722 36,045 127 1,011 Derivat ives des ignated as net investment hedges: Forward foreign exchange contracts 4,402 10 12 3,130 17 51 Total derivat ives held for hedg ing 100,110 1,671 1,964 95,416 2,210 2,575 Company 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ives des ignated as fair value hedges: Interest rate swaps 45,062 1,075 1,207 54,273 1,978 1,507 Currency swaps 115 10 6 114 14 4 45,177 1,085 1,213 54,387 1,992 1,511 Derivat ives des ignated as cash ﬂow hedges: Interest rate swaps 33,330 81 535 20,880 24 576 Forward foreign exchange contracts 11,097 416 165 11,829 93 385 Currency swaps 199 4 1 47 –– 2 44,626 501 701 32,756 117 963 Derivat ives des ignated as net investment hedges: Forward foreign exchange contracts 3,339 8 3 1,939 17 – Total derivat ives held for hedg ing 93,142 1,594 1,917 89,082 2,126 2,474 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 234 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Fair value hedges The Group issues various long-term ﬁxed-rate debt issuances that are measured at amortised cost, includ ing some denominated in foreign currency, such as unsecured senior and subordinated debt (see Notes 22 and 27). The Group also holds various ﬁxed rate debt securit ies such as government and corporate bonds, includ ing some denom inated in foreign currency (see Note 13). These assets and liab il it ies held are exposed to changes in fair value due to movements in market interest and foreign currency rates. The Group uses interest rate swaps to exchange ﬁxed rates for ﬂoating rates on funding to match ﬂoating rates received on assets, or exchange ﬁxed rates on assets to match ﬂoating rates paid on funding. The Group further uses cross-currency swaps to match the currency of the issued debt or held asset with that of the entity’s functional currency. Hedge ineffect iveness from fa ir value hedges is driven by cross -currency basis risk and interest cashﬂows mismatch between the hedging instruments and underlying hedged items. The amortisat ion of fa ir value hedge adjustments for hedged items no longer designated is recognised in net interest income. At 31 December 2023 the Group held the following interest rate and cross-currency swaps as hedging instruments in fair value hedges of interest and currency risk. Hedging instruments and ineffect iveness Group 2023 Carrying amount Change in fair value used to Ineffectiveness calculate hedge recognised in Notional Asset Liab il ity ineffect iveness proﬁt or loss Interest rate 1 $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate swaps – debt securit ies/subord inated notes issued 26,617 311 1,107 574 3 Interest rate swaps – loans and advances 537 5 1 1 – Interest rate swaps – debt securit ies and other el ig ible b ills 20,103 799 116 (382) (14) Interest and currency risk 1 Cross-currency swaps – debt securit ies/subord inated notes issued 70 – 6 (2) – Cross-currency swaps – debt securit ies and other el ig ible b ills 45 10 – 10 – Total at 31 December 2023 47,372 1,125 1,230 201 (11) 1 Interest rate swaps are designated in hedges of the fair value of interest rate risk attributable to the hedged item. Cross currency swaps are used to hedge both interest rate and currency risks. All the hedging instruments are derivat ives, w ith changes in fair value includ ing hedge ineffect iveness recorded w ith in net trad ing income 2022 Carrying amount Change in fair value used to Ineffectiveness calculate hedge recognised in Notional Asset Liab il ity ineffect iveness proﬁt or loss Interest rate 1 $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate swaps – debt securit ies/subord inated notes issued 24,373 100 1,489 (1,439) 2 Interest rate swaps – loans and advances 299 22 – 21 (1) Interest rate swaps – debt securit ies and other el ig ible b ills 31,455 1,930 20 2,711 11 Interest and currency risk 1 Cross-currency swaps – debt securit ies/subord inated notes issued 72 – 4 (6) 2 Cross-currency swaps – debt securit ies and other el ig ible b ills 42 14 – 9 3 Total at 31 December 2022 56,241 2,066 1,513 1,296 17 1 Interest rate swaps are designated in hedges of the fair value of interest rate risk attributable to the hedged item. Cross currency swaps are used to hedge both interest rate and currency risks. All the hedging instruments are derivat ives, w ith changes in fair value includ ing hedge ineffect iveness recorded w ith in net trad ing income Notes to the ﬁnancial statements cont inued Standard Chartered Bank 235 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Hedged items in fair value hedges 2023 Accumulated amount of fair Cumulative value hedge adjustments balance of fair included in the carrying value Carrying amount amount Change in the adjustments value used for from de- calculating designated hedge hedge Asset Liab il ity Asset Liab il ity ineffect iveness relationsh ips¹ $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies /subord inated notes issued – 27,465 – 674 (569) (50) Debt securit ies and other el ig ible b ills 18,977 – (520) – 358 591 Loans and advances to customers 534 – (4) – (1) 11 Total at 31 December 2023 19,511 27,465 (524) 674 (212) 552 2022 Accumulated amount of fair Cumulative value hedge adjustments balance of fair included in the carrying value Carrying amount amount Change in fair adjustments value used for from de- calculating designated hedge hedge Asset Liab il ity Asset Liab il ity ineffect iveness relationsh ips 1 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies /subord inated notes issued – 25,892 – 1,339 1,450 28 Debt securit ies and other el ig ible b ills 28,861 – (1,819) – (2,708) 383 Loans and advances to customers 277 – (22) – (21) 1 Total at 31 December 2022 29,138 25,892 (1,841) 1,339 (1,279) 412 1 This represents a credit/(debit) to the balance sheet value Income statement impact of fair value hedges 2023 2022 $mill ion $mill ion Income/ Income/ (expense) (expense) Change in fair value of hedging instruments 201 1,296 Change in fair value of hedged risks attributable to hedged items (212) (1,279) Net ineffect iveness (loss)/ga in to net trading income (11) 17 Amortisat ion ga in to net interest income 193 117 Hedging instruments and ineffect iveness Company 2023 Carrying amount Change in fair value used to Ineffectiveness calculate hedge recognised in Notional Asset Liab il ity ineffect iveness proﬁt or loss Interest rate 1 $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate swaps – debt securit ies/subord inated notes issued 26,617 311 1,107 575 3 Interest rate swaps – loans and advances 509 4 1 – – Interest rate swaps – debt securit ies and other el ig ible b ills 17,936 760 99 (367) (13) Interest and currency risk 1 Cross-currency swaps – debt securit ies/subord inated notes issued 70 – 6 (2) – Cross-currency swaps – debt securit ies and other el ig ible b ills 45 10 – 10 – Total at 31 December 2023 45,177 1,085 1,213 216 (10) 1 Interest rate swaps are designated in hedges of the fair value of interest rate risk attributable to the hedged item. Cross currency swaps are used to hedge both interest rate and currency risks. All the hedging instruments are derivat ives, w ith changes in fair value includ ing hedge ineffect iveness recorded w ith in net trad ing income Notes to the ﬁnancial statements cont inued Standard Chartered Bank 236 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued 2022 Carrying amount Change in fair value used to Ineffectiveness calculate hedge recognised in Notional Asset Liab il ity ineffect iveness proﬁt or loss Interest rate 1 $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate swaps – debt securit ies/subord inated notes issued 24,373 101 1,489 (1,440) 3 Interest rate swaps – loans and advances 270 19 – 19 (1) Interest rate swaps – debt securit ies and other el ig ible b ills 29,630 1,858 18 2,582 10 Interest and currency risk 1 Cross-currency swaps – debt securit ies/subord inated notes issued 72 – 4 (6) 2 Cross-currency swaps – debt securit ies and other el ig ible b ills 42 14 – 9 3 Total at 31 December 2022 54,387 1,992 1,511 1,164 17 1 Interest rate swaps are designated in hedges of the fair value of interest rate risk attributable to the hedged item. Cross currency swaps are used to hedge both interest rate and currency risks. All the hedging instruments are derivat ives, w ith changes in fair value includ ing hedge ineffect iveness recorded w ith in net trad ing income Hedged Items in fair value hedges 2023 Accumulated amount of fair Cumulative value hedge adjustments balance of fair included in the carrying value Carrying amount amount Change in the adjustments value used for from de- calculating designated hedge hedge Asset Liab il ity Asset Liab il ity ineffect iveness relationsh ips 1 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies /subord inated notes issued – 27,465 – 674 (570) (50) Debt securit ies and other el ig ible b ills 16,867 – (510) – 344 564 Loans and advances to customers 507 – (2) – – 11 Total at 31 December 2023 17,374 27,465 (512) 674 (226) 525 2022 Accumulated amount of fair Cumulative value hedge adjustments balance of fair included in the carrying value Carrying amount amount Change in fair adjustments value used for from de- calculating designated hedge hedge Asset Liab il ity Asset Liab il ity ineffect iveness relationsh ips 1 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies /subord inated notes issued – 25,892 – 1,339 1,450 28 Debt securit ies and other el ig ible b ills 27,141 – (1,751) – (2,578) 373 Loans and advances to customers 251 – (19) – (19) 1 Total at 31 December 2022 27,392 25,892 (1,770) 1,339 (1,147) 402 1 This represents a credit/(debit) to the balance sheet value Income statement impact of fair value hedges 2023 2022 $mill ion $mill ion Income/ Income/ (expense) (expense) Change in fair value of hedging instruments 216 1,164 Change in fair value of hedged risks attributable to hedged items (226) (1,147) Net ineffect iveness (loss)/ga in to net trading income (10) 17 Amortisat ion ga in to net interest income 192 120 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 237 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Cash ﬂow hedges The Group has exposure to market movements in future interest cash ﬂows on portfolios of customer accounts, debt securit ies and loans and advances to customers. The amounts and t im ing of future cash ﬂows, represent ing both princ ipal and interest ﬂows, are projected on the basis of contractual terms and other relevant factors, includ ing est imates of prepayments and defaults. The hedging strategy of the Group involves using interest rate swaps to manage the variab il ity in future cash ﬂows on assets and liab il it ies that have ﬂoat ing rates of interest by exchanging the ﬂoating rates for ﬁxed rates. It also uses foreign exchange contracts and currency swaps to manage the variab il ity in future exchange rates on its assets and liab il it ies and costs in foreign currencies. This is done on both a micro basis whereby a single interest rate or cross-currency swap is designated in a separate relationsh ip w ith a single hedged item (such as a ﬂoating-rate loan to a customer), and on a portfolio basis whereby each hedging instrument is designated against a group of hedged items that share the same risk (such as a group of customer accounts). Hedge ineffect iveness for cash ﬂow hedges is mainly driven by payment frequency mismatch between the hedging instrument and the underlying hedged item. The hedged risk is determined as the variab il ity of future cash ﬂows aris ing from changes in the designated benchmark interest and/or foreign exchange rates. Hedging instruments and ineffect iveness Group 2023 Carrying amount Change in fair Ineffectiveness Amount value used to Gain gain recognised reclassif ied from calculate hedge recognised in in net trading reserves to net Notional Asset Liab il ity ineffect iveness OCI income trading income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate risk Interest rate swaps 35,467 99 535 501 499 2 – Currency risk Forward foreign exchange contract 11,862 416 183 107 106 1 – Cross-currency swaps 1,007 21 4 – – – – Total as at 31 December 2023 48,336 536 722 608 605 3 – 2022 Carrying amount Change in fair Ineffectiveness Amount value used to (loss)/gain reclassif ied calculate Loss recognised in from reserves hedge recognised in net trading to net trading Notional Asset Liab il ity ineffect iveness OCI income income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate risk Interest rate swaps 22,820 25 576 (552) (551) (1) – Currency risk Forward foreign exchange contract 11,889 97 385 (141) (141) – – Cross-currency swaps 1,336 5 50 (9) (10) 1 – Total as at 31 December 2022 36,045 127 1,011 (702) (702) – – Notes to the ﬁnancial statements cont inued Standard Chartered Bank 238 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Hedged items in cash ﬂow hedges 2023 Cumulative balance in the cash ﬂow hedge reserve Change in fair from value used for de- calculating designated hedge Cash ﬂow hedge ineffect iveness hedge reserve relationsh ips $mill ion $mill ion $mill ion Customer accounts (389) (74) 25 Debt securit ies and other el ig ible b ills (19) (28) (12) Loans and advances to customers (197) 77 – Intragroup borrowing currency hedge – – – Total at 31 December 2023 (605) (25) 13 2022 Cumulative balance in the cash ﬂow hedge reserve Change in fair from value used for de- calculating designated hedge Cash ﬂow hedge ineffect iveness hedge reserve relationsh ips $mill ion $mill ion $mill ion Customer accounts 390 (450) 31 Debt securit ies and other el ig ible b ills 110 (67) (22) Loans and advances to customers 204 (83) (12) Intragroup lending currency hedge (2) – – Total at 31 December 2022 702 (600) (3) Impact of cash ﬂow hedges on proﬁt and loss and other comprehensive income 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion Cash ﬂow hedge reserve balance as at 1 January (513) (11) Gains/(losses) recognised in other comprehensive income on effective portion of changes in fair value of hedging instruments 605 (702) (Losses)/gains reclassif ied to income statement when hedged item affected net proﬁt (22) 110 Taxation credit relating to cash ﬂow hedges (83) 90 Cash ﬂow hedge reserve balance as at 31 December (13) (513) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 239 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Hedging instruments and ineffect iveness Company 2023 Carrying amount Change in fair Ineffectiveness Amount value used to gain reclassif ied calculate Gain recognised in from reserves hedge recognised in net trading to net trading Notional Asset Liab il ity ineffect iveness OCI income income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate risk Interest rate swaps 33,330 81 535 478 476 2 – Currency risk Forward foreign exchange contract 11,097 416 165 107 106 1 – Cross-currency swaps 199 4 1 – – – – Total as at 31 December 2023 44,626 501 701 585 582 3 – 2022 Carrying amount Change in fair Ineffectiveness Amount value used to (loss) reclassif ied calculate (Loss) recognised in from reserves hedge recognised in net trading to net trading Notional Asset Liab il ity ineffect iveness OCI income income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate risk Interest rate swaps 20,880 24 576 (534) (533) (1) – Currency risk Forward foreign exchange contract 11,829 93 385 (147) (147) – – Cross-currency swaps 47 – 2 (2) (2) – – Total as at 31 December 2022 32,756 117 963 (683) (682) (1) – Hedged items in cash ﬂow hedges 2023 Change in fair value used for Cumulative balance in the calculating cash ﬂow hedge reserve from hedge Cash ﬂow de-designated hedge ineffect iveness hedge reserve relationsh ips $mill ion $mill ion $mill ion Customer accounts (389) (74) 25 Debt securit ies and other el ig ible b ills (19) (28) (12) Loans and advances to customers (174) 60 – Intragroup lending currency hedge – – – Total at 31 December 2023 (582) (42) 13 2022 Change in fair value used for Cumulative balance in the calculating cash ﬂow hedge reserve from hedge Cash ﬂow de-designated hedge ineffect iveness hedge reserve relationsh ips $mill ion $mill ion $mill ion Customer accounts 390 (443) 31 Debt securit ies and other el ig ible b ills 105 (61) (22) Loans and advances to customers 189 (69) (11) Intragroup lending currency hedge (2) – – Total at 31 December 2022 682 (573) (2) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 240 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Impact of cash ﬂow hedges on proﬁt and loss and other comprehensive income 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion Cash ﬂow hedge reserve balance as at 1 January (522) (39) Gains/(losses) recognised in other comprehensive income on effective portion of changes in fair value of hedging instruments 582 (682) (Losses)/gains reclassif ied to income statement when hedged item affected net proﬁt (32) 110 Taxation credit relating to cash ﬂow hedges (79) 89 Cash ﬂow hedge reserve balance as at 31 December (51) (522) Net investment hedges Foreign currency exposures arise from investments in subsid iar ies that have a different functional currency from that of the presentation currency of the Group. This risk arises from the ﬂuctuation in spot exchange rates between the functional currency of the subsid iar ies and the Group’s presentation currency, which causes the value of the investment to vary. The Group's policy is to hedge these exposures only when not doing so would be expected to have a sign iﬁcant impact on the regulatory ratios of the Group and its banking subsid iar ies. The Group uses foreign exchange forwards to manage the effect of exchange rates on its net investments in foreign subsid iar ies. Hedging instruments and ineffect iveness Group 2023 Carrying amount Changes in the value of Change in fair the hedging Amount value used to instrument Ineffectiveness reclassif ied calculate hedge recognised in recognised in from reserves Notional Asset Liab il ity ineffect iveness OCI proﬁt or loss to income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive forward currency contracts¹ 4,402 10 12 (18) (18) – – 2022 Carrying amount Changes in the value of Change in fair the hedging Amount value used to instrument Ineffectiveness reclassif ied calculate hedge recognised in recognised in from reserves Notional Asset Liab il ity ineffect iveness OCI proﬁt or loss to income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive forward currency contracts¹ 3,130 17 51 54 54 – – 1 These derivat ive forward currency contracts have a matur ity of less than one year. The hedges are rolled on a period ic bas is Hedged items in net investment hedges 2023 Change in the Balances remain ing in the value used for translation reserve from calculating hedging relationsh ips for hedge Translation which hedge accounting is no ineffect iveness reserve longer applied $mill ion $mill ion $mill ion Net investments 18 (2) – 2022 Change in the Balances remain ing in the value used for translation reserve from calculating hedging relationsh ips for hedge Translation which hedge accounting is no ineffect iveness reserve longer applied $mill ion $mill ion $mill ion Net investments (54) (34) – Notes to the ﬁnancial statements cont inued Standard Chartered Bank 241 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Impact of net investment hedges on other comprehensive income 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion (Losses) / gains recognised in other comprehensive income (18) 54 Hedging instruments and ineffect iveness Company 2023 Carrying amount Changes in the value of Change in fair the hedging Amount value used to instrument Ineffectiveness reclassif ied calculate hedge recognised in recognised in from reserves Notional Asset Liab il ity ineffect iveness OCI proﬁt or loss to income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive forward currency contracts¹ 3,339 8 3 (16) (16) – – 2022 Changes in Carrying amount the value of Change in fair the hedging Amount value used to instrument Ineffectiveness reclassif ied calculate hedge recognised in recognised in from reserves Notional Asset Liab il ity ineffect iveness OCI proﬁt or loss to income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive forward currency contracts¹ 1,939 17 – 51 51 – – 1 These derivat ive forward currency contracts have a matur ity of less than one year. The hedges are rolled on a period ic bas is Hedged items in net investment hedges 2023 Change in the Balances remain ing in the value used for translation reserve from calculating hedging relationsh ips for hedge Translation which hedge accounting is no ineffect iveness reserve longer applied $mill ion $mill ion $mill ion Net investments 16 5 – 2022 Change in the Balances remain ing in the value used for translation reserve from calculating hedging relationsh ips for hedge Translation which hedge accounting is no ineffect iveness reserve longer applied $mill ion $mill ion $mill ion Net investments (51) 17 – Impact of net investment hedges on other comprehensive income 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion (Losses)/gains recognised in other comprehensive income (16) 51 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 242 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Maturity of hedging instruments Group Fair value hedges 2023 More than one month and Less than one less than one One to ﬁve More than ﬁve month year years years Interest rate swap Notional $mill ion 2,914 6,142 28,697 9,504 Cross-currency swap Notional $mill ion – 115 – – Average ﬁxed interest rate (to USD) GBP – 1.33% – – CNH – 3.17% – – Average exchange rate GBP/USD – 0.66 – – HKD/USD – 6.37 – – Cash ﬂow hedges Interest rate swap Notional $mill ion 1,990 25,831 7,239 407 Average ﬁxed interest rate USD 5.09% 3.39% 4.68% 3.16% Cross-currency swap Notional $mill ion 74 735 198 – Average ﬁxed interest rate INR – 7.85% 10.02% – KRO – 4.11% 3.11% – THO – 2.17% 2.36% – IDR – 6.43% – – Average exchange rate INR/USD – 82.90 82.69 – KRO/USD – 1,275.24 1,220.50 – THO/USD – 33.72 33.72 – IDR/USD – 15,715.00 – – Forward foreign exchange contracts Notional $mill ion 2,194 9,668 – – Average exchange rate JPY/USD 130.49 136.05 – – BRL/USD – 5.17 – – Net investment hedges Foreign exchange derivat ives Notional $mill ion 4,402 – – – Average exchange rate INR/USD 82.91 – – – SGD/USD 1.33 – – – AED/USD 3.67 – – – Notes to the ﬁnancial statements cont inued Standard Chartered Bank 243 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Fair value hedges 2022 More than one month Less than one and less than One to ﬁve More than ﬁve month one year years years Interest rate swap Notional $mill ion 451 7,406 36,788 11,482 Cross-currency swap Notional $mill ion – – 114 – Average ﬁxed interest rate (to USD) GBP – – 1.33% – HKD – – 3.17% – Average exchange rate GBP/USD – – 0.66 – HKD/USD – – 6.37 – Cash ﬂow hedges Interest rate swap Notional $mill ion 195 8,831 13,582 212 Average ﬁxed interest rate USD 3.80% 2.16% 1.60% 2.14% Cross-currency swap Notional $mill ion – 594 742 – Average ﬁxed interest rate INO – 8.67% 11.50% – Average exchange rate INO/USD – 78.32 79.90 – Forward foreign exchange contracts Notional $mill ion 1,246 10,643 – – Average exchange rate CLO/USD Net investment hedges Foreign exchange derivat ives Notional $mill ion 3,130 – – – Average exchange rate INR/USD 80.55 – – – SGD/USD 1.40 – – – AED/USD 3.67 – – – Notes to the ﬁnancial statements cont inued Standard Chartered Bank 244 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Maturity of hedging instruments Company Fair value hedges 2023 More than one month and Less than one less than one One to ﬁve More than ﬁve month year years years Interest rate swap Notional $mill ion 2,914 6,142 26,502 9,504 Cross-currency swap Notional $mill ion – 115 – – Average ﬁxed interest rate (to USD) GBP – 1.33% – – CNH – 3.17% – – Average exchange rate GBP/USD – 0.66 – – HKD/USD – 6.37 – – Cash ﬂow hedges Interest rate swap Notional $mill ion 1,965 25,058 5,900 407 Average ﬁxed interest rate USD 5.09% 2.59% 4.56% 2.65% Cross-currency swap Notional $mill ion – 199 – – Average ﬁxed interest rate KRO – 3.13% – – PHP – 6.30% – – IDR – 6.43% – – Average exchange rate KRO/USD – 1,318.70 – – PHP/USD – 55.54 – – IDR/USD – 15,715.00 – – Forward foreign exchange contracts Notional $mill ion 2,194 8,903 – – Average exchange rate JPY/USD 130.49 136.05 – – Net investment hedges Foreign exchange derivat ives Notional $mill ion 3,339 – – – Average exchange rate INR/USD 82.91 – – – AED/USD 3.67 – – – Notes to the ﬁnancial statements cont inued Standard Chartered Bank 245 Directors’ Report and Financ ial Statements 2023 13. Derivat ive ﬁnancial instruments continued Fair value hedges 2022 More than one month Less than one and less than One to ﬁve More than ﬁve month one year years years Interest rate swap Notional $mill ion 451 7,251 35,089 11,482 Cross-currency swap Notional $mill ion – – 114 – Average ﬁxed interest rate (to USD) GBP – – 1.33% – HKD – – 3.17% – Average exchange rate GBP/USD – – 0.66 – HKD/USD – – 6.37 – Cash ﬂow hedges Interest rate swap Notional $mill ion 195 6,891 13,582 212 Average ﬁxed interest rate USD 3.80% 2.44% 1.60% 2.14% Cross-currency swap Notional $mill ion – 47 – – Average ﬁxed interest rate KRO 5.58% Average exchange rate KRO/USD 1,356.70 Forward foreign exchange contracts Notional $mill ion 1186 10643 0 0 Average exchange rate JPY/USD 135.18 133.26 – 0 Net investment hedges Foreign exchange derivat ives Notional $mill ion 1939 – – – Average exchange rate INR/USD 80.55 AED/USD 3.67 – – – Interest rate benchmark reform As at 31 December 2023, there are no derivat ive instruments designated in fair value or cash ﬂow hedge accounting relationsh ips that were l inked to IBOR reference rates (31 December 2022: $45,540 mill ion for Group and $41,569 m ill ion for Company). Notes to the ﬁnancial statements cont inued Standard Chartered Bank 246 Directors’ Report and Financ ial Statements 2023 14. Loans and advances to banks and customers Accounting policy Refer to Note 12 Financ ial instruments for the relevant accounting policy Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Loans and advances to banks 22,821 27,394 10,141 18,552 Expected credit loss (18) (11) (6) (4) 22,803 27,383 10,135 18,548 Loans and advances to customers 159,552 162,158 78,181 83,457 Expected credit loss (3,409) (4,032) (2,298) (2,846) 156,143 158,126 75,883 80,611 Total loans and advances to banks and customers 1 178,946 185,509 86,018 99,159 1 Includes $2.2 bill ion (31 December 2022: $1 b ill ion) of assets pledged as collateral. Analysis of loans and advances to customers by client segments and related impa irment prov is ions as set out w ith in the Risk review and Capital review (page 58 to 145). 15. Reverse repurchase and repurchase agreements includ ing other s im ilar lend ing and borrowing Accounting policy The Group purchases securit ies (a reverse repurchase agreement – ‘reverse repo’) typ ically with ﬁnanc ial inst itut ions subject to a commitment to resell or return the securit ies at a predeterm ined price. These securit ies are not included in the balance sheet as the Group does not acquire the risks and rewards of ownership, however they are recorded off-balance sheet as collateral received. Considerat ion pa id (or cash collateral provided) is accounted for as a loan asset at amortised cost, unless it is managed on a fair value basis or designated at fair value through proﬁt or loss. In major ity of cases through the contractual terms of a reverse repo arrangement, the Group as the transferee of the security collateral has the right to sell or repledge the asset concerned. The Group also sells securit ies (a repurchase agreement – ‘repo’) subject to a comm itment to repurchase or redeem the securit ies at a predeterm ined price. The securit ies are reta ined on the balance sheet as the Group retains substantially all the risks and rewards of ownership and these securit ies are d isclosed as pledged collateral. Considerat ion rece ived (or cash collateral received) is accounted for as a ﬁnanc ial l iab il ity at amortised cost, unless it is either mandatorily classif ied as fa ir value through proﬁt or loss or irrevocably designated at fair value through proﬁt or loss at in it ial recognit ion. Repo and reverse repo transactions typically entitle the Group and its counterparties to have recourse to assets sim ilar to those provided as collateral in the event of a default. Securit ies sold subject to repos, e ither by way of a Global Master Repurchase Agreement (GMRA), or through a securit ies sale and Total Return Swap (TRS) cont inue to be recognised on the balance sheet as the Group retains substantially the associated risks and rewards of the securit ies (the TRS is not recognised). The counterparty liab il ity is included in deposits by banks or customer accounts, as appropriate. Assets sold under repurchase agreements are considered encumbered as the Group cannot pledge these to obtain funding. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 247 Directors’ Report and Financ ial Statements 2023 15. Reverse repurchase and repurchase agreements includ ing other s im ilar lend ing and borrowing continued Group 2023 2022 $mill ion $mill ion Banks 27,706 24,154 Customers 55,923 54,643 83,629 78,797 Of which: Fair value through proﬁt or loss 68,149 62,333 Banks 26,053 23,276 Customers 42,096 39,057 Held at amortised cost 15,480 16,464 Banks 1,653 878 Customers 13,827 15,586 Under reverse repurchase and securit ies borrow ing arrangements, the Group obtains securit ies under usual and customary terms which permit it to repledge or resell the securit ies to others. Amounts on such terms are: 2023 2022 $mill ion $mill ion Securit ies and collateral rece ived (at fair value) 87,153 113,744 Securit ies and collateral wh ich can be repledged or sold (at fair value) 87,084 113,624 Amounts repledged/transferred to others for ﬁnancing act iv it ies, to satisfy liab il it ies under sale and repurchase agreements (at fair value) 33,652 44,628 Company 2023 2022 $mill ion $mill ion Banks 23,965 21,383 Customers 53,605 52,929 77,570 74,312 Of which: Fair value through proﬁt or loss 64,804 59,057 Banks 23,411 21,199 Customers 41,393 37,858 Held at amortised cost 12,766 15,255 Banks 554 184 Customers 12,212 15,071 Under reverse repurchase and securit ies borrow ing arrangements, the Group obtains securit ies under usual and customary terms which permit it to repledge or resell the securit ies to others. Amounts on such terms are: 2023 2022 $mill ion $mill ion Securit ies and collateral rece ived (at fair value) 80,899 108,433 Securit ies and collateral wh ich can be repledged or sold (at fair value) 80,852 108,314 Amounts repledged/transferred to others for ﬁnancing act iv it ies, to satisfy liab il it ies under sale and repurchase agreements (at fair value) 32,774 44,419 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 248 Directors’ Report and Financ ial Statements 2023 15. Reverse repurchase and repurchase agreements includ ing other s im ilar lend ing and borrowing continued Repurchase agreements and other sim ilar secured borrow ing Group 2023 2022 $mill ion $mill ion Banks 4,968 6,536 Customers 46,497 45,857 51,465 52,393 Of which: Fair value through proﬁt or loss 39,432 50,402 Banks 4,137 5,422 Customers 35,295 44,980 Held at amortised cost 12,033 1,991 Banks 831 1,114 Customers 11,202 877 The tables below set out the ﬁnancial assets prov ided as collateral for repurchase and other secured borrowing transactions: Collateral pledged against repurchase agreements 2023 Fair value Fair value through other through proﬁt comprehensive Amortised Off-balance or loss income cost sheet Total $mill ion $mill ion $mill ion $mill ion $mill ion On-balance sheet Debt securit ies and other el ig ible b ills 4,069 7,312 10,181 – 21,562 Off-balance sheet Repledged collateral received – – – 33,652 33,652 At 31 December 2023 4,069 7,312 10,181 33,652 55,214 Collateral pledged against repurchase agreements 2022 Fair value Fair value through other through proﬁt comprehensive Amortised Off-balance or loss income cost sheet Total $mill ion $mill ion $mill ion $mill ion $mill ion On-balance sheet Debt securit ies and other el ig ible b ills 1,629 3,624 4,799 – 10,052 Off-balance sheet Repledged collateral received – – – 44,628 44,628 At 31 December 2022 1,629 3,624 4,799 44,628 54,680 Company 2023 2022 $mill ion $mill ion Banks 4,824 6,215 Customers 46,327 45,687 51,151 51,902 Of which: Fair value through proﬁt or loss 39,174 50,179 Banks 4,030 5,307 Customers 35,144 44,872 Held at amortised cost 11,977 1,723 Banks 794 908 Customers 11,183 815 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 249 Directors’ Report and Financ ial Statements 2023 15. Reverse repurchase and repurchase agreements includ ing other s im ilar lend ing and borrowing continued The tables below set out the ﬁnancial assets prov ided as collateral for repurchase and other secured borrowing transactions: 2023 Fair value Fair value through other through proﬁt comprehensive Amortised Off-balance or loss income cost sheet Total Collateral pledged against repurchase agreements $mill ion $mill ion $mill ion $mill ion $mill ion On-balance sheet Debt securit ies and other el ig ible b ills 3,985 7,293 10,181 – 21,459 Off-balance sheet Repledged collateral received – – – 32,774 32,774 At 31 December 2023 3,985 7,293 10,181 32,774 54,233 2022 Fair value Fair value through other through proﬁt comprehensive Amortised Off-balance or loss income cost sheet Total Collateral pledged against repurchase agreements $mill ion $mill ion $mill ion $mill ion $mill ion On-balance sheet Debt securit ies and other el ig ible b ills 1,407 3,624 4,799 – 9,830 Off-balance sheet Repledged collateral received – – – 44,419 44,419 At 31 December 2022 1,407 3,624 4,799 44,419 54,249 16. Goodwill and intang ible assets Accounting policy Goodwill Goodwill on acquis it ions of subsid iar ies is included in intang ible assets. Goodw ill on acquis it ions of associates is included in Investments in associates. Goodwill included in intang ible assets is assessed at each balance sheet date for impa irment and carried at cost less any accumulated impa irment losses. Ga ins and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Detailed calculations are performed based on discount ing expected cash ﬂows of the relevant cash-generating units (CGUs) and discount ing these at an appropr iate discount rate, the determinat ion of which requires the exercise of judgement. Goodwill is allocated to CGUs for the purpose of impa irment test ing. CGUs represent the lowest level with in the Group wh ich generates separate cash inﬂows and at which the goodwill is monitored for internal management purposes. These are equal to or smaller than the Group’s reportable segments (as set out in Note 2) as the Group views its reportable segments on a global basis. The major CGUs to which goodwill has been allocated are set out in the CGU table (page 251). Other accounting estimates and judgements The carrying amount of goodwill is based on the applicat ion of judgements includ ing the bas is of goodwill impa irment calculation assumptions. Judgement is also applied in determinat ion of CGUs. Estimates include forecasts used for determin ing cash ﬂows for CGUs and, the appropr iate long term growth rates to use and discount rates which factor in country risk-free rates and applicable risk premiums. These estimates are period ically assessed for appropriateness. The Group undertakes an annual assessment to evaluate whether the carrying value of goodwill is impa ired. The est imat ion of future cash ﬂows and the level to wh ich they are discounted is inherently uncertain and requires sign iﬁcant judgement and is subject to potential change over time. Acquired intang ibles At the date of acquis it ion of a subsid iary or assoc iate, intang ible assets wh ich are deemed separable and that arise from contractual or other legal rights are capital ised and included with in the net ident iﬁable assets acqu ired. These intang ible assets are in it ially measured at fair value, which reﬂects market expectations of the probabil ity that the future econom ic beneﬁts embodied in the asset will ﬂow to the entity, and are amortised on the basis of their expected useful lives (4 to 16 years). At each balance sheet date, these assets are assessed for ind icators of impa irment. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down immed iately to the recoverable amount. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 250 Directors’ Report and Financ ial Statements 2023 16. Goodwill and intang ible assets cont inued Computer software Acquired computer software licences are capital ised, on the bas is of the costs incurred to acquire and bring to use the specif ic software. Internally generated software represents substantially all of the total software capital ised. D irect costs of the development of separately ident iﬁable internally generated software are capital ised where it is probable that future economic beneﬁts attributable to the asset will ﬂow from its use. These costs include staff remuneration costs such as salaries, statutory payments and share-based payments, materials, service providers and contractors, provided their time is directly attributable to the software build. Costs incurred in the ongoing maintenance of software are expensed immed iately when incurred. Internally generated software is amortised over each assets useful life to a maximum of 10 years. On an annual basis software assets’ residual values and useful lives are reviewed, includ ing assess ing for ind icators of impa irment. Ind icators of impa irment include loss of business relevance, obsolescence of asset, exit of the business to which the software relates, technological changes, change in use of the asset, reduction in useful life, plans to reduce usage or scope. For capital ised software that is internally generated, judgement is required to determine which costs relate to research (expensed) and which costs relate to development (capital ised). Further judgement is required to determine the technical feasib il ity of completing the software such that it will be available for use. Estimates are used to determine how the software will generate probable future economic beneﬁts, these estimates include; cost savings, income increases, balance sheet improvements, improved functional ity or improved asset safeguarding. Software as a Service (SaaS) is a contractual arrangement that conveys the right to receive access to the supplier’s software applicat ion over the contract term. As such, the Group does not have control and as a result recogn ises an operating expense for these costs over the contract term. Certain costs, includ ing custom isat ion costs related to implementat ion of the SaaS may meet the deﬁnit ion of an intang ible asset in their own right if it is separately ident iﬁable and control is established. These costs are capital ised if it is expected to provide the Group with future economic beneﬁts ﬂowing from the underlying resource and the Group can restrict others from accessing those beneﬁts. Group 2023 2022 Acquired Computer Acquired Computer Goodwill intang ibles software Total Goodwill intang ibles software Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cost At 1 January 1,323 143 3,962 5,428 1,379 148 3,569 5,096 Exchange translation differences (24) (8) 23 (9) (44) (5) 1 (48) Addit ions – – 649 649 – – 761 761 Impairment charge¹ – – (50) (50) (10) – (18) (28) Amounts written off – – (5) (5) – – (346) (346) Assets held for sale – – – – (2) – (5) (7) At 31 December 1,299 135 4,579 6,013 1,323 143 3,962 5,428 Provis ion for amort isat ion At 1 January – 119 1,257 1,376 – 118 1,178 1,296 Exchange translation differences – (8) 6 (2) – (5) (6) (11) Amortisat ion – 4 440 444 – 6 379 385 Impairment (charge)/ release 1 – – (15) (15) – – 39 39 Amounts written off – – – – – – (329) (329) Assets held for sale – – – – – – (4) (4) At 31 December – 115 1,688 1,803 – 119 1,257 1,376 Net book value 1,299 20 2,891 4,210 1,323 24 2,705 4,052 1 Computer software impa irment includes $14.3 mill ion (31 December 2022: $50 m ill ion) charge relat ing to write off on SaaS (Software as a Service) applicat ions capital ised in previous years At 31 December 2023, accumulated goodwill impa irment losses incurred from 1 January 2005 amounted to $3,237 mill ion (31 December 2022: $3,237 mill ion), of wh ich Nil mill ion was recogn ised in 2023 (31 December 2022: $10 mill ion). Notes to the ﬁnancial statements cont inued Standard Chartered Bank 251 Directors’ Report and Financ ial Statements 2023 16. Goodwill and intang ible assets cont inued Company 2023 2022 Acquired Computer Acquired Computer Goodwill intang ibles software Total Goodwill intang ibles software Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cost At 1 January 72 29 3,183 3,284 79 30 2,997 3,106 Exchange translation differences – (1) 35 34 – (1) 1 – Addit ions – – 378 378 – – 501 501 Impairment charge¹ – – (23) (23) (6) – (17) (23) Amounts written off – – (5) (5) – – (297) (297) Assets held for sale – – – – (1) – (2) (3) At 31 December 72 28 3,568 3,668 72 29 3,183 3,284 Provis ion for amort isat ion At 1 January – 18 987 1,005 – 18 967 985 Exchange translation differences – (1) 11 10 – (2) (3) (5) Amortisat ion – – 302 302 – 2 271 273 Impairment (charge)/ release¹ – – (8) (8) – – 37 37 Amounts written off – – – – – – (285) (285) At 31 December – 17 1,292 1,309 – 18 987 1,005 Net book value 72 11 2,276 2,359 72 11 2,196 2,279 1 Computer software impa irment includes $5 mill ion release (31 December 2022: $50 m ill ion charge) relat ing to write off on SaaS (Software as a Service) applicat ions capital ised in previous years Goodwill Outcome of impa irment assessment An annual assessment is made as to whether the current carrying value of goodwill is impa ired. For the purposes of impa irment test ing, goodwill is allocated at the date of acquis it ion to a CGU. Goodwill is considered to be impa ired if the carrying amount of the relevant CGU exceeds its recoverable amount. Indicators of impa irment include changes in the economic performance and outlook of the region, includ ing geopol it ical changes, changes in market value of regional investments, large credit defaults and strategic decis ions to ex it certain regions. The recoverable amounts for all the CGUs were measured based on value in use (VIU). The calculation of VIU for each CGU is calculated using ﬁve-year cashﬂow projections and an est imated terminal value based on a perpetuity value after year ﬁve. The cashﬂow project ions are based on forecasts approved by management up to 2028. The perpetuity terminal value amount is calculated using year ﬁve cashﬂows using long-term GDP growth rates. All cashﬂows are discounted using discount rates which reﬂect market rates appropriate to the CGU. Post-tax discount rates are used to calculate the VIU using the post-tax cashﬂows. The post-tax discount rate is subsequently grossed up to pre-tax discount rate. The calculated VIU using post-tax and pre-tax discount rate is the same. The goodwill allocated to each CGU and key assumptions used in determin ing the recoverable amounts are set out below and are solely estimates for the purposes of assessing impa irment of acqu ired goodwill. Group 2023 2022 Pre-Tax Long-term Pre-Tax Long-term Discount forecast GDP Discount forecast GDP Goodwill Rates growth rates Goodwill Rates growth rates Cash-generating unit $mill ion per cent per cent $mill ion per cent per cent Country CGUs Africa & Middle East 65 69 Pakistan 31 35.5 3.2 35 30.9 5.9 Bahrain 34 12.4 0.5 34 16.6 0.7 Asia 284 281 Singapore 284 13.9 2.1 281 12.3 2.3 Global CGUs 950 973 Global Private Banking 83 15.4 1.9 83 14.4 2.0 Global Corporate, Commercial & Institut ional Bank ing 867 16.1 2.3 890 14.5 2.5 1,299 1,323 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 252 Directors’ Report and Financ ial Statements 2023 16. Goodwill and intang ible assets cont inued In the current year there are no CGUs that are sensit ive to any ind iv idual movement on key estimates (cashﬂow, discount rate and GDP growth rate). Company Acquired intang ibles pr imar ily compr ise those recognised as part of the acquis it ions of American Express Bank, Tradewinds, Australia and New Zealand Project Finance and Grindlays. Sign iﬁcant items of goodwill aris ing on acqu is it ions have been allocated to the following cash generating units for the purposes of impa irment test ing: 2023 2022 Cash-generating unit $mill ion $mill ion Country CGUs Bahrain 17 17 Global CGUs Global Corporate, Commercial & Institut ional Bank ing 55 55 72 72 Acquired intang ibles Acquired Intangibles primar ily compr ises of the intellectual property acquired from Standard chartered Bank Hongkong Lim ited. The acquired intang ibles are amort ised over periods from four years to a maximum of 16 years. The constituents are as follows: Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Acquired intang ibles compr ise: Brand names – 1 – – Customer relationsh ips 1 1 2 2 Licences 19 22 10 9 Net book value 20 24 12 11 17. Property, plant and equipment Accounting policy All property, plant and equipment is stated at cost less accumulated depreciat ion and impa irment losses. Land and build ings compr ise mainly branches and ofﬁces. Freehold land is not depreciated although it is subject to impa irment test ing. Depreciat ion on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: • Owned premises up to 50 years • Leasehold premises up to 50 years • Leasehold improvements shorter of remain ing lease term and 10 years • Equipment and motor vehicles three to 15 years Where the Group is a lessee of a right-of-use asset, the leased assets are capital ised and included in Property, plant and equipment with a corresponding liab il ity to the lessor recognised in Other liab il it ies. The account ing policy for leased assets is set out in Note 18 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 253 Directors’ Report and Financ ial Statements 2023 17. Property, plant and equipment continued Group 2023 Leased Leased premises equipment Premises Equipment assets assets Total $mill ion $mill ion $mill ion $mill ion $mill ion Cost or valuation At 1 January 549 519 780 7 1,855 Exchange translation differences (24) (18) (3) (1) (46) Addit ions 1 25 75 124 – 224 Disposals and fully depreciated assets written off 2 (33) (99) (1) – (133) Assets held for sale 15 – – – 15 As at 31 December 532 477 900 6 1,915 Depreciat ion Accumulated at 1 January 207 348 302 4 861 Exchange translation differences (9) (15) (23) (1) (48) Charge for the year 30 71 101 1 203 Impairment release – – (1) – (1) Attributable to assets sold, transferred or written off 2 (31) (98) (1) – (130) Assets held for sale 1 (1) – – – Accumulated at 31 December 198 305 378 4 885 Net book amount at 31 December 334 172 522 2 1,030 1 Refer to the cash ﬂow statement under cash ﬂows from invest ing act iv it ies section for the purchase of property, plant and equipment during the year of $100 mill ion on page 164 2 Disposals for property, plant and equipment during the year of $15 mill ion in the cash ﬂow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the year and the net book value disposed Group 2022 Leased Leased premises equipment Premises Equipment assets assets Total $mill ion $mill ion $mill ion $mill ion $mill ion Cost or valuation At 1 January 663 566 879 8 2,116 Exchange translation differences (31) (47) (78) (1) (157) Addit ions 1 55 84 247 – 386 Disposals and fully depreciated assets written off 2 (82) (66) (263) – (411) Assets held for sale (56) (18) (5) – (79) As at 31 December 549 519 780 7 1,855 Depreciat ion Accumulated at 1 January 298 366 376 5 1,045 Exchange translation differences (16) (26) (22) (2) (66) Charge for the year 32 85 108 1 226 Impairment charge 1 – 4 – 5 Attributable to assets sold, transferred or written off 2 (80) (65) (162) – (307) Assets held for sale (28) (12) (2) – (42) Accumulated at 31 December 207 348 302 4 861 Net book amount at 31 December 342 171 478 3 994 1 Refer to the cash ﬂow statement under cash ﬂows from invest ing act iv it ies section for the purchase of property, plant and equipment during the year of $139mill ion on page 164 2 Disposals for property, plant and equipment during the year of $30 mill ion in the cash ﬂow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the year and the net book value disposed Group Notes to the ﬁnancial statements cont inued Standard Chartered Bank 254 Directors’ Report and Financ ial Statements 2023 17. Property, plant and equipment continued Company 2023 Leased Leased premises equipment Premises Equipment assets assets Total $mill ion $mill ion $mill ion $mill ion $mill ion Cost or valuation At 1 January 205 311 377 1 894 Exchange translation differences (2) (2) (3) – (7) Addit ions 1 7 46 112 – 165 Disposals, transfers and fully depreciated assets written off 2 (27) (52) – – (79) Assets held for sale 17 – – – 17 As at 31 December 200 303 486 1 990 Depreciat ion Accumulated at 1 January 75 191 197 1 464 Exchange translation differences – – (15) – (15) Charge for the year 9 45 43 – 97 Impairment release – – (1) – (1) Attributable to assets sold, transferred or written off 2 (26) (52) – – (78) Assets held for sale 2 – – – 2 Accumulated at 31 December 60 184 224 1 469 Net book amount at 31 December 140 119 262 – 521 1 Refer to the cash ﬂow statement under cash ﬂows from invest ing act iv it ies section for the purchase of property, plant and equipment during the year of $53 mill ion on page 164 2 Disposals for property, plant and equipment during the year of $1 mill ion in the cash ﬂow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the year and the net book value disposed 2022 Leased Leased premises equipment Premises Equipment assets assets Total $mill ion $mill ion $mill ion $mill ion $mill ion Cost or valuation At 1 January 314 309 596 1 1,220 Exchange translation differences (19) (12) (17) – (48) Addit ions 1 12 47 24 – 83 Disposals and fully depreciated assets written off 2 (75) (31) (226) – (332) Assets held for sale (27) (2) – – (29) As at 31 December 205 311 377 1 894 Depreciat ion Accumulated at 1 January 150 182 260 1 593 Exchange translation differences (7) (9) (8) – (24) Charge for the year 13 49 61 – 123 Impairment charge/(release) 1 – (2) – (1) Attributable to assets sold, transferred or written off 2 (74) (30) (114) – (218) Assets held for sale (8) (1) – – (9) Accumulated at 31 December 75 191 197 1 464 Net book amount at 31 December 130 120 180 – 430 1 Refer to the cash ﬂow statement under cash ﬂows from invest ing act iv it ies section for the purchase of property, plant and equipment during the year of $59mill ion on page 164 2 Disposals for property, plant and equipment during the year of $14 mill ion in the cash ﬂow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the year and the net book value disposed Notes to the ﬁnancial statements cont inued Standard Chartered Bank 255 Directors’ Report and Financ ial Statements 2023 18. Leased assets Accounting policy Where the Group is a lessee and the lease is deemed in scope, it recognises a liab il ity equal to the present value of lease payments over the lease term, discounted using the incremental borrowing rate applicable in the economic environment of the lease. The liab il ity is recognised in ‘Other liab il it ies’. A correspond ing right-of-use asset equal to the liab il ity, adjusted for any lease payments made at or before the commencement date, is recognised in ‘Property, plant and equipment’. The lease term includes any extension options contained in the contract that the Group is reasonably certain it will exercise. The Group subsequently depreciates the right-of-use asset using the straight-line method over the lease term and measures the lease liab il ity using the effective interest method. Depreciat ion on the asset is recognised in ‘Depreciat ion and amortisat ion’, and interest on the lease liab il ity is recognised in ‘Interest expense’. If a leased premise, or a physically dist inct port ion of a premise such as an ind iv idual ﬂoor, is deemed by management to be surplus to the Group’s needs and action has been taken to abandon the space before the lease expires, this is considered an ind icator of impa irment. An impa irment loss is recognised if the right-of-use asset, or portion thereof, has a carrying value in excess of its value-in-use when taking into account factors such as the abil ity and l ikel ihood of obta in ing a subtenant. The judgements in determin ing lease balances are the determ inat ion of whether the Group is reasonably certain that it will exercise extension options present in lease contracts. On in it ial recognit ion, the Group cons iders a range of characterist ics such as premises function, regional trends and the term remain ing on the lease to determ ine whether it is reasonably certain that a contractual right to extend a lease will be exercised. Where a change in assumption is conﬁrmed by the local property management team, a remeasurement is performed in the Group-managed vendor system. The estimates are the determinat ion of incremental borrowing rates in the respective economic environments. The Group uses third party broker quotes to estimate its USD cost of senior unsecured borrowing, then uses cross currency swap pric ing informat ion to determ ine the equivalent cost of borrowing in other currencies. If it is not possible to estimate an incremental borrowing rate through this process, other proxies such as local government bond yields are used. The Group primar ily enters lease contracts that grant it the right to use premises such as ofﬁce build ings and reta il branches. Exist ing lease l iab il it ies may change in future periods due to changes in assumptions or decis ions to exerc ise lease renewal or terminat ion opt ions, changes in payments due to renegotiat ions of market rental rates as perm itted by those contracts and changes to payments due to rent being contractually linked to an inﬂat ion index. In general the re-measurement of a lease liab il ity under these circumstances leads to an equal change to the right-of-use asset balance, with no immed iate effect on the income statement. The total cash outﬂow during the year for premises and equipment leases was $131 mill ion for Group and $62 m ill ion for Company. The total expense during the year in respect of leases with a term less than or equal to 12 months Nil mill ion for Group. The right-of-use asset balances and depreciat ion charges are d isclosed in Note 17. The lease liab il ity balances are disclosed in Note 22 and the interest expense on lease liab il it ies is disclosed in Note 3. Maturity analysis The maturity proﬁle for lease liab il it ies assoc iated with leased premises and equipment assets is as follows: Group 2023 Between one Between two One year or year and two years and ﬁve More than ﬁve less years years years Total $mill ion $mill ion $mill ion $mill ion $mill ion Other liab il it ies – lease l iab il it ies 123 103 208 308 742 2022 Between one Between two One year or year and two years and ﬁve More than ﬁve less years years years Total $mill ion $mill ion $mill ion $mill ion $mill ion Other liab il it ies – lease l iab il it ies 130 119 260 238 747 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 256 Directors’ Report and Financ ial Statements 2023 18. Leased assets continued Company 2023 Between one Between two One year or year and two years and ﬁve More than ﬁve less years years years Total $mill ion $mill ion $mill ion $mill ion $mill ion Other liab il it ies – lease l iab il it ies 60 48 89 201 398 2022 Between one Between two One year or year and two years and ﬁve More than ﬁve less years years years Total $mill ion $mill ion $mill ion $mill ion $mill ion Other liab il it ies – lease l iab il it ies 63 57 133 111 364 19. Other assets Group Other assets include: 2023 2022 $mill ion $mill ion Financ ial assets held at amort ised cost (Note 12): Cash collateral 1 8,378 11,372 Acceptances and endorsements 3,967 3,777 Unsettled trades and other ﬁnancial assets 8,369 12,061 20,714 27,210 Non-ﬁnancial assets: Commodit ies 2 7,405 10,174 Other assets 388 257 28,507 37,641 1 Cash collateral are margins placed to collateralize net derivat ive mark-to-market (MTM) pos it ions 2 Commodit ies and em iss ions cert if icates are carr ied at fair value less costs to sell, $3.6 bill ion (31 December 2022: $5.5 b ill ion) are class if ied as Level 1 and $3.8 b ill ion are classif ied as Level 2 (31 December 2022: $4.6 b ill ion) Company Other assets include: 2023 2022 $mill ion $mill ion Financ ial assets held at amort ized cost (Note 12): Cash collateral 1 7,505 10,231 Acceptances and endorsements 2,315 2,737 Unsettled trades and other ﬁnancial assets 7,170 10,657 16,990 23,625 Non-ﬁnancial assets: Commodit ies 2 4,485 7,921 Other assets 267 169 21,742 31,715 1 Cash collateral are margins placed to collateralize net derivat ive mark-to-market (MTM) pos it ions 2 Commodit ies and em iss ions cert if icates are carr ied at fair value less costs to sell, $3.2 bill ion (31 December 2022: $3.2 b ill ion) are class if ied as Level 1 and $1.2 b ill ion are classif ied as Level 2 (31 December 2022: $4.7 b ill ion). Notes to the ﬁnancial statements cont inued Standard Chartered Bank 257 Directors’ Report and Financ ial Statements 2023 20. Assets held for sale and associated liab il it ies Accounting policy Upon reclassif icat ion property, plant and equipment are measured at the lower of their carrying amount and fair value less costs to sell. Financ ial instruments continue to be measured per the accounting polic ies in Note 12 Financ ial instruments. The assets below have been presented as held for sale following the approval of Group management and the transactions are expected to complete in 2024. Group Assets held for sale The ﬁnancial assets reported below are class if ied under Level 1 $101 m ill ion (31 December 2022: $345 m ill ion), Level 2 $541 mill ion (31 December 2022: $946 m ill ion) and Level 3 $51 m ill ion (31 December 2022: $100 m ill ion). 2023 2022 $mill ion $mill ion Financ ial assets held at fa ir value through proﬁt or loss – 3 Equity shares – 2 Derivat ive F inanc ial Instruments – Assets – 1 Financ ial assets held at amort ised cost¹ 693 1,388 Cash and balances at central banks 246 423 Loans and advances to banks 24 81 Loans and advances to customers 243 508 Debt securit ies held at amort ised cost 180 376 Goodwill and intang ible assets¹ – 4 Property, plant and equipment¹ 12 36 Others 50 55 755 1,486 1 Refer to the cash ﬂow statement under cash ﬂow from invest ing act iv it ies for Jordan sale ($108 mill ion) dur ing the year 2023 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 258 Directors’ Report and Financ ial Statements 2023 20. Assets held for sale and associated liab il it ies cont inued Liab il it ies held for sale The ﬁnancial l iab il it ies reported below are class if ied under Level 1 $54m ill ion (31 December 2022: $402m ill ion) and Level 2 $672 mill ion (31 December 2022: $833 m ill ion). 2023 2022 $mill ion $mill ion Financ ial l iab il it ies held at fa ir value through proﬁt or loss – 5 Derivat ive ﬁnancial instruments – 5 Financ ial l iab il it ies held at amort ised cost 726 1,230 Deposits by banks 3 17 Customer accounts 723 1,213 Other liab il it ies 50 64 Provis ions for l iab il it ies and charges 11 8 787 1,307 Company Assets held for sale The ﬁnancial assets reported below are class if ied under Level 1 n il (31 December 2022: $198 mill ion), Level 2 n il (31 December 2022: $248 mill ion) and Level 3 $52 m ill ion (31 December 2022: $100 m ill ion). 2023 2022 $mill ion $mill ion Financ ial assets held at fa ir value through proﬁt or loss – 2 Equity shares – 2 Financ ial assets held at amort ised cost 52 544 Cash and balances at central banks – 96 Loans and advances to banks – 74 Loans and advances to customers 52 230 Debt securit ies held at amort ised cost – 144 Goodwill and intang ible assets – 3 Property, plant and equipment – 20 Others 16 23 68 592 Liab il it ies held for sale The ﬁnancial l iab il it ies reported below are class if ied under Level 1 n il (31 December 2022: $325 mill ion) and Level 2 n il (31 December 2022: $10 mill ion). 2023 2022 $mill ion $mill ion Financ ial l iab il it ies held at amort ised cost – 335 Deposits by banks – 7 Customer accounts – 328 Other liab il it ies 5 10 5 345 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 259 Directors’ Report and Financ ial Statements 2023 21. Debt securit ies in issue Accounting policy Refer to Note 12 Financ ial instruments for the relevant accounting policy. Group 2023 2022 Certif icates of Certif icates of deposit of Other debt deposit of Other debt $100,000 or securit ies in $100,000 or securit ies in more issue Total more issue Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies in issue 13,833 22,648 36,481 20,026 16,956 36,982 Debt securit ies in issue included with in: Financ ial l iab il it ies held at fa ir value through proﬁt or loss (Note 12) – 9,850 9,850 – 7,563 7,563 Total debt securit ies in issue 13,833 32,498 46,331 20,026 24,519 44,545 Company 2023 2022 Certif icates of Certif icates of deposit of Other debt deposit of Other debt $100,000 or securit ies in $100,000 or securit ies in more issue Total more issue Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies in issue 13,733 21,007 34,740 19,926 15,066 34,992 Debt securit ies in issue included with in: Financ ial l iab il it ies held at fa ir value through proﬁt or loss (Note 12) – 9,554 9,554 – 7,271 7,271 Total debt securit ies in issue 13,733 30,561 44,294 19,926 22,337 42,263 In 2023, the Company issued a total of $2.9 bill ion sen ior notes for general business purposes of the Group as shown below: Securit ies $mill ion USD 1,500 mill ion callable ﬁxed-rate sen ior notes due 2029 (callable 2028) 1,500 USD 750 mill ion callable ﬁxed-rate sen ior notes due 2028 (callable 2027) 750 USD 653 mill ion callable ﬁxed- rate sen ior notes due 2030 (callable 2029) 653 Total senior notes issued 2,903 In 2022, the Company issued a total of $2.5 bill ion sen ior notes for general business purposes of the Group as shown below : Securit ies $mill ion CNY 1100 mill ion callable ﬁxed-rate sen ior notes due 2026 (callable 2025) 158 SGD 225 mill ion callable ﬁxed-rate sen ior notes due 2033 (callable 2032) 190 HKD 800 mill ion callable ﬁxed-rate sen ior notes due 2025 (callable 2024) 103 $1,000 mill ion callable ﬁxed-rate sen ior notes due 2028 (callable 2027) 1,000 $1,000 mill ion callable ﬁxed-rate sen ior notes due 2025 (callable 2024) 1,000 Total senior notes issued 2,451 Where a debt instrument is callable, the issuer has the right to call. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 260 Directors’ Report and Financ ial Statements 2023 22. Other liab il it ies Accounting policy Refer to Note 12 Financ ial instruments for the relevant accounting policy for ﬁnanc ial l iab il it ies, Note 18 Leased assets for the accounting policy for leases and Note 30 Share-based payments for the accounting policy for cash-settled share-based payments. Group 2023 2022 $mill ion $mill ion Financ ial l iab il it ies held at amort ized cost (Note 12) Acceptances and endorsements 1 4,026 3,842 Cash collateral³ 7,960 8,304 Property leases 2 593 550 Equipment leases 2 1 2 Unsettled trades and other ﬁnancial l iab il it ies 11,529 12,869 24,109 25,567 Non-ﬁnancial l iab il it ies Cash-settled share-based payments – 2 Other liab il it ies 368 356 24,477 25,925 Company 2023 2022 $mill ion $mill ion Financ ial l iab il it ies held at amort ised cost (Note 12) Acceptances and endorsements 2,315 2,737 Cash collateral³ 7,289 7,710 Property leases 2 295 227 Unsettled trades and other ﬁnancial l iab il it ies 8,980 9,987 18,879 20,661 Non-ﬁnancial l iab il it ies Other liab il it ies 334 329 19,213 20,990 1 Includes early receipts of funds ($60 mill ion) from customer and correspond ing liab il ity is due on January 2024 2 Other ﬁnancial l iab il it ies include the present value of lease liab il it ies, as requ ired by IFRS 16 from 1 January 2019; refer to Note 18 3 Cash collateral are margins received against collateralize net derivat ive mark-to-market (MTM) pos it ions Notes to the ﬁnancial statements cont inued Standard Chartered Bank 261 Directors’ Report and Financ ial Statements 2023 23. Provis ions for l iab il it ies and charges Accounting policy The recognit ion and measurement of prov is ions for l iab il it ies and charges requ ires sign iﬁcant judgement and the use of estimates about uncertain future condit ions or events. Estimates include the best estimate of the probabil ity of outﬂow of econom ic resources, cost of settling a provis ion and t im ing of settlement. Judgements are required for inherently uncertain areas such as legal decis ions ( includ ing external adv ice obtained), and outcome of regulator reviews. Group 2023 2022 Expected Expected credit loss for credit loss for credit Other credit Other commitments 1 provis ions 2 Total commitments 1 provis ions 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 251 84 335 316 80 396 Exchange translation differences (8) 4 (4) (36) (4) (40) (Release)/charge against proﬁt (63) 15 (48) (29) 27 (2) Provis ions ut il ised – (45) (45) – (19) (19) Transfer 3 – (3) (3) – – – At 31 December 180 55 235 251 84 335 Company 2023 2022 Expected Expected credit loss for credit loss for credit Other credit Other commitments 1 provis ions 2 Total commitments 1 provis ions² Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 183 66 249 245 53 298 Exchange translation differences (2) – (2) (32) (3) (35) (Release)/charge against proﬁt (49) (4) (53) (30) 13 (17) Provis ions ut il ised – (20) (20) – (3) (3) Transfer 3 – (3) (3) – 6 6 At 31 December 132 39 171 183 66 249 1 Expected credit loss for credit commitment comprises those undrawn contractually committed facil it ies where there is doubt as to the borrowers’ abil ity to meet the ir repayment obligat ions. 2 Other provis ions cons ist mainly of provis ions for legal cla ims and regulatory and enforcement invest igat ions and proceedings. 3 Includes the provis ions transferred to held for sale. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 262 Directors’ Report and Financ ial Statements 2023 24. Contingent liab il it ies and comm itments Accounting policy Financ ial guarantee contracts and loan comm itments Financ ial guarantee contracts and any loan comm itments issued at below-market interest rates are in it ially recognised at their fair value as a ﬁnanc ial l iab il ity, and subsequently measured at the higher of the in it ial value less the cumulative amount of income recognised and their expected credit loss provis ion. Loan comm itments may be designated at fair value through proﬁt or loss where that is the business model under which such contracts are held. Notional values of ﬁnanc ial guarantee contracts and loan commitments are disclosed in the table below. Financ ial guarantees, trade cred its and irrevocable letters of credit are the notional values of contracts issued by the Group’s Transaction Banking business for which an obligat ion to make a payment has not ar isen at the reporting date. Transaction Banking will issue contracts to clients and counterparties of clients, whereby in the event the holder of the contract is not paid, the Group will reimburse the holder of the contract for the actual ﬁnanc ial loss suffered. These contracts have var ious legal forms such as letters of credit, guarantee contracts and performance bonds. The contracts are issued to facil itate trade through export and import business, provide guarantees to ﬁnanc ial inst itut ions where the Group has a local presence, as well as guaranteeing project ﬁnanc ing involv ing large construct ion projects undertaken by sovereigns and corporates. The contracts may contain performance clauses which require the counterparty performing services or provid ing goods to meet certain condit ions before a r ight to payment is achieved, however the Group does not guarantee this performance. The Group will only guarantee the credit of the counterparty paying for the services or goods. Commitments are where the Group has conﬁrmed its intent ion to prov ide funds to a customer or on behalf of a customer under prespecif ied terms and cond it ions in the form of loans, overdrafts, future guarantees whether cancellable or not and the Group has not made payments at the balance sheet date; those instruments are included in these ﬁnanc ial statements as commitments. Commitments and contingent liab il it ies are generally cons idered on demand as the Group may have to honour them, or the client may draw down at any time. Capital commitments are contractual commitments the Group has entered into to purchase non-ﬁnanc ial assets. The table below shows the contract or underlying princ ipal amounts of unmatured off-balance sheet transact ions at the balance sheet date. The contract or underlying princ ipal amounts ind icate the volume of bus iness outstanding and do not represent amounts at risk. Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Financ ial guarantees and trade cred its Financ ial guarantees, trade and irrevocable letters of credit 60,707 47,799 49,586 37,890 60,707 47,799 49,586 37,890 Commitments Undrawn formal standby facil it ies, credit lines and other commitments to lend One year and over 62,083 54,610 48,719 44,162 Less than one year 17,895 18,429 14,113 13,807 Uncondit ionally cancellable 37,921 34,846 6,175 6,036 117,899 107,885 69,007 64,005 Capital commitments Contracted capital expenditure approved by the directors but not provided for in these accounts 215 11 – – Notes to the ﬁnancial statements cont inued Standard Chartered Bank 263 Directors’ Report and Financ ial Statements 2023 24. Contingent liab il it ies and comm itments continued The table below shows the contract or underlying princ ipal amounts and r isk-weighted amounts of unmatured Group off-balance sheet transactions at the balance sheet date. The contract or underlying princ ipal amounts ind icate the volume of business outstanding and do not represent amounts at risk. Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Financ ial guarantees and trade cred its (Group) Financ ial guarantees, trade and irrevocable letters of credit 3,031 3,076 12,017 12,465 3,031 3,076 12,017 12,465 Commitments(Group) Undrawn commitments 1,504 1,007 1,916 1,936 1,504 1,007 1,916 1,936 As set out in Note 25, the Group has contingent liab il it ies in respect of certain legal and regulatory matters for which it is not practicable to estimate the ﬁnanc ial impact as there are many factors that may affect the range of possible outcomes. 25. Legal and regulatory matters Accounting policy The Group receives legal claims against it in a number of jur isd ict ions and is subject to regulatory and enforcement invest igat ions and proceedings from time to time. Apart from the matters described below, the Group currently considers none of the ongoing claims, invest igat ions or proceedings to be ind iv idually material. However, in light of the uncertaint ies involved in such matters there can be no assurance that the outcome of a particular matter or matters currently not considered to be material may not ultimately be material to the Group’s results in a particular reporting period depending on, among other things, the amount of the loss resulting from the matter(s) and the results otherwise reported for such period. Since 2014, the PLC Group has been named as a defendant in a series of lawsuits that have been ﬁled in the United States Distr ict Courts for the Southern and Eastern D istr icts of New York aga inst a number of banks (includ ing Standard Chartered or its afﬁl iates) on behalf of pla int iffs who are, or are relat ives of, vict ims of attacks in Iraq and Afghanistan. The plaint iffs in each of these lawsuits have alleged that the defendant banks aided and abetted the unlawful conduct of parties with connections to terrorist organisat ions in breach of the United States Anti-Terrorism Act. None of these lawsuits specify the amount of damages claimed. The PLC Group continues to defend these lawsuits. In January 2020, a shareholder derivat ive compla int was ﬁled by the City of Philadelph ia in New York State Court against 45 current and former directors and senior ofﬁcers of the PLC Group. It is alleged that the ind iv iduals breached their duties to the PLC Group and caused a waste of corporate assets by permitt ing the conduct that gave r ise to the costs and losses to the PLC Group related to legacy conduct and control issues. In March 2021, an amended complaint was served in which the Company and seven ind iv iduals were removed from the case. Standard Chartered PLC and Standard Chartered Holdings Lim ited rema ined as named “nominal defendants” in the complaint. In May 2021, Standard Chartered PLC ﬁled a motion to dism iss the compla int. In February 2022, the New York State Court ruled in favour of Standard Chartered PLC’s motion to dism iss the compla int. The plaint iffs are pursu ing an appeal against the February 2022 ruling. A hearing date for the plaint iffs' appeal is awaited. Bernard Madoff’s 2008 confession to running a Ponzi scheme through Bernard L. Madoff Investment Securit ies LLC (BMIS) gave rise to a number of lawsuits against the PLC Group. BMIS and the Fairf ield funds (wh ich invested in BMIS) are in bankruptcy and liqu idat ion, respectively. Between 2010 and 2012, ﬁve lawsuits were brought against the PLC Group by the BMIS bankruptcy trustee and the Fairf ield funds’ l iqu idators, in each case seeking to recover funds paid to the PLC Group’s clients pursuant to redemption requests made prior to BMIS’ bankruptcy ﬁl ing. The total amount sought in these cases exceeds USD 300 mill ion, exclud ing any pre-judgment interest that may be awarded. The four lawsuits commenced by the Fairf ield funds’ l iqu idators have been d ism issed and the appeals of those d ism issals by the funds’ l iqu idators are ongo ing. The Group has concluded that the threshold for recording provis ions pursuant to IAS 37 Prov is ions, Cont ingent Liab il it ies and Contingent Assets is not met with respect to the above matters; however, the outcomes of these lawsuits are inherently uncertain and diff icult to pred ict. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 264 Directors’ Report and Financ ial Statements 2023 26. Subordinated liab il it ies and other borrowed funds 2023 2022 $mill ion $mill ion Subordinated loan capital – issued by subsid iary undertak ings $540 mill ion ﬂoat ing rate subordinated notes due 2030 (callable 2025) 1 540 540 NPR 2.4 bill ion ﬁxed sub debt rate 10.3 per cent 2,3 18 – 558 540 Subordinated loan capital – issued by the Company $700 mill ion 8.0 per cent subord inated notes due 2031 342 345 $ 2 bill ion 2.335 per cent subord inated notes due 2023 – 2,000 $500 mill ion 4.96 per cent subord inated notes due 2043 414 393 $2 bill ion 4.82 per cent subord inated notes due 2044 1,856 1,821 $250 mill ion 4.82 per cent subord inated notes due 2048 250 250 $1 bill ion 2.94 per cent subord inated notes due 2029 999 991 $1.5 bill ion ﬂoat ing rate subordinated notes due 2032 1,250 1,250 $1 bill ion 3.516 per cent subord inated notes due 2030 965 881 £504 mill ion 6.1368 per cent subord inated notes due 2043 689 630 $2 bill ion 5.30 per cent subord inated notes due 2035 1,764 1,767 £527 mill ion ﬂoat ing rate subordinated notes due 2039 671 633 €1 bill ion 2.5 per cent subord inated notes due 2030 1,048 977 $750 mill ion 3.603 per cent subord inated notes due 2033 648 630 10,896 12,568 Primary capital ﬂoating rate notes $400 mill ion ﬂoat ing rate undated subordinated notes – 16 $300 mill ion ﬂoat ing rate undated subordinated notes (Series 2) – 69 $400 mill ion ﬂoat ing rate undated subordinated notes (Series 3) – 50 $200 mill ion ﬂoat ing rate undated subordinated notes (Series 4) – 26 – 161 Total for Group 11,454 13,269 1 Issued by Standard Chartered Bank Singapore Lim ited 2 Issued by Standard Chartered Bank Nepal Lim ited 3 NPR refers to Nepalese Rupee 2023 2022 $mill ion $mill ion USD 9,028 11,028 GBP 1,360 1,264 EUR 1,048 977 NPR 18 – Total 11,454 13,269 Redemptions and repurchases during the year Standard Chartered Bank exercised its right to redeem $2 bill ion 2.335 per cent subord inated notes 2023. Further to that the outstanding balances of ﬂoating rate undated subordinate notes were redeemed during the year. Issuances during the year On 1st March 2023, Standard Chartered Bank Nepal Lim ited issued NPR 2.4 bill ion 10.3 per cent ﬁxed rate dated subord inated notes due 2028. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 265 Directors’ Report and Financ ial Statements 2023 27. Share capital, other equity instruments and reserves Accounting policy Securit ies wh ich carry a discret ionary coupon and have no ﬁxed matur ity or redemption date are classif ied as other equ ity instruments. Interest payments on these securit ies are recogn ised, net of tax, as distr ibut ions from equity in the period in which they are paid. Where the Company or other members of the consolidated Group purchase the Company’s equity share capital, the considerat ion pa id is deducted from the total shareholders’ equity of the Group and/or of the Company as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any considerat ion rece ived is included in shareholders’ equity of the Group and/or the Company. Group and Company Total share Number of Ordinary Preference capital and ordinary Ordinary share share share Other equity shares share capital 1 premium premium premium instruments mill ions mill ions mill ions mill ions mill ions mill ions At 1 January 2022 20,597 20,597 296 1,500 22,393 4,749 Addit ional T ier 1 equity issuance – – – – – 1,000 Addit ional T ier 1 redemption – – – – – (999) At 31 December 2022 20,597 20,597 296 1,500 22,393 4,750 Cancellation of shares includ ing share buy-back 2 – – – (750) (750) – Addit ional T ier 1 equity issuance – – – – – 992 Addit ional T ier 1 redemption – – – – – (1,000) At 31 December 2023 20,597 20,597 296 750 21,643 4,742 1 Issued and fully paid ordinary shares of $1 each 2 Includes preference share capital of $37,500 Ordinary share capital The authorised share capital of the Company at 31 December 2023 was $26,789 mill ion and TWD 1,225 m ill ion (31 December 2022: $26,789 mill ion and TWD 1,225 m ill ion) made up of 26,782 m ill ion ord inary shares of $1 each, 2.4 mill ion non-cumulat ive irredeemable preference shares of $0.01 each, 1 mill ion non-cumulat ive preference shares of $5 each, 15,000 non-cumulative redeemable preference shares of $5 each, 462,500 non-cumulative redeemable 8.125% preference shares of $5 each and 50 mill ion non-cumulat ive redeemable preference shares of TWD24.50 each. The issued share capital of the Company at 31 December 2023 was $20,597 mill ion (31 December 2022: $20,597 m ill ion) made up of: 20,597 mill ion ord inary shares of $1 each. There was no new issue of shares during the year. The Company has one class of ordinary shares, which carries no rights to ﬁxed income. Subject to any special rights or restrict ions as to vot ing attached to any shares in accordance with the Company’s Royal Charter Bye-Laws and Rules, on a show of hands every member present at a general meeting by a representative or proxy shall have one vote. On a poll, every member holding shares or stock of less than the nominal amount of US$25 shall not have any vote, but every other member who is present in person or by proxy shall have votes in accordance with the following scale: Number of Nominal amount of Shares or Stock held Votes US$25 or more but less than US$50 1 vote US$50 or more but less than US$100 2 votes US$100 or more but less than US$250 3 votes US$250 or more but less than US$375 4 votes US$375 or more but less than US$500 5 votes US$500 or more but less than US$750 6 votes US$750 or more but less than US$1,000 7 votes US$1,000 or more but less than US$1,250 8 votes US$1,250 or more but less than US$1,500 9 votes US$1,500 or more 10 votes Notes to the ﬁnancial statements cont inued Standard Chartered Bank 266 Directors’ Report and Financ ial Statements 2023 27. Share capital, other equity instruments and reserves continued Preference share capital 7,500 non-cumulative redeemable preference shares issued on 8 December 2006 with a nominal value of $5 each and a premium of $99,995, making a paid-up amount per preference share of $100,000. The preference shares are redeemable at the option of the company in whole or in part on 31 Jan 2027 and on any quarterly div idend payment date fall ing on or around ten-year intervals thereafter. The amount payable on redemption will be the paid-up amount of $100,000 per preference share to be redeemed, plus an amount equal to the accrued but unpaid div idend thereon up to but exclud ing the redemption date. Other equity instruments The table provides details of outstanding Fixed Rate Resetting Perpetual Subordinated Contingent Convertible AT1 securit ies issued by Standard Chartered Bank. All issuances are made for general business purposes and to increase the regulatory capital base of the Group. Issuance date Nominal value Interest rate 1 Coupon payment dates 2 First reset dates 3 14 January 2021 USD 1,250 mill ion 4.75% 14 January, 14 July each year 14 July 2031 19 August 2021 USD 1,500 mill ion 4.30% 19 February, 19 August each year 19 August 2028 15 August 2022 USD 1,000 mill ion 7.75% 15 February, 15 August each year 15 February 2028 31 March 2023 USD 750 mill ion 7.75% 30 January, 30 July each year 30 July 3037 31 March 2023 GBP 96 mill ion 7.90% 4 April, 4 October each year 4 April 2028 31 March 2023 GBP 99 mill ion 7.90% 4 April, 4 October each year 4 April 2028 1 Interest rates for the period from (and includ ing) the issue date to (but excluding) the ﬁrst reset date 2 Interest payable semi-annually in arrears 3 Securit ies are resettable each date fall ing ﬁve years, or an integral multiple of ﬁve years, after the ﬁrst reset date The princ ipal terms of the AT1 secur it ies are descr ibed below: • The securit ies are perpetual and redeemable, at the opt ion of the Company in whole but not in part, on the ﬁrst call date or on any ﬁfth anniversary after the ﬁrst call date • The securit ies are also redeemable for certa in regulatory or tax reasons on any date at 100 per cent of their princ ipal amount together with any accrued but unpaid interest up to (but excluding) the date ﬁxed for redemption. Any redemption is subject to the Company giv ing not ice to the relevant regulator and the regulator granting permiss ion to redeem interest payments on these securit ies w ill be accounted for as a div idend • Interest on the securit ies is due and payable only at the sole and absolute discret ion of the Company, subject to certa in addit ional restr ict ions set out in the terms and condit ions. Accord ingly, the Company may at any time elect to cancel any interest payment (or part thereof) which would otherwise be payable on any interest payment date • The securit ies w ill be written down in full should the fully loaded Common Equity Tier 1 ratio of the issuer fall below 7.0 per cent (a Loss Absorption Event). The securit ies rank beh ind the claims against the Company of: (a) unsubordinated creditors; (b) claims which are expressed to be subordinated to the claims of unsubordinated creditors of the Company but not further or otherwise; or (c) claims which are, or are expressed to be, junior to the cla ims of other creditors of the Company, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank, pari passu with, or jun ior to, the cla ims of holders of the AT1 securit ies in a wind ing-up occurr ing prior to the Loss Absorption Event. Reserves The constituents of the reserves are summarised as follows: The capital reserve represents the exchange difference on redenominat ion of share cap ital and share premium from sterling to US dollars in 2001. The capital redemption reserve represents the nominal value of preference shares redeemed. • Own credit adjustment reserve represents the cumulative gains and losses on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss relating to own credit. Gains and losses on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss relating to own credit in the year have been taken through other comprehensive income into this reserve. On derecognit ion of appl icable instruments, the balance of any OCA will not be recycled to the income statement, but will be transferred with in equ ity to retained earnings • Fair value through other comprehensive income (FVOCI) debt reserve represents the unrealised fair value gains and losses in respect of ﬁnanc ial assets class if ied as FVOCI, net of expected cred it losses. Gains and losses are deferred in this reserve and are reclassif ied to the income statement when the underlying asset is sold, matures or becomes impa ired. • FVOCI equity reserve represents unrealised fair value gains and losses in respect of ﬁnanc ial assets class if ied as FVOCI. Gains and losses are recorded in this reserve and never recycled to the income statement Notes to the ﬁnancial statements cont inued Standard Chartered Bank 267 Directors’ Report and Financ ial Statements 2023 27. Share capital, other equity instruments and reserves continued • Cash ﬂow hedge reserve represents the effective portion of the gains and losses on derivat ives that meet the cr iter ia for these types of hedges. Gains and losses are deferred in this reserve and are reclassif ied to the income statement when the underlying hedged item affects proﬁt and loss or when a forecast transaction is no longer expected to occur. • Translation reserve represents the cumulative foreign exchange gains and losses on translation of the net investment of the Group in foreign operations. Since 1 January 2004, gains and losses are deferred to this reserve and are reclassif ied to the income statement when the underlying foreign operation is disposed. Gains and losses aris ing from der ivat ives used as hedges of net investments are netted against the foreign exchange gains and losses on translation of the net investment of the foreign operations. • Retained earnings represents proﬁts and other comprehensive income earned by the Group and Company in the current and prior periods, together with the after tax increase relating to equity-settled share options, less div idend d istr ibut ions and own shares held (treasury shares). A substantial part of the Group’s reserves is held in overseas subsid iary undertak ings and branches, princ ipally to support local operations or to comply with local regulations. The maintenance of local regulatory capital ratios could potentially restrict the amount of reserves which can be remitted. In addit ion, if these overseas reserves were to be remitted, further unprovided taxation liab il it ies m ight arise. As at 31 December 2023, the distr ibutable reserves of Standard Chartered Bank (the Company) were $2.7 b ill ion (2022: $5.2 bill ion). These compr ised of retained earnings. Distr ibut ion of reserves is subject to mainta in ing min imum capital requirements. 28. Non-controlling interests $mill ion At 1 January 2022 1,248 Comprehensive loss for the year (56) Loss in equity attributable to non-controlling interests (38) Other loss attributable to non-controlling interests (18) Distr ibut ions (87) Other increases 1 59 At 31 December 2022 1,164 Comprehensive loss for the year (2) Loss in equity attributable to non-controlling interests (31) Other proﬁts attributable to non-controlling interests 29 Distr ibut ions (103) Other increases 2 21 At 31 December 2023 1,080 1 Addit ional investment by minor ity shareholders in Trust Bank Singapore Lim ited ($47 m ill ion), Power2SME Pte. Ltd. ($9 m ill ion), & Zod ia Markets Holdings Lim ited ($3 mill ion) 2 Addit ional investment by minor ity shareholders ($28 m ill ion) majorly in Trust Bank Singapore Lim ited offset by release of interest on account of change in ownership ($7 mill ion) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 268 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions Accounting policy The Bank Group operates pension and other post-retirement beneﬁt plans around the world, which can be categorised into deﬁned contribut ion plans and deﬁned beneﬁt plans. • For deﬁned contribut ion plans, the Bank Group pays contribut ions to publ icly or privately admin istered pens ion plans on a statutory or contractual basis, and such amounts are charged to operating expenses. The Bank Group has no further payment obligat ions once the contr ibut ions have been pa id. • For deﬁned beneﬁt plans, which promise levels of payment where the future cost is not known with certainty: – The accounting obligat ion is calculated annually by independent actuaries using the projected unit method. – Actuarial gains and losses that arise are recognised in shareholders’ equity and presented in the statement of other comprehensive income in the period they arise. – The Group determines the net interest expense on the net deﬁned beneﬁt liab il ity for the year by applying the discount rate used to measure the deﬁned beneﬁt obligat ion at the beg inn ing of the annual per iod to the net deﬁned beneﬁt liab il ity, taking into account any changes in the net deﬁned beneﬁt liab il ity during the year as a result of contribut ions and beneﬁt payments. Net interest expense, the cost of the accrual of new beneﬁts, beneﬁt enhancements (or reductions) and admin istrat ion expenses met directly from plan assets are recognised in the income statement in the period in which they were incurred. Other accounting estimates and judgements There are many factors that affect the measurement of the retirement beneﬁt obligat ions. Th is measurement requires the use of estimates, such as discount rates, inﬂat ion, pens ion increases, salary increases, and life expectancies which are inherently uncertain. The table below summarises how these assumptions are set Assumption Detail Discount rate Determined by reference to market yields at the end of the reporting period on high-quality corporate bonds (or, in countries where there is no deep market in such bonds, government bonds) of a currency and term consistent with the currency and term of the post-employment beneﬁt obligat ions. Th is is the approach adopted across all our geographies. Inﬂation Where there are inﬂat ion-l inked bonds available (e.g. United Kingdom and the eurozone), the Group derives inﬂat ion based on the market on those bonds, w ith the market yield adjusted in respect of the United Kingdom to take account of the fact that liab il it ies are l inked to Consumer Price Index inﬂat ion, whereas the reference bonds are linked to Retail Price Index inﬂat ion. Where no inﬂat ion-l inked bonds exist, we determine inﬂat ion assumpt ions based on a combinat ion of long-term forecasts and short-term inﬂat ion data. Salary growth Salary growth assumptions reﬂect the Group’s long-term expectations, taking into account future business plans and macroeconomic data (primar ily expected future long-term inﬂat ion). Demographic Demographic assumptions, includ ing mortal ity and turnover rates, are typically set based on the assumptions assumptions used in the most recent actuarial funding valuation, and will generally use industry standard tables, adjusted where appropriate to reﬂect recent histor ic exper ience and/or future expectations. The sensit iv ity of the liab il it ies to changes in these assumptions is shown in the Note below Group Retirement beneﬁt obligat ions compr ise: 2023 2022 $mill ion $mill ion Deﬁned beneﬁt plans obligat ion 161 147 Deﬁned contribut ion plans obl igat ion 16 19 Net obligat ion 177 166 Retirement beneﬁt charge comprises: 2023 2022 $mill ion $mill ion Deﬁned beneﬁt plans 41 28 Deﬁned contribut ion plans 271 247 Charge against proﬁt (Note 7) 312 275 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 269 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued The Group operates over 50 deﬁned beneﬁt plans across its geographies, many of which are closed to new entrants who now join deﬁned contr ibut ion arrangements. The a im of all these plans is, as part of the Group’s commitment to ﬁnanc ial wellbeing for employees, to give employees the opportunity to save appropriately for retirement in a way that is consistent with local regulations, taxation requirements and market condit ions. The deﬁned beneﬁt plans expose the Group to currency risk, interest rate risk, investment risk and actuarial risks such as longevity risk. The material holdings of government and corporate bonds shown on page 273 partially hedge movements in the liab il it ies resulting from interest rate and inﬂat ion changes. Sett ing aside movements from other drivers such as currency ﬂuctuation, reduction in discount rates in most countries with material pension liab il it ies over 2023 has led to h igher liab il it ies. Th is has been partly offset by increases in the value of bonds held as well as good performance of growth assets such as equit ies, leading to an increase in the pension deﬁc it reported. These movements are shown as actuar ial gains and losses in the table below. Contribut ions into a number of plans in excess of the amounts required to fund beneﬁts accruing have also partially offset the increase in the net deﬁc it over the year. The disclosures required under IAS 19 have been calculated by independent qualif ied actuar ies based on the most recent full actuarial valuations updated, where necessary, to 31 December 2023. UK Fund The Standard Chartered Pension Fund (the ‘UK Fund’) is the Group’s largest pension plan, representing 67 per cent (31 December 2022: 67 per cent) of total pension liab il it ies. The UK Fund is set up under a trust that is legally separate from the Bank (its formal sponsor) and, as required by UK legislat ion, at least one-th ird of the trustee directors are nominated by members; the remainder are appointed by the Bank. The trustee directors have a ﬁduc iary duty to members and are responsible for governing the UK Fund in accordance with its Trust Deed and Rules. The UK Fund was closed to new entrants from 1 July 1998 and closed to the accrual of new beneﬁts from 1 April 2018. All employees are now offered membership of a deﬁned contribut ion plan. The ﬁnancial pos it ion of the UK Fund is regularly assessed by an independent qualif ied actuary. The fund ing valuation as at 31 December 2020 was completed in December 2021 by the Scheme Actuary, T Kripps of WTW, using assumptions different from those on page 286, and agreed with the UK Fund trustee. It showed that the UK Fund was 92% funded at that date, revealing a past service deﬁc it of $162m ill ion (£127 m ill ion). To repair the deﬁc it, three annual cash payments of $42 m ill ion (£32.9 m ill ion) were agreed, w ith the ﬁrst of these paid in December 2021, and two further instalments to be paid in December 2022 and December 2023. However, the agreement allows that, if the funding posit ion improves to being at or near a surplus in future years, the payments due in 2022 and 2023 will be reduced or elim inated. Based on the fund ing posit ions at the agreed measurement po int of mid-year, no payment was made in December 2022 and a reduced payment of $8m (£6m) was made in December 2023. As part of the 2020 valuation, in order to provide security for future contribut ions an add it ional $64 m ill ion nom inal gilts (£50 mill ion) were purchased and transferred into the exist ing escrow account of $140 m ill ion g ilts (£110 mill ion), topp ing it up to $204 mill ion. Under the terms of the 2020 valuation agreement, the $8 mill ion payment made in December 2023 is deductible from the funds held in escrow. The Bank Group has not recognised any addit ional l iab il ity under IFRIC 14 as the Bank has control of any pension surplus under the Trust Deed and Rules. Virg in Med ia vs NTL Pension Trustees II Ltd Following the June 2023 ruling in the case of Virg in Med ia vs NTL Pension Trustees II Lim ited, the Bank has cons idered the potential impact of this ruling on the UK Fund and is of the view that any potential impact is not expected to be material. Overseas plans The princ ipal overseas deﬁned beneﬁt arrangements operated by the Bank Group are in Germany, India, Jersey, United Arab Emirates (UAE) and the United States of America (US). Plans in Germany, India and UAE remain open for accrual of future beneﬁts. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 270 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued Key assumptions The princ ipal ﬁnancial assumpt ions used at 31 December 2023 were: 2023 2022 Overseas Overseas UK Fund Plans 1 Unfunded Plans 2 UK Funded Plans 1 Unfunded Plans 2 % % % % % % Discount rate 4.6 3.3 – 7.4 3.1 – 7.4 4.8 3.7 – 7.6 3.7 – 7.6 Price inﬂat ion 2.5 2.2 – 5.0 2.0 – 5.0 2.6 2.3 – 4.0 2.0 – 4.0 Salary increases n/a 3.7 – 8.5 4.0 – 8.5 n/a 3.8 – 7.8 3.7 – 7.8 Pension increases 2.3 0.0 - 2.9 N/A 2.4 0.0 - 3.1 0.0 – 2.4 8% in 2023 reducing 7% in 2022 reducing Post-retirement medical by 0.5% per annum by 0.5% per annum rate to 5% in 2029 to 5% in 2026 1 The range of assumptions shown is for the main funded deﬁned beneﬁt overseas plans in Germany, India, Jersey, and the US. These comprise around 80 per cent of the total liab il it ies of funded overseas deﬁned beneﬁt plans 2 The range of assumptions shown is for the main unfunded plans in, India, Thailand, UAE, UK and the US. They comprise around 90 per cent of the total liab il it ies of unfunded plans The princ ipal non-ﬁnancial assumpt ions are those made for UK life expectancy. The UK mortality tables are S3PMA for males and S3PFA for females, projected by year of birth with the CMI 2019 improvement model with a 1.25% annual trend and in it ial addit ion parameter of 0.25%. Scal ing factors of 92% for male pensioners, 92% for female pensioners, 92% for male dependants and 82% for female dependants have been applied. The assumptions for life expectancy for the UK Fund are that a male member currently aged 60 will live for 27 years (31 December 2022: 27 years) and a female member for 30 years (31 December 2022: 30 years) and a male member currently aged 40 will live for 29 years (31 December 2022: 29 years) and a female member for 32 years (31 December 2022: 31 years) after their 60th birthdays. Both ﬁnancial and non-ﬁnancial assumpt ions can be expected to change in the future, which would affect the value placed on the liab il it ies. For example, changes at the report ing date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the deﬁned beneﬁt obligat ion by the amounts shown below: • If the discount rate increased by 25 basis points, the liab il ity would reduce by approximately $35 mill ion for the UK Fund (31 December 2022: $30 mill ion) and $20 m ill ion for the other plans (31 December 2022: $15 m ill ion) • If the rate of inﬂat ion increased by 25 basis points, the liab il ity allowing for the consequent impact on pension and salary increases, would increase by approximately $20 mill ion for the UK Fund (31 December 2022: $20 m ill ion) and $10 m ill ion for the other plans (31 December 2022: $10 mill ion) • If the rate of salary growth relative to inﬂat ion increased by 25 basis points, the liab il ity would increase by nil for the UK Fund (31 December 2022: nil) and approximately $5 mill ion for the other plans (31 December 2022: $5 m ill ion) • If longevity expectations increased by one year, the liab il ity would increase by approximately $35 mill ion for the UK Fund (31 December 2022: $35 mill ion) and $10 m ill ion for the other plans (31 December 2022: $10 m ill ion) Although this analysis does not take account of the full distr ibut ion of cash ﬂows expected under the UK Fund, it does provide an approximat ion of the sens it iv ity to the main assumptions. While changes in other assumptions would also have an impact, the effect would not be as sign iﬁcant. Proﬁle of plan obligat ions Funded plans Unfunded UK Fund Overseas plans Duration of the deﬁned beneﬁt obligat ion ( in years) 11 11 9 Duration of the deﬁned beneﬁt obligat ion – 2022 11 11 9 Beneﬁts expected to be paid from plans Beneﬁts expected to be paid during 2024 80 34 18 Beneﬁts expected to be paid during 2025 82 29 16 Beneﬁts expected to be paid during 2026 84 31 17 Beneﬁts expected to be paid during 2027 86 31 16 Beneﬁts expected to be paid during 2028 89 35 17 Beneﬁts expected to be paid during 2029 to 2033 478 204 78 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 271 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued Fund values: The fair value of assets and present value of liab il it ies of the deﬁned beneﬁt plans were: UK Fund Overseas plans Unquoted Unquoted Quoted assets assets Total assets Quoted assets assets Total assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 31 December 2022 Equit ies 2 – 2 97 – 97 Government bonds 206 – 206 104 – 104 Corporate bonds 309 82 391 81 – 81 Hedge funds – 14 14 – – – Infrastructure – 177 177 – – – Property – 126 126 – – – Derivat ives 2 – 2 – – – Cash and equivalents 257 – 257 21 – 21 Others 7 4 11 – 63 63 Total fair value of assets 1 783 403 1,186 303 63 366 At 31 December 2023 Equit ies 2 – 2 44 – 44 Government bonds 443 – 443 119 – 119 Corporate bonds 360 113 473 148 – 148 Hedge funds – 9 9 – – – Infrastructure – 166 166 – – – Property – 84 84 – – – Derivat ives 2 5 7 – – – Cash and equivalents 66 – 66 20 – 20 Others 7 2 9 - 78 78 Total fair value of assets 1 880 379 1,259 331 78 409 1 Self-investment is monitored closely and is less than $1 mill ion of Standard Chartered equ it ies and bonds for 2023 (31 December 2022: <$1 m ill ion). Self- investment is only allowed where it is not practical to exclude it – for example through investment in index-tracking funds where Standard Chartered is a constituent of the relevant index At 31 December 2023 At 31 December 2022 Funded plans Funded plans Overseas Unfunded Overseas Unfunded UK Fund Plans Plans UK Fund Plans Plans $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Total fair value of assets 1,259 409 N/A 1,186 366 N/A Present value of liab il it ies (1,219) (429) (181) (1,138) (394) (167) Net pension plan asset/(obligat ion) 40 (20) (181) 48 (28) (167) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 272 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued The pension cost for deﬁned beneﬁt plans was: Funded plans Overseas Unfunded UK Fund plans plans Total 2023 $mill ion $mill ion $mill ion $mill ion Current service cost 1 – 15 9 24 Past service cost and curtailments 2 8 – – 8 Settlement cost 3 – 2 – 2 Interest income on pension plan assets (57) (25) – (82) Interest on pension plan liab il it ies 56 25 8 89 Total charge to proﬁt before deduction of tax 7 17 17 41 Net (gains)/losses on plan assets 4 (18) (50) – (68) (Gains)/losses on liab il it ies 30 57 8 95 Total (gains)/losses recognised directly in statement of comprehensive income before tax 12 7 8 27 Deferred taxation (1) (6) – (7) Total (gains)/losses after tax 11 1 8 20 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 2 Includes the cost of discret ionary increases paid to UK pensioners 3 Terminat ion beneﬁts pa id from the pension plan in Indonesia 4 The actual return on the UK Fund assets was a gain of $75 mill ion and on overseas plan assets was a ga in of $75 mill ion Funded plans Overseas Unfunded UK Fund plans plans Total 2022 $mill ion $mill ion $mill ion $mill ion Current service cost 1 – 17 6 23 Past service cost and curtailments 2 – 1 – 1 Settlement cost – – – – Interest income on pension plan assets (33) (23) – (56) Interest on pension plan liab il it ies 32 22 6 60 Total charge to proﬁt before deduction of tax (1) 17 12 28 Net (gains)/losses on plan assets 3 485 68 – 553 (Gains)/losses on liab il it ies (452) (83) (41) (576) Total (gains)/losses recognised directly in statement of comprehensive income before tax 33 (15) (41) (23) Deferred taxation 7 5 – 12 Total (gains)/losses after tax 40 (10) (41) (11) 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2021: $1 m ill ion) 2 Past service costs arose from plan amendments in India, Kenya, Maurit ius and Sr i Lanka 3 The actual return on the UK Fund assets was a gain of $452 mill ion and on overseas plan assets was a ga in of $45 mill ion Notes to the ﬁnancial statements cont inued Standard Chartered Bank 273 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued Movement in the deﬁned beneﬁt pension plan deﬁc it dur ing the year comprise: Funded plans Overseas Unfunded UK Fund plans plans Total $mill ion $mill ion $mill ion $mill ion Surplus/(deﬁcit) at 1 January 2023 48 (28) (167) (147) Contribut ions 8 38 14 60 Current service cost – (15) (9) (24) Past service cost and curtailments (8) – – (8) Settlement costs and transfers impact – (2) – (2) Net interest on the net deﬁned beneﬁt asset/liab il ity 1 – (8) (7) Actuarial (losses)/gains (12) (7) (8) (27) Asset held for sale – (7) 6 (1) Exchange rate adjustment 3 1 (9) (5) Surplus/(deﬁcit) at 31 December 2023¹ 40 (20) (181) (161) 1 The deﬁcit total of $161 m ill ion is made up of plans in deﬁc it of $236 m ill ion (31 December 2022: $220 m ill ion) net of plans in surplus with assets totalling $75 mill ion (31 December 2022: $73 mill ion) Funded plans Overseas Unfunded UK Fund plans plans Total $mill ion $mill ion $mill ion $mill ion Surplus/(deﬁcit )at 1 January 2022 88 (47) (228) (187) Contribut ions – 32 14 46 Current service cost – (17) (6) (23) Past service cost and curtailments – (1) – (1) Settlement costs and transfers impact – – – – Net interest on the net deﬁned beneﬁt asset/liab il ity 1 1 (6) (4) Actuarial (losses)/gains (33) 15 41 23 Assets held for sale – (4) 2 (2) Exchange rate adjustment (8) (7) 16 1 Surplus/(deﬁcit) at 31 December 2022¹ 48 (28) (167) (147) 1 The deﬁcit total of $147 m ill ion is made up of plans in deﬁc it of $220 m ill ion (31 December 2022: $305 m ill ion) net of plans in surplus with assets totalling $73 mill ion (31 December 2022: $118 mill ion) The Bank Group’s expected contribut ion to its deﬁned beneﬁt pension plans in 2024 is $ 31 mill ion. 2023 2022 Assets Obligat ions Total Assets Obligat ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 1,552 (1,699) (147) 2,424 (2,611) (187) Contribut ions 1 61 (1) 60 47 (1) 46 Current service cost 2 – (24) (24) – (23) (23) Past service cost and curtailments – (8) (8) – (1) (1) Settlement costs & transfers – (2) (2) (5) 5 – Interest cost on pension plan liab il it ies – (89) (89) – (60) (60) Interest income on pension plan assets 82 – 82 56 – 56 Beneﬁts paid out (120) 120 – (130) 130 – Actuarial (losses)/gains 3 68 (95) (27) (553) 576 23 Assets held for sale (7) 6 (1) (18) 16 (2) Exchange rate adjustment 32 (37) (5) (269) 270 1 At 31 December 1,668 (1,829) (161) 1,552 (1,699) (147) 1 Includes employee contribut ion of $1 m ill ion (31 December 2022: $1 m ill ion) 2 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 3 Actuarial loss on obligat ion compr ises of $28 mill ion loss (31 December 2022: $644 m ill ion ga in) from ﬁnanc ial assumpt ion changes, $1 mill ion loss (31 December 2022: $4 mill ion ga in) from demographic assumption changes and $34 mill ion loss (31 December 2022: $74 m ill ion loss) from exper ience Notes to the ﬁnancial statements cont inued Standard Chartered Bank 274 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued Company Retirement beneﬁt obligat ions compr ise: 2023 2022 $mill ion $mill ion Deﬁned beneﬁt plans obligat ion 128 120 Deﬁned contribut ion plans obl igat ion 5 4 Net obligat ion 133 124 Retirement beneﬁt charge comprises: 2023 2022 $mill ion $mill ion Deﬁned beneﬁt plans 29 17 Deﬁned contribut ion plans 135 119 Charge against proﬁt 164 136 UK Fund See the Bank Group section on the UK Fund in this note (page 341). There are no differences between Bank Group and Company in respect of the Fund Overseas Plans The princ ipal overseas deﬁned beneﬁt arrangements operated by the Company are in Germany, Jersey, India, United Arab Emirates (UAE) and the United States of Americas (US). All Plans The disclosures required under IAS 19 have been calculated by qualif ied independent actuaries based on the most recent full actuarial valuations updated, where necessary, to 31 December 2023. The ﬁnancial assumpt ions used at 31 December 2023 as shown below. Sensit iv it ies are recorded on page 271 of the Bank Group accounts and those for non-UK Fund plans are applicable in proportion to the lower liab il it ies of the Company. 2023 2022 Overseas Overseas UK Fund Plans 1 Unfunded Plans 2 UK Funded Plans 1 Unfunded Plans 2 % % % % % % Discount rate 4.6 3.3 – 7.4 4.6 – 7.4 4.8 3.7 – 7.6 4.8 – 7.6 Price inﬂat ion 2.5 2.2 – 5.0 2.5 – 5.0 2.6 2.3 – 4.0 2.5 – 4.0 Salary increases n/a 3.7 – 8.5 4.0 – 8.5 n/a 3.8 – 7.8 4.0 – 7.8 Pension increases 2.3 0.0 - 2.9 0.0 – 2.3 2.4 0.0 - 3.1 0.0 – 2.4 8% in 2023 reducing 7% in 2022 reducing Post-retirement medical by 0.5% per annum by 0.5% per annum rate to 5% in 2029 to 5% in 2026 1 The range of assumptions shown is for the main funded deﬁned beneﬁt overseas plans in Germany, India, Jersey and the US. These comprise around 80 per cent of the total liab il it ies of funded overseas plans 2 The range of assumptions shown is for the main unfunded plans in India, UAE and the UK. These comprise around 85 per cent of the total liab il it ies of unfunded plans Notes to the ﬁnancial statements cont inued Standard Chartered Bank 275 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued Fund values: The fair value of assets and present value of liab il it ies of the deﬁned beneﬁt plans were: UK Fund Overseas plans Unquoted Unquoted Quoted assets assets Total assets Quoted assets assets Total assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 31 December 2022 Equit ies 2 – 2 90 – 90 Government bonds 206 – 206 94 – 94 Corporate bonds 309 82 391 79 – 79 Hedge funds – 14 14 – – – Infrastructure – 177 177 – – – Property – 126 126 – – – Derivat ives 2 – 2 – – – Cash and equivalents 257 – 257 15 – 15 Others 7 4 11 – 27 27 Total fair value of assets 1 783 403 1,186 278 27 305 At 31 December 2023 Equit ies 2 – 2 39 – 39 Government bonds 443 – 443 111 – 111 Corporate bonds 360 113 473 146 – 146 Hedge funds – 9 9 – – – Infrastructure – 166 166 – – – Property – 84 84 – – – Derivat ives 2 5 7 – – – Cash and equivalents 66 – 66 12 – 12 Others 7 2 9 – 32 32 Total fair value of assets 1 880 379 1,259 308 32 340 1 Self investment is monitored closely and is less than $1 mill ion of Standard Chartered equ it ies and bonds for 2023 (31 December 2022: <$1 m ill ion). Self- investment is only allowed where it is not practical to exclude it – for example through investment in index-tracking funds where Standard Chartered is a constituent of the relevant index At 31 December 2023 At 31 December 2022 Funded plans Funded plans Overseas Unfunded Overseas Unfunded UK Fund Plans Plans UK Fund Plans Plans $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Total fair value of assets 1,259 340 N/A 1,186 305 N/A Present value of liab il it ies (1,219) (338) (170) (1,138) (315) (158) Net pension plan asset/(obligat ion) 40 2 (170) 48 (10) (158) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 276 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued The pension cost for deﬁned beneﬁt plans was: Funded plans Overseas Unfunded UK Fund plans Plans Total 2023 $mill ion $mill ion $mill ion $mill ion Current service cost 1 – 7 6 13 Past service cost and curtailments 2 8 – – 8 Settlement cost – 2 – 2 Interest income on pension plan assets 3 (57) (18) – (75) Interest on pension plan liab il it ies 56 18 7 81 Total charge to proﬁt before deduction of tax 7 9 13 29 Net gains on plan assets 4 (18) (13) – (31) Loss on liab il it ies 30 18 8 56 Total loss recognised directly in statement of comprehensive income before tax 12 5 8 25 Deferred taxation (1) (3) – (4) Total loss after tax 11 2 8 21 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 2 Includes the cost of discret ionary pens ion increases paid to UK pensioners. 3 Terminat ion beneﬁts pa id from the pension plan in Indonesia. 4 The actual return on the UK Fund assets was a gain of $75 mill ion and on overseas plan assets was a ga in of $31 mill ion Funded plans Overseas Unfunded UK Fund plans plans Total 2022 $mill ion $mill ion $mill ion $mill ion Current service cost 1 – 9 4 13 Past service cost and curtailments – 1 – 1 Interest income on pension plan assets (33) (15) – (48) Interest on pension plan liab il it ies 32 15 4 51 Total charge to proﬁt before deduction of tax (1) 10 8 17 Net loss on plan assets 2 485 89 – 574 Gains on liab il it ies (452) (91) (41) (584) Total losses/(gains) recognised directly in statement of comprehensive income before tax 33 (2) (41) (10) Deferred taxation 7 3 – 10 Total losses/(gains) after tax 40 1 (41) – 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 2 The actual return on the UK Fund assets was a loss of $452 mill ion and on overseas plan assets was a ga in of $74 mill ion Notes to the ﬁnancial statements cont inued Standard Chartered Bank 277 Directors’ Report and Financ ial Statements 2023 29. Retirement beneﬁt obligat ions cont inued Movement in the deﬁned beneﬁt pension plans and post-retirement medical deﬁc it dur ing the year comprise: Funded plans Overseas Unfunded UK Fund plans plans Total $mill ion $mill ion $mill ion $mill ion Surplus/(deﬁcit) at 1 January 2023 48 (10) (158) (120) Contribut ions 8 26 12 46 Current service cost – (7) (6) (13) Past service cost and curtailments (8) – – (8) Settlement costs and transfers impact – (2) – (2) Net interest on the net deﬁned beneﬁt asset/liab il ity 1 – (7) (6) Actuarial loss (12) (5) (8) (25) Assets held for sale 2 – – (1) (1) Exchange rate adjustment 3 – (2) 1 Surplus/(deﬁcit) at 31 December 2023¹ 40 2 (170) (128) 1 The deﬁcit total of $128 m ill ion is made up of plans in deﬁc it of $202 m ill ion ( 31 December 2022: $192 m ill ion) net of plans in surplus with assets totalling $74 mill ion (31 December 2022: $72 mill ion) 2 “Assets held for sale” is an adjustment related to an unfunded plan in Jordan, which was sold in August 2023, due to the country being excluded in the opening assets and liab il it ies but included in the proﬁt & loss and other comprehensive income items shown. Funded plans Overseas Unfunded UK Fund plans plans Total $mill ion $mill ion $mill ion $mill ion Surplus/(deﬁcit) at 1 January 2022 88 (23) (217) (152) Contribut ions – 22 14 36 Current service cost – (9) (4) (13) Past service cost and curtailments 2 – (1) – (1) Settlement costs and transfers impact – – – – Net interest on the net deﬁned beneﬁt asset/liab il ity 1 – (4) (3) Actuarial (losses)/gains (33) 2 41 10 Assets held for sale – – 1 1 Exchange rate adjustment (8) (1) 11 2 Surplus/(deﬁcit) at 31 December 2022¹ 48 (10) (158) (120) 1 The deﬁcit total of $120 m ill ion is made up of plans in deﬁc it of $192 m ill ion (2021: $266 m ill ion) net of plans in surplus with assets totalling $72 mill ion (2021: $114 m ill ion) 2 Past service costs and gains arose due to plan amendments in India, Kenya and Sri Lanka The Company’s expected contribut ion to its deﬁned beneﬁt pension plans in 2024 is $28 mill ion 2023 2022 Assets Obligat ions Total Assets Obligat ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 1,491 (1,611) (120) 2,336 (2,488) (152) Contribut ions 46 – 46 36 – 36 Current service cost 1 – (13) (13) – (13) (13) Past service cost and curtailments – (8) (8) – (1) (1) Settlement costs – (2) (2) – – – Interest cost on pension plan liab il it ies – (81) (81) – (51) (51) Interest income on pension plan assets 75 – 75 48 – 48 Beneﬁts paid out (114) 114 – (122) 122 – Actuarial gains/(losses)² 31 (56) (25) (574) 584 10 Asset held for sale – (1) (1) – 1 1 Exchange rate adjustment 70 (69) 1 (233) 235 2 At 31 December 1,599 (1,727) (128) 1,491 (1,611) (120) 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 2 Actuarial loss on obligat ion compr ises of $25 mill ion loss (31 December 2022: $633 m ill ion ga in) from ﬁnanc ial assumpt ion changes, $1 mill ion loss (31 December 2022: $4 mill ion ga in) from demographic assumption changes and $30 mill ion loss (31 December 2022: $55 m ill ion loss) from exper ience Notes to the ﬁnancial statements cont inued Standard Chartered Bank 278 Directors’ Report and Financ ial Statements 2023 30. Share-based payments Accounting policy The Group operates equity-settled and cash-settled share-based compensation plans. The fair value of the employee services (measured by the fair value of the awards granted) received in exchange for the grant of the shares and awards is recognised as an expense. For deferred share awards granted as part of an annual performance award, the expense is recognised over the period from the start of the performance period to the vesting date. For example, the expense for three-year awards granted in 2024 in respect of 2023 performance, which vest in 2025-2027, is recognised as an expense over the period from 1 January 2023 to the vesting dates in 2025-2027. For all other awards, the expense is recognised over the period from the date of grant to the vesting date. For equity-settled awards, the total amount to be expensed over the vesting period is determined by reference to the fair value of the shares and awards at the date of grant, which excludes the impact of any non-market vesting condit ions (for example, proﬁtabil ity and growth targets). The fair value of equity instruments granted is based on market prices, if available, at the date of grant. In the absence of market prices, the fair value of the instruments is estimated using an appropriate valuation technique, such as a binom ial opt ion pric ing model. Non-market vest ing condit ions are included in assumptions for the number of shares and awards that are expected to vest. At each balance sheet date, the Group revises its estimates of the number of shares and awards that are expected to vest. It recognises the impact of the revis ion of or ig inal est imates, if any, in the income statement and a corresponding adjustment to equity over the remain ing vest ing period. Forfeitures prior to vesting attributable to factors other than the failure to satisfy service condit ions and non-market vest ing condit ions are treated as a cancellat ion and the remain ing unamort ised charge is debited to the income statement at the time of cancellation. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when awards in the form of options are exercised. Cash-settled awards are revalued at each balance sheet date and a liab il ity recognised on the balance sheet for all unpaid amounts, with any changes in fair value charged or credited to staff costs in the income statement until the awards are exercised. Where forfeitures occur prior to vesting that are attributable to factors other than a failure to satisfy service condit ions or market-based performance cond it ions, the cumulat ive charge incurred up to the date of forfeiture is credited to the income statement. Any revaluation related to cash-settled awards is recorded as an amount due to parent undertakings.. Other accounting estimates and judgements Share-based payments involve judgement and estimat ion uncerta inty in determin ing the expenses and carry ing values of share awards at the balance sheet date. • LTIP awards are determined using an estimat ion of the probab il ity of meet ing certain metrics over a three-year performance period using the Monte Carlo simulat ion model. • Deferred shares are determined using an estimat ion of expected d iv idends. • Sharesave Plan valuations are determined using a binom ial opt ion-pric ing model. The Group operates a number of share-based arrangements for its executive directors and employees. Details of the share-based payment charge are set out below. Total Total $mill ion $mill ion Deferred share awards 99 84 Other share awards 75 66 Total share-based payments 1,2 174 150 1 No forfeiture during the year 2 Includes $(1) mill ion (2022: $(6) m ill ion) of share-based payments reported in ‘other staff costs’. This reﬂects Bank Group’s requirement under IFRS 2 to account for cash-settled awards made to employees of Bank Group settled by Standard Chartered PLC with payments linked to PLC’s share price as equity-settled awards Notes to the ﬁnancial statements cont inued Standard Chartered Bank 279 Directors’ Report and Financ ial Statements 2023 30. Share-based payments continued 2011 Standard Chartered Share Plan (the ‘2011 Plan’) and 2021 Standard Chartered Share Plan (the ‘2021 Plan’) The 2021 Plan was approved by shareholders in May 2021 and is the Group’s main share plan, replacing the 2011 Plan for new awards from June 2021. It may be used to deliver various types of share awards to employees and former employees of the Group, includ ing d irectors and former executive directors: • Long Term Incentive Plan (LTIP) awards: granted with vesting subject to performance measures. Performance measures attached to awards granted previously include: relative total shareholder return (TSR); return on tangible equity (RoTE) (with a Common Equity Tier 1 (CET1) underpin); and strategic measures. Each measure is assessed independently over a three-year period. LTIP awards have an ind iv idual conduct gateway requirement that results in the award lapsing if not met. • Deferred awards are used to deliver: – the deferred portion of variable remuneration, in line with both market practice and regulatory requirements. These awards vest in instalments on anniversar ies of the award date spec if ied at the t ime of grant. Deferred awards are not subject to any plan lim it. Th is enables the Group to meet regulatory requirements relating to deferral levels, and is in line with market practice. – replacement buy-out awards to new joiners who forfe it awards on leaving their previous employers. These vest in the quarter most closely following the date when the award would have vested at the previous employer. This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market practice. In line with sim ilar plans operated by our competitors, these awards are not subject to an annual lim it and do not have any performance measures. Under the 2021 Plan and 2011 Plan, no grant price is payable to receive an award. The remain ing l ife of the 2021 Plan during which new awards can be made is eight years. The 2011 Plan has expired and no further awards will be granted under this plan. Valuation – LTIP awards The vesting of awards granted in 2023, 2022 and 2021 is subject to relative TSR performance measures, achievement of a strategic scorecard and satisfact ion of RoTE (subject to a cap ital CET1 underpin). The vesting of awards also have addit ional condit ions under strateg ic measures related to targets set for sustainab il ity linked to business strategy. The fair value of the relative TSR component is calculated using the probabil ity of meet ing the measures over a three-year performance period, using a Monte Carlo simulat ion model. The value of the rema in ing components is based on the expected performance against the RoTE and strategic measures in the scorecard and the resulting estimated number of shares expected to vest at each reporting date. These combined values are used to determine the accounting charge. No div idend equ ivalents accrue for the LTIP awards made in 2023, 2022 or 2021 and the fair value takes this into account, calculated by reference to market consensus div idend y ield. 2023 2022 Grant date 13 March 14 March Share price at grant date (£) 7.40 4.88 Vesting period (years) 3-7 3-7 Expected div ided y ield (%) 3.1 3.4 Fair value (RoTE) (£) 1.91, 1.85 1.24, 1.20 Fair value (TSR) (£) 1.08, 1.04 0.70, 0.68 Fair value (Strategic) (£) 2.54, 2.46 1.65, 1.60 Deferred shares The fair value for deferred awards which are not granted to material risk takers is based on 100 per cent of the face value of the shares at the date of grant as the share price will reﬂect expectations of all future div idends. For awards granted to material risk takers in 2021, the fair value of awards takes into account the lack of div idend equ ivalents, calculated by reference to market consensus div idend y ield. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 280 Directors’ Report and Financ ial Statements 2023 30. Share-based payments continued Deferred share awards – variable remuneration 2023 Grant date 18 September 19 June 13 March Share price at grant date (£) 7.43 6.75 7.40 Expected Expected Expected div idend y ield div idend y ield div idend y ield Vesting period (years) (%) Fair value (£) (%) Fair value (£) (%) Fair value (£) 1-3 years N/A 7.43 3.3 6.75 3.1 7.40 1-5 years 3.0 6.51 3.3, 3.3 6.23, 5.83 3.1, 3.1 6.85, 6.65 6.65, 6.75, 3-7 years – – – – 3.1,3.1,3.1,3.1 6.35, 6.16 2022 Grant date 09 November 20 June 14 March Share price at grant date (£) 5.62 6.04 4.88 Expected Expected Expected div idend y ield div idend y ield div idend y ield Vesting period (years) (%) Fair value (£) (%) Fair value (£) (%) Fair value (£) 1-3 years N/A 5.62 N/A 6.04 N/A 4.88 N/A, 3.4, 3.4, 4.88, 4.48, 1-5 years 3.4 5.17 3.4, 3.4 5.56, 5.56 3.4 4.41, 4.34 4.48, 4.13, 3-7 years – – – – 3.4,3.4,3.4 3.99 Deferred share awards – buy-outs 2023 Grant date 20-Nov 18-Sep 19-Jun 13-Mar Share price at grant date (£) 6.60 7.43 6.75 7.40 Expected Expected Expected Expected div idend y ield div idend y ield div idend y ield div idend y ield Vesting period (years) (%) Fair Value (£) (%) Fair Value (£) (%) Fair Value (£) (%) Fair Value (£) 3 months 3.0 7.38 3.3 6.7 3.1 7.34 4 months 3.0 6.54 6 months 3.0 7.32 3.3 6.64 7 months 3.0 6.49 9 months 3.0 7.27 3.3 6.48, 6.59 10 months 3.0 6.44 6.25, 6.30, 7.06, 7.11, 6.18, 6.38, 1 years 3.0 6.35, 6.39 3.0 7.16, 7.22 3.3 6.43, 6.54 3.1 7.12, 7.18 6.12, 6.16, 6.85, 6.9, 5.98, 6.18, 2 years 3.0 6.21 3.0 6.95, 7.01 3.3 6.33 3.1 6.91, 6.96 5.94, 5.98, 5.98, 5.79, 3 years 3.0 6.03 3.0 6.65, 6.7, 6.8 3.3 6.13 3.1 6.70, 6.75 4 years 3.0 5.76 3.1 6.50, 6.55 5 years 3.1 6.35 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 281 Directors’ Report and Financ ial Statements 2023 30. Share-based payments continued 2022 Grant date 28-Nov 09-Nov 20-Jun 14-Mar Share price at grant date (£) 5.90 5.62 6.04 4.88 Expected Expected Expected Expected div idend y ield div idend y ield div idend y ield div idend y ield Vesting period (years) (%) Fair value (£) (%) Fair value (£) (%) Fair value (£) (%) Fair value (£) 4 months 3.4 5.56 1 year 3.4 5.71 3.4 5.44 3.4 5.84 3.4 4.72 1.4 years 3.4 5.38 3.4 3.4 2 years 3.4 5.52 3.4 5.26 3.4 5.65 3.4 4.56 2.4 years 3.4 5.2 3.4 3.4 3 years 3.4 5.34 3.4 5.08 3.4 5.46 3.4 4.41 4 years 3.4 5.16 3.4 4.92 3.4 5.28 3.4 4.27 5 years 3.4 4.99 3.4 5.11 3.4 4.13 6 years 3.4 3.99 All Employee Sharesave Plans Sharesave Plans The 2013 Sharesave Plan expired in May 2023 and a new 2023 Sharesave Plan was approved by shareholders at the Annual General Meeting in May 2023. Under the 2023 Sharesave Plan, employees may open a savings contract. Employees can save up to £250 per month over three years to purchase ordinary shares in the Company at a discount of up to 20 per cent on the share price at the date of inv itat ion (the ‘option exercise price’), after which they have a period of six months to exercise the option. There are no performance measures attached to options granted under the 2013 Sharesave Plan and no grant price is payable to receive an option. In some countries in which the Group operates, it is not possible to operate Sharesave plans, typically due to securit ies law and regulatory restr ict ions. In these countr ies, where possible, the Group offers an equivalent cash-based alternative to its employees. The remain ing l ife of the 2023 Sharesave Plan during which new awards can be made is ten years. The 2013 Sharesave Plan has expired and no further awards will be granted under this plan. Valuation – Sharesave: Options under the Sharesave plans are valued using a binom ial opt ion-pric ing model. The same fa ir value is applied to all employees includ ing execut ive directors. The fair value per option granted and the assumptions used in the calculation are as follows: 2023 2022 18 30 Grant date September November Share price at grant date (£) 7.35 5.80 Exercise price (£) 5.88 4.23 Vesting period (years) 3 3 Expected volatil ity (%) 36.7 39.3 Expected option life (years) 3.5 3.33 Risk-free rate (%) 4.48 3.21 Expected div idend y ield (%) 3.0 3.4 Fair value (£) 3.05 2.08 The expected volatil ity is based on histor ical volat il ity over the last three years, or three years pr ior to grant. The expected life is the average expected period to exercise. The risk-free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life. The expected div idend y ield is calculated by reference to market consensus div idend y ield. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 282 Directors’ Report and Financ ial Statements 2023 30. Share-based payments continued Lim its An award shall not be granted under the 2021 Plan in any calendar year if, at the time of its proposed grant, it would cause the number of Standard Chartered PLC ordinary shares allocated in the period of 10 calendar years ending with that calendar year under the 2021 Plan and under any other discret ionary share plan operated by Standard Chartered PLC to exceed such number as represents 5 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. An award shall not be granted under the 2021 Plan or 2023 Sharesave Plan in any calendar year if, at the time of its proposed grant, it would cause the number of Standard Chartered PLC ordinary shares allocated in the period of 10 calendar years ending with that calendar year under the 2021 Plan or 2023 Sharesave Plan and under any other employee share plan operated by Standard Chartered PLC to exceed such number as represents 10 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. An award shall not be granted under the 2021 Plan or 2023 Sharesave Plan in any calendar year if, at the time of its proposed grant, it would cause the number of Standard Chartered PLC ordinary shares which may be issued or transferred pursuant to awards then outstanding under the 2021 Plan or 2023 Sharesave Plan as relevant to exceed such number as represents 10 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. The number of Standard Chartered PLC ordinary shares which may be issued pursuant to awards granted under the 2021 Plan in any 12-month period must not exceed such number as represents 1 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. The number of Standard Chartered PLC ordinary shares which may be issued pursuant to awards granted under the 2023 Sharesave Plan in any 12-month period must not exceed such number as represents 1 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. Standard Chartered PLC has been granted a waiver from strict compliance with Rules 17.03(3), 17.03(9) and 17.03(18) of the Rules Governing the List ing of Secur it ies on the Stock Exchange of Hong Kong. Deta ils are set out in the market announcement made on 30 March 2023. In relation to the waiver of strict compliance with Note 1 to 17.03(18), in 2023 no changes to the Plan rules have been proposed and therefore the Board has not been required to exercise its discret ion. Reconcil iat ion of share award movements for the year ending 31 December 2023 Weighted average Sharesave Deferred exercise price LTIP1 shares 1 Sharesave (£) Outstanding at 1 January 2023 10,739,911 39,721,124 9,959,559 3.85 Granted 2,3 2,019,504 18,097,855 3,994,289 – Lapsed (1,815,215) (1,067,731) (1,021,483) 4.17 Vested/Exercised (605,890) (17,042,123) (2,055,642) 3.81 Outstanding at 31 December 2023 10,338,310 39,709,125 10,876,723 4.57 Total number of securit ies ava ilable for issue under the plan 10,338,310 39,709,125 10,876,723 4.57 Percentage of the issued shares this represents as at 31 December 0.39 1.49 0.41 Exercisable as at 31 December 2023 – 670,108 1,319,426 3.17 Range of exercise prices (£) – – 3.14 - 5.88 Intrins ic value of vested but not exerc ised options ($ mill ion) 0.00 5.69 5.88 Weighted average contractual remain ing l ife (years) 5.79 8.16 2.39 Weighted average share price for awards exercised during the period (£) 6.95 7.04 6.68 1 Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards. 2 2,011,685 (LTIP) granted on 13 March 2023, 6,501 (LTIP) granted as a notional div idend on 1 March 2023, 1318 (LTIP) granted as a not ional div idend on 1 September 2023, 17,360,108 (Deferred shares) granted on 13 March 2023, 96,805 (Deferred shares) granted as a notional div idend on 1 March 2023, 288,238 (Deferred Shares) granted on 19 June 2023, 218,497 (Deferred Shares) granted on 18 September 2023, 41,298 (Deferred shares) granted as a notional div idend on 1 September 2023, 92,909 (Deferred shares) granted on 20 November 2023, 3,994,289 (Sharesave) granted on 18 September 2023 under the 2023 Sharesave Plan. 3 For Sharesave granted in 2023 the exercise price is £5.88 per share, a 20% discount from the average of the closing prices prior to ﬁve days to the inv itat ion date of 21 August 2023. The closing share price on 18 August 2023 was £7.214. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 283 Directors’ Report and Financ ial Statements 2023 30. Share-based payments continued Reconcil iat ion of share award movements for the year ending 31 December 2022 Weighted average Sharesave Deferred exercise price LTIP1 shares 1 Sharesave (£) Outstanding at 1 January 2022 11,091,777 34,204,272 10,058,458 4.07 Granted 2,3 2,903,903 21,159,348 3,882,756 - Lapsed (2,835,051) (881,277) (1,898,141) 4.46 Vested/Exercised (420,718) (14,761,219) (2,083,514) 5.06 Outstanding at 31 December 2022 10,739,911 39,721,124 9,959,559 3.85 Total number of securit ies ava ilable for issue under the plan 10,739,911 39,721,124 9,959,559 3.85 Percentage of the issued shares this represents as at 31 December 0.37 1.37 0.34 Exercisable as at 31 December 2022 – 1,180,633 864,082 4.96 Range of exercise prices (£) – – 3.14 - 5.13 Intrins ic value of vested but not exerc ised options ($ mill ion) 0.00 8.84 1.32 Weighted average contractual remain ing l ife (years) 7.86 8.20 1.02 Weighted average share price for awards exercised during the period (£) 5.09 4.97 5.90 1 Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards. 2. 2,886,441 (LTIP) granted on 14 March 2022, 14,989 (LTIP) granted as a notional div idend on 1 March 2022, 2,473 (LTIP) granted as a not ional div idend on 8 August 2022, 19,677,909 (Deferred shares) granted on 14 March 2022, 62,076 (Deferred shares) granted as a notional div idend on 1 March 2022, 550,432 (Deferred shares) granted on 20 June 2022, 35,175 (Deferred shares) granted as a notional div idend on 8 August 2022, 710,435 (Deferred shares) granted on 9 November 2022, 123,321 (Deferred shares) granted on 28 November 2022 under the 2021 Plan. 3,882,756 (Sharesave) granted on 28 November 2022 under the 2013 Sharesave Plan. 3 For Sharesave granted in 2022 the exercise price is £4.23 per share, a 20% discount from the closing price on 1 November 2022. The closing price on 1 November 2022 was £5.282. 31. Investments in subsid iary undertak ings, jo int ventures and assoc iates Accounting policy Associates and jo int arrangements The Group did not have any contractual interest in jo int operat ions. Investments in associates and jo int ventures are accounted for by the equ ity method of accounting and are in it ially recognised at cost. The Group’s investment in associates and jo int ventures includes goodwill ident iﬁed on acqu is it ion (net of any accumulated impa irment loss). The Group’s share of its associates’ and jo int ventures’ post-acqu is it ion proﬁts or losses is recognised in the income statement, and its share of post-acquis it ion movements in other comprehensive income is recognised in reserves. The cumulative post-acquis it ion movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or a jo int venture equals or exceeds its interest in the associate, includ ing any other unsecured rece ivables, the Group does not recognise further losses, unless it has incurred obligat ions or made payments on behalf of the assoc iate or joint venture. Unrealised gains and losses on transactions between the Group and its associates and jo int ventures are el im inated to the extent of the Group’s interest in the associates and jo int ventures. At each balance sheet date, the Group assesses whether there is any object ive ev idence of impa irment in the investment in associates and jo int ventures. Such ev idence includes a sign iﬁcant or prolonged decl ine in the fair value of the Group’s investment in an associate or jo int venture below its cost, among other factors. Sign iﬁcant account ing estimates and judgements The Group applies judgement in determin ing if it has control, jo int control or s ign iﬁcant inﬂuence over subsid iar ies, jo int ventures and associates respectively. These judgements are based upon ident ify ing the relevant activ it ies of counterparties, being those activ it ies that sign iﬁcantly affect the ent it ies returns, and further mak ing a decis ion of if the Group has control over those entit ies, joint control, or has s ign iﬁcant inﬂuence (being the power to partic ipate in the ﬁnanc ial and operat ing policy decis ions but not control them). These judgements are at times determined by equity holdings, and the voting rights associated with those holdings. However, further considerat ions includ ing but not l im ited to board seats, adv isory committee members and special ist knowledge of some decis ion-makers are also taken into account. Further judgement is required when determin ing if the Group has de-facto control over an entity even though it may hold less than 50% of the voting shares of that entity. Judgement is required to determine the relative size of the Group’s shareholding when compared to the size and dispers ion of other shareholders. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 284 Directors’ Report and Financ ial Statements 2023 31. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued Impairment testing of investments in associates and jo int ventures, and on a Company level investments in subsid iar ies is performed if there is a possible ind icator of impa irment. Judgement is used to determine if there is object ive ev idence of impa irment. Objective ev idence may be observable data such as losses incurred on the investment when applying the equity method, the granting of concessions as a result of ﬁnanc ial d iff iculty, or breaches of contracts/regulatory ﬁnes of the associate or jo int venture. Further judgement is required when consider ing broader ind icators of impa irment such as losses of active markets or ratings downgrades across key markets in which the associate or jo int venture operate in. Impairment testing is based on estimates includ ing forecast ing the expected cash ﬂows from the investments, growth rates, terminal values and the discount rate used in calculation of the present values of those cash ﬂows. The estimat ion of future cash ﬂows and the level to which they are discounted is inherently uncertain and requires sign iﬁcant judgement. Business combinat ions The acquis it ion method of accounting is used to account for the acquis it ion of subsid iar ies by the Group. In the Company’s ﬁnancial statements, investment in subsid iar ies, associates and jo int ventures are held at cost less impa irment and d iv idends from pre-acqu is it ion proﬁts received prior to 1 January 2009, if any. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are elim inated in the Group accounts. 2023 2022 Investments in subsid iary undertak ings $mill ion $mill ion As at 1 January 10,300 9,694 Addit ions¹ 529 357 Disposal² (465) – Impairment (Charge)/release³ (298) 249 As at 31 December 10,066 10,300 1 Includes issuances of $124 mill ion to Standard Chartered Bank AG, $299 m ill ion to Standard Chartered Bank (S ingapore) Lim ited, $47 m ill ion to SC Ventures Hold ings Lim ited (formerly Standard Chartered UK Hold ings Lim ited) and $40 m ill ion to Standard Chartered Cap ital Ltd, $18 mill ion to Standard Chartered Afr ica Ltd. (31 December 2022 Includes issuances of $241 mill ion to Standard Chartered Bank AG, $114 m ill ion to Standard Chartered UK hold ings and $1 mill ion to Standard Chartered Global Business Services Co., Ltd) 2 Includes disposal of SC Ventures Holdings Lim ited ($464 m ill ion) 3 Primar ily relates to the net of impa irment charge of $388 m ill ion on account of decrease in the valuation of SC Ventures Holdings Lim ited (31 December 2022: $273 mill ion reversal of impa irment) and impa irment release of $78 m ill ion in the valuation of Standard Chartered Bank AG On 6 June 2023, the Group sold its subsid iary SC Ventures Hold ings Lim ited (formerly Standard Chartered UK Hold ings Lim ited) and its associated subsid iary undertak ings to Standard Chartered I H Lim ited (a fellow group undertak ing of Standard Chartered PLC) for the arms-length purchase price of $464 mill ion, g iv ing r ise to a gain on disposal of $416 mill ion. In addit ion the Group d isposed of its wholly owned subsid iary Kozag i during 2023. The gain on sale of business was $7 mill ion. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 285 Directors’ Report and Financ ial Statements 2023 31. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued At 31 December 2023, the princ ipal subs id iary undertak ings, all ind irectly held except for Standard Chartered Bank AG, Standard Chartered Bank (Pakistan) Lim ited and 13.6 per cent of Standard Chartered Bank (S ingapore) Lim ited, and princ ipally engaged in the business of banking and provis ion of other ﬁnancial serv ices, were as follows: Group interest in ordinary share capital Place of incorporation or registrat ion Main areas of operation % Standard Chartered Bank (Singapore) Lim ited, S ingapore Singapore 100 Standard Chartered Bank AG, Germany Germany 100 Standard Chartered Bank Malaysia Berhad, Malaysia Malaysia 100 Standard Chartered Bank Niger ia L im ited, N iger ia Niger ia 100 Standard Chartered Bank (Vietnam) Lim ited, V ietnam Vietnam 100 Standard Chartered Bank (Maurit ius) L im ited, Maur it ius Maurit ius 100 Group interest in ordinary share capital Place of incorporation or registrat ion Main areas of operation % Standard Chartered Bank (Thai) Public Company Lim ited, Tha iland Thailand 99.87 Standard Chartered Bank (Pakistan) Lim ited, Pak istan Pakistan 98.99 Standard Chartered Bank Zambia PLC, Zambia Zambia 90.00 Standard Chartered Bank Botswana Lim ited, Botswana Botswana 75.83 Standard Chartered Bank Kenya Lim ited, Kenya Kenya 74.32 Standard Chartered Bank Ghana PLC, Ghana Ghana 69.42 A complete list of subsid iary undertak ing is included in Note 39. The Group does not have any material non-controlling interest except as listed above, which contribute $58 mill ion (31 December 2022: $16 mill ion) of the proﬁt attr ibutable to non-controlling interest and $172 mill ion (31 December 2022: $164 mill ion) of the equ ity attributable to non-controlling interests. While the Group’s subsid iar ies are subject to local statutory capital and liqu id ity requirements in relation to foreign exchange remittance, these restrict ions ar ise in the normal course of business and do not sign iﬁcantly restr ict the Group’s abil ity to access or use assets and settle liab il it ies of the Group. The Group does not have sign iﬁcant restr ict ions on its abil ity to access or use its assets and settle its liab il it ies other than those resulting from the regulatory framework with in wh ich the banking subsid iar ies operate. These frameworks require banking operations to keep certain levels of regulatory capital, liqu id assets, exposure l im its and comply w ith other required ratios. These restrict ions are summar ised below: Regulatory and liqu id ity requirements The Group’s subsid iar ies are required to mainta in m in imum cap ital, leverage ratios, liqu id ity and exposure ratios which therefore restrict the abil ity of these subs id iar ies to distr ibute cash or other assets to the parent company. The subsid iar ies are also required to mainta in balances w ith central banks and other regulatory authorit ies in the countries in which they operate. At 31 December 2023, the total cash and balances with central banks was $64.2 bill ion (31 December 2022: $50.5 bill ion) of wh ich $3 bill ion (31 December 2022: $3.5 b ill ion) is restricted. Statutory requirements The Group’s subsid iar ies are subject to statutory requirements not to make distr ibut ions of capital and unrealised proﬁts to the parent company, generally to mainta in solvency. These requ irements restrict the abil ity of subs id iar ies to remit div idends to the Group. Certain subsid iar ies are also subject to local exchange control regulations which provide for restrict ions on exporting capital from the country other than through normal div idends. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 286 Directors’ Report and Financ ial Statements 2023 31. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued Contractual requirements The encumbered assets in the balance sheet of the Group’s subsid iar ies are not available for transfer around the Group. Share of proﬁt from investment in associates and jo int ventures compr ises: 2023 2022 $mill ion $mill ion Loss from investment in jo int ventures (7) (7) Proﬁt/(loss) from investment in associates 3 (6) Total (4) (13) Group Interests in associates and jo int ventures 2023 2022 $mill ion $mill ion As at 1 January 143 156 Exchange translation differences – 2 Addit ions 1 25 Share of loss (4) (13) Disposals 1 (55) (1) Div idends rece ived (4) (6) Impairment – (28) Other Movements – 8 As at 31 December 81 143 1 Disposal of interest in associates due to change in ownership. Associates - CurrencyFair Lim ited ($40 m ill ion), F intech for International Development Ltd ($1 mill ion), Olea Global Pte. Ltd. ($14 mill ion) and Metaco SA (n il). Metaco SA was disposed for a sale considerat ion of $18 m ill ion. Except Metaco SA all other d isposals were part of disposal of SC Ventures Holdings Lim ited ($464 m ill ion). 32. Structured entit ies Accounting policy Structured entit ies are consol idated when the substance of the relationsh ip between the Group and the structured ent ity ind icates the Group has power over the contractual relevant act iv it ies of the structured entity, is exposed to variable returns, and can use that power to affect the variable return exposure. In determin ing whether to consol idate a structured entity to which assets have been transferred, the Group takes into account its abil ity to d irect the relevant activ it ies of the structured entity. These relevant activ it ies are generally evidenced through a unilateral right to liqu idate the structured ent ity, investment in a substantial proportion of the securit ies issued by the structured entity or where the Group holds specif ic subord inate securit ies that embody certa in controlling rights. The Group may further consider relevant activ it ies embedded with in contractual arrangements such as call opt ions which give the practical abil ity to d irect the entity, special relationsh ips between the structured ent ity and investors, and if a single investor has a large exposure to variable returns of the structured entity. Judgement is required in determin ing control over structured ent it ies. The purpose and des ign of the entity is considered, along with a determinat ion of what the relevant act iv it ies are of the entity and who directs these. Further judgements are made around which investor is exposed to, and absorbs the variable returns of the structured entity. The Group will have to weigh up all of these facts to consider whether the Group, or another involved party is acting as a princ ipal in its own right or as an agent on behalf of others. Judgement is further required in the ongoing assessment of control over structured entit ies, specif ically if market condit ions have an effect on the var iable return exposure of different investors. Interests in consolidated structured entit ies: A structured entity is consolidated into the Group’s ﬁnanc ial statements where the Group controls the structured entity, as per the determinat ion in the accounting policy above. The following table presents the Group's interests in consolidated structured entit ies. 2023 2022 $mill ion $mill ion Princ ipal and other structured ﬁnance 116 212 Total 116 212 Notes to the ﬁnancial statements cont inued Standard Chartered Bank 287 Directors’ Report and Financ ial Statements 2023 32. Structured entit ies cont inued Interests in unconsolidated structured entit ies: Unconsolidated structured entit ies are all structured ent it ies that are not controlled by the Group. The Group enters into transactions with unconsolidated structured entit ies in the normal course of business to facil itate customer transact ions and for specif ic investment opportunit ies. An interest in a structured entity is contractual or non-contractual involvement which creates variab il ity of the returns of the Group aris ing from the performance of the structured entity. The table below presents the carrying amount of the assets recognised in the ﬁnanc ial statements relat ing to variable interests held in unconsolidated structured entit ies, the max imum exposure to loss relating to those interests and the total assets of the structured entit ies. Max imum exposure to loss is primar ily l im ited to the carry ing amount of the Group’s on- balance sheet exposure to the structured entity. For derivat ives, the max imum exposure to loss represents the on-balance sheet valuation and not the notional amount. For commitments and guarantees, the maximum exposure to loss is the notional amount of potential future losses. 2023 2022 Asset- Princ ipal Asset- Princ ipal backed Structured Finance Other backed Structured Finance Other securit ies Lending Finance funds activ it ies Total securit ies Lending Finance funds activ it ies Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Group's interest – assets Financ ial assets held at fair value through proﬁt or loss 368 172 139 75 – 754 194 – – 81 – 275 Loans and advances/ Investment securit ies at amortised cost 13,184 9,298 7,210 – 190 29,882 13,508 11,804 10,165 – 246 35,723 Investment securit ies (fa ir value through other comprehensive income) 1,977 – – – – 1,977 1,496 – – – – 1,496 Other assets – – 34 – – 34 – – – 1 – 1 Total assets 15,529 9,470 7,383 75 190 32,647 15,198 11,804 10,165 82 246 37,495 Off-balance sheet – 3,971 4,752 – 20 8,743 – 3,220 6,527 92 – 9,839 Group's maximum exposure to loss 15,529 13,441 12,135 75 210 41,390 15,198 15,024 16,692 174 246 47,334 Total assets of structured entit ies 113,622 9,470 7,383 89 1,688 132,252 98,835 8,236 11,384 150 1,828 120,433 The main types of activ it ies for which the Group util ises unconsol idated structured entit ies cover synthet ic credit default swaps for managed investment funds (includ ing spec ial ised Pr inc ipal F inance funds), portfolio management purposes, structured ﬁnance and asset-backed securit ies. These are deta iled as follows: • Asset-backed securit ies (ABS): The Group also has investments in asset-backed securit ies issued by third-party sponsored and managed structured entit ies. For the purpose of market mak ing and at the discret ion of ABS trad ing desk, the Group may hold an immater ial amount of debt secur it ies from structured ent it ies or ig inated by cred it portfolio management. This is disclosed in the ABS column above. • Portfolio management (Group sponsored entit ies): For the purposes of portfolio management, the Group purchased credit protection via synthetic credit default swaps from note-issu ing structured ent it ies. Th is credit protection creates credit risk which the structured entity and subsequently the end investor absorbs. The referenced assets remain on the Group’s balance sheet as they are not assigned to these structured entit ies. The Group cont inues to own or hold all of the risks and returns relating to these assets. The credit protection obtained from the regulatory-compliant securit isat ion only serves to protect the Group against losses upon the occurrence of elig ible cred it events and the underlying assets are not derecognised from the Group’s balance sheet. The Group does not hold any equity interests in the structured entit ies but may hold an ins ign if icant amount of the issued notes for market making purposes. This is disclosed in the ABS section above. The proceeds of the notes’ issuance are typically held as cash collateral in the issuer’s account operated by a trustee or invested in AAA-rated government-backed securit ies to collateral ise the structured entit ies swap obl igat ions to the Group, and to repay the princ ipal to investors at maturity. The structured entit ies re imburse the Group on actual losses incurred, through the use of the cash collateral or realisat ion of the collateral secur ity. Correspondingly, the structured entit ies wr ite down the notes issued by an equal amount of the losses incurred, in reverse order of senior ity. All fund ing is committed for the life of these vehicles and the Group has no ind irect exposure in respect of the vehicles’ liqu id ity posit ion. The Group has reputational risk in respect of certain portfolio management vehicles and investment funds either because the Group is the arranger and lead manager or because the structured entit ies have Standard Chartered brand ing. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 288 Directors’ Report and Financ ial Statements 2023 32. Structured entit ies cont inued • Lending: Lending comprises secured lending in the normal course of business to third parties through structured entit ies • Structured Finance: Structured ﬁnance comprises interests in transaction that the Group or, more usually, a customer has structured, using one or more structured entit ies, wh ich provide beneﬁc ial arrangements for customers. The Group’s exposure primar ily represents the prov is ion of fund ing to these structures as a ﬁnanc ial intermed iary, for wh ich it receives a lender’s return. The transactions largely relate to real estate ﬁnanc ing and the prov is ion of a ircraft leasing and ship ﬁnance • Princ ipal F inance Fund: The Group’s exposure to Princ ipal F inance Funds represents committed or invested capital in unleveraged investment funds, primar ily invest ing in pan-Asian infrastructure, real estate and private equity. • Other activ it ies: Other activ it ies include structured entit ies created to support marg in ﬁnanc ing transact ions, the reﬁnancing of ex ist ing cred it and debt facil it ies, as well as setting up of bankruptcy remote structured entit ies. In the above table, the Group determined the total assets of the structured entit ies us ing following bases: • Asset Backed Securit ies, Pr inc ipal F inance, and Other activ it ies are based on the published total assets of the structured entit ies • Lending and Structured Finance are estimated based on the Group's loan values to the structured entit ies. 33. Cash ﬂow statement Adjustment for non-cash items and other adjustments included with in income statement Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Amortisat ion of d iscounts and premiums of investment securit ies (509) 353 (286) 556 Interest expense on subordinated liab il it ies 602 562 876 508 Interest expense on senior debt securit ies in issue 516 7 820 81 Other non-cash items (306) 1 (18) (132) (19) Pension costs for deﬁned beneﬁt schemes 41 28 25 17 Share-based payment costs 175 156 116 100 Impairment losses on loans and advances and other credit risk provis ions (58) (22) (81) (183) Div idend income from subsid iar ies – – (2,060) (1,046) Other impa irment 42 107 314 (181) Gain on disposal of property, plant and equipment (12) (18) – (10) Loss on disposal of FVOCI & AMCST ﬁnanc ial assets 178 154 114 99 Depreciat ion and amort isat ion 647 611 399 396 Fair value changes taken to income statement (1,531) (235) (940) (113) Foreign Currency revaluation 104 202 45 176 Loss from associates and jo int ventures 4 13 – – Total (107) 1,900 (790) 381 1 This includes gain on sale of subsid iary, assoc iate and jo int venture (ma inly SC Ventures Holdings Lim ited $416 m ill ion) offset w ith discount unwind $139 mill ion Change in operating assets Group Company 2022 2022 2023 (Restated) 2023 (Restated) $mill ion $mill ion $mill ion $mill ion Decrease/(increase) in derivat ive ﬁnancial instruments 9,954 (8,171) 8,873 (6,448) (Increase)/decrease in debt securit ies, treasury b ills and equity shares held at fair value through proﬁt or loss 1 (10,371) 9,622 (3,059) 2,415 (Increase)/decrease in loans and advances to banks and customers¹ (2,412) 10,992 5,247 7,185 Net decrease/(increase) in prepayments and accrued income 75 (908) 209 (718) Net decrease/(increase) in other assets 7,160 (3,905) 11,834 (5,227) Total 4,406 7,630 23,104 (2,793) 1 Decrease in debt securit ies, treasury b ills and equity shares held at fair value through proﬁt or loss for 2022 has been restated by $(823) mill ion for Group and $(849) mill ion for Company and the decrease in loans and advances to banks and customers for 2022 has been restated by $10,611 mill ion for Group and $3,507 m ill ion for Company (refer note 34) Notes to the ﬁnancial statements cont inued Standard Chartered Bank 289 Directors’ Report and Financ ial Statements 2023 33. Cash ﬂow statement continued Change in operating liab il it ies Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion (Decrease)/Increase in derivat ive ﬁnancial instruments (11,197) 11,674 (10,275) 9,854 Net increase/(decrease) in deposits from banks, customer accounts, debt securit ies in issue and short posit ions 2,419 (2,526) (9,347) (4,239) Increase in accruals and deferred income 431 919 315 644 Increase/(decrease) in amount due to parents/subsid iar ies/other related 3,580 (1,932) 7,627 (59) Net increase/(decrease) in other liab il it ies 264 (1,181) (2,211) (1,679) Total (4,503) 6,954 (13,891) 4,521 Disclosures Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Subordinated debt (includ ing accrued interest): Opening balance 13,272 14,621 12,731 14,081 Proceeds from the issue 18 750 – 750 Interest paid (714) (424) (583) (378) Repayment (2,160) (1,008) (2,160) (1,008) Foreign exchange movements 113 (227) 113 (227) Fair value changes from hedge accounting 215 (861) 215 (861) Accrued Interest and Others 713 421 583 374 Closing balance 11,457 13,272 10,899 12,731 Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Senior debt (includ ing accrued interest): Opening balance 5,154 1,289 4,777 923 Proceeds from the issue 5,597 5,316 4,820 4,091 Interest paid (235) (1) (235) (1) Repayment (2,546) (1,490) (1,806) (298) Foreign exchange movements 2 (49) 3 (12) Fair value changes from hedge accounting (1) 8 – 6 Accrued Interest and Others (111) 81 268 68 Closing balance 7,860 5,154 7,827 4,777 34. Cash and cash equivalents Accounting policy Cash and cash equivalents includes: • ‘Cash and balances at central banks’, except for restricted balances; and • Other balances listed in the table below, when they have less than three months’ maturity from the date of acquis it ion, are not subject to contractual restrict ions, are subject to ins ign if icant changes in value, are highly liqu id and are held for the purpose of meeting short-term cash commitments. This includes products such as treasury bills and other elig ible b ills, short-term government securit ies, loans and advances to banks ( includ ing reverse repos), and loans and advances to customers (placements at central banks), which are held for appropriate business purposes. ‘Cash and balances at central banks’ includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of ‘Loans and advances to customers’. Following a reassessment of the nature and purpose of balances held with central banks, customers and banks, the Group’s and Company’s cash and cash equivalents balances for 31 December 2022 and 1 January 2022 have been restated. The following balances have been ident iﬁed by the Group and Company as be ing cash and cash equivalents based on the criter ia descr ibed above. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 290 Directors’ Report and Financ ial Statements 2023 34. Cash and cash equivalents continued Group Company 2022 2022 2023 (Restated) 2023 (Restated) $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks 64,198 50,531 52,758 38,867 Less: restricted balances (3,050) (3,515) (1,311) (1,320) Treasury bills and other elig ible b ills 3,298 5,801 896 181 Loans and advances to banks 3,195 4,665 1,333 2,536 Loans and advances to customers 20,475 20,611 68 – Investments 244 162 244 – Total 88,360 78,255 53,988 40,264 The Group’s cash and cash equivalents balance for 31 December 2022 has been restated to increase the balance by $7,185 mill ion as balances w ith central banks that met the cash and cash equivalents deﬁn it ion were orig inally included in loans and advances to customers ($20,611 mill ion) but not included in cash and cash equivalents and there were balances included in cash and cash equivalents related to loans and advances to banks ($9,754 mill ion), treasury b ills and other elig ible b ills ($3,654 mill ion) as well as Investments ($18 m ill ion) that d id not meet the cash and cash equivalents deﬁn it ion. The cash and cash equivalents balance at the beginn ing of the year for 2022 has also been restated to decrease the balance by $2,604 mill ion. On the 2022 cash ﬂow statement for Group, the change in operating assets has also been restated by $9,788 mill ion as a result of these changes. The Company’s cash and cash equivalents balance for 31 December 2022 have been restated to decrease the balance by $7,354 mill ion as there were balances included in cash and cash equivalents related to loans and advances to banks ($5,030 mill ion), treasury b ills and other elig ible b ills ($2,306 mill ion) as well as Investments ($18 m ill ion) that d id not meet the cash and cash equivalents deﬁn it ion. The cash and cash equivalents balance at the beginn ing of the year for 2022 has also been restated to decrease the balance by $10,012 mill ion. On the 2022 cash ﬂow statement for the Company, the change in operating assets has also been restated by $2,658 mill ion as a result of these changes. 35. Related party transactions Directors and ofﬁcers Details of directors’ remuneration and interests in shares are disclosed in the Note 37 Remuneration of Directors. IAS 24 Related party disclosures requires the following addit ional informat ion for key management compensat ion. Key management comprises non-executive directors, executive directors of Standard Chartered PLC, the Court directors of Standard Chartered Bank and the persons discharg ing manager ial responsib il it ies (PDMR) of Standard Chartered PLC Group. 2023 2022 $mill ion $mill ion Salaries, allowances and beneﬁts in kind 41 38 Share-based payments 26 26 Bonuses paid or receivable 5 4 Terminat ion beneﬁts – 1 Total 72 69 Transactions with directors and others At 31 December 2023, the total amounts to be disclosed under the Companies Act 2006 (the Act) and the List ing Rules of the Hong Kong Stock Exchange Lim ited (HK L ist ing Rules) about loans to d irectors were as follows: 2023 2022 Number $mill ion Number $mill ion Directors 1 4 – 3 – 1 Outstanding loan balances were below $50,000 The loan transactions provided to the directors of Standard Chartered PLC were a connected transaction under Chapter 14A of the HK List ing Rules. It was fully exempt as ﬁnancial ass istance under Rule 14A.87(1), as it was provided in our ordinary and usual course of business and on normal commercial terms. Other than as disclosed in these ﬁnanc ial statements, there were no other transact ions, arrangements or agreements outstanding for any director of the Company which have to be disclosed under the Act. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 291 Directors’ Report and Financ ial Statements 2023 35. Related party transactions continued Group 2023 2022 Due from/to subsid iary Subordinated Due from/to Subordinated undertakings liab il it ies and subsid iary liab il it ies and and other Derivat ive other undertakings Derivat ive other related ﬁnancial borrowed Debt and other ﬁnancial borrowed Debt parties instruments funds Securit ies related parties instruments funds Securit ies $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Ultimate parent company 26 1,127 – 20 133 1,557 – – Fellow subsid iar ies of Standard Chartered PLC Group 5,640 7,057 – 655 6,254 9,573 – 601 5,666 8,184 – 675 6,387 11,130 – 601 Liab il it ies Ultimate parent company 10,193 85 11,094 9,543 6,516 321 12,924 6,707 Fellow subsid iar ies of Standard Chartered PLC Group 20,974 6,748 – 18 21,586 9,007 – 669 31,166 6,833 11,094 9,561 28,102 9,328 12,924 7,376 2023 Fees and Fees and commiss ion commiss ion Interest Interest income expense income expense $mill ion $mill ion $mill ion $mill ion Ultimate parent company – – – 1,296 Fellow subsid iar ies of Standard Chartered PLC Group 225 151 129 819 225 151 130 2,116 2022 Fees and Fees and commiss ion commiss ion Interest Interest income expense income expense $mill ion $mill ion $mill ion $mill ion Ultimate parent company – – 1 875 Fellow subsid iar ies of Standard Chartered PLC Group 79 122 63 329 79 122 64 1,204 The Group contributes to employee pension funds and provides banking services free of charge to the UK fund. For details of the funds (see Note 29). The Group’s employees partic ipate in the Standard Chartered PLC group’s share-based compensation plans (see Note 30). The cost of the compensation is recharged from Standard Chartered PLC to the Group’s branches and subsid iar ies. Associates and jo int ventures The following transactions with related parties are on an arm’s length basis: 2023 2022 $mill ion $mill ion Assets Loans and advances – 20 Financ ial Assets held at FVTPL 14 – Derivat ive assets 12 18 Total assets 26 38 Liab il it ies Deposits 38 49 Other liab il it ies 1 19 Total liab il it ies 39 69 Loan commitments and other guarantees 1 113 164 1 The maximum loan commitments and other guarantees during the year was $113 mill ion Notes to the ﬁnancial statements cont inued Standard Chartered Bank 292 Directors’ Report and Financ ial Statements 2023 35. Related party transactions continued Company 2023 2022 Due from/to subsid iary Subordinated Due from/to Subordinated undertakings liab il it ies and subsid iary liab il it ies and and other Derivat ive other undertakings Derivat ive other related ﬁnancial borrowed Debt and other ﬁnancial borrowed Debt parties instruments funds Securit ies related parties instruments funds Securit ies $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Ultimate parent company 26 1,127 – 20 133 1,557 – – Subsid iar ies and fellow subsid iar ies of SC PLC Group 10,028 10,365 – 4,436 13,081 13,207 – 2,438 10,053 11,492 – 4,456 13,214 14,764 – 2,438 Liab il it ies Ultimate parent company 10,184 85 10,554 9,543 6,510 321 12,384 6,707 Subsid iar ies and fellow subsid iar ies of SC PLC Group 37,133 10,281 – 18 33,423 13,421 – 2 47,317 10,366 10,554 9,561 39,933 13,742 12,384 6,709 2023 Fees and Fees and commiss ion commiss ion Interest Interest Div idend income expense income expense income $mill ion $mill ion $mill ion $mill ion $mill ion Ultimate parent company – – – 1,257 – Subsid iar ies and fellow subsid iar ies of SC PLC Group 349 59 459 1,378 2,060 349 59 459 2,635 2,060 2022 Fees and Fees and commiss ion commiss ion Interest Interest Div idend income expense income expense income $mill ion $mill ion $mill ion $mill ion $mill ion Ultimate parent company – – 1 854 – Subsid iar ies and fellow subsid iar ies of SC PLC Group 122 127 177 502 1,046 122 127 178 1,356 1,046 As at 31 December 2023, Standard Chartered Bank had created a charge over $68 mill ion (31 December 2022: $89 m ill ion) of cash assets in favour of the non-consolidated independent trustee of its employer ﬁnanced retirement beneﬁt scheme. The Company contributes to employee pension funds and provides banking services free of charge to the UK fund. For details of the funds see note 29. The Company’s employees partic ipate in the Standard Chartered PLC group’s share-based compensation plans (see note 30). The Company has an agreement with Standard Chartered PLC that in the event of the Company defaulting on its debt coupon interest payments, where the terms of such debt requires it, Standard Chartered PLC shall issue shares as settlement for non-payment of the coupon interest. SC Ventures Lim ited d isposal On 6 June 2023, the Group sold its subsid iary SC Ventures Hold ings Lim ited (formerly Standard Chartered UK Hold ings Lim ited) and its associated subsid iary undertak ings to Standard Chartered I H Lim ited (a fellow group undertak ing of Standard Chartered PLC) for the arms-length purchase price of $464 mill ion, g iv ing r ise to a gain on disposal of $416 mill ion. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 293 Directors’ Report and Financ ial Statements 2023 36. Auditor’s remuneration Auditor’s remuneration is included with in other general adm in istrat ion expenses. The amounts paid by the Group to their princ ipal aud itor, Ernst & Young LLP (EY LLP) and its associates (together EY LLP), are set out below. All services are approved by the Group Audit Committee and are subject to controls to ensure the external auditor’s independence is unaffected by the provis ion of other serv ices. 2023 2022 $mill ion $mill ion Audit fees for the Standard Chartered PLC Group statutory audit 27.8 22.2 Of which fees for the statutory audit of Standard Chartered Bank Group 20.6 16.3 Fees payable to EY for other services provided to the Standard Chartered Bank Group: Audit of Standard Chartered Bank subsid iar ies 8.8 8.4 Total Audit fees 36.6 30.7 Audit -related assurance services 3.4 2.9 Other assurance services 6.2 3.8 Other non-audit services 0.8 0.1 Total fees payable 47.0 37.5 The following is a descript ion of the type of serv ices included with in the categor ies listed above: • Audit fees for the Group statutory audit are in respect of fees payable to EY LLP for the statutory audit of the consolidated ﬁnancial statements of the Group and the separate ﬁnancial statements of Standard Chartered PLC • Audit-related fees consist of fees such as those for services required by law or regulation to be provided by the auditor, reviews of inter im ﬁnancial informat ion, report ing on regulatory returns, reporting to a regulator on client assets and extended work performed over ﬁnancial informat ion and controls author ised by those charged with governance • Other assurance services include agreed-upon-procedures in relation to statutory and regulatory ﬁl ings • Transaction related services are fees payable to EY LLP for issu ing comfort letters Expenses incurred in respect of their role as auditors were reimbursed to EY LLP $0.9 mill ion (2022: $0.5 m ill ion). 37. Remuneration of Directors This table sets out salary (includ ing salary shares), pens ion and beneﬁts received in 2023 and variable remuneration awards received in respect of 2023. 2023 1 2022 2 £000 £000 Salaries and fees 8,299 8,263 Pension 421 533 Beneﬁts 638 576 Annual incent ive 3,399 4,011 Vesting of LTIP awards 5,475 3,538 Buy-out award 3 862 0 Total 19,094 16,921 1 L Yueh and S Ricke jo ined the Court on 1 January and 24 February 2023 respect ively. C Hodgson and J Whitbread stepped down from the Court on 31 January and 3 May 2023 respectively. 2 The values of vesting 2020-22 LTIP awards have been restated based on the ﬁnal vesting outcome of 36.8% and actual share price of £6.57 when the awards vested in March 2023. 3 S Ricke received a buy-out award in respect of shares forfeited upon leaving her former role to jo in the Group. The buy-out award takes the form of upfront shares, deferred shares, and deferred cash, and has been calculated in line with PRA and FCA remuneration regulations. The buy-out will be delivered over the period of March 2023 – 2027. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 294 Directors’ Report and Financ ial Statements 2023 37. Remuneration of Directors continued Addit ional informat ion on the remunerat ion elements in the above single total ﬁgure table Salaries and fees The total salaries of the three directors as at 1 January 2023 (or the date of appointment, if later) was £4,940,000. For two of the directors, salary is paid part in cash and part in shares which are subject to a retention period and released pro rata over ﬁve years. The number of salary shares allocated is determined based on the monetary value and the prevail ing market pr ice of the Group’s shares on the date of allocation. The emoluments, includ ing share based payments and other beneﬁts, of the highest paid director during 2023 were £7,836,987 (2022: £6,407,691). There were employer pension contribut ions for the highest paid director during 2023 of £250,625 (2022: £244,800). The total annualised fees of the Chairman and directors as at 1 January 2023 (or the date of appointment, if later) were £3,336,533. There is no apportionment of remuneration between Standard Chartered Bank and Standard Chartered PLC. Share awards No directors exercised share awards over Standard Chartered PLC during the year. Pension and beneﬁts An explanation of pension and beneﬁts for those directors who are also executive directors of the Standard Chartered PLC Group can be found in the Standard Chartered PLC Group’s 2023 Directors’ remuneration report on pages 182 to 216. The directors who are also employees of the Standard Chartered PLC Group received a ﬂexible beneﬁts allowance in alignment with the UK workforce to include a mixture of core pension and beneﬁts provis ion, includ ing pr ivate medical cover, life assurance and permanent health insurance. Some directors occasionally use a Group car service for traveling and, in some circumstances, were accompanied by their spouses to attend events. For those directors who are also employees of the Standard Chartered PLC Group, annual incent ives in respect of 2023 are delivered upfront with at least 50 per cent paid in shares subject to a min imum twelve-month retent ion period. Vesting of LTIP awards The long-term incent ive plan (LTIP) awards granted in March 2020 vested in March 2023, based on performance over the years 2020 to 2022. 36.8 per cent of these awards vested. The LTIP awards granted in March 2021 are due to vest in March 2024, based on performance over the years 2021 to 2023. Following a projected assessment of the performance measures (RoTE with CET1 underpin, relative TSR, sustainab il ity and strategic measures), 66 per cent of these awards are expected to vest. The ﬁnal assessment of the relative TSR performance will be conducted in March 2024, the end of the three-year performance period. Based on a share price of £6.72, the three-month average to 31 December 2023, the projected value to be delivered to the directors is £5,475,443. The highest paid director has not exercised any share options during the year. An LTIP award of 506,045 shares was made in March 2023 to the highest paid director, at a share price of £7.398, which are subject to the satisfact ion of stretch ing RoTE, relative TSR, sustainab il ity and strategic performance measures over three years (2023 to 2025). Other disclosures The remuneration policy and practices applying to the Material Risk Taker employees of the Bank are the same as those applied by the Standard Chartered PLC Group which are set out in the Standard Chartered Pillar 3 report on pages 131 to 135. Further informat ion on the remunerat ion for those directors who are also executive directors of the Standard Chartered PLC Group can be found in the Standard Chartered PLC Group’s 2023 Directors’ remuneration report on pages 182 to 216. Notes to the ﬁnancial statements cont inued Standard Chartered Bank 295 Directors’ Report and Financ ial Statements 2023 38. Related undertakings of the Group As at 31 December 2023, the Group’s interests in related undertakings in accordance with Section 409 of the Companies Act 2006 are disclosed below. Unless otherwise stated, the share capital disclosed comprises ordinary or common shares which are held by subsid iar ies of the Group. Unless otherwise ind icated, all related undertak ings are held ind irectly. Subsid iary undertak ings Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) The following company have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom SC (Secretaries) Lim ited 1 Others United Kingdom £1.00 Ordinary 100 SC Transport Leasing 1 LTD 7, 8 Leasing Business United Kingdom £1.00 Ordinary 100 SC Transport Leasing 2 Lim ited 7, 8 Leasing Business United Kingdom £1.00 Ordinary 100 US$1.00 Redeemable 100 Preference SCMB Overseas Lim ited 1 Investment Holding United Kingdom £0.10 Ordinary 100 Company Standard Chartered Africa Lim ited 1, 7, 8 Investment Holding United Kingdom £1.00 Ordinary 100 Company Standard Chartered Foundation 1, 2 Charity projects United Kingdom Guarantor 100 Standard Chartered Health Trustee (UK) Lim ited 1 Trustee Services United Kingdom £1.00 Ordinary 100 Standard Chartered Leasing (UK) Lim ited 1, 7, 8 Leasing Business United Kingdom US$1.00 Ordinary 100 Standard Chartered Nominees (Private Clients UK) Nominee Services United Kingdom US$1.00 Ordinary 100 Lim ited 1 Standard Chartered Securit ies (Afr ica) Holdings Investment Holding United Kingdom US$1.00 Ordinary 100 Lim ited 7, 8 Company US$1.00 Ordinary 100 Standard Chartered Trustees (UK) Lim ited 1 Trustee Services United Kingdom £1.00 Ordinary 100 The BW Leasing Partnership 1 LP 2 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The BW Leasing Partnership 2 LP 2 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The BW Leasing Partnership 3 LP 2 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The BW Leasing Partnership 4 LP 2 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The BW Leasing Partnership 5 LP 2 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The SC Transport Leasing Partnership 1 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The SC Transport Leasing Partnership 2 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The SC Transport Leasing Partnership 3 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The SC Transport Leasing Partnership 4 Leasing Business United Kingdom Lim ited Partnersh ip 100 Interest The following company have the address of 1 Bartholomew Lane, London, EC2N 2AX, United Kingdom Corrasi Covered Bonds LLP Trustee Services United Kingdom Membership Interest 100 The following company have the address of 2 More London Rivers ide, London, SE1 2JT, Un ited Kingdom Bricks (C&K) LP 2 Lim ited Partnersh ip United Kingdom Lim ited Partnersh ip 100 interest Interest Bricks (T) LP 2 Lim ited Partnersh ip United Kingdom Lim ited Partnersh ip 100 interest Interest Bricks (C) LP 2 Lim ited Partnersh ip United Kingdom Lim ited Partnersh ip 100 interest Interest Notes to the ﬁnancial statements cont inued Standard Chartered Bank 296 Directors’ Report and Financ ial Statements 2023 Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) The following company have the address of Edifíc io K ilamba, 8º Andar Avenida 4 de Fevereiro, Marginal, Luanda, Angola Standard Chartered Bank Angola S.A. Banking & Financ ial Angola AOK8,742.05 Ordinary 60 Services The following company have the address of Level 5, 345 George St, Sydney NSW 2000, Australia Standard Chartered Grindlays Pty Lim ited¹ Investment Holding Australia AUD Ordinary 100 Company The following company have the address of 5th Floor Standard House Bldg, The Mall, Queens Road, PO Box 496, Gaborone, Botswana Standard Chartered Bank Botswana Lim ited Banking & Financ ial Botswana BWP Ordinary 75.827 Services Standard Chartered Bank Insurance Agency Insurance Services Botswana BWP Ordinary Shares 100 (Proprietary) Lim ited Standard Chartered Botswana Education Trust 1,2, 3 CSR programme. Botswana Trust Interest 100 Standard Chartered Botswana Nominees Nominee Services Botswana BWP Ordinary 100 (Proprietary) Lim ited Standard Chartered Investment Services (Proprietary) Nominee Services Botswana BWP Ordinary Shares 100 Lim ited The following company have the address of Avenida Brigade iro Far ia Lima, no 3.477, 6º andar, conjunto 62 - Torre Norte, Condomin io Patio Victor Malzoni, CEP 04538-133, Sao Paulo, Brazil Standard Chartered Representação e Partic ipações Banking & Financ ial Brazil BRL1.00 Ordinary 100 Ltda 1 Services The following company have the address of G01-02, Wisma Haj i Mohd Taha Bu ild ing, , Jalan Gadong, BE4119, Brune i Darussalam Standard Chartered Securit ies (B) Sdn Bhd 1 Investment Brunei DarussalamBND1.00 Ordinary 100 Management The following company have the address of Standard Chartered Bank Cameroon S.A, 1155, Boulevard de la Liberté, Douala, B.P. 1784, Cameroon Standard Chartered Bank Cameroon S.A. Banking & Financ ial Cameroon XAF10,000.00 Ordinary 100 Services The following company have the address of c/o Maples Finance Lim ited, PO Box 1093 GT, Queensgate House, Georgetown, Grand Cayman, Cayman Islands SCB Investment Holding Company Lim ited 1 Investment Holding Cayman Islands US$1,000.00 Ordinary-A 99.999 Company The following company have the address of Maples Corporate Services Lim ited, PO Box 309, Ugland House, Grand Cayman, KY1-1104 , Cayman Islands Cerulean Investments LP Investment Holding Cayman Islands Lim ited Partnersh ip 100 Company Interest The following company have the address of No. 35, Xinhuanbe i Road, Teda, T ianjin, 300457, China Standard Chartered Global Business Services Co., Ltd 1 Research, China US$ Ordinary 100 development, other services The following company have the address of Unit 802B, 803, 1001A,1002B,1003-1005,1101-1105,, 201-1205,1302C,1303, No. 235 Tianhe North Road, Tianhe Distr ict,, Guangzhou C ity, Guangdong Province, China Standard Chartered Global Business Services Research, China US$ Ordinary 100 (Guangzhou) Co., Ltd 1 development, other services The following company have the address of Standard Chartered Bank Cote d'Ivoire, 23 Boulevard de la République, Abidjan 17, 17 B.P. 1141, Cote d'Ivoire Standard Chartered Bank Cote d' Ivoire SA Banking & Financ ial Cote d'Ivoire XOF100,000.00 Ordinary 100 Services The following company have the address of 8 Ecowas Avenue, Banjul, Gambia Standard Chartered Bank Gambia Lim ited Banking & Financ ial Gambia GMD1.00 Ordinary 74.852 Services The following company have the address of Taunusanlage 16, 60325, Frankfurt am Main, Germany 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 297 Directors’ Report and Financ ial Statements 2023 Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) Standard Chartered Bank AG 1 Banking & Financ ial Germany € Ordinary 100 Services The following company have the address of Standard Chartered Bank Build ing, No. 87, Independence Avenue, P.O. Box 768, Accra, Ghana Standard Chartered Bank Ghana PLC Banking & Financ ial Ghana GHS Ordinary 69.416 Services GHS0.52 Non-cumulative 87.043 Irredeemable Preference Standard Chartered Ghana Nominees Lim ited Nominee Services Ghana GHS Ordinary 100 The following company have the address of Standard Chartered Bank Ghana Lim ited, 87, Independence Avenue, Post Ofﬁce Box 678, Accra, Ghana Standard Chartered Wealth Management Lim ited Investment Ghana GHS Ordinary 100 Company Management The following company have the address of 13/F Standard Chartered Bank Build ing, 4-4A Des Voeux Road Central, Hong Kong Standard Chartered Private Equity Lim ited Investment Holding Hong Kong HKD Ordinary 100 Company The following company have the address of 13/F Standard Chartered Bank Build ing, 4-4A Des Voeux Road Central, Hong Kong Standard Chartered Asia Lim ited Investment Holding Hong Kong HKD Deferred 100 Company The following company have the address of 14th Floor, One Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong Standard Chartered PF Real Estate (Hong Kong) Investment Holding Hong Kong US$ Ordinary 100 Lim ited Company The following company have the address of Vaishnav i Seren ity, First Floor, No. 112, Koramangala Industrial Area, 5th Block, Koramangala, Bangalore, Karnataka, 560095, India Standard Chartered (India) Modeling and Analytics Support Services India INR10.00 Equity 100 Centre Private Lim ited¹ The following company have the address of 1st Floor, Europe Build ing, No.1, Haddows Road, Nungambakkam, Chenna i, 600 006, India Standard Chartered Global Business Services Private Offshore Support India INR10.00 Equity 100 Lim ited 1 Services The following company have the address of 2nd Floor, 23-25 M.G. Road, Fort, Mumbai 400 001, India Standard Chartered Securit ies (Ind ia) Lim ited Banking & Financ ial India INR10.00 Equity 100 Services The following company have the address of 90 M.G.Road, II Floor, Fort, Mumbai, Maharashtra, 400001, India Standard Chartered Finance Private Lim ited 1 Support Services India INR10.00 Ordinary 98.683 The following company have the address of Crescenzo, 6th Floor, Plot No 38-39 G Block , Bandra Kurla Complex, Bandra East , Mumbai , Maharashtra , 400051, India Standard Chartered Capital Lim ited 1 Banking & Financ ial India INR10.00 Equity 100 Services The following company have the address of Ground Floor, Crescenzo Build ing, G Block, C 38/39 , Bandra Kurla Complex, Bandra (East) , Mumbai , Maharashtra , 400051, India St Helen's Nominees India Private Lim ited 1 Nominee Services India INR10.00 Equity 100 Standard Chartered Private Equity Advisory (India) Support Services India INR1,000.00 Equity 100 Private Lim ited The following company have the address of 1st Floor, Goldie House, 1-4 Goldie Terrace, Upper Church Street, Douglas, IM1 1EB, Isle of Man Standard Chartered Assurance Lim ited 1 Insurance Services Isle of Man US$1.00 Ordinary 100 US$1.00 Redeemable 100 Preference Standard Chartered Isle of Man Lim ited 1, 6 Insurance & Isle of Man US$1.00 Ordinary 100 Reinsurance Company 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 298 Directors’ Report and Financ ial Statements 2023 Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) The following company have the address of 21/F, Sanno Park Tower, 2-11-1 Nagatacho, Chiyoda-ku, Tokyo, 100-6155, Japan Standard Chartered Securit ies (Japan) L im ited¹ Banking & Financ ial Japan JPY Ordinary 100 Services The following company have the address of 15 Castle Street, St Helier, JE4 8PT, Jersey SCB Nominees (CI) Lim ited 1 Nominee Services Jersey US$1.00 Ordinary 100 The following company have the address of Standard Chartered@Chiromo, 48 Westlands Road, P. O. Box 30003 - 00100, Nairob i , Kenya Standard Chartered Bancassurance Intermediary Insurance Services Kenya KES100.00 Ordinary 100 Lim ited Standard Chartered Bank Kenya Lim ited Banking & Financ ial Kenya KES5.00 Ordinary 74.318 Services KES5.00 Preference 100 Standard Chartered Financ ial Serv ices Lim ited Merchant Banking Kenya KES20.00 Ordinary 100 Standard Chartered Investment Services Lim ited Investment services Kenya KES20.00 Ordinary 100 Standard Chartered Kenya Nominees Lim ited 1 Nominee Services Kenya KES20.00 Ordinary 100 Standard Chartered Securit ies (Kenya) L im ited Corporate Finance & Kenya KES10.00 Ordinary 100 Advisory Services The following company have the address of Atrium Build ing, Maarad Street, 3rd Floor, P.O. Box 11-4081 Ra id El Solh, Beirut Central Distr ict, Lebanon Standard Chartered Metropolitan Holdings SAL Investment Holding Lebanon US$10.00 Ordinary A 100 Company The following company have the address of Level 1, Wisma Standard Chartered, Jalan Teknologi 8, , Taman Teknologi Malaysia, Bukit Jalil, , 57000 Kuala Lumpur, Wilayah Persekutuan, Malaysia Standard Chartered Global Business Services Sdn Offshore Support Malaysia RM Ordinary 100 Bhd 1 Services The following company have the address of Level 25, Equatorial Plaza, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Cartaban (Malaya) Nominees Sdn Berhad Nominee Services Malaysia RM Ordinary 100 Cartaban Nominees (Asing) Sdn Bhd Nominee Services Malaysia RM Ordinary 100 Cartaban Nominees (Tempatan) Sdn Bhd Nominee Services Malaysia RM Ordinary 100 Golden Maestro Sdn Bhd Investment Holding Malaysia RM Ordinary 100 Company Price Solutions Sdn Bhd Direct Sales/Collection Malaysia RM Ordinary 100 Services SCBMB Trustee Berhad Trustee Services Malaysia RM Ordinary 100 Standard Chartered Bank Malaysia Berhad Banking & Financ ial Malaysia RM Irredeemable 100 Services Convertible Preference RM Ordinary 100 Standard Chartered Saadiq Berhad Banking & Financ ial Malaysia RM Ordinary 100 Services The following company have the address of Suite 18-1, Level 18, Vertical Corporate Tower B, Avenue 10, The Vertical, Bangsar South City , No. 8, Jalan Kerinch i , 59200 Kuala Lumpur, W ilayah Persekutuan, Malaysia Resolution Alliance Sdn Bhd Investment Holding Malaysia Ordinary 91 Company The following company have the address of 6th Floor, Standard Chartered Tower , 19, Bank Street, Cybercity, Ebene, 72201, Maurit ius Standard Chartered Bank (Maurit ius) L im ited 1 Banking & Financ ial Maurit ius Ordinary No Par Value 100 Services The following company have the address of c/o Ocorian Corporate Services (Maurit ius) Ltd, 6th Floor, Tower A, 1 Cyberc ity, Ebene, 72201, Maurit ius Standard Chartered Private Equity (Maurit ius) II Investment Maurit ius US$1.00 Ordinary 100 Lim ited Management 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 299 Directors’ Report and Financ ial Statements 2023 Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) Standard Chartered Private Equity (Maurit ius) Investment Maurit ius US$1.00 Ordinary 100 Lim ited 1 Management Standard Chartered Private Equity (Maurit ius) lll Investment Maurit ius US$1.00 Ordinary 100 Lim ited Management The following company have the address of Mondial Management Services Ltd, Unit 2L, 2nd Floor Standard Chartered Tower, 19 Cybercity, Ebene, Maurit ius Subcontinental Equit ies L im ited Investment Holding Maurit ius US$1.00 Ordinary 100 Company The following company have the address of Standard Chartered Bank Nepal Lim ited, Madan Bhandar i Marg. Ward No.31, Kathmandu Metropolitan City, Kathmandu Distr ict, Bagmat i Province, Kathmandu, 44600, Nepal Standard Chartered Bank Nepal Lim ited Banking & Financ ial Nepal NPR100.00 Ordinary 70.21 Services The following company have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Standard Chartered Holdings (Africa) B.V. 6 Holding Company Netherlands €4.50 Ordinary 100 Standard Chartered Holdings (Asia Pacif ic) B.V. 6 Holding Company Netherlands €4.50 Ordinary 100 Standard Chartered Holdings (International) B.V. 6 Holding Company Netherlands €4.50 Ordinary 100 Standard Chartered MB Holdings B.V. 6 Holding company. Netherlands €4.50 Ordinary 100 The following company have the address of 142, Ahmadu Bello Way, Victor ia Island, Lagos, 101241, N iger ia Standard Chartered Bank Niger ia L im ited Banking & Financ ial Niger ia NGN1.00 B Redeemable 100 Services Preference NGN1.00 Irredeemable 100 Non Cumulative Preference NGN1.00 Ordinary 100 Standard Chartered Capital & Advisory Niger ia Corporate Finance & Niger ia NGN1.00 Ordinary 100 Lim ited Advisory Services Standard Chartered Nominees (Niger ia) L im ited Custody Services Niger ia NGN1.00 Ordinary 100 The following company have the address of P.O. Box No. 5556, I.I. Chundrigar Road , Karachi , 74000, Pakistan Standard Chartered Bank (Pakistan) Lim ited 1 Banking & Financ ial Pakistan PKR10.00 Ordinary 98.986 Services The following company have the address of 8th Floor, Makati Sky Plaza Build ing 6788, Ayala Avenue San Lorenzo, C ity of Makati, Fourth Distr ict, Nat ional Capi, 1223, Phil ipp ines Standard Chartered Group Services, Manila Offshore Support Phil ipp ines PHP1.00 Ordinary 100 Incorporated 1 Services The following company have the address of Rondo Ignacego Daszyńskiego 2B, 00-843, Warsaw, Poland Standard Chartered Global Business Services spółka z Offshore Support Poland PLN50.00 Ordinary 100 ograniczoną odpowiedz ialnośc ią 1 Services The following company have the address of Al Faisal iah Ofﬁce Tower Floor No 7 (T07D) , K ing Fahad Highway, Olaya Distr ict, R iyadh P.O box 295522 , Riyadh, 11351 , Saudi Arabia Standard Chartered Capital (Saudi Arabia) 1 Custody Services Saudi Arabia SAR10.00 Ordinary 100 The following company have the address of 9 & 11, Lightfoot Boston Street, Freetown, Sierra Leone Standard Chartered Bank Sierra Leone Lim ited Banking & Financ ial Sierra Leone SLL1.00 Ordinary 80.656 Services The following company have the address of 7 Changi Business Park Crescent, #03-00 Standard Chartered @ Changi, 486028, Singapore Rafﬂes Nominees (Pte.) Lim ited Nominee Services Singapore SGD Ordinary 100 The following company have the address of 77 Robinson Road, #25-00 Robinson 77, 068896, Singapore Trust Bank Singapore Lim ited Banking & Financ ial Singapore SGD Ordinary 60 Services The following company have the address of 8 Marina Boulevard, #27-01 Marina Bay Financ ial Centre Tower 1, 018981, S ingapore SCTS Capital Pte. Ltd Nominee Services Singapore SGD Ordinary 100 SCTS Management Pte. Ltd. Nominee Services Singapore SGD Ordinary 100 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 300 Directors’ Report and Financ ial Statements 2023 Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) Standard Chartered Bank (Singapore) Lim ited 1 Banking & Financ ial Singapore SGD Non-cumulative Class 100 Services C Tier-1 preference SGD Non-cumulative Class 100 D Tier-1 Preference SGD Ordinary-A 100 US$ Non-cumulative Class 100 B Tier-1 Preference US$ Ordinary-A 100 US$ Ordinary-B 100 US$ Ordinary-C 100 Standard Chartered Holdings (Singapore) Private Investment Holding Singapore SGD Ordinary 100 Lim ited 1 Company US$ Ordinary 100 Standard Chartered Nominees (Singapore) Pte Ltd 1 Nominee Services Singapore SGD Ordinary 100 Standard Chartered Trust (Singapore) Lim ited 1 Trustee Services Singapore SGD Ordinary 100 The following company have the address of Abogado Pte Ltd, No. 8 Marina Boulevard, #05-02 MBFC Tower 1, 018981, Singapore Standard Chartered IL&FS Management (Singapore) Investment Singapore USD Ordinary 50 Pte. Lim ited 1 Management The following company have the address of Standard Chartered Bank, Level 25, MBFC, 8 Marina Blvd, 018981, Singapore Standard Chartered Real Estate Investment Holdings Investment Holding Singapore US$ Ordinary 100 (Singapore) Private Lim ited Company The following company have the address of 2nd Floor, 115 West Street, Sandton, Johannesburg, 2196, South Africa CMB Nominees (RF) PTY Lim ited 1 Nominee Services South Africa ZAR1.00 Ordinary 100 Standard Chartered Nominees South Africa Nominee Services South Africa ZAR Ordinary 100 Proprietary Lim ited (RF) 1 The following company have the address of 1 Floor, International House, Corner of Shaaban Robert Street and Garden Ave, PO Box 9011, Dar Es Salaam, Tanzania Standard Chartered Tanzania Nominees Lim ited Nominee Services Tanzania, United TZS1,000.00 Ordinary 100 Republic of The following company have the address of 1 Floor, International House, Shaaban Robert Street / Garden Avenue, PO Box 9011, Dar Es Salaam, Tanzania, United Republic of Standard Chartered Bank Tanzania Lim ited Banking & Financ ial Tanzania, United TZS1,000.00 Ordinary 100 Services Republic of TZS1,000.00 Preference 100 The following company have the address of No. 140, 11th, 12th and 14th Floor, Wireless Road, Lumpin i, Patumwan, Bangkok, 10330, Thailand Standard Chartered Bank (Thai) Public Company Banking & Financ ial Thailand THB10.00 Ordinary 99.871 Lim ited Services The following company have the address of Buyukdere Cad. Yapi Kredi Plaza C Blok, Kat 15, Levent, Istanbul, 34330, Turkey Standard Chartered Yatir im Bankas i Turk Anonim Banking & Financ ial Turkey TRL0.10 Ordinary 100 Sirket i 1 Services The following company have the address of Standard Chartered Bank Bldg, 5 Speke Road, PO Box 7111, Kampala, Uganda Standard Chartered Bank Uganda Lim ited Banking & Financ ial Uganda UGS1,000.00 Ordinary 100 Services The following company have the address of 1095 Avenue of Americas, New York City NY 10036, United States Standard Chartered Bank International (Americas) Banking & Financ ial United States US$1,000.00 Ordinary 100 Lim ited 1 Services The following company have the address of 50 Fremont Street, San Francisco CA 94105, United States Standard Chartered Overseas Investment, Inc. Investment Holding United States US$10.00 Ordinary 100 Company 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 301 Directors’ Report and Financ ial Statements 2023 Proportion of Place of shares held Name and registered address Activ ity incorporation Descript ion of shares (%) The following company have the address of C/O Corporation Service Company, 251 Little Falls Drive, Wilm ington DE 19808, Un ited States Standard Chartered Trade Services Corporation Trade Services United States US$0.01 Common 100 The following company have the address of Corporation Trust Center, 1209 Orange Street, Wilm ington DE 19801, Un ited States Standard Chartered Holdings Inc. 1 Investment Holding United States US$100.00 Common 100 Company Standard Chartered Securit ies (North Amer ica) LLC Banking & Financ ial United States US$1.00 Membership 100 Services Interest The following company have the address of Level 3, #CP1.L01 and #CP2.L01, Capital Place, 29 Lieu Gia i Street, Ngoc Khanh Ward, Ba Dinh Distr ict, Ha No i, 10000, Vietnam Standard Chartered Bank (Vietnam) Lim ited Banking & Financ ial Vietnam VND Charter Capital 100 Services The following company have the address of The Company's Registered Ofﬁce, Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, Virg in Islands, Br it ish Sky Harmony Holdings Lim ited 5 Investment Holding Virg in Islands, USD1.00 Ordinary 100 Company Brit ish The following company have the address of Stand No. 4642, Corner of Mwaimwena Road and Addis Ababa Dri, Lusaka, 10101, Zambia Standard Chartered Bank Zambia Plc Banking & Financ ial Zambia ZMW0.25 Ordinary 90 Services The following company have the address of Stand No. 4642, Corner of Mwaimwena Road and Addis Ababa Dri, Lusaka, 10101, Zambia Standard Chartered Zambia Securit ies Serv ices Nominee Services Zambia ZMW0.0203 Ordinary 100 Nominees Lim ited The following company have the address of Africa Unity Square Build ing, 68 Nelson Mandela Avenue, Harare, Z imbabwe Africa Enterprise Network Trust 3 Investment Holding Zimbabwe Trust Interest 100 Company Standard Chartered Bank Zimbabwe Lim ited Banking & Financ ial Zimbabwe US$1.00 Ordinary 100 Services Standard Chartered Nominees Zimbabwe (Private) Nominee Services Zimbabwe US$2.00 Ordinary 100 Lim ited 1 Directly held related undertaking 2 The Group has determined that these undertakings are excluded from being consolidated into the Groups accounts, and do not meet the deﬁn it ion of a Subsid iary under IFRS. See note 31 for the consolidat ion pol icy and disclosure of the undertaking. 3 No share capital by virtue of being a trust 4 Lim ited l iab il ity company 5 The Group has determined the princ ipal place of operat ion to be Hong Kong 6 The Group has determined the princ ipal place of operat ion to be United Kingdom 7 Company is exempt from the requirements of the companies Act relating to the audit of ind iv idual accounts by virtue of S479A 8 Company numbers of the subsid iar ies taking the audit exemption are SC Transport Leasing 1 Ltd 06787116, SC Transport Leasing 2 Lim ited 06787090, Standard Chartered Leasing (UK) Lim ited 05513184, Standard Chartered Afr ica Lim ited 00002877 and Standard Chartered Secur it ies (Afr ica) Holdings Lim ited 05843604. 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 302 Directors’ Report and Financ ial Statements 2023 Associates Proportion of Place of shares held Name and registered address Activ ity Incorporation Descript ion of shares (%) The following company has the address of Victor ia House, State House Avenue, V ictor ia, MAHE, Seychelles Seychelles International Mercantile Banking Commercial Bank Seychelles SCR1,000.00 Ordinary 22 Corporation Lim ited. The following company has the address of 1 Rafﬂes Quay, #23-01, One Rafﬂes Quay, 048583, Singapore Clifford Capital Holdings Pte. Ltd. Investment Holding Singapore $1.00 Ordinary 9.9 Company The following company has the address of 10 Marina Boulevard #08-08, Marina Bay, Financ ial Centre, 018983, S ingapore Verif ied Impact Exchange Hold ings Pte. Ltd Exchange offering Singapore SGD Ordinary 15 liqu id ity of trade Sign iﬁcant investment holdings and other related undertakings Proportion of Place of shares held Name and registered address Activ ity Incorporation Descript ion of shares (%) The following company has the address of 1 Bartholomew Lane, London, EC2N 2AX, United Kingdom Corrasi Covered Bonds (LM) Lim ited Liqu idat ion member United Kingdom £1.00 Ordinary 20 (Bond holders) The following company has the address of Intertrust Corporate Services (Cayman) Lim ited, 190 Elg in Avenue, George Town, Grand Cayman , KY1-9005, Cayman Islands ATSC Cayman Holdco Lim ited Investment holding Cayman Islands $0.01 Ordinary-A 5.272 $0.01 Ordinary-B 100 The following companies have the address of Unit 605-07, 6/F Wing On Centre, 111 Connaught Road, Central, Sheung Wan, Hong Kong Actis Temple Stay Holdings (HK) Lim ited Investment holding Hong Kong $ Class A Ordinary 39.689 $ Class B Ordinary 39.689 Actis Rivendell Holdings (HK) Lim ited Investment holding Hong Kong $ Class A Ordinary 39.671 $ Class B Ordinary 39.671 The following company has the address of 1221 A, Devika Tower, 12th Floor, , 6 Nehru Place, New Delhi 110019, New Delhi, 110019, India Mikado Realtors Private Lim ited Other business India INR10.00 Ordinary 26 activ it ies The following company has the address of 4thFloor, 274, Chital ia House, Dr. Cawasji Hormusji Road, Dhob i Talao, Mumbai City, Maharashtra, India 400 002, Mumbai, 400 002, India Industrial Minerals and Chemical Co. Pvt. Ltd Minerals and India INR100.00 Ordinary 26 Chemical The following companies has the address of 251 Little Falls Drive, Wilm ington, New Castle DE 19808, Un ited States Paxata, Inc. Data Analytics United States US$0.0001 Series C2 40.74 Preferred Stock US$0.0001 Series C3 8.91 Preferred Stock 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 303 Directors’ Report and Financ ial Statements 2023 In liqu idat ion Subsid iary Undertak ings Proportion of Place of shares held Name and registered address Activ ity Incorporation Descript ion of shares (%) The following companies have the address of C/O Teneo Financ ial Adv isory Lim ited, The Colmore Bu ild ing, 20 Colmore C ircus, Queensway, Birm ingham, B4 6AT, Un ited Kingdom Standard Chartered Masterbrand Licens ing L im ited To manage United Kingdom $1.00 Ordinary 100 intellectual property for Group Standard Chartered Leasing (UK) 3 Lim ited Leasing Business United Kingdom $1.00 Ordinary 100 The following companies have the address of Bucktrout House, Glategny Esplanade, St Peter Port, GY1 3HQ, Guernsey Birdsong Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary 100 Nominees One Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary 100 Nominees Two Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary 100 Songbird Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary 100 Standard Chartered Secretaries (Guernsey) Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary 100 Standard Chartered Trust (Guernsey) Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary 100 The following company has the address of 30 Rue Schrobilgen, 2526, Luxembourg Standard Chartered Financ ial Serv ices (Luxembourg) Corporate Finance & Luxembourg €25.00 Ordinary 100 S.A. Advisory Services The following company has the address of Jiron Huascar 2055, Jesus Maria, Lima 15072, Peru Banco Standard Chartered en Liqu idac ion Banking services Peru $75.133 Ordinary 100 The following company has the address of Luis Alberto de Herrera 1248, Torre II, Piso 11, Esc. 1111, Uruguay Standard Chartered Uruguay Representacion S.A. Financ ial counsell ing Uruguay UYU1.00 Ordinary 100 services 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 304 Directors’ Report and Financ ial Statements 2023 Liqu idated/d issolved/sold Subsid iary and other related Undertak ings Proportion Country of of shares Name Activ ity Incorporation Descript ion of shares held (%) The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Standard Chartered UK Holdings Lim ited² Investment Holding United Kingdom $1.00 Ordinary 100 Company The following companies have the address of C/o WALKERS CORPORATE LIMITED, 190 Elgin Avenue George Town Grand Cayman KY1-9008 , Cayman Islands Sirat Holdings Lim ited¹ Investment Holding Entity Cayman Islands $0.01 Ordinary 100 The following company has the address of 3, Floor 1, No.1, Shiner Wuxingca iyuan, West Er Huan Rd, , X i Shan Distr ict, Kunm ing, Yunnan Province, PRC , China Yunnan Golden Shiner Property Development Co., Real Estate Developers China CNY1.00 Ordinary 42.5 Ltd. The following companies have the address of 14th Floor, One Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong. Kozagi Lim ited Investment Holding Hong Kong HKD Ordinary 100 Company The following companies have the address of 91 Pembroke Road, Dublin 4, Ballsbridge, Dublin, DO4 EC42, Ireland Currencyfair Lim ited FX transfer services Ireland €0.001 A Ordinary 100 €0.001 Ordinary 43.422 The following companies have the address of Standard Chartered@Chiromo, 48 Westlands Road, P. O. Box 30003 - 00100, Nairob i , Kenya Tawi Fresh Kenya Lim ited Dig ital Marketplace, Kenya KES1,000.00 Ordinary 100 Ecommerce The following companies have the address of c/o Ocorian Corporate Services (Maurit ius) Ltd, 6th Floor, Tower A, 1 Cyberc ity, Ebene, 72201, Maurit ius Standard Chartered Financ ial Hold ings Investment Holding Maurit ius $1.00 Ordinary 100 Company The following companies have the address of 142, Ahmadu Bello Way, Victor ia Island, Lagos, 101241, N iger ia Cherroots Niger ia L im ited Investment Holding Niger ia NGN1.00 Ordinary 100 Company The following companies have the address of Rafﬂes Place, #26-01 Republic Plaza, Singapore , 048619, Singapore Audax Financ ial Technology Pte. Ltd Support Services Singapore $ Ordinary 100 Autumn Life Pte. Ltd. Support Services Singapore $ Ordinary 100 Letsbloom Pte. Ltd. Others Singapore $ Ordinary 100 Pegasus Dealmaking Pte. Ltd. Mergers and Acquis it ions Singapore $ Ordinary 100 (M&A) marketplace The following companies have the address of 9 Rafﬂes Place, #26-01 Republic Plaza , Singapore , 048619, Singapore SCV Research and Development Pte. Ltd. Research, development, Singapore $ Ordinary 100 other services SCV Master Holding Company Pte. Ltd. Investment Holding Entity Singapore $ Ordinary 100 Power2SME Pte. Ltd. Investment Holding Entity Singapore US$ Ordinary 90.6 The following companies have the address of 80 Robinson Road, #02-00, 068898, Singapore Cardspal Pte. Ltd. Support Services Singapore $ Ordinary 100 The following companies has the address of 49, Sungei Kadut Avenue, #03-01 S729673, Singapore Omni Centre Pte. Ltd. Real Estate Owners & Singapore SGD Redeemable 99.998 Developers Convertible Preference 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 305 Directors’ Report and Financ ial Statements 2023 Proportion Country of of shares Name Activ ity Incorporation Descript ion of shares held (%) The following company has the address of Tricor WP Corporate Services Pte Ltd, 80 Robinson Road #02-00, 068898, Singapore Olea Global Pte. Ltd. Provis ion of trade ﬁnance Singapore $ Ordinary 41 products and services. $ Preference 100 Solv-India Pte. Ltd. Investment Holding Entity Singapore $ Ordinary 100 The following company has the address of Avenue de Tivol i 2, 1007, Lausanne, Sw itzerland Metaco SA Integrated infrastructure Switzerland CHF 0.01 Preference A 29.505 solutions The following companies have the address of Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, Virg in Islands, Brit ish Sky Favour Investments Lim ited Investment Holding Virg in Islands, $1.00 Ordinary 100 Company Brit ish The following company has the address of EX-26, Ground Floor, Bldg 16-Co Work, Dubai Internet City, Dubai, United Arab Emirates Appro Onboarding Solutions FZ-LLC IT solutions provider and United Arab AED1,000.00 Ordinary 100 support service provider Emirates The following company has the address of Suites 508, 509, 15th Floor, Al Sarab Tower, Adgm Square, Al Maryah Island, Abu Dhabi, United Arab Emirates Financ ial Inclus ion Technologies Ltd Dig ital wallet and United Arab US$1.00 Ordinary 100 technology payments Emirates platform The following companies have the address of 5th Floor, Holland House 1-4 Bury Street, London, EC3A 5AW, United Kingdom Zodia Holdings Lim ited Investment Holding United Kingdom $1.00 Ordinary 100 Company Zodia Custody Lim ited Custody Services United Kingdom $1.00 Ordinary 95.1 The following company has the address of 41 Luke Street, London, EC2A 4DP , United Kingdom Fintech for International Development Ltd Financ ial intermed iat ion United Kingdom $0.0001 Ordinary-A 44.445 The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom SC Ventures Innovation Investment L.P. Investment Holding United Kingdom Lim ited Partnersh ip 100 Company Interest Shoal Lim ited Dig ital marketplace for United Kingdom US$1.00 Ordinary 100 sustainable and “green” products. SC Ventures G.P. Lim ited Investment Holding United Kingdom £1.00 Ordinary 100 Company Zodia Markets (UK) Lim ited Banking & Financ ial United Kingdom £1.00 Ordinary 100 Services The following companies have the address of 6th Floor, 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Zodia Markets Holdings Lim ited Dig ital Venture: Hold ing United Kingdom US$1.00 Ordinary 75.01 Company for The Zodia Markets Group The following company has the address of 505 Howard St. #201, San Francisco, CA 94105, United States SC Studios, LLC Offshore Support Services United States US$1.00 Membership 100 Interest 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 306 Directors’ Report and Financ ial Statements 2023 Proportion Country of of shares Name Activ ity Incorporation Descript ion of shares held (%) The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom The following companies have the address of 8th Floor, 20 Farringdon Street, London, EC4A 4AB, United Kingdom. Assembly Payments UK Ltd Payment Services Provider United Kingdom $1.00 Ordinary 100 The following company has the address of Robert Denholm House, Bletchingly Road, Nutﬁeld, Redhill, RH1 4HW, United Kingdom CurrencyFair (UK) Lim ited Banking & Financ ial United Kingdom £1.00 Ordinary 100 Services The following company has the address of 1 Poultry, London, EC2R 8EJ, United Kingdom Zai Technologies Lim ited Payment Services Provider. United Kingdom £1.00 Ordinary 100 The following companies has the address of 17/31 Queen Street, Melbourne VIC 3000, Australia Assembly Payments Australia Pty Ltd Holding Company Australia $ Ordinary 100 The following companies has the address of Wilsons Landing, Level 5, 6A Glen Street, Milsons Point NSW 2061, Australia CurrencyFair Australia Pty Ltd Foreign Currency Australia AUD Ordinary 100 conversion services. The following company has the address of Level 20, 31 Queen Street, Melbourne VIC 3000, Australia Zai Australia Pty Ltd Payment Service Provider Australia $1.00 Ordinary 100 AUD0.01 Ordinary The following company has the address of 66 Wellington Street, West, Suite 4100, Toronto Domin ion Centre, Toronto ON M5K 1B7, Canada CurrencyFair (Canada) Ltd Dormant Canada CAD$ Common 100 The following company has the address of Room 2619, No 9, Linhe West Road, Tianhe Distr ict, Guangzhou, Ch ina Guangzhou CurrencyFair Information Technology Providers of Foreign China CNY Ordinary 100 Lim ited Currency conversion services. The following company has the address of 31/F, Tower 2 Times Square, 1 Matheson St, Causeway Bay, Hong Kong Assembly Payments HK Lim ited Online payment platform Hong Kong HKD Ordinary 100 The following company has the address of Suites 1103-4 AXA Tower, Landmark East, 100 How Ming Street, Kwun Tong, Hong Kong Currencyfair Asia Lim ited Foreign Currency Hong Kong HKD Ordinary 100 conversion services. The following company has the address of 2 Floor Sabari Complex 24 Field Marshal, Capriappa RD Shanthala Nagar, Ashok Nagar, Bangalore, Karnataka, , 560025, India Assembly Payments India Private Lim ited Activ it ies auxil iary to India INR100.00 Ordinary 100 ﬁnancial intermed iat ion The following company has the address of Second Floor, Indiqube Edge, Khata No. 571/630/6/4, Sy.No.6/4, Ambalipura Village, Varthur Hobli, Marathahalli Sub-Div is ion, Ward No. 150, Bengaluru, 560102, India. Standard Chartered Research and Technology Support Services India INR10.00 A Equity 100 India Private Lim ited INR10.00 Cumulative 100 Redeemable Preference The following companies have the address of 91 Pembroke Road, Dublin 4, Ballsbridge, Dublin, DO4 EC42, Ireland CurrencyFair (Canada) Lim ited Dormant Ireland €1.00 Ordinary 100 CurrencyFair Nominees Lim ited Nominee company Ireland €1.00 Ordinary 100 The following company has the address of 32 Molesworth Street, Dublin 2, D02Y512, Ireland Zodia Markets (Ireland) Lim ited Banking & Financ ial Ireland $1.00 Ordinary 100 Services The following company has the address of 27 Fitzw ill iam Street, Dublin, D02 TP23, Ireland Zodia Custody (Ireland) Lim ited Custody services Ireland $1.00 Ordinary 100 The following companies have the address of StandardChartered@Chiromo, Number 48, Westlands Road, P. O. Box 30003 - 00100, Nairob i, Kenya Solveazy Technology Kenya Ltd B2B dig ital platform Kenya KES1,000.00 Ordinary 100 38. Related undertakings of the Group continued Notes to the ﬁnancial statements cont inued Standard Chartered Bank 307 Directors’ Report and Financ ial Statements 2023 Proportion Country of of shares Name Activ ity Incorporation Descript ion of shares held (%) The following company has the address of 12th Floor, Menara Symphony , No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya , Selangor, Malaysia Solv Sdn. Bhd. B2B dig ital platform Malaysia RM5.00 Ordinary 100 offering ﬁnanc ial serv ices The following company has the address of 10th Floor, Menara Hap Seng, No. 1&3, Jalan P. Ramlee, 50250 Kuala Lumpur, Malaysia Assembly Payments Malaysia Sdn. Bhd. Other ﬁnancial serv ice Malaysia RM Ordinary 100 activ it ies The following company has the address of 4 All good Place, Rototuna North, Hamilton, New Zealand, 3210 PromisePay Lim ited Payment Services Provider New Zealand NZD Ordinary 100 The following company has the address of 1 Robinson Road, #17-00, AIA Tower, 048542, Singapore CurrencyFair (Singapore) Pte.Ltd Foreign Currency Singapore SGD Ordinary 100 conversion services. The following companies have the address of 38 Beach Road, #29-11 South Beach Tower, 189767, Singapore Assembly Payments SGP Pte. Ltd. Transaction/Payment Singapore SGD Ordinary 100 Processing Services Assembly Payments Pte. Ltd. Investment holding Singapore $ Ordinary 100 company $ Preference 100 The following company has the address of 6 Fort Street, PO 785848, , Birnam, Sandton, 2196 2146, South Africa Promisepay (PTY) Ltd Payment Services Provider South Africa ZAR1.00 Ordinary 100 The following companies have the address of C/O Corporation Service Company, 251 Little Falls Drive, Wilm ington DE 19808, Un ited States CurrencyFair (USA) Inc Dormant United States $1.00 Uncertif icated 100 The following company has the address of 25 Taylor St, San Francisco, CA, 94102-3916 Assembly Escrow Inc Payment Services Provider United States $0.0001 Ordinary 100 The following company has the address of 555 Washington Av, St Louis, MO, United States of America, 63101 Assembly Payments, Inc Payment services provider United States $0.0001 Ordinary 100 1 Directly held related undertaking 2 Internal sale to Standard Chartered I H Ltd 39. Group Reorganisat ion On 6 June 2023, the Group sold its subsid iary SC Ventures Hold ings Lim ited (formerly Standard Chartered UK Hold ings Lim ited) and its associated subsid iary undertak ings to Standard Chartered I H Lim ited (a fellow group undertak ing of Standard Chartered PLC) for the arms-length purchase price of $464 mill ion, g iv ing r ise to a gain on disposal of $416 mill ion 40. Post balance sheet events Nil 38. Related undertakings of the Group continued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 308 Supplementary ﬁnancial informat ion Insured and uninsured deposits SCB operates and provides services to customers across many countries and insured deposit is determined on the basis of lim its enacted w ith in local regulat ions. 2023 2022 Bank deposits $mill ion Customer accounts $mill ion Bank deposits $mill ion Customer accounts $mill ion Insured deposits 10 18,456 28 16,218 Current accounts 9 7,932 8 8,336 Savings deposits – 5,359 – 4,352 Time deposits 1 5,072 20 3,467 Other deposits – 93 – 63 Uninsured deposits 29,895 275,109 31,244 279,269 Current accounts 17,790 112,752 18,970 107,316 Savings deposits – 15,063 – 14,339 Time deposits 6,643 99,876 5,381 110,379 Other deposits 5,462 47,418 6,893 47,235 Total 29,905 293,565 31,272 295,487 Classif icat ion of insured deposits is based on the local deposits insurance regulations exist ing in the jur isd ict ions in which the Group operates. The jurisd ict ions w ith the most sign iﬁcant levels of customer depos its are Hong Kong, Korea and Singapore, which provide insurance for deposits up to SGD 75,000, in each case based on the total relationsh ip value. UK and non-UK deposits The following table summarises the split of Bank and Customer deposits into UK and Non-UK deposits for respective account lines based on the domic ile or res idence of the clients. 2023 2022 Bank deposits $mill ion Customer accounts $mill ion Bank deposits $mill ion Customer accounts $mill ion UK deposits 2,881 27,476 4,109 36,461 Current accounts 888 5,695 849 7,481 Savings deposits – 31 – 34 Time deposits 310 5,237 1,004 6,558 Other deposits 1,683 16,513 2,256 22,388 Non-UK deposits 27,024 266,089 27,163 259,026 Current accounts 16,911 114,989 18,129 108,171 Savings deposits – 20,391 – 18,657 Time deposits 6,334 99,711 4,397 107,288 Other deposits 3,779 30,998 4,637 24,910 Total 29,905 293,565 31,272 295,487 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 309 Contractual maturity of Loans, Investment securit ies and Depos its 2023 Loans and advances to banks $mill ion Loans and advances to customers $mill ion Investment securit ies – Treasury and other elig ible Bills $mill ion Investment securit ies – Debt securit ies $mill ion Investment securit ies - Equity shares $mill ion Bank deposits $mill ion Customer accounts $mill ion One year or less 46,411 137,816 21,695 22,486 – 25,813 285,976 Between one and ﬁve years 3,612 29,162 4 43,724 – 4,088 7,362 Between ﬁve and ten years 837 9,816 – 14,565 – 4 131 Between ten years and ﬁfteen years 35 6,891 – 9,189 – – 86 More than ﬁfteen years and undated 226 17,742 – 12,434 1,875 – 10 Total 51,121 201,427 21,699 102,398 1,875 29,905 293,565 Total amortised cost and FVOCI exposures 22,803 156,143 Fixed interest rate exposures 20,514 94,343 Floating interest rate exposures 2,289 61,800 2022 Loans and advances to banks $mill ion Loans and advances to customers $mill ion Investment securit ies – Treasury and other elig ible Bills $mill ion Investment securit ies – Debt securit ies $mill ion Investment securit ies – Equity shares $mill ion Bank deposits $mill ion Customer accounts $mill ion One year or less 47,334 139,074 25,668 20,194 – 29,918 288,472 Between one and ﬁve years 3,549 28,958 430 40,005 – 1,348 6,860 Between ﬁve and ten years 361 9,435 – 17,884 – 6 90 Between ten years and ﬁfteen years 92 6,387 – 12,843 – – 48 More than ﬁfteen years and undated 182 17,394 – 8,811 2,490 – 17 Total 51,518 201,248 26,098 99,737 2,490 31,272 295,487 Total amortised cost and FVOCI exposures 27,383 158,126 Fixed interest rate exposures 26,083 89,636 Floating interest rate exposures 1,300 68,490 Maturity and yield of Debt securit ies, alternat ive tier one and other elig ible b ills held at amortised cost One year or less Between one and ﬁve years Between ﬁve and ten years More than ten years Total $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % Central and Central and other government agencies • US 1,373 1.44 6,807 1.62 4,356 1.66 4,524 3.89 17,060 2.22 • UK 39 2.75 39 1.25 101 0.67 – – 179 1.25 • Other 1,915 2.88 4,556 2.93 1,460 3.16 37 9.13 7,968 2.99 Other debt securit ies 2,361 6.51 2,156 5.44 1,688 5.90 8,508 5.21 14,713 5.54 As at 31 December 2023 5,688 4.05 13,558 2.67 7,605 2.87 13,069 4.76 39,920 3.59 Supplementary ﬁnancial informat ion cont inued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 310 Supplementary ﬁnancial informat ion cont inued Maturity and yield of Debt securit ies, alternat ive tier one and other elig ible b ills held at amortised cost continued One year or less Between one and ﬁve years Between ﬁve and ten years More than ten years Total $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % Central and other government agencies • US 1,860 1.56 3,803 1.42 4,900 1.27 4,498 3.47 15,061 2.00 • UK – – 85 1.98 60 0.50 47 0.90 191 1.26 • Other 579 2.58 5,401 2.39 3,056 2.21 – – 9,036 2.34 Other debt securit ies 3,188 4.66 1,982 5.64 1,453 3.82 10,890 3.32 17,513 3.87 As at 31 December 2022 5,627 3.42 11,271 2.63 9,469 1.96 15,435 3.36 41,801 2.85 The maturity distr ibut ions are presented in the above table on the basis of residual contractual maturity dates. The weighted average yield for each range of maturit ies is calculated by div id ing the annualised interest income for the year by the book amount of debt securit ies at that date. Average balance sheets and yields and volume and price variances Average balance sheets and yields For the purposes of calculating net interest margin the following adjustments are made: Reported net interest income is adjusted to remove interest expense on amortised cost liab il it ies used to prov ide funding to the ﬁnancial Markets bus iness Financ ial instruments measured at fair value through proﬁt or loss are classif ied as non- interest earning Premiums on ﬁnancial guarantees purchased to manage interest earning assets are treated as interest expense In the Group’s view this results in a net interest margin that is more reﬂective of banking book performance. The following tables set out the average balances and yields for the SC Bank Group’s assets and liab il it ies for the per iods ended 31 December 2023 and 31 December 2022 under the revised deﬁn it ion of net interest margin. For the purpose of these tables, average balances have been determined on the basis of daily balances, except for certain categories, for which balances have been determined less frequently. The Group does not believe that the informat ion presented in these tables would be sign iﬁcantly d ifferent had such balances been determined on a daily basis. Average assets 2023 Average non-interest earning balance $mill ion Average interest earning balance $mill ion Interest income $mill ion Gross yield % Gross yield total balance % Cash and balances at central banks 6,849 65,375 2,813 4.30 3.89 Gross loans and advances to banks 30,042 24,619 1,175 4.77 2.15 Gross loans and advances to customers 48,839 160,448 9,408 5.86 4.50 Impairment provis ions aga inst loans and advances to banks and customers – (4,330) – – – Investment securit ies – Treasury and Other El ig ible B ills 4,284 18,151 1,204 6.63 5.37 Investment securit ies – Debt Secur it ies 13,372 87,099 3,650 4.19 3.63 Investment securit ies – Equ ity Shares 1,313 – – - - Due from subsid iary undertak ings and other related parties – 5,088 130 2.56 2.56 Property, plant and equipment and intang ible assets 4,202 – – – – Prepayments, accrued income and other assets 95,872 – – – – Investment associates and jo int ventures 143 – – - - Total average assets 204,916 356,450 18,380 5.16 3.27 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 311 Average balance sheets and yields and volume and price variances continued Average assets 2022 Average non-interest earning balance $mill ion Average interest earning balance $mill ion Interest income $mill ion Gross yield % Gross yield total balance % Cash and balances at central banks 14,190 52,002 745 1.43 1.13 Gross loans and advances to banks 28,252 28,560 635 2.22 1.12 Gross loans and advances to customers 56,483 155,518 5,766 3.71 2.72 Impairment provis ions aga inst loans and advances to banks and customers – (4,804) – – – Investment securit ies – Treasury and Other El ig ible B ills 3,485 14,113 518 3.67 2.94 Investment securit ies – Debt Secur it ies 9,776 92,171 2,037 2.21 2.00 Investment securit ies – Equ ity Shares 2,860 – – – – Due from subsid iary undertak ings and other related parties – 6,387 64 1.00 1.00 Property, plant and equipment and intang ible assets 3,873 – – – – Prepayments, accrued income and other assets 111,206 – – – – Investment associates and jo int ventures 220 – – – – Total average assets 230,345 343,947 9,765 2.84 1.70 Average liab il it ies 2023 Average non-interest bearing balance $mill ion Average interest bearing balance $mill ion Interest expense $mill ion Rate paid % Rate paid total balance % Deposits by banks 10,587 20,824 626 3.01 1.99 Customer accounts: Current accounts 28,008 100,986 2,839 2.81 2.20 Savings deposits – 18,922 512 2.71 2.71 Time deposits 8,310 105,927 5,099 4.81 4.46 Other deposits 44,163 5,008 173 3.45 0.35 Debt securit ies in issue 10,246 31,086 1,771 5.70 4.28 Due to parent companies, subsid iary undertak ings & other related parties – 26,744 2,116 7.91 7.91 Accruals, deferred income and other liab il it ies 103,131 584 35 5.99 0.03 Subordinated liab il it ies and other borrowed funds – 12,341 602 4.88 4.88 Non-controlling interests 1,184 – – – – Shareholders’ funds 33,315 – – – – 238,944 322,422 13,773 4.27 2.45 Adjustment for Financ ial Markets fund ing costs and ﬁnanc ial guarantee fees on interest earning assets (1,087) Total average liab il it ies and shareholders’ funds 238,944 322,422 12,686 3.93 2.26 Supplementary ﬁnancial informat ion cont inued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 312 Supplementary ﬁnancial informat ion cont inued Average balance sheets and yields and volume and price variances continued Average liab il it ies 2022 Average non-interest bearing balance $mill ion Average interest bearing balance $mill ion Interest expense $mill ion Rate paid % Rate paid total balance % Deposits by banks 12,185 22,783 358 1.57 1.02 Customer accounts: Current accounts 31,956 100,431 968 0.96 0.73 Savings deposits – 20,621 454 2.20 2.20 Time deposits 7,736 94,825 1,295 1.37 1.26 Other deposits 52,918 3,888 78 2.01 0.14 Debt securit ies in issue 6,250 29,800 367 1.23 1.02 Due to parent companies, subsid iary undertak ings & other related parties – 29,003 1,204 4.15 4.15 Accruals, deferred income and other liab il it ies 102,775 548 28 5.11 0.03 Subordinated liab il it ies and other borrowed funds – 15,065 562 3.73 3.73 Non-controlling interests 2,972 – – – – Shareholders’ funds 40,536 – – – – Total average liab il it ies and shareholders’ funds 257,328 316,964 5,314 1.68 0.93 Adjustment for Financ ial Markets fund ing costs and ﬁnanc ial guarantee fees on interest earning assets (244) Total average liab il it ies and shareholders’ funds 257,328 316,964 5,070 1.60 0.88 Net interest margin 2023 $mill ion 2022 $mill ion Interest income (Reported) 18,380 9,765 Average interest earning assets 356,450 343,947 Gross yield (%) 5.16 2.84 Interest expense (Reported) 13,773 5,314 Adjustment for Financ ial Markets fund ing costs and ﬁnanc ial guarantee fees on interest earning assets (1,087) (244) Interest expense adjusted for Financ ial Markets trad ing book funding costs and ﬁnanc ial guarantee fees on interest-earning assets 12,686 5,070 Average interest-bearing liab il it ies 322,422 316,964 Rate paid (%) 3.93 1.60 Net yield (%) 1.23 1.24 Net interest income adjusted for Financ ial Markets fund ing costs and Financ ial guarantee fees on interest earning assets 5,694 4,695 Net interest margin (%) 1.60 1.37 Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 313 Volume and price variances The following table analyses the estimated change in the Group’s net interest income attributable to changes in the average volume of interest-earning assets and interest-bearing liab il it ies, and changes in their respective interest rates for the years presented. Volume and rate variances have been determined based on movements in average balances and average exchange rates over the year and changes in interest rates on average interest-earning assets and average interest- bearing liab il it ies. 2023 versus 2022 (Decrease)/increase in interest due to: Net increase/ (decrease) in interest $mill ion Volume $mill ion Rate $mill ion Interest earning assets Cash and unrestricted balances at central banks 575 1,493 2,068 Loans and advances to banks (189) 729 540 Loans and advances to customers 325 3,359 3,684 Investment securit ies (47) 2,346 2,299 Due from subsid iary undertak ings and other related parties (6) 30 24 Total interest earning assets 658 7,957 8,615 Interest bearing liab il it ies Subordinated liab il it ies and other borrowed funds (33) 73 40 Deposits by banks (59) 327 268 Customer accounts: Current accounts and savings deposits (243) 3,025 2,782 Time and other deposits 612 2,975 3,587 Debt securit ies in issue 124 1,280 1,404 Due to parent companies, subsid iary undertak ings & other related parties (58) 436 378 Total interest bearing liab il it ies 343 8,116 8,459 2022 versus 2021 (Decrease)/increase in interest due to: Net increase/ (decrease) in interest $mill ion Volume $mill ion Rate $mill ion Interest earning assets Cash and unrestricted balances at central banks (14) 692 678 Loans and advances to banks 18 296 314 Loans and advances to customers 59 1,475 1,534 Investment securit ies 313 717 1,030 Due from subsid iary undertak ings and other related parties (6) 30 24 Total interest earning assets 370 3,210 3,580 Interest bearing liab il it ies Subordinated liab il it ies and other borrowed funds – 138 138 Deposits by banks (11) 301 290 Customer accounts: Current accounts and savings deposits 89 818 907 Time and other deposits 88 1,111 1,199 Debt securit ies in issue 39 230 269 Due to parent companies, subsid iary undertak ings & other related parties (58) 436 378 Total interest bearing liab il it ies 147 3,034 3,181 Supplementary ﬁnancial informat ion cont inued Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 314 The following table summarises the number of employees with in the Group and Company: Group 2023 2022 Business Support services Total Business Support services Total At 31 December 19,611 49,619 69,230 20,031 47,166 67,197 Average for the year 19,958 49,417 69,375 20,069 46,334 66,403 Company 2023 2022 Business Support services Total Business Support services Total At 31 December 8,245 13,493 21,738 8,493 12,627 21,120 Average for the year 8,479 13,483 21,962 8,359 12,404 20,763 Return on assets FY'23 $mill ion FY'22 $mill ion Proﬁt attributable to shareholders 3,208 2,370 Total assets 538,579 550,734 Return on assets 1 0.6% 0.4% 1 Represents proﬁt attributable to shareholders div ided by the total assets of the Group Supplementary people informat ion Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 315 AT1 or Addit ional T ier 1 capital Addit ional T ier 1 capital consists of instruments other than Common Equity Tier 1 that meet the condit ions set out in Article 52(1) of the Capital Requirements Regulation (as it forms part of UK domestic law), as well as the share premium accounts related to those instruments. Addit ional value adjustment See Prudent valuation adjustment. Advanced Internal Rating Based (AIRB) approach The AIRB approach under the Basel framework is used to calculate credit risk capital based on the Group’s own estimates of prudential parameters. Alternative performance measures A ﬁnancial measure of h istor ical or future ﬁnancial performance, ﬁnancial pos it ion, or cash ﬂows, other than a ﬁnancial measure deﬁned or specif ied in the applicable ﬁnanc ial report ing framework. ASEAN Associat ion of South East As ian Nations (ASEAN) which includes the Group’s operations in Brunei, Indonesia, Malaysia, Phil ipp ines, Singapore, Thailand and Vietnam. AUM or Assets under management Total market value of assets such as deposits, securit ies and funds held by the Group on behalf of the cl ients. Basel II The capital adequacy framework issued by the Basel Committee on Banking Supervis ion (BCBS) in June 2006 in the form of the International Convergence of Capital Measurement and Capital Standards. Basel III The global regulatory standards on bank capital adequacy and liqu id ity, orig inally issued in December 2010 and updated in June 2011. In December 2017, the BCBS published a document setting out the ﬁnal isat ion of the Basel III framework. The requirements are expected to be implemented in the UK from 2025. BCBS or Basel Committee on Banking Supervis ion A forum on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are ofﬁcials from 45 central banks or prudent ial supervisors from 28 countries and territor ies. Basis point (bps) One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent. CRD or Capital Requirements Direct ive An EU capital adequacy legislat ive package largely implemented or onshored into UK law. The package comprises the Capital Requirements Direct ive and the Cap ital Requirements Regulation (CRR) and implements the Basel III framework together with transit ional arrangements for some of its requirements. CRD IV came into force on 1 January 2014. The EU CRR II and CRD V amending the exist ing package came into force in June 2019 with most changes starting to apply from 28 June 2021. Only those parts of the EU CRR II that applied on or before 31 December 2020, when the UK was a member of the EU, have been implemented. The PRA has recently implemented the UK’s version of CRR II Capital-lite income Income derived from products with low RWA consumption or products which are non-funding in nature. Capital resources Sum of Tier 1 and Tier 2 capital after regulatory adjustments. CGU or Cash-generating unit The smallest ident iﬁable group of assets that generates cash inﬂows that are largely independent of the cash inﬂows from other assets or groups of assets. Cash shortfall The difference between the cash ﬂows that are due in accordance with the contractual terms of the instrument and the cash ﬂows that the Group expects to receive over the contractual life of the instrument. Glossary Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 316 Glossary continued Clawback An amount an ind iv idual is required to pay back to the Group, which has to be returned to the Group under certain circumstances. Commercial real estate Includes ofﬁce build ings, industr ial property, med ical centres, hotels, malls, retail stores, shopping centres, farm land, multi- family housing build ings, warehouses, garages, and industr ial propert ies. Commercial real estate loans are those backed by a package of commercial real estate assets. CET1 or Common Equity Tier 1 capital Common Equity Tier 1 capital consists of the items, includ ing the common shares issued by the Group and related share premium, retained earnings, accumulated other comprehensive income and other disclosed reserves, elig ible noncontroll ing interests and regulatory adjustments required in the calculation of Common Equity Tier 1, set out in Article 26(1) of the of the Capital Requirements Regulation (as it forms part of UK domestic law), capable of being available to the inst itut ion for unrestricted and immed iate use to absorb losses as soon as these occur. CET1 ratio A measure of the Group's CET1 capital as a percentage of risk-weighted assets. Contractual maturity Contractual maturity refers to the ﬁnal payment date of a loan or other ﬁnanc ial instrument, at which point all the remain ing outstanding princ ipal and interest is due to be paid. Countercyclical capital buffer The countercyclical capital buffer (CCyB) is part of a set of macroprudential instruments, designed to help counter procyclical ity in the ﬁnanc ial system. CCyB as deﬁned in the Basel III standard provides for an addit ional cap ital requirement of up to 2.5 per cent of risk-weighted assets in a given jur isd ict ion. The Bank of England’s F inanc ial Pol icy Committee has the power to set the CCyB rate for the United Kingdom. Each bank must calculate its ‘inst itut ion-specif ic’ CCyB rate, deﬁned as the weighted average of the CCyB rates in effect across the jur isd ict ions in which it has credit exposures. The inst itut ion- specif ic CCyB rate is then applied to a bank’s total risk-weighted assets. Counterparty credit risk The risk that a counterparty defaults before satisfy ing its obligat ions under a der ivat ive, a secur it ies ﬁnancing transact ion (SFT) or a sim ilar contract. CCF or Credit conversion factor An estimate of the amount the Group expects a customer to have drawn further on a facil ity l im it at the po int of default. This is either prescribed by CRR or modelled by the bank. CDS or Credit default swaps A credit derivat ive is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a deﬁned credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency. Credit grade A standard alphanumeric Credit Risk grade system is used for CCIB Client Coverage. The numeric grades run from 1 to 14 and some of the grades are further sub-classif ied. Lower numer ic credit grades are ind icat ive of a lower likel ihood of default. Credit grades 1 to 12 are assigned to performing customers, while credit grades 13 and 14 are assigned to nonperforming or defaulted customers. Credit inst itut ions An inst itut ion whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account. Credit risk mit igat ion Credit risk mit igat ion is a process to mit igate potent ial credit losses from any given account, customer or portfolio by using a range of tools such as collateral, netting agreements, credit insurance, credit derivat ives and guarantees. CVA or Credit valuation adjustments An adjustment to the fair value of derivat ive contracts that reﬂects the poss ib il ity that the counterparty may default such that the Group would not receive the full market value of the contracts. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 317 Glossary continued Customer accounts Money deposited by all ind iv iduals and companies which are not credit inst itut ions includ ing secur it ies sold under repurchase agreement (see repo/reverse repo). Such funds are recorded as liab il it ies in the Group’s balance sheet under customer accounts. Days past due One or more days that interest and/or princ ipal payments are overdue based on the contractual terms. DVA or Debit valuation adjustment An adjustment to the fair value of derivat ive contracts that reﬂects the poss ib il ity that the Group may default and not pay the full market value of contracts. Debt securit ies Debt securit ies are assets on the Group’s balance sheet and represent cert if icates of indebtedness of credit inst itut ions, public bodies or other undertakings excluding those issued by central banks. Debt securit ies in issue Debt securit ies in issue are transferable certif icates of indebtedness of the Group to the bearer of the certif icate. These are liab il it ies of the Group and include certif icates of depos its. Deferred tax asset Income taxes recoverable in future periods in respect of deductible temporary differences between the accounting and tax base of an asset or liab il ity that will result in tax deductible amounts in future periods, the carry-forward of tax losses or the carry-forward of unused tax credits. Deferred tax liab il ity Income taxes payable in future periods in respect of taxable temporary differences between the accounting and tax base of an asset or liab il ity that will result in taxable amounts in future periods. Default Financ ial assets in default represent those that are at least 90 days past due in respect of princ ipal or interest and/or where the assets are otherwise considered to be unlikely to pay, includ ing those that are cred it-impa ired. Deﬁned beneﬁt obligat ion The present value of expected future payments required to settle the obligat ions of a deﬁned beneﬁt scheme result ing from employee service. Deﬁned beneﬁt scheme Pension or other post-retirement beneﬁt scheme other than a deﬁned contribut ion scheme. Deﬁned contribut ion scheme A pension or other post-retirement beneﬁt scheme where the employer’s obligat ion is lim ited to its contribut ions to the fund. Delinquency A debt or other ﬁnancial obl igat ion is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as arrears. Deposits by banks Deposits by banks comprise amounts owed to other domestic or foreign credit inst itut ions by the Group includ ing secur it ies sold under repo. Div idend per share Represents the entitlement of each shareholder in the share of the proﬁts of the Company. Calculated in the lowest unit of currency in which the shares are quoted. Early alert, purely and non-purely precautionary A borrower’s account which exhib its r isks or potential weaknesses of a material nature requir ing closer mon itor ing, supervis ion, or attent ion by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deteriorat ion of repayment prospects and the l ikel ihood of be ing downgraded to credit grade 12 or worse. When an account is on early alert, it is classif ied as e ither purely precautionary or non-purely precautionary. A purely precautionary account is one that exhib its early alert character ist ics, but these do not present any imm inent cred it concern. If the symptoms present an imm inent cred it concern, an account will be considered for classif icat ion as non-purely precautionary. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 318 Glossary continued Effective tax rate The tax on proﬁt/ (losses) on ordinary activ it ies as a percentage of proﬁt/ (loss) on ordinary activ it ies before taxation. Encumbered assets On-balance sheet assets pledged or used as collateral in respect of certain of the Group’s liab il it ies. EU or European Union The European Union (EU) is a polit ical and econom ic union of 27 member states that are located primar ily in Europe. Eurozone Represents the 20 EU countries that have adopted the euro as their common currency. ECL or Expected credit loss Represents the present value of expected cash shortfalls over the residual term of a ﬁnanc ial asset, undrawn comm itment or ﬁnancial guarantee. Expected loss The Group measure of antic ipated loss for exposures captured under an internal ratings-based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of antic ipated loss based on probab il ity of default, loss given default and exposure at default, with a one-year time horizon. Exposures Credit exposures represent the amount lent to a customer, together with any undrawn commitments. EAD or Exposure at default The estimat ion of the extent to wh ich the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the princ ipal, so that exposure is typically less than the approved loan lim it. ECAI or External Credit Assessment Institut ion External credit ratings are used to assign risk-weights under the standardised approach for sovereigns, corporates and inst itut ions. The external ratings are from credit rating agencies that are registered or certif ied in accordance with the credit rating agencies regulation or from a central bank issu ing cred it ratings which is exempt from the applicat ion of th is regulation. FCA or Financ ial Conduct Author ity The Financ ial Conduct Author ity regulates the conduct of ﬁnanc ial ﬁrms and, for certa in ﬁrms, sets prudential standards in the UK. It has a strategic object ive to ensure that the relevant markets funct ion well. Forbearance Forbearance takes place when a concession is made to the contractual terms of a loan in response to an obligor’s ﬁnanc ial diff icult ies. The Group classif ies such mod if ied loans as e ither ‘Forborne – not impa ired loans’ or ‘Loans subject to forbearance – impa ired’. Once a loan is categorised as either of these, it will remain in one of these two categories until the loan matures or satisf ies the ‘cur ing’ condit ions descr ibed in Note 8 to the ﬁnanc ial statements. Forborne – not impa ired loans Loans where the contractual terms have been modif ied due to ﬁnancial d iff icult ies of the borrower, but the loan is not considered to be impa ired. See ‘Forbearance’. Funded/unfunded exposures Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where a commitment to provide future funding is made but funds have been released/ not released. FVA or Funding valuation adjustments FVA reﬂects an adjustment to fair value in respect of derivat ive contracts that reﬂects the fund ing costs that the market partic ipant would incorporate when determin ing an ex it price. G-SIBs or Global Systemically Important Banks Global banking ﬁnanc ial inst itut ions whose size, complexity and systemic interconnectedness mean that their distress or failure would cause sign iﬁcant d isrupt ion to the w ider ﬁnanc ial system and econom ic activ ity. The l ist of G-SIBs is assessed under a framework established by the FSB and the BCBS. In the UK, the G-SIB framework is implemented via the CRD and G-SIBs are referred to as Global Systemically Important Institut ions (G-SIIs). Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 319 Glossary continued G-SII buffer A CET1 capital buffer which results from designat ion as a G-SII. The G-SII buffer is between 1 per cent and 3.5 per cent, depending on the allocation to one of ﬁve buckets based on the annual scoring. In the EU, the G-SII buffer is implemented via CRD IV as Global Systemically Important Institut ions (G-SII) buffer requ irement. Hong Kong regional hub Standard Chartered Bank (Hong Kong) Lim ited and its subsid iar ies includ ing the pr imary operating entit ies in China, Korea and Taiwan. Standard Chartered PLC is the ultimate parent company of Standard Chartered Bank (Hong Kong) Lim ited. Interest rate risk The risk of an adverse impact on the Group’s income statement due to changes in interest rates. IRB or internal ratings-based approach Risk-weight ing methodology in accordance with the Basel Capital Accord where capital requirements are based on a ﬁrm’s own estimates of prudential parameters. Internal model approach The approach used to calculate market risk capital and RWA with an internal market risk model approved by the PRA under the terms of CRD/CRR. IAS or International Accounting Standard A standard that forms part of the International Financ ial Report ing Standards framework. IASB or International Accounting Standards Board An independent standard-setting body responsible for the development and publicat ion of IFRS, and approv ing interpretat ions of IFRS standards that are recommended by the IFRS Interpretat ions Committee (IFRIC). IFRS or International Financ ial Report ing Standards A set of internat ional account ing standards developed and issued by the International Accounting Standards Board, consist ing of pr inc iples-based gu idance contained with in IFRSs and IASs. All compan ies that have issued publicly traded securit ies in the EU are required to prepare annual and inter im reports under IFRS and IAS standards that have been endorsed by the EU. IFRIC The IFRS Interpretations Committee supports the IASB in provid ing author itat ive gu idance on the accounting treatment of issues not specif ically dealt w ith by exist ing IFRSs and IASs. Income Return on risk weighted assets (IRORWA) Annualised income excluding Debit Valuation Adjustment as a percentage of Average RWA. Investment grade A debt security, treasury bill or sim ilar instrument with a credit rating measured by external agencies of AAA to BBB. Leverage ratio A ratio introduced under CRD IV that compares Tier 1 capital to total exposures, includ ing certa in exposures held off-balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk-based backstop measure. Liqu idat ion portfolio A portfolio of assets which is beyond our current risk appetite metrics and is held for liqu idat ion. LCR or Liqu id ity coverage ratio The ratio of the stock of high-quality liqu id assets to expected net cash outﬂows under stressed cond it ions over the follow ing 30 days. High-quality liqu id assets should be unencumbered, l iqu id in markets during a time of stress, and ideally, be central bank elig ible. Loan exposure Loans and advances to customers reported on the balance sheet held at amortised cost or FVOCI, non-cancellable credit commitments and cancellable credit commitments for credit cards and overdraft facil it ies. Loans and advances to customers This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 320 Glossary continued Loans and advances to banks Amounts loaned to credit inst itut ions includ ing secur it ies bought under Reverse repo. LTV or loan-to-value ratio A calculation which expresses the amount of a ﬁrst mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determin ing the appropr iate level of risk for the loan and therefore the correct price of the loan to the borrower. Loans past due Loans on which payments have been due for up to a maximum of 90 days includ ing those on wh ich partial payments are being made. Loans subject to forbearance – impa ired Loans where the terms have been renegotiated on terms not consistent with current market levels due to ﬁnanc ial d iff icult ies of the borrower. Loans in this category are necessarily impa ired. See ‘Forbearance’. Loss rate Uses an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances. LGD or Loss given default The percentage of an exposure that a lender expects to lose in the event of obligor default. Low returning clients See ‘Perennial sub-optimal clients’. Malus An arrangement that permits the Group to prevent vesting of all or part of the amount of an unvested variable remuneration award, due to a specif ic crystall ised risk, behaviour, conduct or adverse performance outcome. Master netting agreement An agreement between two counterparties that have multiple derivat ive contracts w ith each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or terminat ion of, any one contract. Mezzanine capital Financ ing that comb ines debt and equity characterist ics. For example, a loan that also confers some proﬁt part ic ipat ion to the lender. MREL or min imum requ irement for own funds and elig ible l iab il it ies A requirement under the Bank Recovery and Resolution Direct ive for EU resolut ion authorit ies and the Bank of England (as the UK resolution authority) to set a min imum requ irement for own funds and elig ible l iab il it ies for bank ing groups, implement ing the FSB’s Total Loss Absorbing Capacity (TLAC) standard. MREL is intended to ensure that there is sufﬁc ient equ ity and specif ic types of l iab il it ies to fac il itate an orderly resolut ion that min im ises any impact on ﬁnanc ial stab il ity ensures the continu ity of cr it ical funct ions and avoids exposing taxpayers to loss. Net asset value (NAV) per share Ratio of net assets (total assets less total liab il it ies) to the number of ord inary shares outstanding at the end of a reporting period. Net exposure The aggregate of loans and advances to customers/loans and advances to banks after impa irment prov is ions, restr icted balances with central banks, derivat ives (net of master nett ing agreements), investment debt and equity securit ies, and letters of credit and guarantees. NII or Net interest income The difference between interest received on assets and interest paid on liab il it ies. NSFR or Net stable funding ratio The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. It is a longer-term liqu id ity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one-year time horizon. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 321 Glossary continued NPLs or non-performing loans An NPL is any loan that is more than 90 days past due or is otherwise ind iv idually impa ired. Th is excludes Retail loans renegotiated at or after 90 days past due, but on which there has been no default in interest or princ ipal payments for more than 180 days since renegotiat ion, and aga inst which no loss of princ ipal is expected. Non-linear ity Non-linear ity of expected cred it loss occurs when the average of expected credit loss for a portfolio is higher than the base case (median) due to the fact that bad economic environment could have a larger impact on ECL calculation than good economic environment. Normalised items See ‘Underlying/Normalised’ on page 31. Operating expenses Staff and premises costs, general and admin istrat ive expenses, depreciat ion and amort isat ion. Underly ing operating expenses exclude expenses as described in ‘Underlying earnings’. A reconcil iat ion between underlying and operating earnings is contained in Note 2 to the ﬁnanc ial statements. Operating income or operating proﬁt Net interest, net fee and net trading income, as well as other operating income. Underlying operating income represents the income line items above, on an underlying basis. See ‘Underlying earnings’. OTC or Over-the-counter derivat ives A bilateral transaction (e.g. derivat ives) that is not exchange traded and that is valued using valuation models. OCA or Own credit adjustment An adjustment to the Group’s issued debt designated at fair value through proﬁt or loss that reﬂects the possib il ity that the Group may default and not pay the full market value of the contracts. Perennial sub-optimal clients Clients that have returned below 3% return on risk-weighted assets for the last three years Physical risks The risk of increased extreme weather events includ ing ﬂood, drought and sea level r ise. Pillar 1 The ﬁrst pillar of the three pillars of the Basel framework which provides the approach to calculation of the min imum cap ital requirements for credit, market and operational risk. Min imum cap ital requirements are 8 per cent of the Group’s risk- weighted assets. Pillar 2 The second pillar of the three pillars of the Basel framework which requires banks to undertake a comprehensive assessment of their risks and to determine the appropriate amounts of capital to be held against these risks where other suitable mit igants are not ava ilable. Pillar 3 The third pillar of the three pillars of the Basel framework which aims to provide a consistent and comprehensive disclosure framework that enhances comparabil ity between banks and further promotes improvements in risk practices. Prior ity Bank ing Prior ity Bank ing customers are ind iv iduals who have met certain criter ia for depos its, AUM, mortgage loans or monthly payroll. Criter ia var ies by country. Private equity investments Equity securit ies in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or inst itut ional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. PD or Probabil ity of default PD is an internal estimate for each borrower grade of the likel ihood that an obl igor will default on an obligat ion over a g iven time horizon. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 322 Glossary continued Probabil ity we ighted Obtained by consider ing the values the metr ic can assume, weighted by the probabil ity of each value occurr ing. Proﬁt (loss) attributable to ordinary shareholders Proﬁt (loss) for the year after non-controlling interests and div idends declared in respect of preference shares classif ied as equity. PVA or Prudent valuation adjustment An adjustment to CET1 capital to reﬂect the difference between fair value and prudent value posit ions, where the appl icat ion of prudence results in a lower absolute carrying value than recognised in the ﬁnanc ial statements. PRA or Prudential Regulation Authority The Prudential Regulation Authority is the statutory body responsible for the prudential supervis ion of banks, bu ild ing societ ies, cred it unions, insurers and a small number of sign iﬁcant investment ﬁrms in the UK. The PRA is a part of the Bank of England. Regulatory consolidat ion The regulatory consolidat ion of Standard Chartered PLC d iffers from the statutory consolidat ion in that it includes Ascenta IV, Olea Global group, Seychelles International Mercantile Banking Corporation Lim ited., and all of the legal ent it ies in the Currency Fair group on a proportionate consolidat ion bas is. These entit ies are cons idered associates for statutory accounting purposes. The regulatory consolidat ion further excludes the follow ing entit ies, wh ich are consolidated for statutory accounting purposes; Audax Financ ial Technology Pte. Ltd, Cardspal Pte. Ltd. Letsbloom Pte. Ltd, SCV Research and Development Pte. Ltd., Standard Chartered Assurance Lim ited, Standard Chartered Isle of Man L im ited, Corras i Covered Bonds LLP, Pegasus Dealmaking Pte. Ltd., Solv Sdn. Bhd., Standard Chartered Botswana Education Trust, Standard Chartered Bancassurance Intermediary Lim ited, Standard Chartered Bank Insurance Agency (Propr ietary) Lim ited, Standard Chartered Research and Technology India Private Lim ited, Standard Chartered Trad ing (Shanghai) Lim ited, Taw i Fresh Kenya Lim ited. Repo/reverse repo A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell a ﬁnanc ial asset, such as asset-backed securit ies or government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future), it is a reverse repurchase agreement or reverse repo. Reported performance/results Reported performance/results with in th is ﬁnanc ial report means amounts reported under UK-adopted IAS and EU IFRS. In prior periods Reported performance/ results were described as Statutory performance/results. Resident ial mortgage A loan to purchase a resident ial property wh ich is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a home loan. RoRWA or Return on risk-weighted assets Proﬁt before tax for year as a percentage of RWA. Proﬁt may be statutory or underlying and is specif ied where used. See ‘RWA’ and ‘Underlying earnings’. RWA or Risk-weighted assets A measure of a bank’s assets adjusted for their associated risks, expressed as a percentage of an exposure value in accordance with the applicable standardised or IRB approach provis ions. Risks-not-in-VaR (RNIV) A framework for ident ify ing and quantify ing marg inal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a far-tail risk or the necessary histor ical market data not be ing available. Roll rate Uses a matrix that gives average loan migrat ion rate from del inquency states from period to period. A matrix multipl icat ion is then performed to generate the ﬁnal PDs by delinquency bucket over different time horizons. Secured (fully and partially) A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of orig inat ion. All other secured loans are considered to be partly secured. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 323 Glossary continued Securit isat ion Securit isat ion is a process by which credit exposures are aggregated into a pool, which is used to back new securit ies. Under tradit ional secur it isat ion transactions, assets are sold to a structured entity which then issues new securit ies to investors at different levels of senior ity (cred it tranching). This allows the credit quality of the assets to be separated from the credit rating of the orig inat ing inst itut ion and transfers risk to external investors in a way that meets their risk appetite. Under synthetic securit isat ion transactions, the transfer of risk is achieved by the use of credit derivat ives or guarantees, and the exposures being securit ised rema in exposures of the orig inat ing inst itut ion. Senior debt Debt that takes prior ity over other unsecured or otherw ise more ‘ jun ior’ debt owed by the issuer. Senior debt has greater senior ity in the issuer's capital structure than subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment. SICR or Sign iﬁcant increase in credit risk Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at orig inat ion (after consider ing the passage of t ime). Solo The solo regulatory group as listed in the Prudential Regulation Authority waiver written notice dated 21 August 2023. This differs from Standard Chartered Bank Company in that it includes the full consolidat ion of three subs id iar ies, namely Standard Chartered Holdings (International) B.V., Standard Chartered Grindlays PTY Lim ited, SCMB Overseas L im ited. Sovereign exposures Exposures to central governments and central government departments, central banks and entit ies owned or guaranteed by the aforementioned. Sovereign exposures, as deﬁned by the European Banking Authority, include only exposures to central governments. Stage 1 Assets have not experienced a sign iﬁcant increase in credit risk since orig inat ion and impa irment recogn ised on the basis of 12 months expected credit losses. Stage 2 Assets have experienced a sign iﬁcant increase in credit risk since orig inat ion and impa irment is recognised on the basis of lifet ime expected cred it losses. Stage 3 Assets that are in default and considered credit-impa ired (non-perform ing loans). Standardised approach In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institut ions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the applicat ion of a superv isory deﬁned percentage charge to the gross income of eight specif ied bus iness lines. Structured note An investment tool which pays a return linked to the value or level of a specif ied asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equit ies, interest rates, funds, commodit ies and fore ign currency. Subordinated liab il it ies Liab il it ies wh ich, in the event of insolvency or liqu idat ion of the issuer, are subordinated to the claims of depositors and other creditors of the issuer. Tier 1 capital The sum of Common Equity Tier 1 capital and Addit ional T ier 1 capital. Tier 1 capital ratio Tier 1 capital as a percentage of risk-weighted assets. Tier 2 capital Tier 2 capital comprises qualify ing subord inated liab il it ies and related share prem ium accounts. Standard Chartered Bank Directors’ Report and Financ ial Statements 2023 324 Glossary continued TLAC or Total loss absorbing capacity An internat ional standard for TLAC issued by the FSB, which requires G-SIBs to have sufﬁc ient loss-absorb ing and recapital isat ion capacity available in resolution, to min im ise impacts on ﬁnanc ial stab il ity, ma inta in the cont inu ity of cr it ical functions and avoid exposing public funds to loss. Transit ion r isks The risk of changes to market dynamics or sectoral economics due to governments’ response to climate change. UK bank levy A levy that applies to certain UK banks and the UK operations of foreign banks. The levy is payable each year based on a percentage of the chargeable equit ies and l iab il it ies on the Group’s UK tax res ident entit ies’ balance sheets. Key exclus ions from chargeable equit ies and l iab il it ies include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liab il it ies subject to nett ing. Unbiased Not overly optim ist ic or pessim ist ic, represents informat ion that is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to increase the probabil ity that the ﬁnancial informat ion w ill be received favourably or unfavourably by users. Unlikely to pay Indicat ions of unl ikel iness to pay shall include placing the credit obligat ion on non-accrued status; the recogn it ion of a specif ic cred it adjustment resulting from a sign iﬁcant perce ived decline in credit quality subsequent to the Group taking on the exposure; selling the credit obligat ion at a mater ial credit-related economic loss; the Group consenting to a distressed restructuring of the credit obligat ion where th is is likely to result in a dim in ished ﬁnanc ial obl igat ion caused by the mater ial forgiveness, or postponement, of princ ipal, interest or, where relevant fees; ﬁl ing for the obl igor's bankruptcy or a sim ilar order in respect of an obligor's credit obligat ion to the Group; the obl igor has sought or has been placed in bankruptcy or sim ilar protection where this would avoid or delay repayment of a credit obligat ion to the Group. VaR or Value at Risk A quantitat ive measure of market r isk estimat ing the potent ial loss that will not be exceeded in a set time period at a set statist ical conﬁdence level. ViU or Value-in-Use The present value of the future expected cash ﬂows expected to be derived from an asset or CGU. Write-downs After an advance has been ident iﬁed as impa ired and is subject to an impa irment prov is ion, the stage may be reached whereby it is concluded that there is no realist ic prospect of further recovery. Wr ite-downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable. XVA The term used to incorporate credit, debit and funding valuation adjustments to the fair value of derivat ive ﬁnancial instruments. See ‘CVA’, ‘DVA’ and ‘FVA’.

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