Standard Chartered PLC — Annual Report 2016

Dec 31, 2016

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Standard Chartered Bank Reference Number ZC18 Directors’ Report and Financial Statements 31 December 2016

Incorporated in England with limited liability by Royal Charter 1853 Principal Office: 1 Basinghall Avenue, London, EC2V 5DD, England

Standard Chartered Bank Contents

	Page
Strategic report	2
Economic Environment	2
Business Model	3
How We Do Business	5
Our Strategy	7
Key Performance Indicators	10
Risk review	13
Financial Review	16
Client Segment Review	22
Regional Review	32
Directors’ Report	42
Risk review and Capital review	48
Financial Statements and Notes	133
Consolidated income statement	133
Consolidated statement of comprehensive income	134
Balance sheets	135
Consolidated statement of changes in equity	136
Cash flow statements	137
Company statement of changes in equity	138
Notes to the financial statements	139
Glossary	268

1

Standard Chartered Bank Strategic Report

Economic environment

In 2016, the global economy lost momentum as the major economies and emerging markets slowed. Both the US and the eurozone grew slower than in 2015. Emerging markets saw softer growth in 2016 despite stabilisation of growth in China. Standard Chartered’s biggest markets in Asia continued to grow at a robust pace and once again proved to be the main engine of global growth. Growth in Sub ‑ Saharan Africa (SSA) and the Middle East weakened on the back of low oil prices.

Estimates suggest that Asia, excluding Japan, expanded its GDP by 5.9 per cent; Africa growth slowed to 1.6 per cent and the Middle East to 2.1 per cent. China expanded by 6.7 per cent in 2016 and continues to be one of the fastest-growing economies in the world. India also maintained an impressive growth rate of approximately 6.8 per cent in 2016 despite the near-term growth pains from demonetisation. China focused on stabilising growth, with fiscal policy playing a more important role. The US continued gradual normalisation of its monetary policy, with a 0.25 percentage point interest rate hike in December 2016. Despite the monetary tightening in the US, global monetary policy remained accommodative, with the Bank of Japan, the European Central Bank and the Bank of England all easing monetary conditions.

The outlook for 2017

The economic landscape in 2017 is likely to be quite different from that in previous years. The potential reflation of the US economy is fuelling optimism while rising anti-globalisation and US-led protectionism are likely to result in higher volatility. No economy is likely to boom and geo-political events will continue to dominate macro and financial market moves. We expect the US economy to grow by 2.1 per cent in 2017 on the back of rising energy investment and consumer leverage. However, we doubt that the Trump administration will be able to implement its ambitious fiscaleasing plan. Policy divergence will remain a key theme.

We expect the Federal Reserve (Fed) to continue to tighten monetary policy gradually with two rate hikes in 2017. Euro area growth is likely to moderate slightly to 1.4 per cent on the back of greater political uncertainty and weak investments.

Following a referendum on 23 June 2016, the UK voted to leave the European Union (Brexit). As a result, the country is likely to witness a slowdown in growth as both investor and consumer sentiment is affected by the likelihood of a so-called hard Brexit. Global growth is likely to rise modestly in 2017.

We expect Asia to remain the main driver of the global economy, with growth of 5.9 per cent. China is likely to continue to use fiscal policy to support GDP growth ahead of the 19th Communist Party Congress in autumn 2017. We expect oil prices to rise to $70 per barrel by Q4 2017 and, broadly, higher metals prices, which should also help drive a cyclical recovery in growth of 2.2 per cent in SSA. Growth in the Middle East and North Africa (MENA) is likely to remain subdued at 2.1 per cent respectively, despite expected higher oil prices partly owing to the oil production cuts agreed by Organization of Petroleum Exporting Countries (OPEC) members in November 2016.

Medium-term outlook

Global growth is likely to remain moderate over the next two to five years, despite some pick-up in US growth. Reflationary policies such as tax cuts will provide some support for US GDP growth in the medium term, but we expect the extent of fiscal stimulus to be limited owing to deteriorating fiscal metrics. Growth beyond 2018 might also be constrained by likely trade protectionism measures and higher financing costs; we expect the Fed to raise rates by 75 basis points in 2018 on the back of higher inflation. The Fed’s balance sheet may start passively shrinking in 2017. A stimulatory US fiscal policy, in the absence of similar easing by other major economies, is likely to be offset to a certain extent by tighter

financial conditions, including a stronger US dollar. The benefits to other countries of an expansionary US fiscal policy may be constrained by US protectionism. We do not expect other countries to follow suit with substantial fiscal stimulus, with the euro area and Japan continuing to rely on monetary easing. Emerging markets, however, are sensitive to US monetary policy shocks and we are likely to see greater volatility for countries that have weak fundamentals, particularly weak external positions. Anti ‑ globalisation and anti-trade sentiments are also likely to be a key risk for emerging markets through global trade weakness. However, Asia is likely to remain one of the most resilient regions with robust growth of approximately 6 per cent, supported by domestic drivers. Rising anti-globalisation sentiment is also likely to be countered by renewed efforts for alternative regional trade deals led by China. The pace of growth in MENA and SSA will depend upon continued measures to diversify economies away from commodity dependent sectors. Over the last two years, both oil-exporting and oil-importing MENA economies have taken the opportunity to reform subsidies while oil prices are low.

Further structural reforms, together with recovering oil prices, are likely to support a growth recovery in these countries over the medium term. Tighter financial conditions could also affect SSA with record eurobond issuance in 2012 to 2014 resulting in a concentration of debt maturities in 2022 to 2024.

Long-term outlook

Our long-term forecasts, which look ahead more than five years, show developed countries stuck in a shallow recovery trend, held back by shrinking labour pools and weak productivity growth. Labour force growth could pick up with the rising participation of women, the elderly and immigrants. Rising anti-immigration rhetoric in the developed world would pose a threat to labour force growth, although efforts by European Union leaders to strengthen ties and keep borders open could counter such concerns there. More widespread use of digital technologies could also boost productivity growth, which has been impeded by high leverage and weak investment. Digital technologies – such as robotics – will gain importance in a world of shrinking labour pools and governments will have to adjust redistribution mechanisms to support sections of the workforce that are losing out to technological change.

The onus is on emerging markets to support global growth in the long term, in our view. Many countries in Asia and Africa should benefit from comparatively better demographic trends in the coming decade. This improvement, together with low income starting points, suggests a period of rapid catch-up for these economies – India’s economy is set to expand by over 8 per cent per annum, on average, for the next 15 years. As countries enter middle-income status, slower growth is normal. We expect China’s growth rate to trend down to approximately 5 per cent in the late 2020s. Reforms, however, will be essential to ensuring that countries currently going through soft patches – such as Brazil, South Africa and Turkey – achieve their potential in the coming years.

Emerging Southeast Asian economies are on a solid growth trend of approximately 5-7 per cent. Steady progress in the ASEAN Economic Community and new reforms could provide upside risk to these forecasts. Reforms aimed at economic diversification could also help resource-rich countries such as Nigeria to overcome short-term volatility in commodity prices. Our forecasts show emerging-market economies continuing to grow substantially faster than developed-market economies, narrowing the income gap. This implies fairly strong global growth, partly driven by the rising share of fast-growing emerging markets in the world total.

2

Standard Chartered Bank Strategic Report

Business model

How we are structured to create value for our stakeholders

HOW WE AIM TO CREATE VALUE

As discussed in the Economic environment section of this report, the short-, medium- and long-term prospects of the global economy remain challenging. Despite this, the markets in which we operate are providing attractive opportunities with Asia, Africa and the Middle East likely to maintain longer-term growth. Standard Chartered is well positioned to serve the needs of our clients in these markets and we have, as a result, set out a

We have a sustainable approach to business and we strive to achieve highest standards of conduct...

Focusing on clients

We build long-term relationships with clients

number of strategic actions to allow us to better realise our ambitions. Our business model is structured to facilitate the delivery of these actions and withstand market volatility that comes our way. We aim to create long-term value for a broad range of stakeholders and we take proactive measures to deliver positive impact.

...using a robust Risk Management Framework to maintain a stable organisation...

Risk management

We strive to manage our risks to build a sustainable franchise that is in the interests of all our stakeholders

Contributing to sustainable economic growth

We seek to ensure that our core business of banking supports sustainable growth

Being a responsible Company

We commit to a strong conduct framework, ensuring fair outcomes for our stakeholders and supporting the effective functioning of our markets

Investing in communities

We work with local communities to promote social and economic development

Risk appetite

We take risk within our approved risk appetite levels, which set out the maximum amount of risk we are willing to take in pursuit of our strategy

Risk profile

We manage our risk profile to maintain low probability of an unexpected loss event that could materially undermine the confidence of our investors

Risk awareness

We seek to anticipate material future risks, learn lessons from past events that have produced adverse outcomes and ensure awareness of known risks

...so that we can use our strengths to offer our stakeholders a distinct proposition...

Strong brand

We are a leading international banking group, with a 150-year history in most of our major markets, clear strategic objectives and a strong focus on client engagement

International network

We have a proven track record of providing banking services across Asia, Africa and the Middle East

Local connectivity

We support clients at a regional level by drawing on deep local knowledge and through collaboration across network

Investment approach

We invest in our business and its systems to improve our services and drive long-term value for our stakeholders

Our people

We employ a diverse and inclusive workforce that is highly motivated and strives to do the right thing for our shareholders

3

Standard Chartered Bank Strategic Report

...through client segments that are run on either a global or regional basis...

Global

Clients in our global businesses are supported by relationship managers with global oversight

Corporate & Institutional Banking allows companies and financial institutions to operate and trade globally by serving them across multiple markets

Private Banking supports high net worth individuals with their banking needs across borders and offers access to global investment opportunities

Regional

Clients in our regional businesses are supported by country-level relationship managers with global oversight of our systems and products

...to provide banking solutions that meet the evolving needs of our clients...

Retail Products

Deposits, savings, mortgages, credit cards, personal loans and other retail banking products

Wealth Management

Investments; portfolio management; insurance and advice; and planning services

Transaction Banking

Cash management; payments and transactions; securities holdings; and trade finance products

Corporate Finance

Financing; strategic advice; mergers and acquisitions; and equity

Financial Markets

Investment, risk management and debt capital markets

Retail Banking offers affluent, emerging affluent as well as small businesses a full spectrum of banking support solutions

Commercial Banking provides mid-sized companies with financial solutions and services that help them achieve their international expansion and growth ambitions

...to generate income, profits and return on equity...

...to create long-term value for a broad range of stakeholders.

Income

Net interest income, fee income and trading income

Profits

Income gained from providing our products and services, minus expenses, impairment and taxes

Return on equity

Profit generated relative to equity invested

Clients

We enable individuals to grow and protect their wealth. We help businesses to trade, transact, invest and expand. We also help a variety of financial institutions – including banks, public sector clients and development organisations – with their banking needs

Investors

We aim to deliver robust returns and long-term sustainable value for our investors

Society

We collaborate with local partners to promote social and economic development

Employees

We provide learning and development opportunities to create an engaged and values-driven team

Regulators and governments

We engage with governing bodies to support the effective functioning of the financial system and the broader economy

4

Standard Chartered Bank Strategic Report

How we do business

We want all our stakeholders have a positive experience. One way to achieve this is performing to the highest standards of conduct. This is a priority for both our stakeholders and the Group.

Embedding good conduct

Our conduct management framework touches all parts of our business and sets out the elements that we need to identify, control and govern conduct-related risks. The framework aims to ensure that the Group is governed appropriately, with adequate infrastructure and a transparent business model. It empowers our leaders to create an ethical environment where our employees are incentivised to exercise good judgement. Managing the business in this way helps us to achieve fair outcomes for stakeholders and support our markets.

Employees receive mandatory conduct training, and their performance objectives and reward mechanisms are explicitly linked to behaving appropriately. In 2016, we launched a comprehensive global communications campaign on conduct, #knowtherules, which established a clear tone from the top and highlighted the importance of conduct to the Group.

performance indicators can be found on pages 10 to12 to show the progress we are making.

How we serve society

We collaborate with our clients and partners to promote social and economic development by financing key sectors of the economy that drive sustainable growth, minimising the impact of our lending and operations on the environment and investing in our communities.

In 2016, we agreed 11 Sustainability Aspirations which demonstrate how the financing that we provide contributes to sustainable development. We will embed these Aspirations in 2017.

The Aspirations are supported by our targets to reduce the environmental impact of our operations and to support local community programmes, including:

• Seeing is Believing (SiB), to eliminate avoidable blindness

• Goal, to empower girls and young women through sports and life skills training

• Financial education, to build the capability of youth and entrepreneurs

Financial crime and human rights

Financial crime, such as bribery, corruption and money laundering, hinders economic progress and harms communities. We are strengthening our Financial Crime Compliance standards by making enhancements to our financial crime controls, training our staff and sharing best practice with clients and partners.

As an employer, a provider of financial services and a procurer of goods and services, we have a responsibility to respect human rights across our business. We address human rights in our Code of Conduct, Supplier Charter and Position Statements, the latter protecting the rights of children, workers and communities in relation to specific industry-sector risks.

How we serve clients

In 2016, we took a series of measures to put clients at the heart of our business. We invested heavily in improving their experience in each of our four client segments. For example, in Corporate & Institutional Banking we prioritised banking the end-to-end supply chain of our clients and improved our digital operations; in Retail Banking we launched video banking, voice biometric technology and offered clients innovative new payment options; in Commercial Banking we improved our client on-boarding process and turnaround time, and focused on banking our clients’ networks; and in Private Banking we enhanced our Wealth Management proposition and simplified our account opening process.

We continue to build on these successes. We are investing more than $3 billion from 2015 to 2017 to make us a simpler, faster and better organisation, focusing on technology innovation, process streamlining and faster turnaround times.

How we engage with clients

During 2016, we significantly strengthened our approach to capturing and addressing client feedback.

We did this in a number of ways, including through third-party studies, which allowed us to benchmark our performance against competitors and gain expert insights; by broadening our client surveys to give us more accurate feedback across all client segments; and through client experience forums that allow us to hear directly from clients, respond to their needs by taking the appropriate action.

How we engage with society

From 2008 to 2016, we reduced our energy consumption by 37 per cent, water consumption by 35 per cent and paper use by 71 per cent.

In 2016, we invested $52.3 million in community programmes, and employees contributed to 67,611 volunteering days.

Through fundraising and matching from the Group, we raised $6.5 million for SiB in 2016. Our fundraising from 2003 to 2016 is $92.8 million, impacting 133.8 million people.

We celebrated the 10th anniversary of Goal in 2016 and reached nearly 69,000 girls, bringing the total since 2006 to 285,000 girls in 2016.

Through our Financial Education programmes, we trained more than 106,000 young people and 1,020 entrepreneurs, including 57 per cent women, in 2016.

How we serve employees

We continue to deliver a comprehensive employee learning programme, with a focus on risk and conduct.

We have invested significantly in ensuring that our people connect with clients to understand their needs, and how we can serve them better.

We view diversity and inclusion as critical to our business success in the long term. It enables teams to unlock innovation, make better decisions and manage risk. We are committed to creating an inclusive environment, free from bias, where everyone can realise their full potential. We are committed to gender diversity, with key performance indicators tracking our progress on page 10, we are also focused on developing African, Chinese and Emirati talent to better align our leadership composition to our footprint.

In 2017, we will implement a refreshed flexible working policy and enhanced parental leave benefits.

Taken together, these activities have shown us that we need to simplify our processes and become easier to deal with. We are committed to achieving this goal and selection of our key

5

Standard Chartered Bank Contents

How we engage with employees

We have over 40 country-based Employee Networks and three Global Networks (Women, Disability, and LGBT and Allies) to support our diversity ambitions. One of the ways in which we measure staff engagement is through My Voice, a global survey completed by approximately 70,000 employees across 68 countries in 2016.

markets ensures that the Group meets its obligations. In turn, this supports the resilience and effective functioning of the Group and the broader financial system and economy. On a day-to-day basis, our Compliance and Public Affairs functions are responsible for identifying changes in the legal and regulatory environment, ensuring that we comply with all requirements, and help to manage relationships.

How we engage with regulators and governments

Responding to My Voice feedback, in 2016 we sharpened our focus on quality performance and career coaching. We launched a new approach for developing managers together with new career development guides and toolkits. In 2016, we also re-launched our Speaking Up Programme, linking this to our Group Code of Conduct, to which our people recommit annually. We see the programme as critical to ensuring good conduct and creating the right environment for our people.

How we serve regulators and governments

We are committed to complying with all legislation, rules and other regulatory requirements applicable to our businesses and operations in the jurisdictions within which we operate. Our compliance with legal and regulatory frameworks across our

We actively engage with governments, regulators and policymakers at a global, regional and national level to share insights and technical expertise on key policy issues. This engagement supports the development of best practice and the adoption of consistent approaches across our markets. We comply with all relevant transparency requirements and disclose information about our political activities. Our engagement with governments and regulators is through ongoing dialogue, submission of responses to formal consultations and by joining and participating in industry working groups. In 2016, for example, we submitted written and verbal responses to proposed changes to the regulatory framework for banks being developed by global standard-setters.

6

Standard Chartered Bank Strategic Report

Our strategy

An overview of the actions we are taking to deliver profitable growth

The rapid economic development of Asia, Africa and the Middle East is accompanied by a growing demand for increasingly sophisticated financial services. Our strategy is to capture this opportunity by developing long-term relationships with clients across our network of local markets. We place a particular focus on supporting clients who trade, operate or invest across our footprint.

We combine our local expertise with our international brand, products and network to differentiate ourselves from domestic and other international competitors.

At the heart of our strategy is the aim to meet the needs of our clients through global standards of conduct and compliance as well as ensuring we support sustainable economic and social development in our markets.

Underpinning this is more than 150 years of history in many of our markets and our commitment to our brand promise: Here for good. This builds on our rich heritage, culture and values and is at the core of who we are and how we work.

In November 2015 we rolled out a plan to strengthen and reposition the Group to ensure that it is well placed to capture the strategic opportunities in our markets. This plan remains unchanged. The focus is on disciplined execution of this plan, which will enable us to better serve the needs of our clients and deliver long-term sustainable value to all of our stakeholders. In reaffirming our strategy and formulating our plan, we rigorously evaluated the external longer-term trends that are shaping banking opportunities in our footprint markets against our internal strengths and areas of differentiation and the challenges that lie ahead.

LONGER-TERM TRENDS

There are several structural longer-term trends that are shaping the economies in Asia, Africa and the Middle East. Although these trends may not evolve linearly, our footprint should uniquely position us to benefit from these trends.

Rise of urban middle class

Markets in our footprint are rapidly urbanising and becoming more consumption led. According to an Organisation for Economic Co ‑ operation and Development study, by 2030, 73 per cent of the world middle class population will be in our footprint (versus 36 per cent in 2009). By 2030, 29 of the top 41 global mega-cities will be in our footprint. These forces are driving rapid growth in demand for wealth and financing solutions.

Financial deepening

Clients are increasingly looking for innovative cross-border funding, cash management and investment solutions, coupled with local hedging instruments to better manage risks. This, along with the growing sophistication of the financial services sector, and ongoing government-led reforms, is driving the deepening and internationalisation of local capital markets in our footprint.

The rise of renminbi (RMB)

Digital revolution

Our markets are undergoing an unprecedented digital revolution and, in certain areas, the digital adoption in our markets is ahead of more developed western markets. Increasing internet connectivity and rapid mobile telephony adoption have led to the emergence of new and innovative ways of conducting business activities. Digitisation offers an opportunity for us to deliver more convenient solutions to clients while enabling us to increase our client reach.

The launch of the Cross-Border Interbank Payment System (CIPS) and the inclusion of RMB in the International Monetary Fund’s Special Drawing Rights basket of currencies are major landmarks on the RMB’s path to internationalisation. Although the trend slowed in 2016, Standard Chartered’s Renminbi internationalisation report suggests that by 2020, 5 per cent of global international payments could be settled in RMB (compared to 1.5 per cent in 2015).

The growth of Africa

Increasing regional connectivity

Notwithstanding current protectionist sentiments in the US, the emergence of complex supply chain technologies, intra-regional trade pacts and new frameworks for cooperation, such as One Belt, One Road and ASEAN Economic Community, are reshaping trade and investment flows. These trends play to our natural advantage as the leading trade and commerce bank in Asia, Africa and the Middle East.

Backed by a large workforce and a growing, connected urban middle class, there are many opportunities across African economies. This is particularly the case in sectors such as agriculture, fast-moving consumer goods and infrastructure. As a result, the favourable long-term trends – both in terms of GDP growth and opening up of the African economies – remain intact.

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Standard Chartered Bank Strategic Report

Challenges going into 2016

The Group adds value to its clients by leveraging certain strengths and sources of competitive advantage, as highlighted by our business model. These strengths were instrumental in delivering a decade of rising profits and stakeholder value creation up until 2012.

However, the Group’s performance started to plateau in 2012 and worsened progressively in subsequent years. As the economic growth de-accelerated in some of our major markets, it created strain for some of our large corporate borrowers and impacted our portfolio risk quality. The strategic review we conducted in late 2015 highlighted that whilst our strategic opportunities remain compelling; the Group had to consolidate and reposition to pursue these opportunities differently. Changes in the external operating environment, particularly owing to regulation, economic developments and internal issues, such as organisational scale and complexity, highlighted the following key challenges

• The Group had to absorb greater regulatory risk-weighted assets (RWAs) and meet increasingly stringent capital requirements following the global financial crisis, resulting in a steady decline in the Group’s capital ratios over time

• Higher capital requirements and the sustained low interest-rate environment led to a structural decline in banking sector profitability, especially for international banks. The Group’s profitability came under further pressure from overconcentrations and a cyclical impact of higher loan impairments

• While the Group has always strived to put impeccable conduct at the heart of how we do business, we still had more to do to follow the letter and the spirit of the law across our diverse markets to ensure we play a robust role in the fight against financial crime

• The strategic review also highlighted that the slowdown in the Group’s financial performance was partly a result of past underinvestment, particularly in technology. To reverse this and build a foundation for sustainable future growth, the Group had to create significant new investment capacity, while continuing to balance the trade-off between short and longerterm profitability

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Standard Chartered Bank Strategic Report

Strategic objectives and underpinning actions

As mentioned in the introduction to this section, in November 2015 we rolled out a comprehensive action plan designed to enable us to execute the Group’s strategy and capture the underlying strategic opportunity. In devising this plan we made certain conscious trade-offs. First, we prioritised the actions needed to ensure we can execute our strategy on strong foundations. Second, we prioritised improving returns to ensure that the Group maintains a value-accretive sustainable growth path. Third, we decided to channel our resources to key opportunities in which the Group has distinctive advantages.

As a result, our plan has three core objectives: secure the foundations; get lean and focused; and invest and innovate. Underpinning this plan, we have a programme of actions designed to strengthen our capital base, improve portfolio risk and, over time, increase returns for our shareholders.

We remain excited by the opportunities present in our markets and the untapped potential of our franchise. We have a clear plan to restore the Group to a sustainable profitable growth trajectory and create value for all our stakeholders. We are also fully aware of our conduct and Financial Crime Compliance obligations and the overarching need to ensure safe growth.

Our focus is on disciplined execution of this plan. However, there are a number of external headwinds that could affect the Group’s performance and, in turn, our ability to deliver the plan. We are realistic about these challenges and believe that the right course of action for now is to continue to execute our plan with discipline and drive our business more dynamically.

STRATEGIC OBJECTIVES AND UNDERPINNING ACTIONS

1	1	2	2	3	3
Secure the foundations		Get	lean and focused	Invest and innovate
•	Execute rights issue to strengthen the	•	Restructure Corporate & Institutional	•	Invest and innovate in Private Banking
	balance sheet materially		Banking for higher returns		and Wealth Management to capture
•	Align business strategy within the	•	Accelerate Retail Banking transformation		opportunities
	tightened risk tolerance	•	Fundamentally overhaul Commercial	•	Build on a strong foundation and invest
•	Restructure businesses and assets		Banking		to grow safely in Africa
	representing approximately one-third of	•	Define a clear and deliverable strategy	•	Leverage opening of China; capture
	Group RWAs		for our regions		opportunities from renminbi (RMB)
•	Simplify organisation structure to focus	•	Assertively manage costs to create		internationalisation
	more on geographic execution		investment capacity	•	Roll out enhanced Retail Banking digital
•	Deliver our conduct and financial crime				capabilities across our footprint
	risk programmes

This is the first and foremost objective of the Group. We have made considerable progress since 2015, when we executed a rights issue that materially strengthened our balance sheet. We have also taken decisive action to improve portfolio quality.

To safeguard against any future recurrence, the client segments have put in place more granular risk appetite levels. For example, reducing the tolerance for risk concentrations such as commodities.

In 2016, we invested heavily in our conduct and financial crime risk programmes and remain committed to asking further investments as necessary. Our investment in control systems and data analytics is already improving our ability to fight financial crime.

We are making good progress in embedding our regional execution model – operating Retail Banking and Commercial Banking with greater local decision-making and accountability, while managing Corporate & Institutional Banking and Private Banking at a more global level.

Our second objective is to shift the business mix for higher returns and create additional investment capacity through assertive cost actions. This is critical for the long-term competitiveness and sustainability of our business.

Our Corporate & Institutional Banking segment is shifting away from capitalintensive businesses and has rolled out a new client coverage model to ensure we stay close to our clients and simplify the way we meet their needs.

Corporate & Institutional Banking has also diversified its portfolio of clients by selectively on-boarding new clients that will be critical to our future growth.

Our Retail Banking segment remains focused on providing services for emerging affluent and affluent clients across 60 cities more cost efficiently. The segment will achieve this by improved digitisation, innovation, service quality and the development of multi-product relationships.

We are making progress on our cost efficiency plans – in 2016 we achieved $1.2 billion in gross cost efficiencies and created capacity to increase investment in the second half of 2016.

The purpose of our third core objective is to be more selective about the opportunities we will pursue and channel sufficient resources accordingly.

We have prioritised four long-term opportunities that we believe are most compelling for the Group: Private Banking and Wealth Management growth; RMB internationalisation and the broader opening of China; Africa’s growth potential; and digital revolution in Retail.

As a result, we have launched a multi-year investment programme to upgrade our Private Banking and Wealth Management technology platforms and client capabilities.

We remain committed to RMB’s long-term growth potential in our footprint and continue to play a key role in shaping its future. In Africa, we will calibrate the pace of our growth by taking into account the broader risk environment.

We are making significant investments in digital to deliver on our Retail transformation. We have also launched a $200 million investment programme for 2017 to improve our client offering in Foreign Exchange, Rates and Credit.

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Standard Chartered Bank Strategic Report

Our key performance indicators

We use a variety of financial and non-financial key performance indicators (KPIs) to measure performance and progress at a Group level. In addition to our strategic objectives and targeted investment areas that are described elsewhere in this report, there is also a programme of specific actions across all regions designed to put clients’ needs at the heart of everything we do and deliver sustainably higher returns for shareholders. A selection of both Group and client-oriented KPIs is included below. We have indicated for each KPI which of our five stakeholder groups it has particular relevance for.

SELECTED GROUP KEY PERFORMANCE INDICATORS

Indicator	Aim	Analysis	2016	2015	2014
Financial	Deliver sustainable	Underlying ROE of negative 0.5 per	(0.5)%	(1.3)%	6.8%
Underlying return on equity	improvement in the	cent in 2016 was an improvement
(ROE)	Group’s profitability as a	on negative 1.3 per cent in 2015 but
	percentage of the value of shareholders’ equity	significant further progress is required
	The underlying profit attributable to ordinary shareholders expressed as a percentage of average		ordinary shareholders’ equity
Financial	Maintain a strong capital	The Group’s CET1 ratio rose	14.0%	11.7%	10.5%
Capital ratios	base and a Common	230bps in 2016 to 14.0 per cent
	Equity Tier 1 (CET1) ratio	--above the top end of the target
	of between 12 to 13 per cent	range --primarily as a result of reduced risk-weighted assets
	The components of the Group’s capital are summarised on page 130. The tier ratios are measured by the ratio of respective capital to risk-weighted
	assets ona CRD IVbasis
Financial	Improve quality of	The creation of new gross	(9.0)%	60.0%	30.0%
Credit quality	Corporate & Institutional	non‑performing loans (NPLs) in
	Banking and Commercial	the ongoing book decreased by
	Banking loan book by	9 per cent in 2016, compared to
	originating stronger credit	a 60 per cent increase in 2015
	clients and actively
	managing the portfolio
	Absolute value of flow of new NPLs in the period. The 2014 flow figure represents the Group’s 2013 client segmentation and may not be directly
	comparable.
Diversity and Inclusion	Improve gender diversity	In 2016, we signed the UK HM	25.3%	24.8%	23.3%
Gender diversity in senior	in the Group’s top levels	Treasury Women in Finance Charter
roles	of management by	and announced an overall target of
	supporting, developing,	having women occupy 30 per cent
	promoting and retaining	of our top four levels of management
	senior women employees	by December 2020. The 25.3 per
		cent result in 2016 was an
		improvement on 2015 and takes us
		closer to our target
	The total number of women in the most senior (band 1-4) roles expressed as a percentage of total band 1-4 roles
Employee engagement	Increase engagement	In 2016, the first year that the	2%	N/A	N/A
	across the Group by	Group introduced this measure,
Net Promoter Score (NPS)	creating a better working	the employee NPS was
	environment for	+2 per cent, meaning that
	employees that should	more participating employees
	translate into improved	would promote the Group
	client experience	than would not

The proportion of participating employees that are promoters (would recommend the Group as a great place to work) compared to detractors.

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Standard Chartered Bank Strategic Report

SELECTED CLIENT KEY PERFORMANCE INDICATORS

Corporate & Institutional	Deliver higher returns by	While income in Corporate &	30.0%	27.9%	27.0%
Banking	adding and deepening	Institutional Banking fell 10 per cent
Client diversity	client relationships in high-	year-on-year the proportion of client
	growth consumption-led	income from consumption-led
	industries, typically with	industries increased from 25.3 per
	more ‘flow’ product needs	cent to 30.0 per cent
	Proportion of corporate income from	clients in consumption-led industries, including Consumer Services, Food and Staples Retailing, Household and
	Personal Products,Media, aswellas	Telecommunications Services
Corporate & Institutional	Increase collaboration with	Employee Banking account	129k	89k	N/A
Banking	other client segments to	sign-ups from Corporate &
Collaboration with other	generate cross-segment	Institutional Banking clients
client segments	business opportunities	have increased by 45 per cent
		year-on-year from 89,000
		to 129,000
	Number of Employee Banking account sign-ups from Corporate & Institutional Banking client relationships. Tracked on this basis from 2015.
Retail Banking	Align the Group’s service	Online applications have doubled	38.9%	35.0%	32.4%
Online adoption	to how clients want to	year-on-year, with the proportion
	interact and increase	of Retail Banking clients that are
	efficiency by reducing the	digital-active up from 35.0 per
	amount of manual	cent in 2015 to 38.9 per cent at
	processing	the end of 2016
	Digital-active clients as a proportion of total Retail Banking active clients
Retail Banking	Increase the proportion of	The share of Retail Banking	39.0%	35.1%	27.5%
Priority client focus	income from Priority	income from Priority clients
	clients, reflecting the	increased to 39.0 per cent in
	strategic shift in client mix	2016 from 35.1 per cent in 2015,
	towards affluent and	supported by more than 90,000
	emerging affluent clients	new-to-bank Priority clients in
		the year
	Income from Priority clients as a proportion of total Retail Banking income
Commercial	Improve client experience	Straight2Bank utilisation	42.4%	38.0%	N/A
Banking	and minimise manual	increased 11 per cent in 2016,
Straight2Bank	transactions and the	with 42.4 per cent of active
Penetration	reliance on branches for	Commercial Banking clients using
	cash, trade and FX,	the capability by the end of 2016
	thereby reducing the cost
	of servicing	Comparable date for 2014 is not
		available as Commercial Banking
		was formed in 2015
	The proportion of active Commercial Banking clients that are active on Straight2Bank.
Commercial	Bank our clients’	Commercial Banking on-boarded	26.9%	(1.7)%	N/A
Banking	international and domestic	26.9 per cent more clients
New-to-bank	networks of suppliers and	through its ‘banking the
ecosystem clients	buyers (the ecosystem)	ecosystem’ initiative in 2016. This
		was a significant improvement
		compared to 2015

Number of new-to-bank clients on-boarded in the period as part of our ‘banking the ecosystem’ initiative

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Standard Chartered Bank Strategic Report

SELECTED CLIENT KEY PERFORMANCE INDICATORS continued

Private Banking	Grow and deepen client	We saw significant outflows in	$(2.0)bn	$0.3bn	N/A
Net new money	relationships, improve	2016, particularly in ASEAN &
	investment penetration	South Asia and Europe &
	and attract new clients	Americas, where investor
		sentiment was impacted by
		volatility in equity and other
		markets, coupled with actions
		taken to improve our risk profile
	Net new money added in the period	in US dollar billions. Tracked on this basis since 2015.
Private Banking	Holistically improve the	Launched in 2016, the annual	17.4%	N/A	N/A
Net client score for	Private Banking client	Private Banking client satisfaction
ease of doing new	experience through	survey reviews multiple
business	all touch points with the	dimensions of client sentiment
	Group	and measures our progress in
		putting client needs at the heart of
		everything we do
		In 2016, significantly more clients
		rated us very easy to do business
		with than those that rated us
		difficult to do business with
	The percentage of clients who rate us very easy to do business with, less the percentage who		find us difficult to do business with.

12

Standard Chartered Bank Strategic Report

Risk review

Risk management approach

The Bank is an integral part of the Standard Chartered PLC Group and as such works with and relies primarily on Standard Chartered PLC governance processes and procedures.

Executive responsibility for the risk management of the Group rests with the Standard Chartered Bank Court (the ‘Court’). The Court comprises the executive directors of Standard Chartered Bank.

This responsibility sits within, and is consistent with the overall risk framework of the Standard Chartered PLC, the ultimate parent undertaking, with the ultimate responsibility resting with the Standard Chartered PLC Board. There is no separate risk appetite set for the Group.

The Standard Chartered PLC Board, delegate this responsibility to the Board Risk Committee, Brand, Values and Conduct Committee, Board Financial Crime Risk Committee and Audit Committee, which oversee and manage the risks of the Group, Company and Standard Chartered PLC Group collectively.

The risk management approach below is therefore written with the context of the overall Standard Chartered PLC risk management structure, which is coherent and consistent with the Group risk structure.

The risk and compliance function is an integral part of the Group’s strategic decision-making process and plays a key role in building a stronger and more efficient business with the potential to produce better returns. The Group’s business plans to execute our strategy are fully aligned with our tightened risk appetite and both have appropriate Board level oversight.

We have a strong capital and liquidity position and a robust risk governance structure managed by an experienced senior team which enables the support of our clients. Action taken to reduce our concentrations is making the Group less sensitive to idiosyncratic impairment volatility. Good risk management is not just about reducing exposures and we have selectively increased exposures in certain sectors and locations, further diversifying our portfolio.

We are focused on ensuring that risk and compliance work effectively as control functions to holistically identify and manage risks. A healthy risk culture owned collectively by everyone within the Group is critical to the successful delivery of our business objectives and to facilitate safe and sustainable growth.

The table below shows the Group’s principal risks and how they are managed.

Principal risks	Our approach
Credit risk and country	The Group manages its credit and country cross-border exposures following the principle of
cross-border risk	diversification cross-border risk across products, regions, client segments and industry sectors
Market risk	The Group controls its trading portfolio and activities to ensure that market risk losses (financial or
	reputational) do not cause material damage to the Group’s franchise
Liquidity and funding risk	The Group should be able to manage its portfolio to meet its payment and collateral obligations under
	extreme but plausible liquidity stress scenarios without recourse to extraordinary central bank support
Capital risk	The Group maintains a strong capital position including the maintenance of management buffers
	sufficient to support its strategic aims
Operational risk (including,	The Group aims to control operational risks to ensure that operational losses (financial or reputational),
among others, financial	including any related to conduct of business matters, do not cause material damage to the Group’s
crime, regulatory	franchise
compliance and cyber risk)
Strategic risk	The Group reviews its strategy on an annual basis to take account of external and internal
	developments and monitors execution of strategic plans to ensure their effective implementation
Reputational risk	The Group will protect its reputation to ensure that there is no material damage to the Group’s franchise

Risk profile and performance in 2016

Overall, the credit quality of the Group has improved in 2016, although stresses remain some sectors. This reflects significant exits within the liquidation portfolio and a repositioning of the corporate portfolio in line with our new granular risk appetite levels. The Group continues to take action to improve returns safely and sustainably. In 2016, we disclosed that we would exit the Principal Finance business over time, given its weak performance. The Group’s client exposures remain short tenor and our portfolio is increasingly well diversified across various dimensions as we manage within the Group’s tighter risk appetite.

Conditions remain challenging in our markets in 2016. Loan impairment in the Group’s ongoing business was

broadly stable compared to last year representing a historically elevated level.

Risk performance by client segment is as follows:

• Corporate & Institutional Banking loan impairment remains elevated compared to long run historical levels. Economic conditions in certain sectors remained challenging, notably in the oil and gas support services and diamond and jewellery sector, although exposures to these sectors are not material in the context of the Group. Conditions also remain stressed in certain countries impacted by sustained low commodities prices. The cover ratio for the Corporate & Institutional Banking ongoing business has improved to 62 per cent from 47 per cent through 2016

13

Standard Chartered Bank Strategic Report

• Commercial Banking loan impairment remained elevated but improved significantly across all regions benefitting from improvements in credit and account management. The cover ratio increased from 70 per cent to 75 per cent in 2016.

• Retail Banking loan impairment continued to benefit from actions taken to reduce higher risk unsecured portfolios, and the rollout of new Retail decisioning framework in 11 markets to target high quality originations

The Group’s gross non-performing loans (NPLs) fell year-onyear, mainly due to progress on the liquidation portfolio. Gross NPLs in the ongoing business increased, driven by a small number of exposures in the Corporate & Institutional Banking segment.

NPL inflows, credit grade 12 inflows and accounts on early alert fell in the second half of 2016. However, it is likely that the challenging conditions in our markets will persist into 2017 and therefore we remain vigilant.

Update on key risk priorities

In the Group’s 2016 half year report and accounts I described the priorities that we were focused on in 2016. We still have more work to do on many of these objectives but I can report the following progress on each priority:

• Enhance our compliance risk management framework

  • We are making progress to implement our multi-year programme to upgrade systems. We are investing in best-in-class systems and are committed to achieving the highest possible standards of conduct from all employees under our firm-wide conduct programme

• Mitigating financial crime risks Our investment in control systems and data analytics is improving our ability to fight financial crime. We are committed to being a leader in fighting financial crime

• Strengthen the management of information and cyber security risks The evolving threat landscape and increased focus by regulators on information and cyber security (ICS) risk has led to enhanced focus by the Group. While much progress has been made, we will continue to assess and invest in our ICS risk capability

• Improve risk infrastructure We have multiple initiatives to improve infrastructure for exposure management, data quality, stress-testing, operational risk management and reporting

• Build on the Group’s risk culture We made good progress in embedding accountability and end-to-end ownership of risk within the business teams. We continue to set the tone from the top to build a strong first line of defence

• Proactive portfolio management We worked closely in the year with the credit portfolio management team within Corporate & Institutional Banking to reshape the segment’s risk appetite, ensuring pricing discipline and improved distribution. We continue to enhance our stress-testing capability and build our enterprise-wide risk management function so that we can better manage the boundaries within which the Group operates

• Right-size our risk appetite The Board approved more granular risk appetite levels to avoid the build-up of concentrations. We have actively reduced exposures in key areas such as commodity producers and in higher risk sectors in China. We will continue to identify and manage risks as they emerge

• Exit the liquidation portfolio and learn the lessons We exited more than 80 per cent of RWAs in the liquidation portfolio with limited additional impairment. The hard lessons learnt from this exercise influence our approach to addressing the preceding three priorities

14

Standard Chartered Bank Strategic Report

Principal uncertainties

We are in the business of taking selected risks to generate shareholder value, and we seek to contain and mitigate these risks to ensure they remain within our risk appetite and are adequately compensated. The table below shows the Group’s principal uncertainties and how we are managing them.

	Change
	from prior
Principal uncertainties	year	How this is mitigated
Deteriorating macroeconomic conditions including continuing slow growth in the eurozone, moderation of growth in China and asset price	Risk remained consistent with 2015 levels	• •	We have a framework that provides a 12 to 18 month forward view of the economic, business and credit conditions across our key markets enabling us to take proactive action We monitor economic trends and geo-political events and conduct stress
correction			tests and portfolio reviews at a Group, country and business level to
			assess the impact of extreme but plausible events
Geo-political uncertainties, including increasing protectionist policies following the US Presidential elections	Risk heightened in 2016	•	We ensure that there is regular senior level oversight, through the Group Risk Committee, of work undertaken to assess and manage geo-political risk
and the UK referendum decision to		•	We continue to proactively assess and where appropriate, manage the
leave the European Union (Brexit) and			impact to the Group and our exposures to clients, taking account of geo-
the impact on world trade			political risks
Evolving financial crime, fraud	Risk	•	We continue to execute the Financial Crime Risk Mitigation Programme
and cybercrime	remained	•	A Global Fraud Risk Management Group has been instituted to augment
	consistent		our fraud risk standards
	with 2015	•	The Group has implemented a range of cyber crime defences to protect
	levels		from hacking, misuse, malware, errors, social engineering and physical
			threats in recognition of heightened risk of cyber security
Operational performance	Risk	•	The Group has a clear strategy, consistent with the risk appetite and
eroding confidence in the Group	remained		financial objectives that are agreed with the Board from time to time.
	consistent	•	The strategy is reviewed and challenged regularly at the Board level, with a
	with 2015		focus on execution
	levels	•	We update our equity and debt providers and rating agencies regularly to
			ensure they understand our progress against strategy
Exchange rate movements	Risk	•	We monitor movements closely and adjust our exposures accordingly. We
	remained		hedge our exposures to protect our capital ratios where practicable
	consistent
	with 2015
	levels
Evolving impact of regulatory	Risk	•	We have implemented Group-wide policies and procedures to manage the
compliance	remained		risks associated with managing regulatory change and to inform behaviour
	consistent		across the organisation with clear accountability and responsibilities
	with 2015	•	We are closely monitoring the discussions of Basel Committee of Banking
	levels		Services on the standards for the calibration and implementation of capital
			floors
Regulatory investigations, reviews	Risk	•	We have invested in improving compliance controls, including increasing
and legal proceedings	remained		the capacity and capability of compliance resources, enhancing systems
	consistent		and controls, and implementing remediation programmes
	with 2015	•	We are cooperating with all relevant ongoing reviews, requests for
	levels		information and investigations and we actively manage legal proceedings
			including in respect of legacy issues. We are restructuring or otherwise
			mitigating higher risk business activities

Conclusion

The Group has considerable opportunities to add value to our clients in our footprint. We are pursuing this objective – putting their interests at the heart of everything we do – while aligning

our portfolio to our more granular risk appetite thresholds. The economic landscape remains challenging in many of our markets and we continue to take assertive actions where required.

15

Standard Chartered Bank Strategic Report

Financial review

The Group committed to a set of actions at the end of 2015 designed to stabilise its financial performance. As a result of disciplined execution in 2016 we delivered quarterly income stability, lower costs and a higher quality balance sheet. This is encouraging early progress but we have a long way to go and further significant improvement in financial performance is required.

Financial performance highlights:

• Underlying income of $13.8 billion was down 10 per cent year-on-year but stable during 2016

• Underlying operating expenses were 5 per cent lower, a second successive year-on-year reduction. Gross cost efficiencies of over $1.2 billion in 2016 created capacity to increase investment in the second half

• Overall credit quality improved though stresses remain. Underlying loan impairment in the ongoing business of $2.4 billion was flat year-on-year

• Underlying profit before tax increased 35 per cent yearon-year to $1.3 billion despite a $215 million share of losses related to PT Permata Bank Tbk (Permata)

• Statutory profit before tax of $603 million in 2016 was a significant improvement on the $1.4 billion loss in 2015

• Due to a strong focus on returns and progress reducing exposures in the liquidation portfolio the Group’s Common Equity Tier 1 (CET1) ratio increased 230 basis points to 14.0 per cent

• Underlying return on equity (ROE) of (0.5) per cent while still negative is an improvement on (1.3) per cent reported in 2015. Statutory ROE was (1.9) per cent

• In addition to the $2 billion Additional Tier 1 (AT1) securities issued in August 2016, the Group issued a further $1 billion of AT1 in January 2017

Underlying performance summary

Underlying performance summary
			Better /
		2016	2015 (worse)
		$million	$million %
Operating income		13,758	15,369 (10)
Operatingexpenses		(9,855)	(10,415) 5
Operating profit before impairment losses and taxation		3,903	4,954 (21)
Impairment losses on loans and advances and other credit risk provisions		(2,382)	(4,008) 41
Other impairment		(259)	(188) (38)
Profit from associates andjoint ventures		25	192 (87)
Underlying profit before taxation		1,287	950 35
Restructuring		(855)	(1,845) 54
Other items		171	(512) nm2
Statutory profit/(loss) before taxation1		603	(1,407) 143
Taxation		(630)	(661) 5
Loss foryear		(27)	(2,068) 99
Underlying return on equity (%)		(0.5)	(1.3)
Return on equity (%)		(1.9)	(6.5)
Common EquityTier 1 endpoint basis(%)		14.0	11.7
1 A reconciliation between underlying and statutory results is set out on page 19 2 Not meaningful

The performance commentary that follows is on an underlying basis unless otherwise stated. A reconciliation of underlying to statutory is set out later.

16

Standard Chartered Bank Strategic Report

Underlying income

Income of $13.8 billion was down 10 per cent year-on-year or 8 per cent on a constant currency basis. Factors negatively impacting income include US dollar strength against emerging market currencies and businesses that were sold or exited in 2015.

Despite difficult market conditions quarterly trends remained stable through the year. This is a significant improvement on the sequential quarterly decline experienced through 2015 and reflects the good early progress made against our strategic priorities.

Underlying operating expenses

The Group delivered more than $1.2 billion of gross cost efficiencies in 2016 primarily through actions taken to reduce headcount at the end of 2015. This created capacity for 50 per cent more investment year-on-year, which contributed to higher expenses in the second half. This investment was focused on enhancing our regulatory and compliance infrastructure and upgrading or replacing technology platforms. This will over time improve our control environment and make us more efficient and better able to serve our clients.

Actions are underway to achieve a further $1.1 billion of gross cost efficiencies by the end of 2018 such that operating expenses excluding the UK bank levy in 2018 are lower than in 2015.

Operating expenses excluding the UK bank levy were 5 per cent lower year-on-year or 2 per cent on a constant currency basis. Regulatory costs continue to be a significant part of overall costs given the number of continuing initiatives.

			2016	2015	Better / (worse)
			$million	$million	%
Staff costs (includes variable compensation)			5,542	5,999	8
Premises costs			729	772	6
General administrative expenses			1,450	1,601	9
Depreciationand amortisation			624	597	(5)
Other underlying operating expenses			8,345	8,969	7
UK bank levy			383	440	13
Regulatorycosts			1,127	1,006	(12)
Total underlyingoperatingexpenses			9,855	10,415	5

Underlying loan impairment

Loan impairment in 2015 included $1.6 billion related to exposures transferred to the liquidation portfolio that was incurred prior to transfer. Excluding this, loan impairment in our ongoing business of $2.4 billion was flat year-on-year and remains elevated relative to historic trends.

Within the ongoing business we have seen lower year-onyear impairment in Commercial Banking across all regions although it remains elevated. Continued improvement in Retail Banking was driven primarily by a better performance in Korea. Offsetting this were increases in Corporate & Institutional Banking loan impairment related to a small number of clients engaged in commodity-related sectors and parts of the diamond and jewellery industry.

2016 $million Corporate and Institutional Banking 1,401 Retail Banking 489 Commercial Banking 491 Private Banking 1 Central & other items – Ongoingbusiness loan impairment 2,382 Corporate & Institutional Banking – Commercial Banking – Private Banking – Liquidationportfolio loan impairment – Underlying Impairment on loans and advances and other credit risk provisions 2,382 Loan impairment / loan book(bps) 92	Better /
	2015 (worse)
	$million %
	723 (94)
	677 28
	980 50
	1 –
	– nm1
	2,381 nm1
	1,353 nm1
	181 nm1
	93 nm1
	1,627 nm1
	4,008 41
	143

1 Not meaningful

17

Standard Chartered Bank Strategic Report

Other impairment

Other impairment of $259 million included $191 million related to valuation impairment of Principal Finance investments that is up $115 million year-on-year related to changes in the trading outlook for the companies invested in.

Profit from associates and joint ventures

Profit from associates and joint ventures of $25 million included a $153 million loss in relation to the Group’s share of losses arising from credit issues recently reported by its Permata joint venture in Indonesia. In addition to the underlying profit, a further $62 million was taken as a restructuring charge, giving a total loss of $215 million relating to this joint venture.

Ongoing business and liquidation portfolio

Credit quality for the Group overall has improved in 2016 although stresses remain in parts of the portfolio.

We made significant progress in 2016 exiting exposures in the liquidation portfolio. As a result, gross non-performing loans (NPLs) in the liquidation portfolio were $3.7 billion

lower and the NPL cover ratio improved from 47 per cent to 64 per cent.

Gross NPLs in the ongoing business of $5.9 billion were $633 million higher year-on-year following the downgrade of a small number of exposures in Corporate & Institutional Banking. New inflows into NPLs in the ongoing business have slowed year-on-year, however continued challenging market conditions mean stresses remain in certain commodities-related sectors. The NPL cover ratio of our ongoing business rose to 69 per cent and 73 per cent after including collateral.

Credit grade 12 accounts in the ongoing business increased to $1.5 billion in 2016 but new inflows have slowed in the second half.

We continue to take action to improve the Group’s credit quality, exiting weaker credit or lower return clients, and we are selectively adding new clients. Overall the Group’s exposures remain short tenor and are becoming increasingly diverse as we proactively manage our portfolios within the Group’s tighter risk appetite.

Further details can be found in the Risk Review and Capital Review.

	2016			2015
	Ongoing Liquidation		Ongoing	Liquidation
	business portfolio s	Total	business	portfolio s	Total
	$million $million	$million	$million	$million	$million
Impairment
Underlying loan Impairment	2,382 – – 409	2,382 409	2,381 –	1,627 968	4,008 968
Restructuringloan impairment
Statutoryloan impairment	2,382 409	2,791	2,381	2,595	4,976
Loans and advances to customers	258,387 3,854 254,454 1,433	262,241 255,887	260,015 256,879	7,940 4,396	267,955 261,275
Gross loans and advances
Net loans and advances
Creditquality
Gross Non Performing Loans	5,880 3,807 (3,355) (2,421)	9,687 (5,776)	5,247 (2,584)	7,512 (3,544)	12,759 (6,128)
Individual Impairment Provisions
Net Non PerformingLoans	2,525 1,386	3,911	2,663	3,968	6,631
Credit Grade 12 accounts1	1,499 22 69 64 73 80	1,521 67 76	893 62 71	318 47 64	1,211 53 67
Cover ratio %2
Cover ratio(after collateral) %3
Risk Weighted Assets	264,311 3,808	268,199	280,487	19,627	300,114

1. Includes Corporate & Institutional Banking, Commercial Banking and Central & other items

2. Including portfolio impairment provision

3. Excluding portfolio impairment provision

18

Standard Chartered Bank Strategic Report

Restructuring and other items

We have made good early progress executing against the commitments we made to restructure the Group’s businesses.

The Group incurred further restructuring charges in 2016 of $855 million taking the total since November 2015 to $2.7 billion. The main components of the 2016 charges include:

• A charge against income of $85 million comprising net interest income on the liquidation portfolio offset by fair value adjustments and gains and losses on business disposals. This includes write-downs of legacy assets in a non-strategic Corporate Finance business and our closed equity derivatives business, and a gain on the sale of our Philippines Retail Banking business offset by a loss following the reclassification of our Thailand Retail Banking business.

• Expenses of $236 million largely arising from redundancy costs and further branch rationalisation most of which was incurred in the fourth quarter

• Loan impairment of $409 million and other impairment of $63 million related almost entirely to the liquidation portfolio

• A $62 million loss related to the Group’s share of losses on a portfolio of loans separately identified by PT Permata Bank Tbk joint venture that are to be liquidated

In 2016 the Group disclosed its decision to reduce its balance sheet exposure to Principal Finance by streamlining the business over time and managing its third party portfolio to maximise value for shareholders and third party investors. In 2016 Principal Finance incurred losses of around $550 million compared to around $250 million in 2015. As a non-

strategic business the Group will exit Principal Finance and future gains and losses will be treated as restructuring and excluded from the underlying results of the Group.

It remains our expectation that restructuring charges will total around $3 billion once complete.

In addition to restructuring charges other items excluded from the Group’s underlying performance include:

• In 2015 the Group incurred a one-off valuation adjustment of $863 million relating to a change in its methodology for estimating credit and funding valuation adjustments

• In 2015 the Group realised a $218 million net gain on the sale of standalone consumer finance businesses in Hong Kong and elsewhere. In 2016 the group booked a $253 million net gain relating to the sale of its Mandatory Provident Fund business in Hong Kong

• The Group has adopted the IFRS 9 Financial Instruments requirement to reflect changes in the value attributable to own credit on fair value elected liabilities in other comprehensive income. As a result, in 2016 the Group’s own credit adjustment loss of $372 million was reported within equity instead of through the income statement. This change will remove future volatility in the reported results arising from changes in the Group’s own credit risk

• Goodwill impairment of $166 million in 2016 related to the Group’s subsidiary in Thailand where market conditions remain challenging and we are exiting our local Retail Banking business

million compared to around $250 million	in 2015. As a non-
	2016
	Underlying Restructuring Valuation methodology changes Net (losses)/gains on businesses disposed/held for sale Own credit adjustment Goodwill impairment Gains arising on repurchase of subordinated liabilities Statutory
	$million $million $million $million $million $million $million $million
Operating income	13,758 (85) – 253 – – 84 14,010
Operatingexpenses	(9,855) (236) – – – – – (10,091)
Operating profit before impairment losses and taxation
	3,903 (321) – 253 – – 84 3,919
Impairment losses on loans and advances and other credit risk provisions	(2,382) (409) – – – – – (2,791)
Other impairment	(259) (63) – – – (166) – (488)
Profit/(loss) from associates and joint ventures	25 (62) – – – – – (37)
Profit before taxation	1,287 (855) – 253 – (166) 84 603

	2015
	Underlying Restructuring Valuation methodology changes Net (losses)/gains on businesses disposed/held for sale Own credit adjustment Goodwill impairment Gains arising on repurchase of subordinated liabilities Statutory
	$million $million $million $million $million $million $million $million
Operating income	15,369 (863) 218 495 – – 15,219
Operatingexpenses	(10,415) (695) – – – – (11,110)
Operating profit before impairment losses and taxation
	4,954 (695) (863) 218 495 – – 4,109
Impairment losses on loans and advances and other credit risk provisions
	(4,008) (968) – – – – – (4,976)
Other impairment	(188) (182) – – – (362) – (732)
Profit from associates andjoint ventures	192 – – – – – 192
Profit/(loss) before taxation	950 (1,845) (863) 218 495 (362) – (1,407)

19

Standard Chartered Bank Strategic Report

Group summary consolidated balance sheet

As a result of actions taken in 2016 the Group’s balance sheet is more resilient, more liquid and becoming increasingly diverse across multiple dimensions including industry, region and single names.

We continue to be funded primarily by client deposits with a client advances-to-deposits ratio of 67.6 per cent. The Group’s funding structure remains conservative with limited refinancing requirements over the next few years.

Around 70 per cent of the Group’s financial assets are held at amortised cost and 61 per cent of total assets have a residual maturity of less than one year.

Key points to note:

• Cash balances increased by $5.4 billion reflecting higher surplus liquidity held primarily in Europe & Americas

• Loans to customers and banks remained stable year-onyear. Loans to customers were lower by 2 per cent despite increases in short-term reverse repurchase transactions due to a strong focus on returns and restructuring activities. Offsetting this, loans to banks were up 12 per cent with strong growth in ASEAN & South Asia and Greater China & North Asia as we redeployed liquidity in these markets

• Investment securities were down 6 per cent or $8 billion as we reduced holdings of UK Government bonds and other debt securities due to price volatility and increased to a lesser degree investments in United States treasury bills to take advantage of the eligibility criteria for liquid asset buffers. Around 90 per cent of our investment in treasury bills and debt securities are of investment grade

• and 48 per cent have a residual maturity of less than 12 months

• Customer appetite for derivative transactions has increased in currency and rates markets as political uncertainties caused volatility in the US dollar against emerging markets and G10 currencies. This was partially offset by declines in commodity derivatives as the Group was managing its commodity exposures. Our derivative positions continue to be largely balanced

• Customer accounts increased by 5 per cent or $19 billion to $378 billion year-on-year with more focus on diverse sources of funding including from repurchase transactions

• Debt securities in issue of $35 billion were $16 billion lower compared to 2015 as the Group focused on customer accounts as a source of efficient funding

• Subordinated liabilities decreased $0.7 billion primarily due to the redemption and repurchase of notes partly offset by debt issued in the year

Total shareholders’ equity of $51 billion was $3.7 billion higher reflecting a capital injection of $3.8 billion by the parent entity and $2 billion of AT1 capital issued in the year partly offset by $0.7 billion foreign currency translation reserve loss, $0.6 billion loss reported in the year, a $0.3 billion own credit adjustment and $0.2 billion of dividend on preference shares and AT1 coupons.

other debt securities due to price volatility and increased to a lesser degree investments in United States treasury bills to take advantage of the eligibility criteria for liquid asset buffers. Around 90 per cent of our investment in treasury bills and debt securities are of investment grade
	Increase /	Increase /
2016 2015	(decrease)	(decrease)
$million $million	$million	%
Assets
Cash and balances at central banks 70,706 65,312 Loans and advances to banks1 74,665 66,767 Loans and advances to customers1 255,887 261,275 Investment securities1 123,454 131,468 Derivative financial instruments 67,061 64,587 Other assets 56,123 50,383	5,394	8
	7,898	12
	(5,388)	(2)
	(8,014)	(6)
	2,474	4
	5,740	11
Total assets 647,896 639,792	8,104	1
Liabilities Deposits by banks1 37,612 38,163 Customer accounts1 378,302 359,127 Debt securities in issue1 35,189 51,504 Derivative financial instruments 66,251 62,586 Subordinated liabilities and other borrowed funds 20,064 20,716 Other liabilities1 59,484 60,423
	(551)	(1)
	19,175	5
	(16,315)	(32)
	3,665	6
	(652)	(3)
	(939)	(2)
Total liabilities 596,902 592,519	4,383	1
Equity 50,994 47,273	3,721	8
Total liabilities and shareholders' funds 647,896 639,792	8,104	1
1. Includes balances held at fair value through profit or loss

20

Standard Chartered Bank Strategic Report

Capital base and ratios

Capital Management applies to the Group’s regulated consolidations and entities. The Group’s Common Equity Tier 1 (CET1) ratio increased from 11.7 per cent to 14.0 per cent, as a result of a decrease in risk-weighted assets (RWA) from

asset reductions, business disposals and RWA efficiencies. The Group is strongly capitalised with low leverage and high levels of loss absorbing capacity.

	2016	2015
	$million	$million
Common Equity Tier 1	14.0%	11.7%
Total capital	22.4%	18.3%
Leverage ratio	5.8%	5.1%
Total risk weighted assets	268,199	300,114

Summary

The series of actions that we committed to at the end of 2015 and executed throughout 2016 were designed with a challenging macro environment in mind.

Despite these challenges we ended the year with income stability, lower costs and we have strengthened our foundations, increasing our resilience to economic cycles.

any event enable us to build a stronger business with better returns.

We remain confident in the opportunities in our markets as well as the ability of our people and our strategy to capture them.

While this is encouraging further significant improvement in our financial performance is required.

The timing and extent of any financial benefit that might arise should the macro environment improve in 2017 remains uncertain. Our collective actions in 2016 will in

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Standard Chartered Bank Strategic Report

Client segments reviews

We have four client segments. Corporate & Institutional Banking and Private Banking are run globally, with clients in those segments supported by relationship managers with global oversight. Commercial Banking and Retail Banking are run regionally with global oversight of segment strategy, systems and products. Clients are served by country-level relationship managers with specific knowledge of the local market. Items not directly managed by client segments are included in Central & other items. The following table highlights the performance of our client segments during 2016.

Underlying performance	2016
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other Items Total $million $million $million $million $million $million
Operating income Operatingexpenses	6,425 4,669 1,295 496 873 13,758 (4,154) (3,413) (929) (463) (896) (9,855)
Operating profit/(loss) before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions Other impairment Profit from associates andjoint ventures	2,271 1,256 366 33 (23) 3,903 (1,401) (489) (491) (1) – (2,382) (244) (1) 5 – (19) (259) – – – – 25 25
Underlying profit/(loss)before taxation	626 766 (120) 32 (17) 1,287
Restructuring Net (losses)/gains on businesses disposed held for sale Own credit adjustment1 Goodwill impairment Gains arising on repurchase of subordinated liabilities	(459) (47) (26) (73) (250) (855) – – – – 253 253 – – – – – – – – – – (166) (166) – – – – 84 84
Statutory profit/(loss) before taxation	167 719 (146) (41) (96) 603
Total assets employed Of which: loans and advances to customers Total liabilities employed Of which:customeraccounts	287,121 96,834 27,151 11,974 224,816 647,896 122,231 93,488 24,013 11,908 4,247 255,887 346,019 121,015 35,576 21,840 72,452 596,902 204,279 117,355 32,570 21,767 2,331 378,302
Underlying performance	2015
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other Items Total $million $million $million $million $million $million
Operating income Operatingexpenses	7,004 5,106 1,605 534 1,120 15,369 (4,338) (3,510) (1,071) (341) (1,155) (10,415)
Operating profit before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions Other impairment Profit from associates andjoint ventures	2,666 1,596 534 193 (35) 4,954 (2,076) (678) (1,160) (94) – (4,008) (122) – (17) – (49) (188) – – – – 192 192
Underlying profit/(loss)before taxation	468 918 (643) 99 108 950
Restructuring Valuation methodology changes Net gains on businesses disposed/ held for sale Own Credit adjustment1 Goodwill impairment	(1,193) (395) (61) (7) (189) (1,845) (863) – – – – (863) – – – – 218 218 – – – – 495 495 – – – – (362) (362)
Statutory (loss)/profit before taxation	(1,588) 523 (704) 92 270 (1,407)
Total assets employed Of which: loans and advances to customers Total liabilities employed Of which: customer accounts	285,845 97,266 25,460 15,393 215,828 639,792 121,395 94,697 24,340 15,296 5,547 261,275 345,281 117,189 32,361 24,627 73,061 592,519 187,462 114,584 30,685 24,540 1,856 359,127

1. In 2016 the Group was an early adopter of the IFRS 9 Financial Instruments requirement to reflect changes in the value attributable to own credit on fair value elected liabilities in other comprehensive income. IFRS 9 does not permit the prior year to be restated. Refer to note 1 for further details

2. The 2015 comparatives have been re-presented to reflect the reorganisation of the Group’s client segments. Refer to notes 1 and 2 for details

22

Standard Chartered Bank Strategic Report

Corporate & Institutional Banking

PERFORMANCE HIGHLIGHTS

• Underlying income down owing to difficult market conditions, Principal Finance losses and assertive management actions which impacted balance sheet momentum

• Underlying profit rose with tightly controlled costs and reduced loan impairment more than offsetting lower income and significant Principal Finance losses

• Balance sheet momentum improved in the second half of 2016, supported by Trade Finance

Segment overview

Corporate & Institutional Banking supports our clients with transaction banking, corporate finance, financial markets and lending products and services in over 50 countries. We provide solutions to over 4,000 clients in some of the world’s fastest-growing economies and most active trade corridors. Our clients include large corporations, governments, banks and investors headquartered and operating in Asia, Africa and the Middle East as well as those looking for access to and support in these dynamic markets.

Strategic objectives

We want to be the bank of choice for our clients’ global investment, trade and payment needs. Our priorities for the segment are to:

• Better organise ourselves around our clients to deliver a service that is more aligned to their needs

• Improve the efficiency of how we do business to provide clients with a seamless experience, irrespective of jurisdiction or time zone

• Diversify and expand our client base, particularly to those based in OECD countries, to drive revenues and returns

• Leverage our unique footprint by focusing on clients for whom our network is a key differentiator

• Embed ourselves in our clients’ operations and supply chains to maximise the relevance of our network and product suite

• Improve and grow our asset distribution capabilities to increase balance sheet efficiency and better mitigate against risks

• Improve the quality of our funding base to reduce funding costs, improve returns and enable future growth

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Identified a new generation of clients to drive growth, including selectively on-boarding new clients in the OECD region for whose business the Group’s network is a differentiator

• Restructured our client coverage model to improve efficiency and reduce overlaps

• Won multiple key mandates from our buyer-supplier ecosystem initiative

• Delivered our cost reduction target for 2016 and took actions that will drive further efficiency improvements

• On track to exit or up-tier the low-returning portfolio identified in 2015

• Improved processes with significantly faster credit turnaround times and a reduction in the average number of days taken to on-board a new client

• Took significant actions to improve our risk profile

Financial performance summary

Statutory profit before taxation of $167 million in 2016 compared with a loss of $1,588 million in 2015.

Underlying profit before taxation rose 34 per cent year-onyear to $626 million due to reduced loan impairment and expenses which more than offset lower income and significant Principal Finance losses.

The difference between underlying and statutory profit before taxation is explained by restructuring charges of $459 million in 2016 and $1,193 million in 2015 as well as a $863 million loss on valuation methodology changes recorded in 2015. Commentary hereafter is on an underlying basis, unless otherwise stated.

Income

Income of $6,425 million was down 8 per cent year-on-year as a result of challenging market conditions, Principal Finance losses and loss of income from exposures that were moved to the liquidation portfolio during 2016. This was partially offset by the non-recurrence of mark-to-market losses on syndicated loans in the prior year and from credit and funding valuation adjustment gains. Income in the second half of 2016 rose 6 per cent compared to the first half.

Transaction Banking income fell 11 per cent year-on-year. Within this, Trade Finance income fell 20 per cent due to weaker demand and declining commodity prices early in the year. Cash Management income was impacted by lower balances, although margins improved from active re-pricing, higher central bank rates in the US and a change in mix towards high quality operating account balances. Custody income was lower owing to the weaker investment environment in emerging markets. Transaction Banking income grew 4 per cent in the second half compared to the first half of 2016, driven by balance sheet growth and improved margins in Cash Management, coupled with a stabilised performance in Trade Finance.

Financial Markets income fell 2 per cent year-on-year, impacted by actions taken to rationalise the product range to enhance capital efficiency. This was coupled with lower income from Foreign Exchange and Rates. Foreign Exchange income declined 10 per cent as spread compression offset volume growth. Rates income fell 10 per cent from lower structured callable notes issuance. This was offset by credit and funding valuation adjustment gains and increased Credit income, which benefited from higher secondary market activity.

Corporate Finance income rose 6 per cent year-on-year although income in 2015 was significantly impacted by markto-market losses on syndicated loans. Excluding these from both years, income fell 15 per cent, impacted by more selective origination and challenging market conditions.

Lending and Portfolio Management income fell 43 per cent, reflecting lower balances as we exited low-returning relationships and from margin compression.

Principal Finance income fell from negative $3 million in 2015 to negative $173 million following changes due to fair valuation of Principal Finance investments.

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Standard Chartered Bank Strategic Report

Expenses

Expenses fell 4 per cent year-on-year to $4,154 million. These savings and the wider cost efficiency programme created capacity for increased investment to enhance our regulatory and compliance platforms and to deliver strategic initiatives.

Impairment

Loan impairment fell 33 per cent year-on-year to $1,401 million. 2015 included $1,353 million of impairment relating to exposures transferred to the liquidation portfolio that was incurred prior to transfer. Loan impairment of $795 million in the second half of 2016 compared with $606 million in the first half with the increase driven by exposures to the diamond and jewellery sector.

Other impairment rose 100 per cent due to valuation impairment of Principal Finance investments following changes in the trading outlook for companies we invested in.

Balance sheet

Loans and advances to customers rose 1 per cent as higher reverse repo balances were offset by lower balances in Lending and Portfolio Management. The exit of exposures within the liquidation portfolio also impacted loans. Asset momentum improved in the second half, supported by growth in Trade Finance balances.

Customer accounts rose 9 per cent, driven by repo balances, operating account balances and corporate term deposits.

	Better /
	2016 2015 (worse)
Underlying performance	$million $million %
Transaction Banking	2,168 2,448 (11)
Financial Markets	2,486 2,533 (2)
Corporate Finance	1,708 1,612 6
Lending and Portfolio Management	236 414 (43)
Principal Finance	(173) (3) nm1
Operating income	6,425 7,004 (8)
Operating expenses	(4,154) (4,338) 4
Impairment losses on loans and advances and other credit risk provisions	(1,401) (2,076) 33
Other impairment	(244) (122) (100)
Underlying profit before taxation	626 468 34
Statutory profit/(loss)before taxation	167 (1,588) 111
Loans and advances to customers	122,231 121,395 1
Customer accounts	204,279 187,462 9

1. Not meaningful

24

Standard Chartered Bank Strategic Report

Retail Banking

PERFORMANCE HIGHLIGHTS

• Transformation is well underway with significant investment in digitisation and improvement in leading performance indicators

• Continued improvement in expenses and loan impairment offset by lower income

• Income declined year-on-year, but rose in the second half of 2016, underpinned by improved client quality, balance sheet growth and Wealth Management

Segment overview

We serve over 9 million affluent and emerging affluent clients and small businesses in many of the world’s fastest growing cities across Asia, Africa and the Middle East. Our focus is on serving the banking needs of these Priority, Business and Personal Clients with market-leading digital capabilities and best-in-class products.

Strategic objectives

We have made significant progress transforming Retail Banking in the last two years, sharpening our client proposition and building new technology.

Our priorities for the segment are:

• Continue to shift the client mix towards affluent and emerging affluent clients by focusing on our corporate ecosystems and alliances

• Improving quality of income through changes in client mix, risk profiles and products

• Invest to improve client experience through an enhanced end-to-end digital offering, with straightforward platforms and best-in-class products and services

• Move towards a more automated and standardised business model to improve efficiency and reduce our cost-to-income ratio

• Focus on core cities to drive income growth supported by digitisation and branch optimisation

• Reinvigorate our brand by clearly defining our proposition and simplifying our product and service offering

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Increased share of income from Priority clients to 39 per cent of Retail Banking income supported by more than 90,000 new-to-bank Priority clients

• Announced the exit of Retail Banking in the Philippines and Thailand

• New risk decision framework in 11 markets to target high-quality growth and lower volatility in our unsecured asset portfolio

• Step-up of investment in digitisation with Retail Workbench now operational in 10 markets, upgraded mobile and internet banking platform in 12 markets, the launch of video/chat banking in three markets, and enhanced client payment capabilities in selected markets

• Commenced a multi-year overhaul of core platforms and digital sales capability in Wealth Management

• Launched focused client campaigns with new alliance partners, including Uber in six markets, Asia Miles in Hong Kong and Samsung Card and Shinsegae/E-mart in Korea

Financial performance summary

Statutory profit before taxation of $719 million in 2016 compared with a statutory profit of $523 million in 2015.

Retail Banking recorded underlying profit before taxation of $766 million in 2016 compared to a profit of $918 million in 2015 owing to lower income, which more than offset continued improvement in expenses and loan impairment. Excluding the impact of currency translation, the exit of our consumer finance business and a property disposal gain recorded in 2015, underlying profit declined 10 per cent due to lower income and increased investment.

The difference between underlying and statutory profit before taxation is explained by restructuring charges of $47 million in 2016 and $395 million in 2015. Commentary hereafter is on an underlying basis, unless otherwise stated.

Income

Income fell 9 per cent year-on-year to $4,669 million, or 4 per cent excluding the impact of currency translation, business exits and a property disposal gain recorded in 2015. This decline was driven by weaker Wealth Management income in the first half of the year and lower income from unsecured lending. Income rose 2 per cent in the second half driven by Deposits and Wealth Management.

Greater China & North Asia income declined 9 per cent yearon-year, or 2 per cent excluding the impact of local currency depreciation, business exits and a property disposal gain recorded in 2015. Growth in Hong Kong from Deposits was offset by declines in Korea and to a lesser extent China and Taiwan. Korea income fell due to lower central bank rates and actions to improve the risk profile of our unsecured lending portfolio. Income rose in Korea in the second half compared to the first half driven by Mortgages and Wealth Management. Wealth Management income also rose in all other markets in the region during the second half of 2016 benefiting from improved market conditions.

ASEAN & South Asia income fell 10 per cent year-on-year or 8 per cent on a constant currency basis. Income was impacted by central bank rate cuts in India which offset asset growth, and by lower Credit Cards and Personal Loans income in Singapore and Malaysia resulting from actions to improve client quality.

Africa & Middle East income fell 6 per cent year-on-year, impacted by local currency depreciation, particularly in Nigeria. On a constant currency basis, income fell 3 per cent with growth in Africa from Deposits and Wealth Management offset by central bank rate cuts in Pakistan and lower Wealth Management income in UAE.

Expenses

Retail Banking expenses fell 3 per cent year-on-year to $3,413 million. On a constant currency basis, expenses were flat with cost efficiency initiatives and business exits offset by increased investment in digitisation and in our sales force.

Impairment

Loan impairment fell 28 per cent year-on-year to $489 million. Reduced loan impairment in 2016 is an outcome of improving portfolio performance and mix across markets, notably Korea.

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Standard Chartered Bank Strategic Report

Balance sheet

Loans and advances to customers decreased by 1 per cent compared with the end of 2015 as growth in Mortgages

was offset by a decline in Personal Loans. Customer accounts increased by 2 per cent year-on-year driven by Greater China & North Asia.

Underlying performance	Great &No	er China rth Asia ASEAN & South Asia Africa & MiddleEast Europe & Americas	Total
	2016 $million	2015 2016 2015 2016 2015 2016 2015 $million $million $million $million $million $million $million	2016 2015 Better/ worse $million $million %
Operating income Operating expenses Impairment losses on loans and advances and other credit risk provisions Other impairment	2,445 (1,714) (180) –	2,683 1,381 1,531 809 863 34 29 (1,866) (1,054) (1,012) (623) (615) (22) (17) (296) (222) (312) (87) (70) – – – – – (1) – – –	4,669 5,106 (9) (3,413) (3,510) 3 (489) (678) 28 (1) – nm1
Underlying profit before taxation	551	521 105 207 98 178 12 12	766 918 (17)
Statutory profit before taxation	524	171 102 182 82 161 11 9	719 523 37
Loans and advances to customers Customer accounts	62,261 79,627	60,388 25,001 27,667 5,912 6,360 314 282 75,523 27,892 28,974 8,606 8,744 1,230 1,343	93,488 94,697 (1) 117,355 114,584 2

1. Not meaningful

26

Standard Chartered Bank Strategic Report

Commercial Banking

PERFORMANCE HIGHLIGHTS

• We made good progress on our multi-year overhaul of the business and improving its risk profile

• Lower loss for the year with reduced loan impairment and expenses more than offsetting a decline in income

• Customer deposits grew in the second half but loans and advances were lower, impacted by management actions to improve the business’ risk profile

Segment overview

Our clients are small and mid-sized companies in 27 markets across Asia, Africa and the Middle East. We serve these clients through dedicated relationship managers, providing financial solutions and services in areas such as trade finance, cash management, foreign exchange and interest rate hedging.

Strategic objectives

Our ambition is to be our clients’ partner of choice as they build their businesses internationally.

Our priorities for the segment are:

• Focus on digital channels and process efficiencies to improve client experience

• Materially improve the risk profile of the business by continuing to upgrade the standard of our client due diligence and credit risk management

• Leverage the Corporate & Institutional Banking product set and technology capabilities to strengthen our client offering

• Continue to control expenses in support of a lower costto-income ratio

• Invest in frontline staff to upgrade relationship manager capabilities and invest to create targeted value propositions to meet our clients’ needs

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Completed a client due diligence remediation programme and the exit of our small and mid-sized enterprise (SME) business in the UAE as well as enhancing financial crime controls

• Enhanced credit risk management by implementing refreshed portfolio standards for originating business and increased credit training for relationship managers

• Integrated Local Corporates clients, roughly doubling the size of Commercial Banking

• Migrated from legacy platforms and made progress integrating our infrastructure with Corporate & Institutional Banking

• Began setting up sector-specific offerings for clients and rolled out a dedicated Transaction Banking and Financial Markets sales coverage model to meet clients’ international banking needs

Commercial Banking recorded an underlying loss before taxation of $120 million in 2016 compared to a loss of $643 million in 2015 owing to lower loan impairment and expenses.

The difference between underlying and statutory loss before taxation is explained by restructuring charges of $26 milllion in 2016 and $61 million in 2015. Commentary hereafter is on an underlying basis unless otherwise stated.

Income statement

Income fell 19 per cent year-on-year to $1,295 million due to declines in Greater China & North Asia and to a lesser extent ASEAN & South Asia and Africa & Middle East. The decline was driven by a slowdown in economic activity, reduced demand for Foreign Exchange hedging products in Hong Kong and by assertive steps taken to improve the risk profile of the business including the exit of our SME business in the UAE. Income in the second half declined 6 per cent owing to lower Lending income, which was impacted by management actions to optimise returns and reduce risk.

Greater China & North Asia income fell 26 per cent year-onyear impacted mainly by a slowdown in economic activity in China. Income in Hong Kong was particularly impacted by reduced demand for Foreign Exchange products used for hedging, owing to renminbi depreciation. Income from Korea declined owing to lower balances in Transaction Banking and Lending, as well as margin reduction in Cash Management and Lending as a result of central bank rate cuts.

Income from ASEAN & South Asia fell 10 per cent year-onyear. Income was down across most products due to the impact of management actions to optimise returns and reduce risk, coupled with unfavourable macroeconomic environment and local currency depreciation. Income from Trade Finance and Financial Markets stabilised in the second half compared to the first half of 2016.

Income from Africa & Middle East fell 19 per cent year-onyear, largely owing to our tightened risk appetite and the exit of our SME business in the UAE, which impacted income from Trade Finance and Financial Markets. African markets, notably Nigeria and Kenya, were impacted primarily by local currency depreciation.

Expenses

Expenses declined 13 per cent year-on-year to $929 million, benefiting from cost efficiency actions and reduced headcount in Korea following the Special Retirement Plan announced at the end of 2015.

Impairment

Loan impairment improved 58 per cent year-on-year to $491 million – or a decline of 50 per cent in the ongoing business – but remains elevated, particularly in Africa & Middle East.

Balance sheet

Loans and advances to customers decreased 1 per cent compared to 2015 as a result of management actions to improve the business’ risk profile.

Customer accounts increased 6 per cent year-on-year driven by Greater China & North Asia and Africa & Middle East. Commercial Banking remains a liquidity generator for the Group with a ratio of customer advances to deposits of 74 per cent.

• Reduced the cost base through targeted initiatives

Financial performance summary

Statutory loss before taxation in 2016 of $146 million compared with a loss of $704 million in 2015.

27

Standard Chartered Bank Strategic Report

Standard Chartered Bank Strategic Report
Underlying performance	Greater China & North Asia ASEAN & South Asia Africa & Middle East Total
	2016 2015 2016 2015 2016 2015 2016 2015 Better/ worse $million $million $million $million $million $million $million $million %
Operating income Operating expenses Impairment losses on loans and advances and other credit risk provisions Other impairment	522 709 478 533 295 363 1,295 1,605 (19) (427) (510) (280) (313) (222) (248) (929) (1,071) 13 (114) (423) (158) (429) (219) (308) (491) (1,160) 58 2 (9) 3 (8) – – 5 (17) 129
Underlying (loss)/profitbeforetaxation	(17) (233) 43 (217) (146) (193) (120) (643) 81
Statutory (loss)/profit before taxation	(23) (285) 27 (221) (150) (198) (146) (704) 79
Loans and advances to customers Customer accounts	11,925 12,097 8,306 8,307 3,782 3,936 24,013 24,340 (1) 20,107 17,717 8,699 9,523 3,764 3,445 32,570 30,685 6

1. Not meaningful

28

Standard Chartered Bank Strategic Report

Private Banking

PERFORMANCE HIGHLIGHTS

• Income was impacted by market volatility and actions taken to improve the risk profile of the segment

• Investment increased significantly to enhance our control environment, improve our technology infrastructure and hire senior private bankers

• Assets under management declined owing to actions we took to improve our risk profile as well as maturing deposits

Segment Overview

We help our clients manage, preserve and grow their wealth, recognising that in many cases their personal and business banking needs are closely linked. Through our presence in Asia, Africa, the Middle East and the UK, we offer clients access to a full suite of private banking services from investment and credit solutions to wealth preservation and succession planning. We combine market insights from multiple sources with our own research to deliver investment recommendations and our open architecture platform ensures clients can access a wide range of investment solutions.

Strategic objectives

We want to be recognised as the private bank for entrepreneurs and are investing significantly to capture the opportunities present in our footprint.

Our priorities for the segment are:

• Enhance controls and processes to increase productivity

• Invest in our core banking platform and upgrade technology to improve the quality and breadth of our client service

• Broaden our product offering to give our staff the tools they need to attract new clients with assets under management of at least $5 million

• Leverage the deep relationships across other client segments to expand our Private Banking client base

• Enhance our ability to attract and service ultra high net worth clients by investing in existing staff and hiring senior private bankers

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Put in place a new Executive Management Team to drive the segment forward

• Intensified frontline hiring with a greater focus on more senior private bankers who are better able to acquire and service ultra high net worth clients

• In partnership with Thomson Reuters, we were the first in the industry to deliver cross-asset product recommendations and investment advice live through our online client interface

• Delivered a number of exclusive product launches, strengthened our discretionary proposition with our new US high yield fixed income portfolio and capitalised on

demand for yield to launch our non-resident external deposit product

Financial performance summary

Statutory loss before taxation of $41 million in 2016 compared with a profit of $92 million in 2015.

Private Banking recorded underlying profit of $32 million in 2016 compared to a profit of $99 million in 2015, owing to lower income and higher expenses, which more than offset the benefit of lower loan impairment.

The difference between underlying and statutory profit before taxation is explained by restructuring charges of $73 million in 2016 and $7 million in 2015. Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Income declined 7 per cent year-on-year to $496 million, or a decline of 12 per cent excluding a one-off insurance recovery booked in 2016. The performance was impacted by market volatility and actions taken to improve the risk profile of the segment.

Wealth Management income fell 23 per cent year-on-year as market volatility early in the year impacted sales of funds and treasury products. Income was also impacted by actions we took which reduced secured lending balances in ASEAN & South Asia and Africa & Middle East. Wealth Management income declined in the second half of the year compared with the first half of 2016 owing to our actions to refocus the segment.

Income from Retail Banking products grew 17 per cent yearon-year, mainly in Deposits, which benefited from interest rate rises on foreign currency deposits in Hong Kong and Singapore. This momentum continued in the second half of the year with income growth of 12 per cent in Retail Banking products compared with the first half.

Expenses

Expenses rose 36 per cent year-on-year to $463 million, or an increase of 17 per cent excluding a one-off insurance credit in 2015. This increase was driven by a step-up in investment to enhance our control environment, the upfront cost to upgrade to our core banking platform and the hiring of new senior private bankers.

Impairment

Loan impairment benefited from the non-repeat of a provision relating to a single client in the first half of 2015. In the ongoing business, loan impairment was negligible in 2016.

Assets under management

Assets under management declined 4 per cent to $54 billion as growth in Hong Kong was offset by actions we took to improve our risk profile in other markets as well as maturing deposits.

Balance sheet

Loans and advances to customers declined 22 per cent yearon-year and customer accounts declined 11 per cent yearon-year impacted by the maturity of fixed-term leveraged deposit products during the period. Loans and advances were also impacted by actions to improve our risk profile.

29

Standard Chartered Bank Strategic Report

				Better /
		2016	2015	(worse)
	Underlying performance	$million	$million	%
	Transaction Banking	1	1	–
	Corporate Finance	–	2	(100)
	Wealth Management	280	365	(23)
	Retail Products	193	165	17
	Principal Finance	–	1	(100)
	Other	22	–	nm1
	Operating income	496	534	(7)
	Operating expenses	(463)	(341)	(36)
	Impairment losses on loans and advances and other credit risk provisions	(1)	(94)	99
	Other impairment	–	–	nm1
	Underlying profitbeforetaxation	32	99	(68)
	Statutory (loss)/profitbeforetaxation	(41)	92	(145)
	Loans and advances to customers	11,908	15,296	(22)
	Customer accounts	21,767	24,540	(11)
	Assets under management	54,218	56,664	(4)

30

Standard Chartered Bank Strategic Report

Central & other items

Segment overview

Items included in Central & other items in client segments and regions analysis differ, depending on whether they are managed directly by client segments, regions or centrally.

Central & other items in the client segment analysis includes corporate centre costs, Asset and Liability Management (ALM), treasury activities, joint ventures and associate investments, and the UK bank levy.

Financial performance summary

Statutory loss before taxation of $96 million in 2016 compared with a profit of $270 million in 2015.

Underlying loss before taxation of $17 million in 2016 compared with a profit of $108 million in 2015, with improved expenses and other impairments offset by lower profits from associates and joint ventures and lower income.

The difference between underlying and statutory profit before taxation is primarily explained by the following items:

• Restructuring charges of $250 million in 2016 and $189 million in 2015

• Gain on sale of $253 million in 2016 and $218 million in 2015. The gain in 2016 relates to the sale of Mandatory Provident Fund in Hong Kong, while the gain in 2015 relates to the sale of Prime Credit in Hong Kong

• An own credit adjustment gain of $495 million reported in the income statement in 2015. In 2016 an own credit adjustment loss of $372 million was reported within equity. For further details on this change in treatment please refer to note 1

• Goodwill impairment of $166 million in 2016 and $362 million in 2015. The 2016 impairment relates to our business in Thailand while the 2015 impairment related to our business in Taiwan

• Gains arising on repurchase of subordinated liabilities of $84 million in 2016 compared with nil in 2015 as wider credit spreads enabled the Group to buy back Standard Chartered’s issued debt from the market at a discount

Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Income declined 22 per cent year-on-year owing to lower yields on liquid asset securities on lower central bank rates in Korea, India and China, and lower gains from the realisation of available-for-sale securities. This was partly offset by the non-repeat of the foreign exchange related loss on the prior year rights issue.

Expenses

Operating expenses declined 22 per cent owing to the nonrecurrence of one-off items from 2015, lower UK bank levy and a reduction in costs relating to structural cost hedges. The UK bank levy declined to.$383 million in 2016 compared to $440 million in 2015 due to reduced rates and an increase in assets qualifying for relief.

Impairment

Other impairment was lower by 61 per cent due to nonrecurring strategic investment write downs in 2015.

Associates and joint ventures

Associates and joint ventures recorded a profit of $25 million in 2016 compared with a profit of $192 million in 2015 impacted by losses at joint venture PT Bank Permata on elevated impairments.

Balance sheet

Loans and advances to customers and customer accounts mainly relate to ALM activity. Balances are generally small, but can fluctuate between periods.

				Better /
		2016	2015	(worse)
	Underlying performance	$million	$million	%
	Operating income	873	1,120	(22)
	Operating expenses	(896)	(1,155)	22
	Other impairment	(19)	(49)	61
	Profit from associates and joint ventures	25	192	(87)
	Underlying (loss)/profitbeforetaxation	(17)	108	(116)
	Restructuring	(250)	(189)	(32)
	Net gains on businesses disposed/held for sale	253	218	16
	Own credit adjustment	-	495	nm1
	Goodwill impairment	(166)	(362)	54
	Gains arising on repurchase ofsubordinatedliabilities	84	–	nm1
	Statutory (loss)/profitbeforetaxation	(96)	270	(136)
	Loans and advances to customers	4,247	5,547	(23)
	Customer accounts	2,331	1,856	26

1. Not meaningful

31

Standard Chartered Bank Strategic Report

Regional reviews

We have a simplified organisational structure that ensures we support clients across our footprint. Our four regions – Greater China & North Asia, ASEAN & South Asia, Africa & Middle East and Europe & Americas – are managed by their own CEOs. Items not directly managed by regions are included in Central & other items. The following table outlines the 2016 performance of each of our regions.

Underlying performance	2016
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Central & other Items Total $million $million $million $million $million $million
Operating income Operating expenses	5,190 4,052 2,742 1,664 110 13,758 (3,546) (2,518) (1,730) (1,302) (759) (9,855)
Operating profit/(loss) before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions Other impairment Profit/(loss)fromassociates and jointventures	1,644 1,534 1,012 362 (649) 3,903 (424) (762) (563) (511) (122) (2,382) (47) 3 (18) 1 (198) (259) 167 (146) - - 4 25
Underlying profit/(loss) before taxation Restructuring Net gains on businesses disposed held for sale Own credit adjustment1 Goodwill impairment Gains arising on repurchase of subordinated liabilities	1,340 629 431 (148) (965) 1,287 (137) (443) (82) (113) (80) (855) 253 – – – – 253 – – – – – – – – – – (166) (166) – – – – 84 84
Statutory profit/(loss)before taxation	1,456 186 349 (261) (1,127) 603
Total assets Of which: loans and advances to customers Total liabilities Of which: customer accounts	239,727 143,733 56,993 195,938 11,505 647,896 110,533 73,161 28,140 44,053 – 255,887 210,782 126,730 38,033 181,640 39,717 596,902 169,957 88,141 29,931 90,273 – 378,302
Underlying performance	2015
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Central & other Items Total $million $million $million $million $million $million
Operating income Operating expenses	6,077 4,253 2,858 1,877 304 15,369 (3,763) (2,621) (1,790) (1,387) (854) (10,415)
Operating profit/(loss) before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions Other impairment Profit from associates and joint ventures	2,314 1,632 1,068 490 (550) 4,954 (935) (1,942) (844) (192) (95) (4,008) (28) (63) (36) 18 (79) (188) 172 15 – – 5 192
Underlying profit/(loss) before taxation Restructuring Valuation methodology changes Net gains on businesses disposed/ held for sale Own credit adjustment1 Goodwill impairment	1,523 (358) 188 316 (719) 950 (520) (547) (112) (516) (150) (1,845) – – – – (863) (863) 217 – 1 – – 218 – – – – 495 495 – – – – (362) (362)
Statutory profit/(loss)before taxation	1,220 (905) 77 (200) (1,599) (1,407)
Total assets Of which: loans and advances to customers Total liabilities Of which:customeraccounts	233,102 150,566 60,123 188,478 7,523 639,792 106,161 86,343 31,070 37,701 – 261,275 208,220 130,253 40,961 170,142 42,943 592,519 163,519 90,731 33,013 71,864 – 359,127

1. In 2016 the Group was an early adopter of the IFRS 9 Financial Instruments requirement to reflect changes in the value attributable to own credit on fair value elected liabilities in other comprehensive income. IFRS 9 does not permit the prior year to be restated. Refer to note 1 for further details

2. The 2015 comparatives have been re-presented to reflect the reorganisation of the Group’s regions. Refer to notes 1 and 2 for details

32

Standard Chartered Bank Strategic Report

Greater China & North Asia

PERFORMANCE HIGHLIGHTS

• Underlying profit down with income impacted by a slowdown in China and actions taken to improve our risk profile

• Performance momentum improved in the second half with income up half-on-half

• Progress made addressing performance challenges, particularly in Korea and China

Region overview

Greater China & North Asia is the Group’s largest region and includes our client segments in Hong Kong, China, Taiwan, Korea, Japan and Mongolia. Hong Kong remains our single largest market, underpinned by a diversified franchise and deeply-rooted presence. Our distinctive proposition and continued investment position us strongly to capture opportunities as they arise from the continuing opening up of China’s economy.

Strategic objectives

Our business is fit for growth after a series of management actions that include significantly improving the risk profile of our credit portfolios – particularly in China and Korea – and reducing our cost base, which has created the capacity to invest.

Our priorities for the region are:

• Leverage our network strength to serve inbound and outbound cross-border trade and investment needs of our Corporate & Institutional Banking clients

• Invest to capture opportunities arising from China’s opening, including renminbi, One Belt One Road, onshore capital markets and mainland wealth flows

• Invest in digital capabilities to improve our client service and experience in our Retail Banking and Private Banking segments

• Optimise physical presence and invest in core cities

• Return China and Korea to sustained profitability and strengthen market position in Hong Kong

• Continue to leverage strategic alliances to accelerate client acquisition

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Strong progress in Retail Banking with over 40,000 Priority new-to-bank clients in Hong Kong

• Launched several alliances including Asia Miles and Disney in Hong Kong and Samsung and Shinsegae/EMart in Korea

• Significant investment in digital platforms supporting the rollout of enhanced payment capabilities and digital Wealth Management solutions

• Returned Korea to profitability through focused client acquisition, cost efficiencies and an improved risk profile

• Strengthened China desks across the network to better position the Group to capture growth in cross-border trade and investment

• Maintained leadership in renminbi services. We became the first commercial issuer of Special Drawing Rights bonds in China and are well positioned to benefit from One Belt, One Road initiatives

Financial performance summary

Statutory profit before taxation of $1,456 million in 2016 compared with a profit of $1,220 million in 2015.

Greater China & North Asia recorded underlying profit before taxation of $1,340 million in 2016 compared to a profit of $1,523 million in 2015 owing to lower income, which more than offset lower expenses and improved loan impairment.

Underlying profit before taxation rose 27 per cent to $108 million in China, but fell 14 per cent in Hong Kong to $1,111 million and 59 per cent to $69 million in Taiwan. Korea reported underlying profit before taxation of $35 million in 2016 compared with a loss of $17 million in 2015.

The difference between underlying and statutory profit before taxation is explained by restructuring charges of $137 million in 2016 and $520 million in 2015 as well as business disposal gains of $253 million in 2016 and $217 million in 2015. Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Income from the region fell 15 per cent year-on-year to $5,190 million and was impacted by a slowdown in China as well as actions taken in 2015 to improve the risk profile of the region. Income momentum improved in the second half across all markets and client segments, with a 3 per cent increase half-on-half.

Income in Hong Kong fell 9 per cent year-on-year to $3,138 million owing to lower income from Foreign Exchange, Trade Finance and Lending. This impacted Corporate & Institutional Banking and Commercial Banking, which saw income fall 14 per cent and 29 per cent, respectively. Retail Banking income fell 1 per cent owing to business exits. Excluding business exits, Retail Banking income rose 5 per cent year-on-year benefiting from improved margins and volumes in Deposits. Wealth Management income fell compared to 2015, but momentum improved during the year, with second half income up 10 per cent compared with the first half.

In Korea, income fell 23 per cent year-on-year to $881 million. Retail Banking income fell 23 per cent impacted by business exits and a property disposal gain recorded in 2015. Excluding these, income fell 12 per cent due to actions taken to improve the risk profile of our unsecured lending portfolio and from Deposit margin compression from central bank rate cuts. Income from Corporate & Institutional Banking fell 18 per cent, impacted by lower Rates income while Commercial Banking income fell 21 per cent due to lower loans and advances and margin compression.

Income in China declined 22 per cent year-on-year to $696 million, or 16 per cent on a constant currency basis, driven by policy measures impacting margins and actions taken to improve our risk profile. Slower economic and trade activities also impacted business volume. We successfully on-boarded strategic clients from growth industries as China continues to be a key origination market for network income.

Income in Taiwan declined 20 per cent year-on-year to $407 million, impacted by weaker Financial Markets across Corporate & Institutional Banking and Commercial Banking.

33

Standard Chartered Bank Strategic Report

Retail Banking income was affected by a slowdown in the property market and by weak investor sentiment which impacted Wealth Management in the first half of the year.

Expenses

Expenses were well controlled across the region and declined 6 per cent year-on-year to $3,546 million, or 4 per cent on a constant currency basis. Cost efficiency initiatives focused on premises and branch rationalisation and staff headcount reduction particularly around removing role duplications, which created capacity for increased investments in our strategic objectives.

our risk profile. Non-performing loan levels improved across our largest markets. Impairments in Commercial Banking and Retail Banking were lower, however Corporate & Institutional Banking impairments rose driven by a small number of exposures.

Balance sheet

Loans and advances to customers rose 4 per cent year-onyear, mainly due to growth in reverse repos and improved momentum in Corporate Finance in Hong Kong.

Customer accounts rose 4 per cent driven by Retail Banking.

Impairment

Loan impairment decreased 55 per cent year-on-year to $424 million reflecting good progress in the strengthening of

		Better /
		2016 2015 (worse)
Underlying performance		$million $million %
Operating income		5,190 6,077 (15)
Operating expenses		(3,546) (3,763) 6
Impairment losses on loans and advances and other credit risk provisions		(424) (935) 55
Other impairment		(47) (28) (68)
Profitfromassociates and jointventures		167 172 (3)
Underlying profitbeforetaxation		1,340 1,523 (12)
Statutory profitbeforetaxation		1,456 1,220 19
Loans and advances to customers		110,533 106,161 4
Customer accounts		169,957 163,519 4

34

Standard Chartered Bank Strategic Report

ASEAN & South Asia

PERFORMANCE HIGHLIGHTS

• The region returned to profit as we controlled expenses and the improved risk profile resulted in lower loan impairments

• Income declined year-on-year driven by weaker market conditions, local currency depreciation and actions we took to reposition our business

• Cost efficiencies enabled increased investment in the second half

Region overview

Our ASEAN & South Asia business is well balanced with strong representation from all four of the Group’s client segments. We are the only bank with a presence in all 10 ASEAN countries and have meaningful operations in all key South Asian markets. With a deep-rooted presence for more than 150 years, our two largest markets are Singapore and India.

Strategic objectives

Our aim is to be the international banking partner of choice for our clients in the region. We will deliver this through a comprehensive client offering in larger markets and a more targeted proposition in smaller, high-growth markets.

Our priorities for the region are:

• Profitably build Retail Banking segments in key markets – Singapore, India, Malaysia, Bangladesh and Vietnam – through significant investment in client-facing and operationally efficient technology

• Reshape Corporate & Institutional Banking for better returns by leveraging flow and network opportunities within the Group’s tightened risk appetite

• Focus on safe, differentiated growth in Commercial Banking. This will include banking the supply chains of our International Corporate clients, leveraging our international product set and helping our clients grow across our markets

• Grow Private Banking and Financial Markets by leveraging Singapore as a Wealth Management and regional hub

• Reshape or selectively exit businesses with a sub-scale or unprofitable position, while continuing to focus on cost and balance sheet efficiency to improve returns

• Improve portfolio quality by applying more rigorous risk standards

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Good progress in securing the foundations of the business through the rigorous application of our tightened risk appetite

• Improved processes and efficiency and created capacity to invest in our competitive strengths

• Announced the exit of Retail Banking in the Philippines and Thailand

• Added over 1,000 frontline full-time Retail Banking employees in India, Singapore and Bangladesh

• Improved our end-to-end digital sales processes resulting in a significant increase in online card acquisition in countries such as Singapore

• Our focus on banking the ecosystem of our International Corporate clients led to strong momentum in attracting new-to-bank Commercial Banking clients in India, Singapore, Malaysia and Indonesia

Financial performance summary

Statutory profit before taxation in 2016 of $186 million in 2016 compared with a statutory loss of $905 million 2015.

ASEAN & South Asia recorded underlying profit before taxation of $629 million in 2016 compared to a loss of $358 million in 2015 due to lower loan impairment and improved expense efficiency, partly offset by a loss from associates and joint ventures.

Underlying profit before taxation rose 14 per cent to $416 million in Singapore. India recorded an underlying loss before taxation of $24 million in 2016 compared with a loss of $551 million in 2015.

The difference between underlying and statutory profit before taxation is explained by restructuring charges of $443 million in 2016 and $547 million in 2015. Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Income in the region fell 5 per cent year-on-year to $4,052 million reflecting weaker market conditions, lower central bank rates in some of our markets, actions taken to reposition our business and local currency depreciation. Income declined 3 per cent in the second half of the year.

Income in Singapore declined 6 per cent year-on-year to $1,489 million in 2016 reflecting margin compression and lower Financial Markets activity in Corporate & Institutional Banking, and weaker demand for Wealth Management products. This was partially offset by higher Deposit income in Retail Banking which benefited from new product offerings such as the re-launch of our Bonus$aver account and improved margins. Income also benefited from credit and funding valuation adjustment gains in Financial Markets. Market-wide levels of trade activity remained weak in the period although we have regained some momentum with Trade Finance balances up during the second half of the year.

Income in India fell 4 per cent year-on-year to $960 million in 2016 driven by local currency depreciation and margin compression from central bank interest rate cuts, which particularly impacted income from Deposits and Cash Management. In addition, Lending and Trade Finance income was impacted by actions we took to improve our risk profile.

Income in Malaysia fell 12 per cent year-on-year to $451 million in 2016 driven by local currency depreciation and actions taken to improve the risk profile of our unsecured lending portfolio in Retail Banking. Reduced volumes impacted Financial Markets income, while margin pressure impacted Trade Finance.

Income in Indonesia rose 38 per cent to $310 million as the prior year mark-to-market losses on syndicated loans were not repeated. Excluding this, income fell 8 per cent due to actions taken to improve the risk profile of our unsecured lending portfolio in Retail Banking.

35

Standard Chartered Bank Strategic Report

Expenses

Expenses for the region declined 4 per cent year-on-year to $2,518 million with the impact of cost efficiencies enabling increased investment in the second half, in particular to build infrastructure and frontline capacity in Retail Banking.

Impairment

Loan impairment decreased 61 per cent year-on-year to $762 million. 2015 included $982 million of impairment relating to exposures transferred to the liquidation portfolio that was incurred prior to transfer. Excluding this, loan impairment fell 21 per cent due to actions we took to improve our risk profile in Commercial Banking and Retail Banking. This was partly offset by increased impairment in Corporate &

Institutional Banking driven by a small number of exposures in the commodity sector in India.

Associates and joint ventures

Profit from associates and joint ventures was impacted by losses in Permata due to elevated impairments.

Balance sheet

Loans and advances to customers fell by 15 per cent compared with 2015 due to business exits, challenging market conditions and more selective asset origination.

Customer accounts fell by 3 per cent due to balance sheet optimisation actions.

	Better /
	2016 2015 (worse)
Underlying performance	$million $million %
Operating income	4,052 4,253 (5)
Operating expenses	(2,518) (2,621) 4
Impairment losses on loans and advances and other credit risk provisions	(762) (1,942) 61
Other impairment	3 (63) 105
(Loss)/profitfromassociates and jointventures	(146) 15 nm1
Underlying profit/(loss) before taxation	629 (358) nm1
Statutory profit/(loss) beforetaxation	186 (905) nm1
Loans and advances to customers	73,161 86,343 (15)
Customer accounts	88,141 90,731 (3)
1. Not meaningful

36

Standard Chartered Bank Strategic Report

Africa & Middle East

PERFORMANCE HIGHLIGHTS

• Underlying profit improved due to lower impairments and expense efficiencies, offsetting lower income

• Our diversification within the region limited the income decline despite significant strategic actions in the UAE and local currency depreciation in Africa

• Good progress on improving conduct and controls, as well as investment priorities including the digitisation of Retail Banking in Africa

Region overview

We have a deep-rooted heritage of over 150 years in the region and are present in 25 markets, of which the most sizeable are the UAE, Nigeria, Pakistan and Kenya. We are the largest international bank by number of markets with a presence in Sub-Saharan Africa and one of only few banks with a strong network across Africa, Asia and the Middle East. This, coupled with our presence in origination centres in Europe & Americas, enables us to connect clients to opportunities in some of the world’s most exciting growth markets.

Strategic objectives

We have made a conscious decision to invest through the cycle in Sub-Saharan Africa, while continuing to consolidate and build on our differentiated position across the rest of the region. Recognising near-term challenges, the Group has taken early actions to secure and invest in a platform suitable for sustainable, profitable growth, which we will leverage to capture opportunities in the medium term.

Our priorities for the region are:

• Protect and grow Retail Banking in core markets, supported by the roll-out of digital capability for our clients

• Became a market leader in providing best-in-class structuring and financing solutions to our Corporate & Institutional Banking clients

• Rebuild Commercial Banking, targeting a low-cost, lowrisk, supply chain-driven model with tightened underwriting standards and a focus on specific trade corridors

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

• Invested in the digitisation of Retail Banking in Africa, including upgrading our mobile and internet banking platform in eight markets and launching Retail Workbench in Kenya and Nigeria

• Improved conduct and controls capabilities through increased system automation, hubbing and increased investment in our staff

• Improved our Corporate & Institutional Banking management structure and client coverage model to enhance our offering to clients

• Deepened our relationships with Corporate & Institutional Banking clients reflected by winning more employee banking and multi-country cash management mandates, and by leading several landmark transactions

Financial performance summary

Statutory profit before taxation of $349 million in 2016 compared with a profit of $77 million in 2015.

Africa & Middle East recorded underlying profit before taxation of $431 million in 2016 compared to $188 million in 2015 due to lower impairments and reduced expenses. The UAE reported an underlying loss before taxation of $31 million in 2016 compared with a loss of $91 million in 2015.

The difference between underlying and statutory profit before taxation is primarily explained by restructuring charges of $82 million in 2016 and $112 million in 2015. Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Income from the region fell 4 per cent year-on-year to $2,742 million reflecting local currency depreciation in Africa, actions taken to improve our risk profile, lower commodity prices and a slowdown in corporate activity in the Middle East. On a constant currency basis, income rose 2 per cent year-onyear.

Income from the UAE declined 6 per cent year-on-year to $754 million impacted by actions taken to improve our risk profile, including the exit of our SME business in Retail Banking and Commercial Banking, and from weak market conditions. Income in the second half of the year was 12 per cent lower compared with the first half due to lower client activity in Corporate Finance and Foreign Exchange.

Income from Africa was flat year-on-year at $1,429 million impacted by local currency depreciation, particularly in Nigeria. On a constant currency basis, income from Africa rose 12 per cent year-on-year. Despite the adverse impact of local currency depreciation, income from Kenya increased with growth across all Retail Banking products, in particular Deposits, as well as higher Corporate & Institutional Banking income due to increased activity in Corporate Finance. Income from Africa increased 2 per cent in the second half of the year compared to the first half, driven by higher Foreign Exchange and Rates income and from improved yield on our Asset and Liability Management portfolio.

Expenses

Expenses fell 3 per cent year-on-year to $1,730 million, but rose 3 per cent on a constant currency basis with cost savings from headcount reductions and improved efficiency more than offset by increased investment in areas such as the digitisation of our Retail Banking business and conduct and controls.

Impairment

Loan impairment was down 33 per cent year-on-year to $563 million. 2015 included $230 million of impairment relating to exposures transferred to the liquidation portfolio that was incurred prior to transfer. Excluding this, loan impairment fell 8 per cent reflecting actions taken as a result of tightened risk appetite levels in our Commercial Banking portfolio. Levels of loan impairment in both Commercial Banking and Corporate & Institutional Banking, however, remained elevated due to challenging market conditions.

• Rolled out new underwriting standards in Commercial Banking, exited low-returning clients and developed our relationship managers

37

Standard Chartered Bank Strategic Report

Balance sheet

Loans and advances to customers declined 9 per cent yearon-year driven by local currency depreciation, actions taken to improve our risk profile and selective origination efforts in Corporate & Institutional Banking.

Customer accounts fell 9 per cent year-on-year driven by a reduction in corporate term deposits as we took steps to improve our liability funding mix.

on-year driven by local currency depreciation, actions taken to improve our risk profile and selective origination efforts in Corporate & Institutional Banking.
				Better /
		2016	2015	(worse)
Underlying performance		$million	$million	%
Operating income		2,742	2,858	(4)
Operating expenses		(1,730)	(1,790)	3
Impairment losses on loans and advances and other credit risk provisions		(563)	(844)	33
Other impairment		(18)	(36)	50
Underlying profitbeforetaxation		431	188	nm1
Statutory profitbeforetaxation		349	77	nm1
Loans and advances to customers		28,140	31,070	(9)
Customer accounts		29,931	33,013	(9)

1. Not meaningful

38

Standard Chartered Bank Strategic Report

Europe & Americas

PERFORMANCE HIGHLIGHTS

• Income fell as a result of the transfer of loans to the liquidation portfolio

• Expenses benefited from cost efficiency initiatives and some reductions in regulatory remediation costs

• Loan impairment remains elevated following additional individual and portfolio impairments

Region overview

With hubs in London and New York as well as a presence in several European and Latin American markets, we are the Group’s largest origination centre. Our clients generate over one-third of Corporate & Institutional Banking income globally, the majority of which is booked outside the region in Asia, Africa and the Middle East. We provide our clients with rich network capabilities, comprehensive offerings in key product areas including transaction banking, corporate finance and financial markets, and deep industry expertise. We also have a profitable Private Banking business in London and Jersey.

• Made good progress on the financial crime remediation programme including introducing state-of-the-art surveillance technology and launching the second phase of our internal awareness campaign

Financial performance summary

Statutory loss before taxation of $261 million in 2016 compared with a loss of $200 million in 2015.

Europe & Americas recorded an underlying loss before taxation of $148 million in 2016 compared to a profit of $316 million in 2015 due to higher loan impairment provisions and lower income.

The UK reported an underlying loss before taxation of $115 million in 2016 compared with a profit of $157 million in 2015. The US reported an underlying loss before taxation of $76 million in 2016 compared with a profit of $17 million in 2015.

The difference between underlying and statutory profit before taxation is explained by restructuring charges of $113 million in 2016 and $516 million in 2015. Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Strategic objectives

The Europe & Americas region will play a vital role in delivering the Group’s strategic priorities by delivering client growth, optimising returns, and through continued focus on risk and compliance management.

Our priorities for the region are:

• Serve our Corporate & Institutional Banking clients better in our emerging markets by embedding our ‘one team’ client approach

• Attract new International Corporate clients, deepen relationships with existing clients by banking them across the network, and expand the depth and breadth of our coverage of Financial Institutions clients

• Enhance capital efficiency, maintain strong risk oversight and further improve the quality of our funding base

• Grow our Private Banking franchise and assets under management in London and Jersey

• Deliver our conduct and financial crime risk programmes

Progress against strategic objectives

Our focus in 2016 was on building the foundations for growth:

• Strengthened our core bank positioning with Corporate & Institutional Banking clients by restructuring our client coverage model and improving processes which has enabled better cross-sell and the onboarding of new clients

• Continued to demonstrate renminbi expertise, acting as an advisor on the first ever Panda bond by a French issuer, and the second ever Panda bond issued by a European corporate

• Strengthened control environment and risk profile through active risk management and reduced exposure to sectors we consider higher risk in a challenging environment

Income in the region fell 11 per cent year-on-year to $1,664 million as a result of actions taken to improve our risk profile, lower client activity, loss of income from the transfer of loans to the liquidation portfolio and lower Asset and Liability Management income due to the role the region plays in managing the Group’s liquidity requirements. This was partially offset by credit and funding valuation adjustment gains in Financial Markets.

Income in the UK declined 11 per cent year-on-year to $791 million due to the loss of income on loans transferred to the liquidation portfolio. Income was also impacted by lower Asset and Liability Management income, while Trade Finance and Lending income declined due to weaker market conditions and actions taken to improve our risk profile. This was partially offset by credit and funding valuation adjustment gains and increased client activity in Foreign Exchange and Credit.

Income in the US fell 17 per cent year-on-year to $661 million due to decreased client hedging activity in Rates, a decline in Trade Finance and Lending income due to actions taken to improve our risk profile and from lower Asset and Liability Management income. This was partially offset by increased income from Cash Management and Corporate Finance.

Expenses

Expenses fell 6 per cent year-on-year to $1,302 million due to reduced regulatory remediation costs, efficiency savings and local currency depreciation.

Impairment

Loan impairment increased to $511 million from $192 million in 2015, driven by a small number of exposures in the diamond and jewellery sector and increased portfolio impairments in Corporate & Institutional Banking.

• Increased investment in our Private Banking business, adding over 150 new clients in 2016

39

Standard Chartered Bank Strategic Report

Balance sheet

Loans and advances to customers increased by 17 per cent compared with 2015 driven by reverse repos backed by high quality collateral as we expanded this business in response to client demand. Excluding the growth in this business, loans and advances to customers declined due to actions taken to

improve the risk profile of our business and from the exit of exposures from the liquidation portfolio.

Customer accounts increased 26 per cent compared with 2015 due to growth in Financial Market repos and corporate term deposits, improving the quality of our funding base.

		Better /
		2016 2015 (worse)
Underlying performance		$million $million %
Operating income		1,664 1,877 (11)
Operating expenses		(1,302) (1,387) 6
Impairment losses on loans and advances and other credit risk provisions		(511) (192) nm1
Other impairment		1 18 94
Underlying (loss) /profitbeforetaxation		(148) 316 nm1
Statutoryloss beforetaxation		(261) (200) (31)
Loans and advances to customers		44,053 37,701 17
Customer accounts		90,273 71,864 26
1. Not meaningful

40

Standard Chartered Bank Strategic Report

Central & other items

Region overview

Items included in Central & other items form client segments and regions analysis differ, depending on whether they are managed directly by client segments, regions or centrally.

Central & other items in the regional analysis includes corporate centre costs, treasury activities, certain strategic investments and the UK bank levy. Central & other items for regions also includes globally run businesses and activities that are managed by the client segments but not by regional management. These include private equity investments within our Principal Finance business and Portfolio Management.

Financial performance summary

On a statutory basis, we recorded a loss of $1,127 million in 2016 compared with a loss of $1,599 million in 2015. Underlying loss before taxation of $965 million in 2016 compared with $719 million in 2015 driven by a decline in income and an increase in impairment.

The difference between underlying and statutory profit before taxation is primarily explained by the following items:

• Restructuring charges of $80 million in 2016 compared with $150 million in 2015

• Loss on valuation methodology changes of nil in 2016 and $863 million in 2015 in relation to one-off changes to align with market practice

• An own credit adjustment gain of $495 million reported in the income statement in 2015. In 2016 an own credit adjustment loss of $372 million was reported within equity.

For further details on this change in treatment please refer to note 1.

• Goodwill impairment of $166 million in 2016 and $362 million in 2015. The 2016 impairment relates to our business in Thailand while the 2015 impairment related to our business in Taiwan

• Gains arising on repurchase of subordinated liabilities of $84 million in 2016 compared with nil in 2015, as wider credit spreads enabled the Group to buy back Standard Chartered’s issued debt from the market at a discount

Commentary hereafter is on an underlying basis unless otherwise stated.

Income

Income declined 64 per cent year-on-year due to fair valuations of private equity investments and lower realised gains on exits. This was partly offset by the non-repeat of a foreign exchangerelated loss on the prior year rights issue.

Expenses

Operating expenses decreased 11 per cent with lower UK bank levy and a reduction in costs relating to structural cost hedges partly offset by the non-recurrence of a one-off credit booked in 2015.

The UK bank levy declined to $383 million in 2016 compared to $440 million in 2015 predominantly as a result of reduced rates and an increase in assets qualifying for relief.

Impairment

Other impairment increased 151 per cent year-on-year due to valuation impairment of private equity investments following changes in the trading outlook for the companies we invested in.

in.
			Better /
	2016	2015	(worse)
Underlying performance	$million	$million	%
Operating income	110	304	(64)
Operating expenses	(759)	(854)	11
Impairment losses on loans and advances and other credit risk provisions	(122)	(95)	(28)
Other impairment	(198)	(79)	(151)
Profit from associates and joint ventures	4	5	(20)
Underlying loss before taxation	(965)	(719)	(34)
Restructuring	(80)	(150)	47
Valuation methodology changes	-	(863)	nm1
Own credit adjustment	-	495	nm1
Goodwill impairment	(166)	(362)	54
Gains arising on repurchase ofsubordinatedliabilities	84	-	nm1
Statutoryloss beforetaxation	(1,127)	(1,599)	(30)

1. Not meaningful

Authority

The strategic report up to page 41 has been issued by order of the Court.

==> picture [148 x 55] intentionally omitted <==

Bill Winters Director 24 February 2017 Company Reference Number: ZC18

41

Standard Chartered Bank Directors’ Report

Directors’ Report

The directors present their report and the audited financial statements of Standard Chartered Bank and its subsidiaries (the ‘Group’) and Standard Chartered Bank (the ‘Company’) for the year ended 31 December 2016.

Activities

The activities of the Group are banking and providing other financial services. The Financial Review on pages 16 to 21 contains a review of the business during 2016.

Financial instruments

Details of financial instruments are given in note 12 to the accounts.

Results and dividends

The results for the year are given in the income statement on page 133.

No Interim dividends were paid during the year (2015: $551million) to ordinary shareholders. The directors do not recommend the payment of a final dividend (2015: $nil).

Share capital

Details of the Company’s share capital are given in note 26 to the accounts.

Loan capital

Details of the loan capital are given in note 25 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.

Directors and their interests

The directors of the Company during the year were as follows:

Mr W T Winters Mrs T J Clarke Mr A N Halford Mr M Smith (appointed 1 March 2016) Mr A M G Rees (resigned 30 April 2016)

None of the directors have a beneficial or non-beneficial interest in the shares of the Company or in any of its subsidiary undertakings.

Details of directors’ pay and benefits are disclosed in note 37 to the accounts.

All of the directors as at 31 December 2016, except for Mrs Clarke and Mr Smith are directors of the Company’s ultimate holding company, Standard Chartered PLC, and their interests in the share capital of that company are shown in its report and accounts.

Directors’ Interests in Standard Chartered PLC Ordinary Shares

	At 1 January 2016	At 31 December 2016
Directors	Total interests	Total interests
T J Clarke1	178,746	194,055
M Smith2	-	39,434

1 Mrs T J Clarke’s shareholding as at 1 January 2016 has increased by 33 shares from that reported in the 2015 Directors’ Report due to an administrative error

2 Mr M Smith was appointed as a director on 1 March 2016. His interests represent his holdings on appointment and as at 31 December 2016

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Standard Chartered Bank Directors’ Report

Share Awards

Standard Chartered PLC operates a number of share based arrangements for its directors and employees. Details of these arrangements are included in note 29 to the accounts.

Scheme interests awarded in 2016

	Changes in interests during2016
	As at 1January1 Awarded Dividends awarded1 Exercised Lapsed As at 31 December4 Performance period end or first vest Last vesting date
T J Clarke LTIP 2013-15 LTIP 2014-16 LTIP 2015-17 LTIP 2016-18 Deferred shares 2012 Deferred shares 2013 Deferred shares 2014 5 year underpin shares 2015-17 3 year underpin shares 2015-17	84,300 – – – 84,300 – 31-Dec-15 – 96,764 – – – – 96,764 31-Dec-16 13-Mar-17 21,603 – – – – 21,603 31-Dec-17 13-Mar-20 - 410,637 – – – 410,637 31-Dec-18 11-Mar-21 8,280 – 806 9,0862 – – 11-Mar-16 11-Mar-16 9,441 – 566 10,0073 – – 13-Mar-16 13-Mar-16 9,451 – – – – 9,451 13-Mar-17 13-Mar-17 9,792 – 103 9,8953 – – 19-Mar-16 19-Mar-16 9,792 – – – – 9,792 19-Mar-17 19-Mar-17 9,796 – – – – 9,796 19-Mar-18 19-Mar-18 10,801 – – – – 10,801 31-Dec-17 19-Mar-20 10,801 – – – – 10,801 31-Dec-17 19-Mar-18
M Smith Restricted shares (buy-out) LTIP 2016-18 Deferred shares 2015	– 22,554 – – – 22,554 11-Mar-17 11-Mar-17 – 22,554 – – – 22,554 11-Mar-18 11-Mar-18 – 22,554 – – – 22,554 11-Mar-19 11-Mar-19 – 22,554 – – – 22,554 11-Mar-20 11-Mar-20 – 76,476 – – – 76,476 31-Dec-18 11-Mar-21 – 8,921 – – – 8,921 11-Mar-17 11-Mar-17 – 8,921 – – – 8,921 11-Mar-18 11-Mar-18 – 8,924 – – – 8,924 11-Mar-19 11-Mar-19

Note

1. Dividend equivalents are awarded at vesting (previously accrued dividends also shown) 2. Exercises on 11 March 2016 on which date the share price was £4.464

2. Exercises on 21 March 2016 on which date the share price was £4.885

3. All figures are as at 31 December 2016. There were no changes to any directors’ scheme interests in ordinary shares between 31 December 2016 and 23 February 2017

Unvested share awards

Directors	Subject to deferral but not	Subject to performance conditions1
	performance conditions1
TJ Clarke	29,039	550,606
M Smith	116,982	76,476
		76,476

• 1 The details of the share award schemes are included in note 29

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Standard Chartered Bank Directors’ Report

Going concern

Having made appropriate enquiries, the Court is satisfied that the Company and the Group as a whole have adequate resources to continue operational businesses for a period of at least 12 months from the date of this report and therefore continue to adopt the going concern basis in preparing the financial statements.

Significant contracts

The Company is not party to any significant agreements that would take effect, alter or terminate following a change of control of the Company. The Company does not have agreements with any director or employee that would provide compensation for loss of office or employment resulting from a takeover, except that provisions of the Company’s share schemes and plans may cause options and awards granted to employees under such schemes and plans to vest on a takeover.

Areas of operation

The Company operates through branches and subsidiaries in 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 34 to the financial statements

Employee policies and engagement

Standard Chartered takes communications very seriously and works hard to ensure that employees are kept informed about matters affecting or of interest to them, but more importantly to provide opportunities for feedback and dialogue. The Group has a clear set of communications mechanisms that are used to inform employees of key business activity at a global, regional, business and function level. A recent review of internal communications was undertaken to establish the effectiveness of the Group’s communications mechanisms, staff’s preferred channels for obtaining information and providing feedback and to ensure that staff are getting the information they want and need. The review captured qualitative and quantitative feedback from staff and highlighted where communications are effective and where improvements need to be made. These insights have proved invaluable in how we evolve our communications approach.

- The primary channel for communicating with our employees is the Bridge - the Group’s new social business collaboration platform. The Bridge not only provides global, local, business and function communications but it allows employees to collaborate, exchange ideas, feedback, comment, innovate, communicate, and find experts all through one space, wherever they are located.

- The Bridge is supported by Group, local and business newsletters, targeted audio calls - for business area or management level videos, success story bulletins, town halls and engagement events including brown bag lunches, leadership events, regional meetings, and focus groups. Business or time-critical information is sent directly to employee inboxes through a measurable email marketing platform.

The Group’s leadership team and line managers also have a critical role to play in communicating to our employees ensuring that they are kept up to date on key business information, the Group’s performance and strategy, their role in executing the strategy and ensuring that they consult and listen to staff views, feedback and concerns. Across the organisation team meetings with line managers, one-to-one discussions, and management meetings enable employees to discuss and clarify anything they have heard or read and address any questions they may have. The individual performance reviews also provide the opportunity to discuss how the employee, the team and the business area contributed to the overall performance of the Group and how any compensation awards relate to this.

This mix of channels ensures that all staff receive relevant information promptly regardless of how they prefer to be communicated with and regardless of where they sit in the organisation.

We continue to communicate with employees who have left the Group via our Alumni network and all employees, past, present and future are able to follow the Group’s progress through social networks including the Group’s LinkedIn network, Facebook page and Twitter stream.

As well as capturing staff feedback and views through team meetings, two-way communications and day-to-day dialogue, our employee engagement survey has been an important way for us to gather feedback on how employees feel about the organisation, how it is working, where our areas of strength are, and how we can further improve. The My Voice survey was launched in 2014 and was last carried out in May 2016. My Voice measures engagement across the Group on a variety of business factors such as leadership, strategy and conduct. In 2016 approximately 70,000 staff completed the survey and gave their views. The insight gained has been used to inform action plans intended to resolve highlighted issues.

In addition, targeted local surveys and focus groups seek views on particular topics or from particular groups of employees. Less formal measures of sentiment and engagement include quick polls and conversation on the Bridge.

Combined with over 40 employee networks across 18 countries and numerous champion groups, these insights are invaluable in shaping our thinking and future planning.

The Group Equal Opportunities, Diversity, Inclusion and Dignity at Work Policy, reinforcing the Group’s commitment to providing equality of opportunity and fair treatment in employment, is regularly reviewed (last revised in 2015). It does not accept unlawful discrimination in its recruitment and employment policies, terms, procedures, processes and decisions on the grounds of: race; colour; nationality; national or ethnic origins; gender; parental status; marital or civil partner status; sexual orientation; gender identity, expression or reassignment; HIV or AIDS status; employment status; flexibility of working arrangements; disability; age; religion; or belief. The Group appoints trains, develops, rewards and promotes employees on the basis of their merit and ability. If employees become disabled, every endeavour is made to ensure their employment continues, with appropriate training and workplace adjustments where necessary. In 2016, the Group also launched a Global Guideline and Process for Workplace Adjustment that covers guidelines and processes for employees with disabilities.

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Standard Chartered Bank Directors’ Report

Action may be taken to address disadvantage or under representation among specific groups, with the aim of ensuring that employment decisions are free from bias.

The Group does not tolerate any bullying or harassment of, discrimination against, or victimisation of staff, clients or visitors of the Group, whether verbal, written, physical or psychological. All staff has a duty to treat all those with whom they come into contact through work with dignity and respect at all times. This is also enshrined in our Group Code of Conduct, which states that colleagues must be treated fairly and with respect, and that all employees are entitled to a safe working environment that is inclusive and free from discrimination, bullying and harassment.

Equally, in our recognition and interactions with various employee representative bodies (unions, works councils) globally, we are heavily influenced by the 1948 United Nations Universal Declaration of Human Rights (UDHR), several ILO conventions including the Right to Organise and Collective Bargaining Convention, 1949 (No. 98) and the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87) as well as local country labour laws and acts that protect employees’ rights to organise.

Qualifying Third Party Indemnities

The Company has granted indemnities to all of its directors on terms consistent with the applicable statutory provisions. Qualifying third-party indemnity provisions for the purposes of section 234 of the Companies Act 2006 were accordingly in force during the course of the financial year ended 31 December 2016, and remain in force at the date of this report.

Group Code of Conduct

The Court has adopted a refreshed Group Code of Conduct (the Code) relating to the lawful and ethical conduct of business and this is supported by the Group’s core values.

It has been communicated to all directors and employees, all of whom are expected to observe high standards of integrity and fair dealing in relation to customers, staff and regulators in the communities in which the Group operates.

Directors and employees are asked to recommit to the Code annually, and this was done during September 2016.

Environmental and social risk management

Environmental risk is the potential for material harm or degradation to the natural environment, while social risk is the potential to cause material harm to individuals or communities. Environmental and social risks associated with clients are a key area of risk for the Group and we have continued to develop and enhance our approach to managing such risks since 1997.

The Court receives regular information to identify and assess significant risks and opportunities arising from environmental and social matters. These issues are overseen by the Brand, Values and Conduct Committee. The Committee reviews sustainability priorities, and oversees the development of, and delivery against, public commitments regarding the activities and/or businesses that the Group will or will not accept in alignment with our Here for good brand promise.

We take our position statement commitments seriously. To ensure we deliver our commitments, we embed these requirements through our core banking processes. We have mechanisms in our origination and credit processes to identify and assess environmental and social risks in accordance with our standards. We have a dedicated Environmental and Social Risk Management (ESRM) team that reviews clients and proposed transactions that present specific risks.

The Group recognises that stakeholder expectations of our environmental and social risk management will change over time. As such we seek to explain our approach and standards via our position statements, and to ensure they remain appropriate through active monitoring. In 2016 we have updated our Climate Change and Energy Position Statements to reflect changing expectations on our role in energy financing and in managing climate risk. We also created a Human Rights Position Statement, consolidating our previous policies and disclosures. In 2016, our ESRM team reviewed over 320 client relationships and transactions across a range of Position Statement sectors. We believe in working collaboratively to achieve sustainability goals. This includes working with clients, other financial institutions and industry bodies to promote develop and encourage leading E&S standards. For all risks identified, we seek to develop effective mitigating measures. Where this is not possible, transactions have been and will continue to be turned down. In 2016, we trained more than 110 staff on our requirements and processes.

The Group reports on its environmental and social performance through the Group’s Annual Report and Accounts and through the sustainability section of the Group’s website.

Environmental impact of our operations

We aim to minimise the environmental impact of our operations as part of our commitment to being a responsible company. We report on energy, water, paper and waste data that are the basis of our Greenhouse Gas (GHG) emissions management as well as the targets we have set to reduce energy, water and paper use.

How we serve society

We collaborate with our clients and partners to promote social and economic development by financing key sectors of the economy that drive sustainable growth, minimising the impact of our lending and operations on the environment and investing in our communities.

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Standard Chartered Bank Directors’ Report

In 2016, we agreed 11 Sustainability Aspirations which demonstrate how the financing that we provide contributes to sustainable development. We will embed these Aspirations in 2017. The Aspirations are supported by our targets to reduce the environmental impact of our operations and to support local community programmes, including:

• Seeing is Believing (SiB), to eliminate avoidable blindness

• Goal, to empower girls and young women through sports and life skills training

• Financial education, to build the capability of youth and entrepreneurs

How we engage with society

From 2008 to 2016, we reduced our energy consumption by 37 per cent, water consumption by 35 per cent and paper use by 71 per cent. In 2016, we invested $52.3 million in community programmes, and employees contributed to 67,611 volunteering days. Through fundraising and matching from the Group, we raised $6.5 million for SiB in 2016. Our fundraising from 2003 to 2016 is $92.8 million, impacting 133.8 million people. We celebrated the 10th anniversary of Goal in 2016 and reached nearly 69,000 girls, bringing the total since 2006 to 285,000 girls in 2016. Through our Financial Education programmes, we trained more than 106,000 young people and 1,020 entrepreneurs, including 57 per cent women, in 2016.

Auditor

KPMG LLP have agreed to continue as the Company’s auditor and a resolution for its re-appointment will be proposed at this year’s annual general meeting.

The directors have taken all necessary steps to make themselves and KPMG LLP aware of any information needed in performing the audit of the 2016 Annual Report and Accounts and as far as each of the directors is aware, there is no relevant audit information of which KPMG LLP is unaware.

By order of the Court

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Bill Winters Director 24 February 2017 Company Reference Number: ZC18

46

Standard Chartered Bank Statement of directors’ responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. Under that law they are required to prepare the group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU;

• and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the parent company will continue in business

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility 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 irregularities.

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, and Corporate Governance Statement that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the annual financial report

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, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

• the strategic report/directors' report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Court

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Andy Halford Director 24 February 2017

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Standard Chartered Bank Principal uncertainties

The following parts of the Risk review and Capital review form part of the financial statements and are audited:

From the start of the Risk management approach on page 52 to the end of ‘Liquidity risk – stress testing’ on page 61, excluding Country cross-border risk on page 104

• From the start of the Risk profile section on page 65 to the end of ‘Top risks and emerging risks’ in the same section on page 129, excluding:

• Our risk profile in 2016, page 65

• Selected portfolios, page 100

• Asset backed securities, page 103

• Country cross-border risk, page 104

• Market risk changes – risks not in VaR, page 108

• Market risk changes – backtesting, page 108

• Mapping of market risk items to the balance sheet, page 109

• Stressed coverage, page 111

• Liquidity coverage ratio (LCR), page 111

• Net stable funding ratio (NSFR), page 111

• Liquidity pool, page 112

• Encumbered assets, page 115

• Readily available for encumbrance, page 115

• Operational risk, page 128

• Capital Requirements Directive (CRD) IV Capital base, excluding the capital ratios and risk-weighted assets (RWA) amounts, on page 131

The Risk review is divided into the following sections:

Principal uncertainties on page 48 to 51 sets out the key external factors that could impact the Group in the coming year.

Risk management approach on page 52 to 64 details how we control and govern risk.

Risk profile on page 65 to 129 provides an analysis of our risk exposures across all major risk types.

Principal uncertainties

The key uncertainties and material risks we face in the current year are set out below. This should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties that we may experience.

Deteriorating macroeconomic conditions

Deteriorating macroeconomic conditions such as the continuing slow growth in the eurozone, moderation of growth in China and asset price correction, influence personal expenditure and consumption patterns; demand for business products and services; the debt service burden of consumers and businesses; the general availability of credit for retail and corporate borrowers; and the availability of capital and liquidity for our business.

Global economic growth remains subdued, although the outlook for economic growth differs across each of our markets. Weak investment spending and low productivity growth remain key concerns for the developed world. The uncertainty related to recent geopolitical developments could exacerbate these weaknesses. Asia remains the main driver of global growth supported by internal growth drivers, led by China. A mini-credit boom in early 2016 helped steady China’s growth outlook, however, this will continue to fuel concerns about the size of its debt and the pace of transition to more consumption-led growth. While commodity prices have recovered from the lows of early 2016, further weakness in commodity prices could have a continued negative effect on the economic performance of commodity dependent nations in sub-saharan Africa, Middle East and North Africa, through reduced foreign exchange earnings and government revenues.

The global economy has entered a period of monetary policy divergence, with the US Federal Reserve raising policy rates while other major central banks have adopted unorthodox monetary policy measures, including the setting of negative real benchmark interest rates and quantitative easing. This divergence is likely to result in changing asset preferences of

investors and volatility in markets. Significant increases in interest rates from the historically low levels currently prevailing in many markets, in particular the US, could have an impact on the wider economy through credit quality and asset values.

Financial markets are highly linked to macroeconomic developments. A sudden financial markets dislocation could affect our performance, directly through its impact on the valuation of assets in our available-for-sale and trading portfolios or indirectly through the availability of capital or liquidity. Financial markets instability may also increase the likelihood of default by our counterparties and may increase the likelihood of client disputes.

To mitigate the abovementioned risks, we have for a number of years had in place a Business Risk Horizon framework that provides a forward looking 12 to 18 month view of the economic, regions and credit conditions across the Group’s key markets enabling us to take proactive action.

We monitor economic trends in our key markets very closely and ensure that our portfolio remains well diversified across products, regions and client segments so as to provide resilience against economic shocks. We monitor our portfolio indicators regularly to ensure that we are operating within our risk appetite and we take necessary risk mitigating actions on our exposures when such a need arises.

Stress testing is also an integral part of the Group’s approach to risk management. We conduct stress tests at a Group, country, portfolio and business level to assess the effect of extreme but plausible developments in the global economy and financial markets on our performance and our ability to operate within our risk appetite. This includes assessing the management actions we can take to ensure our resilience to stress. We have a comprehensive stress testing program which is conducted throughout the year and includes the annual Bank of England stress test. The results of the stress test are considered in our assessment of risk appetite and

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Standard Chartered Bank Principal uncertainties

limit setting. The Group’s approach to stress testing is discussed in greater detail in the Risk Management Approach on page 55.

We stress test our market risk exposures to highlight the potential impact of extreme market events and to confirm that they are within authorised stress loss triggers. Our stress scenarios are regularly updated to reflect changes in risk profile and economic events. We also perform scenario analysis on our portfolios to monitor the impact from emerging trends. Where necessary, overall reductions in market risk exposures are enforced.

We continuously review the suitability of our risk policies and controls and maintain robust processes to assess the suitability and appropriateness of the products and services we provide to our clients.

Geo-political uncertainties

Geo-political uncertainty, and its impact on world trade affects trade flows, our customers’ ability to pay, and our ability to manage capital or operations across borders as our performance is in part reliant on the openness of cross-border trade and capital flows. Political developments and policy decisions will continue to influence global macroeconomic conditions.

In Europe, the outcome of the UK referendum to leave the European Union (Brexit) as well as upcoming elections in key European Union member states in 2017 could have implications on economic conditions globally as a result of changes in policy direction which may in turn influence the economic outlook for the Eurozone and its key trading partners. The election cycle in Europe could bring market volatility while the uncertainties linked to the Brexit negotiation process could delay some investment decisions until there is more clarity.

The result of the US Presidential elections in November 2016 led to some initial market volatility with the longer term impact unclear given uncertainty about the broader direction and impact of US foreign and domestic policy. In particular, policies questioning free trade or the traditional system of security alliances could trigger market volatility and have a direct impact on some economic activities, including global trade. The protectionist policies, if followed by the US, could disrupt established supply chains and invoke retaliatory actions from other countries. A sudden change in fiscal policy could lead to a large market repricing of financial assets, with repercussions on all dollar-linked transactions.

Financial markets are also closely linked to geo-political events and a sudden dislocation of financial markets could affect our performance. The impact from such an occurrence and the measures we take to manage the resulting market risks has been discussed in the previous section on deteriorating macroeconomic conditions.

We regularly assess the geo-political risks and forward looking impact on economic, business and credit conditions across the Group’s key markets through the Business Risk Horizon framework, enabling us to take pro-active actions where appropriate. There is regular senior level oversight, through the Group Risk Committee, of work undertaken to assess and manage geo-political risk.

We also conduct stress tests, where appropriate, with a focus on the potential impact of geo-political and physical events on relevant geographies, client segments and risk types. The Risk Committees may commission portfolio reviews and deep dives to highlight the impact of geo-political events and proactively manage the portfolio.

Impact from the UK referendum to leave the European Union (Brexit)

On 23 June 2016, the UK held a referendum and voted to leave the European Union. The precise timing and terms of the exit are unclear, as is the nature of the relationship between the UK, the European Union and other nations post exit. This has resulted in significant financial market and macroeconomic uncertainty.

The first order impact of Brexit is not material given the Group’s exposure is predominantly to economies in Asia, Africa and the Middle East.

In addition to relevant mitigants mentioned elsewhere in thissection, we continue to ensure that there is regular senior oversight of work undertaken to assess and manage Brexit risk and the practical implications, including our contingency plans.

Our continued approach is to maximise planning and preparedness while we observe further developments, including the triggering of Article 50 of the Treaty of Lisbon to formally provide notice of the UK’s intention to leave the European Union, and we are in the advanced stages of our planning for continued market access for our clients.

The full impact of Brexit will only be known over the next coupleof years as the negotiations progress with the European Union and other major trading partners. We continue to proactively assess and, where appropriate, manage the impact to the Group and our exposures to clients.

Evolving financial crime, fraud and cybercrime

The banking industry continues to be a target for financial crime, fraud and cybercrime. Operational losses may result from, for example:

• Failure to comply with legal or regulatory requirements, or to meet regulatory expectations, in relation to anti-money laundering, countering terrorist financing and sanctions compliance

• Internal and external fraud

• Cybercrime, or criminal exploitation via information systems or online channels

The Group, through its size and strategic intent, continues to be exposed to money laundering and sanctions risks. These risks are inherent in the Group’s operations and may arise from, amongst other things, the Group offering different banking products to diverse customer types delivered through multiple channels in or related to many regions; the Group’s defences being overcome by criminals; and/or regulators assessing deficiencies in the Group’s design and/or governance over controls operating across the Group’s client or counterparty due diligence and surveillance.

Economic crime arising from internal or external fraud continues to be a global problem for the financial services industry, and managing fraud risk is more complex. The Group is also exposed to economic crime arising from fraud risk for similar reasons as those listed above for money laundering and sanctions.

Cybercrime is rising and becoming more globally coordinated. The Group may incur losses due to cybercrime which includes risks relating to fraud, vandalism and damage to critical infrastructure. The Group’s business depends on the ability to process a large number of transactions efficiently and accurately, and is highly reliant on digital technologies, computer and email services, software and networks. This dependency on secure processing, storage and transmission of confidential and other information in our computer systems and networks increases our exposure risk to cybercrime.

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Standard Chartered Bank Principal uncertainties

The Group seeks to be vigilant in managing risk relating to financial crime, fraud and cybercrime. The Group has implemented policies and procedures to minimise these risks. Controls are embedded in the Group’s processes to prevent such risks or to detect them as quickly as possible. The Group performs regular reviews of our control environment, and performs benchmarking of its standards to continuously improve its controls against these risks. The Group considers these risks as scenarios in stress testing. In June 2016, the Group was formally recognised by the US Financial Crimes Enforcement Network (FinCEN) for two investigations conducted by the Group’s Financial Crime Compliance team that led to successful law enforcement action.

The Group continues to pursue its Financial Crime Risk Mitigation Programme to enhance its approach to money laundering prevention, combating terrorist financing, and compliance with sanctions as described below in the regulatory investigations and legal proceedings principal uncertainty. To improve the oversight of fraud management, a Global Fraud Risk Management Group has been formed and is overseeing the enhancement of standards to meet the Group Fraud Risk Management Policy and related Procedure. The Group has implemented a range of cybercrime defences to protect from hacking, misuse, malware, errors, social engineering and physical threats. The Group also performs external benchmarking against government and international cyber security standards and frameworks, and conducts tests of our defences against cyber and other attacks in line with regulatory frameworks. Any of the foregoing risks, or a failure by the Group to manage such risks may have a material adverse effect on the Group’s financial condition, results of operations and prospects.

Operational performance eroding external confidence in the Group

Group operational under-performance can result from differences in the Group’s earnings as compared to market expectations or competitor performance. A material underperformance may erode confidence in the Group.

The Group has a clear strategy which is consistent with the risk appetite and financial objectives for the Group. The risk appetite is set at granular levels and is approved by the Board, against which regular updates are provided. The financial objectives are reviewed periodically and the strategy is regularly reviewed and challenged by the Board for potential risks and its execution.

The Organizational structure of Country, Regional and Segment CEOs allows us to respond quickly and effectively to any areas of under-performance. The Group regularly monitors the execution of its strategic plan through the Group’s performance management process.

We update our equity and debt providers and rating agencies regularly to ensure they understand our progress against the strategy.

Exchange rate movements

Changes in exchange rates affect, among other things, the value of our assets and liabilities denominated in foreign currencies, as well as the earnings reported by our non-US dollar denominated branches and subsidiaries. Sharp currency movements can also affect trade flows, the ability of countries and clients to service debt and the wealth of clients, any of which could have an impact on our performance.

We monitor exchange rate movements closely and adjust our exposures accordingly. Under certain circumstances, we may take the decision to hedge our foreign exchange exposures in order to protect our capital ratios from the effects of changes in exchange rates. The effect of exchange rate movements on the capital adequacy ratio is partially mitigated to the extent there are proportionate movements in risk-weighted assets.

Evolving impact of regulatory compliance

Our business as an international bank will continue to comply with an evolving and complex regulatory and legislative framework in each of the jurisdictions in which we operate. The precise nature and impact of future changes in laws and regulations is not always predictable and may, at times, not be aligned with our strategic interests. These changes sometimes have broader implications on the volatility and liquidity in some of the markets in which we operate, which may in turn have an impact on the way we conduct business and manage our capital and liquidity. As a bank with a substantial footprint across emerging markets, but being headquartered in the UK, we continue to face an evolving and complex regulatory framework in each of the jurisdictions in which we operate. Despite regulatory frameworks being enhanced for much of the decade to increase confidence in the banking sector, we await final rules in many key areas of regulation that could further impact on our business model and how we manage our capital and liquidity. At the time of writing we await final proposals from the Basel Committee on the revisions to credit risk and operational risk, as well as the European application the revised approach to calculating market risk, binding leverage ratio and net stable funding ratio.

In addition to having to comply with regulations in each of our emerging markets we operate in, the fact that many regulations stemming from the US or EU regulators are extraterritorial in their application adds additional challenges, complexities and uncertainties for cross-border business in these markets. MIFID2 will be implemented from the start of 2018, yet the precise geographical scope of its application to products and securities in markets outside the EU remains uncertain. A number of regulations require the repapering of all clients to ensure compliance with OTC derivative reforms or bail-in requirements stemming from the EUs BRRD (Banking Resolution and Recovery Directive).

The Group requires adherence to and implementation of regulations while meeting and anticipating the expectations of regulators and regulatory reform. The Group has implemented Group wide policies and procedures to manage the risks associated with managing regulatory change.

Regulatory investigations, reviews and legal proceedings

While the Group seeks to comply with the letter and spirit of all applicable laws and regulations at all times, it has been, and may continue to be, subject to regulatory actions, reviews, requests for information (including subpoenas and requests for documents) and investigations across our markets, the outcomes of which are generally difficult to predict and can be material to the Group. The Group is also party to legal proceedings from time to time, which may give rise to financial losses or adversely impact our reputation in the eyes of our customers, investors and other stakeholders.

Regulatory and enforcement authorities have broad discretion to pursue prosecutions and impose a wide range of penalties for non-compliance with laws and regulations. Penalties imposed by authorities have included substantial monetary penalties, additional compliance and remediation requirements and additional business restrictions. In recent years, such authorities have exercised their discretion to impose increasingly severe penalties on financial institutions that have been determined to have violated laws and regulations, and there can be no assurance that future penalties will not be of a different type or increased severity. The Group is cooperating with a number of reviews, requests for information and investigations and actively managing its legal proceedings, but both the nature and timing of the outcome of these matters is uncertain and difficult to predict. As such, it is not possible to predict the extent of any liabilities or other adverse consequences that may arise for the Group.

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Standard Chartered Bank Principal uncertainties

The Group has made significant investments to enhance its systems and controls environment and has materially increased the capacity and capability of its compliance resources. A Financial Crime Risk Committee sits at the Board level to oversee financial crime compliance and the Group has invested in various remediation programmes and appointed independent reviewers to critically examine its systems and controls. The Group has an ongoing Financial Crime Risk Mitigation Programme (FCRMP), which is a comprehensive, multi-year programme designed to review and enhance many aspects of the Group’s existing approach to money laundering prevention and combating terrorism finance and the approach to sanctions compliance and the prevention of bribery and corruption. In addition, as a result of the Group’s 2012 and 2014 settlements with certain US authorities (the “Settlements”), a remediation programme referred to as the US Supervisory Remediation Program (“SRP”) was established comprising workstreams designed to ensure compliance with the Settlements. Many of the deliverables under the SRP are reliant on, or led by, individuals or functions outside the US, and in some cases represent the US implementation of Group-wide remediation or upgrade activity managed under the FCRMP. Consequently, there is a close working relationship between the SRP and FCRMP for the purpose of project coordination and delivery. As part of the FCRMP, the Group or its advisors may identify new issues, potential breaches or matters requiring further review or further process improvements that could impact the scope or duration of the FCRMP.

Group and affect numerous markets, businesses and functions. The roll-out of these programmes and enhancements may be complex and the timing and associated costs of these measures are uncertain.

The Group recognises that its compliance with historical, current and future sanctions, as well as AML and BSA requirements, and customer due diligence practices, not just in the US but throughout the Group’s footprint, are and will remain a focus of the relevant authorities.

In meeting regulatory expectations and demonstrating active risk management, the Group is also reviewing its portfolio and taking steps to restrict or restructure or otherwise mitigate higher-risk business activities, which could include divesting or closing businesses that exist beyond risk appetite. We continue to educate and train our people on conduct, conflicts of interest, information security and financial crime compliance in order to reduce our exposure to legal and regulatory proceedings.

For further details on legal and regulatory matters, including details on the Settlements, refer to note 24 to the financial statements on page 211.

As a result of our normal business operations, Standard Chartered is exposed to a broader range of risks than those principal uncertainties mentioned above and our approach to managing risk is detailed on the following pages .

The remediation programmes and other compliance-related investments are a necessary cost of doing business for the

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Standard Chartered Bank Risk management approach

Risk management approach

Effective risk management is essential to consistent and sustainable performance for all of our stakeholders and is therefore a central part of the financial and operational management of the Group. The Group adds value to clients and therefore the communities in which they operate, generating returns for shareholders by taking and managing risk.

Through our Risk Management Framework we manage enterprise-wide risks, with the objective of maximising riskadjusted returns while remaining within our risk appetite.

As part of this framework, the Board has approved a set of principles that describe the risk management culture we wish to sustain:

Balancing risk and return

• We manage our risks to build a sustainable franchise, in the interests of all our stakeholders

• We only take risks within our risk appetite and risk tolerances, and where consistent with our approved strategy

• We manage our risk profile so as to maintain a low probability of an unexpected loss event that would materially undermine the confidence of our investors

Conduct of business

• We demonstrate that we are Here for good through our conduct, and are mindful of the reputational consequences of inappropriate conduct

• We seek to achieve good outcomes for clients, investors and the markets in which we operate, while abiding by the spirit and letter of laws and regulations

• We treat our colleagues fairly and with respect

Responsibility and accountability

• We take individual responsibility to ensure risk-taking is disciplined and focused, particularly within our area of authority

• We make sure risk-taking is transparent, controlled and reported in line with the Risk Management Framework, within risk appetite and risk tolerance boundaries and only where there is appropriate infrastructure and resource

Anticipation

• We seek to anticipate material future risks, learn lessons from events that have produced adverse outcomes and ensure awareness of known risks

Competitive advantage

• We seek to achieve competitive advantage through efficient and effective risk management and control

Risk governance

Ultimate responsibility for setting our risk appetite statement and for the effective management of risk rests with the Board.

Acting within an authority delegated by the Board, the Board Risk Committee Group has responsibility for oversight and review of prudential risks, including but not limited to credit, country cross-border, market, pension, capital, liquidity and funding and operational risks. Its responsibilities also include reviewing the appropriateness and effectiveness of the Group’s risk management systems and controlling the adequacy of information it is provided with, considering the implications of material regulatory change proposals, and ensuring effective due diligence on material acquisitions and disposals. The Board Risk Committee also reviews reports on key cyber risks, threats, events, project updates and the Board’s top risk profile updates as identified by the Information and Cyber Security Management Group.

The Committee has the authority to request and receive relevant information consistent with the requirements of the Basel Committee on Banking Supervision regulation 239 (BCBS239) that will allow the Committee to fulfil its governance mandate relating to the risks to which the Group is exposed, and alert senior management when risk reports do not meet its requirements.

The Board Risk Committee receives regular reports on risk management, including our portfolio trends, policies and standards, stress testing, liquidity and capital adequacy, and is authorised to investigate or seek any information relating to an activity within its terms of reference. The Board Risk Committee also conducts deep dive reviews on a rolling basis of different sections of the consolidated risk information report that is provided at each scheduled committee meeting.

The Business Responsibility & Reputational Risk Committee oversees the brand, values and good reputation of the Group, ensuring that reputational risk is consistent with the Risk Appetite Statement approved by the Board and the creation of long-term shareholder value.

The Board Financial Crime Risk Committee focuses on financial crime compliance risk matters across the Group and oversees the Group’s effective compliance with financial crime regulations.

The Audit Committee reviews the Group’s internal financial controls to identify, assess, manage and monitor financial risks.

The Group Asset and Liability Committee is responsible for determining the Group’s approach to balance sheet management and ensuring that, in executing the Group’s strategy, the Group operates within internally approved and externally required capital, liquidity and leverage risk appetite. It is also responsible for policies relating to balance sheet management, including management of our liquidity, capital adequacy and structural foreign exchange and interest rate exposure and tax exposure.

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Standard Chartered Bank Risk management approach

HOW THE STANDARD CHARTERED COURT COMMITTEE STRUCTURE HAS CHANGED

As at 1 January 2016

STANDARD CHARTERED BANK COURT

Group Risk Committee		Group Asset and Liability Committee
Group Operational Risk Committee		Liquidity Management Committee
Group Financial Crime Risk Committee		Capital Management Committee
Group Information Management Governance Committee		Global Balance Sheet Committee
Stress Testing Committee		Tax Management Committee
Business Responsibility and Reputational Risk Committee
Credit & Market Risk Committee

As at 31 December 2016

STANDARD CHARTERED BANK COURT

Group Risk Committee		Group Asset and Liability Committee
Group Operational Risk Committee		Operational Balance Sheet Committee
Group Financial Crime Risk Committee
Group Information Management
Governance Committee
Stress Testing Committee
Business Responsibility and Reputational Risk Committee
Corporate & Institutional Banking Risk Committee
Private Banking Risk Committee
Greater China and North Asia Risk Committee
ASEAN and South Asia Risk Committee
Africa and Middle East Risk Committee

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Standard Chartered Bank Risk management approach

Further simplification of the committee structure was carried out in 2016. Five risk committees were formed to ensure coverage of all risks arising from activities within the businesses and regions. These committees, appointed by the Group Risk Committee comprised: Africa and Middle East Risk Committee, ASEAN and South Asia Risk Committee, Greater China and North Asia Risk Committee, Corporate & Institutional Banking Risk Committee, and Private Banking Risk Committee. These committees are chaired by the respective Chief Risk Officer.

Under the revised risk committee structure, Corporate & Institutional Banking Risk Committee covers risks arising from activities in Corporate & Institutional Banking globally and in the Europe and Americas region as well as bank wide Market and Traded Credit Risk. The Private Banking Risk Committee covers risks arising in Private Banking globally including Wealth Management. The three Regional risk committees will cover risks arising from their respective region including Commercial and Retail Banking.

The roles of the Group Risk Committee and the Group Asset and Liability Committee are essentially unchanged following the reorganisation of our business, although the committee structures below them have changed in some areas.

Members of the Group Risk Committee are drawn from the Management Team and the Group Asset and Liability Committee are drawn principally from the Court. The Group Risk Committee is chaired by the Group Chief Risk Officer. The Group Asset and Liability Committee is chaired by the Group Chief Financial Officer. Risk limits and risk exposure approval authority frameworks are set by the Group Risk Committee in respect of credit risk, country cross-border risk, market risk and operational risk. The Group Asset and Liability Committee sets the approval authority frameworks in respect of capital and liquidity and funding risks. Risk approval authorities may be exercised by risk committees or authorised individuals.

The committee governance structure ensures that risk-taking authority and risk management policies are cascaded down from the Board to the appropriate functional, client segment and country-level senior management and committees. Information regarding material risk issues and compliance with policies and standards is communicated to the appropriate country, client segment, functional and Group-level senior management and committees.

In 2016, we aligned the sources of authorities to the Senior Managers Regime. Given the focus on individual accountability, this area continues to be reviewed and further refined.

The Group Risk Committee and Group Asset and Liability Committee request and receive information to fulfil their governance mandates relating to the risks to which the Group is exposed, and alert senior management when risk reports do not meet their requirements. Similar to the Board Risk Committee, the Group Risk Committee and Group Asset and Liability Committee receive reports that include information on risk measures, risk appetite metrics, risk concentrations, forward-looking assessments, updates on specific risk situations or actions agreed by these committees to reduce or manage risk.

On 29 June 2016, the Standard Chartered Bank Combined United States Operations Risk Committee was established to comply with the Dodd-Frank Act section 165 Enhanced Prudential Standards (EPS Rules). The EPS Rules legislated a number of enhanced obligations on the US operations commensurate with its structure, risk profile, complexity, activities and size. The committee receives its authority from the Court and is chaired by the Group Chief Risk Officer with membership drawn from the board of directors of Standard Chartered Bank and one Independent Director of Standard Chartered Bank. Its responsibilities are drawn from the EPS Rules and pertain to liquidity, risk governance and oversight. The committee receives

reports that include information on risk measures, compliance with local liquidity risk limits, risk concentrations, changes to risk management framework and updates on specific risk situations or actions agreed by the Committee to reduce or manage risk.

Roles and responsibilities for risk management are defined under a Three Lines of Defence model. Each line of defence describes a specific set of responsibilities for risk management and control.

• First line of defence: all employees are required to ensure the effective management of risks within the scope of their direct organisational responsibilities. Business unit, function and geographic heads are accountable for risk management in their respective businesses and functions, and for countries where they have governance responsibilities

• Second line of defence: this comprises the risk control owners, supported by their respective control functions. Risk control owners are responsible for ensuring that the residual risks within the scope of their responsibilities remain within risk appetite. The scope of a risk control owner’s responsibilities is defined by a given risk type and the risk management processes that relate to that risk type. These responsibilities cut across the Group and are not constrained by functional, business and geographic boundaries. The major risk types are described individually on pages 66 to 129

• Third line of defence: the independent assurance provided by the Group Internal Audit function. Its role is defined and overseen by the Audit Committee of the Board

Group Internal Audit provides independent assurance of the effectiveness of management’s control of its own business activities (the first line) and of the processes maintained by the risk control functions (the second line). As a result, Group Internal Audit provides assurance that the overall system of control effectiveness is working as required within the Risk Management Framework.

The Risk function

The Group Chief Risk Officer directly manages a Risk function that is separate and independent from the origination, trading and sales functions of the businesses.

The role of the Risk function is:

• To maintain the Risk Management Framework, ensuring it remains appropriate to the Group’s activities, is effectively communicated and implemented across the Group, and to administer related governance and reporting processes

• To uphold the overall integrity of the Group’s risk/return decisions, and in particular to ensure that risks are properly assessed, that risk/return decisions are made transparently on the basis of this proper assessment, and controlled in accordance with the Group’s standards and risk appetite

• To exercise direct risk control ownership for credit, market, country cross-border and operational risk types

The independence of the Risk function is to ensure that the necessary balance in risk/return decisions is not compromised by short-term pressures to generate revenues. This is particularly important given that revenues are recognised from the point of sale, while losses arising from risk positions typically manifest themselves over time.

In addition, the Risk function is a centre of excellence that provides specialist capabilities of relevance to risk management processes in the wider organisation.

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Standard Chartered Bank Risk management approach

Risk appetite

In 2016 our risk appetite and risk tolerance definitions were updated. We recognise three sets of constraints which determine the risks that we are willing to take in pursuit of our strategy and the development of a sustainable business:

• Risk capacity defines externally imposed constraints within which the Group must operate. It is the maximum level of risk the Group can assume, given its current capabilities and resources, before breaching constraints determined by regulatory capital and liquidity requirements, or otherwise failing to meet the expectations of regulators and law enforcement agencies

• Risk appetite – this is defined by the Group and approved by the Board. It is the maximum amount and type of risk that the Group is willing to assume in pursuit of its strategy. Risk appetite cannot exceed risk capacity

• Risk tolerances – are outer constraints defined by the Group for each risk type via metrics and thresholds. Risk tolerance is set within the risk appetite and is a buffer, determined by management, within the Board approved risk appetite

The Group’s risk profile is our overall exposure to risk at a given point in time, covering all applicable risk types. Risk control tools such as exposure limits, underwriting standards, scorecard cutoffs and policies and other operational control parameters are used to keep the Group’s risk profile within risk appetite (and therefore also risk capacity). Status against risk appetite is reported to the Board Risk Committee. This includes the reporting of breaches.

The Board has approved a Risk Appetite Statement, which is underpinned by a set of financial and operational control parameters, known as risk tolerances. These risk tolerances directly constrain the aggregate risk exposures that can be taken across the Group. The number of risk tolerances has been increased in 2016 to include greater breadth and greater granularity for credit, capital, market and operational risks. A strategic risk appetite statement has been introduced for the first time. The Risk Appetite Statement has been supplemented by an overarching statement outlining the Group’s Risk Appetite Principles.

The Group’s Risk Appetite Principles and Risk Appetite Statement, along with the key associated risk appetite metrics approved by the Board are as follows:

• Risk Appetite Principles: The Group Risk Appetite is in accordance with Risk Management Principles that inform our overall approach to risk management and our risk culture. We follow the highest ethical standards required by investors and ensure a fair outcome for our clients, the effective operation of financial markets and while at the same time meeting expectations of regulators and law enforcement agencies. We set our risk appetite to enable us to grow sustainably and to avoid shocks to earnings or our general financial health, that would materially undermine the confidence of our investors and all internal and external stakeholders.

• General: the Group will not compromise adherence to its risk appetite in order to pursue revenue growth or higher returns

• Credit and country cross-border risk: the Group manages its credit and country cross-border exposures following the principle of diversification across products, geographies, client segments and industry sectors. Specific metrics are set for individual and aggregate single-name credit concentrations, industry credit concentrations, portfolio tenor, specific portfolio exposure, portfolio collateralisation, retail unsecured credit risk concentrations, high risk retail

unsecured credit risk concentrations, mortgage high loanto-value concentrations and country cross-border credit risk concentrations

• Market risk: the Group should control its trading portfolio and activities to ensure that market risk losses (financial or reputational) do not cause material damage to the Group’s franchise. Specific metrics are set to ensure resilience to market stress to minimise volatility to profit and loss in Financial Markets and Common Equity Tier 1 capital

• Liquidity and Funding risk: the Group should be able to meet its payment and collateral obligations under extreme but plausible liquidity stress scenarios without recourse to extraordinary central bank support. Specific metrics are set for liquidity stress survival horizons, short-term wholesale borrowing, minimum advances to deposits and liquidity coverage ratios

• Capital: The Group should maintain a strong capital position including the maintenance of management buffers sufficient to support its strategic aims. Specific metrics are set for minimum Common Equity Tier 1 capital, Tier 1 capital, Total capital and leverage ratios under business-as-usual and stress conditions

• Operational risk: the Group aims to control operational risks to ensure that operational losses (financial or reputational), including any related to conduct of business matters, do not cause material damage to the Group’s franchise. This statement is underpinned by metrics for each operational top risk. See page 129 for the list of the Group’s current operational top risks

• Reputational risk: the Group will protect its reputation to ensure that there is no material damage to the Group’s franchise

• Pension risk: the Group will manage its pension plans such that:

• There is no material unexpected deterioration in their funding requirements or other financial metrics

• Members’ benefits will continue in their current form although management actions such as a removal of discretionary benefits are allowable in the case of a market stress event

• Strategic risk: the Group will review its strategy on an annual basis to take account of external and internal developments and monitor execution of strategic plans to ensure their effective implementation

The Group Risk Committee, the Group Financial Crime Risk Committee and the Group Asset and Liability Committee are responsible for ensuring that our risk profile is managed in compliance with the risk appetite set by the Board. The Board Risk Committee and the Board Financial Crime Risk

Committee (for Financial Crime Compliance) advises the Board on the Risk Appetite Statement and monitors Group compliance with it.

Stress testing

Stress testing and scenario analysis are used to assess the ability of Standard Chartered to continue operating effectively under extreme but plausible macrofinancial conditions.

Our approach to stress testing is designed to:

• Contribute to the setting and monitoring of Boardlevel risk appetite

• Contribute to the setting and monitoring of executive-level risk appetite and risk management more generally

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Standard Chartered Bank Risk management approach

• Identify key risks to our capital and liquidity positions, strategy, franchise and reputation

• Support the development of management actions and contingency plans, including business continuity, to ensure the Group can recover from extreme but plausible conditions

• Meet regulatory requirements

Stress tests are performed at Group, country, business and portfolio level. Bespoke scenarios are applied to our market and liquidity positions as described in the section on market risk on page 66 and liquidity and funding risk on page 61. In addition to these, our stress tests also focus on the potential impact of macroeconomic, geo-political and physical events on relevant regions, client segments and risk types including among others credit risk which is discussed in more detail below.

Credit risk

Credit risk is the potential for loss due to the failure of a counterparty to meet its obligations to pay the Group in accordance with agreed terms. Credit exposures arise from both the banking and trading books.

Credit risk is managed through a framework that sets out policies and procedures covering the measurement and management of credit risk. There is a clear segregation of duties between transaction originators in the businesses and approvers in the Risk function other than in very few authorised cases for Retail Banking - this is discussed in the Credit approval and credit risk assessment section. All credit exposure limits are approved within a defined credit approval authority framework. The Group manages its credit exposures following the principle of diversification across products, regions, industries, collateral types and client segments.

Credit Risk Governance

The Group Risk Committee delegates the authority for the management of credit risk (amongst other risk types) to several committees – the Corporate & Institutional Banking Risk Committee, Private Banking Risk Committee as well as the regional risk committees for Greater China & North Asia, ASEAN & South Asia and Africa & Middle East. These committees are responsible for overseeing the credit risk profile of the Group within the respective business areas and regions. Meetings are held regularly and the committees monitor all material credit risk exposures, key internal developments and external trends, and ensure that appropriate action is taken.

Credit policies

Credit policies and standards are considered and approved by recognised second line risk committees or individuals with delegated authority. The Group Risk Committee oversees the delegation of credit approval and loan impairment provisioning authorities. The principles for the delegation, review and maintenance of credit approval authorities are defined in the Risk Authorities policy. In addition, there are other Group-wide policies integral to credit risk management such as those relating to stress testing, risk measurement and impairment provisioning.

Policies and procedures specific to each client or product segment are established by authorised individuals identified in the Risk Authorities policy. These are consistent with our Group-wide credit policies, but are more detailed and adapted to reflect the different risk characteristics across client and product segments. Policies are regularly reviewed and monitored to ensure they remain effective and consistent with the risk environment and risk appetite.

Credit rating and measurement

Risk measurement plays a central role, along with judgement and experience, in informing risk-taking and portfolio management decisions.

Since 1 January 2008, Standard Chartered has used the advanced internal ratings-based (AIRB) approach under the Basel II regulatory framework to calculate credit risk capital requirements.

A standard alphanumeric credit risk grade (CG) system for Corporate & Institutional and Commercial Banking Clients is used. The numeric grades run from 1 to 14 and some of the grades are further sub-classified. Lower credit grades are indicative of a lower likelihood of default. CG 1 to 12 are assigned to performing customers or accounts, while CG 13 and 14 are assigned to non-performing or defaulted customers. An analysis by CG of those loans that are neither past due nor impaired is set out on pages 71 to 74.

Retail Banking IRB portfolios use application and behaviour credit scores that are calibrated to generate a probability of default and then mapped to the standard alphanumeric credit risk grade system. We refer to external ratings from credit bureaus (where these are available), however, we do not rely solely on these to determine Retail Banking CGs.

Advanced IRB models cover a substantial majority of our exposures and are used in assessing risks at a customer and portfolio level, setting strategy and optimising our risk return decisions. Material IRB risk measurement models were approved by the Credit and Market Risk Committee, on the recommendation of the Credit Model Assessment Committee. The Credit Model Assessment Committee approves all other IRB risk measurement models, with key decisions noted to the Credit and Market Risk Committee. The Credit Model Assessment Committee drew authority from the Credit and Market Risk Committee in ensuring risk identification and measurement capabilities are objective and consistent, so that risk control and risk origination decisions are properly informed. The Credit and Market Risk Committee ceased to exist in September 2016 and the Stress Testing Committee assumed these authorities. Prior to review by the Credit Model Assessment Committee, all IRB models are validated in detail by a model validation team, which is separate from the teams that develop and maintain the models. Models undergo annual review. Reviews are also triggered if the performance of a model deteriorates materially against predetermined thresholds during the ongoing model performance monitoring process.

Credit approval and credit risk assessment

Major credit exposures to individual counterparties, groups of connected counterparties and portfolios of retail exposures are reviewed and approved by the Credit Approval Committee. The Credit Approval Committee is appointed by the Group Risk Committee.

All other credit approval authorities are delegated by the Group Risk Committee to individuals based both on their judgement and experience and a risk-adjusted scale that takes account of the estimated maximum potential loss from a given customer or portfolio. Credit origination and approval roles are segregated in all but a very few authorised cases for Retail Banking. In those very few exceptions where they are not, originators can only approve limited exposures within defined risk parameters which are subject to oversight from the credit risk function.

All credit proposals are subject to a robust credit risk assessment. It includes a comprehensive evaluation of the client’s credit quality, including willingness, ability and capacity to repay. The primary lending consideration is usually based on the client’s credit quality and the repayment capacity from operating

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Standard Chartered Bank Risk management approach

cash flows for counterparties; and personal income or wealth for individual borrowers. The risk assessment gives due consideration to the client’s liquidity and leverage position. Where applicable, the assessment includes a detailed analysis of the credit risk mitigation arrangements to determine the level of reliance on such arrangements as the secondary source of repayment in the event of a significant deterioration in a client’s credit quality leading to default. Lending activities that are considered as higher risk or non-standard are subjected to stricter minimum requirements and require escalation to a senior credit officer or authorised body. An analysis of the loan portfolio is set out on pages 93 to 99.

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 limits set by counterparty or group of connected counterparties.

At the portfolio level, credit concentration thresholds are set and monitored to control concentrations, where appropriate, by country, industry, product, tenor, collateral type, collateralisation level and credit risk profile.

For concentrations that are material at a Group level, thresholds are set and monitored by the respective Risk Committees and reported to the Group Risk and Board Risk Committees.

Risk appetite levels are set by counterparty depending on credit grade, by industry, and for the Top 20 Corporate exposures.

Credit risk mitigation

Potential credit losses from any given account, client or portfolio are mitigated using a range of tools such as collateral, netting agreements, credit insurance, credit derivatives and guarantees. The reliance that can be placed on risk mitigants is carefully assessed in light of issues such as legal certainty and enforceability, market valuation, correlation and counterparty risk of the protection provider. The requirement for risk mitigation is, however, not a substitute for the ability to pay, which is the primary consideration for any lending decisions.

The Group credit policies set out the key considerations for eligibility, enforceability and effectiveness of credit risk mitigation arrangements.

Collateral types that are eligible as risk mitigants include: cash; residential, commercial and industrial property; fixed assets such as motor vehicles, aircraft, plant and machinery; marketable securities; commodities; bank guarantees; and standby letters of credit. The Group also enters into collateralised reverse repurchase agreements.

The Group has credit policies and procedures in place setting out the criteria for collateral to be recognised as a credit risk mitigant, including requirements concerning legal certainty, priority, concentration, correlation, liquidity and valuation parameters such as frequency of review and independence.

Physical collateral, such as property, fixed assets and commodities, and financial collateral must be independently valued and an active secondary resale market must exist. The collateral must be valued prior to drawdown and regularly thereafter. The valuation frequency is at minimum annual and more frequent valuations are driven by the level of price volatility of each type of collateral and the nature of the underlying product or risk exposure. For financial collateral to be eligible for recognition the collateral must be sufficiently liquid and its value over time sufficiently stable to provide appropriate certainty as to

the credit protection achieved. Risk mitigation benefits may be reduced or removed where the collateral value is not supported by a recent independent valuation.

Documentation must be held to enable the Group to realise the collateral without the cooperation of the obligor in the event that this is necessary. For certain types of lending, typically mortgages or asset financing where a first charge over the risk mitigant must be attained, the right to take charge over physical assets is significant in terms of determining appropriate pricing and recoverability in the event of default. Physical collateral is required to be insured at all times against risk of physical loss or damage.

Collateral values are, where appropriate, adjusted to reflect current market conditions, the probability of recovery and the period of time to realise the collateral in the event of liquidation. Stress tests are performed on changes in collateral values for key portfolios to assist senior management in managing the risks in those portfolios. The Group also seeks to diversify its collateral holdings across asset classes and markets.

Where guarantees, credit insurance or credit derivatives are used as credit risk mitigation, the creditworthiness of the protection provider is assessed and monitored using the same credit approval process applied to the obligor. The main types of guarantors include banks, insurance companies, parent companies, governments and export credit agencies.

Traded products

Credit risk from traded products derives from the positive mark-to-market value of the underlying instruments, and an additional component to cater for potential future market movements. This counterparty credit risk is managed within the Group’s overall credit risk appetite for corporate and financial institutions and relies on various single and multi-risk factor stress test scenarios to measure, identify and risk manage counterparty credit risk across derivatives and securities financing transactions.

The Group uses bilateral and multilateral netting to reduce pre settlement and settlement counterparty credit risk. Pre-settlement risk exposures are normally netted using bilateral netting documentation in legally approved jurisdictions. Settlement exposures are generally netted using Delivery versus Payments or Payment versus Payments systems. Master netting agreements are generally enforced only in the event of default. In line with International Accounting Standards (IAS) 32, derivative exposures are presented on a net basis in the financial statements only if there is a legal right to offset and there is intent to settle on a net basis or realise the assets and liabilities simultaneously.

In addition, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mitigant to the exposure. Further details on CSAs are set out on page 92.

Wrong way risk occurs when an exposure increase is coupled with a decrease in the credit quality of the obligor. Specifically, as the mark-to-market on a derivative contract increases in favour of the Group, the driver of this mark-to-market change also reduces the ability of the counterparty to meet its payment, margin call or collateral posting requirements. The Group employs various policies and procedures to ensure that wrong way risk exposures are recognised upfront and monitored.

Securities

The portfolio limits and parameters for the underwriting and purchase of all predefined securities assets to be held for sale are approved by the Underwriting Committee. The Underwriting Committee is established under the authority of the Corporate & Institutional Banking Risk Committee. The

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Standard Chartered Bank Risk management approach

business operates within set limits, which include country, single issuer, holding period and credit grade limits.

Day-to-day credit risk management activities for traded securities are carried out by a specialist team within the Risk function whose activities include oversight and approval within the levels delegated by the Underwriting Committee. Issuer credit risk, including settlement and pre-settlement risk, and price risk are controlled by the Risk function.

The Underwriting Committee approves individual proposals to underwrite new security issues for our clients. Where an underwritten security is held for a period longer than the target sell-down period, the final decision on whether to sell the position rests with the Risk function.

Credit monitoring

We regularly monitor credit exposures, portfolio performance, and external trends that may impact risk management outcomes.

Internal risk management reports that are presented to risk committees contain information on key environmental, political and economic trends across major portfolios and countries; portfolio delinquency and loan impairment performance.

Credit risk committees meet regularly to assess the impact of external events and trends on the Group’s credit risk portfolios and to define and implement our response in terms of the appropriate changes to portfolio shape, portfolio and underwriting standards, risk policy and procedures.

Clients or portfolios are placed on early alert when they display signs of actual or potential weakness, for example, where there is a decline in the client’s position within the industry, financial deterioration, a breach of covenants, nonperformance of an obligation within the stipulated period, or there are concerns relating to ownership or management.

Such accounts and portfolios are subjected to a dedicated process overseen by the Credit Issues Committees in the relevant countries where client account plans and credit grades are re-evaluated. In addition, remedial actions are agreed and monitored. Remedial actions include, but are not limited to, exposure reduction, security enhancement, exiting the account or immediate movement of the account into the control of Group Special Assets Management (GSAM), our specialist recovery unit. Typically, all Corporate & Institutional Banking clients, Commercial Banking clients and Private Banking clients past due accounts are managed by GSAM.

For Retail Banking exposures, portfolio delinquency trends are monitored continuously at a detailed level. Individual customer behaviour is also tracked and considered for lending decisions. Accounts that are past due or charged-off are subject to a collections or recovery process respectively, and managed independently by the Risk function. In some countries, aspects of collections and recovery activities are outsourced.

Loan impairment

A loan is impaired when we assess that we will not recover a portion of the contractual cash flows. Specific definitions of when a loan is deemed as impaired are discussed in the following sections for Retail Banking clients as well as Corporate & Institutional Banking, Commercial Banking and Private Banking.

The Group’s loan loss provisions are established to recognise incurred impairment losses either on specific loan assets or within a portfolio of loans and advances. Individually impaired loans are those loans against which individual impairment provisions (IIP) have been raised.

Estimating the amount and timing of future recoveries involves significant judgement, and considers the level of arrears as well

as the assessment of matters such as future economic conditions and the value of collateral, for which there may not be a readily accessible market.

Loan losses that have been incurred but have not been separately identified at the balance sheet date are determined by taking into account past loss experience as a result of uncertainties arising from the economic environment, and defaults based on portfolio trends. Actual losses identified could differ significantly from the impairment provisions reported, for example, as a result of uncertainties arising from the economic environment.

The total amount of the Group’s impairment provision is inherently uncertain, being sensitive to changes in economic and credit conditions across the geographies in which the Group operates. Economic and credit conditions are interdependent within each geography and as a result there is no single factor to which the Group’s loan impairment allowances as a whole are sensitive. It is possible that actual events over the next year differ from the assumptions built into our model, resulting in material adjustments to the carrying amount of loans and advances.

Retail Banking

For Retail Banking portfolios, an account is considered impaired when it meets certain defined threshold conditions in terms of overdue payments (contractual impairment) or meets other objective conditions such as bankruptcy, debt restructuring, fraud or death. A loan is considered delinquent (or past due), when the customer has failed to make a principal or interest payment in accordance with the loan contract. These threshold conditions are defined in policy and are set at the point where empirical evidence suggests that the client is unlikely to meet their contractual obligations or a loss of principal is expected.

Portfolio impairment provisions (PIP) cover the inherent losses in the portfolio that exist at the balance sheet date but have not been individually identified. Considerations applied in determining the appropriate level of portfolio provisions include historic loss experience, loss emergence periods, risk indicators such as delinquency rates, and the potential impact of existing external conditions. Some of these factors require judgemental overlays. PIPs take into account the fact that, while delinquency is an indication of impairment, not all delinquent loans (particularly those in the early stages of delinquency) will in fact be impaired. This will only become apparent with the passage of time and as we investigate the causes of delinquency on a caseby-case basis.

It is on this basis that Retail Banking accounts are considered impaired when a credit obligation is 150 days past due. There are, however, exceptions to this rule for portfolios where empirical evidence suggests that they should be set more conservatively.

The core components of the IIP calculation are the value of gross charge off and recoveries. Gross charge off and/or provisions are recognised when it is established that the account is unlikely to pay, either through past due or any other specific condition. Recovery of unsecured debt postimpairment is recognised based on actual cash collected, either directly from clients or through the sale of defaulted loans to third-party institutions. Provision release of secured loans postimpairment is recognised if the loan outstanding is paid in full (release of full provision), or the provision is higher than the loan outstanding (release of the excess provision), or the loan is paid to current and remains in current for more than 180 days (release of full provision).

For further details on Retail Banking see pages 71 and 92.

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Standard Chartered Bank Risk management approach

Corporate & Institutional, Commercial and Private Banking

Loans are classified as impaired where analysis and review indicate that full payment of either interest or principal is questionable, or as soon as payment of interest or principal is 90 days overdue. Impaired accounts are managed by our specialist recovery unit, GSAM, which is independent from our main businesses. Where any amount is considered irrecoverable, an IIP is raised. This provision is the difference between the loancarrying amount and the present value of estimated future cash flows.

The individual circumstances of each client are taken into account when GSAM estimates future cash flows. All available sources, such as cash flow arising from operations, selling assets or subsidiaries, realising collateral or payments under guarantees are considered. In any decision relating to the raising of provisions, we attempt to balance economic conditions, local knowledge and experience, and the results of independent asset reviews.

Where it is considered that there is no realistic prospect of recovering a portion of an exposure against which an impairment provision has been raised, that amount will be written off.

As with Retail Banking, a PIP is held to cover the inherent risk of losses which, although not identified, are known through experience to be present in any loan portfolio. This is set with reference to historical loss rates and subjective factors such as the economic environment and the trends in key portfolio indicators. The PIP methodology provides for accounts for which an IIP has not been raised.

For further details on Corporate & Institutional Banking, Commercial Banking and Private Banking see pages 71 and 92.

Country cross-border risk (unaudited)

Country cross-border risk is the risk that we will be unable to obtain payment from our customers or third parties on their contractual obligations as a result of certain actions taken by foreign governments, chiefly relating to convertibility and transferability of foreign currency.

The Group Risk Committee is responsible for approving country cross-border risk limits and delegates the setting and management of limits to the Group Country Risk function. The business and country chief executive officers manage exposures within these limits. Countries designated as higher risk are subject to increased central monitoring.

Assets that generate country cross-border exposure are those where the main source of repayment or security is derived from a country other than the country in which the asset is booked. These cover a wide range of products, including loans and advances, deposits with other banks, trade and other bills, acceptances, amounts receivable under finance leases, derivatives, certificates of deposit and other negotiable paper, investment securities and formal commitments. Cross-border assets also include exposures to local residents denominated in currencies other than the local currency and local-currency assets funded by intra-group funding. Cross-border exposure also includes the value of commodity, aircraft and shipping assets owned by the Group that are held in a given country.

Market risk

Market risk is the potential for loss of economic value due to adverse changes in financial market rates or prices. The Group’s exposure to market risk arises predominantly from these sources:

• Trading book: The Group provides clients access to financial markets, facilitation of which entails the Group taking moderate market risk positions. All trading teams support client activity; there are no proprietary trading teams. Hence, income earned from market risk-related activities is primarily driven by the volume of client activity rather than risk-taking. From 1 January 2016, a CVA desk has been actively hedging the credit and market exposures arising from CVA and FVA. From 1 August 2016, Credit and Funding Valuation Adjustment (XVA) risk was recognised in the total trading and non-trading VaR, and the impact of which was not material.

• Non-trading book: – The Asset and Liability Management (ALM) desk is

• required to hold a liquid assets buffer of which $84.8 billion is held in high-quality marketable debt securities

– The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these are not hedged, the Group is subject to structural foreign exchange risk, which is reflected in reserves

The primary categories of market risk for the Group are:

• Interest rate risk: arising from changes in yield curves, credit spreads and implied volatilities on interest rate options

• Currency exchange rate risk: arising from changes in exchange rates and implied volatilities on foreign exchange options

• Commodity price risk: arising from changes in commodity prices and implied volatilities on commodity options; covering energy, precious metals, base metals and agriculture

• Credit spread risk: arising from changes in the credit spread of its derivatives’ counterparties through Credit Value Adjustment (CVA) accounting

Market risk governance

The Board approves the Group’s risk appetite for market risk. Subject to the risk appetite set for market risk, the Group Risk Committee sets Group-level market risk limits and stress loss triggers.

The Corporate and Institutional Banking Risk Committee (CIBRC), under authority delegated by the Group Risk Committee, is responsible for setting material value at risk (VaR) and stress loss triggers for market risk within the levels set by the Group Risk Committee. The CIBRC also delegates to the Global Head, Market & Traded Credit Risk responsibility for the policies and standards for the control of market risk and overseeing their ongoing effectiveness. These policies cover both trading and non-trading books of the Group.

The Market and Traded Credit Risk function approves all the other market risk limits within delegated authorities and monitors exposures against these limits. Additional limits are placed on specific instruments and position concentrations where appropriate. Sensitivity measures are used in addition to VaR as risk management tools. For example, interest rate sensitivity is measured in terms of exposure to a one basis point increase in yields, whereas foreign exchange, commodity and equity sensitivities are measured in terms of the underlying values or amounts involved. Option risks are controlled through revaluation limits on underlying price and volatility shifts, limits on volatility risk and other variables that determine the option’s value.

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Standard Chartered Bank Risk management approach

VaR

The Group applies VaR as a measure of the risk of losses arising from future potential adverse movements in market rates, prices and volatilities. VaR, in general, is a quantitative measure of market risk that applies recent historical market conditions to estimate the potential future loss in market value that will not be exceeded in a set time period at a set statistical 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 outcome.

VaR is calculated for expected movements over a minimum of one business day and to a confidence level of 97.5 per cent. This confidence level suggests that potential daily losses, in excess of the VaR measure, are likely to be experienced six times per year.

The Group applies two VaR methodologies:

• Historical simulation: involves the revaluation of all existing positions to reflect the effect of historically 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 specific (credit spread) risk VaR

• Monte Carlo simulation: this methodology is similar to historical simulation but with considerably more input risk factor observations. These are generated by random sampling techniques, but the results retain the essential variability and correlations of historically observed risk factor changes. This approach is applied for some of the specific (credit spread) risk VaR in relation to idiosyncratic exposures in credit markets

In both methods a historical observation period of one year is chosen and applied.

VaR is calculated as our exposure as at the close of business, generally UK time. Intra-day risk levels may vary from those reported at the end of the day.

A small proportion of market risk generated by trading positions is not included in VaR or cannot be appropriately captured by VaR. This is recognised through a Risks-not-in-VaR (RNIV) framework, which estimates these risks and applies capital add-ons.

To assess their ongoing performance, VaR models are backtested against actual results.

See an analysis of VaR and backtesting results in 2016 on pages 106 to 108.

Stress testing

Losses beyond the 97.5 per cent confidence interval are not captured by a VaR calculation, which therefore gives no indication of the size of losses in tail event situations.

Market and Traded Credit Risk complements the VaR measurement by weekly stress testing of market risk exposures to highlight the potential risk that may arise from extreme market events that are rare but plausible.

Stress testing is an integral part of the market risk management framework and considers both historical market events and forward-looking scenarios. A consistent stress-testing methodology is applied to trading and non-trading books. The stress-testing methodology assumes that scope for management action would be limited during a stress event, reflecting the decrease in market liquidity that often occurs.

Stress scenarios are regularly updated to reflect changes in risk profile and economic events. The Market and Traded Credit Risk function reviews stress exposures and, where necessary, enforces reductions in overall market risk exposure.

The Group Risk Committee considers the results of stress tests as part of its supervision of risk appetite.

Regular stress-test scenarios are applied to interest rates, credit spreads, exchange rates, commodity prices and equity prices. This covers all asset classes in the Financial Markets banking and trading books.

Ad hoc scenarios are also prepared, reflecting specific market conditions and for particular concentrations of risk that arise within the business.

Non-trading book and Group Treasury market risk treatment

Interest rate risk from non-trading book portfolios is transferred to local Asset and Liability Management (ALM) desks. ALM deals in the market in approved financial instruments in order to manage the net interest rate risk, subject to approved VaR and risk limits. Local Asset and Liability Committees are responsible for any residual interest rate risks that cannot be managed by ALM.

VaR and stress tests are therefore applied to these ALM exposures, including available-for-sale debt securities, in the same way as for the trading book. Securities classed as Loans and Receivables or Held-to-maturity are not reflected in VaR or stress tests since they are accounted for on an amortised cost basis, so market price movements have limited effect on either profit and loss or reserves.

Equity risk relating to non-listed private equity and strategic investments is not included within VaR. It is separately managed through delegated limits for both investment and divestment, and is also subject to regular review by an investment committee.

These are included as Level 3 assets, as disclosed in note 12 to the financial statements on pages 172 to 175.

Group Treasury raises debt and equity capital and the proceeds are invested within the Group as capital or placed with ALM. Interest rate risk arises due to the investment of equity and reserves into rate-sensitive assets, as well as some tenor mismatches between debt issuance and placements. These risks were managed within an Earnings at Risk limit set by Operational Balance Sheet Committee but, in future, will be incorporated into the overall Earnings Risk framework of the Group.

Group Treasury also manages the structural foreign exchange risk that arises from non-US dollar currency net investments in branches and subsidiaries. The impact of foreign exchange movements is taken to reserves which form part of the capital base. The effect of exchange rate movements on the capital ratio is partially mitigated by the fact that both the value of these investments and the risk-weighted assets in those currencies follow broadly the same exchange rate movements. Under delegated authorities, the Group Treasurer may decide to hedge the net investments if it is expected that the capital ratio will be materially affected by exchange rate movements. Changes in the valuation of these positions are taken to reserves. See details on page 110. Structural foreign exchange risk is not included within Group VaR.

Liquidity and funding risk

Liquidity Risk is the potential for loss because the Group, although solvent, does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can access these financial resources only at excessive cost.

Funding risk is the potential for actual or opportunity loss because the Group does not have stable or diversified sources of funding in the medium and long term to enable it to meet its financial obligations, in pursuit of its desired business strategy or growth objectives.

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Standard Chartered Bank Risk management approach

We seek to manage our liquidity and funding prudently in all locations and for all currencies. Exceptional market events could impact us adversely, thereby potentially affecting our ability to fulfil our obligations as they fall due.

We have a robust risk type framework for managing the Group’s liquidity and funding risk. Through this framework we control and optimise the risk-return profile of the Group. This is principally achieved by:

• Setting risk appetites aligned with strategic objectives

• Identifying, measuring and monitoring liquidity risks:

• Assessment of regulatory requirements and internal

• balance sheet characteristics driving liquidity risk

• The ILAAP (Internal Liquidity Adequacy Assessment Process), which assesses the liquidity adequacy of the Group under business as usual and stressed conditions

• The Group’s liquidity stress testing framework covering both internal and regulatory scenarios

• Constraining risk profile within the Board approved risk appetite:

• Development of policies to address the liquidity and

• funding risks identified

• Implementation of associated risk measures that act as mitigants of these risks

• Ongoing monitoring of risk measures against limits

To mitigate liquidity and funding risk we maintain a well diversified, customer-driven funding base and access to wholesale funds under normal market conditions. In addition, we maintain a diversified portfolio of marketable securities that can be monetised or pledged as collateral in the event of a liquidity stress. The Group Recovery Plan, reviewed and approved annually, is maintained by Group Treasury and includes a broad set of Recovery Indicators, an escalation framework and a set of management actions that could be effectively implemented by senior management in the event of a liquidity stress. A similar plan is maintained within each major country.

Liquidity and Funding risk governance

The Board approves the Group’s Risk Appetite for liquidity and funding risk along with supporting metrics. The Group Chief Financial Officer has overall responsibility for determining the Group’s approach to liquidity and funding risk management and delegates authority to the Group Treasurer.

Country oversight under the liquidity and funding framework resides with country Asset and Liability Committees, supported by local Asset and Liability Management desks. Countries must ensure they operate within predefined liquidity limits and remain in compliance with Group liquidity policies and practices, as well as local regulatory requirements.

Stress testing

The Group intends to maintain a prudent and sustainable funding and liquidity position, in all presence countries and currencies, such that it can withstand a severe yet plausible liquidity stress. This is reflected in the Risk Appetite Statement and metrics discussed on page 111.

Regular stress testing is conducted to demonstrate that the Group’s liquidity exposure remains within the approved Risk Appetite Statement as well as within regulatory limits.

The internal liquidity stress testing framework includes multiple stress scenarios with varied survival periods and stressed conditions to appropriately reflect the liquidity risks undertaken by the Group. The framework includes an idiosyncratic stress, a market-wide stress and a combined stress. The combined stress assumes both idiosyncratic and market-wide events affect the Group simultaneously and hence is typically the most severe scenario.

The results for the combined stress takes into account convertibility and portability constraints across all major presence countries and is used to calibrate the amount of liquidity resources the bank should hold. It is monitored daily and managed by Group Treasury.

The Stress Testing Committee (STC) has oversight over the appropriateness of the stress scenarios and the assumptions contained within them.

Operational risk (unaudited)

We define operational risk as the potential for loss from inadequate or failed internal processes, people and systems or from the impact of external events, including legal risks.

The management of operational risk is a challenge due to its broad scope as operational risks arise from all activities carried out within the Group. To address this challenge we map risks across the Group at a processes level with controls installed to mitigate these risks. We benchmark practices against peers and regulatory requirements.

Operational risk governance

The Group Risk Committee provides oversight of operational risk management across the Group. It is supported by the Group Operational Risk Committee, and the Group Financial Crime Risk Committee , which oversee operational risk arising from the global businesses and functions. These committees receive regular reports on the Group’s operational risk profile. The Group Risk Committee is also supported by the Group Information Management Governance Committee which oversees the management of the data quality framework and strategy.

Internal organisation – Three lines of defence

To implement its operational risk management approach, the Group applies the Three Lines of defence, as set out in the Risk Management Framework and explained on page 54. In the context of operational risk:

The first line of defence is responsible for identifying and managing the inherent risks in processes they own.

The second line of defence is responsible for setting and maintaining control standards for the operational risk management. The second line of defence comprises both risk control owners of each operational risk sub-type and Group policy owners.

The third line of defence is the independent assurance provided by the Group Internal Audit function.

Risk classification

Operational risk sub-types are the different ways that the Group may be operationally exposed to loss. The Group uses operational risk sub-types principally as an aid to ensure comprehensive and consistent identification of operational risks, wherever they may arise. Operational risk sub-types are listed on page 62.

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Standard Chartered Bank Risk management approach

OPERATIONAL RISK SUB-TYPES

External rules	Potential for actual or opportunity loss due to failure to comply with laws or regulations, or as a
and regulations	result of changes in laws or regulations or in their interpretation or application
Liability	Potential for loss or sanction due to a legal claim against any part of the Group or individuals
	within the Group
Legal enforceability	Potential for loss due to failure to legally protect the Group’s interests or from difficulty in
	enforcing the Group’srights
Damage or loss of	Potential for loss or damage or denial of use of property or other physical assets
physical asset
Safety and security	Potential for loss or damage relating to health and safety or physical security
Internal fraud	Potential for loss due to action by staff that is intended to defraud, or to circumvent the law or
or dishonesty	Group policy
External fraud	Potential for loss due to criminal acts by external parties such as fraud or theft of financial assets
Information security	Potential for loss due to unauthorised access, use, disclosure, disruption, modification or
	destructionof information
Processing failure	Potential for loss due to failure of an established process or a process design weakness
Model	Potential for loss due to a significant discrepancy between the output of credit and market risk
	measurement models and actual experience
	Potential for regulatory breach due to a significant discrepancy between the output of financial
	crime client risk scoring and financial crime transaction monitoring models and actual experience

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Standard Chartered Bank Risk management approach

Operational risk management approach

The Group defines and maintains a process universe for all client segments, products and functions.

The process universe is the complete list of end-to-end processes that collectively describe the activities of the Group and is the reference for the application of the operational risk management approach. This approach has been installed for prioritised risks across all countries.The operational risk management approach requires:

• All processes to be identified and standardised except for regulatory or legitimate system exceptions

• Inherent risks to be identified and assessed by the first line and approved by the second lines

• Industrial strength controls to be designed with standards for quantity, materiality and timeliness of detection and rectification of defects

• Residual risk to be assessed by first line and approved by second line

• Monitoring of risks and controls

• Prompt execution of risk treatment actions

Stress testing

As part of the operational risk management approach, the Group conducts stress testing by scenario analysis.

In 2016, we participated in the Bank of England stress test and the annual Internal Capital Adequacy Assessment Process. The exercises included judgemental overlays for the potential risk of low-frequency, high-severity events occurring during stress conditions.

In addition to the above, we review concentration of risks across the Group’s processes and prioritises lowfrequency high-severity scenarios to assess the potential impact that may exceed the Group’s risk appetite. During 2016, the scenario analysis programme conducted 13 scenarios. These scenarios included anti-money laundering, sanctions, information and cyber security and change management.

Conduct of business, or conduct, is a term that is used in a broad number of ways across the financial services industry. At its broadest, good conduct is the appropriate execution of business, by the Group or any individual acting on its behalf, in accordance with our strategic intent, risk management principles and risk appetite. More narrowly, it refers to specific regulations designed to achieve fair outcomes for customers and the effective operation of markets.

Good conduct is evidenced through disciplined adherence to our overall systems and controls outlined in the Risk Management Framework and the standards of individual behaviour set out in the Code of Conduct (the ‘Code’).

Specifically for operational risk:

• External rules and regulations classifications defined in the Operational Risk Framework include specific categories of regulation designed to achieve fair outcomes for clients (client conduct) and the effective operation of markets (market conduct). This ensures that each category of regulation is properly classified and aligned to the Group’s systems and control structures. Risk control owners and Group policy owners are responsible for defining the Group’s minimum standards and controls in respect of each category.

• Conduct is considered in the Group’s operational top risks (see Risk profile on page 129). The Group aims to prevent the risks of failure to deliver the conduct of

business standards expected by the Group’s clients, investors and markets in which we operate. Many of the top risks can be driven by poor conduct so the Group is focused on its control standards around these risks.

Reputational risk (unaudited)

Reputational risk is the potential for damage to the Group’s franchise, resulting in loss of earnings or adverse impact on market capitalisation as a result of stakeholders taking a negative view of the Group or its actions. Failures in behaviours or systems may affect stakeholders’ perceptions of the Group’s commitment to its Here for good brand promise. Reputational risk could arise from the failure of the Group to effectively mitigate the risks in its businesses, including one or more of country, credit, liquidity, market, regulatory, legal, strategic or other operational risk. Damage to the Group’s reputation could cause existing clients to reduce or cease to do business with the Group and prospective clients to be reluctant to do business with the Group. All employees are responsible for day-to-day identification and management of reputational risk. These responsibilities form part of the Code and are further embedded through values-based performance assessments. Risk control owners must identify material reputational risks arising from any business activity or transaction that they control and ensure that these are escalated and controlled in accordance with the Group’s Reputational Risk Policy and applicable procedures.

Our reputational risk framework covers two areas. Reputational risk management refers to proactively avoiding or mitigating the potential damage that might result from a future reputational risk event (ex ante). Reputational issues management and crisis communication refers to measures to limit damage from a reputational risk event that has already occurred (ex post).

Reputational risk may also arise from a failure to comply with environmental and social standards in our relationship with clients and in our financing decisions. Environmental risk is the potential for material harm or degradation to the natural environment, while social risk is the potential to cause material harm to individuals or communities. Environmental and social risks associated with clients are a key area of risk for the Group and we have continued to develop and enhance our approach to managing such risks since 1997.

Reflecting the differing regulatory and legislative frameworks applicable to clients in the Group’s markets, we have global sector-specific environmental and social (E&S) standards as set out in our 17 sectoral and three thematic position statements. We apply these in the provision of financial services to clients who operate in sectors presenting specific risks, and for key issues. These are underpinned by the Equator Principles and the IFC Performance Standards.

The Court recognises its responsibility to manage these risks and that failure to manage them adequately would have an adverse impact on our business, and is responsible for ensuring that high standards of responsible business are maintained and that an effective control framework is in place.

The Court receives regular information to identify and assess significant risks and opportunities arising from environmental and social matters. These issues are overseen by the Brand, Values and Conduct Committee. The Committee reviews sustainability priorities, and oversees the development of, and delivery against, public commitments regarding the activities and/or businesses that the Group will or will not accept in alignment with our Here for good brand promise.

We take our position statement commitments seriously. To ensure we deliver our commitments, we embed these requirements through our core banking processes. We have mechanisms in our origination and credit processes to

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Standard Chartered Bank Risk management approach

identify and assess environmental and social risks in accordance with our standards. We have a dedicated Environmental and Social Risk Management (ESRM) team that reviews clients and proposed transactions that present specific risks.

The Group recognises that stakeholder expectations of our environmental and social risk management will change over time. As such we seek to explain our approach and standards via our position statements, and to ensure they remain appropriate through active monitoring. In 2016 we have updated our Climate Change and Energy Position Statements to reflect changing expectations on our role in energy financing and in managing climate risk. We also created a Human Rights Position Statement, consolidating our previous policies and disclosures.

In 2016, our ESRM team reviewed over 320 client relationships and transactions across a range of Position Statement sectors. We believe in working collaboratively to achieve sustainability goals. This includes working with clients, other financial institutions and industry bodies to promote, develop and encourage leading E&S standards. For all risks identified, we seek to develop effective mitigating measures. Where this is not possible, transactions have been and will continue to be turned down. In 2016, we trained more than 110 staff on our requirements and processes.

For more information on our environmental and social risk assessment please refer to sc.com/eandsrisk

The Group reports on its environmental and social performance through the Group’s Annual Report and Accounts and through the sustainability section of the Group’s website.

The Group Risk Committee provides Group-wide oversight on reputational risk, sets policy and monitors material risks. The Brand, Values and Conduct and Board Risk Committees provide additional oversight of reputational risk on behalf of the Board. At the business level, the Business Responsibility and Reputational Risk Committee has responsibility for managing reputational risk.

In 2017 a review of risk control ownership and governance of reputational risk will take place.

Pension risk (unaudited)

Pension risk is the potential for loss due to having to meet an actuarially assessed shortfall in the Group’s pension

schemes. Standard Chartered offers defined contribution pension plans for new hires in most locations, and only maintains defined benefit plans where required by law, contract or for closed groups of long-serving employees. The Group monitors and manages both the pension financial risks stemming from its legacy defined benefit schemes and the operational and reputational risks of all its pension arrangements. In doing this the Group has primary regard to its capital position, and the relative costs and benefits of reducing or removing its risk exposure.

The Group’s primary pension risk measures are updates, at least quarterly, of the accounting balance sheet position, the 1-in-200 year stress test required annually by the PRA, and the funding position of the UK Fund (over 60 per cent of the Group’s pension liabilities). The Group mitigates pension risk via a Group Pension Risk Policy which requires all new plans to be defined contribution where possible, and mandates standards around investments, benefit changes, funding, documentation, actuarial valuations, accounts and auditing. Adherence to these standards is assured by an annual governance review.

The Pension Risk Control Owner is responsible for the governance of pension risk and reports to the Group Risk Committee every six months on pension risk matters.

Strategic risk (unaudited)

Strategic Risk is defined as a possible source of loss (or lost opportunity) that might arise from the pursuit of an unsuccessful business plan. Strategic risk is as much about missing out on potential upside opportunities as managing downside risks. Strategic Risks also materialise through other risk types.

As the ultimate governance body for the Group, the Board challenges the Group’s strategy and highlights potential underlying risks. The Group Chief Financial Officer is responsible for formulation of the Group Strategy consistent with the risk appetite and financial objectives agreed by the Board from time to time. He is also responsible for ensuring any strategic analysis presented to the Group Chief Executive, the Board of Standard Chartered PLC or other governing bodies is sound and comprehensive. Responsibility for strategy development formally rests with the business heads, but the Group Head of Strategy is the risk control owner for all strategic risks.

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Standard Chartered Bank Risk profile

Our risk profile in 2016 (unaudited)

We have a well-established risk governance structure and we closely manage our risks to maintain the Group’s risk profile in compliance with the Risk Appetite Statement. Market conditions continued to be challenging in 2016 and the economic outlook remains uncertain. We manage these uncertainties through a framework that provides a forwardlooking 12 to 18 month view of the economic, business and credit conditions across the Group’s key markets, enabling us to proactively manage our portfolio.

We continue to take action to reposition the Group’s corporate portfolio, exiting weaker credit or lower return clients and adding new clients selectively. The Group’s portfolio is now more diversified across dimensions such as industry sectors, geographies and single names.

The table below highlights the Group’s overall risk profile associated with our business strategy.

Robust risk governance structure and	Robust risk governance structure and		Increasingly diversified short	Strong capital and	Strong capital and
experienced senior team			tenor portfolio with reducing	liquidity position
			concentrations
•	We have a robust Risk Management	•	Our balance sheet remains resilient and
	Framework that assigns accountability		increasingly well-diversified across a wide range	•	We remain well capitalised and our
	and responsibility for the management		of regions, client segments, industries and		balance sheet remains highly liquid
	and control of risk		products which serves to mitigate risk.	•	We have a strong advances-to-
•	The SC PLC Group has a clear Risk	•	Within the Corporate & Institutional Banking		deposits ratio, and remain a net
	Appetite Statement which is aligned		and Commercial Banking portfolio:		provider of liquidity to interbank
	to the Group’s strategy; it is approved		– Loans and advances to the financing, insurance		markets
	by the Board and informs the more		and non-banking industry are 27 per cent of the	•	Our customer deposit base is
	granular risk parameters within which		total customer portfolio, mostly to investment		diversified by type and maturity
	our businesses operate with a		grade institutions. All other industry	•	We have a substantial portfolio of
	particular focus on reducing		concentrations are below 14 per cent of the		liquid assets which can be realised
	concentrations		total customer portfolio		if a liquidity stress occurs
•	We have a very experienced senior		– The loan portfolio remains predominantly short-
	risk team and our risk committees are		dated, with 70 per cent of loans and advances
	staffed by the Group’s most senior		to customers maturing in under one year
	leaders		– Our top 20 corporate exposures have reduced
•	We continuously monitor our risk		to 55 per cent of Tier 1 capital, from 61 per
	profile to ensure it remains within our		cent as at December 2015
	risk appetite, regularly conduct stress		– Over 47 per cent of customer loans and
	tests and adjust our exposures,		advances is investment grade and this mix is
	underwriting standards and limits		improving
			– We hold a diverse mix of collateral, valued
			conservatively. Over half of our sub-investment
			grade corporate portfolio is collateralised. 55
			per cent of long-term sub investment grade is
			collateralised
		•	More than 41 per cent of customer loans and
			advances are in retail products. The overall loan-
			to-value ratio on our mortgage portfolio is less
			than 50 per cent
		•	We have low exposure to asset classes outside
			our core markets

Basis of preparation

Unless otherwise stated the balance sheet and income statement information presented within this section is based on the Group’s management view. This is principally the location from which a client relationship is managed, which may differ from where it is financially booked and may be shared between businesses and/or regions. This view reflects how the client segments and regions are managed internally.

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Standard Chartered Bank Risk profile

Credit Risk

The following pages provide detail of credit exposure, split as follows:

• Overall exposure to credit risk, for on-balance sheet and offbalance sheet financial instruments, before and after taking into account credit risk mitigation (page 67)

• Credit quality, which provides an analysis of the loan portfolio by client segment categorised by Strong, Satisfactory and Higher risk, forborne loans and a credit quality by region (pages 69 to 77)

• Problem credit management and provisioning, which provides an analysis of non-performing loans and impaired loans (pages 78 to 87)

• Credit risk mitigation, which provides analysis of collateral held by client segment and collateral type, and details of loan-to-value ratios and other forms of credit risk mitigation (pages 88 to 92)

• Other portfolio analysis, which provides maturity analysis by client segment, and industry and retail products analysis by region (pages 92 to 99)

• Selected portfolios, which provide further detail on commodities and commodities related exposures, debt securities and treasury bills and asset backed securities (pages 100 to 103)

Credit risk is the potential for loss due to the failure of a counterparty to meet its obligations to pay the Group in accordance with agreed terms. Credit exposures arise from both the banking and trading books.

A summary of our current policies and practices regarding credit risk management is provided in the Risk management approach on page 52.

Maximum exposure to credit risk

The table on page 67 presents the Group’s maximum exposure to credit risk for its on-balance sheet and off-balance sheet financial instruments as at 31 December 2016, before and after taking into account any collateral held or other credit risk mitigation. For on balance sheet instruments, the maximum exposure to credit risk is the carrying amount reported on the balance sheet. For off-balance sheet instruments, the maximum exposure to credit risk generally represents the contractual notional amounts.

The Group’s maximum exposure to credit risk is spread across its markets and is affected by the general economic conditions in the regions in which it operates. The Group sets limits on the exposure to any counterparty, and credit risk is spread over a variety of different personal, commercial and institutional customers.

The Group’s gross maximum exposure to credit risk has increased by $261 million when compared to 2015, mainly driven by the increase in on-balance sheet exposure, offset by the reduction in off-balance sheet exposure. Cash and balances at central banks have increased by $5.4 billion reflecting higher surplus liquidity in Europe and the Americas. Loans and advances to customers and banks have increased by $2.5 billion, with loans to customers down $5.4 billion mainly due to risk-mitigating actions to reduce exposures in some markets and sectors and exposure to Banks, up $7.9 billion from short term reverse repurchase transactions backed up by high quality bonds. Further details of the loan portfolio are set out on page 95. Off balance sheet exposures, mainly arising from trade finance, decreased by $6.2 billion, reflecting the slowdown in key markets in our footprint.

Investment securities decreased by $5.9 billion as we reduced holdings of UK government bonds and other debt securities. The Group’s credit risk exposure before risk mitigation arising from derivatives increased by $2.5 billion.

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Standard Chartered Bank Risk profile

Maximum exposure to credit risk

Group		2016		2015
	Credit risk management Maximum exposure Collateral Master netting agreements Net Exposure $million $million $million $million		Credit risk management Maximum exposure Collateral Master netting agreements Net Exposure $million $million $million $million
On-balance sheet Cash and balances at central banks Total Loans and advances to customers held at:1 Fair value through profit or loss Amortised cost Total Loans and advances to banks held at:1 Fair value through profit or loss Amortised cost Total Loans and advances to banks and customers Investment securities2 As per balance sheet Included within fair value through profit and loss Less: Equity securities Derivative financial instruments3 Accrued income4 Assets held for sale Otherassets 5	70,706 - - 70,706		65,312 - - 65,312
	3,177 252,710		4,047 257,228
	255,887		261,275
	2,060 72,605		2,275 64,492
	74,665 330,552 151,310 - 179,242		66,767 328,042 145,3117 - 182,731
	108,866 - - 108,866 14,588 - - 14,588 (2,257) - - (2,257)		114,549 - - 114,549 16,919 - - 16,919 (4,328) - - (4,328)
	121,197 - - 121,197 67,061 9,624 40,391 17,046 1,639 - - 1,639 1,102 - - 1,102 33,897 - - 33,897		127,140 - - 127,140 64,587 10,074 38,934 15,579 1,924 - - 1,924 340 - - 340 32,312 - - 32,312
Total balance sheet	626,154 160,934 40,391 424,829		619,657 155,385 38,934 425,338
Off-balance sheet Contingent liabilities 37,390 - - 37,390 Undrawn irrevocable standby facilities, credit lines and other commitments to lend6 55,655 - - 55,655 Documentary credits and short term trade-related transactions 4,120 - - 4,120 Forward asset purchases and forward deposits 6 - - 6			39,055 - - 39,055 59,431 - - 59,431 4,852 - - 4,852 698 - - 69
Total off- balance sheet 97,171 - - 97,171			103,407 - - 103,407
Total 723,325 160,934 40,391 522,000			723,064 155,385 38,934 528,745

1. An analysis of credit quality is set out on page 69. Further details of collateral held by client segment and held for past due and individually impaired loans are set out on page 88

2. Equity shares are excluded as they are not subject to credit risk

3. The Group enters into master netting agreements, which in the event of default results in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions

4. Accrued income is now included in the table to more accurately reflect the maximum exposure to credit risk

5. The composition of other assets has been amended to more accurately reflect the maximum exposure to credit risk. Other assets now also include HK certificate of indebtedness, cash collateral, acceptances in addition to unsettled trades and other financial assets

6. Excludes unconditionally cancellable facilities 7. Collateral balance has been restated. Refer to page 88 for details. 8. Forward asset purchases and forward deposits have been restated. Refer to Note 23 for details.

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Standard Chartered Bank Risk profile

Maximum exposure to credit risk

Company		2016		2015
	Credit risk management Maximum exposure Collateral Master netting agreements Net Exposure $million $million $million $million		Credit risk management Maximum exposure Collateral Master netting agreements Net Exposure $million $million $million $million
On-balance sheet Cash and balances at central banks Total Loans and advances to customers held at:1 Fair value through profit or loss Amortised cost Total Loans and advances to banks held at:1 Fair value through profit or loss Amortised cost Total Loans and advances to banks and customers Investment securities2 As per balance sheet Included within fair value through profit and loss Less: Equity securities Derivative financial instruments3 Accrued income4 Otherassets 5	59,373 - - 59,373		49,916 - - 49,916
	2,242 117,244		3,865 118,763
	119,486		122,628
	2,060 41,214		2,231 40,089
	43,274 162,760 62,097 - 100,663		42,320 164,948 55,1127 - 109,836
	55,590 - - 55,590 8,539 - - 8,539 (918) - - (918)		61,396 - - 61,396 9,836 - - 9,836 (2,604) - - (2,604)
	63,211 - - 63,211 66,772 9,348 37,880 19,544 871 - - 871 23,831 - - 23,831		68,628 - - 68,628 62,814 9,605 38,820 14,389 954 - - 954 22,537 - - 22,537
Total balance sheet	376,818 71,445 37,880 267,493		369,797 64,717 38,820 266,260
Off-balance sheet Contingent liabilities 28,317 - - 28,317 Undrawn irrevocable standby facilities, credit lines and other commitments to lend6 36,157 - - 36,157 Documentary credits and short term trade-related transactions 2,621 - - 2,621 Forward asset purchases and forward deposits 5 - - 5			29,624 - - 29,624 38,369 - - 38,369 3,530 - - 3,530 98 - - 9
Total off- balance sheet 67,100 - - 67,100			71,532 - - 71,532
Total 443,918 71,445 37,880 334,593			441,329 64,717 38,820 337,792

1. An analysis of credit quality is set out on page 69. Further details of collateral held by client segment and held for past due and individually impaired loans are set out on page 89

2. Equity shares are excluded as they are not subject to credit risk

3. The Group enters into master netting agreements, which in the event of default results in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions

4. Accrued income is now included in the table to more accurately reflect the maximum exposure to credit risk

5. The composition of other assets has been amended to more accurately reflect the maximum exposure to credit risk. Other assets now also include HK certificate of indebtedness, cash collateral, acceptances in addition to unsettled trades and other financial assets

6. Excludes unconditionally cancellable facilities 7. Collateral balance has been restated. Refer to page 89 for details. 8. Forward asset purchases and forward deposits have been restated. Refer to Note 23 for details.

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Standard Chartered Bank Risk profile

Credit quality analysis

An overall breakdown of the loan portfolio by client segment is set out on pages 71 to 74, differentiating between the performing and non-performing book.

Further analysis of credit quality by geography, together with the related impairment charges and provisions, is set out on pages 76 to 77.

Within the performing book, there is an analysis:

• By credit quality, which plays a central role in the quality assessment and monitoring of risk as explained on pages 56 to 57

• Of loans and advances past due but not impaired: a loan is considered past due if payment of principal or interest has not been made on its contractual due date

• Of loans and advances where an impairment provision has been raised - these represent certain forborne accounts that have complied with their revised contractual terms for more than 180 days and on which no further loss of principal is expected

Credit grade migration

Performing loans constitute 98 per cent of customer loans, a 1 per cent increase from 2015.

All loans are assigned a Credit Grade CG, which is reviewed periodically and amended in light of changes in the borrower’s circumstances or behaviour. CG 1 to 12 are assigned to performing clients or accounts, while CG 13 and 14 are assigned to non-performing or defaulted clients. A breakdown of the performing loans by credit quality is provided on pages 71 to 73.The Group uses an internal risk mapping to determine the credit quality for loans, as shown in the table below

Mapping of credit quality[1]

Credit quality description	Corporate & Institutional Banking and Commercial Banking Private Banking Retail Banking
	Credit Grade mapping S&P external ratings equivalent Probability of default (%) Facility type Number of days past due
Strong	Grades 1-5 AAA to BBB- 0.000-0.425 Class I & Class IV Current loans (no past dues nor impaired)
Satisfactory	Grades 6-8 Grades 9-11 BB+ to BB-/B+ B+ to B-/CCC 0.426-2.350 Class II & Class III Loans past due till 29 days 2.351-15.750
Higher Risk	Grade 12 B-/CCC 15.751-50.000 GSAM managed Past due loans 30 days and over till 90 days

1. The credit quality categories for performing loans were changed to align them to how the business is managed in Retail Banking and Private Banking. The categories for Corporate &Institutional Banking and Commercial Banking were aligned to external ratings categories

Overall, the credit quality of the Corporate & Institutional Banking and Commercial Banking loan book has improved when compared to 2015. The strong credit quality category has increased by $6.9 billion due to higher levels of reverse repurchase activity with financing, insurance and nonbanking clients. The satisfactory credit quality category has decreased by $4.1 billion due to actions taken to reduce single name concentration and commodities exposure. Excluding the above two items, the credit quality composition across most sectors and countries is consistent with the prior year, although there has been some deterioration in the commodities related sector due to sustained commodity price volatility. This deterioration resulted in a small increase in the higher risk credit quality category of $0.3 billion.

The credit quality composition for loans to banks is also consistent with prior periods, with the majority of the growth in this period being in the strong category.

Retail Banking credit quality remained stable over the past year.

Further details of our approach to credit rating and measurement is set out on page 56.

Performing loans and advances that are past due but not impaired decreased slightly in 2016, with improvement in 61-

90 days past dues. The past due balances arise substantially in the ‘up to 30 days past due’ category. In the Corporate & Institutional Banking and Commercial Banking segments, across all past due categories, approximately 73 per cent of the amounts past due were regularised by 31 January 2017.

Non-performing loans (NPLs)

A NPL is any loan that is more than 90 days past due or is otherwise individually impaired. This excludes loans renegotiated at or after 90 days past due, but on which there has been no default in interest or principal payments for more than 180 days since renegotiation, and against which no loss of principal is expected.

NPLs are analysed, net of individual impairment provisions, between what is past due but not impaired and what is impaired.

NPLs (net of individual impairment provisions) are $2.7bn lower than 2015. This is driven primarily by the liquidation portfolio in the Corporate & Institutional Banking segment. Gross NPLs increased in the ongoing business mainly due to a small number of exposures in the commodities-related sector and diamond and jewellery sector in the Corporate business for the second half of 2016 was lower compared to the first half of 2016.

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Standard Chartered Bank Risk profile

Individual impairment provisions

In Corporate & Institutional Banking, individual impairment provisions on the balance sheet for NPLs decreased by $269 million (6 per cent) compared to 31 December 2015. This was mainly driven by lower provisions in the liquidation portfolio. Individual impairment provisions in the ongoing business increased by $825 million. Commercial Banking individual impairment provisions on the balance sheet for NPLs remained flat compared to 31 December 2015.

Retail Banking individual impairment provision balance (IIP) improved by $70 million compared to 2015, primarily driven by improvements in Korea Personal Debt Rehabilitation Scheme (PDRS) related losses and the sale of portfolios in Thailand and Philippines. We remain disciplined in our approach to risk management and proactive in our collection efforts to minimise account delinquencies.

Portfolio impairment provision

Portfolio impairment provisions are held to cover the inherent risk of losses, which, although not identified, are known through experience to be present in any loan portfolio. Portfolio impairment provision balances have increased 4.6 per cent from 2015. There was an increase of $106 million in the Corporate & Institutional Banking segment due to an adjustment for uncertainties arising from the same sectors as those driving loan impairment. The increase in Corporate & Institutional Banking portfolio impairment provision was partially offset by a decrease of $58 million in the Retail Banking segment and $19 million in the Commercial Banking segment due to improvement in credit quality.

Further details around the policy and rationale underlying the determinant of the portfolio impairment provision are provided on pages 58 to 59.

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Standard Chartered Bank Risk profile

By Client segment

By Client segment
Group		2016
	Loans to banks $million	Loans to Customers
		Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Performing Loans - Strong - Satisfactory - Higher risk Impaired forborne loans, net of provisions Non-performingLoans	66,950 7,682 34 74,666 - -
		63,547 91,186 4,851 7,816 4,014 171,414 55,207 1,560 18,296 3,767 233 79,063 1,223 410 264 38 - 1,935
		119,977 93,156 23,411 11,621 4,247 252,412 - 251 - - - 251 2,515 339 768 289 - 3,911
Total loans Portfolioimpairment provision	74,666 (1)	122,492 93,746 24,179 11,910 4,247 256,574 (261) (258) (166) (2) - (687)
Total net loans	74,665	122,231 93,488 24,013 11,908 4,247 255,887

The following table further analyses total loans included within the table above

		2016
	Loans to banks $million	Loansto Customers
		Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Included in performing loans Neither past due nor impaired - Strong - Satisfactory - Higher risk Past due but not impaired - Up to 30 days past due - 31 - 60 days past due - 61 - 90 days past due	66,596 7,580 34 74,210 456 - - 456
		63,416 91,186 4,812 7,816 4,014 171,244 53,791 - 17,728 3,690 233 75,442 1,121 - 188 18 - 1,327
		118,328 91,186 22,728 11,524 4,247 248,013
		1,402 1,560 539 91 - 3,592 100 282 111 - - 493 147 128 33 6 - 314
		1,649 1,970 683 97 - 4,399
Totalperformingloans	74,666	119,977 93,156 23,411 11,621 4,247 252,412
of which, forborne loans amounting to	1	964 224 111 - - 1,299
Included in non-performing loans Past due but not impaired - 91 - 120 days past due - 121 - 150 days past due Individually impaired loans, net of provisions	- - - -
		- 72 5 - - 77 - 60 12 - - 72
		- 132 17 - - 149
		2,515 207 751 289 - 3,762
Total non-performingloans	-	2,515 339 768 289 - 3,911
of which, forborne loans amounting to	-	889 135 200 - - 1,224

The following table sets out loans held at fair value through profit and loss which are included within the table above	The following table sets out loans held at fair value through profit and loss which are included within the table above	The following table sets out loans held at fair value through profit and loss which are included within the table above
Neither past due nor impaired - Strong - Satisfactory Individually impaired loans	1,659 401 2,060 -
		1,769 - - - - 1,769 1,346 - 47 - - 1,393
		3,115 - 47 - - 3,162
		15 - - - - 15
Total loans held at fair value through profit and loss	2,060	3,130 - 47 - - 3,177

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Standard Chartered Bank Risk profile

Credit quality analysis continued By Client segment

Credit quality analysiscontinued
By Client segment Group		2015
	Loans to banks $million	Loansto Customers1
		Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Performing Loans - Strong - Satisfactory - Higher risk Impaired forborne loans, net of provisions Non-performingLoans	60,500 6,183 44 66,727 - 41
		57,169 92,117 4,335 10,010 5,547 169,178 58,694 1,701 18,910 4,965 - 84,270 830 487 337 - - 1,654
		116,693 94,305 23,582 14,975 5,547 255,102 - 240 - - - 240 4,857 468 943 322 - 6,590
Total loans Portfolioimpairment provision	66,768 (1)	121,550 95,013 24,525 15,297 5,547 261,932 (155) (316) (185) (1) - (657)
Total netloans	66,767	121,395 94,697 24,340 15,296 5,547 261,275

The following table further analyses total loans included within the table above

			2015
	Loans to banks $million		Loansto Customers1
			Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Included in performing loans Neither past due nor impaired - Strong - Satisfactory - Higher risk Past due but not impaired - Up to 30 days past due - 31 - 60 days past due - 61 - 90 days past due	60,195 6,183 44 66,422 177 2 126 305
			55,434 92,117 3,773 9,958 5,547 166,829 58,929 - 19,024 4,965 - 82,918 595 - 223 - - 818
			114,958 92,117 23,020 14,923 5,547 250,565
			1,237 1,701 453 52 - 3,443 89 335 60 - - 484 409 152 49 - - 610
			1,735 2,188 562 52 - 4,537
Totalperformingloans	66,727		116,693 94,305 23,582 14,975 5,547 255,102
of which, forborne loans amounting to	1		1,038 194 110 - - 1,342
Included in non-performing loans Past due but not impaired - 91 - 120 days past due - 121 - 150 days past due	- - -
			- 149 9 - - 158 - 65 4 - - 69
			- 214 13 - - 227
Individually impaired loans, net of provisions	41		4,857 254 930 322 - 6,363
Total non-performingloans	41		4,857 468 943 322 - 6,590
of which, forborne loans amounting to	1		2,868 214 211 - - 3,293

The following table sets out loans held at fair value through profit and loss which are included within the table above Neither past due nor impaired - Strong 2,275 3,707 - 5 - - 3,712 - Satisfactory - 103 - - - - 103 2,275 3,810 - 5 - - 3,815 Past due but not impaired - 61 - 90 days past due - 98 - - - - 98 - 98 - - - - 98 Individually impaired loans - 134 - - - - 134	The following table sets out loans held at fair value through profit and loss which are included within the table above Neither past due nor impaired - Strong 2,275 3,707 - 5 - - 3,712 - Satisfactory - 103 - - - - 103 2,275 3,810 - 5 - - 3,815 Past due but not impaired - 61 - 90 days past due - 98 - - - - 98 - 98 - - - - 98 Individually impaired loans - 134 - - - - 134	The following table sets out loans held at fair value through profit and loss which are included within the table above Neither past due nor impaired - Strong 2,275 3,707 - 5 - - 3,712 - Satisfactory - 103 - - - - 103 2,275 3,810 - 5 - - 3,815 Past due but not impaired - 61 - 90 days past due - 98 - - - - 98 - 98 - - - - 98 Individually impaired loans - 134 - - - - 134
		3,707 - 5 - - 3,712 103 - - - - 103
		3,810 - 5 - - 3,815
		98 - - - - 98
		98 - - - - 98
		134 - - - - 134
Total loans held at fair value through profit and loss	2,275	4,042 - 5 - - 4,047

1. The 2015 comparatives have been represented to reflect the reorganisation of the Company’s segments. Refer to note 1 for details

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Standard Chartered Bank Risk profile

Credit quality analysis continued By Client segment

Credit quality analysiscontinued
By Client segment Company		2016
	Loans to banks $million	Loans to Customers
		Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Performing Loans - Strong - Satisfactory - Higher risk Impaired forborne loans, net of provisions Non-performingLoans	37,290 5,951 34 43,275 - -
		45,946 9,281 1,244 1,418 2,796 60,685 41,898 406 6,839 5,816 101 55,060 825 124 159 24 - 1,132
		88,669 9,811 8,242 7,258 2,897 116,877 - 4 - - - 4 2,303 95 312 287 - 2,997
Total loans Portfolioimpairment provision	43,275 (1)	90,972 9,910 8,554 7,545 2,897 119,878 (226) (78) (87) (1) - (392)
Total netloans	43,274	90,746 9,832 8,467 7,544 2,897 119,486

The following table further analyses total loans included within the table above

		2016
	Loans to banks $million	Loans to Customers
		Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Included in performing loans Neither past due nor impaired - Strong - Satisfactory - Higher risk Past due but not impaired - Up to 30 days past due - 31 - 60 days past due - 61 - 90 days past due	37,244 5,851 34 43,129 146 - - 146
		45,825 9,281 1,224 1,415 2,796 60,541 40,774 - 6,344 5,727 101 52,946 760 - 109 21 - 890
		87,359 9,281 7,677 7,163 2,897 114,377
		1,159 406 463 89 - 2,117 80 80 80 - - 240 71 44 22 6 - 143
		1,310 530 565 95 - 2,500
Totalperformingloans	43,275	88,669 9,811 8,242 7,258 2,897 116,877
of which, forborne loans amounting to	1	893 19 52 - - 964
Included in non-performing loans Past due but not impaired - 91 - 120 days past due - 121 - 150 days past due Individually impaired loans, net of provisions	- - - -
		- 35 5 - - 40 - 20 12 - - 32
		- 55 17 - - 72
		2303 40 295 287 - 2,925
Total non-performingloans	-	2,303 95 312 287 - 2,997
of which, forborne loans amounting to	-	877 9 70 - - 956

The following table sets out loans held at fair value through profit and loss which are included within the table above Neither past due nor impaired

Neither past due nor impaired
- Strong - Satisfactory Individually impaired loans	1,659 401	1,186 - - - - 1,186 1,015 - 26 - - 1,041
		2,201 - 26 - - 2,227
		15 - - - - 15
Total loans held at fair value through profit and loss	2,060	2,216 - 26 - - 2,242

73

Standard Chartered Bank Risk profile

By Client segment

By Client segment
Company		2015
	Loans to banks $million	Loansto Customers1
		Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Performing Loans - Strong - Satisfactory - Higher risk Impaired forborne loans, net of provisions Non-performingLoans	36,753 5,484 44 42,281 - 40
		42,136 9,429 1,443 2,089 1,588 56,685 44,381 347 6,934 8,253 70 59,985 376 117 97 122 - 712
		86,893 9,893 8,474 10,464 1,658 117,382 - 4 - - - 4 4,661 103 432 322 - 5,518
Total loans Portfolioimpairment provision	42,321 (1)	91,554 10,000 8,906 10,786 1,658 122,904 (124) (77) (73) (2) - (276)
Total net loans	42,320	91,430 9,923 8,833 10,784 1,658 122,628

The following table further analyses total loans included within the table above

			2015
	Loans to banks $million		Loansto Customers1
			Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & other items Total $million $million $million $million $million $million
Included in performing loans Neither past due nor impaired - Strong - Satisfactory - Higher risk Past due but not impaired - Up to 30 days past due - 31 - 60 days past due - 61 - 90 days past due	36,673 5,356 44 42,073
			41,012 4,425 1,133 2,038 1,588 50,196 43,930 4,966 6,869 8,253 70 64,088 376 38 97 122 - 633
			85,318 9,429 8,099 10,413 1,658 114,917
	80 2 126		1,124 347 310 51 - 1,832 56 75 37 - - 168 395 42 28 - - 465
	208		1,575 464 375 51 - 2,465
Totalperformingloans	42,281		86,893 9,893 8,474 10,464 1,658 117,382
of which, forborne loans amounting to	1		918 22 46 - - 986
Included in non-performing loans Past due but not impaired - 91 - 120 days past due -121 - 150 days past due Individually impaired loans, net of provisions Total non-performingloans	- - -
			- 43 7 - - 50 - 20 1 - - 21
			- 63 8 - - 71
	40		4,661 40 424 322 - 5,447
	40		4,661 103 432 322 - 5,518
of which, forborne loans amounting to	1		2,841 19 133 - - 2,993
The following table sets out loans held at fair value through profit and loss which are included within the table above Neither past due nor impaired - Strong 2,090 1,634 - - - - 1,634 - Satisfactory 141 1,999 - - - - 1,999 - High Risk - - - - - - - 2,231 3,633 - - - - 3,633 Past due but not impaired - 61 - 90 days past due - 98 - - - - 98 - 98 - - - - 98 Individually impaired loans - 134 - - - - 134
			1,634 - - - - 1,634 1,999 - - - - 1,999 - - - - - -
			3,633 - - - - 3,633
			98 - - - - 98
			98 - - - - 98
			134 - - - - 134
Total loans held at fair value through profit and loss	2,231		3,865 - - - - 3,865

1. The 2015 comparatives have been represented to reflect the reorganisation of the Company’s client segments. Refer to note 1 for details

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Standard Chartered Bank Risk profile

Forborne loans

The table below shows an analysis of forborne loans by region. The 43 per cent reduction in total forborne loans in 2016 was due to the settlement of a large exposure in the liquidation portfolio. Refer to note 8 for the accounting policy on forborne loans.

Group	2016 Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Not impaired Impaired	159 242 790 109 1,300 327 726 284 138 1,475
Total forborne loans	486 968 1,074 247 2,775

Group	20151 Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Not impaired Impaired	304 350 632 57 1,343 334 1,325 384 1,491 3,534
Total forborne loans	638 1,675 1,016 1,548 4,877

1. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details

Company	2016
	Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Not Impaired Impaired	- 214 641 109 964 - 512 311 138 961
Total forborne loans	- 726 952 247 1,925

Company	20151
	Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Not Impaired Impaired	- 294 638 55 987 - 1,325 340 1,333 2,998
Total forborneloans	- 1,619 978 1,388 3,985

1. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details

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Standard Chartered Bank Risk profile

Credit quality by region

Loans and advances to customers

The following tables set out an analysis of the loans to customers and banks between those loans that are neither past due nor impaired, those that are past due but not impaired, those that are impaired, the impairment provision and net impairment charge by geographic region

Group	2016
	Balance sheet1	Profit and loss1
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision3 Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China &North Asia ASEAN & South Asia Africa & Middle East Europe &Americas	109,250 901 1,115 (535) (198) 110,533 69,652 1,648 4,665 (2,568) (236) 73,161 25,846 1,720 2,682 (1,981) (127) 28,140 43,265 279 1,218 (583) (126) 44,053	484 (53) 431 984 6 990 594 7 601 491 92 583
	248,013 4,548 9,680 (5,667) (687) 255,887	2,553 52 2,605

Group	2015
	Balance sheet1 2	Profit and loss1 2
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe &Americas	104,800 912 1,489 (787) (253) 106,161 81,365 2,195 5,537 (2,509) (245) 86,343 28,486 1,462 3,021 (1,771) (128) 31,070 35,914 195 2,579 (956) (31) 37,701	847 89 936 2,143 57 2,200 908 (11) 897 832 (138) 694
	250,565 4,764 12,626 (6,023) (657) 261,275	4,730 (3) 4,727

Company	2016
	Balance sheet1	Profit and loss1
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China &North Asia ASEAN & South Asia Africa & Middle East Europe & Americas	6,439 - - - - 6,439 44,953 948 3,963 (2,207) (128) 47,529 20,235 1,397 1,984 (1,330) (52) 22,234 42,750 227 1,219 (700) (212) 43,284	- - - 815 25 840 469 3 472 491 90 581
	114,377 2,572 7,166 (4,237) (392) 119,486	1,775 118 1,893
	2015

Company	Balance sheet1,2	Profit and loss1,2
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe &Americas	3,150 - 51 (9) (1) 3,191 53,194 1,360 5,241 (2,136) (111) 57,548 22,659 1,102 2,564 (1,407) (52) 24,866 35,914 74 1,846 (699) (112) 37,023	(3) 14 11 1,902 51 1,953 528 (14) 514 798 (126) 672
	114,917 2,536 9,702 (4,251) (276) 122,628	3,225 (75) 3,150

1. Excludes impairment charges relating to debt securities classified as loans and receivables (refer to note 8)

2. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details on page 142

3. The movement in portfolio impairment provision include net impairment charge, transfer to asset held for sale and translation differences, refer to page 84 for details

76

Standard Chartered Bank Risk profile

Credit quality by geographic region continued Loans and advances to banks

Group	2016
	Balance sheet1	Profit and loss1
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe &Americas	31,930 309 - - - 32,239 14,722 17 163 (163) (1) 14,738 7,492 61 - - - 7,553 20,066 69 - - - 20,135	- - - - - - - - - - - -
	74,210 456 163 (163) (1) 74,665	- - -

Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe &Americas	31,930 309 - - - 32,239 14,722 17 163 (163) (1) 14,738 7,492 61 - - - 7,553 20,066 69 - - - 20,135 74,210 456 163 (163) (1) 74,665	- - - - - - - - - - - - - - -
Group	2015
	Balance sheet1 2	Profit and loss1
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas	29,151 1 - - - 29,152 9,438 21 160 (160) (1) 9,458 6,827 98 1 - - 6,926 21,006 185 43 (3) - 21,231	- - - 82 (1) 81 - - - 8 - 8
	66,422 305 204 (163) (1) 66,767	90 (1) 89

Company	2016
	Balance sheet1	Profit and loss1,2
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas	3,774 - - - - 3,774 12,591 16 - - (1) 12,606 6,879 61 - - - 6,940 19,885 69 3 (3) - 19,954	- - - - - - - - - - - -
	43,129 146 3 (3) (1) 43,274	- - -

Company	2015
	Balance sheet1	Profit and loss1,2
	Neither past due nor individually impaired Past due but not individually impaired Individually impaired Individual impairment provision Portfolio impairment provision Total $million $million $million $million $million $million	Net individual impairment provision Portfolio impairment provision/ (release) Net loan impairment charge $million $million $million
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas	3,272 - - - - 3,272 12,898 21 - - (1) 12,918 5,092 2 - - - 5,094 20,811 185 43 (3) - 21,036	- - - - - - - - - 8 - 8
	42,073 208 43 (3) (1) 42,320	8 - 8

1. Excludes impairment charges relating to debt securities classified as loans and receivables (refer to note 8 on page 150)

2. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details on page 142.

77

Standard Chartered Bank Risk profile

Problem credit management and provisioning

Impairments

At Group level, total loan impairment including the liquidation portfolio was $2,791 million representing 107 basis points (bps) of average customer loans and advances, down from $4,976 million in 2015. Loan impairment for the ongoing business remained largely flat at $2,382 million compared to $2,381 million in 2015.

By segment, Retail Banking loan impairment has continued to improve and fell 28 per cent to $489 million (2015: $677 million) representing 51 bps of loss. Improvement in loan impairment in 2016 is an outcome of improving portfolio performance in markets such as Korea, Hong Kong, Thailand, Singapore and a modest improvement in other markets.

Commercial Banking ongoing business impairment, though remaining elevated, fell by 50 per cent to $491 million in 2016 (2015: $980 million). This was across all regions as a result of improved credit and account management, but we remain vigilant for emerging risks.

The ongoing business loan impairment charge in Corporate & Institutional Banking increased to $1,401 million when compared to $723 million in 2015. Loan impairment of $795 million in the second half of 2016 is higher than previous half years (H1 2016: $606 million; H2 2015: $525 million) due to impairment related to the diamond & jewellery sector. Geographically, Europe and Americas contributed to 36 per cent of the 2016 loan impairment.

The ongoing business cover ratio for Corporate & Institutional Banking has increased to 62 per cent (2015: 47 per cent) and for Commercial Banking increased to 75 per cent (2015: 70 per cent). The ongoing business cover ratio for the Group has increased to 69 per cent (2015: 62 per cent).

By industry sector, loan impairment related to commodities in the Corporate & Institutional Banking ongoing business was

$435 million, an increase of 8 per cent from 2015 (2015: $401 million) albeit lower in the second half of 2016 than in the first half. This constitutes 31 per cent of the Corporate & Institutional Banking ongoing business impairment charge and mainly relates to exposures in India.

The commodities sector loan impairment in the Commercial Banking ongoing business was $101 million, down 41 per cent from 2015 (2015: $171 million) and constituted 21 per cent of the Commercial Banking impairment charge.

In India, loan impairment for the Corporate & Institutional Banking ongoing business increased to $284 million in 2016 (2015: $188 million). The increase was primarily driven by a small number of exposures in the commodities sector. Loan impairment in the India Commercial Banking ongoing business decreased by 57 percent to $103 million (2015: $239 million)

In 2015 the liquidation portfolio had been marked down to an estimate of its realisable value resulting in an impairment of $2.6bn. Additional impairment of $409 million was recognised in 2016 on the resolution of cases and on a clearer view of realisable value.

Other impairment (including restructuring charges and goodwill impairment) was $488 million (FY 2015: $732million). Excluding goodwill impairment, Other impairment was $322 million, an increase of $78 million primarily due to the decline in value of Principal Finance.

In 2016 the Group disclosed its decision to reduce balance sheet exposure to Principal Finance by streamlining the business over time and managing its third-party portfolio to maximise value for shareholders and third party investors. As a non-strategic business, the Group will exit Principal Finance and future gains and losses will be treated as restructuring and excluded from the underlying results of the Group.

The following table provides details of the impairment charge for the year.

	2016	2015
	$million	$million
Ongoing business portfolio loan impairment
Corporate & Institutional Banking	1,401	723
Retail Banking	489	677
Commercial Banking	491	980
Private Banking	1	1
Impairment on loans and advances and other credit risk provisions	2,382	2,381
Liquidation portfolio loan impairment
Corporate & Institutional Banking	335	2,321
Commercial Banking	10	181
Private Banking	64	93
Impairment on loans and advances and other credit risk provisions	409	2,595
Total loan impairment	2,791	4,976
Other Impairment1	488	732
Total Impairment	3,279	5,708

1. Includes charges relating to restructuring actions for other impairment

78

Standard Chartered Bank Risk profile

Non-performing loans by client segment

Gross NPLs decreased by $3.1 billion, or 24 per cent, compared to 2015. These decreases were primarily driven by a reduction in the liquidation portfolio through disposal of loans and write-offs. Gross NPLs in the ongoing business were up by $633 million on account of a small number of exposures in the commodities related sectors (oil and gas offshore support) and in the diamond and jewellery sector.

Compared to 2015, amounts written off relating to Corporate & Institutional Banking increased due to a small number of large write-offs from the liquidation portfolio.

Commercial Banking amounts written off increased compared to 2015, primarily in Greater China as a result of the partial write-off of a large exposure in the liquidation portfolio and a number of small write-offs from the ongoing business.

The table below presents a movement of the gross NPLs to banks and customers, together with the provisions held and the respective cover ratios for all segments.

Cover ratio

The cover ratio measures the proportion of total impairment provisions to gross NPLs, and is a metric commonly used in considering impairment trends. This metric does not allow for variations in the composition of NPLs and should be used in conjunction with other credit risk information provided, including the level of collateral cover.

The cover ratio before collateral for Retail Banking improved to 85 per cent (2015: 80 per cent) due to sale of portfolios in Thailand and the Philippines.

The cover ratio before collateral for Corporate & Institutional Banking increased to 65 per cent compared to 48 per cent in 2015. The Commercial Banking cover ratio before collateral also increased to 75 per cent from 70 per cent in 2015.

The balance of NPLs not covered by individual impairment provisions represents the adjusted value of collateral held and the Group’s estimate of the net outcome of any workout or recovery strategy.

Collateral provides risk mitigation to some degree in all client segments and supports the credit quality and cover ratio assessments post impairment provisions. Further information on collateral is provided on pages 88 to 89.

2016

Group	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Total $million $million $million $million $million
Gross non-performing loans at 1 January Exchange translation differences Classified as non-performing during the year Recoveries on loans and advances previously written off Additions Transferred to assets held for sale Transferred to performing during the year Net repayments Amounts written off Disposals of loans Reductions	9,128 747 2,559 325 12,759 (68) (12) (59) (2) (141)
	1,800 864 642 103 3,409 13 63 51 - 127
	1,813 927 693 103 3,536
	- (47) - - (47) (39) (147) (5) - (191) (2,416) (180) (300) - (2,896) (1,390) (722) (480) (63) (2,655) (552) (18) (39) (69) (678)
	(4,397) (1,114) (824) (132) (6,467)
Gross non-performing loans at 31 December Individual impairment provisions1	6,476 548 2,369 294 9,687 (3,961) (209) (1,601) (5) (5,776)
Net non-performing loans Portfolioimpairment provision	2,515 339 768 289 3,911 (262) (258) (166) (2) (688)
Total	2,253 81 602 287 3,223
Cover ratio Collateral ($million) Cover ratio (aftercollateral)	65% 85% 75% 2% 67% 702 255 358 290 1,605 72% 85% 83% 100% 76%
Ofthe above,includedin liquidationportfolio
Gross non-performing loans at 31 December Individual impairment provisions	3,333 - 213 261 3,807 (2,267) - (154) - (2,421)
Net non-performingloans	1,066 - 59 261 1,386
Cover ratio Collateral ($million) Cover ratio (after collateral)	68% - 72% - 64% 356 - - 261 617 79% - 72% 100% 80%

1. The difference to total individual impairment provision reflects provisions against performing forborne loans that are not included within non-performing loans as they have been performing for 180 days

79

Standard Chartered Bank Risk profile

Standard Chartered Bank Risk profile
Group	20152
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Total $million $million $million $million $million
Gross non-performing loans at 1 January Exchange translation differences Classified as non-performing during the year Recoveries on loans and advances previously written off Additions Transferred to performing during the year Net repayments Amounts written off Disposals of loans Reductions	4,380 797 2,225 90 7,492 (200) (55) (92) (2) (349)
	5,778 561 951 394 7,684 - 5 - - 5
	5,778 566 951 394 7,689
	(11) (59) (28) (6) (104) (357) (144) (230) - (731) (461) (305) (244) (93) (1,103) (1) (53) (23) (58) (135)
	(830) (561) (525) (157) (2,073)
Gross non-performing loans at 31 December Individual impairment provisions1	9,128 747 2,559 325 12,759 (4,230) (279) (1,616) (3) (6,128)
Net non-performing loans Portfolioimpairment provision	4,898 468 943 322 6,631 (155) (316) (185) (2) (658)
Total	4,743 152 758 320 5,973
Cover ratio Collateral ($ million) Cover ratio(after collateral)	48% 80% 70% 1% 53% 1,396 258 449 322 2,425 62% 72% 81% 100% 67%
Of the above,included in liquidationportfolio
Gross non-performing loans at 31 December Individual impairment provisions	6,960 - 250 302 7,512 (3,361) - (183) - (3,544)
Net non-performingloans	3,599 - 67 302 3,968
Cover ratio Collateral ($ million) Cover ratio (aftercollateral, excludingPIP)	48% - 73% - 47% 992 - - 302 1,294 63% - 73% 100% 64%

1. The difference to total individual impairment provision reflects provisions against performing forborne loans that are not included within non-performing loans as they have been performing for 180 days

2 The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 for details

80

Standard Chartered Bank Risk profile

Problem credit management and provisioning continued

Problem credit management and provisioningcontinued
Company	2016
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Total $million $million $million $million $million
Gross non-performing loans at 1 January Exchange translation differences Classified as non-performing during the year Recoveries on loans and advances previously written off Additions Transferred to performing during the year Net repayments Amounts written off Disposals of loans Reductions	8,051 171 1,265 325 9,812 (20) (2) (17) (2) (41)
	1,612 45 308 100 2,065 - 59 - - 59
	1,612 104 308 100 2,124
	- (17) (2) - (19) (2,336) (17) (115) - (2,468) (1,193) (81) (213) (64) (1,551) (552) - - (69) (621)
	(4,081) (115) (330) (133) (4,659)
Gross non-performing loans at 31 December Individual impairment provisions1	5,562 158 1,226 290 7,236 (3,259) (63) (914) (3) (4,239)
Net non-performing loans Portfolioimpairment provision	2,303 95 312 287 2,997 (227) (78) (87) (1) (393)
Total	2,076 17 225 286 2,604
Cover ratio Collateral ($ million) Cover ratio(after collateral)	63% 89% 82% 1% 64% 563 81 109 287 1,040 69% 91% 83% 100% 73%
Ofthe above,includedin liquidationportfolio
Gross non-performing loans at 31 December Individual impairment provisions	2,923 - 63 261 3,247 (1,948) - (62) - (2,010)
Net non-performingloans	975 - 1 261 1,237
Cover ratio Collateral ($ million) Cover ratio (aftercollateral)	67% - 98% - 62% 316 - - 261 577 77% - 98% 100% 80%

1. The difference to total individual impairment provision reflects provisions against performing forborne loans that are not included within non-performing loans as they have been performing for 180 days

81

Standard Chartered Bank Risk profile

Company	20152
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Total $million $million $million $million $million
Gross non-performing loans at 1 January Exchange translation differences Classified as non-performing during the year Additions Transferred to performing during the year Net repayments Amounts written off Disposals of loans Reductions	3,362 172 1,273 31 4,838 (121) (4) (28) (1) (154)
	5,474 52 134 301 5,961
	5,474 52 134 301 5,961
	- (11) (28) (6) (45) (286) (11) (56) - (353) (377) (19) (28) - (424) (1) (8) (2) - (11)
	(664) (49) (114) (6) (833)
Gross non-performing loans at 31 December Individual impairment provisions1	8,051 171 1,265 325 9,812 (3,350) (68) (833) (3) (4,254)
Net non-performing loans Portfolioimpairment provision	4,701 103 432 322 5,558 (125) (77) (73) (2) (277)
Total	4,576 26 359 320 5,281
Cover ratio Collateral ($ million) Cover ratio(after collateral)	43% 85% 72% 2% 46% 1,252 79 80 322 1,733 57% 86% 72% 100% 61%
Ofthe above,includedin liquidationportfolio
Grossnon-performingloans at 31 December	6,673 - - 302 6,975
Individual impairmentprovisions	(3,135) - - - (3,135)
Total	3,538 - - 302 3,840
Cover ratio Collateral ($ million) Cover ratio(after collateral,excludingPIP)	47% - - - 45% 964 - - 302 1,266 61% - - 100% 63%

1. The difference to total individual impairment provision reflects provisions against performing forborne loans that are not included within non-performing loans as they have been performing for 180 days

2. The 2015 comparatives have been represented to reflect the reorganisation of the Company’s client segments. Refer to note 1 for details

82

Standard Chartered Bank Risk profile

Non-performing loans by geographic region

The following tables set out the total non-performing loans to banks and customers on the basis of the geographic regions:

Group	2016
	Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Loans and advances Gross non-performing Individual impairment provision1	1,170 4,711 2,739 1,067 9,687 (600) (2,659) (1,847) (670) (5,776)
Non-performing loans net of individual impairment provision Portfolioimpairment provision	570 2,052 892 397 3,911 (198) (236) (128) (126) (688)
Net non-performingloans and advances	372 1,816 764 271 3,223
Cover ratio	68% 61% 72% 75% 67%
Group	20152
	Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Loans and advances Gross non-performing Individual impairment provision1	1,392 5,686 3,058 2,623 12,759 (748) (2,650) (1,771) (959) (6,128)
Non-performing loans net of individual impairment provision Portfolioimpairment provision	644 3,036 1,287 1,664 6,631 (253) (246) (128) (31) (658)
Net non-performingloans and advances	391 2,790 1,159 1,633 5,973
Cover ratio	72% 51% 62% 38% 53%
Company	2016
	Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Loans and advances Gross non-performing Individual impairment provision1	- 4,002 2,011 1,223 7,236 - (2,207) (1,330) (702) (4,239)
Non-performing loans net of individual impairment provision Portfolioimpairment provision	- 1,795 681 521 2,997 - (128) (53) (212) (393)
Net non-performingloans and advances	- 1,667 628 309 2,604
Cover ratio	- 58% 69% 75% 64%
Company	20152
	Greater China & North Asia ASEAN & South Asia Africa & MENAP Europe & Americas Total $million $million $million $million $million
Loans and advances Gross non-performing Individual impairment provision1	51 5,172 2,591 1,998 9,812 (9) (2,136) (1,407) (702) (4,254)
Non-performing loans net of individual impairment provision Portfolioimpairment provision	42 3,036 1,184 1,296 5,558 (1) (112) (52) (112) (277)
Net non-performingloans and advances	41 2,924 1,132 1,184 5,281
Cover ratio	20% 43% 56% 41% 46%

1. The difference to total individual impairment provision reflects provisions against performing forborne loans that are not included within non-performing loans as they have been performing for 180 days

2. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details

83

Standard Chartered Bank Risk profile

Individual and portfolio impairment provisions

The present value of estimated future cash flows, discounted at the asset’s original effective interest rate is used to determine the amount of any impairment. In the case of the liquidation portfolio, the effect and timing of the disposal strategy is included in the estimate of future cash flows.

The significant increase in discount unwind in 2016 is mainly due to a large exposure in the liquidation portfolio. The movement in individual impairment provisions is provided below.

Group	2016 2015
	Individual impairment provisions Portfolio impairment provisions Total Individual impairment provisions Portfolio impairment provisions Total $million $million $million $million $million $million
Provisions held at 1 January Exchange translation differences Amounts written off Releases of acquisition fair values Recoveries of amounts previously written off Discount unwind Transferred to assets held for sale Disposal of business units New provisions - restructuring New provisions - excluding restructuring New provisions Recoveries/provisions no longer required Net impairment charge/(releases) against profit Other movements1	6,186 658 6,844 3,375 698 4,073 (68) (9) (77) (214) (36) (250) (2,745) - (2,745) (1,889) - (1,889) - - - (1) - (1) 177 - 177 181 - 181 (287) - (287) (107) - (107) (16) (13) (29) - - - - - - (14) - (14)
	409 - 409 968 - 968 2,582 205 2,787 4,174 229 4,403
	2,991 205 3,196 5,142 229 5,371 (438) (153) (591) (322) (233) (555)
	2,553 52 2,605 4,820 (4) 4,816 30 - 30 35 - 35
Provisions held at 31 December	5,830 688 6,518 6,186 658 6,844

Company	2016 2015
	Individual impairment provisions Portfolio impairment provisions Total Individual impairment provisions Portfolio impairment provisions Total $million $million $million $million $million $million
Provisions held at 1 January Exchange translation differences Amounts written off Releases of acquisition fair values Recoveries of amounts previously written off Discount unwind Transferred to assets held for sale Disposal of business units New provisions - restructuring New provisions - excluding restructuring New provisions Recoveries/provisions no longer required Net impairment charge/(releases) against profit Other movements1	4,254 277 4,531 1,883 360 2,243 (27) (1) (28) (118) (8) (126) (1,566) (1) (1,567) (767) - (767) - - - - - - 44 - 44 49 - 49 (243) - (243) (66) - (66) - - - - - - - - - - - -
	409 - 409 968 - 968 1,552 174 1,726 2,363 80 2,443
	1,961 174 2,135 3,331 80 3,411 (186) (56) (242) (98) (155) (253)
	1,775 118 1,893 3,233 (75) 3,158 3 - 3 40 - 40
Provisionsheld at 31 December	4,240 393 4,633 4,254 277 4,531

1. Other movements include provision for liabilities and charges that have been drawn down and are now part of loan impairment.

84

Standard Chartered Bank Risk profile

Individually impaired loans by client segment

Corporate & Institutional Banking gross individually impaired loans decreased by $2.7 billion, or 29 per cent, since 2015 primarily in Europe and South Asia as a result of the settlement of a large exposure in the liquidation portfolio.

Gross impaired loans in the Retail Banking book decreased to $0.7 billion mainly due to improvement in Korea and the sale of Thailand and Philippine portfolios. The following table shows the movement of individually impaired loans and provisions for each client segment:

Group	2016
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Total $million $million $million $million $million
Gross impaired loans at 1 January Exchange translation differences Classified as individually impaired during the year Transferred to not impaired during the year Other movements1	9,128 831 2,546 325 12,830 (75) (11) (59) (1) (146) 1,801 769 573 103 3,246 (39) (87) (2) - (128) (4,339) (782) (705) (133) (5,959)
Gross impaired loans at 31 December	6,476 720 2,353 294 9,843
Provisions held at 1 January Exchange translation differences Amounts written off Recoveries of amounts previously written off Discount unwind Transferred to assets held for sale New provisions Recoveries/provisions no longer required Net individual impairment charge against profit Other movements2	4,230 337 1,616 3 6,186 (77) (3) 12 - (68) (1,439) (722) (520) (64) (2,745) 8 164 5 - 177 (230) (26) (31) - (287) - (16) - - (16)
	1,574 763 587 67 2,991 (134) (235) (68) (1) (438)
	1,440 528 519 66 2,553 29 - 1 - 30
Individual impairment provisions held at 31 December	3,961 262 1,602 5 5,830
Netindividuallyimpairedloans	2,515 458 751 289 4,013

1. Other movement includes repayments, amounts written off and disposals of loans

2. Other movements include provision for liabilities and charges that has been drawn down and now part of loan impairment.

85

Standard Chartered Bank Risk profile

Group	20153
	Corporate and Institutional Clients Retail Clients Commercial Clients Private Banking Clients Total $million $million $million $million $million
Gross impaired loans at 1 January Exchange translation differences Classified as individually impaired during the year Transferred to not impaired during the year Other movements1	4,964 846 2,198 91 8,099 (199) (40) (86) (2) (327) 5,548 382 940 394 7,264 (370) (43) (27) (6) (446) (815) (314) (479) (152) (1,760)
Grossimpairedloans at 31 December	9,128 831 2,546 325 12,830
Provisions held at 1 January Exchange translation differences Amounts written off Releases of acquisition fair values Recoveries of amounts previously written off Discount unwind Transferred to assets held for sale New provisions Recoveries/provisions no longer required Net individual impairment charge against profit Other movements2	1,852 458 1,006 59 3,375 (123) (47) (41) (3) (214) (528) (875) (340) (146) (1,889) (1) - - - (1) 2 175 4 - 181 (48) (25) (34) - (107) - (14) - - (14)
	3,061 914 1,074 93 5,142 (25) (249) (48) - (322)
	3,036 665 1,026 93 4,820 40 - (5) - 35
Individual impairment provisions held at 31 December	4,230 337 1,616 3 6,186
Net individuallyimpaired loans	4,898 494 930 322 6,644

Company	2016
	Corporate and Institutional Clients Retail Clients Commercial Clients Private Banking Clients Total $million $million $million $million $million
Gross impaired loans at 1 January Exchange translation differences Classified as individually impaired during the year Transferred to not impaired during the year Other movements1	8,052 109 1,259 325 9,745 (20) (1) (16) (2) (39) 1,612 24 291 100 2,027 - (14) (1) - (15) (4,079) (13) (324) (133) (4,549)
Grossimpairedloans at 31 December	5,565 105 1,209 290 7,169
Provisions held at 1 January Exchange translation differences Amounts written off Recoveries of amounts previously written off Discount unwind New provisions Recoveries/provisions no longer required Net individual impairment charge against profit Other movements2 Individual impairment provisionsheld at 31 December	3,351 65 835 3 4,254 (13) (2) (12) - (27) (1,092) (189) (221) (64) (1,566) 1 43 - - 44 (223) (1) (19) - (243)
	1,338 204 355 64 1,961 (103) (59) (24) - (186)
	1,235 145 331 64 1,775 3 - - - 3 3,262 61 914 3 4,240
Net individuallyimpaired loans	2,303 44 295 287 2,929

1. Other movement includes repayments, amounts written off and disposals of loans

2. Other movements include provision for liabilities and charges that has been drawn down and now part of loan impairment.

3. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 for details

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Standard Chartered Bank Risk profile

Company	20153
	Corporate and Institutional Clients Retail Clients Commercial Clients Private Banking Clients Total $million $million $million $million $million
Gross impaired loans at 1 January Exchange translation differences Classified as individually impaired during the year Transferred to not impaired during the year Other movements1	3,946 109 1,275 32 5,362 (119) (2) (28) (1) (150) 5,246 21 128 303 5,698 (360) (3) (27) (6) (396) (661) (16) (89) (3) (769)
Grossimpairedloans at 31 December	8,052 109 1,259 325 9,745
Provisions held at 1 January Exchange translation differences Amounts written off Recoveries of amounts previously written off Discount unwind New provisions Recoveries/provisions no longer required Net individual impairment charge against profit Other movements2	1,266 89 516 12 1,883 (99) (10) (9) - (118) (464) (201) (93) (9) (767) 2 45 2 - 49 (42) (1) (23) - (66)
	2,668 207 456 - 3,331 (20) (64) (14) - (98)
	2,648 143 442 - 3,233 40 - - - 40
Individual impairment provisionsheld at 31 December	3,351 65 835 3 4,254
Net individuallyimpaired loans	4,701 44 424 322 5,491

1. Other movement includes repayments, amounts written off and disposals of loans

2. Other movements include provision for liabilities and charges that has been drawn down and now part of loan impairment.

3. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 for details

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Standard Chartered Bank Risk profile

Credit risk mitigation

Potential credit losses from any given account, customer or portfolio are mitigated using a range of tools such as collateral, netting arrangements, credit insurance, credit derivatives taking into account expected volatility and guarantees. The reliance that can be placed on these mitigants is carefully assessed in light of issues such as legal certainty and enforceability, market valuation correlation and counterparty risk of the guarantor. See page 57 for our overall approach to credit risk mitigation.

Collateral

The requirement for collateral is not a substitute for the ability to pay, which is the primary consideration for any lending decisions.

As a result of reinforcing our collateralisation requirements, the fair value of collateral held as percentage of amount outstanding has increased by 1 per cent since the end of 2015.

The unadjusted market value of collateral across all asset types, in respect of Corporate & Institutional Banking and Commercial Banking, without adjusting for overcollateralisation, was $229 billion (2015: $201 billion).

The collateral values in the table on below are adjusted where appropriate in accordance with our risk mitigation policy and for the effect of over-collateralisation. 50 per cent of the clients that have placed collateral with the Group are ������������������������������������������������ collateralisation is 47 per cent.

We have remained conservative 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.

The increase of reverse repurchase (repo) collateral from 49 per cent to 56 per cent was due to increased liquidity management activity by the Group.

The average loan-to-value (LTV) ratio of the commercial real estate (CRE) portfolio has increased to 39 per cent, compared with 37 per cent in 2015. The increase in average LTV is due to drop in market value of the properties in India and Middle East. The proportion of loans with an LTV greater than 80 per cent has remained below 1 per cent during the same period.

In the Retail Banking and Private Banking 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. The collateral levels for Retail Banking have increased marginally compared to 2015.

For loans and advances to customers and banks (including those held at fair value through profit or loss), the table below sets out the fair value of collateral held by the Group, adjusted where appropriate in accordance with the risk mitigation policy as outlined on page 57 and for the effect of over-collateralisation.

Group		Collateral A	mount Outstanding1, 2
	Of which Of which Total Past due but not individually impaired loans Individually impaired loans Total Past due but not individually impaired loans Individually impaired loans $million $million $million $million $million $million		Of which
As at 31 December 2016 Corporate and Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other items	57,378 93 702 174,873 2,105 6,476 73,352 1,527 255 93,846 2,102 720 7,084 393 358 25,042 700 2,353 7,584 94 290 11,926 97 294 5,912 - - 25,553 - -
Total	151,310 2,107 1,605 331,240 5,004 9,843
As at 31 December 20153,4 Corporate and Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other items	50,218 41 1,396 168,611 2,040 9,128 72,017 1,563 258 95,013 2,402 831 7,934 207 449 24,525 575 2,546 9,859 52 322 15,297 52 325 5,283 - - 25,254 - -
Total	145,311 1,863 2,425 328,700 5,069 12,830

1. Includes loans held at fair value through profit or loss

2. Includes loans and advances to banks

3. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 for details

4. Total collateral against loans and advances has been restated by $7.2 billion to $145.3 billion across the relevant client segments

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Standard Chartered Bank Risk profile

Standard Chartered Bank Risk profile
Company		Collateral A	mount Outstanding1,2
	Of which Of which Total Past due but not individually impaired loans Individually impaired loans Total Past due but not individually impaired loans Individually impaired loans $million $million $million $million $million $million		Of which
As at 30 December 2016 Corporate and Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other items	48,680 33 563 130,179 1,444 5,565 4,621 441 81 9,934 585 105 1,816 324 109 9,078 594 1,209 4,608 92 287 7,560 95 290 2,372 - - 6,402 - -
Total	62,097 890 1,040 163,153 2,718 7,169
As at 31 December 20153,4 Corporate and Institutional Banking Retail Banking Commercial Banking Private Banking Central& Other items	37,152 42 1,252 133,875 1,783 8,052 4,561 354 79 10,000 527 109 3,977 159 80 8,906 383 1,259 6,669 51 322 10,786 51 325 2,753 - - 1,658 - -
Total	55,112 606 1,733 165,225 2,744 9,745

1. Includes loans held at fair value through profit or loss

2. Includes loans and advances to banks

3. The 2015 comparatives have been represented to reflect the re-organisation of the Group’s client segments. Refer to note 1 for details

4. Total collateral against loans and advances has been restated by $4.0 billion to $55.1 billion across the relevant client segments

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Standard Chartered Bank Risk profile

Corporate & Institutional Banking and Commercial Banking

Collateral held against Corporate & Institutional Banking and Commercial Banking exposures amounted to $64 billion (2015: $58 billion).

Our underwriting standards encourage taking specific charges on assets and we consistently seek high-quality, investment grade collateral. 29 per cent of collateral held comprises physical assets or is property-based, with the remainder held largely in cash and investment securities.

Non-tangible collateral – such as guarantees and standby letters of credit – may also be held against corporate exposures, although the financial effect of this type of collateral is less significant in terms of recoveries. However, this type of

collateral is considered when determining probability of default and other credit related factors.

Collateral taken for longer-term and sub-investment grade Corporate loans continues to be high at 55 per cent (59 per cent in 2015). Collateral is also held against off-balance sheet exposures, including undrawn commitments and trade-related instruments.

The proportion of highly rated reverse repos to total collateral has increased from 37 per cent in 2015 to 43 per cent in 2016. The following table provides an analysis of the types of collateral held against Corporate & Institutional Banking and Commercial Banking loan exposures:

Group	2016 20151,2 $million $million
Property Plant, machinery and other stock Cash Reverse repo AAA AA- to AA+ BBB- to BBB+ Lower than BBB- Unrated Commodities Ships and aircraft	10,763 12,266 4,509 3,430 8,842 8,778 35,930 28,474
	327 225 27,660 21,255 2,657 3,009 854 1,185 4,432 2,800
	776 765 3,642 4,439
Total value ofcollateral	64,462 58,152

1. The 2015 comparatives have been represented to reflect the re-organisation of the Group’s client segments. Refer to note 1 for details

2. Total collateral against loans and advances has been restated by $10.3 billion to $58.2 billion across the relevant types of collateral

Company	2016 20151 $million $million
Property Plant, machinery and other stock Cash Reverse repo AAA AA- to AA+ BBB- to BBB+ Lower than BBB- Unrated Commodities Ships and aircraft	4,164 5,332 2,504 2,429 6,429 6,522 34,583 23,415
	327 192 27,188 17,254 2,657 2,993 854 1,185 3,557 1,791
	617 634 2,198 2,798
Total value ofcollateral	50,495 41,130

1. The 2015 comparatives have been represented to reflect the re-organisation of the Group’s client segments. Refer to note 1 for details

2. Total collateral against loans and advances has been restated by $6.1 billion to $41.1 billion across the relevant types of collateral

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Standard Chartered Bank Risk profile

Retail Banking and Private Banking

In Retail Banking and Private Banking, 83 per cent of the portfolio is fully secured. The proportion of the unsecured loans remains unchanged from 2015 at15 per cent.

The table below presents an analysis of loans to individuals by product, split between fully secured, partially secured and unsecured.

In Retail mortgage loans, the value of property held as security significantly exceeds the value of mortgage loans. LTV ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties on which they are secured.

The overall LTV ratio of our mortgage portfolio is less than 50 per cent – relatively unchanged since the end of 2015. All our key markets continue to have low portfolio LTVs. Hong Kong mortgage average LTV is at 44 per cent, while Korea, Singapore and Taiwan average mortgage LTV are at 50 per cent, 59 per cent and 49 per cent respectively.

Page 91, presents an analysis of LTV ratios by geography for the mortgage portfolio.

The following table presents an analysis of loans to individuals by product split between fully secured, partially secured and unsecured.

Group	2016 20152
	Fully secured Partially secured Unsecured Total1 Fully secured Partially secured Unsecured Total1 $million $million $million $million $million $million $million $million
Loans to individuals Mortgages CCPL Auto Secured wealth products Other	73,484 23 - 73,507 74,006 12 - 74,018 360 690 15,156 16,206 386 632 16,534 17,552 635 - 3 638 792 - 4 796 11,036 44 - 11,080 13,689 383 14 14,086 2,935 875 415 4,225 2,330 1,208 320 3,858
	88,450 1,632 15,574 105,656 91,203 2,235 16,872 110,310
Percentage of total loans	83% 2% 15% 83% 2% 15%

1. Amounts net of individual impairment provision

2. Collateral on a mortgage book of $0.3 billion presented in Central & other items has been moved to Retail Banking, Mortgages. 1 billion of collateral on Mortgages presented as Partially secured has been re-categorised to Fully secured

Mortgage Loan-to-value ratios by geography

The following table provides an analysis of LTV ratios by geography for the mortgages portfolio:

Group	2016
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total % % % % %
Less than 50 per cent 50 per cent to 59 per cent 60 per cent to 69 per cent 70 per cent to 79 per cent 80 per cent to 89 per cent 90 per cent to 99 per cent 100 percent and greater	55.9 36.9 22.3 36.7 49.9 18.2 16.8 16.9 37.4 18.1 17.3 18.8 20.5 16.2 17.8 6.4 17.6 20.7 8.3 9.7 1.9 8.8 11.3 0.9 3.9 0.2 0.7 4.2 0.5 0.5 0.1 0.4 4.1 - 0.3
Average Portfolio loan to value	46.6 54.7 64.9 44.4 49.0
Loans to individuals - mortgages($million)	51,219 18,903 2,245 1,140 73,507

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Standard Chartered Bank Risk profile

Group Less than 50 per cent 50 per cent to 59 per cent 60 per cent to 69 per cent 70 per cent to 79 per cent 80 per cent to 89 per cent 90 per cent to 99 per cent 100 percent and greater Average Portfolio loan to value Loans to individuals - mortgages($million)	2015
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total % % % % %
	62.9 32.5 23.7 38.5 52.0 15.1 18.4 18.0 38.5 17.0 10.8 19.5 22.2 18.3 16.2 6.9 18.9 17.9 4.3 9.5 3.7 9.9 9.7 - 4.4 0.6 0.6 3.5 0.5 0.6 - 0.2 5.0 - 0.3
	45.9 55.3 63.2 44.4 48.9
	49,266 21,194 2,245 1,313 74,018

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 securities acquired may be held by the Group for investment purposes and are classified as available-for-sale, and the related loan written off.

The carrying value of collateral possessed and held by the Group as at 31 December 2016 is $51 million (2015: $45 million).

million).
	2016	2015
	$million	$million
Property, plant and equipment	13.0	11.0
Equity shares	0.1	2.6
Guarantees	11.5	3.6
Cash	26.1	26.1
Other	0.4	2.0
Total	51.1	45.3

Other credit risk mitigation

Other forms of credit risk mitigation are set out below.

Securitisation

The Group has transferred to third parties by way of securitisation the rights to any collection of principal and interest on client loan assets with a face value of $21 million (2015: $76 million). The Group continues to recognise these assets in addition to the proceeds and related liability of $15 million (2015: $43 million) arising from the securitisations. The Group considers the above client loan assets to be encumbered. Further details of encumbered assets are provided on page 115.

Credit default swaps

The Group has entered into credit default swaps for portfolio management purposes, referencing loan assets with a notional value of $17.5 billion (2015: $23 billion). These credit default swaps are accounted for as guarantees as they meet the accounting requirements set out in International Accounting Standards (IAS) 39. 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.

Derivatives financial instruments

The Group enters into master netting agreements, which in the event of default results in a single amount owed by or to the counterparty through netting the sum of the positive and negative mark-to-market values of applicable derivative transactions. The value of exposure under master netting agreements is $40,391 million (2015: $38,934 million).

In addition, we enter into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mitigant to the exposure. Cash collateral includes collateral called under a variation margin process from counterparties if total uncollateralised mark-to-market exposure exceeds the threshold and minimum transfer amount specified in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to-market values of positions are in the counterparty’s favour and exceed an agreed threshold. The Group holds $7,280 million (2015: $4,194 million) under CSAs.

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 by business segment and Industry and Retail Products analysis by Region.

Maturity analysis by Business segment

The loans and advances to the Corporate & Institutional Banking and Commercial Banking segments remain predominantly short term, with 70 per cent of loans and advances to customers in the segments maturing in under one year, an increase compared to December 2015. 96 per cent of the loans to banks mature in less than one year. Shorter maturity gives us the flexibility to respond promptly to events and rebalance or reduce our exposure to clients or sectors that are facing increased pressure or uncertainty.

The Private Banking loan book also demonstrates a short-term bias typical for loans that are secured on wealth management assets.

The Retail Banking loan book continues to be longer-term in nature as mortgages constitute the majority of the Retail Banking loan book, at 66 per cent (2015: 66 per cent).

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Standard Chartered Bank Risk profile

This section covers a summary of the Group’s loan portfolio, broadly analysed by business and geography, along with an analysis of the maturity profile, credit quality and provisioning of the loan book.

By Client segment

By Client segment
Group	2016
	One year or less One to five years Over five years Total $million $million $million $million
Corporate and Institutional Banking Retail Banking Commercial Banking Private Banking Central& Others	84,199 29,919 8,374 122,492 15,510 16,725 61,511 93,746 19,125 4,048 1,006 24,179 10,802 249 859 11,910 4,215 30 2 4,247
Loans and advances to customers net of individual impairment Portfolioimpairment provision	133,851 50,971 71,752 256,574 (687)
Net loans and advances to customers	255,887
Net loans and advances to banks	71,863 2,644 158 74,665
Group	20151
	One year or less One to five years Over five years Total $million $million $million $million
Corporate and Institutional Banking Retail Banking Commercial Banking Private Banking Central& Others	77,317 34,443 9,790 121,550 15,214 17,304 62,495 95,013 18,738 4,266 1,521 24,525 13,695 494 1,108 15,297 5,537 10 - 5,547
Loans and advances to customers net of individual impairment Portfolioimpairment provision	130,501 56,517 74,914 261,932 (657)
Net loans and advances to customers	261,275
Net loans and advances to banks	63,157 3,572 38 66,767

1. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segment segments. Refer to note 1 for details

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Standard Chartered Bank Risk profile

By Client segment

By Client segment
Company	2016
	One year or less One to five years Over five years Total $million $million $million $million
Corporate and Institutional Retail Commercial Private Banking Central& Others	63,304 21,245 6,422 90,971 2,744 3,191 3,974 9,909 6,746 1,500 310 8,556 7,126 205 214 7,545 2,890 5 2 2,897
Loans and advances to customers net of individual impairment provision Portfolioimpairment provision	82,810 26,146 10,922 119,878 (392)
Total loans and advances to customers	119,486
Total loans and advances to banks	41,318 1,917 39 43,274

Company	20151
	One year or less One to five years Over five years Total $million $million $million $million
Corporate and Institutional Retail Commercial Private Banking Central& Others	56,820 26,642 8,092 91,554 2,835 2,589 4,576 10,000 6,843 1,624 439 8,906 10,142 369 275 10,786 1,658 - - 1,658
Loans and advances to customers net of individual impairment provision Portfolioimpairment provision	78,298 31,224 13,382 122,904 (276)
Total loans and advances to customers	122,628
Total loans and advancesto banks	39,227 3,056 37 42,320

1. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 for details

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Other portfolio analysis continued

Geographic region analysis

Loans and advances to customers (net of individual impairment provisions (IIP) and portfolio impairment provisions (PIP)) decreased by $5.5 billion since December 2015. This reduction was primarily within the Private Banking segment ($3.4 billion), Central & other items ($1.3 billion) and Retail Banking segment ($1.3 billion).

Loans and advances to banks increased by $7.9 billion since December 2015 and was across ASEAN & South Asia ($5.3 billion) and Greater China & North Asia ($3.1 billion). This is mostly due to the liquidity management activity of the Group. Given the nature of the book, it is predominantly short term and the maturity profile remains consistent period-on-period.

Loans and advances in the Retail Banking portfolio decreased mainly in ASEAN & South Asia region due to Thailand (sales of portfolio), Singapore (lower new booking for residential mortgages and Business Banking) and Malaysia (lower new booking for residential mortgages). This was partly offset by growth in mortgages especially in Korea and Hong Kong (under GCNA).

Overall, the regional split of our loans and advances to customers is very similar to 2015 and our loan portfolio remains well diversified across our footprint countries, with our largest single country representing 24 per cent of loans and advances to customers and banks. The largest movements in loans and advances to customers are: ASEAN & South Asia decreased by $13 billion, primarily due to settlements in liquidation book and reduction in Retail Banking exposure; and Europe & Americas increased by $6 billion due to increased liquidity management activity by the Group.

Industry and retail products analysis by region

In the Corporate & Institutional Banking and Commercial Banking segments our largest industry exposure is financing, insurance and non-banking Banking, which constitutes 27 per cent of Corporate & Institutional

Banking and Commercial Banking loans and advances to customers (2015: 21 per cent). Lending to financing, insurance and non-banking clients is mostly to investment grade institutions, is short dated and is part of the liquidity management of the Group.

The manufacturing sector makes up 13 per cent of the Corporate & Institutional Banking and Commercial Banking loans and advances (2015: 14 per cent). The manufacturing industry group is spread across a diverse range of industries, including automobiles and components, capital goods, pharmaceuticals, biotech and life sciences, technology hardware and equipment, chemicals, paper products and packaging, with lending spread over 4,200 clients.

Loans and advances to the energy sector have reduced to $18.8 billion from $19.7 billion in 2015 and constitutes 12 per cent (2015: 13 per cent) of total loans and advances to Corporate & Institutional Banking and Commercial Banking. The energy sector lending is spread across five subsectors and over 360 clients.

The Group provides loans to commercial real estate (CRE) counterparties of $11.3 billion (2015: $13.0 billion), which represents less than 5 per cent of total customer loans and advances. In total, $6.4 billion of this lending is to counterparties where the source of repayment is substantially derived from rental or sale of real estate and is secured by real estate collateral. The remaining CRE loans comprise working capital loans to real estate corporates, loans with non-property collateral, unsecured loans and loans to real estate entities of diversified conglomerates.

Transport, telecom and utilities includes financial leasing exposures. This does not include operation leasing exposures of $5.6 billion as these assets are owed by the bank. Further details are set out in the note 18 to the financial statements.

Credit cards and personal loans (CCPL) and other unsecured lending of Retail Banking portfolio remains broadly stable at 15 per cent of total the Retail Banking products loans and advances.

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Industry and Retail products analysis by geographic region

Group	2016
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total $million $million $million $million $million
Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies & distributors Government Other Retail Products: Mortgages CCPL and other unsecured lending Auto Secured wealth products Other	2,781 5,334 4,076 6,586 18,777 8,807 5,944 3,161 1,830 19,742 7,959 5,007 1,451 26,816 41,233 5,562 4,570 3,659 1,699 15,490 1,932 4,624 2,408 1,088 10,052 5,580 4,555 1,122 27 11,284 2,063 3,568 1,234 959 7,824 4,356 2,321 1,432 1,261 9,370 1,027 1,313 1,392 84 3,816 938 535 657 259 2,389 2,290 3,053 468 504 6,315 1,437 1,644 1,015 530 4,626 51,219 18,903 2,245 1,140 73,507 9,265 3,838 3,012 91 16,206 - 315 323 - 638 3,725 5,965 90 1,300 11,080 1,790 1,908 522 5 4,225
Portfolio impairment provision	110,731 73,397 28,267 44,179 256,574 (198) (236) (127) (126) (687)
Total loans and advances to customers	110,533 73,161 28,140 44,053 255,887
Total loans and advances to banks	32,239 14,739 7,552 20,135 74,665

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Industry and Retail products analysis by geographic region continued

Group	20151
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total $million $million $million $million $million
Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies & distributors Government Other Retail Products: Mortgages CCPL and other unsecured lending Auto Secured wealth products Other	1,466 7,198 4,370 6,647 19,681 9,586 5,538 3,623 2,142 20,889 5,287 6,996 1,548 17,627 31,458 4,512 6,129 4,048 1,662 16,351 1,825 5,763 2,762 1,278 11,628 6,821 5,008 1,162 37 13,028 2,126 4,116 1,458 855 8,555 4,491 2,350 1,394 2,624 10,859 1,307 2,080 1,741 174 5,302 892 701 801 35 2,429 2,418 3,191 465 138 6,212 1,563 1,975 1,091 601 5,230 49,266 21,194 2,245 1,313 74,018 9,484 4,793 3,185 90 17,552 - 445 351 - 796 3,727 7,756 98 2,505 14,086 1,643 1,355 856 4 3,858
Portfolio impairment provision	106,414 86,588 31,198 37,732 261,932 (253) (245) (128) (31) (657)
Total loans and advances to customers	106,161 86,343 31,070 37,701 261,275
Total loans and advances to banks	29,152 9,458 6,926 21,231 66,767

1. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details

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Industry and Retail products analysis by geographic region continued

	2016
Company	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total
	$million $million $million $million $million
Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies & distributors Government Other Retail Products: Mortgages CCPL and other unsecured lending Auto Secured wealth products Other	483 5,170 3,462 6,586 15,701 1,133 4,499 2,501 1,828 9,961 1,902 4,789 1,132 26,585 34,408 816 4,140 3,137 1,527 9,620 26 3,790 1,491 1,088 6,395 1 4,067 1,088 26 5,182 57 3,069 1,030 958 5,114 104 2,057 1,008 1,261 4,430 - 1,001 1,205 84 2,290 70 437 399 54 960 1,811 2,631 446 504 5,392 37 1,491 980 460 2,968 - 2,721 1,804 1,140 5,665 - 1,486 1,793 91 3,370 - 18 315 - 333 - 5,015 75 1,300 6,390 - 1,275 420 4 1,699
Portfolio impairment provision	6,440 47,656 22,286 43,496 119,878 (1) (127) (52) (212) (392)
Total loans and advances to customers	6,439 47,529 22,234 43,284 119,486
Total loans and advances to banks	3,774 12,607 6,939 19,954 43,274

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Industry and Retail products analysis by geographic region continued

Company	20151
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total $million $million $million $million $million
Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies & distributors Government Other Retail Products: Mortgages CCPL and other unsecured lending Auto Secured wealth products Other	197 7,012 3,930 6,648 17,787 836 4,200 2,874 2,142 10,052 325 6,847 1,266 17,751 26,189 1,035 5,844 3,330 1,281 11,490 103 4,778 1,697 1,277 7,855 50 4,568 1,074 37 5,729 458 3,590 1,217 854 6,119 44 2,028 1,089 2,622 5,783 32 1,734 1,590 174 3,530 48 547 496 35 1,126 - 2,447 435 138 3,020 64 1,811 894 590 3,359 - 3,060 1,846 991 5,897 - 1,561 1,952 90 3,603 - 15 345 - 360 - 6,839 89 2,505 9,433 - 778 794 - 1,572
Portfolio impairment provision	3,192 57,659 24,918 37,135 122,904 (1) (111) (52) (112) (276)
Total loans and advances to customers	3,191 57,548 24,866 37,023 122,628
Total loans and advances to banks	3,272 12,918 5,094 21,036 42,320

1. The 2015 comparatives have been represented to reflect the management view. Previously numbers were presented on a financial view. Refer to note 2 for details

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Standard Chartered Bank Risk profile

Selected portfolios (unaudited)

This section provides further detail on commodities and commodities-related exposures, debt securities and treasury bills and asset backed securities.

Commodities and commodities-related exposures

Commodities producers and traders

Commodities producers and traders credit portfolio $billion

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The Group’s net exposure to commodities has reduced by $1.7 billion (4 per cent) over the past 12 months across producers and traders. This was driven by the continued close management of exposures across the sector in the first half of 2016, partially offset by an increase in facility utilisation for commodities traders in the final quarter of 2016 as commodities prices rose.

The commodities portfolio represented 7 per cent of the total Corporate & Institutional Banking and Commercial Banking net exposure (H1 2016: 7 per cent, H2 2015: 8 per cent).

Commodities credit exposure arises from the pursuit of the Group’s strategy in its core markets, where commodities form a very significant proportion of the trade flows within and into the Group’s footprint countries. Commodities will continue to be a key component of the Group’s strategy and portfolio. The Group is managing parts of the portfolio to reduce targeted exposures, increase diversification and reduce the volatility of loan impairment. The cover ratio before collateral has improved to 65 per cent from 58 per cent in H1 2016 (H2 2015: 61 per cent).

The tenor profile of the portfolio continued to remain predominantly short-dated,, with 76 per cent (2015: 68 per cent) of net exposure maturing in one year or less. Longterm (maturity of greater than one year) net exposures to sub-investment grade and non-large state-owned enterprises (SOEs) have seen improved collateralisation levels over the course of 2016: 34 per cent in the first half of the year, increasing to 36 per cent in the second half of the year.

Producers are primarily from the oil and gas and metals and mining sectors. Our net exposure to oil and gas producers is $8.9 billion (H1 2016: $8.5 billion; H2 2015: $9.6 billion) and our net exposure to metals and mining producers is $7.7 billion (H1 2016: $7.7 billion; H2 2015: $7.6 billion).

87 per cent, $7.3 billion of performing clients, can sustain an oil price of $30 per barrel for 12 months or to global majors or are large SOEs. The breakeven prices have been calculated on a debt service coverage ratio of one. Debt service coverage ratio has been computed based on the amount of cash flow available to meet the annual interest and principal payments on debt, if oil prices remain at the breakeven level for a period of up to 12 months. This analysis is conservative as it does not take into consideration refinancing options available to clients, or their ability to defer capital expenditure.

The key risk for traders, which are less directly affected by price changes, is the lack of liquidity and their risk management practices. The traders portfolio makes up 52 per cent of the commodities portfolio.

Exposure to traders increased by 4 per cent in the second half of 2016, due to higher utilisation of limits on the back of higher commodity prices. Most of the increase was in investment grade clients and strongly secured via commodity collateral.

Commodity-related sectors

Commodities-related sectors credit portfolio $billion

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As at 31 December 2016, the Group’s net exposure to commodities-related sectors consisting of refineries, oil and gas offshore support, oil and gas service providers and oil and gas shipping was $10.6 billion.

Petroleum refineries ($3.9 billion): Net exposure to refineries dropped significantly in 2016 due to the settlement of a large exposure in the liquidation portfolio. The profitability of refiners is driven by gross refining margins and the margins held broadly steady during this period despite the volatility in crude oil prices.

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Standard Chartered Bank Risk profile

Oil and gas offshore support ($2.2billion): The portfolio consists of companies which provide support services allied to the offshore oil & gas industry including provision of drill ships, jack-up rigs, platform support vessels, anchor handlers, pipe laying support vessels, floating production support and operations vessels and other specialised vessels and equipment. The prolonged period of low prices has resulted in stress in this sector as the bulk of vessels are chartered on short-to-medium term basis. Although oil prices have increased, the increase is not high enough to spur capital expenditure spend by oil producers. The Group performed an account by account review and continues to take targeted risk-mitigating actions on the sector. 68 per

cent of the portfolio is being closely monitored, which includes $0.2 billion of non performing exposures.

Oil and gas service providers ($3.0 billion): The service providers sub sector is related to oilfield equipment manufacturers and other service providers. 43 per cent of the exposure is investment grade.

Oil and gas shipping ($1.5 billion): The portfolio comprises shipping companies which are engaged in the transportation of oil and gas products. The vessels in this sector have benefitted from low oil prices resulting in higher demand and charter rates. Notwithstanding, an expected increase in the supply of tankers will dampen charter rates going forward.

Debt securities and treasury bills

Debt securities and treasury bills are analysed as follows:

Group	2016 2015
	Debt securities Treasury bills Total Debt securities Treasury bills Total $million $million $million $million $million $million
Net impaired securities: Impaired securities Impairment Securities neither past due nor impaired: AAA AA- to AA+ A- to A+ BBB- to BBB+ Lower than BBB- Unrated
	406 - 406 395 - 395 (400) - (400) (283) - (283)
	6 - 6 112 - 112
	29,807 15,008 44,815 28,996 15,778 44,774 21,472 12,640 34,112 30,688 12,930 43,618 12,778 2,538 15,316 10,590 451 11,041 10,014 2,584 12,598 9,389 1,962 11,351 3,832 1,529 5,361 3,106 1,578 4,684 6,899 2,090 8,989 10,947 613 11,560
	84,802 36,389 121,191 93,716 33,312 127,028
	84,808 36,389 121,197 93,828 33,312 127,140
Of which: Assets at fair value Trading Designated at fair value Available-for-sale Assets at amortised cost Loans and receivables Held-to-maturity
	12,025 1,285 13,310 12,896 859 13,755 354 - 354 389 - 389 69,204 35,104 104,308 77,684 32,453 110,137
	81,583 36,389 117,972 90,969 33,312 124,281
	3,055 - 3,055 2,649 - 2,649 170 - 170 210 - 210
	3,225 - 3,225 2,859 - 2,859
	84,808 36,389 121,197 93,828 33,312 127,140

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Standard Chartered Bank Risk profile

Debt securities and treasury bills

Debt securities and treasury bills are analysed as follows:

Company	2016 2015
	Debt securities Treasury bills Total Debt securities Treasury bills Total $million $million $million $million $million $million
Net impaired securities: Impaired securities Impairment Securities neither past due nor impaired: AAA AA- to AA+ A- to A+ BBB- to BBB+ Lower than BBB- Unrated
	73 - 73 111 - 111 (66) - (66) (90) - (90)
	7 - 7 21 - 21
	20,145 12,180 32,325 23,075 13,321 36,396 5,580 638 6,218 8,851 118 8,969 4,135 1,213 5,348 2,949 60 3,009 7,506 698 8,204 6,146 1,263 7,409 3,027 194 3,221 2,083 188 2,271 6,340 1,548 7,888 10,141 412 10,553
	46,733 16,471 63,204 53,245 15,362 68,607
	46,740 16,471 63,211 53,266 15,362 68,628
Of which: Assets at fair value Trading Available-for-sale Assets at amortised cost Loans and receivables Held-to-maturity
	7,908 420 8,328 7,690 240 7,930 34,990 16,051 51,041 42,366 15,122 57,488
	42,898 16,471 59,369 50,056 15,362 65,418
	3,672 - 3,672 3,000 - 3,000 170 - 170 210 - 210
	3,842 - 3,842 3,210 - 3,210
	46,740 16,471 63,211 53,266 15,362 68,628

The above table analyses debt securities and treasury bills that are neither past due nor impaired by external credit rating. The standard credit ratings used by the Group are those used by Standard & Poor’s or its equivalent. Debt securities held that have a short-term rating are reported against the long-term rating of the issuer. For securities that are unrated, the Group applies an internal credit rating, as described under credit rating and measurements on page 56.

Net impaired debt securities decreased during the year, primarily due to debt securities disposal in Europe and decrease of a corporate bond exposure in India.

Debt securities in the AA- to AA+ rating category decreased by $9.2 billion to $21.5 billion in December 2016, mainly driven by reduced holdings of United Kingdom Government bonds and other debt securities due to price volatility.

Unrated securities primarily relate to corporate issuers.

Using internal credit ratings, $6,961 million (2015: $9,629 million) of these securities is considered to be equivalent to investment grade.

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Standard Chartered Bank Risk profile

Asset backed securities (unaudited)

Total exposures to asset backed securities

Total exposures to asset backed securities
	2016 2015
	Percentage of notional value of portfolio Notional $million Carrying value $million Fair value $million1 Percentage of notional value ofportfolio Notional $million Carrying value $million Fair value $million1
Residential Mortgage Backed Securities (RMBS)2 Collateralised Debt Obligations (CDOs) Commercial Mortgage Backed Securities (CMBS) Other AssetBacked Securities (Other ABS)3	37% 2,248 2,248 2,244 39% 2,988 2,983 2,980 0% 28 8 7 0% 35 15 13 1% 50 19 18 1% 75 37 36 62% 3,717 3,716 3,716 60% 4,710 4,698 4,698
	100% 6,043 5,991 5,985 100% 7,808 7,733 7,727
Of which included within: Financial assets held at fair value through profit or loss Investment securities - available-for-sale Investment securities-loans and receivables	3% 172 172 172 1% 96 97 97 72% 4,380 4,331 4,331 84% 6,551 6,480 6,480 25% 1,491 1,488 1,482 15% 1,161 1,156 1,150
	100% 6,043 5,991 5,985 100% 7,808 7,733 7,727

1. Fair value reflects the value of the entire portfolio, including assets redesignated to loans and receivables.

2. RMBS includes Other UK, Dutch, Australia and Korea RMBS

3. Other Asset Backed Securities includes Auto Loans, Credit cards, Student Loans, Future Flows and Trade receivables

The carrying value of Asset Backed Securities (ABS) represents 1 per cent (2015: 1 per cent) of the Group’s total assets.

The decline in the portfolio in the year is attributable to natural amortisations and sales reflecting reductions in the Asset and Liability Management (ALM) liquidity portfolio.

The credit quality of the ABS exposures remains strong, with 97 per cent of the overall portfolio rated A- or better, and over 86 per cent of the overall portfolio rated as AAA. The portfolio is broadly diversified across asset classes and geographies with an average credit grade of AA+.

Residential Mortgage Backed Securities (RMBS) make up 37 per cent of the overall portfolio and have a weighted average credit rating of AAA (AAA in 2015).

Note 12 on page 165 to the financial statements provides details of the remaining balance of those assets reclassified in 2008.

Other ABS includes Credit Cards ABS, comprising 27 per cent of the overall portfolio, and Auto ABS (23 per cent) both maintain a weighted average credit rating of AAA. The balance of Other ABS mainly includes securities backed by diversified payment types and trade receivables with a net weighted average credit rating of A.

Financial statement impact of asset backed securities

Financial statement impact of asset backed securities
	Available	Loan and
	for-sale	Receivables	Total
	$million	$million	$million
2016
Credit to available-for-sale reserves	7	-	7
(Charge)/credit to the profit andloss account	(9)	1	(8)
2015
(Charge) to available-for-sale reserves	(19)	-	(19)
Credit to the profit andloss account	17	5	22

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Standard Chartered Bank Risk profile

Country cross-border risk (unaudited)

Country cross-border risk is the risk that the Group will be unable to obtain payment from its customers or thirdparties on their contractual obligations as a result of certain actions taken by foreign governments, chiefly relating to convertibility and transferability of foreign currency.

The profile of the Group’s country cross-border exposures as at 31 December 2016 remained consistent with its strategic focus on core franchise countries, and with the scale of the larger markets in which it operates. Changes in the pace of economic activity and portfolio management activity had an impact on the growth of cross-border exposure for certain territories.

Cross-border exposure to China remains predominantly short-term (71 per cent of such exposure had a tenor of less than 12 months). During 2016, the Group’s crossborder exposure to China from lending and trade finance activity reduced in response to the moderation in Chinese and global economic conditions, with some of this reduction offset by increased exposure arising from liquidity management activity associated with the deployment of excess liquidity within the region.

Country cross-border risk exposure to Hong Kong increased during 2016. Factors contributing to the increase in exposure to Hong Kong included short-dated money market treasury and liquidity management activity, and growth in interbank placements.

The overall size of cross-border exposure to India reflects the size of the Group’s franchise in the country, and the facilitation of overseas investment and trade flows supported by parent companies in India. Portfolio management activity and actions taken to ensure the most efficient use of risk appetite and capital, has contributed to the decline in cross-border exposure to India throughout 2016.

Slowing economic growth rates, weaker global demand for Korean exports, and a reduction in interbank placements associated with asset and liability management activity resulted in a decrease in country cross-border risk exposure to Korea in 2016.

Cross-border exposure to developed countries in which the Group does not have a major presence predominantly relates to short dated money market treasury and liquidity management activities, which can change significantly from period to period. Exposure also represents global corporate business for customers with interests in our footprint. This is a key factor explaining the significant cross-border exposure to the US, Japan and France.

The table below, which is based on the Group’s internal country cross-border risk reporting requirements, shows cross-border exposures that exceed 1 per cent of total assets.

Group	2016 2015
	Less than one year More than one year Total Less than one year More than one year Total $million $million $million $million $million $million
US China Hong Kong Singapore India United Arab Emirates Korea Japan France Malaysia	22,063 14,153 36,216 18,091 14,378 32,469 25,644 10,540 36,184 25,999 10,626 36,625 18,119 7,531 25,650 15,767 7,340 23,107 18,235 3,487 21,722 16,805 4,379 21,184 6,333 9,264 15,597 6,711 12,747 19,458 5,653 9,145 14,798 5,756 8,562 14,318 8,101 6,669 14,770 10,933 7,684 18,617 8,349 2,749 11,098 1,746 5,265 7,011 3,217 3,786 7,003 1,784 3,729 5,513 2,987 3,745 6,732 3,555 2,675 6,230

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Standard Chartered Bank Risk profile

Market risk

Market risk is the potential for loss of economic value due to adverse changes in financial market rates or prices. The Group’s exposure to market risk arises predominantly from these sources:

• Trading book: The Group provides clients access to financial markets, facilitation of which entails the Group taking moderate market risk positions. All trading teams support client activity; there are no proprietary trading teams. Hence, income earned from market risk-related activities is primarily driven by the volume of client activity rather than risk-taking. From 1 August 2016, Credit and Funding Valuation Adjustment (XVA) risk was recognised in the total trading and non-trading VaR, and the impact of which was not material.

The primary categories of market risk for the Group are:

  - Interest rate risk: arising from changes in yield curves, credit spreads and implied volatilities on interest rate options

  - Currency exchange rate risk: arising from changes in exchange rates and implied volatilities on foreign exchange options

  - Commodity price risk: arising from changes in commodity prices and implied volatilities on commodity options; covering energy, precious metals, base metals and agriculture

  - Credit spread risk: arising from changes in the credit spread of the Group’s derivative counterparties through CVA accounting.

• Non-trading book:

• The Asset and Liability Management (ALM) desk is required to hold a liquid assets buffer of which $84.9bn is held in high-quality marketable debt securities

• The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these are not hedged, the Group is subject to structural foreign exchange risk which is reflected in reserves

A summary of our current policies and practices regarding market risk management is provided in the Risk management approach section on page 59.

Market risk changes

The average level of total trading and non-trading VaR in 2016 was lower than in 2015 by 4 per cent and the actual level of total VaR as at end December 2016 was 17 per cent lower than in 2015. These declines were both primarily due to reduced market volatility in the historical time series. In 2015 the VaR had been elevated by events such as the devaluation of Chinese renminbi in August 2015 and uncertainty about the timing of anticipated US interest rate rises.

Foreign exchange VaR increased due to increased market volatility in the historical time series following the devaluation of the Nigerian naira in June 2016 and increased foreign exchange positions in the second half of the year.

Non-trading book equity risk VaR decreased in 2016 due to reduced non-listed Private Equity holdings.

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Standard Chartered Bank Risk profile

Daily value at risk (VaR at 97.5%, one day)

Daily value at risk (VaR at 97.5%,	one day)
Group Trading andnon-trading	2016 2015
	Average High1 Low1 Actual2 Average High1 Low1 Actual2 $million $million $million $million $million $million $million $million
Interest rate risk3 Foreign exchange risk Commodity risk Equity risk	27.7 32.7 24.1 25.3 26.9 35.5 18.9 30.7 6.3 12.2 3.7 9.4 4.9 9.0 2.3 4.8 1.9 3.1 1.0 1.4 1.6 2.6 0.7 1.6 10.0 13.1 6.9 8.1 13.7 18.2 9.7 11.0
Total4	31.6 38.8 26.4 29.9 32.9 45.9 24.4 36.1
Trading5	2016 2015
	Average High1 Low1 Actual2 Average High1 Low1 Actual2 $million $million $million $million $million $million $million $million
Interest rate risk3 Foreign exchange risk Commodity risk Equityrisk	6.7 10.3 4.7 6.8 7.0 8.8 5.3 6.4 6.3 12.2 3.7 9.4 4.9 9.0 2.3 4.8 1.9 3.1 1.0 1.4 1.6 2.6 0.7 1.6 0.4 1.3 0.1 0.1 1.7 2.8 0.7 0.8
Total4	10.6 18.7 7.5 11.6 9.9 13.2 6.8 9.7
Non-trading	2016 2015
	Average High1 Low1 Actual2 Average High1 Low1 Actual2 $million $million $million $million $million $million $million $million
Interest rate risk3 Equityrisk	26.3 31.4 21.5 22.8 24.1 34.6 15.6 30.3 9.8 12.5 6.9 8.1 12.9 17.9 9.2 10.4
Total4	30.7 35.1 24.6 27.3 29.6 37.8 23.2 31.4

1.[Highest and lowest VaR for each risk factor are independent and usually occur on different days]

1. Actual one day VaR at year end date

2. Interest rate risk VaR includes credit spread risk arising from securities held for trading or available-for-sale.

3. The total VaR shown in the tables above is not a sum of the component risks due to offsets between them

4. Trading book for market risk is defined in accordance with the EU Capital Requirements Regulation (CRDIV/CRR) Part 3 Title I Chapter 3 which restricts the positions permitted in the trading book. This regulatory definition is narrower than the accounting definition of the trading book within IAS39 ‘Financial Instruments: Recognition and Measurement’

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Standard Chartered Bank Risk profile

The following table sets out how trading and non-trading VaR is distributed across the Group’s products:

Group	2016 2015
	Average High1 Low1 Actual2 Average High1 Low1 Actual2 $million $million $million $million $million $million $million $million
Tradingand non-trading3	31.6 38.8 26.4 29.9 32.9 45.9 24.4 36.1
Trading4 Rates Global Foreign Exchange Credit Trading and Capital Markets Commodities Equities	5.2 8.6 3.3 5.8 5.5 7.0 3.5 5.1 6.3 12.2 3.7 9.4 4.9 9.0 2.3 4.8 3.0 5.3 2.2 3.2 2.7 4.3 1.9 2.4 1.9 3.1 1.0 1.4 1.6 2.6 0.7 1.6 0.4 1.3 0.1 0.1 1.7 2.8 0.7 0.8
Total3,5	10.6 18.7 7.5 11.6 9.9 13.2 6.8 9.7
XVA3	9.8 12.0 6.6 6.6 - - - -
Non-trading
Asset & Liability Management Listed private equity	26.3 31.4 21.5 22.8 24.1 34.6 15.6 30.3 9.8 12.5 6.9 8.1 12.9 17.9 9.2 10.4
Total5	30.7 35.1 24.6 27.3 29.6 37.8 23.2 31.4

1.[Highest and lowest VaR for each risk factor are independent and usually occur on different days]

1. Actual one day VaR at year end date

2. XVA (Credit and Funding Valuation Adjustment): The XVA trading desk was mandated to actively hedge the market exposures arising from the recognition of CVA commencing 1 January 2016. The XVA desk VaR is included in the Trading and Non-trading Interest Rate and Total VaR results from 1 August 2016, but does not contribute to the Trading Interest Rate or Total VaR figures.

3. Trading book for market risk is defined in accordance with the EU Capital Requirements Regulation (CRDIV/CRR) Part 3 Title I Chapter 3 which restricts the positions permitted in the trading book. This regulatory definition is narrower than the accounting definition of the trading book within IAS39 ‘Financial Instruments: Recognition and Measurement’

4. The total VaR shown in the tables above is not a sum of the component risks due to offsets between them

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Standard Chartered Bank Risk profile

Risks not in VaR (unaudited)

In 2016 the main market risk not reflected in VaR was the currency risk where the exchange rate is currently pegged or managed. The VaR historical one-year observation period does not reflect the future possibility of a change in the currency regime such as sudden depegging. The other material market risk not reflected in VaR was associated with off-the-run bonds. Newly issued bonds are actively traded (on-the-run). Off-the-run bonds are no longer so actively traded which means that historical market price data for VaR is sometimes more limited. Additional capital is set aside to cover such ‘risks not in VaR’. For further details on market risk capital see the Standard Chartered PLC Pillar 3 Disclosures 2016 section on market risk.

Backtesting (unaudited)

Regulatory backtesting is applied at both Group and Solo levels. In 2016, negative exceptions due to exceptional market volatility occurred on two days: one at Group level (two in 2015) and two at Solo level (one in 2015). These occasions were:

• 4 February: Weak US economic data lowered expectations of a Federal Reserve rate hike causing the US dollar to depreciate against other currencies.

• 17 June: Opinion polls ahead of the UK referendum to leave the European Union (EU) on 23 June indicated a shift towards the UK remaining in the EU. This caused appreciation of major currencies against the US dollar.

Two exceptions in a year due to market events are within the ‘green zone’ applied internationally to internal models by bank supervisors (Basel Committee on Banking Supervision: ‘Supervisory framework for the use of backtesting in conjunction with the internal models approach to market risk capital requirements’, January 1996).

The graph below illustrates the performance of the VaR model used in capital calculations. It compares the 99 percentile loss confidence level given by the VaR model with the Hypothetical P&L of each day given the actual market movement without taking into account any intra-day trading activity.

==> picture [480 x 210] intentionally omitted <==

Financial Markets loss days

	2016	2015
Number of loss days reported for Financial Markets trading book total product income1	30	5

1. Reflects total product income for Financial Markets excluding the ALM business (non-trading) and periodic valuation changes for Capital Markets, expected loss provisions and OIS discounting

The increase in Financial Markets loss days in 2016 is mainly due to the recognition of CVA and FVA risk which commenced from the beginning of 2016 and was not reflected in the 2015 loss days. If CVA and FVA were not included then there would have been 12 loss days in 2016. Whilst still an increase compared with 2015, this is due to certain events which increased market volatility in 2016 including: the crash in oil prices and China equity market sell-off in January 2016; the outcome of the UK referendum to leave the European Union (Brexit) in June 2016; and the results of the US presidential elections in November 2016 which led to some initial market volatility with the longer term impact unclear.

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Standard Chartered Bank Risk profile

Average daily income earned from market risk related activities[1]

Group	2016	2015
Trading	$million	$million
Interest rate risk	4.5	1.8
Foreign exchange risk	4.6	5.2
Commodity risk	0.7	1.0
Equityrisk	(0.0)	0.3
Total	9.8	8.3
Non-trading
Interest rate risk	1.8	2.1
Equityrisk	(0.2)	0.4
Total	1.6	2.5

1. Reflects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and other income which are generated from market risk related activities. XVA income is included under interest rate risk

Mapping of market risk items to the balance sheet (unaudited)

Market risk contributes only 8.2 per cent of the Group’s regulatory capital risk-weighted asset (RWA) requirement . As highlighted in the VaR disclosure during 2016, the

majority of market risk is managed within Financial Markets, which spans both trading book and nontrading book. The non-trading equity market risk is generated by listed private equity holdings within Principal Finance. Group Treasury manages the market risk associated with debt and equity capital issuance.

	Amounts as	Exposure to	Exposure to	Market risk type
	per financial	trading risk	non-trading
	statements		risk
	$million	$million	$million
Financial assets
Derivative financial instruments	67,061	65,148	1,913	Interest rate, foreign exchange, commodity or equity risk
Loans and advances to banks	74,665	18,152	56,513	Interest rate or foreign exchange risk
Loans and advances to customers	255,887	29,225	226,662	Interest rate or foreign exchange risk
Debt securities	84,808	12,294	72,514	Interest rate mainly, but also foreign exchange or equity risk
Treasury bills	36,389	1,285	35,104	Interest rate or foreign exchange risk
Equities	2,257	92	2,165	Equities risk mainly, but also interest or foreign exchange risk
Other assets	36,807	5,262	31,545	Interest rate, foreign exchange, commodity or equity risk
Total	557,874	131,458	426,416
Financial liabilities
Deposits by banks	37,612	-	37,612	Interest rate or foreign exchange risk
Customer accounts	378,302	-	378,302	Interest rate or foreign exchange risk
Debt securities in issue	35,189	-	35,189	Interest rate mainly, but also foreign exchange or equity risk
Derivatives financial instruments	66,251	65,255	996	Interest rate, foreign exchange, commodity or equity risk
Shortpositions	3,763	3,763	-	Interest rate, foreign exchange, commodity or equity risk
Total	521,117	69,018	452,099

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Standard Chartered Bank Risk profile

Structural foreign exchange exposures

The table below sets out the principal structural foreign exchange exposures (net of investment hedges) of the Group.

	2016	2015
	$million	$million
Hong Kong dollar	6,447	6,973
Indian rupee	4,450	4,434
Renminbi	3,370	3,577
Singapore dollar	2,505	2,654
Korean won	2,460	2,448
Taiwanese dollar	2,140	2,143
UAE dirham	1,556	1,647
Malaysian ringgit	1,330	1,291
Thai baht	1,290	1,332
Indonesian rupiah	1,090	994
Pakistani rupee	573	588
Other	3,595	3,535
	30,806	31,616

As at 31 December 2016, the Group had taken net investment hedges (using a combination of derivative and non-derivative financial investments) of $1,313 million (2015: $1,339 million) to partly cover its exposure to the Korean won. An analysis 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 positions above would be an increase of $225 million (2015: $228 million). Changes in the valuation of these positions are taken to reserves.

Liquidity and funding risk

Liquidity and funding risk is the potential that the Group does not have sufficient financial resources or stable sources of funding in the medium or long term, to meet its obligations as they fall due, or can access these financial resources only at excessive cost.

The Group’s liquidity and funding risk framework requires each country to operate on a standalone basis without implicit reliance on Group support or recourse to extraordinary central bank support.

The Group achieves this through a combination of setting risk appetite and associated limits, policy formation, risk measurement and monitoring, prudential and internal stress testing, governance and review.

For further information on the Group’s liquidity and funding risk framework refer to page 61.

In 2016, the Group issued $1.1 billion of senior debt, $4 billion of subordinated debt and $2 billion of Additional Tier 1 (AT1) securities (2015: $1.1 billion of senior debt, nil of subordinated debt and $2 billion of AT1).

The Group has relatively low levels of sterling and euro funding and exposures within the context of the overall Group balance sheet. The result of the UK referendum to leave the European Union has therefore not had a material first order liquidity impact.

Primary sources of funding

A substantial portion of our assets are funded by customer deposits. Wholesale funding is diversified by type and maturity and represents a stable source of funds for the Group.

We maintain access to wholesale funding markets in all major financial centres and countries in which we operate. This seeks

to ensure that we have market intelligence, maintain stable funding lines and can obtain optimal pricing when performing our interest rate risk management activities.

Debt refinancing levels are low. In the next 12 months approximately $2.2 billion of the Group’s senior and subordinated debt and Additional Tier 1 securities are falling due for repayment either contractually or callable by the Group.

The information presented on page 113 is on a Financial View. This is the location in which the transaction or balance was booked and provides a more accurate view of where liquidity risk is actually located.

The chart below shows the composition of liabilities in which customer deposits make up 58.5 per cent of total liabilities as at 31 December 2016, the majority of which are current accounts, savings accounts and time deposits. Our largest customer deposit base by geography is Greater China & North Asia (in particular Hong Kong), which holds 44.7 per cent of Group customer accounts

customer accounts
	2016	2015
Group's compositionof liabilities	%	%
Customer accounts	58.4	56.1
Deposits by banks	5.8	6.0
Derivative financial instruments	10.2	9.8
Other liabilities	9.2	9.4
Debt securities in issue	5.4	8.1
Subordinated liabilities and other
borrowed funds	3.1	3.2
Equity	7.9	7.4
	100.0	100.0
	2016	2015
Customer accounts	%	%
Greater China & North Asia	44.7	45.3
ASEAN & South Asia	22.7	24.6
Africa & Middle East	8.4	9.1
Europe &Americas	24.2	21.0
	100.0	100.0

110

Standard Chartered Bank Risk profile

Liquidity metrics

We monitor key liquidity metrics on a regular basis, both on a country basis and in aggregate across the Group.

Stressed coverage (unaudited)

The Group intends to maintain a prudent and sustainable funding and liquidity position, in all presence countries and currencies, such that it can withstand a severe but plausible liquidity stress:

• Across major presence countries[1] , the Group intends to be able to meet its payment and collateral obligations for at least 60 days in a combined Standard Chartered-specific and market-wide liquidity stress, without recourse to extraordinary central bank support;

• In smaller presence countries, each operating entity should be able to meet its payment and collateral obligations for at least 60 days in the event of a systemic market-wide stress in that country, without implicit reliance on Group support, or recourse to extraordinary central bank support.

The Group’s internal liquidity stress testing framework covers the following stress scenarios:

Standard Chartered-specific – This scenario captures the liquidity impact from an idiosyncratic event affecting only Standard Chartered, i.e. the rest of the market is assumed to operate normally.

Market-wide – This scenario captures the liquidity impact from a market wide crisis affecting all participants in a country, region or globally.

Combined – This scenario is a Board approved risk appetite metric. It scenario assumes both Standard Chartered-specific and market-wide events affecting the Group simultaneously and hence is the most severe scenario.

All scenarios include, but are not limited to, modelled outflows for retail and wholesale funding, off-balance sheet funding risk, cross-currency funding risk, intra-day risk, franchise risk and risks associated with a deterioration of a firm’s credit rating.

Stress testing results show that a positive surplus was maintained under all scenarios at 31 December 2016 i.e. respective countries are able to survive for a period of time as defined under each scenario. The combined scenario as at 31

December 2016 showed the Group maintained liquidity resources to survive greater than 60 days, as per our Board approved risk appetite. The results take into account currency convertibility and portability constraints across all major presence countries.

Standard Chartered Bank’s credit ratings as at 31 December 2016 were A+ with stable outlook (Fitch), A with stable outlook (S&P) and Aa3 with negative outlook (Moody’s). A downgrade in credit rating would increase derivative collateral requirements and outflows due to rating-linked liabilities. One possible outcome of a two-notch long-term ratings downgrade could be an estimated outflow of $1.5 billion (unaudited).

For further information on the Group’s liquidity stress testing framework refer to page 61.

Liquidity Coverage Ratio (LCR) (unaudited)

The Group monitors and reports its liquidity position under European Commission Delegated Regulation 2015/61 and has maintained its liquidity position above the prudential requirement. As at 31 December 2016 the Group LCR was comfortably above 100 per cent with a prudent surplus to both Board approved risk appetite and regulatory requirements. We also held adequate liquidity across our footprint to meet all local prudential LCR requirements, where applicable.

Net stable funding ratio (NSFR) (unaudited)

On 23 November 2016 the European Commission, as part of a package of risk-reducing measures, proposed a binding requirement for stable funding (Net Stable Funding Ratio (NSFR)) at European Union level. The proposal aims to implement the European Banking Authority’s interpretation of the Basel standard on NSFR (BCBS295).

The ratio will apply at a level of 100 per cent two years after the date of entry into force of the proposed regulation.

The Group continues to monitor NSFR in line with the BCBS’ final recommendation (BCBS295), pending review and approval of the European Commission’s proposals by the European Parliament and Council.

As at 31 December 2016 the Group NSFR was above 100 per cent.

1. On an aggregate basis after consideration of portability and convertibility constraints

111

Standard Chartered Bank Risk profile

Advances-to-deposits ratio

This is defined as the ratio of total loans and advances to customers relative to total customer deposits. An advances-todeposits 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. Customer deposits tend to be more stable than wholesale funding and a core portion of these deposits is likely to remain with the bank for the medium term.

The advances-to-deposits ratio (2016: 67.6 per cent) decreased from the previous year (2015: 72.8 per cent). Loans and advances to customers decreased due in reduced customer assets from more selective asset origination, deliberate de-risking and subdued corporate activity partially offset by an increase in reverse repurchase agreement transactions. Customer accounts increased largely due to growth in our customer repo business.

	2016	2015
	$million	$million
Loans and advances to customers1	255,887	261,275
Customer accounts	378,302	359,127
Advances to deposits ratio	67.6%	72.8%

1. See note 12 to the financial statements

Liquidity pool (unaudited)

Liquid assets are the total cash (less restricted balances), treasury bills, loans and advances to banks (less deposits by banks) and debt securities (less illiquid securities). Illiquid securities are debt securities that cannot be sold or exchanged easily for cash without substantial loss in value amounting to $1,508 million (2015: $1,210 million). Encumbered securities are now excluded from liquid assets for the purposes of the Group’s liquidity pool.

The Group keeps sufficient liquid assets to survive a number of severe stress scenarios, both internal and regulatory.

Liquid assets increased $4.4 billion from the previous year as higher surplus liquidity, largely resulting from reduced customer lending, was in part held in cash and central bank balances primarily in Europe & Americas. Net interbank lending also increased, with strong growth in ASEAN & South Asia and Greater China & North Asia as we repositioned liquidity in some markets. Debt securities were down $9 billion in the year as we reduced holdings of UK government bonds and other debt securities due to price volatility and increased investment in treasury bills.

112

Standard Chartered Bank Risk profile

Liquidity pool (unaudited) continued

Group	2016
	Greater China & North East Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total $million $million $million $million $million
Cash and balances at central banks Restricted balances Loans and advances to banks - net of non-performing loans1 Deposits by banks1 Treasury bills1 Debt securities1 of which : Issued by governments Issued by banks Issued by corporate and other entities Illiquid securities and Other Assets of which : Illiquid securities Encumbered securities	17,770 3,868 3,585 45,483 70,706 (4,247) (1,988) (2,027) (386) (8,648) 29,521 13,952 3,214 27,978 74,665 (7,402) (3,846) (2,913) (23,451) (37,612) 12,889 6,558 4,782 12,160 36,389 33,785 17,761 6,740 26,522 84,808
	17,899 10,133 4,465 5,331 37,828 10,636 3,027 1,205 14,675 29,543 5,250 4,601 1,070 6,516 17,437
	(3,009) (262) - (4,105) (7,376)
	(909) (123) - (476) (1,508) (2,100) (139) - (3,629) (5,868)
Liquid assets	79,307 36,043 13,381 84,201 212,932

Group	2015
	Greater China & North East Asia ASEAN & South Asia Africa & Middle East Europe & Americas Total $million $million $million $million $million
Cash and balances at central banks Restricted balances Loans and advances to banks - net of non-performing loans1 Deposits by banks1 Treasury bills1 Debt securities1 of which : Issued by governments Issued by banks Issued by corporate and other entities Illiquid securities and Other Assets of which : Illiquid securities Encumbered securities	17,572 4,540 4,071 39,129 65,312 (4,108) (2,511) (2,094) (399) (9,112) 25,971 8,292 3,222 29,241 66,726 (8,313) (5,243) (2,729) (21,878) (38,163) 12,903 5,887 3,308 11,214 33,312 35,549 17,043 7,654 33,582 93,828
	19,553 9,056 5,332 9,395 43,336 8,942 4,004 730 13,939 27,615 7,054 3,983 1,592 10,248 22,877
	(1,950) (449) (11) (947) (3,357)
	(599) (39) - (572) (1,210) (1,351) (410) (11) (375) (2,147)
Liquid assets	77,624 27,559 13,421 89,942 208,546

1. Amounts include financial instruments held at fair value through profit or loss (see note 12)

113

Standard Chartered Bank Risk profile

Liquidity Pool (unaudited) continued

Liquidity Pool (unaudited)continued
			2016
	Greater
	China & North	ASEAN &	Africa &	Europe &
	East Asia	South Asia	Middle East	Americas	Total
Company	$million	$million	$million	$million	$million
Cash and balances at central banks	10,063	2,408	1,452	45,450	59,373
Restricted balances	(5)	(1,187)	(1,017)	(386)	(2,595)
Loans and advances to banks - net of non-performing loans1	1,053	11,823	2,600	27,797	43,273
Deposits by banks1	(1,697)	(3,164)	(2,397)	(23,451)	(30,709)
Treasury bills1	4	3,652	655	12,160	16,471
Debt securities1	954	12,818	4,344	28,624	46,740
of which :
Issued by governments	954	7,070	2,535	5,219	15,778
Issued by banks	-	2,293	1,200	16,562	20,055
Issued by corporate and otherentities	-	3,455	609	6,843	10,907
Illiquid and Encumbered securities	-	(253)	-	(4,105)	(4,358)
of which:
Illiquid securities	-	(123)	-	(476)	(599)
Encumbered securities	-	(130)	-	(3,629)	(3,759)
Liquid assets	10,372	26,097	5,637	86,089	128,195

			2015
	Greater
	China & North	ASEAN &	Africa &	Europe &
	East Asia	South Asia	Middle East	Americas	Total
Company	$million	$million	$million	$million	$million
Cash and balances at central banks	6,424	2,606	1,795	39,091	49,916
Restricted balances	(6)	(1,765)	(1,104)	(399)	(3,274)
Loans and advances to banks - net of non-performing loans1	3,272	7,431	2,420	29,157	42,280
Deposits by banks1	(2,885)	(4,754)	(2,168)	(21,878)	(31,685)
Treasury bills1	9	3,419	720	11,214	15,362
Debt securities1	871	12,831	4,364	35,200	53,266
of which :
Issued by governments	871	6,737	3,035	9,342	19,985
Issued by banks	-	3,050	726	13,921	17,697
Issued by corporate and otherentities	-	3,044	603	11,937	15,584
Illiquid and Encumbered securities	-	(347)	-	(942)	(1,289)
of which:
Illiquid securities	-	(39)	-	(572)	(611)
Encumbered securities	-	(308)	-	(370)	(678)
Liquid assets	7,685	19,421	6,027	91,443	124,576

1. Amounts include financial instruments held at fair value through profit or loss (see note 12 )

114

Standard Chartered Bank Risk profile

Encumbered assets (unaudited)

Encumbered assets represent those on-balance sheet assets pledged or used as collateral in respect of certain of the Group’s liabilities. Hong Kong government certificates of indebtedness which secure the equivalent amount of Hong Kong currency notes in circulation, and cash collateral pledged against derivatives are included within other assets.

The following table provides a reconciliation of the Group’s encumbered assets to total assets.

20	16
Assets encumbered as a result of transactions with counterparties other Other assets
	(comprising assets encumbered at the central bank and
than central banks	unencumbered assets)
As a result of securitisations Other Total Assets positioned at the central bank (ie pre- positioned plus encumbered) Assets notpositioned at the central bank Total Group Assets Readily available for encumbrance Other assets that are capable of being encumbered Cannot be encumbered $million $million $million $million $million $million $million $million $million
Cash and balances at central banks 70,706 - - - 8,648 62,058 - - 70,706 Derivative financial instruments 67,061 - - - - - - 67,061 67,061 Loans and advances to banks1 74,665 - - - - 32,228 - 42,437 74,665 Loans and advances to customers1 255,887 21 - 21 - - - 255,866 255,866
Investment securities1 123,454 - 5,868 5,868 35 78,519 27,909 11,123 117,586
Other assets 36,807 - 19,674 19,674 - - - 17,133 17,133
Due from Subsidiary undertakings and other related parties 1,533 - - - - - - 1,533 1,533
Current tax assets 474 - - - - - - 474 474 Prepayments and accrued income 2,237 - - - - - - 2,237 2,237
Interests in associates and joint ventures 1,922 - - - - - - 1,922 1,922
Goodwill and intangible assets 4,294 - - - - - - 4,294 4,294 Property, plant and equipment 6,308 - - - - - - 6,308 6,308
Deferred tax assets 1,294 - - - - - - 1,294 1,294 Assets classified asheldforsale 1,254 - - - - - - 1,254 1,254
Total 647,896 21 25,542 25,563 8,683 172,805 27,909 412,936 622,333

1. Includes assets held at fair value through profit or loss

115

Standard Chartered Bank

Risk profile

Encumbered assets (unaudited) continued

Encumbered assets (unaudited)continued	Encumbered assets (unaudited)continued
		2015
Assets encumbered as a result of transactions with counterparties other than central banks Other ass
		ets (comprising assets encumbered at the central bank and
		unencumbered assets)
As a result of securitisations Other Total Assets positioned at the central bank (ie pre- positioned plus encumbered) Assets notpositioned at the central bank Total Group Assets Readily available for encumbrance Other assets that are capable of being encumbered Cannot be encumbered $million $million $million $million $million $million $million $million $million
Cash and balances at central banks 65,312 - - - 9,112 56,200 - - 65,312 Derivative financial instruments 64,587 - - - - - - 64,587 64,587 Loans and advances to banks1 66,767 - - - - 31,121 - 35,646 66,767 Loans and advances to customers1 261,275 76 - 76 - - - 261,199 261,199 Investment securities1 131,468 - 2,147 2,147 230 95,539 22,425 11,127 129,321 Other assets 34,147 - 18,337 18,337 - - - 15,810 15,810 Current tax assets 388 - - - - - - 388 388 Prepayments and accrued income 2,174 - - - - - - 2,174 2,174 Interests in associates and joint ventures 1,929 - - - - - - 1,929 1,929 Goodwill and intangible assets 4,217 - - - - - - 4,217 4,217 Property, plant and equipment 6,120 - - - - - - 6,120 6,120 Deferred tax assets 1,059 - - - - - - 1,059 1,059 Assets classified as held for sale 349 - - - - - - 349 349
Total 639,792 76 20,484 20,560	9,342 182,860 22,425 404,605 619,232

1. Includes assets held at fair value through profit or loss

116

Standard Chartered Bank

Risk profile

Encumbered assets (unaudited) continued

Encumbered assets (unaudited)continued	Encumbered assets (unaudited)continued
2		016
Assets encumbered as a result of Other asset		(comrisin assets encumbered at the central bank and
transactions with counterparties other than central banks		pg unencumbered assets)
As a result of securitisations Other Total Assets positioned at the central bank (ie pre- positioned plus encumbered) Assets notpositioned at the central bank Total Company Assets Readily available for encumbrance Other assets that are capable of being encumbered Cannot be encumbered $million $million $million $million $million $million $million $million $million
Cash and balances at central banks 59,373 - - - 2,595 56,778 - - 59,373 Derivative financial instruments 66,772 - - - - - - 66,772 66,772 Loans and advances to banks1 43,274 - - - - 16,774 - 26,500 43,274 Loans and advances to customers1 119,486 13 - 13 - - - 119,473 119,473
Investment securities1 64,129 - 3,759 3,759 35 47,932 5,473 6,930 60,370
Other assets 26,696 - 13,877 13,877 - - - 12,819 12,819 Due from Subsidiary undertakings and other related parties 14,138 - - - - - - 14,138 14,138
Current tax assets 242 - - - - - - 242 242
Prepayments and accrued income 1,022 - - - - - - 1,022 1,022
Interests in associates and joint ventures 14,960 - - - - - - 14,960 14,960
Goodwill and intangible assets 1,361 - - - - - - 1,361 1,361 Property, plant and equipment 446 - - - - - - 446 446
Deferred tax assets 915 - - - - - - 915 915 Assets classified as held for sale 1 - - - - - - 1 1
Total 412,815 13 17,636 17,649	2,630 121,484 5,473 265,579 395,166

1. Includes assets held at fair value through profit or loss

117

Standard Chartered Bank Risk profile

Encumbered assets (unaudited) continued

Encumbered assets (unaudited)continued
2	015
Assets encumbered as a result of transactions with counterparties other than central banks Other asse
	ts (comprising assets encumbered at the central bank and
	unencumbered assets)
As a result of securitisations Other Total Assets positioned at the central bank (ie pre- positioned plus encumbered) Assets notpositioned at the central bank Total Company Assets Readily available for encumbrance Other assets that are capable of being encumbered Cannot be encumbered $million $million $million $million $million $million $million $million $million
Cash and balances at central banks 49,916 - - - 3,274 46,642 - - 49,916 Derivative financial instruments 62,814 - - - - - - 62,814 62,814 Loans and advances to banks1 42,320 - - - - 17,748 - 24,572 42,320 Loans and advances to customers1 122,628 17 - 17 - - - 122,611 122,611 Investment securities1 71,232 - 678 678 230 60,949 6,988 2,387 70,554 Other assets 24,273 - 13,006 13,006 - - - 11,267 11,267 Due from Subsidiary undertakings and other related parties 14,599 - - - - - - 14,599 14,599 Current tax assets 46 - - - - - - 46 46 Prepayments and accrued income 1,103 - - - - - - 1,103 1,103 Interests in associates and joint ventures 13,704 - - - - - - 13,704 13,704 Goodwill and intangible assets 1,115 - - - - - - 1,115 1,115 Property, plant and equipment 436 - - - - - - 436 436 Deferred tax assets 753 - - - - - - 753 753 Assets classified as held for sale 6 - - - - - - 6 6
Total 404,945 17 13,684 13,701 3,504 125,339 6,988 255,413 391,244

1. Includes assets held at fair value through profit or loss

In addition to the above, the Group received $54,473 million (2015: $52,841 million) as collateral under reverse repurchase agreements that was eligible for repledging; of this the Group sold or repledged $33,053 million (2015: $22,185 million) under repurchase agreements.

Readily available to for encumbrance (unaudited)

Readily available for encumbrance includes unencumbered assets that can be sold outright or under repo within a few days, in line with regulatory definitions. The Group’s readily available assets comprise cash and balances at central banks, loans and advances to banks, and investment securities.

Assets classified as not readily available for encumbrance include:

• Assets that have no restrictions for funding and collateral purposes, such as loans and advances to customers, which are not acquired or originated with the intent of generating liquidity value

• Assets that cannot be encumbered, such as derivatives, goodwill and intangible and deferred tax assets

118

Standard Chartered Bank Risk profile

Liquidity analysis of the Group’s balance sheet

Contractual maturity of assets and liabilities

The following table presents assets and liabilities by maturity groupings based on the remaining period to the contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturities do not necessarily reflect actual repayments or cash flow.

Within the tables below cash and balances with central banks, interbank placements, treasury bills and investment securities that are available-for-sale are used by the Group principally for liquidity management purposes.

Assets remain predominantly short-dated, with 61 per cent maturing in under one year. Our less than three month cumulative net funding gap has improved from the previous year, in part due to shorter asset tenors including an increase in cash and balances held at central banks.

	2016
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total
Group	$million $million $million $million $million $million $million $million $million
Assets
Cash and balances at central banks
	62,058 - - - - - - 8,648 70,706
Derivative financial instruments
	7,749 10,562 8,263 5,317 4,580 8,472 10,798 11,320 67,061
Loans and advances to banks1
	32,228 23,388 10,667 3,041 2,540 1,240 1,404 157 74,665
Loans and advances to customers1
	71,483 27,977 17,948 7,917 7,837 18,358 32,615 71,752 255,887
Investment securities	8,600 16,894 11,796 10,496 11,764 19,221 32,626 12,057 123,454
Other assets	24,926 5,377 2,843 195 1,007 52 92 21,631 56,123
Total assets	207,044 84,198 51,517 26,966 27,728 47,343 77,535 125,565 647,896
Liabilities
Deposits by banks1	31,340 2,912 1,115 665 573 629 146 232 37,612
Customer accounts1	280,329 46,060 25,258 11,135 8,942 2,577 2,119 1,882 378,302
Derivative financial instruments
	8,709 9,911 7,661 6,058 4,825 8,969 11,275 8,843 66,251
Senior debt	96 124 97 - 134 719 991 249 2,410
Other debt securities in issue1
	5,916 11,188 6,883 2,687 447 860 748 4,050 32,779
Due to Parent companies and other related undertakings
	15,490 - - - - - - - 15,490
Other liabilities	19,036 5,993 4,930 683 580 1,360 698 10,714 43,994
Subordinated liabilities and otherborrowedfunds
	23 31 - 1,710 - 978 785 16,537 20,064
Total liabilities	360,939 76,219 45,944 22,938 15,501 16,092 16,762 42,507 596,902
Netliquidity gap	(153,895) 7,979 5,573 4,028 12,227 31,251 60,773 83,058 50,994

1.Amounts include financial instruments held at fair value through profit or loss (see note 12 on pages 159 and 161)

119

Standard Chartered Bank Risk profile

Contractual maturity continued

		2015
		One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total
Group		$million $million $million $million $million $million $million $million $million
Assets
Cash and balances at central banks		56,200 - - - - - - 9,112 65,312
Derivative financial instruments		6,654 7,957 6,926 5,413 4,152 9,136 14,181 10,168 64,587
Loans and advances to banks1		31,208 16,628 9,179 3,648 2,494 1,982 1,590 38 66,767
Loans and advances to customers1		70,254 23,863 16,642 10,046 9,039 18,474 38,043 74,914 261,275
Investment securities1		7,226 14,706 15,874 10,078 7,095 19,359 40,959 16,171 131,468
Otherassets		21,263 5,198 2,433 82 208 102 231 20,866 50,383
Total assets		192,805 68,352 51,054 29,267 22,988 49,053 95,004 131,269 639,792
Liabilities
Deposits by banks1		32,008 2,606 1,623 867 70 414 369 206 38,163
Customer accounts1		283,048 33,939 20,768 8,539 7,974 1,960 1,187 1,712 359,127
Derivative financial instruments		6,830 7,510 6,878 5,137 4,324 8,552 14,304 9,051 62,586
Senior debt		128 170 1,571 153 60 321 778 764 3,945
Other debt securities in issue1		9,430 15,641 9,104 1,345 976 3,453 776 6,834 47,559
Due to Parent companies and other related undertakings		18,916 - - - - - - - 18,916
Other liabilities		17,256 5,895 3,309 540 525 783 744 12,455 41,507
Subordinated liabilities and otherborrowedfunds		- - - - - 2,344 2,641 15,731 20,716
Total liabilities		367,616 65,761 43,253 16,581 13,929 17,827 20,799 46,753 592,519
Net liquidity gap		(174,811) 2,591 7,801 12,686 9,059 31,226 74,205 84,516 47,273
1. Amounts include financial instruments held at fair value through profit or loss (see note 12 on pages 160 and 161)

120

Standard Chartered Bank Risk profile

Contractual maturity continued

	Contractual maturitycontinued
	2016
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total
Company $million $million $million $million $million $million $million $million $million
Assets
Cash and balances at central banks 56,778 - - - - - - 2,595 59,373
Derivative financial instruments 7,900 10,743 8,400 5,443 4,655 7,961 11,171 10,499 66,772
Loans and advances to banks1 16,774 14,470 6,719 1,446 1,909 1,087 830 39 43,274
Loans and advances to customers1 49,406 17,285 9,878 2,716 3,133 9,158 16,988 10,922 119,486
Investment securities1 1,496 4,546 4,177 3,640 7,417 11,767 22,474 8,612 64,129
Investments in subsidiary undertaking - - - - - - - 14,144 14,144
Other assets 21,893 4,061 1,332 97 191 49 4 3,872 31,499
Due from Subsidiary undertakings and other related parties 14,138 - - - - - - - 14,138
Total assets 168,385 51,105 30,506 13,342 17,305 30,022 51,467 50,683 412,815
Liabilities
Deposits by banks1 25,870 2,527 1,045 336 360 399 140 32 30,709
Customer accounts1 110,169 30,953 15,382 5,534 3,705 1,346 1,443 323 168,855
Derivative financial instruments 9,008 10,008 7,892 6,265 4,951 8,486 10,738 8,854 66,202
Senior debt - - - - - - - - -
Other debt securities in issue1 5,800 10,799 6,553 2,464 297 746 659 2,354 29,672
Due to Parent companies and other related undertakings 30,731 - - - - - - - 30,731
Other liabilities 16,563 4,199 3,203 512 209 1,238 444 1,565 27,933
Subordinated liabilities and otherborrowedfunds - - - 1,710 - 898 - 16,544 19,152
Total liabilities 198,141 58,486 34,075 16,821 9,522 13,113 13,424 29,672 373,254
Net liquidity gap (29,756) (7,381) (3,569) (3,479) 7,783 16,909 38,043 21,011 39,561

1. Amounts include financial instruments held at fair value through profit or loss (see note 12 on pages 162 and 163)

121

Standard Chartered Bank Risk profile

Contractual maturity continued

	2015
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total
	$million $million $million $million $million $million $million $million $million
Company
Assets
	46,642 - - - - - - 3,274 49,916
Cash and balances at
central banks
	6,529 7,789 7,048 5,426 4,419 8,846 13,581 9,176 62,814
Derivative financial
instruments
	17,834 9,864 6,838 2,521 2,169 1,703 1,353 38 42,320
Loans and advances to
banks1
	48,350 13,478 7,575 4,541 4,078 9,580 21,644 13,382 122,628
Loans and advances to
customers1
Investment securities1	1,630 4,978 8,752 4,762 2,606 7,385 30,620 10,499 71,232
	- - - - - - - 13,127 13,127
Investments in subsidiary
undertaking
Other assets	19,441 3,352 2,099 72 98 93 15 3,139 28,309
Due from Subsidiary	14,599 - - - - - - - 14,599
undertakings and other
related parties
Total assets	155,025 39,461 32,312 17,322 13,370 27,607 67,213 52,635 404,945
Liabilities
Deposits by banks1	26,804 1,827 1,596 863 36 402 123 34 31,685
Customer accounts1	115,031 18,844 10,967 4,885 3,809 481 502 182 154,701
	6,751 7,491 7,008 5,120 4,112 8,147 13,280 8,813 60,722
Derivative financial
instruments
Senior debt	- - - - - - - - -
	10,888 15,276 8,794 1,368 709 1,643 600 4,294 43,572
Other debt securities in
issue1
Other liabilities	15,167 4,018 2,306 602 294 404 431 3,514 26,736
	33,983 - - - - - - - 33,983
Due to Parent companies
and other related
undertakings
	- - 905 - - 2,344 1,757 14,034 19,040
Subordinated liabilities and
otherborrowedfunds
Total liabilities	208,624 47,456 31,576 12,838 8,960 13,421 16,693 30,871 370,439
	(53,599) (7,995) 736 4,484 4,410 14,186 50,520 21,764 34,506
Netliquidity gap

1. Amounts include financial instruments held at fair value through profit or loss (see note 12 on pages 161 and163

122

Standard Chartered Bank Risk profile

Behavioural maturity of financial assets and liabilities The cash flows presented on page 119 reflect the cash flows that will be contractually payable over the residual maturity of the instruments. However, contractual maturities do not necessarily reflect the timing of actual repayments or cash flow. In practice, certain asset and liabilities behave differently 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. Such behavioural adjustments are identified and managed in each country through analysis of the historical behaviour of balances. The Group’s expectation of when assets and liabilities are likely to become due is provided in the table below.

Behavioural maturity

Behavioural maturity
	2016
Group	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total
	$million $million $million $million $million $million $million $million $million
Assets
Loans and advances to banks1	32,287 23,359 10,664 3,091 2,654 1,187 1,265 158 74,665
Loans and advances to customers1	54,207 25,544 15,282 7,059 12,485 16,738 75,988 48,584 255,887
Total loans and advances	86,494 48,903 25,946 10,150 15,139 17,925 77,253 48,742 330,552
Liabilities
Deposits by banks1	25,923 3,026 1,233 821 637 5,479 262 231 37,612
Customer accounts1	112,256 38,040 19,232 10,837 19,060 63,392 112,301 3,184 378,302
Totaldeposits	138,179 41,066 20,465 11,658 19,697 68,871 112,563 3,415 415,914
Netgap	(51,685) 7,837 5,481 (1,508) (4,558) (50,946) (35,310) 45,327 (85,362)

Group	2015
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total $million $million $million $million $million $million $million $million $million
Assets Loans and advances to banks1 Loans and advances to customers1	31,090 16,646 9,053 3,549 2,779 1,965 1,647 38 66,767 54,682 22,171 13,262 8,045 13,269 18,065 79,046 52,735 261,275
Total loans and advances	85,772 38,817 22,315 11,594 16,048 20,030 80,693 52,773 328,042
Liabilities Deposits by banks1 Customer accounts1	21,861 2,705 1,744 985 193 9,758 711 206 38,163 115,514 21,641 13,423 8,821 17,582 65,241 114,913 1,992 359,127
Total deposits	137,375 24,346 15,167 9,806 17,775 74,999 115,624 2,198 397,290
Net gap	(51,603) 14,471 7,148 1,788 (1,727) (54,969) (34,931) 50,575 (69,248)

1.Amounts include financial instruments held at fair value through profit or loss (see note 12 on pages 159 and 161)

123

Standard Chartered Bank Risk profile

Behavioural maturity continued

Behavioural maturitycontinued
	2016
	One month Between one month and three Between three months and Between six months and Between nine months and Between one year and Between two years and More than five years
	or less months six months nine months one year two years five years and undated Total
Company	$million $million $million $million $million $million $million $million $million
Assets
Loans and advances to banks1	16,801 14,458 6,720 1,495 1,857 1,047 856 40 43,274
Loans and advances to customers1	44,553 18,447 10,415 3,341 3,264 10,265 18,637 10,564 119,486
Total loans and advances	61,354 32,905 17,135 4,836 5,121 11,312 19,493 10,604 162,760
Liabilities
Deposits by banks1	20,849 2,623 1,163 491 424 5,158 (33) 34 30,709
Customer accounts1	75,414 30,582 15,233 7,537 5,985 13,076 20,699 329 168,855
Total deposits	96,263 33,205 16,396 8,028 6,409 18,234 20,666 363 199,564
Netgap	(34,909) (300) 739 (3,192) (1,288) (6,922) (1,173) 10,241 (36,804)

Company	2015
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total $million $million $million $million $million $million $million $million $million
Assets Loans and advances to banks1 Loans and advances to customers1	17,852 9,862 6,707 2,422 2,399 1,700 1,340 38 42,320 43,470 14,576 7,995 4,862 4,363 10,905 23,395 13,062 122,628
Total loans and advances	61,322 24,438 14,702 7,284 6,762 12,605 24,735 13,100 164,948
Liabilities Deposits by banks1 Customeraccounts1	17,011 1,926 1,717 982 159 9,684 172 34 31,685 78,653 14,777 9,229 6,085 5,844 16,279 23,691 143 154,701
Total deposits	95,664 16,703 10,946 7,067 6,003 25,963 23,863 177 186,386
Netgap	(34,342) 7,735 3,756 217 759 (13,358) 872 12,923 (21,438)

1 Amounts include financial instruments held at fair value through profit or loss (see note 12 on pages 159 and 163)

Maturity of financial liabilities (excluding derivative financial instruments) on an undiscounted basis

The following table analyses the contractual cash flows payable for the Group’s financial liabilities by remaining contractual maturities on an undiscounted basis. The financial liability balances in the table below will not agree to the balances reported in the consolidated balance sheet as the table incorporates all contractual cash flows, on an

undiscounted basis, relating to both principal and interest payments.

Within the ‘more than five years and undated’ maturity band are undated financial liabilities, all of which relate to subordinated debt, on which interest payments are not included as this information would not be meaningful given the instruments are undated. Interest payments on these instruments are included within the relevant maturities up to five years.

124

Standard Chartered Bank Risk profile

					2016
		Between	Between	Between	Between	Between	Between
		one month	three months	six months	nine months	one year	two years	More than
	One month	and	and	and	and	and	and	five years
	or less	three months	six months	nine months	one year	two years	five years	and undated	Total
Group	$million	$million	$million	$million	$million	$million	$million	$million	$million
Deposits by banks	31,412	2,923	1,123	671	576	644	154	257	37,760
Customer accounts	280,731	46,268	25,539	11,289	9,074	2,622	2,177	2,548	380,248
Debt securities in issue	6,100	11,328	7,029	2,695	593	1,644	1,792	5,113	36,294
Subordinated liabilities and
other borrowed funds	68	52	151	1,808	145	1,382	1,796	18,311	23,713
Other liabilities	20,897	6,736	4,987	765	588	1,383	766	11,489	47,611
Total liabilities	339,208	67,307	38,829	17,228	10,976	7,675	6,685	37,718	525,626
					2015
		Between	Between	Between	Between	Between	Between
		one month	three months	six months	nine months	one year	two years	More than
	One month	and	and	and	and	and	and	five years
	or less	three months	six months	nine months	one year	two years	five years	and undated	Total
Group	$million	$million	$million	$million	$million	$million	$million	$million	$million
Deposits by banks	32,030	2,615	1,629	875	73	434	393	254	38,303
Customer accounts	283,318	34,133	21,019	8,794	8,060	2,037	1,338	2,514	361,213
Debt securities in issue	9,568	15,834	10,741	1,520	1,061	3,912	1,859	8,985	53,480
Subordinated liabilities and
other borrowed funds	72	75	1,210	226	153	3,104	4,334	17,703	26,877
Other liabilities	17,260	6,572	3,355	540	548	783	757	14,013	43,828
Total liabilities	342,248	59,229	37,954	11,955	9,895	10,270	8,681	43,469	523,701

1. Certain balances within Deposits by banks, Customer accounts and Other liabilities reported according to the behavioural maturity of their cash flows has been adjusted to contractual maturity. Certain transactions reported on a discounted basis have been adjusted to an undiscounted basis. The total undiscounted liabilities of the Group reported in 2015 as $506 billion has been restated to $524 billion. The relevant maturity categories have also been restated.

125

Standard Chartered Bank Risk profile

Maturity of financial liabilities (excluding derivative financial instruments) on an undiscounted basis continued

					2016
		Between	Between	Between	Between	Between	Between
		one month	three months	six months	nine months	one year	two years	More than
	One month	and	and	and	and	and	and	five years
	or less	three months	six months	nine months	one year	two years	five years	and undated	Total
Company	$million	$million	$million	$million	$million	$million	$million	$million	$million
Deposits by banks	25,904	2,534	1,050	340	362	402	140	32	30,764
Customer accounts	110,342	31,065	15,503	5,605	3,772	1,369	1,449	389	169,494
Debt securities in issue	5,888	10,806	6,561	2,466	297	764	677	2,354	29,813
Subordinated liabilities and
other borrowed funds	45	49	124	1,807	120	1,258	937	18,206	22,546
Other liabilities	18,210	4,950	3,215	513	210	1,243	444	2,373	31,158
Total liabilities	160,389	49,404	26,453	10,731	4,761	5,036	3,647	23,354	283,775

					2015
		Between	Between	Between	Between	Between	Between
		one month	three months	six months	nine months	one year	two years	More than
	One month	and	and	and	and	and	and	five years
	or less	three months	six months	nine months	one year	two years	five years	and undated	Total
Company	$million	$million	$million	$million	$million	$million	$million	$million	$million
Deposits by banks	26,817	1,835	1,602	871	38	416	126	34	31,739
Customer accounts	115,210	18,939	11,105	4,942	3,990	515	532	227	155,460
Debt securities in issue	10,893	15,281	8,794	1,373	711	1,643	605	4,294	43,594
Subordinated liabilities and
other borrowed funds	70	72	1,173	221	116	3,021	3,234	16,879	24,786
Other liabilities	15,167	4,147	2,347	602	294	411	473	3,897	27,338
Total liabilities	168,157	40,274	25,021	8,009	5,149	6,006	4,970	25,331	282,917

1. Certain balances within Deposits by banks, Customer accounts and Other liabilities reported according to the behavioural maturity of their cash flows has been adjusted to contractual maturity. Certain transactions reported on a discounted basis have been adjusted to an undiscounted basis. The total undiscounted liabilities of the Group reported in 2015 as $266 billion has been restated to $283 billion. The relevant maturity categories have also been restated.

126

Standard Chartered Bank Risk profile

Maturity of derivative financial instruments on an undiscounted (notional) basis

Derivative financial instruments include those net settled derivative contracts in a net liability position, together with the pay leg of gross settled contracts regardless of whether the overall contract is in an asset or liability position. The

receiving leg is not shown in this table and as a result the derivative amounts in this table are increased by their exclusion. Derivative financial instruments make up 10 per cent of the Group balance sheet.

the overall contract is in an	asset or liability position. The
Group	2016
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total $million $million $million $million $million $million $million $million $million
Derivative financial instruments	547,118 460,423 224,617 125,906 118,198 100,353 111,839 76,549 1,765,003
Group	2015
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total $million $million $million $million $million $million $million $million $million
Derivative financial instruments	435,036 375,963 179,355 132,034 87,710 105,856 137,942 83,673 1,537,569

Company	2016
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total $million $million $million $million $million $million $million $million $million
Derivative financial instruments	718,981 609,042 300,035 164,335 155,798 105,751 115,492 77,624 2,247,058

Company	2015
	One month or less Between one month and three months Between three months and six months Between six months and nine months Between nine months and one year Between one year and two years Between two years and five years More than five years and undated Total $million $million $million $million $million $million $million $million $million
Derivative financial instruments	583,853 480,404 246,638 180,600 112,075 115,540 141,634 83,559 1,944,303

127

Standard Chartered Bank Risk profile

Operational risk (unaudited)

We define operational risk as the potential for loss from inadequate or failed internal processes, people and systems or from the impact of external events, including legal risks.

The management of operational risk is a challenge due to its broad scope as operational risks arise from all activities carried out within the Group. To address this challenge we map risks across the Group at a process level with controls installed to mitigate these risks. We benchmark practices against peers and regulatory requirements.

Operational risk events and losses

Operational losses for 2016 were lower than 2015 and comprise a number of unrelated non-systemic events which were not individually significant.

The highest losses reviewed by Group committees during the year were:

• An $8.1 million provision raised in Hong Kong for ������������������������������������������������������

• A $6.8 million recovery of excess spread in Nigeria

A summary of our operational risk management approach is provided in Risk management approach on page 63.

Operational risk profile

The operational risk profile is the Group’s overall exposure to operational risk, at a given point in time, covering all applicable operational risk sub-types. The operational risk profile comprises both operational risk events and losses that have already occurred and the current exposures to operational risks which, at an aggregate level, includes the consideration of top risks and emerging risks.

The Group’s profile of operational loss events in 2016 and 2015 is summarised in the table below. It shows by Basel business line the percentage distribution of gross operational losses.

Distribution of operational losses byBasel business line	%Loss
	2016 20151
Agency services Commercial Banking Corporate finance Corporate items Payment and settlements Retail banking Retail brokerage Tradingand sales	4.7% 0.6% 6.5% 23.8% 0.0% 0.0% 15.9% 3.7% 13.5% 7.8% 30.6% 46.8% 6.0% 1.4% 22.8% 15.9%

1. 2015 operational losses are restated to reflect incremental losses recorded

The Group’s profile of operational loss events in 2016 and 2015 is also summarised by Basel event type in the table below. It shows the percentage distribution of gross operational losses by Basel event type:

Distribution of operational losses byBasel Event Type	% Loss
	2016 20151
Business disruption and system failures Clients products and business practices Damage to physical assets Employment practices and workplace safety Execution delivery and process management External fraud Internal fraud	3.6% 0.5% 25.3% 15.2% 0.1% 0.0% 0.5% 0.0% 49.2% 20.1% 19.6% 26.7% 1.7% 37.5%

1. 2015 operational losses are restated to reflect incremental losses recorded

Operational losses are one indicator of the effectiveness and robustness of the operational risk control environment. In addition, lessons learnt reviews and root cause analyses from external and internal loss events, including near misses, are used to improve processes and controls.

The 2016 loss distribution reflects improvements in the number of large losses compared with 2015 which impacted the Retail Banking, Trading and sales and Commercial Banking Basel business lines and the internal fraud, external fraud and clients products and business practices Basel event types. In addition, in 2016

128

Standard Chartered Bank Risk profile

Commercial Banking experienced a lower number of losses greater than $1 million compared to 2015.

Top risks and emerging risks

A top risk is a risk exposure, or a group of highly correlated risk exposures, that has the highest potential to breach the Group’s risk capacity. The objective is to identify those risks that can materially impact the Group’s risk capacity, and to calibrate metrics as early warning indicators against undesirable outcomes and performance under stress. Top risk candidates are identified through a top-down

Macro-prudential, regulatory and external risks

• Regulatory non-compliance

• Anti-money laundering and terrorist financing

• • International sanctions

• External fraud

• Information and cyber security

• Critical third-party vendors

• Additional conduct

• Anti-bribery and corruption

assessment of concentration of exposures or aggregation of risks.

Emerging risks are also considered, both internally from the Group’s internal operational risk profile and from external events. Given their significance, top risks attract closer scrutiny from management and governance committees. Top risks are expected to change over time based on the top-down assessments by management.

The Group’s operational top risks as at 31 December 2016 are shown in the table below.

Internal processes, systems and change risks

• Change management

• Data management

• • Major systems failure • Significant business interruption • Rogue trading • Internal fraud

• Market misconduct

• Mis-selling

• Product management

• Collateral management

129

Standard Chartered Bank Capital review

Capital management and governance

The Capital Requirements Directive (CRD) IV Capital base, excluding the capital ratios and risk-weighted assets (RWA) amounts, on page 131 forms part of the financial statements.

Standard Chartered Bank is a regulated entity. Capital management and governance as described below applies to the Group’s regulated consolidations and entities.

The Group seeks to maintain a strong capital base to support the development of its business and to meet regulatory capital, leverage and loss absorbing capacity requirements.

Strategic business and capital plans are drawn up covering a five-year horizon and are approved by the Board. The capital plan ensures that adequate levels of capital and an efficient mix of the different components of capital are maintained to support our strategy and business plans. Group Treasury is responsible for the ongoing assessment of the demand for capital and the updating of the Group’s capital plan.

Capital planning takes the following into account:

• Current regulatory capital requirements and our assessment of future standards

• Demand for capital due to business outlook, loan impairment outlook and potential market shocks or stresses

• Available supply of capital and capital raising options

The Group formulates a capital plan with the help of internal models and other quantitative techniques. The Group uses a capital model to assess the capital demand for material risks and supports this with our internal capital adequacy assessment. Other internal models help to estimate potential future losses arising from credit, market and other risks and, using regulatory formulae, the amount of capital required to support them. In addition the models enable the Group to gain an enhanced understanding of its risk profile, for example by identifying potential concentrations and assessing the impact of portfolio management actions.

Stress testing and scenario analysis are an integral part of capital planning, and are used to ensure that the Group’s internal capital adequacy assessment considers the impact of extreme but plausible scenarios on its risk profile and capital position. They provide an insight into the potential impact of significant adverse events and how these could be

mitigated through appropriate management actions. The capital modelling process is a key part of our management discipline.

A strong governance and process framework is embedded in our capital planning and assessment methodology. The key capital management committee is the Group Asset and Liability Committee (GALCO). In 2016 members of the GALCO included the Group Executive Directors, the Group Chief Risk Officer, the Group Treasurer, Regional CEOs and the heads of the Group’s businesses, with additional senior attendees from Finance, Risk and the businesses. The GALCO regularly reviews the capital plan and approves capital management policies and guidelines.

Additionally the Operational Balance Sheet Committee (OBSC), focuses on ensuring that, in executing the business strategy, the Group operates within internally approved and externally required capital, loss absorbing capacity, liquidity and leverage risk tolerances.

The Group’s capital position, including its relationship to the Group’s risk appetite statement, is regularly considered by the Board Risk Committee. At a country level, capital is monitored by the Country Asset and Liability Committee. Appropriate policies are in place governing the transfer of capital within the Group.

The Group’s view is that, in light of the uncertain economic environment and continuing uncertainty as to the end state for banks’ regulatory capital and other loss absorbency requirements, it is appropriate to remain both strongly capitalised and above regulatory requirements.

The capital that the Group is required to hold is determined by its balance sheet, off-balance sheet, counterparty and other risk exposures. Further detail on counterparty and risk exposures is included in the Risk and Capital review on pages 48 to 129.

Capital in branches and subsidiaries is maintained on the basis of host regulators’ requirements and the Group’s assessment of capital requirements under normal and stressed conditions. Suitable processes and controls are in place to monitor and manage capital adequacy and ensure compliance with local regulatory requirements in all Group entities. These processes are designed to ensure that we have sufficient capital available to meet local regulatory capital requirements.

130

Standard Chartered Bank Capital review

Capital ratios
	2016	2015
CET 1
	14.0%	11.7%
Total capital
	22.4%	18.3%
CRD IV Capital base
	2016	2015
	$million	$million
CET1 instruments and reserves
Capital instruments and the related sharepremium accounts
	26,820	23,032
Of which: Sharepremium accounts
	296	296
Retained earnings1	20,549	24,1892
Accumulated other comprehensive income (and other reserves)
	(5,481)	(5,045)2
Non-controlling interests (amount allowed in consolidated CET1)
	2,797	2,326
Independently reviewed interim and year-end losses
	(581)	(2,631)2
Foreseeable dividendsnet ofscrip
	(163)	(115)
CET1 capital before regulatoryadjustments
	43,941	41,756
CET1 regulatory adjustments
Additional value adjustments (prudent valuation adjustments)
	(660)	(564)
Intangible assets (net of related tax liability)
	(4,432)	(4,395)
Deferred tax assets that rely on future profitability (excludes those arising from temporary differences)
	(197)	(212)
Fair value reserves related to losses on cash flow hedges
	73	38
Deduction of amounts resulting from the calculation of excess expected loss
	(740)	(567)
Net gains on liabilities at fair value resulting from changes in own credit risk
	(289)	(631)
Defined-benefit pension fund assets
	(18)	(4)
Fair value gains arising from the institution's own credit risk related to derivative liabilities	(20)	(34)
Exposure amounts which couldqualifyfor risk weightingof 1250%
	(168)	(199)
Of which: securitisation positions
	(134)	(168)
Of which: free deliveries
	(34)	(31)
Total regulatoryadjustments to CET1
	(6,451)	(6,568)
CET 1 capital
	37,490	35,188
Additional Tier 1 capital(AT1)instruments
	5,500	4,472
AT1 regulatoryadjustments
	(20)	(20)
Tier 1 capital
	42,970	39,640
Tier 2 capital instruments
	17,174	15,364
Tier 2 regulatoryadjustments
	(30)	(30)
Tier 2 capital
	17,144	15,334
Total capital
	60,114	54,974
Credit Risk	212,593
		244,000
Operational Risk	33,729
		34,201
Market Risk	21,877
		21,913
Total risk-weighted assets(unaudited)	268,199
		300,114

1. Retained earnings include the effect of regulatory consolidation adjustments

2. Comparatives have been re-presented on a basis consistent with the current year disclosure

131

Standard Chartered Bank Independent Auditor’s Report to the members of Standard Chartered Bank

We have audited the financial statements of the Group (Standard Chartered Bank and its subsidiaries) and Bank (Standard Chartered Bank) for the year ended 31 December 2016 set out on pages 133 to 267. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the Bank’s financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Bank’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 Bank’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 responsibility to anyone other than the Bank’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement set out on page 47, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the Bank’s affairs as at 31 December 2016 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

• the Bank’s financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year is consistent with the financial statements.

Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading the Strategic report and the Directors’ report:

• we have not identified material misstatements in those reports; and

• in our opinion, those reports have been prepared in accordance with the Companies Act 2006.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Bank, or returns adequate for our audit have not been received from branches not visited by us; or

• the Bank’s financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

==> picture [184 x 48] intentionally omitted <==

Michelle Hinchliffe

(Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL 24 February 2017

132

Standard Chartered Bank Consolidated income statement For the year ended 31 December 2016

Standard Chartered Bank Consolidated income statement For the year ended 31 December 2016
Notes	2016 2015 $million $million
Interest income Interest expense	13,007 14,598 (5,109) (5,092)
Net interest income 3 Fees and commission income Fees and commission expense Net Fees and commission income 4 Net trading income 5 Other operatingincome 6	7,898 9,506
	3,697 4,115 (507) (548)
	3,190 3,567 1,929 939 993 1,207
Operating income Staff costs Premises costs General administrative expenses Depreciation and amortisation Operatingexpenses 7	14,010 15,219
	(6,269) (7,124) (786) (824) (2,353) (2,540) (683) (622)
	(10,091) (11,110)
Operating profit before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions 8 Other impairment Goodwill 9 Other 9 (Loss)/profit from associates and joint ventures 30	3,919 4,109 (2,791) (4,976) (166) (488) (322) (244) (37) 192
Profit/(loss) before taxation Taxation 10	603 (1,407) (630) (661)
Loss for theyear	(27) (2,068)
Profit/(loss) attributable to: Non-controlling interests 27 Parent company shareholders	554 563 (581) (2,631)
Loss for theyear	(27) (2,068)

he notes on pages [.] to [.] form an integral part of these financial statements.

The notes on pages 140 to 267 form an integral part of these financial statements.

133

Standard Chartered Bank Consolidated statement of comprehensive income For the year ended 31 December 2016

Standard Chartered Bank Consolidated statement of comprehensive income For the year ended 31 December 2016
Notes	2016 2015 $million $million
Loss for the year Other comprehensive loss: Items that will not be reclassified to Income statement: Own credit losses on financial liabilities designated at fair value through profit or loss Actuarial losses on retirement benefit obligations 28 Taxation relating to components of other comprehensive income 10 Items that may be reclassified subsequently to Income statement: Exchange differences on translation of foreign operations: Net losses taken to equity Net gains on net investment hedges Share of other comprehensive loss from associates and joint ventures 30 Available-for-sale investments: Net valuation gains/(losses) taken to equity Reclassified to income statement Cash flow hedges: Net losses taken to equity Reclassified to income statement 13 Taxation relating to components of other comprehensive income 10 Othercomprehensivelossfor the year,netof taxation	(27) (2,068) (445) (67)
	(372) - (105) (57) 32 (10)
	(958) (2,239)
	(817) (2,004) 30 90 (11) - 58 (65) (188) (328) (79) (71) 57 107 (8) 32
	(1,403) (2,306)
Total comprehensive loss for theyear	(1,430) (4,374)
Total comprehensive income/(loss) attributable to: Non-controlling interests 27 Parent company shareholders	459 447 (1,889) (4,821)
	(1,430) (4,374)

134

Standard Chartered Bank Balance sheets As at 31 December 2016

Standard Chartered Bank Balance sheets As at 31 December 2016
		Group		Company
		2016	2015	2016	2015
	Notes	$million	$million	$million	$million
Assets
Cash and balances at central banks	12,33	70,706	65,312	59,373	49,916
Financial assets held at fair value through profit or loss	12	19,825	23,241	12,841	15,932
Derivative financial instruments	12,13	67,061	64,587	66,772	62,814
Loans and advances to banks	12,15	72,605	64,492	41,214	40,089
Loans and advances to customers	12,15	252,710	257,228	117,244	118,763
Investment securities	12,14	108,866	114,549	55,590	61,396
Other assets	12,19	36,807	34,147	26,696	24,273
Due from subsidiary undertakings and other related parties	34	1,533	-	14,138	14,599
Current tax assets	10	474	388	242	46
Prepayments and accrued income		2,237	2,174	1,022	1,103
Interests in associates and joint ventures	30	1,922	1,929	816	577
Investment in subsidiary undertakings	30	-	-	14,144	13,127
Goodwill and intangible assets	16	4,294	4,217	1,361	1,115
Property, plant and equipment	17	6,308	6,120	446	436
Deferred tax assets	10	1,294	1,059	915	753
Assets classified held for sale	12,19	1,254	349	1	6
Total assets		647,896	639,792	412,815	404,945
Liabilities
Deposits by banks	12	36,894	37,526	30,206	31,317
Customer accounts	12	371,855	350,633	164,310	150,002
Financial liabilities held at fair value through profit or loss	12	16,598	20,872	11,224	12,588
Derivative financial instruments	12,13	66,251	62,586	66,202	60,722
Debt securities in issue	12,20	29,519	42,587	26,114	37,716
Other liabilities	12,21	33,057	31,897	21,136	20,359
Due to parent companies, subsidiary undertakings and other
related parties	34	15,490	18,916	30,731	33,983
Current tax liabilities	10	324	744	187	592
Accruals and deferred income		4,817	5,072	3,062	3,414
Subordinated liabilities and other borrowed funds	12,25	20,064	20,716	19,152	19,040
Deferred tax liabilities	10	330	238	225	117
Provisions for liabilities and charges	22	213	215	279	255
Retirement benefit obligations	28	525	445	426	334
Liabilities included in disposal groups held for sale	12,21	965	72	-	-
Total liabilities		596,902	592,519	373,254	370,439
Equity
Share capital and Share premium account	26	28,320	24,532	28,320	24,532
Other reserves		(5,481)	(4,892)	(2,082)	(1,686)
Retained earnings		19,968	21,472	9,323	9,660
Total parent company shareholders’ equity		42,807	41,112	35,561	32,506
Other equity instruments	26	4,000	2,000	4,000	2,000
Total equity excluding non-controlling interests		46,807	43,112	39,561	34,506
Non-controllinginterests	27	4,187	4,161	-	-
Total equity		50,994	47,273	39,561	34,506
Totalequity andliabilities		647,896	639,792	412,815	404,945

The notes on pages 140 to 267 form an integral part of these financial statements. These financial statements were approved by the Court of directors and authorised for issue on 24 February 2017 and signed on its behalf by:

==> picture [148 x 56] intentionally omitted <==

Bill Winters, Director

==> picture [238 x 45] intentionally omitted <==

Andy Halford, Director

135

Standard Chartered Bank

Consolidated statement of changes in equity For the year ended 31 December 2016

Share capital and share premium account $million	Capital and capital redemption reserve1 Own credit adjustme nt reserve Available -for-sale reserve $million $million $million	Cash flow hedge reserve Translation reserve Retained earnings Parent company shareholders' equity Other equity instruments Non- controlling interests Total $million $million $million $million $million $million $million
At 1 January 2015 22,650 (Loss) / profit for the year - Other comprehensive (loss)/ income, net of taxation - Distributions - Shares issued, net of expenses 1,882 Other equity instruments issued, net of expenses - Deemed capital contribution3 - Dividends, net of scrip4 - Deemed distribution to parent - Other movements5 -	40 - 473 - - - - - (316) - - - - - - - - - - - - - - - - - - - - -	(60) (3,194) 24,759 44,668 - 4,151 48,819 - - (2,631) (2,631) - 563 (2,068) 13 (1,848) (39)2 (2,190) - (116) (2,306) - - - - - (518) (518) - - - 1,882 - - 1,882 - - - - 2,000 - 2,000 - - 177 177 - - 177 - - (652) (652) - - (652) - - (142) (142) - - (142) - - - - - 81 81
As at 31 December 2015 24,532 Transfer of own credit adjustment, net of taxation6 - (Loss) / profit for the year - Other comprehensive loss - Distributions - Shares issued, net of expenses 3,788 Other equity instruments issued, net of expenses - Deemed capital contribution3 - Dividends, net of scrip4 - Deemed distribution to parent - Other movements7 -	40 - 157 - 631 - - - - - (342) (111) - - - - - - - - - - - - - - - - - - - - -	(47) (5,042) 21,472 41,112 2,000 4,161 47,273 - - (631) - - - - - - (581) (581) - 554 (27) (26) (741) (88)2 (1,308) - (95) (1,403) - - - - - (425) (425) - - - 3,788 - - 3,788 - - - - 2,000 - 2,000 - - 107 107 - - 107 - - (204) (204) - - (204) - - (98) (98) - - (98) - - (9) (9) - (8) (17)
As at 31 December 2016 28,320	40 289 46	(73) (5,783) 19,968 42,807 4,000 4,187 50,994

1. Includes capital reserve of $35 million and capital redemption reserve of $5 million

2. Comprises actuarial loss, net of taxation, non controlling interest, share of associates and joint ventures of $88 million (2015: $39 million)

3. Relates to deemed capital contribution from parent company arising from share based payment net of taxation

4. Comprises ordinary shares dividend paid $nil million (2015: $551 million) and dividends on preference shares classified as equity and Additional Tier 1 securities $204 million (2015: $101million)

5. Additional investment from non controlling interests in one of the Group’s subsidiary undertakings

6. Following Group early adopting the IFRS9 Financial Instruments requirement to present own credit adjustment within other comprehensive income (rather than net trading income)

7. Predominantly due to completion of sale of businesses with non-controlling interest in Pakistan and issuance of shares to non controlling interest in Angola

Note 26 includes a description of each reserve.

The notes on pages 140 to 267 form an integral part of these financial statements.

136

Standard Chartered Bank Cash flow statement For the year ended 31 December 2016

Standard Chartered Bank Cash flow statement For the year ended 31 December 2016
Notes	Group Company
	2016 2015 2016 2015 $million $million $million $million
Cash flows from operating activities Profit/(loss) before taxation 603 (1,407) 148 (832) Adjustments for non-cash items and other adjustments included within income statement 32 3,548 6,435 1,218 2,818 Change in operating assets 32 (10,984) 34,476 (4,622) 14,118 Change in operating liabilities 32 11,573 (65,179) 4,596 (40,707) Contributions to defined benefit schemes 28 (98) (109) (59) (53) UKand overseas taxes paid (1,263) (1,273) (848) (690)
Netcash from/(usedin) operating activities 3,379 (27,057) 433 (25,346)
Cash flows from investing activities Purchase of property, plant and equipment 17 (195) (130) (90) (73) Disposal of property, plant and equipment 23 106 2 22 Acquisition of investment in subsidiaries, associates, and joint ventures, net of cash acquired 30 (238) - (1,876) (217) Dividends received from associates, joint ventures and subsidiaries 3 12 1,427 1,502 Disposal of subsidiaries 30 593 667 137 23 Purchase of investment securities (203,273) (209,450) (100,740) (73,971) Disposal and maturity of investment securities 206,854 195,329 105,912 60,317
Net cash from/(used)in investing activities 3,767 (13,466) 4,772 (12,397)
Cash flows from financing activities Issue of ordinary and preference share capital, net of expenses 26 3,788 1,882 3,788 1,882 Issue of Additional Tier 1 capital, net of expenses 26 2,000 2,000 2,000 2,000 Proceeds from issue of subordinated liabilities 4,000 - 4,000 - Interest paid on subordinated liabilities (641) (801) (893) (720) Repayment of subordinated liabilities (3,997) (5) (3,215) - Proceeds from issue of senior debts 1,068 1,140 - - Interest paid on senior debts (90) (123) - - Repayment of senior debts (2,529) (2,399) - (166) (Investment in )/repayment from non-controlling interests (8) 82 - - Dividends paid to non-controlling interests, other equity and preference shareholders (629) (619) (204) (101) Dividends paid to ordinary shareholders,net ofscrip - (551) - (551)
Netcash from financing activities 2,962 606 5,476 2,344
Net increase/(decrease) in cash and cash equivalents 10,108 (39,917) 10,681 (35,399) Cash and cash equivalents at beginning of the year 88,428 129,870 59,130 95,209 Effect of exchange rate movements on cash and cash equivalents (1,559) (1,525) (889) (680)
Cash and cash equivalents at end of theyear 33 96,977 88,428 68,922 59,130

The notes on pages 140 to 267 form an integral part of these financial statements.

137

Standard Chartered Bank Company statement of changes in equity For the year ended 31 December 2016

	Share
	capital and	Capital and
	share	capital	Own credit	Available-	Cash flow
	premium	redemption	adjustment	for-sale	hedge	Translation	Retained	Other equity
	account	reserve1	reserve	reserve	reserve	reserve	earnings	instruments	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
At 1 January 2015	22,650	40	-	154	(56)	(1,164)	11,516	-	33,140
Loss for the year	-	-	-	-	-	-	(1,177)	-	(1,177)
Other comprehensive (loss)/income
for the year net of taxation	-	-	-	(174)	21	(507)	(40)	-	(700)
Shares issued, net of expenses	1,882	-	-	-	-	-	-	-	1,882
Other equity instruments issued, net
of expenses	-	-	-	-	-	-	-	2,000	2,000
Deemed capital contribution2	-	-	-	-	-	-	124	-	124
Deemed distribution to parent	-	-	-	-	-	-	(111)	-	(111)
Dividends, net of scrip3	-	-	-	-	-	-	(652)	-	(652)
At 31 December 2015	24,532	40	-	(20)	(35)	(1,671)	9,660	2,000	34,506
Transfer of own credit adjustment, net
of taxation4	-	-	494	-	-	-	(494)	-	-
Loss for the year	-	-	-	-	-	-	(15)	-	(15)
Other comprehensive loss for the year
net of taxation			(256)	(23)	(8)	(108)	(119)	-	(514)
Shares issued, net of expenses	3,788	-	-	-	-	-	-	-	3,788
Other equity instruments issued, net
of expenses	-	-	-	-	-	-	-	2,000	2,000
Deemed capital contribution2	-	-	-	-	-	-	72	-	72
Dividends, net of scrip3	-	-	-	-	-	-	(204)	-	(204)
Deemed distributionto parent	-	-	-	-	-	-	(72)	-	(72)
At 31 December 2016	28,320	40	238	(43)	(43)	(1,779)	8,828	4,000	39,561

1. Includes capital reserve of $35 million and capital redemption reserve of $5 million

2. Relates to deemed capital distribution from parent company arising from share based payments net of taxation.

3. Comprises ordinary shares dividend paid $nil million ($2015: $551 million) and dividends on preference shares classified as equity and Additional Tier 1 securities $ 204 million (2015 $101million)

4. Following Group early adopting the IFRS9 Financial Instruments requirement to present own credit adjustment within other comprehensive income (rather than net trading income)

Note 26 includes a description of each reserve.

The notes on pages 140 to 267 form an integral part of these financial statements.

138

Standard Chartered Bank Contents - Notes to the financial statements

CONTENTS

Section	Note		Page
Basis of preparation	1	Accounting policies	140
Performance/return	2	Segmental information	142
	3	Net interest income	144
	4	Net fees and commission	145
	5	Net trading income	145
	6	Other operating income	146
	7	Operating expenses	146
	8	Impairment losses on loans and advances and other	148
		credit risk provisions
	9	Other impairment	150
	10	Taxation	151
	11	Dividends	156
Assets and liabilities held at fair value	12	Financial instruments	157
	13	Derivatives financial instruments	189
	14	Investment securities	193
Financial instruments held at amortised cost	15	Loans and advances to banks and customers	198
Other assets and investments	16	Goodwill and intangible assets	202
	17	Property, plant and equipment	204
	18	Operating lease commitments	206
	19	Other assets	207
Funding, accruals, provisions, contingent	20	Debt securities in issue	208
liabilities and legal proceedings	21	Other liabilities	208
	22	Provisions for liabilities and charges	209
	23	Contingent liabilities and commitments	210
	24	Legal and regulatorymatters	211
Capital instruments, equity and reserves	25	Subordinated liabilities and other borrowed funds	213
	26	Share capital, other equity instruments and reserves	215
	27	Non-controllinginterests	217
Employee benefits	28	Retirement benefit obligations	218
	29	Share basedpayments	226
Scope of consolidation	30	Investment in subsidiary undertakings, joint ventures	231
		and associates
	31	Structured entities	236
Cash flow statement	32	Cash flow statement	238
	33	Cash and cash equivalents	239
Other disclosure matters	34	Related party transactions	239
	35	Post balance sheet events	242
	36	Auditor’s remuneration	242
	37	Remuneration of directors	243
	38	Related undertakings of the Group	245
	39	IFRS 9 Financial Instruments	262
	40	Representation of prior year financial information	265

139

Standard Chartered Bank Notes to the financial statements

1. Accounting policies

Statement of compliance

The Group financial statements consolidate Standard Chartered Bank (the Company) and its subsidiaries (together referred to as the Group) and equity account the Group’s interest in associates and jointly controlled entities.

The parent company financial statements present information about the Company as a separate entity.

Both the parent company financial statements and the Group financial statements have been prepared and approved by the directors in accordance with IFRS and IFRS Interpretations Committee interpretations as endorsed by the EU. EU-endorsed IFRS may differ from IFRS published by the International Accounting Standard Board if a standard has not been endorsed by the EU.

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual statement of comprehensive income and related notes that form a part of these financial statements.

The following pages of the Strategic report form part of these financial statements:

• Client segment reviews, page 22

• Regional reviews, page 32

The following parts of the Risk review form part of these financial statements:

a) From the start of Risk profile on page 65 to the end of the Top risks and emerging risks section on page 129 excluding:

• Asset backed securities, page 103

• Country cross-border risk, page 104

• Market risk changes – risks not in value at risk, page 108

• Market risk changes – backtesting, page 108

• Mapping of market risk items to the balance sheet, page

• 109

• Stressed coverage, liquidity coverage ratio and net stable

• funding ratio, page 111

• Liquidity pool, page 112

• Encumbered assets, page 115

• Readily available for encumberance, page 118

• Operational risk, page 138

b) Regulatory compliance, review, request for information and investigations on page 50

c) From the start of Risk management approach on page 52 to the end of Liquidity risk – stress testing on page 61, excluding Country cross-border risk on page 59 and where indicated on page 61

d) Capital Requirements Directive (CRD) IV Capital base, excluding the capital ratios and risk-weighted assets (RWA) amounts, on page 131

Basis of preparation

The consolidated and Company financial statements have been prepared under the historical cost convention, as modified by the revaluation of cash-settled share-based payments, available-for-sale assets, and financial assets and liabilities (including derivatives) at fair value through profit or loss.

Significant accounting estimates and judgements

In determining the carrying amounts of certain assets and liabilities, the Group makes assumptions of the effects of

uncertain future events on those assets and liabilities at the balance sheet date. The Group’s estimates and assumptions are based on historical experience and expectation of future events and are reviewed periodically. Further information about key assumptions concerning the future, and other key sources of estimation uncertainty, are set out in the relevant disclosure notes for the following areas:

• Loan loss provisioning (refer to Risk review and Capital

• review on page 58)

• Taxation (note 10)

• Fair value and impairment of financial instruments (note 12)

• Goodwill impairment (note 16)

• Provisions for liabilities and charges (note 22)

• Retirement benefit obligations (note 28)

• Impairment of investments in associates and joint

• arrangements (note 30)

• Structured entities (note 31)

IFRS and Hong Kong Listing Rules

There are no significant differences between EU-endorsed IFRS and Hong Kong Financial Reporting Standards.

Comparatives

Certain comparatives have been changed to comply with current year disclosures. Details of these changes are set out in the relevant notes below:

• Financial instruments (note 12)

• Contingent liabilities and commitments (note 23)

• Structured entities (note 31)

• Liquidity risk (page 12)

• Credit risk (pages 66 to 100)

These changes have not resulted in any amendments to the reported income statement or balance sheet of the Group.

The Group also represented its client and geographic region segment financial information for 2015 as described in Note 40.

New accounting standards adopted by the Group

The requirements for the classification and measurement of financial liabilities are specified in IAS 39, including the ability to designate financial liabilities as fair value through profit or loss. Following the EU Adoption of IFRS 9 Financial Instruments in November 2016, the Group elected to early apply the requirements for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss relating to own credit in other comprehensive income rather than net trading income (without applying the other requirements in IFRS 9). The own credit amounts are accounted for as a separate category of equity. Opening retained earnings have been adjusted to reclassify the cumulative own credit adjustment component of the cumulative fair value adjustment on financial liabilities designated at fair value through profit or loss. These amounts will not be recycled to the income statement but will be recycled to retained earnings on derecognition of the applicable instruments. IFRS 9 does not permit the prior year to be restated as discussed below.

The reporting of fair value changes relating to own credit in Other comprehensive income is only

140

Standard Chartered Bank Notes to the financial statements

permitted where this does not create or enlarge an accounting mismatch. Where an accounting mismatch arises, the fair value changes are reported in the income statement. The Group currently designates financial liabilities at fair value through profit or loss only on the basis that they contain a bifurcated embedded derivative and not as a result of an accounting mismatch. There is no economic offset between fair value changes in own credit and the fair value changes in financial assets measured at fair value.

The accounting policies used by the Group are detailed in the relevant note to the financial statements, except those set out below. All have been applied consistently across the Group and to all years presented in these financial statements.

Foreign currencies

Items included in the Group financial statements for each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency of that entity). Both the Group and Company financial statements are presented in US dollars, which is the functional and presentation currency of the Company and the presentation currency of the Group.

Transactions and balances

New accounting standards in issue but not yet effective

The following new standards are effective for periods beginning after 1 January 2017 and have not been applied in preparing these consolidated financial statements:

IFRS 9 Financial Instruments

IFRS 9 was issued in July 2014 and has an effective date of 1 January 2018. It was endorsed by the EU in November 2016. IFRS 9 replaces a number of elements of IAS 39 Financial Instruments: Recognition and Measurement, introducing new requirements for the classification and measurement of financial instruments; the recognition and measurement of credit impairment provisions; and providing for a simplified approach to hedge accounting.

The changes in measures arising on initial application of IFRS 9 will be incorporated through an adjustment to the opening reserves and retained earnings position as at 1 January 2018. Although IFRS 9 will be retrospectively applied, the Group is only permitted to restate comparatives if, and only if, it is possible without the use of hindsight. The Group does not consider it possible to restate comparatives for impairment without the use of hindsight. If comparatives were to be restated, they must incorporate all of the requirements of IFRS 9. For further details on the effect and implementation of IFRS 9 refer to note 39.

IFRS 15 Revenue from Contracts with Customers

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Non-monetary assets and liabilities are translated at historical exchange rates if held at historical cost, or year-end exchange rates if held at fair value, and the resulting foreign exchange gains and losses are recognised in either the income statement or shareholders’ equity depending on the treatment of the gain or loss on the asset or liability.

Foreign currency translation

The results and financial position of all the entities included in the Group financial statements that have a functional currency different from the Group’s presentation currency are accounted for as follows:

• Assets and liabilities for each balance sheet presented are translated at the closing rate at the balance sheet date

• Income and expenses for each income statement are translated at average exchange rates or at rates on the date of the transaction where exchange rates fluctuate significantly

• All resulting exchange differences arising since 1 January 2004 are recognised as a separate component of equity

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is sold or capital repatriated they are recognised in the income statement as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The effective date of IFRS 15 is 1 January 2018 with early adoption permitted. The standard has been endorsed by the EU. The standard provides a principlesbased approach for revenue recognition and introduces the concept of recognising revenue for obligations as or when they are satisfied. The standard may either be applied fully retrospectively or can be applied on a ‘modified retrospective’ basis whereby recognition, measurement and disclosure requirements are applied from 1 January 2018, subject to a cumulative catch-up adjustment to opening retained earnings on this date in respect of open contracts in scope of the standard.

It is expected that revenue in scope of IFRS 15 will predominantly be fees and commission income and the impact of the standard is currently being assessed. It is not yet practicable to quantify the effect of IFRS 15 in these financial statements. We intend to provide a more comprehensive update in the 2017 Half Year Report.

IFRS 16 Leases

The effective date of IFRS 16 is 1 January 2019 with early adoption permitted if IFRS 15 is also adopted at or before application of IFRS 16. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17 Leases. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The impact of the standard is currently being assessed. It is not yet practicable to quantify the effect of IFRS 16 on these consolidated financial statements. The standard has yet to be endorsed by the EU.

141

Standard Chartered Bank Notes to the financial statements

2. Segmental information

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. The four client segments are Corporate & Institutional Banking, Private Banking, Commercial Banking and Retail Banking. The four geographic regions are Greater China & North Asia, ASEAN & South Asia, Africa & Middle East, and Europe & America. Activities not directly related to a client segment and/or geographic region is included in Central and other items. This mainly includes Corporate Centre costs, Asset and Liability Management, treasury activities, certain strategic investments and the UK bank levy. The following should also be noted:

• Transactions and funding between the segments are carried out on an arm’s-length basis

• Corporate Centre costs represent stewardship and central management services roles and activities that are not directly attributable to business or country operations

• Asset and Liability Management, joint ventures and associate investments are managed in the regions and are included within the applicable region. However, they are not managed directly by a client segment and therefore included in the Central and other items segment

• In addition to treasury activities, Corporate Centre costs and other group related functions, Central and other items for regions includes globally run businesses or activities that are managed by the client segments but not directly by geographic management. These include Principal Finance and Portfolio Management

• The Group allocates central costs (excluding Corporate Centre costs) relating to client segments and geographic regions using appropriate business drivers and these are reported within operating expenses.

• An analysis of the Group’s performance by client segment and region is set out on pages 22 and 40.

Basis of preparation

The analysis reflects how the client segments and geographic regions are managed internally. This is described as the Management View and is principally the location from which a client relationship is managed, which may differ from where it is financially booked and may be shared between businesses and/or regions. In certain instances this approach is not appropriate and a Financial View is disclosed, that is, the location in which the transaction or balance was booked. Typically the Financial View is used in areas such as the Market and Liquidity Risk reviews where actual location is more important for an assessment. Segmental information is therefore on a Management View unless otherwise stated.

Restructuring items excluded from underlying results

Income, costs and impairment relating to identifiable business units, products or portfolios from the date that have been approved for restructuring, disposal, wind down or redundancy as a consequence of the Strategy Review announced 3 November 2015 are presented as restructuring and excluded from the underlying results of the Group. This includes realised and unrealised gains and losses from management’s decisions to dispose of assets as well as residual income, direct costs and impairment of related legacy assets of those identifiable business units, products or portfolios.

Additional segmental information (statutory)

	2016
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other Items Total $million $million $million $million $million $million
Net interest income Other income	3,087 2,977 782 287 765 7,898 3,354 1,692 511 209 346 6,112
Operatingincome	6,441 4,669 1,293 496 1,111 14,010

	2015
	Corporate & Institutional Banking Retail Banking Commercial Banking Private Banking Central & Other Items Total $million $million $million $million $million $million
Net interest income Other income	4,000 3,218 924 297 1,067 9,506 2,141 1,888 681 237 766 5,713
Operatingincome	6,141 5,106 1,605 534 1,833 15,219

142

Standard Chartered Bank Notes to the financial statements

Additional segmental information (statutory)

	2016
	Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Central & other Items Total $million $million $million $million $million $million
Net interest income Other income	2,684 2,485 1,566 744 419 7,898 2,698 1,557 1,171 911 (225) 6,112
Operatingincome	5,382 4,042 2,737 1,655 194 14,010

		2015
		Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Central & other Items Total $million $million $million $million $million $million
Net interest income Other income		3,194 2,884 1,768 969 691 9,506 3,100 1,369 1,091 908 (755) 5,713
Operatingincome		6,294 4,253 2,859 1,877 (64) 15,219
		2016
	Hong Kong Korea China Singapore India UAE UK US $million $million $million $million $million $million $million $million
Net interest income Other income	1,375 586 505 817 680 392 451 179 1,959 295 187 683 275 357 331 482
Operatingincome	3,334 881 692 1,500 955 749 782 661

	2015
	Hong Kong Korea China Singapore India UAE UK US $million $million $million $million $million $million $million $million
Net interest income Other income	1,540 737 670 946 844 455 594 278 2,123 379 249 634 153 346 291 521
Operatingincome	3,663 1,116 919 1,580 997 801 885 799

143

Standard Chartered Bank Notes to the financial statements

3. Net interest income

Accounting policy

Interest income and expense on available-for-sale assets and financial assets and liabilities held at amortised cost, is recognised using the effective interest method.

Contractual interest income and expense on financial instruments held at fair value through profit or loss is recognised within net interest income.

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. 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 financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering 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. Where the estimates of cash flows have been revised, the carrying amount of the financial asset or liability is adjusted to reflect the actual and revised cash flows, discounted at the instruments original effective interest rate. The adjustment is recognised as interest income or expense in the period in which the revision is made.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

loss.
	2016	2015
	$million	$million
Balances at central banks	213	238
Treasury bills	593	647
Loans and advances to banks	1,281	1,020
Loans and advances to customers	8,460	10,266
Listed debt securities	604	712
Unlisted debt securities	1,568	1,608
Accrued on impaired assets (discount unwind)	288	107
Interest income	13,007	14,598
Deposits by banks	489	392
Customer accounts	3,181	3,458
Debt securities in issue	462	465
Subordinatedliabilities and otherborrowedfunds	977	777
Interest expense	5,109	5,092
Net interest income	7,898	9,506
Of which from financial instruments held at:
Amortised cost	10,053	11,793
Available-for-sale	2,291	2,425
Fair value throughprofit or loss	663	380
Interest income	13,007	14,598
Of which from financial instruments held at:
Amortised cost	5,000	4,959
Fair value throughprofit or loss	109	133
Interest expense	5,109	5,092
Net interest income	7,898	9,506

144

Standard Chartered Bank Notes to the financial statements

4. Net fees and commission

Accounting policy

Fees and commissions charged for services provided or received by the Group are recognised on an accrual basis when the service has been provided or significant act performed.

Loan syndication fees are recognised as revenue when the syndication has been completed and the Group retained no part of the loan package for itself, or retained a part at the same effective interest rate as for the other participants.

The Group can act as trustee or in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. The assets and income arising thereon are excluded from these financial statements, as they are not assets and income of the Group.

statements, as they are not assets and income of the Group.
	2016	20151
	$million	$million
Fees and commissions income	3,697	4,115
Fees and commissions expense	(507)	(548)
Net fees and commission	3,190	3,567
Transaction Banking	1,194	1,302
Financial Markets	(62)	(73)
Corporate Finance	502	541
Wealth Management	1,089	1,210
Retail Products	464	556
Asset and Liability Management	(22)	(29)
Lending and Portfolio Management	50	66
Principal Finance	(27)	(24)
Others	2	18
Net fees and commission	3,190	3,567

1. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments and products. Refer to note 1 for details.

Total fee income arising from financial instruments that are not fair valued through profit or loss is $1,035 million (2015: $1,190 million) and arising from trust and other fiduciary activities of $115 million (2015: $156 million)

Total fee expense arising from financial instruments that are not fair valued through profit or loss is $56 million (2015: $40 million) and arising from trust and other fiduciary activities of $17 million (2015: $25 million)

5. Net trading income

Accounting policy

Gains and losses arising from changes in the fair value of financial instruments held at fair value through profit or loss are included in the income statement in the period in which they arise.

Income is recognised from the sale and purchase of trading positions, margins on market making and customer business and fair value changes.

Change in policy: In 2016 the Group early adopted the IFRS 9 Financial Instruments requirement to present own credit adjustments within other comprehensive income (rather than net trading income). IFRS 9 does not permit the prior year to be restated. Refer to Note 1 for further details.

restated. Refer to Note 1 for further details.
	2016	2015
	$million	$million
Trading Income1	1,929	444
Owncredit adjustment2	-	495
	1,929	939

1. 2015 Trading income includes $863 million valuation losses relating to the change in the methodology of calculating the CVA and FVA (see Note 12).

2. 2016 balances are reported in other comprehensive income.

Significant items within net trading income include:

• Gains of $2,139 million (2015: $793 million) on instruments held for trading

• Losses of $73 million (2015: $118 million) on financial assets designated at fair value through profit or loss and losses of $178 million (2015: $391 million) on financial liabilities designated at fair value

145

Standard Chartered Bank Notes to the financial statements

6. Other operating income

Accounting policy

Operating lease income is recognised on a straight line basis over the period of the lease unless another systematic basis is more appropriate.

Dividends on equity instruments are recognised when the Group’s right to receive payment is established.

On disposal of available for sale financial instruments, the cumulative gain or loss recognised in other comprehensive income is recycled to the profit or loss in other operating income/expense.

When the Group loses control of the subsidiary or disposal group, the difference between the consideration received and the carrying amount of the subsidiary or disposal group is recognised as a gain or loss on sale of the business.

	2016 2015 $million $million
Other operating income includes: Rental income from operating lease assets Gains less losses on disposal of financial instruments: Available-for-sale Loans and receivables Net gain on sale of businesses Dividend income Other	453 403 189 336
	189 332 - 4
	292 222 50 101 9 145
	993 1,207

7. Operating expenses

Accounting policy

Short-term employee benefits: salaries and social security expenses are recognised over the period in which the employees provide the service. Variable compensation is included within share-based payments costs and wages and salaries. Further details are disclosed in the Directors’ remuneration report on page 43.

Pension costs: contributions to defined contribution pension schemes are recognised in profit or loss when payable. For defined benefit plans net interest expense, service costs and expenses are recognised to the income statement. Further details are provided in note 28.

Share based compensation: The Group operates equity-settled and cash-settled share-based payment compensation plans. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. Further details are provided in note 29.

provided in note 29.
	2016	2015
	$million	$million
Staff costs:
Wages and salaries	4,685	4,895
Social security costs	144	152
Other pension costs (note 28)	316	299
Share-based payment costs (note 29)	98	183
Otherstaffcosts	1,026	1,595
	6,269	7,124

Other staff costs include redundancy and other restructuring expenses of $236 million (2015: $695 million) due to the Strategic Review. Other costs include training, travel costs and other staff related costs.

The following tables summarise the number of employees within the Group:

Group

Group	2016
	Business Support services Total
At 31 December Average for theyear	43,265 43,389 86,654 42,583 42,294 84,877
	2015
	Business Support services Total
At 31 December Average for theyear	42,013 41,855 83,868 45,050 41,900 86,950

146

Standard Chartered Bank Notes to the financial statements

Company	2016
	Business Support services Total
At 31 December Average for theyear	14,166 12,798 26,964 13,718 12,218 25,936
	2015
	Business Support services Total
At 31 December Average for theyear	12,968 11,822 24,790 13,396 11,944 25,340

Details of directors’ pay and benefits and interests in shares are disclosed in the Directors’ remuneration report on pages 43. Transactions with directors, officers and other related parties are disclosed in note 34.

	2016 2015 $million $million
Premises and equipment expenses Rental of premises Other premises and equipment costs Rentalofcomputers and equipment	399 432 369 370 18 22
	786 824
General administrative expenses UK bank levy1 Other general administrative expenses	383 440 1,970 2,100
	2,353 2,540
Depreciation and amortisation Property, plant and equipment (note 17): Premises Equipment Operating lease assets Intangibles (note 16): Software Acquired onbusiness combinations
	98 91 85 88 214 199
	397 378 272 205 14 39
	683 622

1. The UK bank levy is applied on the chargeable equities and liabilities on the Group’s consolidated balance sheet. Key exclusions from chargeable equities and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting. The rate of the levy for 2016 is the blended rate of 0.18 per cent for chargeable short term liabilities, with a lower rate of 0.09 per cent generally applied to chargeable equity and long term liabilities (i.e. liabilities with a remaining maturity greater than one year). The rates will be gradually reduced over the next five years: from 1 January 2021, they will be 0.10 per cent for short-term liabilities and 0.05 per cent for long-term liabilities. In addition, the scope of the bank levy will be restricted to the balance sheet of the UK operations only from that date.

147

Standard Chartered Bank Notes to the financial statements

8. Impairment losses on loans and advances and other credit risk provisions

Accounting policy

Significant accounting estimates and judgements

The calculation of impairment involves key judgements to be made by the credit risk management team.

• For individually significant financial assets, Group Special Asset Management (GSAM) will consider all judgements that have an impact on the expected future cash flows of the asset. These include: The business prospects, industry and geo-political climate of the customer, quality of realisable value of collateral, the Group’s legal position relative to other claimants and any renegotiation/forbearance options

• The difference between the loan carrying amount and the discounted expected future cash flows will result in the impairment amount. The future cash flow calculation involves significant judgements and estimates. As new information becomes available and further negotiations/forbearance measures are taken the estimates of the future cash flows will be revised, and will have an impact on the future cash flow analysis

• For financial assets which are not individually significant, such as the retail portfolio or small business loans, which comprise a large number of homogenous loans that share similar characteristics, statistical estimates and techniques are used, as well as credit scoring analysis. These techniques use models which analyse historical repayment and default rates over a time horizon. Where various models are used, judgement is required to analyse the available information provided and selects the appropriate model or combination of models to use. Further judgement is required to determine overlays on the models (described below in Retail) with the aim of reasonable and supportable impairment allowance for the portfolio being provided

Objective evidence of impairment

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events occurring after the initial recognition of the asset (a loss event), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The Group considers the following factors in assessing objective evidence of impairment:

• Whether the counterparty is in default of principal or interest payments

• When a counterparty files for bankruptcy protection (or the local equivalent) and this would avoid or delay discharge of its obligation

• Where the Group files to have the counterparty declared bankrupt or files a similar order in respect of a credit obligation

• Where the Group consents to a restructuring of the obligation, resulting in a diminished financial obligation, demonstrated by a material forgiveness of debt or postponement of scheduled payments

• Where the Group sells a credit obligation at a material credit-related economic loss; or where there is observable data indicating that there is a measurable decrease in the estimated future cash flows of a group of financial assets, although the decrease cannot yet be identified with specific individual financial assets

Assets at amortised cost

Corporate & Institutional Banking and Commercial Banking

The assessment of the credit risk of corporate and commercial loans is done by the Credit Risk department, based upon counterparty information they receive from various sources including Relationship managers and on external market information.

Once a loan starts to exhibit credit deterioration, it will move along the credit grading scale in the performing book and when it is classified as Credit Grade (CG) 12, the credit assessment and oversight of the loan will normally be performed by Group Special Assets Management (GSAM).

Where GSAM’s assessment indicates that a loan is impaired, GSAM will calculate an Individual Impairment Provision (IIP) based on estimated cash flows revised to reflect anticipated recoveries.

If there is objective evidence that an impairment loss on a loan and receivable or a held-to-maturity asset has occurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan and receivable or held-to-maturity asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure, less cost for obtaining and selling the collateral, whether or not foreclosure is probable.

Further details on collateral held by the Group are discussed in the Risk and capital review on page 88.

In cases where the impairment assessment indicates that there will be a loss of principal, the loan is graded a CG14 while other impaired loans will be graded CG13. Loans graded CG13-CG14 are classified as Non Performing Loans.

The performing loan portfolio is subject to a Portfolio Impairment Provision (PIP) to cover latent losses i.e. those that are not specifically identified but are known, by experience, to be present in any performing portfolio. The PIP is based on models using risk sizing (including probability of default and loss given default), environmental parameters and adjustment overlays. The calculation of the PIP uses regulatory expected credit loss (ECL) models; however as the regulatory ECL models are more punitive than the incurred loss model under IAS 39, adjustments are made to align the calculation with IFRS.

148

Standard Chartered Bank Notes to the financial statements

Retail Banking

An Individual Impairment Provision (IIP) is recognised for Retail banking when an account meets a defined threshold condition in terms of overdue payments (‘contractual impairment’) or meets other objective conditions as described above in the assessment factors. The threshold conditions are set at the point where empirical evidence suggests that the client is unlikely to meet their contractual obligations or a loss of principal is expected.

A credit obligation in Retail Banking clients portfolio that is more than 150 Days Past Due (DPD) or, a credit obligation secured by Wealth Management products that is 90 Days Past Due, is recognised as ‘impaired’ and IIP is provided for accordingly. In addition, the credit account is recognized as ‘impaired’ immediately if the borrower files for bankruptcy or other equivalent forbearance programme, or the borrower is deceased, or the business is closed in case of small business clients, or the borrower’s other credit accounts with Standard Chartered Bank are impaired.

Retail Banking PIP is computed on performing loans (no contractual impairment), using Expected Loss (EL) rates, to determine latent losses in the portfolio (the EL utilises probability of default and loss given default inherent within the portfolio of impaired loans or receivables and the historical loss experience for assets with credit risk characteristics similar to those in the Group). For defaulted yet non-impaired accounts (greater than 90 days past due) full EL is used, while for non-defaulted accounts, a threemonth emergence period is applied. An adjustment is added to PIP calculation to take into the account instances where the ELbased PIP is deemed imprecise due to under-prediction or over-prediction of EL by underlying models. An overlay in the form of Special Risk adjustment (SRA) is added to the EL-based PIP calculation to take into account instances where EL-based PIP is deemed insufficient to incorporate the impact of a specific credit event. An overlay in the form of Business Cycle Adjustment (BCA) is taken to account for the impact of cyclical volatility in operating environment, which is not adequately covered in the underlying models.

Write-off and reversal of impairment

To the extent a loan is irrecoverable, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed, it is decided that there is no realistic probability of recovery and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement during the period.

Forborne loans

A forborne loan is where a concession has been made to the contractual terms of a loan in response to a customer’s financial difficulties.

In certain circumstances, the Group may renegotiate client loans. Loans that are renegotiated for commercial reasons, such as when a client had a credit rating upgrade, are not included as part of forborne loans because they are not indicative of any credit stress or event.

Forbearance strategies assist clients who are temporarily in financial distress and are unable to meet their original contractual repayment terms. Forbearance can be initiated by the client, the Group or a third party (including government-sponsored programmes or a conglomerate of credit institutions) and includes debt restructuring such as a new repayment schedule, payment deferrals, tenor extensions and interest only payments.

Loans that are renegotiated on terms that are not consistent with those readily available in the market and/or where we have granted a concession compared to the original terms of the loans, are considered for impairment. If the terms of the renegotiation are such that, where the present value of the new cash flows is lower than the present value of the original cash flows, the loan would be considered to be impaired and, at a minimum, a discount provision would be raised and the loan is disclosed as Loans subject to forbearance – impaired’, which is a sub set of impaired loans. All other loans that have been subject to a forbearance contract amendment, but which are not considered impaired (not classified as CG 13 or 14) are classified as ‘Forborne – not impaired’(previously disclosed as ‘other renegotiated loans’).

If a loan enters the forbearance process and the terms are substantially modified, the original loan will be derecognised, and a new loan will be recognised. Once a loan is subject to forbearance, the loan continues to be reported as such, until the loan is repaid or written off.

For Retail Banking clients, all forborne loans are managed within a separate portfolio. If such loans subsequently become past due, charge-off and IIP is accelerated to 90 days past due for unsecured loans and automobile finance or 120 days past due for secured loans. The accelerated loss rates applied to this portfolio are derived from experience with other forborne loans, rather than the Retail Banking clients portfolio as a whole, to recognise the greater degree of inherent risk.

For Corporate & Institutional Banking, Commercial Banking and Private Banking clients, forbearance is applied on a case-by-case basis and is not subject to business-wide programmes. In some cases, the asset is derecognised and a new loan is granted as part of the restructure. In others, the contractual terms and repayment of the existing loans are changed or extended (for example, interest only for a period). Loans classified as subject to forbearance are managed by GSAM and are kept under close review to assess the client’s ability to adhere to the restructured repayment strategy and to identify any events that could result in a deterioration in the client’s ability to repay.

Forborne loans are disclosed by client segments on pages 71 to 75.

Further details on the application of these policies are set out in the Risk review on page 75.

149

Standard Chartered Bank Notes to the financial statements

The following table reconciles the charge for impairment provisions on loans and advances to the total impairment charge and other credit risk provision:

credit risk provision:
	2016	2015
	$million	$million
Net charge against profit on loans and advances:
Individual impairment charge	2,553	4,820
Portfolio impairment charge / (release)	52	(4)
	2,605	4,816
Impairment charges related to credit commitments	45	94
Impairment charges relating to debt securities classified as loans and receivables	97	66
Impairment charges relating to credit risk mitigation instruments	44	-
Total impairment losses and other credit riskprovisions on loans and advances	2,791	4,976

Impairment charges relating to credit risk mitigation instruments

The Group executed funded credit mitigation transactions related to the Liquidation Portfolio, which did not achieve derecognition and are recorded as liabilities on an amortised cost basis. The liability balances are adjusted for revisions to the impairment estimates for the loans referenced in the transactions. Both impairment losses on the referenced loans and the related impairment on these credit mitigation transactions are recorded in total impairment losses and other credit risk provisions on loans and advances.

An analysis of impairment provisions on loans and advances by client segment is set out within the Risk Review on page 85.

9. Other impairment

Accounting policy

Available-for-sale assets

Where objective evidence of impairment exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the amortised cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement) is reclassified from equity and recognised in the income statement.

Available-for-sale debt securities are assessed for impairment in the same way as assets carried at amortised cost (see note 8 – Objective evidence of impairment, for impairment ‘trigger’ events).

Further the extent, observability and depth of market price decreases and collateral rights are considered when assessing objective evidence of listed impairment for available-for-sale instruments.

If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the income statement.

For equity securities, a significant or prolonged decline in the fair value of an equity security below its cost is considered, among other factors, in assessing objective evidence of impairment. In assessing significance, the decline in fair value is evaluated against the original fair value of the asset upon recognition.

In assessing prolonged, the decline is evaluated against the continuous period in which the fair value of the asset has been below its initial recognition amount. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

Refer to the below referenced notes for the remaining relevant accounting policy.

	2016 2015 $million $million
Impairment of goodwill (note 16) Other impairment Impairment of fixed assets (note 17) Impairment losses on available-for-sale financial assets (note 12): - Debt securities - Equity shares Impairment of investment in associates (note 30) Impairment of acquired intangible assets (note 16) Other Recovery of impairment ondisposalof instruments1	166 488 43 28
	54 5 211 142
	- 46 - 1 14 40 - (18)
	322 244
Total other impairment	488 732

1. Relates to private equity instruments sold that had impairment provisions raised against them in prior years

150

Standard Chartered Bank Notes to the financial statements

10. Taxation

Accounting policy

Income tax payable on profits is based on the applicable tax law in each jurisdiction and is recognised as an expense in the period in which profits arise.

Deferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income 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 income tax asset is realised or the deferred income tax liability 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 utilised. Where permitted deferred tax assets and liabilities are offset on an entity 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.

Significant accounting estimates and judgements

• Determining the Group's tax charge for the year involves estimation and judgement on the potential outcome, which includes an interpretation of local tax laws and an assessment of whether the tax authorities will accept the position taken. These judgements take account of external advice where appropriate, and the Group’s view on settling with tax authorities

• The Group provides for current tax liabilities at the best estimate of the amount that is expected to be paid to the tax authorities where an outflow is probable

• The recoverability of the Group’s deferred tax assets is based on management’s judgement of the availability of future taxable profits against which the deferred tax assets will be utilised

The following table provides analysis of taxation charge in the year:

The following table provides analysis of taxation charge in the year:
	2016 2015 $million $million
The charge for taxation based upon the (loss)/profit for the year comprises: Current tax: United Kingdom corporation tax at 20.0 per cent (2015: 20.25 per cent): Current tax charge/(credit) on income for the year Adjustments in respect of years (including double taxation relief) Double taxation relief Foreign tax: Current tax charge on income for the year Adjustments in respect of prior years Deferred tax: Origination/reversal of temporary differences Adjustments in respect of prior years
	10 (16) (73) 41 - (4) 783 1,073 84 50
	804 1,144
	(107) (514) (67) 31
	(174) (483)
Tax onprofits/(loss)on ordinaryactivities	630 661
Effective tax rate	nm1 nm1

1.Not meaningful

Foreign taxation includes current taxation on Hong Kong profits of $109 million (2015: $131 million) on the profits assessable in Hong Kong.

Deferred taxation includes origination/reversal of temporary differences in Hong Kong profits of $(4) million (2015: $(12) million) provided at a rate of 16.5 per cent (2015: 16.5 per cent) on the profits assessable to Hong Kong.

The tax charge for the year of $630 million (2015: $661 million) on a profit before taxation of $603 million (2015: loss before taxation of $1,407 million) reflects the impact of deferred tax assets not recognised relating to UK losses, non-deductible expenses and the impact of countries with tax rates higher or lower than the UK, the most significant of which is India. In addition, the impact of nontaxable losses on investments increased due to losses on Principal Finance investments.

151

Standard Chartered Bank Notes to the financial statements

Taxation Rate: The taxation charge for the year is higher than the charge at the rate of corporation tax in the United Kingdom, 20.0 per cent. The differences are explained below:

per cent. The differences are explained below:
	2016	2015
	$million	$million
Profit/(loss) onordinary activities before taxation	603	(1,407)
Tax at 20.0 per cent (2015: 20.25 per cent)	121	(285)
Lower tax rates on overseas earnings	(11)	(48)
Higher tax rates on overseas earnings	269	230
Tax free income	(116)	(128)
Share of associates and joint ventures	13	(30)
Non-deductible expenses	191	184
Bank levy	77	89
Non-taxable losses on investments	100	36
Non-taxable gains on disposals of businesses	(41)	(44)
Goodwill impairment	33	99
Deferred tax not recognised	93	303
Adjustments to tax charge in respect of prior years	(56)	122
Other items	(43)	133
Tax onprofit/(loss)on ordinaryactivities	630	661

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 including acquisitions, disposals and restructuring of our businesses, the mix of profits across jurisdictions with different statutory tax rates, changes in tax legislation and tax rates and resolution of uncertain tax positions.

The Group does not currently consider that assumptions made in assessing tax liabilities have a significant risk of resulting in a material adjustment within the next financial year.

Tax recognised in other comprehensive income Available-for-sale assets Cash flow hedges Own credit adjustment Retirement benefit obligations Other tax recognised in equity - share-based payments	2016 2015
	Current Tax Deferred Tax Total Current Tax Deferred Tax Total $million $million $million $million $million $million
	11 (2) 9 3 54 57 - (17) (17) - (25) (25) 29 1 30 - - - - 2 2 - (10) (10)
	40 (16) 24 3 19 22 - - - - (6) (6)
Total tax credit/(charge)recognised in equity	40 (16) 24 3 13 16

		Group		Company
	2016	2015	2016		2015
	$million	$million	$million		$million
Current tax assets	388	362	46		69
Current tax liabilities	(744)	(879)	(592)		(618)
Net current tax balance as at 1 January	(356)	(517)	(546)		(549)
Movements in income statement	(804)	(1,144)	(273)		(718)
Movements in other comprehensive income	40	3	24		-
Taxes paid	1,263	1,273	848		690
Other movements	7	29	2		31
Net current tax balance as at 31 December	150	(356)	55		(546)
Current tax assets	474	388	242		46
Current tax liabilities	(324)	(744)	(187)		(592)
Total	150	(356)	55		(546)

152

Standard Chartered Bank Notes to the financial statements

Deferred tax:

Group

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the year:

	At	Exchange	(Charge)/	(Charge)/	At
	1 January	& other	credit	credit	31 December
	2016	adjustments	to profit	to equity	2016
	$million	$million	$million	$million	$million
Deferred taxation comprises:
Accelerated tax depreciation	(195)	8	(105)	-	(292)
Impairment provisions on loans and advances	767	(22)	189	-	934
Tax losses carried forward	325	-	(13)	-	312
Available-for-sale assets	(26)	-	-	(2)	(28)
Cash flow hedges	2	1	19	(17)	5
Retirement benefit obligations	71	2	1	2	76
Share-based payments	26	-	(10)	-	16
Othertemporary differences	(149)	(4)	93	1	(59)
Net deferred tax assets	821	(15)	174	(16)	964

	At	Exchange		(Charge)/	(Charge)/	At
	1 January	& other	credit	to	credit	31 December
	2015	adjustments		profit	to equity	2015
	$million	$million		$million	$million	$million
Deferred taxation comprises:
Accelerated tax depreciation	(156)	7		(46)	-	(195)
Impairment provisions on loans and advances	314	(21)		474	-	767
Tax losses carried forward	256	(9)		78	-	325
Available-for-sale assets	(85)	3		2	54	(26)
Cash flow hedges	29	(2)		-	(25)	2
Retirement benefit obligations	79	(2)		4	(10)	71
Share-based payments	42	(1)		(9)	(6)	26
Other temporary differences	(133)	4		(20)	-	(149)
Net deferred tax assets	346	(21)		483	13	821

Deferred taxation comprises assets and liabilities as follows:

	2016 2015
	Total Asset Liability Total Asset Liability $million $million $million $million $million $million
Deferred taxation comprises: Accelerated tax depreciation Impairment provisions on loans and advances Tax losses carried forward Available-for-sale assets Cash flow hedges Retirement benefit obligations Share-based payments Othertemporary differences	(292) 13 (305) (195) 18 (213) 934 914 20 767 765 2 312 217 95 325 253 72 (28) (11) (17) (26) (9) (17) 5 - 5 2 - 2 76 76 - 71 59 12 16 16 - 26 22 4 (59) 69 (128) (149) (49) (100)
	964 1,294 (330) 821 1,059 (238)

153

Standard Chartered Bank Notes to the financial statements

Deferred tax: Company The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon during the year:

	At	Exchange	(Charge)/	(Charge)/	At
	1 January	& other	credit	credit	31 December
	2016	adjustments	to profit	to equity	2016
	$million	$million	$million	$million	$million
Deferred taxation comprises:
Accelerated tax depreciation	(88)	4	(67)	-	(151)
Impairment provisions on loans and advances	725	(14)	134	-	845
Tax losses carried forward	82	(1)	5	-	86
Available-for-sale assets	(2)	1	-	(37)	(38)
Cash flow hedges	1	1	19	(22)	(1)
Retirement benefit obligations	44	1	4	6	55
Share-based payments	1	1	(5)	-	(3)
Other temporary differences	(127)	3	20	1	(103)
Net deferred tax assets	636	(4)	110	(52)	690

	At	Exchange		(Charge)/	At
	1 January	& other	(Charge)/	credit	31 December
	2015	adjustments	credit to profit	to equity	2015
	$million	$million	$million	$million	$million
Deferred taxation comprises:
Accelerated tax depreciation	(76)	8	(20)	-	(88)
Impairment provisions on loans and advances	358	(24)	391	-	725
Tax losses carried forward	110	(2)	(26)	-	82
Available-for-sale assets	(41)	1	-	38	(2)
Cash flow hedges	29	(1)	-	(27)	1
Retirement benefit obligations	60	(2)	1	(15)	44
Share-based payments	20	-	(13)	(6)	1
Othertemporary differences	(173)	6	40	-	(127)
Net deferred tax assets	287	(14)	373	(10)	636

Deferred taxation comprises assets and liabilities as follows:

	2016 2015
	Total Asset Liability Total Asset Liability $million $million $million $million $million $million
Deferred taxation comprises: Accelerated tax depreciation Impairment provisions on loans and advances Tax losses carried forward Available-for-sale assets Cash flow hedges Retirement benefit obligations Share-based payments Other temporary differences	(151) 5 (156) (88) 5 (93) 845 848 (3) 725 727 (2) 86 86 - 82 82 - (38) (27) (11) (2) - (2) (1) (6) 5 1 1 - 55 55 - 44 34 10 (3) (3) - 1 (3) 4 (103) (43) (60) (127) (93) (34)
	690 915 (225) 636 753 (117)

154

Standard Chartered Bank Notes to the financial statements

At 31 December 2016, the Group has net deferred tax assets of $964 million (2015: $821 million). The recoverability of the Group’s deferred tax assets is based on management’s judgement of the availability of future taxable profits against which the deferred tax assets will be utilised.

Of the Group’s total deferred tax assets, $312 million relates to tax losses carried forward. These tax losses have arisen in individual legal entities and will be offset as future taxable profits arise in those entities.

• $94 million of the deferred tax assets relating to losses has arisen in Ireland, where there is no expiry date for unused tax losses. These losses relate to aircraft leasing and are expected to be fully utilised over the useful economical life of the assets being up to 18 years

• $42 million of the deferred tax assets relating to losses has arisen in Korea. Management forecasts show that $13 million of the deferred tax asset relating to losses are expected to be fully utilised over a period of three years. These tax losses expire after 10 years. There is a defined profit stream against which the remaining $29 million of deferred tax assets relating to losses which have no expiry date, are forecast to be utilised

• $83 million of the deferred tax assets relating to losses has arisen in the US. Management forecasts show that the losses are expected to be fully utilised over a period of nine years. The tax losses expire after 20 years

• $31 million of the deferred tax assets relating to losses has arisen in Taiwan. Management forecasts show that the losses are expected to be fully utilised over a period of four years. The tax losses expire after 10 years

• The remaining deferred tax assets relating to losses have arisen in other jurisdictions and are expected to be recovered in less than 10 years

	Group Company
	2016 2015 2016 2015 $million $million $million $million
No account has been taken of the following potential deferred taxation (liabilities)/asset: Withholding tax on unremitted earnings from overseas subsidiaries and branches Foreign exchange movements on investments in branches Tax losses1 Held over gains on incorporation of overseas branches Other temporarydifferences	(333) (237) (183) (119) (263) (241) (263) (241) 1,171 499 394 469 (417) (468) (417) (468) 53 38 47 32

1. During the year a tax ruling in Korea allowed for the offset of previously expired losses. The potential deferred tax asset in relation to these losses is $775 million.

155

Standard Chartered Bank Notes to the financial statements

11. Dividends

Accounting policy

Dividends on ordinary shares and preference shares classified as equity are recognised in equity in the year in which they are declared.

In determining if dividends are distributed, and the level of dividends declared, the Board considers a number of factors which include but are not limited to:

• The amount of distributable reserves (see note 26)

• The capital requirements of the Group (see Capital ratios on page 131)

• The level of cash investment projections to achieve the Group’s strategy

Ordinary equity shares

Ordinary equity shares
	2016 2015
	Centsper share $million Cents pershare $million
2016/2015interimdividend declared and paid during the year	- - 2.64 551

Preference shares and Additional Tier 1 securities

Dividends on these preference shares and securities classified as equity are recorded in the period in which they are declared.

		2016	2015
		$million	$million
Non-cumulative redeemable preference shares:	7.014 per cent preference shares of $5 each	53	53
	6.409 percent preference shares of$5 each	48	48
		101	101
Additional Tier 1 securities: $2 billion fixed rate resetting perpetual subordinated contingent convertible
securities		103	-
		204	101

The amounts in the table above reflect the actual dividend per share declared and paid to shareholders in 2016 and 2015. Dividends on ordinary equity shares are recorded in the year in which they are declared and, in respect of the final dividend, have been approved by the shareholders. Accordingly, the final ordinary equity share dividends set out above relate to the respective prior years.

156

Standard Chartered Bank Notes to the financial statements

12. Financial instruments

Classification and measurement

Accounting policy

The Group classifies its financial assets into the following measurement categories: financial assets held at fair value through profit or loss; loans and receivables; held-to-maturity; or available-for-sale.

Financial liabilities are classified as either held at fair value through profit or loss or at amortised cost.

Management determines the classification of its financial assets and liabilities at initial recognition.

The following details the approach for the categories:

• a) Financial assets and liabilities held at fair value through profit or loss: This category has two sub-categories:

• Financial assets and liabilities held for trading. A financial asset or liability is classified as held for trading if acquired principally for the purpose of selling in the short term, or forms part of a portfolio of financial instruments which are managed together and for which there is evidence of short-term profit taking or is a derivative (excluding qualifying hedging relationships)

• Designated at fair value through profit or loss. Financial assets and liabilities may be designated at fair value through profit or loss when:

• The designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis (for example, the Group may designate certain fixed rate loan and receivables that are managed with derivative interest rate swaps)

• A group of financial assets and/or liabilities is managed and its performance evaluated on a fair value basis (for example, the Group may designate issued debt to fund a portfolio of trading assets and liabilities that are all managed on a fair value basis)

• The assets or liabilities include embedded derivatives and such derivatives are required to be recognised separately

• b) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and it is expected that apart from credit deterioration substantially all of the initial investment will be recovered.

• c) Held-to-maturity assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the intention and ability to hold to maturity.

• d) Available-for-sale assets are those non-derivative financial assets intended to be held for an indefinite period of time, which may be sold in response to liquidity requirements or changes in interest rates, exchange rates, commodity prices or equity prices.

• e) Financial liabilities held at amortised cost. Financial liabilities, which include borrowings not classified as held at fair value through profit or loss, are classified as amortised cost instruments. Preference shares which carry a mandatory coupon that represents a market rate of interest at the issue date, or which are redeemable on a specific date or at the option of the shareholders, are classified as financial liabilities and are presented in other borrowed funds. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.

A financial guarantee issued is a special case of financial liability. Under a financial guarantee contract the Group, in return for a fee, undertakes to meet customer’s obligations under the terms of a debt instrument if the customer fails to do so. A financial guarantee is recognised as a liability; initially at fair value and, if not designated as at fair value through profit or loss, subsequently at the higher of its initial value less cumulative amortisation and any provision under the contract measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets . Amortisation is calculated so as to recognise fees receivable in profit or loss over the period of the guarantee.

Initial recognition of financial instruments

All financial instruments are initially recognised at fair value, which is normally the transaction price plus, for those financial assets and liabilities not carried at fair value through profit or loss, directly attributable transaction costs.

In certain circumstances the initial fair value may be based on a valuation technique which may lead to the recognition of profits or losses at the time of initial recognition. However, these profits or losses can only be recognised when the valuation technique used is based primarily on observable market data. In those cases where the initially 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 immediately in the income statement. The difference is amortised to the income statement until the inputs become observable, or the transaction matures or is terminated.

Regular way purchases and sales of financial assets and liabilities held at fair value through profit or loss, and financial assets classified as held-to-maturity and available-for-sale, are initially recognised on the trade date (the date on which the Group commits to purchase or sell the asset). Regular way loans are recognised on settlement date when cash is advanced to the borrowers.

157

Standard Chartered Bank Notes to the financial statements

Subsequent measurement

Financial assets and liabilities held at fair value through profit or loss are carried at fair value, with gains and losses arising from changes in fair value taken directly to the net trading income line in the income statement except for changes in fair value on financial liabilities designated at fair value attributable to the Group’s own credit presented directly within other comprehensive income.

Available-for-sale financial assets are carried at fair value, with gains and losses arising from changes in fair value taken to the available-for-sale reserve within equity until the asset is sold, or is impaired, when the cumulative gain or loss is transferred to the income statement.

Loans and receivables are carried at amortised cost using the effective interest method.

Held-to-maturity financial assets are carried at amortised cost using the effective interest method.

Financial liabilities are stated at amortised cost, with any difference between proceeds net of directly attributable transaction costs and the redemption value recognised in the income statement over the period of the borrowings using the effective interest method.

In addition to these instruments, the carrying value of a financial instrument carried at amortised cost that is the hedged item in a qualifying fair value hedge relationship is adjusted by the fair value gain or loss attributable to the hedged risk.

Reclassification of financial instruments:

Reclassifications of financial assets or financial liabilities between measurement categories are not permitted following initial recognition, other than:

• Held for trading non-derivative financial assets can only be transferred out of the held at fair value through profit or loss category in the following circumstances: to the available-for-sale category, where, in rare circumstances, they are no longer held for the purpose of selling or repurchasing in the near term; or to the loan and receivables category, where they are no longer held for the purpose of selling or repurchasing in the near term and they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity

• Financial assets can only be transferred out of the available-for-sale category to the loan and receivables category where they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity

158

Standard Chartered Bank Notes to the financial statements

The Group’s classification of its financial assets and liabilities is summarised in the following tables.

Group Assets Notes	Assets at fair value	Assets atamortised cost Loans and receivables Held-to- maturity Non- financial assets Total $million $million $million $million
	Trading Derivatives held for hedging Designated at fair value through profit or loss Available- for-sale $million $million $million $million
Cash and balances at central banks Financial assets held at fair value through profit or loss Loans and advances to banks1 Loans and advances to customers1 Debt securities 12 Equity shares 12 Treasury bills 12 Derivative financial instruments 13 Loans and advances to banks1 15 Loans and advances to customers1 15 Investment securities Debt securities 14 Equity shares 14 Treasury bills 14 Other assets 19 Assetsheldforsale 19	- - - -	70,706 - - 70,706
	267 - 1,793 - 936 - 2,241 - 12,025 - 354 - 336 - 588 - 1,285 - - -	- - - 2,060 - - - 3,177 - - - 12,379 - - - 924 - - - 1,285
	14,849 - 4,976 - 66,515 546 - - - - - - - - - -	- - - 19,825 - - - 67,061 72,605 - - 72,605 252,710 - - 252,710
	- - - 69,204 - - - 1,333 - - - 35,104	3,055 170 - 72,429 - - - 1,333 - - - 35,104
	- - - 105,641 - - - - - - - -	3,055 170 - 108,866 33,897 - 2,910 36,807 1,102 - 152 1,254
Total at 31 December 2016	81,364 546 4,976 105,641	434,075 170 3,062 629,834

1. Further analysed in Risk review on pages 65 to 102

159

Standard Chartered Bank Notes to the financial statements

Group Assets Notes	Group Assets Notes	Group Assets Notes	Group Assets Notes	Assets at fair value	Assets atamortised cost Loans and receivables Held-to- maturity Non-financial assets Total $million $million $million $million
				Trading Derivatives held for hedging Designated at fair value through profit or loss Available- for-sale $million $million $million $million
Cash and balances at central banks Financial assets held at fair value through profit or loss Loans and advances to banks1 Loans and advances to customers1 Debt securities 12 Equity shares 12 Treasury bills 12 Derivative financial instruments 13 Loans and advances to banks1 15 Loans and advances to customers1 15 Investment securities Debt securities 14 Equity shares 14 Treasury bills 14 Other assets 19 Assetsheldforsale2 19				- - - -	65,312 - - 65,312
				92 - 2,1833 - 3,008 - 1,039 - 12,896 - 389 - 2,152 - 623 - 859 - - -	- - - 2,275 - - - 4,047 - - - 13,285 - - - 2,775 - - - 859
				19,007 - 4,234 - 63,898 689 - - - - - - - - - -	- - - 23,241 - - - 64,587 64,492 - - 64,492 257,228 - - 257,228
				- - - 77,684 - - - 1,553 - - - 32,453	2,649 210 - 80,543 - - - 1,553 - - - 32,453
				- - - 111,690 - - - - - - - -	2,649 210 - 114,549 32,312 - 1,835 34,147 - - 349 349
Total at 31 December 2015				~~82905~~ ~~689~~ ~~4234~~ ~~111690~~	~~4219~~93 210 2184 623905
				~~,~~ ~~,~~ ~~,~~	~~,~~ , ,
1. Further analys 2. Previously incl 3. $1.9 billion of loans were de classification o	ed in Risk review uded within Other Loans and advan signated at incept n the balance she	on pages 65 to 1 assets ces to banks pres ion as fair value t et. There was no	02 ented as ‘Trading’ in 2015 has been re-categorised to ‘Designated at fair value through profit or loss’. These hrough profit or loss and have always been measured at fair value. There is no change in measurement or impact to the relevant income statement disclosures

1. Further analysed in Risk review on pages 65 to 102

2. Previously included within Other assets

3. $1.9 billion of Loans and advances to banks presented as ‘Trading’ in 2015 has been re-categorised to ‘Designated at fair value through profit or loss’. These loans were designated at inception as fair value through profit or loss and have always been measured at fair value. There is no change in measurement or classification on the balance sheet. There was no impact to the relevant income statement disclosures

160

Standard Chartered Bank Notes to the financial statements

Group

Group Liabilities Notes	Liabilities at fair value Trading Derivatives held for hedging Designated at fair value through profit or loss Amortised cost Non-financial liabilities Total $million $million $million $million $million $million
Financial liabilities held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue 20 Short positions Derivative financial instruments 13 Deposits by banks Customer accounts Debt securities in issue 20 Other liabilities 21 Subordinated liabilities and other borrowed funds 25 Liabilitiesincludedindisposalgroupsheldforsale 21
	- - 718 - - 718 - - 6,447 - - 6,447 - - 5,670 - - 5,670 3,763 - - - - 3,763
	3,763 - 12,835 - - 16,598 65,001 1,250 - - - 66,251 - - - 36,894 - 36,894 - - - 371,855 - 371,855 - - - 29,519 - 29,519 - - - 32,897 160 33,057 - - - 20,064 - 20,064 - - - 958 7 965
Total at 31 December 2016	68,764 1,250 12,835 492,187 167 575,203

Group Liabilities Notes	Liabilities at fair value Trading Derivatives held for hedging Designated at fair value through profit or loss Amortised cost Non-financial liabilities Total $million $million $million $million $million $million
Financial liabilities held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue 20 Short positions Derivative financial instruments 13 Deposits by banks Customer accounts Debt securities in issue 20 Other liabilities 21 Subordinated liabilities and other borrowed funds 25 Liabilitiesincludedindisposalgroupsheldforsale1 21
	- - 637 - - 637 - - 8,494 - - 8,494 - - 8,917 - - 8,917 2,824 - - - - 2,824
	2,824 - 18,048 - - 20,872 61,475 1,111 - - - 62,586 - - - 37,526 - 37,526 - - - 350,633 - 350,633 - - - 42,587 - 42,587 - - - 31,503 394 31,897 - - - 20,716 - 20,716 - - - - 72 72
Total at 31 December 2015	64,299 1,111 18,048 482,965 466 566,889

1. Previously included within Other liabilities

161

Standard Chartered Bank Notes to the financial statements

Company

Company
Assets Notes	Assets at fair value	Assets at amortised cost Loans and receivables Held-to- maturity Non- financial assets Total $million $million $million $million
	Trading Derivatives held for hedging Designated at fair value through profit or loss Available- for-sale $million $million $million $million
Cash and balances at central banks Financial assets held at fair value through profit or loss Loans and advances to banks1 Loans and advances to customers1 Debt securities 12 Equity shares 12 Treasury bills 12 Derivative financial instruments 13 Loans and advances to banks1 15 Loans and advances to customers1 15 Investment securities Debt securities 14 Equity shares 14 Treasury bills 14 Other assets 19 Assetsheldforsale	- - - -	59,373 - - 59,373
	267 - 1,793 - 921 - 1,321 - 7,908 - - - 158 - 53 - 420 - - -	- - - 2,060 - - - 2,242 - - - 7,908 - - - 211 - - - 420
	9,674 - 3,167 - 66,296 476 - - - - - - - - - -	- - - 12,841 - - - 66,772 41,214 - - 41,214 117,244 - - 117,244
	- - - 34,990 - - - 707 - - - 16,051	3,672 170 - 38,832 - - - 707 - - - 16,051
	- - - 51,748 - - - - - - - -	3,672 170 - 55,590 23,831 - 2,865 26,696 - - 1 1
Total at 31 December 2016	75,970 476 3,167 51,748	245,334 170 2,866 379,731

Assetsheldforsale Total at 31 December 2016	- - - - 75,970 476 3,167 51,748	- - 1 1 245,334 170 2,866 379,731
Company Assets Notes	Assets at fair value	Assets atamortised cost Loans and receivables Held-to- maturity Non-financial assets Total $million $million $million $million
	Trading Derivatives held for hedging Designated at fair value through profit or loss Available- for-sale $million $million $million $million
Cash and balances at central banks Financial assets held at fair value through profit or loss Loans and advances to banks1 Loans and advances to customers1 Debt securities 12 Equity shares 12 Treasury bills 12 Derivative financial instruments 13 Loans and advances to banks1 15 Loans and advances to customers1 15 Investment securities Debt securities 14 Equity shares 14 Treasury bills 14 Other assets 19 Assetsheldforsale2	- - - -	49,916 - - 49,916
	92 - 2,1393 - 2,987 - 878 - 7,690 - - - 1,906 - - - 240 - - -	- - - 2,231 - - - 3,865 - - - 7,690 - - - 1,906 - - - 240
	12,915 - 3,017 - 62,241 573 - - - - - - - - - -	- - - 15,932 - - - 62,814 40,089 - - 40,089 118,763 - - 118,763
	- - - 42,3664 - - - 698 - - - 15,122	3,0004 210 - 45,576 - - - 698 - - - 15,122
	- - - 58,186 - - - - - - - -	3.000 210 - 61,396 22,537 - 1,736 24,273 - - 6 6
Total at 31 December 2015	75,156 573 3,017 58,186	234,305 210 1,742 373,189

1[Further analysed in Risk review on pages 65 to 102]

2[Previously included within Other assets]

3 $1.9 billion of Loans and advances to banks presented as ‘Trading’ in 2015 has been re-categorised to ‘Designated at fair value through profit or loss’. These loans were designated at inception as fair value through profit or loss and have always been measured at fair value. There is no change in measurement or classification on the balance sheet. There was no impact to the relevant income statement disclosures

1. $1.8 billion of Debt securities issued by banks presented as ’Available-for-sale’ in 2015 have been reclassified to ‘Loans and receivables’. The securities were issued by subsidiaries consolidated within the Group and should have been classified as ‘Loans and receivables’ since the securities were quoted but are not in an active market.

162

Standard Chartered Bank Notes to the financial statements

Company

Company
Liabilities Notes	Liabilities at fair value Trading Derivatives held for hedging Designated at fair value through profit or loss Amortised cost Non-financial liabilities Total $million $million $million $million $million $million
Financial liabilities held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue 20 Short positions Derivative financial instruments 13 Deposits by banks Customer accounts Debt securities in issue 20 Other liabilities 21 Subordinatedliabilities and otherborrowedfunds 25
	- - 503 - - 503 - - 4,545 - - 4,545 - - 3,558 - - 3,558 2,618 - - - - 2,618
	2,618 - 8,606 - - 11,224 65,078 1,124 - - - 66,202 - - - 30,206 - 30,206 - - - 164,310 - 164,310 - - - 26,114 - 26,114 - - - 21,033 103 21,136 - - - 19,152 - 19,152
Total at 31 December 2016	67,696 1,124 8,606 260,815 103 338,344

Company

Company
Liabilities Notes	Liabilities at fair value Trading Derivatives held for hedging Designated at fair value through profit or loss Amortised cost Non-financial liabilities Total $million $million $million $million $million $million
Financial liabilities held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue 20 Short positions Derivative financial instruments 13 Deposits by banks Customer accounts Debt securities in issue 20 Other liabilities 21 Subordinatedliabilities and otherborrowedfunds 25
	- - 368 - - 368 - - 4,699 - - 4,699 - - 5,856 - - 5,856 1,665 - - - - 1,665
	1,665 - 10,923 - - 12,588 59,636 1,086 - - - 60,722 - - - 31,317 - 31,317 - - - 150,002 - 150,002 - - - 37,716 - 37,716 - - - 20,108 251 20,359 - - - 19,040 - 19,040
Total at 31 December 2015	61,301 1,086 10,923 258,183 251 331,744

163

Standard Chartered Bank Notes to the financial statements

Debt securities, equity shares and treasury bills held at fair value through profit or loss Group

Group
	2016
	Debt Securities Equity Shares Treasury bills Total $million $million $million $million
Issued by public bodies: Government securities Otherpublic sectorsecurities	7,343 77 7,420 406 1,546 1,952 3,007 12,379 164 - - 164 7,595 44 504 8,143 4,620 880 781 6,281
Issued by banks: Certificates of deposit Otherdebt securities
Issued by corporate entities and other issuers: Otherdebt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	12,379 924 1,285 14,588
Market value of listed securities	7,759 44 504 8,307

Group

Group
	2015
	Debt Securities Equity Shares Treasury bills Total $million $million $million $million
Issued by public bodies: Government securities Other public sector securities	8,091 88 8,179 87 1,327 1,414 3,692 13,285 116 - - 116 8,516 1,648 282 10,446 4,653 1,127 577 6,357
Issued by banks: Certificates of deposit Other debt securities
Issued by corporate entities and other issuers: Otherdebt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	13,285 2,775 859 16,919
Market value of listed securities	8,632 1,648 282 10,562

164

Standard Chartered Bank Notes to the financial statements

Debt securities, equity shares and treasury bills held at fair value through profit or loss Company

Company	2016
	Debt Securities Equity Shares Treasury bills Total $million $million $million $million
Issued by public bodies: Government securities Otherpublic sectorsecurities	3,862 61 3,923 61 1,355 1,416 2,569 7,908 148 - - 148 5,122 12 338 5,472 2,638 199 82 2,919
Issued by banks: Certificates of deposit Otherdebt securities
Issued by corporate entities and other issuers: Otherdebt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	7,908 211 420 8,539
Market value of listed securities	5,270 12 338 5,620

Company

Company
	2015
	Debt Securities Equity Shares Treasury bills Total $million $million $million $million
Issued by public bodies: Government securities Otherpublic sectorsecurities	4,023 88 4,111 14 905 919 2,660 7,690 97 - - 97 5,284 1,431 50 6,765 2,309 475 190 2,974
Issued by banks: Certificates of deposit Otherdebt securities
Issued by corporate entities and other issuers: Otherdebt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	7,690 1,906 240 9,836
Market value of listed securities	5,381 1,431 50 6,862

Reclassification of financial assets

In 2008, the Group reclassified certain eligible financial assets from trading and available for sale, to loans and receivables where the Group had the intent and ability to hold the reclassified assets for the foreseeable future or until maturity. This reclassification was made possible through the circumstances of the credit crisis in financial markets which significantly impacted the liquidity in certain markets. The carrying value and fair value of securities reclassified into loans and receivables for both Group and Company is $79 million (2015: $123 million) and $80 million (2015: $120 million) respectively. If the reclassifications had not been made, the Group and Company’s income statement for 2016 would have included a net gain on the reclassified trading assets of $1m (2015: gain of $1 million). There have been no reclassifications since 2008.

165

Standard Chartered Bank Notes to the financial statements

Offsetting of financial instruments

Financial assets and liabilities 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 intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

In practice, for credit mitigation, the Group is able to offset assets and liabilities which do not meet the IAS 32 netting criteria set out above. Such arrangements include master netting arrangements for derivatives 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 addition the Group also receives and pledges readily realisable collateral for derivative transactions 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 liquid assets which can be sold in the event of a default.

The following tables set out the impact of netting on the balance sheet. This comprises derivative transactions settled through an enforceable netting agreement where we have the intent and ability to settle net and which are offset on the balance sheet.

Group

Group
	20	16
	Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet $million $million $million	Related amount not offset in the balance sheet Financial instruments Financial collateral Net amount $million $million $million
Assets Derivative financial instruments Reverse repurchase agreements	75,374 (8,313) 67,061 42,389 - 42,389	(40,391) (9,624) 17,046 - (42,389) -
At 31 December 2016	117,763 (8,313) 109,450	(40,391) (52,013) 17,046
Liabilities Derivative financial instruments Sale andrepurchaseliabilities	74,564 (8,313) 66,251 37,692 - 37,692	(40,391) (14,230) 11,630 - (37,692) -
At 31 December 2016	112,256 (8,313) 103,943	(40,391) (51,922) 11,630

Group

Group
	20	15
	Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet $million $million $million	Related amount not offset in the balance sheet Financial instruments Financial collateral Net amount $million $million $million
Assets Derivative financial instruments Reverserepurchase agreements	71,316 (6,729) 64,587 32,637 - 32,637	(38,934) (10,074) 15,579 - (32,637) -
At 31 December 2015	103,953 (6,729) 97,224	(38,934) (42,711) 15,579
Liabilities Derivative financial instruments Sale and repurchase liabilities	69,315 (6,729) 62,586 20,606 - 20,606	(38,934) (13,430) 10,222 - (20,606) -
At 31 December 2015	89,921 (6,729) 83,192	(38,934) (34,036) 10,222

166

Standard Chartered Bank Notes to the financial statements

Company

Company
	20	16
	Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet $million $million $million	Related amount not offset in the balance sheet Financial instruments Financial collateral Net amount $million $million $million
Assets Derivative financial instruments Reverserepurchase agreements	75,085 (8,313) 66,772 38,361 - 38,361	(37,880) (9,348) 19,544 - (38,361) -
At 31 December 2016	113,446 (8,313) 105,133	(37,880) (47,709) 19,544
Liabilities Derivative financial instruments Sale andrepurchaseliabilities	74,515 (8,313) 66,202 36,610 - 36,610	(37,880) (13,877) 14,445 - (36,610) -
At 31 December 2016	111,125 (8,313) 102,812	(37,880) (50,487) 14,445

Company

Company
	20	15
	Gross amounts of recognised financial instruments Impact of offset in the balance sheet Net amounts of financial instruments presented in the balance sheet $million $million $million	Related amount not offset in the balance sheet Financial instruments Financial collateral Net amount $million $million $million
Assets Derivative financial instruments Reverserepurchase agreements	69,543 (6,729) 62,814 26,603 - 26,603	(38,820) (9,605) 14,389 - (26,603) -
At 31 December 2015	96,146 (6,729) 89,417	(38,820) (36,208) 14,389
Liabilities Derivative financial instruments Sale andrepurchaseliabilities	67,451 (6,729) 60,722 20,277 - 20,277	(38,820) (13,006) 8,896 - (20,277) -
At 31 December 2015	87,728 (6,729) 80,999	(38,820) (33,283) 8,896

Related amounts not offset in the balance sheet comprise:

• Financial instruments not offset in the balance sheet, but covered by an enforceable netting arrangement. This comprises master netting arrangements held against derivative financial instruments and excludes the effect of over-collateralisation

• Financial collateral – this comprises cash collateral pledged and received for derivative financial instruments and collateral bought and sold for reverse repo and repo agreements respectively and excludes the effect of over-collateralisation

167

Standard Chartered Bank Notes to the financial statements

Loans and advances designated at fair value through profit or loss

The maximum exposure to credit risk for loans designated at fair value through profit or loss was $4,034 million (2015: $3,222 million) for the Group and $3,114 million (2015: $3,017 million) for the company.

The Group’s net fair value gain on loans and advances to customers designated at fair value through profit or loss was $17 million (2015: $2 million). Of this, $1 million (2015: $nil million) relates to changes in credit risk. The cumulative fair value movement relating to changes in credit risk was $2 million (2015: $3 million). Further details of the Group’s valuation technique is described on page 169.

Financial liabilities designated at fair value through profit or loss

Financial liabilities designated at fair value through profit or loss
	2016	2015
	$million	$million
Carrying balance aggregate fair value	12,835	18,048
Amount contractually obliged to repay at maturity	12,941	18,404
Difference between aggregate fair value and contractually obliged to repay at maturity	(106)	(356)
Cumulative change in FV accredited to credit risk difference1	331	703

1. The Group has early adopted IFRS 9 Financial Instruments to present own credit adjustments within other comprehensive income

The net fair value loss on financial liabilities designated at fair value through profit or loss was $178 million for the year (2015: net gain of $104 million). The amount includes $nil million (2015: gain of $495 million) related to change in credit risk. Further details of the Group’s own credit adjustment (OCA) valuation technique is described on page 170.

Valuation of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal market or, in the absence of this, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects the Group’s non-performance risk. The fair value of financial instruments is generally measured on the basis of the individual financial instrument. However, when a group of financial assets and financial liabilities is managed on the basis of its net exposure to either market risks or credit risk, the fair value of the group of financial instruments is measured on a net basis.

The fair values of quoted financial assets and liabilities in active markets are based on current prices. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, 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 pricing models and, where appropriate, comparison to instruments with characteristics similar to those of the instruments held by the Group.

The Valuation Control function is responsible for independent price verification, oversight of fair value adjustments and escalation of valuation issues. Independent price verification is the process of determining the valuations incorporated into the financial statements are validated independent of the business area responsible for the product. The Valuation Control function has oversight of the fair value adjustments to ensure the financial instruments are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the financial statements. The market data used for price verification may include those sourced from recent trade data involving external counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pricing providers. Valuation Control performs a semi-annual review of the suitability of the market data used for price testing. Price verification 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, reliability, availability of multiple data sources and methodology employed by the pricing provider are taken into consideration.

Formal committees for the business clusters, consisting of representatives from Group Market Risk, Product Control, Valuation Control and the business meet monthly to discuss and approve the valuations of the inventory. The Principal Finance valuation committee meetings are held on a quarterly basis. The business cluster valuation committees fall under the Valuation Benchmarks Committee (VBC) as part the of the valuation governance structure.

Significant accounting estimates and judgements

The Group evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgement and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date.

• Fair value of financial instruments are determined using valuation techniques (see below) which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Changes in the observability of significant valuation inputs can materially affect the fair values of financial instruments

• When establishing the exit price of a financial instrument using a valuation technique, the Group considers valuation adjustments in determining the fair value (see page 170)

• In determining the valuation of financial instruments, the Group’s makes judgments on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 assets, and the significant valuation judgments in respect of Level 3 instruments (see page 172)

• Where the measurement of fair value is more judgemental in respect of Level 3 assets, these are valued based on models that use a significant degree of non-market-based unobservable inputs

168

Standard Chartered Bank Notes to the financial statements

Valuation techniques

Refer to page 171 for an explanation of the Fair value hierarchy – Level 1, 2 and 3.

• Financial instruments held at fair value

• Loans and advances: These include loans in the global syndications business which were not syndicated as of the balance sheet date and other financing transactions within Financial Markets. These loans are generally bilateral in nature and, where available, their valuation is based on market observable credit spreads. If observable credit spreads are not available, proxy spreads based on comparable loans with similar credit grade, sector, and region, are used. Where observable credit spreads and market standard proxy methods are available, these loans are classified as Level 2. Where there are no recent transactions or comparable loans, these loans are classified as Level 3

• Debt securities - asset backed securities: Asset backed securities are priced based on external prices obtained from consensus pricing providers, broker quotes, recent trades, arrangers’ quotes, etc. Where an observable price is available for a given security, it is classified as Level 2. In instances where third party prices are not available or reliable, the security is classified as Level 3. The fair value of Level 3 securities is estimated using market standard cash flow models with input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securities with similar vintage, collateral type, and credit ratings. Therefore, once external pricing has been verified, an assessment is made whether each security is traded with significant liquidity based on its credit rating and sector. If a security is of high credit rating and is traded in a liquid sector, it will be classified as Level 2, otherwise it will be classified as Level 3

• Other debt securities: These debt securities include convertible bonds, corporate bonds, credit and structured notes. Where quoted prices are available through pricing vendors, brokers or observable trading activities from liquid markets, these are classified as Level 2 and valued using such quotes. Where there are significant valuation inputs which are unobservable in the market, due to illiquid trading or the complexity of the product, these are classified as Level 3. The valuations of these debt securities are implied using 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

• Equity shares - private equity: The majority of private equity unlisted investments are valued based on earning multiples - Price-to-Earnings (P/E) or enterprise value to earnings before income tax, depreciation and amortisation (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. 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, alternate valuation techniques (for example, discounted cash flow models), which 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, OTC prices) are classified as Level 3 on the basis that the valuation methods involve judgments ranging from determining comparable companies to discount rates where the discounted cash flow method is applied

• Derivatives: Derivative products are classified as Level 2 if the valuation of the product is based upon input parameters which are observable from independent and reliable market data sources. Derivative products are classified as Level 3 if there are significant valuation 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 indices and interest rate products with quanto payouts. These unobservable correlation parameters could only be implied from the market, through methods such as historical analysis and comparison to historical levels or benchmark data

• Debt securities in issue: These debt securities relate to structured notes issued by the Group. Where independent market data is available through pricing vendors and broker sources these positions are classified as Level 2. Where such liquid external prices are not available, valuation of these debt securities are implied using input parameters such as bond spreads and credit spreads, and are classified as Level 3. These input parameters are determined with reference to the same issuer (if available) or proxies from comparable issuers or assets

• Financial instruments held at amortised cost

The following sets out the Group’s basis of establishing fair values of amortised cost financial instruments and their classification between Levels 1, 2 and 3. As certain categories of financial instruments are not traded, there is a significant 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

• 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 prevailing money market rates for debts with a similar credit risk and remaining maturity. The Group’s loans and advances to customers’ portfolio is well diversified by geography and industry. Approximately a quarter of the portfolio re-prices within one month, and approximately half re-prices within 12 months. Loans and advances are presented net of provisions for impairment. The fair value of loans and advances to customers with a residual maturity of less than one year generally approximates the carrying value, subject to any significant movement in credit spreads. 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, including assumptions relating to prepayment rates and, where appropriate, credit spreads. Expected cash flows are discounted at current market rates to determine fair value. The Group has a wide range of individual instruments within its loans and advances portfolio and as a result providing quantification of the key assumptions used to value such instruments is impractical

• Investment securities: For investment securities that do not have directly observable market values, the Group utilises a number of valuation techniques to determine fair value. Where available, securities are valued using inputs proxies from the same or closely related underlying (for example, bond spreads from the same or closely related issuer) or inputs proxies from a different underlying (for example, a similar bond but using spreads for a particular sector and rating). Certain instruments cannot be proxies as set out above, and in such cases the positions are valued using non-market observable inputs. This

169

Standard Chartered Bank Notes to the financial statements

includes those instruments held at amortised cost and predominantly relate to asset backed securities. The fair value for such instruments is usually proxies from internal assessments of the underlying cash flows. The Group has a wide range of individual investments within the unlisted debt securities portfolio. Given the number of instruments involved, providing quantification of the key assumptions used to value such instruments is impractical, with no one assumption being material

• 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 prevailing market rates for debts with a similar credit risk and remaining maturity. Following the adoption of IFRS 13 the Group also adjusts the fair value of deposits and borrowings for own credit adjustment using the principles described above

• Debt securities in issue, subordinated liabilities 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 remaining term to maturity

Fair value adjustments

When establishing the exit price of a financial instrument using a valuation technique, the Group considers adjustments to the modelled price which market participants would make when pricing that instrument. The main valuation adjustments in determining fair value for financial assets and financial liabilities are as follows:

financial assets and financial liabilities are as follows:
	2016	2015
Valuation adjustments	$million	$million
Bid-offer	106	72
Credit1	443	815
Own credit	331	703
Model	6	13
Funding	248	366
Others (including Day one)	132	169
Total	1,266	2,138

1. Includes debit valuation adjustments on derivatives

2. Bid-offer valuation adjustments: Where market parameters are marked on a mid market basis in the revaluation systems, a bid offer valuation adjustment is required to quantify the expected cost of neutralising the business’ positions through dealing away in the market, thereby bringing long positions to bid and short positions to offer. The methodology to calculate the bid-offer adjustment for a derivative portfolio involves netting between long and short positions and the grouping of risk by strike and tenor based on the hedging strategy where long positions are marked to bid and short positions marked to offer in the systems

3. Credit valuation adjustment (CVA): The Group makes CVA adjustment against the fair value of derivative products. CVA is an adjustment to the fair value of the transactions to reflect the possibility 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 participant would include when deriving a purchase price to acquire our exposures. CVA is calculated for each subsidiary, and within each entity for each counterparty to which the entity has exposure and takes account of any collateral we may hold. The Group calculates the CVA by applying the probability of default (PD) on the potential estimated future positive exposure of the counterparty using market-implied PD. Where market-implied data is not readily available, we use market based proxies to estimate the PD. The methodologies do not, in general, account for ‘wrong-way risk’. Wrong-way risk arises when the underlying value of the derivative prior to any CVA is positively correlated to the probability of default by the counterparty. The Group continues to include ‘wrong-way risk’ in its Prudential Valuation Adjustments

In 2015 the Group enhanced its methodology for estimating the CVA for derivatives. Prior to 2015, the CVA was based on an expected counterparty loss calculation using historical default probabilities, whereas the enhanced methodology uses market-implied default probabilities. In addition, the funding valuation adjustment (FVA) was also enhanced moving from bank internal funding rates to market-based rates. The net effect of the changes in estimates in 2015 was to reduce net trading income by $863 million

• Debit valuation adjustment (DVA): The Group calculates DVA adjustments to reflect changes in its own credit standing. The Group’s DVA adjustments are calculated on its derivative liabilities. The Group’s DVA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. The Group’s DVA adjustments will reverse over time as its derivatives mature. For derivative liabilities, a DVA adjustment is determined by applying the Group’s probability of default to the Group’s negative expected exposure against the counterparty. The Group’s probability of default and loss expected in the event of default is derived based on internally assessed credit ratings and market standard recovery levels. The expected exposure is modelled based on simulation methodology and is generated through simulation of underlying risk factors over the life of the deal booked against the particular counterparty. This simulation methodology incorporates the collateral posted by the Group and the effects of master netting agreements. The methodology used to determine a DVA adjustment on derivative liabilities is consistent with the methodology used to determine CVA on derivative assets

• Own credit adjustment (OCA): The Group calculates OCA adjustments to reflect changes in its own credit standing. The Group’s OCA adjustments are calculated on its issued debt designated at fair value, including structured notes. The Group’s OCA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. The Group’s OCA adjustments will reverse over time as its liabilities mature. For issued debt and structured notes designated at fair value, an OCA adjustment is determined by discounting the contractual cash flows using a yield curve adjusted for market observed secondary senior debt issuance spreads above average interbank rates

In December 2016, the Group refined its calculation of OCA by incorporating a more accurate calculation of the expected maturity of callable structured notes. This calculation change is treated as a change in estimate and resulted in a decrease in the OCA balance of $141 million

170

Standard Chartered Bank Notes to the financial statements

• Model valuation adjustments: Valuation models may have pricing deficiencies or limitations that require a valuation adjustment. These pricing deficiencies or limitations arise due to the choice, implementation and calibration of the pricing model

• Funding valuation adjustment (FVA): The Group makes FVA adjustments against derivative products. FVA reflects an estimate of the adjustment to its fair value that a market participant would make to incorporate funding costs that could arise in relation to the exposure. FVA is calculated by determining 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 collateralised derivatives is based on discounting the expected future cash flows at the relevant overnight indexed swap (OIS) rate after taking into consideration the terms of the underlying collateral agreement with the counterparty. The FVA for uncollateralised (including partially collateralised) derivatives incorporates the estimated present value of the market funding cost or benefit associated with funding these transactions. The FVA calculation was previously based on the Bank’s internal funding rates. As at 31 December 2015, the calculation was revised to use market based rates. The change in estimate reduced net trading income by $151 million

• Day one profit and loss: In certain circumstances the initial fair value may be based on a valuation technique which may lead to the recognition of profits or losses at the time of initial recognition. However, these profits or losses can only be recognised when the valuation technique used is based primarily on observable market data. In those cases where the initially 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 immediately in the income statement. The difference is amortised to the income statement until the inputs become observable, or the transaction matures or is terminated

Fair value hierarchy – Financial instruments held at fair value

Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the observability of the significant inputs used to determine the fair values. Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level of observability 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 identical assets or liabilities

• Level 2: Fair value measurements are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable

• Level 3: Fair value measurements are those where at least one input which could have a significant effect on the instrument’s valuation is not based on observable market data

171

Standard Chartered Bank Notes to the financial statements

The following tables show the classification of financial instruments held at fair value into the valuation hierarchy. Group

Group
Assets	Level 1 Level 2 Level 3 Total $million $million $million $million
Financial instruments held at fair value through profit or loss Loans and advances to banks Loans and advances to customers Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index Investment securities Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares	- 2,060 - 2,060 - 2,998 179 3,177 795 490 - 1,285 3,454 8,921 4 12,379
	3,249 3,752 - 7,001 77 2,467 3 2,547 128 2,702 1 2,831
	181 - 743 924 513 66,188 360 67,061
	52 55,042 324 55,418 14 10,074 6 10,094 447 879 - 1,326 - 171 - 171 - 22 30 52
	29,602 5,367 135 35,104 28,945 40,195 64 69,204
	17,400 9,124 38 26,562 6,928 7,741 24 14,693 4,617 23,330 2 27,949
	770 41 522 1,333
Total at 31 December 2016	64,260 126,260 2,007 192,527
Liabilities
Financial instruments held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue Short positions Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index	- 718 - 718 - 6,447 - 6,447 - 5,140 530 5,670 1,845 1,918 - 3,763 547 65,388 316 66,251
	52 53,847 233 54,132 25 10,441 25 10,491 470 628 - 1,098 - 442 30 472 - 30 28 58
Total at 31 December 2016	2,392 79,611 846 82,849

There have been no significant changes to valuation or levelling approaches in 2016.

There were no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period.

172

Standard Chartered Bank Notes to the financial statements

Group

Group
Assets	Level 1 Level 2 Level 3 Total $million $million $million $million
Financial instruments held at fair value through profit or loss Loans and advances to banks Loans and advances to customers Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index Investment securities Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares	- 2,275 - 2,275 - 3,815 232 4,047 810 49 - 859 4,492 8,537 256 13,285
	4,181 3,993 12 8,186 21 2,555 141 2,717 290 1,989 103 2,382
	2,122 - 653 2,775 736 63,373 478 64,587
	67 48,328 291 48,686 1 11,753 9 11,763 668 2,837 - 3,505 - 303 35 338 - 152 143 295
	28,978 3,393 82 32,453 34,868 42,559 257 77,684
	20,435 10,356 53 30,844 10,005 8,818 204 19,027 4,428 23,385 - 27,813
	831 7 715 1,553
Total at 31 December 2015	72,837 124,008 2,673 199,518
Liabilities
Financial instruments held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue Short positions Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index	- 637 - 637 - 8,493 1 8,494 - 8,422 495 8,917 1,222 1,602 - 2,824 695 61,572 319 62,586
	86 47,740 246 48,072 - 12,502 38 12,540 609 817 - 1,426 - 300 14 314 - 213 21 234
Total at 31 December 2015	1,917 80,726 815 83,458

There are no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the year.

173

Standard Chartered Bank Notes to the financial statements

Standard Chartered Bank Notes to the financial statements
Company Assets	Level 1 Level 2 Level 3 Total $million $million $million $million
Financial instruments held at fair value through profit or loss Loans and advances to banks Loans and advances to customers Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index Investment securities Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares	- 2,060 - 2,060 - 2,161 81 2,242 163 257 - 420 1,723 6,079 106 7,908
	1,621 2,215 - 3,836 75 1,890 105 2,070 27 1,974 1 2,002
	159 - 52 211 512 65,943 317 66,772
	51 54,589 305 54,945 14 10,281 6 10,301 447 878 - 1,325 - 171 - 171 - 24 6 30
	14,526 1,525 - 16,051 17,382 17,595 13 34,990
	7,612 4,155 13 11,780 6,060 3,804 - 9,864 3,710 9,636 - 13,346
	582 2 123 707
Total at 31 December 2016	35,047 95,622 692 131,361
Liabilities
Financial instruments held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue Short positions Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index	- 503 - 503 - 4,545 - 4,545 - 3,246 312 3,558 1,482 1,136 - 2,618 542 65,337 323 66,202
	48 53,587 261 53,896 24 10,619 28 10,671 470 627 - 1,097 - 466 30 496 - 38 4 42
Total at 31 December 2016	2,024 74,767 635 77,426

There have been no significant changes to valuation or levelling approaches in 2016. There are no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the year.

174

Standard Chartered Bank Notes to the financial statements

Company

Company
Assets	Level 1 Level 2 Level 3 Total $million $million $million $million
Financial instruments held at fair value through profit or loss Loans and advances to banks Loans and advances to customers Treasury bills Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Equity shares Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index Investment securities Equity shares Debt securities Of which: Government bonds Issued by corporates other than financial institutions Issued by financial institutions Treasury bills	- 2,231 - 2,231 - 3,633 232 3,865 239 1 - 240 2,069 5,365 256 7,690
	1,973 2,038 12 4,023 20 1,743 141 1,904 76 1,584 103 1,763
	1,904 - 2 1,906 728 61,658 428 62,814
	60 46,908 283 47,251 - 11,423 6 11,429 668 2,835 - 3,503 - 284 35 319 - 208 104 312
	574 - 124 698 23,829 18,417 120 42,366
	11,010 5,992 8 17,010 9,439 3,254 112 12,805 3,380 9,1711 - 12,551
	14,083 1,039 - 15,122
Total at 31 December 2015	43,426 92,344 1,162 136,932

1. $1.8 billion of Debt securities issued presented as ’Available-for-sale’ in 2015 have been reclassified to ‘Loans and receivables’. The securities were issued by subsidiaries consolidated within the Group and should have been classified as ‘Loans and receivables’ since the securities were quoted but are not in an active market.

Liabilities
Financial instruments held at fair value through profit or loss Deposits by banks Customer accounts Debt securities in issue Short positions Derivative financial instruments Of which: Foreign exchange Interest rate Commodity Credit Equity and stock index	- 368 - 368 - 4,699 - 4,699 - 5,623 233 5,856 746 919 - 1,665 692 59,668 362 60,722
	83 46,555 301 46,939 - 11,709 31 11,740 609 825 - 1,434 - 356 14 370 - 223 16 239
Total at 31 December 2015	1,438 71,277 595 73,310

There are no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the period.

175

Standard Chartered Bank Notes to the financial statements

Fair value hierarchy - financial instruments measured at amortised cost

The following table shows the carrying amounts and incorporates the Group's estimate of fair values of those financial assets and liabilities not presented on the Group’s balance sheet at fair value. These fair values may be different from the actual amount that will be received or paid on the settlement or maturity of the financial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available.

using assumptions for which no observable prices are available.
Group Carrying value $million	Fair value
	Level 1 Level 2 Level 3 Total $million $million $million $million
Assets Cash and balances at central banks1 70,706 Loans and advances to banks 72,605 Loans and advances to customers 252,710 Investment securities 3,225 Other assets1 33,897 Assets held for sale 1,102	- 70,706 - 70,706 - 72,541 - 72,541 - 7,760 244,655 252,415 - 3,201 6 3,207 - 33,897 - 33,897 - - 1,102 1,102
At 31 December 2016 434,245	- 188,105 245,763 433,868
Liabilities Deposits by banks 36,894 Customer accounts 371,855 Debt securities in issue 29,519 Subordinated liabilities and other borrowed funds 20,064 Other liabilities1 32,897 Liabilitiesincludedindisposalgroupsheldforsale 958	- 36,762 - 36,762 - 371,823 - 371,823 - 29,552 - 29,552 11,291 8,669 - 19,960 - 32,897 - 32,897 - 958 - 958
At 31 December 2016 492,187	11,291 480,661 - 491,952

Group Carrying value $million	Fair value
	Level 1 Level 2 Level 3 Total $million $million $million $million
Assets Cash and balances at central banks1 65,312 Loans and advances to banks 64,492 Loans and advances to customers 257,228 Investment securities 2,859 Otherassets1 32,312	- 65,312 - 65,312 - 64,520 161 64,681 - 6,539 250,215 256,754 - 2,785 71 2,856 - 32,312 - 32,312
At 31 December 2015 422,203	- 171,468 250,447 421,915
Liabilities Deposits by banks 37,526 Customer accounts 350,633 Debt securities in issue 42,587 Subordinated liabilities and other borrowed funds 20,716 Other liabilities1 31,503	- 37,973 - 37,973 - 350,614 - 350,614 319 42,230 - 42,549 9,990 10,486 - 20,476 - 31,503 - 31,503
At 31 December 2015 482,965	10,309 472,806 - 483,115

1. The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently

176

Standard Chartered Bank Notes to the financial statements

Company

Company
Carrying value $million	Fair value
	Level 1 Level 2 Level 3 Total $million $million $million $million
Assets Cash and balances at central banks1 59,373 Loans and advances to banks 41,214 Loans and advances to customers 117,244 Investment securities 3,842 Otherassets1 23,831	- 59,373 - 59,373 - 41,225 - 41,225 - 6,511 110,896 117,407 - 2,013 1,771 3,784 - 23,831 - 23,831
At 31 December 2016 245,504	- 132,953 112,667 245,620
Liabilities Deposits by banks 30,206 Customer accounts 164,310 Debt securities in issue 26,114 Subordinated liabilities and other borrowed funds 19,152 Other liabilities1 21,033	- 30,201 - 30,201 - 164,283 - 164,283 - 26,147 - 26,147 10,479 8,490 - 18,969 - 21,033 - 21,033
At 31 December 2016 260,815	10,479 250,154 - 260,633

Company

Company
Carrying value $million	Fair value
	Level 1 Level 2 Level 3 Total $million $million $million $million
Assets Cash and balances at central banks1 49,916 Loans and advances to banks 40,089 Loans and advances to customers 118,763 Investment securities 3,270 Otherassets1 22,537	- 49,916 - 49,916 - 40,287 1 40,288 - 3,945 114,534 118,479 - 1,459 1,7102 3,169 - 22,537 - 22,537
At 31 December 2015 234,575	- 118,144 116,245 234,389
Liabilities Deposits by banks 31,317 Customer accounts 150,002 Debt securities in issue 37,716 Subordinated liabilities and other borrowed funds 19,040 Other liabilities1 20,108	- 31,763 - 31,763 - 150,030 - 150,030 - 37,695 - 37,695 8,626 10,058 - 18,684 - 20,110 - 20,110
At 31 December 2015 258,183	8,626 249,656 - 258,282

1 The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are short-term in nature or reprice to current market rates frequently

1. $1.8 billion of Debt securities issued presented as ’Available-for-sale’ in 2015 have been reclassified to ‘Loans and receivables’. The securities were issued by subsidiaries consolidated within the Group and should have been classified as ‘Loans and receivables’ since the securities were quoted but are not in an active market.

177

Standard Chartered Bank Notes to the financial statements

By Client Segment

By Client Segment
Group	2016
	CarryingValue Fair value
	Impaired Not impaired Total Impaired Not impaired Total $million $million $million $million $million $million
Corporate & Institutional Clients Retail Clients Commercial Clients Private Banking Clients Central& other items	2,500 116,601 119,101 2,481 116,501 118,982 458 93,030 93,488 460 92,786 93,246 751 23,215 23,966 736 23,306 24,042 289 11,619 11,908 289 11,609 11,898 - 4,247 4,247 - 4,246 4,246
At 31 December 2016	3,998 248,712 252,710 3,966 248,449 252,415

Group	20151
	CarryingValue Fair value
	Impaired Not impaired Total Impaired Not impaired Total $million $million $million $million $million $million
Corporate & Institutional Clients Retail Clients Commercial Clients Private Banking Clients Central & other items	4,723 111,917 116,640 4,795 113,250 118,045 494 94,355 94,849 506 94,178 94,684 930 24,815 25,745 912 23,099 24,011 322 14,739 15,061 322 14,738 15,060 - 4,933 4,933 - 4,954 4,954
At 31 December 2015	6,469 250,759 257,228 6,535 250,219 256,754

1. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 and 2 for details

Company	2016
	CarryingValue Fair value
	Impaired Not impaired Total Impaired Not impaired Total $million $million $million $million $million $million
Corporate & Institutional Clients Retail Clients Commercial Clients Private Banking Clients Central& other items	2,288 86,242 88,530 2,276 86,260 88,536 44 9,788 9,832 44 9,864 9,908 295 8,146 8,441 295 8,226 8,521 287 7,257 7,544 287 7,258 7,545 - 2,897 2,897 - 2,897 2,897
At 31 December 2016	2,914 114,330 117,244 2,902 114,505 117,407

Company	20151
	CarryingValue Fair value
	Impaired Not impaired Total Impaired Not impaired Total $million $million $million $million $million $million
Corporate & Institutional Clients Retail Clients Commercial Clients Private Banking Clients Central& other items	4,527 83,043 87,570 4,564 82,607 87,171 44 9,879 9,923 44 9,869 9,913 424 8,404 8,828 424 8,529 8,953 322 10,462 10,784 322 10,462 10,784 - 1,658 1,658 - 1,658 1,658
At 31 December 2015	5,317 113,446 118,763 5,354 113,125 118,479

1. The 2015 comparatives have been represented to reflect the reorganisation of the Group’s client segments. Refer to note 1 and 2 for details

178

Standard Chartered Bank Notes to the financial statements

Level 3 Summary and significant unobservable inputs

The following table presents the Group’s primary Level 3 financial instruments which are held at the fair value and the valuation techniques used to measure those instruments, the significant unobservable inputs, the range of values for those inputs and the weighted average of those inputs.

weighted average of those inputs.
Value at 31 December 2016 Assets Liabilities Instrument $million $million	Principal Significant Weighted valuation technique unobservable inputs Range1 average2
Loans and advances to customers 179 -	Comparable pricing/yield Recovery rates 2.7% to 45.8% 18.7%
Debt securities2 25 -	Comparable pricing/yield Price/yield 3.5% to 14.5% 9.3%
Asset backed securities 5 -	Discounted cash flows Credit Spreads 0.4% to 13.5% 6.5%
Debt securities in issue - 530	Discounted cash flows Price/yield 0.5% to 4.0% 1.7%
Government bonds 173 -	Discounted cash flows Price/yield 2.3% to 23.8% 10.9%
Derivative financial instruments of which: Foreign exchange 324 233 Interest rate 6 25 Credit - 30 Equity 30 28	Option pricing model Foreign exchange option 10.4% to 18.8% 16.7% implied volatility
	Discounted cash flows Interest rate curves 0.2% to 20.8% 7.0%
	Discounted cash flows Credit spreads 0.5% to 4.0% 2.0%
	Internal pricing model Equity correlation -35.0% to 92.0% N/A Equity-FX correlation -87.0% to 91.0% N/A
Equity shares (includes private equity investments) 1,265 -	Comparable pricing/Yield EV/EBITDA multiples 7.7x to 26.6x 10.6x P/E multiples 7.6x to 22.3x 16.9x P/B multiples 1.4x 1.4x P/S multiple 1.7x to 2.6x 2.4x Liquidity discount 10% to 20% 19.0% Discounted cash flows Discount rates 9.9% 9.9%
Total 2,007 846

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 financial instruments as at 31 December 2016. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions 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 financial instruments

2. Weighted average for non-derivative financial instruments have been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator

179

Standard Chartered Bank Notes to the financial statements

The following section describes the significant unobservable inputs identified in the valuation technique table:

• Credit spreads represent the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument

• Recovery rates are the expectation of the rate of return resulting from the liquidation of a particular loan. As the probability of default increases for a given instrument, the valuation of that instrument will increasingly reflect its expected recovery level assuming default. An increase in the recovery rate, in isolation, would result in a favourable movement in the fair value of the loan

• Comparable price/yield is a valuation methodology in which a 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 implied yield (or spread over a liquid benchmark) from the price of a comparable instrument, then adjusting that yield (or spread) to derive a value for the instrument. The adjustment should account for relevant differences in the financial 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, deriving a fair value for a junior unsecured bond from the price of a senior secured bond). An increase in price, in isolation, would result in a favourable movement in the fair value of the asset. An increase in yield, in isolation, 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

• Volatility represents an estimate of how much a particular instrument, parameter or index will change in value over time. Generally, the higher the volatility, the more expensive the option will be

• Interest rate curves is the term structure of interest rates and measure of future interest rates at a particular point of time

• EV/EBITDA ratio multiples is the ratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA). EV is the aggregate market capitalisation and debt minus the cash and cash equivalents. An increase in EV/EBITDA multiple in isolation, will result in a favourable movement in the fair value of the unlisted firm

• Price-Earnings (P/E) multiples is the ratio of the Market Capitalisation to the Net Income after tax. The multiples are determined from multiples of listed comparables, which are observable. An increase in P/E multiple will result in a favourable movement in the fair value of the unlisted firm

• Liquidity discounts in the valuation of unlisted investments: A liquidity discount is primarily applied to the valuation of unlisted firms’ investments to reflect the fact that these stocks are not actively traded. An increase in liquidity discount will result in unfavourable movement in the fair value of the unlisted firm

• Price-Book (P/B) multiple: This 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: This 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

180

Standard Chartered Bank Notes to the financial statements

Level 3 movement

The table below analyses movements in Level 3 financial assets carried at fair value.

Group Assets	Held at fair value throughprofit or loss Derivative financial instruments Investment securities Loans and advances to customers Debt securities Equity shares Treasury bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million
At 1 January 2016 Total (losses)/gains recognised in income statement Net trading income Other operating income Impairment charge Total losses recognised in other comprehensive income Available-for-sale Exchange difference Purchases Sales Settlements Transfers out1 Transfers in2	232 256 653 478 82 257 715 2,673 (87) 4 (181) 44 - (64) (163) (447)
	(87) 4 (181) 44 - - - (220) - - - - - - (7) (7) - - - - - (64) (156) (220)
	- - - - - (4) (3) (7)
	- - - - - - 1 1 - - - - - (4) (4) (8)
	- 73 186 32 91 13 121 516 (6) (197) (58) (13) - (50) (36) (360) (67) (10) - (54) - (23) - (154) (100) (122) - (127) (38) (82) (112) (581) 207 - 143 - - 17 - 367
At 31 December 2016	179 4 743 360 135 64 522 2,007
Total unrealised (losses)/gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2016	(87) 5 (172) 24 - - - (230)
Total unrealised losses recognised in the income statement, within impairment charges at 31 December 2016	- - - - - (64) (156) (220)

1. Transfers out during the year primarily relate to loans and advances, debt securities, derivative financial instruments, treasury bills and equity shares where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2 financial assets

2. Transfers in during the year primarily relate to loans and advances, equity shares and debt securities where the valuation parameters become unobservable during the year

181

Standard Chartered Bank Notes to the financial statements

Group Assets	Held at fair valuethroughprofitor loss Derivative financial instruments Investmentsecurities Loans and advances to customers Debt securities Equity shares Treasury bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million
At 1 January 2015 Total (losses)/gains recognised in income statement Net trading income Other operating income Impairment charge Total losses recognised in other comprehensive income Available-for-sale reserve Exchange difference Purchases Sales Settlements Transfers out1 Transfersin2	640 395 590 575 - 360 767 3,327 (441) 5 (62) 22 - (17) (34) (527)
	(441) 5 (62) 22 - - 9 (467) - - - - - - 30 30 - - - - - (17) (73) (90)
	- - - (4) (1) (49) (21) (75)
	- - - - - (29) (15) (44) - - - (4) (1) (20) (6) (31)
	3 80 347 101 44 - 330 905 - (161) (237) (72) - (116) (255) (841) - (25) - (81) (22) (52) - (180) - (185) - (78) (78) (123) (72) (536) 30 147 15 15 139 254 - 600
At 31 December 2015	232 256 653 478 82 257 715 2,673
Total (losses)/gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2015	(430) 6 (52) 33 - - - (443)
Total unrealised losses recognised in the income statement, within impairment charges at 31 December 2015	- - - - - (17) (9) (26)

1.Transfers out during the year primarily relate to certain equity shares and debt securities where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2 financial assets

1. Transfers in during the year primarily relate to investment in structured notes, corporate debt securities and loans and advances where the valuation parameters become unobservable during the year

182

Standard Chartered Bank Notes to the financial statements

Company Assets	Held at fair value throughprofit or loss Derivative financial instruments Investment securities Loans and advances to customers Debt securities Equity shares Treasury bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million
At 1 January 2016 Total (losses)/gains recognised in income statement Net trading income Impairment charge Purchases Sales Settlements Transfers out1 Transfers in2	232 256 2 428 - 120 124 1,162 (85) 3 (1) 37 - - (14) (60)
	(85) 3 (1) 37 - - - (46) - - - - - - (14) (14)
	- 73 52 35 - 13 18 191 (6) (197) (1) (12) - (50) (5) (271) (67) (10) - (47) - (8) - (132) (100) (122) - (124) - (62) - (408) 107 103 - - - - - 210
At 31 December 2016	81 106 52 317 - 13 123 692
Total unrealised (losses)/gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2016	(87) 3 (1) 15 - - - (70)
Total unrealised losses recognised in the income statement, within impairment charges at 31 December 2016	- - - - - - (14) (14)

1. Transfers out during the year primarily relate to loans and advances, debt securities and derivative financial instruments where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2 financial assets

2. Transfers in during the year primarily relate to loans and advances and debt securities where the valuation parameters become unobservable during the year valuation parameters become unobservable during the year

183

Standard Chartered Bank Notes to the financial statements

Company Assets	Held at fair valuethroughprofitor loss Derivative financial instruments Investmentsecurities Loans and advances to customers Debt securities Equity shares Treasury bills Debt securities Equity shares Total $million $million $million $million $million $million $million $million
At 1 January 2015 Total (losses)/gains recognised in income statement Net trading income Total losses recognised in other comprehensive income Available-for-sale reserve Exchange difference Purchases Sales Settlements Transfers out1 Transfers in2	640 394 - 514 - 162 97 1,807 (441) 5 3 (9) - - 11 (431)
	(441) 5 3 (9) - - 11 (431)
	- - - - - (38) - (38)
	- - - - - (28) - (28) - - - - - (10) - (10)
	3 80 - 105 - - 26 214 - (161) (16) (73) - (116) (10) (376) - (25) - (50) (22) (5) - (102) - (184) - (75) - (80) - (339) 30 147 15 16 22 197 - 427
At 31 December 2015	232 256 2 428 - 120 124 1,162
Total unrealised (losses)/gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2015	(430) 6 (1) 5 - - 11 (409)

1. Transfers out during the year primarily relate to certain equity shares and debt securities where the valuation parameters became observable during the year and were transferred to Level 1 and Level 2 financial assets

2. Transfers in during the year primarily relate to investment in structured notes, corporate debt securities and loans and advances where the valuation parameters become unobservable during the year

184

Standard Chartered Bank Notes to the financial statements

Level 3 movement tables – Financial liabilities

Level 3 movement tables – Financial liabilities
Group	2016
	Customer accounts Debt securities in issue Derivative financial instruments Total $million $million $million $million
At 1 January 2016 Total losses/(gains) recognised in income statement – net trading income Issues Settlements Transfers out1 Transfersin	1 495 319 815 - 1 31 32 - 268 78 346 - (237) (74) (311) (1) - (38) (39) - 3 - 3
At 31 December 2016	- 530 316 846
Total unrealised losses recognised in the income statement, within net trading income, relatingto change in fair value of liabilities held at 31 December 2016	- 5 39 44

Group	2015
	Customer accounts Debt securities in issue Derivative financial instruments Total $million $million $million $million
At 1 January 2015 Total losses recognised in income statement – net trading income Issues Settlements Transfers out Transfersin2	1 208 296 505 - 11 6 17 - 310 40 350 - (176) (26) (202) - - (3) (3) - 142 6 148
At 31 December 2015	1 495 319 815
Total unrealised losses recognised in the income statement, within net trading income, relatingto change in fair value of liabilities held at 31 December 2015	- - 16 16

1. Transfers out during the year primarily relate to derivative financial instruments where the valuation parameters became observable during the year and were transferred to Level 2 financial liabilities

2. Transfers in during the year primarily relate to debt securities in issue for which parameters became unobservable during the year

185

Standard Chartered Bank Notes to the financial statements

Company	2016
	Debt securities in issue Derivative financial instruments Total $million $million $million
At 1 January 2016 Total losses/(gains) recognised in income statement – net trading income Issues Settlements Transfers out1 Transfersin	233 362 595 18 (7) 11 267 92 359 (209) (91) (300) - (37) (37) 3 4 7
At 31 December 2016	312 323 635
Total unrealised losses recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 31 December 2016	22 - 22

Company	2015
	Debt securities in issue Derivative financial instruments Total $million $million $million
At 1 January 2015 Total losses recognised in income statement – net trading income Issues Settlements Transfers out Transfersin2	94 272 366 5 11 16 168 91 259 (176) (13) (189) - (3) (3) 142 4 146
At 31 December 2015	233 362 595
Total unrealised losses recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 31 December 2015	6 - 6

1. Transfers out during the year primarily relate to derivative financial instruments where the valuation parameters became observable during the year and were transferred to Level 2 financial liabilities

2. Transfers in during the year primarily relate to debt securities in issue for which parameters became unobservable during the year

186

Standard Chartered Bank Notes to the financial statements

Sensitivities in respect of the fair values of level 3 assets and liabilities

Sensitivity analysis is performed on products with significant unobservable inputs. The Group apply a 10 per cent increase or decrease on the values of these unobservable reasonably possible alternatives which could have increased fair values of financial instruments inputs, to generate a range of reasonably possible alternative inputs valuations. The percentage shift is determined by statistical analyses performed on a set of reference prices based on the composition of our Level 3 assets. Favourable and unfavourable changes are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. This Level 3 sensitivity analysis assumes a one way market move and does not consider offsets for hedges.

hedges.
Group	Held at fair valuethroughprofitor loss Available-for-sale
	Favourable Unfavourable Favourable Unfavourable Net exposure Changes Changes Net exposure Changes Changes $million $million $million $million $million $million
Financial instruments held at fair value Debt securities Equity shares Loan and advances Treasury bills Derivative financial instruments Debt securitiesin issue	4 4 4 64 64 64 743 815 671 522 574 470 179 187 171 - - - - - - 135 136 134 44 165 25 - - - (530) (521) (539) - - -
At 31 December 2016	440 650 332 721 774 668
Financial instruments held at fair value Debt securities Equity shares Loan and advances Treasury bills Derivative financial instruments Debt securitiesin issue	256 261 251 257 266 247 653 771 631 715 797 633 232 259 217 - - - - - - 82 83 81 159 423 (106) - - - (495) (482) (508) - - -
At 31 December 2015	805 1,232 485 1,054 1,146 961

The reasonably possible alternatives could have increased or decreased the fair values of financial instruments held at fair value through profit or loss and those classified as available-for-sale by the amounts disclosed below.

Financial instruments	2016 2015 Fair value changes $million $million
Designated at fair value through profit or loss	Possible increase 210 427
	Possible decrease (108) (320)
Available-for-sale	Possible increase 53 92
	Possible decrease (53) (93)

187

Standard Chartered Bank Notes to the financial statements

Company	Held at fair valuethroughprofitor loss Available-for-sale
	Favourable Unfavourable Favourable Unfavourable Net exposure Changes Changes Net exposure Changes Changes $million $million $million $million $million $million
Financial instruments held at fair value Debt securities Equity shares Loan and advances Derivative financial instruments Debt securitiesin issue	106 107 105 13 14 12 52 57 47 123 135 111 81 85 77 - - - (6) (3) (9) - - - (312) (308) (316) - - -
At 31 December 2016	(79) (62) (96) 136 149 123
Financial instruments held at fair value Debt securities Equity shares Loan and advances Derivative financial instruments Debt securitiesin issue	256 260 252 120 131 109 2 2 2 124 148 100 232 259 217 - - - 66 142 (275) - - - (233) (232) (234) - - -
At 31 December 2015	323 431 (38) 244 279 209

The reasonably possible alternatives could have increased or decreased the fair values of financial instruments held at fair value through profit or loss and those classified as available-for-sale by the amounts disclosed below.

Financial instruments	2016 2015 Fair value changes $million $million
Designated at fair value through profit or loss	Possible increase 17 108
	Possible decrease (17) (361)
Available-for-sale	Possible increase 13 35
	Possible decrease (13) (35)

188

Standard Chartered Bank Notes to the financial statements

13. Derivative financial instruments

Accounting policy

Accounting for derivatives: Derivatives are financial instruments that derive their value in response to changes in interest rates, financial instrument prices, commodity prices, foreign exchange rates, credit risk and indices. Derivatives are categorised as trading unless they are designated as hedging instruments.

Derivatives are initially recognised and subsequently measured at fair value, with revaluation gains recognised in profit and loss (except where cash flow or net investment hedging has been achieved, in which case the effective portion of changes in fair value is recognised within other comprehensive income).

Fair values may be obtained from quoted market prices in active markets, recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. Where the initially recognised fair value of a derivative contract is based on a valuation model that uses inputs which are not observable in the market, it follows the same initial recognition accounting policy as for other financial assets and liabilities. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond held, are valued as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Embedded derivatives continue to be presented with the host contract and are not separately disclosed or included within derivatives.

Hedge accounting: The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:

a) hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge)

b) hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecasted transaction (cash flow hedge)

c) hedges of the net investment of a foreign operation (net investment hedges)

Hedge accounting is used for derivatives designated in this way, provided certain criteria are met.

The Group and Company document at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions ����������������������������������������������������������������������������������������

The Group may enter into economic hedges that do not qualify for IAS 39 hedge accounting treatment. Where these economic hedges use derivative to offset risk, the derivatives are fair valued, with fair value changes recognised through profit or loss. Fair value hedge: Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. If the hedge no longer meets the criteria for hedge accounting, 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 period to maturity or derecognition.

Cash flow hedge : �������������������������������������������������������������������������������������������������������������� hedging instruments is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to the income statement in the periods in which the hedged item �����������������������

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.

Net investment hedge: ������������������������������������������������������������������������������������������������������������ loss on the hedging instrument relating to the effective portion of the hedge is recognised in the translation reserve; the gain or loss relating to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity are reclassified to the income statement when the foreign operation is disposed of.

189

Standard Chartered Bank Notes to the financial statements

The tables below analyse the notional principal amounts are the positive and negative fair values of derivative financial instruments. Notional principal amounts and the amount of principal underlying the contract at the reporting date

Group

Group
Derivatives	2016 2015
	Notional principal amounts Assets Liabilities Notional principal amounts Assets Liabilities $million $million $million $million $million $million
Foreign exchange derivative contracts: Forward foreign exchange contracts Currency swaps and options Exchange tradedfutures and options	1,904,058 26,208 24,484 1,846,097 20,380 20,014 1,288,908 29,210 29,648 1,335,953 28,306 28,058 225 - - 454 - -
	3,193,191 55,418 54,132 3,182,504 48,686 48,072
Interest rate derivative contracts: Swaps Forward rate agreements and options Exchange tradedfutures and options	2,210,291 8,641 8,939 2,135,573 10,828 11,369 114,988 1,305 1,404 72,776 935 1,171 789,901 148 148 586,588 - -
	3,115,180 10,094 10,491 2,794,937 11,763 12,540
Credit derivative contracts	25,101 171 472 23,561 338 314
Equity and stock indexoptions	2,535 52 58 9,384 295 234
Commodity derivative contracts	80,921 1,326 1,098 96,984 3,505 1,426
Total derivatives	6,416,928 67,061 66,251 6,107,370 64,587 62,586
Company Derivatives	2016 2015
	Notional principal amounts Assets Liabilities Notional principal amounts Assets Liabilities $million $million $million $million $million $million
Foreign exchange derivative contracts: Forward foreign exchange contracts Currency swaps and options Exchange tradedfutures and options	2,097,839 25,353 25,035 1,907,941 20,185 20,374 1,276,118 29,592 28,861 1,308,236 27,066 26,565 - - - 154 - -
	3,373,957 54,945 53,896 3,216,331 47,251 46,939
Interest rate derivative contracts: Swaps Forward rate agreements and options Exchange tradedfutures and options	2,136,145 8,615 9,152 2,026,740 10,276 10,638 113,733 1,538 1,371 70,276 1,150 1,102 789,858 148 148 586,504 3 -
	3,039,736 10,301 10,671 2,683,520 11,429 11,740
Credit derivative contracts	26,176 171 496 24,202 319 370
Equity and stock indexoptions	1,913 30 42 9,548 312 239
Commodity derivative contracts	80,996 1,325 1,097 98,017 3,503 1,434
Totalderivatives	6,522,778 66,772 66,202 6,031,618 62,814 60,722

The Group limits exposure to credit 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. Details of the amounts available for offset are set out in note 12 on pages 166 to 167.

The Derivatives and Hedging sections of the Risk review and Capital review on page 92 explain the Group’s risk management of derivative contracts and application of hedging.

190

Standard Chartered Bank Notes to the financial statements

Derivatives held for hedging

Included in the table above are derivatives held for hedging purposes as follows:

Included in the table above are derivatives	held for hedging purposes as follows:
Group	2016 2015
	Notional principal amounts Assets Liabilities Notional principal amounts Assets Liabilities $million $million $million $million $million $million
Derivatives designated as fair value hedges: Interest rate swaps Forward foreign exchange contracts Currency swaps	30,331 442 93 37,409 151 221 419 12 15 5 1 - 13,497 37 1,044 18,671 452 821
	44,247 491 1,152 56,085 604 1,042
Derivatives designated as cash flow hedges: Interest rate swaps Forward foreign exchange contracts Currency swaps	9,925 3 84 8,777 3 20 883 - 13 1,589 3 46 895 1 1 2,621 40 3
	11,703 4 98 12,987 46 69
Derivatives designated as net investment hedges: Forwardforeignexchange contracts	1,313 51 - 1,339 39 -
Total derivatives held for hedging	57,263 546 1,250 70,411 689 1,111

Company	2016 2015
	Notional principal amounts Assets Liabilities Notional principal amounts Assets Liabilities $million $million $million $million $million $million
Derivatives designated as fair value hedges: Interest rate swaps Currency swaps	23,168 389 39 28,140 156 219 9,425 34 1,033 13,014 335 801
	32,593 423 1,072 41,154 491 1,020
Derivatives designated as cash flow hedges: Interest rate swaps Forward foreign exchange contracts Currency swaps	2,738 1 50 4,175 3 20 403 - 1 1,451 1 46 853 1 1 1,969 39 -
	3,994 2 52 7,595 43 66
Derivatives designated as net investment hedges: Forward foreign exchange contracts	1,313 51 - 1,339 39 -
Total derivatives held for hedging	37,900 476 1,124 50,088 573 1,086

191

Standard Chartered Bank Notes to the financial statements

Fair value hedges

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.

For qualifying hedges, the fair value changes of the derivative are substantially matched by corresponding fair value changes of the hedged item, both of which are recognised in profit and loss. All qualifying hedges were effective.

	Group Company
	2016 2015 2016 2015 $million $million $million $million
Net losses on hedging instruments Net gains on hedging items1	(223) (234) (304) (203) 213 234 294 208

1. Includes amortisation of fair value adjustments in respect of hedges no longer qualifying for hedge accounting

Cash flow hedges

The Group uses interest rate swaps to manage the variability in future cash flows on assets and liabilities that have floating rates of interest by exchanging the floating rates for fixed rates. It also uses foreign exchange contracts, currency swaps and options to manage the variability in future exchange rates on its assets and liabilities and costs in foreign currencies.

Gains and losses arising on the effective portion of the hedges are deferred in equity until the variability on the cash flow affects profit and loss, at which time the gains or losses are transferred to profit and loss.

and loss, at which time the gains or losses are transferred to profit and loss.
	Group Company
	2016 2015 2016 2015 $million $million $million $million
Losses reclassified from reserves to income statement Losses recognised in operating costs Gains recognised in other comprehensive income	(57) (107) (62) (116) (67) (118) (67) (118) 10 11 5 2

Group

The Group has hedged the following cash flows which are expected to impact the income statement in the following years:

	2016
	Less than one year One to two years Two to three years Three to four years Four to five years Over five years Total $million $million $million $million $million $million $million
Forecast receivable cash flows Forecast payable cash flows	62 48 47 33 23 8 221 (20) (9) (28) (1) - - (58)
	42 39 19 32 23 8 163

	2015
	Less than one year One to two years Two to three years Three to four years Four to five years Over five years Total $million $million $million $million $million $million $million
Forecast receivable cash flows Forecast payable cash flows	47 46 29 26 12 - 160 (12) (10) (5) (1) - - (28)
	35 36 24 25 12 - 132

Company

Company	2016
	Less than one year One to two years Two to three years Three to four years Four to five years Over five years Total $million $million $million $million $million $million $million
Forecast receivable cash flows Forecast payable cash flows	67 46 47 32 21 8 221 (20) (9) (28) (1) - - (58)
	47 37 19 31 21 8 163

192

Standard Chartered Bank Notes to the financial statements

				2015
	Less than	One to	Two to	Three to	Four to	Over
	one year	two years	three years	four years	five years	five years	Total
	$million	$million	$million	$million	$million	$million	$million
Forecast receivable cash flows	37	36	27	24	11	-	135
Forecast payable cash flows	(11)	(10)	(5)	(7)	-	-	(33)
	26	26	22	17	11	-	102

Net investment hedges

The Group uses a combination of foreign exchange contracts and non derivative financial assets to manage the variability in future exchange rates on its net investments in foreign currencies. Gains and losses arising on the effective portion of the hedges are deferred in equity until the net investment is disposed of.

	2016	2015
	$million	$million
Gains recognised in other comprehensive income	30	90

14. Investment securities

Accounting policy

Investment securities are treasury bills, debt securities and equity securities intended to be held on a continuing basis. The securities are predominantly classified as available for sale. Please refer to note 12 Financial Instruments for the accounting policy.

Group	2016
	Debt securities Held-to- maturity Available- for-sale Loans and receivables Equity shares1 Treasury bills Total $million $million $million $million $million $million
Issued by public bodies: Government securities Otherpublic sectorsecurities	163 30,312 10 - 1,705 222 163 32,017 232 - 5,764 - - 21,748 79 - 27,512 79 7 9,675 2,744 170 69,204 3,055 - 8,847 1082 3 628 9,586 7 32,585 5962 713 15,765 49,666 163 27,772 2,351 617 18,711 49,614
Issued by banks: Certificates of deposit Otherdebt securities
Issued by corporate entities and other issuers: Otherdebt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	170 69,204 3,055 1,333 35,104 108,866
Market value of listed securities	7 41,432 704 716 16,393 59,252

1. Equity shares largely comprise investments in corporates

2 . These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid

193

Standard Chartered Bank Notes to the financial statements

Group

Group	2015
	Debtsecurities Held-to- maturity Available- for-sale Loans and receivables Equity shares1 Treasury bills Total $million $million $million $million $million $million
Issued by public bodies: Government securities Otherpublic sectorsecurities	159 35,086 - - 2,215 37 159 37,301 37 - 4,076 - - 22,110 15 - 26,186 15 51 14,197 2,597 210 77,684 2,649 - 15,992 1202 8 2,057 18,177 51 31,837 4832 782 14,703 47,856 159 29,855 2,046 763 15,693 48,516
Issued by banks: Certificates of deposit Otherdebt securities
Issued by corporate entities and other issuers: Other debt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	210 77,684 2,649 1,553 32,453 114,549
Market value of listed securities	51 47,829 603 790 16,760 66,033

1. Equity shares largely comprise investments in corporates

2. These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid

Company	2016
	Debtsecurities Held-to- maturity Available- for-sale Loans and receivables Equity shares1 Treasury bills Total $million $million $million $million $million $million
Issued by public bodies: Government securities Other public sector securities	163 11,743 10 - 1,026 222 163 12,769 232 - 2,037 - - 14,758 1,844 - 16,795 1,844 7 5,426 1,596 170 34,990 3,672 - 7,781 882 3 628 8,500 7 15,739 282 577 8,017 24,368 163 11,470 3,556 127 7,406 22,722
Issued by banks: Certificates of deposit Other debt securities
Issued by corporate entities and other issuers: Other debt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	170 34,990 3,672 707 16,051 55,590
Market value of listed securities	7 23,520 116 580 8,645 32,868

1. Equity shares largely comprise investments in corporates

2. These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid

194

Standard Chartered Bank Notes to the financial statements

Company	2015
	Debtsecurities Held-to- maturity Available- for-sale Loans and receivables Equity shares1 Treasury bills Total $million $million $million $million $million $million
Issued by public bodies: Government securities Otherpublic sectorsecurities	159 15,803 - - 1,523 37 159 17,326 37 - 1,668 - - 13,4063 1,7043 - 15,074 1,704 51 9,966 1,259 210 42,366 3,000 - 14,462 882 8 1,970 16,528 51 15,275 232 530 7,074 22,953 159 12,6293 2,8893 160 6,078 21,915
Issued by banks: Certificates of deposit Otherdebt securities
Issued by corporate entities and other issuers: Otherdebt securities
Total debt securities
Of which: Listed on a recognised UK exchange Listed elsewhere Unlisted
	210 42,366 3,000 698 15,122 61,396
Market value of listed securities	51 29,737 111 538 9,044 39,481

1. Equity shares largely comprise investments in corporates

2. These debt securities listed or registered on a recognised UK exchange or elsewhere are thinly traded or the market for these securities is illiquid

3. $1.8 billion of Debt securities issued presented as ’Available-for-sale’ in 2015 have been reclassified to ‘Loans and receivables’. The securities were issued by subsidiaries consolidated within the Group and should have been classified as ‘Loans and receivables’ since the securities were quoted but are not in an active market.

195

Standard Chartered Bank Notes to the financial statements

The changes in the carrying amount of investment securities comprised:

Group	2016 2015
	Debt securities Equity shares Treasury bills Total Debt securities Equity shares Treasury bills Total $million $million $million $million $million $million $million $million
At 1 January Exchange translation differences Additions Maturities and disposals Impairment, net of recoveries on disposal Changes in fair value (including the effect of fair value hedging) Amortisation of discounts and premiums	80,543 1,553 32,453 114,549 77,812 2,022 24,089 103,923 (1,504) (30) (756) (2,290) (2,866) 2 (966) (3,830) 95,915 192 107,166 203,273 132,800 350 76,300 209,450 (102,505) (217) (104,035) (206,757) (127,107) (652) (67,244) (195,003) (151) (211) - (362) (71) (124) - (195) 122 46 21 189 14 (44) (7) (37) 9 - 255 264 (39) (1) 281 241
At 31 December	72,429 1,333 35,104 108,866 80,543 1,553 32,453 114,549

The analysis of unamortised premiums and unamortised discounts on debt securities and income on equity shares held for investment purposes is provided below:

purposes is provided below:
	2016	2015
	$million	$million
Debt securities:
Unamortised premiums	462	401
Unamortised discounts	139	149
Income from listed equity shares	39	92
Income from unlisted equityshares	11	9

The following table sets out the movement in the allowance of impairment provisions for investment securities classified as loans and receivables.

and receivables.
	2016	2015
	$million	$million
At 1 January	56	25
Exchange translation differences	(2)	(1)
Amounts written off	(7)	(34)
Impairment charge	97	66
At 31 December	144	56

196

Standard Chartered Bank Notes to the financial statements

Company

The change in the carrying amount of investment securities comprised:

	2016 2015
	Debt securities Equity shares Treasury bills Total Debt securities Equity shares Treasury bills Total $million $million $million $million $million $million $million $million
At 1 January Exchange translation differences Additions Maturities and disposals Impairment, net of recoveries on Changes in fair value (including the Amortisationofdiscounts and premiums	45,576 698 15,122 61,396 40,765 783 7,445 48,993 (950) (1) (114) (1,065) (1,128) (3) (263) (1,394) 43,678 31 57,031 100,740 44,432 60 29,479 73,971 (49,679) (8) (56,123) (105,810) (38,511) (9) (21,654) (60,174) - (19) - (19) 8 (50) - (42) 217 6 43 266 28 (83) (24) (79) (10) - 92 82 (18) - 139 121
At 31 December	38,832 707 16,051 55,590 45,576 698 15,122 61,396

The analysis of unamortised premiums and unamortised discounts on debt securities and income on equity shares held for investment purposes is provided below:

purposes is provided below:
	2016	2015
	$million	$million
Debt securities:
Unamortised premiums	299	248
Unamortised discounts	69	75
Income from listed equity shares	36	81
Income from unlisted equityshares	5	1

The following table sets out the movement in the allowance of impairment provisions for investment securities classified as loans and receivables.

	2016	2015
	$million	$million
At 1 January	23	21
Exchange translation differences	-	(1)
Amounts written off	(7)	(6)
Impairment charge	-	9
At 31 December	16	23

197

Standard Chartered Bank Notes to the financial statements

15. Loans and advances to banks and customers

Accounting policy

Refer to note 8 Impairment losses on loans and advances and other credit risk provisions and note 12 Financial instruments for the accounting policies.

	Group Company
	2016 2015 2016 2015 $million $million $million $million
Loans and advances to banks Individual impairment provision Portfolioimpairment provision	72,769 64,656 41,218 40,093 (163) (163) (3) (3) (1) (1) (1) (1)
Loans and advances to customers Individual impairment provision Portfolioimpairment provision	72,605 64,492 41,214 40,089 259,064 263,908 121,873 123,290 (5,667) (6,023) (4,237) (4,251) (687) (657) (392) (276)
	252,7101 257,228 117,244 118,763
Total loans and advances to banks and customers	325,315 321,720 158,458 158,852
1. Loans and advances to customers (net of provision) totalling $1.1 billion (2015: $nil billion) has been classified and disclosed as held for sales in note 19

The Group has outstanding residential mortgage loans to Korea residents of $15.3 billion (2015: $13.4 billion) and Hong Kong residents of $28.7 billion (2015: $27.7 billion).

Analysis of loans and advances to customers by geographic region and client segments and related impairment provisions as set out within the Risk and capital review on pages 100 to 118.

Accounting policy

Sale and repurchase agreements: Securities sold subject to repurchase agreements (repos) remain on the balance sheet, the counterparty liability is included in deposits by banks or customer accounts, as appropriate. Securities purchased under agreements to resell (reverse-repos) are recorded as loans and advances to other banks or customers, as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method.

Securities lent to counterparties are also retained in the financial statements. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded with the gain or loss included in trading income.

Derecognition: Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership. If substantially all the risks and rewards have been neither retained nor transferred and the Group has retained control, the assets continue to be recognised to the extent of the Group’s continuing involvement.

Financial liabilities are derecognised when they are extinguished. A financial liability is extinguished when the obligation is discharged, cancelled or expires.

If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of the liability and the consideration paid is included in Other income.

Repos and securities borrowing and lending transactions: These transactions typically entitle the Group and its

counterparties to have recourse to assets similar to those provided as collateral in the event of a default. Securities sold subject to repos, either by way of a Global Master Repurchase Agreement (GMRA), or through a securities sale and TRS continue to be recognised on the balance sheet as the Group retains substantially the associated risks and rewards of the securities, the TRS is not recognised. The counterparty liability 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.

198

Standard Chartered Bank Notes to the financial statements

The table below sets out the financial assets provided as collateral for repurchase transactions.

	Fair value
Group	through profit and loss	Available for sale	Loans and receivables	Total
Collateralpledged against repurchase agreements	$million	$million	$million	$million
On balance sheet
Treasury bills	-	110	-	110
Debt securities	1,094	3,576	-	4,670
Off balance sheet
Repledged collateral received	-	-	33,053	33,053
At 31 December 2016	1,094	3,686	33,053	37,833
Balance sheet liabilities - Repurchase agreements
Deposits by banks				4,022
Customeraccounts				33,670
At 31 December 2016				37,692

	Fair value
	through	Available	Loans and
	profit and loss	for sale	receivables	Total
Collateralpledged against repurchase agreements	$million	$million	$million	$million
On balance sheet
Treasury bills	-	98	-	98
Debt securities	487	520	-	1,007
Off balance sheet
Repledged collateral received	491	-	21,694	22,185
At 31 December 2015	978	618	21,694	23,290
Balance sheet liabilities - Repurchase agreements
Deposits by banks				7,598
Customeraccounts				13,008
At 31 December 2015				20,606

199

Standard Chartered Bank Notes to the financial statements

	Fair value
Company	through profit and loss	Available for sale	Loans and receivables	Total
Collateralpledged against repurchase agreements	$million	$million	$million	$million
On balance sheet
Treasury bills	-	77	-	77
Debt securities	1,094	2,495	-	3,589
Off balance sheet
Repledged collateral received	-	-	33,053	33,053
At 31 December 2016	1,094	2,572	33,053	36,719
Balance sheet liabilities - Repurchase agreements
Deposits by banks				3,874
Customeraccounts				32,736
At 31 December 2016				36,610

	Fair value
	through	Available	Loans and
	profit and loss	for sale	receivables	Total
Collateralpledged against repurchase agreements	$million	$million	$million	$million
On balance sheet
Treasury bills	-	3	-	3
Debt securities	332	395	-	727
Off balance sheet
Repledged collateral received	491	-	21,694	22,185
At 31 December 2015	823	398	21,694	22,915
Balance sheet liabilities - Repurchase agreements
Deposits by banks				7,330
Customeraccounts				12,947
At 31 December 2015				20,277

Reverse repurchase agreements - Group

The Group also undertakes reverse repurchase (reverse repo) lending agreements with counterparties typically financial institutions in exchange for collateral. Reverse repo agreements entitle the Group to have recourse to assets similar to those received as collateral in the event of a default. In addition the Group also obtains collateral on terms that permit the Group to repledge or resell the collateral to others. The Group does not recognise the securities bought under reverse repos as collateral on its balance sheet as the Group is not substantially entitled to the risks and rewards associated with those assets and instead recognises the lending as loans and advances to banks or customers, as appropriate. The Group's reverse repos at 31 December 2016 and 31 December 2015 are set out in the table below:

Balance sheet assets - Reverse repurchase agreements

Balance sheet assets - Reverse repurchase agreements
	2016	2015
	$million	$million
Loans and advances to banks	18,464	17,330
Loans and advances to customers	23,925	15,307
	42,389	32,637

Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are:

repledge or resell the securities to others. Amounts on such terms are:
	2016	2015
	$million	$million
Securities and collateral received (at fair value)	55,394	53,357
Securities and collateral which can be repledged or sold (at fair value)	54,473	52,841
Thereof repledged/transferred to others for financing activities, to satisfy commitments
under short sale transactions or liabilities under sale and repurchase agreements (at fair
value)	33,053	22,185

200

Standard Chartered Bank Notes to the financial statements

Reverse repurchase agreements - Company

The Company also undertakes reverse repurchase lending agreements as set out in the table below:

Balance sheet assets - Reverse repurchase agreements

Balance sheet assets - Reverse repurchase agreements
	2016	2015
	$million	$million
Loans and advances to banks	15,210	12,816
Loans and advances to customers	23,151	13,787
	38,361	26,603

Under reverse repurchase and securities borrowing arrangements, the Company obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are:

repledge or resell the securities to others. Amounts on such terms are:
	2016	2015
	$million	$million
Securities and collateral received (at fair value)	51,302	47,290
Securities and collateral whichcanberepledged orsold (atfair value)	51,207	47,212
Thereof repledged/transferred to others for financing activities, to satisfy commitments
under short sale transactions or liabilities under sale and repurchase agreements (at fair
value)	33,053	22,185

Securitisation transactions

The Group has also entered into a number of securitisation transactions where the underlying loans and advances have been transferred to Structured Entities (SEs) that are fully consolidated by the Group. As a result, the Group continues to recognise the assets on its balance sheet, together with the associated liability instruments issued by the SEs. The holders of the liability instruments have recourse only to the assets transferred to the SEs.

The following table sets out the carrying value and fair value of the assets transferred and the carrying value and fair value of the associated liabilities.

Group	2016 2015
	Carrying value Fair value Carrying value Fair value $million $million $million $million
Loans and advances to customers Securitisation liability	21 21 76 76 15 15 43 43
Net	6 6 33 33

The Group did not undertake any transactions that required the recognition of an asset representing continuing involvement in financial assets.

Company	2016 2015
	Carrying value Fair value Carrying value Fair value $million $million $million $million
Loans and advances to customers Securitisation liability	13 13 17 17 15 15 18 18
Net	(2) (2) (1) (1)

The Company did not undertake any transactions that required the recognition of an asset representing continuing involvement in financial assets.

201

Standard Chartered Bank Notes to the financial statements

16. Goodwill and intangible assets

Accounting policy

Goodwill: Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets and contingent liabilities of the acquired subsidiary, associate or joint venture at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in Intangible assets. Goodwill on acquisitions of associates is included in Investments in associates. Goodwill included in intangible assets is assessed at each balance sheet date for impairment and carried at cost less any accumulated impairment losses. Gains 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 discounting expected pre-tax cash flows of the relevant cash generating units (CGUs) and discounting these at an appropriate discount rate, the determination of which requires the exercise of judgement. Goodwill is allocated to CGUs for the purpose of impairment testing. CGUs represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. These are 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 below.

Significant accounting estimates and judgments: The carrying amount of goodwill is based on the extent of judgements including the basis of assumptions and forecasts used for determining cash flows for CGUs, headroom availability, and sensitivities of the forecasts to reasonably possible changes in assumptions. The Group undertakes an annual assessment to evaluate whether the carrying value of goodwill on balance sheet is impaired. The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement.

Acquired intangibles: At the date of acquisition of a subsidiary or associate, intangible assets which are deemed separable and that arise from contractual or other legal rights are capitalised and included within the net identifiable assets acquired. These intangible assets are initially measured at fair value, which reflects market expectations of the probability that the future economic 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 indicators of impairment. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately.

Computer software: Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Direct costs of the development of separately identifiable internally generated software are capitalised where it is probable that future economic benefits attributable to the asset will flow from its use (internally generated software). These costs include salaries and wages, materials, service providers and contractors, and directly attributable overheads. Costs incurred in the ongoing maintenance of software are expensed immediately when incurred. Internally generated software is amortised over a three-year time period.

Group

Group
	2016 2015
	Goodwill Acquired intangibles Computer software 1 Total Goodwill Acquired intangibles Computer software Total $million $million $million $million $million $million $million $million
Cost At 1 January Exchange translation differences Additions Disposals Impairment Amounts written off	3,192 475 1,550 5,217 3,800 777 1,347 5,924 4 (1) (55) (52) (120) (37) (93) (250) - 24 567 591 - - 368 368 - - (1) (1) - - - - (166) - - (166) (488) - - (488) - (12) (181) (193) - (265) (72) (337)
At 31 December	3,030 486 1,880 5,396 3,192 475 1,550 5,217
Provision for amortisation At 1 January Exchange translation differences Amortisation Impairment charge Disposals Amounts written off	- 413 587 1,000 - 665 477 1,142 - (2) (16) (18) - (27) (34) (61) - 14 272 286 - 39 205 244 - - - - - 1 - 1 - - (1) (1) - - - - - (12) (153) (165) - (265) (61) (326)
At 31 December	- 413 689 1,102 - 413 587 1,000
Net book value	3,030 73 1,191 4,294 3,192 62 963 4,217

1. Computer software is materially all internally generated.

202

Standard Chartered Bank Notes to the financial statements

Company

Company
	2016 2015
	Goodwill Acquired intangibles Computer Software Total Goodwill Acquired intangibles Software Total $million $million $million $million $million $million $million $million
Cost At 1 January Exchange translation differences Additions Amounts written off Other movements	265 47 1,237 1,549 270 69 1,037 1,376 1 2 (39) (36) (5) (8) (71) (84) - - 548 548 - - 350 350 - (10) (145) (155) - (14) (57) (71) - - (34) (34) - - (22) (22)
At 31 December	266 39 1,567 1,872 265 47 1,237 1,549
Provision for amortisation At 1 January Exchange translation differences Amortisation Impairment charge Amountswrittenoff	- 23 411 434 - 34 322 356 - 1 (12) (11) - (3) (22) (25) - 3 221 224 - 5 158 163 - - - - - 1 - 1 - (10) (126) (136) - (14) (47) (61)
At 31 December	- 17 494 511 - 23 411 434
Net book value	266 22 1,073 1,361 265 24 826 1,115

1. Computer software is materially all internally generated.

Goodwill: At 31 December 2016, accumulated goodwill impairment losses incurred from 1 January 2005 amounted to $2,481 million (2015: $2,315 million).

An annual assessment is made as to whether the current carrying value of goodwill is impaired. For the purposes of impairment testing, goodwill is allocated at the date of acquisition to a CGU. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. Indicators of impairment include changes in the economic performance and outlook of the region including geo-political changes, changes in market value of regional investments, large credit defaults and strategic decisions to exit certain regions. The recoverable amounts for all the CGUs were measured based on value-in-use (ViU).

At 31 December 2016, all CGUs had recoverable amounts that exceed the carrying amounts with the exception of the Thailand CGU, where the carrying amount exceeded the recoverable value by $166 million. An impairment charge of $166 million has been recognised to write off this remaining goodwill.

The calculation of ViU for each CGU is calculated using five-year cash flow projections and an estimated terminal value based on a perpetuity value after year five. The cash flow projections are based on forecasts approved by management up to 2021. The perpetuity terminal value amount is calculated using year five cash flows using long-term GDP growth rates. All cash flows are discounted using pre-tax discount rates which reflect market rates appropriate to the CGU. In prior years the terminal value element of the calculation was calculated by projecting a further 15-years of cash flow and then including a terminal value. The change in assessment methodology of the terminal value is not materially different between the two methods.

The goodwill allocated to each CGU and key assumptions used in determining the recoverable amounts are set out below and are solely estimates for the purposes of assessing impairment of acquired goodwill.

CashGenerating Unit	2016 2015
	Goodwill Pre-tax discount rate Long-term forecast GDP growth rates Goodwill Pre-tax discount rate Long-term forecast GDP growth rates $million percent percent $million percent percent
Pakistan business Taiwan business Credit card and personal loan - Asia, India & MENAP India business MESA business1 Thailand business Financial Institutions and Private Banking business Corporate advisory business Consumer banking business in Singapore Other	251 23.8 5.3 251 27.0 4.9 845 12.8 2.2 828 16.3 3.0 494 13.1 3.6 494 15.0 4.0 295 17.0 7.8 303 19.2 7.6 368 13.6 3.7 368 19.3 4.0 - 13.9 3.1 165 17.4 3.3 396 13.5 2.9 396 14.0 3.8 58 13.4 2.9 74 14.0 3.8 193 10.1 2.6 197 11.9 4.0 130 13.4-21.2 2.9-5.9 116 13.8-20.7 3.8-6.2
	3,030 3,192

1. MESA business consists of UAE, Saudi Arabia, Jordan, Oman, Qatar, Bahrain, Lebanon, Pakistan, Sri Lanka and Bangladesh

203

Standard Chartered Bank Notes to the financial statements

The Group has performed sensitivity analysis on the key assumptions for each CGU’s recoverable amount. These include a 1 per cent (post-tax) increase in the discount rate, a 1percent (pre-tax) reduction in long-term GDP growth rates, a 10 per cent (post-tax) reduction in estimated cash flows and in certain instances a combination of these factors. In each case, except the Taiwan business CGU, the recoverable amounts exceed the carrying amounts. In the case of Taiwan the sensitivity analysis under various scenarios could lead to a potential impairment in a future period; however, at present we do not consider that this is required. The discount rate would need to increase by 1 percent (pre-tax) or the cash flows would need to fall by 9.3 per cent (pre-tax) on an annual basis.

Company

Acquired intangibles primarily comprise those recognised as part of the acquisitions of American Express Bank, GE Money and GE Singapore.

Significant items of goodwill arising on acquisitions have been allocated to the following cash generating units for the purposes of impairment testing:

impairment testing:
	2016	2015
CashGenerating Unit	$million	$million
Financial Institutions and Private Banking Business	148	148
Other	118	117
	266	265

Acquired intangibles: These primarily comprise those items recognised as part of the acquisitions of Union Bank (now amalgamated into Standard Chartered Bank (Pakistan) Limited), Hsinchu (now amalgamated into Standard Chartered Bank (Taiwan) Limited), Pembroke, Harrison Lovegrove, American Express Bank and Absa’s custody business in Africa. Maintenance intangible assets represent the value in the difference between the contractual right under acquired leases to receive aircraft in a specified maintenance condition at the end of the lease and the actual physical condition of the aircraft at the date of acquisition.

The acquired intangibles are amortised over periods from four years to a maximum of 16 years. The constituents are as follows:

	Group Company
	2016 2015 2016 2015 $million $million $million $million
Acquired intangibles comprise: Aircraft maintenance Brand names Core deposits Customer relationships Licences	24 - - - - 1 - - 3 5 - - 39 50 15 18 7 6 7 6
Net book value	73 62 22 24

17. Property, plant and equipment

Accounting policy

All property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

At each balance sheet date the assets’ residual values and useful lives are reviewed, and adjusted if appropriate, including assessing for indicators of impairment. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down to the recoverable amount. Gains and losses on disposals are included in the income statement.

Repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Land and buildings comprise mainly branches and offices. Freehold land is not depreciated although it is subject to impairment testing.

Depreciation 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:

• Buildings - up to 50 years

• Leasehold improvements life of lease - up to 50 years

• Equipment and motor vehicles - three to 15 years

• Aircraft - up to 18 years

• Ships - up to 15 years

Where the Group is a lessee under finance leases, the leased assets are capitalised and included in Property, plant and equipment with a corresponding liability to the lessor recognised in Other liabilities. Finance charges payable are recognised over the period of the lease based on the interest rate implicit in the lease to give a constant periodic rate of return.

204

Standard Chartered Bank Notes to the financial statements

All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Change in Accounting estimate

During the year, the Group revised the useful lives (to the Group) and residual value estimates of the Standard Chartered aviation and shipping assets which are leased to third parties under operating leases. A review researched the latest industry participant information and resulted in the Group concluding that the useful life of its aviation assets is a maximum of 18 years and its shipping assets is a maximum of 15 years (both previously up to 25 years) aligned to the Group’s intended use of the assets. This had the effect of increasing the depreciation expense for the year ended 31 December 2016 by $17 million.

Group

Group
	2016 2015
	Premises Equipment Operating lease assets Total Premises Equipment Operating lease assets Total $million $million $million $million $million $million $million $million
Cost or valuation At 1 January Exchange translation differences Additions Disposals and fully depreciated assets written off Transfers to assetsheldforsale	2,156 735 4,919 7,810 2,330 805 5,047 8,182 (62) (28) - (90) (107) (52) - (159) 79 116 1,016 1,211 45 85 885 1,015 (38) (123) (561) (722) (108) (103) (749) (960) (18) (1) - (19) (4) - (264) (268)
As at 31 December	2,117 699 5,374 8,190 2,156 735 4,919 7,810
Depreciation Accumulated at 1 January Exchange translation differences Charge for the year Impairment charge Attributable to assets sold, transferred or written off Transfers to assetsheldforsale	667 528 495 1,690 652 581 334 1,567 (19) (17) - (36) (32) (38) - (70) 98 85 214 397 91 88 199 378 - - 43 43 21 - 7 28 (28) (121) (56) (205) (62) (103) (28) (193) (6) (1) - (7) (3) - (17) (20)
Accumulated at 31 December	712 474 696 1,882 667 528 495 1,690
Net book amount at 31 December	1,405 225 4,678 6,308 1,489 207 4,424 6,120

During the year, an impairment charge of $43 million (2015: $7 million) was recognised in respect of aircraft and ships held as operating lease assets, as the value-in-use of the assets was lower than the net book value. The charge was recognised within the Corporate & Institutional Banking segment

Company

Company
	2016 2015
	Premises Equipment Total Premises Equipment Total $million $million $million $million $million $million
Cost or valuation At 1 January Exchange translation differences Additions Disposals and fully depreciated assets written off	513 229 742 540 256 796 (7) (2) (9) (26) (14) (40) 24 66 90 26 47 73 (6) (75) (81) (27) (60) (87)
As at 31 December	524 218 742 513 229 742
Depreciation Accumulated at 1 January Exchange translation differences Charge for the year Attributable to assets sold, transferred or written off	170 136 306 156 166 322 (2) - (2) (5) (7) (12) 39 33 72 35 36 71 (6) (74) (80) (16) (59) (75)
Accumulated at 31 December	201 95 296 170 136 306
Net book amount at 31 December	323 123 446 343 93 436

205

Standard Chartered Bank Notes to the financial statements

Operating lease assets

Assets leased to customers under operating leases consist of commercial aircraft and ships which are included within property, plant and equipment. At 31 December 2016 these assets had a net book value of $4,678 million (December 2015: $4,424 million).

	Group
	2016 2015 Minimum lease receivables under operating leases falling due: Minimum lease receivables under operating leases falling due: $million $million
Within one year Later than one year and less than five years After five years	495 481 1,865 1,778 1,093 1,395
	3,453 3,654

18. Operating lease commitments

Accounting policy

The leases entered into by the Group are primarily operating leases. An operating lease is a lease where substantially all of the risks and rewards of the leased assets remain with the lessor. The group leases various premises under non-cancellable lease arrangements. The total payments made under operating leases are charged to the Income Statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place. If an operating lease contains a reinstatement clause, a provision will be raised for the best estimate of the expenses to be incurred at the end of the lease to reinstate the property to its original condition. This cost is amortised over the life of the lease.

Group

Group
	2016 2015
	Premises Equipment Premises Equipment $million $million $million $million
Commitments under non-cancellable operating leases expiring: Within one year Later than one year and less than five years After five years	258 1 282 3 623 1 674 2 245 - 383 -
	1,126 2 1,339 5

During the year $400 million (2015: $433 million) was recognised as an expense in the income statement in respect of operating leases. The Group leases various premises and equipment under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The total future minimum sublease payments expected to be received under non-cancellable subleases at 31 December 2016 is $96 million (2015: $116 million).

Company

Company
	2016 2015
	Premises Equipment Premises Equipment $million $million $million $million
Commitments under non-cancellable operating leases expiring: Within one year Later than one year and less than five years After five years	76 - 80 - 262 - 285 - 200 - 281 -
	538 - 646 -

During the year $97 million (2015: $132 million) was recognised as an expense in the income statement in respect of operating leases. The Group leases various premises and equipment under non-cancellable operating lease agreements. The leases have various terms, escalation clauses and renewal rights. The total future minimum sublease payments expected to be received under non-cancellable subleases at 31 December 2016 is $13 million (2015: $3 million).

206

Standard Chartered Bank Notes to the financial statements

19. Other assets

Accounting policy

Refer to note 12 Financial Instruments for the accounting policy.

Assets held for sale: Non-current assets (such as property) and disposal groups (including both the assets and liabilities of the disposal groups) are classified as held for sale and measured at the lower of their carrying amount and fair value less cost to sell when:

• a) their carrying amounts will be recovered principally through sale;

• b) they are available-for-sale in their present condition; and c) their sale is highly probable.

Immediately before the initial classification as held for sale, the carrying amounts of the assets (or assets and liabilities in the disposal group) are measured in accordance with the applicable accounting policies related to the asset or liability before reclassification as held for sale.

held for sale.
	Group Company
	2016 2015 2016 2015 $million $million $million $million
Financial assets held at amortised cost (note 12) Hong Kong SAR Government certificates of indebtedness (note 21)1 Cash collateral Acceptances and endorsements Unsettled trades and other financialassets	5,444 4,907 - - 14,230 13,430 13,877 13,006 4,479 3,949 3,223 2,700 9,744 10,026 6,731 6,831
Non-financial assets Commodities Other assets	33,897 32,312 23,831 22,537 2,719 1,652 2,719 1,652 191 183 146 84
	36,807 34,147 26,696 24,273

1.[The Hong Kong SAR Government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued]

The disposal groups below have been presented as held for sale following the approval of the Group management and the transactions are expected to complete in 2017. The assets and liabilities of the disposal groups were remeasured to the lower of carrying amount and fair value less costs to sell.

	2016	2015
Assets classified asheldforsale1	$million	$million
Cash and balances at central banks	1	-
Loans and advances to customers	1,101	93
Prepayments and accrued income	9	-
Interest in associates	131	-
Property, plant and equipment	12	256
	1,254	349

Assets held for sale represent businesses held for sale which are measured at fair value less costs to sell. They are classified within level 3 of the fair value hierarchy. The disposal group include:

• Retail Banking business of Standard Chartered Bank (Thai) Public Company Limited $1,111 million, expected to be completed in 2017

• Asia Commercial Bank $131 million for 2016, expected to be completed in 2017

There have been losses due to changes in fair value of assets classified as held-for-sale during 2016 of $44 million (2015: $4 million loss) within other operating income (note 6)

The assets reported above are level 3 except for cash and balances at central banks (level 2) and financial assets held at fair value through profit and loss (level 2). The net liabilities due to Group undertakings will be transferred to the acquirers on completion of the sale.

207

Standard Chartered Bank Notes to the financial statements

20. Debt securities in issue

Accounting policy

Refer to note 12 Financial Instruments for the accounting policy.

Group	2016 2015
	Certificates of deposit of $100,000 or more Other debt securities in issue Total Certificates of deposit of $100,000 or more Other debt securities in issue Total $million $million $million $million $million $million
Debt securities in issue Debt securities in issue included within: Financial liabilities held at fair value through profit or loss (note 12)	15,020 14,499 29,519 20,174 22,413 42,587 35 5,635 5,670 104 8,813 8,917
Total debt securities in issue	15,055 20,134 35,189 20,278 31,226 51,504
Company	2016 2015
	Certificates of deposit of $100,000 or more Other debt securities in issue Total Certificates of deposit of $100,000 or more Other debt securities in issue Total $million $million $million $million $million $million
Debt securities in issue Debt securities in issue included within: Financial liabilities held at fair value through profit or loss (note12)	14,214 11,900 26,114 19,386 18,330 37,716 - 3,558 3,558 - 5,856 5,856
Total debt securities in issue	14,214 15,458 29,672 19,386 24,186 43,572

21. Other liabilities

Accounting policy

Please refer to note 12 Financial instruments for the relevant accounting policy.

Please refer to note 12 Financial instruments for the relevant accounting policy.
	Group Company
	2016 2015 2016 2015 $million $million $million $million
Financial liabilities held at amortised cost (note 12) Notes in circulation1 Acceptances and endorsements Cash collateral Unsettled trades and other financial liabilities	5,444 4,907 - - 4,479 3,949 3,218 2,700 9,624 10,074 9,348 9,605 13,350 12,573 8,467 7,803
Non-financial liabilities Other liabilities	32,897 31,503 21,033 20,108 160 394 103 251
	33,057 31,897 21,136 20,359

1Hong Kong currency notes in circulation of $5,444 million (2015: $4,907 million) that are secured by the government of Hong Kong SAR certificates of indebtedness of the same amount included in other assets (note 19)

	2016	2015
Liabilities included in disposal groups held for sale1	$million	$million
Customer accounts	958	58
Other liabilities	1	14
Accruals and deferredincome	6	-
	965	72

1. Liabilities included in disposal groups held for sale are classified within level 2 of the fair value hierarchy. In 2016, the balance represents the Retail Banking Business of Standard Chartered Bank (Thai) Public Company Limited (assets classified as held for sale $965 million and is expected to be completed in 2017.

208

Standard Chartered Bank Notes to the financial statements

22. Provisions for liabilities and charges

Accounting policy

The Group recognises a provision for a present legal or constructive obligation resulting from a past event when it is more likely than not that it will be required to transfer economic benefits to settle the obligation and the amount of the obligation can be estimated reliably. Where a liability arises based on participation in a market at a specified date, the obligation is recognised in the financial statements on that date and is not accrued over the period.

Significant accounting estimates and judgements

The recognition and measurement of provisions for liabilities and charges requires significant judgement and the use of estimates about uncertain future conditions or events.

Group

Group
	2016 2015
	Provision for credit commitments Other provisions Total Provision for credit commitments Other provisions Total $million $million $million $million $million $million
At 1 January Exchange translation differences Charge against profit Provisions utilised	100 115 215 20 109 129 (2) (2) (4) (3) (4) (7) 45 37 82 94 89 183 (34) (46) (80) (11) (79) (90)
At 31 December	109 104 213 100 115 215

Company

Company
	2016 2015
	Provision for credit commitments Other provisions Total Provision for credit commitments Other provisions Total $million $million $million $million $million $million
At 1 January Exchange translation differences Charge against profit Provisions utilised	206 49 255 109 28 137 (2) - (2) (1) (1) (2) 40 7 47 145 49 194 (4) (17) (21) (47) (27) (74)
At 31 December	240 39 279 206 49 255

Provision for credit commitments comprises those undrawn contractually committed facilities where there is doubt as to the borrowers' ability to meet their repayment obligations.

Other provisions consist mainly of provisions for regulatory settlements and legal claims (note 24).

209

Standard Chartered Bank Notes to the financial statements

23. Contingent liabilities and commitments

Accounting policy

Contingent liabilities are possible obligations arising from past events, whose existence will be confirmed only by uncertain future events, or present obligations arising from past events, that are not recognised because either an outflow of economic benefits is not probable or the amount of the obligation cannot be reliably measured. Contingent liabilities are not recognised but information about them is disclosed unless the possibility of any outflow of economic benefits in settlement is remote.

Where the Group undertakes to make a payment on behalf of its customers for guarantees issued, such as for performance bonds or as irrevocable letters of credit as part of the Group’s transaction banking business for which an obligation to make a payment has not arisen at the reporting date, those are included in these financial statements as contingent liabilities.

Other contingent liabilities primarily include revocable letters of credit and bonds issued on behalf of customers to customs officials, for bids or offers and as shipping guarantees.

Commitments are where the Group has confirmed its intention to provide funds to a customer or on behalf of a customer in the form of loans, overdrafts, future guarantees whether cancellable or not or letters of credit and the Group has not made payments at the balance sheet date, those instruments are included in these financial statement as commitments.

Capital commitments are contracted commitments the Group has entered into to purchase non-financial assets.

The table below shows the contract or underlying principal amounts and risk-weighted amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk.

do not represent amounts at risk.
	Group Company
	2016 20151 2016 2015 $million $million $million $million
Contingent liabilities Guarantees and irrevocable letters of credit Othercontingentliabilities	33,551 29,694 24,994 20,880 3,839 9,361 3,323 8,744
	37,390 39,055 28,317 29,624
Commitments Documentary credits and short-term trade-related transactions Forward asset purchases and forward deposits placed Undrawn formal standby facilities, credit lines and other commitments to lend One year and over Less than one year Unconditionally cancellable	4,120 4,852 2,621 3,530 6 69 5 9 38,108 45,327 28,728 34,782 17,547 14,104 7,429 3,587 118,330 123,036 39,155 46,013
	178,111 187,388 77,938 87,921
Capital commitments Contracted capital expenditure approved by the directors but not provided for inthese accounts	1,736 1 - -

1. $461 million of derivative notionals reported in 2015 as forward asset purchases and forward deposits placed has been restated to $69 million. Accordingly, total reported commitments of the Group in 2015 was $187.8 billion and has been restated to $187.4 billion.

The Group’s share of contingent liabilities and commitments relating to joint ventures is $246 million (2015: $286 million).

The Group has committed to purchase 16 aircraft for delivery in 2017 and 2018. The combined purchase commitment for these orders totals a maximum of $1.7 billion. Pre-delivery payments of $0.4 billion have been made to date in respect of these aircraft.

210

Standard Chartered Bank Notes to the financial statements

24. Legal and regulatory matters

Accounting policy

Where appropriate, the Group recognises a provision for liabilities when it is probable that an outflow of economic resources embodying economic benefits will be required and for which a reliable estimate can be made of the obligation. The uncertainties inherent in legal and regulatory matters affect the amount and timing of any potential outflows with respect to which provisions have been established.

The Group receives legal claims against it in a number of jurisdictions and is a party to regulatory matters arising in the normal course of business. Apart from the matters described below, the Group currently considers none of these claims and proceedings as material.

2012 Settlements with certain US authorities

In 2012, the Group reached settlements with certain US authorities regarding US sanctions compliance in the period 2001 to 2007, involving a Consent Order by the New York Department of Financial Services (NYDFS), a Cease and Desist Order by the Board of Governors of the Federal Reserve System (FED), Deferred Prosecution Agreements (DPAs) with each of the Department of Justice (DOJ) and the New York County District Attorney’s Office (DANY) and a Settlement Agreement with the Office of Foreign Assets Control (together, the ‘Settlements’). In addition to the civil penalties totalling $667 million, the terms of these Settlements include a number of conditions and ongoing obligations with regard to improving sanctions, Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) controls such as remediation programmes, reporting requirements, compliance reviews and programmes, banking transparency requirements, training measures, audit programmes, disclosure obligations and, in connection with the NYDFS Consent Order, the appointment of an independent monitor (Monitor). These obligations are managed under a programme of work referred to as the US Supervisory Remediation Program (SRP). The SRP comprises work streams designed to ensure compliance with the remediation requirements contained in all of the Settlements.

On 9 December 2014, the Group announced that the DOJ, DANY and the Group had agreed to a three-year extension of the DPAs until 10 December 2017, and to the retention of a monitor to evaluate and make recommendations regarding the Group’s sanctions compliance programme. The DOJ agreement acknowledges that the Group has taken a number of steps to comply with the requirements of the original DPAs and to enhance and optimise its sanctions compliance, including the implementation of more rigorous US sanctions policies and procedures, certified staff training, hiring of senior legal and financial crime compliance staff, and recently implementing additional measures to block payment instructions for countries subject to US sanctions laws and regulations. The Group will work closely with the authorities to make additional substantial improvements to its US sanctions programme to reach the standard required by the DPAs.

The Group is engaged with all relevant authorities to implement these programmes and meet the obligations under the Settlements.

2014 Settlement with NYDFS

On 19 August 2014, the Group announced that it had reached a final settlement with the NYDFS regarding deficiencies in the AML transaction surveillance system in its New York branch (the ‘Branch’). The system, which is separate from the sanctions screening process, is one part of the Group’s overall financial crime controls and is designed to alert the Branch to unusual transaction patterns that require further investigation on a post-transaction basis.

The Settlement provisions are summarised as follows:

• (i) A civil monetary penalty of $300 million

• (ii) Enhancements to the transaction surveillance system at the Branch

• (iii) A two-year extension to the term of the Monitor, which we expect to be further extended

• (iv) The following set of temporary remediation measures, which will remain in place until the transaction surveillance system’s detection scenarios are operating to a standard approved by the Monitor:

• (a) The Branch will not, without prior approval of the NYDFS in consultation with the Monitor, open a dollar demand deposit account for any client that does not already have such an account with the Branch

• (b) Requirements for inclusion of identifying information for originators and beneficiaries of some affiliate and thirdparty payment messages cleared through the Branch

• (c) A restriction on dollar-clearing services for certain Hong Kong retail business clients

• (d) Enhanced monitoring of certain small and medium-sized enterprise clients in the UAE. The Group decided to exit this business as part of its broader efforts to sharpen its strategic focus, withdrawing from or realigning nonstrategic businesses, including those where increased regulatory costs undermine their economic viability. The exit process is largely complete and, in accordance with the settlement agreement, dollar clearance restrictions were implemented effective 17 November 2014.

The remit of the SRP has been expanded to cover the management of these obligations.

211

Standard Chartered Bank Notes to the financial statements

Other ongoing reviews

The Group is cooperating with an investigation by the US authorities and the New York State Attorney General relating to possible historical violations of US sanctions laws and regulations. In contrast to the 2012 settlements, which focused on the period before the Group’s 2007 decision to stop doing new business with known Iranian parties, the ongoing investigation is focused on examining the extent to which conduct and control failures permitted clients with Iranian interests to conduct transactions through Standard Chartered Bank after 2007 and the extent to which any such failures were shared with relevant US authorities in 2012. The Financial Conduct Authority (FCA) is investigating Standard Chartered Bank’s financial crime controls, looking at the effectiveness and governance of those controls within the correspondent banking business carried out by Standard Chartered Bank’s London branch, particularly in relation to the business carried on with respondent banks from outside the European Economic Area, and the effectiveness and governance of those controls in one of Standard Chartered Bank’s overseas branches and the oversight exercised at Group level over those controls.

As part of their remit to oversee market conduct, regulators and other agencies in certain markets are conducting investigations or requesting reviews into a number of areas of regulatory compliance and market conduct, including sales and trading, involving a range of financial products, and submissions made to set various market interest rates and other financial benchmarks, such as foreign exchange. At relevant times, certain of the Group’s branches and/or subsidiaries were (and are) participants in some of those markets, in some cases submitting data to bodies that set such rates and other financial benchmarks and responding to inquiries and investigations by relevant authorities. The Group is contributing to industry proposals to strengthen financial benchmarks processes in certain markets and continues to review its practices and processes in the light of the investigations, reviews and the industry proposals.

The Securities and Futures Commission (SFC) in Hong Kong has been investigating Standard Chartered Securities (Hong Kong) Limited’s (SCSHK) role as a joint sponsor of an initial public offering of China Forestry Holdings Limited, listed on the Hong Kong Stock Exchange in 2009. In October 2016, SFC informed the Group that it intends to commence action against SCSHK and other parties. On 16 January 2017 a writ was filed by the SFC with Hong Kong’s High Court. The writ names SCSHK as one of six defendants from whom the SFC is seeking compensation for an unspecified amount of losses incurred by certain shareholders in relation to the initial public offering. There may be financial consequences for SCSHK in connection with this matter.

212

Standard Chartered Bank Notes to the financial statements

25. Subordinated liabilities and other borrowed funds

Accounting policy

Subordinated liabilities and other borrowed funds are classified as financial instruments. Refer to note 12 Financial Instruments for the accounting policy.

All subordinated liabilities are unsecured, unguaranteed and subordinated to the claims of other creditors including without limitation, customer deposits and deposits by banks. The Group has the right to settle these debt instruments in certain circumstances as set out in the contractual agreements.

out in the contractual agreements.
	2016	2015
	$million	$million
Subordinated loan capital – issued by subsidiary undertakings
$750 million 5.875 per cent subordinated notes 2020	786	799
BWP 127.26 million 8.2 per cent subordinated notes 2022 (callable 2017)	12	11
BWP 70 million floating rate subordinated notes 2021 (callable 2016)	7	6
BWP 50 million floating rate subordinated notes 2022 (callable 2017)	5	5
KRW 270 billion 4.67 per cent subordinated debt 2021 (callable 2016)	-	231
KRW 90 billion 6.05 per cent subordinated debt 2018	78	85
PKR 2.5 billion floating rate notes 2022 (callable 2017)	24	24
SGD 750 million 4.15 per cent subordinated notes 2021 (callable 2016)	-	503
UGX 40 billion 13 percent subordinatednotes2020 (callable2015)	-	12
	912	1,676
Subordinated loan capital – issued by the Company
£700 million 7.75 per cent subordinated notes 2018	898	1,106
£675 million 5.375 per cent undated step up subordinated notes (callable 2020)	307	651
£600 million 8.103 per cent step up callable perpetual preferred securities (callable 2016)	-	905
£200 million 7.75 per cent undated step up subordinated notes (callable 2022)	215	364
�1.1 billion 5.875 per cent subordinated notes 2017	1,198	1,280
$1.6 billion floating rate subordinated notes 2022 (callable 2017)	1,600	1,600
$1.3 billion floating rate subordinated notes 2021 (callable 2016)	-	1,300
$1.25 billion floating rate subordinated notes 2022 (callable 2017)	1,250	1,250
$1 billion 6.4 per cent subordinated notes 2017	512	1,065
$1 billion floating rate subordinated notes 2022	1,000	1,000
$960 million floating rate subordinated notes 2022	960	960
$700 million 8.0 per cent subordinated notes 2031	432	636
JPY 10 billion 3.35 per cent subordinated notes 2023 (callable 2018)	88	86
SGD 450 million 5.25 per cent subordinated notes 2023 (callable 2018)	318	323
$2 billion floating rate subordinated notes 2023	2,000	2,000
$500 million floating rate subordinated notes 2043	500	500
$1.698 billion floating rate subordinated notes 2025 (callable 2020)	1,698	1,698
$2 billion floating rate subordinated notes 2044 (callable 2039)	2,000	2,000
$250 million floating rate subordinated notes due 2048 (callable 2043)	250	-
$1 billion floating rate subordinated notes due 2029 (callable 2024)	1,000	-
$1.5 billion floating rate subordinated notes due 2039 (callable 2034)	1,500	-
$1.25 billion floatingrate subordinatednotes due2032(callable2027)	1,250	-
	18,976	18,724
Primary Capital Floating Rate Notes
$400 million	16	57
$300 million (Series 2)	69	80
$400 million (Series 3)	50	83
$200 million (Series 4)	26	51
£150million	15	45
	176	316
Total for Bank Group	20,064	20,716

213

Standard Chartered Bank Notes to the financial statements

	2016
	USD GBP Euro Others Total $million $million $million $million $million
Fixed rate subordinated debt Floatingrate subordinated debt	1,730 1,420 1,198 496 4,844 15,169 15 - 36 15,220
Total	16,899 1,435 1,198 532 20,064
	2015
	USD GBP Euro Others Total $million $million $million $million $million
Fixed rate subordinated debt Floatingrate subordinated debt	2,500 3,026 1,280 1,251 8,057 12,579 45 - 35 12,659
Total	15,079 3,071 1,280 1,286 20,716

Repurchases during the year

On 23 March 2016, Standard Chartered Bank repurchased the below listed subordinated debt securities as a result of the tender offer announced on 11 March 2016;

• $503.1m of $1 billion 6.4 per cent subordinated notes 2017

• $145.9m of $700 million 8.0 per cent subordinated notes 2031

• £172.7m of £675 million 5.375 per cent undated step up subordinated notes (callable 2020)

• £65.5m of £200 million 7.75 per cent undated step up subordinated notes (callable 2022)

• $40.6 million of $400 million Undated Primary Capital Floating Rate Notes (Series 1)

• £18.6million of £150 million Undated Primary Capital Floating Rate Notes

• $12.4 million of $300 million Undated Primary Capital Floating Rate Notes (Series 2)

• $32.9 million of $400 million Undated Primary Capital Floating Rate Notes (Series 3)

• $25.2 million of $200 million Undated Primary Capital Floating Rate Notes (Series 4)

On 11 May 2016, Standard Chartered Bank exercised it rights to redeem its £600 million 8.103 per cent step up callable perpetual preferred securities in full on the first call date.

On 20 May 2016, Standard Chartered Bank exercised it rights to redeem its $1.3 billion floating rate subordinated notes in full on the first call date.

On 28 October 2016, Standard Chartered Bank Hong Kong exercised it rights to redeem its SGD 750 million 4.15 per cent subordinated notes in full on the first call date.

On 6 December 2016, Standard Chartered Bank Korea exercised it rights to redeem its KRW 270 billion 4.67 per cent subordinated debt in full on the first call date.

On 6 December 2016, Standard Chartered Bank Uganda exercised it rights to redeem its UGX 40 billion 13.0 per cent subordinated debt in full on the first call date.

Issuance during the year

On 19 August 2016, Standard Chartered Bank issued the subordinated notes below;

• $1 billion floating rate subordinated notes due 2029

• $1.25 billion floating rate subordinated notes due 2032

• $1.5 billion floating rate subordinated notes due 2039

• $250 million floating rate subordinated notes due 2048

214

Standard Chartered Bank Notes to the financial statements

26. Share capital, other equity and reserves

Accounting policy

Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue variable number of own equity instruments. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Securities which carry a discretionary coupon and have no fixed maturity or redemption date are classified as other equity instruments. Interest payments on these securities are recognised, net of tax, as distributions 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 consideration paid 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 consideration received is included in shareholders’ equity of the Group and/or the Company.

Group and Company

Group and Company
	Number of	Ordinary		Total	Other equity
	ordinary shares	share capital	Share premium	share capital	instruments
	millions	$million	$million	$million	$million
At 1 January 2015	20,854	20,854	1,796	22,650	-
Capitalised on scrip dividend	-	-	-	-	-
Shares issued	1,882	1,882	-	1,882	-
Additional Tier 1equityissuance	-	-	-	-	2,000
At 31 December 2015	22,736	22,736	1,796	24,532	2,000
Capitalised on scrip dividend	-	-	-	-	-
Shares issued	3,788	3,788	-	3,788	-
Additional Tier 1 equity issuance	-	-	-	-	2,000
At 31 December 2016	26,524	26,524	1,796	28,320	4,000

Ordinary share capital

The authorised share capital of the Company at 31 December 2016 was $26,789 million and TWD 1,225 million (2015: $22,989 million and TWD 1,225 million) made up of 26,782 million ordinary shares of $1 each, 2.4 million non-cumulative irredeemable preference shares of $0.01 each, 1 million non-cumulative 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 50million non cumulative redeemable preference shares of TWD24.50 each.

On 16 December 2016 the issued share capital of the Company was increased from $22,736 million to $26,136 million by the issue of an additional 3,400,000,000 ordinary shares of USD1.00 each at nil premium to its parent company, to Standard Chartered Holdings Limited.

On 28 December 2016 the issued share capital of the Company was increased from $26,136 million to $26,524 million by the issue of an additional 388 million ordinary shares of $1 each at nil premium to its parent company, Standard Chartered Holdings Limited.

The issued share capital of the Company at 31 December 2016 was $26,524 million (2015: $22,736 million) made up of: 26,524 million ordinary shares of $1 each.

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 2017 and on any quarterly dividend payment date falling 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 dividend thereon up to but excluding the redemption date; and;

7,500 non-cumulative redeemable preference shares issued on 25 May 2007 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 on 30 July 2037 and on any quarterly dividend payment date falling 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 dividend thereon up to but excluding the redemption date

215

Standard Chartered Bank Notes to the financial statements

Other equity instruments

On 17 December 2015 the Company issued $2,000 million Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities as Additional Tier 1 (AT1) securities. On 19 December 2016 the Company issued a further $2,000 million Fixed Rate Resetting Perpetual Subordinated Capital Securities as AT1 securities.

The principal terms of the AT1 securities are described below:

• Both securities are perpetual and redeemable, at the option of SCB in whole but not in part, on the first call date or on any fifth anniversary after the first call date

• The securities are also redeemable for certain regulatory or tax reasons on any date at 100 per cent of their principal amount together with any accrued but unpaid interest to (but excluding) the date fixed for redemption. Any redemption is subject to the Company giving notice to the relevant regulator and the regulator granting permission to redeem

• The interest rate in respect of the securities issued on 17 December 2015 for the period from (and including) the issue date to (but excluding) 2 April 2021 is a fixed rate of 6.50 per cent per annum. The reset date for the interest rate is 2 April 2021 and each date falling five, or an integral multiple of five years after the first reset date

• The interest rate in respect of the securities issued on 19 December 2016 for the period from (and including) the issue date to (but excluding) 2 April 2022 is a fixed rate of 7.50 per cent per annum. The reset date for the interest rate is 2 April 2022 and each date falling five years, or an integral multiple of five years after the first reset date

• The interest rate on each of the securities will be payable semi-annually in arrear on 2 April and 2 October in each year, accounted for as a dividend

• Interest on the securities is due and payable only at the sole and absolute discretion of SCB, subject to certain additional restrictions set out in the terms and conditions. Accordingly, SCB may at any time elect to cancel any interest payment (or part thereof) which would otherwise be payable on any interest payment date

• The securities will 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 securities rank behind the claims against SCB of (a) unsubordinated creditors, (b) claims which are expressed to be subordinated to the claims of unsubordinated creditors of SCB but not further or otherwise; or (c) claims which are, or are expressed to be, junior to the claims of other creditors of SCB, whether subordinated or unsubordinated, other than claims which rank , or are expressed to rank, pari passu with, or junior to, the claims of holders of the AT1 securities in a winding up occurring prior to the Loss Absorption Event.

Reserves

The constituents of the reserves are summarised as follows:

• Capital reserve represents the exchange difference on redenomination of share capital 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 financial liabilities designated at fair value through profit or loss relating to own credit. Following the Group’s decision to early apply this IFRS 9 requirement the cumulative own credit adjustment component of financial liabilities designated at fair value through profit or loss has been transferred from opening retained earnings to the OCA reserve. Gains and losses on financial liabilities designated 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 derecognition of applicable instruments the balance of any OCA will not be recycled to the income statement, but will be transferred within equity to retained earnings

• Available-for-sale reserve represents the unrealised fair value gains and losses in respect of financial assets classified as available-for-sale, net of taxation. Gains and losses are deferred in this reserve and are reclassified to the income statement when the underlying asset is sold, matures or becomes impaired

• The cash flow hedge reserve represents the effective portion of the gains and losses on derivatives that meet the criteria for these types of hedges. Gains and losses are deferred in this reserve and are reclassified to the income statement when the underlying hedged item affects profit and loss or when a forecast transaction is no longer expected to occur

• The 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 reclassified to the income statement when the underlying foreign operation is disposed. Gains and losses arising from derivatives 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 dividend distributions and own shares held (treasury shares)

A substantial part of the Group’s reserves are held in overseas subsidiary undertakings and branches, principally 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 addition, if these overseas reserves were to be remitted, further unprovided taxation liabilities might arise

216

Standard Chartered Bank Notes to the financial statements

27. Non-controlling interests

Accounting policy

Non-controlling interests are measured either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

	Non Controlling interest $million
At 1 January 2015 Expenses in equity attributable to non-controlling interests Other profits attributable to non-controlling interests Comprehensive income for the year Distributions Other Increases1	4,151
	(116) 563
	447 (518) 81
At 31 December 2015 Expense in equity attributable to non-controlling interests Other profits attributable to non-controlling interests Comprehensive income for the year Distributions Otherdecreases2	4,161
	(95) 554
	459 (425) (8)
At 31 December 2016	4,187

1. Additional investment from non-controlling interests in one of the Group's undertakings

2. Predominately due to completion of sale of businesses with non controlling interest in Pakistan and issuance of shares to non controlling interest in Angola

217

Standard Chartered Bank Notes to the financial statements

28. Retirement benefit obligations

Accounting policy

The Group operates a number of pension and other post-retirement benefit plans around the world, including defined contribution plans and defined benefit plans. For defined contribution plans, the Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual basis, and such amounts are charged to operating expenses. The Group has no further payment obligations once the contributions have been paid. For funded defined benefit plans, the liability recognised in the balance sheet is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. For unfunded defined benefit plans the liability recognised at the balance sheet date is the present value of the defined benefit obligation. The defined benefit obligation is calculated annually by independent actuaries using the projected unit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using an interest rate equal to the yield on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have a term to maturity approximating to the term of the related pension liability. 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 liability for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability, taking into account any changes in the net defined benefit liability during the year as a result of contributions and benefit payment. Net interest expense and other expense related to defined benefit plans are recognised in the income statement.

Significant accounting estimates and judgements

There are many factors that affect the measurement of retirement benefit obligations as it requires the use of assumptions which are inherently uncertain; the sensitivity of the liabilities to changes in these assumptions is shown in the note below.

Retirement benefit obligations comprise:

Retirement benefit obligations comprise:
	2016	2015
	$million	$million
Defined benefit plans obligation	495	422
Defined contribution plans obligation	30	23
Net obligation	525	445

Retirement benefit charge comprises:

Retirement benefit charge comprises:
	2016	2015
	$million	$million
Defined benefit plans	85	96
Defined contributionplans	231	203
Charge against profit/(loss) (note7)	316	299

The Group operates 50 defined benefit plans across its geographies, many of which are closed to new entrants who now join defined contribution arrangements. The aim of all these plans is to give employees the opportunity to save appropriately for retirement in a way that is consistent with local regulations, taxation requirements and market conditions. 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 bond holdings shown in the asset table below partially hedge movements in the liabilities resulting from interest rate changes. Setting aside movements from other drivers such as currency fluctuation, the falls in discount rates in most geographies over 2016 have led to higher liabilities. These have been somewhat offset by rises in the value of bonds held. These movements are shown as actuarial losses versus gains respectively in the tables below.

The disclosures required under IAS 19 have been calculated by independent qualified actuaries based on the most recent full actuarial valuations updated, where necessary, to 31 December 2016.

UK Fund

The Standard Chartered Pension Fund (the ‘UK Fund’) is the Group’s largest pension plan, representing 60% of total pension liabilities, and provides pensions based on 1/60th of final salary per year of service, normally payable from age 60. The UK Fund is set up under a Trust that is legally separate from the Bank (its formal sponsor) and, as required by UK legislation, at least one third of the Trustee Directors are nominated by members; the remainder are appointed by the Bank. The Trustee Directors have a fiduciary duty to members and are responsible for governing the UK Fund in accordance with its Trust Deed and Rules.

The financial position of the UK Fund is regularly assessed by an independent qualified actuary. The most recent funding valuation was performed as at 31 December 2014 by A Zegleman, Fellow of the Institute and Faculty of Actuaries, of Willis Towers Watson, using the projected unit method and assumptions different from those below. To repair the $89 million (£72 million) past service deficit identified as at 31 December 2014, four annual cash payments of $15.5 million (£12.6 million) were agreed, starting in January 2016. The agreement allows that if the funding position improves more quickly than expected, the three payments from January 2017 could be reduced or eliminated. The actuarial assessment that applied to the January 2017 payment did not allow for a reduction so the full £12.6 million was paid into the Fund on 16 January 2017. In addition, an escrow account of $136 million (£110 million) exists to provide security for future contributions. Following the 31 December 2014 valuation, regular contributions to the UK Fund were set at 32 per cent of pensionable salary for all members. The next valuation is due as at 31 December 2017.

218

Standard Chartered Bank Notes to the financial statements

With effect from 1 July 1998, the UK Fund was closed to new entrants and new employees are offered membership of a defined contribution plan. Over 85 per cent of the Fund’s liabilities now relate to pensioners or ex-employees who have left the Group but have not yet retired. As at 31 December 2016, the weighted-average duration of the UK Fund was 16 years (2015: 15 years).

The Bank is not required to recognise any additional liability under IFRIC14 or the current exposure draft of proposed amendments to it, as it has control of any pension surplus.

Overseas Plans

The principal overseas defined benefit arrangements operated by the Group are in Germany, Hong Kong, India, Jersey, Korea, Taiwan and the United States (US).

Key assumptions

The principal financial assumptions used at 31 December 2016 were:

	Funded plans
	UK Fund 1 Overseas Plans 2
	2016 % 2015 % 2016 % 2015 %
Price inflation Salary increases Pension increases Discount rate	2.1 1.9 1.0 – 5.0 1.0 – 5.0 2.1 1.9 2.1 – 6.5 1.9 – 6.5 2.1 1.9 1.5 – 3.2 1.3 – 3.0 2.7 3.7 1.3 – 6.9 1.0 – 8.1

1The assumptions for life expectancy for the UK Fund are that a male member currently aged 60 will live for 28 years (2015: 28 years) and a female member 29 years (2015: 29 years) and a male member currently aged 40 will live for 30 years (2015: 30 years) and a female member 31 years (2015: 31 years) after their 60th birthdays.

2The range of assumptions shown is for the main funded defined benefit overseas plans in Germany, Hong Kong, India, Jersey, Korea, Taiwan and the US. These comprise over 85 per cent of the total liabilities of funded overseas plans

These assumptions are likely to change in the future and this will affect the value placed on the liabilities. For example, changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

• If the discount rate increased by 25 basis points the liability would reduce by approximately $70 million for the UK Fund and $35 million for the other plans.

• If the rate of inflation and pension increases by 25 basis points the liability would increase by approximately $45 million for the UK Fund and $10 million for the other plans.

• If the rate salaries increase compared to inflation by 25 basis points the liability would increase by approximately $6 million for the UK Fund and $10 million for the other plans.

• If longevity expectations increased by one year the liability would increase by approximately $35 million for the UK Fund and $10 million for the other plans.

Although this analysis does not take account of the full distribution of cash flows expected under the UK Fund, it does provide an approximation of the sensitivity to the main assumptions. While changes in other assumptions would also have an impact, the effect would not be as significant.

	Unfundedplans
	Post-retirement medical 1 Other 2
	2016 % 2015 % 2016 % 2015 %
Price inflation Salary increases Pension increases Discount rate Post-retirement medical rate	2.5 2.5 2.0 – 5.0 1.9 – 5.0 4.0 4.0 2.1 – 6.5 1.9 – 6.5 N/A N/A 0.0 – 2.1 0.0 – 1.9 4.4 4.6 2.7 – 8.4 2.5 – 8.2 9% in 2016 reducing by 1% per annum to 5% in 2020 8% in 2015 reducing by 1% per annum to 5% in 2018 N/A N/A

1. The post-retirement medical plan is in the US

2. The range of assumptions shown is for the main unfunded plans in India, Indonesia, Korea, Thailand, UAE and the UK. They comprise over 85 per cent of the total liabilities of unfunded plans

219

Standard Chartered Bank Notes to the financial statements

Fund values : The fair value of assets and present value of liabilities of the plans attributable to defined benefit members were:

At 31 December	2016 2015
	Fundedplans Unfundedplans Fundedplans Unfundedplans
	UK Fund $million Overseas plans $million Post-retirement medical $million Other $million UK Fund $million Overseas plans $million Post-retirement medical $million Other $million
Equities Government Bonds Corporate Bonds Absolute Return Fund Hedge Funds1 Insurance linked funds1 Opportunistic credit1 Property Derivatives Cash and equivalents Others1	191 291 N/A N/A 176 267 N/A N/A 642 153 N/A N/A 686 164 N/A N/A 169 81 N/A N/A 192 68 N/A N/A 148 - N/A N/A 187 - N/A N/A 187 - N/A N/A 189 - N/A N/A 29 - N/A N/A 56 - N/A N/A 61 - N/A N/A 79 - N/A N/A 70 4 N/A N/A 71 5 N/A N/A (16) - N/A N/A (11) - N/A N/A 52 160 N/A N/A 49 197 N/A N/A 8 30 N/A N/A 9 25 N/A N/A
Total fair value of assets2 Present value of liabilities3	1,541 719 N/A N/A 1,683 726 N/A N/A (1,657) (878) (22) (198) (1,719) (901) (24) (187)
Net pension liability	(116) (159) (22) (198) (36) (175) (24) (187)

1. Unquoted assets

2. Self investment is monitored closely and is less than $2m of Standard Chartered equities and bonds for 2016 (2015: $2m). Self investment is only allowed where it is not practical to exclude it – for example through investment in index-tracking funds where the Group is a constituent of the relevant index. 3. Includes $nil million (2015: $nil million) impact as a result of unrecognisable surplus in Kenya

The pension cost for defined benefit plans was:

The pension cost for defined benefit plans was:
2016	Fundedplans Unfundedplans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Current service cost Past service cost and curtailments Gain on settlements1 Interest income on pension plan assets2 Interest onpensionplan liabilities	5 52 1 17 75 - (7) - 3 (4) - (1) - - (1) (56) (22) - - (78) 57 27 1 8 93
Total charge toprofit before deduction of tax	6 49 2 28 85
Return on plan assets excluding interest income2 Losses / (gains) on liabilities	(139) (18) - - (157) 239 12 (4) 15 262
Total losses / (gains) recognised directly in statement of comprehensive income before tax Deferred taxation	100 (6) (4) 15 105 - (2) - - (2)
Total losses /(gains)after tax	100 (8) (4) 15 103

1. These movements reflect a reduction in workforce in a number of geographies as result of the restructuring actions of the Group

2. The actual return on the UK fund assets was $195 million and on overseas plan assets was $40 million

220

Standard Chartered Bank Notes to the financial statements

Standard Chartered Bank Notes to the financial statements
2015	Funded plans Unfunded plans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Current service cost Past service cost and curtailments Gain on settlements Interest income on pension plan assets Interest onpensionplan liabilities	7 62 1 21 91 - (2) - - (2) - (7) - - (7) (64) (24) - - (88) 63 29 1 9 102
Total charge to loss before deduction of tax	6 58 2 30 96
Return on plan assets excluding interest income1 Losses/(gains) on liabilities	45 22 - - 67 2 7 (4) (15) (10)
Total (gains)/losses recognised directly in statement of comprehensive income before tax Deferred taxation	47 29 (4) (15) 57 15 (5) - - 10
Total(gains)/losses after tax	62 24 (4) (15) 67

1. The actual return on the UK fund assets was $19 million and on overseas plan assets was $2 million

Movement in the defined benefit pension plans and post-retirement medical deficit during the year comprise:

	Funded plans Unfunded plans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Deficit at 1 January 2016 Contributions Current service cost Past service cost and curtailments Settlement costs and transfers impact Net interest on the net defined benefit asset/liability Actuarial (losses) / gains Exchangerate adjustment	(36) (175) (24) (187) (422) 20 60 - 18 98 (5) (52) (1) (17) (75) - 7 - (3) 4 - 1 - - 1 (1) (5) (1) (8) (15) (100) 6 4 (15) (105) 6 (1) - 14 19
Deficit at 31 December 2016	(116) (159) (22) (198) (495)

	Funded plans Unfunded plans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Deficit at 1 January 2015 Contributions Current service cost Past service cost and curtailments Settlement costs Net interest on the net defined benefit asset/liability Actuarial (losses)/gains Exchange rate adjustment	10 (178) (27) (196) (391) 7 81 1 20 109 (7) (62) (1) (21) (91) - 2 - - 2 - 7 - - 7 1 (5) (1) (9) (14) (47) (29) 4 15 (57) - 9 - 4 13
Deficit at 31 December 2015	(36) (175) (24) (187) (422)

221

Standard Chartered Bank Notes to the financial statements

The Group’s expected contribution to its defined benefit pension plans in 2017 is $80 million

	2016 2015
	Assets Obligations Total Assets Obligations Total $million $million $million $million $million $million
Deficit at 1 January Contributions1 Current service cost2 Past service cost and curtailments Settlement costs Interest cost on pension plan liabilities Interest income on pension plan assets Benefits paid out Actuarial gains/(losses)3 Exchangerate adjustment	2,409 (2,831) (422) 2,634 (3,025) (391) 99 (1) 98 110 (1) 109 - (75) (75) - (91) (91) - 4 4 - 2 2 (13) 14 1 (46) 53 7 - (93) (93) - (102) (102) 78 - 78 88 - 88 (175) 175 - (196) 196 - 157 (262) (105) (67) 10 (57) (295) 314 19 (114) 127 13
Deficit at 31 December	2,260 (2,755) (495) 2,409 (2,831) (422)

1. Included employee contributions of $1 million (2015: $1 million)

2. Included administrative expenses paid out of plan assets of $1 million (2015: $1 million)

3. Actuarial (loss)/gain on obligation comprises $284 million loss (2015: $42 million gain) from financial assumption changes, $8 million gain (2015: $5 million gain) from demographic assumption changes and $14 million gain from experience (2015: $37 million loss) from experience

Company

Retirement benefit obligations comprise:

Retirement benefit obligations comprise:
	2016	2015
	$million	$million
Defined benefit plans obligation	409	321
Defined contributionplans obligation	17	13
Net obligation	426	334

Retirement benefit charge comprises:

Retirement benefit charge comprises:
	2016	2015
	$million	$million
Defined benefit plans	43	65
Defined contributionplans	100	92
Charge against profit/(loss)	143	157

UK Fund

See the Group note on the UK fund on page 218. There are no differences between Group and Company in respect of the Fund.

Overseas Plans

The principal overseas defined benefit arrangements operated by the Company are in Germany, India, Jersey and the United States. All Plans

The disclosures required under IAS 19 have been calculated by qualified independent actuaries based on the most recent full actuarial valuations updated, where necessary, to 31 December 2016.

Employer contributions to defined benefit plans over 2017 are expected to be $45 million.

222

Standard Chartered Bank Notes to the financial statements

Key assumptions

The principal financial assumptions used at 31 December 2016 were:

	Funded plans
	UK Fund1 Overseas Plans2
	2016 % 2015 % 2016 % 2015 %
Price inflation Salary increases Pension increases Discount rate	2.1 1.9 1.6 – 5.0 1.4 – 5.0 2.1 1.9 2.1 – 6.5 1.9 – 6.5 2.1 1.9 0.0 – 3.2 0.0 – 3.0 2.7 3.7 1.6 – 6.9 2.4 – 8.1

1. The assumptions for life expectancy for the UK Fund are that a male member currently aged 60 will live for 28 years (2015: 28 years) and a female member 29 years (2015: 29 years) and a male member currently aged 40 will live for 30 years (2015: 30 years) and a female member 31 years (2015: 31 years) after their 60th birthdays.

2. The range of assumptions shown is for the main funded defined benefit overseas plans in Germany, India, Jersey and the United States. These comprise 85 per cent of the total liabilities of funded overseas plans

cent of the total liabilities of funded overseas plans
	Unfunded plans
	Post-retirement medical1 Other2
	2016 % 2015 % 2016 % 2015 %
Price inflation Salary increases Pension increases Discount rate Post-retirement medical rate	2.5 2.5 2.1 – 5.0 1.9 – 5.0 4.0 4.0 2.1 – 6.5 1.9 – 6.5 N/A N/A 0.0 – 2.1 0.0 – 1.9 4.4 4.6 2.7 – 8.40 3.7 – 9.2 9% in 2016 reducing by 1% per annum to 5% in 2020 8% in 2014 reducing by 1% per annum to 5% in 2018 N/A N/A

1. The Post-retirement medical plan is in the United States

2. The range of assumptions shown is for the main Unfunded Plans in India, Indonesia, UAE and the UK. These comprise over 85 per cent of the total liabilities of unfunded plans.

unfunded plans.
At 31 December	2016 2015
	Fundedplans Unfundedplans Fundedplans Unfundedplans
	UK Fund $million Overseas plans $million Post-retirement medical $million Other $million UK Fund $million Overseas plans $million Post-retirement medical $million Other $million
Equities Government Bonds Corporate Bonds Absolute return fund Hedge Funds1 Insurance linked funds1 Opportunistic credit1 Property Derivatives Cash and equivalents Others1	191 116 N/A N/A 176 104 N/A N/A 642 83 N/A N/A 686 86 N/A N/A 169 46 N/A N/A 192 42 N/A N/A 148 - N/A N/A 187 - N/A N/A 187 - N/A N/A 189 - N/A N/A 29 - N/A N/A 56 - N/A N/A 61 - N/A N/A 79 - N/A N/A 70 - N/A N/A 71 - N/A N/A (16) - N/A N/A (11) - N/A N/A 52 33 N/A N/A 49 20 N/A N/A 8 9 N/A N/A 9 24 N/A N/A
Total fair value of assets2 Present value of liabilities	1,541 287 N/A N/A 1,683 276 N/A N/A (1,657) (381) (22) (177) (1,719) (370) (24) (167)
Netpension(liability)/asset	(116) (94) (22) (177) (36) (94) (24) (167)

1. Unquoted assets

2. Self investment is monitored closely and is less than $1million of Standard Chartered equities and bonds for 2016 (2015: $1 million). Self investment is only allowed where it is not practical to exclude it, for example, through investment in index-tracking funds where the Group is a constituent of the relevant index.

223

Standard Chartered Bank Notes to the financial statements

The pension cost for defined benefit plans was:

The pension cost for defined benefit plans was:
2016	Fundedplans Unfundedplans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Current service cost Past service cost and curtailments Gain on settlements Interest income on pension plan assets1 Interest onpensionplan liabilities	5 15 1 15 36 - (7) - - (7) - - - - - (56) (13) - - (69) 57 17 1 8 83
Total charge toprofit before deduction of tax	6 12 2 23 43
Return on plan assets excluding interest income1 Losses / (gains) on liabilities	(139) (17) - - (156) 239 29 (4) 17 281
Total losses / (gains)recognised directly in statement of comprehensive income before tax Deferred taxation	100 12 (4) 17 125 - (5) - - (5)
Total losses /(gains)after tax	100 7 (4) 17 120

1. The actual return on the UK fund assets was $195 million and on overseas plan assets was $30 million

2015	Funded plans Unfunded plans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Current service cost Past service cost and curtailments Gain on settlements Interest income on pension plan assets1 Interest on pension plan liabilities	7 16 1 19 43 - 11 - - 11 - - - - - (64) (13) - - (77) 63 16 1 8 88
Total charge to loss before deduction of tax	6 30 2 27 65
Return on plan assets excluding interest income1 Losses/(gains) on liabilities	45 10 - - 55 2 (15) (4) (13) (30)
Total losses /(gains) recognised directly in statement of comprehensive income before tax Deferred taxation	47 (5) (4) (13) 25 15 - - - 15
Total losses/(gains)after tax	62 (5) (4) (13) 40

1. The actual return on the UK fund assets was $19 million and on overseas plan assets was $3 million

Movement in the defined benefit pension plans and post-retirement medical deficit during the year comprise:

	Funded plans Unfunded plans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Deficit at 1 January 2016 Contributions Current service cost Past service cost and curtailments Settlement costs and transfers impact Net interest on the net defined benefit asset/liability Actuarial (losses) / gains Exchangerate adjustment	(36) (94) (24) (167) (321) 20 22 - 17 59 (5) (15) (1) (15) (36) - 7 - - 7 - - - - - (1) (4) (1) (8) (14) (100) (12) 4 (17) (125) 6 2 - 13 21
Deficit at 31 December 2016	(116) (94) (22) (177) (409)

224

Standard Chartered Bank Notes to the financial statements

	Fundedplans Unfundedplans UK Fund Overseas plans Post- retirement medical Other Total $million $million $million $million $million
Deficit at 1 January 2015 Contributions Current service cost Past service cost and curtailments Settlement costs and transfers impact Net interest on the net defined benefit asset/liability Actuarial (losses) / gains Exchangerate adjustment	10 (103) (27) (176) (296) 7 28 1 17 53 (7) (16) (1) (19) (43) - (11) - - (11) - - - - - 1 (3) (1) (8) (11) (47) 5 4 13 (25) - 6 - 6 12
Deficit at 31 December 2015	(36) (94) (24) (167) (321)

	2016 2015
	Assets Obligations Total Assets Obligations Total $million $million $million $million $million $million
Deficit at 1 January Contributions1 Current service cost1 Past service cost and curtailments Settlement costs Interest cost on pension plan liabilities Interest income on pension plan assets Benefits paid out Actuarial (losses) /gains2 Exchange rate adjustment	1,959 (2,280) (321) 2,126 (2,422) (296) 59 - 59 53 - 53 - (36) (36) - (43) (43) - 7 7 - (11) (11) (2) 2 - - - - - (83) (83) - (88) (88) 69 - 69 77 - 77 (124) 124 - (136) 136 - 156 (281) (125) (55) 30 (25) (289) 310 21 (106) 118 12
Deficit at 31 December	1,828 (2,237) (409) 1,959 (2,280) (321)

1. These movements reflects a reduction in workforce in a number of geographies as a result of restructuring actions of the Group

2. Actuarial (loss)/gain on obligation comprises $298 million loss (2015: $56 million gain) from financial assumption changes, $8 million gain (2015: $5 million gain) from demographic assumption changes and $9 million gain from experience (2015: $31 million loss)

225

Standard Chartered Bank Notes to the financial statements

29. Share-based payments

Accounting policy

The Group operates equity-settled and cash-settled share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options 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 awards granted in 2016 in respect of 2015 performance, which vest in 2017-2019, is recognised as an expense over the period from 1 January 2015 to the vesting dates in 2017-2019. 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 options at the date of grant, which excludes the impact of any non-market vesting conditions (for example, profitability 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 binomial option pricing model. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. Forfeitures prior to vesting attributable to factors other than the failure to satisfy a non-market vesting condition are treated as a cancellation and the remaining unamortised 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 the options are exercised. Cash-settled awards are revalued at each balance sheet date and a liability 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 market-based performance conditions, the cumulative charge incurred up to the date of forfeiture is credited to the income statement. The Company records the value of the equity-settled awards as a deemed investment in subsidiaries. Any revaluation related to cash-settled awards is recorded as an amount due from subsidiary undertakings.

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.

	20161 20151
	Cash $million Equity $million Total $million Cash $million Equity $million Total $million
Deferred share awards Othershare awards	- 39 39 - 130 130 - 59 59 - 53 53
Total share-basedpayments	- 98 98 - 183 183

1. No forfeiture assumed

2011 Standard Chartered Share Plan (the ‘2011 Plan’)

The 2011 Plan was approved by shareholders in May 2011 and is the Group’s main share plan. Since approval, it has been used to deliver various types of share awards:

• a) Long Term Incentive Plan (‘LTIP’) awards: granted with vesting subject to performance measures. Performance measures attached to awards granted previously include: total shareholder return (‘TSR’); return on equity (‘RoE’) with a common equity tier 1 (‘CET1’) underpin; strategic measures; earnings per share (‘EPS’) growth; and return on risk-weighted assets (‘RoRWA’). Each measure is assessed independently over a three year period. Awards granted from 2016 have an individual conduct gateway that results in the award lapsing if not met

• b) 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 anniversaries of the award date specified at the time of grant. Deferred awards are not subject to any plan limit. This enables the Group to meet regulatory requirements relating to deferral levels, and is in line with market practice

• c) Restricted share awards, made outside of the annual performance process as replacement buy-out awards to new joiners who forfeit awards on leaving their previous employers, vest in instalments on the anniversaries of the award date specified at the time of grant. This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market practice. In line with similar plans operated by our competitors, restricted share awards are not subject to an annual limit and do not have any performance measures

• d) Underpin shares are subject to a combination of two performance measures: EPS growth and return on RoRWA. The weighting between the two elements is split equally, one-half of the award depending on each measure, assessed independently. These awards vest after three or five years. Underpin shares formed part of the variable remuneration awarded to executive directors and senior management in respect of 2014 performance

Under the 2011 Plan, no grant price is payable to receive an award. The remaining life of the 2011 Plan during which new awards can be made is four years.

226

Standard Chartered Bank Notes to the financial statements

Valuation – LTIP awards

The vesting of awards granted in 2016 is subject to the satisfaction of RoE (subject to a capital underpin) and relative TSR performance measures and achievement of a strategic scorecard. The fair value of the TSR component is calculated using the probability of meeting the measures over a three year performance period, using a Monte Carlo simulation model. The number of shares expected to vest is evaluated at each reporting date, based on the expected performance against the RoE and strategic measures in the scorecard, to determine the accounting charge.

The vesting of awards granted in 2015 is subject to the satisfaction of EPS growth, RoRWA and relative TSR performance measures. The fair value of the TSR component was derived by the probability of meeting the condition over a three year performance period, calculated by the area under the TSR vesting schedule curve. The number of shares expected to vest based on the performance of the EPS growth and RoRWA conditions is assessed at each reporting date to determine the accounting charge. Dividend equivalents accrue on these awards during the vesting period, so no discount is applied.

Grantdate	2016 15 June 4 May 11 March	2015
		19March
Share price at grant date (£) Vesting period (years) Expected dividend yield (%) Fair value (RoE) (£) Fair value (TSR) (£) Fair value (Strategic) (£) Fair value (EPS) (£) Fair value(RoRWA) (£)	5.05 5.08 4.68 3 3, 3-7 3 N/A N/A N/A 1.68 1.69, 1.69 1.56 1.24 1.25, 1.12 1.15 1.68 1.69, 1.69 1.56 - - - - - -	10.51 5 N/A1 1.08 2.65 2.65

1. The expected dividend yield for PSA 2015 (grant date 19 March) has been amended to “N/A” as dividend equivalents accrued

Valuation – deferred shares and restricted shares

The fair value for all employees 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 dividends.

Deferred shares and underpin shares accrue dividend equivalent payments during the vesting period. The expected dividend yield assumption is based on a historical average over a period commensurate with this ‘average’ period until vesting, or over one year if the average period until vesting is less than one year.

Details of deferred, underpin and LTIP awards for executive directors can be found in the Directors’ remuneration report.

Deferred share awards[1]

Deferred share awards1
Grantdate		2016 4 October 15 June 4 May 11 March	2015
	30 November		17 June 19 March
Share price at grant date (£) Vesting Period	6.41 Fair value (£)	6.50 5.05 5.08 4.68 Fair value (£) Fair value (£) Fair value (£) Fair value (£)	10.28 10.51 Fair value (£) Fair value (£)
1-3 years 3 year 1-5 years 5 year	6.41 - - -	6.50 5.05 5.08 4.68 - - - - - - - - - - - -	10.28 10.51 - 10.51 10.28 10.51 - 10.51

1. Deferred shares include 88,024 underpin shares, granted on 19 March 2015, with three- and five-year cliff vesting. Valuation as per deferred shares granted on the same date

227

Standard Chartered Bank Notes to the financial statements

Other restricted share awards

					2016
Grantdate	30November		4October		15 June		4 May		11 March
Share price at grant date (£)	6.41		6.50		5.05		5.08		4.68
Vesting Period	Expected	Fair	Expected	Fair	Expected	Fair	Expected	Fair	Expected	Fair
	dividend yield	value (£)	dividend	value (£)	dividend	value (£)	dividend	value (£)	dividend	value (£)
	(%)		yield (%)		yield (%)		yield (%)		yield (%)
1 year	-	6.41	-	6.50	-	-	-	-	-	-
2 year	2.4	6.11	2.4	6.20	-	-	-	-	-	-
2-3 years	2.5	6.03	2.5	6.11	3.6	4.62	3.6	4.65	3.5	4.30
3 year	3.0	5.87	3.0	5.95	-	-	3.4	4.60	-	-
2-4 years	-	-	-	-	-	-	3.8	4.65	-	-
1-4 years	-	-	-	-	-	-	-	-	3.5	4.30
4 year	-	-	3.1	5.76	-	-	3.4	4.44	-	-

Grant date	2015
	1 December 22 September 17 June 19 March
Share price at grant date (£)	5.57 6.73 10.28 10.51
Vesting Period	Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£)
2-3 years 2-4 years 1-4 years	6.4 4.77 6.4 5.77 7.0 8.68 7.0 8.88 - - 6.4 5.77 - - - - - - 6.4 5.77 - - - -

2001 Performance Share Plan (‘2001 PSP’) – now closed to new grants

The Group’s previous plan for delivering performance shares was the 2001 PSP and there remain outstanding vested awards. Under the 2001 PSP half the award was dependent upon TSR performance and the balance was subject to a target of defined EPS growth. Both measures used the same three-year period and were assessed independently.

2006 Restricted Share Scheme (‘2006 RSS’)/2007 Supplementary Restricted Share Scheme (‘2007 SRSS’)

The Group’s previous plans for delivering restricted shares were the 2006 RSS and 2007 SRSS both now replaced by the 2011 Plan. There remain outstanding vested awards under these plans. Awards were generally in the form of nil cost options and did not have any performance measures. Generally deferred restricted share awards vested equally over three years and for non-deferred awards half vested two years after the date of grant and the balance after three years. No further awards will be granted under the 2006 RSS and 2007 SRSS.

All Employee Sharesave Plans (comprised of the ‘2004 International Sharesave Plan’, the ‘2004 UK Sharesave Plan’ and the ‘2013 Sharesave Plan’)

Under the All Employee Sharesave Plans, employees may open a savings contract. Within a period of six months after the third or fifth anniversary, as appropriate, employees may purchase ordinary shares in the Company at a discount of up to 20 per cent on the share price at the date of invitation (this is known as the "option exercise price"). There are no performance measures attached to options granted under the All Employee Sharesave Plans 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 securities law and regulatory restrictions. In these countries the Group offers an equivalent cash-based plan to its employees. The 2004 International Sharesave and the 2004 UK Sharesave plans are now closed and no further awards will be granted under these plans.

The 2013 Sharesave Plan was approved by Shareholders in May 2013 and all future Sharesave invitations are made under this plan. The remaining life of the 2013 Sharesave Plan is six years.

228

Standard Chartered Bank Notes to the financial statements

Valuation – Sharesave

Options under the Sharesave plans are valued using a binomial option-pricing model. The same fair value is applied to all employees including executive directors. The fair value per option granted and the assumptions used in the calculation are as follows:

All Employee Sharesave Plan (Sharesave)

All Employee Sharesave Plan (Sharesave)
Grant date	2016 2015
	4 October 7 October
Share price at grant date (£) Exercise price (£)1 Vesting period (years) Expected volatility (%) Expected option life (years) Risk-free rate (%) Expected dividend yield (%) Fair value(£)	6.50 7.41 5.30 5.86 3 3 34.2 28.0 3.33 3.33 0.13 0.9 3.04 6.3 1.71 1.40

1. For Sharesave granted in 2015 the exercise prices have been adjusted downwards to reflect the rights issue by approximately 5.06 per cent (the adjusted exercise price is £5.58 for 2015)

The expected volatility is based on historical volatility over the last three years, or three years prior 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 dividend yield is based on historical dividend for three years prior to grant.

Reconciliation of option movements for the year to 31 December 2016

	2011 Plan1 PSP1 RSS1 Performance shares Deferred/ restricted shares	2011 Plan1 PSP1 RSS1 Performance shares Deferred/ restricted shares	SRSS1 Sharesave	Weighted average exercise price (£)
	Performance shares
Outstanding as at 1 January Granted2 Lapsed Exercised	9,603,367 24,911,4303 (6,048,261) (163,492)	22,677,693 95,894 999,229 8,357,2544 – – (1,542,089) (14,007) (121,802) (5,747,948) (12,784) (245,634)	140,110 15,326,280 – 3,796,078 (348) (5,846,931) (59,463) (365)	7.87 5.30 8.83 5.67
Outstanding as at 31 December	28,303,044	23,744,910 69,103 631,793	80,299 13,275,062	6.72
Exercisable as at 31 December	138,148	5,500,606 69,103 631,793	80,299 1,484,146	10.98
Range of exercise prices (£)2	–	– – –	– 5.30-11.21	–
Intrinsic value of vested but not exercised options ($ million)	0.1	3.5 0.1 0.4	0.1 0.0	–
Weighted average contractual remaining life (years)	8.88	8.15 2.02 0.90	0.45 2.31	–
Weighted average share price for options exercised duringtheperiod(£)	4.89	5.20 6.23 5.72	6.02 5.85	–

1. Employees do not contribute towards the cost of these awards

2. For Sharesave granted in 2016 the exercise price is £5.30 per share, which was the average of the closing prices over the five days to the invitation date of 5 September. The closing share price on 2 September 2016 was £6.614.

3. 23,029,565 granted on 11 March 2016, 922 (notional dividend) granted on 19 March 2016, 1,810,435 granted on 4 May 2016, 70,508 granted on 15 June 2016

4. 7,036,953 granted on 11 March 2016, 34,367 (notional dividend) granted on 11 March 2016, 51,790 (notional dividend) granted on 13 March 2016, 92,358

(notional dividend) granted on 19 March 2016, 600,413 granted on 4 May 2016, 21,991 granted on 15 June 2016, 187 (notional dividend) granted on 17 June 2016, 35 (notional dividend) granted on 18 June 2016, 14 (notional dividend) granted on 19) June 2016, 434,555 granted on 4 October 2016, and 84,591 granted on 30 November 2016

229

Standard Chartered Bank Notes to the financial statements

Reconciliation of option movements for the year to 31 December 2015

	2011 Plan1 PSP1 RSS1 SRSS1 Performance shares Deferred/ restricted shares	Sharesave Weighted average exercise price (£)
Outstanding as at 1 January Granted2 Additional shares for rights issue3 Lapsed Exercised	14,197,531 18,004,114 242,150 2,101,014 663,148 83,787 11,468,678 - - - 463,356 1,093,846 4,607 48,365 6,761 (4,669,438) (839,289) (78,787) (472,152) (386,668) (471,869) (7,049,656) (72,076) (677,998) (143,131)	14,003,914 10.91 7,735,481 5.86 781,316 (6,971,739) 10.74 (222,692) 10.66
Outstanding as at 31 December	9,603,367 22,677,693 95,894 999,229 140,110	15,326,280 7.87
Exercisable as at 31 December	316,593 3,322,627 95,894 999,229 140,110	1,683,365 11.31
Range of exercise prices (£)	- - - - -	5.58-13.93 -
Intrinsic value of vested but not exercised options ($ million)	0.1 1.7 0.2 0.5 0.1	- -
Weighted average contractual remaining life (years)	7.7 5.3 2.4 1.4 1.4	2.6 -
Weighted average share price for options exercised during the period(£)	10.02 9.78 9.13 9.65 9.99	10.82 -

1. Employees do not contribute towards the cost of these awards

2. For Sharesave granted in 2015 the exercise price has been adjusted downwards to reflect the rights issue by approximately 5.06 per cent (the adjusted exercise price is £5.58)

3. For grants awarded prior to the announcement of the rights issue and which had not been exercised or lapsed as of 23 November 2015, the number of shares under award has been adjusted upwards to reflect the rights issue by approximately 5.06 per cent. The adjustment follows the standard approach that companies apply to employee shares awards in the event of a rights issue. The adjustment compensates participants for their inability to participate in the rights issue in relation to their outstanding employee share awards

4. 83,787 granted on 19 March 2015

5. 9,253,919 granted on 19 March 2015, 768,225 (notional dividend) granted on 13 March 2015, 140,722 granted on 17 June 2015, 2,572 (notional dividend) granted on 18 June 2015, 261 (notional dividend) granted on 19 September 2015, 1,215,196 granted on 22 September 2015, and 87,783 granted on 1 December 2015

230

Standard Chartered Bank

Notes to the financial statements

30. Investments in subsidiary undertakings, joint ventures and associates

Accounting policy

Subsidiaries

Subsidiaries are all entities, including structured entities, which the Group controls. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the investee. The assessment of power is based on the Group’s practical ability to direct the relevant activities of the entity unilaterally for the Group’s own benefit and is subject to reassessment if and when one or more of the elements of control change. Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. They are deconsolidated from the date that control ceases, and where any interest in the subsidiary remains, this is remeasured to its fair value and the change in carrying amount is recognised in the income statement.

Associates and joint arrangements

Joint arrangements are where two or more parties either have rights to the assets, and obligations of the joint arrangement (joint operations), or have rights to the net assets of the joint arrangement (joint venture). The Group evaluates the contractual terms of joint arrangements to determine whether a joint arrangement is a joint operation or a joint venture. As at 31 December 2016, the Group did not have any contractual interest in joint operations.

Investments in associates and joint ventures are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investment in associates and joint ventures includes goodwill identified on acquisition (net of any accumulated impairment loss). The Group’s share of its associates’ and joint ventures’ post acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.

Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the associates and joint ventures. At each balance sheet date the Group assesses whether there is any objective evidence of impairment in the investment in associates and joint ventures. Such evidence includes a significant or prolonged decline in the fair value of the Group’s investment in an associate or joint venture below its cost, among other factors.

Investment in subsidiaries, associates and joint ventures

In the Company’s financial statements, investment in subsidiaries, associates and joint ventures are held at cost less impairment and dividends from pre-acquisition profits received prior to 1 January 2009, if any. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated in the Group accounts.

Significant accounting estimates and judgements

Impairment testing of investments in associates and joint arrangements is based on judgements including the basis of assumptions and forecasts used for estimating the expected cash flows from the investments and in the calculations of the present values of those cash flows. The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement.

Business combinations

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, together with the fair value of any contingent consideration payable. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets and contingent liabilities acquired is recorded as goodwill (see note 16) for details on goodwill recognised by the Group). If the cost of acquisition is less than the fair value of the net assets and contingent liabilities of the subsidiary acquired, the difference is recognised directly in the income statement.

Where the fair values of the identifiable net assets and contingent liabilities acquired have been determined provisionally, or where contingent or deferred consideration is payable, adjustments arising from their subsequent finalisation are not reflected in the income statement if (i) they arise within 12 months of the acquisition date (or relate to acquisitions completed before 1 January 2014) and (ii) the adjustments arise from better information about conditions existing at the acquisition date (measurement period adjustments). Such adjustments are applied as at the date of acquisition and, if applicable, prior year amounts are restated. All changes that are not measurement period adjustments are reported in income other than changes in contingent consideration not classified as financial instruments, which are accounted for in accordance with the appropriate accounting policy, and changes in contingent consideration classified as equity, which is not remeasured.

Changes in ownership interest in a subsidiary, which do not result in a loss of control, are treated as transactions between equity holders and are reported in equity. Where a business combination is achieved in stages, the previously held equity interest is remeasured at the acquisition date fair value with the resulting gain or loss recognised in the income statement.

	2016	2015
Investment insubsidiary undertakings	$million	$million
As at 1 January	13,127	12,962
Additions	1,638	217
Disposals	(84)	(5)
Impairment	(537)	(47)
As at 31 December	14,144	13,127

231

Standard Chartered Bank Notes to the financial statements

		Group interest
Countryandplace of incorporation or registration	Main areas of operation	in ordinary share capital %
Standard Chartered Bank Korea Limited,Korea	Korea	100
Standard Chartered Bank Malaysia Berhad,Malaysia	Malaysia	100
Standard Chartered Bank(Pakistan)Limited,Pakistan	Pakistan	98.99
Standard Chartered Bank(Taiwan)Limited,Taiwan	Taiwan	100
Standard Chartered Bank(HongKong)Limited,HongKong	HongKong	511
Standard Chartered Bank(Singapore)Limited,Singapore	Singapore	100
Standard Chartered Bank(China)Limited,China	China	100
Standard Chartered Bank(Thai)Public CompanyLimited,Thailand	Thailand	99.99
Standard Chartered Bank Nigeria Limited,Nigeria	Nigeria	100
Standard Chartered Bank Kenya Limited,Kenya	Kenya	74.30
Standard Chartered Private EquityLimited, HongKong	HongKong	100

1. 49 per cent is held by Standard Chartered Holdings Limited, the Group’s parent company

A complete list of subsidiary undertaking is included in note 38.

The Group does not have any material non-controlling interests in any of its subsidiaries except the 49% non-controlling interest in Standard Chartered Bank (Hong Kong) Limited (‘SCHK’) amounting to $3,865 million (2015: $3,839 million) and the 25.7 per cent noncontrolling interest amounting to $103 million (2015: $95 million) in Standard Chartered Bank Kenya Limited (‘SCK’). SCHK contributes 30.5 per cent of the Group’s Operating Profit and 20.9 per cent of the Group’s assets. SCK contributes 3.9 per cent of the Group’s Operating Profit and 0.4 per cent of the Group’s assets.

Whilst the Group’s subsidiaries are subject to local statutory capital and liquidity requirements in relation to foreign exchange remittance, these restrictions arise in the normal course of business and do not significantly restrict the Group’s ability to access or use assets and settle liabilities of the Group

The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the regulatory framework within which the banking subsidiaries operate. These frameworks require banking operations to keep certain levels of regulatory capital, liquid assets, exposure limits and comply with other required ratios. These restrictions are summarised below:

Regulatory and liquidity requirements

The Group’s subsidiaries are required to maintain minimum capital, leverage ratios, liquidity and exposure ratios which therefore restrict the ability of these subsidiaries to distribute cash or other assets to the parent company.

The subsidiaries are also required to maintain balances with central banks and other regulatory authorities in the countries in which they operate. At 31 December 2016, the total cash and balances with central bank was $71 billion (2015: $65 billion) of which $9 billion (2015: $9 billion) is restricted. See liquid asset disclosure on page 113.

Statutory requirements

The Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits to the parent company, generally to maintain solvency. These requirements restrict the ability of subsidiaries to remit dividends to the Group. Certain subsidiaries are also subject to local exchange control regulations which provide for restrictions on exporting capital from the country other than through normal dividends.

Contractual requirements

The encumbered assets in the balance sheet of the group’s subsidiaries are not available for transfer around the Group. Encumbered assets are disclosed on page 115. In addition the securitised assets disclosed in note 15 have legal restrictions.

232

Standard Chartered Bank Notes to the financial statements

Interests in joint ventures

	PT Bank permata Tbk	PT Bank permata Tbk
	2016	2015
Group	$million	$million
At 1 January	672	743
Exchange translation difference	13	(74)
Additions	238	-
Share of profits	(215)	9
Dividends received	-	(6)
Share of AFS and Other reserves	(2)	-
At 31 December	706	672

	2016	2015
Company	$million	$million
At 1 January	546	546
Additions	238	-
At 31 December	784	546

The Company accounts for its investments in joint ventures at cost.

The Group’s principal joint venture is PT Bank Permata Tbk (Permata). The Group has a 44.56 per cent (2015: 44.56 per cent) interest through a (joint venture) company which holds a majority investment in Permata. Permata provides financial services to consumer and commercial segment in Indonesia The Group’s share of (loss)/profit of Permata amounts to $(215) million (2015: $9 million) and the Group share of net assets as $705 million (2015: $672 million). On 16 February 2017 Permata announced plans for a IDR3 trillion (approximately $225 million) rights issue to drive growth. The Group is committed to participating in this capital raising and its share would be approximately $100 million. In December 2016 the Group made a capital advance to Permata of approximately $50 million and this is expected to be utilised in the 2017 rights issue

The following table sets out the summarised financial statements of PT Bank Permata Tbk prior to the Group's share of joint ventures being applied:

being applied:
	2016	2015
	$million	$million
Current assets	6,484	8,918
Non-current assets	5,697	4,183
Current liabilities	(9,896)	(10,739)
Non-currentliabilities	(963)	(1,107)
Net assets	1,322	1,255
Operating income	608	623
Of which:
Interest income	1,083	1,205
Interest expense	(641)	(742)
Expenses	(329)	(573)
Impairment	(923)	(25)
Operating profit	(644)	25
Taxation	161	(5)
Profit after tax	(483)	20
The above amounts of assets and liabilities include the following:
Cash and cash equivalents	1,964	1,814
Other comprehensive Loss for the year	(4)	-
Total comprehensive (loss) / income for the year	(487)	20
Dividendsreceivedfromthe jointventure during the year	-	(6)

In December 2016 Permata established a portfolio of non-performing loans that are beyond its risk appetite which are to be liquidated. This resulted in an incremental impairment of $140 million, representing the difference between the carrying amount of the liquidation portfolio on a hold to collect basis and the amount expected to be realised upon liquidation. This is consistent with the Group’s restructuring actions. Accordingly, the Group has recorded its $62 million share of this incremental impairment as restructuring and it has been normalised from the underlying results of the Group.

Non-current assets are primarily loans to customers and current liabilities are primarily customer deposits based on contractual maturities.

233

Standard Chartered Bank Notes to the financial statements

Reconciliation of the net assets above to the carrying amount of the investments in PT Bank Permata Tbk recognised in the consolidated financial statements:

consolidated financial statements:
	2016	2015
	$million	$million
Net assets of PT Bank PermataTbk	1,322	1,255
Proportion of the Group’s ownership interest in joint ventures	589	559
Notionalgoodwill	116	113
Carryingamount of the Group’s interest in PT Bank Permata Tbk	705	672

Interests in associates	China Bohai Bank Asia Commercial Bank(ACB)1 Other Total
	2016 2015 2016 2015 2016 2015 2016 2015 $million $million $million $million $million $million $million $million
At 1 January Exchange translation differences Additions Share of profits Disposals Dividends received Share of AFS and Other reserves Impairment Others	1099 987 125 174 34 50 1258 1,211 (75) (63) - (4) (1) - (76) (67) - - - - - - - - 167 173 8 7 3 3 178 183 - - - - - (18) - (18) - - - (5) (3) (1) (3) (6) (9) 2 - (1) - - (9) 1 - - - (46) - - - (46) - - (133) - 1 - (132) -
At 31 December	1,182 1,099 - 125 34 34 1,216 1,258

1 Transferred to assets held for sale

	2016	2015
Company	$million	$million
At 1 January	31	43
Exchange translation differences	-	(2)
Disposals	-	(10)
At 31 December	31	31

A complete list of the Group's interest in associates is included in note 38. The Group’s principal associates are:

			Group interest
			in ordinary
		Main areas of	share capital
Associate	Nature of activities	operation	%
China Bohai Bank	BankingOperations	China	19.99

234

Standard Chartered Bank Notes to the financial statements

The Group’s investment in China Bohai Bank is less than 20 per cent but is considered to be an associate because of the significant influence the Group is able to exercise over the management and financial and operating policies. Significant influence is evidenced largely through the interchange of management personnel and the provision of expertise. The Group applies the equity method of accounting for investments in associates. The reporting date (30 November 2016) of this associate is within three months of the Group’s reporting date. The following table sets out the summarised financial statements of China Bohai Bank prior to the Group’s share of the associates being applied:

	China Bohai	Bank
	30 Nov 2016	30 Nov 2015
	$million	$million
Current assets	39,799	37,947
Non-current assets	86,568	85,877
Current liabilities	(71,453)	(96,282)
Non-currentliabilities	(49,001)	(22,047)
Net assets	5,913	5,495
Operating income	3,221	2,968
Of which:
Interest income	5,763	6,468
Interest expense	(3,432)	(4,023)
Expenses	(1,208)	(1,110)
Impairment	(994)	(776)
Operating profit	1,019	1,082
Taxation	(182)	(221)
Profit after tax	837	861
The above amounts of assets and liabilities include the following:
Other comprehensive (loss) / income for the year	(43)	9
Total comprehensive income for the year	794	870
Dividends received from the associate duringtheyear	-	-

Non-current assets are primarily loans to customers and current liabilities are primarily customer deposits based on contractual maturities.

235

Standard Chartered Bank Notes to the financial statements

31. Structured entities

Accounting policy

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. Contractual arrangements determine the rights and therefore relevant activities of the Structured entity . Structured entities are generally created to achieve a narrow and well defined objective with restrictions around their activities. Structured entities are consolidated when the substance of the relationship between the Group and the structured entity indicates the Group has power over the contractual relevant activities of the structured entity, is exposed to variable returns, and can use that power to affect the variable return exposure.

In determining whether to consolidate a structured entity, the Group takes into account its ability to direct the relevant activities of the structured entity. Control over relevant activities is generally evidenced through a unilateral right to liquidate the structured entity, investment in a substantial proportion of the securities issued by the structured entity or where the Group holds specific subordinated securities that embody certain controlling rights. The Group may further consider relevant activities embedded within contractual arrangements such as call options which give the practical ability to direct the entity, special relationships between the structured entity and investors, and if a single investor has a large exposure to variable returns of the structured entity.

Significant accounting judgements

Significant judgement is required in determining control over Structured entities. The purpose and design of the entity is considered, along with a determination of what the relevant activities 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 principal in its own right or as an agent on behalf of others. Judgement is further required in the ongoing assessment of control over structured entities, specifically if market conditions have an effect on the variable return exposure of different investors.

The Group has involvement with both consolidated and unconsolidated structured entities, which may be established by the Group as a sponsor or by a third party, as detailed below.

Interests in consolidated structured entities: A structured entity is consolidated into the Group’s financial statements where the Group controls the structured entity, as per the determination in the accounting policy above.

The following table presents the Group’s interests in consolidated structured entities.

	2016	2015
	Total Assets	Total Assets
	$million	$million
Securitisation1	21	76
Aircraft and ship leasing	4,678	4,424
Structuredfinance	1,294	1,125
Total	5,993	5,625

1. The amortisation charge for the year is recognised in the income statement within note 3

Interests in unconsolidated structured entities: Unconsolidated structured entities are all structured entities that are not controlled by the Group. The Group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific investment opportunities. An interest in a structured entity is contractual or non-contractual involvement which creates variability of the returns of The Group arising from the performance of the structured entity.

The table below presents the carrying amount of the assets and liabilities recognised in the financial statements relating to variable interests held in unconsolidated structured entities, the maximum exposure to loss relating to those interests and the total assets of the structured entities. Maximum exposure to loss is primarily limited to the carrying amount of the Group’s on-balance sheet exposure to the structured entity. For derivatives, the maximum 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.

236

Standard Chartered Bank Notes to the financial statements

		2016				20151
	Principal		Asset-		Principal		Asset-
	finance	Structured	backed		finance	Structured	backed
	funds	finance	securities	Total	funds	finance	securities	Total
	$million	$million	$million	$million	$million	$million	$million	$million
Group's interest - assets
Financial assets held at fair value through profit or loss	515	-	172	687	483	-	97	580
Investment securities - Debt securities (AFS)	54	-	4,331	4,385	73	-	6,480	6,553
Investment securities - Debt securities (Loans and
receivables)	624	-	1,489	2,113	1,547	-	1,156	2,703
Other assets	12	-	-	12	6	297	-	303
Total assets	1,205	-	5,992	7,197	2,109	297	7,733	10,139
Group's interest - liabilities
Customer Accounts	-	1,193	8	1,201	-	900	42	942
Debt securities in issue	-	-	929	929	-	-	1,304	1,304
Other liabilities	-	-	-	-	-	290	-	290
Total liabilities	-	1,193	937	2,130	-	1,190	1,346	2,536
Off balance sheet
Capital commitment	422	353	82	857	153	46	270	469
Group's maximum exposure to loss	1,627	353	6,074	8,054	2,262	343	8,003	10,608
Total assets of Structured Entities	4,967	5,038 316,324		326,329	4,804	4,094 539,976		548,874

1 Principal Finance balances for 2015 have been restated to include further structured entities identified increasing the Group’s total interest in assets from $8.6 billion to $10.1 billion, and reclassify certain entities as structured finance and asset-backed securities. Total assets of structured entities has been restated from $668.4 billion to $548.9 billion arising from a currency translation adjustment. These changes only affect this disclosure and do not adjust the Group’s reported balance sheet

The main types of activities for which the Group utilises unconsolidated structured entities cover synthetic credit default swaps for managed investment funds (including specialised principal finance funds), portfolio management purposes, structured finance and asset backed securities. These are detailed as follows:

• Principal finance fund: The Group’s exposure to Principal Finance funds represents committed or invested capital in unleveraged investment funds, primarily investing in pan-Asian infrastructure, real estate and private equity.

• Portfolio management: For the purposes of portfolio management, the Group purchased credit protection via synthetic credit default swaps from note-issuing structured entities. The referenced assets remain on the Group’s balance sheet as they are not assigned to these structured entities. The Group continues to own or hold all of the risks and returns relating to these assets. The credit protection obtained from the regulatory-compliant securitisation only serves to protect the Group against losses upon the occurrence of eligible credit events and the underlying assets are not de-recognised from the Group balance sheet. The Group does not hold any equity interests in the structured entities, but may hold an insignificant amount of the issued notes for market making purposes. This is disclosed in the ABS section below. The proceeds of the notes’ issuance are typically held as cash collateral in Issuer’s account operated by a Trustee or invested in AAA-rated Government-backed securities to collateralise the structured entities swap obligations to the Group, and to repay the principal to investors at maturity. The structured entities reimburse the Group on actual losses incurred, through the use of the cash collateral or realisation of the collateral security. Correspondingly, the structured entities write down the notes issued by an equal amount of the losses incurred, in reverse order of seniority. All funding is committed for the life of these vehicles and the Group has no indirect exposure in respect of the vehicles’ liquidity position. 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 entities have Standard Chartered branding.

• Structured finance: Structured finance comprises interests in transactions that the Group or, more usually, a customer has structured, using one or more structured entities, which provide beneficial arrangements for customers. The Group’s exposure primarily represents the provision of funding to these structures as a financial intermediary, for which it receives a lender’s return. The transactions largely relate to the provision of aircraft leasing and ship finance.

• Asset-backed securities: The Group also has investments in asset-backed securities issued by third party structured entities as set out on page 103 of the Risk and Capital Review. For the purpose of market marking and at the discretion of ABS trading desk, the Group may hold an immaterial amount of debt securities ($2.5m at year end) from structured entities originated by CPM. This is disclosed in the ABS column above.

237

Standard Chartered Bank Notes to the financial statements

32. Cash flow statement

Adjustment for non-cash items and other adjustments included within income statement

	Group Company
	2016 2015 2016 2015 $million $million $million $million
Amortisation of discounts and premiums of investment securities Interest expense on subordinated liabilities Interest expense on senior debt securities in issue Other non-cash items Pension costs for defined benefit schemes Share-based payment costs Impairment losses on loans and advances and other credit risk provisions Dividend income from subsidiaries Other impairment Loss on business classified as held for sale Loss /(profit)fromassociates and jointventures	(264) (241) (82) (121) 231 477 121 491 129 127 43 2 (91) 273 (93) 283 85 96 40 65 98 183 72 130 2,791 4,976 1,933 3,312 - - (1,427) (1,502) 488 732 611 158 44 4 37 (192) - -
Total	3,548 6,435 1,218 2,818
Change in operating assets	Group Company
	2016 2015 2016 2015 $million $million $million $million
Increase in derivative financial instruments Decrease in debt securities, treasury bills and equity shares held at fair value through profit or loss (Increase)/decrease in loans and advances to banks and customers Net (increase)/decrease in pre-payments and accrued income Net (increase)/decreaseinotherassets	(2,800) (231) (4,031) (438) 815 9,523 539 4,622 (3,742) 20,957 701 8,933 (97) 357 77 176 (5,160) 3,870 (1,908) 825
Total	(10,984) 34,476 (4,622) 14,118

Change in operating liabilities

Change in operating liabilities
	Group Company
	2016 2015 2016 2015 $million $million $million $million
Increase/(decrease) in derivative financial instruments Net increase/(decrease) in deposits from banks, customer accounts, debt securities in issue, Hong Kong notes in circulation and short positions (Decrease)/increase in accruals and deferred income (Decrease)/increasein amount due to parents/subsidiaries/other Netincreaseinother liabilities	4,002 (528) 5,568 (418) 9,495 (69,369) 371 (44,826) (166) (179) (318) 72 (3,976) 4,310 (3,648) 2,119 2,218 587 2,623 2,346
Total	11,573 (65,179) 4,596 (40,707)

238

Standard Chartered Bank Notes to the financial statements

33. Cash and cash equivalents

Accounting policy

For the purposes of the cash flow statement, cash and cash equivalents comprise cash, on demand and overnight balances with central banks (unless restricted) and balances with less than three months’ maturity from the date of acquisition, including treasury bills and other eligible bills, loans and advances to banks, and short-term government securities.

	Group Company
	2016 2015 2016 2015 $million $million $million $million
Cash and balances at central banks Less: restricted balances Treasury bills Loans and advances to banks Trading securities	70,706 65,312 59,373 49,916 (8,648) (9,112) (2,595) (3,274) 9,163 10,280 612 491 23,109 18,946 10,148 9,780 2,647 3,002 1,384 2,217
Total	96,977 88,428 68,922 59,130

Restricted balances comprise minimum balances required to be held at central banks.

34. Related party transactions

Directors and officers

Details of directors’ remuneration and interests in shares are disclosed in note 37 on Remuneration of Directors.

IAS 24 Related party disclosures requires the following additional information for key management compensation. Key management comprises non-executive directors, executive directors of Standard Chartered PLC, the Court Directors of Standard Chartered Bank and the Persons Discharging Managerial Responsibilities (PDMR) of Standard Chartered PLC.

	2016	2015
	$million	$million
Salaries, allowances and benefits in kind	17	36
Pension contributions	-	3
Share-based payments	18	17
Bonuses paid or receivable	1	-
	36	56

Transactions with directors and others

At 31 December 2016, the total amounts to be disclosed under the Companies Act 2006 (the Act) about loans to directors and officers were as follows:

	2016 2015
	Number $million Number $million
Directors	1 - 1 -

Other than as disclosed in these financial statements, there were no other transactions, arrangements or agreements outstanding for any director of the Company which have to be disclosed under the Act.

239

Standard Chartered Bank Notes to the financial statements

Group

Group
	2016 2015
	Due from/to subsidiary undertakings and other related parties Derivatives Subordinated liabilities and other borrowed funds Accruals Due from/to subsidiary undertakings and other related parties Derivatives Subordinated liabilities and other borrowed funds Accruals $million $million $million $million $million $million $million $million
Assets Ultimate parent company Fellow subsidiaries of Standard Chartered PLC Group	209 1,541 - 1 - 1,437 - - 1,316 6 - 7 - 7 - -
	1,525 1,547 - 8 - 1,444 - -
Liabilities Ultimate parent company Fellow subsidiaries of Standard CharteredPLC Group	14,075 529 15,184 134 16,081 638 12,624 139 1,265 10 - 16 2,676 9 - 20
	15,340 539 15,184 150 18,757 647 12,624 159
	`

	2016 2015
	Interest expense Dividend expense Interest expense Dividend expense
	751 476 632 551

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 28.

The Group’s employees participate in the Standard Chartered PLC group’s share based compensation plans (see note 29). The cost of the compensation is recharged from Standard Chartered PLC to the Group’s branches and subsidiaries.

Associate and joint ventures

Associate and joint ventures
Assets Loans and advances Debt securities Derivative assets Total assets Liabilities Deposits Debt securities issued Derivativeliabilities Total liabilities Loan commitments and otherguarantees	2016 2015
	China Bohai Bank Clifford Capital PT Bank Permata China Bohai Bank1 Clifford Capital PT Bank Permata $million $million $million $million $million $million
	- 40 90 11 - 69 - 27 - - - 112 - - - 18 6 -
	- 67 90 29 6 181
	7 - 29 70 - 16 14 - - - - - - - - 3 - -
	21 - 29 73 - 16
	- 10 - - 50 -

1Balances have been restated

240

Standard Chartered Bank Notes to the financial statements

Company

Company
	2016 2015
	Due from/to subsidiary undertakings and other related parties Derivatives Subordinated liabilities and other borrowed funds Accruals Due from/to subsidiary undertakings and other related parties Derivatives Subordinated liabilities and other borrowed funds Accruals $million $million $million $million $million $million $million $million
Assets Ultimate parent company Subsidiaries and fellow subsidiaries of Standard CharteredPLC Group	209 1,541 - - - 1,437 - - 13,884 5,931 - 45 14,548 5,079 - 51
	14,093 7,472 - 45 14,548 6,516 - 51
Liabilities Ultimate parent company Subsidiaries and fellow subsidiaries of Standard CharteredPLC Group	14,066 529 15,183 134 16,072 638 12,624 139 16,518 5,737 - 13 17,749 4,193 - 23
	30,584 6,266 15,183 147 33,821 4,831 12,624 162

	2016
	Fees and commission income Fees and commission expense Interest income Interest expense Dividend income Dividend expense $million $million $million $million $million $million
Ultimate parent company Subsidiaries and fellow subsidiaries of Standard CharteredPLC Group	- - - 751 - - 6 32 175 81 - -
	6 32 175 832 - -

2015

	Fees and	Fees and
	commission	commission	Interest	Interest	Dividend	Dividend
	income	expense	income	expense	income	expense
	$million	$million	$million	$million	$million	$million
Ultimate parent company	-	-	5	632	-	-
Subsidiaries and fellow subsidiaries of
Standard Chartered PLC Group	5	175	278	168	-	-
	5	175	283	800	-	-

As at 31 December 2016, Standard Chartered Bank had created a charge over $68 million (2015: $74 million) of cash assets in favour of the independent trustee of its employer financed retirement benefit scheme.

The Company has provided letters of support to its subsidiary undertakings, SC Overseas Investments Limited and Standard Chartered Masterbrand Licensing Limited.

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 28.

As at 31 December 2016, the Company held debt securities issued by subsidiary undertakings of $1,765 million (2015: $1,689 million). There is no debt security issued to subsidiary undertakings.

The Company’s employees participate in the Standard Chartered PLC group’s share based compensation plans (see note 29).

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.

241

Standard Chartered Bank Notes to the financial statements

35. Post balance sheet events

On 18 January 2017, Standard Chartered PLC issued $1 billion 7.75% fixed rate resetting perpetual subordinated contingent convertible securities with the first reset date being 2 April 2023.

36. Auditor’s remuneration

Auditor’s remuneration is included within other general administration expenses. The amounts paid by the Group to their principal auditor, KPMG LLP, and its associates (together KPMG) 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 provision of other services.

	2016	2015
	$million	$million
Audit fees for the Group statutory audit:
Fees relating to the current year	4.0	3.9
Fees payable to KPMG for other services provided to the Group:
Audit of Standard Chartered PLC subsidiaries, pursuant to legislation
Fees relatingto the currentyear	10.1	10.9
Total audit and audit related fees	14.1	14.8
Other services pursuant to legislation	5.3	5.4
Tax services	0.4	0.4
Services relating to corporate finance transactions	0.7	2.1
All other services	0.9	0.9
Total fees payable	21.4	23.6

The following is a description of the type of services included within the categories listed above:

• Audit fees are in respect of fees payable to KPMG LLP for the statutory audit of the consolidated financial statements of the Group and the separate financial statements of Standard Chartered PLC. They exclude amounts payable for the audit of Standard Chartered PLC’s subsidiaries and amounts payable to KPMG LLP’s associates. These amounts have been included in fees payable to KPMG for other services provided to the Group

• Other services pursuant to legislation include services for assurance and other services that are in relation to statutory and regulatory filings.

• Tax services include tax compliance services and tax advisory services

• Services related to corporate finance transactions include fees payable to KPMG for transaction related work irrespective of whether the Group is vendor or purchaser, such as debt issuances, acquisition due diligence and long-form reports

• All other services include other assurance and advisory services such as transaction services, ad hoc accounting advice, and reviews of interim financial information

Expenses incurred during the provision of services and which have been reimbursed by the Group are included within auditor’s remuneration.

242

Standard Chartered Bank Notes to the financial statements

37. Remuneration of Directors

This table sets out salary, fixed pay allowances, benefits (including pensions) and one-off amounts (such as buy-out awards) received in 2016 and variable remuneration awards received in respect of 2016. All figures are in £000s.

	W T Winters A N Halford A MG Rees1 TJ Clarke MSmith2
	2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
Salary Fixed pay allowances Pension Benefits Annual incentive Vesting of LTIPawards	1,150 767 850 850 325 975 975 510 1,011 - 1,150 767 519 458 741 654 - 376 - - 460 307 340 340 108 1,187 195 213 202 - 135 58 111 104 47 126 55 46 35 - 497 - 308 - - - 528 - 632 - - - - - - - - - - -
Sub-total Buy-out award	3,392 1,899 2,128 1,752 1,221 2,942 1,753 1,145 1,880 - - 6,500 - - - - - - 1,018 -
Total	3,392 8,399 2,128 1,752 1,221 2,942 1,753 1,145 2,898 -

1 Mike Rees retired from the Court on 30 April 2016. The table shows remuneration for the period for which he was appointed

2 Mark Smith joined the Court on 1 March 2016. The remuneration includes the period from when he joined the Group on 25 January 2016 to 1 March 2016

Additional information on the remuneration elements in the above single total figure table

Salaries

The salaries of current directors as at 1 January 2016 (or date of appointment, if later) were; W T Winters, £1,150,000, A N Halford, £850,000, T J Clarke, £975,000, M Smith, £1,080,000.

Fixed pay allowances

These are paid in shares, subject to a retention period and released over five years. The number of shares allocated is determined based on the monetary value of the allowance and the prevailing market price of the Group’s shares on the date of allocation. FPAs are not variable remuneration; therefore, performance measures are not applicable

Benefits

All directors receive benefits, such as private medical cover, life assurance, permanent health insurance, an allowance in respect of taxation advice and a car and, for some of the directors, the use of a company vehicle and driver for business purposes. Some directors occasionally use a Group car service for travelling and had spouses travel to attend events. The 2016 benefits figures are shown in respect of the 2015/16 tax year. This provides consistency with the reporting in previous years.

Pension

Bill Winters and Andy Halford received pension contributions and cash allowances which combined equate to 40 per cent of salary. Tracy Clarke and Mark Smith received pension contributions and cash allowances which combined equate to 20 per cent of salary. Mike Rees, was contractually entitled to participate in a defined benefit pension plan, with a headline entitlement of one-thirtieth of salary for each year of service. He received no further accrual after 13 February 2016, when he reached the normal retirement age of 60. His DB entitlement as at 13 February 2016 was £563,672.

Incentives

Directors’ annual incentives in respect of 2016 are delivered up front with 50 per cent paid in shares subject to a minimum six month retention period.

The long term incentive plan awards granted in March 2014 were due to vest in March 2017, based on performance over the years 2014 to 2016. Performance measures were not met and so the awards will lapse.

Buy-out award for Mark Smith

In January 2016, Mark Smith joined the Group and became a director of the Court in March 2016. As part of Mark’s remuneration arrangements, he received a buy-out award in respect of share interests forfeited as a consequence of leaving his previous role to join the Group. The buy-out is delivered in a combination of up-front shares, deferred cash (to be delivered over a two year period from March 2016) and restricted shares with a face value of £1.018 million. These shares will vest (i.e. the restrictions will lift) in four equal annual tranches from March 2017, subject to continued employment with the Group.

Compensation for loss of office and payments to former directors

Mike Rees retired from the Court on 30 April 2016. From 1 May 2016 to 31 December 2016 he received salary of £650,000 and benefits of £44,559, plus appropriate professional legal fees of £7,500 incurred by him in respect of finalising his retirement arrangements, in accordance with his contract of employment. In addition, the Group’s remuneration committee exercised its discretion in accordance with the rules of the share plans, under which Mike held unvested awards, and determined that he should be treated as an eligible leaver and, as such, be allowed

243

Standard Chartered Bank Notes to the financial statements

to retain any unvested share awards. These awards continue to vest over the original vesting periods and remain subject to the application of malus and claw-back and the satisfaction of the performance measures. This discretion was applied by the Group’s remuneration committee consistent with the treatment for others retiring from the Group.

Jaspal Bindra stepped down from the Court during 2015. He received payments from the date he ceased to be a director until 25 February 2016, in accordance with his contract of employment and twelve month notice period. From 1 January 2016 to 25 February 2016, Jaspal received salary of $129,932, benefits of $14,868 and pension of $63,367, in addition to a statutory long service payment of $33,948 consistent with Hong Kong law.

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 SC PLC Group which are set out in the SC PLC Group’s 2016 Directors’ remuneration report on pages 119 to 120.

Further information on the remuneration for those directors who are also executive directors of the SC PLC Group can be found in the SC PLC Group’s 2016 Directors’ remuneration report on pages 95 to 96.

244

Standard Chartered Bank Notes to the financial statements

38. Related undertakings of the Group

As at 31 December 2016 the Group’s interests in related undertakings is disclosed below. Unless otherwise stated, the share capital disclosed comprises ordinary or common shares which are held by subsidiaries of the Group. Note 30 details undertakings that have a significant contribution to the Group’s net profit or net assets.

Subsidiaries

Subsidiaries
Name andregistered address Country of Incorporation	Descriptionofshares Proportion of shares held (%)
The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom BWA Dependents Limited United Kingdom Chartered Financial Holdings Limited United Kingdom Pembroke Aircraft Leasing (UK) Limited United Kingdom SC (Secretaries) Limited1 United Kingdom SC Leaseco Limited1 United Kingdom SC Overseas Investments Limited1 United Kingdom SC Transport Leasing 1 LTD United Kingdom SC Transport Leasing 2 Limited United Kingdom SCMB Overseas Limited1 United Kingdom Standard Chartered (GCT) Limited1 United Kingdom Standard Chartered Africa Limited United Kingdom Standard Chartered APR Limited United Kingdom Standard Chartered Debt Trading Limited1 United Kingdom Standard Chartered Health Trustee (UK) Limited1 United Kingdom Standard Chartered Leasing (UK) 3 Limited1 United Kingdom Standard Chartered Leasing (UK) Limited United Kingdom Standard Chartered Masterbrand Licensing Limited1 United Kingdom Standard Chartered NEA Limited1 United Kingdom Standard Chartered Nominees (Private Clients UK) Limited1 United Kingdom Standard Chartered Overseas Holdings Limited1 United Kingdom Standard Chartered Securities (Africa) Holdings Limited United Kingdom Standard Chartered Trustees (UK) Limited1 United Kingdom Standard Chartered UK Holdings Limited1 United Kingdom The SC Transport Leasing Partnership 12 United Kingdom The SC Transport Leasing Partnership 22 United Kingdom The SC Transport Leasing Partnership 32 United Kingdom The SC Transport Leasing Partnership 42 United Kingdom The BW Leasing Partnership 1 LP3 United Kingdom The BW Leasing Partnership 2 LP3 United Kingdom The BW Leasing Partnership 3 LP3 United Kingdom The BW Leasing Partnership 4 LP3 United Kingdom The BW Leasing Partnership 5 LP3 United Kingdom	£1.00 Ordinary shares 100
	£5.00 Ordinary shares 100 £1.00 Preference shares 100
	£1.00 Ordinary shares 100 £1.00 Ordinary shares 100 $1.00 Ordinary shares 100
	AUD1.00 Ordinary shares 100 $1.00 Ordinary shares 100
	£1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £0.10 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 $1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 £1.00 Ordinary shares 100 $1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £10.00 Ordinary shares 100 Partnership interest 100 Partnership interest 100 Partnership interest 100 Partnership interest 100 Partnership interest 99.9 Partnership interest 99.9 Partnership interest 99.9 Partnership interest 99.9 Partnership interest 99.9

245

Standard Chartered Bank Notes to the financial statements

The following company has the address at Rua Gamal Abdel Nasser, Edificio Tres Torres, Eixo Viario, Distrito Urbano da Ingombota, Municipio de Luanda, Provincia de Luanda, Angola Standard Chartered Bank Angola S.A. Angola The following company has the address of Level 5, 345 George St, Sydney NSW 2000, Australia Standard Chartered Grindlays Pty Limited1 Australia The following companies have the address of 5th Floor Standard House Bldg, The Mall, Queens Road, PO Box 496, Gaborone, Botswana Standard Chartered Bank Botswana Insurance Agency (Proprietary) Limited Botswana Standard Chartered Bank Botswana Investment Services (Pty) Limited Botswana Standard Chartered Bank Botswana Limited Botswana Standard Chartered Botswana Education Trust1,4 Botswana Standard Chartered Botswana Nominees (Proprietary) Limited Botswana The following companies have the address of Avenida Brigadeiro Faria Lima, 3600 - 7th floor, Sao Paulo, Sao Paulo, 04538-132, Brazil Standard Chartered Bank (Brasil) S.A. - Banco de Investimento1 Brazil Standard Chartered Participacoes E Assessoria Economica Ltda1 Brazil The following companies have the address at G01-02, Wisma Haji Mohd Taha Building, Jalan Gadong, BE4119, Brunei Darussalam Standard Chartered Finance (Brunei) Bhd Brunei Darussalam Standard Chartered Securities (B) Sdn Bhd1 Brunei Darussalam The following company has the address of 1155, Boulevard de la Liberté, Douala, B.P. 1784, Cameroon Standard Chartered Bank Cameroon S.A Cameroon The following company has the address of 20 Adelaide Street, Suite 1105, Toronto ON M5C 2T6, Canada Standard Chartered (Canada) Limited1 Canada The following company has the address of Maples Finance Limited, PO Box 1093 GT, Queensgate House, Georgetown, Grand Cayman, Cayman Islands SCB Investment Holding Company Limited1 Cayman Islands The following companies have the address of Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road George Town, Grand Cayman KY1-9008, Cayman Islands Standard Chartered Principal Finance (Cayman) Limited1 Cayman Islands Sirat Holdings Limited Cayman Islands The following company has the address of Mourant Ozannes Corporate Services (Cayman) Limited, Harbour Centre, 42 North Church Street, PO Box 1348, Grand Cayman KY1-1108, Cayman Islands Sunflower Cayman SPC1,5 Cayman Islands The following companies have the address of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands Cerulean Investments LP Cayman Islands Standard Chartered Saadiq Mudarib Company Limited1 Cayman Islands The following company has the address of Standard Chartered Tower, 201 Century Avenue, Pudong, Shanghai 200120, China Standard Chartered Bank (China) Limited1 China The following company has the address of Unit 5, 12th Floor, Standard Chartered Tower, World Finance, No 1 East Third Ring Middle Road, Chaoyang District, Beijing 100020, China Standard Chartered Corporate Advisory Co. Ltd China	AOK4,825.00 Ordinary shares 60 AUD Ordinary shares 100 BWP1.00 Ordinary shares 100 BWP1.00 Ordinary shares 100 BWP1.00 Ordinary shares 75.8 Interest in trust 100 BWP Ordinary shares 100 BRL Ordinary shares 100 BRL0.51 Common shares 100 BND1.00 Ordinary shares 100 BND1.00 Ordinary shares 100 XAF10,000.00 shares 100 CAD1.00 Ordinary shares 100 $0.01 A Ordinary shares 100 $1.00 Ordinary shares 100
	$0.01 Ordinary shares 91 $0.01 Preference shares 66.7
	$1.00 Management shares 100 Partnership interest 100 $1.00 Ordinary shares 100 CNY Ordinary shares 100 $1.00 Ordinary shares 100

246

Standard Chartered Bank Notes to the financial statements

The following company has the address of No. 188 Yeshen Rd, 11F, A-1161 RM, Pudong New District, Shanghai 31201308, China Standard Chartered Trading (Shanghai) Limited China The following company has the address of No. 35, Xinhuanbei Road, TEDA, Tianjin, 300457, China Standard Chartered Global Business Services Co. Limited (Previously named Scope International (China) Co. Limited ) China The following company has 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 Cote d'Ivoire The following company has the address of 8 Ecowas Avenue, PMB 259 Banjul, The Gambia Standard Chartered Bank Gambia Limited Gambia The following companies have the address of Standard Chartered Bank Building, 6 John Evans Atta Mills High Street,P.O. Box 768, Accra,Ghana Standard Chartered Bank Ghana Limited Ghana Standard Chartered Ghana Nominees Limited Ghana The following companies have the address of Bordeaux CourtLes Echelons, South Esplanade, St.Peter Port, Guernsey Birdsong Limited Guernsey Nominees One Limited Guernsey Nominees Two Limited Guernsey Songbird Limited Guernsey Standard Chartered Secretaries (Guernsey) Limited Guernsey Standard Chartered Trust (Guernsey) Limited1 Guernsey The following companies have the address of 1401 Hutchison House, 10 Harcourt Road, Hong Kong Double Wings Limited Hong Kong Kozagi Limited Hong Kong Majestic Legend Limited Hong Kong Ori Private Limited Hong Kong Rivendell Private Limited Hong Kong Standard Chartered PF Real Estate (Hong Kong) Limited Hong Kong The following company has the address of 15th Floor, Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Hong Kong Horsford Nominees Limited Hong Kong The following companies have the address of 25/F, Standard Chartered Bank Building, 4-4A Des Voeux Road Central, Hong Kong Marina Acacia Shipping Limited Hong Kong Marina Amaryllis Shipping Limited Hong Kong Marina Amethyst Shipping Limited Hong Kong Marina Ametrine Shipping Limited Hong Kong Marina Angelite Shipping Limited Hong Kong Marina Apollo Shipping Limited Hong Kong Marina Beryl Shipping Limited Hong Kong Marina Carnelian Shipping Limited Hong Kong	$15,000,000.00 Ordinary shares 100 $ Ordinary shares 100 XOF100,000.00 Ordinary shares 100 GMD1.00 Ordinary shares 74.9
	GHS Ordinary shares 69.4 GHS0.52 Preference shares 87.0
	GHS Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 HKD1.00 Ordinary shares 100 HKD10.00 Ordinary shares 100 HKD1.00 Ordinary shares 100
	$1.00 Ordinary shares 100 $1.00 A Ordinary shares 90.8
	$1.00 A Ordinary shares 84.8 HKD10.00 Ordinary shares 100 HKD Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100

247

Standard Chartered Bank Notes to the financial statements

Marina Emerald Shipping Limited Hong Kong Marina Flax Shipping Limited Hong Kong Marina Gloxinia Shipping Limited Hong Kong Marina Hazel Shipping Limited Hong Kong Marina Honor Shipping Limited Hong Kong Marina Ilex Shipping Limited Hong Kong Marina Iridot Shipping Limited Hong Kong Marina Kunzite Shipping Limited Hong Kong Marina Leasing Limited Hong Kong Marina Mimosa Shipping Limited Hong Kong Marina Moonstone Shipping Limited Hong Kong Marina Peridot Shipping Limited Hong Kong Marina Sapphire Shipping Limited Hong Kong Marina Splendor Shipping Limited Hong Kong Marina Tourmaline Shipping Limited Hong Kong Standard Chartered Leasing Group Limited Hong Kong Standard Chartered Trade Support (HK) Limited Hong Kong The following companies have the address of 13/F, Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong S C Learning Limited Hong Kong Standard Chartered Asia Limited Hong Kong The following companies have the address of 32nd Floor, 4-4A Des Voeux Road, Central, Hong Kong Standard Chartered Sherwood (HK) Limited1 Hong Kong Standard Chartered Bank (Hong Kong) Limited1 Hong Kong The following company has the address of L5 The Forum, Exchange Square, 8 Connaught Place,Central, Hong Kong Standard Chartered Global Trading Investments Limited Hong Kong The following company has the address of 20/F, Standard Chartered Bank Building, 4-4A Des Voeux Road, Central, Hong Kong Standard Chartered Private Equity Limited Hong Kong The following company has the address of 15/F, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong Standard Chartered Securities (Hong Kong) Limited Hong Kong The following company has the address of 17/F, Standard Chartered Bank Building, 4-4A Des Voeux Road, Central, Hong Kong Standard Chartered Trust (Hong Kong) Limited Hong Kong The following company has the address of Room 1305, 13/F, Shun Tak Center West Tower, 200 Connaught Road, Hong Kong Union Town Limited Hong Kong The following company has the address of 1st Floor, Europe Building, No.1, Haddows Road, Nungambakkam, Chennai, 600 006, India Standard Chartered Global Business Services Private Limited (Previously named Scope International Private Limited)1 India	$ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100
	HKD Ordinary shares 100 $ Ordinary shares 100
	$ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100
	HKD Ordinary shares 100 $ Ordinary shares 100
	$ Ordinary shares 100 $ Ordinary shares 100 HKD Ordinary shares 100 HKD Ordinary shares 100
	HKD Deferred shares 100 HKD Ordinary shares 100
	HKD Ordinary shares 100
	HKD A Ordinary shares 21.4 HKD B Ordinary shares 29.6 $ Preference shares 100
	HKD Ordinary shares 100
	HKD1.00 Ordinary shares 100 HKD Ordinary shares 100
	HKD Ordinary shares 100 HKD10.00 Ordinary shares 100 HKD1.00 Ordinary shares 100 INR10.00 Equity shares 100

248

Standard Chartered Bank Notes to the financial statements

The following companies have the address of 1st Floor, Crescenzo,Crescenzo, Plot no. C-38 & 39, G-Block, Bandra (East), Mumbai, Maharashtra, 400 051, India St Helen's Nominees India Private Limited1 India Standard Chartered (India) Modeling and Analytics Centre Private Limited1 India The following company has the address of 90 M.G.Road, II Floor, FORT, Mumbai, MAHARASHTRA, 400 001, India Standard Chartered Finance Limited1 India The following company has the address of Crescenzo, 6th Floor, Plot No 38-39, G Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra, 400051, India Standard Chartered Investments and Loans (India) Limited1 India The following company has the address of Floor no.7, Crescenzo Building, C-38/39, G" Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra, 400051, India Standard Chartered Private Equity Advisory (India) Private Limited India The following company has the address of 2nd Floor, 23-25 M.G. Road, Fort, Mumbai, 400 001, India Standard Chartered Securities (India) Limited India The following company has the address of Menara Standard Chartered, 3rd Floor, Jl. Prof.Dr. Satrio no. 164, Setiabudi, Jarkarta Selatan, Indonesia PT Standard Chartered Securities Indonesia1 Indonesia The following company has the address of Menara Standard Chartered, 7th floor, Jl. Prof. DR. Satrio No. 164, Jakarta, 12930, Indonesia PT. Price Solutions Indonesia1 Indonesia The following companies have the address of 33-41 Lower Mount Street, Dublin 2, Ireland Pembroke Aircraft Leasing 1 Limited Ireland Pembroke Aircraft Leasing 2 Limited Ireland Pembroke Aircraft Leasing 3 Limited Ireland Pembroke Aircraft Leasing 4 Limited Ireland Pembroke Aircraft Leasing 5 Limited Ireland Pembroke Aircraft Leasing 6 Limited Ireland Pembroke Aircraft Leasing 7 Limited Ireland Pembroke Aircraft Leasing 8 Limited Ireland Pembroke Aircraft Leasing 9 Limited Ireland Pembroke Aircraft Leasing 10 Limited Ireland Pembroke Aircraft Leasing 11 Limited Ireland Pembroke Aircraft Leasing 12 Limited Ireland Pembroke Aircraft Leasing Holdings Limited Ireland The following companies have the address of 1st Floor, Rose House, 51-59 Circular Road, Douglas, IM1 1RE, Isle of Man Standard Chartered Assurance Limited Isle of Man Standard Chartered Insurance Limited1 Isle of Man The following company has the address of 21/F, Sanno Park Tower, 2-11-1 Nagatacho, Chiyoda-ku, Tokyo, 100-6155, Japan Standard Chartered Securities (Japan) Limited1 Japan The following company has the address of 15 Castle Street, St Helier, JE4 8PT, Jersey SCB Nominees (CI) Limited1 Jersey	INR10.00 Equity shares 100 INR10.00 Ordinary shares 100 INR10.00 Ordinary shares 98.7 INR10.00 Ordinary shares 100 INR1,000.00 Ordinary shares 100 INR10.00 Ordinary shares 100 IDR100,000,000.00 Ordinary shares 99 $100.00 Ordinary shares 100 �1.00 Ordinary shares 100 �1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100
	$1.00 Ordinary shares 100 $1.00 Redeemable Preference shares 100
	$1.00 Ordinary shares 100 JPY50,000 Ordinary shares 100 $1.00 Ordinary shares 100

249

Standard Chartered Bank Notes to the financial statements

The following companies have the address of Standard Chartered@ Chiromo, Number 48, Westlands Road, P. O. Box 30003 - 00100, Nairobi, Kenya Standard Chartered Investment Services Limited Kenya Standard Chartered Bank Kenya Limited Kenya Standard Chartered Securities (Kenya) Limited Kenya Standard Chartered Financial Services Limited Kenya Standard Chartered Insurance Agency Limited Kenya Standard Chartered Kenya Nominees Limited Kenya The following company has the address of M6-2701, West 27Fl, Suha-dong, 26, Eulji-ro 5-gil, Jung-gu, Seoul, Korea, Republic of Resolution Alliance Korea Ltd1 Korea, Republic of The following company has the address of 47 Jongno, Jongno-gu, Seoul, 110-702, Korea, Republic of Standard Chartered Bank Korea Limited Korea, Republic of The following company has the address of 2F, 47 Jongno, Jongno-gu, Seoul, 110-702, Korea, Republic of Standard Chartered Securities Korea Limited Korea, Republic of The following company has the address of Atrium Building, Maarad Street, 3rd Floor, P.O.Box: 11-4081 Riad El Solh, Beirut, Beirut Central District, Lebanon Standard Chartered Metropolitan Holdings SAL Lebanon The following companies have the address of Level 16, Menara Standard Chartered, 30, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Amphissa Corporation Sdn Bhd1 Malaysia Cartaban (Malaya) Nominees Sdn Berhad Malaysia Cartaban Nominees (Asing) Sdn Bhd Malaysia Cartaban Nominees (Tempatan) Sdn Bhd Malaysia The following company has the address of Suite 8-3A, Menara RA, No. 18, Jalan Dataran SD2, Dataran SD, PJU 9, Bandar Sri Damansara, 52200 Kuala Lumpur, Wilayah Persekutuan, Malaysia Golden Maestro Sdn Bhd Malaysia The following companies have the address of Brumby Centre, Lot 42, Jalan Muhibbah, 87000 Labuan F.T., Malaysia Marina Morganite Shipping Limited Malaysia Marina Moss Shipping Limited Malaysia Marina Tanzanite Shipping Limited Malaysia The following company has the address of Suite 8-3A, Menara RA, No. 18, Jalan Dataran SD2, Dataran SD, PJU 9, Bandar Sri Damansara, 52200 Kuala Lumpur, Wilayah Persekutuan, Malaysia Popular Ambience Sdn Bhd Malaysia The following company has the address of 12th Floor, Menara KH, Jalan Sultan Ismail, 50250 Kuala Lumpur, Wilayah Persekutuan, Malaysia Resolution Alliance Sdn Bhd6 Malaysia The following companies have the address of Level 16, Menara Standard Chartered, 30, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia SCBMB Trustee Berhad Malaysia Standard Chartered Bank Malaysia Berhad Malaysia	KES1.00 Ordinary shares 100
	KES5.00 Ordinary shares 74.3 KES5.00 Preference shares 100
	KES10.00 Ordinary shares 100 KES20.00 Ordinary shares 100 KES100.00 Ordinary shares 100 KES20.00 Ordinary shares 100 KRW5,000.00 Ordinary shares 100 KRW5,000.00 Ordinary shares 100 KRW5,000.00 Ordinary shares 100 $10.00 Ordinary A shares 100 RM1.00 Ordinary shares 100 RM10.00 Ordinary shares 100 RM1.00 Ordinary shares 100 RM1.00 Ordinary shares 100 RM1.00 Ordinary shares 100 $ Ordinary shares 100 $1.00 Ordinary shares 100 $ Ordinary shares 100 RM1.00 Ordinary shares 100 RM1.00 Ordinary shares 91 RM10.00 Ordinary shares 100
	RM0.10 Irredeemable Cumulative Preference shares 100

250

Standard Chartered Bank Notes to the financial statements

Standard Chartered Saadiq Berhad Malaysia Price Solutions Sdn Bhd Malaysia The following company has the address of Level 7, Wisma Standard Chartered, Jalan Teknologi 8, Taman Teknologi Malaysia, 57000 Bukit Jalil, Kuala Lumpur, Wilayah Persekutuan, Malaysia. Standard Chartered Global Business Services Sdn Bhd (Previously named Scope International (M) Sdn Bhd) 1 Malaysia The following companies have the address of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands Marina Alysse Shipping Limited Marshall Islands Marina Amandier Shipping Limited Marshall Islands Marina Ambroisee Shipping Limited Marshall Islands Marina Angelica Shipping Limited Marshall Islands Marina Aquamarine Shipping Limited Marshall Islands Marina Aventurine Shipping Limited Marshall Islands Marina Buxus Shipping Limited Marshall Islands Marina Celsie Shipping Limited Marshall Islands Marina Citrine Shipping Limited Marshall Islands Marina Dahlia Shipping Limited Marshall Islands Marina Dittany Shipping Limited Marshall Islands Marina Dorado Shipping Limited Marshall Islands Marina Jessamine Shipping Limited Marshall Islands Marina Lilac Shipping Limited Marshall Islands Marina Lolite Shipping Limited Marshall Islands Marina Obsidian Shipping Limited Marshall Islands Marina Pissenlet Shipping Limited Marshall Islands Marina Poseidon Shipping Limited Marshall Islands Marina Protea Shipping Limited Marshall Islands Marina Quartz Shipping Limited Marshall Islands Marina Remora Shipping Limited Marshall Islands Marina Turquoise Shipping Limited Marshall Islands Marina Zeus Shipping Limited Marshall Islands Marina Zircon Shipping Limited Marshall Islands The following company has the address of 6th Floor, Standard Chartered Tower, 19, Bank Street, Cybercity, Ebene, 72201, Mauritius Standard Chartered Bank (Mauritius) Limited1 Mauritius The following companies have the address of c/o Abax Corporate Services Ltd, 6th Floor, Tower A, 1 CYBERCITY, Ebene, Mauritius Standard Chartered Financial Holdings Mauritius Standard Chartered Private Equity (Mauritius) II Limited Mauritius Standard Chartered Private Equity (Mauritius) Limited1 Mauritius Standard Chartered Private Equity (Mauritius) lll Limited Mauritius The following company has the address of 5th Floor, Ebene Esplanade, 24 Bank Street, Cybercity, Ebene, Mauritius Subcontinental Equities Limited Mauritius The following company has the address of Av. Julius Nyerere n. 3412, Maputo, Mozambique Standard Chartered Bank Mozambique, S.A. Mozambique	RM1.00 Ordinary shares 100
	RM1.00 Ordinary shares 100 RM1.00 Ordinary shares 100 RM1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $10.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100
	$1.00 Ordinary shares 100 $ Redeemable Preference shares 100
	$1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100

251

Standard Chartered Bank Notes to the financial statements

The following company has the address of Standard Chartered Bank Nepal Limited, Madan Bhandari Marg, Ward No.34, Kathmandu Metropolitan City, Kathmandu District, Bagmati Zone, Kathmandu, Nepal Standard Chartered Bank Nepal Limited Nepal The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Smart Application Investment B.V. Netherlands Standard Chartered Holdings (Africa) B.V. Netherlands Standard Chartered Holdings (Asia Pacific) B.V. Netherlands Standard Chartered Holdings (International) B.V. Netherlands Standard Chartered MB Holdings B.V. Netherlands The following companies have the address of 142 Ahmadu Bello Way, Victoria Island, Lagos, Nigeria Cherroots Nigeria Limited Nigeria Standard Chartered Bank Nigeria Limited Nigeria Standard Chartered Capital & Advisory Nigeria Limited Nigeria Standard Chartered Nominees (Nigeria) Limited Nigeria The following company has the address of P.O. Box No. 5556I.I. Chundrigar Road, Karachi, 74000, Pakistan Standard Chartered Bank (Pakistan) Limited1 Pakistan The following company has the address of Offshore Chambers, PO Box 217, Apia, Western Samoa Standard Chartered Nominees (Western Samoa) Limited Samoa The following company has the address of Al Faisaliah Office Tower Floor No 7 (T07D), King Fahad Highway, Olaya District, Riyadh P.O box 295522, Riyadh, 11351, Saudi Arabia Standard Chartered Capital (Saudi Arabia) 1 Saudi Arabia The following company has the address of 9 & 11, Lightfoot Boston Street, Freetown, Sierra Leone Standard Chartered Bank Sierra Leone Limited Sierra Leone The following companies have the address of 8 Marina Boulevard, Level 26, Marina Bay Financial Centre, Tower 1, 018981, Singapore Marina Aquata Shipping Pte. Ltd. Singapore Marina Aruana Shipping Pte. Ltd. Singapore Marina Aster Shipping Pte. Ltd. Singapore Marina Cobia Shipping Pte. Ltd. Singapore Marina Daffodil Shipping Pte. Ltd. Singapore Marina Fatmarini Shipping Pte. Ltd. Singapore Marina Frabandari Shipping Pte. Ltd. Singapore	NPR100.00 Ordinary shares 75 �45.00 Ordinary shares 100 �4.50 Ordinary shares 100 �4.50 Ordinary shares 100
	�4.50 Ordinary A Shares 100 �4.50 Ordinary B Shares 100 �4.50 Ordinary C Shares 100 �4.50 Ordinary D Shares 100 �4.50 Ordinary E Shares 100 �4.50 Ordinary F Shares 100 �4.50 Ordinary G Shares 100
	�4.50 Ordinary shares 100 NGN1.00 Ordinary shares 100
	NGN1.00 Irredeemable Non Cumulative Preference shares 100 NGN1.00 Ordinary shares 100 NGN1.00 Redeemable Preference shares 100
	NGN1.00 Ordinary shares 100 NGN1.00 Ordinary shares 100 PKR10.00 Ordinary shares 99 $1.00 Ordinary shares 100 SAR10.00 Ordinary shares 100 SLL1.00 Ordinary shares 80.7 $ Ordinary shares 100
	SGD Ordinary shares 100 $ Ordinary shares 100
	SGD Ordinary shares 100
	SGD Ordinary shares 100 $ Ordinary shares 100
	SGD Ordinary shares 100 $ Ordinary shares 100 $ Ordinary shares 100

252

Standard Chartered Bank Notes to the financial statements

Marina Freesia Shipping Pte. Ltd. Singapore Marina Gerbera Shipping Pte. Ltd. Singapore Marina Mars Shipping Pte. Ltd. Singapore Marina Mercury Shipping Pte. Ltd. Singapore Marina Opah Shipping Pte. Ltd. Singapore Marina Partawati Shipping Pte. Ltd. Singapore Marina Poise Shipping Pte. Ltd. Singapore The following company has the address of 7 Changi Business Park Crescent, #03-00 Standard Chartered @ Changi, 486028, Singapore Raffles Nominees (Pte.) Limited Singapore The following companies have the address of 8 Marina Boulevard, #27-01 Marina Bay Financial Centre Tower 1, 018981, Singapore SCM Real Estate (Singapore) Private Limited Singapore SCTS Capital Pte. Ltd Singapore SCTS Management Pte. Ltd. Singapore Standard Chartered (2000) Limited Singapore Standard Chartered Bank (Singapore) Limited Singapore Standard Chartered Trust (Singapore) Limited1 Singapore Standard Chartered Holdings (Singapore) Private Limited1 Singapore The following company has the address of Abogado Pte Ltd, No. 8 Marina Boulevard, #05-02 MBFC Tower 1, 018981, Singapore Standard Chartered IL&FS Management (Singapore) Pte. Limited1 Singapore The following company has the address of 9 Battery Road, #15-01 Straits Trading Building, 049910, Singapore Standard Chartered Nominees (Singapore) Pte Ltd1 Singapore The following company has the address of Marina Bay Financial Centre (Tower 1), 8 Marina Boulevard, #05-02, 018981, Singapore Standard Chartered PF Managers Pte. Limited1 Singapore The following companies have the address of Marina Bay Financial Centre (Tower 1), 8 Marina Boulevard, Level 23, 018981, Singapore Standard Chartered Real Estate Investment (Singapore) I Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) II Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) III Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) IV Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) V Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) VI Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) VII Private Limited Singapore Standard Chartered Real Estate Investment (Singapore) VIII Private Limited Singapore Standard Chartered Real Estate Investment Holdings (Singapore) Private Limited Singapore The following companies have the address of 5th Floor, 4 Sandown Valley Crescent, Sandton, Gauteng, 2196, South Africa CMB Nominees Proprietary Limited1 South Africa Standard Chartered Nominees South Africa Proprietary Limited South Africa	SGD Ordinary shares 100 $ Ordinary shares 100 SGD Ordinary shares 100 SGD Ordinary shares 100
	SGD Ordinary shares 100 $ Ordinary shares 100
	$ Ordinary shares 100 $ Ordinary shares 100 SGD Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD Ordinary shares 100 SGD Ordinary shares 100 SGD1.00 Ordinary shares 100
	SGD Ordinary shares 100 SGD Preference shares 100
	SGD Ordinary shares 100 SGD Ordinary shares 100 $1.00 Ordinary shares 50 SGD1.00 Ordinary shares 100 $1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 SGD1.00 Ordinary shares 100 ZAR1.00 Ordinary shares 100 ZAR Ordinary shares 100

Standard Chartered Nominees South Africa Proprietary Limited (RF)[1]

253

Standard Chartered Bank Notes to the financial statements

The following company has the address of 1, 2, 4, 7, 9, 10F, No.
168/170 & 8F, 12F, No.168 & B1, No. 170, Dunhua N. Rd.,
Songshan Dist., Taipei, 105, Taiwan
Standard Chartered Bank (Taiwan) Limited1	Taiwan	TWD10.00 Ordinary	100
		shares
The following companies 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 Limited	Tanzania, United	TZS1,000.00 Ordinary	100
	Republic of	shares
Standard Chartered Tanzania Nominees Limited	Tanzania, United	TZS1,000.00 Ordinary	100
	Republic of	shares
The following company has the address of 90 North Sathorn Road,
Silom, Bangrak Bangkok , 10500, Thailand
Standard Chartered Bank (Thai) Public Company Limited1	Thailand	THB10.00 Ordinary	99.9
		shares
The following company has the address of Buyukdere Cad. Yapi
Kredi Plaza C Blok, Kat 15, Levent, Istanbul, 34330, Turkey
Standard Chartered Yatirim Bankasi Turk Anonim Sirketi1	Turkey	TRL0.10 Ordinary shares	100
The following company has the address of Standard Chartered
Bank, Bldg5 Speke Road, PO Box 7111, Kampala, Uganda
Standard Chartered Bank Uganda Limited	Uganda	UGS1,000.00 Ordinary	100
		shares
The following company has the address of 625 2nd Street, #102,
San Francisco CA 94107, United States
SC Studios, LLC1	United States	$1.00 Membership	100
		Interest shares
The following companies have the address of 1111 Brickell
Avenue, Miami FL 33131, United States
StanChart Securities International, Inc. 1	United States	$0.01 Common shares	100
Standard Chartered Bank International (Americas) Limited1	United States	$1.00 Ordinary shares	100
The following companies have the address of Corporation Trust
Centre, 1209 Orange Street, Wilmington DE 19801, United States
Standard Chartered Holdings Inc.	United States	$100.00 Common shares	100
Standard Chartered Capital Management (Jersey), LLC1	United States	$ Ordinary shares	100
Standard Chartered Securities (North America) Inc. 1	United States	$0.01 Ordinary shares	100
The following company has the address of 1095 Avenue of
Americas, New York City NY, United States
Standard Chartered International (USA) Ltd. 1	United States	$100.00 Ordinary shares	100
The following company has the address of 50 Fremont Street, San
Francisco CA 94105, United States
Standard Chartered Overseas Investment, Inc.	United States	$10.00 Ordinary shares	100
The following company has the address of 1013 Centre Road,
Wilmington, Delaware, USA
Standard Chartered Trade Services Corporation	United States	$0.01 Common shares	100
The following company has the address of Room 1810-1815,
Level 18, Building 72, Keangnam Hanoi Landmark Tower, Pham
Hung Road, Cau Giay New Urban Area, Me Tri Ward, Nam Tu
Liem District, Hanoi10000, Vietnam
Standard Chartered Bank (Vietnam) Limited1	Vietnam	VND Charter Capital	100
		shares
The following companies have the address of P.O.Box 438, Palm
Grove House, Road Town, Tortola, Virgin Islands, British
California Rose Limited1	Virgin Islands, British	$1.00 Ordinary shares	90.5
Earnest Range Limited1	Virgin Islands, British	$1.00 Ordinary shares	90.5
The following companies have the address of Offshore
Incorporations Limited, P.O. Box 957, Offshore Incorporations
Centre, Road Town, Tortola, Virgin Islands, British
Sky Favour Investments Limited	Virgin Islands, British	$1.00 Ordinary shares	100
Sky Harmony Holdings Limited	Virgin Islands, British	$1.00 Ordinary shares	100

254

Standard Chartered Bank Notes to the financial statements

The following companies have the address of Standard Chartered
House, Cairo Road, Lusaka, PO BOX 32238, Zambia
Standard Chartered Bank Zambia Plc	Zambia	ZMW0.25 Ordinary	90
		shares
Standard Chartered Zambia Securities Services Nominees	Zambia	ZMK1.00 Ordinary shares	100
Limited
The following companies have the address of Africa Unitry Square
Building, 68 Nelson Mandela Avenue, Harare, Zimbabwe
Standard Chartered Asset Management Limited	Zimbabwe	$0.001 Ordinary shares	100
Standard Chartered Bank Zimbabwe Limited	Zimbabwe	$1.00 Ordinary shares	100
Standard Chartered Nominees Zimbabwe (Private) Limited	Zimbabwe	$2.00 Ordinary shares	100
Associates
			Proportion
	Country of		of shares
Name	Incorporation	Description of shares	held(%)
The following company has the address of Bohai Bank Building,
No.218 Hai He Dong Lu, Hedong District, Tianjin, China, 300012,
China
China Bohai Bank Co. Ltd11,7	China	CNY Ordinary Shares	19.99
The following company has the address of C/o CIM Corporate
Services Ltd, Les Cascades, Edith Cavell Street, Port Louis,
Mauritius
FAI Limited	Mauritius	$1.00 Ordinary shares	25
The following company has the address of Victoria House, State
House Avenue, Victoria, MAHE, Seychelles
Seychelles International Mercantile Banking Corporation Limited	Seychelles	SCR1,000.00 Ordinary	22
		shares
The following company has the address of Marina Bay Financial
Centre, 17-03, MBFC Tower 3, 12 Marina Boulevard, 018981,
Singapore
Clifford Capital Pte. Ltd1,8	Singapore	$ Ordinary Shares	9.9
The following company has the address of 442 Nguyen Thi Minh
Khai Street, Ward 5, District 3, Ho Chi Minh City, Vietnam
Asia Commercial Bank7	Vietnam	VND10,000.00 Ordinary	15
		Shares
Joint ventures
			Proportion
	Country of		of shares
Name	Incorporation	Description of shares	held(%)
The following company has the address of WTC II Building, Jalan
Jenderal Sudirman Kav29-31, Jakarta, 12920' Indonesia
PT Bank Permata Tbk1,9	Indonesia	IDR125.00 B shares	44.6
The following company has the address of 100/36 Sathorn Nakorn
Tower, Fl 21 North Sathorn Road, Silom Sub-District, Bangrak
District, Bangkok, 10500, Thailand
Resolution Alliance Limited	Thailand	THB10.00 Ordinary	49
		shares

255

Standard Chartered Bank Notes to the financial statements

Significant investment holdings

Significant investment holdings
Name Country of Incorporation	Description of shares Proportion of shares held(%)
The following company has the address of 20-22 Bedford Row, London, WC1R 4JS, United Kingdom Cyber Defence Alliance Limited1 United Kingdom The following company has the address of Corporate Services (Pty) Ltd, Plot 115, Unit 5, Kgale Mews, Kgale Hill, Gaborone, Botswana Spark Capital (Proprietary) Limited Botswana The following companies have the address of 2PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands Abacus Eight Limited1 Cayman Islands Abacus Nine Limited1 Cayman Islands Abacus Seven Limited1 Cayman Islands Abacus Ten Limited1 Cayman Islands Asia Trading Holdings Limited1 Cayman Islands The following company has the address of Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman, KY1-9005, Cayman Islands ATSC Cayman Holdco Limited Cayman Islands The following company has the address of Floor 4, Willow House, Cricket Square, PO Box 2804, Grand Cayman, KY1-1112, Cayman Islands Etonkids Educational Group Limited Cayman Islands The following companies have the address of Mourant Ozannes Corporate Services (Cayman) Limited, 94 Solaris Avenue, Camana Bay, PO Box 1348, Grand Cayman KY1-1108, Cayman Islands Standard Chartered IL&FS Asia Infrastructure (Cayman) Limited1 Cayman Islands Standard Chartered IL&FS Asia Infrastructure Growth Fund Company Ltd. 1 Cayman Islands The following company has the address of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, Cayman Islands BCC Launchpad, L.P. 1 Cayman Islands The following companies have the address of 190 Elgin Avenue, George Town, Grand Cayman, KY1-9005, Cayman Islands Greathorse Chemical Limited Cayman Islands Hygienic Holdings Group Ltd Cayman Islands	25 BWP Ordinary shares 49.90 A Shares 24.5 A Shares 24.5 A Shares 24.5 A Shares 31.2 $0.01 Ordinary shares 50
	$0.01 A Ordinary shares 5.3 $0.01 B Ordinary shares 100
	$0.001 Series A Preferred Shares 100 $0.001 Series A-1 Preferred Shares 100 $0.01 Ordinary shares 50 $1.00 Ordinary shares 50 Partnership Interest 49 $1.00 Ordinary shares 28.3 US$0.01 Redeemable Exchangeable Preferred Shares 29.319

256

Standard Chartered Bank Notes to the financial statements

The following company has the address of Zhuhaishi Jida, Jiuzhoudadao, Dont 1164 Hao, Wuzidasha, 9 Ceng-11, China Guangdong Aiyingdao Children Departmental Store Co. Ltd China The following company has the address of Unit 405A, 4/F, Building 4, No. 258 Jinzang Road, Pudong New District, Shanghai, the PRC, China Jin Li Realty (Shanghai) Co., Ltd. China The following company has the address of Unit 4, 14F Ke Chuang Building, No. 16 Buzheng Lane, Haishu District, Ningbo, China Ningbo Xingxin Real Estate Development Co.,Ltd* China The following company has the address of Room 4-405, Block 36, No.1888 Jinqiao Road, Pudong New District, Shanghai, China Shui Li Realty (Shanghai) Limited China The following company has the address of No.8 Hua Shiyuan North Road, East Lake New Technology Development Zone, Wu Han, China Ecoplast Technologies Inc China The following company has the address of 3, Floor 1, No.1, Shiner Wuxingcaiyuan, West Er Huan Rd, Xi Shan District, Kunming, Yunnan Province, PRC, China Yunnan Golden Shiner Property Development Co., Ltd. China The following company has the address of Room 1A-1, No.88 Xianxia Road, Changning District, Shanghai, China Shanghai Siyanli Industrial Co., Ltd. China The following company has the address of 3, Floor 1, No.1, Shiner Wuxingcaiyuan, West Er Huan Rd, Xi Shan District, Kunming, Yunnan Province, PRC, China Fast Great Investment Limited Hong Kong The following company has the address of 70, Nagindas Master Road, Fort, Mumbai, 400023, India Joyville Shapoorji Housing Private Limited India The following company has the address of 5th Floor, Mahindra Towers, Worli, Mumbai, 400018, India Mahindra Homes Private Limited India The following company has the address of 9th Floor, KP Platina, Racecourse, Vadodara, Gujarat-390007, India Inox India Limited India 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 Limited India The following company has the address of Elphinstone Building, 2nd Floor,10 Veer Nariman Road, Fort, Mumbai -400001, Maharashtra, India TRIL IT4 Private Limited India	CNY1.00 Common shares 20.2 Registered Capital 48.6 Registered Capital 60 Registered Capital 45 US$0.0001 Class C Preferred shares 100 Registered Capital 40 CNY Ordinary shares 39 HKD1.00 Ordinary shares 28 INR10.00 Common Equity Shares 25.8
	INR100.00 Compulsorily Convertible Debentures Series A shares 100 INR10.00 Compulsorily Convertible Preference Shares 100 INR10.00 Ordinary-A shares 50 INR10.00 Ordinary-B shares 100
	Compulsorily Convertible Preference Shares 100 Equity Shares 4.62 INR10.00 Ordinary shares 22.1 INR10.00 Ordinary shares 26

The following companies have the address of 4th Floor, St Pauls Gate, 22-24 New Street, St Helier, Jersey JE1 4TR, Jersey

257

Standard Chartered Bank Notes to the financial statements

Standard Jazeera Limited Jersey Standard Topaz Limited Jersey The following company has the address of 146-8 Chusa-ro Sinam- myeon, Yesan-gun Chungnam, Korea, Republic of Daiyang Metal Company Ltd Korea, Republic of The following company has the address of Building A 10th floor, 50, Jong-ro 1-gil, (Junghak-dong, the K Twin Tower), Jongno-gu, Seoul, Korea, Republic of Fountain Valley PFV Limited Korea, Republic of The following company has the address of Suite 8-3A, Menara RA, No. 18, Jalan Dataran SD2, Dataran SD, PJU 9, Bandar Sri Damansara, 52200 Kuala Lumpur, Wilayah Persekutuan, Malaysia House Network SDN BHD Malaysia The following company has the address of 80 Robinson Road, #02-00, 068898, Singapore Maxpower Group Pte Ltd Singapore The following company has the address of 1 Venture Avenue, #07- 07 Big Box, 608521, Singapore Omni Centre Pte. Ltd. Singapore The following company has the address of 180B Bencoolen Street, #11-00 The Bencoolen, Singapore, 189648, Singapore Crystal Jade Group Holdings Pte Ltd Singapore The following company has the address of Blk 10, Kaki Bukit Avenue 1, #07-05 Kaki Bukitr Industrial Estate, 417492, Singapore MMI Technoventures Pte Ltd Singapore The following company has the address of 81 Ubi Avenue 4, #03- 11 UB One, Singapore, 408830, Singapore Polaris Limited Singapore	USD1.00 Ordinary shares 20 USD1.00 Ordinary shares 20.1
	KRW 500 Common Shares 23.1 KRW 500 Convertible Preference Shares 100
	KRW5,000.00 Ordinary shares 47.3 RM1.00 Ordinary shares 25 US$1,000.00 Preference shares 100 $ Redeemable Convertible Preference Shares 100 $1.00 Ordinary shares 42.3 SGD Ordinary shares 50 SGD 0.01 Redeemable Preference shares 50 SGD Ordinary shares 25.8

258

Standard Chartered Bank Notes to the financial statements

In liquidation

In liquidation
Name Country of Incorporation	Description of shares Proportion of shares held(%)
The following companies have the address of Deloitte LLP, Hill House, 1 Little New Street, London, EC4A 3TR, United Kingdom Standard Chartered Capital Markets Limited1 United Kingdom Standard Chartered (CT) Limited United Kingdom Standard Chartered Corporate Finance (Canada) Limited1 United Kingdom Standard Chartered Corporate Finance (Eurasia) Limited1 United Kingdom Standard Chartered Equitor Limited United Kingdom Standard Chartered Financial Investments Limited1 United Kingdom Standard Chartered Portfolio Trading (UK) Limited1 United Kingdom Standard Chartered Receivables (UK) Limited1 United Kingdom Compass Estates Limited1 United Kingdom The following company has the address of 648-07 room, Building 2, Shanghai Zhangjiang High-tech Park, 351 Guo shoujing road, Shanghai, 201203, China SCL Consulting (Shanghai) Co. Ltd China The following company has the address of Cra 7 Nro 71-52 TA if 702, Bogata, Colombia Sociedad Fiduciaria Extebandes S.A. Colombia The following companies have the address of Schottegatweg Oost, 44, Curacao, Netherlands Antilles American Express International Finance Corp.N.V. Curaçao Ricanex Participations N.V. Curaçao The following company has the address of 8/F Eurotrade Centre, 21-23 Des Voeux Road Central, Hong Kong GE Capital (Hong Kong) Limited1 Hong Kong The following company has the address of 8th Floor, Gloucester Tower , The Landmark, 15 Queen's Road Central, Hong Kong Leopard Hong Kong Limited1 Hong Kong The following company has the address of Standard Chartered@Chiromo, Number 48, Westlands Road, P. O. Box 30003 - 00100, Nairobi, Kenya Standard Chartered Management Services Limited Kenya The following company has the address of 26 boulevard royal, 2449, Luxembourg Standard Chartered Financial Services (Luxembourg) S.A.1 Luxembourg The following company has the address of 380 Canaval y Moreyra, Lima 27, Peru, Peru Banco Standard Chartered en Liquidacion1 Peru The following companies have the address of 8 Marina Boulevard, #27-01 Marina Bay Financial Centre Tower 1, Singapore, 018981, Singapore SC2 Investments (Singapore) Private Limited Singapore Standard Chartered (1996) Limited1 Singapore Standard Chartered Investments (Singapore) Private Limited1 Singapore Standard Chartered Securities (Singapore) Pte. Limited Singapore Prime Financial Holdings Limited1 Singapore
	£1.00 Ordinary shares 100 $1.00 Ordinary shares 100
	£1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary A Shares 100 £1.00 Ordinary shares 100 $1.00 Ordinary shares 100 £1.00 Ordinary shares 100 $ Ordinary shares 100 COP1.00 Ordinary shares 100 $1,000.00 Ordinary shares 100 $1,000.00 Ordinary shares 100 HKD10.00 Ordinary shares 100 $ Ordinary shares 100 KES20.00 Ordinary shares 100 �25.00 Ordinary shares 100 $75.133 Ordinary shares 100 SGD Ordinary shares 100 SGD Ordinary shares 100 $ Ordinary shares 100 SGD Ordinary shares 100
	SGD Ordinary shares 100 $ Ordinary shares 100

259

Standard Chartered Bank Notes to the financial statements

The following company has the address of 9 Changi Business Park Crescent, Level 2, 486005, Singapore Price Solutions Singapore Pte. Ltd. Singapore The following company has the address of Quai du General Guisan 38, 8022, Zurich, Switzerland, Switzerland Standard Chartered Bank (Switzerland) S.A. 1 Switzerland The following company has the address of 6th Floor, Hewlett Packard Building, 337 Fu Hsing North Road, Taipei, Taiwan Kwang Hua Mocatta Ltd. (Taiwan) Taiwan The following companies have the address of 100/3, Sathorn Nakorn Tower, 3rd Floor, North Sathorn Road, Silom, Bangrak, Bangkok, 10500, Thailand Thai Exclusive Leasing Company Limited Thailand Standard Chartered (Thailand) Company Limited Thailand 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. 1 Uruguay The following company has the address of PO Box 957, Offshore Incorporations Centre, Road Town, Tortola, Virgin Islands, British New Group Investments Limited Virgin Islands, British Associates	SGD Ordinary shares 100
	CHF1,000.00 Ordinary shares 100 CHF100.00 Participation Capital shares 100
	TWD1,000.00 Ordinary shares 100 THB10.00 Ordinary shares 100 THB10.00 Ordinary shares 100 UYU1.00 Ordinary shares 100 $1.00 Ordinary shares 100
The following company has the address of Quadrant House, 4 Thomas More Square, London, E1W 1YW, United Kingdom MCashback Limited1 United Kingdom	£0.01 Ordinary shares 31.7

260

Standard Chartered Bank Notes to the financial statements

Liquidated in 2016

Liquidated in 2016
Name Country of Incorporation	Description of shares Proportion of shares held(%)
Harrison Lovegrove & Co. Limited United Kingdom Standard Chartered FURBS Trustee Limited United Kingdom Standard Chartered Lease Trustee Limited United Kingdom Standard Chartered Asia Real Estate Fund Company Limited Cayman Islands Standard Chartered Saadiq Certificate Company Limited Cayman Islands Gettysburg Investments LP Cayman Islands Larne Limited Hong Kong Prime Financial Limited Hong Kong Grimes Golden Limited Hong Kong Standard Chartered Life Insurance Agency Company Taiwan Taiwan Standard Chartered Insurance Agency Company Taiwan Standard Chartered Zambia Nominees Limited Zambia	£1.00 Ordinary shares 100 £1.00 Ordinary shares 100 £1.00 Ordinary shares 100 $1.00 Ordinary shares 100 $1.00 Ordinary shares 100 Partnership interest 100 HKD Ordinary shares 100 HKD Ordinary shares 100
	HKD Ordinary shares 100 $ Ordinary shares 100
	TWD10.00 Ordinary shares 100 TWD10.00 Ordinary shares 100 ZMK2.00 Ordinary shares 100

1. Directly held by parent company of the Group

2. These partnerships are included within the consolidated financial statements in accordance with Note 30. Consequently, they have taken advantage of the exemption within the

Partnerships (Accounts) Regulations 2008 (regulation 7) from filing annual financial statements

1. These partnerships are not included within the consolidated financial statements because the Group indirectly controls the General Partners, but its management role is limited to defined administrative functions over which it has no discretion. Copies of the latest financial statements will be filed with Companies House

2. No share capital by virtue of being a trust

3. Not consolidated because the Group does not actively manage the funds and activities are limited to finding funds to market. As the entity does not invest on its own account, the Group gets no benefit and suffers no risk from the investments

4. Not consolidated because the Group does not control the entity by virtue of the shareholder agreement with Orix Leasing Malaysia Bhd

5. Both are considered to be associates as described in Note 30

6. Accounted for as an associate because the Group has significant influence over the management and their financial and operational policies through our representation on their board

7. Joint management is based on significant influence over the management and their financial and operational policies derived from the joint venture agreement

261

Standard Chartered Bank Notes to the financial statements

39. IFRS 9 Financial Instruments

validating the controls and efficiency of new governance and operational processes, including those relating to systems

Classification and measurement

The Group is committed to a high quality implementation of IFRS 9. In addition to complying with the requirements of IFRS 9, the Group will seek to adhere to the Guidance on Credit Risk and the Accounting for Expected Credit Losses issued by the BCBS and will also implement the guidance issued by the IASB’s Impairment Transition Resource Group. The Group will also seek to implement the recommendations of the Enhanced Disclosure Task Force set out in their report Impact of Expected Credit Loss Approaches on Bank Risk Disclosures and those of the European Securities and Markets Authority, including the recommendations on disclosures in advance of the date of initial application.

The Group continues to assess the impact that IFRS 9 will have on its consolidated financial statements but it is not yet practicable to provide a robust and reliable estimate of the potential effect. The Group will disclose the impact of IFRS 9 when it is reliably able to do so, which will be no later than the publication of its 2017 Annual Report and Accounts. To the extent that amounts are disclosed based on a period earlier than 31 December 2017, the actual impact on initial application of IFRS 9 is likely to be different, reflecting changes in the composition of portfolios and/or different economic conditions in the interim period.

It is currently anticipated that the initial adoption of IFRS 9 would be unlikely to result in a material movement between asset measurement categories compared to IAS 39. In line with IFRS 9 requirements, all non-trading equity securities will be classified at fair value through profit or loss with all realised and unrealised gains and losses reported directly in income. The Group is not currently proposing to designate any equity securities at fair value through other comprehensive income. In respect of credit impairment provisions, the Group currently anticipate that the overall provisioning base will increase on initial adoption compared to IAS 39, with most of the increase arising from the requirement to initially recognise 12 months of expected credit losses. We currently anticipate a moderate impact from the introduction of lifetime loss provisions for non-defaulted but significantly deteriorated credit assets, in part reflecting the relatively short tenor of our Corporate and Institutional Banking portfolio. Further details to our approach is set below.

The adoption of IFRS 9 may also have a capital impact, in particular on the CET1 capital base, reflecting the anticipated increase in the stock of impairment provisions under an expected credit loss model. Further details are set out in the ‘Impact on capital planning’ section below.

Summary of IFRS 9 and implementation status

Implementation governance, strategy and milestones

The IFRS 9 programme has a full-time implementation team in place with an established plan and is one of the largest programmes within the Group. The implementation is jointly run by Finance and Risk and overseen by a Project Steering Committee, which comprises senior management from Risk, Finance and Technology. From a control perspective, the implementation programme is subject to review by Group Internal Audit and regular updates on the implementation are also provided to the Group Risk Committee and the Audit Committee. In addition, there is a Group-wide programme of education and training in place, which includes briefings with the Management Team, the Group Chief Financial Officer, Chief Risk Officer and Chief Information Officer, and independent non-executive directors. The build phase of the IFRS 9 implementation is underway and testing of the systems will take place in 2017 to embed the changes. The Group will perform a parallel assessment during the second half of 2017 to better understand the implications of IFRS 9. The parallel assessment will allow an evaluation of the impact of the new ECL models on the Group’s results, as well as

There are three measurement classifications under IFRS 9: amortised cost, fair value through profit or loss (FVTPL) and, for financial assets, fair value through other comprehensive income (FVOCI). The existing IAS 39 financial asset categories of held to maturity, loans and receivables and available-for-sale (AFS) are removed.

Financial assets are classified into these measurement classifications on the basis of the business model within which they are held, and their contractual cash flow characteristics. Financial assets can only be held at amortised cost if the instruments are held in order to collect the contractual cash flows, and where those contractual cash flows are solely payments of principal and interest (SPPI). Interest in this context represents compensation for the time value of money and associated credit risks together with compensation for other basic lending risks and costs and profit margin.

Financial asset debt instruments that have a hold to collect and sell business model and that meet the SPPI criteria are held at FVOCI, with unrealised gains or losses deferred in reserves until the asset is derecognised. In certain circumstances, non-trading equity instruments can be irrevocably designated as FVOCI but both unrealised and realised gains or losses are recognised in reserves and no amounts other than dividends are recognised in the income statement.

Financial debt instruments that would otherwise be measured at amortised cost or FVOCI can be elected at recognition to be measured at FVTPL. This election is irrevocable and is only available where the Group can demonstrate there is an accounting mismatch. All other financial assets will be held at FVTPL.

The requirements for the classification and measurement of financial liabilities were carried forward unchanged from IAS 39, including the ability to designate financial liabilities as FVTPL. However, the requirements relating to financial liabilities designated at fair value through profit or loss have been amended to require that the change in the fair value of an entity’s own credit risk is presented within other comprehensive income rather than net trading income. These amounts would not be recycled to the income statement, even on derecognition of the instrument. The Group has decided to early adopt this change (as permitted by IFRS 9) before the mandatory effective date. Please refer note 1.

The derecognition requirements under IFRS 9 have been carried forward unchanged from IAS 39. Where the contractual cash flows of a financial instrument not measured at FVTPL have been modified, however, a modification gain or loss is recognised in the income statement if the modification does not result in derecognition. The gain or loss represents the difference in the present value of the contractual cash flows as a result of the modification, discounted at the original effective interest rate.

Implementation status

The Group has completed an initial assessment of its business models and, where the business model is “hold to collect” or “hold to collect and sell”, has completed the initial analysis of the cash flow characteristics of products within those portfolios. In assessing the business models, the Group has considered, amongst other factors, what the objective of the business is, how performance is managed and how staff are rewarded. In assessing the cash flow characteristics of products, the Group has reviewed the underlying contractual terms to determine whether the SPPI criteria have been met.

The Group does not currently anticipate that there will be a material change in the measurement classifications under IFRS 9 compared to IAS 39. We expect the majority of loans and advances to banks and customers to continue to be measured at amortised cost. Debt securities classified as available-for-sale will be classified either as FVOCI or amortised cost, depending on the business model. Equity instruments will be held as FVTPL; the

262

Standard Chartered Bank Notes to the financial statements

Group is not currently proposing to designate any equity instruments as FVOCI.

Impairment

Impairment losses under IAS 39 are only recognised when a loss has been incurred. Where this is separately identified at the balance sheet date, an individual impairment provision is recognised. Where this is not separately identified, a provision is recognised based on past experience for losses that have been incurred at the balance sheet date within the portfolio but have not yet been separately identified. The Group does not currently calculate portfolio impairment provisions for AFS assets or off balance sheet exposures.

Under IFRS 9 the measurement of loan loss provisions will move from the IAS39 incurred loss model to a forward-looking ECL model. This model will be applied to all financial assets measured at amortised cost and FVOCI, lease receivables, and certain loan commitments and financial guarantees. ECL will be recognised regardless of whether a credit loss has been incurred. As a result, together with the increased scope and forward-looking nature of the ECL model, the stock of impairment provisions under IFRS9 is likely to be higher than IAS39.

Under the IFRS 9 ECL approach, an ECL provision is recognised at the time of initial recognition for all financial assets that are in the scope of ECL, including off balance sheet exposures in respect of default events that may occur over the next 12 months (so-called “stage 1 assets” with provisions equivalent to 12-months expected credit losses). ECL continues to be determined on this basis until there is either a significant increase in credit risk or the asset becomes credit impaired.

If a financial asset (or portfolio of financial assets) experiences a significant increase in credit risk since initial recognition, however, an expected credit loss provision is recognised for default events that may occur over the lifetime of the asset (so-called “stage 2 assets” with provisions equivalent to lifetime expected credit losses). A significant increase in credit risk is assessed in the context of an increase in the risk of a default occurring over the life of the financial instrument when compared to that expected at the time of initial recognition. It is not assessed in the context of an increase in the expected credit loss.

Similar to the current IAS 39 requirements for individual impairment provisions, lifetime expected credit losses are recognised for loans that are in default or are otherwise creditimpaired (so-called “stage 3 assets”).

Financial assets may be reclassified out of stage 3 if they are no longer considered credit-impaired. Financial assets in stage 2 may be reclassified to stage 1 if the conditions that led to a significant increase in credit risk no longer apply.

The measurement of expected credit losses across all stages is required to reflect an unbiased and probability weighted amount that is determined by evaluating a range of reasonably possible outcomes using reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. Where credit losses are non-linear in nature, multiple forward looking scenarios are incorporated into the range of reasonably possible outcomes. The period considered when measuring expected credit loss is the contractual term of the financial asset. However, certain revolving portfolios, including credit cards, would be measured over the period that the Group is exposed to credit risk rather than the contractual term.

As IFRS 9 ECL is more forward looking than IAS 39, the impairment charge will be susceptible to changes in period to period forecasts of macroeconomic conditions. The quantum of ECL will also be impacted by the tenor of the portfolios and expected life for revolving facilities.

For assets measured at amortised cost, the balance sheet amount reflects the gross asset less the allowance for expected credit losses. For instruments held at FVOCI, the balance sheet amount reflects the instrument’s fair value, with the expected credit loss

held as a separate reserve within other comprehensive income. Expected credit loss allowances on off-balance sheet instruments are held as liability provisions, if the ECL can be separately identified.

Implementation status

For material portfolios, the Group has adopted a sophisticated approach for determining expected credit losses that makes extensive use of credit modelling. Where available, the Group is leveraging existing advanced internal rating based (AIRB) regulatory models. For portfolios that follow a standardised regulatory approach, the Group has developed new models where those portfolios are sufficiently material. For less material portfolios, which are predominantly within Retail, the Group intends to use simplified approaches based on historical roll rates or loss rates.

The sophisticated credit models that are used to derive ECL have three main components – forward-looking probability of default (PD), loss given default (LGD) and exposure at default (EAD). These elements are defined as follows:

Probability of The probability that a counterparty will default (PD) default, calibrated over the 12 months from the reporting date (stage 1) or over the lifetime of the product (stage 2) and incorporating forward looking information. Loss given The loss that is expected to arise on default (LGD) default, incorporating forward looking information where relevant. Exposure at The expected balance sheet exposure at default (EAD) the time of default, incorporating expectations on drawdowns, amortisation, pre-payments and forward looking information where relevant.

Although the IFRS 9 models leverage the existing Basel risk components, a number of significant adjustments are required to ensure the resulting outcome is in line with the IFRS 9 requirements.

	Basel Expected Loss	IFRS 9 Expected
	(EL)	Credit Loss (ECL)
Rating	Mix of point-in-time,	Point-in-time,
philosophy	through-the-cycle or	forward looking
	hybrid
Parameters	Often conservative,	Best estimate,
calibration	due to regulatory floors	based on
	and downturn	conditions known
	calibration	at the balance
		sheet date
Timeframe	12 month period	12 month and
		lifetime
Discounting	Discounting at the	Discounting at the
	weighted average cost	effective interest
	of capital to the time of	rate (EIR) to the
	default	balance sheet
		reporting date

The PD used in assessing both significant increases in credit risk and in the overall computation of expected credit losses will incorporate the impact of forward looking economic assumptions that have an effect on credit risk, such as interest rates, unemployment rates and GDP forecasts. These factors collectively reflect the Group’s most likely view of future economic conditions across its footprint and will be consistent to those used for strategic planning purposes. In order to account for the

263

Standard Chartered Bank Notes to the financial statements

potential non-linearity in credit risk, multiple forecast economic scenarios will be also be incorporated into the PD (and other parameters, where relevant) and the calculation of ECL, conditioned on the Group’s primary economic forecasts. The Group currently intends to incorporate this aspect through the use of a Monte-Carlo based approach.

In assessing whether a financial asset or portfolio has experienced a significant increase in credit risk, the Group will consider a number of indicators across its portfolios, including changes in PD since origination, early alert watch lists and external indicators such as credit default swap spreads. As a backstop, financial assets that are 30 or more days past due will be considered to have experienced a significant increase in credit risk.

An asset is only considered credit impaired if there is observed objective evidence of impairment. These factors are similar to the current objective evidence of impairment indicators under IAS 39. This includes, among others, default, significant financial difficulty or forbearance actions (see page 149 for further information on forbearance). The Group intends to align its definition of default to the current regulatory requirements, such that all financial assets that are 90 days or more past due or are considered unlikely to pay will be considered as defaulted assets. The determination of credit-impaired ECL provisions will be similar to the current IAS 39 approach; for example, provisions within Corporate & Institutional Banking will continue to be based on the present value of estimated future cash flows for individual clients under a range of scenarios. Where these cash flows include realisable collateral, the values used will incorporate forward looking information.

The Group’s policy on write-offs is expected to remain unchanged.

Hedge accounting

Summary

IFRS 9 aligns hedge accounting more closely with risk management activities and establishes a more principle-based approach to hedge accounting. The IASB is working on a separate project to address the accounting for hedges of open portfolios, usually referred to as ‘macro hedge accounting’. Until such time as that project is complete, entities can choose between applying the hedge accounting requirements of IFRS 9 or to continue to apply the existing hedge accounting requirements in IAS 39.

Implementation status

The Group’s current expectation is that it will continue to apply the existing hedge accounting requirements in IAS 39 until there is further clarification on the IASB’s ‘macro hedge accounting’ project.

Impact on capital planning

The introduction of IFRS 9 is likely to have an impact on the Group’s capital, in particular arising from the anticipated increase in the provisioning base under an expected credit loss model compared to the current IAS 39 incurred loss approach as there are currently no changes proposed to the overall regulatory framework in response to IFRS 9 before the effective date of 1 January 2018

For IRB portfolios, the impact on capital will be mitigated to the extent that there is a current deduction for excess regulatory expected losses (EL). Where the IFRS 9 accounting provisions exceed regulatory EL, the excess accounting provisions will reduce the capital base. This means the CET 1 capital base could become more volatile as the accounting reflects current conditions whereas the regulatory EL is less volatile as it looks across the economic cycle as a whole. If regulatory EL exceeds the accounting provisions, then the current treatment continues. From a total capital perspective, if there is an excess of accounting provisions, this is added back to the Tier 2 capital base but only up to a limit of 0.6 per cent of credit risk weighted assets (RWAs).

For standardised portfolios, there will be a direct flow through to capital for any increase in provisions as there is no shortfall of regulatory EL to offset the increase. Risk weights will not be adjusted.

In October 2016 the BCBS initiated a consultation around whether a period of transition relief would be appropriate to spread the initial impact of IFRS 9 over a number of years; it also issued a discussion paper in respect of what changes in the longer term could be made to the regulatory framework given accounting will now reflect expected loss through IFRS 9.

The basis of incorporating IFRS 9 into the Group’s internal and external stress testing processes continues to be assessed.

264

Standard Chartered Bank Notes to the financial statements

40. Representation of prior year financial information

The Group in 2015 announced its intention to reorganise to better align the Group’s structure to client segments with clear local or global needs and to streamline the geographic regions. These changes became effective on 1 January 2016. This approach aligns with how the client segments and geographies are managed internally. The Group will also separately disclose profit and loss and balance sheet items that are not directly related to any client segment or geographic business and internal income earned on the Group’s capital deployed in local markets, which was previously allocated across each product line. The main changes are summarised as follows:

• Client segments: The Group’s client segments are Corporate and Institutional Banking (CIB), Private Banking, Commercial Banking and Retail Banking. CIB and Private Banking are run as global businesses while Commercial Banking and Retail Banking are run on a country basis with regional oversight. We will therefore continue to present CIB and Private Banking’s financial performance on a global basis, by product, while providing a regional geographic breakdown of the financial performance of the locally run client segments. As previously disclosed, clients from the Local Corporate sub-segment have been transferred from CIB to Commercial Banking as these clients are also managed on a local geographic basis.

• Geographic regions: As part of the Group’s reorganisation in 2015, the geographic regions were rationalised from eight to four. Each of the four new regions is represented on the Group’s Management Team by a regional Chief Executive Officer. The following table represents the relevant historical geographic disclosures to align to the new structure.

• Creation of “Central and other items”: The Group will now disclose centrally those profit and loss and balance sheet items that are not directly related to a client segment or geographic region. The disclosure of Central and other items will create greater transparency and more closely align the disclosed financial information of the business units with the way that they are managed under the new operational structure.

Central and other items for both client segments and geographies include Corporate Centre Costs, treasury activities, certain strategic investments and the UK Bank Levy. Corporate Centre Costs represent stewardship and central management services roles and activities that are not directly tied to the ongoing business and country operations, such as Group Directorate and Group support functions.

Asset and Liability Management, joint ventures and associate investments are managed in the geographies and hence are included within the applicable region. They are not managed directly by a client segment and therefore are included in Central and other items in the client segment tables.

Central and other items for geographies also include globally run businesses or activities that are managed by the client segments but not directly by geographic management. These include Principal Finance and Portfolio Management.

The tables that follow are based on profit before tax on an underlying basis and exclude restructuring charges, the impact of the credit and funding valuation adjustment methodology change, goodwill impairment, own credit adjustment and gains on disposals of businesses, unless otherwise stated

The following tables re-presents the Group’s financial results to reflect these changes for the year ended 31 December 2015. This representation has not resulted in any changes to the reported income or balances in total at a Group level.

265

Standard Chartered Bank Notes to the financial statements

	2015	2015
	Corporate & Retail Commercial Private		Central &
	Institutional Banking Banking Banking Banking		other items Total
	$million $million $million $million		$million $million
Published 2015
Operating income	8,605 5,374 831 559		- 15,369
Operatingexpenses	(5,108) (3,790) (714) (363)		(440) (10,415)
Operating profit before impairment losses and
taxation	3,497 1,584 117 196		(440) 4,954
Loan impairment	(2,638) (677) (599) (94)		- (4,008)
Other impairment	(171) (5) (7) (5)		- (188)
Profitfromassociates and jointventures	171 7 14		- 192
Profit before taxation	859 909 (475) 97		(440) 950
Customer loans and advances	121,413 94,697 24,340 15,296		5,529 261,275
Customer deposits	187,462 114,584 30,685 24,540		1,856 359,127
Transfer between segments
Operating income	(1,601) (268) 774 (25)		1,120 -
Operating expenses	770 280 (357) 22		(715) -
Operating profit before impairment losses and
taxation	831 (12) (417) 3		(405) -
Loan impairment	562 (1) (561) -		- -
Other impairment	49 5 (10) 5		(49) -
Profit from associates and joint ventures	(171) (7) (14) -		192 -
Profit before taxation	(1,271) 15 1,002 (8)		262 -
Customer loans and advances	18	- - -	(18) -
Customer deposits	-	- - -	- -
Re-presented 2015
Operating income	7,004 5,106 1,605 534		1,120 15,369
Operating expenses	(4,338) (3,510) (1,071) (341)		(1,155) (10,415)
Operating profit before impairment losses and
taxation	2,666 1,596 534 193		(35) 4,954
Loan impairment	(2,076) (678) (1,160) (94)		- (4,008)
Other impairment	(122) - (17) -		(49) (188)
Profitfromassociates and jointventures	- - - -		192 192
Profit before taxation	468 918 (643) 99		108 950
Customer loans and advances	121,395 94,697 24,340 15,296		5,547 261,275
Customer deposits	187,462 114,584 30,685 24,540		1,856 359,127

266

Standard Chartered Bank Notes to the financial statements

2015	2015	2015	2015
Greater China & North Asia ASEAN & South Asia Africa & Middle East Europe & Americas Central & others items Total
$million $million $million $million $million $million
Published 2015
Operating income 6,278 4,436 2,950 1,705 - 15,369
Operating expenses (3,989) (2,717) (1,874) (1,835) - (10,415)
Operating profit before impairment losses and
taxation 2,289 1,719 1,076 (130) - 4,954
Loan impairment (948) (1,928) (938) (194) - (4,008)
Other impairment (58) (51) (51) (28) - (188)
Profitfromassociates and jointventures 173 16 4 (1) - 192
Profit before taxation 1,456 (244) 91 (353) - 950
Customer loans and advances 106,283 86,229 31,047 37,716 - 261,275
Customer deposits 163,462 90,824 33,002 71,839 - 359,127
Transfer between segments
Operating income (201) (183) (92) 172 304 -
Operating expenses 226 96 84 448 (854) -
Operating profit before impairment losses and
taxation (25) 87 8 (620) 550 -
Loan impairment 13 (14) 94 2 (95) -
Other impairment 30 (12) 15 46 (79) -
Profit from associates and joint ventures (1) (1) (4) 1 5 -
Profit before taxation (17) (60) (113) 571 (381) -
Customer loans and advances (122) 114 23 (15) - -
Customer deposits 57 (93) 11 25 - -
Re-presented 2015
Operating income 6,077 4,253 2,858 1,877 304 15,369
Operating expenses (3,763) (2,621) (1,790) (1,387) (854) (10,415)
Operating profit before impairment losses and
taxation 2,314 1,632 1,068 490 (550) 4,954
Loan impairment (935) (1,942) (844) (192) (95) (4,008)
Other impairment (28) (63) (36) 18 (79) (188)
Profitfromassociates and jointventures 172 15 5 192
Profit before taxation 1,523 (358) 188 316 (719) 950
Customer loans and advances 106,161 86,343 31,070 37,701 - 261,275
Customer deposits 163,519 90,731 33,013 71,864 - 359,127

267

Standard Chartered Bank Glossary

Glossary
AT1 or Additional Tier 1 capital	Additional Tier 1 capital consists of instruments with no fixed maturity issued by the bank and related
	share premium that meet the Basel III criteria for inclusion in total capital.
Additional value adjustment	See Prudent valuation adjustment.
Advanced Internal Rating Based	The AIRB approach under the Basel II framework is used to calculate credit risk capital based on the
(AIRB) approach	Group’s own estimates of certain parameters.
Advances-to-deposits (ADR) ratio	The ratio of total loans and advances to customers relative to total customer deposits. A low
	advances-to-deposits ratio demonstrates that customer deposits exceed customer loans resulting
	from emphasis placed on generating a high level of stable funding from customers.
ASEAN	Association of South East Asian Nations (ASEAN) which includes the Group’s operations in Brunei,
	Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.
AUM or Assets under management	Total market value of assets such as deposits, securities and funds held by the Group on behalf of
	the clients.
Basel II	The capital adequacy framework issued by the Basel Committee on Banking Supervision (BCBS) in
	June 2006 in the form of the International Convergence of Capital Measurement and Capital
	Standards.
Basel III	Global framework issued by the BCBS in December 2010, revised in June 2011, which sets
	regulatory standards on banks’ composition of capital, counterparty credit risk, liquidity and leverage
	ratios. The new requirements will be phased in and fully implemented by 1 January 2019.
Basis point (bps)	One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent.
BCBS or Basel Committee on	A forum on banking supervisory matters which develops global supervisory standards for the
Banking Supervision	banking industry. Its members are officials from 45 central banks or prudential supervisors from 28
	countries and territories.
BIPRU	The PRA’s Prudential Sourcebook for Banks, Building Societies and Investment Firms.
CRD or Capital Requirements	The Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) that
Directive IV	implement the Basel III proposals in Europe.
Capital resources	Sum of Tier 1 and Tier 2 capital after regulatory adjustments.
CGU or cash-generating unit	The smallest identifiable group of assets that generates cash inflows that are largely independent of
	the cash inflows from other assets or groups of assets.
Claw-back	An individual is required to pay back to the Group, which has to be returned to the Group under
	certain circumstances.
Collectively assessed loan	Also known as portfolio impairment provisions (PIP). Impairment assessment on a collective basis for
impairment provisions	homogeneous groups of loans to cover losses which have been incurred but have not yet been
	identified at the balance sheet date. Typically Retail clients are assessed on a portfolio basis.
CRE or Commercial real estate	Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping
	centres, farm land, multi-family housing buildings, warehouses, garages, and industrial properties.
	Commercial real estate loans are those backed by a package of commercial real estate assets.
CET1 (Common Equity Tier 1	CET1 capital consists of the common shares issued by the Group and related share premium,
capital)	retained earnings, accumulated other comprehensive income and other disclosed reserves, eligible
	non-controlling interests and regulatory adjustments required in the calculation of CET1.
CET1 ratio	A measure of the Group's CET1 capital as a percentage of risk-weighted assets under CRD IV.
Constant currency	Constant currency change is derived by applying a simple translation of the previous period
	functional currency number in each entity using the current average and period end US dollar
	exchange rates to the income statement and balance sheet respectively.
Contractual maturity	Contractual maturity refers to the final payment date of a loan or other financial instrument, at which
	point all the remaining outstanding principal and interest is due to be paid.
CIR or Cost to income ratio	Represents the proportion of total operating expenses to total operating income.
Countercyclical capital buffer	Regulatory Capital of up to 2.5 per cent of risk-weighted assets in a given jurisdiction that is required
	to be held under Basel III rules to ensure that banks build up surplus capital when macroeconomic
	conditions indicate excess credit growth.
Counterparty credit risk	The risk that counterparty defaults before satisfying its obligations under a contract.
Cover ratio	Represents the extent to which non-performing loans are covered by impairment allowances.
CCF or Credit Conversion Factor	An estimate of the amount the Group expects a customer to have drawn down further on a facility
	limit at the point of default, either prescribed by BIPRU or modelled by the Group.
CDS or credit default swaps	A credit derivative 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 institutions	An institution whose business is to receive deposits or other repayable funds from the public and to
	grant credits for its own account.

268

Standard Chartered Bank Glossary

Glossary
Credit risk mitigation	Credit risk mitigation is a process to mitigate potential credit losses from any given account,
	customer or portfolio by using a range of tools such as collateral, netting agreements, credit
	insurance, credit derivatives and other guarantees.
CVA or credit valuation adjustments	An adjustment to the fair value of derivative contracts that reflects the possibility that the
	counterparty may default such that the Group would not receive the full market value of the
	contracts.
Customer deposits	Money deposited by all individuals and companies which are not credit institutions including
	securities sold under repurchase agreement (see repo/reverse repo). Such funds are recorded as
	liabilities in the Group’s balance sheet under customer accounts.
DVA or debit valuation	An adjustment to the fair value of derivative contracts that reflect the possibility that the Group may
adjustment	default and not pay the full market value of contracts.
Debt securities	Debt securities are assets on the Group’s balance sheet and represent certificates of indebtedness
	of credit institutions, public bodies or other undertakings excluding those issued by central banks.
Debt securities in issue	Debt securities in issue are transferrable certificates of indebtedness of the Group to the bearer of
	the certificate. These are liabilities of the Group and include certificates of deposits.
DTA or 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 liability that will result in tax deductible amounts in future
	periods, the carry-forward of tax losses or the carry-forward of unused tax credits.
DTL or deferred tax liability	Income taxes payable in future periods in respect of taxable temporary differences between the
	accounting and tax base of an asset or liability that will result in taxable amounts in future periods.
Defined benefit obligation	The present value of expected future payments required to settle the obligations of a defined benefit
	scheme resulting from employee service.
Defined benefit scheme	Pension or other post-retirement benefit scheme other than a defined contribution scheme.
Defined contribution scheme	A pension or other post-retirement benefit scheme where the employer’s obligation is limited to its
	contributions to the fund.
Delinquency	A debt or other financial obligation 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 institutions by the
	Group including securities sold under repo.
Dividend 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.
Effective tax rate	The tax on profit/ (losses) on ordinary activities as a percentage of profit/ (loss) on ordinary activities
	before taxation.
Encumbered assets	On-balance sheet assets pledged or used as collateral in respect of certain of the Group’s liabilities.
EU or European Union	The European Union (EU) is a political and economic union of 28 member states that are located
	primarily in Europe.
Eurozone	Represents the 19 EU countries that have adopted the euro as their common currency.
Expected loss	The Group measure of anticipated 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
	anticipated loss based on Probability 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 estimation of the extent to which 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 principal, so that exposure is typically
	less than the approved loan limit.
ECAI or External Credit Assessment	For the standardised approach to credit risk for sovereigns, corporate and institutions, external
Institutions	ratings are used to assign riskweights. These external ratings must come from PRA approved rating
	agencies, known as External Credit Assessment Institutions; which are Moody’s, Standard & Poor’s
	and Fitch.
FCA or Financial Conduct Authority	The Financial Conduct Authority regulates the conduct of financial firms and, for certain firms,
	prudential standards in the UK. It has a strategic objective to ensure that the relevant markets
	function well.
Forbearance	Forbearance takes place when a concession is made to the contractual terms of a loan in response
	to an obligor’s financial difficulties. The Group classifies such modified loans as either ‘Forborne – not
	impaired loans’ or ‘Loans subject to forbearance – impaired’. Once a loan is categorised as either of
	these, it will remain in one of these two categories until the loan matures or is otherwise
	derecognised.
Forborne – not impaired loans	Loans where the contractual terms have been modified due to financial difficulties of the borrower,
	but the loan is not considered to be impaired. See ‘Forbearance’.
Free deliveries	A transaction in which securities, foreign currencies or commodities have been paid for before
	receiving them or where securities, foreign currencies or commodities have been delivered before
	receiving payment for them.

269

Standard Chartered Bank Glossary

Free funds Free funds include equity capital, retained reserves, current year unremitted profits and capital injections net of proposed dividends. It does not include debt capital instruments, unrealised profits or losses or any non-cash items. Funded/unfunded exposures Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where there is a commitment to provide future funding is made but funds have been released/ not released. FVA or Funding valuation FVA reflects an adjustment to fair value in respect of derivative contracts that reflect the funding adjustments costs that the market participant would incorporate when determining an exit price. G-SIBs or Global Systemically Global financial institutions whose size, complexity and systemic interconnectedness mean that their Important Banks distress or failure would cause significant disruption to the wider financial system and economic activity. The Financial Stability Board established a methodology to identify G-SIBs in November 2011 based on 12 principal indicators. Designation will result in the application of a CET1 buffer. The list of G-SIBs is re-assessed through annual re-scoring of banks and a triennial review of the methodology. Designation will result in the application of a CET1 buffer between 1% and 3.5%, to be phased in by 1 January 2019. G-SIB buffer A capital buffer prescribed in the EU under CRD IV, to address risks in the financial sector as a whole, or one or more sub-sectors, to be deployed as necessary by each EU member state with a view to mitigate structural macro-prudential risk. Impaired loans Loans where individual identified impairment provisions have been raised and also include loans which are collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing. Impairment allowances A provision held on the balance sheet as a result of the raising of a charge against profit for the incurred loss. An impairment allowance may either be identified or unidentified and individual (specific) or collective (portfolio). IIP or Individually assessed loan Impairment that is measured for assets that are individually significant to the Group. Typically assets impairment provisions within the Corporate & Institutional Banking segment of the Group are assessed individually. Interest rate risk The risk of an adverse impact on the Group’s income statement due to changes in interest rates. IRB approach or internal ratingsUsed to calculate risk-weighted assets in accordance with the Basel Capital Accord where capital based approach requirements are based on a firm’s own estimates of certain parameters. IMA approach or internal model The approach used to calculate market risk capital and RWA with an internal market risk model approach approved by the PRA under the terms of CRD IV/CRR. IAS or International Accounting A standard that forms part of the International Financial Reporting Standards framework. Standard IASB or International An independent standard-setting body responsible for the development and publication of IFRS, and Accounting Standard Board approving interpretations of IFRS standards that are recommended by the IFRS Interpretations

An independent standard-setting body responsible for the development and publication of IFRS, and approving interpretations of IFRS standards that are recommended by the IFRS Interpretations Committee (IFRIC). A set of international accounting standards developed and issued by the International Accounting Standards Board, consisting of principles-based guidance contained within IFRSs and IASs. All companies that have issued publicly traded securities in the EU are required to prepare annual and interim reports under IFRS and IAS standards that have been endorsed by the EU. The IFRS Interpretations Committee supports the IASB in providing authoritative guidance on the accounting treatment of issues not specifically dealt with by existing IFRSs and IASs. A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB. A ratio introduced under CRD IV that compares Tier 1 capital to total exposures, including certain exposures held off balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk based backstop measure. Ratio of total liquid assets to total assets. Liquid assets comprise cash (less restricted balances), net interbank, treasury bills and debt securities less illiquid securities.

IFRS or International Financial Reporting Standards

IFRIC

Investment grade

Leverage ratio

Liquid Asset Ratio Ratio of total liquid assets to total assets. Liquid assets comprise cash (less restricted balances), net interbank, treasury bills and debt securities less illiquid securities. Liquidation portfolio A portfolio of assets which is beyond our current risk appetite metrics and is held for liquidation. LCR or Liquidity Coverage Ratio The ratio of the stock of high quality liquid assets to expected net cash outflows over the following 30 days. High quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. Loans and advances 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. Loans to banks Amounts loaned to credit institutions including securities 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 determining the appropriate 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 including those on which partial payments are being made. Loans subject to forbearance – Loans where the terms have been renegotiated on terms not consistent with current market levels impaired due to financial difficulties of the borrower. Loans in this category are necessarily impaired. See ‘Forbearance’. LGD or loss given default The percentage of an exposure that a lender expects to lose in the event of obligor default.

270

Standard Chartered Bank Glossary

Glossary
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 specific crystallised risk, behaviour, conduct or adverse
	performance outcome.
Master netting agreement	An agreement between two counterparties that have multiple derivative contracts with 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 termination of, any one contract.
Mezzanine capital	Financing that combines debt and equity characteristics. For example, a loan that also confers some
	profit participation to the lender.
MREL or minimum requirement for	A requirement under the Bank Recovery and Resolution Directive for EU resolution authorities to set
own funds and eligible liabilities	a minimum requirement for own funds and eligible liabilities for banks. Similar to Total Loss
	Absorbing Capacity, MREL is intended to ensure there is sufficient equity and specific types of
	liabilities to facilitate an orderly resolution that minimises any impact on financial stability and ensures
	the continuity of critical functions and avoids exposing taxpayers to loss.
Net asset value (NAV) per share	Ratio of net assets (total assets less total liabilities) to the number of ordinary 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 impairment
	provisions, restricted balances with central banks, derivatives (net of master netting agreements),
	investment debt and equity securities, and letters of credit and guarantees.
NII or net interest income	The difference between interest received on assets and interest paid on liabilities.
NIM or net interest margin	Net interest income divided by average interest earning assets.
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 liquidity measure designed to restrain the amount
	of wholesale borrowing and encourage stable funding over a one year time horizon.
NPLs or non-performing loans	Any loan that is more than 90 days past due or is otherwise individually impaired, other than a loan
	which is: (a) renegotiated before 90 days past due, and on which no default in interest payments or
	loss of principal is expected; or (b) renegotiated at or after 90 days past due, but on which there has
	been no default in interest or principal payments for more than 180 days since renegotiation, and
	against which no further loss of principal is expected.
Normalised items	See ‘Underlying earnings’.
OTC or over-the-counter derivatives	A bilateral transaction (e.g. derivatives) 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 possibility that the Group may default and not pay the full market value of the contracts.
Pillar 1	The first pillar of the three pillars of Basel II/Basel III which provides the approach to calculation of the
	minimum capital requirements for credit, market and operational risk.
Pillar 2	The second pillar of the three pillars of Basel II/Basel III 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 mitigants are not available.
Pillar 3	The third pillar of the three pillars of Basel II/Basel III which 3 aims to provide a consistent and
	comprehensive disclosure framework that enhances comparability between banks and further
	promotes improvements in risk practices.
PIP or portfolio impairment	See ‘Collectively Assessed Loan Impairment Provisions.’
provisions
Private equity investments	Equity securities 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 institutional investors and used to fund investment strategies such as
	leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
PD or Probability of default	PD is an internal estimate for each borrower grade of the likelihood that an obligor will default on an
	obligation.
Profit (loss) attributable to ordinary	Profit (loss) for the year after non-controlling interests and dividends declared in respect of preference
shareholders	shares classified as equity.
PVA or prudent valuation	A deduction from CET1 capital, to reflect the difference between fair value and prudent value
adjustment	positions, where the application of prudence results in a lower absolute carrying value than
	recognised in the financial statements.
PRA or Prudential Regulation	The Prudential Regulation Authority is the statutory body responsible for the prudential supervision of
Authority	banks, building societies, credit unions, insurers and a small number of significant investment firms in
	the UK. The PRA is a part of the Bank of England.
Repo/reverse repo	A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell
	a financial asset, such as asset backed securities 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.
Residential mortgage	A loan to purchase a residential property which 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.

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Standard Chartered Bank Glossary

Glossary
RoE or Return on equity	Represents the ratio of the current year’s profit available for distribution to ordinary shareholders to
	the weighted average ordinary shareholders equity for the reporting period.
RoRWA or return on risk-weighted	Profit before tax for year as a percentage of RWA. Profit may be statutory or underlying and is
assets	specified where used. See ‘RWA’ and ‘underlying’.
RWA or risk-weighted assets	A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in
	accordance with the Basel Capital Accord as implemented by the PRA.
Risk capital adjusted profit	A risk-adjusted, profit-based funding mechanism. This is applied as a combination of automatic
	adjustments and other adjustments determined by the Remuneration Committee for specific risk and
	control matters that are not already taken into account through automatic adjustments.
Risks-not-in-VaR (RNIV)	A framework for identifying and quantifying marginal 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 historical
	market data not being available.
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 origination. All other secured loans are considered to be partly secured.
Securitisation	Securitisation is a process by which debt instruments are aggregated into a pool, which is used to
	back new securities. A company sells assets to a special purpose entity (SPE) which then issues
	securities backed by the assets based on their value. This allows the credit quality of the assets to be
	separated from the credit rating of the original company and transfers risk to external investors.
Senior debt	Debt that takes priority over other unsecured or otherwise more ‘junior’ debt owed by the issuer.
	Senior debt has greater seniority in the issuer’s capital structure after subordinated debt. In the event
	the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any
	payment.
Sovereign exposures	Exposures to central governments and central government departments, central banks and entities
	owned or guaranteed by the aforementioned. Sovereign exposures, as defined by the European
	Banking Authority, include only exposures to central governments.
Standardised approach	In relation to credit risk, a method for calculating credit risk capital requirements using External Credit
	Assessment Institutions (ECAI) ratings and supervisory risk weights. In relation to operational risk, a
	method of calculating the operational capital requirement by the application of a supervisory defined
	percentage charge to the gross income of eight specified business lines.
Stressed value at risk	A regulatory market risk measure based on potential market movements for a continuous one-year
	period of stress for a trading portfolio.
Structured note	An investment tool which pays a return linked to the value or level of a specified asset or index and
	sometimes offers capital protection if the value declines. Structured notes can be linked to equities,
	interest rates, funds, commodities and foreign currency.
Subordinated liabilities	Liabilities which, in the event of insolvency or liquidation 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 Additional Tier 1 capital.
Tier 1 capital ratio	Tier 1 capital as a percentage of risk-weighted assets.
Tier 2 capital	Tier 2 capital comprises qualifying subordinated liabilities, allowable portfolio impairment provisions
	and unrealised gains in the eligible revaluation reserves arising from the fair valuation of equity
	instruments held as available-for-sale.
TLAC or Total Loss Absorbing	A standard which recommends that GSIBs hold sufficient equity and specified liabilities which can be
Capacity	used to absorb losses and recapitalise a bank in resolution. It is intended to facilitate an orderly
	resolution that minimises any impact on financial stability, ensures the continuity of critical functions,
	and avoids exposing taxpayers to loss.
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 equities and liabilities on the Group’s
	consolidated balance sheet date. Key exclusions from chargeable equities and liabilities include Tier
	1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and
	liabilities subject to netting.
Underlying earnings	The Group’s statutory performance adjusted for profits or losses of a capital nature; amounts
	consequent to investment transactions driven by strategic intent; and other infrequent and/or
	exceptional transactions that are significant or material in the context of the Group’s normal business
	earnings for the period, and items which management and investors would ordinarily identify
	separately when assessing performance period-by-period. A reconciliation between underlying and
	statutory performance is on page 27.
VaR or Value at Risk	An estimate of the potential loss which might arise from market movements under normal market
	conditions, if the current positions were to be held unchanged for one business day, measured to a
	confidence level of 97.5 per cent.
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 identified as impaired and is subject to an impairment allowance, the
	stage may be reached whereby it is concluded that there is no realistic prospect of further recovery.
	Write 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
	derivative financial instruments. See ‘CVA’, ‘DVA’ and ‘FVA’.

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