Standard Chartered PLC

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Connecting the world’s most dynamic markets  We are a leading internat ional cross-border bank Standard Chartered connects the world’s most dynamic markets, serving the businesses that are the engines of global growth and supporting people to meet their ambit ions. Every day, we help clients to manage and invest their ﬁnances safely and seamlessly, and grow their businesses and wealth with conﬁdence. Over our 170 year history, and across a unique geographical footprint that connects Asia, Africa and the Middle East to each other and the world, we’ve built a bank like no other, with diverse capabil it ies and partnerships that set us apart. Inspired by our brand promise, we are here for good. Strategic report Financ ial KPIs 1 Return on tangible equity 10.1 % 240 bps Underlying basis 8.4 % 160 bps Reported basis Common Equity Tier 1 ratio 14.1 % 10bps Above our 13-14 per cent target range Total shareholder return 9.4 % 2022: 41.4% Non-ﬁnancial KPIs 2 Divers ity and inclus ion: women in senior roles 4 32.5 % 0.4ppt Mobil is ing Sustainable Finance $ $87.2bn $29.8bn Employee net promoter score (eNPS) 25.86 8.31 points Other ﬁnancial measures 1, 3 Operating income $17,378 m 13% Underlying basis $18,019 m 10% Reported basis Proﬁt before tax $5,678 m 27% Underlying basis $5,093 m 24% Reported basis Earnings per share 128.9 cents 31.0 cents Underlying basis 108.6 cents 22.7 cents Reported basis 1 Reconcil iat ions from underlying to reported and deﬁn it ions of alternative performance measures can be found on pages 80 to 87 2 For more informat ion on our culture of inclus ion see page 24, and for more on our Susta inab il ity Aspirat ions see page 66 3 Year-on-Year growth on Operating Income and Proﬁt before tax is on constant currency basis 4 Senior leadership is deﬁned as Managing Directors and Band 4 roles (includ ing Management Team) Stakeholders Throughout this report, we use these icons to represent the different stakeholder groups for whom we create value. Clients Regulators and governments Investors Suppliers Society Employees Tangible net asset value per ordinary share $13.93 12% 01 Standard Chartered – Annual Report 2023 Strategic report Strategic report 02 Who we are and what we do 04 Where we operate 06 Group Chairman’s statement 10 Group Chief Executive’s review 14 Key performance ind icators 16 Market environment 20 Business model 24 Our strategy 26 Our Stands 28 Client segment reviews 31 Regional reviews 34 Group Chief Financ ial Ofﬁcer’s review 44 Group Chief Risk Ofﬁcer’s review 52 Stakeholders and Sustainab il ity overview 80 Underlying versus reported results reconcil iat ions 86 Alternative performance measures 88 Viab il ity statement Sustainab il ity review 92 Sustainab il ity review 94 Sustainab il ity Aspirat ions 99 Sustainab il ity Strategic Pillars 120 Climate- and sustainab il ity-related governance 125 Managing Environmental and Social Risk 126 Managing Climate Risk 130 Integrity, conduct and ethics Directors’ report 136 Group Chairman’s governance overview 137 Board of Directors 142 Management Team 145 Corporate governance 182 Directors’ remuneration report 208 Addit ional remunerat ion disclosures 217 Other disclosures 229 Statement of Directors’ responsib il it ies Risk review and Capital review 234 Risk proﬁle 298 Climate risk 314 Enterprise Risk Management Framework 320 Princ ipal r isks 338 Capital review Financ ial statements 346 Independent Auditor’s report 359 Financ ial statements 366 Notes to the ﬁnancial statements Supplementary informat ion 490 Supplementary ﬁnancial informat ion 498 Supplementary people informat ion 504 Supplementary sustainab il ity informat ion 517 Shareholder informat ion 521 Main awards and accolades in 2023 523 Glossary In this report Unless another currency is specif ied, the word ‘dollar’ or symbol ‘$’ in this document means US dollar and the word ‘cent’ or symbol ‘c’ means one-hundredth of one US dollar. Disclosures in the Strategic report, Sustainab il ity review, Directors’ report, Risk review and Capital review and Supplementary informat ion are unaudited unless otherwise stated. Unless context requires with in the document, ‘China’ refers to the People’s Republic of China and, for the purposes of this document only, excludes Hong Kong Special Admin istrat ive Region (Hong Kong), Macau Special Admin istrat ive Region (Macau) and Taiwan. ‘Korea’ or ‘South Korea’ refers to the Republic of Korea. Asia includes Australia, Bangladesh, Brunei, Cambodia, India, Indonesia, Laos, Malaysia, Myanmar, Nepal, Phil ipp ines, Singapore, Sri Lanka, Thailand, Vietnam, Mainland China, Hong Kong, Japan, Korea, Macau, Taiwan; Africa and Middle East (AME) includes Bahrain, Botswana, Côte d’Ivoire, Egypt, Ghana, Iraq, Kenya, Maurit ius, Niger ia, Oman, Pak istan, Qatar, Saudi Arabia, South Africa, Tanzania, UAE, Uganda, and Zambia; and Europe & Americas (EA) include Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Israel, Jersey, Poland, Sweden, Türkiye, the UK, and the US. With in the tables in this report, blank spaces ind icate that the number is not disclosed, dashes ind icate that the number is zero and ‘nm’ stands for not meaningful. Standard Chartered PLC is incorporated in England and Wales with lim ited l iab il ity, and is headquartered in London. The Group’s head ofﬁce provides guidance on governance and regulatory standards. Standard Chartered PLC. Stock codes are: LSE STAN.LN and HKSE 02888. Sustainab il ity and ESG reporting The Group includes Environmental, Social and Governance (ESG) and sustainab il ity informat ion in this Annual Report, provid ing investors and stakeholders with an understanding of the impl icat ions of relevant sustainab il ity-related risks and opportunit ies, and progress against our object ives. We have observed our obligat ions under: ( i) sections 414CA and 414CB of the UK Companies Act 2006; (i i) the UK’s Financ ial Conduct Author ity’s List ing Rules in respect of climate-related disclosures; and (i i i) the ESG Reporting Guide contained in Appendix C2 to the Rules Governing the List ing of Secur it ies on the Stock Exchange of Hong Kong Lim ited. We have made d isclosures consistent with the Task Force on Climate-Related Financ ial D isclosures (TCFD) recommendations and recommended disclosures throughout this Annual Report. In preparing this report we have given considerat ion to (but do not align in full with) the guidance provided by the International Sustainab il ity Standards Board (ISSB) Standards ﬁnalised in 2023: IFRS S1 and IFRS S2, noting that IFRS S2, although largely based on TCFD, requires a more granular level of disclosure. IFRS S1 and S2 are voluntary standards and compliance is not yet required in the Group’s list ing locat ions. Addit ionally, we publ ish an ESG reporting index against the voluntary Global Reporting Init iat ive (GRI) Universal Standards and select GRI Topic Standards, and the World Economic Forum Stakeholder Capital ism Metrics framework. The Group’s sustainab il ity-related disclosures can be accessed via sc.com/sustainab il ityhub Alternative performance measures The Group uses a number of alternative performance measures in the discuss ion of its performance. These measures exclude certain items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison. They provide the reader with ins ight into how management measures the performance of the business. For more informat ion on Standard Chartered please vis it sc.com All informat ion presented in the Chairman, CEO and CFO statements are on an underlying basis unless otherwise stated. A reconcil iat ion from underlying to reported and deﬁnit ions of alternative performance measures can be found on pages 80 to 87. About this report p 10 Stakeholders and Sustainab il ity overview p 31 p 52 p 28 Regional reviews Group Chief Executive’s review Client segment reviews Our strategy p 24 02 Standard Chartered – Annual Report 2023 Strategic report Who we are Who we are and what we do 1. 2. 3. Total operating income $17,378m Underlying basis $18,019m Reported basis Our client segments Global functions Enabling and supporting our businesses Conduct, Financ ial Cr ime and Compliance Partners internally and externally to achieve the highest standards in conduct and compliance to enable a sustainable business and to ﬁght ﬁnancial cr ime. Corporate Affairs, Brand and Marketing Manages the Group’s marketing and communicat ions and engagement with stakeholders to promote and protect the Group’s reputation, brand and services. Group Chief Financ ial Ofﬁcer Comprises seven support functions: Finance, Treasury, Strategy, Investor Relations, Corporate Development, Supply Chain Management and Property. The leaders of these functions report directly to the Group Chief Financ ial Ofﬁcer. Group Internal Audit An independent function whose primary role is to help the Board and Management Team protect the assets, reputation and sustainab il ity of the Group. Human Resources Maxim ises the value of investment in people through recruitment, development and employee engagement. Legal Provides legal advice and support to the Group to manage legal risks and issues. Risk Responsible for the overall second- line-of-defence responsib il it ies related to risk management, which involves oversight and challenge of risk management actions of the ﬁrst line. Transformation, Technology & Operations Responsible for leading bank-wide transformation and for reshaping the Group’s systems and technology platforms to ensure we provide robust, responsive, and innovat ive technology and dig ital solut ions. Also manages all client operations, seeking to provide an optimal client service and experience across the board. Our client-facing businesses are supported by our global functions, which work together to ensure the Group’s operations run smoothly and consistently. Our Purpose is to drive commerce and prosperity through our unique divers ity. We serve three cl ient segments in three regions, supported by eight global functions. 1. Corporate, Commercial & Institut ional Bank ing Supporting clients with their transaction banking, ﬁnanc ial markets, corporate ﬁnance and borrowing needs, Corporate, Commercial & Institut ional Bank ing provides solutions to nearly 20,000 clients in the world’s fastest-growing economies and most active trade corridors. $11,218m Underlying basis $11,788m Reported basis 2. Consumer, Private & Business Banking Serving more than 11 mill ion ind iv iduals and small businesses, Consumer, Private & Business Banking focuses on the afﬂuent and emerging afﬂuent in many of the world’s fastest-growing economies. $7,106m Underlying basis $7,151m Reported basis 3. Ventures Ventures promotes innovat ion, invests in disrupt ive ﬁnancial technology and explores alternative business models. It represents a diverse portfolio of over 30 ventures and more than 20 investments $156m Underlying basis $156m Reported basis 4. Central and other items $(1,102)m Underlying basis $(1,076)m Reported basis Operating income 03 Standard Chartered – Annual Report 2023 Strategic report 1. 2. 3. 4. Valued behaviours Our regions Total operating income $17,378m Underlying basis $18,019m Reported basis Better together Do the right thing Never settle • Continuously improve and innovate • Simpl ify • Learn from your successes and failures • See more in others • “How can I help?” • Build for the long term • Live with integr ity • Think client • Be brave, be the change Our valued behaviours are the guid ing pr inc iples for how we work together, and the way we do business, every day. 1. Asia We are present in 21 markets, includ ing Hong Kong and Singapore which contribute the highest income. $12,429m Underlying basis $12,651m Reported basis 2. Africa and Middle East We have a presence in 18 markets of which the most sizeable by income are UAE, Pakistan, Kenya, Niger ia, South Afr ica and Ghana. $2,806m Underlying basis $2,924m Reported basis 3. Europe and the Americas Centred in London, with a growing presence across continental Europe, and New York, we operate in both North America and several markets in Latin America. $1,397m Underlying basis $1,702m Reported basis 4. Central and other items $746m Underlying basis $742m Reported basis Operating income 04 Standard Chartered – Annual Report 2023 Strategic report Where we operate We operate in the world’s most dynamic markets which set the pace for global growth and prosperity. Our unique geographic footprint connects high-growth and emerging markets in Asia, Africa and the Middle East with more established economies in Europe and the Americas, allowing us to channel capital to where it’s needed most. For more than 170 years, we have used the power of our network to maxim ise opportun it ies for people and businesses who trade, operate or invest in these regions. Our diverse experience, capabil it ies and culture set us apart.  We are present in 52 markets  Where we operate We have a long-standing and deep franchise in some of the world’s fastest- growing economies. Our Asia region generates two-thirds of our income. The two markets contribut ing the h ighest income are Hong Kong and Singapore . Australia Bangladesh Brunei Cambodia Hong Kong India Indonesia Japan Korea Laos Macau Mainland China Malaysia Myanmar Nepal Phil ipp ines Singapore Sri Lanka Thailand Vietnam Taiwan Asia Read more on page 31 05 Standard Chartered – Annual Report 2023 Strategic report We support clients in Europe and the Americas through hubs in London and New York and have a strong presence in several European and Latin American markets. Argentina Brazil Colombia Falkland Islands France Germany Israel Jersey Poland Sweden Türkiye UK US We have a deep-rooted heritage in Africa and the Middle East. The United Arab Emirates, Pakistan, Kenya, Niger ia, South Africa, and Ghana are our largest markets by income. Bahrain Botswana Côte d’Ivoire Egypt Ghana Iraq Kenya Maurit ius Niger ia Oman Pakistan Qatar Saudi Arabia South Africa Tanzania UAE Uganda Zambia Africa and the Middle East Europe and the Americas Read more on page 32 Read more on page 33 Group Chairman’s statement  Embedding a culture of excellence to deliver sustained value  Dr José Viñals Group Chairman Strategic report Group Chairman’s statement 06 Standard Chartered – Annual Report 2023 07 Standard Chartered – Annual Report 2023 Strategic report During 2023, the Group continued to improve proﬁtab il ity, deliver ing on our objective to ach ieve a double-dig it return on tangible equity (RoTE) for the full year. Our high-growth markets, where we are intent on making further investment, continue to deliver strongly despite an uncertain picture for the global economy. This performance came against a backdrop of ris ing interest rates in many large economies, which undoubtedly gave a strong tailw ind for the bus iness. However, it is also a product of our clear strategy, disc ipl ine and tireless execution – a sign iﬁcant ach ievement for our colleagues, led by our Group Chief Executive, Bill Winters, and his Management Team. Their skills and dedicat ion rema in essential to our performance, and my deepest thanks go to all of them. We have recently bid a fond farewell to Andy Halford, who formally stepped down as Group Chief Financ ial Ofﬁcer on 3 January 2024. Since his arrival in the role in 2014, Andy has been a much-valued colleague and friend and made a phenomenal contribut ion by help ing to steer the business through a challenging external environment. Under his watch we strengthened our foundations, reset our risk appetite and redeﬁned the Group’s strategy. He leaves with our very best wishes, and will continue in an advisory role until his retirement in August. It is with pleasure that we welcome Diego De Giorg i who joins us as Andy’s successor. I am look ing forward to working closely with Diego and Bill to drive further excellence for clients and higher value for shareholders. Advancing our strategic and ﬁnanc ial goals I have said before that our object ive is to grow income in a strong, safe and sustainable manner, while mainta in ing both cost and capital disc ipl ine, and I am delighted to say that was the case last year. We are conﬁdent that our improved RoTE, which reached 10.1 per cent in 2023, will be a milestone on the way to further long-term success for the Group, underpinned by strong performance across the business. We grew income 13 per cent on a constant currency basis while mainta in ing a strong capital and liqu id ity posit ion and pos it ive income-to- cost jaws. We expect our RoTE to steadily increase from 10 per cent, and are targeting 12 per cent in 2026 and to progress thereafter. The strength of our ﬁnancial performance afﬁrms that the strategy that we set out in 2021 is working. We remain focused on investment in high-growth markets and have made sign iﬁcant progress aga inst our strategic prior it ies across Network, Afﬂuent, Mass Retail, and Sustainab il ity. I am acutely aware of the underperformance of our share price in recent months, which I believe does not reﬂect the progress we are making. Both the Board and the Management Team are absolutely focused on deliver ing sustained, long-term value for our shareholders. I believe our solid performance in 2023 gives us a good base from which to do this. As Bill details in the following pages, we have further sharpened the actions we will take to accelerate performance and future growth. ‘We remain focused on investment in high-growth markets and have made sign iﬁcant progress aga inst our strategic prior it ies’ Firstly, we will continue to rely on our stronger capabil it ies to further enhance returns in our Corporate, Commercial & Institut ional Bank ing and Consumer, Private & Business Banking businesses, with a focus on driv ing income growth in high-returning areas. Secondly, we will improve operational leverage with in the Group, address ing structural ineff ic ienc ies and complexit ies wh ilst protecting income. Finally, we will continue to return substantial capital to shareholders. This year, we are pleased to be able to provide an increased full-year div idend of 27 cents per share and are announc ing a further share buyback of $1 bill ion. Alongside the importance of deliver ing improved ﬁnanc ial performance, our Purpose and brand promise to be here for good remain cornerstones of our business. We are keenly aware of our role in supporting our clients and communit ies as they antic ipate and respond to econom ic and social challenges. This is why we remain true to our Stands – Accelerating Zero, Resetting Globalisat ion and L ift ing Partic ipat ion – which are delivered through the execution of our strategy, and which give us an active framework for posit ive impact across our footprint. We updated our net zero roadmap in April 2023, committ ing to an absolute emiss ions target and trajectory for the o il and gas sector. In this year’s Annual Report, we disclose the targets and science-based methodologies for our ﬁnanced emiss ions in 11 of the 12 high-emitt ing sectors ident iﬁed as decarbonisat ion pr ior it ies by the Net Zero Banking Alliance, demonstrating our commitment to support the transit ion of the real-world economy. We have also recently announced our decis ion to become an early adopter of the Taskforce on Nature-related Financ ial Disclosures, highl ight ing the ris ing importance of nature and biod ivers ity as a necessary considerat ion in sustainab il ity. Given that our footprint represents some of the most complex and diverse natural capital in the world, working across our business and with our clients to preserve, restore and enhance nature is crit ically important. It is my honour to be able to act as a voice for our Stands on behalf of the Group as Co-Chair of the United Nations’ Global Investors for Sustainable Development Alliance, as well as at various global platforms and by engaging with stakeholders across our markets. Driv ing h igher standards The Board remains committed to ﬁrmly embedding a culture of excellence across the organisat ion, bu ild ing h igh standards through a ‘one bank’ culture of ambit ion, act ion and accountabil ity that puts our cl ients at the heart of all we do. We are at our best when we harness the full talent and potential of the diverse markets in which we operate. Both the Board and the Management Team are dedicated to mainta in ing our status as an employer of choice. That means offering our colleagues a variety of ways to build their skillset, attracting the best talent through our doors with a diverse set of career paths with in the Group and progress ive employee polic ies, such as the standard ised parental leave announced last year. As the world continues to change around us, we also recognise the ongoing importance of technology and continuous improvement in mainta in ing our competit ive edge, and in build ing an innovat ion-led culture that allows colleagues to try new things with in an effect ive and comprehensive risk management framework. We are intent on capturing the beneﬁts of new, game-changing technologies like artif ic ial intell igence, wh ilst protecting the informat ion and ﬁnancial secur ity of our clients. 08 Standard Chartered – Annual Report 2023 Strategic report Group Chairman’s statement It has been an extremely active year for the Board, with frequent in-depth brief ings on geopol it ical, cyber and sectoral risks, and a sharp focus on corporate governance. We continue to build out our resil ience in both the ﬁnanc ial and non-ﬁnancial d imens ions of r isk and compliance across our varied markets. This gives us the conﬁdence to achieve our strategic goals and act decis ively to grasp new business opportunit ies. We continue to mainta in a d iverse range of skillsets and backgrounds on our Board. Jasmine Whitbread, a long- standing director and impactful former chair of the Culture and Sustainab il ity Committee, stepped down from the Board at last year’s AGM. As announced on 16 February 2024, Gay Huey Evans will step down from the Board with effect from 29 February 2024 after serving nine years and contribut ing s ign iﬁcantly to the Board and its Committees, especially as Chair of the former Board Financ ial Cr ime Risk Committee. Carlson Tong, another much-valued Board member, will step down from the Board on 9 May 2024, ahead of the AGM. I would like to thank Jasmine, Gay and Carlson for their many contribut ions dur ing their time with us. On 16 February 2024, we announced that Diane Jurgens will jo in the Board from 1 March 2024. D iane is a highly experienced and respected technologist who will bring sign iﬁcant technology and transformat ion expertise and ins ight to the Board hav ing operated across a variety of sectors and the Group’s key markets. Our dynamic markets In 2023 I continued to spend time across our markets, seeing their dynamism ﬁrst-hand and experienc ing the amb it ion of our colleagues as they work together for greater growth. Guided by our Purpose – to drive commerce and prosperity through our unique divers ity – we are invest ing heav ily in fast-growing economies and trade corridors in Asia, Africa and the Middle East, and bring ing innovat ive d ig ital products to new clients. A good example of this is Solv, our e-commerce platform for small and medium-size enterprises. We’re also posit ion ing ourselves to be a posit ive force in the expansion of sectors that will deliver a more sustainable global economy, like renewables and electric vehicles. I’m more conﬁdent than ever that we are invest ing in the right places for strong, safe and sustainable growth, and in our role as a connector bank in an ever more complex and fragmenting world. We provide our clients with the right solutions gained from deep experience of our markets, and continue to be a trusted partner for them as they look to seize opportunit ies across our footpr int. ‘I’m more conﬁdent than ever that we’re invest ing in the right places for strong, safe and sustainable growth, and in our role as a connector bank in an ever more complex, fragmenting world’ Looking ahead with conﬁdence We expect to see a ‘soft landing’ for the world economy in 2024. This is no small achievement as we have witnessed the most aggressive period of monetary policy tighten ing in decades. This, plus other favourable supply side developments have led to a fall in inﬂat ion in most countries, engendering expectations of ofﬁc ial interest rate cuts in many economies this year. Growth, in turn, remains resil ient, w ith emerging markets expected to keep growing considerably faster than developed economies, and Asia continu ing to lead global growth. However, one cannot be complacent about the years ahead. The ‘last mile’ of inﬂat ion may prove st ick ier than expected, and geopolit ical r isks abound. As we begin 2024, the war between Ukraine and Russia continues, increas ing uncerta inty for nations in Europe and elsewhere. We see renewed conﬂict in the Middle East, bring ing tragedy to many commun it ies and disrupt ion to the Red Sea, a key chokepo int in global supply chains. 2024 is also a year of major elections in the United States, India and probably the United Kingdom, as well as other markets in our footprint. These all have the potential to affect the economic situat ion. With so much at stake, we must take care not to needlessly damage the means of growth and wealth creation. I have frequently spoken in defence of open, rules-based trade as a lynchpin of global economic growth. This year, the challenges around it remain powerful, with the risk of further fragmentation. I believe the system of global trade that has been created with such care over many decades is one of humanity’s foremost achievements. It is not perfect by any means, but it has arguably brought more opportunity and prosperity to a greater number of people than any other force in history. Like every intr icate system, it is easy to damage and hard to rebuild. Safeguarding and making it more inclus ive and sustainable requires constant vig ilance and cooperat ion from policymakers, legislators, and the private sector in an evolved, modernised multilateral system. While the external landscape remains uncertain, we are conﬁdent that we are well posit ioned to nav igate the challenges and seize the opportunit ies ahead. Our results in 2023 show we are doing just that. We remain focused on continu ing to del iver excellence for our clients, and sustained value for shareholders, in 2024 and beyond. Dr José Viñals Group Chairman 23 February 2024 Group Chairman’s statement continued  Standard Chartered and IFC aim to boost global trade by more than $6 bill ion  In April, we signed a deal to invest $700 mill ion in the IFC’s Global Trade Liqu id ity Programme, which is expected to support up to $6.4 bill ion in trade over three years across Asia, the Middle East, Africa, and Latin America. The deal is a renewal of a facil ity ﬁrst launched in 2009 and has supported $20.5 bill ion in global trade through more than 150 Emerging Market Issuing Banks in 37 countries. Read more at sc.com/IFC Strategic report Strategic report 09 Standard Chartered – Annual Report 2023 Group Chief Executive’s review  Deliver ing sustainably higher returns  Bill Winters Group Chief Executive Strategic report Group Chief Executive’s review 10 Standard Chartered – Annual Report 2023 11 Standard Chartered – Annual Report 2023 Strategic report We produced strong results in 2023, demonstrating the value of our franchise and deliver ing our target to push past the 10 per cent Return on Tangible Equity (‘RoTE’) milestone. But 10 per cent is not the extent of our ambit ion. We have the r ight strategy, business model and intent to build on this momentum. We have set out clear actions to deliver sustainably higher returns, with RoTE increas ing stead ily from 10 per cent, targeting 12 per cent in 2026, and to progress thereafter. Full year 2023 income of $17.4 bill ion was up 13 per cent on a constant currency basis, beneﬁtt ing not only from r is ing interest rates but also encouraging underlying business momentum. Good cost disc ipl ine has enabled us to generate sign iﬁcantly posit ive income-to-cost jaws of 4 per cent for the year, even with continued underlying investment. Loan impa irment declined, primar ily due to reduced impa irments from Ch ina commercial real estate and sovereign risks, with the overall portfolio remain ing res il ient. All th is has helped us grow underlying proﬁt before tax 27 per cent year-on-year, to $5.7 bill ion, the h ighest level for ten years. We remain highly liqu id and strongly cap ital ised. We ﬁnished the year with a Common Equity Tier 1 (‘CET1’) ratio of 14.1 per cent, above the top of our target range, allowing us to increase our full year ordinary div idend by 50 per cent to 27 cents per share. We undertook in February 2022 to return over $5 bill ion to shareholders by the end of 2024. With this full year div idend and the $1 bill ion share buyback announced today, we w ill have exceeded that target well ahead of schedule. As we start the new year, I would like to take a moment to thank my friend and much valued colleague, Andy Halford, who decided to retire this year. Andy has been a great partner to me and the Board and has successfully helped steer the Group over the last ten years. I’d also like to extend a warm welcome to Diego De Giorg i as he takes over as the Group Chief Financ ial Ofﬁcer. D iego brings with him over 30 years of ﬁnancial serv ices experience and I am sure he will continue to build on the progress we have made. Our strategy is driv ing success Our strategy is designed to deliver our Purpose: to drive commerce and prosperity through our unique divers ity. We set out four strategic prior it ies in early 2021: continue to grow our Network and Afﬂuent client businesses, return to growth in Mass Retail and advance on all fronts of our Sustainab il ity agenda. We are making good progress in every area. • Income from our cross-border Network business grew 31 per cent in 2023, with standout growth rates in our China offshore corridors to the Middle East and ASEAN, up 67 per cent and 53 per cent respectively • We increased the total number of Afﬂuent clients to 2.3 mill ion. Th is helped drive sign iﬁcantly h igher levels of net new money in 2023, with net inﬂows of $29 bill ion, up 50 per cent, year-on-year, and deliver 24 per cent growth in income from this client segment • We grew our Mass Retail client base by over 1 mill ion to 9.5 mill ion. We have cont inued to grow our dig ital banks, Mox in Hong Kong and Trust in Singapore. They remain two of the fastest growing dig ital banks globally and underl ine our abil ity to partner and launch d ifferent iated customer proposit ions. The Mass Reta il business also serves a valuable strategic purpose as a pipel ine for future Afﬂuent cl ients, with 224,000 of our Mass Retail clients moving up to Afﬂuent clients in 2023 • Our dedicated Chief Sustainab il ity Ofﬁce unit acts as a centre of excellence and a catalyst for the execution of the Group-wide Sustainab il ity strategy and the achievement of our net zero roadmap, further details of which are set out in the Annual Report. Our Sustainable Finance franchise generated over $0.7 bill ion income in 2023, a year-on-year growth rate of 42 per cent and we are well on our way to deliver a bill ion dollars in income by 2025. We have mobil ised $87 bill ion of susta inable ﬁnance since the beginn ing of 2021, making good progress as we advance towards our $300 bill ion target by 2030 Great execution on our 2022 strategic actions We set out ﬁve actions in 2022 designed to accelerate delivery of double-dig it RoTE. The strong execut ion of these actions over the last two years, where we have either achieved our targets ahead of plan or they are well on track, has enabled us to reach that milestone in 2023. • We are ahead of schedule to drive improved returns in Corporate, Commercial & Institut ional Bank ing (‘CCIB’). We targeted around 160 basis points improvement in income return on risk-weighted assets (‘IRoRWA’) to 6.5 per cent in 2024. The team exceeded this target in 2023, deliver ing an IRoRWA of 7.8 per cent. This was driven by particularly strong growth in income from Financ ial Inst itut ion cl ients, which now accounts for 49 per cent of CCIB income, deliver ing close to the 50 per cent target one year early. The team has also successfully executed $24 bill ion in risk-weighted assets optim isat ion over the last two years, exceeding the target of $22 bill ion. The complet ion of the sale of the Aviat ion Finance business also created further capacity for CCIB to grow higher returning business • We are also ahead of our 2024 target to transform proﬁtabil ity in Consumer, Private and Business Banking (‘CPBB’). The team has achieved its 60 per cent cost-to- income target one year ahead of plan, with a nine- percentage point improvement in 2023. They have delivered $0.4 bill ion of structural expense sav ings from rational is ing the branch network, process re-engineer ing, headcount efﬁcienc ies and further automation • We have continued to seize the China opportunity , with our China-related business performing well, despite post-COVID domestic recovery tracking below expectations. We set a target of doubling the operating proﬁt before tax of our onshore and offshore China business by the end of 2024 and we almost achieved that in 2023, generating $1.3 bill ion. This was driven primar ily by offshore-related income, which delivers sign iﬁcantly h igher returns, growing 42 per cent. Our onshore income, despite the domestic headwinds, grew 4 per cent. Looking forward, we continue to be conﬁdent in the long-term opportunit ies that Ch ina re-opening will generate for our unique franchise • We continued to create operational leverage , and are on track to deliver the three-year $1.3 bill ion expense sav ings target, which has helped us absorb inﬂat ionary pressure and continue to invest. Our cost-to-income ratio is down 7 percentage points since the end of 2021 to 63 per cent for 2023, so we are well advanced towards our target of around 60 per cent by 2024 • Our equity generation and disc ipl ine on risk-weighted assets this year have created capacity for us to continue to deliver substantial shareholder distr ibut ions . With the ﬁnal ordinary share div idend for 2023 and a new $1 b ill ion share buyback programme starting imm inently, means we are well ahead of our total target of returning in excess of $5 bill ion by the end of 2024. We will continue to actively manage the Group’s capital posit ion w ith the target of a further capital return of at least $5 bill ion over the next three years 12 Standard Chartered – Annual Report 2023 Strategic report Group Chief Executive’s review Build ing on our ach ievements to deliver sustainably higher returns Our unique footprint across the world’s most dynamic markets gives us a strategic advantage and underpins my conﬁdence that we can continue to grow even in a less supportive interest rate environment. Our object ive is to ensure that income growth translates into structurally higher proﬁtab il ity, strik ing a balance between mainta in ing the divers ity that our cl ients value, while taking out unnecessary complexity that slows us and drags returns. We are therefore taking further action in each of our three client businesses to drive income growth: • In CCIB, we will seek to drive growth in high-returning businesses such as cross-border income, targeting an 8 to 10 per cent underlying growth rate over the next three years. Addit ionally, bu ild ing on our strength as a top two network trade bank, we are targeting to grow Trade and Working Capital income by 6 to 8 per cent between 2024 and 2026. The team is also driv ing growth in ﬁnanc ing related income (Global Credit and Lending) with a particular focus on accelerating the orig inate to d istr ibute strategy, target ing an 8 to 10 per cent CAGR to 2026 • In CPBB, we will build on our strengths in the Afﬂuent client business , targeting to attract over $80 bill ion of net new money over the next three years, a 19 per cent increase from the previous three years. We also intend on accelerating the growth in our internat ional cl ient business, with the target of increas ing the number of internat ional Afﬂuent cl ients from 274,000 to over 375,000 by 2026 • Build ing on the remarkable momentum in our two dig ital banks, Mox and Trust, we are targeting for the Ventures segment to be RoTE accretive by 2026 By executing these actions, we expect to grow income at a compound annual rate of between 5 and 7 per cent over the next three years, well above the antic ipated rate of growth for the global economy. We are also taking action to transform the way we operate, addressing structural ineff ic ienc ies and complex ity whilst protecting income. Starting this year, we will run a bank-wide programme called Fit for Growth, to accelerate our previous efforts to simpl ify, standard ise and dig it ise our business. We will fundamentally improve our productiv ity, cl ient and employee experience and create capacity to reinvest in incremental growth in it iat ives. This programme will save around $1.5 bill ion of cumulat ive expenses over the next three years and we expect to incur a sim ilar amount in terms of the cost to achieve these permanent organisat ional and ﬁnancial beneﬁts. Th is will help us to deliver posit ive income-to-cost jaws in each of the next three years and keep operating expenses below $12 bill ion in 2026. Continu ing to del iver strong income growth, combined with improv ing operat ional leverage and mainta in ing our responsible approach to risk and capital, means we expect RoTE to increase steadily from 10 per cent, targeting 12 per cent in 2026 and to progress thereafter. Uniquely posit ioned and conﬁdent in the future We are in a priv ileged pos it ion to take advantage of s ign iﬁcant growth opportunit ies that w ill continue to come from the markets in our footprint, generating value for our clients and the communit ies in which we operate. Whilst we expect global growth to stay below potential at 2.9 per cent in 2024, as high interest rates put a drag on consumers as well as investment spending, Asia is likely to be the fastest-growing region continu ing to dr ive global growth, expanding by 4.9 per cent. Easing inﬂat ion is likely to allow major central banks to start cutting rates in the second half of 2024, with a focus on supporting softening economic activ ity. Downside risks to this outlook include a sharper than expected slowdown in major economies, sustained inﬂat ionary pressures, a sluggish housing market in China and increased geopolit ical tensions. But we also see sign iﬁcant opportun it ies emerg ing: • Higher capex to meet sustainab il ity targets and moves towards dig ital isat ion could boost product iv ity growth • With in emerg ing markets, countries in Asia are best placed to take advantage of dig ital isat ion, includ ing generat ive AI • Relatively younger populations, as well as the adoption of dig ital technology, w ill allow emerging markets to become increas ingly important to global growth Our share price reﬂects little of our optim ism about prospects and seems heavily inﬂuenced by the downside concerns mentioned above. The concerns are real, and we take them seriously. We mainta in a strong cap ital posit ion and l iqu id ity to absorb any adverse impact on us and our clients. We believe that the value of our franchise will become increas ingly clear to the broader market as we continue to grow our proﬁts and exceed market expectations in those very areas of most concern. In conclusion: sign iﬁcant progress w ith ambit ion for more We delivered a strong performance in 2023, achiev ing our 10 per cent RoTE milestone, while mainta in ing a strong balance sheet and a robust capital posit ion. But we know we must do more. We have made sign iﬁcant progress on our ﬁve strateg ic actions, with most targets either delivered ahead of plan or well on track, provid ing a strong platform to grow and dr ive sutainably higher returns. And while much external uncertainty persists, we are optim ist ic for the markets and strength of our businesses in our footprint. But we are far from complacent, and my Management Team and I remain focused on deliver ing on our targets, seiz ing the growth opportun it ies we have, dr iv ing a culture of excellence and creating exceptional long-term value for our clients, shareholders and communit ies. Finally, I would like to acknowledge the remarkable efforts of our colleagues again this year. Their impress ive ded icat ion to our customers and the communit ies that we serve help to manifest our brand promise to be here for good. Bill Winters Group Chief Executive 23 February 2024 Group Chief Executive’s review continued 13 Standard Chartered – Annual Report 2023 Strategic report Management Team 1. Bill Winters Group Chief Executive 2. Diego De Giorg i Group Chief Financ ial Ofﬁcer 3. Simon Cooper CEO, Corporate, Commercial & Institut ional Bank ing and Europe & Americas 4. Claire Dixon Group Head, Corporate Affairs, Brand and Marketing 5. Judy Hsu CEO, Consumer, Private and Business Banking 6. Mary Huen CEO, Hong Kong and Cluster CEO for Hong Kong, Taiwan and Macau 7. Benjamin Hung CEO, Asia 8. Tanuj Kapilashram i Group Head, Human Resources 9. Sunil Kaushal CEO, Africa & Middle East 10. Roel Louwhoff Chief Technology, Operations and Transformation Ofﬁcer 11. Tracey McDermott, CBE Group Head, Conduct, Financ ial Cr ime and Compliance 12. Sandie Okoro Group General Counsel 13. Sadia Ricke Group Chief Risk Ofﬁcer 14. Paul Day Group Head, Internal Audit * Paul represents Group Internal Audit as an inv itee at Management Team meetings 14. 1. 2. 7. 5. 13. 6. 3. 4. 12. 8. 9. 10. 11. Strategic report Key performance ind icators 14 Standard Chartered – Annual Report 2023 Key performance ind icators We measure our progress against Group key performance ind icators (KPIs), as detailed below, as well as client KPIs, which can be found on pages 28 to 30. Our Group KPIs include non-ﬁnanc ial measures reﬂect ing our commitment to build an engaged, diverse and inclus ive culture and support social and environmental outcomes. Aim Deliver sustainable improvement in the Group’s proﬁtabil ity as a percentage of the value of shareholders’ tangible equity. Progress in 2023 Our strategy to drive improved levels of return on tangible equity (RoTE) is working. RoTE for the year of 10.1 per cent is 240 basis points higher year-on-year. 1 The underlying proﬁt attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders’ tangible equity. 2 2021-2022 have been restated to reﬂect market and business exits announced in 1Q’23. Aim Mainta in a strong cap ital base and Common Equity Tier 1 (CET1) ratio. Progress in 2023 The Group remains well capital ised and highly liqu id w ith a CET1 ratio of 14.1 per cent above our target range, enabling the Board to announce a 50 per cent increase in the full-year div idend and a further $1 b ill ion share buyback programme to start imm inently. The components of the Group’s capital are summarised in the Capital review on page 338 to 343 . 9.4% 10.1 % 2023 2022 2 7.7 % 2021 2 6.5 % 2020 3.0 % 2019 6.4 % 9.4 % 2023 2022 41.4 % 2021 (2.0) % 2020 (34.6) % 2019 20.2 % 14.1 % 2023 2022 14.0 % 2021 14.1 % 2020 14.4 % 2019 13.8 % Financ ial KPIs Underlying return on tangible equity (RoTE)¹ % Common Equity Tier 1 ratio 1 % +240 bps +10 bps Alignment to remuneration Alignment to remuneration Aim Deliver a posit ive return on shareholders’ investment through share price appreciat ion and d iv idends pa id. Progress in 2023 Our TSR for the full year was 9.4%. 1 Combines simple share price appreciat ion w ith div idends pa id to show the total return to the shareholder and is expressed as a percentage total return to shareholders. Total shareholder return (TSR)¹ % Alignment to remuneration Strategic report 15 Standard Chartered – Annual Report 2023 Alignment to remuneration Reward for all Group employees, includ ing execut ive directors, continues to be aligned to the Group’s strategic prior it ies, through our annual and long-term incent ive scorecards. Our approach to remuneration is consistent for all employees and is designed to create alignment with our Fair Pay Charter, which applies globally. However, our pay structures may vary according to location (to comply with local requirements). Variable remuneration falls into two categories: annual incent ive and a long-term incent ive plan (LTIP) which are aligned to the KPIs ind icated: Annual incent ive is based on measurable performance criter ia l inked to the Group’s strategy and assessed over a period of one year. LTIP awards are granted to senior executives who have the abil ity to inﬂuence the long-term performance of the Group. Awards are performance dependent based on measurable, long-term criter ia. Read more in our Directors’ Remuneration Report on pages 182 to 207 Aim Increase representation of women in senior leadership roles¹ to 35 per cent by 2025. Progress in 2023 In 2023, the proportion of senior leadership roles occupied by women has increased to 32.5 per cent. This is up by 0.4 percentage points from December 2022 (32.1 per cent) and 7 percentage points since December 2016 (25.3 per cent). 1 Senior leadership is deﬁned as Managing Director and Band 4 roles (includ ing Management Team). Aim Cumulative progress towards $300 bill ion mob il isat ion target between 2021 and 2030. Progress in 2023 We made strong progress against this target during the year, see more on page 94. 1 Deﬁned as any investment or ﬁnanc ial serv ice provided to clients which supports: (i) the preservation, and/or improvement of biod ivers ity, nature or the environment; (i i) the long-term avo idance/decrease of GHG emiss ions, includ ing the al ignment of a client’s business and operations with a 1.5 degree Celsius trajectory (known as transit ion ﬁnance); ( i i i) a social purpose ; or (iv) incent iv is ing our cl ients to meet their own sustainab il ity objectives (known as susta inab il ity-linked ﬁnance) 2 Figures reﬂect cumulative Sustainable Finance mobil ised s ince January 2021 up to September of each year. Values noted with a caret symbol (^) are subject to independent lim ited assurance by EY, report ava ilable at sc.com/sustainab il ityhub. Divers ity and inclus ion: Women in senior roles 1 % Mobil isat ion of Sustainable Finance 1,2 $ +0.4 ppt +$29.8 bn 32.5 % 2023 2022 32.1 % 2021 30.7 % 2020 29.5 % 2019 28.5 % 25.86 2023 2022 17.55 2021 12.94 2020 17.51 2019 11.51 $ 87.2 bn^ 2023 2022 $ 57.4 bn 2021 The Group announced this target in Q4 2021. Aim Improve the overall employee experience across the Group by creating a better work environment for our colleagues that should translate into an improved client experience. Progress in 2023 The eNPS score is up by 8.31 points to 25.86, which is our highest ever score. 1 eNPS ranges from -100 to +100 and is based on a single question which measures whether colleagues would recommend working for the Bank. It is calculated by deducting percentage of detractors from percentage of promoters. Employee net promoter score (eNPS) 1 +8.31 points Non-ﬁnancial KPIs Alignment to remuneration Alignment to remuneration Alignment to remuneration 16 Standard Chartered – Annual Report 2023 Strategic report Market environment Global macro trends Market environment Macroeconomic factors affecting the global landscape Trends in 2023 • Global GDP growth continued to slow in 2023, likely to 3.1 per cent, from 3.5 per cent in 2022, as central banks continue to tighten policy and the boost from post-pandemic reopening of economies faded. • Asia was the best-performing region, recording growth of 5.1 per cent, on strong momentum in India and favourable base effects in China. Sub- Saharan Africa likely saw growth of 3 per cent in 2023, nearly unchanged from 2022, supported by domestic reform momentum in key economies. • Among the majors, despite a banking-sector cris is in the ﬁrst half of the year, the US recorded annual growth of 2.5 per cent on the back of resil ient domestic demand, while growth slowed sharply in the UK to 0.1 per cent. • The euro-area economy grew by 0.5 per cent in 2023 following 3.4 per cent growth in 2022, supported by household demand and a posit ive contribut ion from exports in H1. • In most majors, labour markets remained strong, with low unemployment rates that helped support consumer conﬁdence. • Major central banks like the Fed and ECB continued to tighten monetary policy in the ﬁrst three quarters of 2023 with a view to bring ing inﬂat ion back to target levels. F iscal policy remained accommodative as governments tried to shield consumers and businesses from still elevated prices. Outlook for 2024 • Global growth is likely to stay below-trend at 2.9 per cent in 2024 as high interest rates drag on consumers as well as investment spending. • Asia will likely be the fastest-growing region and will continue to drive global growth, expanding by 4.9 per cent. Among the majors, the US is expected to experience below-trend growth of 1.8 per cent in 2024, the UK will grow just 0.1%, while the euro area is likely to see an overall modest expansion of 0.6 per cent. • Easing inﬂat ion is likely to allow major central banks to start cutting rates from Q2 2024, with a focus on supporting softening economic activ ity. • Unfavourable global liqu id ity condit ions are l ikely to make it diff icult for some emerg ing markets to access internat ional ﬁnancing, forc ing them to seek multilateral support. • Downside risks to this outlook include a sharper than expected slowdown in major economies, sustained inﬂat ionary pressures, a slugg ish housing market in China, and another ﬂare-up of geopolit ical tens ions. Medium- and long- term view High interest rate environment • Trade fragmentation and heightened geopolit ical risks and related supply disrupt ions together w ith still resil ient labour markets have the potent ial to keep inﬂat ion elevated over the med ium term. • Concerns about inﬂat ion are l ikely to see central banks adopting a cautious approach to monetary easing, with the risk that rates stay elevated for an extended period of time. • Fiscal policy might also turn from a tailw ind to a headwind for growth. High public debt and government deﬁcits also mean that most economies are looking to tighten ﬁscal policy over the medium term. • There may be adverse environmental, agricultural, and economic consequences of a severe El Niño weather cycle. South Asia and Sub-Saharan Africa economies are most at risk from the impact on agricultural production; and although El Niño has varying impacts on GDP growth, it is inﬂat ionary for most economies. • Growing trade fragmentation could undermine the resil ience of global isat ion, dr iv ing up consumer prices, and slowing the pace of economic convergence for emerging markets. Broader global trends • The world economy could see a permanent loss of economic output or ‘scarring’ due to the recession following the pandemic. This would make it harder for emerging markets to catch up with developed markets. • Long-term growth in the developed world is constrained by ageing populations and high levels of debt, exacerbated by the policy response to COVID-19. • Ris ing nat ional ism, ant i-globalisat ion and protection ism are threats to long-term growth prospects in emerging markets. • However, there are potential offsets. Higher capex to meet sustainab il ity targets, and moves towards dig ital isat ion could boost product iv ity growth, proving an antidote to economic scarring concerns. With in emerg ing markets, countries in Asia are best placed to take advantage of dig ital isat ion, includ ing generat ive artif ic ial intell igence (AI). • Relatively younger populations, and the adoption of dig ital technology, w ill allow emerging markets to become increas ingly important to global growth. • In order to meet net zero targets, energy-related spending will have to increase sign iﬁcantly; headwinds include insuff ic ient funds across emerging markets, labour shortages and supply chain constraints. 17 Standard Chartered – Annual Report 2023 Strategic report Regional outlook • China’s economic activ ity rema ins below potential, leaving room for further recovery. We forecast 2024 growth at 4.8 per cent. The post-COVID recovery has been disappo int ing, due to continu ing contraction of the property sector, a negative contribut ion from foreign trade, and a lack of conﬁdence on the part of consumers and private businesses. While GDP growth picked up to 5.2 per cent in 2023 on the reopening boost, policy support and a favourable base, economic activ ity is currently 2–3 percentage points below trend according to our estimate. We expect the government to set a growth target of around 5 per cent in 2024, the same as in 2023, to narrow the negative output gap and prevent deﬂation expectation from becoming entrenched. • While housing market adjustment will likely continue, we expect it to exert less of a drag on growth next year. The authorit ies have turned more supportive of the sector since the July Politburo meeting, relaxing purchase restrict ions, lower ing mortgage rates, accelerating renovation of urban villages, and pledging to meet reasonable ﬁnancing need from el ig ible property developers. Consumption is likely to remain the key driver of the economy, with consumers showing renewed will ingness to draw on the ir excess savings. The easing bias of macro polic ies is likely to remain to consolidate the recovery. We expect the People’s Bank of China to increas ingly rely on expans ion of its balance sheet to inject ample liqu id ity, keeping the credit condit ion relat ively easy. The ofﬁc ial budget deﬁcit may exceed the impl ic it ceil ing of 3 per cent of GDP, with the central government more will ing to share the debt burden. However, the upside is likely to be capped by private sector’s hesitat ion to expand investment. • Hong Kong’s outlook remains challenging. We expect growth to slow to 2.9 per cent in 2024 from 3.2 per cent in 2023, a reﬂection of still cautious household and business sentiment. The posit ive factors, includ ing a cont inued normalisat ion in tourist arrivals and a persistently tight labour market, may not be sufﬁc ient to offset a weak property market and elevated US interest rates that keep weigh ing on investment appetite. We expect Korea’s growth to accelerate to 2.1 per cent from 1.4 per cent in 2023, beneﬁt ing from a potential upcycle of semiconductors, but prolonged high-interest rates and ris ing commod ity prices will adversely affect Korean consumption and construction investment. • In India, we expect FY25 (year beginn ing Apr il 2024) GDP growth to likely moderate to 6.3 per cent vs 6.8 per cent for FY24 amid slower global growth, higher interest rates and slowing consumer demand . However, the growth dynamics are likely to stay strong. Ris ing real wages are l ikely to support rural demand and we expect private capex recovery post national elections in April/May 2024; the current ruling party is widely expected to return to power. Meanwhile, inﬂat ion pressures are expected to ease sl ightly to 5 per cent in FY25 vs 5.4 per cent in FY24. Hence, we see a shallow rate cut cycle of 50 bps starting June 2024 amid easing global rates. Ample foreign exchange (FX) reserves and yet another year of balance of payment surplus led by index inclus ion related inﬂows, remain a strong buffer for the economy and are likely to lim it FX market volatil ity. The key r isks to our view can emanate from higher oil prices and/or tighter global ﬁnanc ial cond it ions. • While global demand may remain soft in 2024, we expect the external drag on externally oriented economies in Associat ion of South East Asian Nations (ASEAN), includ ing S ingapore, Vietnam, Malaysia and Thailand, to be more moderate due to favourable base effects. In addit ion, a bottom ing of the global electronics cycle may help these economies, though we do not expect a sign iﬁcant recovery given weak external demand and uncertainty. Domestic activ ity may see consumpt ion and investment sentiment partly affected by higher interest rates and still-high inﬂat ion earl ier in the year. But potential rate cuts and easing inﬂat ion in H2 and likely stable labour markets should provide support. Election spending in Indonesia may also provide a boost to consumption earlier in the year. Tourism recovery may continue to bolster growth in 2024 but the support may be fading. Inﬂation is expected to moderate in 2024 on favourable base effects and tighter monetary polic ies but upside risks arise from potentially higher food and energy prices, especially with the latest developments in the Middle East. • Monetary policy in the region may remain tight for longer given upside risks to inﬂat ion, and th is poses a downside risk to economic growth, but some easing is expected in H2 which will help support growth sentiment. On balance, growth may remain somewhat subdued and sim ilar to 2023, but lower inﬂat ion and rate cuts in H2 may help offset a weaker H1. Asia Actual and projected growth by market in 2023 and 2024 % 4.8 % 2024 China 2023 2024 Hong Kong Korea India Indonesia 2023 2024 2023 2024 2023 2024 2023 Singapore 2024 2023 1.1 % 5.2 % 2.9 % 3.2 % 2.1 % 1.4 % 6.3 % 6.8 % 5.2 % 5.1 % 2.6 % See our regional performance on page 31 18 Standard Chartered – Annual Report 2023 Strategic report Strategic report Market environment Regional outlook continued • For Sub-Saharan Africa, external factors remain a key headwind. Constrained or more expensive access to external ﬁnanc ing is a challenge, especially given a concentration of external debt maturit ies in the years ahead. Scaled-up multilateral support for emerging and frontier economies is likely to be a partial mit igant. Whether the US can avoid a hard landing will be key to risk appetite. FX liqu id ity remains an issue, although encouragingly FX reforms are now underway in key markets. Higher oil prices may increase pressures. Common Framework debt restructuring progress in Zambia and Ghana remains key to economic prospects, as they look to build resil ience to further shocks. • In Niger ia, w ith a new cabinet and central bank leadership in place, we expect fuel subsidy and FX reforms to be completed in 2024. New investment in LNG production and a scaling up of domestic reﬁning capac ity should add to economic resil ience. In South Africa, while load shedding has improved, port and rail bottlenecks may hold back growth. In Kenya, increased concessional ﬁnanc ing and a partial reﬁnanc ing of the 2024 Eurobond have eased external liqu id ity concerns, but ﬁscal consolidat ion w ill be key to stabil is ing high debt levels. • Higher for longer rates, higher commodity prices and elevated regional tensions highl ight the d ivergence between MENAP oil exporting and oil import ing econom ies. The Gulf Cooperation Council (GCC) is likely to continue using oil windfalls to reverse the deteriorat ion in government balance sheets stemming from the late-2014 and 2020 oil price shocks. The UAE, Oman and Qatar have committed to de-leveraging alongside the rebuild ing of external buffers. In Saudi Arabia, drawdowns at the Central Bank continue to support growing Public Investment Fund assets; robust domestic investment and execution of giga-projects aim to expand potential in the non-oil economy. Headline growth in Saudi Arabia may be modest, given extension of oil output cuts. However, GCC non-oil growth remains robust against external headwinds, aided by lower levels of domestic inﬂat ion. See our regional performance on page 32 • The US economy has been resil ient in the face of sustained monetary policy tighten ing. But as cred it growth slows, housing affordabil ity weakens and del inquenc ies r ise as higher rates feed through to the real economy, and we expect a slowdown in growth over the course of 2024. In the euro area, we expect growth to be elusive until rate cuts start in Q2, before pick ing up modestly in H2. • Headline inﬂat ion has fallen sharply for both the US and Euro area, but core inﬂat ion st ill remains off target. Central banks will remain alert to any signs of renewed upside risks to inﬂat ion, stemm ing from ongoing tight labour markets and geopolit ical tens ions. • The Fed and ECB have likely completed their rate-hik ing cycles. Lower inﬂat ion leaves room for cuts from both central banks beginn ing in Q2; we expect the Fed to deliver 100bps and the ECB to deliver 125bps by end-2024. • There is likely to be less of a tailw ind to growth in Europe from ﬁscal policy as new ﬁscal rules and higher interest rates force consolidat ion of budget deﬁcits, and programmes introduced during the 2022–2023 energy cris is come to an end. The US economy has beneﬁtted from ﬁscal support for infrastructure investment, but this impulse is likely to fade in 2024. • In Latin America, weakening domestic demand, and a downtrend in inﬂat ion should support further monetary eas ing by the region’s central banks, most of which have already started rate cuts. Lower interest rates are likely to support better recovery in H2 2024, although sluggish external demand and tight global ﬁnanc ial condit ions could be headw inds. See our regional performance on page 33 Europe and the Americas Africa and the Middle East Actual and projected growth by market in 2023 and 2024 % 3.5 % 2024 Nigeria 2023 2024 UAE 2023 2.7 % 4.0 % 2.7 % Actual and projected growth by market in 2023 and 2024 % 0.1 % 2024 UK 2023 2024 USA 2023 0.1 % 1.8 % 2.5 % Market environment continued 19 Standard Chartered – Annual Report 2023 Strategic report Strategic report Section heading  Zodia Custody and Zodia Markets ﬂourish in 2023  SC Ventures backed, UK-based Zodia Custody and Zodia Markets both continued to grow in 2023. Zodia Custody – an inst itut ion ﬁrst dig ital asset custod ian – launched in Australia, Hong Kong, Japan, Luxembourg and Singapore and secured $36 mill ion in Series A funding. Meanwhile, Zodia Markets – a dig ital asset brokerage and exchange platform - expanded into UAE and was registered as a Virtual Asset Service Provider with the Central Bank of Ireland. Read more at zodiamarkets.com and zodia.io 19 Standard Chartered – Annual Report 2023 Strategic report 20 Standard Chartered – Annual Report 2023 Strategic report Business model Business model How we generate returns We earn net interest income on loans and deposit products, fee income on ﬁnanc ing solutions, advisory and other services, and trading income from provid ing r isk management in ﬁnanc ial markets. Income Net interest income Fee income Trading income Proﬁt after tax Income gained from provid ing our products and services minus expenses, impa irments and taxes Return on tangible equity Proﬁt after tax generated relative to tangible equity invested Our business Corporate, Commercial and Institut ional Bank ing (CCIB) We support large corporates and ﬁnancial inst itut ions across the world’s most dynamic markets, helping unlock growth opportunit ies and create susta inable value. Ventures We promote innovat ion, invest in disrupt ive ﬁnancial technology and explore alternat ive business models. Our diverse portfolio of ventures includes two market-leading dig ital banks in Singapore and Hong Kong. Consumer, Private and Business Banking (CPBB) We support small and medium-sized enterprises and ind iv iduals, from Mass Retail clients to Afﬂuent includ ing h igh-net-worth ind iv iduals, both dig itally and in person. We help corporates and ﬁnancial inst itut ions connect and maxim ise opportunit ies across our global network, and we support ind iv iduals and local businesses in growing their wealth. Our products and services Financ ial Markets • Macro, commodit ies and credit trading • Financ ing and securit ies serv ices • Sales and structuring • Debt capital markets and leveraged ﬁnance • Project and export ﬁnance Transaction Banking • Cash management • Trade ﬁnance • Working capital Wealth Management • Investments • Insurance • Wealth advice • Portfolio management Retail Products • Deposits • Mortgages • Credit cards • Personal loans 21 Standard Chartered – Annual Report 2023 Strategic report How we are shaping our future We have progressed strongly in deliver ing our strategy to accelerate returns. In 2022, we set out to uplift our return on tangible equity (RoTE) to 10% by 2024. In 2023, we have improved our RoTE to 10.1%, with strong progress in deliver ing aga inst the ﬁve strategic actions we set out to accelerate our returns: • Driv ing improved returns in CCIB: income return on risk weighted assets further enhanced to 7.8% (2022 1 : 6.2%) and plan to reduce $22bn of risk weighted assets between 2022 and 2024 fully delivered early during the year • Transforming proﬁtab il ity in CPBB: cost-to-income ratio further improved to 60% (2022 1 : 69%), supported by the continuous delivery of business savings and dig it isat ion programme • Seiz ing opportun it ies in China: China onshore and offshore proﬁt before tax grown to $1.3bn (increased 1.6 times vs. 2022 1 ), despite recent market challenges • Creating operational leverage by deliver ing $1.3bn of sustainable cost saves over 2022–2024: $0.4bn of cost saves in 2023, bring ing 2022–2023 total to $0.9bn • Deliver ing susta inable shareholder distr ibut ions in excess of $5bn over 2022–2024: $2.7bn total distr ibut ions for 2023, bring ing 2022–2023 total to $4.5bn; plus a new $1bn share buyback programme starting imm inently in 2024. We have further optim ised our bus inesses and footprint. In 2023, we completed the sale of our Aviat ion F inance leasing business. For the seven Africa and Middle East (AME) markets and two addit ional AME CPBB bus inesses we announced to exit in 2022, we have completed the sale of our Jordan business and closed our Lebanon representative ofﬁce, and have signed bind ing agreements for the divestment of the remainder. The sign iﬁcant progress we have made on our strategic agenda has provided us with a strong platform to grow and drive sustainably higher returns. We target RoTE to increase steadily from 10%, targeting 12% in 2026 and to progress thereafter. Key actions for the next three years include: • Continue to deliver strong income growth targeting 5-7% income growth CAGR 2 for the next three years • Improving operational leverage through the Fit for Growth programme, to simpl ify, standard ise and dig it ise key elements of the Group, enabling the Group to keep annual operating expenses below $12bn in 2026 • Continu ing act ive management of the Group’s capital posit ion, w ith the target of a further capital return of at least $5bn over the next three years. Dist inct proposit ion Our understanding of our markets and our extensive internat ional network allow us to offer a tailored proposit ion to our cl ients, combin ing global expert ise and local knowledge. Sustainable and responsible business We are committed to sustainable social and economic development across our business, operations and communit ies. Client focus Our clients are our business. We build long-term relationsh ips through trusted advice, expertise and best-in- class capabil it ies. What makes us different Our Purpose is to drive commerce and prosperity through our unique divers ity – th is is underpinned by our brand promise, here for good. Our Stands – aimed at tackling some of the world’s biggest issues – Accelerating Zero, Lift ing Part ic ipat ion and Resetting Globalisat ion (see page 26 for more) challenge us to use our unique posit ion articulated below. Robust risk management We are here for the long term. Effective risk management allows us to grow a sustainable business. 1 2022 ﬁgures restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion Finance and (i i i) Debit Valuation Adjustment (DVA) 2 Compound Annual Growth Rate 22 Standard Chartered – Annual Report 2023 Strategic report Business model 1 Excludes CCIB, private bank and business banking clients The sources of value we rely on We aim to use our resources in a sustainable way to achieve the goals of our strategy. How we are enhancing our resources • Upskill ing and resk ill ing our people cont inues to be a prior ity – more than 30,000 colleagues undertook learning in 2023 to build future-ready skills, includ ing in sustainable ﬁnance, data and analytics, dig ital, cyber security, and leadership. • We continue to strengthen a work environment that supports inclus ion, innovat ion, and h igh performance, with an ongoing focus on wellbeing. This includes further embedding ﬂexible working across our markets, provid ing enhanced beneﬁts, and bu ild ing the capabil it ies of our people leaders. • We continue to enhance our product, advisory and dig ital capab il it ies to serve our ind iv idual clients. In 2023, we launched more than 20 new dig ital wealth capabil it ies, made our Signature Chief Investment Ofﬁce (CIO) funds available in 12 markets and launched new dig ital loan partnersh ips. • In Business Banking, we continued to support the growth of small and medium-sized enterprises by making dig ital loan orig inat ion available in ﬁve markets and expanding the SC Women’s International Network, our offering for women entrepreneurs, to ﬁve markets. • In 2023, we continued to invest in our brand through our ‘Possib il it ies are Everywhere’ global advert is ing campaign, highl ight ing our dist inct ive brand promise to be here for good and showcasing how we help people, companies and communit ies grow and prosper across our internat ional network. • We have been successful in leveraging our brand and ins ights to support bus iness growth. Media sentiment towards the Group continued to exceed the average for the banking sector and ranked top three in most of our key markets over 2023. • Our capital posit ion rema ins strong, with a CET1 ratio of 14.1% at the end of 2023, above the target range of 13–14 per cent. • We continue to mainta in a strong and res il ient fund ing proﬁle, with a Liqu id ity Coverage Ratio (LCR) of 145% and a Net Stable Funding Ratio (NSFR) of 138% at the end of 2023. CET1 capital Financ ial strength With $823bn in assets on our balance sheet, we are a strong and trusted partner for our clients. $34 bn • We are mainta in ing momentum on simpl iﬁcation and harmonisat ion of our technology estate, integrat ing platforms using the cloud where appropriate, and invest ing in our engineer ing capab il it ies and best-in- class tools to provide secure and resil ient technology. • We are accelerating automation to optim ise our technology stack and enhancing the end-to-end delivery from requirements to deployment via a new, single platform that enables our colleagues to collaborate on technology projects in a consistent and efﬁcient manner. • We have continued deliver ing value to our cl ients by improv ing speed to market, as enabled by more efﬁcient and scalable technology development and delivery processes. Consumer client satisfact ion metr ic 1 56.6 % 2022: 49.8% International network Our network is our unique competit ive advantage and connects companies, inst itut ions and ind iv iduals to, and in, some of the world’s fastest-growing and most dynamic regions. Business model continued Technology Our strong dig ital foundat ions and leading technological capabil it ies continue to enable a data-driven dig ital bank that del ivers world-class client service. Local expertise We are deeply rooted in our markets with a strong understanding of key economic drivers, offering us ins ights that help our clients achieve their ambit ions. Human capital Divers ity d ifferent iates us. Del iver ing our Purpose rests on how we continue to invest in our people, the employee experience we further enhance, and the culture we strengthen. Brand recognit ion We are a leading internat ional banking group with 170 years of history. In many of our markets, we are a household name. • Across our internat ional network, we are invest ing in capabil it ies such as dig ital channels and cl ient experiences to access new high-growth segments, grow our share of wallet with exist ing cl ients and create new business model opportunit ies. • We are strengthening our Transaction Banking, Financ ial Markets and Sustainable Finance solutions in CCIB and Wealth Management offerings in CPBB to meet the needs of our cross-border clients across our network. 1 Excludes CCIB and Business Banking clients. Includes Private Banking. Restated for 2022 23 Standard Chartered – Annual Report 2023 Strategic report Read more on stakeholder engagement on pages 54 to 64 The value we create We aim to create long-term value for a broad range of stakeholders in a sustainable way. Clients We deliver banking solutions for our clients across our network, both dig itally and in person. We help ind iv iduals grow their wealth while connecting corporates and ﬁnancial inst itut ions to opportunit ies across our network. Suppliers We engage diverse suppliers, locally and globally, to provide efﬁc ient and susta inable goods and services for our business. Corporate Taxes and Bank Levy paid in 2023 $1,476 m 2022 3 : $926m Regulators and governments We play our part in supporting the effective function ing of the ﬁnancial system and the broader economy by proactively engaging with public authorit ies and by paying our taxes. Employees We believe that great employee experience drives great client experience. We want all our people to pursue their ambit ions, del iver with purpose and have a rewarding career enabled by great people leaders. Total spend in 2023 $4.5 bn 2022: $4.3bn Active suppliers 11,600 2022: 11,700 Total active ind iv idual clients 1 Total CCIB and Business Banking clients 1 11.8m 2022 2 : 10.4m 226,000 2022 2 : 232,000 Senior appointments which are internal 60 % 2022: 67% Employees committed to our success 97 % 2022: 96% Div idends declared in 2023 $728 m 2022: $523m Share buy-backs in 2023 $2.0 bn 2022: $1.3bn Investors We aim to deliver robust returns and long-term sustainable value for our investors. Society We strive to operate as a sustainable and responsible company, working with local partners to promote social and economic development. Community investment $68.6 m 2022: $51.3m 1 Excluding customers served or supported by Ventures segment 2 2022 ﬁgures restated for the removal of (i) exit markets and businesses in AME and (i i) Av iat ion F inance 3 2022 restated to include bank levy 24 Standard Chartered – Annual Report 2023 Strategy Strategic report Over the past year, we have executed strongly against our strategy, with a considerable uplift in our return on tangible equity (RoTE) delivered. We continue to focus on: • Four strategic prior it ies: Network business, Afﬂuent client business, Mass Retail business, and Sustainab il ity • Three crit ical enablers: People and Culture, Ways of Working, and Innovation. While the macroeconomic and industry environments continue to evolve, we believe the strategy remains ﬁt for the Bank. Our strategic prior it ies and enablers will continue to be supported by our three Stands: Accelerating Zero, Lift ing Partic ipat ion and Resetting Globalisat ion (please ﬁnd more details of our Stands on page 26). Crit ical enablers Innovation We embed innovat ion through dig it is ing our core, leverag ing partnerships to drive scale and extended reach, and build ing new business models through ventures. We continue to focus on: • Modernis ing and strengthen ing our technology estate and data management • Exploring and experiment ing to enhance client experience, develop new platforms and improve operational resil ience • Leveraging partnerships to access new clients and strengthen our capabil it ies • Build ing, launch ing, and scaling innovat ive ventures wh ile driv ing ventures’ collaboration with the broader Bank and its clients. People and Culture We invest in our people by build ing future-ready skills, provid ing a different iated employee exper ience, and strengthening our inclus ive and innovat ive culture. We do th is by: • Embedding our refreshed approach to performance, reward and recognit ion that puts greater focus on ambit ion, collaborat ion, and innovat ion • Increasing re-skill ing and upsk ill ing towards future roles and work, aligned with our business strategy and workforce’s aspirat ions • Strengthening leadership capabil ity through modern ised development programmes and measurement platforms • Focusing on wellbeing to enhance resil ience, product iv ity and performance, as well as offering progressive, purpose-led beneﬁts • Further embedding ﬂexible working across our footprint, with over 52,000 employees in 44 markets now on agreed ﬂexi-working arrangements. Ways of Working We drive client-centric ity w ith a focus on speed to value for our clients. We are improv ing our operat ing rhythm and organisat ional ag il ity while empowering our people to continuously improve the way we work. We continue strong progress on: • Simpl ify ing and transforming the way we invest, operate and execute • Harnessing operational efﬁc ienc ies to help us continue the drive of commerce and prosperity in our markets • Enhancing the way we deliver and manage change across the Bank, anchored around simpl ify ing our processes end-to-end . Women in senior roles 32.5 % 2022: 32.1% Culture of inclus ion score 83.2 % 2022: 83.1% Speed to value 1 150 days 2022: 160 days Percentage of revenue from new businesses 3 36 % 2022: 22% 1 Speed to value measures the time taken to deliver a change from ideat ion t ill customer go-live and is based on the weighted average of lead time across Corporate, Commercial and Institut ional Bank ing (CCIB) and Consumer, Private and Business Banking (CPBB) businesses. 2 Excludes CCIB and Business Banking clients. Includes Private Banking. Restated for 2022. 3 Income from dig ital in it iat ives, innovat ion and transformat ion of the core, the major ity of wh ich will come from new and upgraded platforms and partnerships. Also includes Sustainable Finance income and 100 per cent of Ventures income. To become a leader in global ﬁnance Our strategy Consumer client satisfact ion metr ic 2 56.6 % 2022: 49.8% 25 Standard Chartered – Annual Report 2023 Strategic report Sustainab il ity We aim to support the sustainable economic and social development of our markets, helping people to thrive long-term. In line with our Stands, we are committed to accelerating the transit ion to net zero, l ift ing part ic ipat ion in the economy and resetting globalisat ion. Our focus includes: • Continu ing to scale our susta inable and transit ion ﬁnance business by integrat ing susta inab il ity as a core component of our value proposit ion and enhanc ing our suite of Sustainable Finance products and solutions across CCIB and CPBB • Progressing on our pathway to achieve net zero ﬁnanced emiss ions by 2050, includ ing sett ing inter im 2030 targets for addit ional h igh-emitt ing sectors and enhanc ing our exist ing climate risk governance and management processes • Contribut ing our sk ills, experience and networks to in it iat ives and coalit ions that a im to further develop the global sustainab il ity ecosystem • Seeking to partner with our clients and communit ies to mobil ise soc ial capital and drive economic inclus ion and entrepreneurship through our Futuremakers global in it iat ive. Cumulative Sustainable Finance mobil ised s ince 2021 3 $87bn 4 2022: $57bn 5 Mass Retail business Mass Retail is strategically important to our client continuum. It demonstrates our deep local expertise, commitment to and relevance in the markets where we operate. Besides provid ing a cont inuous stream of clients who become more afﬂuent over time, Mass Retail underscores our commitment to lift ing part ic ipat ion in the communit ies we serve. Our focus is on: • Continu ing the p ivot towards a dig ital-ﬁrst model to become more personalised, relevant and real-time • Sharpening our onboarding and engagement capabil it ies through dig ital sales and market ing, advanced analytics capabil it ies and straight-through self-service • Launching and developing new business models with leading global and regional partners to leverage synergies in distr ibut ion, dig ital capab il it ies and risk management to serve customers at scale. Active Mass retail clients 9.5m 2022 2 : 8.3m Percentage of dig ital sales for Retail Products Sustainable Finance income in 2023 6 56 % 2022: 48% $720 m 2022: $508m Strategic prior it ies Network business Through our unique network, we enable global trade and investment through ﬁnanc ing, payments, asset or ig inat ion and risk management, with an increas ing focus on Sustainable Finance. Our on-the-ground presence and capabil it ies in more than 50 markets give us an advantage in advice and deal execution for corporates and ﬁnancial inst itut ions by: • Helping our clients seize opportunit ies in shift ing supply cha ins, tapping into exist ing and emerg ing trade and investment corridors such as intra-Asia, and supporting our European and American clients’ access to emerging markets assets • Continuously improv ing cl ient experience with market- leading dig ital platforms that allow seamless onboard ing, client servic ing and appl icat ion programm ing interface (API) connectiv ity • Developing different iated propos it ions in high-returning, high- growth sectors such as Technology, Media & Telecom (TMT), Healthcare, Cleantech and Electric Vehicles. CCIB network income $6.9 bn 2022 1 : $5.2bn Percentage of CCIB transactions dig itally in it iated 65.7 % 2022: 61.5% Afﬂuent client business We offer comprehensive solutions, personalised advice, and exceptional client experiences to help our Afﬂuent clients manage and grow their wealth, at home and abroad. As a leading internat ional wealth manager, we are strengthening our competit ive advantage by: • Unlocking the value of our network, leveraging our wealth hubs in Hong Kong, Singapore, UAE and Jersey to deliver a seamless global proposit ion and cl ient experience with wealth, advisory and dig ital capab il it ies • Maxim is ing synergies across our client portfolios and the Bank by nurturing clients up the Afﬂuent client continuum with our deep local expertise and different iated propos it ions, and by partnering with CCIB to offer solutions such as real estate and acquis it ion ﬁnanc ing to ultra-h igh-net-worth clients • Deliver ing expert adv ice and dig ital-ﬁrst wealth solut ions via an open architecture approach, supported by investments in innovat ion and scalable platforms. Afﬂuent client income $4.6 bn 2022 2 : $3.7bn Active Afﬂuent clients 2.3m 2022 2 : 2.1m 1 2022 ﬁgures restated for removal of (i) exit markets and business in Africa and Middle East (AME) and (i i) Av iat ion F inance. 2 2022 ﬁgures restated for removal of exit markets and business in AME. 3 Deﬁned as any investment or ﬁnanc ial serv ice provided to clients which supports: (i) the preservation and/or improvement of biod ivers ity, nature or the environment; (i i) the long-term avo idance/decrease of greenhouse gas (GHG) emiss ions, includ ing al ignment of a client’s business and operations with a 1.5 degrees Celsius trajectory (known as transit ion ﬁnance); ( i i i) a social purpose; or (iv) incent iv ises clients to meet their own sustainab il ity object ives (known as sustainab il ity-linked ﬁnance). 4 January 2021 to September 2023 cumulative progress towards $300 bill ion mob il isat ion target by 2030. 5 January 2021 to September 2022 cumulative progress towards $300 bill ion mob il isat ion target by 2030. 6 Deﬁned as income generated from Sustainable Finance products as listed in the Green and Sustainable Product Framework. For further informat ion, please refer to pages 99 to 101. 26 Standard Chartered – Annual Report 2023 The world must reach net zero carbon emiss ions by 2050 to l im it the worst effects of climate change. This will require efforts across stakeholder groups to accelerate the transit ion to a low-carbon, climate-resil ient economy. Policymakers, corporates and ﬁnanc ial inst itut ions must play a substantial part in this to ensure that ﬁnance is an enabler of change. The need for a just transit ion that addresses env ironmental challenges, while ensuring inclus ive economic and social development in the footprint markets where we operate, is a prior ity for the Group. Our Stands Climate change, stark inequal ity and the unfa ir aspects of globalisat ion impact us all. We’re taking a stand by setting long-term ambit ions on these issues where they matter most. This works in unison with our strategy, stretching our think ing, our act ion and our leadership to accelerate our growth. Inequality, along with gaps in economic inclus ion, mean that many young people, women, and small businesses struggle to gain access to the ﬁnanc ial system to save for their futures and to grow their businesses. We want to increase access to ﬁnanc ial serv ices and make them available at low cost. We strive to expand the reach and scale of accessible banking and to connect clients and our wider communit ies to the skills and educational opportunit ies that promote and sustain access to ﬁnance and economic opportunity. Globalisat ion has l ifted mill ions out of poverty but left many behind. We advocate for a new model of globalisat ion based on transparency to build trust, renew conﬁdence and promote dialogue and innovat ion. We connect the capital, expertise and ideas needed to drive new standards and create innovat ive solut ions for sustainable growth. We work across our markets to shape a new understanding of growth, one that is based on inclus iv ity, sustainab il ity and our ambit ion to support people and communit ies for the long term. Strategic report Our Stands Accelerating Zero Lift ing Partic ipat ion Resetting Globalisat ion Strategic report  SC Ventures launches Tawi  In May, SC Ventures, our innovat ion, ﬁntech investments and ventures arms, launched Tawi – an Agritech B2B marketplace for smallholder farmers in Kenya. As part of the Tawi marketplace, farmers have access to an e-commerce platform helping them connect with commercial kitchens and reduce post- harvest losses. Tawi also helps improve price transparency and efﬁcient supply cha in management. By the end of 2023, Tawi had onboarded more than 1,000 farmers (65 per cent women), more than 700 commercial kitchens (34 per cent women-led businesses) and fulﬁlled more than 6,000 orders. Tawi is also working to launch ﬁnanc ial serv ices includ ing agr i-loans, savings and working capital to enhance ﬁnancial inclus ion. Read more at tawifresh.com Strategic report 27 Standard Chartered – Annual Report 2023 28 Standard Chartered – Annual Report 2023 Strategic report Client segment reviews We are also committed to promote sustainable ﬁnance in our markets and channeling capital to where the impact will be greatest. We are deliver ing on our amb it ion to support sustainable economic growth, increas ing support and fund ing for ﬁnancial offer ings that have a posit ive impact on our communit ies and env ironment. Strategic prior it ies • Deliver sustainable growth for clients by leveraging our network to facil itate trade, cap ital and investment ﬂows across our footprint markets • Generate high-quality returns by improv ing fund ing quality and income mix, growing capital-lite income and driv ing balance sheet velocity while mainta in ing disc ipl ined risk management • Be a dig ital-ﬁrst and data-dr iven bank, that delivers enhanced client experiences • Accelerate our sustainable ﬁnance offering to our clients through product innovat ion and enabl ing transit ion to a low-carbon future Progress • Our underlying income performance is driven by our divers iﬁed product suite and expanded client solutions supported by the higher interest rate environment. Our cross-border income currently contributes to 61 per cent of total CCIB income with growth across strategic corridors • Robust balance sheet quality with investment-grade net exposures representing 66 per cent of total corporate net exposures (2022: 70 per cent) and high-quality operating account balances broadly stable at 65 per cent of Transaction Banking and Securit ies Serv ices customer balances (2022: 67 per cent) • We defended against liab il it ies attr it ion through act ive pric ing management • Our client migrat ion to the Stra ight to Bank NextGen platform is successfully completed. We achieved dig ital adopt ion of 65.7 per cent (2022: 61.5 per cent) across Cash, Trade and FX, by driv ing cl ient awareness and adoption programs. Client experience remains at the centre of our dig ital transformat ion, with our Net Promoter Score at 78.6 per cent (2022: 68.4 per cent) • We are ~70% of the way towards deliver ing our $1 b ill ion income from sustainable ﬁnance franchise by 2025, and have mobil ised $87 bill ion in sustainable ﬁnanc ing aga inst our $300 bill ion commitment by 2030 Performance highl ights • Underlying proﬁt before tax of $5,436 mill ion up 42 per cent at constant currency (“ccy”), primar ily dr iven by higher income and lower credit impa irment charges, part ially offset by higher expenses • Underlying operating income of $11,218 mill ion up 20 per cent at ccy primar ily due to strong performance in Cash Management from pric ing d isc ipl ine in a ris ing interest rate environment. Financ ial Markets was down 2 per cent at ccy, mainly from lower revenue in FX and Commodit ies on the back of lower market volat il ity, subdued primary issuances and non-repeat of the gains on mark-to-market liab il it ies in 2022. Excluding the latter, Financ ial Markets was up 3 per cent • Underlying operating expenses were up by 10 per cent at ccy largely due to inﬂat ionary pressure, targeted investments and strategic hires to support business growth • Risk-weighted assets were down by $1.6 bill ion s ince 31 December 2022, mainly as a result of optim isat ion in it iat ives partly offset by business growth. We achieved $10.3 bill ion opt im isat ion in risk-weighted assets in 2023 ($24.2 bill ion s ince January 2022) • Underlying RoTE increased from 13.4 per cent to 19.5 per cent Corporate, Commercial and Institut ional Bank ing KPIs Contribut ion of F inanc ial Inst itut ions segment to total income Aim: Drive growth in high-returning Financ ial Inst itut ions segment. Analysis: Share of Financ ial Inst itut ions income improved to 49 per cent in 2023 as we applied continued focus to this segment to drive income and returns. Income Return on risk-weighted assets (Income RoRWA) Aim: Achieve RoRWA of 6.5% by 2024. Analysis: CCIB income RoRWA improved to 7.8% in 2023, up 160bps YoY and in line with our 2024 target, driven by higher income and disc ipl ined risk management. Risk-weighted assets (RWA) $142bn $1.6bn Proﬁt before taxation $5,436 m 42% underlying basis $5,747 m 49% reported basis Return on tangible equity (RoTE) 19.5 % 610bps underlying basis 7.8 % 2023 2022 2021 6.2 % 4.7 % 49 % 2023 2022 2021 47 % 44 % 20.6 % 700bps reported basis Segment overview Corporate, Commercial and Institut ional Bank ing supports local and large corporations, governments, banks and investors with their transaction banking, ﬁnanc ial markets and borrowing needs. We provide solutions to nearly 20,000 clients in some of the world’s fastest-growing economies and most active trade corridors. Our clients operate or invest across 45 markets across the globe. Our strong and deep local presence enables us to help co-create bespoke ﬁnancing solut ions and connect our clients multilaterally to investors, suppliers, buyers and sellers. Our products and services enable our clients to move capital, manage risk and invest to create wealth. Our clients represent a large and important part of the economies we serve. Corporate, Commercial and Institut ional Bank ing is at the heart of the Group’s shared Purpose to drive commerce and prosperity through our unique divers ity. 29 Standard Chartered – Annual Report 2023 Strategic report We are committed to realis ing greater synerg ies from our internat ional network and the Group’s other cl ient segments, from deliver ing hol ist ic propos it ions to cl ients with cross- border investment needs to offering employee banking services to Corporate, Commercial and Institut ional Bank ing clients. Consumer, Private and Business Banking also provides a source of high-quality liqu id ity for the Group. Strategic prior it ies • Maxim ise the value of our internat ional network, w ith wealth hubs in Hong Kong, Singapore, UAE and Jersey, to provide Afﬂuent clients with a global wealth proposit ion bu ilt on deep local expertise and seamless cross-border client experience • Unlock synergies from nurturing clients up our client continuum, by helping them grow and protect their wealth through expert advice and best-in-class wealth proposit ions • Grow Mass Retail proﬁtably, via dig ital-ﬁrst sales and serv ice business models, partnerships, and data analytics • Continue to improve client experience and efﬁc iency through dig ital isat ion, process s impl iﬁcation and operat ional excellence Progress • Accelerated Afﬂuent growth momentum in New to Bank clients, NNM and income across Prior ity Bank ing and Private Bank • Rolled out Standard Chartered-INSEAD Wealth Academy to more markets with over 900 senior frontline staff upskilled to be future-ready advisors • Enhanced cross border dig ital capab il it ies to improve client experience • Expanded myWealth suite of dig ital adv isory tools to enable RMs to provide personalised portfolio construction and investment ideas for clients • Recognised as a leader in dig ital Wealth capab il it ies with 20 industry awards received in 2023 • Enhanced dig ital capab il it ies in key markets focusing on frict ionless mobile experience, leading to an average rating of 4.6 on App Store and Play Store in Hong Kong, Singapore, India, China and Pakistan • Continued to transform our Mass Retail business by scaling sustainably through partnerships, dig ital cl ient engagement, and automation • Eight Mass Retail partnerships live across our footprint in China, Indonesia, Vietnam and Singapore, reaching more than 2.6 mill ion clients Performance highl ights • Underlying proﬁt before tax of $2,487 mill ion was up 60 per cent at ccy driven by higher income, offsetting higher expenses and higher credit impa irments • Underlying operating income of $7,106 mill ion was up 19 per cent (up 22 percent at ccy). Asia was up 20 per cent at ccy and Africa and the Middle East was up 36 per cent at ccy • Strong income growth mainly from Deposits up 76 per cent at ccy with improved margins and balance sheet growth coupled with 10 per cent (ccy) growth from Wealth Management. This offsets lower income in Mortgages, and Unsecured Lending largely due to margin compression impacted by a ris ing interest rate environment • Underlying RoTE increased from 15.8 per cent to 25.3 per cent Consumer, Private and Business Banking KPIs Afﬂuent Net New Money (NNM) Aim: Acquire NNM from new and exist ing Afﬂuent cl ients, via innovat ion, adv isory-led and dig ital-ﬁrst Wealth propos it ions. Analysis: Afﬂuent NNM increased by 50% YoY in 2023, supported by strong new-to-bank client acquis it ion momentum, cross-border referrals and dig ital-dr iven client engagement Dig ital Sales for Reta il Products Aim: Sharpen our on-boarding and engagement capabil it ies through dig ital sales and market ing, advanced analytic capabil it ies and straight-through self-service to improve client experience and efﬁciency Analysis: Dig ital onboard ing for Retail Products has seen sign iﬁcant growth increas ing to 56% in 2023 vs. 41% in 2021. Risk-weighted assets (RWA) $51bn $0.6bn Proﬁt before taxation $2,487 m 60% underlying basis $2,427 m 63% reported basis Return on tangible equity (RoTE) 25.3 % 950bps underlying basis 56 % 2023 2022 2021 48 % 41 % 29.1 bn 2023 2022 2021 19.4 bn 18.1 bn 24.7 % 950bps reported basis Segment overview Consumer, Private and Business Banking serves more than 11 mill ion cl ients in many of the world’s fastest-growing markets. Our client continuum spans from Mass Retail to Afﬂuent, includ ing h igh-net worth clients served by our Private Bank. We leverage dig ital bank ing channels with a human touch to provide clients with different iated products and services such as deposits, payments, ﬁnanc ing, wealth management and personalised advice. We also support small business clients with their business banking needs. 30 Standard Chartered – Annual Report 2023 Strategic report Client segment reviews Ventures KPIs Gross Transaction Value $18 bn $2bn Customers 2 m Loss before taxation $408 m 12% underlying basis External Funds Raised $64 m 41% Risk-weighted assets (RWA) $1.9 bn $0.6bn New Ventures launched 5 2 Strategic prior it ies • SC Ventures’ focus is on build ing and scal ing new business models – across the four themes of Online Economy & Lifestyle, SMEs & World Trade, Dig ital Assets and Susta inab il ity & Inclusion. We do this by connecting ecosystems, partners and clients to create value and new sources of revenue, provid ing opt ional ity for the Bank. Through its fund SC Ventures advances the Fintech agenda by ident ify ing, partnering, and taking minor ity interests in companies, which can be integrated into the Bank and Ventures. Focus is on innovat ive, fast-grow ing, technology-focused companies which accelerate transformation in the ﬁnanc ial industry. • Mox continues to grow the customer base and drive main bank relationsh ips across mass and mass afﬂuent segments in Hong Kong. Mox’s vis ion is to set the global benchmark for dig ital banking from Hong Kong. It aims to be the leading Hong Kong virtual bank for Cards, Dig ital Lend ing and continues to further expand services, includ ing the recent launch of D ig ital Wealth Management services. • Trust Bank aims to become the fourth largest dig ital reta il bank in Singapore by the end of 2024. To achieve this, it will scale through its partner ecosystem and deepen its customer relationsh ips w ith the mass and mass afﬂuent customer segments. Progress • Business performance in 2023 saw continued posit ive momentum for SC Ventures – ﬁve ventures were launched, funds were raised amidst a challenging environment, geographical reach was expanded, and the business exited two investments successfully. As a result, the SC Ventures customer base grew by 25 per cent to reach 587,000 with Gross Transactional Value (GTV) growing by 15 per cent to $18 bn. One sign iﬁcant m ilestone for SC Ventures in 2023 was the establishment of a partnership with SBI Holdings setting up a $100m dig ital asset joint venture in the UAE, a region fast becoming a hub for ﬁntechs in the dig ital asset space. SC Ventures, through a number of innovat ive ﬁntech ventures (such as Shoal, Tawi and myZoi), continues to drive sustainab il ity, ﬁnancial inclus ion and ﬁnancial l iteracy for the underbanked. • In 2023, Mox had a strong focus on expanding its card and dig ital lending services and recorded a strong performance and an engaged customer base. Mox has more than 523,000 customers, up 1.2 times YoY, with customers holding an average of 3.1x products. It delivered close to three times YOY growth in revenue with both deposits and lending expanding over 30 per cent YOY basis. Mox reached 36 per cent (ranked #1) and 30 per cent of (ranked #2) market share in lending and deposits respectively among all Hong Kong virtual banks in H1. The bank was recognised in Forbes’ World’s Best Banks 2023, and The Asian Banker Hong Kong Awards 2023 as the Best Dig ital-only Bank in Hong Kong, and was ranked ﬁfth in the World’s Top 50 Dig ital Banks 2023 by The Dig ital Banker. The Mox app is the top-rated Hong Kong virtual banking app in Apple App Store. Mox consistently has the best Net Promoter Score (NPS) among all Hong Kong virtual banks. • Trust Bank continued to scale and, by reaching 12 per cent market share a year after launch, became one of the world’s fastest growing dig ital banks. Product development rema ined on track, with the launch of unsecured loans, supplementary credit cards, and broadening of the general insurance offering. By the end of 2023, its customer base had grown 1.7 times YoY to 700,000 customers and deposit balances had grown 3.0 times YoY to $1.4bn. Customer engagement remained strong with card activat ion of 85 per cent and more than 2m dig ital coupons redeemed by customers in the Trust ecosystem. In its ﬁrst year of operation, Trust was recognised as the best dig ital reta il bank in Singapore and Southeast Asia by The Dig ital Banker and was the number one rated banking app in the Singapore Apple App Store. Performance highl ights • Underlying loss before tax of $408 mill ion was up $45 m ill ion, driven mainly by higher expenses as we continue to invest in new and exist ing ventures. • Risk-weighted assets of $1.9 bill ion have increased $0.6 bill ion mainly due to continued investment in new and exist ing ventures and minor ity interests. Customers Gross Transaction Value $ 18 bn 2023 2022 2021 $ 16 bn $ 10 bn 1.8 m 2023 2022 2021 1.3 m 0.5 m Segment overview Formed in 2022 the Ventures client segment is a consolidat ion of SC Ventures and its related entit ies as well as the Group’s two majority-owned d ig ital banks Mox in Hong Kong and Trust in Singapore. • SC Ventures is the platform and catalyst for the Group to promote innovat ion, invest in disrupt ive ﬁnancial technology and explore alternative business models. It represents a diverse portfolio of over 30 ventures and more than 20 investments. • Mox , a cloud-native, mobile only dig ital bank, was launched in Hong Kong as a jo int venture w ith HKT, PCCW and Trip. com in September 2020. • Trust Bank is Singapore’s ﬁrst cloud-native bank and was launched in a partnership with FairPr ice Group in September 2022. Customer numbers for 2021 and 2022 normalised for the exit of Cardspal in 2023 31 Standard Chartered – Annual Report 2023 Strategic report Region overview The Asia region has a long-standing and deep franchise across some of the world’s fastest-growing economies. The region generates over two-thirds of the Group’s income from its extensive network of 21 markets. Of these, Hong Kong and Singapore contributed the highest income, underpinned by a divers iﬁed franch ise and deeply rooted presence. The region is highly interconnected, with three dist inct and potent sub-engines of Greater China, ASEAN and South Asia. Our global footprint and strong regional presence, dist inct ive proposit ion, and cont inued investment posit ion us strongly to capture opportunit ies as they ar ise from the continu ing opening up of China’s economy where we now earn two dollars offshore from Chinese clients for every dollar we earn onshore, the growing connectiv ity of ASEAN and the strong economic growth in India. The region is beneﬁt ing from r is ing trade ﬂows, espec ially intra-Asia, continued strong investment, and a ris ing m iddle class which is driv ing consumpt ion growth and improv ing dig ital connect iv ity. Strategic prior it ies • Leverage our network strength to serve the inbound and outbound cross-border trade and investment needs of our clients, particularly across high-growth corridors e.g., China–ASEAN, China–South Asia, China-AME and KR-ASEAN • Capture and monetise opportunit ies ar is ing from Ch ina’s opening and accelerate growth in Asia • Turbocharge our Afﬂuent and Wealth Management businesses through different iated propos it ions and serv ice • Continue to invest and advance in technology, dig ital capab il it ies and partnerships to enhance client experience and build scale efﬁciently • Support clients’ sustainable ﬁnance and transit ion needs and continue to strengthen our thought leadership status Progress • We continue to advance our China strategy both on- and off-shore, and have also made a material increase in both the number of, and the income contribut ion from New to Bank afﬂuent Ma inland China customers and adding new clients through dig ital partnersh ips. The China business delivered record income on-shore and has grown network income strongly along a number of key corridors in ASEAN, up 53 per cent and ME up 67 per cent YoY. We have also made progress with dig ital partnersh ips launching new partnerships JD.com and KCB. • Strong Asia cross border momentum includ ing Ind ia Singapore corridor up 29 per cent YoY highl ight ing the role of Singapore as a ﬁnancial hub for cl ients in ASEAN as well as India • Our two strong internat ional ﬁnancial hubs in Hong Kong and Singapore, delivered strong income growth driven by Wealth Management with Afﬂuent clients, increased Financ ial Markets activ ity w ith Corporate and Institut ional cl ients and a material improvement in the net interest margin. • Our dig ital agendas have progressed; and our v irtual bank Mox has the largest loan book and the 2nd largest deposits base among virtual banks in Hong Kong, while our dig ital bank Trust, is becoming one of the world’s fasting growing dig ital banks; more than one in ten Singaporeans now bank with Trust. Performance highl ights • Underlying proﬁt before tax of $4,740 mill ion was up 32 per cent at constant currency (ccy) on the back of higher income and lower credit impa irment, part ially offset by 8 per cent (ccy) increase in operating expenses • Underlying operating income of $12,429 mill ion was up 15 per cent at ccy, mainly from strong double-dig it increases across Cash Management and Retail Deposits, underpinned by expansion in margins and Wealth Management partly offset by lower Mortgage income and a loss in Treasury Markets • Credit Impairment improved 18 per cent year-on-year (YoY) • Loans and advances to customers were down 5 per cent (reported and ccy); Customer accounts were up 9 per cent (reported and ccy) YoY • Risk-weighted assets up $5 bill ion YoY • RoTE increased to 16.4 per cent from 11.9 per cent in FY22 Asia Proﬁt before taxation $4,740 m 32% underlying basis Risk-weighted assets (RWA) $156 bn $5bn $3,812 m 16% reported basis Income split by key markets Loans and advances to customers (% of group) 74 % 34 % 20 % 10 % 36 % Hong Kong Singapore India Others Strategic report Regional reviews 32 Standard Chartered – Annual Report 2023 Strategic report Regional reviews Region overview We have a rich heritage in Africa and the Middle East (AME) with deep client relationsh ips and h istor ical contr ibut ions to the economy and the communit ies. Our un ique footprint in the region, as well as across centres in Asia, Europe and the Americas, enable us to seamlessly support our clients. AME is becoming increas ingly important for global trade and investment corridors, and we are well placed to facil itate these ﬂows. Gulf Cooperation Council (GCC) markets are expected to outpace global growth on the back of macro-economic tailw inds, h igher government spend in divers iﬁed areas, bilateral trade negotiat ions and evolv ing economic partnerships. The macro-economic risk remains elevated in some markets in the region due to a high level of sovereign debt and FX liqu id ity challenges, but they remain integral to the economic corridors for our global clients. Overall, AME’s medium and long-term attractiveness remains compelling and intact, and it is an important part of our global network proposit ion for our cl ients. Strategic prior it ies • Provide best-in-class structuring and ﬁnanc ing solut ions and drive creation through client in it iat ives • Accelerate growth in different iated internat ional network and Afﬂuent client businesses • Invest in market-leading dig it isat ion in it iat ives in CPBB to protect and grow market share in core markets, continue with our transformation agenda to recalibrate our network and streamline structures • Be an industry leader in the transit ion to net zero across the reg ion • Simpl ify footpr int and refocus on strategic growth areas Progress • Topped the regional DCM league tables for the tenth consecutive year and secured the ﬁrst rank in GCC G3 Bond and Sukuk issuance • Supported Sustainable Finance across our footprint through our comprehensive product offering. ESG DCM volumes across the Middle East grew by over 160 per cent year on year, on the back of some of the largest and most innovat ive ESG deals in the region • Strong cross-border income growth of 39 per cent with broad- based growth across all our key corridors • Further embedded our International Banking proposit ion, activat ing our d iverse footprint across Africa and the Middle East. This has resulted in more than 150 per cent growth in Prior ity Banking client base across our International Banking corridors for the region • Enhanced our dig ital offer ing in Africa by becoming the ﬁrst internat ional bank w ith dig ital ﬁxed income solutions in Kenya, Niger ia and Ghana, extend ing our micro-investment solution (SC Shill ing i) to Uganda, and launching dig ital personal loans in Kenya • Our Saudi franchise saw strong growth following the branch set-up in 2021 while a new branch launched recently in Egypt provides addit ional growth opportun it ies in the region • The sale of the Jordan business has been completed and buyers have been announced for select sub-Saharan African businesses that were ident iﬁed for ex it as part of our strategic announcement in 2022 • Sustained productiv ity act ions have resulted in an improved Cost to Income Ratio at 56 per cent (vs. 63 per cent in FY‘22) and an improvement in productiv ity w ith income per headcount (up 18 per cent year-on-year) Performance highl ights • Underlying proﬁt before tax of $1,311 mill ion, the h ighest annual proﬁt since 2015, was up 66 per cent (up 90 per cent at ccy), driven by higher income and a net release in credit provis ions part ially offset by an increase in expenses • Underlying operating income of $2,806 mill ion was up 14 per cent (up 26 per cent at ccy) with strong growth in Cash Management, Retail Deposits and Financ ial Markets. Income was up 29 per cent (up 38 per cent at ccy) in Middle East, North Africa, Pakistan, up 1 per cent (up 14 per cent at ccy) in Africa • Credit Impairment net release of $91 mill ion in FY23 compared to $119 mill ion charge in FY22 reﬂecting a non-repeat of the prior year’s sovereign related impa irments and releases relat ing to histor ic CCIB provis ions • Loans and advances to customers were up 8 per cent YoY (up 15 per cent at ccy) and customer accounts were up 4 per cent (up 9 percent at ccy) since 31 December 2022 • Risk-weighted assets were 6 per cent lower than 31 December 2022, despite the impact of sovereign downgrades, due to continu ing RWA optim isat ion activ it ies, de-risk ing in markets with elevated macro-economic risk and currency devaluation • RoTE increased to 16.6 per cent from 9.3 per cent in FY22 Africa and the Middle East Proﬁt before taxation $1,311 m 90% underlying basis Risk-weighted assets (RWA) $38.4 bn $2.3bn $1,317 m 87% reported basis Loans and advances to customers (% of group) Income split by key markets 7 % 28 % 13 % 9 % 50 % UAE Pakistan Kenya Others 33 Standard Chartered – Annual Report 2023 Strategic report Region overview The Group supports clients in Europe and the Americas through hubs in London, Frankfurt and New York as well as a presence in several other markets in Europe and Latin America. Our expertise in Asia, Africa and the Middle East allows us to offer our clients in the region unique network and product capabil it ies. The region generates sign iﬁcant income for the Group’s Corporate, Commercial and Institut ional Bank ing business. Clients based in Europe and the Americas contribute over one-third of the Group’s CCIB client income. Over three- quarters of client income is booked in the network, generating above-average returns. In addit ion to be ing a key orig inat ion centre for CCIB, the region offers local, on-the-ground expertise and solutions to help internat ionally m inded clients grow across Europe and the Americas. The region is home to the Group’s two biggest payment clearing centres and the largest trading ﬂoor. Our European CPBB business focuses on serving clients with links to our footprint markets. Strategic prior it ies • Leverage our network capabil it ies to connect new and exist ing Corporate and Financ ial Inst itut ions cl ients in the West to the fastest-growing and highest-potential economies across our footprint • Supercharge our FI Franchise • Grow the business we capture from inbound trade ﬂows from our East to West Corridors • Further develop our Sustainable Finance product offering and risk management capabil it ies • Enhance capital efﬁc iency, ma inta in strong r isk oversight and further improve the quality of our funding base • Expand assets under management in CPBB and continue to strengthen the franchise Progress • Strong growth of 33 per cent in global cross-border network business with Europe and the Americas CCIB clients across key footprint markets • Financ ial Inst itut ions segment growth of 32 per cent, now accounting for 60 per cent of the CCIB business for European and Americas clients. • Material growth in income from sustainable ﬁnance products and expansion of our sustainable product offering • In CPBB we see posit ive momentum on Net New Money in 2023 coupled with strong growth in mortgage balances for our high net worth clients Performance highl ights • Underlying loss before tax of $330 mill ion dr iven by lower income and increased expenses • Underlying operating income of $1,397 mill ion was down 40 per cent reﬂecting the increased cost of hedges with in Treasury wh ilst strong growth in Transaction Banking income was partly offset by lower Financ ial Markets income • Expenses increased by 12 per cent at ccy largely due to increased investment spend and the impact of inﬂat ion • Credit impa irments for the reg ion remain well controlled • FY23 RoTE negative 3.6 per cent down from 8.6% per cent in FY22 Europe and the Americas Loss before taxation $330 m 139% underlying basis Risk-weighted assets (RWA) $46.1 bn $4bn $28 m 103% reported basis Income split by key markets Loans and advances to customers (% of group) 62 % 7 % 31 % US UK Others 18 % Group Chief Financ ial Ofﬁcer’s review Group Chief Financ ial Ofﬁcer’s review Strategic report Group Chief Financ ial Ofﬁcer’s rev iew Standard Chartered – Annual Report 2023 34  Back to growth and improv ing returns  Diego De Giorg i Group Chief Financ ial Ofﬁcer 35 Standard Chartered – Annual Report 2023 Strategic report Summary of ﬁnancial performance The Group delivered on its key ﬁnanc ial objective for 2023, achiev ing a 10 per cent underly ing return on tangible equity, supported by sign iﬁcant progress on the ﬁve strateg ic actions set out in 2022. Underlying proﬁt before tax increased 27 per cent at constant currency as the Group delivered 4 per cent posit ive income-to-cost jaws. Income grew 13 per cent on a constant currency basis as the Group took advantage of the favourable interest rate environment. Expenses increased 8 per cent at constant currency, while the Group incurred a loan loss rate of 17 basis points, well below its histor ical average. The Group reduced the carrying value of its investment in China Bohai Bank (‘Bohai’) by $850 mill ion and booked a $262 mill ion net ga in from selling its Aviat ion F inance business. The Group remains well-capital ised and h ighly liqu id w ith a liqu id ity coverage ratio of 145 per cent and a CET1 ratio of 14.1 per cent, above its target range, enabling the Board to announce a further $1 bill ion share buyback programme. The terms of the buyback will be published, and the programme will start shortly. All commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a reported currency basis, unless otherwise stated. • Operating income of $17.4 bill ion increased by 10 per cent year-on-year or 13 per cent on a constant currency basis as the Group beneﬁtted from the posit ive impact of ris ing interest rates, and a partial recovery in Wealth Management partly offset by losses from hedges • Underlying net interest income increased 20 per cent or 23 per cent on a constant currency basis as the net interest margin increased 26 basis points or 18 per cent with the Group having increased its pric ing on assets and the y ield on its Treasury portfolio more quickly than it repriced its liab il ity base, reﬂecting strong pric ing d isc ipl ine and passthrough rate management as interest rates increased in key footprint currencies. This was partly offset by an addit ional 15 bas is points drag from short-term and structural hedges due to ris ing interest rates, 16 basis points headwind from migrat ion into higher priced term deposits from lower rate paid current and savings accounts (‘CASA’) as well as adverse changes in the mix between Treasury and customer assets • Underlying non NII was stable, or 2 per cent higher on a constant currency basis. This was in part due to a strong Wealth Management performance, which was up 10 per cent on a constant currency basis as it beneﬁtted from a steady ﬂow of new to bank clients and net new money. An accounting asymmetry resulting from Treasury management of business as usual FX posit ions also contributed to an increase in non NII, with a partial offset from reduced net interest income • Operating expenses excluding the UK bank levy increased 7 per cent, or 8 per cent on a constant currency basis, reﬂecting the Group’s continued investment into business growth in it iat ives, strateg ic investments and higher inﬂat ion partly funded by cost efﬁciency act ions. The Group generated 4 per cent posit ive income-to-cost jaws at constant currency and the cost-to-income ratio improved by 2 percentage points to 63 per cent • Credit impa irment was a $528 mill ion charge, a reduct ion of $308 mill ion represent ing an annualised loan loss rate of 17 basis points. The impa irment charge includes $282 mill ion in relation to the China commercial real estate sector, $354 mill ion in the Consumer, Private and Business Banking (‘CPBB’) portfolio and $85 mill ion from Ventures partly offset by a $45 mill ion net release from sovere ign-related exposures and a net release in other Corporate exposures • Other impa irment increased by $91 mill ion to $130 m ill ion primar ily relat ing to write-off of software assets • Proﬁt from associates and jo int ventures decreased 44 per cent to $94 mill ion reﬂect ing a lower proﬁt share from Bohai • Restructuring, other items and goodwill and other impa irment totalled $585 mill ion. Th is included an impa irment charge of $850 m ill ion reﬂect ing a reduction in the carrying value of the Group’s investment in Bohai following a refresh of the value-in-use calculation. Other items include the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leasing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans. Restructur ing charges of $14 mill ion include the impact of actions to transform the organisat ion to improve productiv ity, partly offset by proﬁts from businesses classif ied as held-for-sale. Movements in the Debit Valuation Adjustment (‘DVA’) were a posit ive $17 mill ion • Taxation was $1,631 mill ion on a reported bas is, with an underlying effective tax rate of 29.1 per cent down from 29.9 per cent in the prior year reﬂecting a favourable change in the geographic mix of proﬁts partly offset by increased losses in the United Kingdom where the Group currently does not recognise a tax beneﬁt • Underlying return on tangible equity increased by 240 basis points to 10.1 per cent reﬂecting an increase in proﬁts and lower average tangible equity beneﬁtt ing from distr ibut ions to shareholders and movements in reserves primar ily through the course of 2022 • Underlying basic earnings per share (‘EPS’) increased 32 per cent to 128.9 cents and reported EPS of 108.6 cents increased by 26 per cent • A ﬁnal ordinary div idend per share of 21 cents has been proposed taking the full-year total to 27 cents, a 50 per cent increase. The Group also completed two share buyback programmes totalling $2 bill ion wh ich along with a new share buyback programme of $1 bill ion to start imm inently. Since 1 January 2022, total shareholder distr ibut ions announced total $5.5 bill ion 36 Standard Chartered – Annual Report 2023 Strategic report Group Chief Financ ial Ofﬁcer’s rev iew Summary of ﬁnancial performance 2023 $mill ion 2022 4 $mill ion Change % Constant currency change¹ % Underlying net interest income 5 9,557 7,967 20 23 Underlying non NII 5 7,821 7,795 – 2 Underlying operating income 17,378 15,762 10 13 Other operating expenses (11,025) (10,307) (7) (8) UK bank levy (111) (102) (9) (2) Underlying operating expenses (11,136) (10,409) (7) (8) Underlying operating proﬁt before impa irment and taxat ion 6,242 5,353 17 22 Credit impa irment (528) (836) 37 32 Other impa irment (130) (39) nm⁷ nm⁷ Proﬁt from associates and jo int ventures 94 167 (44) (43) Underlying proﬁt before taxation 5,678 4,645 22 27 Restructuring (14) (99) 86 89 Goodwill and other impa irment 3 (850) (322) (164) (164) DVA 17 42 (60) (60) Other items⁶ 262 20 nm⁷ nm⁷ Reported proﬁt before taxation 5,093 4,286 19 24 Taxation (1,631) (1,384) (18) (25) Proﬁt for the year 3,462 2,902 19 24 Net interest margin (%) 2 1.67 1.41 26 Underlying return on tangible equity (%) 2 10.1 7.7 240 Underlying earnings per share (cents) 128.9 97.9 32 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Change is the basis points (‘bps’) difference between the two periods rather than the percentage change 3. Goodwill and other impa irment include $850 mill ion (2022: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (‘Bohai’) 4. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 5. To be consistent with how we the compute Net Interest Margin (‘NIM’), and to align with the way we manage our business, we have changed our deﬁn it ion of Underlying Net Interest Income (‘NII’) and Underlying non NII. The adjustments made to NIM, includ ing interest expense relating to funding our trading book, will now be shown against Underlying Non NII rather than Underlying NII. Prior periods have been restated. There is no impact on total income 6. Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans 7. Not meaningful Reported ﬁnancial performance summary 2023 $mill ion 2022 $mill ion Change % Constant currency change¹ % Net interest income 7,769 7,593 2 5 Non NII 10,250 8,725 17 20 Reported operating income 18,019 16,318 10 13 Reported operating expenses (11,551) (10,913) (6) (7) Reported operating proﬁt before impa irment and taxat ion 6,468 5,405 20 25 Credit impa irment (508) (836) 39 34 Goodwill and other impa irment (1,008) (439) (130) (130) Proﬁt from associates and jo int ventures 141 156 (10) (10) Reported proﬁt before taxation 5,093 4,286 19 24 Taxation (1,631) (1,384) (18) (25) Proﬁt for the year 3,462 2,902 19 24 Reported return on tangible equity (%) 2 8.4 6.8 160 Reported earnings per share (cents) 108.6 85.9 26 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Change is the basis points (‘bps’) difference between the two periods rather than the percentage change 37 Standard Chartered – Annual Report 2023 Strategic report Operating income by product 2023 $mill ion 2022 2,3 $mill ion Change % Constant currency change¹ % Transaction Banking 5,837 3,874 51 54 Trade & Working capital 1,294 1,343 (4) (1) Cash Management 4,543 2,531 79 83 Financ ial Markets 5,099 5,345 (5) (2) Macro Trading 2,827 2,965 (5) (1) Credit Markets 1,803 1,761 2 5 Credit Trading 554 488 14 17 Financ ing Solut ions & Issuance 3 1,249 1,273 (2) – Financ ing & Secur it ies Serv ices 3 469 619 (24) (22) Lending & Portfolio Management 498 558 (11) (9) Wealth Management 1,944 1,796 8 10 Retail Products 4,969 4,027 23 26 CCPL & other unsecured lending 1,161 1,202 (3) (1) Deposits 3,437 2,021 70 74 Mortgage & Auto 236 633 (63) (62) Other Retail Products 135 171 (21) (19) Treasury (902) 337 nm⁴ nm⁴ Other (67) (175) 62 52 Total underlying operating income 17,378 15,762 10 13 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 3. Shipp ing F inance is now reported under Financ ing Solut ions & Issuance which was reported under Financ ing & Secur it ies Serv ices in 2022 4 Not meaningful The operating income by product commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a constant currency basis, unless otherwise stated. Transaction Banking income increased 54 per cent with Cash Management income up 83 per cent reﬂecting strong pric ing d isc ipl ine and passthrough rate management to take advantage of a ris ing interest rate environment. Trade & Working Capital decreased 1 per cent, reﬂecting lower balance sheet and contingent volumes due to a reduction in economic activ ity and cl ients’ preference for local currency ﬁnancing prov ided by local banks. This was partly offset by higher margins as the Group focused on higher-returning trade products. Financ ial Markets income decreased 2 per cent and was up 3 per cent excluding the non-repeat of $244 mill ion ga in on mark-to-market liab il it ies in 2022. Flow income grew by 7 per cent which was more than offset by the 15 per cent reduction in episod ic income, driven by subdued market volatil ity, reduced issuances and the non-repeat of prior year fair value gains on mark-to-market liab il it ies. Macro Trad ing was down 1 per cent with declines in FX and Commodit ies partly offset by a double-dig it increase in Rates from an expanded product offering. Credit Markets income was up 5 per cent primar ily from h igher Credit Trading income. Financ ing & Secur it ies Serv ices income was down 22 per cent as the beneﬁt of higher interest rates on Securit ies Serv ices balances was offset by negative movements in XVA and the non-repeat of mark-to-market gains. Lending and Portfolio Management income decreased 9 per cent reﬂecting the impact of risk-weighted assets optim isat ion actions which contributed to lower balances and an increase in portfolio management costs. Wealth Management income grew 10 per cent with Bancassurance up 17 per cent and Treasury Products up 16 per cent partly offset by lower income from Wealth Management Lending which was down 15 per cent on the back of client deleveraging and margin compression. There was continued strong growth in net new sales, which totalled $14 bill ion and offset adverse market movements as Wealth Management assets under management remained broadly stable. Retail Products income increased 26 per cent. Deposits income was up 74 per cent due to active passthrough rate management in a ris ing interest rate environment partly offset by migrat ion of Reta il CASA balances into Time Deposits. Mortgage & Auto income decreased 62 per cent on the back of lower volumes and the impact of the Best Lending Rate cap in Hong Kong restrict ing the ab il ity to reprice mortgages, despite an increase in funding costs from higher interest rates. CCPL income decreased 1 per cent reﬂecting reduced margins from increased funding costs partly offset by increased balances, driven by partnerships and the new dig ital banks. Treasury income was a $902 mill ion loss pr imar ily due to losses from structural and short-term hedges in a ris ing interest rate environment. The remain ing short-term hedges mature in February 2024. 38 Standard Chartered – Annual Report 2023 Strategic report Group Chief Financ ial Ofﬁcer’s rev iew Proﬁt before tax by client segment and geographic region 2023 $mill ion 2022 ² $mill ion Change % Constant currency change 1 % Corporate, Commercial & Institut ional Bank ing 5,436 3,990 36 42 Consumer Private & Business Banking 2,487 1,593 56 60 Ventures (408) (363) (12) (12) Central & other items (segment) (1,837) (575) nm³ nm³ Underlying proﬁt before taxation 5,678 4,645 22 27 Asia 4,740 3,616 31 32 Africa & Middle East 1,311 792 66 90 Europe & Americas (330) 834 (140) (139) Central & other items (region) (43) (597) 93 95 Underlying proﬁt before taxation 5,678 4,645 22 27 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 3. Not meaningful The client segment and geographic region commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a constant currency basis, unless otherwise stated. Corporate, Commercial & Institut ional Bank ing (‘CCIB’) proﬁt increased 42 per cent. Income grew 20 per cent with Cash Management beneﬁtting from d isc ipl ined pric ing in it iat ives in a ris ing interest rate environment partly offset by lower episod ic income with in F inanc ial Markets and lower Lending income as CCIB delivered on its RWA optim isat ion in it iat ives. Expenses were 10 per cent h igher while credit impa irment decreased $302 m ill ion w ith lower charges in relation to the China commercial real estate sector and releases on histor ic prov is ions w ith in the rema in ing portfol io. Consumer, Private & Business Banking (‘CPBB’) proﬁt increased 60 per cent, with income up 22 per cent, beneﬁtt ing from higher interest rates on Retail Deposits income and a recovery in Wealth Management. This was partly offset by lower Mortgage income negatively impacted by the Best Lending Rate cap in Hong Kong. Expenses increased 6 per cent while credit impa irment was $92 m ill ion h igher. Ventures loss increased 12 per cent to $408 mill ion, reﬂect ing the Group’s continued investment in transformational dig ital in it iat ives. Income increased ﬁve-fold to $156 mill ion while expenses grew by 27 per cent. This resulted in a lower operating loss before impa irment year-on-year. The impa irment charge increased $69 mill ion to $85 m ill ion reﬂecting increased bankruptcy related write-offs in Mox where credit criter ia have now been adjusted to reduce the current elevated delinquency rate. Central & other items (segment) recorded a loss of $1.8 bill ion as income declined by $1.3 bill ion mostly reﬂect ing the losses from structural and short-term hedges booked with in Treasury. Expenses increased by $43 mill ion wh ile there was a net release in credit impa irment pr imar ily relat ing to sovereign-related exposures. Associate income reduced by $65 mill ion reﬂect ing lower proﬁts at Bohai. Asia proﬁts increased 32 per cent as income grew 15 per cent, expenses increased by 8 per cent and credit impa irments reduced by $146 mill ion. The income growth reﬂects strong double-dig it increases across Cash Management, Retail Deposits and Wealth Management partly offset by lower Mortgage income and a loss in Treasury Markets. The proﬁt share from Bohai reduced by $65 mill ion. The lower credit impa irment charge reﬂects in part a lower level of impa irments booked in the year relating to the China commercial real estate sector. Africa & Middle East (‘AME’) proﬁts increased 90 per cent as income increased 26 per cent with strong growth in Cash Management and Retail Deposit income partly offset by a loss in Treasury Markets following de-risk ing act ions in certain markets. Expenses grew 6 per cent while credit impa irment charges were a net release of $91 mill ion, a $210 m ill ion reduction, reﬂecting a non-repeat of the prior year’s sovereign-related impa irments and releases relat ing to histor ic Corporate prov is ions. Europe & Americas recorded a loss of $330 mill ion as income reduced by 40 per cent, reﬂecting the increased cost of hedges with in Treasury wh ilst strong growth in Transaction Banking income was partly offset by lower Financ ial Markets income. Expenses increased 12 per cent reﬂecting the impact of inﬂat ion and h igher investment spend. There was a $59 mill ion reduct ion in credit impa irment releases. Central & other items (region) recorded a loss of $43 mill ion compared to a $597 mill ion loss in the prior year. This improvement is mainly due to higher returns paid to Treasury on the equity provided to the regions in a ris ing interest rate environment while expenses increased by 8 per cent. 39 Standard Chartered – Annual Report 2023 Strategic report Adjusted net interest income and margin 2023 $mill ion 2022 $mill ion Change¹ % Adjusted net interest income 2 9,547 7,976 20 Average interest-earning assets 572,520 565,370 1 Average interest-bearing liab il it ies 540,350 525,351 3 Gross yield (%) 3 4.76 2.70 206 Rate paid (%) 3 3.27 1.38 189 Net yield (%) 3 1.49 1.32 17 Net interest margin (%) 3,4 1.67 1.41 26 1 Variance is better/(worse) other than assets and liab il it ies wh ich is increase/(decrease) 2 Adjusted net interest income is reported net interest income less ﬁnanc ial markets trad ing book funding costs and ﬁnanc ial guarantee fees on interest- earning assets 3 Change is the basis points (bps) difference between the two periods rather than the percentage change 4 Adjusted net interest income div ided by average interest-earning assets, annualised Adjusted net interest income increased 20 per cent driven by an 18 per cent increase in the net interest margin, which averaged 167 basis points in the year, 26 basis points year-on-year uplift beneﬁt ing from a rap id increase in policy interest rates across many of our markets slightly offset by an adverse change in asset mix. The net interest margin was also depressed by loss making hedges with in Treasury and an account ing asymmetry from Treasury’s business as usual management of FX posit ions with in its portfolio. • Average interest-earning assets grew 1 per cent, or 2 per cent excluding the impact of currency translation and risk-weighted asset optim isat ion actions, reﬂecting an increase in cash and balances at central banks partly offset by lower customer loan balances. Gross yields increased 206 basis points compared with the average in the prior year • Average interest-bearing liab il it ies increased 3 per cent, or 4 per cent excluding the impact of currency translation, reﬂecting an increase in customer accounts while the rate paid on liab il it ies increased 189 basis points compared with the average in the prior year Credit risk summary Income Statement (Underlying view) 2023 $mill ion 2022 2 $mill ion Change 1 % Total credit impa irment charge/(release) 3 528 836 (37) Of which stage 1 and 2 3 138 407 (66) Of which stage 3 3 390 429 (9) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting period 2 Underlying credit impa irment has been restated for the removal of ( i) exit markets and businesses in AME and (i i) Av iat ion F inance. No change to reported credit impa irment 3 Reconcil iat ion from underlying to reported can be found on page 48 40 Standard Chartered – Annual Report 2023 Strategic report Group Chief Financ ial Ofﬁcer’s rev iew Balance sheet 2023 $mill ion 2022 $mill ion Change 1 % Gross loans and advances to customers 2 292,145 316,107 (8) Of which stage 1 273,692 295,219 (7) Of which stage 2 11,225 13,043 (14) Of which stage 3 7,228 7,845 (8) Expected credit loss provis ions (5,170) (5,460) (5) Of which stage 1 (430) (559) (23) Of which stage 2 (420) (444) (5) Of which stage 3 (4,320) (4,457) (3) Net loans and advances to customers 286,975 310,647 (8) Of which stage 1 273,262 294,660 (7) Of which stage 2 10,805 12,599 (14) Of which stage 3 2,908 3,388 (14) Cover ratio of stage 3 before/after collateral (%) 3 60 / 76 57 / 76 3 / 0 Credit grade 12 accounts ($mill ion) 2,155 1,574 37 Early alerts ($mill ion) 5,512 4,967 11 Investment grade corporate exposures (%) 3 73 76 (3) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting period 2 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $13,996 mill ion at 31 December 2023, $10,267 m ill ion at 30 September 2023, $10,950 mill ion at 30 June 2023 and $24,498 m ill ion at 31 December 2022 3 Change is the percentage points difference between the two points rather than the percentage change Credit quality remained resil ient, reﬂected in lower year-on- year credit impa irment charges and an improvement in a number of underlying credit metrics. The Group continues to actively manage the credit portfolio whilst remain ing alert to a volatile and challenging external environment includ ing increased geopolit ical tens ions which has led to id iosyncrat ic stress in a select number of markets and industry sectors. Credit impa irment was a $528 m ill ion charge, down 37 per cent year-on-year, representing a loan loss rate of 17 basis points. There was a $282 mill ion impa irment charge relat ing to the China commercial real estate sector, includ ing a $32 mill ion decrease in the management overlay which now totals $141 mill ion. The decrease in the management overlay reﬂects repayments and loans moving into stage 3. The Group has provided $1.2 bill ion in total, in relation to China commercial real estate sector primar ily over the last three years. There was a net release of $45 mill ion relat ing to sovereign downgrades. Excluding the China commercial real estate portfolio and sovereign-related exposures, there was a net release relating to Corporate exposures, primar ily histor ical prov is ions. CPBB charge of $354 m ill ion reﬂects an uptick in delinquency trends across the year and the $85 mill ion charge in Ventures is primar ily from portfol io growth and increased bankruptcy related write-offs in Mox where credit criter ia have now been adjusted to reduce the current elevated delinquency rate. Gross stage 3 loans and advances to customers of $7.2 bill ion were 8 per cent lower year-on-year as repayments, client upgrades and write-offs more than offset new inﬂows. Credit-impa ired loans represented 2.5 per cent of gross loans and advances, ﬂat on the prior year. The stage 3 cover ratio before collateral of 60 per cent increased by 3 percentage points, while the cover ratio post collateral at 76 per cent was ﬂat on the prior year, with the cover ratio before collateral increas ing due to an increase in stage 3 provis ions in relation to the China commercial real estate sector and a reduction in gross stage 3 balances. Credit grade 12 balances have increased by 37 per cent to $2.2 bill ion substant ially from a change in instrument on an exist ing sovere ign exposure with no increase in risk. Excluding this temporary inﬂow, credit grade 12 balances declined 24 per cent reﬂecting both improvements into stronger credit grades and downgrades to stage 3. Early Alert accounts of $5.5 bill ion have increased by 11 per cent, reﬂecting new inﬂows relating to a select number of clients includ ing sovereign-related exposures. The Group is continu ing to carefully monitor its exposures in vulnerable sectors and select markets, given the unusual stresses caused by the currently challenging macro-economic environment. The proportion of investment grade corporate exposures fell by 3 percentage points to 73 per cent, mainly due to a reduction in repurchase agreement balances across various central clearing counterparties. 41 Standard Chartered – Annual Report 2023 Strategic report Restructuring, goodwill impa irment and other items 2023 2022 1 Restructuring $mill ion Goodwill and other impa irment 2 $mill ion DVA $mill ion Other items 3 $mill ion Restructuring $mill ion Goodwill and other impa irment 2 $mill ion DVA $mill ion Other items $mill ion Operating income 362 – 17 262 494 – 42 20 Operating expenses (415) – – – (504) – – – Credit impa irment 20 – – – – – – – Other impa irment (28) (850) – – (78) (322) – – Proﬁt from associates and joint ventures 47 – – – (11) – – – Total (14) (850) 17 262 (99) (322) 42 20 1. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2. Goodwill and other impa irment include $850 mill ion (2022: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (‘Bohai’) 3. Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans The Group’s reported performance is adjusted for proﬁts or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/ or exceptional transactions that are sign iﬁcant or mater ial in the context of the Group’s normal business earnings for the period and items which management and investors would ordinar ily ident ify separately when assess ing underlying performance period-by period. In 2022 the Group announced the exit of seven markets in the AME region and will focus solely on the CCIB segment in two more markets. In 2023, the Group completed the sale of its Jordan business, closed its Lebanon representative ofﬁce and signed agreements for sale of the remain ing ex it markets. Addit ionally, the Group sold its global Aviat ion F inance leasing business to Aircraft Leasing Company (‘AviLease’) for proceeds of approximately $3.6 bill ion includ ing $0.7 b ill ion considerat ion and $2.9 b ill ion repayment of net- intra-group ﬁnancing, g iv ing r ise to a gain on disposal of $309 mill ion. The $1 bill ion Av iat ion loan bus inesses was sold separately, giv ing r ise to a loss on disposal of $47 mill ion. Both of these transactions are recorded in Other Items. As a result of these disposals, effective 1st January 2023, the Group has not included the exit markets and the Aviat ion F inance business with in the Group’s underly ing operating proﬁt before taxation but reported them with in restructur ing. The Group has also classif ied movements in the debit valuation adjustment (‘DVA’) out of its underlying operating proﬁt before taxation and into Other items. To aid comparisons with prior periods the Group has removed the exit markets, Aviat ion F inance business and DVA from its underlying operating proﬁt before taxation for 2022. Restructuring loss of $14 mill ion reﬂects the impact of actions to transform the organisat ion to improve productiv ity, primar ily add it ional redundancy charges, technology simpl iﬁcation and opt im is ing the Group’s property footprint. This was partly offset by the proﬁts from the AME exit markets and Aviat ion F inance business before the completion of their exit from the Group. Other impa irment of $850 m ill ion is in relation to a further reduction in the carrying value of the Group’s investment in its associate Bohai, to align to a lower value-in-use computation following banking industry challenges and property market uncertaint ies in Mainland China, that may impact Bohai’s future proﬁtab il ity. The carrying value of the Group’s investment in Bohai has reduced to $0.7 bill ion from $1.5 bill ion. Movements in DVA were a posit ive $17 m ill ion dr iven by the widen ing of the Group’s asset swap spreads on der ivat ive liab il ity exposures. The portfolio subject to DVA did not change materially during the year. 42 Standard Chartered – Annual Report 2023 Strategic report Group Chief Financ ial Ofﬁcer’s rev iew Balance sheet and liqu id ity 2023 $mill ion 2022 $mill ion Increase/ (Decrease) 1 $mill ion Increase/ (Decrease) 1 % Assets Loans and advances to banks 44,977 39,519 5,458 14 Loans and advances to customers 286,975 310,647 (23,672) (8) Other assets 490,892 469,756 21,136 4 Total assets 822,844 819,922 2,922 – Liab il it ies Deposits by banks 28,030 28,789 (759) (3) Customer accounts 469,418 461,677 7,741 2 Other liab il it ies 275,043 279,440 (4,397) (2) Total liab il it ies 772,491 769,906 2,585 – Equity 50,353 50,016 337 1 Total equity and liab il it ies 822,844 819,922 2,922 – Advances-to-deposits ratio (%)² 53.3% 57.4% Liqu id ity coverage ratio (%) 145% 147% 1 Variance is increase/(decrease)comparing current reporting period to prior reporting periods 2 The Group now excludes $20,710 mill ion held w ith central banks (30.09.23: $21,241 mill ion, 30.06.23: $24,749 m ill ion, 31.12.22: $20,798 m ill ion) that has been conﬁrmed as repayable at the point of stress. The Group’s balance sheet remains strong, liqu id and well divers iﬁed. • Loans and advances to customers decreased 8 per cent, or $24 bill ion to $287 b ill ion as at 31 December 2023 but declined 1 per cent on an underlying basis. The underlying reduction excludes the impact of $12 bill ion decrease in Treasury and securit ies backed loans held to collect, $7 bill ion reduct ion from risk-weighted asset optim isat ion actions undertaken by CCIB and a $1 bill ion reduct ion from currency translation • Customer accounts increased $8 bill ion to $469 b ill ion and up 2% excluding the $2 bill ion impact of currency translation. Retail time deposits increased $18 bill ion and Cash Management balances increased $11 bill ion partly offset by a $18 bill ion decrease in Corporate Term Deposits • Other assets increased 4 per cent, or $21 bill ion from 31 December 2022 with a $41 bill ion increase in ﬁnanc ial assets held at fair value through proﬁt or loss, primar ily reverse repurchase agreements and debt securit ies and other elig ible b ills. Cash and balances at central banks increased $12 bill ion. Th is was partly offset by a $13 bill ion reduction in derivat ive balances and a $8 b ill ion reduct ion in investment securit ies fa ir valued through other comprehensive income • Other liab il it ies decreased 2 per cent, or $4 b ill ion from 31 December 2022 with a $14 bill ion decrease in derivat ive balances partly offset by a $10 bill ion increase in repurchase agreements The advances-to-deposits ratio decreased to 53.3 per cent from 57.4 per cent at 31 December 2022 reﬂecting the reduction in loans and advances to customers. The liqu id ity coverage ratio decreased 2 percentage points to 145 per cent as at 31 December 2023 after increas ing in the ﬁrst half of the year as the banking industry as a whole navigated turbulent external market condit ions and rema ins well above the min imum regulatory requ irement of 100 per cent. Risk-weighted assets 2023 $mill ion 2022 $mill ion Change 1 $mill ion Change 1 % By risk type Credit risk 191,423 196,855 (5,432) (3) Operational risk 27,861 27,177 684 3 Market risk 24,867 20,679 4,188 20 Total RWAs 244,151 244,711 (560) – 1 Variance is increase/(decrease) comparing current reporting period to prior reporting periods Total risk-weighted assets (‘RWA’) of $244.2 bill ion were broadly ﬂat in comparison to 31 December 2022. • Credit risk RWA decreased by $5.4 bill ion to $191.4 b ill ion. There was a $10.3 bill ion reduct ion from optim isat ion actions, relating to the CCIB low-returning portfolio, a $2.1 bill ion reduct ion from other RWA efﬁc iency act ions, $2.7 bill ion reduct ion from currency translation, and a $1.1 bill ion reduct ion from model and methodology changes. The impa irment of Boha i further reduced RWAs by $2.1 bill ion and the sale of the Av iat ion F inance business by a further $1.6 bill ion. Th is was partly offset by a $11.8 bill ion increase from asset mix and $2.7 bill ion increase relating to adverse credit migrat ion • Operational risk RWA increased $0.7 bill ion pr imar ily due to an increase in average income as measured over a rolling three-year time horizon, with higher 2022 income replacing lower 2019 income • Market risk RWA increased by $4.2 bill ion to $24.9 b ill ion reﬂecting an increase in traded risk posit ions and market volatil ity 43 Standard Chartered – Annual Report 2023 Strategic report Capital base and ratios 2023 $mill ion 2022 $mill ion Change 1 $mill ion Change 1 % CET1 capital 34,314 34,157 157 – Addit ional T ier 1 capital (AT1) 5,492 6,484 (992) (15) Tier 1 capital 39,806 40,641 (835) (2) Tier 2 capital 11,935 12,510 (575) (5) Total capital 51,741 53,151 (1,410) (3) CET1 capital ratio end point (%) 2 14.1 14.0 0.1 Total capital ratio transit ional (%) 2 21.2 21.7 (0.5) Leverage ratio (%) 2 4.7 4.8 (0.1) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting periods 2 Change is percentage points difference between two points rather than percentage change The Group’s CET1 ratio of 14.1 per cent was 10 basis points higher than the ratio as at 31 December 2022. The Group was able to fund $2.7 bill ion of cap ital returns to ordinary shareholders from underlying proﬁts. The CET1 ratio remains 3.5 percentage points above the Group’s latest regulatory min imum of 10.5 per cent and above the top of the 13-14 per cent target range. As well as the 169 basis points of CET1 accretion from underlying proﬁts, the Group’s CET1 ratio decreased 34 basis points from an underlying $5.9 bill ion increase in risk-weighted assets as the Group exercised tight control over capital consumption. A further 22 basis points uplift was the result of an increase in Other Comprehensive Income from fair value gains on debt instruments as long-term interest rates began to fall in the latter half of the year. The sale of the Group’s Aviat ion F inance business increased the CET1 ratio by 20 basis points. Ordinary shareholder distr ibut ions reduced the CET1 ratio by approximately 111 basis points. The Group spent $2 bill ion purchasing 230 mill ion ord inary shares of $0.50 each during the year, representing a volume-weighted average price per share of £7.06. These shares were subsequently cancelled, reducing the total issued share capital by 7.9 per cent and the CET1 ratio by 82 basis points. The Board has recommended a ﬁnal div idend of 21 cents per share result ing in a total 2023 ordinary div idend of 27 cents per share or $728 m ill ion, reducing the CET1 ratio by approximately 30 basis points. Payments due to AT1 and preference shareholders cost approximately 17 basis points. The Board has announced a share buyback for up to a maximum considerat ion of $1 b ill ion to further reduce the number of ordinary shares in issue by cancelling the repurchased shares. The terms of the buyback will be published, and the programme will start shortly and is expected to reduce the Group’s CET1 ratio in the ﬁrst quarter of 2024 by approximately 40 basis points. The $850 mill ion impa irment of Boha i also resulted in an RWA reduction of $2.1 bill ion, the net effect of wh ich resulted in a reduction of the CET1 ratio by 23 basis points. The Group’s leverage ratio of 4.7 per cent is 6 basis points lower than at 31 December 2022. This is primar ily dr iven by a decrease in Tier 1 capital of $0.8 bill ion as CET1 cap ital increased by $0.2 bill ion and was more than offset by the redemption of $1.0 bill ion Add it ional T ier 1 securit ies. The reduction in Tier 1 capital was broadly offset by a $7.2 bill ion reduction in leverage exposures. The Group’s leverage ratio remains sign iﬁcantly above its min imum requ irement of 3.7 per cent. Outlook We have updated our guidance for 2024 and have provided addit ional gu idance for 2025 and 2026 as follows: • Income: – Operating income to increase 5-7 per cent for 2024 to 2026 and around the top of 5-7 per cent range in 2024 – Net interest income for 2024 of $10 bill ion to $10.25 b ill ion, at constant currency • Expenses: – Operating expenses to be below $12 bill ion in 2026, at constant currency – Expense saves of around $1.5 bill ion and cost to ach ieve of no more than $1.5 bill ion from 2024 to 2026 – Posit ive income-to-cost jaws, excluding UK bank levy, at constant currency in each year from 2024 to 2026 • Assets and RWA: – Low single-dig it percentage growth in loans and advances to customers and RWA each year from 2024 to 2026 (pre-Basel 3.1 day-1 impact) – Basel 3.1 day-1 impact, pending clarif icat ion of rules, expected to add no more than 5 per cent incremental RWA • Continue to expect the loan loss rate to normalise towards the histor ical through-the-cycle 30 to 35 bas is points range • Capital: – Continue to operate dynamically with in the full 13-14 per cent CET1 target range – Plan to return at least $5 bill ion to shareholders cumulative 2024 to 2026 – Continue to increase full-year div idend per share over time • RoTE increas ing stead ily from 10%, targeting 12% in 2026 and to progress thereafter Diego De Giorg i Group Chief Financ ial Ofﬁcer 23 February 2024 44 Standard Chartered – Annual Report 2023 Strategic report Group Chief Risk Ofﬁcer’s review ª Proactively managing our risks whilst keeping our focus on the execution of the Group’s strategy º Group Chief Risk Ofﬁcer’s review Managing Risk 2023 presented challenges across many of our markets, with sustained high inﬂat ion levels from 2022 cont inu ing to put pressure on the central banks to dampen ris ing pr ices through increases to interest rates. Increased levels of volatil ity were seen in early 2023 as several bank failures prompted fears of a global contagion. Despite having no material exposures to the failed banks, the Group took proactive steps to further strengthen our liqu id ity posit ion and mon itor for any signs of second order impacts. 2023 also saw a fundamental shift in global power dynamics, includ ing w ith the BRICS expansion. Sovereign risks persisted across emerging markets in the Africa and Middle East region. In Asia, despite slower than expected economic growth in China, we saw posit ive s igns of growth in the second half of the year. We continued to keep our focus on the challenges in the China real estate sector and any contagion risks. The Group has lim ited d irect exposure in Ukraine and to the countries in the Middle East which are currently most impacted by conﬂict. However, we remained cognisant of the volatil ity and the potent ial second order market impacts, includ ing those from elevated o il and commodity prices or supply chains disrupt ion, wh ich we continue to actively monitor through stress testing and portfolio reviews. As we enter 2024, we stay vig ilant and cont inue to review our exposure and lim its across our portfol ios to ident ify vulnerable industr ies and cl ients for closer monitor ing. Corporate, Commercial and Institut ional Bank ing (CCIB) Our CCIB credit portfolio remained resil ient w ith overall good asset quality, as evidenced by our largely investment grade corporate portfolio (31 December 2023: 73 per cent, 31 December 2022: 76 per cent). We actively tracked geopolit ical r isks to enable us to act should the need material ise. In cons iderat ion of the macroeconom ic challenges, addit ional rev iews were conducted throughout 2023 across US regional Banks, Non-Bank Financ ial Inst itut ions (NBFI), Leveraged Lending books, Global Commercial Real Estate (CRE) portfolio and select geographies. We closely monitored vulnerable sectors and ident iﬁed cl ients that may face diff icult ies on account of increased interest rates, foreign exchange movements, commodity volatil ity or increased prices of essential goods. In China, the property market recovery remained slower than expected amidst government support measures and we continued to monitor our developers and sponsors portfolios through dedicated reviews. 45 Standard Chartered – Annual Report 2023 Strategic report Consumer, Private and Business Banking (CPBB) The CPBB credit portfolio remained alert to the risks of the uncertain economic outlook but continued to demonstrate resil ience. An increase in delinquency rates (Stage 2 provis ions as at 31 December 2023: $139 mill ion, 31 December 2022: $118 mill ion) h ighl ights the emerg ing pressure on customers’ debt servic ing capac ity, as our customers continue to adapt to the prolonged higher interest rate environment. We continued to monitor potential secondary impacts of local challenges aris ing from he ightened country risks across Bangladesh, Ghana, Kenya, Niger ia, Pak istan, and Sri Lanka, amongst others. There was no material impact on the CPBB portfolio due to the war in Ukraine and the conﬂict in the Middle East. For both our secured and unsecured consumer credit portfolios, we continued to monitor customer affordabil ity across our key markets and dynamically adjusted orig inat ion criter ia, portfol io management and collections strategies, as appropriate. We were mindful of the higher credit risk associated with increased lending to the mass market segment through our dig ital partnersh ips and dig ital banks and have tailored our lending criter ia and portfol io management approach to the unique risks and customer behaviours observed in these segments. Treasury Risk Our liqu id ity and capital risks are managed to ensure a strong and resil ient balance sheet that supports susta inable growth. We continued to enhance our Treasury Risk framework to incorporate the lessons from recent market events as well as horizon risks. Liqu id ity remained resil ient across the Group and major legal entit ies. Group l iqu id ity coverage ratio (LCR) is 145.4 per cent as at December 2023 (31 December 2022: 147 per cent) with a surplus to both Risk Appetite and regulatory requirements. Common Equity Tier 1 (CET1) ratio was 14.1 per cent as at December 2023 (31 December 2022: 14.0 per cent) while Leverage ratio was 4.7 per cent (31 December 2022: 4.8 per cent). In March 2023, we saw sharp moves in funding markets and customer behaviours trigger ing several bank failures in the US and Switzerland. This resulted in a heightened focus on Treasury risks includ ing cap ital, liqu id ity, and interest rate risk on the banking book, with problems most acute in the US market and reverberating globally. We mainta ined a res il ient l iqu id ity posit ion throughout the period and continued to focus on managing risks even as those event risks receded. The Risk function remains actively engaged in provid ing independent review and challenge to internal and regulatory stress tests and recovery and resolution capabil it ies. Further details on Risk Management for our Princ ipal R isk Types can be found in page 314 Further details on Climate Risk can be found in page 298 Risk Performance Summary Asset quality is resil ient. The percentage of investment- grade corporate net exposure remained high at 73 per cent (31 December 2022: 76 per cent). Exposure to our top 20 corporate clients as a percentage of Tier 1 capital decreased to 62 per cent (31 December 2022: 65 per cent), mainly driven by reduction in Transaction Banking exposures. However, the Group remained vig ilant of pers istent challenging condit ions in some markets and sectors. In 2023, we saw a $0.5 bill ion increase in Early Alerts exposure (31 December 2023: $5.5 bill ion, 31 December 2022: $5.0 b ill ion), dr iven by inﬂows relating to a select number of clients includ ing sovere ign- related exposures, partially offset by transfers to Purely Precautionary, regularisat ions, exposure reduct ions and outﬂows to Credit grades 12-14. Credit grade 12 balances increased to $2.2 bill ion (31 December 2022: $1.6 b ill ion) due to sovereign and client downgrades, partially offset by outﬂows to non-performing loans. 46 Standard Chartered – Annual Report 2023 Strategic report Group Chief Risk Ofﬁcer’s review Key ind icators 2023 2022 Group total business 1 292.1 316.1 Stage 1 loans ($ bill ion) 273.7 295.2 Stage 2 loans ($ bill ion) 11.2 13.0 Stage 3 loans, credit-impa ired ($ b ill ion) 7.2 7.9 Stage 3 cover ratio 60% 57% Stage 3 cover ratio (includ ing collateral) 76% 76% Corporate, Commercial & Institut ional Bank ing Investment grade corporate net exposures as a percentage of total corporate net exposures 73% 76% Loans and advances maturing in one year or less as a percentage of total loans and advances to customers 3 68% 68% Early Alert portfolio net exposures ($ bill ion) 5.5 5.0 Credit grade 12 balances ($ bill ion) 2.2 1.6 Aggregate top 20 corporate net exposures as a percentage of Tier 1 capital 2 62% 65% Collateralisat ion of sub- investment grade net exposures maturing in more than one year 41% 53% Consumer, Private & Business Banking Loan-to-value ratio of Consumer, Private & Business Banking mortgages 47.2% 44.7% 1 These numbers represent total gross loans and advances to customers 2 Excludes reverse repurchase agreements 3 The 2022 ﬁgure has been restated from 65 per cent to 68 per cent The Group’s credit impa irment was a net charge of $508 m ill ion (31 December 2022: $836 m ill ion), a decrease of $328 m ill ion. 2022 included overlays for sovereign downgrades and China commercial real estate, which was partly offset by a full release of COVID-19 overlays. Stage 3 was a charge of $369 mill ion (31 December 2022: $430 m ill ion), and the reduct ion was driven by CCIB releases and lower impa irment charges for our Ch ina commercial real estate clients. This reduction was offset by higher bankruptcy related write-offs in CPBB across Singapore, Hong Kong and Korea, and portfolio growth in dig ital partners. Credit impa irment 2023 2022 1 Stage 1 & 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 & 2 $mill ion Stage 3 $mill ion Total $mill ion Ongoing business portfolio Corporate, Commercial & Institut ional Bank ing 11 112 123 148 277 425 Consumer, Private & Business Banking 129 225 354 151 111 262 Ventures 42 43 85 13 3 16 Central & other items (44) 10 (34) 95 38 133 Credit impa irment charge/(release) 138 390 528 407 429 836 Restructuring business portfolio - - - - - - Others 1 (21) (20) (1) 1 - Credit impa irment charge/(release) 1 (21) (20) (1) 1 - Total credit impa irment charge/(release) 139 369 508 406 430 836 1 Underlying credit impa irment has been restated for the removal of ( i) exit markets and businesses in AME and (i i) Av iat ion F inance. No change in reported credit impa irment Further details of the risk performance for 2023 are set out in the full Risk review section (pages 232 to 343) . 47 Standard Chartered – Annual Report 2023 Strategic report An update on our risk management approach Our Enterprise Risk Management Framework (ERMF) outlines how we manage risk across the Group, as well as at branch and subsid iary level 1 . It gives us the structure to manage exist ing r isks effectively in line with our Group Risk Appetite, as well as allowing for holist ic r isk ident iﬁcation. The ERMF also sets out the roles and respons ib il it ies and the m in imum governance requirements for the management of Princ ipal R isks. In revis ions made in the ERMF in 2023, effective 1 January 2024, the concepts of Integrated Risk Types (IRTs) and IRT Owner roles were discont inued. Overs ight on exist ing IRTs, i.e. Climate Risk, Dig ital Asset and Th ird Party Risk, is achieved through the Risk Type Frameworks (RTFs) and dedicated polic ies. The subject matter experts, as the pol icy owners for these risks, provide overall governance and ensure a holist ic v iew of how risks are monitored and managed across the Princ ipal R isk Types (PRTs). Princ ipal R isk Types PRTs are risks inherent in our strategy and business model. These are formally deﬁned in our ERMF, which provides a structure for monitor ing and controll ing these risks through the Risk Appetite Statement. We will not compromise compliance with our Risk Appetite in order to pursue revenue growth or higher returns. The table below provides an overview of the Group’s PRTs and their corresponding risk appetite statements. Risk Types Risk Appetite Statement Credit Risk The Group manages its credit exposures following the princ iple of d ivers iﬁcation across products, geographies, client segments and industry sectors. Traded Risk The Group should control its ﬁnanc ial markets and act iv it ies to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Treasury Risk The Group should mainta in sufﬁcient cap ital, liqu id ity and funding to support its operations, and an interest rate proﬁle ensuring that the reductions in earnings or value from movements in interest rates impact ing bank ing book items does not cause material damage to the Group’s franchise. In addit ion, the Group should ensure its Pension plans are adequately funded. Operational and Technology Risk The Group aims to control operational and technology risks to ensure that operational losses (ﬁnancial or reputat ional), includ ing any related to conduct of bus iness matters, do not cause material damage to the Group’s franchise. Financ ial Cr ime Risk The Group has no appetite for breaches in laws and regulations related to Financ ial Cr ime, recognis ing that wh ilst inc idents are unwanted, they cannot be ent irely avoided. Compliance Risk The Group has no appetite for breaches in laws and regulations related to regulatory non- compliance; recognis ing that wh ilst inc idents are unwanted, they cannot be ent irely avoided. Information and Cyber Security Risk The Group aims to mit igate and control ICS r isks to ensure that inc idents do not cause the Bank material harm, business disrupt ion, ﬁnancial loss or reputat ional damage – recognis ing that whilst inc idents are unwanted, they cannot be ent irely avoided. Reputational and Sustainab il ity Risk The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activ ity is satisfactor ily assessed and managed w ith the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striv ing to do no s ign iﬁcant env ironmental and social harm. Model Risk The Group has no appetite for material adverse impl icat ions aris ing from m isuse of models or errors in the development or implementat ion of models; wh ilst accepting some model uncertainty. In addit ion to the PRTs, the Group has deﬁned the follow ing Risk Appetite statement for Climate Risk: “The Group aims to measure and manage ﬁnancial and non-ﬁnancial r isks aris ing from cl imate change, and reduce emiss ions related to our own activ it ies and those related to the ﬁnanc ing of cl ients in alignment with the Paris Agreement.” 1 The Group’s Enterprise Risk Management Framework and system of internal control applies only to wholly controlled subsid iar ies of the Group, and not to Associates, Joint Ventures or Structured Entit ies of the Group. Further details on our Risk Management Approach can be found on page 314 . 48 Standard Chartered – Annual Report 2023 Strategic report Group Chief Risk Ofﬁcer’s review Emerging Risks refer to unpredictable and uncontrollable outcomes from certain events which may have the potential to adversely impact our business. Topical Risks refer to themes that may have emerged but are still evolving rapidly. As part of our continuous risk ident iﬁcation process, we have updated the Group’s TERs from those disclosed in the 2022 Annual Report and 2023 Half-Year Report; these remain applicable, with nuances in their evolution noted where pertinent. Below is a summary of the TERs, and the mit igat ing actions we are taking based on our current knowledge and assumptions. This reﬂects the latest internal assessment as performed by senior management. The TER list is not exhaustive and there may be addit ional risks which could have an adverse effect on the Group. There are some horizon risks that, although not highly likely at present, could evolve into a threat in the future and we are therefore monitor ing them. These include future pandemics and the world’s preparedness for them, and other potential cross-border conﬂicts. Our mit igat ion approach for these risks may not elim inate them but demonstrates the Group’s awareness and attempt to reduce or manage the risks. As certain risks develop and material ise over t ime, management will take appropriate steps to mit igate them based on the ir material ity on the Group. Macroeconomic and geopolit ical cons iderat ions There is interconnectedness between risks due to the importance of US Dollar ﬁnanc ing cond it ions for global markets, the global or concentrated nature of key supply chains for energy, food, semi-conductors and rare metals, and the direct inﬂuence of geopolit ics on geoeconom ics. The Group is exposed to these risks directly through investments, infrastructure and staff, and also ind irectly through its clients. Whilst the main impacts are ﬁnanc ial, other ramif icat ions may exist such as reputational, compliance or operational considerat ions. Expanding array of global tensions and new geopolit ical order Global power dynamics have shifted, with different polit ical and economic alliances beginn ing to create a mult ipolar power system. This has been accelerated by the war in Ukraine and conﬂicts in the Middle East. Whilst the Group has lim ited d irect exposure to Russia, Ukraine or Israel, it may be impacted by second order effects on its clients and markets for agricultural commodit ies, o il or gas. The posit ion ing of ‘middle powers’ is complex and evolving, and could tip the geopolit ical scales. The negot iat ing power of exporters of energy and other natural resources has expanded and can shape global markets, as they can use global div is ions to raise their own proﬁle. One such example is the envisaged expansion of BRICS to seek a counterweight to Western power axes. US-China tensions remain, with protection ist measures imposed by both sides. Tariffs, embargos, sanctions, new taxes such as that on carbon, and restrict ions on technology exports and investments, are being used to achieve goals beyond just economic. Further economic or polit ical act ions could escalate distrust and accelerate the decoupling of trade links, leading to increas ingly ineff ic ient production and inﬂat ion pressures. Despite attempts to become more pragmatic, a number of potential ﬂashpoints remain. A push by China to increase RMB trade and establish RMB as a secondary global reserve currency presents new business opportunit ies but also potential disrupt ion to the balance of power. With many elections due across the world in the next twelve months, there is uncertainty over the polit ical d irect ion of domestic and foreign policy. There is a risk of short-term polit ical exped iency taking precedence over long-term strategic decis ion mak ing. The malic ious use of AI-enabled dis informat ion could also cause disrupt ion and underm ine trust in the polit ical process. There is an ongoing threat of terrorism, with unpredictab il ity exacerbated by the wider range of ideolog ies at play. Cyber warfare by state related actors could also be used to disrupt infrastructure or inst itut ions in rival countries. A more complex and less integrated global polit ical and economic landscape has the potential to challenge cross border business models, but also provides new business opportunit ies. Persistent high inﬂat ion and interest rates Although rate cuts have been signalled by the Federal Reserve, global rates could remain elevated for longer. Structurally higher spending and continued supply disrupt ions increase the probabil ity of inﬂat ion rema in ing st icky. During 2023, the International Monetary Fund (IMF) and World Trade Organisat ion lowered the ir in it ial forecasts for trade growth and increased that of inﬂat ion in 2024, suggesting that several economies will walk a ﬁne line between recession and stagﬂation. Concern for the credit environment spans both commercial and retail lending, with price inﬂat ion and the cl iff effects of energy, mortgage and debt re-pric ing ult imately leading to higher defaults. This is vis ible in bond markets with yields widen ing markedly and prone to h igh volatil ity. Drives to de-risk supply chains combined with no obvious resolution to ongoing conﬂicts continue to disrupt supply chains. This complicates efforts to combat inﬂat ion as supply constrained markets dent the effectiveness of monetary policy. Topical and Emerging Risks (TERs) 49 Standard Chartered – Annual Report 2023 Strategic report Some sectors are particularly sensit ive to h igh rates, notably commercial real estate, non-bank ﬁnanc ial inst itut ions (NBFI) and leveraged ﬁnance due to their reliance on the availab il ity of cheap ﬁnancing. Bank fa ilures in Q1 2023 highl ighted challenges in managing liqu id ity, credit, reﬁnanc ing and market risks. They also raised questions of competence and conﬁdence in the ﬁnance industry. Economic slowdown in China Whilst China’s exit from COVID restrict ions has had an overall posit ive impact, it has failed to deliver a sustained boost to the global economy as the country contends with strain in several sectors such as real estate. There has also been a change in the corporate operating environment, with reduced clarity on the economic outlook. Given China’s importance to global trade a slowdown would have wider impl icat ions across the supply chain, especially for its trading partners, as well as to countries which rely on it for investment, such as those in Africa. However, opportunit ies arise from the divers iﬁcation of intra-Asia trade and other global trade routes, and growth acceleration in South Asia, especially India. Sovereign risk Credit fundamentals have been eroding across both emerging and advanced economies due to persistently high interest rates, food and energy prices. Emerging markets will also be affected by weakness in local currencies versus the US Dollar and the resultant cost of reﬁnancing ex ist ing debt, or availab il ity of hard currency liqu id ity. Issues and challenges have already been observed across several of the Group’s footprint markets, includ ing the recent default of Ghana, polit ical instab il ity in Pakistan, high inﬂat ion in Turkey, economic turmoil in Sri Lanka, and coups in Africa. For some countries there is a heightened risk of failure to manage social demands, which might culminate in increased polit ical vulnerab il ity. Furthermore, food secur ity exacerbated by the inﬂuences of armed conﬂict and climate change, and energy security challenges have the potential to drive social unrest. Debt moratoria and reﬁnanc ing in it iat ives are compl icated by larger number of ﬁnanciers, w ith much ﬁnanc ing done on a bilateral basis outside of the Paris Club. Whilst the Global Sovereign Debt Roundtable has made some progress on coordinat ing approaches between the Par is Club and other lenders their interests do not always match. This can lead to delays in negotiat ions on debt resolut ions for developing nations. Supply chain issues and material shortages Demand and supply imbalances in global supply chains are increas ingly becom ing structural in nature and affect a wide range of commodit ies includ ing food, energy, m inerals and raw materials, plus targeted restrict ions on certa in industry sectors. There is growing polit ical awareness around the need for key component and resource security at national level. Countries are enacting rules to “de-risk” by reducing reliance on rivals or concentrated suppliers (for example semiconductors) and look to either re-industr ial ise or make use of near-shoring and friend-shoring production. The growing need for minerals and rare earth metals to power green energy technologies could increase the geopolit ical standing of the main reﬁners, such as China, Indonesia and some African nations. However, there are also environmental and social costs to rapidly increas ing extract ion. A desire to avoid dependence may slow down the move by some nations towards the transit ion. How these risks are mit igated/next steps • We remain vig ilant in monitor ing r isk and assessing impacts from geopolit ical and macroeconom ic risks to portfolio concentrations. • We conduct thematic stress tests and portfolio reviews at the Group, country, and business level, with regular reviews on vulnerable sectors, and undertake any necessary mit igat ing actions. • We mainta in a d ivers iﬁed portfol io across products and geographies, with specif ic r isk appetite metrics to monitor concentrations. • Increased scrutiny is applied when onboarding clients and in ensuring compliance with sanctions. • Collateral and credit insurance are used to manage concentrations. • We track the partic ipat ion of our footprint countries in the G20’s Common Framework Agreement and Debt Service Suspension Init iat ive for Debt Treatments and the associated exposure. • Our NBFI exposure is closely monitored in terms of both lim its, products and counterpart ies. Regulatory considerat ions Changing regulatory environment Given notable bank failures in 2023 (and the response of resolution authorit ies to those fa ilures), the regulatory framework for banks remains subject to continued change in addit ion to the implementat ion of Basel 3.1 in various jurisd ict ions. Add it ionally, the d iffer ing pace and scale of regulatory adoption between jur isd ict ions, along w ith increas ing extraterr itor ial reach and prescr ipt iveness, can make it challenging for multinat ional groups to manage their business. Implementation timel ines are a focus. The scale of upcoming regulatory change in 2024 and 2025 is sign iﬁcant w ith major regime changes in capital and operational resil ience due to take effect. How these risks are mit igated/next steps • We actively monitor regulatory developments, includ ing those related to sustainable ﬁnance and ESG, and respond to consultations either bilaterally or through well-established industry bodies. 50 Standard Chartered – Annual Report 2023 Strategic report Group Chief Risk Ofﬁcer’s review ESG considerat ions ESG stakeholder expectations Organisat ions across the corporate and ﬁnancial sectors are setting ambit ious susta inab il ity goals and net zero targets with many embedding them in their business models. This has prompted increased attention from various stakeholders in ensuring that net zero targets are being met with credible action plans. Stakeholder scrutiny around greenwashing risk relating to ESG focused ﬁnanc ial products, as well as companies’ commitments, transpires in the various regulatory developments and early enforcement actions taken by several key regulators. Fragmentation in the pace and scale of adoption of ESG regulations around the world remains, particularly around taxonomies and disclosure requirements, which may lead to unintended consequences includ ing m isallocat ion of cap ital, increased implementat ion costs and l it igat ion risks. The Group’s net zero aspirat ions may be impacted by governments or corporates scaling back their sustainab il ity targets, especially as economic condit ions rema in challenging, and budgets are constrained. There have been examples in developed nations, such as the UK revis it ing its electric vehicle transit ion t imel ine. A slower trans it ion from key clients may also weigh reputational pressure on the Group’s roadmap. Higher frequencies of extreme weather-related events such as wildf ires, ﬂoods and fam ines may lead to physical climate risk and the cost of managing it becoming a heavier burden on global economies. This will be particularly impactful to developing markets. Alongside climate change, biod ivers ity loss, pollution, and depletion of key resources, such as water, pose incremental risks to food and health systems, energy security and contribute to the disrupt ion of supply cha ins. Human rights concerns are increas ingly in focus, with the scope expanding beyond direct abuses to cover other areas such as technological advancement and supply chains. How these risks are mit igated/next steps • We update our environmental and social standards for provid ing ﬁnancial serv ices to clients every two years, with a new version scheduled for 2024. • We focus on embedding our values through our Posit ion Statements for sensit ive sectors and a l ist of prohib ited activ it ies • We integrate the management of greenwashing risks into our Reputational and Sustainab il ity Risk Framework and polic ies • ‘Green’, ‘sustainable’ and ‘transit ion’ labels for products and transactions reﬂect the criter ia set out in the Group’s Sustainable Finance frameworks, which are regularly reviewed. We obtain external verif icat ion on the Group’s Sustainable Finance asset pool. • We assess our clients and suppliers against various internat ional human r ights princ iples, as well as through our social safeguards and supplier charter. Modern slavery statement: https://www.sc.com/modernslavery Human Rights Posit ion Statement: https://www.sc.com/humanrights • Detailed portfolio reviews and stress tests are conducted to test resil ience to cl imate-related risks and enhance modelling capabil it ies to understand the ﬁnanc ial r isks and opportunit ies from cl imate change. • Work is underway to embed Climate Risk considerat ions across all relevant PRTs. This includes client-level Climate Risk assessments, includ ing sett ing adequate mit igants or controls as part of decis ion mak ing and portfolio management activ it ies. Technological considerat ions Data and dig ital The Group’s dig ital footpr int will expand as more services and products are dig it ised and made more accessible. Scale in operations and interact ions w ith dig ital systems w ill further reduce the tolerance for errors and outages. The risk of data breaches is amplif ied by h ighly organised actors, with threats such as ‘Ransomware as a Service’ and affordable, sophist icated AI systems help ing to facil itate attacks on organisat ions and ind iv iduals. Data regulation continues to be ﬂuid and fragmented. Geopolit ical tens ions have accelerated the implementat ion of data sovereignty laws, includ ing data local isat ion requirements and cross-border access restrict ions. These regulations often have an extraterritor ial reach wh ich could increase operating costs sign iﬁcantly, and also impact cross-border business models. Stakeholder expectations on data management have also increased, particularly relating to quality, integr ity, record keep ing, privacy, sovereignty, the ethical use of data and applicat ion of AI. The sophist icat ion and adoption of AI solutions are growing exponentially and will increase exposure to exist ing r isks such as model, fraud, ﬁnancial cr ime, compliance and Information and Cyber Security (ICS) risks. In response, regulation is accelerating, particularly around the ethical applicat ion of AI in decis ion-mak ing, necessitat ing robust governance measures. The Group needs to ensure that it develops sufﬁcient in-house subject matter expertise. New business structures, channels and competit ion Failure to harness new technologies and new business models would place banks at a competit ive d isadvantage. The continued exploration of partnerships, alliances, dig ital assets, generative AI and nascent technologies, such as quantum computing, provides both opportunit ies and un ique challenges. This is increas ingly important as dig ital assets and distr ibuted ledger technology become progress ively prevalent and interconnected with the ﬁnanc ial ecosystem. Supply chains are becoming more complex, interconnected and dig ital. H ighly extended enterprises expand opportunit ies available for malic ious actors, w ith risk cascading further down supply chains beyond just direct and third party risks. These innovat ions requ ire special ist in-house expertise, new operating models and adapting risk frameworks to perform robust risk assessment and management of new threats. There is also growing regulatory attention in many of these areas. Balancing resil ience and ag il ity is essential given the global nature of new technologies alongside the maintenance of exist ing systems. It is imperat ive to establ ish clear ownership, frameworks, and oversight of the use of emerging technologies. 51 Standard Chartered – Annual Report 2023 Strategic report How these risks are mit igated/next steps • We monitor emerging trends, opportunit ies and developments in technology as well as emerging business models that may have impl icat ions for the banking sector. • We invest in our capabil it ies, to better prepare and protect ourselves against possible disrupt ion and new r isks. • We track the evolving regulatory landscape affecting key areas such as data management, dig ital assets and AI, includ ing country-spec if ic requ irements, and actively collaborate with regulators to support important in it iat ives. • We have established enhanced governance for novel areas through the Dig ital Asset R isk Committee and Responsible AI Council, which considers emerging regulatory guidance. • We manage data risks through our Compliance Risk Type Framework and informat ion secur ity risks through our ICS Risk Type Framework. • We have developed a Group Data Strategy, to strengthen ownership of related data risks. • We mainta in a ded icated Data Compliance Policy with globally applicable standards. These standards undergo regular review to ensure alignment with evolving regulations and industry best practice. • We mainta in programmes to enhance our data r isk management capabil it ies and controls, includ ing compliance with BCBS239 requirements on effective risk data aggregation, with progress tracked at executive level risk governance committees • The Group has implemented a ‘defence-in-depth’ ICS control environment strategy to protect, detect and respond to known and emerging ICS threats. • New risks aris ing from partnersh ips, alliances, dig ital assets and generative technologies are ident iﬁed through the New Init iat ives Risk Assessment and Third Party Risk Management Policy and Standards. Demographic considerat ions Talent pools of the future The expectations of the workforce, especially skilled workers, continue to evolve. The COVID pandemic accelerated changes on how people work, connect and collaborate, with expectations on hybrid working now a given. The focus is increas ingly on ‘what’ work people do and ‘how’ they get to deliver it, which are becoming different iators in the war for future talents. There is greater desire to seek meaning and personal fulﬁlment at work that is aligned to ind iv idual purpose. These trends are even more dist inct among M illenn ials and Generation Z who make up an increas ing proport ion of the global talent pool, and as dig ital nat ives possess the attributes and skills we seek to pursue our strategy. To sustainably attract, grow and retain talent, we must continue to invest in and further strengthen our Employee Value Proposit ion (EVP) and our brand prom ise, here for good, through both ﬁrm-wide intervent ions as well as targeted action. Demographic trends Divergent demographic trends across developed and emerging markets create contrasting challenges. Developed markets’ state budgets could be strained by ageing and shrink ing populat ions, whilst polit ical stances reduce the abil ity to ﬁll sk ills gaps through imm igrat ion. Conversely emerging markets are experienc ing fast-grow ing, younger workforces. Whilst it is an opportunity to develop talent, population growth will put pressure on key resources such as food, water, education and health, as well as government budgets. Population displacement, whether as a result of climate events, lack of key resources, polit ical issues or war, may increase the fragil ity of soc ietal structures in vulnerable centres. Large scale movement could cause social unrest, as well as propagate disease transmiss ion and accelerate the spread of future pandemics. How these risks are mit igated/next steps • Our culture and EVP work aims to address the emerging expectations of the diverse talent we seek. The Brand and Culture Dashboard monitors our divers ity and inclus ion, colleagues’ perceptions of our EVP, and whether we are liv ing our Valued Behav iours. Management teams discuss many of these metrics (includ ing employee survey responses) to ident ify act ions. • We are undertaking a multi-year journey of developing future-skills amongst our colleagues by focusing on continuous learning, to balance appropriately between ‘build ing’ and ‘ induct ing’ sk ills into the Group. • Our internal Talent Marketplace provides colleagues with opportunit ies to learn through exper ience by sign ing up for cross-functional (or even cross-geography) projects. • Employees in 44 markets are on agreed ﬂexible working arrangements. We continue to enhance support and resources to People Leaders and colleagues to help balance productiv ity, collaborat ion and wellbeing. • Our Stands continue to be operational ised through our strategy, and help address the talent pool’s increased expectations of us being purpose-led. Sadia Ricke Group Chief Risk Ofﬁcer 23 February 2024 Strategic report  The Women’s International Network continues to grow  SC Women’s International Network (SC WIN) went from strength to strength in 2023, launching in Malaysia in June, Kenya in July, Singapore in September, and Hong Kong in October. SC WIN aims to provide female entrepreneurs with tailored ﬁnanc ial solutions, business education and opportunit ies to connect w ith like- minded entrepreneurs so they can successfully grow their businesses. SC WIN launched in India in 2022 and is set to launch in further markets in 2024. Read more at sc.com/SCWin Stakeholders and Sustainab il ity overview 54 Stakeholders 66 Our commitment to sustainab il ity 68 Sustainab il ity Aspirat ions 70 Sustainab il ity Strategic Pillars 76 Managing Climate Risk 52 Standard Chartered – Annual Report 2023 Stragegic report 53 Standard Chartered – Annual Report 2023 Strategic report 54 Standard Chartered – Annual Report 2023 Strategic report Stakeholders This section forms our Section 172 disclosure, describ ing how the d irectors considered the matters set out in section 172(1)(a) to (f) of the Companies Act 2006. It also forms the directors’ statement required under section 414CZA of the Act. See the following pages for: • How we engage stakeholders to understand their interests. See pages 55 to 64 • How we engage employees and respond to their interests. See pages 60 to 64 • How we respond to stakeholder interests through sustainable and responsible business. See pages 54 to 64 Detailed informat ion about how the Board engages d irectly with stakeholders and shareholders can be found in the Director’s report on pages 134 to 229. Examples of a selection of the Board’s princ ipal dec is ions are included throughout this section. This section also forms our key non-ﬁnancial d isclosures in relation to sections 414CA and 414CB of the Companies Act 2006. Our Non-ﬁnanc ial informat ion statement can be found at the end of th is section on page 79. Listen ing and respond ing to stakeholder prior it ies and concerns is crit ical to ach iev ing our Purpose and del iver ing on our brand promise, here for good. We strive to mainta in open and constructive relationsh ips w ith a wide range of stakeholders includ ing regulators, lawmakers, cl ients, investors, civ il soc iety, and community groups. In 2023, we made improvements to some of our feedback processes, so relationsh ip managers could address cl ient needs as they emerged. Our engagement took many forms, includ ing one-to-one sess ions using online channels and calls, virtual roundtables, written responses, and targeted surveys. These conversations, and the issues that underpin them, help inform our business strategy and support us to operate as a responsible and sustainable business. Stakeholder feedback, where appropriate, is communicated internally to senior management through the relevant forums and governing committees such as the Sustainab il ity Forum, and to the Board’s Culture and Sustainab il ity Committee (CSC) which oversees the Group’s approach to its main relationsh ips w ith stakeholders. We communicate progress regularly with external stakeholders through channels such as sc.com, established social media platforms and this report. More detailed informat ion on mater ial sustainab il ity topics can be found in our Sustainab il ity review on pages 90 to 133. Stakeholders As an internat ional bank operating in 52 markets, stakeholder engagement is crucial in ensuring we understand local, regional and global perspectives and trends which inform how we do business. Our stakeholders Clients Regulators and governments Investors Suppliers Society Employees Strategic report 55 Standard Chartered – Annual Report 2023 How we create value We want to deliver easy, everyday banking solutions to our clients in a simple and cost-effective way with a great customer experience. We enable ind iv iduals to grow and protect their wealth; we help businesses trade, transact, invest and expand; and we help a variety of ﬁnanc ial inst itut ions, includ ing banks, publ ic sector and development organisat ions, w ith their banking needs. How we serve and engage Our presence in high-growth markets – and ongoing roll out of dig ital platforms – helps connect our cl ients to the global engines of trade and innovat ion. As part of our a im to reach net zero carbon emiss ions by 2050, our trans it ion ﬁnance team have been working closely with our clients in hard-to- abate sectors on their own transit ions. Th is is in addit ion to our plan to mobil ise $300 b ill ion of Susta inable Finance between 2021 and 2030. Across the bank, we have processes and controls to mit igate greenwashing risks, and to support transparency we publish the details of what constitutes our sustainable products and investments universe externally. We work closely with third-party Environmental, Social and Governance (ESG) data providers to support the development of product ideas, and due dil igence is conducted by our in-house team on our high convict ion su ite of sustainable funds. Our push for a best-in-class client experience is underpinned by innovat ive products and d ig ital stra ight-through services. This includes build ing capab il ity to protect our cl ients against evolving risks in the ecosystem, like fraud and cyber security, and comes with education and increased client communicat ion. To act in the best interests of our clients, we use our ins ights gathered from our data alongside robust polic ies, procedures and the Group’s risk appetite to design and offer products and services that meet client needs, regulatory requirements and Group performance targets, while contribut ing to a sustainable and resil ient env ironment. Fees and charges are disclosed to clients in line with regulatory requirements and industry best practice and, where available, benchmarked against competitors. For Personal and Business Banking products, agreed interest rates, fees and other charges as billed to clients are monitored and assessed locally, with global oversight. Triggers for outlier fees and charges are deﬁned and subject to annual review. Complaints are reviewed on an ongoing basis and are one of the factors that are taken into account prior to amendments to annual interest, fees and charges. We also assess our product portfolio for new risks to ensure they remain appropriate for client needs and aligned to emerging regulation. These quantitat ive and qual itat ive assessments, includ ing Per iod ic Product Rev iews, are intended to provide a complete view of whether to continue, enhance, grow or retire products. Train ing is provided to frontline staff across our branches, contact centres and dig ital channels to ident ify and support vulnerable clients, and we have also implemented an educational train ing programme for those cl ients who require assistance in navigat ing onl ine and mobile channels. Throughout 2023, we mainta ined our sharp focus on improv ing the cl ient experience across the Bank. We engaged with clients to show them the opportunit ies trade corridors could bring and how using our network could help them ﬂourish. Consumer, Private & Business Banking In Consumer, Private & Business Banking (CPBB), 2023 saw sign iﬁcant enhancements in dig ital wealth w ith the delivery of around 20 new capabil it ies across our markets. This includes client DIY Wealth Lending for Funds in Hong Kong and the UAE and MyInsure in India where relationsh ip managers can leverage a dig ital tool to perform comprehens ive insurance needs analysis and portfolio reviews for clients. Our focus on partnerships continues to show results with the growth of our exist ing partnersh ips business in China, Vietnam, Indonesia, and Singapore, and we have expanded the partnership business to Malaysia. In 2023, the Bank launched partnerships with Ctrip in China, SeaMoney in Indonesia, and Atome in Singapore and Malaysia. These new and exist ing partnersh ips have incrementally added 2.6 mill ion act ive clients, growth to 1.7 bill ion in balances, and a total of 7.5 bill ion of new d isbursements with impress ive revenue growth in 2023. Addit ionally, we made s ign iﬁcant progress in our advisory business with the launch of SC Wealth Select in 14 markets. SC Wealth Select aims to bring a portfolio approach to client conversations and is supported by our dig ital adv isory tool MyWealth Advisor. Across CPBB, 8,000 colleagues have completed the SC Wealth Select e-learning train ing and 930 frontline colleagues have completed or are undertaking the Standard Chartered INSEAD Wealth Academy Advisory programme. Importantly, we leverage our cross-border scale by using the same technology and open architecture product platform in different markets to offer competit ive products and solut ions globally. Examples of this include our series of Signature CIO Funds which is now available in 12 markets, with more to come in 2024, and Wealth Saver, an innovat ive sav ings product, now available in three markets. Clients 56 Standard Chartered – Annual Report 2023 Strategic report Stakeholders Clients continued Stakeholders continued Corporate, Commercial & Institut ional Bank ing In 2023, Corporate, Commercial & Institut ional Bank ing (CCIB) strengthened its annual feedback process by capturing how clients feel about what we offer – includ ing adv ice, customer service and dig ital channels. CCIB also focused on bu ild ing a consistent dig ital exper ience and accelerated delivery through Cash, Trade, Financ ial Markets and Data Solut ions. Reﬁning our processes through cont inuous improvement has enabled us to achieve beneﬁts in revenue and cost savings by creating capacity and reducing client wait ing t imes. We are transforming our bank-wide processes by taking a client- focused, data-driven dig ital bank approach that w ill enable us to serve the needs of our clients better and faster, and reduce the amount of frict ion and complex ity in our network. We have set in place processes and guidel ines spec if ic to our client businesses for us to better understand and promptly address issues. We implemented self-serve dig ital tools and capab il it ies such as chatbot, our mobile banking app, applicat ion programming interface (API) connectiv ity and data analyt ics. These have reduced operational costs and enhanced the overall client experience. Agile ways of working accelerated our decis ion-mak ing processes and change delivery to create great experiences and make it easier for our clients to bank with us. We continue to engage in partnerships that help us offer enhanced services to customers. Collaborations with Linklog is and Taulia, which is part of SAP, aid clients with supply chain ﬁnancing through blockcha in and dynamic discount ing. Our work with the Partior platform allows us to deliver the speed, efﬁciency and v is ib il ity of domest ic settlement systems to cross-border payments and settlements networks to absolve sign iﬁcant wholesale cross border payment fr ict ions and deliver instant, 24/7 settlement of dig ital assets on the blockchain. Our work with dig ital trade transact ion portal Trade Track-It integrates DHL’s tracking system and Lloyd’s List Intelligence vessel tracking system through API, to offer clients end-to-end vis ib il ity of the ir trade transaction status globally. Across both CCIB and CPBB, throughout 2024, we will continue to listen and respond to stakeholder prior it ies and concerns, addressing feedback as it emerges, strengthen our dig ital transformation and innovat ion capab il it ies, and support our clients as they transit ion to net zero. Using artif ic ial intell igence (AI) to serve CCIB clients In 2023, we deployed artif ic ial intell igence (AI) and other cutting-edge technology to improve how we serve our Corporate, Commercial and Institut ional Bank ing clients. This included: • client and frontline analytics that gave ins ights for better working capital decis ions, FX hedg ing, more efﬁcient l iqu id ity deployment and cross-selling recommendations • data science in the use of in-house proprietary ESG models • the use of a cloud-based machine learning platform to automate manual processes and improve efﬁc iency. We continued our work with open banking APIs to support sector solutions for ﬁntechs, shipp ing, reta il, insurance and healthcare. Their interests • Different iated product and serv ice offering • Dig itally enabled and pos it ive exper ience • Sustainable ﬁnance • Access to internat ional markets. Strategic report 57 Standard Chartered – Annual Report 2023 How we create value We engage with public authorit ies to play our part in supporting the effective function ing of the ﬁnancial system and the broader economy. How we serve and engage We actively engage with governments, regulators and policymakers at a global, regional and national level to share ins ights and support the development of best pract ice, and adoption of consistent approaches, across our markets. In 2023, we engaged with regulators, government ofﬁc ials and trade associat ions on a broad range of top ics that included internat ional trade, susta inab il ity, data, cyber security, dig ital adoption, and innovat ion. We also engaged w ith ofﬁc ials on the ﬁnancial serv ices regulatory environment, in particular on prudential, ﬁnanc ial markets, conduct and ﬁnancial crime frameworks. Our Group Public and Regulatory Affairs team supports most engagements while Conduct, Financ ial Cr ime & Compliance, Risk, Legal and Finance ident ify and analyse relevant pol ic ies, legislat ion and regulat ion. This work is overseen by various governance forums with in the Bank, which comprise senior executives representing business and control functions to support alignment between advocacy and business strategies. For more details on our engagement with regulators and governments, as well as our industry and membership associat ions please see sc.com/polit icalengagement Their interests • Strong capital base and liqu id ity posit ion appropr iate to a global systemically important bank (G-SIB) • Robust standards for conduct and ﬁnancial cr ime • Healthy economies, trade ﬂows and competit ive markets • Sustainable Finance and net zero transit ion • Dig ital innovat ion in ﬁnanc ial serv ices • Operational resil ience • Customer protection • Financ ial stab il ity Regulators and governments How we create value We aim to deliver robust returns and long-term sustainable value for our investors. How we serve and engage We rely on capital from debt and equity investors to execute our business model. Whether they have short- or long-term investment horizons, we provide our investors with informat ion about progress aga inst our strategic and ﬁnancial frameworks. Through our footprint and the execution of our sustainab il ity agenda, we provide our investors with exposure to opportunit ies in emerging markets. We believe that our integrated approach to ESG issues, as well as a strong risk and compliance culture, are key different iators. The Group delivered a strong set of results in 2023 and achieved its ﬁnanc ial objective of a double-d ig it return on tangible equity (RoTE) for the year. We set out ﬁve actions in 2022 designed to accelerate delivery of this RoTE target. The strong execution of these actions over the last two years, where we either achieved our targets ahead of plan or they are well on-track, supported us to reach that milestone in 2023. We will now build on this success, taking action to deliver sustainably higher returns with a focus on driv ing income growth and improv ing operat ional leverage, to deliver a RoTE of 12 per cent in 2026 Regular and transparent engagement with our investors, and the wider market, helps us understand investors’ needs and tailor our public informat ion accord ingly. In addit ion to direct engagement from our Investor Relations team, we communicate through quarterly, half-year and full-year results, conferences, roadshows, investor days and media releases. We continued to expand our use of virtual meetings during the year 2023, coupled with a growing number of face-to-face interact ions. We hosted two cap ital market days, focusing on our Asia region and the Sustainab il ity opportunity in May and November respectively. Key investor feedback, recommendations and requests are considered by the Board, whose members keep abreast of current topics of interest. Standard Chartered PLC’s Annual General Meeting (AGM) in May was open to shareholders to attend either in person or electronically where they were provided a platform to view a live video feed of the meeting. All partic ipants were prov ided with the opportunity to submit their votes and ask the Board questions. Sim ilarly, the Group Cha irman, alongside some members of the Board, hosted a hybrid stewardship event for inst itut ional investors in November which provided a platform for shareholders to receive an update on a number of topics, includ ing susta inab il ity, net zero and governance matters. The event included an open question-and-answer session across a range of key issues. Investors 58 Standard Chartered – Annual Report 2023 Strategic report Stakeholders How we create value We are dedicated to engaging with suppliers who offer value-adding goods and services across our network, and we work closely with them to support global environmental and social standards. Our suppliers are expected to be ethical, respect human rights, divers ity and inclus ion, and the environment to support our colleagues, clients, and communit ies. How we serve and engage We must effectively manage, monitor, and mit igate r isks in our supply chain. We do this through our Third-Party Risk Management Policy. This, in conjunct ion w ith the Princ ipal R isk Type Polic ies and Standards, set out the Group’s m in imum control requirements for the ident iﬁcation, m it igat ion and management of risks aris ing from the use of suppl iers. Our Supplier Charter sets out our princ iples in relation to ethics, human rights, divers ity and inclus ion, and environmental performance. All newly onboarded suppliers are expected to agree with these princ iples. We seek to reinforce this through the terms of our standard contract templates, where possible, and we further encourage alignment by sending an annual letter to all active suppliers. This includes guidance regarding our stance on ethics and conduct, sustainab il ity aspirat ions, payment processes and other relevant princ iples such as Ant i-Bribery and Corruption. Our Charter covers all geographies and categories of suppliers, and we plan to refresh the Charter in 2024. Supporting our suppliers to achieve net zero Our supply chain is crit ical to ach iev ing the Group’s sustainab il ity aspirat ions, and we cont inue to make good progress. We encourage our suppliers to set science-based emiss ions reduct ion targets and by 2028 we plan to direct 70 per cent of our total expenditure to suppliers who have set or committed to setting science-based emiss ion reduct ion targets. In 2023, we held group sessions with our suppliers to support them reduce their emiss ions, d iscuss progress and next steps. Supporting a diverse and inclus ive supply cha in We recognise the value of supply chain divers ity to our business and society. In 2023, we continued to integrate supplier divers ity into our business strategy and make efforts to include diverse suppliers in sourcing activ it ies and improve spending levels with diverse suppliers as appropriate. To do this we have continued to collaborate with non-governmental organisat ions (NGOs), bus iness incubators and others to help build and develop our diverse and talented supplier pool. In 2023, this included jo in ing member-buyer events, local procurement networking activ it ies and best practice sharing events with partners like WEConnect International – a global network supporting women-owned businesses to connect with larger companies. Suppliers Stakeholders continued We continue to respond to growing interest from a wide range of stakeholders on ESG matters, includ ing investors. We sought shareholder endorsement for our net zero pathway at the 2022 AGM, intended as a means by which we will measure progress, engage and gather views. We also work with sustainab il ity analysts and partic ipate in sustainab il ity ind ices that benchmark our performance, includ ing the Carbon D isclosure Project (CDP) Climate Change survey and Workforce Disclosure Init iat ive. Regular engagement with different shareholder groups ensures that we act fairly between them. Our princ ipal engagement event with our retail shareholders is our AGM and in order to hear from as wide a group as possible we encourage maximum partic ipat ion by way of attendance in person and via a live web portal. Further details of our 2023 AGM are on page 159. In 2024, we will continue to engage with investors on progress against our strategic prior it ies and actions, as well as our ﬁnancial framework as we progress towards del iver ing sustainably higher returns. Their interests • Safe, strong and sustainable ﬁnanc ial performance • Facil itat ion of sustainable ﬁnance to meet the United Nations (UN) Sustainable Development Goals • Progress on ESG matters, includ ing advanc ing our net zero agenda Investors continued Strategic report 59 Standard Chartered – Annual Report 2023 How we create value We strive to operate as a sustainable and responsible company, working with local partners to promote social and economic development. How we serve and engage We engage with a wide range of civ il soc iety, internat ional and local NGOs, from those focused on environmental and public policy issues to partners deliver ing our commun ity programmes. To shape our strategy, we aim for constructive dialogue that helps us to understand alternative perspectives and ensure that our approach to doing business is understood. This includes working with NGOs that approach us about a specif ic cl ient, transaction or policy. In 2023, climate change, our net zero pathway, human rights and nature continued to underpin many of our conversations. We primar ily rece ived NGO feedback via our public inbox and responded to queries in line with our standards. For complex issues such as climate change, we held bilateral virtual meetings with NGOs to exchange perspectives in greater depth. In 2023, together with the Standard Chartered Foundation, we continued to engage with NGOs, charit ies and other organisat ions to empower the next generat ion to learn, earn and grow through Futuremakers by Standard Chartered, our global community in it iat ive to tackle inequal ity by promoting greater economic inclus ion. We prov ided education, employabil ity and entrepreneursh ip support to more than one mill ion young people, w ith 62 per cent of those engaged being women. To close the gender gap and promote access to ﬁnance, we piloted ﬁnanc ing fac il it ies to support women-led microbus inesses w ith green and social ambit ions. At the UN Climate Change Conference, COP 28, we held a Futuremakers Youth Panel in Dubai, and online in Nairob i to generate ins ights on scal ing tech solutions for a green and inclus ive economy. In 2024, we will conduct a study on our social return on investment to assess the impact of Futuremakers. By offering three days paid volunteering leave, we inst illed a strong culture of volunteering where 61 per cent of our colleagues contributed over 76,000 days giv ing back to the community. In 2024, we will increase our skills-based activ it ies leveraging our colleagues’ skills to deepen our impact, with a target of 75,000 skills-based hours across our footprint. Their interests • Climate change and decarbonisat ion • Nature • Human rights • Financ ial inclus ion • Economic empowerment • Gender equity • Community impact. Society We have continued to build capacity with our own colleagues through online train ing on suppl ier divers ity and inclus ion. Highl ight ing our commitment, we have been awarded the Chartered Institute of Procurement and Supply Asia Excellence in Procurement Award for outstanding Divers ity and Inclusion practices in procurement teams and Best Init iat ive to Build a Diverse Supplier Base. In 2023, approximately 40 per cent of our newly onboarded suppliers were diverse includ ing, for example, KASHow. KASHow is a micro-owned and predominately women-led business, which managed the logist ics and plann ing of Standard Chartered Hong Kong’s 25th marathon in 2023. In addit ion, KASHow was supportive of our sustainab il ity object ives by us ing recycled materials for the marathon event logist ics and the bu ild ing of the carnival event booth. For Standard Chartered, diverse suppliers are deﬁned as: • Small enterprise (10–49 employees + turnover <USD10 mill ion) • Micro enterprise (<10 employees + turnover 80% of income from thermal coal and those that remain have exit plans agreed/in progress based on contractual obligat ions. LTIP awards 201 Standard Chartered – Annual Report 2023 Directors’ report Responsible company Proof point Assessment • Reduction in property emiss ions of 10% annually. • Achieved. • Reduction of ﬂight emiss ions of 25%. • Achieved with a 36% reduction in ﬂight emiss ions aga inst our 2019 baseline. • Offset 95% of all residual emiss ions from our operations. • Successfully completed our carbon credit purchases against our residual operating emiss ions s ince 2021. Clients Proof point Assessment • Improve client satisfact ion rat ing evidenced in surveys and internal benchmarks. • Sign iﬁcantly improved performance in all three years, with consumer client satisfact ion metr ic of 56.6%, increased from 29.5% in 2020. • Deliver growth in qualif ied cl ients across Private, Prior ity & Prem ium Banking, and Wealth Management. • Improved growth in qualif ied cl ients across our Afﬂuent business, with strong performance achieved in 2023. • Deliver network income growth in CCIB. • Exceeded targets in 2023 ($6.9 bill ion) follow ing strong performance in 2022 and improv ing on performance in 2021 (from $4.4 bill ion in 2020). • Add more than 2 mill ion new customers v ia dig ital partnerships, platforms and technologies. • Added 1.8 mill ion new customers by the end of 2023 following weaker performance in 2022 and 2021. Enablers Proof point Assessment • Drive culture of innovat ion to generate new revenues. • 36% of Group revenue coming from innovat ion, d ig ital and transformation revenue streams • Adopt new ways of working that result in quicker decis ion-mak ing and delivery. • Speed of decis ion-mak ing and delivery have improved in each of the three years includ ing ‘speed to value’, wh ich measures time from ideat ion unt il customer go-live. • Increase senior female representation to 33%. • Increase in the number of females in senior roles by 3 ppt over the three years to 32.5%. • Increase our culture of inclus ion score from 81% to 84% (internal index). • Increased by 1.5 ppt over the three years to 83.2%. Risk and controls Proof point Assessment • Mainta in effect ive risk and control governance. • Improved performance of risk reduction across the Bank and good progress in embedding a healthier risk culture. • Successfully deliver milestones with in the Cyber R isk management plan. • Continued reduction of Cyber Risk includ ing the del ivery of informat ion and Cyber secur ity strategic plan with all objectives ach ieved.  Windfall gains  When making LTIP awards the Committee reviews the proposed size of the award and considers the change in share price in the period leading up to the award compared with the share price when awards were made in the previous year. A sign iﬁcant fall in share price will increase the overall number of shares being awarded, and the Committee considers this, being mindful of the potential for a ‘windfall gain’. For awards made in 2021 the Committee reviewed the change in share price compared with the previous year and, being comfortable that the change was not sign iﬁcant, at -5.7 per cent, determ ined not to adjust the size of the awards. The Committee further reviews any increase in share price at the end of the performance period, when awards are due to vest, and considers potential outcomes to determine if any adjustment should be made where an increase in share price is not reﬂective of a corresponding improvement in underlying ﬁnanc ial performance. To date no adjustments have been made. 202 Standard Chartered – Annual Report 2023 Directors’ report Directors’ remuneration report LTIP awards for the executive directors to be granted in 2024 Based on Group and ind iv idual performance during 2023 awards for the performance year will be granted in March 2024 at the maximum amount under the 2022 directors’ remuneration policy. Performance measures are aligned to our strategic prior it ies. In line with his retirement arrangements, Andy Halford is not elig ible for th is LTIP award. Award as % of salary Award value on grant (£) Award value on vesting (£) Bill Winters 132% 3,322,440 To be determined based on the level of performance achieved at the end of the three-year period against the performance measures and the future share price. Diego De Giorg i 132% 2,178,000 The RoTE target range for the awards is increased to 10 to 13 per cent, versus 10 to 12.5 per cent for the 2023-25 awards, reﬂecting the progress in RoTE achieved in 2023 and our increased ambit ion of 12.5 per cent by 2026. Peer group for the relative TSR measure in the 2024-26 LTIP The peer group of companies selected for the relative TSR performance calculation are those with generally comparable business activ it ies, size or geographic spread to Standard Chartered or with which we compete for investor funds and talent. The group is reviewed annually, prior to new LTIP awards being made and following the 2023 review the group for the 2024-26 LTIP awards has been updated. Bank of China, ICBC and State Bank of India are no longer considered to be comparable peers as they are state-owned banks which have sign iﬁcantly d ifferent purpose, strategies and performance proﬁles. In addit ion, Cred it Suisse has been removed as it ceased public trading during 2023. TSR is measured in sterling for each company and the data is averaged over a month at the start and end of the three-year measurement period which starts from the date of grant. Banco Santander DBS Group Oversea Chinese Banking Corporation Bank of America Deutsche Bank Société Générale Bank of East Asia HSBC Standard Bank Barclays ICICI UBS BNP Paribas JPMorgan Chase United Overseas Bank Cit igroup KB Financ ial Group Financ ial measures for 2024-26 LTIP awards Measure Weight ing Min imum performance (25%) Between min imum and maximum performance Maximum performance (100%) RoTE 1 in 2026 with a CET1 2 of the higher of 13% or the min imum regulatory requirement 30% 10% Straight-line assessment between min imum and maximum 13% Relative TSR performance against peer group 30% Median Straight-line assessment between peer companies posit ioned immed iately above and below the Group Upper quartile 1 Underlying RoTE represents the ratio of the current year’s underlying operating proﬁt attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intang ibles for the report ing period. Underlying RoTE normally excludes regulatory ﬁnes and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 2 The CET1 underpin will be set at the higher of 13 per cent or the min imum regulatory level as of 31 December 2026. In add it ion, the Comm ittee has the discret ion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period, for example in relation to Basel IV Non-ﬁnancial measures for 2024-26 LTIP awards Environmental, social and governance • Accelerating Zero: Progress towards our 2030 Sustainable Finance mobil isat ion target in each of the three performance years. • Actively contribut ing to the development of the susta inab il ity ecosystem through global partnerships, in it iat ives and cross-sector collaborations. • Lift ing part ic ipat ion: Year-on year growth in ﬁnanc ing act iv ity w ith female and/or small and medium enterprise (SME) clients and other underserved populations. • Resetting Globalisat ion: Ma inta in ing our presence and supporting internat ional/cross border trade in key developing markets that we serve. • Improve eNPS target. • Increase senior female representation and increase our ‘culture of inclus ion’ ( internal index). Weight ing – 25% Directors’ remuneration in 2023: LTIP awards continued 203 Standard Chartered – Annual Report 2023 Directors’ report Other strategic measures Clients • Improve client satisfact ion rat ing. • Deliver growth across our markets includ ing in cross-border income in CCIB, in Afﬂuent wealth client activ ity and in Ventures. Productiv ity • Improve Operating Proﬁt less credit impa irment per FTE. • Percentage of transformation programmes on track. Risk and controls • Improve effectiveness of risk and control governance. Weight ing – 15% Remuneration regulations for UK banks prohib it the award of d iv idend equ ivalent shares on vesting. The number of shares awarded in respect of the LTIP will take into account the lack of div idend equ ivalents (calculated by reference to market consensus div idend y ield) such that the overall market value of the award is mainta ined. These awards will vest in ﬁve annual tranches beginn ing after the th ird anniversary of the grant (i.e. March 2027 to March 2031) subject to meeting the performance measures set out at the end of 2026. All vested shares are subject to a 12-month retention period. Total variable remuneration awarded to directors in respect of 2023 (audited) Bill Winters Andy Halford 2023 2022 2023 2022 Annual incent ive (£000) 1,462 1,499 920 945 Annual incent ive as a percentage of salary 58% 62% 57% 61% LTIP award (value of shares subject to performance condit ions) (£000) 1 3,322 3,213 N/A 2,054 LTIP award as a percentage of salary 132% 132% N/A 132% Total variable remuneration (£000) 4,784 4,712 920 2,999 Total variable remuneration as a percentage of salary 190% 194% 57% 193% 1 LTIP awards for the 2023 performance year will be granted to executive directors in March 2024 and are based on 2023 salary 204 Standard Chartered – Annual Report 2023 Directors’ report Directors’ remuneration report Service contracts for executive directors Copies of the executive directors’ service contracts are available for inspect ion at the Group’s reg istered ofﬁce. These contracts have rolling 12-month notice periods and the dates of the executive directors’ current service contracts are shown below. The contracts were updated effective 1 January 2020 to reﬂect the changes made following the implementat ion of the 2019 remuneration policy and the change to pension contribut ions. Executive directors are permitted to hold non-executive directorsh ip pos it ions in other organisat ions. Where such appo intments are agreed with the Board, the executive directors may retain any fees payable for their services. Bill and Andy served as non-executive directors elsewhere and received fees for the period covered by this report as set out below. Andy jo ined the Board of UK Government Investments Lim ited on 17 October 2023. Date of Standard Chartered employment contract Details of any non-executive directorsh ip Fees retained for any non-executive directorsh ip (local currency) Bill Winters 1 January 2020 Novartis International AG CHF360,000 Andy Halford 1 January 2020 Board of UK Government Investments Lim ited GBP5,208 Diego De Giorg i 1 September 2023 – – Single ﬁgure of remuneration for the Chairman and INEDs (audited) The Chairman and INEDs were paid in monthly instalments during the year. The INEDs are required to hold shares with a nominal value of $1,000. The table below shows the fees and beneﬁts received by the Chairman and INEDs in 2023 and 2022. The INEDs’ 2023 beneﬁt ﬁgures are in respect of the 2022/23 tax year and the 2022 beneﬁt ﬁgures are in respect of the 2021/22 tax year to provide consistency with the reporting of sim ilar beneﬁts in previous years and with those received by executive directors. Fees £000 Beneﬁts £000 1 Total £000 Shares beneﬁcially held as at 31 December 2 2023 2022 2023 2022 2023 2022 2023 Group Chairman José Viñals 1,293 1,250 69 45 1,362 1,295 45,000 Current INEDs Shir ish Apte 287 128 0 0 287 128 2,000 David Conner 3 250 233 1 1 251 234 10,000 Christ ine Hodgson, CBE 4 17 289 0 0 17 289 – Gay Huey Evans, CBE 150 155 0 1 150 156 2,615 Jackie Hunt 185 43 3 0 188 43 2,000 Robin Lawther, CBE 225 93 0 0 225 93 2,000 Maria Ramos 332 239 0 0 332 239 2,000 Phil Rivett 247 234 0 0 247 234 2,128 David Tang 185 170 1 1 186 171 2,000 Carlson Tong 190 183 0 0 190 183 2,000 Jasmine Whitbread 5 82 210 0 0 82 210 – Linda Yueh, CBE 6 219 – 0 – 219 – 2,000 1 The costs of beneﬁts (and any associated tax costs) are paid by the Group 2 The beneﬁcial interests of Chairman and INEDs, and connected persons in the shares of the Company are set out above. These directors do not have any non-beneﬁcial interests in the Company’s shares. None of these directors used shares as collateral for any loans. No director had either: (i) an interest in the Company’s preference shares or loan stocks of any subsid iary or assoc iated undertaking of the Group; or (i i) any corporate interests in the Company’s ordinary shares. All ﬁgures are as of 31 December 2023 or on the retirement of a director unless otherwise stated 3 David Conner’s fee includes his role on the Combined US Operations Risk Committee 4 Christ ine Hodgson stepped down from the Board on 31 January 2023 and we are no longer track ing her shareholding. Her reported fee for 2023 of £17,000 is in respect of the period of 1 January 2023 to 31 January 2023 5 Jasmine Whitbread stepped down from the Board on 3 May 2023 and we are no longer tracking her shareholding. Her reported fee for 2023 of £82,000 is in respect of the period of 1 January 2023 to 3 May 2023 6 Linda Yueh was appointed to the Board on 1 January 2023 INEDs’ letters of appointment The INEDs have letters of appointment, which are available for inspect ion at the Group’s reg istered ofﬁce. INEDs are appointed for a period of one year, unless terminated by either party with three months’ notice. Details of the INEDs’ appointments are set out on pages 137 to 141 Directors’ remuneration in 2023 continued 205 Standard Chartered – Annual Report 2023 Directors’ report Remuneration for the executive directors in 2024 will be in line with our directors’ remuneration policy, approved at the AGM in May 2022. Key elements include salary, pension, beneﬁts, an annual incent ive and an LTIP award. Our policy is summarised on pages 188 and 189 of this report and set out in full on pages 159 to 164 of the 2021 Annual Report and on our website at sc.com The Committee annually reviews the executive directors’ salaries, consider ing changes to the scope or respons ib il ity of the role, market alignment and Group-wide increases. Fixed pay for Bill and Diego will not be increased in 2024. £000 Bill Winters Diego De Giorg i 2024 2023 % change 2024 2023 % change Salary 2,517 2,517 0 1,650 – – of which cash 1,258 1,258 0 1,100 – – of which shares 1,259 1,259 0 550 – – Pension 252 252 0 110 – – Total ﬁxed pay 2,769 2,769 0 1,760 – – Proportion of total ﬁxed pay paid in cash 55% 55% – 69% – – Proportion of total ﬁxed pay paid in shares 45% 45% – 31% – – Illustration of applicat ion of 2024 remunerat ion policy The charts below illustrate potential directors’ remuneration outcomes based on our policy (i.e. March 2024 awards based on 2023 performance and ﬁxed remuneration with effect from 1 April 2024). These illustrate four performance scenarios and the percentages in each bar show the remuneration provided by each pay element. 2022 and 2023 single ﬁgures of remuneration for Bill are also shown. Executive director remuneration (£000) Bill Winters 1,000 0 2,000 3,000 4,000 5,000 8,000 10,000 7,000 6,000 12,000 11,000 9,000 Fixed remuneration Annual incent ive LTIP Min imum 3,057 100% On-target 5,825 52% 19% 29% Maximum 8,594 35% 26% 39% 10,255 30% 22% 48% 2022 single ﬁgure 2023 single ﬁgure 6,408 46% 23% 31% 7,837 39% 19% 42% Maximum + 50% share price increase Diego De Giorg i Min imum 1,819 100% On-target 3,634 50% 20% 30% Maximum 5,449 33% 27% 40% 6,538 28% 22% 50% Maximum + 50% share price increase £000 Salary Beneﬁts Pension Total Fixed remuneration Consists of salary and pension (as at 1 April 2024) and beneﬁts (received in 2023, annualised for GCFO) Bill Winters 2,517 288 252 3,057 Diego De Giorg i 1,650 59 110 1,819 Min imum On-target Maximum £000 % of target % of salary % of target % of salary Annual incent ive No annual incent ive is awarded 50% 44% 100% 88% LTIP award No LTIP award vests 50% 66% 100% 132% 2024 policy implementat ion for d irectors 206 Standard Chartered – Annual Report 2023 Directors’ report Directors’ remuneration report 2024 annual incent ive scorecard Our annual incent ive scorecard reﬂects our strateg ic prior it ies. Targets are set annually by the Committee based on the Group’s annual ﬁnancial plans and strateg ic prior it ies. Targets and performance achieved will be disclosed retrospectively in the 2024 Annual Report due to commercial sensit iv ity. Financ ial measures make up 50 per cent of the scorecard. The Comm ittee assesses strategic and personal measures using a quantitat ive and qual itat ive framework. 2024 scorecard – ﬁnancial measures Measure Weight ing Target Income 1 9% • Targets to be disclosed retrospectively CCIB Sustainable Finance Income 3% Costs 8% RoTE 2 with a CET1 3 underpin of the higher of 13% or the min imum regulatory requ irement 30% 1 The Group’s reported performance is adjusted for proﬁts or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are sign iﬁcant or mater ial in the context of the Group’s normal business earnings for the period and items which management and investors would ordinar ily ident ify separately when assess ing underlying performance period by period 2 Underlying RoTE represents the ratio of the current year’s underlying operating proﬁt attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intang ibles for the report ing period. Underlying RoTE normally excludes regulatory ﬁnes and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 3 The CET1 underpin will be set at the higher of 13 per cent or the min imum regulatory level as at 31 December 2024. In add it ion, the Comm ittee has the discret ion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period 2024 scorecard – strategic measures Clients (Network, Afﬂuent, Mass) Target • Improve client satisfact ion and cl ient experience ratings. • Deliver cross border income growth in CCIB. • Deliver network growth in qualif ied cl ients across Afﬂuent activ ity. • Grow value of Ventures. • Mass market Retail growth through new to bank personal customers. Weight ing – 12% Sustainab il ity Target • Meeting key milestones through build ing infrastructure relating to client, transaction and central data for deliver ing on our net zero amb it ion. • Reducing our ﬁnanced emiss ions for key sectors in line with our risk appetite and based on inter im 2030 sectoral targets. • Reducing Scope 1 and 2 emiss ions in line with our operational net zero target by 2025. Weight ing – 4% Productiv ity and transformat ion Target • Grow proportion of dig itally in it iated transactions and dig ital sales adopt ion. • Transformational Change: % of transformation change programmes on track. • Productiv ity: Increase Operat ing Proﬁt less Credit Impairment per FTE. Weight ing – 8% People and culture Target • Improve employee engagement as evidenced in our annual My Voice survey. • Improve senior female representation to support reaching 35% by 2025. • Improve our ‘culture of inclus ion’ score ( internal index). Weight ing – 4% 2024 policy implementat ion for d irectors continued 207 Standard Chartered – Annual Report 2023 Directors’ report Risk and controls Target • Non-ﬁnancial r isk reduction. • Self-ident iﬁcation of aud it issues. Weight ing – 12% 2024 scorecard – personal performance measures Bill – performance goals Target • Further progress towards an efﬁcient and more proﬁtable Bank wh ile mainta in ing focus on risk and control. • Further promote our culture of innovat ion and max im ise synerg ies between the main bank and our various Ventures. • Continue to build a high performance environment and embed the culture of excellence. Weight ing – 10% Diego – performance goals Target • Financ ial performance: contr ibute to the delivery of Group ﬁnanc ial performance and operating leverage. • Finance function performance: partner with and support business in the execution of the Group’s strategy. • Transformation and simpl iﬁcation: lead implementat ion of strateg ic change in it iat ives across the Group. • Process and controls: continue to progress on major multi-year programs and address regulatory requirements. Weight ing – 10% INED fees The Board regularly reviews the fee levels, consider ing market data and the dut ies, time commitment and contribut ion expected for the PLC Board and, where appropriate, subsid iary boards. Cons ider ing the increas ing demands made of our INEDs the Board determined an increase in INED basic fees of GBP5,000 to GBP115,000 to be appropriate. The revised fees are effective from 1 January 2024. The Chairman and the INEDs are elig ible for beneﬁts in line with the directors’ remuneration policy. Neither the Chairman or INEDs receive any performance-related remuneration. Our policy is summarised on pages 188 and 189 of this report and set out in full on pages 159 to 164 of the 2021 Annual Report and on our website at sc.com Role Annual fee Group Chairman 1 £1,293,000 Senior Independent Director £45,000 Independent Non-Executive Director £115,000 Committee Member fee Chair fee Audit, Board Risk, Remuneration £40,000 £80,000 Culture and Sustainab il ity £35,000 £70,000 Governance and Nominat ion £17,000 Nil 1 The Group Chairman receives a stand-alone fee which is inclus ive of all serv ices (includ ing Board and Comm ittee responsib il it ies) 2 The Group does not currently util ise the role of Deputy Cha irman and does not plan to do so 208 Standard Chartered – Annual Report 2023 Directors’ report Addit ional remunerat ion disclosures Addit ional remunerat ion disclosures The following disclosures provide further informat ion and context on execut ive director and wider workforce remuneration as required by the Directors’ Remuneration Report Regulations and The Stock Exchange of Hong Kong Lim ited. The relationsh ip between the remunerat ion of the Group CEO and all UK employees Ratio of the total remuneration of the CEO to that of the UK lower quartile, median and upper quartile employees Year Method CEO UK employee – £000 Pay ratio £000 P25 P50 P75 P25 P50 P75 2023 A 7,837 110 162 247 71:1 48:1 32:1 2022 A 6,408 95 145 228 67:1 44:1 28:1 2021 A 4,740 92 139 215 52:1 34:1 22:1 2020 A 3,926 84 128 199 46:1 31:1 20:1 2019 A 5,360 83 128 212 65:1 42:1 25:1 2018 A 6,287 78 124 208 80:1 51:1 30:1 2017 A 4,683 76 121 203 61:1 39:1 23:1 The ratio will depend materially on yearly LTIP outcomes for the CEO, and accordingly may ﬂuctuate. Therefore, the Committee also discloses salary and salary plus annual incent ive rat ios, as most UK employees do not typically receive LTIP awards. Addit ional rat ios of pay based on salary and salary plus annual incent ive Salary CEO UK employee – £000 Pay ratio £000 P25 P50 P75 P25 P50 P75 2023 2,496 78 103 149 32:1 24:1 17:1 2022 2,418 72 87 138 34:1 28:1 18:1 2021 2,370 68 100 136 35:1 24:1 17:1 2020 2,370 63 93 116 38:1 25:1 20:1 2019 2,353 65 90 128 36:1 26:1 18:1 2018 2,300 59 86 142 39:1 27:1 16:1 2017 2,300 55 81 124 42:1 28:1 19:1 Salary plus annual incent ive CEO UK employee – £000 Pay ratio £000 P25 P50 P75 P25 P50 P75 2023 3,958 96 138 220 41:1 29:1 18:1 2022 3,917 84 123 202 47:1 32:1 19:1 2021 3,559 79 122 186 45:1 29:1 19:1 2020 2,756 74 104 175 37:1 26:1 16:1 2019 3,604 73 109 187 49:1 33:1 19:1 2018 3,691 72 105 183 52:1 35:1 20:1 2017 3,978 69 103 182 58:1 39:1 22:1 CEO pay ratio methodology • Pay ratios are calculated using Option A methodology, aligned with investor guidance. • Employee pay data is based on full-time equivalent UK employees as of 31 December for the relevant year, excluding leavers, joiners, and transfers in/out of the UK during the year for like-for-like comparison. Total remuneration is calculated in line with the single ﬁgure methodology and insured beneﬁts data is based on notional premiums. No other adjustments or assumptions have been made. • CEO pay is the single ﬁgure of remuneration for 2023 and restated for 2022 to reﬂect the ﬁnal LTIP performance outcome assessed in March 2023. The 2023 ratio will be restated in the 2024 report to reﬂect the ﬁnal LTIP performance outcome for elig ible employees and the CEO. • The Committee considered the data for three ind iv iduals ident iﬁed at the quart iles for 2023 and believes it fairly reﬂects UK employee pay. They were full-time employees and received remuneration in line with policy, without exceptional pay. • Our LTIP links remuneration to the achievement of long-term strategy and reinforces alignment with shareholder interests. Partic ipat ion is typically senior employees who directly inﬂuence the award’s performance targets. The ident iﬁed quart ile employees are not LTIP partic ipants. 209 Standard Chartered – Annual Report 2023 Directors’ report Group performance versus the CEO’s remuneration The graph below shows the Group’s TSR performance on a cumulative basis over the past 10 years alongside that of the FTSE 100 and peer banks. The graph also shows CEO remuneration based on the single ﬁgure over the 10 years ended 31 December 2023 for comparison. The FTSE 100 provides a broad comparison group against which shareholders may measure their relative returns. The table below shows the single ﬁgure of total remuneration for the CEO since 2014 and the variable remuneration delivered as a percentage of maximum opportunity. Salary PS PS BW BW BW BW BW BW BW BW BW 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 2023 Single ﬁgure of total remuneration £000 3,093 1,290 8,399 3,392 4,683 6,287 5,360 3,926 4,740 6,408 7,837 Annual incent ive as percentage of maximum opportunity 0% 0% 0% 45% 76% 63% 55% 18.5% 57% 70% 66% Vesting of LTIP awards as a percentage of maximum 1 10% 0% – – – 27% 38% 26% 23% 36.8% 66% 1 TSR performance will be assessed three years from the date of award, in March 2024, making the projected 2023 LTIP outcome of 66 per cent subject to change • Bill’s single ﬁgure of total remuneration in 2015 includes his buyout award of £6.5 mill ion to compensate for the forfe iture of share interests on jo in ing from his previous employment. • The 2022 single ﬁgure for Bill has been restated based on the actual performance outcome and share price when the 2020-22 LTIP awards started vesting in March 2023. 0 1 2 3 4 5 6 7 8 9 10 Jan 24 Jan 23 Jan 22 Jan 21 Jan 20 Jan 19 Jan 18 Jan 17 Jan 16 Jan 16 Jan 15 Jan 14 0 20 40 60 80 100 120 140 160 180 200 Value of £100 invested on 31 December 2013 CEO total remuneration (£ mill ion) CEO single ﬁgure of remuneration (Peter Sands) CEO single ﬁgure of remuneration (Bill Winters) Standard Chartered FTSE 100 Comparator median 210 Standard Chartered – Annual Report 2023 Directors’ report Addit ional remunerat ion disclosures Addit ional remunerat ion disclosures continued Annual percentage change in remuneration of directors and UK employees methodology • Employee pay data is based on FTE UK employees as of 31 December for the relevant year, excluding leavers, jo iners, and transfers in/out of the UK during the year for like-for-like comparison. Salary percentage change reﬂects increases decided at the end of 2022 and implemented in 2023. • Average FTE UK employee percentage change is calculated on a mean basis to allow for a more consistent year-on-year comparison. • Due to the low value taxable beneﬁts received by INEDs, small value changes may lead to annual percentage change ﬂuctuations. Annual percentage change in remuneration of directors and UK employees In line with our Fair Pay Charter, we monitor CEO and wider workforce remuneration changes annually. Addit ionally, comply ing with the Shareholder Rights Direct ive, we compare PLC Board d irectors with an average FTE UK employee. As ind iv iduals are employed by subsid iary compan ies rather than Standard Chartered PLC we voluntarily disclose comparison against UK employees as we feel this is a suitable comparison. Salary % change Taxable beneﬁts % change Annual incent ive % change 2023 2022 2021 2020 2023 2022 2021 2020 2023 2022 2021 2020 CEO Bill Winters 3.2 2.0 0.0 0.7 (3.0) 79.8 (26.5) (2.9) (2.5) 26.1 208.1 (69.2) GCFO Andy Halford 3.2 2.0 0.7 3.7 (17.0) 23.9 (5.6) 30.2 (2.6) 24.3 208.9 (68.2) Workforce average FTE UK employee 10.4 3.3 3.1 3.8 2.2 (7.0) (2.0) 2.9 0.8 14.3 38.2 (22.1) Group Chairman José Viñals 1 3.4 0.0 0.0 0.0 53.2 170.2 (61.5) (11.7) – – – – Shir ish Apte – – – – – – – – – – – – David Conner 7.5 (8.8) (6.7) (0.6) 0.0 0.0 5.9 (57.5) – – – – Christ ine Hodgson, CBE 2 – (11.0) 0.0 0.0 – 0.0 (100.0) 28.2 – – – – Gay Huey Evans, CBE (3.2) (22.5) 0.0 0.0 (100.0) 100.0 (100.0) 233.9 – – – – Jackie Hunt – – – – – – – – – – – – Robin Lawther, CBE – – – – – – – – – – – – Maria Ramos 3 38.8 25.9 – – 0.0 0.0 – – – – – – Phil Rivett 5.7 3.9 – – 0.0 0.0 – – – – – – David Tang 8.8 0.0 18.3 – 0.0 0.0 (82.3) – – – – – Carlson Tong 4.1 (11.0) 0.0 – 0.0 0.0 (100.0) – – – – – Jasmine Whitbread 2 – 0.0 0.0 0.0 – 0.0 (100.0) (49.2) – – – – Linda Yueh – – – – – – – – – – – – 1 The increase in 2023 taxable beneﬁts for José Viñals is primar ily due to the cont inu ing increase in business travel to pre-pandemic levels 2 In 2023, Christ ine Hodgson and Jasm ine Whitbread stepped down from the Board on 31 January and 3 May respectively. Linda Yueh was appointed to the Board on 1 January 3 The increase in fees for Maria Ramos is due to changes in Board and Committee responsib il it ies in 2022 See pages 195 and 204 for the CEO, GCFO, Group Chairman and INEDs data the changes relates to 211 Standard Chartered – Annual Report 2023 Directors’ report Scheme interests awarded, exercised and lapsed during the year Employees, includ ing execut ive directors, are not permitted to engage in any personal investment strategies with regards to their Company shares, includ ing hedg ing against the share price of Company shares. The main features of the outstanding shares and awards are summarised below: Award Performance measures Performance outcome (100%) Accrues notional div idends? 1 Delivery 2016-18 LTIP 33% RoE 2 33% TSR 33% Strategic Yes • Tranche 1: 50% • Tranches 2-5: 12.5% 2017-19 LTIP Yes • 5 equal tranches 2018-20 LTIP No • 5 equal tranches 2019-21 LTIP 33% RoTE 33% TSR 33% Strategic No • 5 equal tranches 2020-22 LTIP No • 5 equal tranches 2021-23 LTIP 30% RoTE 30% TSR 15% Sustainab il ity 25% Strategic No • 5 equal tranches 2022-24 LTIP To be assessed at the end of 2024 No • 5 equal tranches 2023-25 LTIP To be assessed at the end of 2025 No • 5 equal tranches 1 2016-18 and 2017-19 LTIP awards may receive div idend equ ivalent shares based on div idends declared between grant and vest. From 1 January 2017 remunerat ion regulations for European banks prohib ited the award of d iv idend equ ivalent shares. Therefore, the number of shares awarded in respect of the LTIP awards granted after this date took into account the lack of div idend equ ivalents (calculated by reference to market consensus div idend y ield) such that the overall value of the award was mainta ined 2 Return on equity Change in interests during the period 1 January to 31 December 2023 (audited) Bill Winters 1 Date of grant Share award price (£) As at 1 January Awarded 2 Div idends awarded 3 Vested/ exercised 4 Lapsed As at 31 December Performance period end Vesting date 2016-18 LTIP 4 May 2016 5.560 33,507 – 3,292 36,799 – – 11 Mar 2019 4 May 2023 2017-19 LTIP 13 Mar 2017 7.450 45,049 – 4,421 49,470 – – 13 Mar 2020 13 Mar 2023 45,049 – – – – 45,049 13 Mar 2024 2018-20 LTIP 9 Mar 2018 7.782 28,178 – – 28,178 – – 9 Mar 2021 9 Mar 2023 28,178 – – – – 28,178 9 Mar 2024 28,179 – – – – 28,179 9 Mar 2025 2019-21 LTIP 11 Mar 2019 6.105 30,604 – – 30,604 – – 11 Mar 2022 11 Mar 2023 30,604 – – – – 30,604 11 Mar 2024 30,604 – – – – 30,604 11 Mar 2025 30,605 – – – – 30,605 11 Mar 2026 2020-22 LTIP 9 Mar 2020 5.196 161,095 – – 59,282 101,813 – 9 Mar 2023 9 Mar 2023 161,095 – – – 101,813 59,282 9 Mar 2024 161,095 – – – 101,813 59,282 9 Mar 2025 161,095 – – – 101,813 59,282 9 Mar 2026 161,095 – – – 101,813 59,282 9 Mar 2027 2021-23 LTIP 15 Mar 2021 4.901 150,621 – – – – 150,621 15 Mar 2024 15 Mar 2024 150,621 – – – – 150,621 15 Mar 2025 150,621 – – – – 150,621 15 Mar 2026 150,621 – – – – 150,621 15 Mar 2027 150,621 – – – – 150,621 15 Mar 2028 2022-24 LTIP 14 Mar 2022 4.876 151,386 – – – – 151,386 14 Mar 2025 14 Mar 2025 151,386 – – – – 151,386 14 Mar 2026 151,386 – – – – 151,386 14 Mar 2027 151,386 – – – – 151,386 14 Mar 2028 151,388 – – – – 151,388 14 Mar 2029 2023-25 LTIP 13 Mar 2023 7.398 – 101,209 – – – 101,209 13 Mar 2026 13 Mar 2026 – 101,209 – – – 101,209 13 Mar 2027 – 101,209 – – – 101,209 13 Mar 2028 – 101,209 – – – 101,209 13 Mar 2029 – 101,209 – – – 101,209 13 Mar 2030 27% 38% 26% 23% 36.8% 66% 212 Standard Chartered – Annual Report 2023 Directors’ report Addit ional remunerat ion disclosures Addit ional remunerat ion disclosures continued Andy Halford 1 Date of grant Share award price (£) As at 1 January Awarded 2 Div idends awarded 3 Vested/ exercised 4 Lapsed As at 31 December Performance period end Vesting date 2016-18 LTIP 4 May 2016 5.560 20,009 – 1,966 21,975 – – 11 Mar 2019 4 May 2023 2017-19 LTIP 13 Mar 2017 7.450 27,888 – 2,740 30,628 – – 13 Mar 2020 13 Mar 2023 27,890 – – – – 27,890 13 Mar 2024 2018-20 LTIP 9 Mar 2018 7.782 17,448 – – 17,448 – – 9 Mar 2021 9 Mar 2023 17,448 – – – – 17,448 9 Mar 2024 17,448 – – – – 17,448 9 Mar 2025 2019-21 LTIP 11 Mar 2019 6.105 19,571 – – 19,571 – – 11 Mar 2022 11 Mar 2023 19,571 – – – – 19,571 11 Mar 2024 19,571 – – – – 19,571 11 Mar 2025 19,572 – – – – 19,572 11 Mar 2026 2020-22 LTIP 9 Mar 2020 5.196 99,976 – – 36,791 63,185 – 9 Mar 2023 9 Mar 2023 99,976 – – – 63,185 36,791 9 Mar 2024 99,976 – – – 63,185 36,791 9 Mar 2025 99,976 – – – 63,185 36,791 9 Mar 2026 99,977 – – – 63,186 36,791 9 Mar 2027 2021-23 LTIP 15 Mar 2021 4.901 96,283 – – – – 96,283 15 Mar 2024 15 Mar 2024 96,283 – – – – 96,283 15 Mar 2025 96,283 – – – – 96,283 15 Mar 2026 96,283 – – – – 96,283 15 Mar 2027 96,283 – – – – 96,283 15 Mar 2028 2022-24 LTIP 14 Mar 2022 4.876 96,772 – – – – 96,772 14 Mar 2025 14 Mar 2025 96,772 – – – – 96,772 14 Mar 2026 96,772 – – – – 96,772 14 Mar 2027 96,772 – – – – 96,772 14 Mar 2028 96,773 – – – – 96,773 14 Mar 2029 2023-25 LTIP 13 Mar 2023 7.398 – 64,700 – – – 64,700 13 Mar 2026 13 Mar 2026 – 64,700 – – – 64,700 13 Mar 2027 – 64,700 – – – 64,700 13 Mar 2028 – 64,700 – – – 64,700 13 Mar 2029 – 64,702 – – – 64,702 13 Mar 2030 2022 Sharesave 5,6 4.230 2,127 – – – – 2,127 – 1 Feb 2026 1 The unvested LTIP awards held by Bill and Andy are condit ional r ights. They do not have to pay towards these awards. Under these awards, shares are delivered on vesting or as soon as practicable thereafter 2 For the 2023-25 LTIP awards granted to Bill and Andy on 13 March 2023, the values granted were: Bill: £3.2 mill ion; Andy £2.1 m ill ion. The number of shares awarded in respect of the LTIP took into account the lack of div idend equ ivalents (calculated by reference to market consensus div idend y ield) such that the overall value of the award was mainta ined. Performance measures apply to 2023-25 LTIP awards. The clos ing price on the day before grant was £7.398 3 Div idend equ ivalent shares may be awarded on vesting for awards granted prior to 1 January 2018. On 31 March 2020, Standard Chartered announced that in response to the request from the PRA and as a consequence of the unprecedented challenges facing the world due to the COVID-19 pandemic, the Board decided to withdraw the recommendation to pay a ﬁnal div idend for 2019. D iv idend equ ivalent shares allocated to the 2016-18 and 2017-19 LTIP awards vesting in 2023 did not include any shares relating to the cancelled div idend 4 Shares (before tax) were delivered to Bill and Andy from the vesting element of LTIP awards. The closing share price on the day before the shares were delivered was as follows: • 4 May 2023: Shares in respect of the 2016-18 LTIP. Previous day closing share price: £6.114 • 13 March 2023: Shares in respect of the 2017-19 LTIP and 2019-21 LTIP. Previous day closing share price: £7.398 • 9 March 2023: Shares in respect of the 2018-20 LTIP. Previous day closing share price: £7.874 • 15 March 2023: Shares in respect of the 2020-22 LTIP. Previous day closing share price: £6.968 5 Andy chose to partic ipate in the 2022 Sharesave inv itat ion. This unvested option was granted on 28 November 2022 under the 2013 Plan – to exercise this option, Andy has to pay an exercise price of £4.23 per share, which has been discounted by 20 per cent 6 The vesting date relates to the end of the savings contract and the start of the six month exercise window As at 31 December 2023, none of the directors had registered an interest or short posit ion in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to section 352 of the Securit ies and Futures Ord inance, or as otherwise notif ied to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securit ies Transact ions by Directors of Listed Issuers. See page 450 for details of share plan dilut ion l im its 213 Standard Chartered – Annual Report 2023 Directors’ report Executive directors’ shareholdings and share interests includ ing share awards (aud ited) Shares that count towards the executive director shareholding requirements are beneﬁc ially owned shares, includ ing shares subject to a retention period, and unvested share awards for which performance condit ions have been sat isf ied (on a net of tax basis). As of 31 December 2023, both Bill and Andy sign iﬁcantly exceeded the ir shareholding requirement. Shares purchased voluntarily from their own funds are equivalent to 82 and 60 per cent of salary for Bill and Andy, respectively. No shares were purchased voluntarily in 2023. The following chart and table summarise the executive directors’ shareholdings and share interests. Shares held beneﬁcially Bill Winters Andy Halford 0% 100% 200% 300% 400% 500% 600% 700% 800% Unvested share awards not subject to performance measures (net of tax) Shareholding requirement 687% 60% 59% 473% Shares held beneﬁcially 1,2,3 Unvested share awards not subject to performance measures (net of tax) 4,5 Total shares counting towards shareholding requirement Shareholding requirement Salary 3 Value of shares counting towards shareholding requirement as a percentage of salary 1 Unvested share awards subject to performance measures (before tax) Bill Winters 2,590,604 228,083 2,818,687 250% salary £2,517,000 747% 2,016,082 Andy Halford 1,140,269 142,389 1,282,658 200% salary £1,609,000 532% 1,288,778 1 All ﬁgures are as of 31 December 2023 unless stated otherwise. The closing share price on 29 December 2023 was £6.67. No director had either: (i) an interest in Standard Chartered PLC’s preference shares or loan stocks of any subsid iary or assoc iated undertaking of the Group; or (i i) any corporate interests in Standard Chartered PLC’s ordinary shares 2 The beneﬁcial interests of directors and connected persons in the ordinary shares of the Company are set out above. The executive directors do not have any non-beneﬁcial interest in the Company’s shares. Neither of the executive directors used ordinary shares as collateral for any loans 3 The salary and shares held beneﬁcially include shares awarded to deliver the executive directors’ salary shares 4 36.8 per cent of the 2020-22 LTIP award is no longer subject to performance measures due to achievement against 2020-22 TSR and strategic measures 5 As Bill and Andy are both UK taxpayers zero per cent tax is assumed to apply to Sharesave (as Sharesave is a UK tax qualif ied share plan) and 47 per cent tax is assumed to apply to other unvested share awards (marginal combined PAYE rate of income tax at 45 per cent and employee National Insurance contribut ions at 2 per cent) – rates may change Histor ical LTIP awards The current posit ion on projected vest ing for unvested LTIP awards from the 2021 and 2022 performance years based on current performance as at 31 December 2023 is set out in the tables below. Current posit ion on the 2022-24 LTIP award: projected part ial vesting Measure Weight ing Min imum (25%) Maximum (100%) 2022-24 LTIP assessment as of 31 December 2023 RoTE 1 in 2024 with a CET1 2 underpin of the higher of 13% or the min imum regulatory requ irement 30% 7% 11% RoTE between threshold and maximum: ind icat ive partial vesting Relative TSR performance against peer group 30% Median Upper quartile TSR posit ioned between median and upper quartile: ind icat ive partial vesting Sustainab il ity 15% Targets set for sustainab il ity measures linked to the business strategy Tracking above target performance: ind icat ive partial vesting Other strategic measures 25% Targets set for strategic measures linked to the business strategy Tracking above target performance: ind icat ive partial vesting 1 Underlying RoTE represents the ratio of the current year’s underlying operating proﬁt attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intang ibles for the report ing period. Underlying RoTE normally excludes regulatory ﬁnes and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 2 The CET1 underpin will be set at the higher of 13 per cent or the min imum regulatory level as at 31 December 2024. In add it ion, the Comm ittee has the discret ion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period 214 Standard Chartered – Annual Report 2023 Directors’ report Addit ional remunerat ion disclosures Addit ional remunerat ion disclosures continued Current posit ion on the 2023-25 LTIP award: projected part ial vesting Measure Weight ing Min imum (25%) Maximum (100%) 2023-25 LTIP assessment as of 31 December 2023 RoTE 1 in 2025 with a CET1 2 underpin of the higher of 13% or the min imum regulatory requ irement 30% 10% 12.5% RoTE between threshold and maximum: ind icat ive partial vesting Relative TSR performance against peer group 30% Median Upper quartile TSR posit ioned below the median: ind icat ive 0% vesting Sustainab il ity 15% Targets set for sustainab il ity measures linked to the business strategy Tracking above target performance: ind icat ive partial vesting Other strategic measures 25% Targets set for strategic measures linked to the business strategy Tracking above target performance: ind icat ive partial vesting 1 Underlying RoTE represents the ratio of the current year’s underlying operating proﬁt attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intang ibles for the report ing period. Underlying RoTE normally excludes regulatory ﬁnes and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 2 The CET1 underpin will be set at the higher of 13 per cent or the min imum regulatory level as at 31 December 2025. In add it ion, the Comm ittee has the discret ion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period The Committee assesses the value of LTIP awards on vesting and has the ﬂexib il ity to adjust if the formulaic outcome is not considered to be an appropriate reﬂection of the performance achieved and to avoid windfall gains. The approach used to determine Group-wide total discret ionary incent ives in 2023 is explained on pages 182 and 183 of this report. The following tables show the income statement charge for these incent ives. Income statement charge for Group discret ionary incent ives 2023 $mill ion 2022 $mill ion Total discret ionary incent ives 1,574 1,589 Less: discret ionary incent ives that w ill be charged in future years (242) (242) Plus: current year charge for discret ionary incent ives from pr ior years 188 150 Total 1,520 1,497 Year in which income statement is expected to reﬂect discret ionary incent ives Actual Expected 2022 $mill ion 2023 $mill ion 2024 $mill ion 2025 and beyond $mill ion Discret ionary incent ives awarded for 2021 and earl ier 150 82 37 27 Discret ionary incent ives awarded for 2022 77 106 60 60 Discret ionary incent ives awarded for 2023 – 81 116 126 Total 227 269 213 213 215 Standard Chartered – Annual Report 2023 Directors’ report Allocation of the Group’s earnings between stakeholders When consider ing Group var iable remuneration, the Committee takes account of shareholders’ concerns about relative expenditure on pay and determines the allocation of earnings to expenditure on remuneration carefully, and has approached this allocation in a disc ipl ined way. The amount of corporate tax, includ ing the bank levy, is included in the chart because it is a sign iﬁcant payment and illustrates the Group’s contribut ion through the tax system. Approach to risk adjustment Risk adjustment What and how? When? Collective adjustments • At a collective level, the Group annual scorecard and LTIP performance criter ia include risk and control measures. • In addit ion, the Comm ittee carries out a detailed review of all risk, control and conduct matters includ ing ongo ing invest igat ions and any matters raised by regulators, and may use its discret ion to adjust scorecard outcomes or remuneration to reﬂect matters not adequately captured by the scorecards. • Material restatement of the Group’s ﬁnanc ials. • Sign iﬁcant fa ilure in risk management. • Discovery of endemic problems in ﬁnanc ial reporting. • Financ ial losses, due to a mater ial breach of regulatory guidel ines. • The exercise of regulatory or government action to recapital ise the Group follow ing material ﬁnancial losses. Indiv idual adjustments • Indiv idual r isk adjustments to variable remuneration are considered based on the material ity of the issue. • At an ind iv idual level, risk adjustments can be applied through the reduction or forfeiture of the value of current year variable remuneration or the applicat ion of malus or clawback to unpa id or paid variable remuneration as appropriate, at the Committee’s discret ion. • Deemed to have: (i) caused in full or in part a material loss for the Group as a result of reckless, negligent or wilful actions, or (i i) exh ib ited inappropr iate behav iours, or (i i i) applied a lack of appropriate supervis ion and due d il igence. • The ind iv idual failed to meet appropriate standards of ﬁtness and propriety. Our Pillar 3 remuneration disclosures can be viewed in our 2023 Pillar 3 Report at sc.com Remuneration of the ﬁve highest paid ind iv iduals and the remuneration of senior management In line with the requirements of The Stock Exchange of Hong Kong Lim ited, the follow ing table sets out, on an aggregate basis, the annual remuneration of: (i) the ﬁve highest paid employees; and (i i) sen ior management for the year ended 31 December 2023. Components of remuneration Five highest paid 1 $000 Senior management 2 $000 Salary, cash allowances and beneﬁts in kind 19,537 28,286 Pension contribut ions 358 1,428 Variable remuneration awards paid or receivable 31,376 42,928 Payments made on appointment – 1,070 Remuneration for loss of ofﬁce (contractual or other) – – Other – – Total 51,271 73,712 Total HKD equivalent 401,528 577,275 1 The ﬁve highest paid ind iv iduals include Bill Winters 2 Senior management comprises the executive directors and the members of the Group Management Team at any point during 2023 Staff costs 2023 $million 2022 0% 10% 20% 30% 40% 50% 60% 70% 100% Corporate taxation including levy Paid to shareholders in dividends and buybacks 80% 90% 8,256 1,742 2,568 7,618 1,486 1,651 216 Standard Chartered – Annual Report 2023 Directors’ report Addit ional remunerat ion disclosures Share award movements for the ﬁve highest paid ind iv iduals for the year to 31 December 2023 1 LTIP 2 Deferred shares 2 Sharesave Weighted average Sharesave exercise price (£) Outstanding at 1 January 2023 4,483,528 3,097,427 4,246 4.23 Granted 3,4,5 997,172 1,303,485 88 – Lapsed 729,613 – – – Vested/Exercised 253,569 738,051 – – Outstanding at 31 December 2023 4,497,518 3,662,861 4,334 4.26 Exercisable as at 31 December 2023 – – – – Range of exercise prices (£) – – – 4.23 – 5.88 1 The ﬁve highest paid ind iv iduals include Bill Winters 2 Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards 3 993,801 (LTIP) granted on 13 March 2023, 2,821 (LTIP) granted as a notional div idend on 1 March 2023, 550 (LTIP) granted as a not ional div idend on 1 September 2023. 1,302,503 (Deferred shares) granted on 13 March 2023, 690 (Deferred shares) granted as a notional div idend on 1 March 2023, 292 (Deferred shares) granted as a notional div idend on 1 September 2023. 88 (Sharesave) granted on 18 Sep 2023 4 LTIP and Deferred shares were granted at a share price of £7.398, the closing price on the last trading day preceding the grant date. The vesting period for these awards ranges from 1 to 7 years 5 For Sharesave granted in 2023 the exercise price is £5.88 per share, a 20% discount from the average of the closing prices over the ﬁve days to the inv itat ion date of 21 August 2023. The closing share price on 18 August 2023 was £7.214 See page 211 for details of awards and options for Bill Winters See page 451 for a view of share awards and options for all employees See page 447 for details on the accounting standard adopted for share awards is IFRS2 The table below shows the emoluments of: (i) the ﬁve highest paid employees; and (i i) sen ior management for the year ended 31 December 2023. Remuneration band HKD Remuneration band USD equivalent Number of employees Five highest paid Senior management 1 20,000,001 – 20,500,000 2,553,789 – 2,617,634 – 1 22,000,001 – 22,500,000 2,809,168 – 2,873,013 – 1 23,500,001 – 24,000,000 3,000,702 – 3,064,547 – 1 24,000,001 – 24,500,000 3,064,547 – 3,128,392 – 1 26,500,001 – 27,000,000 3,383,771 – 3,447,615 – 1 27,000,001 – 27,500,000 3,447,616 – 3,511,460 – 1 32,000,001 – 32,500,000 4,086,063 – 4,149,907 – 1 32,500,001 – 33,000,000 4,149,908 – 4,213,752 – 1 34,500,001 – 35,000,000 4,405,286 – 4,469,131 – 1 41,000,001 – 41,500,000 5,235,268 – 5,299,113 – 1 44,500,001 – 45,000,000 5,682,181 – 5,746,026 – 1 52,000,001 – 52,500,000 6,639,852 – 6,703,697 1 – 75,500,001 – 76,000,000 9,640,554 – 9,704,399 1 1 78,000,001 – 78,500,000 9,959,778 – 10,023,623 1 1 84,500,001 – 85,000,000 10,789,759 – 10,853,604 1 1 110,500,001 – 111,000,000 14,109,685 – 14,173,530 1 – Total 5 14 1 Senior management comprises the executive directors and the members of the Group Management Team at any point during 2023 Shir ish Apte Chair of the Remuneration Committee 23 February 2024 217 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures The Directors’ report for the year ended 31 December 2023 comprises pages 134 to 229 of this report (together with the sections of the Annual Report incorporated by reference). The Company has chosen, in accordance with section 414C(11) of the Companies Act 2006, and as noted in this Directors’ report, to include certain matters in its Strategic report that would otherwise be disclosed in this Directors’ report. Both the Strategic report and the Directors’ report have been drawn up and presented in accordance with English company law, and the liab il it ies of the d irectors in connection with that report shall be subject to the lim itat ions and restrict ions prov ided by such law. Other informat ion to be d isclosed in the Directors’ report is given in this section. In addit ion to the requ irements set out in the Disclosure Guidance and Transparency Rules relating to the Annual Report, informat ion requ ired by UK List ing Rule 9.8.4 to be included in the Annual Report, where applicable, is set out in the table below and cross-referenced. Information to be included in the Annual Report (UK List ing Rules 9.8.4) Relevant List ing Rule Pages LR 9.8.4 (1) (2) (4-11) (14) (A) (B) N/A LR 9.8.4 (12-13) 439 Princ ipal act iv it ies We are a leading internat ional bank ing group, with over 170 years of history. Our unique geographical footprint in Asia, Africa and the Middle East helps connect the world’s most dynamic markets. Our purpose is to drive commerce and prosperity through our unique divers ity. The Group’s roots in trade ﬁnance and commercial banking have been at the core of its success throughout its history, but the Group is now more broadly based across Consumer, Private and Business Banking and Ventures. The Group operates in the UK and overseas through a number of subsid iar ies, branches and ofﬁces. Further details on our business, includ ing key performance ind icators, can be found with in the Strategic report on pages 11 to 89 Fair, balanced and understandable On behalf of the Board, the Audit Committee has reviewed the Annual Report and the process by which the Group believes that the Annual Report is fair, balanced and understandable and provides the informat ion necessary for shareholders to assess the posit ion and performance, strategy and business model of the Group. Following its review, the Audit Committee has advised the Board that such a statement can be made in the Annual Report. UK Corporate Governance Code compliance The table below contains examples of where the Company has applied the princ iples of the UK Corporate Governance Code in this Annual Report. A copy of the UK Corporate Governance Code can be found at frc.org.uk Princ iples Pages/reference Board leadership and company purpose A – Promoting long-term sustainable success and value 11 to 89, and 137 to 141 B – Purpose, value, strategy and alignment with culture 2 to 3, 24, 130 and 225 C – Performance measures, controls and risk management 14 to 15, and 314 to 319 D – Shareholder and other stakeholder engagement 54 to 64, and 157 to 161 E – Workforce polic ies and pract ices 60 to 64 Div is ion of responsib il it ies F – Chair role and responsib il it ies 151 to 153, and 155 to 156 G – Board roles and responsib il it ies 151 H – Non-executive directors’ role and capacity 151 I – Board effectiveness and efﬁc iency 155 to 156 Composit ion, succession and evaluation J – Board appointments and succession plans 179 K – Board skills, experience, knowledge and tenure 137 to 141 L – Board evaluation of composit ion, d ivers ity and effect iveness 153 and 155 to 157 Audit, risk and internal control M – Independence and effectiveness of internal and external audit functions, integr ity of ﬁnancial and narrat ive statements 166 N – Fair, balanced and understandable assessment of the Company’s posit ion and prospects 164 O – Risk management and internal controls 314 to 319 Remuneration P – Remuneration polic ies and pract ices 182 to 216 Q – Procedure for developing remuneration policy Remuneration Committee Terms of Reference R – Independent judgement and discret ion when author is ing remunerat ion outcomes Remuneration Committee Terms of Reference The Remuneration Committee has written Terms of Reference that can be viewed at sc.com/termsofreference 218 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures Events after the balance sheet date For details on post balance sheet events, see Note 35 to the ﬁnancial statements. Code for Financ ial Report ing Disclosure The Group’s 2023 ﬁnancial statements have been prepared in accordance with the princ iples of the UK F inance Disclosure Code for Financ ial Report ing Disclosure. Viab il ity and going concern Having made appropriate enquir ies, the Board is satisf ied that the Company and the Group as a whole has adequate resources to continue in operation and meet its liab il it ies as they fall due for a period of at least 12 months from 23 February 2024 and therefore continues to adopt the going concern basis in preparing the ﬁnanc ial statements. The directors’ viab il ity statement in respect to the Group can be found in the Strategic report on pages 88 and 89, while the directors’ going concern considerat ions for the Group can be found on page 369. Sufﬁciency of publ ic ﬂoat As at the date of this report, the Company has mainta ined the prescribed public ﬂoat under the rules governing the list ing of secur it ies on The Stock Exchange of Hong Kong Lim ited (the Hong Kong L ist ing Rules), based on the informat ion publ icly available to the Company and with in the knowledge of the d irectors. Research and development During the year, the Group invested $2.01 bill ion (2022: $1.98 bill ion) in research and development, of which $0.99 bill ion (2022: $0.94 b ill ion) was recogn ised as an expense. The research and development investment primar ily related to the plann ing, analysis, design, development, testing, integrat ion, deployment and in it ial support of technology systems. Polit ical donat ions The Group has a policy in place which prohib its donat ions being made that would: (i) improperly inﬂuence legislat ion or regulation, (i i) promote pol it ical v iews or ideolog ies, and (i i i) fund polit ical causes. In al ignment to this, no polit ical donations were made in the year ended 31 December 2023. Directors and their interests The membership of the Board, together with the Directors’ biograph ical deta ils, are given on pages 137 to 141. Details of the directors’ beneﬁc ial and non-beneﬁcial interests in the ordinary shares of the Company as at 31 December 2023 are shown in the Directors’ remuneration report on pages 204 and 213. As at 16 February 2024, there had been no changes to those interests in relation to directors remain ing in ofﬁce at that date. The Group operates a number of share-based arrangements for its directors and employees. Details of these arrangements are included in the Directors’ remuneration report and in Note 29 to the ﬁnanc ial statements The Company has received from each of the INEDs an annual conﬁrmation of independence pursuant to Rule 3.13 of the Hong Kong List ing Rules and st ill considers all of the non- executive directors to be independent. At no time during the year did any director hold a material interest in any contracts of sign iﬁcance w ith the Company or any of its subsid iary undertak ings. In accordance with the Companies Act 2006, we have established a process requir ing d irectors to disclose proposed outside business interests before any are entered into. This enables prior assessment of any conﬂict or potential conﬂict of interest and any impact on time commitment. On behalf of the Board, the GNC reviews exist ing conﬂ icts of interest annually to consider if they continue to be conﬂicts of interest, and also to revis it the terms upon wh ich they were authorised. The Board is satisﬁed that our processes in this respect continue to operate effectively. Subject to company law, the Articles of Associat ion and the authority granted to directors in general meeting, the directors may exercise all the powers of the Company and may delegate authorit ies to comm ittees. The Articles of Associat ion conta in provis ions relat ing to the appointment, re-election and removal of directors. Newly appointed directors retire at the AGM following appointment and are elig ible for elect ion. All directors are nominated for annual re-election by shareholders subject to continued satisfactory performance based upon their annual assessment. Non-executive directors are appointed for an in it ial period of one year and subject to (re)election by shareholders at AGMs, in line with the UK Corporate Governance Code 2018. The Company has granted indemn it ies to all of its directors on terms consistent with the applicable statutory provis ions. Qualify ing th ird-party indemn ity prov is ions for the purposes of section 234 of the Companies Act 2006 were accordingly in force during the course of the ﬁnanc ial year ended 31 December 2023 and remain in force at the date of this report. 219 Standard Chartered – Annual Report 2023 Directors’ report Qualify ing pens ion scheme indemn it ies Qualify ing pens ion scheme indemn ity prov is ions (as deﬁned by section 235 of the Companies Act 2006) were in force during the course of the ﬁnanc ial year ended 31 December 2023 for the beneﬁt of the UK’s pension fund corporate trustee (Standard Chartered Trustees (UK) Lim ited), and rema in in force at the date of this report. Sign iﬁcant agreements The Company is not party to any sign iﬁcant 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 provis ions of the Company’s share schemes and plans may cause awards granted to employees under such schemes and plans to vest on a takeover, subject to any regulatory or tax considerat ions that may prevent th is. Future developments in the business of the Group An ind icat ion of likely future developments in the business of the Group is provided in the Strategic report. Results and div idends 2023: paid inter im d iv idend of 6 cents per ord inary share (2022: paid inter im d iv idend of 4 cents per ord inary share) 2023: proposed ﬁnal div idend of 21 cents per ord inary share (2022: paid ﬁnal div idend of 14 cents per ord inary share) 2023: total div idend of 27 cents per ord inary share (2022: total div idend, 18 cents per ord inary share) Share capital The issued ordinary share capital of the Company was reduced by a total of 229, 693, 294 over the course of 2023. This was due to the cancellation of ordinary shares as part of the Company’s two share buy-back programmes. No ordinary shares were issued during the year. The Company has one class of ordinary shares, which carries no rights to ﬁxed income. On a show of hands, each member present has the right to one vote at our general meetings. On a poll, each member is entitled to one vote for every $2 nominal value of share capital held. The issued nominal value of the ordinary shares represents 84.3 per cent of the total issued nominal value of all share capital. The remain ing 15.7 per cent compr ises preference shares, which have preferential rights to income and capital but which, in general, do not confer a right to attend and vote at our general meetings. Further details of the Group’s share capital can be found in Note 28 to the ﬁnancial statements There are no specif ic restr ict ions on the s ize of a holding nor on the transfer of shares, which are both governed by the general provis ions of the Art icles of Associat ion and preva il ing legislat ion. There are no spec if ic restr ict ions on vot ing rights and the directors are not aware of any agreements between holders of the Company’s shares that may result in restrict ions on the transfer of securit ies or on vot ing rights. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. Articles of Associat ion The Articles of Associat ion may be amended by spec ial resolution of the shareholders. They were last amended at the 2023 AGM. The amendments primar ily related to compl iance with regulatory requirements in Hong Kong, but we also took the opportunity to amend them to reﬂect developments in market practice. A copy of the Company’s Articles of Associat ion can be found on our website here sc.com/investors Authority to purchase own shares At the AGM held on 3 May 2023, our shareholders renewed the Company’s authority to make market purchases of up to 284,703,272 ordinary shares, equivalent to approximately 10 per cent of issued ordinary shares as at 20 March 2023, and up to all of the issued preference share capital. The authority to make market purchases up to 10 per cent of issued ordinary share capital was used during the year through two buy-back programmes announced in February and August 2023. These were util ised to reduce the number of ordinary shares in issue and as part of the Group’s approach to div idend growth and cap ital returns. The ﬁrst share buy-back programme commenced on 20 February 2023 and ended on 29 September 2023. The second share buy-back programme commenced on 1 August 2023 and ended on 6 November 2023. A total of 229,693,294 ordinary shares with a nominal value of $0.50 were re-purchased for an approximate aggregate considerat ion pa id of $2 bill ion. A monthly breakdown of the shares purchased during the period includ ing the lowest and h ighest price paid per share is set out in Note 28 to the ﬁnanc ial statements. All ord inary shares which were bought back were cancelled. In accordance with the terms of a waiver granted by The Stock Exchange of Hong Kong Lim ited (HKSE) as subsequently modif ied, the Company w ill comply with the applicable law and regulation in the UK in relation to holding of any shares in treasury and with the condit ions of grant ing the waiver by the HKSE. No treasury shares were held during the year. Further details can be found in Note 28 to the ﬁnanc ial statements 220 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures Authority to issue shares The Company is granted authority to issue shares by the shareholders at its AGM. The size of the authorit ies granted depends on the purposes for which shares are to be issued and is with in appl icable legal and regulatory requirements. Shareholder rights Under the Companies Act 2006, shareholders holding 5 per cent or more of the paid-up share capital of the Company carrying the right of voting at general meetings of the Company are able to require the directors to hold a general meeting. A request may be in hard copy or electronic form and must be authenticated by the shareholders making it. Where such a request has been duly lodged with the Company, the directors are obliged to call a general meeting with in 21 days of becom ing subject to the request and must set a date for the meeting not more than 28 days from the date of the issue of the notice convening the meeting. Under the Companies Act 2006, shareholders holding 5 per cent or more of the total voting rights at an AGM of the Company, or 100 shareholders entitled to vote at the AGM with an average of at least £100 paid-up share capital per shareholder, are entitled to require the Company to circulate a resolution intended to be moved at the Company’s next AGM. Such a request must be made not later than six weeks before the AGM to which the request relates or, if later, the time notice is given of the AGM. The request may be in hard copy or electronic form, must ident ify the resolut ion of which notice is to be given and must be authenticated by the shareholders making it. Shareholders are also able to put forward proposals to shareholder meetings and enquir ies to the Board and/or the Sen ior Independent Director by using the ‘contact us’ informat ion on the Company’s website sc.com or by email ing the Group Corporate Secretar iat at [email protected] Major interests in shares and voting rights As at 31 December 2023, Temasek Holdings (Private) Lim ited (Temasek) is the only shareholder that has an interest of more than 10 per cent in the Company’s issued ordinary share capital carrying a right to vote at any general meeting. Information provided to the Company pursuant to the FCA’s DTRs is published on a Regulatory Information Service and on the Company’s website. As at 16 February 2024, the Company has been notif ied of the following informat ion, in accordance with DTR 5, from holders of notif iable interests in the Company’s issued share capital. The informat ion prov ided in the table below was correct at the date of notif icat ion; however, the date received may not have been with in 2023. It should be noted that these hold ings are likely to have changed since the Company was notif ied. However, notif icat ion of any change is not required until the next notif iable threshold is crossed. Notif iable interests Interest in ordinary shares (based on voting rights disclosed) Percentage of capital disclosed Nature of holding as per disclosure Temasek Holdings (Private) Lim ited 474,751,383 16.00 Indirect BlackRock Inc. 183,640,172 5.55 Indirect (5.01%) Securit ies Lend ing (0.39%) Contracts for Difference (0.14%) Dodge & Cox 150,620,884 5.08 Indirect Related party transactions Details of transactions with directors and ofﬁcers and other related parties are set out in Note 36 to the ﬁnancial statements. Connected/continu ing connected transact ions By virtue of its shareholding of over 10 per cent in the Company, Temasek and its associates are related parties and connected persons of the Company for the purposes of the UK List ing Rules and the Rules Govern ing the List ing of Securit ies on The Stock Exchange of Hong Kong L im ited (“HKEx”) (“the HK List ing Rules”) respect ively (together “the Rules”). 221 Standard Chartered – Annual Report 2023 Directors’ report The Rules are intended to ensure that there is no favourable treatment to Temasek or its associates to the detriment of other shareholders in the Company. Unless transactions between the Group and Temasek or its associates are specif ically exempt under the Rules or are subject to a spec if ic waiver, they may require a combinat ion of announcements, reporting and independent shareholders’ approval. On 12 November 2021, the HKEx extended a waiver (the “Waiver”) it previously granted to the Company for the revenue banking transactions with Temasek which do not fall under the passive investor exemption (“the Passive Investor Exemption”) under Rules 14A.99 and 14A.100 of the HK List ing Rules. Under the Waiver, the HKEx agreed to waive the announcement requirement, the requirements to enter into written agreements and to set annual caps, and the annual report disclosure (includ ing annual rev iew) requirements under Chapter 14A of the HK List ing Rules for the three-year period ending 31 December 2024 on the condit ions that: a) The Company will disclose details of the Waiver (includ ing nature of the revenue banking transactions with Temasek and reasons for the Waiver) in subsequent annual reports; and b) The Company will continue to monitor the revenue banking transactions with Temasek during the three years ending 31 December 2024 to ensure that the 5 per cent threshold for the revenue ratio will not be exceeded. The main reasons for seeking the Waiver were: • The nature and terms of revenue banking transactions may vary and evolve over time; having ﬁxed-term written agreements would not be suitable to accommodate the various banking needs of the Company’s customers (includ ing Temasek) and would be impract ical and unduly burdensome. • It would be impract icable to est imate and determine an annual cap on the revenue banking transactions with Temasek as the volume and aggregate value of each transaction are uncertain and unknown to the Company as a banking group due to multiple factors includ ing market driven factors. • The revenues generated from revenue banking transactions were ins ign if icant. W ithout a waiver from the HKEx or an applicable exemption, these transactions would be subject to various percentage ratio tests which cater for different types of connected transactions and as such may produce anomalous results. As a result of the Passive Investor Exemption and the Waiver, the vast majority of the Company’s transact ions with Temasek and its associates fall outside of the connected transactions regime. However, non-revenue transactions with Temasek or any of its associates continue to be subject to monitor ing for connected transaction issues. The Company conﬁrms that: • The revenue banking transactions entered into with Temasek and its associates in 2023 were below the 5 per cent threshold for the revenue ratio test under the HK List ing Rules; and • It will continue to monitor revenue banking transactions with Temasek during the three years ending 31 December 2024 to ensure that the 5 per cent threshold for the revenue ratio will not be exceeded. The Company therefore satisf ied the cond it ions of the Wa iver. Fixed assets Details of addit ions to ﬁxed assets are presented in Note 18 to the ﬁnancial statements. Loan capital Details of the loan capital of the Company and its subsid iar ies are set out in Notes 22 and 27 to the ﬁnanc ial statements. Debenture issues and equity-linked agreements During the ﬁnanc ial year ended 31 December 2023, the Company made no issuance of debentures. Further details of the equity-linked agreements the Group entered into can be found in Note 28 to ﬁnanc ial statements. Risk management 1 The Board is responsible for mainta in ing and review ing the effectiveness of the risk management system. An ongoing process for ident ify ing, evaluating and managing the sign iﬁcant r isks that we face is in place. The Board is satisf ied that this process constitutes a robust assessment of all of the princ ipal r isks, topical and emerging risks and integrated risks facing the Group, includ ing those that would threaten its business model, future performance, solvency or liqu id ity. 1 The Group’s Risk Management Framework and System of Internal Control applies only to wholly controlled subsid iar ies of the Group, and not to Associates, Joint Ventures or Structured Entit ies of the Group. Key areas of risk on ﬁnanc ial instruments for the directors included the impa irment of loans and advances and valuation of ﬁnanc ial instruments held at fair value. This risk assessment and management is explained further in the Audit Committee Key areas and Action taken on pages 163 and 164. The Risk review and Capital review on pages 44 to 51, and 314 to 337 sets out the princ ipal r isks, topical and emerging risks and integrated risks, our approach to risk management, includ ing our r isk management princ iples, an overv iew of our Enterprise Risk Management Framework and the risk management and governance practices for each princ ipal risk type. The Board-approved Risk Appetite Statement can be found on pages 47, and 314 to 337 In accordance with Article 435(1)(e) of the Disclosure (CRR) Part of the PRA Rulebook, the Board Risk Committee, on behalf of the Board, has considered the adequacy of the risk management arrangements of the Group and has sought and received assurance that the risk management systems in place are adequate with regard to the Group’s proﬁle and strategy. 222 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures Internal control 2 The Board is responsible for mainta in ing and review ing the effectiveness of the internal control system. Its effectiveness is reviewed regularly by the Board, its committees, the Management Team and Group Internal Audit. For the year ended 31 December 2023, the Board Risk Committee has reviewed the effectiveness of the Group’s system of internal control and discussed a report on the 2024 annual risk and control self-assessment. Group Internal Audit represents the third line of defence and provides independent assurance of the effectiveness of management’s control of business activ it ies (the ﬁrst line) and of the control processes mainta ined by the R isk Framework Owners and Policy Owners (the second line). The audit programme includes obtain ing an understanding of the processes and systems under audit review, evaluating the design of controls, and testing the operating effectiveness and outcomes of key controls. The work of Group Internal Audit is focused on the areas of greatest risk as determined by a risk-based assessment methodology. The Board considers the internal control systems of the Company to be effective and adequate. 2 The Group’s Risk Management Framework and System of Internal Control applies only to wholly controlled subsid iar ies of the Group, and not to Associates, Joint Ventures or Structured Entit ies of the Group. Group Internal Audit reports regularly to the Audit Committee, the Group Chairman and the Group Chief Executive; and the Group Head, Internal Audit reports directly to the Chair of the Audit Committee and admin istrat ively to the Group Chief Executive. The ﬁnd ings of all adverse aud its are reported to the Audit Committee, the Group Chairman and the Group Chief Executive where immed iate correct ive action is required. The Board Risk Committee is responsible for exercis ing oversight, on behalf of the Board, of the key risks of the Group. It reviews the Group’s Risk Appetite Statement and Enterprise Risk Management Framework and makes recommendations to the Board. The Audit Committee is responsible for oversight and advice to the Board on matters relating to ﬁnanc ial, non-ﬁnancial and narrat ive reporting. The Committee’s role is to review, on behalf of the Board, the Group’s internal controls includ ing internal ﬁnanc ial controls. The Aud it Committee receives and discusses a paper on the internal controls for ﬁnancial books and records. The risk management approach starting on page 314 describes the Group’s risk management oversight committee structure. Our business is conducted with in a developed control framework, underpinned by policy statements and standards. There are written polic ies and standards des igned to ensure the ident iﬁcation and management of r isk, includ ing Cred it Risk, Traded Risk, Treasury Risk, Operational and Technology Risk, Information and Cyber Security Risk, Compliance Risk, Financ ial Cr ime Risk, Model Risk and Reputational and Sustainab il ity Risk. This framework incorporates the Group’s internal controls on ﬁnanc ial report ing. The Board has established a management structure that clearly deﬁnes roles, responsib il it ies and report ing lines. Delegated authorit ies are documented and commun icated. Executive risk committees regularly review the Group’s risk proﬁle. The performance of the Group’s businesses is reported regularly to senior management and the Board. Performance trends and forecasts, as well as actual performance against budgets and prior periods, are monitored closely. Group ﬁnancial informat ion is prepared in accordance with UK-adopted International Accounting Standards and International Financ ial Report ing Standards as adopted by the European Union, and ﬁnanc ial report ing is subject to the Group’s control framework for reconcil iat ion processes. Operational procedures and controls have been established to facil itate complete, accurate and t imely processing of transactions and the safeguarding of assets. These controls include appropriate segregation of duties, the regular reconcil iat ion of accounts and the valuation of assets and posit ions. In respect of handl ing ins ide informat ion, we have applied controls to help ensure only those explic itly requ ired receive ins ide informat ion as well as controls regard ing the onward dissem inat ion of ins ide informat ion. Controls are also in place to approve and review dealings in the Company’s shares. Such systems and controls are designed to manage rather than elim inate the r isk of failure to achieve business objectives and can only prov ide reasonable and not absolute assurance against material misstatement or loss. Employee polic ies and engagement We work hard to ensure that our employees are kept informed about matters affecting or of interest to them, and more importantly that they have opportunit ies to prov ide feedback and engage in a dialogue. We strive to listen and act on feedback from colleagues to ensure internal communicat ions are t imely, informat ive, meaningful, and in support of the Group’s strategy and transformation. In November 2023, we launched our new employee communicat ions platform – Pulse. Pulse w ill become our primary internal communicat ions channel that w ill allow colleagues to receive key dynamic updates that are personalised by role and location, sign up for events, provide feedback, and navigate to other internal platforms. In addit ion to targeted d ig ital commun icat ions, we also deploy audio and video calls, virtual and face-to-face townhalls, and other staff engagement and recognit ion events. To continue to improve the way we communicate and ensure our employee communicat ions rema in relevant, we also period ically analyse and measure the impact of our communicat ions through a range of survey and feedback tools. Our senior leaders and people leaders play a crit ical role in engaging our teams across the network, ensuring that they are kept up to date on key business developments related to our performance and strategy. We offer addit ional support to our people leaders with specif ic calls and commun icat ions packs to help them provide context and guidance to their team members to better understand their role in executing and deliver ing the Group’s strategy. 223 Standard Chartered – Annual Report 2023 Directors’ report Across the organisat ion, regular team meet ings with people leaders, one-to-one conversations and various management meetings provide an important platform for colleagues to discuss and clarify key issues. Regular performance conversations provide the opportunity to discuss how ind iv iduals, the team and the business area have contributed to our overall performance and how any recognit ion and reward relate to this. The Group’s senior leadership also regularly shares global, business, function, region and market updates on performance, strategy, structural changes, HR programmes, community involvement and other campaigns. The Board also engages with and listens to the views of the workforce through several sources, includ ing through interact ive engagement sess ions. More informat ion can be found on page 161 in the Directors’ report. Employees past, present and future can follow our progress through the Group’s LinkedIn network and Facebook page, as well as other social network channels includ ing Instagram, which collectively have over 2.7 mill ion followers. The diverse range of internal and external communicat ion tools and channels we have put in place aim to ensure that all colleagues receive timely and relevant informat ion to support their effectiveness. The wellbeing of our employees is central to our think ing about beneﬁts and support, so that they can thrive at work and in their personal lives. Our Group min imum standards provide employees with a range of ﬂexible working options, in relation to both location and working patterns. In terms of leave, employees are provided with at least 30 days’ leave (through annual leave and public holidays), and new parents are provided a min imum of 20 calendar weeks’ fully pa id leave irrespect ive of gender, relat ionsh ip status or how a child comes to permanently jo in a fam ily. These are above the International Labour Organisat ion’s (ILO) m in imum standards. We seek to build productive and enduring partnerships with various employee representative bodies (includ ing un ions and work councils). In our recognit ion and interact ions, we are heavily inﬂuenced by the 1948 United Nations Universal Declaration of Human Rights (UDHR), and several ILO conventions includ ing the R ight to Organise and Collective Bargain ing Convent ion, 1949 (No. 98) and the Freedom of Associat ion and Protect ion of the Right to Organise Convention, 1948 (No. 87). 12.6 per cent of employees, across 20 markets, have collective representation through unions or employee representative bodies. The working condit ions and terms of employment of other employees are based on our Group and country polic ies, and in accordance with ind iv idual employment contracts issued by the Group. The Group Grievance Standard provides a formal framework for dealing with concerns that employees have in relation to their employment or another colleague, which affect them directly, and cannot be resolved through informal mechanisms, such as counselling, coaching or mediat ion. This can include concerns related to bullying, harassment, discr im inat ion and v ict im isat ion, as well as concerns regard ing condit ions of employment (for example, work ing practices or the working environment). Employees can raise grievances to their People Leader or a Human Resources (HR) Representative. The global process for addressing grievances involves an HR representative and a member of the business review ing the gr ievance, conducting fact ﬁnding into the grievance and provid ing a wr itten outcome to the aggrieved employee. Where employees raise concerns regarding alleged wrongdoing which does not pertain to those employees themselves, or in circumstances where the alleged wrongdoing does pertain to the employees themselves but they do not wish to raise a grievance, such concerns are invest igated in accordance with the Group Investigat ions Standard. If a grievance or invest igat ion is upheld, the next steps might include remedying a policy or process, or in it iat ing a disc ipl inary review of the conduct of the colleague who is the subject of the concern. The Group Grievance Standard and accompanying process is reviewed on a period ic bas is in consultation with stakeholders across HR, Legal, Compliance and Shared Investigat ive Serv ices. Grievance trends are reviewed on a quarterly basis and action is taken to address any concerning trends. There is a dist inct Group Speak ing Up Policy and Standard which covers instances where an employee wishes to ‘blow the whistle’ on actual, planned or potential wrongdoing by another employee or the Group. The Group is committed to creating a fair, consistent and transparent approach to making decis ions in a disc ipl inary context. This commitment is codif ied in our Fair Accountabil ity Princ iples, wh ich underpin our Group Disc ipl inary Standard. Dism issals due to m isconduct issues and/or performance (where required by law to follow a disc ipl inary process) are governed by the Group Disc ipl inary Standard. Where local law or regulation requires a different process with regards to dism issals and other d isc ipl inary outcomes, we have country variances in place. 224 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures Our Group Divers ity and Inclus ion Standard has been developed to ensure a respectful workplace, with fair and equal treatment, divers ity and inclus ion, and the prov is ion of opportunit ies for employees to part ic ipate fully and reach their full potential in an appropriate working environment. The Group aims to provide equality of opportunity for all, protect the dign ity of employees and promote respect at work. All ind iv iduals are entitled to be treated with dign ity and respect, and to be free from harassment, bullying, discr im inat ion and v ict im isat ion. Th is helps to support productive working condit ions, decreased staff attr it ion, posit ive employee morale and engagement, ma inta ins employee wellbeing, and reduces people-related risk. All colleagues are responsible for fostering an inclus ive culture where ind iv idual ity and d iffer ing sk ills, capabil it ies and experience are understood, respected and valued. All colleagues, consultants, contractors, volunteers, interns, casual workers and agency workers are required to comply with the Standard, includ ing conduct ing themselves in a manner that demonstrates appropriate, non-discr im inatory behaviours. We do not accept unlawful discr im inat ion in our recruitment or employment practices on any grounds includ ing but not lim ited to: sex, race, colour, nat ional ity, ethn ic ity, nat ional or ind igenous or ig in, d isab il ity, age, marital or civ il partner status, pregnancy or maternity, sexual orientat ion, gender ident ity, expression or reassignment, HIV or AIDS status, parental status, mil itary and veterans status, ﬂex ib il ity of working arrangements, relig ion or bel ief. We are committed to provide equal opportunit ies and fa ir treatment in recruitment, appraisals, pay and condit ions, tra in ing, development, succession planning, promotion, grievance/disc ipl inary procedures and employment terminat ion pract ices, that are inclus ive and access ible; and that do not directly or ind irectly d iscr im inate. Recruitment, employment, train ing, development and promotion decis ions are based on the sk ills, knowledge and behaviour required to perform the role to the Group’s standards. Implied in all employment terms is the commitment to equal pay for equal work. We also endeavour to make reasonable workplace adjustments (includ ing dur ing the hir ing process) to ensure all ind iv iduals feel supported and are able to partic ipate fully and reach the ir potential. If employees become disabled, we will aim to support them with appropriate train ing and workplace adjustments where possible and to support their continued employment. Health, Safety and Wellbeing Our Health, Safety and Wellbeing (HSW) vis ion is to support employee productiv ity through a healthy and res il ient workforce, and our miss ion is for employees to deliver every day in a safe, secure and resil ient way. Our corporate HSW programme covers both mental and physical health and wellbeing. The Group complies with both external regulatory requirements and internal policy and standards for HSW in all markets. It is Group policy to ensure that the more stringent of the two requirements is always met, ensuring our HSW practices meet or exceed the regulatory min imum. Compliance rates are reported at least biannually to each country’s Management Team. We follow the International Labour Organisat ion (ILO) code of practice on recording and notif icat ion of occupational accidents and diseases, and guidance published by the UK Health and Safety Executive (HSE), and ensure that we meet all local Health and Safety (H&S) regulatory reporting requirements. We record and report all work- related illness and injuries, includ ing from sub-contractors, vis itors and cl ients. HSW performance and risks are reported annually to the Group Risk Committee and Board Risk Committee. We use an H&S management system and local regulatory compliance tracker across all countries to ensure a consistently high level of H&S reporting and compliance for all our colleagues and clients. The Group sponsors medical and healthcare services for all employees, except in markets where cover is provided through State-mandated healthcare, which represent less than 0.6 per cent of the Group’s employees. Across the Group, support for employee mental wellbeing is available. All employees have access to professional counselling via our Employee Assistance Programme, as well as to more proactive mental health support through our holist ic wellbe ing app and wellbeing platform. Our global Mental Health First Aid (MHFA) programme offers help to anyone developing a mental health problem, experienc ing a worsening of an exist ing mental illness or a mental health cris is. The mental health support is given until appropriate professional help is received, or the cris is resolved. To date we have trained more than 600 mental health ﬁrst aiders in 51 markets, covering over 99 per cent of colleagues. In 2023, we recorded two work-related fatalit ies. A contractor was tragically and fatally injured while crossing a road on her way to work in Niger ia. An employee was trag ically and fatally injured in a road accident in India. Ma jor in juries (per the UK HSE deﬁnit ion) decreased from 20 in 2022 to 16, with fractures the most common type of major in jury (75 per cent). Overall, reported injuries increased by 28 per cent, with ‘slips/trips/falls’ and ‘transport/commuting’ remain ing the most common causes of injury. The overall increase in reported injuries was a post COVID result, with all markets moving into the new normal in 2023. Our injury rates remain aligned to, or better than industry benchmarks. Hazards and near-miss reports decreased 4 per cent between 2022 and 2023. In 2023, we ran a back-to-basics programme to re-establish commitment and responsib il ity in safety and security at all levels, and address post pandemic and new normal practices. All premises are inspected at least annually to ident ify any hazards, risks and inc idences of non-compl iance. HSW communicat ion is provided through mandatory train ing for all new joiners, along w ith annual refreshers. In 2023, we also created a pathway in the Group’s learning platform using engaging bite-sized video content to help educate colleagues on their responsib il it ies to keep the Group safe. The Group celebrated World Day for Safety and Health at Work in April with the theme ‘Safety is Everyone’s Responsib il ity’ in line with the back-to-basics intent. 225 Standard Chartered – Annual Report 2023 Directors’ report One hundred and ﬁfty eight (158) build ings, wh ich covers more than 90 per cent of our employees, were certif ied w ith the WELL Health & Safety Rating; an evidence-based, third-party certif icat ion that validates our efforts to address the hygiene and safety of our workspaces. Four major head ofﬁce projects also obtained the broader WELL certif icat ion. Our regular Ofﬁce and Home Working Experience survey, conducted across 49 markets, demonstrated continued high scores around wellbeing with 80 per cent of respondents agreeing that the workplace has a posit ive impact on their wellbeing and 87 per cent saying they are able to be physically active and mainta in a healthy work–l ife balance. In 2023, all of the Group’s markets saw relaxation of COVID restrict ions w ith business moving to new normal, and continued uptake of the Group’s Future Workplace Now (ﬂexible working) programme. An ergonomic online assessment tool is available for employees to assess their home working area for hazards, with a virtual assessment of the ind iv idual’s work environment, and a workplace adjustment procedure available for employees who require support based on personal circumstances. Our work injury insurance covers all employees working from home. Business travel returned to pre-pandemic levels in 2023, and we put together a Travel Risk Management Framework aligned to ISO 31030:2021 Travel Risk Management Standards and supported by external travel risk and security advisers at International SOS to support travellers. Major customers Our ﬁve largest customers together accounted for 2.1 per cent of our total operating income in the year ended 31 December 2023. Major suppliers In 2023, USD $4.479 bill ion was spent w ith 11,563 suppliers. Of this, 74 per cent of the total spend was spent in the Asia region, with 18 per cent in Europe and the Americas, and 8 per cent in Africa and the Middle East. Furthermore, 80 per cent of total spend in 2023 was with 474 suppliers. In addit ion, 80 per cent of carbon em iss ions were with 481 suppliers (excluding air travel suppliers). In 2023, our ﬁve largest suppliers together accounted for 14.8 per cent of total spend, with the largest ten amounting to 23 per cent of total spend. Supply chain management To support the operation of our businesses we source a variety of goods and services governed through a third-party risk management framework through which we aim to follow the highest standards in terms of supplier selection, due dil igence and contract management. For informat ion about how the Group engages w ith suppliers on environmental and social matters, please see our Supplier Charter and Supplier Divers ity and Inclus ion Standard. Our Supplier Charter and Supplier Divers ity and Inclus ion standard can be viewed at sc.com/suppliercharter and sc.com/supplierd ivers ity Details of how we create value for our suppliers and other stakeholder groups can be found on pages 58 and 59 Product responsib il ity We aim to design and offer products based on client needs to ensure fair treatment and outcomes for clients. The Group has in place a risk framework, compris ing polic ies, standards and controls to support these objectives in alignment with our Conduct Risk Framework. This framework covers sales practices, client communicat ions, appropriateness and suitab il ity, and post-sales practices. There are controls across all activ it ies above and the controls are tested on a regular basis to provide assurance on the framework. As part of this, we ensure products sold are suitable for clients and comply with relevant laws and regulations. We also review our products on a period ic bas is and reﬁne them to keep them relevant to the changing needs of clients and to meet regulatory obligat ions. We have processes and guidel ines spec if ic to each of our client industr ies, to promptly resolve cl ient complaints and understand and respond to client issues. Conduct considerat ions are g iven sign iﬁcant we ight ing in frontline incent ive structures to dr ive the right behaviours. For more informat ion on our approach to product des ign, product pric ing, treat ing customers fairly and protecting customers, and incent iv is ing our frontl ine employees, see pages 55 and 56. For more informat ion on fraud ident iﬁcation see page 131. Safeguarding intellectual property rights The Group has processes in place to manage the Group’s trade mark rights and it respects third-party intellectual property rights. Group Code of Conduct The Board has adopted a Group Code of Conduct and Ethics (the Code) relating to the lawful and ethical conduct of business and this is supported by the Group’s valued behaviours. This has been communicated to all directors and employees, all of whom are expected to observe high standards of integr ity and fa ir dealing in relation to customers, employees and regulators in the communit ies in which the Group operates. Directors and employees are asked to recommit to the Code annually, and 99.75 per cent have completed the 2023 recommitment. All Board members have recommitted to the Code. Community engagement We collaborate with local partners to support social and economic development in communit ies across our footpr int. We aim to create more inclus ive econom ies by sharing our skills and expertise and supporting community in it iat ives that transform lives. Established in 2019, Futuremakers by Standard Chartered is our global youth economic empowerment in it iat ive, helping disadvantaged young people learn, earn and grow. We are committed to improv ing econom ic partic ipat ion and equitable access to ﬁnance for young women and microbus inesses. For more informat ion on Futuremakers, as well as our employee volunteering and community expenditure, please see pages 97 and 98. 226 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures ESG reporting guide Compliance with List ing Rules We comply with the requirements of the ESG Reporting Guide contained in Appendix C2 to The Rules Governing the List ing of Securit ies on the Stock Exchange of Hong Kong L im ited. With respect to the key performance ind icators (KPIs) noted in Part C: “Comply or explain” provis ions, the Group does not report on KPI A1.3 and KPI A1.6 related to the production and handling of hazardous waste; KPI A2.5 related to packaging materials used for ﬁn ished products; KPI B2.2 related lost days due to work injury; KPI B6.1 total products recalled due to safety and health reasons, and KPI B6.4 product recall procedures. As an ofﬁce-based ﬁnancial serv ices provider these issues were not deemed material. For further informat ion related to Aspect B4 Labour Standards and B5 Supply Chain Management, please also refer to the Group’s annual Modern Slavery Statement. Compliance with Task Force on Climate-related Financ ial Disclosures (TCFD) In line with our “comply or explain” obligat ion under the UK’s Financ ial Conduct Author ity’s List ing Rules, we can conﬁrm that we have made disclosures consistent with the TCFD recommendations and recommended disclosures in this Annual Report. Our TCFD disclosures also meet the new climate-related ﬁnancial d isclosure requirements contained in section 414CB of the Companies Act 2006. We have also taken into account the implementat ion gu idance included in the TCFD 2021 Annex. Further informat ion on net zero progress and ﬁnanced emiss ions is available on pages 104 to 117. For a detailed TCFD summary and alignment index referencing relevant disclosures see page 511 to 516. Modern Slavery Act The Group publishes a Modern Slavery Statement annually. This document gives further detail on the actions the Group has taken as it seeks to prevent modern slavery and human trafﬁcking in its operations (workforce), ﬁnanc ing and supply chain. The Group publishes a Statement under the UK Modern Slavery Act 2015 for the ﬁnancial year end ing 31 December 2023. See more via sc.com/modernslavery Sustainable ﬁnance taxonomies Standard Chartered continues to assess the applicab il ity of sustainable ﬁnance taxonomies across the Group’s footprint. Reporting has commenced in several markets in Asia in accordance with local sustainable ﬁnance taxonomy regulatory requirements. An assessment on the applicab il ity and implementat ion t imel ine of the EU Corporate Sustainab il ity Reporting Direct ive (CSRD) for Standard Chartered Bank AG and Standard Chartered PLC has also been undertaken. Preparatory work has commenced to embed EU Taxonomy classif icat ions and metrics. We will continue to monitor expected policy developments from the UK and the European Commiss ion concern ing guidance on taxonomy alignment and technical screening criter ia to incrementally enhance our assessment and support reporting as required. The Group is developing scalable dig ital capab il ity to facil itate report ing against taxonomies being developed across the jurisd ict ions in which the Group operates. The solution adopts a rules-based approach to assess whether a client and any client activ ity w ith the Group is in-scope and elig ible for taxonomy report ing and will facil itate broader implementat ion of taxonomy compl iance by relevant Group entit ies as and when compl iance implementat ion w ill be required. Taxonomy data availab il ity and quality will continue to evolve via client engagement, data vendors and partnerships. The Group will consider applicable taxonomy alignment in our business decis ions, includ ing at a cl ient and transaction level, as well as more broadly at a sector strategy level. Given our footprint across Europe and the UK, Asia, Africa and the Middle East, we need to continually assess taxonomy- alignment requirements based on informat ion ava ilable from clients and through our due dil igence processes. Environmental impact of our operations We aim to min im ise the environmental impact of our operations as part of our commitment to be a responsible company. We report on the actions we take to reduce energy and water usage and non-hazardous waste generated in our operations in the Sustainab il ity Review on page 106 and in the Supplementary sustainab il ity informat ion sect ion on pages 505 and 506. Our reporting methodology is based on the ‘The Greenhouse Gas Protocol – A Corporate Accounting and Reporting Standard (Revised Edit ion)’. We have adopted the operat ional control approach to deﬁne our reporting boundary for GHG Scope 1 and 2 emiss ions. For Scope 3 ﬁnanced em iss ions, boundaries are noted for each high-emitt ing sector in the ‘Our approach to measuring ﬁnanced emiss ions’ table in the Sustainab il ity Review. Information on the princ iples and methodolog ies used to calculate the GHG emiss ions of the Group can be found in our Environmental Reporting Criter ia document at sc.com/environmentcriter ia. Reporting period, boundary and scope We report on Sustainab il ity and Environmental, Social and Governance (ESG) matters throughout this Annual Report, in particular in the following sections: (i) Strategic report, Sustainab il ity overview on pages 66 to 79; (i i) Susta inab il ity review on pages 92 to 133; (i i i) Risk review on pages 298 to 313; and (iv) in the Supplementary sustainab il ity informat ion section on pages 504 to 516. The Sustainab il ity and ESG informat ion in this Annual report was compiled for the ﬁnanc ial year 1 January to 31 December 2023, unless otherwise specif ied. The reporting period of operational environmental performance ind icators is from 1 October 2022 to 30 September 2023. This allows sufﬁc ient t ime for independent third-party assurance to be completed prior to the publicat ion of the Group’s Annual Report. Accord ingly, the operating income used for associated environmental intens ity metr ics corresponds to the same time period, rather than the calendar year used in ﬁnanc ial report ing. There was no sign iﬁcant change in the boundary and scope of this Annual Report from that of Standard Chartered PLC Annual Report 2022, published on 16 February 2023. 227 Standard Chartered – Annual Report 2023 Directors’ report Assurance Our Scope 1 and 2 emiss ions are assured by an independent company, Global Documentation, against the requirements of ISO 14064. The Group as disclosed GHG emiss ions and energy consumpt ion data as required by the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. Units 2023 2022 2021 Reporting coverage of data Annual operating income from 1 October to 30 September $ mill ion 17,414 15,863 14,541 Net internal area of occupied property m 2 880,515 946,234 998,571 GHG emiss ions Scope 1 & 2: Scope 1 emiss ions tCO 2 e 8,488¹ 2,071 2,902 Scope 2 emiss ions (locat ion-based)² tCO 2 e 85,741 89,410 96,256 Scope 2 emiss ions (market-based) 3 tCO 2 e 26,246 47,363 82,761 Scope 1 & 2 emiss ions (market-based) 3 tCO 2 e 34,734 49,434 85,663 Scope 1 & 2 emiss ions (UK and offshore area only) tCO 2 e 248 – – GHG emiss ions – Intens ity: Total Scope 1 &2 emiss ions (market-based)/ intens ity tCO 2 e/$ mill ion 2 3 6 Environmental resource efﬁc iency Energy Indirect non-renewable energy consumption GWh 142 142 142 Indirect renewable energy consumption GWh 16 24 28 Direct non-renewable energy consumption GWh 13 10 12 Direct renewable energy consumption GWh 2 1 1 Energy consumption GWh 173 177 183 Energy consumption (UK and offshore area only) GWh 6 6 5 1 Scope 1 ﬁgure includes fugit ive em iss ions for the ﬁrst t ime in 2023 (2023: 5,266 tCO 2 e). Prior year data was not available for fugit ive em iss ions. For more informat ion on the methodology and assumptions used to calculate GHG emiss ions, please refer to the Env ironmental Reporting Criter ia at sc.com/sustainab il ityhub . 2 Location based emiss ions have been restated for pr ior comparative periods. Emiss ions erroneously included renewable energy certif icates and power purchase agreements. Other scope 2 reductions outside clean power are attributed to footprint reduction and efﬁc iency ga ins. 3 Market based emiss ions have decreased from 2022 to 2023 due to footpr int reduction, efﬁc iency ga ins and the purchase of addit ional energy attr ibut ion certif icates by the Group. Further detail on our environment performance can be found on pages 104 to 117; associated assumptions and methodologies in our reporting criter ia document at sc.com/environmentalcr iter ia Electronic communicat ion The Board recognises the importance of good communicat ions w ith all shareholders. Directors are in regular contact with our inst itut ional shareholders and general presentations are made when we announce our ﬁnanc ial results. The AGM presents an opportunity to communicate with all shareholders. Our shareholders are encouraged to receive our corporate documents electronically. The annual and inter im ﬁnancial statements, Not ice of AGM and any div idend c irculars are all available electronically. If you do not already receive your corporate documents electronically and would like to do so in future, please contact our registrars at the address on page 517. Shareholders are also able to vote electronically on the resolutions being put to the AGM through our registrars’ website at investorcentre.co.uk. Annual General Meeting Our 2024 AGM will be held at 11:00am (UK time) (6:00pm Hong Kong time) on 10 May 2024. Further details regarding the format, location and business to be transacted will be disclosed with in the 2024 Not ice of AGM. Our 2023 AGM was held on 3 May 2023 at 11:00am (UK time) (6:00pm Hong Kong time). Special business at the meeting included the approval of the power to allot ECAT1 Securit ies for cash without certain formalit ies. 228 Standard Chartered – Annual Report 2023 Directors’ report Other disclosures Non-audit services The Group’s non-audit services policy (the Policy) was reviewed and approved by the Audit Committee on 23 October 2023. The Policy is based on an overrid ing pr inc iple that, to avoid any actual or perceived conﬂicts of interest, the Group’s auditor should only be used when there is evidence that there is no alternative in terms of quality and when there is no conﬂict with their duties as auditor. EY can be used where the work is required by a regulator or competent authority. The Policy clearly sets out the criter ia for when the Aud it Committee’s prior written approval is required. The Policy requires a conservative approach to be taken to the assessment of requests for EY to provide non-audit services. Subject to the overrid ing pr inc iple, the Aud it Committee’s view is that EY can be of value in a range of non-audit service activ it ies and should be allowed to tender subject to the terms of the Policy. The Group is required to take a conservative approach to interpret ing the potent ial threats to auditor independence and requires commensurately robust safeguards against them. UK legislat ion and gu idance from the FRC sets out threats to audit independence, includ ing self- interest, self-review, famil iar ity, taking of a management role or conducting advocacy. In particular, mainta in ing EY’s independence from the Group requires EY to avoid taking decis ions on the Group’s behalf. It is also recognised as essential that management retains the decis ion-mak ing capabil ity as to whether to act on advice given by EY as part of a non-audit service. This means not just the abil ity to act ion the advice given, but to have sufﬁcient knowledge of the subject matter to be able to make a reasoned and independent judgement as to its valid ity. All of this is contained with in the Pol icy. By way of (non-exhaustive) illustrat ion of the appl icat ion of the princ iples set out in the Policy, the following types of non-audit services are likely to be permiss ible under the Pol icy: • Reviews of inter im ﬁnancial informat ion and ver if icat ion of inter im proﬁts – the Group would also extend th is to work on investor circulars in most foreseeable circumstances • Extended audit or assurance work on ﬁnanc ial informat ion and/or ﬁnancial or operat ional controls, where this work is closely linked to the audit engagement • Agreed-upon procedures on materials with in or referenced in the Annual Report of the Group or an entity with in the Group • Internal control review services Strictly prohib ited under the Pol icy: • Bookkeeping, informat ion technology and internal audit services • Corporate ﬁnance services, valuation services or lit igat ion support • Tax or regulatory structuring proposals • Services where fees are paid on a contingent basis (in whole or in part) • Consulting services that actively assist in running the business in place of management as opposed to provid ing or val idat ing informat ion, wh ich management then util ises in the operation of the business The Policy is not a prescribed list of non-audit services that EY is permitted to provide. Rather, each request for EY to provide non-audit services will be assessed on its own merits. The Audit Committee believes that such a case-by-case approach best accommodates (i) the need for the appropriate rigour and challenge to be applied to each request for EY to provide non-audit services while (i i) preserving sufﬁc ient ﬂex ib il ity for the Group to engage EY to provide non-audit services where they are able to deliver particular value to the Group and where the proposed services can be provided without compromis ing EY’s objectiv ity and independence. To ensure that the Group will comply with a cap that lim its fees on non-aud it services provided by EY to under 70 per cent of the average Group audit fee from the previous three consecutive ﬁnanc ial years (which will apply from EY’s fourth year of being the Group’s external auditor), the Policy requires that annual non-audit service fees are lower than 70 per cent of the average annual Group audit fee up to this time. The caps exclude audit related non-audit services and services carried out pursuant to law or regulation. For 2023, without deducting non-audit service fees which were required by law or regulation and performed by EY, the ratio was 0.3:1. Details relating to EY’s remuneration as the Group statutory auditor and a descript ion of the broad categories of the types of non-audit services provided by EY are given in Note 38 to the ﬁnanc ial statements. Auditor The Audit Committee reviews the appointment of the Group’s statutory auditor, its effectiveness and its relationsh ip w ith the Group, which includes monitor ing our use of the aud itors for non-audit services and the balance of audit and non-audit fees paid. Following an annual performance and effectiveness review of EY, it was felt that EY is considered to be effective, object ive and independent in its role as Group statutory auditor. Each director believes that there is no relevant informat ion of which our Group statutory auditor is unaware. Each has taken all steps necessary as a director to be aware of any relevant audit informat ion and to establ ish that the Group statutory auditor is made aware of any pertinent informat ion. EY will be in attendance at the 2024 AGM. A resolution to re-appoint EY as auditor was proposed at the Company’s 2023 AGM and was successfully passed. EY is a Public Interest Entity Auditor recognised in accordance with the Hong Kong Financ ial Report ing Council Ordinance. By order of the Board Adrian de Souza Group Company Secretary 23 February 2024 Standard Chartered PLC Registered No. 966425 229 Standard Chartered – Annual Report 2023 Directors’ report Statement of directors’ responsib il it ies The directors are responsible for preparing the Annual Report and the Group and Company ﬁnancial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and Company ﬁnancial statements for each ﬁnancial year. Under that law: • The Group ﬁnancial statements have been prepared in accordance with UK-adopted International Accounting Standards and International Financ ial Report ing Standards as adopted by the European Union; • The Company ﬁnancial statements have been properly prepared in accordance with UK-adopted International Accounting Standards as applied in accordance with section 408 of the Companies Act 2006; and • The ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. Under company law the directors must not approve the ﬁnancial statements unless they are sat isf ied that they g ive a true and fair view of the state of affairs of the Group and Company and of their proﬁt or loss for that period. In preparing each of the Group and Company ﬁnanc ial statements, the directors are required to: • Select suitable accounting polic ies and then apply them consistently; • Make judgements and estimates that are reasonable, relevant and reliable; • State whether they have been prepared in accordance with UK-adopted International Accounting Standards and International Financ ial Report ing Standards as adopted by the European Union; • Assess the Group and the Company’s abil ity to cont inue as a going concern, disclos ing, as appl icable, matters related to going concern; and • Use the going concern basis of accounting unless they either intend to liqu idate the Group or the Company or to cease operations, or have no realist ic alternat ive but to do so The directors are responsible for keeping adequate accounting records that are sufﬁc ient to show and expla in the Company’s transactions and disclose with reasonable accuracy at any time the ﬁnanc ial pos it ion of the Company and enable them to ensure that its ﬁnanc ial statements comply with the Companies Act 2006. They are responsible for such internal control 1 as they determine is necessary to enable the preparation of ﬁnanc ial statements that are free from material misstatement, whether due to fraud or error, and have general responsib il ity for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregular it ies. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The directors are responsible for the maintenance and integr ity of the corporate and ﬁnancial informat ion included on the Company’s website. Legislat ion in the UK governing the preparation and dissem inat ion of ﬁnanc ial statements d iffer from legislat ion in other jur isd ict ions. Responsib il ity 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, liab il it ies, ﬁnancial pos it ion and proﬁt or loss of the Company and the undertakings included in the consolidat ion taken as a whole; and • The Strategic report includes a fair review of the development and performance of the business and the posit ion of the Company and the undertak ings included in the consolidat ion taken as a whole, together w ith a descript ion of the emerg ing risks and uncertaint ies that they face We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the informat ion necessary for shareholders to assess the Group’s posit ion and performance, bus iness model and strategy. By order of the Board Diego De Giorg i Group Chief Financ ial Ofﬁcer 23 February 2024 Strategic report Section heading 230 Standard Chartered – Annual Report 2023 Risk review and Capital review 234 Risk proﬁle 298 Climate risk 314 Enterprise Risk Management Framework 320 Princ ipal r isks 338 Capital review Risk review  Thousands run our 2023 marathons  In 2023, more than 160,000 elite runners, passionate amateurs and ﬁrst-timers completed our sponsored marathons and races. We sponsor marathons in Singapore, Hong Kong, Taipe i, Na irob i, Kuala Lumpur, Stanley (Falkland Islands) and Jersey, as well as a 10km run in Shanghai and a 5km run in London. These events champion a range of charitable causes, includ ing underpriv ileged commun it ies, healthcare, education, and the environment. We sponsored our ﬁrst marathon in 1997 in Hong Kong and will introduce our ﬁrst heritage marathon in Vietnam in 2024 – our 10th annual race. Read more at sc.com/marathons 231 Standard Chartered – Annual Report 2023 Risk review and Capital review 232 Standard Chartered – Annual Report 2023 Risk review Index Risk review and Capital review Risk Index Annual Report and Accounts Risk proﬁle Credit risk 234 Basis of preparation 234 Credit risk overview 234 Impairment model 234 Staging of ﬁnanc ial instruments 234 IFRS 9 expected credit loss princ iples and approaches 234 Summary of Performance in 2023 235 Maximum exposure to credit risk 237 Analysis of ﬁnanc ial instrument by stage 238 Credit quality analysis 240 • Credit quality by client segment 240 • Credit quality by geographic region 248 Movement in gross exposures and credit impa irment for loans and advances, debt secur it ies, undrawn commitments and ﬁnanc ial guarantees 248 Movement of debt securit ies, alternat ive tier one and other elig ible b ills 251 Analysis of Stage 2 balances 256 Credit impa irment charge 257 Problem credit management and provis ion ing 257 • Forborne and other modif ied loans by cl ient segment 257 • Forborne and other modif ied loans by reg ion 258 • Credit-impa ired (stage 3) loans and advances by geograph ic region 258 Credit risk mit igat ion 258 • Collateral 259 • Collateral held on loans and advances 259 • Collateral – Corporate, Commercial & Institut ional Bank ing 259 • Collateral – Consumer, Private & Business Banking 260 • Mortgage loan-to-value ratios by geography 261 • Collateral and other credit enhancements possessed or called upon 261 • Other Credit risk mit igat ion 262 Other portfolio analysis 262 • Maturity analysis of loans and advances by client segment 262 • Credit quality by industry 263 • Industry and Retail Products analysis of loans and advances by geographic region 264 • Vulnerable, cyclical and high carbon sectors 265 • China commeric ial real estate 271 • Debt securit ies and other el ig ible b ills 272 IFRS 9 expected credit loss methodology 273 Traded risk 286 Market risk movements 286 Counterparty Credit risk 289 Derivat ive ﬁnancial instruments Credit risk mit igat ion 289 Liqu id ity and Funding risk 290 Liqu id ity & Funding risk metrics 290 Liqu id ity analysis of the Group’s balance sheet 293 Interest Rate risk in the Banking Book 296 Operational and Technology risk 297 Operational and Technology risk proﬁle 297 Other princ ipal r isks 297 233 Standard Chartered – Annual Report 2023 Risk review and Capital review Risk Index Annual Report and Accounts Climate risk Managing ﬁnanc ial and non-ﬁnancial r isks from climate change 298 Assessing the resil ience of our strategy us ing scenario analysis 309 Risk management approach Enterprise Risk Management Framework 314 Princ ipal R isks 320 Capital Capital summary 338 • Capital ratio 338 • Capital base 339 Movement in total capital 340 Risk-weighted asset 341 Leverage ratio 343 The following parts of the Risk review and Capital review form part of these ﬁnanc ial statements and are aud ited by the external auditors: • a) Risk review: Disclosures marked as ‘audited’ from the start of Credit risk section (page 234) to the end of other princ ipal risks in the same section (page 297); and • b) Capital review: Tables marked as ‘audited’ from the start of ‘Capital base’ to the end of ‘Movement in total capital’, excluding ‘Total risk-weighted assets’ (pages 339 and 340). 234 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Credit Risk (audited) Basis of preparation Unless otherwise stated the balance sheet and income statement informat ion presented w ith in th is section is based on the Group’s management view. This is princ ipally the location from which a client relationsh ip is managed, which may differ from where it is ﬁnanc ially booked and may be shared between businesses and/or regions. This view reﬂects how the client segments and regions are managed internally. Loans and advances to customers and banks held at amortised cost in this Risk proﬁle section include reverse repurchase agreement balances held at amortised cost, per Note 16 Reverse repurchase and repurchase agreements includ ing other s im ilar secured lend ing and borrowing. Credit Risk overview Credit Risk is the potential for loss due to the failure of a counterparty to meet its contractual obligat ions to pay the Group. Credit exposures arise from both the banking and trading books. Impairment model IFRS 9 mandates an impa irment model that requ ires the recognit ion of expected cred it losses (ECL) on all ﬁnanc ial debt instruments held at amortised cost, Fair Value through Other Comprehensive Income (FVOCI), undrawn loan commitments and ﬁnanc ial guarantees. Staging of ﬁnanc ial instruments Financ ial instruments that are not already credit-impa ired are orig inated into stage 1 and a 12-month expected credit loss provis ion is recognised. Instruments will remain in stage 1 until they are repaid, unless they experience sign iﬁcant cred it deteriorat ion (stage 2) or they become credit-impa ired (stage 3). Instruments will transfer to stage 2 and a lifet ime expected credit loss provis ion is recognised when there has been a sign iﬁcant change in the Credit Risk compared to what was expected at orig inat ion. The framework used to determine a sign iﬁcant increase in credit risk is set out below. IFRS 9 expected credit loss princ iples and approaches The main methodology princ iples and approach adopted by the Group are set out in the following table. Title Supplementary Information Page Approach for determin ing expected cred it losses IFRS 9 methodology Determin ing l ifet ime expected cred it loss for revolving products Post model adjustments 273 273 280 Incorporation of forward-looking informat ion Incorporation of forward-looking informat ion Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact of non-linear ity Judgemental adjustments and sensit iv ity to macroeconomic variables 275 275 279 Sign iﬁcant increase in credit risk (SICR) Quantitat ive and qual itat ive cr iter ia 282 Assessment of credit-impa ired ﬁnancial assets Consumer and Business Banking clients CCIB and Private Banking clients Write-offs 284 284 284 Transfers between stages Movement in loan exposures and expected credit losses 248 Modif ied ﬁnancial assets Forbearance and other modif ied loans 257 Governance and applicat ion of expert cred it judgement in respect of expected credit losses 284 Stage 1 • 12-month ECL • Performing Stage 2 • Lifet ime expected cred it loss • Performing but has exhib ited sign iﬁcant increase in Credit Risk (SICR) Stage 3 • Credit-impa ired • Non-performing Risk proﬁle 235 Standard Chartered – Annual Report 2023 Risk review and Capital review Summary of performance in 2023 Loans and Advances 94 per cent (31 December 2022: 93 per cent) of the Group’s gross loans and advances to customers remain in stage 1 at $273.7 bill ion (31 December 2022: $295.2 b ill ion), reﬂect ing our continued focus on high-quality orig inat ion. Stage 1 loans decreased by $21.5 bill ion to $274 b ill ion (31 December 2022: $295 bill ion). For Corporate, Commerc ial and Institut ional Bank ing (CCIB), stage 1 balances increased to 90 per cent of the gross loans and advances to customers (31 December 2022: 88 per cent), while there was an overall decrease due to reductions in the ﬁnanc ing, insurance and non-banking sectors. Stage 1 balances for Consumer, Private and Business Banking (CPBB) decreased by $5.6 bill ion, ma inly driven by a slowdown in mortgages sales in Korea and Hong Kong, which was partly offset by new Credit Cards and Personal Loans businesses in Asia. Stage 1 balances for Central and other items decreased by $10.8 bill ion due to exposure reductions to a Central Bank in the Asia region. Stage 1 cover ratio remained stable at 0.2 per cent (31 December 2022: 0.2 per cent). Stage 2 gross loans and advances to customers decreased by $1.8 bill ion to $11.2 b ill ion (31 December 2022: $13 b ill ion). Th is was due to CCIB exposure reductions and transfers to stage 3 in the Commercial Real Estate (CRE) sector, and exposure reductions in the Transport sector. This was partially offset by an increase in CPBB Korea and Hong Kong Mortgage portfolio and Singapore Private Banking. Higher risk exposure net increase of $1 bill ion from Central and other items, was due to a short-term exposure to a Central Bank in the Africa and Middle East region, which was partly offset by exposure reductions and transfers to stage 3 in CCIB. Stage 2 cover ratio increased by 0.3 per cent to 3.7 per cent (31 December 2022: 3.4 per cent). The increase was driven by Ventures due to increased delinquenc ies and portfol io growth mainly in Mox Bank. The increase in CCIB cover ratio was due to a decrease in expected credit losses from exposure reductions and transfers to Stage 3. The decrease in CPBB stage 2 cover ratio was mainly due to an increase in secured portfolio exposures with relatively lower Loss Given Default. Stage 3 loans decreased by $0.6 bill ion to $7.2 b ill ion (31 December 2022: $7.8 bill ion) as a result of repayments, debt sales and write-offs in CCIB. Although the portfolio reduced year on year, China CRE clients were the major inﬂows this year. The CCIB stage 3 cover ratio increased by 4.5 per cent to 64 per cent as a result of repayments and incremental provis ions taken (31 December 2022: 60 per cent). The CPBB stage 3 cover ratio reduced by 2.2 per cent to 51 per cent (31 December 2022: 53 per cent), due to a small exposure increase mainly in Secured wealth products. Ventures stage 3 exposures increased by $11 mill ion to $12 m ill ion (31 December 2022: $1 mill ion). The cover rat io after collateral remained stable at 76 per cent (31 December 2022: 76 per cent) Further details can be found in the ‘Analysis of ﬁnanc ial instruments by stage’ section in pages 238 and 239 ; ‘Credit quality by client segment’ section in pages 240 to 247 ; ‘Credit quality by industry’ section in pages 263 and 264 . Stage 3 cover ratio is also disclosed in the ‘Stage 3 cover ratio’ and ‘Credit-impa ired (stage 3) loans and advances by geograph ic region’ sections in page 258 . Maximum exposure The Group’s on-balance sheet maximum exposure to Credit Risk increased by $8.6 bill ion to $798 b ill ion (31 December 2022: $790 bill ion). Cash at Central bank increased by $11.6 bill ion to $70 bill ion (31 December 2022: $58 b ill ion) due to depos its placed with the US Federal Reserve. Loans to banks also increased by $5 bill ion to $45 b ill ion (31 December 2022: $40 bill ion). Fa ir Value through proﬁt and loss increased by $42 bill ion to $144 b ill ion (31 December 2022: $103 b ill ion), largely due to an increase in Debt Securit ies and Reverse Repos. This was partly offset by a $13 bill ion decrease in Derivat ive ﬁnancial instruments, and a $23.7 bill ion decrease in loans and advances to customers to $287 bill ion (31 December 2022: $311 bill ion). Out of the $23.7 b ill ion decrease in loans and advances to customers, a $10.5 bill ion reduction relates to reverse repos, and a $11 bill ion reduct ion relates to Amortised Cost Debt Securit ies, as part of the Group’s liqu id ity management actions. Off-balance sheet instruments increased by $28 bill ion to $257 b ill ion (31 December 2022: $229 bill ion), wh ich was driven by new businesses. Further details can be found in the ‘Maximum exposure to Credit Risk’ section in page 237 . Analysis of stage 2 The key SICR driver that caused exposures to be classif ied as stage 2 remains increase in probabil ity of default. The proportion of exposures in CCIB in stage 2 due to increased PD has decreased partly due to an increase in clients placed on non-purely precautionary early alert that have not breached PD thresholds. In CPBB, the proportion of loans in stage 2 loans from 30 days past due trigger decreased by 2 per cent to 6 per cent (31 December 2022: 8 per cent). ‘Others’ category includes exposures where orig inat ion data is incomplete and the exposures are getting allocated into stage 2. Further details can be found in the ‘Analysis of stage 2 balances’ section in page 256 . Credit impa irment charges The Group’s ongoing credit impa irment was a net charge of $508 mill ion (31 December 2022: $836 m ill ion). For CCIB, stage 1 and 2 impa irment charges decreased by $137 mill ion to $11 m ill ion (31 December 2022: $148 m ill ion), as 2022 included Pakistan Sovereign downgrades and China CRE overlays, which was partly offset by a $102 mill ion full release of COVID-19 overlay. In 2023, $11 mill ion impa irment charges were due to portfolio movements, includ ing impa irments on Pakistan Sovereign clients, and China CRE overlays, which was partly offset by a $13 mill ion net release from model and methodology updates. CCIB stage 3 impa irment charges decreased by $165 m ill ion to $112 mill ion (31 December 2022: $277 m ill ion) largely due to higher releases and lower impa irments on Ch ina CRE clients. In 2023, $112 mill ion impa irment charges were largely dr iven by impa irments on Ch ina CRE clients, and releases across multiple clients. 236 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle For CPBB, stage 1 and 2 impa irment charges decreased by $22 mill ion to $129 m ill ion (31 December 2022: $151 m ill ion). In 2023, $129 mill ion impa irment charges were from normal ﬂows, largely from unsecured portfolios in China, Hong Kong, India and Singapore. This was partially offset by $21 mill ion of COVID-19 overlay releases, includ ing the full release of $16 mill ion rema in ing COVID-19 overlays in Bahrain. CPBB stage 3 impa irment charges increased by $114 mill ion to $225 mill ion (31 December 2022: $111 m ill ion). The increase has been driven mainly by the unsecured business due to a mix of higher bankruptcies in Singapore, Hong Kong and Korea, and portfolio growth in dig ital partnersh ips. For Ventures, stage 1 and 2 impa irment charges increased by $29 mill ion to $42 m ill ion (31 December 2022: $13 m ill ion), mainly due to portfolio growth in Mox Bank. Ventures stage 3 impa irment charges increased by $40 mill ion to $43 mill ion (31 December 2022: $3 m ill ion), ma inly due to portfolio growth in Mox Bank, and higher bankruptcies. Mit igat ing actions have been taken to address these. For Central and other items, stage 1 and 2 impa irment charges decreased by $139 mill ion due to a net release of $44 m ill ion (31 December 2022: $95 mill ion) as 2022 included Pakistan Sovereign CG12 downgrades. In 2023, $44 mill ion net release of impa irment charges were dr iven by exposure reductions and shortening tenors of balances to the Pakistan Government. This was partly offset by a $8 mill ion charge due to Kenya Sovereign downgrade. Central and other items stage 3 impa irment charges decreased by $28 mill ion to $10 m ill ion (31 December 2022: $38 mill ion) as Sr i Lanka and Ghana exposures were downgraded to Stage 3 in 2022. Further details can be found in the ‘Credit impa irment charge’ sect ion in page 257 . Vulnerable and Cyclical Sectors Total net on-balance sheet exposure to vulnerable and cyclical sectors decreased by $3 bill ion to $29 b ill ion (31 December 2022: $32 bill ion) largely due to the ex it of the Aviat ion bus iness and lower drawn balances particularly in the CRE sector, where on-balance sheet exposure decreased by $1.8 bill ion to $14.5 b ill ion (31 December 2022: $16.3 b ill ion). Stage 2 vulnerable and cyclical sector loans decreased by $2.3 bill ion to $3.3 b ill ion (31 December 2022: $5.6 b ill ion), primar ily dr iven by a $1.4 bill ion exposure reduct ion in the CRE sector and transfers to Stage 3. Stage 3 vulnerable and cyclical sector loans decreased by $0.5 bill ion to $3.6 b ill ion (31 December 2022: $4 bill ion), ma inly due to the Oil and Gas, and Commodity sectors, which was partly offset by new inﬂows into the CRE sector. The Group provides loans to CRE counterparties of which $9.6 bill ion is to counterparties in the CCIB segment where the source of repayment is substantially derived from rental or sale of real estate and is secured by real estate collateral. The remain ing CRE loans compr ise working capital loans to real estate corporates, loans with non-property collateral, unsecured loans and loans to real estate entit ies of d ivers iﬁed conglomerates. The average LTV ratio of the performing book CRE portfolio has increased to 52 per cent (31 December 2022: 49 per cent). The proportion of loans with an LTV greater than 80 per cent has increased to 3 per cent (31 December 2022: 1 per cent). Further details can be found in the ‘Vulnerable, cyclical and high carbon sectors’ section in pages 265 to 270 . China commercial real estate Total exposure to China CRE decreased by $0.8 bill ion to $2.6 bill ion (31 December 2022: $3.4 b ill ion) ma inly from exposure reductions. The proportion of credit impa ired exposures increased to 58 per cent (31 December 2022: 33 per cent) as market condit ions cont inued to deteriorate during the period, and provis ion coverage increased to 72 per cent (31 December 2022: 56 per cent) reﬂecting increased provis ion charges dur ing the period. The proportion of the loan book rated as Higher Risk decreased by 8 per cent to 0.3 per cent (31 December 2022: 8.4 per cent) primar ily due to downgrades in the period. The Group continues to hold a judgemental management overlay, which decreased by $32 mill ion to $141 m ill ion (31 December 2022: $173 mill ion), reﬂect ing changes in the portfolio and downgrades to Stage 3. The Group is further ind irectly exposed to Ch ina CRE through its associate investment in China Bohai Bank. Further details can be found in the ‘China commercial real estate’ section in page 271 . Management adjustments Given the evolving nature of the risks in the China CRE sector, a management overlay of $141 mill ion (31 December 2022: $173 mill ion) has been taken by est imat ing the impact of further deteriorat ion to exposures in this sector. Overlays of $5 mill ion (31 December 2022: $16 m ill ion) have been appl ied in CPBB to capture macroeconomic environment challenges caused by sovereign defaults or heightened sovereign risk and an overlay of $17 mill ion (31 December 2022: n il) was applied in Central and other items, due to a temporary market dislocat ion in the Africa and Middle East. The remain ing COVID-19 overlay in CPBB of $21 mill ion that was held at 31 December 2022 has been fully released in 2023. The stage 3 overlay in CCIB of $9 mill ion that was held at 31 December 2022, following the Sri Lanka Sovereign default was also fully released in 2023. Further details can be found in the ‘Judgemental management overlays’ section in page 280 . Model performance and judgemental post model adjustments are also disclosed in the ‘Model performance post model adjustments’ section in page 275 . 237 Standard Chartered – Annual Report 2023 Risk review and Capital review Maximum exposure to Credit Risk (audited) The table below presents the Group’s maximum exposure to credit risk for its on-balance sheet and off-balance sheet ﬁnanc ial instruments as at 31 December 2023, before and after taking into account any collateral held or other credit risk mit igat ion. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236 . 2023 2022 Maximum exposure $mill ion Credit risk management Net Exposure $mill ion Maximum exposure $mill ion Credit risk management Net exposure $mill ion Collateral 8 $mill ion Master netting agreements $mill ion Col l ateral 8 $mill ion Master netting agreements $mill ion On-balance sheet Cash and balances at central banks 69,905 69,905 58,263 58,263 Loans and advances to banks 1 44,977 1,738 43,239 39,519 978 38,541 of which – reverse repurchase agreements and other sim ilar secured lending 7 1,738 1,738 – 978 978 – Loans and advances to customers 1 286,975 118,492 168,483 310,647 135,194 175,453 of which – reverse repurchase agreements and other sim ilar secured lending 7 13,996 13,996 – 24,498 24,498 – Investment securit ies – Debt secur it ies and other elig ible b ills 2 160,263 160,263 171,640 171,640 Fair value through proﬁt or loss 3, 7 144,276 81,847 – 62,429 102,575 64,491 – 38,084 Loans and advances to banks 2,265 2,265 976 976 Loans and advances to customers 7,212 7,212 6,546 6,546 Reverse repurchase agreements and other sim ilar lend ing 7 81,847 81,847 – 64,491 64,491 – Investment securit ies – Debt secur it ies and other elig ible b ills 2 52,952 52,952 30,562 30,562 Derivat ive ﬁnancial instruments 4, 7 50,434 8,440 39,293 2,701 63,717 9,206 50,133 4,378 Accrued income 2,673 2,673 2,706 2,706 Assets held for sale 9 701 701 1,388 1,388 Other assets 5 38,140 38,140 39,295 39,295 Total balance sheet 798,344 210,517 39,293 548,534 789,750 209,869 50,133 529,748 Off-balance sheet 6 Undrawn Commitments 182,390 2,940 179,450 168,668 2,951 165,717 Financ ial Guarantees and other equivalents 74,414 2,590 71,824 60,410 2,592 57,818 Total off-balance sheet 256,804 5,530 – 251,274 229,078 5,543 – 223,535 Total 1,055,148 216,047 39,293 799,808 1,018,828 215,412 50,133 753,283 1. An analysis of credit quality is set out in the credit quality analysis section (page 240). Further details of collateral held by client segment and stage are set out in the collateral analysis section (page 259) 2. Excludes equity and other investments of $992 mill ion (31 December 2022: $808 m ill ion). Further deta ils are set out in Note 13 ﬁnanc ial instruments 3. Excludes equity and other investments of $2,940 mill ion (31 December 2022: $3,230 m ill ion). Further deta ils are set out in Note 13 ﬁnanc ial instruments 4 The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negat ive mark-to-market values of applicable derivat ive transact ions 5. Other assets include Hong Kong certif icates of indebtedness, cash collateral, and acceptances, in addit ion to unsettled trades and other ﬁnancial assets 6. Excludes ECL allowances which are reported under Provis ions for l iab il it ies and charges 7. Collateral capped at maximum exposure (over-collateralised) 8. Adjusted for over-collateralisat ion, wh ich has been determined with reference to the drawn and undrawn component as this best reﬂects the effect on the amount aris ing from expected cred it losses 9. The amount is after ECL. Further details are set out in Note 21 Assets held for sale and associated liab il it ies 238 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Analysis of ﬁnanc ial instruments by stage (audited) The table below presents the gross and credit impa irment balances by stage for the Group’s amort ised cost and FVOCI ﬁnancial instruments as at 31 December 2023. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236 . 2023 Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Cash and balances at central banks 69,313 – 69,313 207 (7) 200 404 (12) 392 69,924 (19) 69,905 Loans and advances to banks (amortised cost) 44,384 (8) 44,376 540 (10) 530 77 (6) 71 45,001 (24) 44,977 Loans and advances to customers (amortised cost) 273,692 (430) 273,262 11,225 (420) 10,805 7,228 (4,320) 2,908 292,145 (5,170) 286,975 Debt securit ies and other elig ible b ills 5 158,314 (26) 1,860 (34) 164 (61) 160,338 (121) Amortised cost 56,787 (16) 56,771 103 (2) 101 120 (57) 63 57,010 (75) 56,935 FVOCI 2 101,527 (10) 1,757 (32) 44 (4) 103,328 (46) – Accrued income (amortised cost) 4 2,673 – 2,673 – – – – – – 2,673 – 2,673 Assets held for sale 4 661 (33) 628 76 (4) 72 1 – 1 738 (37) 701 Other assets 38,139 – 38,139 – – – 4 (3) 1 38,143 (3) 38,140 Undrawn commitments 3 176,654 (52) 5,733 (39) 3 – 182,390 (91) Financ ial guarantees, trade credits and irrevocable letter of credits 3 70,832 (10) 2,910 (14) 672 (112) 74,414 (136) Total 834,662 (559) 22,551 (528) 8,553 (4,514) 865,766 (5,601) 1 Gross carrying amount for off-balance sheet refers to notional values 2 These instruments are held at fair value on the balance sheet. The ECL provis ion in respect of debt securit ies measured at FVOCI is held with in the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a ﬁnanc ial l iab il ity and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liab il ity provis ions to the extent that the drawn and undrawn components of loan exposures can be separately ident iﬁed. Otherw ise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $80 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13 mill ion) 239 Standard Chartered – Annual Report 2023 Risk review and Capital review 2022 Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net carrying value $mill ion Cash and balances at central banks 57,643 – 57,643 333 (8) 325 295 – 295 58,271 (8) 58,263 Loans and advances to banks (amortised cost) 39,149 (9) 39,140 337 (3) 334 59 (14) 45 39,545 (26) 39,519 Loans and advances to customers (amortised cost) 295,219 (559) 294,660 13,043 (444) 12,599 7,845 (4,457) 3,388 316,107 (5,460) 310,647 Debt securit ies and other elig ible b ills 5 166,103 (25) 5,455 (90) 144 (106) 171,702 (221) Amortised cost 59,427 (9) 59,418 271 (2) 269 78 (51) 27 59,776 (62) 59,714 FVOCI 2 106,676 (16) 5,184 (88) 66 (55) 111,926 (159) Accrued income (amortised cost) 4 2,706 – 2,706 – – – – – – 2,706 – 2,706 Assets held for sale 4 1,083 (6) 1,077 262 (4) 258 120 (67) 53 1,465 (77) 1,388 Other assets 39,294 – 39,294 – – – 4 (3) 1 39,298 (3) 39,295 Undrawn commitments 3 162,958 (41) 5,582 (53) 128 – 168,668 (94) Financ ial guarantees, trade credits and irrevocable letter of credits 3 56,683 (11) 3,062 (28) 665 (147) 60,410 (186) Total 820,838 (651) 28,074 (630) 9,260 (4,794) 858,172 (6,075) 1 Gross carrying amount for off-balance sheet refers to notional values 2 These instruments are held at fair value on the balance sheet. The ECL provis ion in respect of debt securit ies measured at FVOCI is held with in the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a ﬁnanc ial l iab il ity and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liab il ity provis ions to the extent that the drawn and undrawn components of loan exposures can be separately ident iﬁed. Otherw ise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $28 mill ion or ig inated cred it-impa ired debt secur it ies w ith impa irment of $13 m ill ion 240 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Credit quality analysis (audited) Credit quality by client segment For CCIB, exposures are analysed by credit grade (CG), which plays a central role in the quality assessment and monitor ing of risk. All loans are assigned a CG, which is reviewed period ically and amended in light of changes in the borrower’s circumstances or behaviour. CGs 1 to 12 are assigned to stage 1 and stage 2 (performing) clients or accounts, while CGs 13 and 14 are assigned to stage 3 (credit-impa ired) cl ients. Consumer and Business Banking portfolios are analysed by days past due and Private Banking by the type of collateral held. Mapping of credit quality The Group uses the following internal risk mapping to determine the credit quality for loans. Credit quality descript ion Corporate, Commercial & Institut ional Bank ing Private Banking 1 Consumer & Business Banking 5 Internal grade mapping S&P external ratings equivalent Regulatory PD range (%) Internal ratings Internal grade mapping Strong 1A to 5B AAA/AA+ to BBB-/ BB+² 0 to 0.425 Class I and Class IV Current loans (no past dues nor impa ired) Satisfactory 6A to 11C BB+/BB to B-/CCC+³ 0.426 to 15.75 Class II and Class III Loans past due till 29 days Higher risk Grade 12 CCC+ to C⁴ 15.751 to 99.999 Stressed Assets Group (SAG) managed Past due loans 30 days and over till 90 days 1 For Private Banking, classes of risk represent the type of collateral held. Class I represents facil it ies with liqu id collateral, such as cash and marketable secur it ies. Class II represents unsecured/partially secured facil it ies and those with ill iqu id collateral, such as equity in private enterprises. Class III represents facil it ies with resident ial or commerc ial real estate collateral. Class IV covers margin trading facil it ies 2 Banks’ rating: AAA/AA+ to BB+. Sovereigns’ rating: AAA to BB+ 3 Banks’ rating: BB to “CCC+ to C”. Sovereigns’ rating: BB+/BB to B-/CCC+ 4 Banks’ rating: CCC+ to C. Sovereigns’ rating: CCC+ to “CCC+ to C” 5 Medium enterprise clients with in Bus iness Banking are managed using the same internal credit grades as CCIB The table below sets out the gross loans and advances held at amortised cost, expected credit loss provis ions and expected credit loss coverage by business segment and stage. Expected credit loss coverage represents the expected credit loss reported for each segment and stage as a proportion of the gross loan balance for each segment and stage. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236 . 241 Standard Chartered – Annual Report 2023 Risk review and Capital review Loans and advances by client segment (audited) Amortised cost 2023 Banks $mill ion Customers Undrawn commitments $mill ion Financ ial Guarantees $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & other items $mill ion Customer Total $mill ion Stage 1 44,384 120,886 123,486 1,015 28,305 273,692 176,654 70,832 – Strong 35,284 84,248 118,193 1,000 27,967 231,408 162,643 47,885 – Satisfactory 9,100 36,638 5,293 15 338 42,284 14,011 22,947 Stage 2 540 7,902 2,304 54 965 11,225 5,733 2,910 – Strong 55 1,145 1,761 34 – 2,940 1,090 830 – Satisfactory 212 5,840 206 7 – 6,053 4,169 1,823 – Higher risk 273 917 337 13 965 2,232 474 257 Of which (stage 2): – Less than 30 days past due – 78 206 7 – 291 – – – More than 30 days past due – 10 337 13 – 360 – – Stage 3, credit-impa ired ﬁnancial assets 77 5,508 1,484 12 224 7,228 3 672 Gross balance¹ 45,001 134,296 127,274 1,081 29,494 292,145 182,390 74,414 Stage 1 (8) (101) (314) (15) – (430) (52) (10) – Strong (3) (34) (234) (14) – (282) (31) (2) – Satisfactory (5) (67) (80) (1) – (148) (21) (8) Stage 2 (10) (257) (141) (21) (1) (420) (39) (14) – Strong (1) (18) (65) (14) – (97) (5) – – Satisfactory (2) (179) (22) (3) – (204) (23) (7) – Higher risk (7) (60) (54) (4) (1) (119) (11) (7) Of which (stage 2): – Less than 30 days past due – (2) (22) (3) – (27) – – – More than 30 days past due – (1) (54) (4) – (59) – – Stage 3, credit-impa ired ﬁnancial assets (6) (3,533) (760) (12) (15) (4,320) – (112) Total credit impa irment (24) (3,891) (1,215) (48) (16) (5,170) (91) (136) Net carrying value 44,977 130,405 126,059 1,033 29,478 286,975 Stage 1 0.0% 0.1% 0.3% 1.5% 0.0% 0.2% 0.0% 0.0% – Strong 0.0% 0.0% 0.2% 1.4% 0.0% 0.1% 0.0% 0.0% – Satisfactory 0.1% 0.2% 1.5% 6.7% 0.0% 0.4% 0.1% 0.0% Stage 2 1.9% 3.3% 6.1% 38.9% 0.1% 3.7% 0.7% 0.5% – Strong 1.8% 1.6% 3.7% 41.2% 0.0% 3.3% 0.5% 0.0% – Satisfactory 0.9% 3.1% 10.7% 42.9% 0.0% 3.4% 0.6% 0.4% – Higher risk 2.6% 6.5% 16.0% 30.8% 0.1% 5.3% 2.3% 2.7% Of which (stage 2): – Less than 30 days past due 0.0% 2.6% 10.7% 42.9% 0.0% 9.3% 0.0% 0.0% – More than 30 days past due 0.0% 10.0% 16.0% 30.8% 0.0% 16.4% 0.0% 0.0% Stage 3, credit-impa ired ﬁnancial assets (S3) 7.8% 64.1% 51.2% 100.0% 6.7% 59.8% 0.0% 16.7% Cover ratio 0.1% 2.9% 1.0% 4.4% 0.1% 1.8% 0.0% 0.2% Fair value through proﬁt or loss Performing 32,813 58,465 13 – – 58,478 – – – Strong 28,402 38,014 13 – – 38,027 – – – Satisfactory 4,411 20,388 – – – 20,388 – – – Higher risk – 63 – – – 63 – – Defaulted (CG13-14) – 33 – – – 33 – – Gross balance (FVTPL) 2 32,813 58,498 13 – – 58,511 – – Net carrying value (incl FVTPL) 77,790 188,903 126,072 1,033 29,478 345,486 – – 1. Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $13,996 mill ion under Customers and of $1,738 m ill ion under Banks, held at amortised cost 2. Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $51,299 mill ion under Customers and of $30,548 m ill ion under Banks, held at fair value through proﬁt or loss 242 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Amortised cost 2022 Banks $mill ion Customers Undrawn commitments $mill ion Financ ial Guarantees $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & other items $mill ion Customer Total $mill ion Stage 1 39,149 126,261 129,134 691 39,133 295,219 162,958 56,683 – Strong 27,941 89,567 124,734 685 39,133 254,119 148,303 39,612 – Satisfactory 11,208 36,694 4,400 6 – 41,100 14,655 17,071 Stage 2 337 11,355 1,670 18 – 13,043 5,582 3,062 – Strong 148 2,068 1,215 10 – 3,293 1,449 522 – Satisfactory 119 7,783 146 4 – 7,933 3,454 2,134 – Higher risk 70 1,504 309 4 – 1,817 679 406 Of which (stage 2): – Less than 30 days past due 5 109 148 4 – 261 – – – More than 30 days past due 6 23 310 4 – 337 – – Stage 3, credit-impa ired ﬁnancial assets 59 6,143 1,453 1 248 7,845 128 665 Gross balance 1 39,545 143,759 132,257 710 39,381 316,107 168,668 60,410 Stage 1 (9) (143) (406) (10) – (559) (41) (11) – Strong (3) (43) (332) (10) – (385) (28) (3) – Satisfactory (6) (100) (74) – – (174) (13) (8) Stage 2 (3) (323) (120) (1) – (444) (53) (28) – Strong – (30) (62) (1) – (93) (6) – – Satisfactory (2) (159) (17) – – (176) (42) (15) – Higher risk (1) (134) (41) – – (175) (5) (13) Of which (stage 2): – Less than 30 days past due – (2) (17) – – (19) – – – More than 30 days past due – (1) (41) – – (42) – – Stage 3, credit-impa ired ﬁnancial assets (14) (3,662) (776) (1) (18) (4,457) – (147) Total credit impa irment (26) (4,128) (1,302) (12) (18) (5,460) (94) (186) Net carrying value 39,519 139,631 130,955 698 39,363 310,647 Stage 1 0.0% 0.1% 0.3% 1.4% 0.0% 0.2% 0.0% 0.0% – Strong 0.0% 0.0% 0.3% 1.5% 0.0% 0.2% 0.0% 0.0% – Satisfactory 0.1% 0.3% 1.7% 0.0% 0.0% 0.4% 0.1% 0.0% Stage 2 0.9% 2.8% 7.2% 5.6% 0.0% 3.4% 0.9% 0.9% – Strong 0.0% 1.5% 5.1% 10.0% 0.0% 2.8% 0.4% 0.0% – Satisfactory 1.7% 2.0% 11.6% 0.0% 0.0% 2.2% 1.2% 0.7% – Higher risk 1.4% 8.9% 13.3% 0.0% 0.0% 9.6% 0.7% 3.2% Of which (stage 2): – Less than 30 days past due 0.0% 1.8% 11.5% 0.0% 0.0% 7.3% 0.0% 0.0% – More than 30 days past due 0.0% 4.3% 13.2% 0.0% 0.0% 12.5% 0.0% 0.0% Stage 3, credit-impa ired ﬁnancial assets (S3) 23.7% 59.6% 53.4% 100.0% 7.3% 56.8% 0.0% 22.1% Cover ratio 0.1% 2.9% 1.0% 1.7% 0.0% 1.7% 0.1% 0.3% Fair value through proﬁt or loss Performing 24,930 44,461 28 – 2,557 47,046 – – – Strong 21,451 36,454 27 – 2,409 38,890 – – – Satisfactory 3,479 8,007 1 – 148 8,156 – – – Higher risk – – – – – – – – Defaulted (CG13-14) – 37 – – – 37 – – Gross balance (FVTPL) 2 24,930 44,498 28 – 2,557 47,083 – – Net carrying value (incl FVTPL) 64,449 184,129 130,983 698 41,920 357,730 – – 1. Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $24,498 mill ion under Customers and of $978 m ill ion under Banks, held at amortised cost 2. Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing of $40,537 mill ion under Customers and of $23,954 m ill ion under Banks, held at fair value through proﬁt or loss 243 Standard Chartered – Annual Report 2023 Risk review and Capital review Loans and advances by client segment credit quality analysis Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate, Commercial & Institut ional Bank ing 2023 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 84,248 1,145 – 85,893 (34) (18) – (52) 1A-2B 0 – 0.045 A+ and above 10,891 81 – 10,972 (1) – – (1) 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 31,974 558 – 32,532 (3) – – (3) 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 41,383 506 – 41,889 (30) (18) – (48) Satisfactory 36,638 5,840 – 42,478 (67) (179) – (246) 6A-7B 0.426 – 1.350 BB+/BB to BB- 24,296 1,873 – 26,169 (38) (77) – (115) 8A-9B 1.351 – 4.000 BB-/B+ to B 8,196 2,273 – 10,469 (13) (90) – (103) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 4,146 1,694 – 5,840 (16) (12) – (28) Higher risk – 917 – 917 – (60) – (60) 12 15.751 – 99.999 CCC+/C – 917 – 917 – (60) – (60) Defaulted – – 5,508 5,508 – – (3,533) (3,533) 13-14 100 Defaulted – – 5,508 5,508 – – (3,533) (3,533) Total 120,886 7,902 5,508 134,296 (101) (257) (3,533) (3,891) Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate, Commercial & Institut ional Bank ing 2022 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 89,567 2,068 – 91,635 (43) (30) – (73) 1A-2B 0 – 0.045 A+ and above 8,247 117 – 8,364 (4) – – (4) 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 36,379 321 – 36,700 (5) – – (5) 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 44,941 1,630 – 46,571 (34) (30) – (64) Satisfactory 36,694 7,783 – 44,477 (100) (159) – (259) 6A-7B 0.426 – 1.350 BB+/BB to BB- 23,196 2,684 – 25,880 (67) (94) – (161) 8A-9B 1.351 – 4.000 BB-/B+ to B 9,979 3,116 – 13,095 (20) (35) – (55) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 3,519 1,983 – 5,502 (13) (30) – (43) Higher risk – 1,504 – 1,504 – (134) – (134) 12 15.751 – 99.999 CCC+/C – 1,504 – 1,504 – (134) – (134) Defaulted – – 6,143 6,143 – – (3,662) (3,662) 13-14 100 Defaulted – – 6,143 6,143 – – (3,662) (3,662) Total 126,261 11,355 6,143 143,759 (143) (323) (3,662) (4,128) Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate lending¹ - Asia 2023 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 36,959 802 – 37,761 (12) (15) – (27) 1A-2B 0 – 0.045 A+ and above 3,550 24 – 3,574 – – – – 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 12,634 400 – 13,034 (1) – – (1) 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 20,775 378 – 21,153 (11) (15) – (26) Satisfactory 22,581 2,534 – 25,115 (35) (137) – (172) 6A-7B 0.426 – 1.350 BB+/BB to BB- 14,740 739 – 15,479 (28) (68) – (96) 8A-9B 1.351 – 4.000 BB-/B+ to B 5,243 1,134 – 6,377 (5) (66) – (71) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 2,598 661 – 3,259 (2) (3) – (5) Higher risk – 231 – 231 – (19) – (19) 12 15.751 – 99.999 CCC+/C – 231 – 231 – (19) – (19) Defaulted – – 2,870 2,870 – – (2,014) (2,014) 13-14 100 Defaulted – – 2,870 2,870 – – (2,014) (2,014) Total 59,540 3,567 2,870 65,977 (47) (171) (2,014) (2,232) 1 Corporate loans and advances to customers excludes loans to “Financ ing, insurance and non-banking” and “Government” counterparties 244 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Corporate lending 1 - Asia 2022 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 40,402 1,361 – 41,763 (28) (21) – (49) 1A-2B 0 – 0.045 A+ and above 3,857 52 – 3,909 (3) – – (3) 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 14,694 250 – 14,944 (2) (1) – (3) 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 21,851 1,059 – 22,910 (23) (20) – (43) Satisfactory 22,064 3,859 – 25,923 (55) (99) – (154) 6A-7B 0.426 – 1.350 BB+/BB to BB- 14,512 1,285 – 15,797 (47) (81) – (128) 8A-9B 1.351 – 4.000 BB-/B+ to B 5,091 1,451 – 6,542 (7) (7) – (14) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 2,461 1,123 – 3,584 (1) (11) – (12) Higher risk – 463 – 463 – (106) – (106) 12 15.751 – 99.999 CCC+/C – 463 – 463 – (106) – (106) Defaulted – – 3,063 3,063 – – (1,748) (1,748) 13-14 100 Defaulted – – 3,063 3,063 – – (1,748) (1,748) Total 62,466 5,683 3,063 71,212 (83) (226) (1,748) (2,057) 1 Corporate loans and advances to customers excludes loans to “Financ ing, insurance and non-banking” and “Government” counterparties Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate lending 1 - Africa & Middle East 2023 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 7,756 43 – 7,799 (1) (2) – (3) 1A-2B 0 – 0.045 A+ and above 358 – – 358 – – – – 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 1,952 – – 1,952 – – – – 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 5,446 43 – 5,489 (1) (2) – (3) Satisfactory 2,801 492 – 3,293 (18) (13) – (31) 6A-7B 0.426 – 1.350 BB+/BB to BB- 1,512 82 – 1,594 (2) (3) – (5) 8A-9B 1.351 – 4.000 BB-/B+ to B 587 175 – 762 (4) (7) – (11) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 702 235 – 937 (12) (3) – (15) Higher risk – 515 – 515 – (37) – (37) 12 15.751 – 99.999 CCC+/C – 515 – 515 – (37) – (37) Defaulted – – 1,435 1,435 – – (1,079) (1,079) 13-14 100 Defaulted – – 1,435 1,435 – – (1,079) (1,079) Total 10,557 1,050 1,435 13,042 (19) (52) (1,079) (1,150) 1 Corporate loans and advances to customers excludes loans to “Financ ing, insurance and non-banking” and “Government” counterparties Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate lending 1 - Africa & Middle East 2022 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 6,268 311 – 6,579 – – – – 1A-2B 0 – 0.045 A+ and above 338 6 – 344 – – – – 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 2,049 23 – 2,072 – – – – 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 3,881 282 – 4,163 – – – – Satisfactory 4,389 642 – 5,031 (32) (41) – (73) 6A-7B 0.426 – 1.350 BB+/BB to BB- 1,454 218 – 1,672 (11) (3) – (14) 8A-9B 1.351 – 4.000 BB-/B+ to B 2,361 320 – 2,681 (11) (24) – (35) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 574 104 – 678 (10) (14) – (24) Higher risk – 653 – 653 – (26) – (26) 12 15.751 – 99.999 CCC+/C – 653 – 653 – (26) – (26) Defaulted – – 1,735 1,735 – – (1,344) (1,344) 13-14 100 Defaulted – – 1,735 1,735 – – (1,344) (1,344) Total 10,657 1,606 1,735 13,998 (32) (67) (1,344) (1,443) 1 Corporate loans and advances to customers excludes loans to “Financ ing, insurance and non-banking” and “Government” counterparties 245 Standard Chartered – Annual Report 2023 Risk review and Capital review Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate lending 1 - Europe &Americas 2023 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 9,283 198 – 9,481 (11) – – (11) 1A-2B 0 – 0.045 A+ and above 528 – – 528 – – – – 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 4,413 124 – 4,537 (1) – – (1) 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 4,342 74 – 4,416 (10) – – (10) Satisfactory 4,778 1,621 – 6,399 (5) (22) – (27) 6A-7B 0.426 – 1.350 BB+/BB to BB- 3,912 768 – 4,680 (4) (2) – (6) 8A-9B 1.351 – 4.000 BB-/B+ to B 596 821 – 1,417 (1) (15) – (16) 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 270 32 – 302 – (5) – (5) Higher risk – 77 – 77 – (7) – (7) 12 15.751 – 99.999 CCC+/C – 77 – 77 – (7) – (7) Defaulted – – 980 980 – – (345) (345) 13-14 100 Defaulted – – 980 980 – – (345) (345) Total 14,061 1,896 980 16,937 (16) (29) (345) (390) 1 Corporate loans and advances to customers excludes loans to “Financ ing, insurance and non-banking” and “Government” counterparties Credit grade Regulatory 1 year PD range (%) S&P external ratings equivalent Corporate lending 1 - Europe & Americas 2022 Gross Credit impa irment Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 $mill ion Stage 2 $mill ion Stage 3 $mill ion Total $mill ion Strong 10,033 225 – 10,258 (13) – – (13) 1A-2B 0 – 0.045 A+ and above 575 – – 575 – – – – 3A-4A 0.046 – 0.110 A/A- to BBB+/BBB 4,065 8 – 4,073 (1) – – (1) 4B-5B 0.111 – 0.425 BBB to BBB-/BB+ 5,393 217 – 5,610 (12) – – (12) Satisfactory 4,498 2,077 – 6,575 (4) (25) – (29) 6A-7B 0.426 – 1.350 BB+/BB to BB- 3,867 1,376 – 5,243 (4) (25) – (29) 8A-9B 1.351 – 4.000 BB-/B+ to B 537 636 – 1,173 – – – – 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 94 65 – 159 – – – – Higher risk – 387 – 387 – (1) – (1) 12 15.751 – 99.999 CCC+/C – 387 – 387 – (1) – (1) Defaulted – – 1,230 1,230 – – (398) (398) 13-14 100 Defaulted – – 1,230 1,230 – – (398) (398) Total 14,531 2,689 1,230 18,450 (17) (26) (398) (441) 1 Corporate loans and advances to customers excludes loans to “Financ ing, insurance and non-banking” and “Government” counterparties 246 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Consumer, Private & Business Banking 2023 Asia Africa & Middle East Europe & Americas Total $mill ion Mort- gages $mill ion Credit Cards $mill ion Others $mill ion Total $mill ion Mort- gages $mill ion Credit Cards $mill ion Others $mill ion Total $mill ion Mort- gages $mill ion Credit Cards $mill ion Others $mill ion Total $mill ion Stage 1 Gross Strong 77,270 6,234 30,027 113,531 974 263 2,471 3,708 335 – 619 954 118,193 Satisfactory 659 113 2,418 3,190 158 11 121 290 1,812 – 1 1,813 5,293 Total 77,929 6,347 32,445 116,721 1,132 274 2,592 3,998 2,147 – 620 2,767 123,486 ECL Strong (5) (25) (181) (211) (2) (7) (13) (22) – – (1) (1) (234) Satisfactory – (57) (19) (76) – – (2) (2) (2) – – (2) (80) Total (5) (82) (200) (287) (2) (7) (15) (24) (2) – (1) (3) (314) Coverage % 0% 1% 1% 0% 0% 3% 1% 1% 0% 0% 0% 0% 0% Stage 2 Gross Strong 1,014 124 583 1,721 17 8 15 40 – – – – 1,761 Satisfactory 122 14 29 165 4 1 9 14 27 – – 27 206 Higher risk 161 39 118 318 5 3 11 19 – – – – 337 Total 1,297 177 730 2,204 26 12 35 73 27 – – 27 2,304 ECL Strong (1) (12) (43) (56) (1) (1) (7) (9) – – – – (65) Satisfactory – (14) (7) (21) – – (1) (1) – – – – (22) Higher risk (1) (17) (34) (52) – (1) (1) (2) – – – – (54) Total (2) (43) (84) (129) (1) (2) (9) (12) – – – – (141) Coverage % 0% 24% 12% 6% 4% 17% 26% 16% 0% 0% 0% 0% 6% Stage 3 Gross credit impa ired 382 53 841 1,276 53 3 59 115 85 – 8 93 1,484 ECL (84) (36) (566) (686) (25) (2) (33) (60) (14) – – (14) (760) Coverage % 22% 68% 67% 54% 47% 67% 56% 52% 16% 0% 0% 15% 51% Total Gross Strong 78,284 6,358 30,610 115,252 991 271 2,486 3,748 335 – 619 954 119,954 Satisfactory 781 127 2,447 3,355 162 12 130 304 1,839 – 1 1,840 5,499 Higher risk 161 39 118 318 5 3 11 19 – – – – 337 Credit-Impaired 382 53 841 1,276 53 3 59 115 85 – 8 93 1,484 Total 79,608 6,577 34,016 120,201 1,211 289 2,686 4,186 2,259 – 628 2,887 127,274 ECL Strong (6) (37) (224) (267) (3) (8) (20) (31) – – (1) (1) (299) Satisfactory – (71) (26) (97) – – (3) (3) (2) – – (2) (102) Higher risk (1) (17) (34) (52) – (1) (1) (2) – – – – (54) Credit-Impaired (84) (36) (566) (686) (25) (2) (33) (60) (14) – – (14) (760) Total (91) (161) (850) (1,102) (28) (11) (57) (96) (16) – (1) (17) (1,215) Coverage % 0% 2% 2% 1% 2% 4% 2% 2% 1% 0% 0% 1% 1% 247 Standard Chartered – Annual Report 2023 Risk review and Capital review Consumer, Private & Business Banking 2022 Asia Africa & Middle East Europe & Americas Mort- gages $mill ion Credit cards $mill ion Others $mill ion Total $mill ion Mort- gages $mill ion Credit cards $mill ion Others $mill ion Total $mill ion Mort- gages $mill ion Credit cards $mill ion Others $mill ion Total $mill ion Total $mill ion Stage 1 Gross Strong 81,738 5,781 32,297 119,816 1,004 281 2,590 3,875 397 – 646 1,043 124,734 Satisfactory 1,155 145 1,378 2,678 189 9 71 269 1,372 – 81 1,453 4,400 Total 82,893 5,926 33,675 122,494 1,193 290 2,661 4,144 1,769 – 727 2,496 129,134 ECL Strong – (49) (233) (282) (3) (6) (37) (46) (2) – (2) (4) (332) Satisfactory (6) (37) (27) (70) (1) – (1) (2) (2) – – (2) (74) Total (6) (86) (260) (352) (4) (6) (38) (48) (4) – (2) (6) (406) Coverage % 0% 1% 1% 0% 0% 2% 1% 1% 0% 0% 0% 0% 0% Stage 2 Gross Strong 576 88 388 1,052 112 2 46 160 1 – 2 3 1,215 Satisfactory 75 10 14 99 43 1 3 47 – – – – 146 Higher risk 150 34 63 247 12 3 13 28 34 – – 34 309 Total 801 132 465 1,398 167 6 62 235 35 – 2 37 1,670 ECL Strong (2) (26) (27) (55) (3) (1) (3) (7) – – – – (62) Satisfactory (1) (9) (7) (17) – – – – – – – – (17) Higher risk (2) (6) (28) (36) – (1) (4) (5) – – – – (41) Total (5) (41) (62) (108) (3) (2) (7) (12) – – – – (120) Coverage % 1% 31% 13% 8% 2% 33% 11% 5% 0% 0% 0% 0% 7% Stage 3 Gross credit impa ired 368 48 783 1,199 111 10 56 177 77 – – 77 1,453 ECL (97) (35) (524) (656) (76) (7) (30) (113) (7) – – (7) (776) Coverage % 26% 73% 67% 55% 68% 70% 54% 64% 9% 0% 0% 9% 53% Total Gross Strong 82,314 5,869 32,685 120,868 1,116 283 2,636 4,035 398 – 648 1,046 125,949 Satisfactory 1,230 155 1,392 2,777 232 10 74 316 1,372 – 81 1,453 4,546 Higher risk 150 34 63 247 12 3 13 28 34 – – 34 309 Credit-Impaired 368 48 783 1,199 111 10 56 177 77 – – 77 1,453 Total 84,062 6,106 34,923 125,091 1,471 306 2,779 4,556 1,881 – 729 2,610 132,257 ECL Strong (2) (75) (260) (337) (6) (7) (40) (53) (2) – (2) (4) (394) Satisfactory (7) (46) (34) (87) (1) – (1) (2) (2) – – (2) (91) Higher risk (2) (6) (28) (36) – (1) (4) (5) – – – – (41) Credit-Impaired (97) (35) (524) (656) (76) (7) (30) (113) (7) – – (7) (776) Total (108) (162) (846) (1,116) (83) (15) (75) (173) (11) – (2) (13) (1,302) Coverage % 0% 3% 2% 1% 6% 5% 3% 4% 1% 0% 0% 0% 1% 248 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Credit quality by geographic region The following table sets out the credit quality for gross loans and advances to customers and banks, held at amortised cost, by geographic region and stage. Loans and advances to customers Amortised cost 2023 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Gross (stage 1) 229,289 17,536 26,867 273,692 248,625 17,553 29,041 295,219 Provis ion (stage 1) (363) (39) (28) (430) (454) (73) (32) (559) Gross (stage 2) 6,660 3,276 1,289 11,225 8,302 3,122 1,619 13,043 Provis ion (stage 2) (321) (70) (29) (420) (337) (104) (3) (444) Gross (stage 3) 4,604 2,273 351 7,228 4,562 2,725 558 7,845 Provis ion (stage 3) (2,734) (1,387) (199) (4,320) (2,483) (1,765) (209) (4,457) Net loans 1 237,135 21,589 28,251 286,975 258,215 21,458 30,974 310,647 1 Includes reverse repurchase agreements and other sim ilar secured lend ing Loans and advances to banks Amortised cost 2023 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Gross (stage 1) 35,338 2,803 6,243 44,384 21,806 3,818 13,525 39,149 Provis ion (stage 1) (7) – (1) (8) (3) (4) (2) (9) Gross (stage 2) 17 311 212 540 212 116 9 337 Provis ion (stage 2) (2) (8) – (10) (2) (1) – (3) Gross (stage 3) 73 – 4 77 59 – – 59 Provis ion (stage 3) (2) – (4) (6) (14) – – (14) Net loans 1 35,417 3,106 6,454 44,977 22,058 3,929 13,532 39,519 1 Includes reverse repurchase agreements and other sim ilar secured lend ing Movement in gross exposures and credit impa irment for loans and advances, debt secur it ies, undrawn comm itments and ﬁnancial guarantees (aud ited) The tables overleaf set out the movement in gross exposures and credit impa irment by stage in respect of amortised cost loans to banks and customers, undrawn commitments, ﬁnanc ial guarantees and debt secur it ies class if ied at amort ised cost and FVOCI. The tables are presented for the Group, debt securit ies and other el ig ible b ills. Methodology The movement lines with in the tables are an aggregat ion of monthly movements over the year and will therefore reﬂect the accumulation of multiple trades during the year. The credit impa irment charge in the income statement comprises the amounts with in the boxes in the table below, less recoveries of amounts previously written off. Discount unwind is reported in net interest income and related to stage 3 ﬁnanc ial instruments only. The approach for determin ing the key l ine items in the tables is set out below. • Transfers - transfers between stages are deemed to occur at the beginn ing of a month based on pr ior month closing balances. • Net remeasurement from stage changes - the remeasurement of credit impa irment prov is ions ar is ing from a change in stage is reported with in the stage that the assets are transferred to. For example, assets transferred into stage 2 are remeasured from a 12-month to a lifet ime expected cred it loss, with the effect of remeasurement reported in stage 2. For stage 3, this represents the in it ial remeasurement from specif ic prov is ions recogn ised on ind iv idual assets transferred into stage 3 in the year. • Net changes in exposures - new business written less repayments in the year. With in stage 1, new bus iness written will attract up to 12 months of expected credit loss charges. Repayments of non-amortis ing loans (pr imar ily w ith in CCIB) w ill have low amounts of expected credit loss provis ions attr ibuted to them, due to the release of provis ions over the term to matur ity. In stages 2 and 3, the net change in exposures reﬂect repayments although stage 2 may include new facil it ies where clients are on non-purely precautionary early alert, are CG 12, or when non-investment grade debt securit ies are acqu ired. 249 Standard Chartered – Annual Report 2023 Risk review and Capital review • Changes in risk parameters - for stages 1 and 2, this reﬂects changes in the probabil ity of default (PD), loss g iven default (LGD) and exposure at default (EAD) of assets during the year, which includes the impact of releasing provis ions over the term to maturity. It also includes the effect of changes in forecasts of macroeconomic variables during the year. In stage 3, this line represents addit ional spec if ic prov is ions recogn ised on exposures held with in stage 3. • Interest due but not paid – change in contractual amount of interest due in stage 3 ﬁnanc ial instruments but not paid, being the net of accruals, repayments and write-offs, together with the corresponding change in credit impa irment. Changes to ECL models, which incorporate changes to model approaches and methodologies, are not reported as a separate line item as these have an impact over a number of lines and stages. Movements during the year Stage 1 gross exposures increased by $3.8 bill ion to $724 b ill ion (31 December 2022: $720 b ill ion). CCIB exposure increased by $21.8 bill ion to $337 b ill ion (31 December 2022: $315 b ill ion) due to off-balance sheet exposures, wh ich was partly offset by a decrease in loans and advances to customers. CPBB decreased by $2.2 bill ion to $191 b ill ion (31 December 2022: $193 b ill ion) which was largely driven by the mortgage portfolio in Korea and Hong Kong. Stage 1 debt securit ies decreased by $7.8 b ill ion to $158 bill ion (31 December 2022: $166 b ill ion) due to l iqu id ity management and maturit ies. Total stage 1 provis ions decreased by $119 m ill ion to $526 m ill ion (31 December 2022: $645 m ill ion). CCIB prov is ions decreased by $43 mill ion to $151 m ill ion (31 December 2022: $194 m ill ion), pr imar ily due to new or ig inat ions, which was partly offset by model updates. Debt securit ies prov is ions was stable at $26 m ill ion (31 December 2022: $25 m ill ion). CPBB decreased by $88 m ill ion to $325 mill ion (31 December 2022: $413 m ill ion), ma inly driven by the release of the judgemental non-linear ity post model adjustment and overlay releases, both of which are reported in ‘Changes in risk parameters’. Stage 2 gross exposures decreased by $5.2 bill ion to $22 b ill ion (31 December 2022: $27 b ill ion), pr imar ily dr iven by a net reduction in exposures in CCIB, particularly in the CRE and Transport sectors. CPBB exposures increased by $0.7 bill ion to $2.5 bill ion (31 December 2022: $1.8 b ill ion), of wh ich $0.4 bill ion was from the Secured portfol io. Debt securit ies decreased by $3.6 bill ion to $1.9 b ill ion (31 December 2022: $5.5 b ill ion). Stage 2 provis ions decreased by $101 m ill ion to $517 m ill ion (31 December 2022: $618 m ill ion). CCIB prov is ions decreased by $93 mill ion to $318 m ill ion (31 December 2022: $411 m ill ion) from releases due to exposure reduct ions, transfers to stage 3 for China CRE exposures and model updates. This was partly offset by a further downgrade of Pakistan sovereign clients with in stage 2. CPBB provis ions increased by $22 mill ion to $140 m ill ion (31 December 2022: $118 m ill ion) due to h igher delinquenc ies. This was partly offset by the release of judgemental non-linear ity post model adjustment and overlay releases wh ich are reported with in ‘Changes in risk parameters’ due to underlying factors not being valid any more. Debt Securit ies decreased by $56 mill ion to $34 m ill ion (31 December 2022: $90 m ill ion) largely due to exposure reduct ions and shortening of tenors, particularly in Pakistan. The impact of model and methodology updates in 2023 reduced stage 1 and 2 provis ions by $15 m ill ion, of wh ich $10 mill ion was in CCIB and Central and other items, while $5 mill ion was in CPBB. Stage 3 gross loans for CCIB decreased by $0.7 bill ion to $6.3 b ill ion (31 December 2022: $7 b ill ion) as repayments and wr ite-offs were partly offset by the downgrade of China CRE clients. CCIB provis ions decreased by $171 m ill ion to $3.7 b ill ion (31 December 2022: $3.8 bill ion) as charges from new downgrades were offset by releases due to repayments and wr ite-offs. CPBB stage 3 loans was stable at $1.5 bill ion (31 December 2022: $1.5 b ill ion) but prov is ions decreased by $17 m ill ion to $0.8 b ill ion (31 December 2022: $0.8 bill ion). Debt secur ity gross assets increased by $20 mill ion to $164 m ill ion (31 December 2022: $144 m ill ion). 250 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle All segments (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 5 Total Gross balance 3 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 3 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 3 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 3 $mill ion Total credit impa ir- ment $mill ion Net $mill ion As at 1 January 2022 684,759 (609) 684,150 34,550 (652) 33,898 9,061 (4,941) 4,120 728,370 (6,202) 722,168 Transfers to stage 1 24,666 (555) 24,111 (24,633) 555 (24,078) (33) – (33) – – – Transfers to stage 2 (46,960) 228 (46,732) 47,479 (246) 47,233 (519) 18 (501) – – – Transfers to stage 3 (176) 74 (102) (3,630) 253 (3,377) 3,806 (327) 3,479 – – – Net change in exposures 83,204 (137) 83,067 (24,324) 93 (24,231) (1,710) 338 (1,372) 57,170 294 57,464 Net remeasurement from stage changes – 45 45 – (126) (126) – (168) (168) – (249) (249) Changes in risk parameters – 106 106 – (387) (387) – (895) (895) – (1,176) (1,176) Write-offs – – – – – – (949) 949 – (949) 949 – Interest due but unpaid – – – – – – (157) 157 – (157) 157 – Discount unwind – – – – – – – 136 136 – 136 136 Exchange translation differences and other movements¹ (25,381) 203 (25,178) (1,963) (108) (2,071) (658) 9 (649) (28,002) 104 (27,898) As at 31 December 2022² 720,112 (645) 719,467 27,479 (618) 26,861 8,841 (4,724) 4,117 756,432 (5,987) 750,445 Income statement ECL (charge)/release 14 (420) (725) (1,131) Recoveries of amounts previously written off – – 293 293 Total credit impa irment (charge)/ release 14 (420) (432) (838) As at 1 January 2023 720,112 (645) 719,467 27,479 (618) 26,861 8,841 (4,724) 4,117 756,432 (5,987)750,445 Transfers to stage 1 19,594 (661) 18,933 (19,583) 661 (18,922) (11) – (11) – – – Transfers to stage 2 (42,628) 174 (42,454) 42,793 (182) 42,611 (165) 8 (157) – – – Transfers to stage 3 (96) 6 (90) (2,329) 326 (2,003) 2,425 (332) 2,093 – – – Net change in exposures 23,717 (185) 23,532 (22,727) 22 (22,705) (1,708) 624 (1,084) (718) 461 (257) Net remeasurement from stage changes – 52 52 – (199) (199) – (163) (163) – (310) (310) Changes in risk parameters – 202 202 – (32) (32) – (1,100) (1,100) – (930) (930) Write-offs – – – – – – (1,027) 1,027 – (1,027) 1,027 – Interest due but unpaid – – – – – – (83) 83 – (83) 83 – Discount unwind – – – – – – – 180 180 – 180 180 Exchange translation differences and other movements¹ 3,177 531 3,708 (3,365) (495) (3,860) (128) (102) (230) (316) (66) (382) As at 31 December 2023² 723,876 (526) 723,350 22,268 (517) 21,751 8,144 (4,499) 3,645 754,288 (5,542) 748,746 Income statement ECL (charge)/release⁶ 69 (209) (639) (779) Recoveries of amounts previously written off – – 271 271 Total credit impa irment (charge)/release 4 69 (209) (368) (508) 1 Includes fair value adjustments and amortisat ion on debt secur it ies 2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets gross balances of $111,478 mill ion (31 December 2022: $101,740 mill ion) and Total cred it impa irment of $59 m ill ion (31 December 2022: $88 m ill ion) 3 The gross balance includes the notional amount of off -balance sheet instruments 4 Reported basis 5 Stage 3 includes gross of $80 mill ion (31 December 2022: $28 m ill ion) and ECL $14 m ill ion (31 December 2022: $13 m ill ion) or ig inated cred it-impa ired debt secur it ies 6 Does not include release relating to Other assets (31 December 2022: $2 mill ion) 251 Standard Chartered – Annual Report 2023 Risk review and Capital review Of which – movement of debt securit ies, alternat ive tier one and other elig ible b ills (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 2 Total Gross balance $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net 3 $mill ion As at 1 January 2022 157,352 (67) 157,285 5,315 (42) 5,273 113 (66) 47 162,780 (175) 162,605 Transfers to stage 1 2,296 (22) 2,274 (2,296) 22 (2,274) – – – – – – Transfers to stage 2 (3,942) 38 (3,904) 3,942 (38) 3,904 – – – – – – Transfers to stage 3 – – – (66) 42 (24) 66 (42) 24 – – – Net change in exposures 21,613 (44) 21,569 (752) 9 (743) – 1 1 20,861 (34) 20,827 Net remeasurement from stage changes – 10 10 – (2) (2) – (23) (23) – (15) (15) Changes in risk parameters – 38 38 – (98) (98) – (13) (13) – (73) (73) Write-offs – – – – – – (30) 30 – (30) 30 – Interest due but unpaid – – – – – – – – – – – – Exchange translation differences and other movements 1 (11,216) 22 (11,194) (688) 17 (671) (5) 7 2 (11,909) 46 (11,863) As at 31 December 2022 166,103 (25) 166,078 5,455 (90) 5,365 144 (106) 38 171,702 (221) 171,481 Income statement ECL (charge)/release 4 (91) (35) (122) Recoveries of amounts previously written off – – – – Total credit impa irment (charge)/release 4 (91) (35) (122) As at 1 January 2023 166,103 (25) 166,078 5,455 (90) 5,365 144 (106) 38 171,702 (221) 171,481 Transfers to stage 1 371 (65) 306 (371) 65 (306) – – – – – – Transfers to stage 2 (884) 14 (870) 884 (14) 870 – – – – – – Transfers to stage 3 – – – (16) – (16) 16 – 16 – – – Net change in exposures (11,583) (28) (11,611) (1,899) (44) (1,943) 7 – 7 (13,475) (72) (13,547) Net remeasurement from stage changes – 7 7 – (18) (18) – – – – (11) (11) Changes in risk parameters – 32 32 – 105 105 – (4) (4) – 133 133 Write-offs – – – – – – – – – – – – Interest due but unpaid – – – – – – – – – – – – Exchange translation differences and other movements 1 4,307 39 4,346 (2,193) (38) (2,231) (3) 49 46 2,111 50 2,161 As at 31 December 2023 158,314 (26) 158,288 1,860 (34) 1,826 164 (61) 103 160,338 (121) 160,217 Income statement ECL (charge)/release 11 43 (4) 50 Recoveries of amounts previously written off – – – – Total credit impa irment (charge)/release 11 43 (4) 50 1 Includes fair value adjustments and amortisat ion on debt secur it ies 2 Stage 3 includes gross of $80 mill ion (31 December 2022: $28 m ill ion) and ECL $14 m ill ion (31 December 2022: $13 m ill ion) or ig inated cred it-impa ired debt secur it ies 3 FVOCI instruments are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount to $160,263 mill ion (31 December 2022: $171,640 mill ion). Refer to the Analys is of ﬁnanc ial instrument by stage table 252 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Corporate, Commercial & Institut ional Bank ing (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion As at 1 January 2022 313,132 (163) 312,969 25,437 (425) 25,012 7,372 (4,079) 3,293 345,941 (4,667) 341,274 Transfers to stage 1 17,565 (227) 17,338 (17,565) 227 (17,338) – – – – – – Transfers to stage 2 (37,505) 48 (37,457) 37,944 (66) 37,878 (439) 18 (421) – – – Transfers to stage 3 (42) – (42) (2,478) 134 (2,344) 2,520 (134) 2,386 – – – Net change in exposures 30,508 (44) 30,464 (21,915) 65 (21,850) (1,314) 340 (974) 7,279 361 7,640 Net remeasurement from stage changes – 2 2 – (42) (42) – (104) (104) – (144) (144) Changes in risk parameters – 21 21 – (154) (154) – (551) (551) – (684) (684) Write-offs – – – – – – (384) 384 – (384) 384 – Interest due but unpaid – – – – – – (130) 130 – (130) 130 – Discount unwind – – – – – – – 110 110 – 110 110 Exchange translation differences and other movements (8,221) 169 (8,052) (1,275) (150) (1,425) (631) 64 (567) (10,127) 83 (10,044) As at 31 December 2022 315,437 (194) 315,243 20,148 (411) 19,737 6,994 (3,822) 3,172 342,579 (4,427) 338,152 Income statement ECL (charge)/release 2 (21) (131) (315) (467) Recoveries of amounts previously written off – – 49 49 Total credit impa irment (charge)/ release (21) (131) (266) (418) As at 1 January 2023 315,437 (194) 315,243 20,148 (411) 19,737 6,994 (3,822) 3,172 342,579 (4,427) 338,152 Transfers to stage 1 14,948 (347) 14,601 (14,948) 347 (14,601) – – – – – – Transfers to stage 2 (34,133) 80 (34,053) 34,175 (88) 34,087 (42) 8 (34) – – – Transfers to stage 3 (17) – (17) (1,270) 141 (1,129) 1,287 (141) 1,146 – – – Net change in exposures 41,314 (73) 41,241 (20,084) 89 (19,995) (1,335) 623 (712) 19,895 639 20,534 Net remeasurement from stage changes – 15 15 – (45) (45) – (82) (82) – (112) (112) Changes in risk parameters – 60 60 – (68) (68) – (668) (668) – (676) (676) Write-offs – – – – – – (340) 340 – (340) 340 – Interest due but unpaid – – – – – – (120) 120 – (120) 120 – Discount unwind – – – – – – – 155 155 – 155 155 Exchange translation differences and other movements (360) 308 (52) (1,148) (283) (1,431) (188) (184) (372) (1,696) (159) (1,855) As at 31 December 2023 337,189 (151) 337,038 16,873 (318) 16,555 6,256 (3,651) 2,605 360,318 (4,120) 356,198 Income statement ECL (charge)/release 2 2 (24) (127) (149) Recoveries of amounts previously written off – – 31 31 Total credit impa irment (charge)/release 2 (24) (96) (118) 1 The gross balance includes the notional amount of off balance sheet instruments 2 Does not include release relating to Other assets (31 December 2022: $2 mill ion) 253 Standard Chartered – Annual Report 2023 Risk review and Capital review Consumer, Private and Business Banking (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total Gross balance¹ $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance¹ $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance¹ $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance¹ $mill ion Total credit impa ir- ment $mill ion Net $mill ion As at 1 January 2022 190,860 (377) 190,483 3,675 (185) 3,490 1,578 (797) 781 196,113 (1,359) 194,754 Transfers to stage 1 4,798 (314) 4,484 (4,765) 314 (4,451) (33) – (33) – – – Transfers to stage 2 (5,498) 92 (5,406) 5,578 (92) 5,486 (80) – (80) – – – Transfers to stage 3 (81) – (81) (890) 151 (739) 971 (151) 820 – – – Net change in exposures 9,072 (49) 9,023 (1,611) 19 (1,592) (396) – (396) 7,065 (30) 7,035 Net remeasurement from stage changes – 32 32 – (82) (82) – (25) (25) – (75) (75) Changes in risk parameters – 63 63 – (132) (132) – (331) (331) – (400) (400) Write-offs – – – – – – (535) 535 – (535) 535 – Interest due but unpaid – – – – – – (27) 27 – (27) 27 – Discount unwind – – – – – – – 26 26 – 26 26 Exchange translation differences and other movements (5,912) 140 (5,772) (166) (111) (277) (24) (60) (84) (6,102) (31) (6,133) As at 31 December 2022 193,239 (413) 192,826 1,821 (118) 1,703 1,454 (776) 678 196,514 (1,307) 195,207 Income statement ECL (charge)/release 46 (195) (356) (505) Recoveries of amounts previously written off – – 245 245 Total credit impa irment (charge)/release 46 (195) (111) (260) As at 1 January 2023 193,239 (413) 192,826 1,821 (118) 1,703 1,454 (776) 678 196,514 (1,307) 195,207 Transfers to stage 1 4,265 (246) 4,019 (4,254) 246 (4,008) (11) – (11) – – – Transfers to stage 2 (7,544) 73 (7,471) 7,667 (73) 7,594 (123) – (123) – – – Transfers to stage 3 (64) 1 (63) (1,049) 187 (862) 1,113 (188) 925 – – – Net change in exposures 1,965 (78) 1,887 (1,713) 14 (1,699) (395) – (395) (143) (64) (207) Net remeasurement from stage changes – 31 31 – (137) (137) – (38) (38) – (144) (144) Changes in risk parameters – 110 110 – (69) (69) – (426) (426) – (385) (385) Write-offs – – – – – – (649) 649 – (649) 649 – Interest due but unpaid – – – – – – 37 (37) – 37 (37) – Discount unwind – – – – – – – 24 24 – 24 24 Exchange translation differences and other movements (862) 197 (665) – (190) (190) 59 33 92 (803) 40 (763) As at 31 December 2023 190,999 (325) 190,674 2,472 (140) 2,332 1,485 (759) 726 194,956 (1,224) 193,732 Income statement ECL (charge)/release 63 (192) (464) (593) Recoveries of amounts previously written off – – 239 239 Total credit impa irment (charge)/release 63 (192) (225) (354) 1 The gross balance includes the notional amount of off-balance sheet instruments 254 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Consumer, Private and Business Banking - Secured (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion As at 1 January 2022 136,600 (96) 136,504 2,685 (32) 2,653 1,103 (517) 586 140,388 (645) 139,743 Transfers to stage 1 3,080 (28) 3,052 (3,054) 28 (3,026) (26) – (26) – – – Transfers to stage 2 (3,254) 11 (3,243) 3,319 (11) 3,308 (65) – (65) – – – Transfers to stage 3 (38) 1 (37) (473) 1 (472) 511 (2) 509 – – – Net change in exposures 3,093 (8) 3,085 (945) 1 (944) (259) – (259) 1,889 (7) 1,882 Net remeasurement from stage changes – 1 1 – (1) (1) – (4) (4) – (4) (4) Changes in risk parameters – (4) (4) – 48 48 – (80) (80) – (36) (36) Write-offs – – – – – – (78) 78 – (78) 78 – Interest due but unpaid – – – – – – – – – – – – Discount unwind – – – – – – – – – – – – Exchange translation differences and other movements (4,119) 63 (4,056) (119) (51) (170) (158) (27) (185) (4,396) (15) (4,411) As at 31 December 2022 135,362 (60) 135,302 1,413 (17) 1,396 1,028 (552) 476 137,803 (629) 137,174 Income statement ECL (charge)/release (11) 48 (84) (47) Recoveries of amounts previously written off – – 55 55 Total credit impa irment (charge)/release (11) 48 (29) 8 As at 1 January 2023 135,362 (60) 135,302 1,413 (17) 1,396 1,028 (552) 476 137,803 (629) 137,174 Transfers to stage 1 3,311 (20) 3,291 (3,302) 20 (3,282) (9) – (9) – – – Transfers to stage 2 (5,340) 11 (5,329) 5,436 (9) 5,427 (96) (2) (98) – – – Transfers to stage 3 (28) 1 (27) (463) 1 (462) 491 (2) 489 – – – Net change in exposures (3,138) (16) (3,154) (1,250) 3 (1,247) (216) – (216) (4,604) (13) (4,617) Net remeasurement from stage changes – 4 4 – (16) (16) – (3) (3) – (15) (15) Changes in risk parameters – 22 22 – 24 24 – (110) (110) – (64) (64) Write-offs – – – – – – (109) 109 – (109) 109 – Interest due but unpaid – – – – – – (3) 3 – (3) 3 – Discount unwind – – – – – – – 12 12 – 12 12 Exchange translation differences and other movements (369) 25 (344) (7) (22) (29) (24) 20 (4) (400) 23 (377) As at 31 December 2023 129,798 (33) 129,765 1,827 (16) 1,811 1,062 (525) 537 132,687 (574) 132,113 Income statement ECL (charge)/release 10 11 (113) (92) Recoveries of amounts previously written off – – 68 68 Total credit impa irment (charge)/release 10 11 (45) (24) 1 The gross balance includes the notional amount of off-balance sheet instruments 255 Standard Chartered – Annual Report 2023 Risk review and Capital review Consumer, Private and Business Banking - Unsecured (audited) Amortised cost and FVOCI Stage 1 Stage 2 Stage 3 Total Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion Gross balance 1 $mill ion Total credit impa ir- ment $mill ion Net $mill ion As at 1 January 2022 54,260 (281) 53,979 990 (153) 837 475 (280) 195 55,725 (714) 55,011 Transfers to stage 1 1,718 (286) 1,432 (1,711) 286 (1,425) (7) – (7) – – – Transfers to stage 2 (2,244) 81 (2,163) 2,259 (81) 2,178 (15) – (15) – – – Transfers to stage 3 (43) (1) (44) (417) 150 (267) 460 (149) 311 – – – Net change in exposures 5,979 (41) 5,938 (666) 18 (648) (137) – (137) 5,176 (23) 5,153 Net remeasurement from stage changes – 31 31 – (81) (81) – (21) (21) – (71) (71) Changes in risk parameters – 67 67 – (180) (180) – (251) (251) – (364) (364) Write-offs – – – – – – (457) 457 – (457) 457 – Interest due but unpaid – – – – – – (27) 27 – (27) 27 – Discount unwind – – – – – – – 26 26 – 26 26 Exchange translation differences and other movements (1,793) 77 (1,716) (47) (60) (107) 134 (33) 101 (1,706) (16) (1,722) As at 31 December 2022 57,877 (353) 57,524 408 (101) 307 426 (224) 202 58,711 (678) 58,033 Income statement ECL (charge)/release 57 (243) (272) (458) Recoveries of amounts previously written off – – 190 190 Total credit impa irment (charge)/release 57 (243) (82) (268) As at 1 January 2023 57,877 (353) 57,524 408 (101) 307 426 (224) 202 58,711 (678) 58,033 Transfers to stage 1 954 (226) 728 (952) 226 (726) (2) – (2) – – – Transfers to stage 2 (2,204) 62 (2,142) 2,231 (64) 2,167 (27) 2 (25) – – – Transfers to stage 3 (36) – (36) (586) 186 (400) 622 (186) 436 – – – Net change in exposures 5,103 (62) 5,041 (463) 11 (452) (179) – (179) 4,461 (51) 4,410 Net remeasurement from stage changes – 27 27 – (121) (121) – (35) (35) – (129) (129) Changes in risk parameters – 88 88 – (93) (93) – (316) (316) – (321) (321) Write-offs – – – – – – (540) 540 – (540) 540 – Interest due but unpaid – – – – – – 40 (40) – 40 (40) – Discount unwind – – – – – – – 12 12 – 12 12 Exchange translation differences and other movements (493) 172 (321) 7 (168) (161) 83 13 96 (403) 17 (386) As at 31 December 2023 61,201 (292) 60,909 645 (124) 521 423 (234) 189 62,269 (650) 61,619 Income statement ECL (charge)/release 53 (203) (351) (501) Recoveries of amounts previously written off – – 171 171 Total credit impa irment (charge)/release 53 (203) (180) (330) 1 The gross balance includes the notional amount of off-balance sheet instruments 256 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Analysis of stage 2 balances The table below analyses total stage 2 gross on-and off-balance sheet exposures and associated expected credit provis ions by the key sign iﬁcant increase in credit risk (SICR) driver that caused the exposures to be classif ied as stage 2 as at 31 December 2023 and 31 December 2022 for each segment. Where multiple drivers apply, the exposure is allocated based on the table order. For example, a loan may have breached the PD thresholds and could also be on non-purely precautionary early alert; in this instance, the exposure is reported under ‘Increase in PD’. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236 . 2023 Corporate, Commercial & Institut ional Bank ing Consumer, Private & Business Banking Ventures Central & other items 1 Total Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Increase in PD 8,262 75 0.9% 1,962 109 5.6% 96 23 24.0% 599 13 2.2% 10,919 220 2.0% Non-purely precautionary early alert 5,136 26 0.5% 37 – 0.0% – – 0.0% – – 0.0% 5,173 26 0.5% Higher risk (CG12) 1,008 56 5.6% 26 1 3.8% – – 0.0% 2,020 17 0.8% 3,054 74 2.4% Sub-investment grade – – 0.0% – – 0.0% – – 0.0% – – 0.0% – – 0.0% Top up/Sell down (Private Banking) – – 0.0% 148 2 1.4% – – 0.0% – – 0.0% 148 2 1.4% Others 2,467 37 1.5% 151 16 10.6% – – 0.0% 489 – 0.0% 3,107 53 1.7% 30 days past due – – 0.0% 148 12 8.1% 2 – 0.0% – – 0.0% 150 12 8.0% Management overlay – 124 0.0% – – 0.0% – – 0.0% – 17 0.0% – 141 0.0% Total stage 2 16,873 318 1.9% 2,472 140 5.7% 98 23 23.5% 3,108 47 1.5% 22,551 528 2.3% 2022 Corporate, Commercial & Institut ional Bank ing Consumer, Private & Business Banking Ventures Central & other items 1 Total Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Gross $mill ion ECL $mill ion Coverage % Increase in PD 13,620 192 1.4% 1,389 89 6.4% – – 0.0% 2,973 11 0.4% 17,982 292 1.6% Non-purely precautionary early alert 3,272 12 0.4% 35 – 0.0% – – 0.0% 5 – 0.0% 3,312 12 0.4% Higher risk (CG12) 653 30 4.6% 18 1 5.6% – – 0.0% 2,534 69 2.7% 3,205 100 3.1% Sub-investment grade – – 0.0% – – 0.0% – – 0.0% 95 11 11.6% 95 11 11.6% Top up/Sell down (Private Banking) – – 0.0% 111 – 0.0% – – 0.0% – – 0.0% 111 – 0.0% Others 2,603 41 1.6% 122 4 3.3% – – 0.0% 451 7 1.6% 3,176 52 1.6% 30 days past due – – 0.0% 146 12 8.2% 47 3 6.4% – – 0.0% 193 15 7.8% Management overlay – 136 0.0% – 12 0.0% – – 0.0% – – 0.0% – 148 0.0% Total stage 2 20,148 411 2.0% 1,821 118 6.5% 47 3 6.4% 6,058 98 1.6% 28,074 630 2.2% 1 Includes Gross and ECL for Cash and balances at central banks and Assets held for sale 257 Standard Chartered – Annual Report 2023 Risk review and Capital review Credit impa irment charge (aud ited) The table below analyses credit impa irment charges or releases of the ongo ing business portfolio and restructuring business portfolio for the year ended 31 December 2023. Further details can be found in the ‘Summary of performance in 2023’ in pages 235 and 236 . 2023 2022 1 Stage 1 & 2 $mill ion Stage 3 $mill ion Total $mill ion Stage 1 & 2 $mill ion Stage 3 $mill ion Total $mill ion Ongoing business portfolio Corporate, Commercial & Institut ional Bank ing 11 112 123 148 277 425 Consumer, Private & Business Banking 129 225 354 151 111 262 Ventures 42 43 85 13 3 16 Central & other items (44) 10 (34) 95 38 133 Credit impa irment charge/(release) 138 390 528 407 429 836 Restructuring business portfolio Others 1 (21) (20) (1) 1 – Credit impa irment charge/(release) 1 (21) (20) (1) 1 – Total credit impa irment charge/(release) 139 369 508 406 430 836 1 Underlying credit impa irment has been restated for the removal of ( i) exit markets and businesses in AME and (i i) Av iat ion F inance. No change to reported credit impa irment Problem credit management and provis ion ing (audited) Forborne and other modif ied loans by cl ient segment A forborne loan arises when a concession has been made to the contractual terms of a loan in response to a customer’s ﬁnancial d iff icult ies. Net forborne loans decreased by $120 mill ion to $1,005 m ill ion (31 December 2022: $1,125 m ill ion) largely on perform ing forborne loans stock. The net performing forborne loans declined from $151 mill ion to $38 m ill ion wh ile net non-performing forborne loans remained stable at $967 mill ion (31 December 2022: $974 m ill ion). Amortised cost 2023 2022 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Total $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Total $mill ion All loans with forbearance measures 2,340 314 – 2,654 2,129 377 – 2,506 Credit impa irment (stage 1 and 2) – (2) – (2) (1) – – (1) Credit impa irment (stage 3) (1,529) (118) – (1,647) (1,253) (127) – (1,380) Net carrying value 811 194 – 1,005 875 250 – 1,125 Included with in the above table Gross performing forborne loans – 40 – 40 89 63 – 152 Modif icat ion of terms and condit ions 1 – 40 – 40 89 63 – 152 Reﬁnancing 2 – – – – – – – – Impairment provis ions – (2) – (2) (1) – – (1) Modif icat ion of terms and condit ions 1 – (2) – (2) (1) – – (1) Reﬁnancing 2 – – – – – – – – Net performing forborne loans – 38 – 38 88 63 – 151 Collateral – 31 – 31 7 60 – 67 Gross non-performing forborne loans 2,340 274 – 2,614 2,040 314 – 2,354 Modif icat ion of terms and condit ions 1 2,113 274 – 2,387 1,997 314 – 2,311 Reﬁnancing 2 227 – – 227 43 – – 43 Impairment provis ions (1,529) (118) – (1,647) (1,253) (127) – (1,380) Modif icat ion of terms and condit ions 1 (1,337) (118) – (1,454) (1,210) (127) – (1,337) Reﬁnancing 2 (192) – – (192) (43) – – (43) Net non-performing forborne loans 811 156 – 967 787 187 – 974 Collateral 341 49 – 390 243 68 – 311 1 Modif icat ion of terms is any contractual change apart from reﬁnanc ing, as a result of cred it stress of the counterparty, i.e. interest reductions, loan covenant waivers 2 Reﬁnancing is a new contract to a borrower in credit stress, such that they are reﬁnanced and can pay other debt contracts that they were unable to honour 258 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Forborne and other modif ied loans by reg ion Net forborne loans decreased by $120 mill ion to $1,005 m ill ion (31 December 2022: $1,125 m ill ion) ma inly in the performing forborne loans, in particular the Asia and the Europe and Americas regions. Amortised cost 2023 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Performing forborne loans 34 4 – 38 129 9 13 151 Stage 3 forborne loans 661 75 231 967 568 144 262 974 Net forborne loans 695 79 231 1,005 697 153 275 1,125 Stage 3 cover ratio (audited) The stage 3 cover ratio measures the proportion of stage 3 impa irment prov is ions to gross stage 3 loans, and is a metric commonly used in consider ing impa irment trends. Th is metric does not allow for variat ions in the composit ion of stage 3 loans and should be used in conjunct ion w ith other Credit Risk informat ion prov ided, includ ing the level of collateral cover. The balance of stage 3 loans not covered by stage 3 impa irment prov is ions represents the adjusted value of collateral held and the net outcome of any workout or recovery strategies. Collateral provides risk mit igat ion to some degree in all client segments and supports the credit quality and cover ratio assessments post impa irment prov is ions. Further informat ion on collateral is provided in the ‘Credit Risk mit igat ion’ section in pages 258 to 260 . Further details on stage 3 loans and advances and cover ratio can be found in the ‘Summary of performance in 2023’ in pages 235 and 236 . Amortised cost 2023 2022 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Others $mill ion Total $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Others $mill ion Total $mill ion Gross credit-impa ired 5,508 1,484 12 224 7,228 6,143 1,453 1 248 7,845 Credit impa irment prov is ions (3,533) (760) (12) (15) (4,320) (3,662) (776) (1) (18) (4,457) Net credit-impa ired 1,975 724 – 209 2,908 2,481 677 – 230 3,388 Cover ratio 64% 51% 100% 7% 60% 60% 53% 100% 7% 57% Collateral ($ mill ion) 623 554 – – 1,177 956 543 – – 1,499 Cover ratio (after collateral) 75% 89% 100% 7% 76% 75% 91% 100% 7% 76% Credit-impa ired (stage 3) loans and advances by geograph ic region Stage 3 gross loans decreased by $0.6 bill ion to $7.2 b ill ion (31 December 2022: $7.8 b ill ion). The decrease was pr imar ily dr iven by repayments and write-offs in the Africa and the Middle East, which was offset by new inﬂows in Asia. Further details can be found in the ‘Summary of performance in 2023’ in pages 235 and 236 . Amortised cost 2023 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Gross credit-impa ired 4,604 2,273 351 7,228 4,562 2,725 558 7,845 Credit impa irment prov is ions (2,734) (1,388) (198) (4,320) (2,483) (1,765) (209) (4,457) Net credit-impa ired 1,870 885 153 2,908 2,079 960 349 3,388 Cover ratio 59% 61% 56% 60% 54% 65% 37% 57% Credit Risk mit igat ion Potential credit losses from any given account, customer or portfolio are mit igated us ing a range of tools such as collateral, netting arrangements, credit insurance and credit derivat ives, tak ing into account expected volatil ity and guarantees. The reliance that can be placed on these mit igants is carefully assessed in light of issues such as legal certainty and enforceabil ity, market valuat ion correlation and counterparty risk of the guarantor. 259 Standard Chartered – Annual Report 2023 Risk review and Capital review Collateral (audited) 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 unadjusted market value of collateral across all asset types, in respect of CCIB, without adjust ing for over-collateral isat ion, reduced to $290 bill ion (31 December 2022: $345 b ill ion) predom inantly due to a reduction in reverse repos. The collateral values in the table below (which covers loans and advances to banks and customers, excluding those held at fair value through proﬁt or loss) are adjusted where appropriate in accordance with our risk mit igat ion policy and for the effect of over-collateralisat ion. The extent of over-collateral isat ion has been determ ined with reference to both the drawn and undrawn components of exposure as this best reﬂects the effect of collateral and other credit enhancements on the amounts aris ing from expected credit losses. The value of collateral reﬂects management’s best estimate and is 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. CCIB collateral decreased by $1.7 bill ion to $36.5 b ill ion (31 December 2022: $38.2 b ill ion) and CPBB collateral decreased by $5.5 bill ion to $86.8 b ill ion (31 December 2022: $92.4 b ill ion) due to exposure reduct ions from the mortgage portfolio. Total collateral for Central and other items decreased by $8.7 bill ion to $2.5 b ill ion (31 December 2022: $11.2 b ill ion) due to a decrease in stage 1 reverse repos. However, collateral for stage 2 Central and other items increased by $1 bill ion (31 December 2022: N il) due to short-term reverse repo with a Central Bank in the Africa and Middle East region. Collateral held on loans and advances The table below details collateral held against exposures, separately disclos ing stage 2 and stage 3 exposure and corresponding collateral. Amortised cost 2023 Net amount outstanding Collateral Net exposure Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total 2 $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Corporate, Commercial & Institut ional Bank ing 1 175,382 8,175 2,046 36,458 2,972 623 138,924 5,203 1,423 Consumer, Private & Business Banking 126,059 2,163 724 86,827 1,136 554 39,232 1,027 170 Ventures 1,033 33 – – – – 1,033 33 – Central & other items 29,478 964 209 2,475 964 – 27,003 – 209 Total 331,952 11,335 2,979 125,760 5,072 1,177 206,192 6,263 1,802 Amortised cost 2022 Net amount outstanding Collateral Net exposure Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total 2 $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Total $mill ion Stage 2 ﬁnancial assets $mill ion Credit- impa ired ﬁnancial assets (S3) $mill ion Corporate, Commercial & Institut ional Bank ing 1 179,150 11,366 2,526 38,151 3,973 956 140,999 7393 1,570 Consumer, Private & Business Banking 130,955 1,550 677 92,350 1,019 543 38,605 531 134 Ventures 698 17 – – – – 698 17 – Central & other items 39,363 – 230 11,214 – – 28,149 – 230 Total 350,166 12,933 3,433 141,715 4,992 1,499 208,451 7,941 1,934 1 Includes loans and advances to banks 2 Adjusted for over-collateralisat ion based on the drawn and undrawn components of exposures Collateral – Corporate, Commercial & Institut ional Bank ing (audited) Collateral taken for longer-term and sub-investment grade corporate loans reduced to 41 per cent (31 December 2022: 53 per cent) primar ily due to the ex it of the Aviat ion bus iness. Our underwrit ing standards encourage tak ing specif ic charges on assets and we cons istently seek high-quality, investment- grade collateral. 83 per cent (31 December 2022: 85 per cent) of tangible collateral excluding reverse repurchase agreements and ﬁnanc ial guarantees held comprises physical assets or is property based, with the remainder held in cash. Overall collateral decreased by $2 bill ion to $36 b ill ion (31 December 2022: $38 b ill ion) ma inly due to a decrease in property collateral. Non-tangible collateral, such as guarantees and standby letters of credit, is also held against corporate exposures, although the ﬁnancial effect of th is type of collateral is less sign iﬁcant in terms of recoveries. However, this is considered when determin ing the probabil ity of default and other cred it-related factors. Collateral is also held against off balance sheet exposures, includ ing undrawn commitments and trade-related instruments. 260 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Corporate, Commercial & Institut ional Bank ing Amortised cost 2023 $mill ion 2022 $mill ion Maximum exposure 175,382 179,150 Property 9,339 10,152 Plant, machinery and other stock 933 1,168 Cash 2,985 2,797 Reverse repos 13,826 14,305 AA– to AA+ 2 1,036 92 A– to A+ 2 10,606 10,459 BBB– to BBB+ 855 1,485 Lower than BBB- 169 – Unrated 1,160 2,269 Financ ial guarantees and insurance 5,057 5,096 Commodit ies 5 37 Ships and aircraft 4,313 4,596 Total value of collateral 1 36,458 38,151 Net exposure 138,924 140,999 1 Adjusted for over-collateralisat ion based on the drawn and undrawn components of exposures 2 Prior year has been represented to provide granular credit ratings Collateral – Consumer, Private & Business Banking (audited) In CPBB, fully secured products remain stable at 85 per cent of the total portfolio (31 December 2022: 86 per cent). The following table presents an analysis of loans to ind iv iduals by product; split between fully secured, partially secured and unsecured. Amortised cost 2023 2022 Fully secured $mill ion Partially secured $mill ion Unsecured $mill ion Total $mill ion Fully secured $mill ion Partially secured $mill ion Unsecured $mill ion Total $mill ion Maximum exposure 106,914 505 18,640 126,059 112,556 449 17,950 130,955 Loans to ind iv iduals Mortgages 82,943 – – 82,943 87,212 – – 87,212 CCPL 375 – 17,395 17,770 221 – 16,711 16,932 Auto 312 – – 312 502 – – 502 Secured wealth products 20,303 – – 20,303 19,551 – – 19,551 Other 2,981 505 1,245 4,731 5,070 449 1,239 6,758 Total collateral 1 86,827 92,350 Net exposure 2 39,232 38,605 Percentage of total loans 85% 0% 15% 86% 0% 14% 1 Collateral values are adjusted where appropriate in accordance with our risk mit igat ion policy and for the effect of over-collateralisat ion 2 Amounts net of ECL 261 Standard Chartered – Annual Report 2023 Risk review and Capital review Mortgage loan-to-value ratios by geography (audited) Loan-to-value (LTV) ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties on which they are secured. In a majority of mortgages, the value of property held as secur ity sign iﬁcantly exceeds pr inc ipal outstand ing of the mortgage loans. The average LTV of the overall mortgage portfolio increased to 47.1 per cent (31 December 2022: 44.7 per cent) driven by property prices decrease in a few key markets, includ ing Hong Kong, Korea and Ch ina. Hong Kong, which represents 39.9 per cent of the resident ial mortgage portfol io, has an average LTV of 55.9 per cent (31 December 2022: 52.6 per cent). The increase of Hong Kong resident ial mortgage LTV is due to a decrease of the Property Price Index. All of our other key markets continue to have low portfolio LTVs (Korea, Singapore and Taiwan at 40.5 per cent, 43.0 per cent and 47.0 per cent respectively). Korea average LTV increase is due to government relaxations whereby highly regulated areas have eased up to accommodate customers with higher LTV. An analysis of LTV ratios by geography for the mortgage portfolio is presented in the table below. Amortised cost 2023 Asia % Gross Africa & Middle East % Gross Europe & Americas % Gross Total % Gross Less than 50 per cent 55.5 51.1 31.0 54.8 50 per cent to 59 per cent 17.1 14.7 17.4 17.1 60 per cent to 69 per cent 11.4 13.7 33.9 12.0 70 per cent to 79 per cent 7.7 12.8 14.4 7.9 80 per cent to 89 per cent 3.3 3.9 2.5 3.3 90 per cent to 99 per cent 2.6 2.1 0.6 2.5 100 per cent and greater 2.5 1.7 0.3 2.4 Average portfolio loan-to-value 46.9 51.1 56.0 47.1 Loans to ind iv iduals – mortgages ($mill ion) 79,517 1,183 2,243 82,943 Amortised cost 2022 Asia 1 % Gross Africa & Middle East % Gross Europe & Americas % Gross Total % Gross Less than 50 per cent 60.9 43.0 32.2 60.1 50 per cent to 59 per cent 15.5 18.2 19.2 15.6 60 per cent to 69 per cent 9.8 16.8 31.3 10.2 70 per cent to 79 per cent 6.5 12.8 14.8 6.7 80 per cent to 89 per cent 3.6 5.1 1.1 3.6 90 per cent to 99 per cent 2.5 2.0 – 2.4 100 per cent and greater 1.4 2.2 1.3 1.4 Average portfolio loan-to-value 44.4 54.3 56.6 44.7 Loans to ind iv iduals – mortgages ($mill ion) 83,954 1,388 1,870 87,212 Collateral and other credit enhancements possessed or called upon (audited) The Group obtains assets by taking possession of collateral or calling upon other credit enhancements (such as guarantees). Repossessed properties are sold in an orderly fashion. Where the proceeds are in excess of the outstanding loan balance the excess is returned to the borrower. Certain equity securit ies acqu ired may be held by the Group for investment purposes and are classif ied as fa ir value through proﬁt or loss, and the related loan written off. The carrying value of collateral possessed and held by the Group is $16.5 mill ion (31 December 2022: $14.9 mill ion). 2023 $mill ion 2022 $mill ion Property, plant and equipment 10.5 9.6 Guarantees 6.0 5.3 Total 16.5 14.9 262 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Other Credit risk mit igat ion (audited) Other forms of credit risk mit igat ion are set out below. Credit default swaps The Group has entered into credit default swaps for portfolio management purposes, referencing loan assets with a notional value of $3.5 bill ion (31 December 2022: $5.1 b ill ion). These credit default swaps are accounted for as ﬁnanc ial guarantees as per IFRS 9 as they will only reimburse the holder for an incurred loss on an underlying debt instrument. The Group continues to hold the underlying assets referenced in the credit default swaps and it continues to be exposed to related Credit Risk and Foreign Exchange Rate Risk on these assets. Credit linked notes The Group has issued credit linked notes for portfolio management purposes, referencing loan assets with a notional value of $22.5 bill ion (31 December 2022: $13.5 b ill ion). The Group continues to hold the underlying assets for which the credit linked notes provide mit igat ion. The credit linked notes are recognised as a ﬁnanc ial l iab il ity at amortised cost on the balance sheet. Derivat ive ﬁnancial instruments The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negative mark-to-market values of applicable derivat ive transactions. Credit Risk mit igat ion for derivat ive ﬁnancial instruments is set out below. 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 credit quality by industry and industry and retail products analysis by region. Maturity analysis of loans and advances by client segment Loans and advances to the CCIB segment remain predominantly short-term, with $91 bill ion (31 December 2022: $98 bill ion) matur ing in less than one year. 98 per cent (31 December 2022: 96 per cent) of loans to banks mature in less than one year, an increase compared with 2022 as net exposures increased by $5.5 bill ion to $45 b ill ion (31 December 2022: $39.5 bill ion). Shorter matur it ies g ive us the ﬂexib il ity to respond promptly to events and rebalance or reduce our exposure to clients or sectors that are facing increased pressure or uncertainty. The CPBB short-term book of one year or less and long-term book of over ﬁve years is stable at 26 per cent (31 December 2022: 25 per cent) and 63 per cent (31 December 2022: 64 per cent) of the total portfolio respectively. Amortised cost 2023 One year or less $mill ion One to ﬁve years $mill ion Over ﬁve years $mill ion Total | $mill ion Corporate, Commercial & Institut ional Bank ing 90,728 30,746 12,822 134,296 Consumer, Private & Business Banking 33,397 13,711 80,166 127,274 Ventures 747 334 – 1,081 Central & other items 29,448 43 3 29,494 Gross loans and advances to customers 154,320 44,834 92,991 292,145 Impairment provis ions (4,872) (185) (113) (5,170) Net loans and advances to customers 149,448 44,649 92,878 286,975 Net loans and advances to banks 43,955 1,021 1 44,977 Amortised cost 2022 One year or less $mill ion One to ﬁve years $mill ion Over ﬁve years $mill ion Total $mill ion Corporate, Commercial & Institut ional Bank ing 98,335 34,635 10,789 143,759 Consumer, Private & Business Banking 33,365 14,161 84,731 132,257 Ventures 548 162 – 710 Central & other items 39,373 – 8 39,381 Gross loans and advances to customers 171,621 48,958 95,528 316,107 Impairment provis ions (4,767) (574) (119) (5,460) Net loans and advances to customers 166,854 48,384 95,409 310,647 Net loans and advances to banks 38,105 1,211 203 39,519 263 Standard Chartered – Annual Report 2023 Risk review and Capital review Credit quality by industry Loans and advances This section provides an analysis of the Group’s amortised cost portfolio by industry on a gross, total credit impa irment and net basis. Amortised cost 2023 Stage 1 Stage 2 Stage 3 Total Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Industry: Energy 9,397 (8) 9,389 672 (22) 650 949 (535) 414 11,018 (565) 10,453 Manufacturing 21,239 (8) 21,231 708 (16) 692 656 (436) 220 22,603 (460) 22,143 Financ ing, insurance and non-banking 31,633 (13) 31,620 571 (1) 570 80 (77) 3 32,284 (91) 32,193 Transport, telecom and util it ies 14,710 (8) 14,702 1,722 (36) 1,686 481 (178) 303 16,913 (222) 16,691 Food and household products 7,668 (15) 7,653 323 (7) 316 355 (262) 93 8,346 (284) 8,062 Commercial real estate 12,261 (30) 12,231 1,848 (129) 1,719 1,712 (1,191) 521 15,821 (1,350) 14,471 Min ing and quarrying 5,995 (4) 5,991 220 (10) 210 151 (84) 67 6,366 (98) 6,268 Consumer durables 5,815 (3) 5,812 300 (21) 279 329 (298) 31 6,444 (322) 6,122 Construction 2,230 (2) 2,228 502 (8) 494 358 (326) 32 3,090 (336) 2,754 Trading companies & distr ibutors 581 – 581 57 – 57 107 (58) 49 745 (58) 687 Government 33,400 (6) 33,394 1,783 (5) 1,778 367 (33) 334 35,550 (44) 35,506 Other 4,262 (4) 4,258 161 (3) 158 187 (70) 117 4,610 (77) 4,533 Retail Products: Mortgage 81,210 (8) 81,202 1,350 (5) 1,345 519 (123) 396 83,079 (136) 82,943 Credit Cards 7,633 (104) 7,529 244 (65) 179 69 (50) 19 7,946 (219) 7,727 Personal loans and other unsecured lending 10,867 (188) 10,679 324 (77) 247 315 (165) 150 11,506 (430) 11,076 Auto 310 – 310 1 – 1 1 – 1 312 – 312 Secured wealth products 19,923 (22) 19,901 278 (10) 268 474 (340) 134 20,675 (372) 20,303 Other 4,558 (7) 4,551 161 (5) 156 118 (94) 24 4,837 (106) 4,731 Net carrying value (customers)¹ 273,692 (430) 273,262 11,225 (420) 10,805 7,228 (4,320) 2,908 292,145 (5,170) 286,975 1 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $13,996 mill ion 264 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Amortised cost 2022 Stage 1 Stage 2 Stage 3 Total Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Gross balance $mill ion Total credit impa ir- ment $mill ion Net carrying amount $mill ion Industry: Energy 10,959 (8) 10,951 818 (7) 811 1,324 (620) 704 13,101 (635) 12,466 Manufacturing 20,990 (23) 20,967 1,089 (27) 1,062 777 (518) 259 22,856 (568) 22,288 Financ ing, insurance and non-banking 34,915 (9) 34,906 774 (3) 771 195 (175) 20 35,884 (187) 35,697 Transport, telecom and util it ies 14,273 (22) 14,251 2,347 (36) 2,311 669 (224) 445 17,289 (282) 17,007 Food and household products 7,841 (21) 7,820 695 (20) 675 418 (259) 159 8,954 (300) 8,654 Commercial real estate 12,393 (43) 12,350 3,217 (195) 3,022 1,305 (761) 544 16,915 (999) 15,916 Min ing and quarrying 5,482 (4) 5,478 537 (5) 532 248 (174) 74 6,267 (183) 6,084 Consumer durables 6,403 (4) 6,399 420 (17) 403 358 (307) 51 7,181 (328) 6,853 Construction 2,424 (2) 2,422 407 (5) 402 495 (410) 85 3,326 (417) 2,909 Trading companies & distr ibutors 2,205 (1) 2,204 170 (2) 168 122 (80) 42 2,497 (83) 2,414 Government 42,825 (2) 42,823 603 (1) 602 168 (15) 153 43,596 (18) 43,578 Other 4,684 (4) 4,680 278 (5) 273 312 (137) 175 5,274 (146) 5,128 Retail Products: Mortgage 85,859 (12) 85,847 996 (7) 989 556 (180) 376 87,411 (199) 87,212 Credit Cards 6,912 (103) 6,809 155 (46) 109 59 (44) 15 7,126 (193) 6,933 Personal loans and other unsecured lending 10,652 (253) 10,399 215 (57) 158 296 (156) 140 11,163 (466) 10,697 Auto 501 – 501 1 – 1 – – – 502 – 502 Secured wealth products 19,269 (45) 19,224 235 (10) 225 407 (305) 102 19,911 (360) 19,551 Other 6,632 (3) 6,629 86 (1) 85 136 (92) 44 6,854 (96) 6,758 Net carrying value (customers)¹ 295,219 (559) 294,660 13,043 (444) 12,599 7,845 (4,457) 3,388 316,107 (5,460) 310,647 1 Includes reverse repurchase agreements and other sim ilar secured lend ing held at amortised cost of $24,498 mill ion Industry and Retail Products analysis of loans and advances by geographic region This section provides an analysis of the Group’s amortised cost loan portfolio, net of provis ions, by industry and region. In the CCIB and Central and other items segment, our largest industry exposures are to Government, Financ ing, insurance and non-banking and Manufacturing with each constitut ing at least 8 per cent of CCIB and Central and other items loans and advances to customers. Financ ing, insurance and non-banking industry clients are mostly investment-grade inst itut ions and this lending forms part of the liqu id ity management of the Group. The Manufacturing sector group is spread across a diverse range of industr ies, includ ing automob iles and components, capital goods, pharmaceuticals, biotech and life sciences, technology hardware and equipment, chemicals, paper products and packaging, with lending spread over 3,255 clients. The Mortgage portfolio continues to be the largest portion of the CPBB portfolio at $83.1 bill ion (31 December 2022: $87.4 b ill ion), of which 96 per cent continues to be in Asia. Credit cards, personal loans and other unsecured lending increased to 15 per cent (31 December 2022: 14 per cent) of the CPBB portfolio, mainly in Asia due to the growth from Mox Bank and dig ital partnersh ips. In Asia, the Financ ing, insurance and non-banking industry decreased by $1.9 bill ion to $22.8 b ill ion (31 December 2022: $24.7 bill ion) wh ile the CRE sector decreased by $2 bill ion to $11.2 b ill ion (31 December 2022: $13.2 b ill ion) due to exposure reductions. The Government sector decreased by $9.2 bill ion to $30.5 b ill ion (31 December 2022: $39.7 b ill ion) due to decreased lending to Korea. 265 Standard Chartered – Annual Report 2023 Risk review and Capital review Amortisecd cost 2023 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Industry: Energy 4,143 3,986 2,324 10,453 6,250 2,278 3,938 12,466 Manufacturing 16,828 1,077 4,238 22,143 17,388 1,267 3,633 22,288 Financ ing, insurance and non-banking 22,771 829 8,593 32,193 24,674 761 10,262 35,697 Transport, telecom and util it ies 12,122 2,650 1,919 16,691 10,841 3,567 2,599 17,007 Food and household products 4,856 1,726 1,480 8,062 4,160 2,566 1,928 8,654 Commercial real estate 11,176 623 2,672 14,471 13,179 598 2,139 15,916 Min ing and quarry ing 3,856 375 2,037 6,268 3,785 390 1,909 6,084 Consumer durables 5,033 429 660 6,122 5,860 461 532 6,853 Construction 1,803 333 618 2,754 1,775 625 509 2,909 Trading companies and distr ibutors 527 109 51 687 2,281 101 32 2,414 Government 30,487 4,778 241 35,506 39,713 3,759 106 43,578 Other 3,401 584 548 4,533 3,636 702 790 5,128 Retail Products: Mortgages 79,517 1,183 2,243 82,943 83,954 1,388 1,870 87,212 Credit Cards 7,449 278 – 7,727 6,642 291 – 6,933 Personal loans and other unsecured lending 9,426 1,565 85 11,076 9,056 1,541 100 10,697 Auto 295 17 – 312 469 33 – 502 Secured wealth products 18,774 987 542 20,303 17,876 1,048 627 19,551 Other 4,671 60 – 4,731 6,676 82 – 6,758 Net loans and advances to customers 237,135 21,589 28,251 286,975 258,215 21,458 30,974 310,647 Net loans and advances to banks 35,417 3,106 6,454 44,977 22,058 3,929 13,532 39,519 Vulnerable, cyclical and high carbon sectors Vulnerable and cyclical sectors are those that the Group considers to be most at risk from current economic stresses, includ ing volatile energy and commodity prices, and we continue to monitor exposures to these sectors particularly carefully. Sectors are ident iﬁed and grouped as per the Internat ional Standard Industrial Classif icat ion (ISIC) system and exposure numbers have been updated to include all in-scope ISIC codes used for target setting among the high carbon sectors. The maximum exposures shown in the table include Loans and Advances to Customers at Amortised cost, Fair Value through proﬁt or loss, and committed facil it ies available as per IFRS 9 – Financ ial Instruments in $mill ion. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236 . 266 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Maximum exposure 2023 Maximum on Balance Sheet Exposure (net of credit impa irment) $mill ion Collateral $mill ion Net On Balance Sheet Exposure $mill ion Undrawn Commitments (net of credit impa irment) $mill ion Financ ial Guarantees (net of credit impa irment) $mill ion Net Off Balance Sheet Exposure $mill ion Total On & Off Balance Sheet Net Exposure $mill ion Industry: Automotive manufacturers¹ 3,564 65 3,499 3,791 538 4,329 7,828 Aviat ion 1,2 1,775 974 801 1,794 668 2,462 3,263 Of which : High Carbon Sector 1,330 974 356 944 615 1,559 1,915 Commodity Traders 2 7,406 303 7,103 2,591 6,281 8,872 15,975 Metals & Min ing 1.2 4,589 307 4,282 3,373 1,218 4,591 8,873 Of which: Steel 1 1,596 193 1,403 601 358 959 2,362 Of which: Coal Min ing 1 29 9 20 51 99 150 170 Of which: Alumin ium 1 526 9 517 338 188 526 1,043 Of which: Other Metals & Min ing 1 2,438 96 2,342 2,383 573 2,956 5,298 Shipp ing 1 5,964 3,557 2,407 2,261 291 2,552 4,959 Construction 2 2,853 448 2,405 2,753 5,927 8,680 11,085 Commercial Real Estate 2 14,533 6,363 8,170 4,658 311 4,969 13,139 Of which: High Carbon Sector 7,498 3,383 4,115 1,587 112 1,699 5,814 Hotels & Tourism 2 1,680 715 965 1,339 227 1,566 2,531 Oil & Gas 1,2 6,278 894 5,384 7,845 6,944 14,789 20,173 Power 1 5,411 1,231 4,180 3,982 732 4,714 8,894 Total 3 54,053 14,857 39,196 34,387 23,137 57,524 96,720 Of which: Vulnerable and cyclical sectors 38,880 9,983 28,897 24,842 21,511 46,353 75,250 Of which: High carbon sectors 4 34,634 10,411 24,223 23,783 10,450 34,233 58,456 Total Corporate, Commercial & Institut ional Bank ing 130,405 32,744 97,661 104,437 63,183 167,620 265,281 Total Group 331,952 125,760 206,192 182,299 74,278 256,577 462,769 1 High carbon sectors 2 Vulnerable and cyclical sectors 3 Maximum On Balance sheet exposure include FVTPL portion of $955 mill ion, of wh ich Vulnerable sector is $821 mill ion and H igh Carbon sector is $443 mill ion 4 Excluded Cement to the value of $671 mill ion net of ECL under Construct ion 267 Standard Chartered – Annual Report 2023 Risk review and Capital review 2022 Maximum On Balance Sheet Exposure (net of credit impa irment) $mill ion Collateral $mill ion Net On Balance Sheet Exposure $mill ion Undrawn Commitments (net of credit impa irment) $mill ion Financ ial Guarantees (net of credit impa irment) $mill ion Net Off Balance Sheet Exposure $mill ion Total On & Off Balance Sheet Net Exposure $mill ion Industry: Automotive manufacturers 1 3,167 84 3,083 3,683 560 4,243 7,326 Aviat ion 1,2,3 3,154 1,597 1,557 1,762 632 2,394 3,951 Of which : High Carbon Sector 2,540 1,582 958 695 555 1,250 2,208 Commodity Traders 2 8,133 341 7,792 2,578 6,095 8,673 16,465 Metals & Min ing 1.2 4,990 333 4,657 3,732 930 4,662 9,319 Of which: Steel 1 1,227 157 1,070 1,450 327 1,777 2,847 Of which: Coal Min ing 1 48 15 33 8 7 15 48 Of which: Alumin ium 1 728 107 621 285 74 359 980 Of which: Other Metals & Min ing 1 2,987 54 2,933 1,989 522 2,511 5,444 Shipp ing 1 5,322 3,167 2,155 1,870 256 2,126 4,281 Construction 2 2,909 552 2,357 2,762 5,969 8,731 11,088 Commercial Real Estate 2 16,286 7,205 9,081 6,258 224 6,482 15,563 Of which: High Carbon Sector 6,547 2,344 4,203 3,996 90 4,086 8,289 Hotels & Tourism 2 1,741 919 822 1,346 138 1,484 2,306 Oil & Gas 1,2 6,668 806 5,862 7,630 7,158 14,788 20,650 Power 1 4,771 1,258 3,513 4,169 1,176 5,345 8,858 Total 4 57,141 16,262 40,879 35,790 23,138 58,928 99,807 Of which: Vulnerable and cyclical sectors 43,678 11,741 31,937 25,761 21,068 46,829 78,766 Of which: High carbon sectors 5 34,005 9,574 24,431 25,775 10,725 36,500 60,931 Total Corporate, Commercial & Institut ional Bank ing 139,631 35,229 104,402 95,272 51,662 146,934 251,336 Total Group 350,166 141,715 208,451 168,574 60,224 228,798 437,249 1 High carbon sectors 2 Vulnerable and cyclical sectors 3 In addit ion to the av iat ion sector loan exposures, the Group owns $3.2 b ill ion of a ircraft under operating leases in 2022 4 Maximum On Balance sheet exposure include FVTPL portion of $1,251 mill ion, of wh ich Vulnerable sector is $1,072 mill ion and H igh Carbon sector is $574 mill ion 5 Excluded Cement to the value of $719 mill ion net of ECL under Construct ion 268 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Loans and advances by stage Amortised Cost 2023 Stage 1 Stage 2 Stage 3 Total Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Industry: Aviat ion 1,619 – 1,619 55 (1) 54 74 (15) 59 1,748 (16) 1,732 Commodity Traders 6,912 (2) 6,910 129 (1) 128 555 (504) 51 7,596 (507) 7,089 Metals & Min ing 3,934 (1) 3,933 140 (8) 132 154 (88) 66 4,228 (97) 4,131 Construction 2,230 (2) 2,228 502 (8) 494 358 (326) 32 3,090 (336) 2,754 Commercial Real Estate 12,261 (30) 12,231 1,848 (129) 1,719 1,712 (1,191) 521 15,821 (1,350) 14,471 Hotels & Tourism 1,468 (2) 1,466 61 – 61 126 (25) 101 1,655 (27) 1,628 Oil & Gas 5,234 (4) 5,230 615 (15) 600 571 (147) 424 6,420 (166) 6,254 Total 33,658 (41) 33,617 3,350 (162) 3,188 3,550 (2,296) 1,254 40,558 (2,499) 38,059 Total Corporate, Commercial & Institut ional Bank ing 120,886 (101) 120,785 7,902 (257) 7,645 5,508 (3,533) 1,975 134,296 (3,891) 130,405 Total Group 318,076 (438) 317,638 11,765 (430) 11,335 7,305 (4,326) 2,979 337,146 (5,194) 331,952 Amortised Cost 2022 Stage 1 Stage 2 Stage 3 Total Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Gross Balance $mill ion Total Credit Impair- ment $mill ion Net Carrying Amount $mill ion Industry: Aviat ion¹ 2,377 (1) 2,376 573 – 573 155 (32) 123 3,105 (33) 3,072 Commodity Traders 7,187 (6) 7,181 138 (2) 136 689 (435) 254 8,014 (443) 7,571 Metals & Min ing 4,184 (1) 4,183 475 (4) 471 257 (157) 100 4,916 (162) 4,754 Construction 2,424 (2) 2,422 407 (5) 402 497 (412) 85 3,328 (419) 2,909 Commercial Real Estate 12,393 (43) 12,350 3,217 (195) 3,022 1,305 (761) 544 16,915 (999) 15,916 Hotels & Tourism 1,448 (2) 1,446 108 (1) 107 206 (18) 188 1,762 (21) 1,741 Oil & Gas 5,468 (4) 5,464 708 (6) 702 919 (442) 477 7,095 (452) 6,643 Total 35,481 (59) 35,422 5,626 (213) 5,413 4,028 (2,257) 1,771 45,135 (2,529) 42,606 Total Corporate, Commercial & Institut ional Bank ing 126,261 (143) 126,118 11,355 (323) 11,032 6,143 (3,662) 2,481 143,759 (4,128) 139,631 Total Group 334,368 (568) 333,800 13,380 (447) 12,933 7,904 (4,471) 3,433 355,652 (5,486) 350,166 1 In addit ion to the av iat ion sector loan exposures, the Group owns $3.2 b ill ion of a ircraft under operating leases in 2022 Loans and advances by region (net of credit impa irment) 2023 2022¹ Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Industry: Aviat ion 1,077 7 648 1,732 1,105 1,259 708 3,072 Commodity Traders 3,778 675 2,636 7,089 3,497 978 3,096 7,571 Metals & Min ing 1,628 1,522 981 4,131 2,966 347 1,441 4,754 Construction 1,803 333 618 2,754 1,776 624 509 2,909 Commercial Real Estate 11,176 623 2,672 14,471 13,180 598 2,138 15,916 Hotel & Tourism 998 178 452 1,628 880 465 396 1,741 Oil & Gas 2,639 1,815 1,800 6,254 3,574 1,445 1,624 6,643 Total 23,099 5,153 9,807 38,059 26,978 5,716 9,912 42,606 1 In addit ion to the av iat ion sector loan exposures, the Group owns $3.2 b ill ion of a ircraft under operating leases in 2022 269 Standard Chartered – Annual Report 2023 Risk review and Capital review Credit quality – loans and advances Amortised Cost Credit Grade 2023 Aviat ion Gross $mill ion Commodity Traders Gross $mill ion Construction Gross $mill ion Metals & Min ing Gross $mill ion Commercial Real Estate Gross $mill ion Hotel & Tourism Gross $mill ion Oil & Gas Gross $mill ion Total Gross $mill ion Strong 1,452 4,444 1,012 3,213 7,326 1,090 4,024 22,561 Satisfactory 222 2,592 1,702 788 6,751 439 1,726 14,220 Higher risk – 5 18 73 32 – 101 229 Credit impa ired (stage 3) 74 555 358 154 1,712 126 569 3,548 Total Gross Balance 1,748 7,596 3,090 4,228 15,821 1,655 6,420 40,558 Strong – (1) (1) – (20) (1) (3) (26) Satisfactory (1) (2) (6) (1) (139) (1) (12) (162) Higher risk – – (4) (8) – – (4) (16) Credit impa ired (stage 3) (15) (504) (325) (88) (1,191) (25) (147) (2,295) Total Credit Impairment (16) (507) (336) (97) (1,350) (27) (166) (2,499) Strong 0.0% 0.0% 0.1% 0.0% 0.3% 0.1% 0.1% 0.1% Satisfactory 0.5% 0.1% 0.4% 0.1% 2.1% 0.2% 0.7% 1.1% Higher risk 0.0% 0.0% 22.2% 11.0% 0.0% 0.0% 4.0% 7.0% Credit impa ired (stage 3) 20.3% 90.8% 90.8% 57.1% 69.6% 19.8% 25.8% 64.7% Cover Ratio 0.9% 6.7% 10.9% 2.3% 8.5% 1.6% 2.6% 6.2% Credit Grade 2022 Aviat ion¹ Gross $mill ion Commodity Traders Gross $mill ion Construction Gross $mill ion Metals & Min ing Gross $mill ion Commercial Real Estate Gross $mill ion Hotel & Tourism Gross $mill ion Oil & Gas Gross $mill ion Total Gross $mill ion Strong 1,437 4,419 1,164 3,425 8,000 1,047 3,923 23,415 Satisfactory 1,413 2,894 1,634 1,208 7,334 494 2,215 17,192 Higher risk 100 12 33 26 276 15 38 500 Credit impa ired (stage 3) 155 689 497 257 1,305 206 919 4,028 Total Gross Balance 3,105 8,014 3,328 4,916 16,915 1,762 7,095 45,135 Strong – (3) – – (25) (1) (1) (30) Satisfactory (1) (4) (3) (5) (129) (1) (7) (150) Higher risk – (1) (4) – (84) (1) (2) (92) Credit impa ired (stage 3) (32) (435) (412) (157) (761) (18) (442) (2,257) Total Credit Impairment (33) (443) (419) (162) (999) (21) (452) (2,529) Strong 0.0% 0.1% 0.0% 0.0% 0.3% 0.1% 0.0% 0.1% Satisfactory 0.1% 0.1% 0.2% 0.4% 1.8% 0.2% 0.3% 0.9% Higher risk 0.0% 8.3% 12.1% 0.0% 30.4% 6.7% 5.3% 18.4% Credit impa ired (stage 3) 20.6% 63.1% 82.9% 61.1% 58.3% 8.7% 48.1% 56.0% Cover Ratio 1.1% 5.5% 12.6% 3.3% 5.9% 1.2% 6.4% 5.6% 1 In addit ion to the av iat ion sector loan exposures, the Group owns $3.2 b ill ion of a ircraft under operating leases in 2022 270 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Maturity and expected credit loss for high-carbon sectors Sector 2023 Maturity Buckets¹ 2023 Loans and advances (Drawn funding) $mill ion Less than 1 year $mill ion More than 1 to 5 years $mill ion More than 5 years $mill ion Expected Credit Loss $mill ion Automotive Manufacturers 3,566 3,106 460 – 2 Aviat ion 1,339 149 145 1,045 9 Cement 719 512 189 18 48 Coal Min ing 42 9 33 – 13 Steel 1,649 1,258 185 206 53 Other Metals & Min ing 2,151 1,886 240 25 34 Alumin ium 537 442 63 32 11 Oil & Gas 6,444 2,980 1,576 1,888 166 Power 5,516 1,933 1,533 2,050 105 Shipp ing 5,971 1,051 2,568 2,352 7 Commercial Real Estate 7,664 3,722 3,935 7 166 Total balance 1 35,598 17,048 10,927 7,623 614 1 Excluded fair value of Other Metals & Min ing of $321 m ill ion Sector 2022 Maturity Buckets¹ 2022 Loans and advances (Drawn funding) $mill ion Less than 1 year $mill ion More than 1 to 5 years $mill ion More than 5 years $mill ion Expected Credit Loss $mill ion Automotive Manufacturers 3,167 2,450 717 – – Aviat ion 2,595 118 749 1,728 55 Cement 762 661 63 38 43 Coal Min ing 60 2 41 17 12 Steel 1,268 1,080 180 8 41 Other Metals & Min ing 1,964 1,660 281 23 44 Alumin ium 744 528 114 102 16 Oil & Gas 6,550 3,100 1,734 1,716 238 Power 4,903 1,615 1,279 2,009 132 Shipp ing 5,374 918 2,567 1,889 52 Commercial Real Estate 6,598 2,568 3,949 81 51 Total balance 2 33,985 14,700 11,674 7,611 684 1 Gross of credit impa irment 2 Excluded fair value of Other Metals & Min ing and O il & Gas of $58 mill ion 271 Standard Chartered – Annual Report 2023 Risk review and Capital review China commercial real estate The table below represents the on and off-balance sheet items that are exposed to China CRE by credit quality. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236 . 2023 China $mill ion Hong Kong $mill ion Rest of Group 1 $mill ion Total $mill ion Loans to customers 584 1,821 39 2,444 Off balance sheet 42 82 – 124 Total as at 31 December 2023 626 1,903 39 2,568 Loans to customers – By Credit quality Gross Strong 33 – – 33 Satisfactory 339 619 39 997 Higher risk 8 – – 8 Credit impa ired (stage 3) 204 1,202 – 1,406 Total as at 31 December 2023 584 1,821 39 2,444 Loans to customers – ECL Strong – – – – Satisfactory (3) (134) (12) (149) Higher risk – – – – Credit impa ired (stage 3) (70) (941) – (1,011) Total as at 31 December 2023 (73) (1,075) (12) (1,160) 1 Rest of Group mainly includes Singapore 2022 China $mill ion Hong Kong $mill ion Rest of Group 1 $mill ion Total $mill ion Loans to customers 953 2,248 39 3,240 Off balance sheet 74 85 8 167 Total as at 31 December 2022 1,027 2,333 47 3,407 Loans to customers – By Credit quality Gross Strong 256 221 – 477 Satisfactory 459 921 39 1,419 Higher risk – 271 – 271 Credit impa ired (stage 3) 238 835 – 1,073 Total as at 31 December 2022 953 2,248 39 3,240 Loans to customers – ECL Strong – (19) – (19) Satisfactory (9) (110) – (119) Higher risk – (83) – (83) Credit impa ired (stage 3) (37) (559) – (596) Total as at 31 December 2022 (46) (771) – (817) 1 Rest of Group mainly includes Singapore 272 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Debt securit ies and other el ig ible b ills (audited) This section provides further detail on gross debt securit ies and treasury b ills. The standard credit ratings used by the Group are those used by Standard & Poor’s or its equivalent. Debt securit ies held that have a short-term rating are reported against the long-term rating of the issuer. For securit ies that are unrated, the Group applies an internal credit rating, as described under the credit rating and measurement section on page 321. Total gross debt securit ies and other el ig ible b ills decreased by $11.4 bill ion to $160 b ill ion (31 December 2022: $172 b ill ion) due to action taken to manage liqu id ity, primar ily in stage 1. Stage 1 gross balance decreased by $7.8 bill ion to $158 b ill ion (31 December 2022: $166 b ill ion) of wh ich $3.4 bill ion of the decrease was from unrated. Stage 2 gross balance decreased by $3.6 bill ion to $2 b ill ion (31 December 2022: $5 b ill ion). Stage 3 gross balance was broadly stable at $0.2 bill ion (31 December 2022: $0.1 b ill ion). Amortised cost and FVOCI 2023 2022 Gross $mill ion ECL $mill ion Net 2 $mill ion Gross $mill ion ECL $mill ion Net 2 $mill ion Stage 1 158,314 (26) 158,288 166,103 (25) 166,078 AAA 61,920 (5) 61,915 73,933 (10) 73,923 AA- to AA+ 34,244 (2) 34,242 42,327 (4) 42,323 A- to A+ 38,891 (2) 38,889 29,488 (2) 29,486 BBB- to BBB+ 13,098 (7) 13,091 7,387 (1) 7,386 Lower than BBB- 1,611 (2) 1,609 1,047 (2) 1,045 Unrated 8,550 (8) 8,542 11,921 (6) 11,915 – Strong 7,415 (7) 7,408 11,760 (6) 11,754 – Satisfactory 1,135 (1) 1,134 161 – 161 Stage 2 1,860 (34) 1,826 5,455 (90) 5,365 AAA 98 – 98 21 – 21 AA- to AA+ 22 – 22 40 – 40 A- to A+ 81 – 81 17 (1) 16 BBB- to BBB+ 499 (3) 496 2,605 (16) 2,589 Lower than BBB- 893 (30) 863 2,485 (71) 2,414 Unrated 267 (1) 266 287 (2) 285 – Strong 217 – 217 26 (2) 24 – Satisfactory 50 (1) 49 – – – – Higher risk – – – 261 – 261 Stage 3 164 (61) 103 144 (106) 38 Lower than BBB- 72 (4) 68 67 (55) 12 Unrated 92 (57) 35 77 (51) 26 Gross balance¹ 160,338 (121) 160,217 171,702 (221) 171,481 1 Stage 3 gross includes $80 mill ion (31 December 2022: $28 m ill ion) or ig inated cred it-impa ired debt secur it ies w ith impa irment of $14 m ill ion (31 December 2022: $13 mill ion) 2 FVOCI instrument are not presented net of ECL. While the presentation is on a net basis for the table, the total net on-balance sheet amount is $160,263 mill ion (31 December 2022: $171,640 mill ion). Refer to the Analys is of ﬁnanc ial instrument by stage table 273 Standard Chartered – Annual Report 2023 Risk review and Capital review IFRS 9 expected credit loss methodology (audited) Approach for determin ing expected cred it losses Credit loss terminology Component Deﬁnit ion Probabil ity of default (PD) The probabil ity that a counterparty w ill default, over the next 12 months from the reporting date (stage 1) or over the lifet ime of the product (stage 2), incorporating the impact of forward- looking economic assumptions that have an effect on Credit Risk, such as unemployment rates and GDP forecasts. The PD estimates will ﬂuctuate in line with the economic cycle. The lifet ime (or term structure) PDs are based on statist ical models, cal ibrated using histor ical data and adjusted to incorporate forward-looking economic assumptions. Loss given default (LGD) The loss that is expected to arise on default, incorporating the impact of forward-looking economic assumptions where relevant, which represents the difference between the contractual cashﬂows due and those that the bank expects to receive. The Group estimates LGD based on the history of recovery rates and considers the recovery of any collateral that is integral to the ﬁnanc ial asset, tak ing into account forward-looking economic assumptions where relevant. Exposure at default (EAD) The expected balance sheet exposure at the time of default, taking into account expected changes over the lifet ime of the exposure. Th is incorporates the impact of drawdowns of facil it ies with lim its, repayments of pr inc ipal and interest, and amortisat ion. To determine the expected credit loss, these components are multipl ied together: PD for the reference per iod (up to 12 months or lifet ime) x LGD x EAD and d iscounted to the balance sheet date using the effective interest rate as the discount rate. IFRS 9 expected credit loss models have been developed for the Corporate, Commercial and Institut ional Bank ing (CCIB) businesses on a global basis, in line with their respective portfolios. However, for some of the key countries, country- specif ic models have also been developed. The calibrat ion of forward-look ing informat ion is assessed at a country or region level to take into account local macroeconomic condit ions. Retail expected credit loss models are country and product specif ic g iven the local nature of the CPBB business. For less material retail portfolios, the Group has adopted less sophist icated approaches based on h istor ical roll rates or loss rates: • For medium-sized retail portfolios, a roll rate model is applied, which uses a matrix that gives the average loan migrat ion rate between del inquency states from period to period. A matrix multipl icat ion is then performed to generate the ﬁnal PDs by delinquency bucket over different time horizons. • For smaller retail portfolios, loss rate models are applied. These use an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances. • While the loss rate models do not incorporate forward- looking informat ion, to the extent that there are s ign iﬁcant changes in the macroeconomic forecasts an assessment will be completed on whether an adjustment to the modelled output is required. For a lim ited number of exposures, proxy parameters or approaches are used where the data is not available to calculate the orig inat ion PDs for the purpose of applying the SICR criter ia; or for some reta il portfolios where a full history of LGD data is not available, estimates based on the loss experience from sim ilar portfol ios are used. The use of proxies is monitored and will reduce over time. The following processes are in place to assess the ongoing performance of the models: • Quarterly model monitor ing that uses recent data to compare the differences between model predict ions and actual outcomes against approved thresholds. • Annual independent validat ions of the performance of material models by Group Model Valuation (GMV); an abridged validat ion is completed for non-material models. Applicat ion of l ifet ime Expected credit loss is estimated based on the period over which the Group is exposed to Credit Risk. For the major ity of exposures this equates to the maximum contractual period. For retail credit cards and corporate overdraft facil it ies, however, the Group does not typically enforce the contractual period, which can be as short as one day. As a result, the period over which the Group is exposed to Credit Risk for these instruments reﬂects their behavioural life, which incorporates expectations of customer behaviour and the extent to which Credit Risk management actions curtail the period of that exposure. The average behavioural life for retail credit cards is between 3 and 6 years across our footprint markets. The behavioural life for corporate overdraft facil it ies is 24 months. 274 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Composit ion of cred it impa irment prov is ions (aud ited) The table below summarises the key components of the Group’s credit impa irment prov is ion balances at 31 December 2023 and 31 December 2022. 31 December 2023 Corporate, Commercial & Institut ional Banking $ mill ion Consumer, Private & Business Banking $ mill ion Ventures $ mill ion Central & other items $ mill ion 2 Total $ mill ion Modelled ECL provis ions (base forecast) 372 553 48 98 1,071 Modelled impact of multiple economic scenarios 20 18 – 6 44 Total ECL provis ions before management judgements 392 571 48 104 1,115 Includes: Model performance post model adjustments (3) (28) – – (31) Judgemental post model adjustments – 2 – – 2 Management overlays 1 – China commercial real estate 141 – – – 141 – Other – 5 – 17 22 Total modelled provis ions 533 578 48 121 1,280 Of which: Stage 1 151 325 15 68 559 Stage 2 318 140 21 49 528 Stage 3 64 113 12 4 193 Stage 3 non-modelled provis ions 3,587 646 – 88 4,321 Total credit impa irment prov is ions 4,120 1,224 48 209 5,601 31 December 2022 Corporate, Commercial & Institut ional Banking $ mill ion Consumer, Private & Business Banking $ mill ion Ventures $ mill ion Central & other items 2 $ mill ion Total $ mill ion Modelled ECL provis ions (base forecast) 505 556 12 194 1,267 Modelled impact of multiple economic scenarios 38 6 – 6 50 Total ECL provis ions before management judgements 543 562 12 200 1,317 Includes: Model performance post model adjustments (22) (38) – – (60) Judgemental post model adjustments – 44 – – 44 Management overlays 1 – China commercial real estate 173 – – – 173 – Other 9 37 – – 46 Total modelled provis ions 725 643 12 200 1,580 Of which: Stage 1 194 413 10 34 651 Stage 2 411 118 1 100 630 Stage 3 120 112 1 66 299 Stage 3 non-modelled provis ions 3,702 664 – 129 4,495 Total credit impa irment prov is ions 4,427 1,307 12 329 6,075 1 $22 mill ion (31 December 2022: $55 m ill ion) is in stage 1, $141 mill ion (31 December 2022: $148 m ill ion) in stage 2 and $nil mill ion (31 December 2022: $16 m ill ion) in stage 3 2 Includes ECL on cash and balances at central banks, accrued income, assets held for sale and other assets 275 Standard Chartered – Annual Report 2023 Risk review and Capital review Model performance post model adjustments (PMA) As part of normal model monitor ing and val idat ion operational processes, where a model’s performance breaches the monitor ing thresholds or val idat ion standards, an assessment is completed to determine whether a model performance post model adjustment is required to correct for the ident iﬁed model issue. Model performance post model adjustments are approved by the Group Credit Model Assessment Committee and will be removed when the models are updated to correct for the ident iﬁed model issue or the estimates return to being with in the monitor ing thresholds. As at 31 December 2023, model performance post model adjustments have been applied for 5 models out of the total of 172 models. In aggregate, these post model adjustments reduce the Group’s impa irment prov is ions by $31 m ill ion (2 per cent of modelled provis ions) compared w ith a $60 mill ion decrease at 31 December 2022. The most sign iﬁcant of these relates to an adjustment to decrease ECL for Korea Personal Loans as the IFRS 9 PD model is sensit ive to the h igher range of interest rates. In addit ion to these model performance post model adjustments, separate judgemental post model and management adjustments have also been applied as set out on pages 279 and 280. 2023 $ mill ion 2022 $ mill ion Model performance PMAs Corporate, Commercial & Institut ional Bank ing (3) (22) Consumer, Private & Business Banking (28) (38) Total model performance PMAs (31) (60) Key assumptions and judgements in determin ing expected credit loss Incorporation of forward-looking informat ion The evolving economic environment is a key determinant of the abil ity of a bank’s cl ients to meet their obligat ions as they fall due. It is a fundamental princ iple of IFRS 9 that the provis ions banks hold aga inst potential future Credit Risk losses should depend, not just on the health of the economy today, but should also take into account potential changes to the economic environment. For example, if a bank were to antic ipate a sharp slowdown in the world economy over the coming year, it should hold more provis ions today to absorb the credit losses likely to occur in the near future. To capture the effect of changes to the economic environment, the PDs and LGDs used to calculate ECL incorporate forward-looking informat ion in the form of forecasts of the values of economic variables and asset prices that are likely to have an effect on the repayment abil ity of the Group’s cl ients. The ‘base forecast’ of the economic variables and asset prices is based on management’s view of the ﬁve-year outlook, supported by projections from the Group’s in-house research team and outputs from a third-party model that project specif ic econom ic variables and asset prices. The research team takes consensus views into considerat ion, and sen ior management review project ions for some core country variables against consensus when forming their view of the outlook. For the period beyond ﬁve years, management util ises the in-house research view and third-party model outputs, which allow for a reversion to long-term growth rates or norms. All projections are updated on a quarterly bas is. Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linear ity In the Base Forecast – management’s view of the most likely outcome –the pace of growth of the world economy is expected to slow marginally in the near term. Global GDP is forecast to grow by just below 3 per cent in 2024. World GDP growth averaged 3.7 per cent for the 10 years prior to COVID-19 (between 2010 and 2019). The world economy should be able to achieve a soft landing after the most aggressive monetary tighten ing cycle in years, although risks abound. The lagged impact of aggressive central bank tighten ing is likely to be felt most acutely in developed economies. Linger ing inﬂat ion and geopol it ical developments are r isks to the global soft-landing scenario. The ongoing war in Ukraine, conﬂicts in the Middle East, ongoing US-China tensions, and the November 2024 US election are key sources of geopolit ical and polit ical r isk; they come against a backdrop of increas ing global fragmentation. On the inﬂat ion front, it is unclear whether it can slow on a sustained basis. Core inﬂat ion has remained sticky in some markets, signall ing pers istent underlying pressures. Structural factors – includ ing h igher ﬁscal deﬁcits, the cost of the cl imate transit ion and recent under-investment in fossil fuels – could keep inﬂat ion h igher than during the pre-COVID period. Oil prices and geopolit ical conﬂict are also sources of upside inﬂat ion r isk. While the quarterly Base Forecasts inform the Group’s strategic plan, one key requirement of IFRS 9 is that the assessment of provis ions should cons ider multiple future economic environments. For example, the global economy may grow more quickly or more slowly than the Base Forecast, and these variat ions would have d ifferent impl icat ions for the provis ions that the Group should hold today. As the negat ive impact of an economic downturn on credit losses tends to be greater than the posit ive impact of an economic upturn, if the Group sets provis ions only on the ECL under the Base Forecast it might mainta in a level of prov is ions that does not appropriately capture the range of potential outcomes. To address the inherent uncertainty in economic forecast, and the property of skewness (or non-linear ity), IFRS 9 requ ires reported ECL to be a probabil ity-we ighted ECL, calculated over a range of possible outcomes. 276 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle To assess the range of possible outcomes the Group simulates a set of 50 scenarios around the Base Forecast, calculates the ECL under each of them and assigns an equal weight of 2 per cent to each scenario outcome. These scenarios are generated by a Monte Carlo simulat ion, wh ich addresses the challenges of crafting many realist ic alternat ive scenarios in the many countries in which the Group operates by means of a model, which produces these alternative scenarios while consider ing the degree of h istor ical uncerta inty (or volatil ity) observed from Q1 1990 to Q3 2023 around economic outcomes, the trends in each macroeconomic variable modelled and the correlation in the unexplained movements around these trends. This naturally means that each of the 50 scenarios do not have a specif ic narrat ive, although collectively they explore a range of hypothetical alternative outcomes for the global economy, includ ing scenar ios that turn out better than expected and scenarios that amplify antic ipated stresses. The GDP graphs below illustrate the shape of the Base Forecast for key footprint markets in relation to prior periods’ actuals. The long-term growth rates are based on the pace of economic expansion expected for 2030. The tables below provide a summary of the Group’s Base Forecast for these markets. The peak/trough amounts show the highest and lowest points with in the Base Forecast. China’s GDP growth is expected to ease to 4.8 per cent in 2024 from over 5 per cent in 2023. This reﬂects a continued contraction in the property sector, a negative contribut ion from foreign trade, and low consumer and business conﬁdence. Sim ilarly, Hong Kong is also facing several headwinds with its GDP growth expected to ease to 2.9 per cent from 3.3 per cent in 2023. These headwinds include a weak property sector and elevated interest rates which will weigh on investment appetite for Hong Kong assets. Lim ited external demand from key markets w ill also weigh on exports. Growth in the US is expected to slow on the impact of tighter ﬁnanc ial and cred it condit ions and as the impact of previous interest rate increases by the central bank feed through to the economy. For sim ilar reasons, Eurozone growth is expected to remain weak in 2024. The uncertainty over the ongoing war in Ukraine, conﬂicts in the Middle East has hit global investor and business conﬁdence. Growth in India is expected to ease to 6 per cent from 6.7 per cent in 2023 due to impact from pre-election uncertaint ies, t ighter lending condit ions and global recess ion concerns. In contrast, GDP growth for Singapore is expected to accelerate to just over 2.5 per cent in 2024 from 0.8 per cent last year. Favourable base effects may boost exports, despite the soft global growth outlook. The global electronics and semiconductor industry is showing signs of bottoming out. Although a strong rebound is not expected, inventory restocking may provide a small boost to Singapore’s electronics sector. Korea’s economic growth will also beneﬁt from the turnaround in this key sector. GDP growth there is expected to reach 2.3 per cent in 2024 from 1.3 per cent last year. 15 Q1 16 Q1 18 Q1 17 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 25 Q1 27 Q1 28 Q1 26 Q1 24 Q1 -8 -4 0 4 8 12 16 20 China GDP YoY% Actual Long-term growth Forecast -10 -8 -6 -4 -2 0 2 4 6 8 10 Hong Kong GDP YoY% Actual Long-term growth 15 Q1 16 Q1 18 Q1 17 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 25 Q1 27 Q1 28 Q1 26 Q1 24 Q1 Forecast -4 -3 -2 -1 0 1 2 3 4 5 6 7 Korea GDP YoY% Actual Long-term growth 15 Q1 16 Q1 18 Q1 17 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 25 Q1 27 Q1 28 Q1 26 Q1 24 Q1 Forecast -15 -10 -5 0 5 10 15 20 Singapore GDP YoY% Actual Long-term growth 15 Q1 16 Q1 18 Q1 17 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 25 Q1 27 Q1 28 Q1 26 Q1 24 Q1 Forecast -30 -20 -10 0 10 20 30 India GDP YoY% Actual Long-term growth 15 Q1 16 Q1 18 Q1 17 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 25 Q1 27 Q1 28 Q1 26 Q1 24 Q1 Forecast 277 Standard Chartered – Annual Report 2023 Risk review and Capital review 2023 year-end forecasts China Hong Kong GDP growth (YoY%) Unemployment % 3-month interest rates % House prices⁵ (YoY %) GDP growth (YoY %) Unemployment % 3-month interest rates % House prices (YoY %) Base forecast 1 2023 5.4 4.1 2.0 (0.8) 3.3 3.0 4.8 (6.8) 2024 4.8 4.1 1.7 3.9 2.9 3.4 4.6 2.1 2025 4.5 4.0 1.8 5.6 2.5 3.4 4.1 3.8 2026 4.3 4.0 2.0 4.5 2.3 3.4 3.5 2.8 2027 4.0 3.9 2.2 4.4 2.4 3.4 2.5 2.7 5-year average 2 4.3 4.0 2.1 4.6 2.5 3.4 3.4 2.8 Quarterly peak 5.7 4.1 2.5 7.2 3.8 3.4 5.0 4.6 Quarterly trough 3.8 3.8 1.7 1.5 1.5 3.4 2.3 (1.1) Monte Carlo Low 3 0.6 3.3 0.8 (1.5) (3.8) 1.4 0.3 (19.3) High 4 7.7 4.4 3.8 12.0 8.2 6.4 8.3 25.5 2023 year-end forecasts Singapore Korea GDP growth (YoY%) Unemployment⁶ % 3-month interest rates % House prices (YoY%) GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY %) Base forecast 1 2023 0.8 2.7 4.1 6.8 1.3 2.7 3.8 (5.8) 2024 2.6 2.8 3.8 (0.2) 2.3 3.3 3.5 3.3 2025 3.1 2.8 3.3 0.4 2.5 3.3 3.1 5.0 2026 3.3 2.8 2.8 2.9 2.4 3.1 3.1 3.5 2027 2.8 2.8 2.4 3.9 2.2 3.0 3.1 2.4 5-year average 2 2.9 2.8 2.9 2.2 2.3 3.1 3.1 3.3 Quarterly peak 3.8 2.9 4.1 3.9 2.6 3.5 3.7 5.3 Quarterly trough 1.9 2.8 2.3 (0.7) 2.0 3.0 3.1 (0.3) Monte Carlo Low 3 (2.4) 1.7 0.6 (16.2) (2.3) 1.4 0.7 (6.1) High 4 8.5 3.8 5.9 19.2 7.0 5.8 6.3 12.5 2023 year-end forecasts India Brent Crude $ pb GDP growth (YoY%) Unemployment % 3month interest rates % House prices (YoY%) Base forecast 1 2023 6.7 NA 6.4 5.3 84.2 2024 6.0 NA 5.9 5.3 89.5 2025 6.0 NA 6.3 6.3 90.3 2026 6.4 NA 6.3 6.5 92.8 2027 6.5 NA 6.2 6.4 84.9 5-year average 2 6.2 NA 6.2 6.1 88.2 Quarterly peak 9.1 NA 6.3 6.5 93.8 Quarterly trough 4.4 NA 5.8 4.7 82.8 Monte Carlo Low 3 2.1 NA 2.7 (0.5) 46.0 High 4 10.5 NA 9.9 13.8 137.8 278 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle 2022 year-end forecasts China Hong Kong GDP growth (YoY%) Unemployment % 3-month interest rates % House prices⁵ (YoY%) GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY%) 5-year average 2 5.1 3.9 2.3 3.6 2.3 3.0 2.8 1.7 Quarterly peak 7.9 4.1 3.0 5.0 4.3 3.1 3.6 4.9 Quarterly trough 4.5 3.8 1.4 0.0 0.5 2.9 2.4 (8.4) Monte Carlo Low 3 1.1 3.4 0.6 (3.4) (3.8) 1.7 0.5 (22.0) High 4 9.6 4.3 4.4 10.0 8.0 4.2 6.1 26.8 2022 year-end forecasts Singapore Korea GDP growth (YoY%) Unemployment⁶ % 3-month interest rates % House prices (YoY%) GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY%) 5-year average 2 2.7 3.0 3.1 2.8 2.2 3.1 3.1 2.1 Quarterly peak 3.7 3.2 4.7 4.7 2.5 3.3 3.9 2.8 Quarterly trough 1.7 3.0 2.4 (2.4) 1.8 3.0 2.7 (0.4) Monte Carlo Low 3 (3.4) 2.1 0.8 (15.9) (2.8) 1.1 1.1 (5.4) High 4 8.6 4.5 5.6 20.4 7.0 4.9 5.9 10.0 2022 year-end forecasts India Brent crude $ pb GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY%) 5-year average 2 6.4 NA 5.6 5.7 106.6 Quarterly peak 7.7 NA 6.3 7.2 118.8 Quarterly trough 3.2 NA 5.3 1.6 88.0 Monte Carlo Low 3 1.5 NA 1.9 (1.1) 42.4 High 4 12.1 NA 9.5 13.0 204.2 1 Data presented are those used in the calculation of ECL. These may differ slightly to forecasts presented elsewhere in the Annual Report as they are ﬁnal ised before the period end. 2 5 year averages reported cover Q1 2024 to Q4 2028 for the 2023 annual report. They cover Q1 2023 to Q4 2027 for the numbers reported for the 2022 annual report. 3 Represents the 10th percentile in the range of economic scenarios used to determine non-linear ity. 4 Represents the 90th percentile in the range of economic scenarios used to determine non-linear ity. 5 A judgemental management adjustment is held in respect of the China commercial real estate sector as discussed on page 280. 6 Singapore unemployment rate covers the resident unemployment rate, which refers to cit izens and permanent res idents. 279 Standard Chartered – Annual Report 2023 Risk review and Capital review Impact of multiple economic scenarios The ﬁnal probabil ity-we ighted ECL reported by the Group is a simple average of the ECL for each of the 50 scenarios simulated using a Monte Carlo model. The Monte Carlo approach has the advantage that it generates many alternative scenarios that cover our global footprint. The total amount of non-linear ity, calculated as the d ifference between the probabil ity-we ighted ECL calculated by the Monte Carlo model and the unweighted base forecast ECL, is $44 mill ion (31 December 2022: $50 m ill ion). The CCIB and Central and other items portfolios accounted for $26 mill ion (31 December 2022: $44 m ill ion) of the calculated non-l inear ity w ith the remain ing $18 m ill ion (31 December 2022: $6 m ill ion) attr ibutable to CPBB portfolios. As the non-linear ity calculated for the CPBB portfolios at 31 December 2022 was relatively low, a judgemental post model adjustment of $34 mill ion was appl ied. Subsequent stand-back analysis was completed during the ﬁrst half of 2023 to benchmark the ECL non-linear ity calculated using the Monte Carlo model, which conﬁrmed that the calculated non-linear ity for CPBB portfol ios was appropriate and the judgemental post model adjustment was released. The impact of multiple economic scenarios on stage 1, stage 2 and stage 3 modelled ECL is set out in the table below, together with the management overlay and other judgemental adjustments. Base forecast $mill ion Multiple economic scenarios 1 $mill ion Management overlays and other judgemental adjustments $mill ion Total modelled ECL 2 $mill ion Total expected credit loss at 31 December 2023 1,071 44 165 1.280 Total expected credit loss at 31 December 2022 1,267 84 229 1,580 1 Includes judgemental post model adjustment of $nil mill ion (31 December 2022: $34 m ill ion) relat ing to Consumer, Private and Business Banking 2 Total modelled ECL comprises stage 1 and stage 2 balances of $1,105 mill ion (31 December 2022: $1,281 m ill ion) and $193 m ill ion (31 December 2022: $299 m ill ion) of modelled ECL on stage 3 loans 3 Includes ECL on Assets held for sale of $37 mill ion (31 December 2022: $10 m ill ion) The average expected credit loss under multiple scenarios is 4 per cent (2022: 7 per cent) higher than the expected credit loss calculated using only the most likely scenario (the Base Forecast). Portfolios that are more sensit ive to non-l inear ity include those with greater leverage and/or a longer tenor, such as Project and Shipp ing F inance portfolios. Other portfolios display min imal non-l inear ity ow ing to lim ited respons iveness to macroeconomic impacts for structural reasons, such as sign iﬁcant collateralisat ion as w ith the CPBB mortgage portfolios. Judgemental adjustments As at 31 December 2023, the Group held judgemental adjustments for ECL as set out in the table below. All of the judgemental adjustments have been determined after taking account of the model performance post model adjustments reported on page 275. They are reassessed quarterly and are reviewed and approved by the IFRS 9 Impairment Committee and will be released when no longer relevant. 31 December 2023 Corporate, Commercial & Institut ional Banking $ mill ion Consumer, Private & Business Banking Central & other $ mill ion Total $ mill ion Mortgages $ mill ion Credit Cards $ mill ion Other $ mill ion Total $ mill ion Judgemental post model adjustments – – 1 1 2 – 2 Judgemental management overlays: – China CRE 141 – – – – – 141 – Other – 1 2 2 5 17 22 Total judgemental adjustments 141 1 3 3 7 17 165 Judgemental adjustments by stage: Stage 1 17 1 3 6 10 – 27 Stage 2 124 – – (3) (3) 17 138 Stage 3 – – – – – – 31 December 2022 Corporate, Commercial & Institut ional Banking $ mill ion Consumer, Private & Business Banking Central & other $mill ion Total $mill ion Mortgages $ mill ion Credit Cards $ mill ion Other $ mill ion Total $mill ion Judgemental post model adjustments – 3 11 30 44 – 44 Judgemental management overlays: – China CRE 173 – – – – – 173 – Other 9 2 5 30 37 – 46 Total judgemental adjustments 182 5 16 60 81 – 263 Judgemental adjustments by stage: Stage 1 37 1 5 39 45 – 82 Stage 2 136 3 9 17 29 – 165 Stage 3 9 1 2 4 7 – 16 280 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Judgemental post model adjustments As at 31 December 2023, judgemental post model adjustments to increase ECL by a net $2 mill ion (31 December 2022: $44 mill ion increase) have been applied to certain CPBB models, primar ily to adjust for temporary factors impact ing modelled outputs. These will be released when these factors normalise. At 31 December 2022, $34 mill ion of the increase in ECL related to multiple economic scenarios, which was fully released in the ﬁrst half of 2023 (see ’Impact of multiple economic scenarios’). Judgemental management overlays China CRE The real estate market in China has now been in a downturn since late 2021 as evidenced by continued decline in sales, and investments in the sector. Liqu id ity issues experienced by Chinese property developers continued into 2023 with more developers defaulting on their obligat ions both offshore and onshore. During 2023, authorit ies on the ma inland have introduced a slew of polic ies to help rev ive the sector and restore buying sentiments. This has helped stabil ise the market to an extent in some cit ies, but demand and home prices remain muted overall. Continued policy relaxations, includ ing those related to house purchase restr ict ions, completion support for elig ible projects from onshore ﬁnancial inst itut ions, relaxation in mortgage rates, and further support for affordable housing, are key for reversing the continued decline in sales and investments and ensuring a stable outlook for 2024. The Group’s loans and advances to China CRE clients was $2.4 bill ion at 31 December 2023 (31 December 2022: $3.2 bill ion). Cl ient level analysis continues to be done, with clients being placed on purely precautionary or non-purely precautionary early alert, where appropriate, for closer monitor ing. G iven the evolving nature of the risks in the China CRE sector, a management overlay of $141 mill ion (31 December 2022: $173 mill ion) has been taken by est imat ing the impact of further deteriorat ion to exposures in this sector. The decrease from 31 December 2022 was primar ily dr iven by repayments and movement of some of the exposures to Stage 3. Other Overlays of $5 mill ion (31 December 2022: $16 m ill ion) have also been applied in CPBB to capture macroeconomic environment challenges caused by sovereign defaults or heightened sovereign risk, the impact of which is not fully captured in the modelled outcomes. An overlay of $17 mill ion (2022: nil) was applied in Central & Other due to a temporary market dislocat ion in the Africa and Middle East region. The remain ing COVID-19 overlay in CPBB of $21 mill ion that was held as at 31 December 2022 has been fully released in 2023. The stage 3 overlay in CCIB of $9 mill ion that was held as at 31 December 2022 following the Sri Lanka Sovereign default was also fully released in 2023. Stage 3 assets Credit-impa ired assets managed by Stressed Asset Group (SAG) incorporate forward-looking economic assumptions in respect of the recovery outcomes ident iﬁed and are assigned ind iv idual probabil ity we ight ings per IFRS 9. These assumptions are not based on a Monte Carlo simulat ion but are informed by the Base Forecast. Sensit iv ity of expected credit loss calculation to macroeconomic variables The ECL calculation relies on multiple variables and is inherently non-linear and portfolio-dependent, which impl ies that no single analysis can fully demonstrate the sensit iv ity of the ECL to changes in the macroeconomic variables. The Group has conducted a series of analyses with the aim of ident ify ing the macroeconomic variables which might have the greatest impact on the overall ECL. These encompassed single variable and multi-variable exercises, using simple up/ down variat ion and extracts from actual calculat ion data, as well as bespoke scenario design assessments. The primary conclusion of these exercises is that no ind iv idual macroeconomic variable is materially inﬂuent ial. The Group believes this is plausible as the number of variables used in the ECL calculation is large. This does not mean that macroeconomic variables are uninﬂuent ial; rather, that the Group believes that considerat ion of macroeconom ics should involve whole scenarios, as this aligns with the multi-variable nature of the calculation. The Group faces downside risks in the operating environment related to the uncertaint ies surround ing the macroeconomic outlook. To explore this, a sensit iv ity analysis of ECL was undertaken to explore the effect of slower economic recoveries across the Group’s footprint markets. Two downside scenarios were considered in particular to explore the current uncertaint ies over commod ity prices. The ﬁrst scenario, Global Stagﬂation, explores a temporary spike (relative to base) in commodity prices, inﬂat ion and interest rates in the near term from the ongoing war in Ukraine and conﬂicts in the Middle East. The second more severe scenario is based on the Bank of England’s most recent Annual Cyclical Scenario (ACS), which explores a persistent rise in commodity prices, inﬂat ion and interest rates. 281 Standard Chartered – Annual Report 2023 Risk review and Capital review Baseline Global Stagﬂation ACS Five year average Peak/Trough Five year average Peak/Trough Five year average Peak/Trough China GDP 4.3 5.7 / 3.8 3.7 6.2 / (0.8) 2.2 3.9 / (3.4) China unemployment 4.0 4.1 / 3.8 5.3 6.4 / 3.8 5.3 5.7 / 4.6 China property prices 4.6 7.2 / 1.5 4.4 15.9 / (17.5) (5.5) 9.2 / (16.3) Hong Kong GDP 2.5 3.8 / 1.5 1.8 5.6 / (1.4) (0.6) 2.9 / (9.4) Hong Kong unemployment 3.4 3.4 / 3.4 5.4 7.4 / 3.4 6.3 7.5 / 3.9 Hong Kong property prices 2.8 4.6 / (1.1) 1.6 9.4 / (3.8) (9.7) 6.2 / (22.5) US GDP 1.7 2.3 / 0.8 1.4 2.7 / (1.3) 0.1 1.5 / (4.8) Singapore GDP 2.9 3.8 / 1.9 2.7 5.0 / (1.6) 1.2 5.9 / (8.7) India GDP 6.2 9.1 / 4.4 4.9 6.6 / 0.6 4.2 7.3 / (0.7) Crude oil 88.2 93.8 / 82.8 95.3 152.9 / 82.8 118 147.9 / 83.6 Period covered from Q1 2024 to Q4 2028 Base (GDP, YoY%) Global Stagﬂation Difference from Base 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 China 4.8 4.5 4.3 4.0 3.8 1.5 1.6 4.8 5.7 4.8 (3.3) (2.9) 0.5 1.7 1.0 Hong Kong 2.9 2.5 2.3 2.4 2.2 0.9 (1.0) 1.7 5.0 2.4 (2.0) (3.5) (0.6) 2.5 0.2 US 1.4 1.5 1.8 1.9 1.9 0.0 0.2 1.8 2.6 2.4 (1.5) (1.3) 0.0 0.7 0.5 Singapore 2.6 3.1 3.3 2.8 2.6 0.3 0.6 3.7 4.8 4.0 (2.3) (2.4) 0.4 2.0 1.3 India 6.0 5.5 6.5 6.4 6.6 2.6 3.9 5.6 6.5 5.7 (3.4) (1.6) (0.8) 0.1 (0.9) Each year is from Q1 to Q4. For example 2024 is from Q1 2024 to Q4 2024. Base (GDP, YoY%) ACS Difference from Base 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 China 4.8 4.5 4.3 4.0 3.8 (0.9) 1.3 3.7 3.4 3.4 (5.6) (3.2) (0.5) (0.6) (0.4) Hong Kong 2.9 2.5 2.3 2.4 2.2 (5.3) (3.5) 2.6 1.8 1.5 (8.1) (6.0) 0.3 (0.6) (0.7) US 1.4 1.5 1.8 1.9 1.9 (1.7) (1.5) 1.0 1.3 1.3 (3.2) (2.9) (0.8) (0.6) (0.6) Singapore 2.6 3.1 3.3 2.8 2.6 (3.8) 0.0 4.2 2.9 2.7 (6.4) (3.1) 0.9 0.1 0.1 India 6.0 5.5 6.5 6.4 6.6 2.8 2.2 4.9 5.3 5.5 (3.2) (3.3) (1.6) (1.1) (1.2) Each year is from Q1 to Q4. For example 2024 is from Q1 2024 to Q4 2024 The total modelled stage 1 and 2 ECL provis ions ( includ ing both on and off-balance sheet instruments) would be approximately $153 mill ion h igher under the Global Stagﬂation scenario, and $489 mill ion h igher under the ACS scenario than the baseline ECL provis ions (wh ich excluded the impact of multiple economic scenarios and management overlays which may already capture some of the risks in these scenarios). Stage 2 exposures as a proportion of stage 1 and 2 exposures would increase from 3.7 per cent in the base case to 4.1 per cent and 6.5 per cent respectively under the Global Stagﬂation and ACS scenarios. This includes the impact of exposures transferring to stage 2 from stage 1 but does not consider an increase in stage 3 defaults. Under both scenarios, the major ity of the increase in ECL in CCIB came from the main corporate and CRE portfolios. For the main corporate portfolios, ECL would increase by $20 mill ion and $79 m ill ion for the Global stagﬂat ion and ACS scenarios respectively and the proportion of stage 2 exposures would increase from 5.5 per cent in the base case to 5.9 per cent and 8.2 per cent respectively. For the CPBB portfolios, most of the increase in ECL came from the unsecured retail portfolios, with the Taiwan and Korea Personal Loans impacted. Under the Global Stagﬂation and ACS scenarios, Credit card ECL would increase by $28 mill ion and $66 mill ion respect ively, largely in the Singapore and Hong Kong portfolios and the proportion of stage 2 credit card exposures would increase from 1.5 per cent in the base case to 2.1 per cent and 3.3 per cent for each scenario respectively, with the Singapore portfolio most impacted. Mortgages ECL would increase by $1 mill ion and $45 m ill ion for each scenario respectively, with portfolios in Hong Kong and Korea most impacted and the proportion of stage 2 mortgages would increase from 1.2 per cent in the base case to 1.7 per cent and 14 per cent respectively, with the Hong Kong and Singapore portfolios most impacted. There was no material change in modelled stage 3 provis ions as these primar ily relate to unsecured CPBB exposures for which the LGD is not sensit ive to changes in the macroeconomic forecasts. There is also no material change for non-modelled stage 3 exposures as these are more sensit ive to cl ient specif ic factors than to alternat ive macroeconomic scenarios. The actual outcome of any scenario may be materially different due to, among other factors, the effect of management actions to mit igate potent ial increases in risk and changes in the underlying portfolio. 282 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Gross as reported 1 $ mill ion ECL as reported 2 $ mill ion ECL Base case $ mill ion ECL Global Stagﬂation $ mill ion ECL ACS $ mill ion Stage 1 modelled Corporate, Commercial & Institut ional Bank ing 337,189 134 124 136 164 Consumer, Private & Business Banking 190,999 315 306 355 455 Ventures 1,015 15 15 15 15 Central & Other items 194,673 35 32 40 50 Total stage 1 excluding management judgements 723,876 499 477 546 684 Stage 2 modelled Corporate, Commercial & Institut ional Bank ing 16,873 194 184 234 333 Consumer, Private & Business Banking 2,472 143 134 167 263 Ventures 54 21 21 21 21 Central & Other items 2,869 21 18 19 22 Total stage 2 excluding management judgements 22,268 379 357 441 639 Total Stage 1 & 2 modelled Corporate, Commercial & Institut ional Bank ing 354.062 328 308 370 497 Consumer, Private & Business Banking 193,471 458 440 522 718 Ventures 1,069 36 36 36 36 Central & Other items 197,542 56 50 59 72 Total excluding management judgements 746,144 878 834 987 1,323 Stage 3 exposures excluding other assets 8,144 4,499 Other ﬁnancial assets 3 111,478 59 ECL from management judgements 165 Total ﬁnancial assets reported at 31 December 2023 865,766 5,601 1 Gross balances includes both on- and off- balance sheet instruments; allocation between stage 1 and 2 will differ by scenario 2 Includes ECL for both on- and off- balance sheet instruments 3 Includes cash and balances at central banks, Accrued income, Other ﬁnanc ial assets; and Assets held for sale Sign iﬁcant increase in credit risk (SICR) Quantitat ive cr iter ia SICR is assessed by comparing the risk of default at the reporting date to the risk of default at orig inat ion. Whether a change in the risk of default is sign iﬁcant or not is assessed using quantitat ive and qual itat ive cr iter ia. These cr iter ia have been separately deﬁned for each business and where meaningful are consistently applied across business lines. Assets are considered to have experienced SICR if they have breached both relative and absolute thresholds for the change in the average annualised IFRS 9 lifet ime probab il ity of default (IFRS 9 PD) over the residual term of the exposure. The absolute measure of increase in credit risk is used to capture instances where the IFRS 9 PDs on exposures are relatively low at in it ial recognit ion as these may increase by several multiples without representing a sign iﬁcant increase in credit risk. Where IFRS 9 PDs are relatively high at in it ial recognit ion, a relat ive measure is more appropriate in assessing whether there is a sign iﬁcant increase in credit risk, as the IFRS 9 PDs increase more quickly. The SICR thresholds have been calibrated based on the following princ iples: • Stabil ity – The thresholds are set to ach ieve a stable stage 2 population at a portfolio level, trying to min im ise the number of accounts moving back and forth between stage 1 and stage 2 in a short period of time • Accuracy – The thresholds are set such that there is a materially higher propensity for stage 2 exposures to eventually default than is the case for stage 1 exposures • Dependency from backstops – The thresholds are stringent enough such that a high proportion of accounts transfer to stage 2 due to movements in forward-looking IFRS 9 PDs rather than relying on backward-looking backstops such as arrears • Relationsh ip w ith business and product risk proﬁles – the thresholds reﬂect the relative risk differences between different products, and are aligned to business processes For CCIB clients the quantitat ive thresholds are a relat ive 100 per cent increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 50 and 100 bps. For Consumer and Business Banking clients, portfolio specif ic quantitat ive thresholds in Hong Kong, Singapore, Malaysia, UAE and Taiwan are applied for credit cards and one personal loan portfolio. The thresholds include relative and absolute increases in IFRS 9 PD with average lifet ime IFRS 9 PD cut-offs for those exposures that are with in a range of customer util isat ion lim its (for cred it cards) and remain ing tenor (for personal loans) and different iate between exposures that are current and those that are 1 to 29 days past due. 283 Standard Chartered – Annual Report 2023 Risk review and Capital review The range of thresholds applied are: Portfolio Relative IFRS 9 PD increase (%) Absolute IFRS 9 PD increase (%) Customer util isat ion (%) Remain ing tenor (%) Average IFRS 9 PD (lifet ime) Credit cards – Current 50% – 150% 3.4% – 9.3% 15% – 90% – 4.15% – 11.6% Credit cards – 1-29 days past due 100% – 210% 3.5% – 6.1% 25% – 67% – 1.5% – 18.5% Personal loans – Current – 3.5% – 70% 2.8% Personal loan – 1-29 days past due 25% 3% – 75% – For all other Consumer and Business Banking portfolios, the quantitat ive SICR thresholds appl ied are a relative threshold of 100 per cent increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 100 and 350 bps depending on the product. Certain countries have a higher absolute threshold reﬂecting the lower default rate with in the ir personal loan portfolios compared with the Group’s other personal loan portfolios. Private Banking clients are assessed qualitat ively, based on a delinquency measure relating to collateral top-ups or sell-downs. Qualitat ive cr iter ia Qualitat ive factors that ind icate that there has been a sign iﬁcant increase in credit risk include processes linked to current risk management, such as placing loans on non-purely precautionary early alert. Backstop Across all portfolios, accounts that are 30 or more days past due (DPD) on contractual payments of princ ipal and/or interest that have not been captured by the criter ia above are considered to have experienced a sign iﬁcant increase in credit risk. Expert credit judgement may be applied in assessing SICR to the extent that certain risks may not have been captured by the models or through the above criter ia. Such instances are expected to be rare, for example due to events and material uncertaint ies ar is ing close to the report ing date. CCIB clients Quantitat ive cr iter ia Exposures are assessed based on both the absolute and the relative movement in the IFRS 9 PD from orig inat ion to the reporting date as described above. To account for the fact that the mapping between internal credit grades (used in the orig inat ion process) and IFRS 9 PDs is non-linear (e.g. a one-notch downgrade in the investment grade universe results in a much smaller IFRS 9 PD increase than in the sub-investment grade universe), the absolute thresholds have been different iated by cred it quality at orig inat ion, as measured by internal credit grades being investment grade or sub-investment grade. Qualitat ive cr iter ia All assets of clients that have been placed on early alert (for non-purely precautionary reasons) are deemed to have experienced a sign iﬁcant increase in credit risk. An account is placed on non-purely precautionary early alert if it exhib its r isk or potential weaknesses of a material nature requir ing closer mon itor ing, superv is ion or attent ion by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deteriorat ion of repayment prospects and the likel ihood of be ing downgraded. Indicators could include a rapid erosion of posit ion w ith in the industry, concerns over management’s abil ity to manage operat ions, weak/deteriorat ing operat ing results, liqu id ity strain and overdue balances, among other factors. All client assets that have been assigned a CG12 rating, equivalent to ‘Higher risk’, are deemed to have experienced a sign iﬁcant increase in credit risk. Accounts rated CG12 are primar ily managed by relat ionsh ip managers in the CCIB unit with support from SAG for certain accounts. All CCIB clients are placed in CG12 when they are 30 DPD unless they are granted a waiver through a strict governance process. Consumer and Business Banking clients Quantitat ive cr iter ia Material portfolios (deﬁned as a combinat ion of country and product, for example Hong Kong mortgages, Singapore credit cards, Taiwan personal loans) for which a statist ical model has been built, are assessed based on both the absolute and relative movement in the IFRS 9 PD from orig inat ion to the reporting date as described previously in page 273. For these portfolios, the orig inal l ifet ime IFRS 9 PD term structure is determined based on the orig inal Appl icat ion Score or R isk Segment of the client. Qualitat ive and backstop cr iter ia Accounts that are 30 DPD that have not been captured by the quantitat ive cr iter ia are cons idered to have experienced a sign iﬁcant increase in credit risk. For less material portfolios, which are modelled based on a roll-rate or loss-rate approach, SICR is primar ily assessed through the 30 DPD tr igger. In addit ion, SICR is also assessed for where specif ic r isk elevation events have occurred in a market that are not yet reﬂected in modelled outcomes or in other metrics. This is applied collectively either to impacted specif ic products/customer cohorts or across the overall consumer banking portfolio in the affected market. 284 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Private Banking clients For Private Banking clients, SICR is assessed by referencing the nature and the level of collateral against which credit is extended (known as ‘Classes of Risk’). Qualitat ive cr iter ia For all Private Banking classes, in line with risk management practice, an increase in credit risk is deemed to have occurred where margin ing or loan-to-value covenants have been breached. For Class I assets (lending against divers iﬁed l iqu id collateral), if these margin ing requ irements have not been met with in 30 days of a trigger, a sign iﬁcant increase in credit risk is assumed to have occurred. For Class I and Class III assets (real-estate lending), a sign iﬁcant increase in credit risk is assumed to have occurred where the bank is unable to ‘sell down’ the applicable assets to meet revised collateral requirements with in ﬁve days of a trigger. Class II assets are typically unsecured or partially secured, or secured against ill iqu id collateral such as shares in private companies. Sign iﬁcant cred it deteriorat ion of these assets is deemed to have occurred when any early alert trigger has been breached. Debt securit ies Quantitat ive cr iter ia For debt securit ies or ig inated before 1 January 2018, the bank is util is ing the low Credit Risk simpl iﬁed approach, where debt securit ies w ith an internal credit rating mapped to an investment grade equivalent are allocated to stage 1 and all other debt securit ies are allocated to stage 2. Debt secur it ies orig inated after 1 January 2018 are assessed based on the absolute and relative movements in IFRS 9 PD from orig inat ion to the reporting date using the same thresholds as for Corporate, Commercial and Institut ional Bank ing clients. Qualitat ive cr iter ia Debt securit ies ut il ise the same qual itat ive cr iter ia as the Corporate, Commercial and Institut ional Bank ing client segments, includ ing be ing placed on non-purely precautionary early alert or being classif ied as CG12. Assessment of credit-impa ired ﬁnancial assets Consumer and Business Banking clients The core components in determin ing cred it-impa ired expected credit loss provis ions are the value of gross charge- off and recoveries. Gross charge-off and/or loss provis ions are recognised when it is established that the account is unlikely to pay through the normal process. Recovery of unsecured debt post credit impa irment is recognised based on actual cash collected, either directly from clients or through the sale of defaulted loans to third-party inst itut ions. Release of credit impa irment prov is ions for secured loans is recognised if the loan outstanding is paid in full (release of full provis ion), or the provis ion is higher than the loan outstanding (release of the excess provis ion). CCIB and Private Banking clients Credit-impa ired accounts are managed by the Group’s special ist recovery un it, Stressed Asset Group (SAG), which is independent from its main businesses. Where a portion of exposure is considered not recoverable, a stage 3 credit impa irment prov is ion is raised. This stage 3 provis ion is the difference between the loan-carrying amount and the probabil ity-we ighted present value of estimated future cash ﬂows, reﬂecting a range of scenarios (typically the Upside, Downside and Likely recovery outcomes). Where the exposure is secured by collateral, the values used will incorporate the impact of forward-looking economic informat ion on the value recoverable collateral and time to realise the same. The ind iv idual circumstances of each client are considered when SAR estimates future cashﬂows and the tim ing of future recoveries which involves sign iﬁcant judgement. All ava ilable sources, such as cashﬂow aris ing from operat ions, selling assets or subsid iar ies, realis ing collateral or payments under guarantees, are considered. In any decis ion relat ing to the rais ing of prov is ions, the Group attempts to balance econom ic condit ions, local knowledge and exper ience, and the results of independent asset reviews. Write-offs Where it is considered that there is no realist ic prospect of recovering a portion of an exposure against which an impa irment prov is ion has been ra ised, that amount will be written off. Governance and applicat ion of expert cred it judgement in respect of expected credit losses The Group’s Credit Policy and Standards framework details the requirements for continuous monitor ing to ident ify any changes in credit quality and resultant ratings, as well as ensuring a consistent approach to monitor ing, manag ing and mit igat ing credit risks. The framework aligns with the governance of ECL estimat ion through the early recogn it ion of sign iﬁcant deter iorat ions in ratings which drive stage 2 and 3 ECL. The models used in determin ing expected cred it losses are reviewed and approved by the Group Credit Model Assessment Committee (CMAC), which is appointed by the Model Risk Committee. CMAC has the responsib il ity to assess and approve the use of models and to review all IFRS 9 interpretat ions related to models. CMAC also provides oversight on operational matters related to model development, performance monitor ing and model val idat ion activ it ies, includ ing standards and regulatory matters. Prior to submiss ion to CMAC for approval, the models are validated by GMV, a function which is independent of the business and the model developers. GMV’s analysis comprises review of model documentation, model design and methodology, data validat ion, rev iew of the model development and calibrat ion process, out-of-sample performance testing, and assessment of compliance review against IFRS 9 rules and internal standards. 285 Standard Chartered – Annual Report 2023 Risk review and Capital review A quarterly model monitor ing process is in place that uses recent data to compare the differences between model predict ions and actual outcomes aga inst approved thresholds. Where a model’s performance breaches the monitor ing thresholds, an assessment of whether a PMA is required to correct for the ident iﬁed model issue is completed. Key inputs into the calculation and resulting expected credit loss provis ions are subject to rev iew and approval by the IFRS 9 Impairment Committee (IIC) which is appointed by the Group Risk Committee. The IIC consists of senior representatives from Risk, Finance, and Group Economic Research. It meets at least twice every quarter; once before the models are run to approve key inputs into the calculation, and once after the models are run to approve the expected credit loss provis ions and any judgemental overrides that may be necessary. The IFRS 9 Impairment Committee: • Oversees the appropriateness of all Business Model Assessment and Solely Payments of Princ ipal and Interest (SPPI) tests • Reviews and approves expected credit loss for ﬁnanc ial assets classif ied as stages 1, 2 and 3 for each ﬁnancial reporting period • Reviews and approves stage allocation rules and thresholds • Approves material adjustments in relation to expected credit loss for fair value through other comprehensive income (FVOCI) and amortised cost ﬁnanc ial assets • Reviews, challenges and approves base macroeconomic forecasts and the multiple macroeconomic scenarios approach that are util ised in the forward-looking expected credit loss calculations The IFRS 9 Impairment Committee is supported by an Expert Panel which also reviews and challenges the base case projections and mult iple macroeconomic scenarios. The Expert Panel consists of members of Enterprise Risk Management (which includes the Scenario Design team), Finance, Group Economic Research and country representatives of major jur isd ict ions. PMAs may be applied to account for ident iﬁed weaknesses in model estimates. The processes for ident ify ing the need for, calculating the level of, and approving PMAs are prescribed in the Credit Risk IFRS 9 ECL Model Family Standards, which are approved by the Global Head, Model Risk Management. PMA calculation methodologies are reviewed by GMV and submitted to CMAC as the model approver or the IIC. All PMAs have a remediat ion plan to ﬁx the ident iﬁed model weakness, and these plans are reported to and tracked at CMAC. In addit ion, R isk Event Overlays account for events that are sudden and therefore not captured in the Base Case Forecast or the resulting ECL calculated by the models. All Risk Event Overlays must be approved by the IIC having considered the nature of the event, why the risk is not captured in the model, and the basis on which the quantum of the overlay has been calculated. Risk Event Overlays are subject to quarterly review and re-approval by the IIC and will be released when the risks are no longer relevant. 286 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Traded Risk Traded Risk is the potential for loss resulting from activ it ies undertaken by the Group in ﬁnanc ial markets. Under the Enterprise Risk Management Framework, the Traded Risk Framework brings together Market Risk, Counterparty Credit Risk and Algorithm ic Trad ing. Traded Risk Management is the core risk management function supporting market- facing businesses, predominantly Financ ial Markets and Treasury Markets. Market Risk (audited) Market Risk is the potential for fair value loss due to adverse moves in ﬁnanc ial markets. The Group’s exposure to Market Risk arises predominantly from the following sources: • Trading book: – The Group provides clients with access to ﬁnanc ial markets, facil itat ion of which entails the Group taking moderate Market Risk posit ions. All trad ing teams support client activ ity. There are no propr ietary trading teams. Hence, income earned from Market Risk-related activ it ies is primar ily dr iven by the volume of client activ ity rather than risk-taking • Non-trading book: – The Treasury Markets desk is required to hold a liqu id assets buffer, much of which is held in high-quality marketable debt securit ies – The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these income streams are not hedged, the Group is subject to Structural Foreign Exchange Risk which is reﬂected in reserves A summary of our current polic ies and pract ices regarding Market Risk management is provided in the Princ ipal R isks section (page 323). The primary categories of Market Risk for the Group are: • Interest Rate Risk: aris ing from changes in yield curves and impl ied volat il it ies on interest rate options • Foreign Exchange Rate Risk: aris ing from changes in currency exchange rates and impl ied volat il it ies on foreign exchange options • Commodity Risk: aris ing from changes in commodity prices and impl ied volat il it ies on commodity options; covering energy, precious metals, base metals and agriculture • Credit Spread Risk: aris ing from changes in the price of debt instruments and credit-linked derivat ives, dr iven by factors other than the level of risk-free interest rates • Equity Risk: aris ing from changes in the prices of equit ies, equity ind ices, equ ity baskets and impl ied volat il it ies on related options Market risk movements (audited) Value at Risk (VaR) allows the Group to manage Market Risk across the trading book and most of the fair valued non- trading books. The average level of total trading and non-trading VaR in 2023 was $53.3 mill ion, 1.5 per cent h igher than 2022 ($52.5 mill ion). The year end level of total trad ing and non- trading VaR in 2023 was $44.5 mill ion, 20.2 per cent lower than 2022 ($55.8 mill ion), due to a reduct ion in non-trading posit ions. For the trading book, the average level of VaR in 2023 was $21.5 mill ion, 19.4 per cent h igher than 2022 ($18.0 mill ion). Trading activ it ies have remained relatively unchanged, and client driven. Daily value at risk (VaR at 97.5%, one day) (audited) Trading 1 and non-trading 2 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Interest Rate Risk 39.5 54.1 23.2 30.5 27.8 42.1 21.0 24.7 Credit Spread Risk 33.8 48.0 25.0 31.7 34.2 47.1 20.3 32.9 Foreign Exchange Risk 7.0 12.2 4.2 7.4 6.5 10.3 4.8 6.8 Commodity Risk 5.8 9.7 3.7 4.3 7.0 11.9 3.5 8.3 Equity Risk 0.1 0.4 – – 0.1 0.2 – 0.1 Divers iﬁcation effect (32.9) N/A N/A (29.4) (23.1) N/A N/A (17.0) Total 53.3 65.5 44.2 44.5 52.5 64.1 40.3 55.8 Trading 1 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Interest Rate Risk 13.1 20.4 7.7 11.6 8.1 11.7 5.3 9.0 Credit Spread Risk 9.4 12.4 7.4 9.4 9.5 14.9 5.0 8.7 Foreign Exchange Risk 7.0 12.2 4.2 7.4 6.5 10.3 4.8 6.8 Commodity Risk 5.8 9.7 3.7 4.4 7.0 11.9 3.5 8.3 Equity Risk – – – – – – – – Divers iﬁcation effect (13.8) N/A N/A (11.5) (13.1) N/A N/A (11.0) Total 21.5 30.6 14.7 21.3 18.0 24.4 12.6 21.8 287 Standard Chartered – Annual Report 2023 Risk review and Capital review Non-trading 2 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Interest Rate Risk 34.2 43.6 19.7 23.9 26.3 44.5 18.1 23.5 Credit Spread Risk 28.3 40.1 21.5 24.4 28.8 37.8 18.7 29.2 Equity Risk 0.1 0.4 – – 0.1 0.2 – 0.1 Divers iﬁcation effect (18.6) N/A N/A (12.7) (10.6) N/A N/A (11.5) Total 44.0 53.4 32.0 35.6 44.6 52.5 35.1 41.3 The following table sets out how trading and non-trading VaR is distr ibuted across the Group’s bus inesses: 2023 2022 Average $mill ion High $mill ion Low $mill ion Year End $mill ion Average $mill ion High $mill ion Low $mill ion Year End $mill ion Trading 1 and non-trading 2 53.3 65.5 44.2 44.5 52.5 64.1 40.3 55.8 Trading 1 Macro Trading 3 13.8 20.2 9.2 15.4 12.8 17.4 10.2 16.9 Global Credit 12.8 18.2 8.5 10.1 10.1 15.7 4.2 8.4 XVA 4.8 7.0 3.4 4.5 3.9 5.0 2.4 4.6 Divers iﬁcation effect (9.9) N/A N/A (8.7) (8.8) N/A N/A (8.1) Total 21.5 30.6 14.7 21.3 18 24.4 12.6 21.8 Non-trading 2 Treasury 4 43.4 50.2 31.1 34.9 38.7 47.5 29.7 40.3 Global Credit 3.9 13.6 2.0 4.0 3.4 5.0 2.3 3.5 Listed Private Equity 0.1 0.4 0.0 0.0 0.1 0.2 – 0.1 Divers iﬁcation effect (3.4) N/A N/A (3.3) 2.4 N/A N/A (2.6) Total 44.0 53.4 32.0 35.6 44.6 52.5 35.1 41.3 1 The trading book for Market Risk is deﬁned in accordance with the UK onshored Capital Requirements Regulation Part 3 Title I Chapter 3, which restricts the posit ions perm itted in the trading book 2 The non-trading book VaR does not include syndicated loans 3 Macro Trading comprises the Rates, FX and Commodit ies bus inesses 4 Treasury comprises Treasury Markets and Treasury Capital Management businesses Risks not in VaR In 2023, the main market risks not reﬂected in VaR were: • Basis risks for which the histor ical market pr ice data is lim ited and is therefore proxied, giv ing r ise to potential proxy basis risk that is not captured in VaR • Potential depeg risk from currencies currently pegged or managed, as the histor ical one-year VaR observat ion period does not reﬂect the possib il ity of a change in the currency regime, such as sudden depegging • Volatil ity skew r isk due to movements in options volatil it ies at different strikes while VaR reﬂects only movements in at-the- money volatil it ies • Deal contingent risk where a client is granted the right to cancel a hedging trade contingent on condit ions not be ing met with in a t ime window Addit ional cap ital is set aside to cover such ‘risks not in VaR’. 288 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Backtesting In 2023, there were ﬁve regulatory backtesting negative exceptions at Group level (in 2022 there were eight regulatory backtesting negative exceptions at Group level). Group exceptions occurred on: • 16 March: After the US authorit ies put S il icon Valley Bank and S ignature Bank into admin istrat ion there were strong market reactions, includ ing notable interest rate yield rises on 16 March • 1 June: After announcement of planned potential economic reforms in Niger ia, there were sharp movements in the offshore Naira FX market in antic ipat ion of Naira devaluation • 12 June: After the governor of the Central Bank of Niger ia was removed there were further sharp movements in the offshore Naira FX market • 1 November and 3 November: After the Niger ian government announced on 30 October that it plans to target an exchange rate of 750 Naira per dollar, the onshore spot market became more volatile on low volumes. The VaR model is currently being enhanced to increase its responsiveness to abrupt upturns in market volatil ity. There have been ﬁve Group exceptions in the previous 250 business days. This is with in the ‘amber zone’ appl ied internat ionally to internal models by bank supervisors (Basel Committee on Banking Supervis ion, Superv isory framework for the use of backtesting in conjunct ion w ith 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 proﬁt and loss conﬁdence level given by the VaR model with the hypothetical proﬁt and loss of each day given the actual market movement without taking into account any intra-day trading activ ity. -60 -40 -20 0 20 40 60 80 100 120 140 2023 Backtesting chart Internal model approach regulatory trading book at Group level Hypothetical proﬁt and loss (P&L) versus VaR (99 per cent, one day) Hypothetical P&L Posit ive VaR at 99% Negative VaR at 99% Negative exceptions Jan 2023 Feb 2023 Mar 2023 Apr 2023 May 2023 Jun 2023 Jul 2023 Aug 2023 Sep 2023 Oct 2023 Nov 2023 Dec 2023 Posit ive except ions Trading loss days 2023 2022 Number of loss days reported for Financ ial Markets trad ing book total product income 1 16 15 1 Includes credit valuation adjustment (CVA) and funding valuation adjustment (FVA), and excludes Treasury Markets business (non-trading), period ic valuat ion changes for Capital Markets, expected loss provis ions, overn ight indexed swap (OIS) discount ing and account ing adjustments such as debit valuation adjustments Average daily income earned from Market Risk-related activ it ies 1 (audited) The average level of total trading daily income in 2023 was $12 mill ion, 14 per cent lower than 2022 ($14 m ill ion). The decrease is largely attributable to lower income in Commodit ies in 2023 on the back of lower volatil ity and fall ing crude oil prices. Addit ionally, the decrease in FX business was on the back of lower cross-border ﬂows and muted FX volatil ity. The average level of total non-trading daily income in 2023 was -$0.7 mill ion, 217 per cent lower than 2022 ($0.6 m ill ion). The decrease is primar ily attr ibutable to lower income from the Credit Solutions business. Trading 2023 $mill ion 2022 $mill ion Interest Rate Risk 4.5 5.0 Credit Spread Risk 1.2 1.4 Foreign Exchange Risk 5.5 6.3 Commodity Risk 0.8 1.3 Equity Risk – – Total 12.0 14.0 289 Standard Chartered – Annual Report 2023 Risk review and Capital review Non-trading $mill ion $mill ion Interest Rate Risk (0.1) – Credit Spread Risk (0.7) 0.6 Equity Risk 0.1 – Total (0.7) 0.6 1 Reﬂects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and non funded income which are generated from Market Risk-related activ it ies. Rates, XVA and Treasury income are included under Interest Rate Risk whilst Credit Trading income is included under Credit Spread Risk Structural foreign exchange exposures The table below sets out the princ ipal structural fore ign exchange exposures (net of investment hedges) of the Group. 2023 $mill ion 2022 1 $mill ion Hong Kong dollar 4,662 3,333 Renminb i 3,523 3,497 Indian rupee 3,309 4,396 Singapore dollar 2,415 1,888 Korean won 2,114 2,409 Malaysian ringg it 1,540 1,571 Taiwanese dollar 1,222 1,055 Euro 1,125 893 Bangladeshi Taka 1,007 832 Thai baht 782 782 UAE dirham 709 670 Pakistan i rupee 306 352 Indonesian rupiah 293 261 Other 3,206 3,233 26,213 25,172 1 Prior year has been represented to provide granular currency details As at 31 December 2023, the Group had taken net investment hedges using derivat ive ﬁnancial instruments to partly cover its exposure to the Hong Kong dollar of $5,603 mill ion (31 December 2022: $6,236 mill ion), Korean won of $2,884 mill ion (31 December 2022: $3,330 m ill ion), Ind ian rupee of $1,809 mill ion (31 December 2022: $620 m ill ion), Renm inb i of $1,516 mill ion (31 December 2022: $1,608 m ill ion), UAE d irham of $1,470 mill ion (31 December 2022: $1,334 m ill ion), S ingapore dollar of $1,047 mill ion (31 December 2022: $1,608 m ill ion), Taiwanese dollar of $1,025 mill ion (31 December 2022: $1,075 mill ion) and South Afr ican rand of $64 mill ion (31 December 2022: $nil mill ion). An analys is has been performed on these exposures to assess the impact of a 1 per cent fall in the US dollar exchange rates, adjusted to incorporate the impacts of correlations of these currencies to the US dollar. The impact on the posit ions above would be an increase of $260 mill ion (31 December 2022: $421 mill ion). Changes in the valuation of these posit ions are taken to reserves. For analys is of the Group’s capital posit ion and requ irements, refer to the Capital Review (page 338). Counterparty Credit Risk Counterparty Credit Risk is the potential for loss in the event of the default of a derivat ive counterparty, after tak ing into account the value of elig ible collaterals and r isk mit igat ion techniques. The Group’s counterparty credit exposures are included in the Credit Risk section. Derivat ive ﬁnancial instruments Credit Risk mit igat ion The Group enters into master netting agreements, which in the event of default result in a single amount owed by or to the counterparty through netting the sum of the posit ive and negative mark-to-market values of applicable derivat ive transact ions. In addit ion, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mit igant to the exposure. Cash collateral includes collateral called under a variat ion marg in process from counterparties if total uncollateralised mark-to- market exposure exceeds the threshold and min imum transfer amount specif ied in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to-market values of posit ions are in the counterparty’s favour and exceed an agreed threshold. 290 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Liqu id ity and Funding Risk Liqu id ity and Funding Risk is the risk that the Group may not have sufﬁcient stable or d iverse sources of funding to meet its obligat ions as they fall due. The Group’s Liqu id ity and Funding Risk framework requires each country to ensure that it operates with in predeﬁned liqu id ity lim its and rema ins in compliance with Group liqu id ity polic ies and pract ices, as well as local regulatory requirements. The Group achieves this through a combinat ion of sett ing Risk Appetite and associated lim its, pol icy formation, risk measurement and monitor ing, prudent ial and internal stress testing, governance and review. Despite the challenging macroeconomic environment, the Group has mainta ined res il ience and reta ined a robust liqu id ity posit ion. The Group cont inues to focus on improv ing the quality and divers iﬁcation of its funding mix and remains committed to supporting its clients. Primary sources of funding (audited) The Group’s funding strategy is largely driven by its policy to mainta in adequate l iqu id ity at all times, in all geographic locations and for all currencies. This is done to ensure the Group can meet all of its obligat ions as they fall due. The Group’s funding proﬁle is therefore well divers iﬁed across different sources, maturit ies and currenc ies. The Group‘s assets are funded predominantly by customer deposits, supplemented with wholesale funding, which is divers iﬁed by type and matur ity. The Group mainta ins access to wholesale fund ing markets in all major ﬁnancial centres in which it operates. This seeks to ensure that the Group has market intell igence, ma inta ins stable funding lines and can obtain optimal pric ing when performing cashﬂow management activ it ies. In 2023, the Group issued approximately $8.1 bill ion of securit ies, all in the form of senior debt, from its holding company (HoldCo) Standard Chartered PLC (2022 $5.2 bill ion of senior debt securit ies, $0.75 b ill ion of subord inated debt securit ies and $1.25 b ill ion of Add it ional T ier 1 securit ies). In the next 12 months, approximately $8.5 bill ion of the Group’s sen ior debt, subordinated debt and Addit ional T ier 1 securit ies in total are either falling due for repayment contractually or callable by the Group. Group’s composition of liabilities and equity 31 December 2023 4.3 6.8 8.9 Geographic distr ibut ion of customer accounts 31 December 2023 Derivat ive ﬁnancial instruments Deposits by banks Debt securit ies in issue Customer accounts Other liab il it ies Equity Subordinated liab il it ies and other borrowed funds 65.0 7.4 1.5 6.1 100% Asia Africa & Middle East Europe & Americas 100% 69.5 6.0 24.5 Liqu id ity and Funding Risk metrics The Group continually monitors key liqu id ity metrics, both on a country basis and consolidated across the Group. The following liqu id ity and funding Board Risk Appetite metrics deﬁne the maximum amount and type of risk that the Group is will ing to assume in pursuit of its strategy: liqu id ity coverage ratio (LCR), liqu id ity stress survival horizons, recovery capacity and net stable funding ratio (NSFR). In addit ion to the Board Risk Appetite, there are further lim its that apply at Group and country level such as, external wholesale borrowing (WBE) and cross currency lim its. Liqu id ity coverage ratio (LCR) The LCR is a regulatory requirement set to ensure the Group has sufﬁcient unencumbered h igh-quality liqu id assets to meet its liqu id ity needs in a 30-calendar-day liqu id ity stress scenario. The Group monitors and reports its liqu id ity posit ions under the Liqu id ity Coverage Ratio per PRA rulebook and has mainta ined its LCR above the prudential requirement. The Group mainta ined strong l iqu id ity ratios despite a challenging macroeconomic and geopolit ical env ironment. At the reporting date, the Group LCR was 145 per cent (31 December 2022: 147 per cent), with a surplus to both Board-approved Risk Appetite and regulatory requirements. Adequate liqu id ity was held across our footprint to meet all local prudential LCR requirements where applicable. 2023 $mill ion 2022 $mill ion Liqu id ity buffer 185,643 177,037 Total net cash outﬂows 128,111 120,720 Liqu id ity coverage ratio 145% 147% 291 Standard Chartered – Annual Report 2023 Risk review and Capital review Stress coverage The Group intends to mainta in a prudent and susta inable funding and liqu id ity posit ion, in all countries and currencies, such that it can withstand a severe but plausible liqu id ity stress. Our approach to managing liqu id ity and funding is reﬂected in the Board-level Risk Appetite Statement which includes the following: “The Group should have sufﬁcient stable and d iverse sources of funding to meet its contractual and contingent obligat ions as they fall due.” The Group’s internal liqu id ity stress testing framework covers the following stress scenarios: • Standard Chartered-specif ic – Captures the l iqu id ity impact from an id iosyncrat ic event affecting Standard Chartered only with the rest of the market assumed to be operating normally. • Market wide – Captures the liqu id ity impact from a market-wide cris is affect ing all partic ipants in a country, region or globally. • Combined – Assumes both Standard Chartered-specif ic and market-wide events affect the Group simultaneously and hence is the most severe scenario. All scenarios include, but are not lim ited to, modelled outﬂows for retail and wholesale funding, off-balance sheet funding risk, cross-currency funding risk, intraday risk, franchise risk and risks associated with a deteriorat ion of a ﬁrm’s cred it rating. Concentration risk approach has been enhanced to capture single name and industry concentration. Stress testing results show that a posit ive surplus was mainta ined under all scenar ios at 31 December 2023, and respective countries were able to survive for a period of time as deﬁned under each scenario. The results take into account currency convertib il ity and portabil ity constra ints while calculating the liqu id ity surplus at Group level. Standard Chartered Bank’s credit ratings as at 31 December 2023 were A+ with stable outlook (Fitch), A+ with stable outlook (S&P) and A1 with stable outlook (Moody’s). As of 31 December 2023, the estimated contractual outﬂow of a three-notch long-term ratings downgrade is $1.1 bill ion. External wholesale borrowing A risk lim it is set to prevent excessive reliance on wholesale borrowing. With in the deﬁnit ion of wholesale borrowing, lim its are applied to all branches and operating subsid iar ies in the Group and as at the reporting date, the Group remained with in the R isk Appetite. Advances-to-deposits ratio This is deﬁned as the ratio of total loans and advances to customers relative to total customer deposits. An advances- to-deposits ratio 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. The Group’s advances-to-deposits ratio has decreased by 4.1 per cent to 53.3 per cent, driven by an increase in customer deposits of 3 per cent and with a reduction of 5 per cent in customer loans and advances. Deposits from customers as at 31 December 2023 are $486,666 mill ion (31 December 2022: $473,383 mill ion). 2023 $mill ion 2022 $mill ion Total loans and advances to customers 1,2 259,481 271,897 Total customer accounts 3 486,666 473,383 Advances-to-deposits ratio 53.3% 57.4% 1 Excludes reverse repurchase agreement and other sim ilar secured lend ing of $13,996 mill ion and includes loans and advances to customers held at fair value through proﬁt and loss of $7,212 mill ion 2 Loans and advances to customers for the purpose of the advances-to-deposits ratio excludes $20,710 mill ion of approved balances held w ith central banks, conﬁrmed as repayable at the point of stress (31 December 2022: $20,798 mill ion) 3 Includes customer accounts held at fair value through proﬁt or loss of $17,248 mill ion (31 December 2022: $11,706 m ill ion) Net stable funding ratio (NSFR) The NSFR is a PRA regulatory requirement that stipulates inst itut ions to mainta in a stable fund ing proﬁle in relation to an assumed duration of their assets and off-balance sheet activ it ies over a one-year horizon. It is the ratio between the amount of available stable funding (ASF) and the amount of required stable funding (RSF). ASF factors are applied to balance sheet liab il it ies and cap ital, based on their perceived stabil ity and the amount of stable fund ing they provide. Likew ise, RSF factors are appl ied to assets and off-balance sheet exposures according to the amount of stable funding they require. The regulatory requirements for NSFR are to mainta in a rat io of at least 100 per cent. The average ratio for the past four quarters is 136 per cent. 292 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Liqu id ity pool The liqu id ity value of the Group’s LCR elig ible l iqu id ity pool at the reporting date was $186 bill ion. The ﬁgures in the table below account for haircuts, currency convertib il ity and portabil ity constra ints per PRA rules for transfer restrict ions, and therefore are not directly comparable with the consolidated balance sheet. A liqu id ity pool is held to offset stress outﬂows as deﬁned in the LCR per PRA rulebook. 2023 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Level 1 securit ies Cash and balances at central banks 32,504 2,456 46,715 81,675 Central banks, governments/public sector entit ies 54,562 1,363 15,843 71,768 Multilateral development banks and internat ional organ isat ions 5,202 961 10,754 16,917 Other 130 – 1,161 1,291 Total Level 1 securit ies 92,398 4,780 74,473 171,651 Level 2A securit ies 6,194 128 6,946 13,268 Level 2B securit ies 348 – 376 724 Total LCR elig ible assets 98,940 4,908 81,795 185,643 2022 Asia $mill ion Africa & Middle East $mill ion Europe & Americas $mill ion Total $mill ion Level 1 securit ies Cash and balances at central banks 34,101 1,066 36,522 71,689 Central banks, governments/public sector entit ies 50,881 2,712 23,680 77,273 Multilateral development banks and internat ional organ isat ions 3,510 837 10,843 15,190 Other 37 7 1,430 1,474 Total Level 1 securit ies 88,529 4,622 72,475 165,626 Level 2A securit ies 4,044 139 6,033 10,216 Level 2B securit ies 71 21 1,103 1,195 Total LCR elig ible assets 92,644 4,782 79,611 177,037 293 Standard Chartered – Annual Report 2023 Risk review and Capital review Liqu id ity analysis of the Group’s balance sheet (audited) Contractual maturity of assets and liab il it ies The following table presents assets and liab il it ies by matur ity groupings based on the remain ing per iod to the contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturit ies do not necessar ily reﬂect actual repayments or cashﬂows. With in the tables below, cash and balances w ith central banks, interbank placements and investment securit ies that are fa ir valued through other comprehensive income are used by the Group princ ipally for l iqu id ity management purposes. As at the reporting date, assets remain predominantly short-dated, with 63 per cent maturing in less than one year. The less than six-month cumulative net funding gap improved by $35 bill ion as of 31 December 2023 compared to 31 December 2022. 2023 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Assets Cash and balances at central banks 63,752 – – – – – – 6,153 69,905 Derivat ive ﬁnancial instruments 12,269 10,632 6,910 3,611 2,921 4,650 6,038 3,403 50,434 Loans and advances to banks 1,2 28,814 23,384 10,086 4,929 5,504 1,583 2,392 1,098 77,790 Loans and advances to customers 1,2 86,695 55,009 25,492 15,392 14,537 25,987 26,545 95,829 345,486 Investment securit ies 1 12,187 28,999 17,131 18,993 20,590 24,244 44,835 50,168 217,147 Other assets 1 17,611 31,729 1,286 409 587 67 93 10,300 62,082 Total assets 221,328 149,753 60,905 43,334 44,139 56,531 79,903 166,951 822,844 Liab il it ies Deposits by banks 1,3 26,745 1,909 1,398 503 778 1,326 2,848 2 35,509 Customer accounts 1,4 384,444 47,723 28,288 13,647 11,806 7,787 38,578 2,349 534,622 Derivat ive ﬁnancial instruments 13,111 12,472 6,655 4,001 3,433 5,142 6,932 4,315 56,061 Senior debt 5 130 1,111 1,537 1,389 624 11,507 20,127 14,443 50,868 Other debt securit ies in issue 1 3,123 5,822 6,109 3,235 3,037 492 482 195 22,495 Other liab il it ies 14,929 26,447 1,695 544 883 1,830 1,809 12,763 60,900 Subordinated liab il it ies and other borrowed funds 980 68 19 172 453 312 1,936 8,096 12,036 Total liab il it ies 443,462 95,552 45,701 23,491 21,014 28,396 72,712 42,163 772,491 Net liqu id ity gap (222,134) 54,201 15,204 19,843 23,125 28,135 7,191 124,788 50,353 1 Loans and advances, investment securit ies, depos its by banks, customer accounts and debt securit ies in issue include ﬁnanc ial instruments held at fair value through proﬁt or loss, see Note 13 Financ ial instruments 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $97.6 bill ion 3 Deposits by banks include repurchase agreements and other sim ilar secured borrow ing of $5.6 bill ion 4 Customer accounts include repurchase agreements and other sim ilar secured borrow ing of $48.0 bill ion 5 Senior debt maturity proﬁles are based upon contractual maturity, which may be later than call options over the debt held by the Group 294 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle 2022 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Assets Cash and balances at central banks 49,097 – – – – – – 9,166 58,263 Derivat ive ﬁnancial instruments 15,558 12,030 8,352 4,446 3,602 6,026 8,410 5,293 63,717 Loans and advances to banks 1,2 24,135 15,293 11,595 4,971 4,138 2,608 1,022 687 64,449 Loans and advances to customers 1,2 96,351 58,605 27,751 12,540 13,444 19,150 33,413 96,476 357,730 Investment securit ies 1 14,175 26,008 23,364 13,024 12,891 22,805 41,217 52,756 206,240 Other assets 1 15,210 31,276 1,341 181 698 89 23 20,705 69,523 Total assets 214,526 143,212 72,403 35,162 34,773 50,678 84,085 185,083 819,922 Liab il it ies Deposits by banks 1,3 29,733 2,042 2,245 871 349 1,432 144 7 36,823 Customer accounts 1,4 402,069 49,769 25,110 15,961 15,216 7,830 2,451 1,823 520,229 Derivat ive ﬁnancial instruments 15,820 15,810 8,645 5,002 4,102 6,795 7,904 5,784 69,862 Senior debt 5 204 342 509 963 711 5,855 19,673 12,086 40,343 Other debt securit ies in issue 1 2,758 5,504 8,732 7,316 2,935 1,088 870 268 29,471 Other liab il it ies 19,857 24,725 1,616 521 503 902 1,043 10,296 59,463 Subordinated liab il it ies and other borrowed funds 2,004 105 22 248 25 1,882 2,045 7,384 13,715 Total liab il it ies 472,445 98,297 46,879 30,882 23,841 25,784 34,130 37,648 769,906 Net liqu id ity gap (257,919) 44,915 25,524 4,280 10,932 24,894 49,955 147,435 50,016 1 Loans and advances, investment securit ies, other assets, depos its by banks, customer accounts and debt securit ies in issue include ﬁnanc ial instruments held at fair value through proﬁt or loss, see Note 13 Financ ial instruments 2 Loans and advances include reverse repurchase agreements and other sim ilar secured lend ing of $90 bill ion 3 Deposits by banks include repurchase agreements and other sim ilar secured borrow ing of $7.0 bill ion 4 Customer accounts include repurchase agreements and other sim ilar secured borrow ing of $46.8 bill ion 5 Senior debt maturity proﬁles are based upon contractual maturity, which may be later than call options over the debt held by the Group Behavioural maturity of ﬁnanc ial assets and l iab il it ies The cashﬂows presented in the previous section reﬂect the cashﬂows that will be contractually payable over the residual maturity of the instruments. However, contractual maturit ies do not necessar ily reﬂect the tim ing of actual repayments or cashﬂow. In practice, certain assets and liab il it ies behave d ifferently from their contractual terms, especially for short-term customer accounts, credit card balances and overdrafts, which extend to a longer period than their contractual maturity. On the other hand, mortgage balances tend to have a shorter repayment period than their contractual maturity date. Expected customer behaviour is assessed and managed on a country basis using qualitat ive and quant itat ive techn iques, includ ing analys is of observed customer behaviour over time. 295 Standard Chartered – Annual Report 2023 Risk review and Capital review Maturity of ﬁnanc ial l iab il it ies on an und iscounted basis (audited) The following table analyses the contractual cashﬂows payable for the Group’s ﬁnanc ial l iab il it ies by rema in ing contractual maturit ies on an und iscounted basis. The ﬁnanc ial l iab il ity balances in the table below will not agree with the balances reported in the consolidated balance sheet as the table incorporates all contractual cashﬂows, on an undiscounted basis, relating to both princ ipal and interest payments. Derivat ives not treated as hedg ing derivat ives are included in the ‘On demand’ time bucket and not by contractual maturity. With in the ‘More than ﬁve years and undated’ matur ity band are undated ﬁnanc ial l iab il it ies, the majority of wh ich relate to subordinated debt, on which interest payments are not included as this informat ion would not be mean ingful, given the instruments are undated. Interest payments on these instruments are included with in the relevant matur it ies up to ﬁve years. 2023 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Deposits by banks 26,759 1,921 1,417 513 790 1,328 2,848 4 35,580 Customer accounts 385,361 48,140 28,763 14,049 12,190 8,118 39,000 3,036 538,657 Derivat ive ﬁnancial instruments 53,054 517 46 44 103 202 887 1,208 56,061 Debt securit ies in issue 3,507 6,995 8,015 5,070 4,002 13,663 23,413 16,396 81,061 Subordinated liab il it ies and other borrowed funds 1,043 134 46 208 570 395 2,389 14,367 19,152 Other liab il it ies 12,200 26,291 1,560 515 884 1,832 1,810 11,513 56,605 Total liab il it ies 481,924 83,998 39,847 20,399 18,539 25,538 70,347 46,524 787,116 2022 One month or less $mill ion Between one month and three months $mill ion Between three months and six months $mill ion Between six months and nine months $mill ion Between nine months and one year $mill ion Between one year and two years $mill ion Between two years and ﬁve years $mill ion More than ﬁve years and undated $mill ion Total $mill ion Deposits by banks 29,742 2,048 2,275 876 362 1,455 144 8 36,910 Customer accounts 401,893 49,196 24,713 15,614 15,283 8,280 5,937 2,591 523,507 Derivat ive ﬁnancial instruments 65,912 48 12 116 213 940 1,185 1,436 69,862 Debt securit ies in issue 3,060 5,912 9,631 8,574 3,979 7,844 22,259 18,465 79,724 Subordinated liab il it ies and other borrowed funds 2,097 165 44 273 28 2,029 2,610 14,004 21,250 Other liab il it ies 17,275 25,751 1,517 504 496 895 901 9,669 57,008 Total liab il it ies 519,979 83,120 38,192 25,957 20,361 21,443 33,036 46,173 788,261 296 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Interest Rate Risk in the Banking Book The following table provides the estimated impact to a hypothetical base case project ion of the Group’s earn ings under the following scenarios: • A 50 basis point parallel interest rate shock (up and down) to the current market-impl ied path of rates, across all y ield curves • A 100 basis point parallel interest rate shock (up and down) to the current market-impl ied path of rates, across all yield curves These interest rate shock scenarios assume all other economic variables remain constant. The sensit iv it ies shown represent the estimated change to a hypothetical base case projected net interest income (NII), plus the change in interest rate impl ied income and expense from FX swaps used to manage banking book currency posit ions, under the d ifferent interest rate shock scenarios. The base case projected NII is based on the current market- impl ied path of rates and forward rate expectat ions. The NII sensit iv it ies below stress th is base case by a further 50 or 100bps. Actual observed interest rate changes will lag behind market expectation. Accordingly, the shocked NII sensit iv ity does not represent a forecast of the Group’s net interest income. The interest rate sensit iv it ies are ind icat ive stress tests and based on simpl iﬁed scenar ios, estimat ing the aggregate impact of an unantic ipated, instantaneous parallel shock across all yield curves over a one-year horizon, includ ing the time taken to implement changes to pric ing before becom ing effective. The assessment assumes that the size and mix of the balance sheet remain constant and that there are no specif ic management act ions in response to the change in rates. No assumptions are made in relation to the impact on credit spreads in a changing rate environment. Sign iﬁcant modell ing and behavioural assumptions are made regarding scenario simpl iﬁcation, market compet it ion, pass-through rates, asset and liab il ity re-pric ing tenors, and price ﬂooring. In particular, the assumption that interest rates of all currencies and maturit ies sh ift by the same amount concurrently, and that no actions are taken to mit igate the impacts aris ing from th is are considered unlikely. Reported sensit iv it ies w ill vary over time due to a number of factors includ ing changes in balance sheet composit ion, market condit ions, customer behav iour and risk management strategy. Therefore, while the NII sensit iv it ies are a relevant measure of the Group’s interest rate exposure, they should not be considered an income or proﬁt forecast. Estimated one-year impact to earnings from a parallel shift in yield curves at the beginn ing of the period of: 2023 USD bloc $mill ion HKD bloc $mill ion SGD bloc $mill ion KRW bloc $mill ion CNY bloc $mill ion Other currency bloc $mill ion Total $mill ion + 50 basis points 90 10 50 10 30 160 350 - 50 basis points (150) (30) (50) (20) (40) (180) (470) + 100 basis points 180 10 100 20 60 320 690 - 100 basis points (280) (40) (100) (40) (80) (350) (890) Estimated one-year impact to earnings from a parallel shift in yield curves at the beginn ing of the period of: 2022 USD bloc $mill ion HKD bloc $mill ion SGD bloc $mill ion KRW bloc $mill ion CNY bloc $mill ion Other currency bloc $mill ion Total $mill ion + 50 basis points 80 20 40 50 30 150 370 - 50 basis points (80) (20) (40) (60) (30) (140) (370) + 100 basis points 160 40 90 100 50 300 740 As at 31 December 2023, the Group estimates the one-year impact of an instantaneous, parallel increase across all yield curves of 50 basis points to increase projected NII by $350 mill ion. The equ ivalent impact from a parallel decrease of 50 basis points would result in a reduction in projected NII of $470 mill ion. The Group est imates the one-year impact of an instantaneous, parallel increase across all yield curves of 100 basis points to increase projected NII by $690 mill ion. The equivalent impact from a parallel decrease of 100 basis points would result in a reduction in projected NII of $890 mill ion. The beneﬁt from ris ing interest rates is primar ily from reinvest ing at h igher yields and from assets re-pric ing faster and to a greater extent than deposits. NII sensit iv ity in falling rate scenarios has increased versus 31 December 2022, due to changes in modelling assumptions to reﬂect expected re-pric ing act iv ity on Reta il and Transaction Banking current accounts and savings accounts in the current interest rate environment. Over the course of 2023 the size of the interest rate swaps and HTC-accounted bond portfolios used to programmatically hedge the behavioural lives of structural equity and CASA balances increased from $31 bill ion to $47 b ill ion. The portfolios had a weighted average maturity of 2.9 years, which reﬂects the behavioural ised l ives of the rate-insens it ive deposit and equity balances that they hedge, and a yield of 3.1%, as at 31 December 2023. 297 Standard Chartered – Annual Report 2023 Risk review and Capital review Operational and Technology Risk The Group deﬁnes Operational and Technology risk as the potential for loss from inadequate or failed internal processes, technology events, human error, or from the impact of external events (includ ing legal r isks). Operational and Technology risk may occur anywhere in the Group, includ ing third-party processes. Operational and Technology risk proﬁle Risk management practices help the business grow safely and ensure governance and management of Operational and Technology risk through the delivery and embedding of effective frameworks and polic ies, together w ith continuous oversight and assurance. Managing Operational and Technology risk makes the Group more efﬁc ient and enables it to offer better, sustainable service to its customers. The Group’s Operational and Technology Risk Type Framework (‘O&T RTF’) is designed to enable the Group to govern, ident ify, measure, mon itor and test, manage and report on its Operational and Technology risks. The Group continues to ensure the O&T RTF supports the business and the functions in effectively managing risk and controls with in r isk appetite to meet their strategic object ives. The Group has demonstrated progress on ensuring vis ib il ity of risks and risk management through implementat ion of a standardised risk taxonomy. Standardis ing the r isk taxonomy enables improved risk aggregation and reporting as well as provid ing opportun it ies for s impl ify ing the process of risk ident iﬁcation and assessment. A rev ised process universe along with taxonomies for causes and controls have been designed and will be implemented in 2024, with control categories supporting the streamlin ing and removal of duplicate controls, reducing complexity, and improv ing risk and control management. Macro processes will provide a client-centric view and enable clearer accountabil ity for delivery as well as management of risks in line with business object ives. Operational and Technology risk is elevated in areas such as Information and Cyber Security, Data Management and Transaction Processing. Other key areas of focus are Change, Systems Health/Technology risk, Third Party risk, Resil ience and Regulatory Compliance. Management has focused on addressing these areas, improv ing the susta inable operating environment and has in it iated a number of programmes to enhance the control environment. The Group continues to monitor and manage Operational and Technology risks associated with the external environment such as geopolit ical factors and the increas ing r isk of cyber-attacks. Dig ital isat ion and inappropr iate use of Art if ic ial Intelligence, various regulatory expectations across our footprint and the changing technology landscape remain key emerging areas to manage, allowing the Group to keep pace with new business developments, whilst ensuring that risk and control frameworks evolve accordingly. The Group continues to strengthen its risk management to understand the full spectrum of risks in the operating environment, enhance its defences and improve resil ience. Operational and Technology risk events and losses Operational losses are one ind icator of the effect iveness and robustness of the non-ﬁnancial r isk control environment. The Group’s proﬁle of operational loss events in 2023 and 2022 is summarised in the table below, which shows the distr ibut ion of gross operational losses by Basel business line. Distr ibut ion of Operational Losses by Basel business line % Loss 2023 2022¹ Agency Services 1.8% 3.0% Asset Management 0.1% 0.8% Commercial Banking 8.4% 8.9% Corporate Finance 7.6% 1.1% Corporate Items 35.5% 2.5% Payment and Settlements 17.6% 42.9% Retail Banking 20.3% 25.5% Retail Brokerage 0.0% 0.0% Trading and Sales 8.5% 15.2% 1 Losses in 2022 have been restated to include incremental events recognised in 2023 The Group’s proﬁle of operational loss events in 2023 and 2022 is also summarised by Basel event type in the table below. It shows the distr ibut ion of gross operational losses by Basel event type. Distr ibut ion of Operational Losses by Basel event type % Loss 2023 2022 1 Business disrupt ion and system fa ilures 6.0% 3.5% Clients’ products and business practices 3.6% 7.1% Damage to physical assets 0.0% 0.0% Employment practices and workplace safety 0.6% 0.2% Execution delivery and process management 75.0% 79.6% External fraud 14.6% 8.6% Internal fraud 0.2% 0.9% 1 Losses in 2022 have been restated to include incremental events recognised in 2023 Other princ ipal r isks Losses aris ing from operat ional failures for other princ ipal and integrated risks are reported as operational losses. Operational losses do not include operational risk-related credit impa irments. 298 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Discla imer For the avoidance of doubt, this ‘Climate Risk’ section is subject to the statements included in (i) the ‘Forward- Looking Statements’ section; and (i i) the ‘Bas is of Preparation and Caution Regarding Data Lim itat ions’ section provided under ‘Important Notices’ at page 519. Credit Risk We have developed a climate risk management framework, which provides a baseline level of effective risk mit igat ion. Consumer, Private and Business Banking (CPBB) Credit Risk As of September 2023, we have assessed the physical risk for 79 per cent and transit ion r isk for 54 per cent of our CPBB portfolio. CCPL Private Banking Business Banking Consumer Mortgage Overall CPBB 80% 20% 77% 46% 2% 21% 23% 54% 98% 79% Physical Risk Measuring and Monitoring in CPBB (as of September 2023) Physical Risk Assessed Physical Risk Not assessed CCPL Private Banking Business Banking Consumer Mortgage Overall CPBB 100% 70% 78% 42% 46% 30% 22% 58% 54% Transition Risk Measuring and Monitoring in CPBB (as of September 2023) Transition Risk Assessed Transition Risk Not assessed For our secured portfolio, assessments are based on the underlying physical collateral for our resident ial and commerc ial portfolios where we continue to leverage Munich Re’s Risk Suite (Natural Hazards Edit ion) to measure acute and chron ic physical risk impact ing each asset. For our unsecured portfol ios, such as credit cards and personal loans, we recognise that physical risk is likely to have a more pronounced second order impact that may ind irectly affect our customers’ ab il ity to repay. We have further expanded our scope of risk measurement and monitor ing to cover these products in 2023, albeit using proxies based on the location of bank branches. We assess the exposure concentrations to high physical risk across acute and chronic hazards quarterly, and report these at risk management committees at Group, Region and Country, with a stronger focus on ﬂood risk and ris ing sea levels. Dur ing 2023, the physical risk proﬁle across products and markets has remained stable, apart from slight variat ions in exposure to high ﬂood risk levels due to enhancements in Munich Re’s ﬂood risk model. Assessment of Acute and Chronic Physical Risk for Top 10 Markets’ Exposures backed by Property Collateral, ind icat ing Exposure Concentration Subjected to Very High Gross Risk (as of September 2023) Physical risk event Global Korea Hong Kong Taiwan 23% 38% 7% Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Flood Risk 24.80% 24.20% 14.00% 12.30% 44.60% 44.90% 11.90% 11.00% Sea-level rise (Year 2100, RCP 8.5) 2.10% 2.20% 0.01% 0.60% 3.40% 3.60% 0.04% 0.03% Physical risk event India Singapore Malaysia UAE 5% 18% 4% 1% Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Flood Risk 30.20% 22.30% 3.50% 3.40% 6.50% 5.30% 29.50% 26.50% Sea-level rise (Year 2100, RCP 8.5) 1.10% 0.90% 0.08% 0.06% 0.20% 0.30% 36.80% 36.10% Physical risk event Jersey Vietham China 2% 1% 2% Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Q3-22 Q3-23 Trend Flood Risk 1.90% 1.60% 63.90% 60.40% 67.70% 67.10% Sea-level rise (Year 2100, RCP 8.5) – – – 1.80% 1.00% 8.30% 8.30% Note: Movements are called out for markets showing a change of >5 per cent year-on-year change in ﬂood risk exposure concentration. Climate Risk Managing the ﬁnanc ial and non-ﬁnancial r isks from climate change 299 Standard Chartered – Annual Report 2023 Risk review and Capital review Our key resident ial mortgage markets have not implemented min imum bu ild ing energy efﬁciency standards. As such, in 2023 we took an alternative approach towards assessing the transit ion r isk impact on our borrowers, by quantify ing the robustness of their repayment capabil ity, rather than account ing for valuation related risks of property collateral. We used a combinat ion of internal and external data, includ ing results from our net zero ﬁnanced em iss ions calculat ions and our in it ial analysis shows that the transit ion r isk levels appear to be low across key resident ial mortgage markets. These results w ill be reﬁned along with revis ions in exposure concentrations, as the data landscape matures over time and as we improve upon the in it ial approach. Approaches to Measure Transit ion R isk Impact on collateral valuation Impact on borrower repayment capabil ity Energy price increase Energy price increase Min imum bu ild ing enegy efﬁciency regulations Retroﬁtting cost Retroﬁtting cost Macroeconomic impacts Transit ion R isk Ratings using SCB CPBB Approach, by Exposure Concentration (as of December 2022) Very high High Medium Low Very Low 13% 3% 2% 2% 80% Singapore $9.4bn 16% 4% 2% 1% 77% Hong Kong $32.3bn 23% 12% 9% 10% 47% Taiwan $5.3bn For the Jersey resident ial mortgage portfol io, we used EPC (Energy Performance Certif icate) data to assess the energy efﬁciency distr ibut ion, with results ind icat ing that more than 80 per cent of the portfolio is rated at C or better. Transit ion R isk Ratings for Resident ial Mortgages in Jersey using EPC Ratings by Exposure EPC Ratings for Resident ial Mortgages in Jersey by Count (as of August 2023) 17 % 12% 7% 0.3% 64% Jersey $0.3bn A B C D E E D C B A E D C B A E D C B A Prior to 2000 2000 - 2021 2022 onwards 4% 0% 2% 8% 0% 1% 9% 0% 9% 3% 3% 60% 0% 0% 0% We aim to continue to explore ways to enhance our assessment approaches across both secured and unsecured CPBB portfolios through improved methodologies and data. This will enable us to better assess the susceptib il ity to and readiness of our clients in managing climate-driven risks, whilst also enabling us to ident ify opportun it ies to ass ist them in their transit ion towards a low-carbon economy. Options we are consider ing include expanding the scope of our exist ing cred it orig inat ion process to cover Climate-related considerat ions in segments such as Medium Enterprises. 300 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Corporate, Commercial and Institut ional Bank ing (CCIB) Credit Risk This section covers details of how we assess climate risk for our corporate clients, includ ing ins ights ga ined from our client level assessments and progress made to further strengthen our framework for climate and credit related portfolio and risk management. The ﬁgure below outlines our process in assessing climate risk. 1. Identify Risks and Mit igat ion Plans Climate risk questiona ire (CRQ) 3. Evaluating the Risk 5. Controls and Assurance 2. Analyzing the Risk Climate Risk Assesment (BRAG) Data Gathering Control Sample Testing Time Horizon Impact Client Outreach Independant Assurance 4. Portfolio Management and Monitor ing Credit Underwrit ing Pr inc iples Risk Appit ite (%Black or Red) Mit igat ing Factors Scenario Analysis Business Credit Applicat ion BCA Analysis Financ ial Impacts Review and Approval Risk Trigers Warning Signals Green Amber Red Black High Climate Risk Clients Monitor ing 1. 2. 3. 4. 5. 1. Identify risks and mit igat ion plans Our client-level Climate Risk Questionna ire (CRQ) a ims to help assess the potential ﬁnanc ial r isks from climate change using quantitat ive and qual itat ive informat ion. The assessment presents a consol idated view across ﬁve pillars of how exposed and ready for transit ion or adaptat ion our clients may be. Governance & Disclosures Gross Physical Risk Physical Risk Adaptation Gross Transit ion R isk Transit ion R isk Mit igat ion Intent, commitment and reporting • Reporting of Climate targets • Board responsib il ity and accountabil ity • Management incent ives to manage climate risk with in the organisat ion Exposure to acute and chronic events • Asset locations exposed to physical risk events (Floods, Storms, Droughts etc) • Model output to assess current and future risk to client’s operating location Mit igat ions to acute and chronic events • Assessment of client’s adaptation plans to its operating locations and supply chain • Insurance coverage to protect against physical risk Relative emiss ions for sector and region • Reliance on fossil fuel/carbon products • Policy environmental/ impact due to sovereign decarbonisat ion policy in sector • Potential ﬁnanc ial impact from various climate scenarios Decarbonisat ion plan and emiss ion targets • Assess client’s plans and its credib il ity to transit ion its business and supply chain • Emiss ions report ing targets and plan to acheive them • Capex in low carbon technologies, internal carbon pric ing scenar ios 301 Standard Chartered – Annual Report 2023 Risk review and Capital review The CRQ helps us to form a view of the overall climate risk proﬁle of our clients and supports the underlying themes that feed into our broader scenario analysis and corporate planning exercises. In 2023, we completed an exhaustive review of the CRQ based on histor ical data, includ ing rat ional is ing questions, introduc ing a methodolog ical different iat ion in assessing corporates against projects, introduc ing sector-spec if ic quest ions, and build ing stronger l inkages to our net zero and credible transit ion plan workstreams. Coverage of our analysis In 2023 we completed CRAs for c.4,100 clients, which is c.85-90 per cent of our corporate client lim its and is a sign iﬁcant improvement from c.2,200 clients assessed in the year before. How do different regions in our footprint compare? Overall, while the levels and consistency in the availab il ity of climate informat ion from publ ic disclosures has increased, this is still a developing aspect in our markets, which highl ights the importance of engaging our clients on this topic. Client-level Climate Risk assessment scores by region 2023 YTD Assessment Number of clients Overall score across the ﬁve pillars 1. Governance & disclosures 2. Gross Physical Risk 3 Physical Risk adaptation 4. Gross Transit ion R isk 5. Transit ion RIsk Mit igat ion Asia 2,709 46% 44% 69% 27% 48% 41% Africa & Middle East 409 36% 27% 69% 13% 46% 25% Europe & Americas 1,018 64% 75% 78% 53% 50% 65% Total 4,136 49% 50% 71% 32% 48% 45% * Data assessed is as of September 2023 • We continue to see better transit ion r isk mit igat ion and physical risk adaptation scores for corporates domic iled in Europe and Americas, where disclosure levels are highest and the plans to effectively manage climate risk are being put in place. • Physical risk adaptation levels remain an area of risk for most of our markets, with the lowest absolute scores in Africa and the Middle East. • Asia constitutes c.65 per cent of our total volume of clients assessed in 2023 (2022: c.63 per cent) followed by Europe and Americas, which represents c.25 per cent of the clients and the largest increase in share (2022: 18 per cent) Insights from these assessments for the pillars mentioned previously are provided below. Governance and disclosures We have seen a gradual increase in the number of clients reporting quantif iable cl imate change related commitments over 2022 and 2023 driven by an improvement in climate risk transit ion plans be ing put in place across our markets but this does not necessarily come via ‘Carbon Disclosures Project’, which remains more a developing market disclosure across our client footprint. Key risk remains on management incent ives l inked to climate change; an area where we are actively engaging with clients. Percentage of clients in scope Has a quantiﬁable climate policy or commitment 2023 2022 2021 62% 58% 55% Has TCFD-aligned disclosures Discloses to CDP Has board member with climage oversight Have management incentives linked to climate 2023 2022 2021 66% 55% 49% 2023 2022 2021 37% 29% 32% 2023 2022 2021 47% 37% 29% 2023 2022 2021 24% 29% 33% 302 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Transit ion r isk mit igat ion levels Over the last two years, there has been a material increase in both the number of clients putting in place a transit ion plan and those planning investments to move to low carbon technologies, driven by increas ing regulatory pressure and enhanced transit ion r isk commitments in some of our key markets. While the number of clients reporting Scope 1, 2 and 3 emiss ions has not increased in the last two years, we have seen an increase in clients that report Scope 1, 2 and 3 emiss ions reduct ion targets. However, the abil ity to set quant if iable targets to ach ieve broader commitments is still lagging when looked at on an absolute basis and the scale of the transit ion needed. Percentage of clients in scope Reports Scope 1 & 2 emissions Reports Scope 3 emissions Has transition plan to meet current or future regulations Has made plans for investment in low carbon technologies Has scope 1 & 2 reduction targets Has scope 3 reduction targets Client performs ﬁnancial transition scenario analysis 2023 2022 2021 71% 61% 71% 2023 2022 2021 54% 52% 61% 2023 2022 2021 63% 43% 43% 2023 2022 2021 68% 54% 49% 2023 2022 2021 50% 49% 35% 2023 2022 2021 31% 17% 13% 2023 2022 2021 34% 21% 23% Physical risk readiness Physical risk adaptation remains an area of concern and we have seen downward trends across our portfolio of clients due to an increase in the number of assessments (from c.2,200 - 4,100) captured in our coverage, which now better reﬂects our overall corporate portfolio. This reﬂects the nature of many of our footprint markets, where physical risk adaptation and associated levels of disclosures are in nascent stages. Percentage of clients in scope Acknowledges physical risk 2023 2022 2021 42% 54% 50% 2023 2022 2021 35% 39% 34% 2023 2022 2021 32% 40% 39% Estimates a ﬁnancial impact 2023 2022 2021 18% 24% 22% Assessed physical risk Have taken adaptation measures to date or made future plans to 303 Standard Chartered – Annual Report 2023 Risk review and Capital review Transit ion r isk – Gross Risk and Transit ion Plan levels for key sectors For four key sectors that have high transit ion r isk i.e. Commercial Real Estate (CRE), O&G Producers, Metals and Min ing Producers and Util it ies, we have assessed the risk against the level of transit ion plans and how it varies across our key markets. CRE: Companies across our key markets are close together with respect to their transit ion scores, reﬂect ing the policy environment in the build ing sector, wh ich is broadly sim ilar across major markets. Key factors which determine the transit ion r isk grading for a build ing are its location, which helps ascertain the intens ity of the power gr id supplying electric ity to the asset, the property type, and its energy efﬁciency. Power: Clients in the UAE are slightly behind some of their global peers, although this is driven in part by a lower level of disclosures and higher transit ion r isk as a result of fossil fuel intens ive bus iness models. O&G : This sector has been gradually preparing for the transit ion to lower carbon intens ive fuels over the last few years. While there is a lot more to do in terms of transit ion ing, the improved transit ion r isk understanding and associated disclosures lead to on average better mit igat ion scores in this sector. Min ing: Almost 50 per cent of the Metals and Min ing clients in our portfolio, ranging from Steel to Cement to Alumin ium producers are based in China and India. Effective decarbonisat ion in this sector is reliant on the power grid decarbonis ing, improved energy efﬁc iency in overall operations, includ ing heat ing, as well as managing process level emiss ions. China Hong Kong India Singapore UK USA UAE South Africa Korea Rest of Middle East Europe CRE High mit igat ion Low mit igat ion Transit ion R isk Mit igat ion Gross Transit ion R isk O&G Producer High mit igat ion Low mit igat ion Transit ion R isk Mit igat ion Gross Transit ion R isk Utilities High mit igat ion Low mit igat ion Transit ion R isk Mit igat ion Gross Transit ion R isk Metals & Mining Producers High mit igat ion Low mit igat ion Transit ion R isk Mit igat ion Gross Transit ion R isk 304 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle 2. Analysing the climate risk grading Each client is assigned a climate risk grading (BRAG) computed based on the gross transit ion r isk and transit ion r isk mit igat ion. Owing to physical risk data being less robust, we have to date focused only on transit ion r isk drivers to compute the climate risk grading. However, as highl ighted in the section above, we have seen a steady improvement in the coverage of physical risk data in the last two years. During 2024, we plan to develop a methodology to incorporate both physical and transit ion r isk drivers in the computation of BRAG which will holist ically represent the extent of cl imate risk faced by a client. There are currently four types of BRAG ratings assigned to clients – black, red, amber, green. Black Clients are deemed to have very high exposure to Transit ion R isk with little or no mit igat ion plans Red Clients are deemed to have very high exposure to Transit ion R isk but with acceptable or good mit igat ion plans Amber Clients are deemed to have high exposure to Transit ion R isk but with acceptable or good mit igat ion plans. Green Clients are deemed to have low or lim ited exposure to Trans it ion R isk 3. Evaluating the risk (linkage to credit process) Once a climate risk grading is assigned to a client, the impacts from climate-related risks are integrated into the exist ing credit approval process qualitat ively and/or quant itat ively through inclus ion w ith in the bus iness risk analysis and ﬁnancial modell ing. If the risks are deemed material and not adequately represented via the exist ing cred it rating of the client, subject ive warn ing signals may be added to inﬂuence the credit rating. Addit ionally, r isk triggers are added to monitor risks that are not adequately mit igated and to seek addit ional informat ion from the cl ient where applicable. 4. Portfolio management and monitor ing Concentration of black and red graded clients remains with in proposed Risk Appetite levels at 6 per cent with in our key markets; some of the more developed markets have the highest proportion of green clients, which reﬂects the higher level of climate risk disclosures and governance established by companies in this region. Amongst our key markets, the UAE currently has the highest proportion of red and black clients, driven by a combinat ion of cl ients that had fewer disclosures and high transit ion r isk, particularly fossil fuel led util ity prov iders. During 2023 we have embedded qualitat ive and quant itat ive climate considerat ions into the Group’s credit underwrit ing princ iples for O&G, M in ing, Sh ipp ing and CRE sectors for wh ich we have industry specif ic or ig inat ion teams. This included introduc ing portfol io level caps for black and red rated clients and lower preference for emiss ion intens ive transact ions. It is important to note that underlying princ iples vary depend ing on the sector, to help steer the portfolio in the desired direct ion over the medium term, and also consider the Group’s 2030 ﬁnanced emiss ion targets. We have also in it iated work to assess risks to underlying collateral from physical and transit ion r isk specif ically for our CRE and Sh ipp ing portfol ios. A key strategic focus area going forward is to embed climate risk and net zero targets into business and credit decis ions. To enable this, we have established a Net Zero Climate Risk Working Forum where discuss ions on account plans on h igh climate risk and net zero divergent clients are held. China Hong Kong UAE US UK India Singapore Total 76.6% 17.3% 5.4% 81.73% 16.74% 1.52% 73.8% 21.1% 5.1% 56.1% 39.1% 4.8% 82.3% 13.5% 4.2% 74.4% 8.0% 16.1% 1.5% 84.8% 11.9% 3.1% Portfolio distribution across key markets 0% 40% 20% 60% 80% 100% 0.7% 0.2% 74.49% 15.17% 6.45% 3.89% 305 Standard Chartered – Annual Report 2023 Risk review and Capital review 5. Controls and assurance Independent control checks by ﬁrst line of defence and assurance reviews by second line of defence on integrat ing climate risk with in the cred it process are carried out quarterly to improve the quality and effectiveness of assessing climate risk. The results of the assurance testing and steps to address gaps are period ically shared w ith impacted stakeholders and as part of governance updates to risk committees. Credib il ity of transit ion plans We aim to actively manage our exposure by shift ing to lower emiss ions- intens ive cl ients and working closely with our exist ing cl ients to develop credible transit ion plans that are consistent with our net zero commitments. To help us ident ity such clients, we draw on our exist ing CRQ framework to ﬁnalise a methodology to assess the Cred ib il ity of Transit ion Plan (CTP) by analysing client commitments to transit ion their business to a low carbon economy. We leverage the data captured in the CRQ and assign a credib il ity rating to the clients’ transit ion plan based on an in-house scoring methodology that draws on the UK Transit ion Plann ing Taskforce and Glasgow Financ ial All iance for Net Zero guidance on net zero transit ion plans. The current methodology will be period ically rev iewed as the level of client climate-related disclosure steps up across our footprint, to ensure it remains ﬁt for purpose and in line with industry best practices, stakeholder expectations and regulatory requirements. The CTP has been embedded into the Version 3 CRQ that was implemented in January 2024. Reputational and Sustainab il ity Risk Climate risk is considered with in the Reputat ional and Sustainab il ity Risk framework, for our corporate clients, through an assessment of a client’s abil ity to meet the ir own climate-related commitments, as well as meet the Group’s aim to reach net zero GHG emiss ions by 2050. We have continued to perform addit ional cl ient level due dil igence for ( i) clients covered by the Group’s net zero targets for high carbon sectors (O&G, Power, Steel, Alumin ium, Cement, Automobiles, Shipp ing, Av iat ion and CRE), ( i i) cl ients with a coal nexus 2 as well as (i i i) those that have been assessed at client level as high climate risk. The assessment focuses on three pillars at covering both client and transaction level aspects: Of the case reviews completed, an increase in Reputational and Sustainab il ity Risk rating was suggested for c.24 per cent of transactions compared to c.17 per cent in 2022. These consisted of companies in Coal Production, O&G, Min ing, Steel and Cement sectors, primar ily from the South East As ia region, looking to procure coal or other high carbon emitt ing products for manufacturing, production, or wholesale purposes. In addit ion, some ent it ies w ith high temperature alignment scores and no clear transit ion plan were ra ised as having addit ional r isk and rating increases recommended. The above-mentioned due dil igence is in addit ion to management of environmental and social risk aris ing from the Group’s client relationsh ips and transact ions. Further informat ion is available in the Sustainab il ity Review section on page 68 to 133. Temperature alignment is one way to consider a company’s impact on climate change and an ind icator of a cl ient’s progress towards a net zero economy. It is calculated based on histor ic em iss ion intens it ies and volume of hydrocarbons produced to produce a forward-looking temperature alignment score. We assessed the weighted average temperature alignment (WATA) projected to 2030 of 3,661 corporate client entit ies (cover ing c.62 per cent of corporate client portfolio on a net nominal basis) by high carbon sector. Client Level Transaction Level Temperature Alignment Temperature Alignment and Comparison to client peers Net Zero Emiss ions Impact Inﬂuence on Net Zero alignment from both internal and regional context Credib il ity of Transit ion Plan Readiness and Robustness of transit ion strategy from cl ient risk assesments 2 As deﬁned by the Group’s public Posit ion Statement to only prov ide ﬁnanc ial serv ices to clients who by 2030, are less than 5 per cent dependent on thermal coal (based on percentage revenue). 306 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Insights • Portfolio average temperature alignment is 3.48⁰C. Compared to other sectors with in our portfol io, O&G, CRE, Util it ies and Construction have a higher temperature alignment given their dependence on high carbon emitt ing product ion. • Compared to 2022, there was an increase in sector temperature alignment scores across O&G and Construction sectors driven by improvements in both coverage of the corporate clients assessed and emiss ion data coverage for our cl ients (due to reduced use of proxies). Others Commodity Traders Technology Hardware & Equipment Metals & Min ing Automobiles & Components Consumer Durables & Apparel Build ing Products, Construction & Engineer ing CRE Transportation and Storage O&G Util it ies 4.68% 2.84% 3.64% 3.52% 3.50% 2.79% 2.91% 3.54% 3.52% 3.39% 3.60% Weighted average temperature alignment (WATA) by client sectors (as of September 2023) 0.0 2.5 2.0 1.5 0.5 1.0 3.0 3.5 4.0 4.5 5.0 2021 WATA (°C) 2022 2023 Util it ies O&G Transportation and Storage CRE Build ing Products, Construction & Engineer ing Consumer Durables & Apparel Automobiles & Components Metals & Min ing Technology Hardware & Equipment Commodity Traders Others Asia 3.7°C 4.9°C 2.7°C 3.6°C 3.5°C 3.2°C 2.7°C 3.2°C 3.9°C 3.5°C 3.6°C Africa & Middle East 3.9°C 4.6°C 2.8°C 3.3°C 3.6°C 3.4°C 3.5°C 2.8°C 3.3°C 4.6°C 3.2°C Europe & Americas 3.0°C 4.6°C 3.1°C 3.9°C 3.2°C 4.0°C 3.0°C 2.6°C 1.8°C 3.2°C 3.1°C As part of our 2023 modelling roadmap, we in it iated work on developing an in-house methodology to model temperature alignment for prior ity sectors ( i.e. O&G, Steel and Automotive) as well as a sector-agnostic model to cover remain ing corporate portfolios. This has helped to reduce reliance on third party modelling capabil it ies. Temperature alignment is an emerging concept, and industry-wide standards on methodology are still evolving. We fully expect our approach to evolve in line with best practice. Client-level emiss ions are only ava ilable for c.55 per cent of corporate clients and sector average proxies are being used for the remainder. Improving such data gaps remains a key prior ity. Country Risk The Group uses a set of physical and transit ion r isk rankings to ident ify the markets most vulnerable and least ready to adapt and mit igate cl imate-related physical and transit ion r isks. • The physical risk rankings are based on a set of publicly available scores such as ND-Gain Country Index and GermanWatch Climate Risk Index, as well as S&P Global Ratings and Moody’s Investors Service. • The transit ion r isk rankings are based on an internally developed methodology which is a combinat ion of cl imate and macroeconomic drivers. 307 Standard Chartered – Annual Report 2023 Risk review and Capital review Physical and Transit ion R isk rankings methodological deep dives ND-Gain Country Index S&P Global Rating German Watch Climate Risk Index Moody’s Investor Services Assessing markets’ vulnerabil it ies to climate change and readiness to adapt Physical Risk Transit ion R isk Risk faced to transit ion Abil ity to trans it ion Gross Transit ion Risk factors Transit ion R isk Mit igat ion factors Measuring markets’ exposure to extreme weather events Gauging markets’ histor ical losses as a result of extreme weather events Measuring markets’ exposure to extreme weather events Reil iance on foss il fuel imports and exports Governments’ effectiveness in achiev ing targets Emiss ion footpr int per capita Low-carbon energy production capacity Carbon footprint of imports and efforts Governments’ ﬁscal ﬂexib il ity to support the transit ion Energy efﬁciency levels Imports of low-carbon technology products Based on their aggregated physical and transit ion r isk scores, sovereigns are split into decile-based buckets ranging from 1 (low risk) to 10 (high risk). These rankings are a qualitat ive input to our internal Country Risk management process spanning annual sovereign credit grades and lim its rev iews, inputs to climate-related scenario analysis, and Risk Appetite. Gross Country Risk (GCR) exposure distr ibut ion as of 30 September 2023 across Physical Risk categories Bucket 1 (Best) 2 3 4 5 6 7 8 9 10 (Worst) Exposures % 10.5 29.1 20.0 4.4 17.5 8.3 1.9 6.5 0.8 1.1 GCR exposure distr ibut ion as of 30 September 2023 across Transit ion R isk Categories Bucket 1 (Best) 2 3 4 5 6 7 8 9 10 (Worst) Exposures % 2.7 14.4 12.0 36.0 18.6 4.3 3.8 7.3 0.7 0.1 Bubble size represent markets’ GCR exposure UAE India Mainland China Hong Kong Pakistan Nigeria Singapore USA South Korea Physical and Transition Risk rankings distribution for key markets¹: Key markets’ climate risk bucket allocation (as of Sept 2023) High risk Low risk High risk Low risk Physical Risk Transit ion R isk 308 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Insights • For both physical and transit ion r isk, our exposure to high-risk countries (buckets 9 and 10) remains well below Risk Appetite. • The rankings are largely driven by the level of ﬁnanc ial risk countries are exposed to and their abil ity to absorb these losses. As such, the rankings are largely dependent on countries’ development stage, economy-wide divers iﬁcation, in-country inequal it ies and gross exposure to physical and transit ion r isk shocks. • Addit ionally, we keep close track of trans it ion r isk events such as the establishment of the EU’s Carbon Border Adjustment Mechanism (EU CBAM) and its potential impact on our key portfolios. Other markets with internal carbon pric ing mechan isms (such as Singapore, South Korea, South Africa, etc) are also being monitored as part of country risk annual reviews. From a physical risk standpoint, the rise of El Niño season (expected to peak at the beginn ing of 2024) is likely to exacerbate climate condit ions throughout the Group’s footpr int regions and we continue to monitor these as part of our annual reviews. Lim itat ions • The computation inputs are based on latest available data which may be dated. Proxies have been used where data for the sovereign is not available. • The ranking uses equally spaced decile scores and provides the results in an ordinal manner. While the simpl ic ity helps in adoption and provides the relative posit ion of the sovereigns, other systems may provide more informat ion. Operational and Technology Risk Climate risk primar ily impacts Operational and Technology risk as it manifests when physical risk disrupts our properties, data centres and third party arrangements. Thus far, our focus has been on physical risks, and we aim to explore transit ion risk elements in 2024. We continue exploring enhancements to our control framework across impacted areas. Whilst Continu ity Plans for th ird party arrangements have been enhanced to include climate risk related considerat ions, we are targeting to gather our material vendors’ operating site location data to assess their specif ic phys ical risk exposures, such that enhanced continu ity plans can be developed. We continue to assess the physical risk vulnerabil it ies of our own operating locations on a regular basis. Furthermore, we have expanded the assessment of physical risk exposure at onboarding to include data centres. Assessment of gross Physical Risk at our own operating locations (as of September 2023) Physical Risk event Time horizon Scenario Asia AME E&A Global Flood (Acute) 2023 N/A 24% 8% 17% 20% Wildf ire (Acute) 0% 0% 0% 0% Storm (Acute) 18% 1% 6% 14% Sea-level rise (Chronic) 2100 RCP 8.5 1% 5% 0% 2% Heat Stress (Chronic) 2050 RCP 8.5 24% 35% 0% 26% Number of operating locations 714 239 35 988 Insights • From an acute risk perspective, 20 per cent of the Group’s locations globally are subjected to ﬂood risk, 14 per cent with storm risk and none at risk from wildf ire. G iven our footprint, a higher proportion (24 per cent for ﬂood, 18 per cent for storm) of the Group’s locations in Asia are subject to acute risks and 17 per cent of locations in Europe and Americas are subjected to ﬂood risks. • In the locations where weather events such as storms or cyclones are frequent, the build ings are bu ilt in considerat ion of these r isks in line with regional standards. • From a chronic risk perspective, under RCP 8.5 for heat stress is at 26 per cent (35 per cent for AME, 24 per cent for Asia). Exposure to sea level rise remains below 5 per cent. • A broad range of mit igat ion options are considered, such as property insurance, operating a divers iﬁed location strategy, splitt ing del ivery and therefore reducing concentration risk. Traded Risk We manage the climate risk of traded risk exposures through the stress-testing framework. Climate risks are incorporated in the scenarios monitored against the traded risk stress Risk Appetite, covering all fair value exposures in the trading and banking books. Climate-related stress scenarios are designed to include transit ion r isk effects from climate change polic ies and shocks to markets due to supply and demand disrupt ion from physical climate events. Three scenarios are currently in place: two physical and one transit ional. The assumpt ions and results are subject to internal governance. Our climate risk management for traded risk exposures is evolving and we are working closely with industry bodies and academics to better assess and monitor climate-related risks and opportunit ies. 309 Standard Chartered – Annual Report 2023 Risk review and Capital review Treasury Risk From a capital perspective, climate risk considerat ions have been part of our Internal Capital Adequacy Assessment Process submiss ions s ince 2019. Our approach for assessing climate risk impact on capital adequacy has improved from qualitat ive judgements to quant itat ive s imulat ions w ith the availab il ity of tools and greater understanding of our portfolio. As understanding of climate risk management and potential forward-looking scenarios develop, our approach and assessment will evolve, includ ing us ing a wide range of scenario outcomes to determine any potential capital-related impact in the future. From a liqu id ity risk perspective, we have started monitor ing climate risk-related vulnerabil it ies and readiness of the top corporate client liqu id ity portfolios, leveraging the client outreach and data gathering exercise being undertaken on the asset side. The most recent exposure concentration in the ‘high transit ion r isk and low readiness’ bucket is broadly comparable to what we see for our top corporate client exposures on the asset side. Liqu id ity providers with high transit ion r isk and low readiness are from commodity traders and util it ies sectors. The results of the analysis have been considered as part of our internal liqu id ity adequacy assessment process and we continue to monitor the proﬁle. Model Risk Throughout 2023, we have been build ing our internal climate risk modelling capabil it ies to assess impacts from climate risk, through collaboration with various external vendors. These models have been independently validated by the second line of defence and approved by the Credit Model Assessment Committee, and were used to estimate climate impact on ECL for IFRS9. The amount of incremental ECL as a result of climate risk was below the Group’s material ity threshold and as such was not included as a quantitat ive post model adjustment. In future, the models will also be used for stress testing. The development of internal climate risk models has helped us to reduce reliance on external vendor models, and we will continue to enhance our internal capabil it ies by extending model coverage (e.g. to develop models to cover more portfolios, or to develop more granular sector- specif ic models) and incorporating model enhancements recommended by internal and external stakeholders. For the corporate portfolios, we developed transit ion r isk models that adopt the microeconomic theory of demand and supply to determine price changes based on sustainab il ity transit ion costs in different sectors of the economy. The model accounts for several key market dynamics, such as sensit iv it ies with respect to price, revenue, cost, and proﬁt due to changes in carbon prices. The model is calibrated at portfolio level, covering prior ity sectors that are carbon- intens ive and a generic model that covers non-prior ity sectors. For retail mortgages, an asset haircut model was developed to assess physical climate risk impact by estimat ing the devaluation of property values along different climate pathways. The model takes input from the current and prospective risk proﬁle of a property, which captures the evolution of various hazard types, includ ing r iver ﬂoods and storms. For sovereigns, the climate adjusted Probabil ity of Defaults is derived by consider ing benchmarks from the Cambr idge Paper (Klusak et al., 2021) and incorporating the country risk rankings currently used by the Group, which covers both physical and transit ion r isks. Apart from models that are used to estimate ECL, we have also developed temperature alignment models that assess impl ied temperature r ise scores for corporate counterparties. The model methodology is forward-looking and compares the forecasted emiss ions of a counterparty to relevant benchmark scenarios. The cumulative difference in emiss ions between the counterparty’s forecast and the benchmark scenarios is converted into a temperature score. The output from temperature alignment models will support internal climate risk management processes. We have also partnered with external vendors for a scenario expansion model which has been used to for NGFS Version 3 scenarios. Assessing the resil ience of our strategy us ing scenario analysis To assess climate-related risks and opportunit ies in the short, medium, and long-term we use scenario analysis to consider how risks and opportunit ies may evolve under different situat ions. Over two years, we have progress ively strengthened our scenario analysis capabil it ies and developed our infrastructure and capabil it ies to incorporate climate risk into data, modelling, and analysis. We have expanded our portfolio coverage, built bespoke scenarios, and partic ipated in several regulatory climate stress tests in 2023, includ ing the Hong Kong Monetary Author ity (HKMA) and the Central Bank United Arab Emirates stress tests. Scenarios used at Standard Chartered The table below summarises the climate risk scenarios used internally by the Group across risk types: Risk Types Scenario Family Number of Scenarios Risk Measure Refer Page no Credit Risk – Corporate, Commercial and Institut ional Bank ing (CCIB) Network for Greening the Financ ial System (NGFS) Version 3 3 ECL, RWA 311 Credit Risk – CCIB Bespoke (Tail and Base) 3 ECL, RWA 311 Credit Risk – Consumer, Private and Business Banking (CPBB) Intergovernmental Panel on Climate Change’s (IPCC) Representative concentration pathways (RCP) scenarios 3 Exposure Concentration to sea level rise risk 298 Operational and Technology Risk IPCC’s RCP 8.5 scenario 1 Physical Risk Concentration for sea level rise risk and heat stress to our own operations 308 Reputational and Sustainab il ity Risk NGFS Version 3 2 Weighted Average Temperature Alignment 305 Traded Risk Bespoke (two Physical scenarios and one Transit ion scenar io) 3 Stressed Loss 308 310 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle In addit ion to the internal scenarios, Standard Chartered Bank (Hong Kong) Lim ited is responding to two HKMA mandated climate risk stress tests to (i) assess the impact on capital for short tenor scenarios across credit, traded and operational risks and (i i) a 30-year scenar io based on NGFS Version 3 scenarios. The hybrid bespoke short-term ﬁve-year scenario has elements of a macro recession, transit ion, and phys ical risk events such as typhoons in Hong Kong, heatwave, and precip itat ion in China. We have used our exist ing stress test ing models to model the credit risk impact with overlays provided for physical and transit ion r isk using data on client transit ion m it igat ion readiness, climate adjusted asset level haircuts, assumptions on stranded assets for consumer mortgages and other available data. For Operational and Technology risk, we are assessing the impact of damage to our premises and business disrupt ion. Transit ion (T) and Phys ical (P) Risk scenarios We adapted the following scenarios for our CCIB portfolio: Scenario Family Scenario Name Key Features NGFS v3 Net Zero 2050 (T) Global warming lim ited to 1.5°C through str ingent climate polic ies and innovat ion Global net zero CO 2 emiss ions around 2050 Delayed Transit ion (T) Strong polic ies w ill be needed to lim it warm ing to below 2°C Annual emiss ions do not decrease unt il 2030 Current Polic ies (P+T) No addit ional pol ic ies beyond those currently implemented, along with slow technology change Global temperature rises over 3 degrees by 2100 Bespoke In-house Base Case (P+T) Credib il ity assessment of countries’ current sector targets in the short-term (2030) and a durabil ity assessment of reduct ion commitments in the long-term (2050) Delayed transit ion to a low-carbon economy and a lack of early cl imate action resulting in a 2.5°C temperature rise by 2100 ‘Green Trade War’ Tail (T) Impact to global trade due to introduct ion of Carbon Border Adjustment Mechan ism leading to trade war escalation Explores risks which are not addressed by NGFS scenarios and may emerge over a short-term horizon ‘Migrat ion’ Ta il (P) Increasing severe acute weather events globally impact global food prices and drive migrat ion and d isplacement The scenarios used for CCIB clients are characterised by different levels of physical and transit ion r isk, driven by various features in each scenario. Carbon price: increase in carbon price puts addit ional cost pressure on cl ients, squeezes the proﬁt margin, and thus helps to determine level of potential credit losses. Oil price: increase (or lack thereof) in oil price impacts on clients’ revenues and proﬁtab il ity and thus helps to determine level of potential credit losses. Features of the NGFS and bespoke scenarios used in a Standard Chartered scenario analysis NGFS v3 Bespoke Scenarios Feature Year Net Zero 2050 Delayed Transit ion Current polic ices Tail Risk (Physical) Tail Risk (Transit ion) Temperature rise 2050 1.4°C 1.6°C 3°C+ NA NA Carbon price ($2015/tCO²) 2030 124 6 6 61 66 2050 487 416 7 70 90 Oil price ($2015/boe) 2030 84 94 94 50 50 2050 107 118 125 41 41 Gas price change (vs 2020, %) 2030 56% 43% 43% 15% 15% 2050 52% 54% 80% -14% -14% Power demand change (vs 2020, %) 2030 27% 35% 35% 20% 20% 2050 120% 129% 106% 75% 75% GDP baseline change (vs 2020, %) 2030 34% 36% 36% -4% -5% 2050 111% 110% 118% -2% -5% 311 Standard Chartered – Annual Report 2023 Risk review and Capital review Physical risk scenarios We adapted the following scenarios for our CPBB portfolio. The table below summarises acute and chronic hazards outputs we currently use in the Munich Re’s Location Risk Intelligence Platform tool. Scenario Family Scenario Name Key Features IPCC (2050, 2100) RCP 2.6 (P) RCP 4.5 (P) RCP 8.5 (P) Pathways of Greenhouse gas (GHG) emiss ions and atmospher ic concentrations, air pollutant emiss ions and land use to project the ir consequences for the climate system Current and Projected Hazard scores from Munich Re model: • Tropical cyclone zones • River ﬂood zones • Sea level rise zones • Heat stress index based on range of high-temperature ind icators • Precip itat ion stress index based on heavy- precip itat ion ind icators • Climatolog ical index for wildf ire hazard • Drought stress index based on Standardised Precip itat ion- Evapotranspirat ion Index Scenario analysis results for CCIB We assessed the impact of climate-related risks on our corporate, sovereign, and ﬁnanc ial inst itut ions clients under different climate scenarios. This assessment, across the NGFS and bespoke scenarios, covered approximately 95 per cent of our CCIB portfolio for these clients, primar ily reﬂect ive of the gross transit ion r isks. While client-level transit ion plans were not factored into the modelling, they were referenced to draw addit ional ins ights for pr ior ity sectors. 1 The size of the bubble is ind icat ive of the gross expected losses assessed for 94% of our corporate portfolio Net Zero 2050 Tail Transition Delayed Transition Tail Physical Current Policies SCB In-house Scenarios used in Standard Chartered Scenario Analysis¹: Loan impairment for corporate portfolio High risk Low risk High risk Low risk Transit ion R isk Physical Risk The loan impa irment (LI) intens ity wh ich measures the level of gross ECL against the exposure at default (EAD) enables us to assess the relative size of our exposure subject to potential losses from climate risks. As the graph below illustrates, LI intens it ies do not go beyond 3 per cent during the forecast horizon for the climate scenarios considered in our scenario analysis. We expect our LI intens ity to r ise the most in the NGFS Net Zero 2050 scenario. This is reﬂective of the high transit ion r isks noted by higher carbon prices, coupled with the needs for greater investment to move to a low carbon economy. The NGFS Delayed Transit ion scenario also projects high LI intens ity reﬂect ing that such delayed transit ion w ill be equally disrupt ive due to lower levels of innovat ions that l im its the ab il ity to decarbon ise effectively, and ris ing carbon pr ices that squeeze proﬁt margins. Relatively lower LI intens ity observed in the NGFS Current Polic ies scenar io reﬂects the nascent modelling capabil it ies on assessing the physical risk impact to client asset locations and second-order impacts, such as that on the supply chain. 312 Standard Chartered – Annual Report 2023 Risk review Risk proﬁle Among the bespoke scenarios, we expect our LI intens ity to r ise the most in the tail transit ion r isk scenario. This is reﬂective of the potential risks to the global economy and subsequent increase in credit losses that may manifest due to the climate subsidy competit ion and introduct ion of carbon border adjustment mechan ism. Overall, we believe that the level of potential credit losses can be mit igated by cont inu ing to take necessary act ions which the Group is already doing across sectors, engaging with our clients on this topic and supporting them in enhancing their climate transit ion plans. 2050 2045 2040 2035 2030 2026 2022 Loan Impairment intensities for the NGFS and bespoke scenarios (December 2022 snapshot) 0% 1.5% 1.0% 0.5% 2.0% 2.5% 2.7% to 0.7% 3.0% Current polic ies SCB in-house Delayed transit ion Tail Physical Net Zero 2050 Tail Transit ion LI Intensity is calculated as gross ECL over EAD For corporate clients, we focused on the below sectors that have been ident iﬁed as more vulnerable to potent ial climate impacts. As of December 2022, these sectors represented 55 per cent of our corporate portfolio. Loan Impairment intens it ies for key corporate sectors for the NGFS and bespoke scenarios Long Term - 2050 EAD NGFS Net Zero 2050 NGFS Delayed Transit ion NGFS Current polic ices Bespoke Baseline Bespoke Tail Transit ion R isk Bespoke Tail Physical Risk Automobiles & Components 4% Medium Medium Low Low Medium Medium Construction 7% Medium Medium Low Medium Medium Medium Consumer Durables & Apparel 6% Medium Medium Low Low Medium Medium CRE 8% Low Low Low Low Medium Low Metal & Min ing 5% Medium Medium Low Low Medium Low O&G 11% High High Low Medium High Medium Telecomms 2% Medium Medium Low Low Low Low Transportation 9% High Medium Medium Medium High Medium Util it ies 3% Medium Low Low Low Medium Low Total portfolio 100% Medium Medium Low Low Medium Medium As observed in the table above, O&G and transportation sectors are most impacted by a higher LI intens ity level across the scenarios. Higher carbon prices, decrease in O&G demand characterised in the NGFS Net Zero 2050 and NGFS Delayed Transit ion scenar io are the main drivers for higher LI levels for these sectors. The extreme phsycial and transit ion r isk events occurring in the short term and their longer term second order impacts on the global economy result in the higher LI Intensity levels for these sectors in 2050. 313 Standard Chartered – Annual Report 2023 Risk review and Capital review The results are used to assess the impact of climate change on our portfolio and provide the management informat ion to monitor stressed LI over the next ﬁve-year horizon under plausible and extreme climate scenarios. The results also form part of our Climate Risk Assessments (CRAs). Whilst further enhancements are required to improve our modelling capabil it ies, the results of scenario analysis have provided further validat ion to the act ions we are taking as a Group in terms of our net zero ambit ions and strategy and qual itat ive management actions in terms of improv ing the data qual ity and build ing in-house modelling expertise. The results have been subject to internal governance, includ ing rev iew and challenge by an expert panel and discuss ion at the Cl imate Risk Management Committee and Board Risk Committee. Scenario analysis results for CPBB As part of our internal climate scenario analysis for CPBB, we carried out physical risk assessments for ris ing sea levels for our top 10 retail mortgage markets. The concentration of the Group’s portfolio exposure exposed to extreme ris ing sea levels risk has been observed to remain stable at 2 per cent in the most extreme RCP 8.5 scenario. Further details on the metrics used in the climate scenario analysis for CPBB can be found in pages 298 and 299 We measured the impact of physical risk on ECL to the retail mortgage portfolio for four key markets (Hong Kong, China, Taiwan and Korea) as part of the HKMA stress test exercise. For our key resident ial mortgage markets, we have collaborated with our academic partner (Imperial College London) to develop an internal model for revaluating property valuations under different climate scenarios using the forward-looking risk ind ices from Mun ich Re. These revaluations are then used to inform haircuts on the property prices and arrive at climate adjusted ECL values for the mortgage book. Lim itat ions and next steps Despite the efforts in gathering transit ion r isk data relating to our CPBB credit portfolios, gaps still exist across our footprint markets, and we have not been able to run a forward-looking transit ion r isk scenario for CPBB. We have a plan to address these data gaps by working with third parties, engaging clients to gather more informat ion, and us ing appropriate proxies for remain ing data gaps. Many of the assumptions and methodologies that underpin the scenario analysis continue to rely sign iﬁcantly on nascent methodologies as well as a dependence on ﬁrst generation models and data challenges. Many of these lim itat ions are shared across the industry. Given the complexit ies of cl imate modelling, it should also be noted that the results do not include the real-world aspects such as the non-linear shifts and complex feedback loops. However, they are intended to provide a strategic direct ion of the sense of portfol io concentrations subject to potential climate losses. As more solution providers become available and banks start extensively using them to build internal understanding and capabil it ies, the transparency and sophist icat ion of modelling methodologies and assumptions will increase. Despite these lim itat ions, our intent ion is to focus on how climate risk management can inform portfolio management and support opportunity ident iﬁcation w ith clients on their transit ion and adaptation pathways. Work is under way to build capabil ity from a people, process, and technology perspective to support stress tests at country level, includ ing in-house train ing and a plan to implement the in-house models in the Group infrastructure. 314 Standard Chartered — Annual Report 2023 Risk review Risk management approach Enterprise Risk Management Framework Risk management is at the heart of banking, it is what we do. Managing risk effectively is how we drive commerce and prosperity for our clients and our communit ies, and it is how we grow sustainably and proﬁtably as an organisat ion. Effective risk management is essential in deliver ing cons istent and sustainable performance for all our stakeholders and is a central part of the ﬁnancial and operat ional management of the Group. The Group adds value to clients and the communit ies in which they operate by balancing risk and reward to generate returns for shareholders. The Enterprise Risk Management Framework (ERMF) enables the Group to manage enterprise-wide risks, with the object ive of maxim is ing risk-adjusted returns while remain ing w ith in our Risk Appetite (RA). The ERMF is embedded across the Group, includ ing its branches and subsid iar ies 1 , and is reviewed annually. The latest version is effective from January 2024. Annual review In the 2023 review, the concepts of Integrated Risk Types (IRTs) and IRT Owner roles were discont inued. Overs ight on IRTs, i.e. Climate Risk, Dig ital Assets and Th ird Party Risk, is provided through the Risk Type Frameworks (RTFs) and relevant dedicated polic ies. The subject matter experts as policy owners for these risks provide overall governance and a holist ic v iew of how risks are monitored and managed across the Princ ipal R isk Types (PRTs). Risk culture Risk culture encompasses our general awareness, attitudes, and behaviours towards risk, as well as how risk is managed at enterprise level. A healthy risk culture is one in which everyone takes personal responsib il ity to ident ify and assess, openly d iscuss, and take prompt action to address exist ing and emerg ing risks. We expect those in our control functions to provide oversight and challenge constructively, collaboratively, and in a timely manner. This effort is reﬂected in our valued behaviours, underpinned by our Code of Conduct and Ethics, and reinforced by how we hire, develop, reward our people, serve our clients, and contribute to communit ies around the world. The risks we face constantly evolve, and we must always look for ways to manage them as effectively as possible. While unfavourable outcomes will occur from time to time, a healthy risk culture means that we react quickly and transparently. We can then take the opportunity to learn from our experience and improve our framework and processes. Strategic risk management The Group’s approach to strategic risk management includes the following: • Risk ident iﬁcation: impact analyses of risks that arise from the Group’s growth plans, strategic in it iat ives, and bus iness model vulnerabil it ies are reviewed. This assesses how exist ing r isks have evolved in terms of relative importance or whether new risks have emerged. • Risk Appetite: impact analysis is performed to assess if strategic in it iat ives can be ach ieved with in RA and h ighl ight areas where addit ional RA should be cons idered. • Stress testing: the risks highl ighted dur ing the strategy review and other risk ident iﬁcation processes are used to develop scenarios for enterprise stress tests. In order to ensure that the Group’s Strategy remains with in the approved RA, the Group Chief Risk Ofﬁcer (GCRO) and Group Chief Financ ial Ofﬁcer (GCFO) recommend strateg ic actions based on the stress test results. Roles and responsib il it ies Senior Managers Regime 2 Roles and responsib il it ies under the ERMF are al igned to the objectives of the Sen ior Managers Regime (SMR). The GCRO is responsible for the overall development and maintenance of the Group’s ERMF and for ident ify ing material risks which the Group may be exposed to. The GCRO delegates effective implementat ion of the RTFs to R isk Framework Owners (RFO) who provide second line of defence oversight for their respective PRTs. In addit ion, the GCRO is the senior manager responsible for the development of the Group’s Dig ital Assets R isk Assessment Approach, and management of Climate Risk. 1 The Group’s ERMF and System of Internal Control applies only to wholly controlled subsid iar ies of the Group, and not to Associates, Joint Ventures or Structured Entit ies of the Group. 2 Senior managers refers to ind iv iduals designated as senior management functions under the FCA and PRA Senior Managers Regime. 315 Standard Chartered — Annual Report 2023 Risk review and Capital review The Risk function The Risk function provides oversight and challenge on the Group’s risk management, ensuring that business is conducted in line with regulatory expectations. The GCRO directly manages the Risk function, which is independent from the orig inat ion, trading, and sales functions of the businesses. The Risk function is responsible for: • Determin ing the RA for approval by Group’s Management Team (GMT) and the Board. • Mainta in ing the ERMF, ensuring that it remains relevant and appropriate to the Group’s business activ it ies, and is effectively communicated and implemented across the Group. • Ensuring that risks are properly assessed, risk and return decis ions are transparent and r isks are controlled in accordance with the Group’s standards and RA. • Overseeing and challenging the management of PRTs under the ERMF. • Ensuring that the necessary balance in making risk and return decis ions is not compromised by short-term pressures to generate revenues through the independence of the Risk function. In addit ion, the R isk function provides special ist capabil it ies relevant to risk management processes in the broader organisat ion. The Risk function supports the Group’s strategy by build ing a sustainable ERMF that places regulatory and compliance standards, together with culture of appropriate conduct, at the forefront of the Group’s agenda. Our Conduct, Financ ial Cr ime and Compliance (CFCC) function works alongside the Risk function with in the ERMF to deliver a unif ied second l ine of defence. Three lines of defence model The Group applies a three line of defence model to its day-to-day activ it ies for effective risk management, and to reinforce a strong governance and control environment. Typically: • The businesses and functions engaged in or supporting revenue generating activ it ies that own and manage the risks constitute the ﬁrst line of defence. • The control functions, independent of the ﬁrst line of defence, that provide oversight and challenge of risk management activ it ies act as the second line of defence. • Internal Audit acts as the third line of defence provid ing independent assurance on the effectiveness of controls supporting the activ it ies of the ﬁrst and second line of defence functions. Risk Appetite and proﬁle The Group recognises the following constraints which determine the risks that we are will ing to take in pursuit of our strategy and the development of a sustainable business: • Risk capacity is the maximum level of risk the Group can assume, given its current capabil it ies and resources, before breaching constraints determined by capital and liqu id ity requirements or the internal operational environment, or otherwise fail ing to meet the expectat ions of regulator and law enforcement agencies. • RA is deﬁned by the Group and approved by the Board. It is the boundary for the risk that the Group is will ing to undertake to achieve its strategic object ives and Corporate Plan. The Board is responsible for approving the RA Statements, which are underpinned by a set of ﬁnanc ial and operat ional control parameters known as RA metrics and their associated thresholds. These directly constrain the aggregate risk exposures that can be taken across the Group. The Group RA is reviewed at least annually to ensure that it is ﬁt for purpose and aligned with strategy, with focus given to new or emerging risks. Risk Appetite Framework The Group RA is deﬁned in accordance with risk management princ iples that inform our overall approach to risk management and our risk culture. We set RA to enable us to grow sustainably whilst managing our risks, giv ing conﬁdence to our stakeholders. The Group RA is supplemented by risk control tools such as granular-level lim its, pol ic ies, standards, and other operat ional control parameters that are used to mainta in the Group’s r isk proﬁle with in approved RA. Risk Appetite Statement The Group will not compromise compliance with its Risk Appetite in order to pursue revenue growth or higher returns. See Table 1 for the set of RA statements. Risk ident iﬁcation and assessment Identif icat ion and assessment of potentially adverse risk events is an essential ﬁrst step in managing the risks of any business or activ ity. To ensure cons istency in communicat ion, we use PRTs to classify our risk exposures. We also recognise the need to mainta in a hol ist ic perspective since: • a single transaction or activ ity may g ive rise to multiple types of risk exposure; • risk concentrations may arise from multiple exposures that are closely correlated; and • a given risk exposure may change its form from one risk type to another. 316 Standard Chartered — Annual Report 2023 Risk review Risk management approach There are also sources of risk that arise beyond our own operations, such as the Group’s dependency on suppliers for the provis ion of serv ices and technology. As the Group remains accountable for risks aris ing from the actions of such third parties, failure to adequately monitor and manage these relationsh ips could mater ially impact the Group’s abil ity to operate. The Group mainta ins a dynam ic risk-scanning process with inputs on the internal and external risk environment, as well as potential threats and opportunit ies from the bus iness and client perspectives. The Group mainta ins a taxonomy of the PRTs, and risk sub-types; as well as the Topical and Emerging Risks (TERs) inventory that includes near-term as well as longer-term uncertaint ies. R isk assessments of planned growth and strategic in it iat ives aga inst the Group’s RA is undertaken annually. The GCRO and the Group Risk Committee (GRC) regularly review reports on the risk proﬁle for the PRTs, adherence to Group RA and the Group risk inventory, includ ing TERs. They use this informat ion to escalate mater ial developments and make recommendations to the Board annually on any potential changes to our Corporate Plan. Stress testing The objective of stress test ing is to support the Group in assessing that it: • does not have a portfolio with excessive risk concentration that could produce unacceptably high losses under severe but plausible scenarios; • has sufﬁcient ﬁnancial resources to w ithstand severe but plausible scenarios; • has the ﬁnancial ﬂex ib il ity to respond to extreme but plausible scenarios; • understands key business model risks and considers what kind of event might crystallise those risks – even if extreme and with a low likel ihood of occurr ing; • Identify, as required, actions to mit igate the l ikel ihood or impact of those events; • considers how the outcome of plausible stress events, includ ing TERs, may impact availab il ity of liqu id ity and regulatory capital; and • has set RA metrics at appropriate levels. Enterprise stress tests incorporate Capital and Liqu id ity Adequacy Stress Tests, includ ing recovery and resolut ion, as well as reverse stress tests. Stress tests are performed at the Group, country, business, and portfolio level under a wide range of risks and at varying degrees of severity. Unless specif ically set by the regulator, scenario design is a bespoke process that aims to explore risks that can adversely impact the Group. The Board delegates approval of the Bank of England (BoE) stress test submiss ions to the Board R isk Committee (BRC), which reviews the recommendations from the GRC. Based on the stress test results, the GCFO and GCRO can recommend strategic actions to the Board to ensure that the Group’s strategy remains with in RA. In addit ion, analys is is run at PRT level to assess specif ic r isks and concentrations that the Group may be exposed to. These include qualitat ive assessments such as stress ing of credit sectors or portfolios, measures such as Value at Risk (VaR) and multi-factor scenarios in Traded Risk and internal stressed liqu id ity metrics. Non-ﬁnanc ial r isk types are also stressed to assess the necessary capital requirements under the Operational & Technology RTF. The Group has also undertaken a number of Climate Risk stress tests, both those mandated by regulators as well as management scenarios. 317 Standard Chartered — Annual Report 2023 Risk review and Capital review Princ ipal R isk Types PRTs are those risks that are inherent in our strategy and business model and have been formally deﬁned in the Group’s ERMF. These risks are managed through dist inct RTFs wh ich are approved by the GCRO. The PRTs and associated RA Statements are reviewed annually. The table below shows the Group’s current PRTs. Table 1: Princ ipal R isk Types Deﬁn it ion and RA Statement Princ ipal R isk Types Deﬁnit ion Risk Appetite Statement Credit Risk Potential for loss due to failure of a counterparty to meet its agreed obligat ions to pay the Group. The Group manages its credit exposures following the princ iple of d ivers iﬁcation across products, geograph ies, client segments and industry sectors. Traded Risk Potential for loss resulting from activ it ies undertaken by the Group in ﬁnanc ial markets. The Group should control its ﬁnanc ial markets and activ it ies to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Treasury Risk Potential for insuff ic ient capital, liqu id ity, or funding to support our operations, the risk of reductions in earnings or value from movements in interest rates impact ing bank ing book items and the potential for losses from a shortfall in the Group’s pension plans. The Group should mainta in sufﬁcient cap ital, liqu id ity and funding to support its operations, and an interest rate proﬁle ensuring that the reductions in earnings or value from movements in interest rates impact ing banking book items does not cause material damage to the Group’s franchise. In addit ion, the Group should ensure its pension plans are adequately funded. Operational and Technology Risk Potential for loss resulting from inadequate or failed internal processes, technology events, human error, or from the impact of external events (includ ing legal risks). The Group aims to control operational and technology risks to ensure that operational losses (ﬁnanc ial or reputational), includ ing any related to conduct of business matters, do not cause material damage to the Group’s franchise. Financ ial Cr ime Risk 1 Potential for legal or regulatory penalties, material ﬁnancial loss or reputat ional damage resulting from the failure to comply with applicable laws and regulations relating to internat ional sanct ions, anti-money laundering and anti-bribery and corruption, and fraud. The Group has no appetite for breaches in laws and regulations related to Financ ial Cr ime, recognis ing that whilst inc idents are unwanted, they cannot be entirely avoided. Compliance Risk Potential for penalties or loss to the Group or for an adverse impact to our clients, stakeholders or to the integr ity of the markets we operate in through a failure on our part to comply with laws, or regulations. The Group has no appetite for breaches in laws and regulations related to regulatory non-compliance; recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Information and Cyber Security Risk Risk to the Group’s assets, operations, and ind iv iduals due to the potential for unauthorised access, use, disclosure, disrupt ion, mod if icat ion, or destruction of informat ion assets and/or informat ion systems. The Group aims to mit igate and control ICS r isks to ensure that inc idents do not cause the Bank mater ial harm, business disrupt ion, ﬁnancial loss or reputat ional damage – recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Reputational and Sustainab il ity Risk Potential for damage to the franchise (such as loss of trust, earnings or market capital isat ion), because of stakeholders taking a negative view of the Group through actual or perceived actions or inact ions, includ ing a fa ilure to uphold responsible business conduct as we strive to do no sign iﬁcant environmental and social harm through our client, third party relationsh ips, or our own operat ions. The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activ ity is satisfactor ily assessed and managed w ith the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striv ing to do no sign iﬁcant env ironmental and social harm. Model Risk Potential loss that may occur because of decis ions or the risk of mis-estimat ion that could be pr inc ipally based on the output of models, due to errors in the development, implementat ion, or use of such models. The Group has no appetite for material adverse impl icat ions aris ing from m isuse of models or errors in the development or implementat ion of models; whilst accepting some model uncertainty. 1 Fraud forms part of the Financ ial Cr ime RA Statement but in line with market practice does not apply a zero-tolerance approach In addit ion to the PRTs, there is a RA statement for Climate Risk: “The Group aims to measure and manage ﬁnanc ial and non-ﬁnancial r isks aris ing from cl imate change, and reduce emiss ions related to our own act iv it ies and those related to the ﬁnancing of cl ients in alignment with the Paris Agreement.” 318 Standard Chartered — Annual Report 2023 Risk review Risk management approach ERMF effectiveness reviews The GCRO is responsible for annually afﬁrm ing the effectiveness of the ERMF to the BRC via an effectiveness review. This review uses evidence-based self-assessments for all the RTFs and relevant polic ies. A top-down rev iew and challenge of the results is conducted by the GCRO with all RFOs and an opin ion on the internal control environment is provided by Group Internal Audit. The ERMF effectiveness review enables measurement of year-on-year progress. The key outcomes of the 2023 review are: • Continued focus on embedding the ERMF across the organisat ion. • Financ ial r isks continue to be more effectively managed and the Group continues to make good progress in embedding non-ﬁnanc ial r isk management. • Other aspects of the ERMF, includ ing the key r isk committees and key supporting standards, are established. • Country-led self-assessments ensure adherence to the ERMF. Country and regional risk committees continue to play an active role in managing and overseeing material issues aris ing in countries. Ongoing ffectiveness reviews allow for a structured approach to ident ify improvement opportunit ies and bu ild plans to address them. In 2024, the Group aims to further strengthen its risk management practices by improv ing the management of non-ﬁnancial r isks with in its businesses, functions and across our footprint. Executive and Board risk oversight Overview The Board has ultimate responsib il ity for risk management and is supported by ﬁve core Board level committees. The Board approves the ERMF based on the recommendation from the BRC, which also recommends the Group RA Statement for all PRTs. In addit ion, the Culture and Sustainab il ity Committee oversees the Group’s culture and key sustainab il ity prior it ies. Board and Executive level risk committee governance structure The Committee governance structure below presents the view as of 2023. Board of Directors Board Risk Committee Governance and Nominat ion Committee Culture and Sustainab il ity Committee Remuneration Committee Audit Committee Board level committees Group Risk Committee The GRC, which derives its authority from the GCRO, is responsible for ensuring the effective management of risk throughout the Group in support of the Group’s strategy. The GCRO chairs the GRC, whose members are drawn from the Group Management Team. The GRC oversees the effective implementat ion of the ERMF for the Group, includ ing the delegat ion of any part of its authorit ies to appropriate ind iv iduals or sub-committees. Group Risk Committee sub-committees • The Group Non-Financ ial R isk Committee (GNFRC) , chaired by the Global Head, Risk, Functions and Operational Risk, governs the non-ﬁnanc ial r isks throughout the Group, in support of the ERMF and the Group’s strategy. The GNFRC also reviews the adequacy of the internal control system across in-scope PRTs. • The Group Financ ial Cr ime Risk Committee (GFCRC) , chaired by the Group Head, CFCC, governs the Financ ial Crime Risk Type (excluding Fraud Risk and Secondary Reputational Risk aris ing from F inanc ial Cr ime Risk). The GFCRC ensures that the Financ ial Cr ime Risk proﬁle is managed with in RA and pol ic ies. 319 Standard Chartered — Annual Report 2023 Risk review and Capital review • The Group Responsib il ity and Reputational Risk Committee (GRRRC) , chaired by the Group Head, CFCC, ensures the effective management of Reputational and Sustainab il ity Risk across the Group. This includes provid ing oversight of matters aris ing from cl ients, products, transactions and strategic coverage-related decis ions and matters escalated by the respective RFOs. • The International Financ ial Report ing Standards (IFRS) 9 Impairment Committee , co-chaired by the Global Head Enterprise Risk Management (ERM) and Group Head, Central Finance, ensures the effective management of Expected Credit Loss (ECL) computations, as well as stage allocation of ﬁnanc ial assets for quarterly ﬁnancial report ing. • The Model Risk Committee , chaired by the Global Head, ERM, ensures the effective measurement and management of Model Risk in line with internal polic ies and RA. • The Corporate, Commercial and Institut ional Bank ing (CCIB) Risk Committee , chaired by the Chief Risk Ofﬁcer (CRO), CCIB and Europe and Americas, ensures the effective management of risk throughout CCIB in support of the Group’s strategy. • The Consumer, Private and Business Banking (CPBB) Risk Committee, chaired by the CRO, CPBB, ensures the effective management of risk throughout CPBB in support of the Group’s strategy. • The Asia Risk Committee and the Africa and Middle East Risk Committee are chaired by the CRO for the respective region. These committees ensure the effective management of risk in the regions in support of the Group’s strategy. • The Investment Committee , chaired by representatives from the Risk function (CRO, Stressed Asset Group (SAG), Chief Credit Ofﬁcer), ensures the optim ised w ind-down of the Group’s exist ing d irect investment activ it ies in equit ies, quasi-equit ies (exclud ing mezzanine), funds and other alternative investments (excluding debt/debt-like instruments). This includes equity or quasi-equity stakes obtained as a result of restructuring of distressed debt, non-core equit ies and l im ited partner investments in funds linked to CCIB and managed by the Credit and Portfolio Management. • The SC Ventures (SCV) Risk Committee , chaired by the CRO, SCV, receives authority directly from the GCRO and oversees the effective management of risk throughout SCV and the portfolio of subsid iar ies operating under SCV, in support of the Group’s strategy. • The Climate Risk Management Committee (CRMC) , chaired by the Global Head, ERM, oversees the effective implementat ion of the Group’s Cl imate Risk Policy and workplan. This includes relevant regulatory requirements and covers Climate Risk related ﬁnanc ial and non- ﬁnancial r isks. • The Regulatory Interpretation Committee , co-chaired by the Global Head ERM and Group Head, Central Finance, provides oversight of material regulatory interpretat ions for the Capital Requirements Regulation (as amended by UK legislat ion), the Prudent ial Regulatory Authority (PRA) rulebook and other relevant regulations impact ing Group regulatory capital calculations and reporting. The areas and risk types in scope are credit risk, traded risk, operational risk, large exposures, leverage ratio and securit isat ion. • The Dig ital Assets R isk Committee , chaired by the Global Head, ERM, oversees effective risk management of the Dig ital Assets (DA) R isk proﬁle of the Group. This includes provid ing overs ight and subject matter expertise of DA Risk matters aris ing from DA-related act iv it ies across the PRTs. Group Asset and Liab il ity Committee The Group Asset and Liab il ity Committee (GALCO) is chaired by the GCFO. Its members are drawn princ ipally from the Management Team. GALCO is responsible for determin ing the Group’s balance sheet strategy and for ensuring that, in executing the Group’s strategy, the Group operates with in RA and regulatory requirements relating to capital, loss- absorbing capacity, liqu id ity, leverage, Interest Rate Risk in the Banking Book (IRRBB), Banking Book Basis Risk and Structural Foreign Exchange Risk. It also monitors the structural impact of decis ions around susta inable ﬁnance, net zero and climate risk. GALCO is also responsible for ensuring that internal and external recovery planning requirements are met. 320 Standard Chartered – Annual Report 2023 Risk review Risk management approach Princ ipal r isks We manage and control our PRTs through dist inct RTFs, pol ic ies and RA. The Group deﬁnes Credit Risk as the potential for loss due to failure of a counterparty to meet its agreed obligat ions to pay the Group. Risk Appetite Statement The Group manages its credit exposures following the princ iple of d ivers iﬁcation across products, geographies, client segments and industry sectors. Roles and responsib il it ies The Credit RTF for the Group are set and owned by the CROs for the respective business segments. The Credit Risk control function is the second line of defence responsible for independent challenge, monitor ing and oversight of the Credit Risk management practices of the ﬁrst line of defence. In addit ion, they ensure that cred it risks are properly assessed and transparent; and that credit decis ions are controlled in accordance with the Group’s RA, credit polic ies and standards. Mit igat ion Segment-specif ic pol ic ies for CCIB and CPBB are in place for the management of Credit Risk. The Credit Policy for CCIB Client Coverage sets the princ iples that must be followed for the end-to-end credit process, includ ing cred it in it iat ion, credit grading, credit assessment, product structuring, credit risk mit igat ion, monitor ing and control, and documentat ion. The CPBB Credit Risk Management Policy sets the princ iples for the management of CPBB segments, for end-to-end credit process includ ing cred it in it iat ion, cred it assessment, documentation and monitor ing for lend ing to these segments. The Group also sets out standards for the elig ib il ity, enforceabil ity, and effect iveness of Credit Risk mit igat ion arrangements. Potential credit losses from a given account, client or portfolio are mit igated us ing a range of tools, such as collateral, netting agreements, credit insurance, credit derivat ives and guarantees. Risk mit igants are also carefully assessed for the ir market value, legal enforceabil ity, correlat ion, and counterparty risk of the protection provider. Collateral is valued prior to drawdown and regularly thereafter as required, to reﬂect current market condit ions, the probabil ity of recovery and the per iod of time to realise the collateral in the event of liqu idat ion. The Group also seeks to divers ify its collateral holdings across asset classes and markets. Where guarantees, credit insurance, standby letters of credit or credit derivat ives are used as Cred it Risk mit igat ion, the creditworth iness of the protect ion provider is assessed and monitored using the same credit approval process applied to the obligor. Governance committee oversight At Board level, the BRC oversees the effective management of Credit Risk. At the executive level, the GRC oversees and appoints sub-committees for the management of all risk types includ ing Cred it Risk – in particular the CCIB Risk Committee, CPBB Risk Committee, Asia Risk Committee, and Africa and Middle East Risk Committee. The GRC also receives reports from other key Group Committees such as the Standard Chartered Bank Executive Risk Committee (in relation to Credit Risk). These committees are responsible for overseeing all risk proﬁles includ ing Cred it Risk of the Group with in the respect ive business areas and regions. Meetings are held regularly, and the committees monitor all material Credit Risk exposures, as well as key internal developments and external trends, ensuring that appropriate action is taken where necessary. Decis ion-mak ing authorit ies and delegat ion The Credit RTF is the formal mechanism of delegating Credit Risk authorit ies cascad ing from the GCRO, as the Senior Manager of the Credit Risk PRT. The delegation is to ind iv iduals such as the business segments’ CROs. Further delegation of credit authorit ies to ind iv idual credit ofﬁcers may be undertaken based on risk-adjusted scales by customer type or portfolio. Credit Risk authorit ies are rev iewed at least annually to ensure that they remain appropriate. In CCIB Client Coverage, the ind iv iduals delegating the Credit Risk authorit ies perform oversight by review ing a sample of the l im it appl icat ions approved by the delegated credit ofﬁcers period ically. In CPBB, where credit decis ion systems and tools (e.g. appl icat ion scorecards) are used for credit decis ion ing, such risk models are subject to performance monitor ing and per iod ic validat ion. Where manual or d iscret ionary cred it decis ions are applied, the ind iv iduals delegating the Credit Risk authorit ies perform per iod ic qual ity control assessments and assurance checks. Credit Risk 321 Standard Chartered – Annual Report 2023 Risk review and Capital review Monitor ing The Group regularly monitors credit exposures, portfolio performance, external trends and emerging risks that may impact risk management outcomes. Internal risk management reports that are presented to risk committees contain informat ion on key pol it ical and econom ic trends across major portfolios and countries, portfolio delinquency and loan impa irment performance. In CCIB Client Coverage, clients and portfolios are subject to addit ional rev iew when they display signs of actual or potential weakness; for example, where there is a decline in the client’s posit ion w ith in the industry, ﬁnanc ial deter iorat ion, a breach of covenants, or non-performance of an obligat ion with in the st ipulated period. Such accounts are subject to a dedicated process overseen by the Credit Issues Committee in the relevant countries where client account strategies and credit grades are re-evaluated. In addit ion, remed ial actions, includ ing plac ing accounts on early alert for increased scrutiny, exposure reduction, security enhancement or exit ing the account could be undertaken. Certain accounts could also be transferred into the control management of the SAG, which is our special ist recovery un it for CCIB Client Coverage that operates independently from our main business. On an annual basis, senior members from Business and Risk partic ipate in a more extensive portfolio review for certain corporate industry groups. In addit ion to a rev iew of the portfolio informat ion, th is enhanced review (known as the industry portfolio review) incorporates industry outlook, key elements of business strategy, RA, credit proﬁle and emerging/horizon risks. A condensed version of these industry portfolio reviews will also be shared with the CCIB Risk Committee. Any material in-country developments that may impact sovereign ratings are monitored closely by the Country Risk Team. The Country Risk Early Warning system, a triage-based risk ident iﬁcation system, categor ises countries based on a forward-looking view of possible downgrades and the potential incremental risk-weighted assets (RWA) impact. For CPBB, exposures and collateral monitor ing are performed at the counterparty and/or portfolio level across different client segments to ensure transactions and portfolio exposures remain with in RA. Portfol io delinquency trends are also monitored. Accounts that are past due (or perceived as high risk but not yet past due) are subject to collections or recovery processes managed by a special ist independent function. In some countries, aspects of collections and recovery activ it ies are outsourced. For discret ionary lend ing portfolios, sim ilar processes to those of CCIB cl ient coverage are followed. In addit ion, an independent Credit Risk Review team (part of ERM function), performs judgement-based assessments of the Credit Risk proﬁles at various portfolio levels. They focus on selected countries and segments through deep dives, comparative analysis, and review and challenge of the basis of credit approvals. The review ensures that the evolving Credit Risk proﬁles of CCIB and CPBB are well managed with in RA and polic ies, through forward-look ing mit igat ing actions where necessary. Credit rating and measurement All credit proposals are subject to a robust credit risk assessment. It includes a comprehensive evaluation of the client’s credit quality, includ ing w ill ingness, ab il ity, and capacity to repay. The primary lending considerat ion is based on the client’s credit quality and the repayment capacity from operating cashﬂows for counterparties, and personal income or wealth for ind iv idual borrowers. The risk assessment gives due considerat ion to the cl ient’s liqu id ity and leverage posit ion. Where applicable, the assessment includes a detailed analysis of the Credit Risk mit igat ion arrangements to determine the level of reliance on such arrangements as the secondary source of repayment in the event of a sign iﬁcant deteriorat ion in a client’s credit quality leading to default. Client income, net worth, and the liqu id ity of asset by class are considered for overall risk assessment for wealth lending. The availab il ity of Wealth Lending credit lim its is subject to the availab il ity of qualif ied collateral. Risk measurement plays a central role, along with judgement and experience, in inform ing r isk-taking and portfolio management decis ions. We adopt the Advanced Internal Ratings Based (AIRB) approach under the Basel regulatory framework to calculate Credit Risk capital requirements. The Group has also established a global programme to assess capital requirements necessary to be implemented to meet the latest revised Basel III ﬁnal isat ion (referred to as Basel 3.1 or Basel IV) regulations. A standard alphanumeric Credit Risk grade system is used for CCIB Client Coverage. The numeric grades run from 1 to 14 and some of the grades are further sub-classif ied. Lower numer ic credit grades are ind icat ive of a lower likel ihood of default. Credit grades 1 to 12 are assigned to performing customers, while credit grades 13 and 14 are assigned to non-performing or defaulted customers. CPBB internal ratings-based portfolios use applicat ion and behavioural credit scores that are calibrated to generate a probabil ity of default. The R isk Decis ion Framework uses a credit rating system to deﬁne the portfolio/new booking segmentation, shape and decis ion cr iter ia for the unsecured consumer business segment. AIRB models cover a substantial major ity of our exposures and are used in assessing risks at a customer and portfolio level, setting strategy, and optim is ing our risk-return decis ions. The Model Risk Committee approves material internal ratings-based risk measurement models. Prior to review and approval, all internal ratings based models are validated in detail by an independent model validat ion team. Rev iews are also triggered if the performance of a model deteriorates materially against predetermined thresholds during the ongoing model performance monitor ing process, wh ich takes place between the annual validat ions. 322 Standard Chartered – Annual Report 2023 Risk review Risk management approach Credit Concentration Risk Credit Concentration Risk may arise from a single large exposure to a counterparty or a group of connected counterparties, or from multiple exposures across the portfolio that are closely correlated. Large exposure Concentration Risk is managed through concentration lim its set for a counterparty or a group of connected counterparties based on control and economic dependence criter ia. RA metr ics are set at portfolio level and monitored to control concentrations, where appropriate, by industry, products, tenor, collateralisat ion level, top cl ients, and exposure to holding companies. Single name credit concentration thresholds are set by client group depending on credit grade, and by customer segment. For concentrations that are material at a Group level, breaches and potential breaches are monitored by the respective governance committees and reported to the GRC and BRC. Credit impa irment ECL is determined for all ﬁnanc ial assets that are class if ied as amortised cost or fair value through other comprehensive income. ECL is computed as an unbiased, probabil ity- weighted provis ion determ ined by evaluating a range of plausible outcomes, the time value of money, and forward- looking informat ion such as cr it ical global or country-spec if ic macroeconomic variables. For more detailed informat ion on macroeconomic data feeding into IFRS 9 ECL calculations, please refer to the Risk proﬁle section (pages 273 to 285). At the time of orig inat ion or purchase of a non-credit impa ired ﬁnancial asset (Stage 1), ECL represents cash shortfalls ar is ing from possible default events up to 12 months into the future from the balance sheet date. ECL continues to be determined on this basis until there is a sign iﬁcant increase in the Credit Risk of the asset (Stage 2), in which case ECL is recognised for default events that may occur over the lifet ime of the asset. If there is observed object ive ev idence of credit impa irment or default (Stage 3), ECL continues to be measured on a lifet ime basis. To provide the Board with oversight and assurance that the quality of assets orig inated are al igned to the Group’s strategy, there is a RA metric to monitor Stage 1 and Stage 2 ECL from assets orig inated in the past 12 months. For CCIB, in line with the regulatory guidel ines, Stage 3 ECL is considered when an obligor is more than 90 days past due on any amount payable to the Group, or the obligor(s) has symptoms of unlikel iness to pay its credit obligat ions in full as they fall due. These credit-impa ired accounts are managed by SAG. In CPBB, loans to ind iv iduals and small businesses are considered credit-impa ired as soon as any payment of interest or princ ipal is 90 days overdue or they meet other objective ev idence of impa irment, such as bankruptcy, debt restructuring, fraud, or death. Financ ial assets are wr itten off, in the amount that is determined to be irrecoverable, when they meet condit ions set such that emp ir ical ev idence suggests the client is unlikely to meet their contractual obligat ions, or a loss of pr inc ipal is reasonably expected. Estimat ing the amount and t im ing of future recover ies involves sign iﬁcant judgement and cons iders the assessment of matters such as future economic condit ions and the value of collateral, for which there may not be a readily accessible market. The total amount of the Group’s impa irment prov is ion is inherently uncertain, being sensit ive to changes in economic and credit condit ions across the reg ions in which the Group operates. For further details on sensit iv ity analysis of ECL under IFRS 9, please refer to the Risk proﬁle section (pages 273 to 285). 323 Standard Chartered – Annual Report 2023 Risk review and Capital review Roles and responsib il it ies The Traded RTF, which sets the roles and responsib il it ies in respect of Traded Risk for the Group, is owned by the Global Head, Traded Risk Management (TRM). The business, acting as ﬁrst line of defence, is responsible for the effective management of risks with in the scope of its direct organisat ional respons ib il it ies set by the Board. TRM is the second line control function that performs independent challenge, monitor ing and overs ight of the Traded Risk management practices of the ﬁrst line of defence, predominantly Financ ial Markets and Treasury Markets. Mit igat ion The Traded RTF requires that Traded Risk lim its be deﬁned at a level appropriate to ensure that the Group remains with in RA. All businesses incurr ing Traded R isk must comply with the Traded RTF. The Traded Risk Policy sets the princ iples that must be followed for the end-to-end traded risk management process, includ ing l im it sett ing, risk capture and measurement, lim it mon itor ing and escalat ion, risk mit igat ion and stress testing. Polic ies and standards ensure that these Traded R isk lim its are implemented. Polic ies are rev iewed and approved by the Global Head, TRM period ically to ensure the ir ongoing effectiveness. Governance committee oversight At Board level, the BRC oversees the effective management of Traded Risk. At the executive level, the GRC delegates responsib il it ies to the CCIB R isk Committee to oversee the Traded Risk proﬁle of the Group. For subsid iar ies, the authority for setting Traded Risk lim its is delegated from the local board to the local risk committee, Country CRO and Traded Risk managers. Meetings are held regularly, and the committees monitor all material Traded Risk exposures, as well as key internal developments and external trends, and ensure that appropriate action is taken. Decis ion-mak ing authorit ies and delegat ion The Traded RTF is the formal mechanism which delegates Traded Risk authorit ies cascad ing from the GCRO, as the Senior Manager of the Traded Risk Type, to the Global Head, TRM who further delegates authorit ies to named ind iv iduals. Traded Risk authorit ies are rev iewed at least annually to ensure that they remain appropriate and to assess the quality of decis ions taken by the author ised person. Key risk-taking decis ions are made only by certa in ind iv iduals with the skills, judgement, and perspective to ensure that the Group’s control standards and risk-return object ives are met. Market Risk The Group uses a VaR model to measure the risk of losses aris ing from future potent ial adverse movements in market rates, prices, and volatil it ies. VaR is a quantitat ive measure of Market Risk that applies recent histor ical market cond it ions to estimate the potential future loss in market value that will not be exceeded in a set time period at a set statist ical conﬁdence level. VaR provides a consistent measure that can be applied across trading businesses and products over time and can be set against actual daily trading proﬁt and loss outcomes. For day-to-day risk management, VaR is calculated as at the close of business, generally at UK time for expected market movements over one business day and to a conﬁdence level of 97.5 per cent. Intra-day risk levels may vary from those reported at the end of the day. The Group applies two VaR methodologies: • Histor ical s imulat ion: th is involves the revaluation of all exist ing pos it ions to reﬂect the effect of h istor ically observed changes in Market Risk factors on the valuation of the current portfolio. This approach is applied for general Market Risk factors and the major ity of spec if ic (cred it spread) risk VaRs. • Monte Carlo simulat ion: th is methodology is sim ilar to histor ical s imulat ion but w ith considerably more input risk factor observations. These are generated by random sampling techniques, but the results retain the essential variab il ity and correlations of histor ically observed r isk factor changes. This approach is applied for some of the specif ic (cred it spread) risk VaRs in relation to id iosyncrat ic exposures in credit markets. A one-year histor ical observat ion period is applied in both methods. As an input to regulatory capital, trading book VaR is calculated for expected movements over 10 business days and to a conﬁdence level of 99 per cent. Some types of Market Risk are not captured in the regulatory VaR measure, and these Risks not in VaR are subject to capital add-ons. An analysis of VaR results in 2023 is available in the Risk proﬁle section (pages 286 to 289). The Group deﬁnes Traded Risk as the potential for loss resulting from activ it ies undertaken by the Group in ﬁnancial markets. Risk Appetite Statement The Group should control its ﬁnanc ial markets and activ it ies to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Traded Risk 324 Standard Chartered – Annual Report 2023 Risk review Risk management approach Counterparty Credit Risk The Group uses a Potential Future Exposure (PFE) model to measure the credit exposure aris ing from the pos it ive mark-to- market of traded products and future potential movements in market rates, prices, and volatil it ies. PFE is a quantitat ive measure of Counterparty Credit Risk that applies recent histor ical market cond it ions to est imate the potential future credit exposure that will not be exceeded in a set time period at a conﬁdence level of 97.5 per cent. PFE is calculated for expected market movements over different time horizons based on the tenor of the transactions. The Group applies two PFE methodologies: simulat ion based, which is predominantly used, and an add-on based PFE methodology. Underwrit ing The underwrit ing of secur it ies and loans is in scope of the RA set by the Group for Traded Risk. Addit ional l im its approved by the GCRO are set on the sectoral concentration, and the maximum holding period. The Underwrit ing Comm ittee, under the authority of the GCRO, approves ind iv idual proposals to underwrite new security issues and loans for our clients. Monitor ing TRM monitors the overall portfolio risk and ensures that it is with in spec if ied l im its and therefore RA. L im its are typ ically reviewed twice a year. Most of the Traded Risk exposures are monitored daily against approved lim its. Traded R isk lim its apply at all times unless separate intra-day lim its have been set. Lim it excess approval dec is ions are based on an assessment of the circumstances driv ing the excess and of the proposed remediat ion plan. L im its and excesses can only be approved by a Traded Risk manager with the appropriate delegated authority. 325 Standard Chartered – Annual Report 2023 Risk review and Capital review Roles and responsib il it ies The Global Head, ERM is responsible for the RTF for Treasury Risk under the ERMF. The Group Treasurer is supported by teams in Treasury and Finance to implement the Treasury RTF as the ﬁrst line of defence and is responsible for managing Treasury Risk. At Regional and Country level, Chief Executive Ofﬁcers (CEOs) supported by Regional and Country level Finance and Treasury teams are responsible for managing Treasury Risk as the ﬁrst line of defence. Regional Treasury CROs and Country CROs for Treasury Risk (except Pension Risk) and Head of Pensions (for Pension Risk) are responsible for overseeing and challenging the ﬁrst line of defence. Mit igat ion The Group develops polic ies to address mater ial Treasury Risks and aims to mainta in its risk proﬁle with in RA. In order to do this, metrics are set against Capital Risk, Liqu id ity and Funding Risk and IRRBB. Where appropriate, RA metrics are cascaded down to regions and countries in the form of Lim its and Management Action Triggers. Capital Risk In order to manage Capital Risk, strategic business, and capital plans (Corporate Plan) are drawn up covering a ﬁve-year horizon which are approved by the Board annually. The plan ensures that adequate levels of capital, includ ing loss absorbing capacity, and an efﬁc ient m ix of the different components of capital are mainta ined to support our strategy and business plans. Treasury is responsible for the ongoing assessment of the demand for capital and the updating of the Group’s capital plan. RA metrics includ ing cap ital, leverage, Min imum Requ irement for own funds and Elig ible L iab il ity (MREL) and double leverage are assessed with in the Corporate Plan to ensure that the strategy can be achieved with in r isk tolerances. Structural Foreign Exchange (FX) Risk The Group’s structural FX posit ion results from the Group’s non-US dollar investment in the share capital and reserves of subsid iar ies and branches. The FX translation gains, or losses, are recorded in the Group’s translation reserves with a direct impact on the Group’s Common Equity Tier 1 ratio. The Group contracts hedges to manage its structural FX posit ion in accordance with the RA, and as a result the Group has taken net investment hedges to partially cover its exposure to certain non-US dollar currencies to mit igate the FX impact of such posit ions on its capital ratios. Liqu id ity and Funding Risk At Group, regional and country level we implement various business-as-usual and stress risk metrics to monitor and manage liqu id ity and funding risk. This ensures that the Group mainta ins an adequate and well-d ivers iﬁed l iqu id ity buffer, as well as a stable funding base, and that it meets its liqu id ity and funding regulatory requirements. The approach to managing risks and the RA is assessed annually through the Internal Liqu id ity Adequacy Assessment Process. A funding plan is also developed for efﬁc ient l iqu id ity project ions to ensure that the Group is adequately funded in the required currencies, to meet its obligat ions and cl ient funding needs. The funding plan is part of the overall Corporate Plan process align ing to the cap ital requirements. Interest Rate Risk in the Banking Book This risk arises from differences in the repric ing proﬁle, interest rate basis, and optional ity of bank ing book assets liab il it ies and off-balance sheet items. IRRBB represents an economic and commercial risk to the Group and its capital adequacy. The Group monitors IRRBB against the RA. Pension Risk Pension Risk is the potential for loss due to having to meet an actuarially assessed shortfall in the Group’s pension plans. Pension obligat ion r isk to a ﬁrm arises from its contractual or other liab il it ies to or w ith respect to an occupational pension plan or other long-term beneﬁt obligat ion. For a funded plan it represents the risk that addit ional contr ibut ions w ill need to be made because of a future shortfall in the funding of the plan. Or, for unfunded obligat ions, it represents the risk that the cost of meeting future beneﬁt payments is greater than currently antic ipated. The Pens ion Risk posit ion aga inst RA metric is reported to the GRC. This metric is calculated as the total capital requirement (includ ing both P illar 1 and Pillar 2A capital) in respect of Pension Risk, expressed as a number of basis points of RWA. Recovery and Resolution Planning In line with PRA requirements, the Group mainta ins a Recovery Plan which is a live document to be used by management in the event of stress in order to restore the Group to a stable and sustainable posit ion. The Recovery Plan includes a set of recovery ind icators, an escalat ion framework, and a set of management actions capable of being implemented during a stress. A Recovery Plan is also mainta ined w ith in each major entity, and all recovery plans are subject to period ic ﬁre-drill testing. The Group deﬁnes Treasury Risk as the potential for insuff ic ient capital, liqu id ity, or funding to support our operations, the risk of reductions in earnings or value from movements in interest rates impact ing bank ing book items and the potential for losses from a shortfall in the Group’s pension plans. Risk Appetite Statement The Group should mainta in sufﬁcient cap ital, liqu id ity and funding to support its operations, and an interest rate proﬁle ensuring that the reductions in earnings or value from movements in interest rates impact ing bank ing book items does not cause material damage to the Group’s franchise. In addit ion, the Group should ensure its pension plans are adequately funded. Treasury Risk 326 Standard Chartered – Annual Report 2023 Risk review Risk management approach As the UK resolution authority, the BoE is required to set a preferred resolution strategy for the Group. The BoE’s preferred resolution strategy is whole Group single point of entry bail-in at the ultimate holding company level (Standard Chartered PLC) and would be led by the BoE. In support of this strategy, the Group has been developing a set of capabil it ies, arrangements, and resources to achieve the required outcomes. Following the BoE’s ﬁrst resolvabil ity assessment and public disclosure for major UK ﬁrms in 2022, the second Resolvabil ity Assessment Framework (RAF) cycle is under way. The Group submitted its Resolvabil ity Assessment Report to the BoE and PRA on 6 October 2023 and is due to publish its resolvabil ity publ ic disclosure in June 2024. Governance committee oversight At the Board level, the BRC oversees the effective management of Treasury Risk. At the executive level, the GALCO ensures the effective management of risk throughout the Group in support of the Group’s strategy, guides the Group’s strategy on balance sheet optim isat ion and ensures that the Group operates with in the RA and other internal and external requirements relating to Treasury Risk (except Pension Risk). The GRC and Regional Risk Committees provide oversight for Pension Risk. Regional and country oversight resides with regional and country Asset and Liab il ity Committees. Regions and countries must ensure that they remain in compliance with Group Treasury polic ies and pract ices, as well as local regulatory requirements. Decis ion-mak ing authorit ies and delegat ion The GCFO has responsib il ity for capital, funding, and liqu id ity under the SMR. The GCRO has delegated the RFO responsib il it ies assoc iated with Treasury Risk to the Global Head, ERM. The Global Head, ERM delegates second line of defence oversight and challenge responsib il it ies to the Treasury CRO and Country CROs for Capital Risk, Liqu id ity and Funding Risk and IRRBB, and to Head of Pensions for Pension Risk. Monitor ing On a day-to-day basis, Treasury Risk is managed by Treasury, Finance and Country CEOs. The Group regularly reports and monitors Treasury Risk inherent in its business activ it ies and those that arise from internal and external events. Internal risk management reports covering the balance sheet and the capital and liqu id ity posit ion are presented to the relevant country Asset and Liab il ity Committee. The reports contain key informat ion on balance sheet trends, exposures against RA and supporting risk measures which enable members to make informed decis ions around the overall management of the balance sheet. In addit ion, an independent Treasury CRO as part of ERM reviews the prudency and effectiveness of Treasury Risk management. Pension Risk is actively managed by the Head of Pensions and monitored by the Head of Country Risk, Scenario Analysis, Insurable and Pension Risk. The Head of Pensions ensures that accurate, complete, and timely updates on Pension Risk are shared with the Head of Country Risk, Scenario Analysis and Pension Risk, the Treasury CRO and the Global Head, ERM on a period ic bas is. 327 Standard Chartered – Annual Report 2023 Risk review and Capital review Changes to Third Party Risk With effect from January 2024, the Group has removed the IRT classif icat ion and formally included Third Party Risk as a sub risk under Operational and Technology Risk. Third Party Risk is deﬁned as the potential for loss or adverse impact due to the failure to manage the onboarding, lifecycle and exit strategy of a third party. The Third Party Risk Management Policy and Standard, in conjunct ion w ith the respective PRT polic ies and standards, hol ist ically set out the Group’s min imum controls requ irements for the ident iﬁcation, mit igat ion and management of risks aris ing from the use of Third Parties. Roles and responsib il it ies The Operational and Technology RTF sets the roles and responsib il it ies in respect of Operational and Technology risk for the Group. The Operational and Technology RTF deﬁnes the Group’s Operational and Technology risk sub-types and sets standards for the ident iﬁcation, control, mon itor ing and treatment of risks. These standards are applicable across all PRTs and risk sub-types in the Operational and Technology RTF. The list of risk sub-types includes Execution Capabil ity, Governance, Reporting and Obligat ions, Legal Enforceab il ity, and Operational Resil ience ( includ ing cl ient service, change management, people management, safety and security, and technology risk). The Operational and Technology RTF reinforces clear accountabil ity for manag ing risk throughout the Group and delegates second line of defence responsib il it ies to ident iﬁed SMEs. For each risk sub-type, the subject matter expert sets polic ies and standards for the organ isat ion to comply w ith, and provides guidance, oversight, and challenge over the activ it ies of the Group. They ensure that key risk decis ions are only taken by ind iv iduals with the requis ite sk ills, judgement, and perspective to ensure that the Group’s risk-return objectives are met. Mit igat ion The Operational and Technology RTF sets out the Group’s overall approach to the management of Operational and Technology risk in line with the Group’s Operational and Technology RA. This is supported by the Risk and Control Self-Assessment (RCSA) which deﬁnes roles and responsib il it ies for the ident iﬁcation, control, and mon itor ing of risks (applicable to all PRTs, risk sub-types and IRTs). The RCSA is used to determine the design strength and reliab il ity of each process, and requires: • the recording of processes run by client segments, products, and functions into a process universe; • the ident iﬁcation of potent ial failures in these processes and the related risks of such failures; • an assessment of the impact of the ident iﬁed r isks based on a consistent scale; • the design and monitor ing of controls to m it igate pr ior it ised risks; and • assessments of residual risk and timely actions for elevated risks. Risks that exceed the Group’s Operational and Technology RA require treatment plans to address underlying causes. Governance committee oversight At Board level, the BRC oversees the effective management of Operational and Technology risk. At the executive level, the GRC is responsible for the governance and oversight of Operational and Technology risk for the Group. The GRC, supported by the GNFRC, monitors the Group’s Operational and Technology RA and relies on other key committees for the management of Operational and Technology risk. Regional business segments and functional committees also provide governance oversight of their respective processes and related Operational and Technology risk. In addit ion, Country Non-Financ ial R isk Committees (CNFRCs) oversee the management of Operational and Technology Risk at the country (or entity) level. In smaller countries, the responsib il it ies of the CNFRC may be exercised directly by the Country Risk Committee (for branches) or Executive Risk Committee (for subsid iar ies). Decis ion-mak ing authorit ies and delegat ion The GCRO has delegated the RFO responsib il it ies assoc iated with the Operational and Technology RTF to the Global Head of Risk, Functions and Operational Risk (GHRFOR). The Operational and Technology RTF is the formal mechanism through which the delegation of Operational and Technology Risk authorit ies is made. The GHRFOR places reliance on the respective SMEs for second line of defence oversight of the relevant Operational and Technology risk sub-types through the Operational and Technology RTF. The Group deﬁnes Operational and Technology risk as the potential for loss resulting from inadequate or failed internal processes, technology events, human error, or from the impact of external events (includ ing legal risks). Risk Appetite Statement The Group aims to control operational and technology risks to ensure that operational losses (ﬁnancial or reputat ional), includ ing any related to conduct of business matters, do not cause material damage to the Group’s franchise. Operational and Technology Risk 328 Standard Chartered – Annual Report 2023 Risk review Risk management approach Monitor ing To deliver services to clients and to partic ipate in the ﬁnanc ial services sector, the Group runs processes which are exposed to Operational and Technology risks. The Group prior it ises and manages risks which are sign iﬁcant to cl ients and to the ﬁnancial serv ices sectors. Control ind icators are regularly monitored to determine the Group’s exposure to residual risk. The residual risk assessments and reporting of events form the Group’s Operational and Technology Risk proﬁle. The completeness of the Operational and Technology Risk proﬁle ensures appropriate prior it isat ion and t imel iness of risk decis ions, includ ing r isk acceptances with treatment plans for risks that exceed acceptable thresholds. The Board Risk Committee is informed on adherence to Operational and Technology RA through metrics reported for selected risks. These metrics are monitored, and escalation thresholds are devised based on the material ity and sign iﬁcance of the r isk. These Operational and Technology RA metrics are consolidated on a regular basis and reported at relevant Group committees. This provides senior management with the relevant informat ion to inform their risk decis ions. 329 Standard Chartered – Annual Report 2023 Risk review and Capital review Roles and responsib il it ies The Group Head, CFCC has overall responsib il ity for Financ ial Crime Risk and is responsible for the establishment and maintenance of effective systems and controls to meet legal and regulatory obligat ions in respect of Financ ial Cr ime Risk. The Group Head, CFCC is the Group’s Compliance and Money-Laundering Reporting Ofﬁcer and performs the Financ ial Conduct Author ity (FCA) controlled function and senior management function in accordance with the requirements set out by the FCA, includ ing those set out in their handbook on systems and controls. As the ﬁrst line of defence, the business process owners have responsib il ity for the applicat ion of pol icy controls and the ident iﬁcation and measurement of risks relating to ﬁnanc ial cr ime. The business must communicate risks and any policy non-compliance to the second line of defence for review and approval following the model for delegation of authority. Mit igat ion There are four Group polic ies in support of the Financ ial Crime RTF: • Group Anti-Bribery and Corruption Policy • Group Anti-Money Laundering and Counter Terrorist Financ ing Pol icy • Group Sanctions Policy • Group Fraud Risk Management Policy The Group operates risk-based assessments and controls in support of its Financ ial Cr ime Risk programme, includ ing (but not lim ited to): • Group Risk Assessment: the Group monitors enterprise-wide Financ ial Cr ime Risks through the CFCC Risk Assessment process consist ing of F inanc ial Cr ime Risk and Compliance Risk assessments. The Financ ial Cr ime Risk assessment is a Group-wide risk assessment undertaken annually to assess the inherent Financ ial Cr ime Risk exposures and the associated processes and controls by which these exposures are mit igated. • Financ ial Cr ime Surveillance: risk-based systems and processes to prevent and detect ﬁnancial cr ime. The strength of controls is tested and assessed through the Group’s Operational and Technology RTF, in addit ion to oversight by CFCC Assurance. Governance committee oversight Financ ial Cr ime Risk with in the Group is governed by the GFCRC and the GNFRC for Fraud Risk. The GFCRC is responsible for ensuring effective oversight for operational risk relating to Financ ial Cr ime Risk. Board Level oversight of Financ ial Cr ime risk is performed by the Audit Committee and the BRC. Decis ion-mak ing authorit ies and delegat ion The Financ ial Cr ime RTF is the formal mechanism through which the delegation of Financ ial Cr ime Risk authorit ies is made. The Group Head, CFCC is the RFO for Financ ial Cr ime Risk under the Group’s ERMF. Certain aspects of Financ ial Crime Compliance, second line of defence oversight and challenge, are delegated with in the CFCC funct ion. Approval frameworks are in place to allow for risk-based decis ions on client onboarding, potential breaches of sanctions regulation or policy, situat ions of potent ial money laundering (and terrorist ﬁnanc ing), br ibery and corruption or internal and external fraud. Monitor ing The Group monitors Financ ial Cr ime Risk compliance against a set of RA metrics. These metrics are reviewed period ically and reported regularly to the GFCRC, GNFRC, BRC, GRC, and relevant Board committees. The Group deﬁnes Financ ial Cr ime Risk as the potential for legal or regulatory penalties, material ﬁnanc ial loss or reputational damage resulting from the failure to comply with applicable laws and regulations relating to internat ional sanct ions, anti-money laundering and anti-bribery and corruption, and fraud. Risk Appetite Statement The Group has no appetite for breaches in laws and regulations related to ﬁnanc ial cr ime, recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Financ ial Cr ime Risk 330 Standard Chartered – Annual Report 2023 Risk review Risk management approach Roles and responsib il it ies The Group Head, CFCC as RFO for Compliance Risk provides support to senior management on regulatory and compliance matters by: • provid ing interpretat ion and adv ice on CFCC regulatory requirements and their impact on the Group; and • setting enterprise-wide standards for management of compliance risks through the establishment and maintenance of the Compliance RTF. The Group Head, CFCC also performs the FCA controlled function and senior management function of Compliance Risk oversight in accordance with the requirements set out by the FCA. All activ it ies that the Group engages in must be designed to comply with the applicable laws and regulations in the countries in which we operate. The CFCC function provides second line of defence oversight and challenge of the ﬁrst line of defence risk management activ it ies that relate to Compliance Risk. Where Compliance Risk arises, or could arise, from failure to manage another PRT or sub-type, the Compliance RTF outlines that the responsib il ity rests with the respective RFO or control function to ensure that effective oversight and challenge of the ﬁrst line of defence can be provided by the appropriate second line of defence function. Each of the assigned second line of defence functions have responsib il it ies, includ ing mon itor ing relevant regulatory developments from Non-Financ ial Serv ices regulators at both Group and country levels, policy development, implementat ion, and val idat ion as well as overs ight and challenge of ﬁrst line of defence processes and controls. In addit ion, the rem it of CFCC has been further clarif ied in 2023 in relation to Compliance risk and the boundary of responsib il it ies w ith other PRTs. Mit igat ion The CFCC function is responsible for the establishment and maintenance of polic ies, standards and controls to ensure continued legal and regulatory compliance, and the mit igat ion of Compliance Risk. In this, the requirements of the Operational and Technology RTF are followed to ensure a consistent approach to the management of processes and controls. The deployment of technological solutions to improve efﬁcienc ies and simpl ify processes has cont inued in 2023. These include launch of a new Regulatory Change Management System for Group regulatory obligat ions management, and further enhancement of the Ask Compliance platform. Governance committee oversight Both Compliance Risk and the risk of non-compliance with laws and regulations resulting from failed processes and controls are reported at the respective country, business, product, function, Risk and CFCC Non-Financ ial R isk Committees. Relevant matters, as required, are further escalated to the GNFRC and GRC. At Board level, oversight of Compliance Risk is primar ily prov ided by the Audit Committee, and by the BRC for relevant issues. Whilst not a formal governance committee, the CFCC Oversight Group provides oversight of CFCC risks includ ing the effective implementat ion of the Compl iance RTF. The Regulatory Change Oversight Forum provides vis ib il ity and oversight of material and/or complex large-scale regulatory change emanating from Financ ial Serv ices regulators impact ing Non-F inanc ial R isks. The CFCC Policy Council provides oversight, challenge and direct ion to Compl iance and FCC Policy Owners on material changes and posit ions taken in CFCC-owned polic ies, includ ing issues relating to regulatory interpretat ion and Group’s CFCC RA. Decis ion-mak ing authorit ies and delegat ion The Compliance RTF is the formal mechanism through which the delegation of Compliance Risk authorit ies is made. The Group Head, CFCC has the authority to delegate second line of defence responsib il it ies w ith in the CFCC function to relevant and suitably qualif ied ind iv iduals. Monitor ing The monitor ing of controls des igned to mit igate the r isk of regulatory non-compliance in processes is governed in line with the Operational and Technology RTF. The Group has a monitor ing and report ing process in place for Compliance Risk, which includes escalation and reporting to Risk and CFCC Non-Financ ial R isk Committee, GNFRC, GRC, BRC, and relevant Board committees. The Group deﬁnes Compliance Risk as the potential for penalties or loss to the Group or for an adverse impact to our clients, stakeholders or to the integr ity of the markets we operate in through a failure on our part to comply with laws, or regulations. Risk Appetite Statement The Group has no appetite for breaches in laws and regulations related to regulatory non- compliance; recognis ing that wh ilst inc idents are unwanted, they cannot be entirely avoided. Compliance Risk 331 Standard Chartered – Annual Report 2023 Risk review and Capital review The Group deﬁnes ICS Risk as the risk to the Group’s assets, operations, and ind iv iduals due to the potential for unauthorised access, use, disclosure, disrupt ion, modif icat ion, or destruction of informat ion assets and/or informat ion systems. Risk Appetite Statement The Group aims to mit igate and control ICS r isks to ensure that inc idents do not cause the Bank material harm, business disrupt ion, ﬁnancial loss or reputational damage - recognis ing that whilst inc idents are unwanted, they cannot be entirely avoided. Information and Cyber Security (ICS) Risk Roles and responsib il it ies The Group’s ICS RTF deﬁnes the roles and responsib il it ies of the ﬁrst and second lines of defence in managing and governing ICS Risk across the Group. It emphasises business ownership and ind iv idual accountabil ity. The Group Chief Transformation, Technology & Operations Ofﬁcer (CTTO) has the ﬁrst line of defence responsib il ity for ICS Risk and is accountable for the Group’s ICS strategy. The Group Chief Information Security Ofﬁcer (CISO) leads the development and execution of the ICS strategy. The ﬁrst line of defence also manages all key ICS Risks, breaches and risk treatment plans. ICS Risk proﬁle, RA breaches and remediat ion status are reported at Board and Execut ive committees, alongside business, function and country governance committees. The Group Chief Information Security Risk Ofﬁcer (CISRO) function with in Group R isk is the second line of defence and sets the framework, policy, standards, and methodology for assessing, scoring, and prior it is ing ICS R isks across the Group. The ICS Policy and standards are aligned to industry best practice models includ ing the Nat ional Institute of Standards and Technology Cyber Security Framework and ISO 27001. This function has the responsib il ity for governance, oversight, and independent challenge of ﬁrst line of defence’s pursuit of the ICS strategy. Group ICS Risk Framework Strategy remains the responsib il ity of the ICS RFO (RFO), delegated from the GCRO to the Group CISRO. Mit igat ion ICS Risk is managed through the ICS RTF, compris ing a risk assessment methodology and supporting policy, standards, and methodologies. These are aligned to industry recommended practice. We undertake an annual ICS Effectiveness Review to evaluate ICS Risk management practices in alignment with the ERMF. Governance committee oversight The BRC oversees the effective management of ICS Risk. The GRC has delegated authority to the GNFRC to ensure effective implementat ion of the ICS RTF. The GRC and GNFRC are responsible for oversight of ICS Risk proﬁle and RA breaches. Sub-committees of the GNFRC have oversight of ICS Risk management aris ing from the bus inesses, countries and functions. Decis ion-mak ing authorit ies and delegat ion The ICS RTF deﬁnes how the Group manages ICS Risk. The Group CISRO delegates authority to designated ind iv iduals through the ICS RTF, includ ing at a bus iness, function, region and country level. The Group CISO is responsible for implement ing ICS R isk Management with in the Group, and to cascade ICS r isk management into the businesses, functions and countries to comply with the ICS RTF, policy, and standards. Monitor ing Group CISO performs a threat-led risk assessment to ident ify key threats, in-scope applicat ions and key controls requ ired to ensure the Group remains with in RA. The ICS Risk proﬁles of all businesses, functions and countries are consolidated to present a holist ic Group-level ICS R isk proﬁle for ongoing monitor ing. Mandatory ICS learn ing, phish ing exerc ises and role-specif ic tra in ing support colleagues to monitor and manage this risk. During these reviews, the status of each risk is assessed against the Group’s controls to ident ify any changes to impact and likel ihood, wh ich affects the overall risk rating. Group CISO and Group CISRO monitor the ICS Risk proﬁle and ensure that breaches of RA are escalated to the appropriate governance committee or authority levels for remediat ion and tracking. A dedicated Group CISRO team supports this work by executing offensive security testing exercises, includ ing vulnerabil ity assessments and penetrat ion tests, which show a wider picture of the Group’s risk proﬁle, leading to better vis ib il ity on potent ial ‘in ﬂight’ risks. The Group also tracks remediat ion of secur ity matters ident iﬁed by external rev iews such as the BoE CBEST Threat Intelligence-Led Assessment and the Hong Kong Monetary Authority’s (HKMA) Intelligence-led Cyber Attack Simulat ion Test ing (iCAST). 332 Standard Chartered – Annual Report 2023 Risk review Risk management approach Roles and responsib il it ies The Global Head, ERM is responsible as RFO for Reputational and Sustainab il ity Risk under the Group’s ERMF. Our Reputational and Sustainab il ity RTF allocates responsib il it ies in a manner consistent with the three lines of defence model. In the ﬁrst line of defence, the Chief Sustainab il ity Ofﬁcer (CSO) manages the overall Group Sustainab il ity strategy and engagements. A dedicated Sustainable Finance solutions team is responsible for sustainable ﬁnance products and frameworks to help ident ify green and susta inable ﬁnance, and transit ion ﬁnance opportun it ies to a id our clients on their sustainab il ity journey. The CSO team works with businesses to launch various sustainable ﬁnance products. Furthermore, the Environmental and Social Risk Management (ESRM) team provides dedicated advisory and challenge to businesses on the management of environmental and social risks and impacts aris ing from the Group’s cl ient relationsh ips and transactions. In the second line of defence, the responsib il ity for Reputational and Sustainab il ity Risk management is delegated to the Group Environmental, Social, and Corporate Governance (ESG) and Reputational Risk team, as well as CROs at region, country and client-business levels. They constitute the second line responsible to oversee and challenge the ﬁrst line, which resides with the CEOs, business heads, product heads and function heads. The Group ESG and Reputational Risk team is responsible for establish ing RA, framework and polic ies for manag ing Reputational and Sustainab il ity risk, in line with emerging regulatory expectations across our markets. Mit igat ion In line with the princ iples of Respons ible Business Conduct and Do No Sign iﬁcant Harm, the Group deems Reputat ional and Sustainab il ity Risk to be driven by: • negative shifts in stakeholder perceptions, includ ing shifts as a result of greenwashing claims, due to decis ions related to clients, products, transactions, third parties and strategic coverage; • potential material harm or degradation to the natural environment (environmental) through actions/inact ions of the Group; and • potential material harm to ind iv iduals or communit ies (social) risks through actions/inact ions of the Group. The Group’s Reputational Risk policy sets out the princ ipal sources of Reputational Risk driven by negative shifts in stakeholder perceptions as well as responsib il it ies, control and oversight standards for ident ify ing, assessing, escalating and effectively managing Reputational Risk. The assessment of risks associated with how ind iv idual client, transaction, product and strategic coverage decis ions may affect perceptions of the organisat ion and its activ it ies is based on explic it pr inc iples includ ing, but not l im ited to, human rights and climate change. The assessment of stakeholder perception risk considers a variety of factors. Whenever potential for stakeholder concerns is ident iﬁed, issues are subject to review and decis ion by both ﬁrst and second l ines of defence. The Group’s Sustainab il ity Risk policy sets out the requirements and responsib il it ies for manag ing environmental and social risks for the Group’s clients, third parties and in our own operations. This includes management of greenwashing risks through the ongoing monitor ing of Susta inable Finance products and transactions and clients throughout their lifecycle, from labelling to disclosures in line with emerging local and internat ional regulatory obl igat ions. • Clients are expected to adhere to the min imum regulatory and compliance requirements, includ ing cr iter ia from the Group’s Posit ion Statements to sens it ive sectors where environmental and social risks are heightened. The Group also deﬁnes the approach to certain special ist sectors where there are conﬂict ing stakeholder v iews. • Third parties such as suppliers must comply with the Group’s Supplier Charter, which sets out the Group’s expectations on ethics, anti-bribery and corruption, human rights, environmental, health and safety standards, labour and protection of the environment. The Group is committed to respecting universal human rights, and we assess our clients and suppliers against various internat ional pr inc iples, as well as through our social safeguards. • With in our operat ions, the Group seeks to min im ise its impact on the environment and have targets to reduce energy, water and waste. We are committed to becoming Net Zero in our own operations by 2025. • We rely on our frameworks to help the labelling of Sustainable Finance Use of Proceeds products and transactions as well as the classif icat ion of pureplay clients. Reputational and Sustainab il ity Risk polic ies and standards are applicable to all Group entit ies. However, where local regulators impose addit ional requ irements, these are complied with in addit ion to ex ist ing Group requ irements. The Group deﬁnes Reputational and Sustainab il ity Risk as the potential for damage to the franchise (such as loss of trust, earnings, or market capital isat ion), because of stakeholders taking a negative view of the Group through actual or perceived actions or inact ions, includ ing a fa ilure to uphold responsible business conduct as we strive to do no sign iﬁcant env ironmental and social harm through our client, third party relationsh ips or our own operat ions. Risk Appetite Statement The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activ ity is satisfactor ily assessed and managed with the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striv ing to do no s ign iﬁcant environmental and social harm. Reputational and Sustainab il ity Risk 333 Standard Chartered – Annual Report 2023 Risk review and Capital review Governance committee oversight At Board level, the Culture and Sustainab il ity Committee provides oversight for our Sustainab il ity strategy while the BRC oversees Reputational and Sustainab il ity Risk as part of the ERMF. The GRC provides executive level committee oversight and delegates the authority to ensure effective management of Reputational and Sustainab il ity Risk to the GRRRC. The GRRRC’s remit is to: • Challenge, constrain and, if required, stop business activ it ies where Reputational and Sustainab il ity risks are not aligned with the Group’s RA; • Make decis ions on Reputat ional and Sustainab il ity Risk matters assessed as high or very high based on the Group’s Reputational and Sustainab il ity Risk Material ity Assessment Matrix, and matters escalated from the regions or client businesses; • Provide oversight of material Reputational and Sustainab il ity Risk and/or thematic issues aris ing from the potential failure of other risk types; • Identify TERs, as part of a dynamic risk scanning process; • Monitor exist ing or new regulatory pr ior it ies. The Sustainable Finance Governance Committee, appointed by the GRRRC, provides leadership, governance, and oversight for deliver ing the Group’s susta inable ﬁnance offering. This includes: • Review ing and support ing the Group’s frameworks for Green and Sustainable Products, and Transit ion F inance for approval of GRRRC. These frameworks set out the guidel ines for approval of products and transact ions which carry the sustainable ﬁnance and/or transit ion ﬁnance label; • Decis ion-mak ing authority on the elig ib il ity of a susta inable asset for any RWA relief; • Approving sustainable ﬁnance and transit ion ﬁnance labels for products in addit ion to regular product management and governance; • Review ing the reputat ional risks aris ing from greenwash ing claims related to Sustainable Finance products and services. The GNFRC has oversight of the control environment and effective management of Reputational Risk incurred when there are negative shifts in stakeholder perceptions of the Group due to failure of other PRTs. The regional and client-business risk committees provide oversight on the Reputational and Sustainab il ity Risk proﬁle with in the ir remit. The CNFRC provides oversight of the Reputational and Sustainab il ity Risk proﬁle at a country level. Decis ion-mak ing authorit ies and delegat ion The Global Head, ERM delegates risk acceptance authorit ies for stakeholder perception risks to designated ind iv iduals in the ﬁrst line and second line or to committees such as the GRRRC via risk authority matrices. These risk authority matrices are tiered at country, regional, business segment or Group levels and are established for risks incurred in strategic coverage, clients, products, or transactions. For environmental and social risks, the ESRM team reviews and supports the risk assessments for clients and transactions and escalates to the Group ESG and Reputational Risk team as required. Monitor ing Exposure to stakeholder perception risks aris ing from transactions, clients, products and strategic coverage is monitored through established triggers to prompt the right levels of appropriate risk-based considerat ion and assessment by the ﬁrst line and escalations to the second line where necessary. Risk acceptance decis ions and thematic trends are also reviewed on a period ic bas is. Exposure to Sustainab il ity Risk is monitored through triggers embedded with in the ﬁrst l ine of defence processes. The Environmental and Social Risks are considered for clients and transactions via the environmental and social risk assessments and for vendors in our supply chain through the Modern Slavery questionna ires. Furthermore, monitor ing and report ing on the RA metrics ensures that there is appropriate oversight by the MT and Board over performance and breaches of thresholds across key metrics. 334 Standard Chartered – Annual Report 2023 Risk review Risk management approach The Group deﬁnes Model Risk as potential loss that may occur because of decis ions or the r isk of mis- estimat ion that could be pr inc ipally based on the output of models due to errors in the development, implementat ion, or use of such models. Risk Appetite Statement The Group has no appetite for material adverse impl icat ions aris ing from m isuse of models or errors in the development or implementat ion of models; whilst accepting some model uncertainty. Model Risk Roles and responsib il it ies The Global Head, ERM is the RFO for Model Risk under the Group’s ERMF. Responsib il ity for the oversight and implementat ion of the Model RTF is delegated to the Global Head, Model Risk Management. The Model RTF sets out clear accountabil ity and roles for Model Risk management through the three lines of defence model. First line of defence ownership of Model Risk resides with Model Sponsors, who are business or function heads and assign a Model Owner and provide oversight of Model Owner activ it ies. Model Owners are accountable for the model development process, represent model users, are responsible for the overall model design process, coordinate the submiss ion of models for val idat ion and approval, and ensure appropriate implementat ion and use. Model Developers are responsible for the development of models and are responsible for documenting and testing the model in accordance with Policy requirements, and for engaging with Model Users. Second line of defence oversight is provided by Model Risk Management, which comprises Group Model Validat ion (GMV) to independently review and grade models, and the Model Risk Policy and Governance team, which provides oversight of model risk activ it ies and reports to senior management via respective committees. The Group adopts an industry standard model deﬁn it ion as specif ied in the Group Model Risk Policy, together with a scope of applicab il ity represented by deﬁned model family types as detailed with in the Model R isk Framework. Model Owners are accountable for ensuring that all models under their purview have been independently validated by GMV. Models are validated before use and then on an ongoing basis, with schedule determined by the perceived level of model risk associated with the model, or more frequently if there are specif ic regulatory requ irements. The Model Risk Framework is cascaded to in-scope countries by way of local addendum or local framework documentation, along with specif ic respons ib il it ies of the Country Model RFO. In-scope countries are selected with reference to regulatory capital requirements with credit risk (AIRB), counterparty credit risk Internal Model Method (IMM), or market risk Internal Model Approach (IMA) permiss ions for use of models for regulatory capital calculations; and countries where regulators have stipulated specif ic model risk requirements. Addit ional cr iter ia, includ ing ﬁnancial material ity, regulatory importance, presence of important business services or crit ical econom ic functions are also considered. The main responsib il it ies of Country Model RFO are to ensure model usage is correctly ident iﬁed, a su itable local governance process is established, and fundamental model risk train ing is provided for respective country stakeholders. Based on respective levels of regulatory expectations regarding Model Risk, a tier ing approach is adopted to provide appropriate risk-based levels of depth and rigour of the associated requirements. Mit igat ion The Model Risk policy and standards deﬁne requirements for model development and validat ion act iv it ies, includ ing regular model performance monitor ing. Any model issues or deﬁcienc ies ident iﬁed through the val idat ion process are mit igated through model mon itor ing, model overlays and/or a model redevelopment plan, which undergoes robust review, challenge, and approval. Operational controls govern all Model Risk-related processes, with regular risk assessments performed to assess appropriateness and effectiveness of those controls, in line with the Operational and Technology RTF, with remediat ion plans implemented where necessary. Governance committee oversight At Board level, the BRC exercises oversight of Model Risk with in the Group. At the executive level, the GRC has appointed the Model Risk Committee to ensure effective measurement and management of Model Risk. Sub-committees such as the Credit Model Assessment Committee, Traded Risk Model Assessment Committee and Financ ial Cr ime Compliance Model Assessment Committee oversee their respective in-scope models and escalate material Model Risks to the Model Risk Committee. In parallel, business and function-level risk committees provide governance oversight of the models used in their respective processes. Decis ion-mak ing authorit ies and delegat ion The Model RTF is the formal mechanism through which the delegation of Model Risk authorit ies is made. The Global Head, ERM delegates authorit ies to des ignated ind iv iduals or Policy Owners through the Model RTF. The second line of defence ownership for Model Risk at country level is delegated to Country CROs at the applicable branches and subsid iar ies. The Model Risk Committee is responsible for approving models for use. Model approval authority is also delegated to the Credit Model Assessment Committee, Traded Risk Model Assessment Committee, Financ ial Cr ime Compliance Model Assessment Committee, and ind iv idual designated model approvers for less material models. 335 Standard Chartered – Annual Report 2023 Risk review and Capital review Monitor ing The Group monitors Model Risk via a set of RA metrics. Adherence to Model RA and any threshold breaches are reported to the BRC, GRC and Model Risk Committee. These metrics and thresholds are reviewed twice per year to ensure that threshold calibrat ion rema ins appropriate, and the themes adequately cover the current risks. Models undergo regular monitor ing based on the ir level of perceived Model Risk, with monitor ing results and breaches presented to Model Risk Management and delegated model approvers. Model Risk Management produces Model Risk reports covering the model landscape, which include performance metrics, ident iﬁed model issues and remediat ion plans. These are presented for discuss ion at the Model R isk governance committees on a regular basis. 336 Standard Chartered – Annual Report 2023 Risk review Risk management approach With effect from January 2024, the Group has removed the IRT classif icat ion. Climate Risk is deﬁned as the potential for ﬁnanc ial loss and non-ﬁnancial detriments aris ing from cl imate change and society’s response to it. We are developing methodologies to ident ify, measure and manage the phys ical and transit ion r isks that we are exposed to through our own operations, our suppliers, our clients, and the markets we operate in. Risk Appetite Statement The Group aims to measure and manage ﬁnanc ial and non-ﬁnancial r isks aris ing from cl imate change, and reduce emiss ions related to our own activ it ies and those related to the ﬁnanc ing of clients in alignment with the Paris Agreement. Climate Risk (Oversight has moved to Reputational and Sustainab il ity Risk with effect from January 2024) Roles and responsib il it ies The GCRO has the ultimate second line of defence and responsib il ity for Climate Risk, with support by the Global Head, ERM who has day-today oversight and central responsib il ity for second line of defence Climate Risk activ it ies. As Climate Risk is embedded into the relevant PRTs, second line of defence responsib il it ies l ie with those RFOs (at Group, regional and country level), with SME support from the central Climate Risk team. Mit igat ion We have completed c.4,100 Climate Risk Assessments (CRAs) in 2023 (c.85 - 90 per cent of the CCIB corporate portfolio lim its), wh ich measures transit ion r isk of our clients. Concentration of Black and Red rated clients remain with in proposed RA levels at 6 per cent. L inkages to Credit Underwrit ing Pr inc iples have been ﬁnalised for four sectors (Oil and Gas (O&G), Shipp ing, Commerc ial Real Estate (CRE) and Min ing), includ ing improved climate-related analysis, portfolio-level caps and addit ional data gather ing measures. A key focus area going forward is to embed Climate Risk and net zero targets into business and credit decis ions. To enable this, we have established a Net Zero Climate Risk Working Forum to facil itate d iscuss ions on account plans for h igh Climate Risk and net zero divergent clients. As of September 2023, we have assessed physical risk for 79 per cent and transit ion r isk for 54 per cent of our CPBB book. The focus for Operational and Technology Risk has been to assess physical risks for our properties and data centres, as well as third parties. Concentration of top corporate liqu id ity providers to high transit ion r isk and low levels of mit igat ion is being monitored. Governance committee oversight Board level oversight is exercised through the BRC, with regular updates on Climate Risk. At an executive level, the GRC has appointed the Climate Risk Management Committee (CRMC), which meets at least six times a year to oversee the implementat ion of Cl imate Risk workplans and monitor ing the Group’s Cl imate Risk proﬁle. In 2023, we have strengthened country and regional governance oversight for the Climate Risk proﬁle across our key markets by cascading ident iﬁed RA metr ics, and rolling out climate risk management informat ion. Decis ion-mak ing authorit ies and delegat ion The Global Head, ERM is supported by a Climate Risk team with in the ERM funct ion. The Global Head, ESG and Reputational Risk is responsible for executing the delivery of the Climate Risk workplan which will deﬁne decis ion- making authorit ies and delegat ions across the Group. Monitor ing The Climate RA Statement is approved and reviewed annually by the Board, following the recommendation of the BRC. The Group has developed its ﬁrst-generation Climate Risk reporting and Board/MT Level RA metrics and these will continue to be enhanced in 2024. Management informat ion and RA metrics are also being progressively rolled out at the regional and country level. Management informat ion is reviewed at a quarterly frequency and any breaches in RA are reported to the GRC and BRC. 337 Standard Chartered – Annual Report 2023 Risk review and Capital review With effect from January 2024, the Group has removed the IRT classif icat ion. The Group recognises Dig ital Assets (DA) as an asset class which is managed under the ERMF. DA Risk is deﬁned as the potential for regulatory penalties, ﬁnanc ial loss and/or reputat ional damage to the Group resulting from DA-related activ it ies aris ing from the Group’s bus inesses across clients, products, investments and projects. Risk Appetite Statement As DA Risk manifests through the various PRTs, the ind iv idual RA statements for each PRT take account of the risks specif ic to DAs. Dig ital Assets R isk Roles and responsib il it ies Senior managers with in the ﬁrst l ine of defence are responsible for the overall management of DA risks, in it iat ives and exposures that may arise with in the ir business segments. The GCRO has the second line of defence responsib il ity for deﬁning the Group’s framework for manag ing DA-related risks, through the Dig ital Assets R isk Management Approach (DARMA). The GCRO is supported by the Global Head, ERM and the Global Head, DA Risk Management, who have day-to-day responsib il ity for second line of defence oversight of the DARMA. As DA Risk management is embedded into the relevant PRTs, RFOs and dedicated SMEs across the PRTs have second line of defence responsib il it ies of DA R isks for their respective PRTs. Mit igat ion The Group deploys a DA Risk management policy (DA Policy) to deﬁne the incremental risk management requirements for DA-related activ it ies under the DARMA. The respective PRTs then include specif ic r isk mit igat ion requirements with in the relevant processes, polic ies and standards for the ir PRTs. DA Risk Assessments are conducted on certain higher-risk DA-related projects and products. These risk assessments detail the specif ic inherent risks, residual risks, controls and mit igants across the PRTs, and are rev iewed and supported by the respective businesses, RFOs and DA SMEs. Governance committee oversight Board level oversight is exercised through the BRC, and DA Risk updates are provided to the Board and BRC, as requested. At the executive level, the GRC oversees the risk management of DA. The GCRO has also appointed a dedicated DA Risk Committee (DRC) consist ing of sen ior business representatives, RFOs and DA SMEs across the Group. The DRC meets a min imum of four t imes per year to review and assess the risk assessments related to DA Projects and Products, discuss development and implementat ion of the DARMA, and to provide structured governance around DA Risk. Decis ion-mak ing authorit ies and delegat ion The Global Head, ERM is supported by a centralised DA Risk team with in the ERM Funct ion and is responsible for the design and maintenance of the DARMA. Decis ion- making authorit ies and delegat ion are deﬁned in the DA Policy, outlin ing the incremental responsib il it ies and the embedding of risk management with in assoc iated polic ies and r isk artefacts. The businesses are responsible for implementat ion of the DARMA and respective business governance forums, PRT RFOs and DA SMEs util ise dec is ion-mak ing authorit ies granted to them by their respective businesses, PRTs or in ind iv idual capacit ies to assess and approve DA act iv it ies and exposures that may give rise to risk. DA Risk follows prescribed robust risk management practices across the PRTs, with specif ic expert ise applied from DA experts. Risk management practices are informed by the “Dear CEO” letters published by the PRA and the FCA in June 2018, with updated notices in June 2022. Further guidance from the recent publicat ion of the BCBS d545 on the prudential treatment of crypto assets, which will be in effect from January 2025, has reﬁned the risk management approach. DA is a developing area which will continue to mature and stabil ise over t ime as the technology, together with its use in ﬁnanc ial serv ices and associated research, become more established. Monitor ing DA Risks are monitored through the exist ing Group RA metr ics across the PRTs. In addit ion, spec if ic DA R isk Management Monitor ing level metr ics are reviewed and monitored by the relevant ind iv idual PRTs. DA risk decis ions relat ing to other PRTs are taken with in the author it ies for the respect ive PRT. 338 Standard Chartered – Annual Report 2023 Capital review Capital review Capital summary The Group’s capital, leverage and min imum requ irements for own funds and elig ible l iab il it ies (MREL) pos it ion is managed with in the Board-approved r isk appetite. The Group is well capital ised w ith low leverage and high levels of loss-absorbing capacity. 2023 2022 CET1 capital 14.1% 14.0% Tier 1 capital 16.3% 16.6% Total capital 21.2% 21.7% Leverage ratio 4.7% 4.8% MREL ratio 33.3% 32.1% Risk-weighted assets (RWA) $mill ion 244,151 244,711 The Group‘s capital, leverage and MREL posit ions were all above current requirements and Board-approved risk appetite. For further detail see the Capital section in the Standard Chartered PLC Pillar 3 Disclosures for FY 2023. The Group’s CET1 capital increased 10 basis points to 14.1 percent of RWA since FY2022. Proﬁts, gains from the aviat ion leas ing sale, movements in FVOCI and RWA optim isat ions were partly offset by distr ibut ions (includ ing ordinary share buybacks of $2.0 bill ion dur ing the year), impa irments of the Group’s investment in Bohai, lower FX translation reserves and an increase in regulatory deductions. The PRA updated the Group’s Pillar 2A requirement during Q4 2023. As at 31 December 2023 the Group’s Pillar 2A was 3.8 percent of RWA, of which at least 2.1 per cent must be held in CET1 capital. The Group’s min imum CET1 cap ital requirement was 10.5 per cent at 31 December 2023. The UK countercyclical buffer increased to 2.0 per cent which impacts Group CET1 min imum requ irement by approximately 8 basis points from July 2023. The Group CET1 capital ratio at 31 December 2023 reﬂects the share buy-backs of $2 bill ion completed dur ing the year. The CET1 capital ratio also includes an accrual for the FY 2023 div idend. The Board has recommended a ﬁnal d iv idend for FY 2023 of $560 mill ion or 21 cents per share result ing in a full year 2023 div idend of 27 cents per share, a 50 percent increase on the 2022 div idend. In add it ion, the Board has announced a further share buy-back of $1 bill ion, the impact of this will reduce the Group’s CET1 capital by around 40 basis points in the ﬁrst quarter of 2024. The Group expects to manage CET1 capital dynamically with in our 13-14 per cent target range, in support of our aim of deliver ing future susta inable shareholder distr ibut ions. The Group’s MREL requirement as at 31 December 2023 was 27.4 per cent of RWA. This is composed of a min imum requirement of 23.5 per cent of RWA and the Group’s combined buffer (compris ing the cap ital conservation buffer, the G-SII buffer and the countercyclical buffer). The Group’s MREL ratio was 33.3 per cent of RWA and 9.6 per cent of leverage exposure at 31 December 2023. During 2023, the Group successfully raised $8.1 bill ion of MREL elig ible secur it ies from its holding company, Standard Chartered PLC. Issuance was entirely in callable senior debt. The Group is a G-SII, with a 1.0 per cent G-SII CET1 capital buffer. The Standard Chartered PLC G-SII disclosure is published at: sc.com/en/investors/ﬁnanc ial-results. The Capital review provides an analysis of the Group’s capital and leverage posit ion, and requirements. 339 Standard Chartered – Annual Report 2023 Risk review and Capital review Capital base 1 (audited) 2023 $mill ion 2022 $mill ion CET1 capital instruments and reserves Capital instruments and the related share premium accounts 5,321 5,436 Of which: share premium accounts 3,989 3,989 Retained earnings 2 24,930 25,154 Accumulated other comprehensive income (and other reserves) 9,171 8,165 Non-controlling interests (amount allowed in consolidated CET1) 217 189 Independently audited year-end proﬁts 3,542 2,988 Foreseeable div idends (768) (648) CET1 capital before regulatory adjustments 42,413 41,284 CET1 regulatory adjustments Addit ional value adjustments (prudent ial valuation adjustments) (730) (854) Intangible assets (net of related tax liab il ity) (6,128) (5,802) Deferred tax assets that rely on future proﬁtabil ity (excludes those aris ing from temporary d ifferences) (41) (76) Fair value reserves related to net losses on cash ﬂow hedges (91) 564 Deduction of amounts resulting from the calculation of excess expected loss (754) (684) Net gains on liab il it ies at fa ir value resulting from changes in own credit risk (100) 63 Deﬁned-beneﬁt pension fund assets (95) (116) Fair value gains aris ing from the inst itut ion’s own credit risk related to derivat ive l iab il it ies (116) (90) Exposure amounts which could qualify for risk weight ing of 1,250% (44) (103) Other regulatory adjustments to CET1 capital 3 – (29) Total regulatory adjustments to CET1 (8,099) (7,127) CET1 capital 34,314 34,157 Addit ional T ier 1 capital (AT1) instruments 5,512 6,504 AT1 regulatory adjustments (20) (20) Tier 1 capital 39,806 40,641 Tier 2 capital instruments 11,965 12,540 Tier 2 regulatory adjustments (30) (30) Tier 2 capital 11,935 12,510 Total capital 51,741 53,151 Total risk-weighted assets (unaudited) 244,151 244,711 1 Capital base is prepared on the regulatory scope of consolidat ion 2 Retained earnings includes IFRS9 capital relief (transit ional) of n il (2022: $106 mill ion) 3 Other regulatory adjustments to CET1 capital includes Insufﬁc ient coverage for non-perform ing exposures of nil (2022: $(29) mill ion) 340 Standard Chartered – Annual Report 2023 Capital review Movement in total capital (audited) 2023 $mill ion 2022 $mill ion CET1 at 1 January 34,157 38,362 Ordinary shares issued in the period and share premium – – Share buy-back (2,000) (1,258) Proﬁt for the period 3,542 2,988 Foreseeable div idends deducted from CET1 (768) (648) Difference between div idends pa id and foreseeable div idends (372) (301) Movement in goodwill and other intang ible assets (326) (1,410) Foreign currency translation differences (477) (1,892) Non-controlling interests 28 (12) Movement in elig ible other comprehens ive income 464 (1,224) Deferred tax assets that rely on future proﬁtabil ity 35 74 Increase in excess expected loss (70) (104) Addit ional value adjustments (prudent ial valuation adjustment) 124 (189) IFRS 9 transit ional impact on regulatory reserves includ ing day one (106) (146) Exposure amounts which could qualify for risk weight ing of 1,250% 59 (67) Fair value gains aris ing from the inst itut ion’s own credit risk related to derivat ive l iab il it ies (26) (30) Others 50 14 CET1 at 31 December 34,314 34,157 AT1 at 1 January 6,484 6,791 Net issuances (redemptions) (1,000) 241 Foreign currency translation difference and others 8 9 Excess on AT1 grandfathered lim it ( inel ig ible) – (557) AT1 at 31 December 5,492 6,484 Tier 2 capital at 1 January 12,510 12,491 Regulatory amortisat ion 1,416 778 Net issuances (redemptions) (2,160) (1,098) Foreign currency translation difference 146 (337) Tier 2 inel ig ible minor ity interest 19 102 Recognit ion of inel ig ible AT1 – 557 Others 4 17 Tier 2 capital at 31 December 11,935 12,510 Total capital at 31 December 51,741 53,151 The main movements in capital in the period were: • CET1 capital increased by $0.2 bill ion as reta ined proﬁts of $3.5 bill ion, movement in FVOCI of $0.6bn were partly offset by share buy-backs of $2.0 bill ion, d istr ibut ions paid and foreseeable of $1.1 bill ion, fore ign currency translation impact of $0.5 bill ion and an increase in regulatory deductions and other movements of $0.3bn. • AT1 capital decreased by $1.0 bill ion follow ing the redemption of $1.0 bill ion of 7.75 per cent secur it ies. • Tier 2 capital decreased by $0.6 bill ion due to the redempt ion of $2.2 bill ion of T ier 2 during the year partly offset by the reversal of regulatory amortisat ion and fore ign currency translation impact. 341 Standard Chartered – Annual Report 2023 Risk review and Capital review Risk-weighted assets by business 2023 Credit risk $mill ion Operational risk $mill ion Market risk $mill ion Total risk $mill ion Corporate, Commercial & Institut ional Bank ing 102,675 18,083 21,221 141,979 Consumer, Private & Business Banking 42,559 8,783 – 51,342 Ventures 1,885 35 3 1,923 Central & Other items 44,304 960 3,643 48,907 Total risk-weighted assets 191,423 27,861 24,867 244,151 2022 Credit risk $mill ion Operational risk $mill ion Market risk $mill ion Total risk $mill ion Corporate, Commercial & Institut ional Bank ing 110,103 17,039 16,440 143,582 Consumer, Private & Business Banking 42,091 8,639 – 50,730 Ventures 1,350 6 2 1,358 Central & Other items 43,311 1,493 4,237 49,041 Total risk-weighted assets 196,855 27,177 20,679 244,711 Risk-weighted assets by geographic region 2023 $mill ion 2022 $mill ion Asia 155,995 150,816 Africa & Middle East 38,393 40,716 Europe & Americas 46,106 50,174 Central & Other items 3,657 3,005 Total risk-weighted assets 244,151 244,711 Movement in risk-weighted assets Credit risk Operational risk $mill ion Market risk $mill ion Total risk $mill ion Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & Other items $mill ion Total $mill ion At 31 December 2021 125,813 42,731 756 50,288 219,588 27,116 24,529 271,233 At 1 January 2022 125,813 42,731 756 50,288 219,588 27,116 24,529 271,233 Assets growth & mix (13,213) (985) 594 (10,033) (23,637) – – (23,637) Asset quality (4,258) 431 – 7,344 3,517 – – 3,517 Risk-weighted assets efﬁc ienc ies – – – – – – – – Model Updates 4,329 1,420 – – 5,749 – (1,000) 4,749 Methodology and policy changes 2,024 85 – 93 2,202 – 1,500 3,702 Acquis it ions and disposals – – – – – – – – Foreign currency translation (4,883) (1,591) – (3,376) (9,850) – – (9,850) Other, Including non-credit risk movements 291 – – (1,005) (714) 61 (4,350) (5,003) At 31 December 2022 110,103 42,091 1,350 43,311 196,855 27,177 20,679 244,711 Assets growth & mix (4,424) 728 535 1,183 (1,978) – – (1,978) Asset quality (391) 390 – 2,684 2,683 – – 2,683 Risk-weighted assets efﬁc ienc ies – – – (688) (688) – – (688) Model Updates (597) (151) – (151) (899) – 500 (399) Methodology and policy changes – (196) – – (196) – (800) (996) Acquis it ions and disposals (1,630) – – – (1,630) – – (1,630) Foreign currency translation (386) (303) – (2,035) (2,724) – – (2,724) Other, Including non-credit risk movements – – – – – 684 4,488 5,172 At 31 December 2023 102,675 42,559 1,885 44,304 191,423 27,861 24,867 244,151 342 Standard Chartered – Annual Report 2023 Capital review Movements in risk-weighted assets RWA decreased by $0.6 bill ion, or 0.2 per cent from 31 December 2022 to $244.2 bill ion. Th is was due to a decrease in Credit Risk RWA of $5.4 bill ion, an increase in Market Risk RWA of $4.2 bill ion and an increase in Operational Risk RWA of $0.7 bill ion. Corporate, Commercial & Institut ional Bank ing Credit Risk RWA decreased by $7.4 bill ion, or 6.7 per cent from 31 December 2022 to $102.7 bill ion ma inly due to: • $4.4 bill ion decrease from changes in asset growth & mix of which: – $10.3 bill ion decrease from opt im isat ion actions includ ing reduction in lower returning portfolios – $5.9 bill ion increase from asset balance growth across the rest of the portfolio • $1.6 bill ion decrease from sale of Av iat ion bus iness • $0.9 bill ion decrease from industry-wide regulatory changes to align IRB model performance • $0.4 bill ion decrease from fore ign currency translation • $0.4 bill ion decrease from asset qual ity movements, reﬂecting client upgrades in Asia, Europe & Americas, partially offset by sovereign downgrades in Africa & Middle East • $0.3 bill ion increase from model changes in Financ ial Markets and Lending Consumer, Private & Business Banking Credit Risk RWA increased by $0.5 bill ion, or 1.1 per cent from 31 December 2022 to $42.6 bill ion ma inly due to: • $0.7 bill ion increase from changes in asset growth and mix, mainly from Asia • $0.4 bill ion increase due to deteriorat ion in asset quality mainly in Asia • $0.3 bill ion decrease from fore ign currency translation • $0.2 bill ion decrease from methodology change relat ing to an unsecured lending portfolio in Africa & Middle East • $0.1 bill ion decrease from industry-wide regulatory changes to align IRB model performance Ventures Ventures is comprised of Mox Bank Lim ited, Trust Bank and SC Ventures. Credit Risk RWA increased by $0.5 bill ion, or 39.7 per cent from 31 December 2022 to $1.9 bill ion from asset balance growth, mainly from SC Ventures. Central & Other items Central & Other items RWA mainly relate to the Treasury Markets liqu id ity portfolio, equity investments and current & deferred tax assets. Credit Risk RWA increased by $1 bill ion, or 2.3 per cent from 31 December 2022 to $44.3 bill ion ma inly due to: • $2.7 bill ion increase due to deteriorat ion in asset quality mainly from sovereign downgrades in Africa & Middle East • $1.2 bill ion increase from changes in asset growth & mix • $2.0 bill ion decrease from fore ign currency translation • $0.7 bill ion decrease from RWA efﬁcienc ies • $0.2 bill ion decrease from model changes in Treasury Markets Market Risk Total Market Risk RWA increased by $4.2 bill ion, or 20.3 per cent from 31 December 2022 to $24.9 bill ion due to: • $2.4 bill ion increase in Standardised Approach (SA) RWA driven by higher Specif ic Interest Rate R isk relating to the traded credit portfolio, offset by lower net Structural FX posit ions • $2.1 bill ion increase in Internal Models Approach (IMA) RWA due to increased posit ions and increased market volatil ity • $0.5 bill ion increase in IMA RWA due to introduct ion of a new VaR model to address the rise in VaR backtesting exceptions in 2022 • $0.8 bill ion decrease in IMA RWA due to reduction in the IMA multipl ier w ith fewer VaR backtesting exceptions in 2023 than in 2022 Operational Risk Operational Risk RWA increased by $0.7 bill ion, or 2.5 per cent from 31 December 2022 to $27.9 bill ion, ma inly due to a marginal increase in average income as measured over a rolling three-year time horizon for certain products. 343 Standard Chartered – Annual Report 2023 Risk review and Capital review Leverage ratio The Group’s UK leverage ratio, which excludes qualify ing cla ims on central banks was 4.7 per cent, which is above the current min imum requ irement of 3.7 per cent. The leverage ratio was 6 basis points lower than FY22. Tier 1 Capital decreased by $0.8 bill ion as CET1 cap ital increased by $0.2 bill ion and was more than offset by the redempt ion of $1 bill ion 7.75 per cent AT1 securit ies. Leverage exposure decreased by $7.2 b ill ion beneﬁting from an increase in deduction for central bank claims of $19.6 bill ion, a decrease in securit ies ﬁnancing transact ions and add-on of $1.3 bill ion, partly offset by increase in Other Assets of $7.2 bill ion, Off-balance sheet items of $4.5 bill ion and Der ivat ives of $2 b ill ion. Leverage ratio 2023 $mill ion 2022 $mill ion Tier 1 capital 39,806 40,641 Derivat ive ﬁnancial instruments 50,434 63,717 Derivat ive cash collateral 10,337 12,515 Securit ies ﬁnancing transact ions (SFTs) 97,581 89,967 Loans and advances and other assets 664,492 653,723 Total on-balance sheet assets 822,844 819,922 Regulatory consolidat ion adjustments 1 (92,709) (71,728) Derivat ives adjustments Derivat ives nett ing (39,031) (47,118) Adjustments to cash collateral (9,833) (10,640) Net written credit protection 1,359 548 Potential future exposure on derivat ives 42,184 35,824 Total derivat ives adjustments (5,321) (21,386) Counterparty risk leverage exposure measure for SFTs 6,639 15,553 Off-balance sheet items 123,572 119,049 Regulatory deductions from Tier 1 capital (7,883) (7,099) Total exposure measure excluding claims on central banks 847,142 854,311 Leverage ratio excluding claims on central banks (%) 4.7% 4.8% Average leverage exposure measure excluding claims on central banks 853,968 864,605 Average leverage ratio excluding claims on central banks (%) 4.6% 4.7% Countercyclical leverage ratio buffer 0.1% 0.1% G-SII addit ional leverage rat io buffer 0.4% 0.4% 1 Includes adjustment for qualify ing central bank cla ims and unsettled regular way trades 344 Standard Chartered – Annual Report 2023 Financ ial statements 346 Independent Auditor’s report 359 Consolidated income statement 360 Consolidated statement of comprehensive income 361 Consolidated balance sheet 362 Consolidated statement of changes in equity 363 Cash ﬂow statement 364 Company balance sheet 365 Company statement of changes in equity 366 Notes to the ﬁnancial statements Financ ial statements  Bolstering the client experience for afﬂuent clients in Asia  To enrich client experiences with holist ic wealth adv ice for afﬂuent clients, we opened two new Private Banking Centres in India as well as two Prior ity Pr ivate Centres for high-net- worth (HNW) clients in Shanghai and Hong Kong. The hubs offer bespoke services to HNW and Ultra HNW clients and form part of our continu ing growth in the afﬂuent sector. We also introduced an enhanced Prior ity Private value proposit ion for HNW clients during the launch of the Shanghai centre. In addit ion to the new openings, we also renovated and rebranded 17 branches across Asia, the Middle East and Africa, creating addit ional Pr ior ity Centres. Read more on our new centres in India at sc.com/privatebank ingcentres 345 Standard Chartered – Annual Report 2023 Financ ial statements 346 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report Opin ion In our opin ion: • the ﬁnancial statements of Standard Chartered PLC (the ‘Company’ or the ‘Parent Company’), its subsid iar ies, interests in associates and jo intly controlled ent it ies (together with the Company, the ‘Group’) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2023 and of the Group’s proﬁt for the year then ended; • the Group ﬁnancial statements have been properly prepared in accordance with UK adopted International Accounting Standards (IAS) and International Financ ial Reporting Standards (IFRS) as adopted by the European Union (EU IFRS); • the Company ﬁnancial statements have been properly prepared in accordance with UK adopted IAS as applied in accordance with section 408 of the Companies Act 2006; and • the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the ﬁnanc ial statements of the Group and the Company for the year ended 31 December 2023 which comprise: Group Company Consolidated income statement for the year ended 31 December 2023; Balance sheet as at 31 December 2023; Consolidated statement of comprehensive income for the year then ended; Cash ﬂow statement for the year then ended; Consolidated balance sheet as at 31 December 2023; Statement of changes in equity for the year then ended; and Consolidated statement of changes in equity for the year then ended; Related notes 1 to 40, where relevant to the ﬁnancial statements, includ ing mater ial accounting policy informat ion. Consolidated cash ﬂow statement for the year then ended; Related notes 1 to 40 to the ﬁnancial statements, includ ing mater ial accounting policy informat ion; Information marked as ‘audited’ with in the D irectors’ remuneration report from page 182 to 216; and Risk Review and Capital Review disclosures marked as ‘audited’ from page 232 to 343. The ﬁnancial report ing framework that has been applied in their preparation is applicable law and UK adopted IAS and EU IFRS; and as regards the Parent Company ﬁnancial statements, UK adopted IAS as applied in accordance with section 408 of the Companies Act 2006. Basis for opin ion We conducted our audit in accordance with International Standards on Audit ing (UK) (ISAs (UK)) and appl icable law. Our responsib il it ies under those standards are further described in the Auditor’s responsib il it ies for the aud it of the ﬁnancial statements sect ion of our report. We believe that the audit evidence we have obtained is sufﬁc ient and appropriate to provide a basis for our opin ion. Independence We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the ﬁnanc ial statements in the UK, includ ing the FRC’s Ethical Standard as applied to listed public interest entit ies, and we have fulﬁlled our other eth ical responsib il it ies in accordance with these requirements. The non-audit services prohib ited by the FRC’s Eth ical Standard were not provided to the Group or the Company and we remain independent of the Group and the Company in conducting the audit. Conclusions relating to going concern In audit ing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the ﬁnanc ial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s abil ity to cont inue to adopt the going concern basis of accounting included: • Performing a risk assessment to ident ify factors that could impact the going concern basis of accounting, includ ing the impact of external risks such as geopolit ical r isk. • Assessing the directors’ going concern assessment includ ing the Group’s forecast capital, liqu id ity, and leverage ratios over the period of twelve months from 23 February 2024 to evaluate the headroom against the min imum regulatory requirements and the risk appetite set by the directors. • Engaging internal valuation and economic special ists to assess and challenge the reasonableness of assumptions used to develop the forecasts in the Corporate Plan and evaluating the accuracy of histor ical forecast ing. • Assessing the Group’s funding plan and repayment plan for funding instruments maturing over the period of twelve months from 23 February 2024. • Understanding and evaluating credit rating agency ratings and actions. • Engaging internal prudential regulatory special ists to assess the results of management’s stress testing, includ ing considerat ion of pr inc ipal and emerg ing risks, on funding, liqu id ity, and regulatory capital. • Review ing correspondence w ith prudential regulators and authorit ies for matters that may impact the going concern assessment; and • Evaluating the going concern disclosure included in note 1 to the ﬁnancial statements in order to assess that the disclosures were appropriate and in conformity with the reporting standards. Independent Auditor’s Report to the members of Standard Chartered PLC 347 Standard Chartered – Annual Report 2023 Financ ial statements Based on the work we have performed, we have not ident iﬁed any material uncertaint ies relat ing to events or condit ions that, ind iv idually or collectively, may cast sign iﬁcant doubt on the Group and Company’s abil ity to cont inue as a going concern for a period of twelve months from 23 February 2024. In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the ﬁnanc ial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsib il it ies and the respons ib il it ies of the d irectors with respect to going concern are described in the relevant sections of this report. However, because not all future events or condit ions can be pred icted, this statement is not a guarantee as to the Group and Company’s abil ity to continue as a going concern. Overview of our audit approach Audit scope • We performed an audit of the complete ﬁnanc ial informat ion of 10 components in 8 countries and audit procedures on specif ic balances for a further 17 components in 14 countries. • In addit ion to the above, the Pr imary Audit Team also performed full-scope audit procedures on components related to the Group consolidat ion process. • The components where we performed full or specif ic aud it procedures accounted for 78% of the absolute proﬁt before tax (PBT), 87% of absolute operating income and 94% of Total assets. Key audit matters • Credit impa irment • Basis of accounting and impa irment assessment of China Bohai Bank (interest in associate) • Priv ileged Access Management • Impairment of goodwill and investments in subsid iary undertak ings • Valuation of ﬁnanc ial instruments held at fair value with higher risk characterist ics Material ity • Overall group material ity of $274m wh ich represents 5% of Adjusted PBT. An overview of the scope of the parent company and group audits Tailor ing the scope Our assessment of audit risk, our evaluation of material ity and our allocation of performance material ity determ ine our audit scope for each component with in the Group. Taken together, this enables us to form an opin ion on the consolidated ﬁnanc ial statements. We took into account the size, risk proﬁle, the organisat ion of the Group and effectiveness of control environment, changes in the business environment and other factors such as the level of issues and misstatements noted in prior period when assessing the level of work to be performed at each component. In assessing the risk of material misstatement to the Group ﬁnancial statements, and to ensure we had adequate quantitat ive coverage of s ign iﬁcant accounts in the ﬁnanc ial statements, of the 346 reporting units of the Group, we selected 66 reporting units which represent 27 components in 21 countries: Bahrain, Bangladesh, Hong Kong, India, Indonesia, Japan, Jersey, Kenya, Mainland China, Malaysia, Niger ia, Pak istan, Republic of Ireland, Republic of Korea, Singapore, Sri Lanka, Taiwan, United Arab Emirates, United Kingdom, United States of America, and Zambia. The deﬁnit ion of a component is aligned with the structure of the Group’s consolidat ion system, typ ically these are either a branch, group of branches, group of subsid iar ies (or associates), or a subsid iary. We took a centralised approach to audit ing certa in processes and controls, as well as the substantive testing of specif ic balances. This included audit work over Group’s Global Business Services shared services centre (SSC), Commercial, Corporate and Institut ional Bank ing SSC, Credit Impairment SSC and Technology, as well as certain other matters audited centrally by the Primary Audit Team. Of the 27 components selected in 21 countries, we performed an audit of the complete ﬁnanc ial informat ion of 10 components (“full scope components”) which were selected based on their size or risk characterist ics. For 14 components (“specif ic scope components”) we performed audit procedures on specif ic accounts w ith in that component that we considered had the potential for the greatest impact on the sign iﬁcant accounts in the Group ﬁnanc ial statements either because of the size of these accounts or their risk proﬁle. We also instructed 3 locations to perform specif ied procedures over certain aspects of credit impa irment r isk. Groups Absoulute PBT Group’s Total assets Group’s Absolute Operating Income 2023 2022 2023 2022 2023 2022 Full scope components 62% 72% 87% 87% 72% 79% Specif ic scope components 15% 10% 7% 8% 14% 10% Specif ied procedures 1% 0% 0.10% 0% 1% 0% Total 78% 82% 94% 95% 87% 89% Of the remain ing report ing units that together represent 22% of the Group’s absolute PBT, none are ind iv idually greater than 2.3% of the Group’s absolute PBT. For the components represented by these reporting units, we performed other procedures at the Group level which included: performing analytical reviews at the Group ﬁnanc ial statement l ine item level, evaluating entity level controls, performing audit procedures on the centralised shared service centres, testing of consolidat ion journals and intercompany elim inat ions, inqu ir ing with selected overseas EY teams on the outcome of prior year local statutory audits (where audited by EY) to ident ify any potent ial risks of material misstatement to the Group ﬁnancial statements. 348 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report The charts below illustrate the coverage obtained from the work performed by our audit teams. Absolute proﬁt before tax 62% Full scope components (2022: 72%) 15% Specif ic scope components (2022: 10%) 1% Specif ied procedures (2022: 0%) 22% Other procedures (2022: 18%) 72% Full scope components (2022: 79%) 14% Specif ic scope components (2022: 10%) 1% Specif ied procedures (2022: 0%) 13% Other procedures (2022: 11%) 87% Full scope components (2022: 87%) 7% Specif ic scope components (2022: 8%) 0.1% Specif ied procedures (2022: 0%) 6% Other procedures (2022: 5%) Absolute operating income Total assets Changes from the prior year We assessed our 2023 audit scope with considerat ion of history or expectation of unusual or complex transactions and potential for material misstatements. We also kept our audit scope under review throughout the year. Three components in Cameroon, Republic of Ireland, and South Africa, which were included in prior year audit scope and assigned specif ic scope, were excluded from the Group audit scope in the current year based on our updated risk assessment. These components represent ind iv idually no more than 0.1% of Group absolute PBT, 0.4% of the Group’s absolute operating income and 0.3% of the Group’s Total assets respectively in the current year. No component which was full scope in the prior year, has been excluded from Group audit scope for the 2023 audit. For Germany, Australia, Ghana and Cameroon, the Primary Audit Team performed certain procedures centrally over the cash balances as at 31 December 2023. Taiwan, Malaysia, Indonesia, Pakistan and Kenya were full scope components in the prior year but were designated as specif ic scope components in the current year based on our updated risk assessment. In 2023, we assigned a specif ic scope to Bahra in and United Kingdom (Jersey) components that are sign iﬁcant based on risk, and specif ied procedures to Ta iwan (Taipe i Branch). These components were not in-scope in the prior year. Involvement with component teams In establish ing our overall approach to the Group aud it, we determined the type of work that needed to be undertaken at each of the components by us, as the primary audit engagement team (the “Primary Audit Team”), or by component auditors from other ﬁrms operating under our instruct ion. All of the d irect components of the Group (full, specif ic or spec if ied procedures) were aud ited by EY global network ﬁrms. There were two non-EY component teams audit ing a s ingle component in a single location, which were instructed by a direct component of the Group. Of the 10 full scope components, audit procedures were performed on 3 of these (includ ing the aud it of the Company) directly by the Primary Audit Team (EY London) in the United Kingdom. For 1 specif ic scope component, the aud it procedures were performed by the Primary Audit Team. Where components were audited by the Primary Audit Team, this was under the direct ion and superv is ion of the Sen ior Statutory Auditor. For the 23 remain ing components, where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufﬁc ient aud it evidence had been obtained as a basis for our opin ion on the Group as a whole. In addit ion to the above, the Pr imary Audit Team also performed full-scope audit procedures on components related to the Group consolidat ion process. In addit ion, the Group has central ised processes and controls over key areas in its shared service centres. Members of the Primary Audit Team undertook direct oversight, review and coordinat ion of our shared serv ice centre audits. The Primary Audit Team continued to follow a programme of planned vis its to component teams and shared serv ice centres. During the current year’s audit cycle, vis its were undertaken by the Primary Audit Team to the component teams in the following locations: • Bangladesh • Hong Kong • India (includ ing the shared serv ices centre) • Indonesia • Mainland China • Malaysia (includ ing the shared serv ices centre) • Pakistan • Republic of Korea • Singapore (includ ing the shared serv ices centre) • United Arab Emirates • United States of America These vis its typ ically involved oversight of work undertaken at those locations, discuss ion of the aud it approach and any issues aris ing from the ir work, meeting with local management, and review ing relevant aud it working papers on key risk areas. 349 Standard Chartered – Annual Report 2023 Financ ial statements In addit ion to the s ite vis its, the Pr imary Audit Team interacted regularly with the component and SSC audit teams where appropriate during various stages of the audit, reviewed relevant working papers and deliverables to the Primary Audit Team, and were responsible for the scope and direct ion of the audit process. The Primary Audit Team also undertook video conference meetings with component and SSC audit teams and management. These virtual meetings involved discuss ing the audit approach and any issues aris ing from the ir work, as well as performing remote reviews of key audit workpapers. This, together with the procedures performed at Group level, gave us appropriate evidence for our opin ion on the Group and Company ﬁnancial statements. Climate change Stakeholders are increas ingly interested in how climate change will impact the economy, includ ing the bank ing sector, and further how this may consequently impact the valuation of assets and liab il it ies held on bank balance sheets. The Group manages climate risk according to the characterist ics of the impacted risk types and is embedding climate-risk considerat ions into relevant frameworks, includ ing pr inc ipal risk type frameworks, and processes. The assessment of the risk by the Group is explained on pages 336 and 298-313 in the “Risk review: Climate Risk” section, and on pages 90-133 in the “Sustainab il ity review” section of the Annual Report, where the Group has also explained their climate commitments. All of these disclosures form part of the “Other informat ion,” rather than the audited ﬁnanc ial statements. Our procedures on these unaudited disclosures therefore consisted solely of consider ing whether they are mater ially incons istent w ith the ﬁnancial statements or our knowledge obta ined in the course of the audit or otherwise appear to be materially misstated, in line with our responsib il it ies on “Other informat ion”. In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material impact on its ﬁnancial statements. The Group has explained in the “Sustainab il ity review” section of the Annual Report how they have reﬂected the impact of climate change in their ﬁnanc ial statements, includ ing how this aligns with their commitment to the aspirat ions of the Paris Agreement to achieve net zero emiss ions by 2050. Sign iﬁcant judgements and est imates relating to climate change are included in the section “Climate impact on the Group’s balance sheet” of note 1 to the ﬁnancial statements. As stated in these disclosures, the Group has considered Climate to be an area of sign iﬁcant account ing estimate and judgement through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liab il it ies. The Group has concluded that wh ilst it is not currently quantitat ively mater ial, it considers climate to be qualitat ively mater ial. Our audit effort in consider ing the impact of climate change on the ﬁnancial statements was focused on evaluat ing whether management’s assessment of the impact of climate risk, physical and transit ion, the ir climate commitments, and the sign iﬁcant judgements and est imates disclosed in note 1 have been appropriately reﬂected in the valuation of assets and liab il it ies, where these can be rel iably measured, following the currently effective requirements of UK adopted IAS and EU IFRS. This was in the context of the Group’s process being lim ited, g iven that this is an emerging area, as a result of lim itat ions in the data available and the availab il ity of sophist icated models, and as the Group considers how it further embeds its climate ambit ions into the planning process. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal special ists, to determ ine the risks of material misstatement in the ﬁnanc ial statements from cl imate change which needed to be considered in our audit. We also challenged the Directors’ considerat ions of climate change risks in their assessment of going concern and viab il ity, and the associated disclosures. Where considerat ions of cl imate change were relevant to our assessment of going concern, these are covered by the procedures described above. Based on our work, we have considered the impact of climate change on the ﬁnancial statements to impact certain key audit matters. Details of our procedures and ﬁnd ings are included in our explanation of key audit matters below. 350 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report Key audit matters Key audit matters are those matters that, in our professional judgment, were of most sign iﬁcance in our audit of the ﬁnanc ial statements of the current period and include the most sign iﬁcant assessed r isks of material misstatement (whether or not due to fraud) that we ident iﬁed. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and direct ing the efforts of the engagement team. These matters were addressed in the context of our audit of the ﬁnanc ial statements as a whole, and in our opin ion thereon, and we do not prov ide a separate opin ion on these matters. Risk Our response to the risk Key observations communicated to the Audit Committee 1. Credit Impairment Refer to the Audit Committee Report (page 163); Accounting polic ies (page 380); Note 8 of the ﬁnancial statements; and relevant cred it risk disclosures (includ ing pages 238 and 274) At 31 December 2023, the Group reported total credit impa irment balance sheet prov is ion of $5,601 mill ion (2022: $6,075 m ill ion). Management’s judgements and estimates are highly subject ive as a result of the s ign iﬁcant uncertainty associated with the estimat ion of expected future credit losses that are dependent upon several hard to estimate factors. Assumptions with increased complexity in respect of the tim ing and measurement of expected credit losses (ECL) include: • Staging – the determinat ion of what constitutes sign iﬁcant increase in credit risk and consequent timely allocation of qualify ing assets to the appropriate stage in accordance with IFRS 9; • Model output and adjustments – Accounting interpretat ions, modell ing assumptions and data used to build and run the models that calculate the ECL, includ ing the appropriateness, completeness and valuation of post-model adjustments applied to model output to address ident iﬁed model deﬁcienc ies or risks not fully captured by the models; • Economic scenarios – Sign iﬁcant judgements involved in the determinat ion of the appropriateness of economic variables, the future forecasting of these variables and the parameters used in the Monte Carlo Simulat ion. The assessment of non-l inear ity produced by the Monte Carlo simulat ion, the benchmarking of the output and the evaluation of the need for any Post Model adjustments; • Management overlays – Appropriateness, completeness and valuation of risk event overlays to capture risks not ident iﬁed by the credit impa irment models, includ ing the considerat ion of the r isk of management override; and • Indiv idually assessed ECL allowances – Measurement of ind iv idual provis ions includ ing the assessment of probab il ity weighted recovery scenarios, exit strategies, collateral valuations, expected future cashﬂows and the tim ing of these cashﬂows. We evaluated the design of controls relevant to the Group’s systems and processes over material ECL balances, includ ing the judgements and estimates noted, involv ing EY special ists to ass ist us in performing our procedures where relevant. Based on our evaluation we selected the controls upon which we intended to rely and tested those for operating effectiveness. We increased the extent of our reliance on controls over model governance and in certain locations of the stage 3 exposures. We performed an overall stand-back assessment of the ECL allowance in total and by stage to determine if the ECL was reasonable. We considered the overall credit quality of the Group’s portfolios, risk proﬁle, the impact of sovereign downgrades and challenges facing the China Commercial Real Estate sector. We performed peer benchmarking to the extent that this was considered relevant and invest igated and sought explanations for any areas noted as being outliers. Our assessment also included the evaluation of the macroeconomic environment by consider ing trends in the economies and countries to which the Group is exposed. Staging – We evaluated the criter ia used to determine sign iﬁcant increase in credit risk includ ing quant itat ive backstops w ith the resultant allocation of ﬁnanc ial assets to stage 1, 2 or 3 in accordance with IFRS 9. We reperformed the staging distr ibut ion for a sample of ﬁnancial assets and assessed the reasonableness of staging downgrades applied by management. To test the completeness of the ident iﬁcation of sign iﬁcant increase in credit risk, we challenged the risk ratings (includ ing appropr iate operation of quantitat ive backstops) for a sample of performing accounts and other accounts exhib it ing risk characterist ics such as ﬁnancial diff icult ies, deferment of payment, late payment and watchlist. We also considered whether vulnerable and cyclical sectors (as deﬁned on page 265 in the annual report) resulted in a sign iﬁcant increase in credit risk at a sector level. We highl ighted the follow ing matters to the Audit Committee: • We increased the extent of our reliance of controls over model governance and stage 3 exposures in certain locations; • Our evaluation of the appropriateness of the sign iﬁcant increase in credit risk triggers, and the results of our sensit iv ity analysis and recalculation of the staging. • Our assessment of the assumptions used to determine the Stage 3 ECL with a focus on sponsor and developers exposed to China Commercial Real Estate and the appropriateness of the management overlay applied to the sector’s modelled ECL; • Our assessment of the completeness and measurement of post model adjustments and overlays. • Our assessment of the quantum of the non-linear ity adjustment produced by the Monte Carlo model includ ing the compar ison to the non-linear ity produced by running narrative discrete scenarios. • Our assessment of the appropriateness of the Group’s models to generate the ECL and staging outcomes includ ing the appropriateness and valid ity of the data used in the models and to generate the staging and consequent ECL. • Our evaluation of management’s enhanced modelling approach to the assessment of the potential impact on ECL from climate change; We concluded that management’s methodology, judgements and assumptions used in calculating credit impa irment are mater ially in accordance with the accounting standard. 351 Standard Chartered – Annual Report 2023 Financ ial statements Risk Our response to the risk Key observations communicated to the Audit Committee 1. Credit Impairment continued In 2023, the most material factors impact ing the ECL were in relation to the China Commercial Real Estate (CRE) portfolio, sovereign downgrades impacted by dollar availab il ity, the continu ing impact of higher interest rates and inﬂat ion and geopol it ical uncerta inty. In addit ion, where relevant we cons idered the impact of climate on the impa irment prov is ions. Overall, these factors were prevalent in the prior year, and consequently the risk of a material misstatement to the ECL remained consistent with that of the prior year. Modelled output and adjustments – We performed a risk assessment on models involved in the ECL calculation using EY independently determined quantitat ive and qualitat ive cr iter ia to select a sample of models to test. Based on this risk assessment, we engaged our modelling special ists to evaluate a sample of ECL models by assessing the reasonableness of underpinn ing assumptions, inputs and formulae used. This included a combinat ion of assess ing the appropriateness of model design, formulae and algorithms, alternative modelling techniques and recalculating the Probabil ity of Default, Loss Given Default and Exposure at Default parameters. Together with our modelling special ists, we also assessed mater ial post- model adjustments which were applied as a response to risks not fully captured by the models or for known model deﬁcienc ies. This included the completeness and appropriateness of these adjustments. In response to new or enhanced models implemented this year to address known weaknesses in previous models, we performed substantive testing procedures as deﬁned by our model inherent risk assessment process, includ ing code rev iew and implementat ion test ing. We did not rely on controls over model monitor ing and therefore adopted a substantive approach compris ing reperformance of model monitor ing procedures for models classif ied as h igher risk in accordance with our EY independent risk assessment. To evaluate data quality, we agreed a sample of ECL calculation data points to source systems, includ ing, among other data po ints, balance sheet data used to run the models. We also tested a sample of the ECL data points from the calculation engine through to the general ledger and disclosures. Economic scenarios – In collaboration with our economists and modelling special ists, we challenged the completeness and appropriateness of the macroeconomic variables used as inputs to the ECL models. Addit ionally, we involved our economic special ists to ass ist us in evaluating the reasonableness of the base forecast for sample of macroeconomic variables most relevant for the Group’s ECL calculation inﬂuenced by the above assessment. Procedures performed included benchmarking the forecast for a sample of macroeconomic variables to a variety of global external sources. We reviewed and challenged the appropriateness of the underlying coding and assumptions used in the Monte Carlo simulat ion. 352 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report Risk Our response to the risk Key observations communicated to the Audit Committee 1. Credit Impairment continued We assessed the reasonableness of the non-linear ity impact on ECL allowances. We engaged our economists and modelling special ists, to assess and challenge the Group’s choice of discrete scenarios to benchmark the output from the Monte Carlo model and determine the sensit iv ity analysis as set out on page 280 in the annual report. This challenge included the choice of narrative scenarios and we independently challenged the output from these scenarios using independently determined EY weights for each scenario. We also performed a stand-back assessment by benchmarking the resulting non-linear ity up-lift and overall ECL charge and provis ion coverage to peers. Management overlays – We challenged the completeness and appropriateness of overlays used for risks not captured by the models. We focussed our challenge on China Commercial Real Estate, sovereign risks and the sustained impact of higher interest rates and inﬂat ion. Our procedures included assessing the need for management overlays, evaluating the assumptions and judgments used to determine each overlay taking current market condit ions into account. We computed a range of EY independently determined outcomes for the China Commercial Real Estate overlay. Indiv idually assessed ECL allowances – Our procedures included challenging management’s forward-looking economic assumptions of the recovery outcomes ident iﬁed, cashﬂow proﬁle and t im ing, ind iv idual probabil ity we ight ings for each scenario, and recalculating a sample of ind iv idually assessed provis ions. We also engaged our valuation special ists to test the value of the collateral used in management’s calculations. Our sample was based on quantitat ive thresholds and qualitat ive factors, includ ing exposure to vulnerable sectors. We have independently assessed all material China CRE developers in Stage 3 includ ing challeng ing the plausib il ity of the applied scenarios, the corresponding weights assigned to work out scenarios and engaging local EY Real Estate special ists to validate the collateral values. We also considered whether planned exit strategies were viable. 353 Standard Chartered – Annual Report 2023 Financ ial statements Risk Our response to the risk Key observations communicated to the Audit Committee 2. Basis of accounting and impa irment assessment of Ch ina Bohai Bank (Interest in Associate) Refer to the Audit Committee Report (page 30); Accounting polic ies (page 452); and Note 32 of the ﬁnancial statements Interest in Associate – China Bohai Bank $700 mill ion (2022: $1,421m ill ion). Other impa irment – Ch ina Bohai Bank – $850 mill ion (2022: $308 m ill ion). At 31 December 2023, the Group’s share of China Bohai Bank’s market capital isat ion was $282m lower than the carrying value of $700m. We focused on judgements and estimates, includ ing the appropr iateness of the equity accounting treatment under IAS 28 and the assessment of whether the investment was impa ired. Basis of accounting The Group holds a 16.26% stake in China Bohai Bank and equity accounts for the investment as an associate, on the grounds that the Group is able to exercise sign iﬁcant inﬂuence over China Bohai Bank. IAS 28 states that if the entity holds, directly or ind irectly, less than 20% of the vot ing power of the investee, it is presumed that the entity does not have sign iﬁcant inﬂuence, unless such inﬂuence can be clearly demonstrated. There is a risk that the equity accounting treatment may not be appropriate, if the Group cannot demonstrate that it exerts sign iﬁcant inﬂuence over China Bohai Bank. Impairment testing At 31 December 2023, China Bohai Bank’s market capital isat ion was sign iﬁcantly lower than the carrying value of the investment. In addit ion, the ﬁnancial performance of Ch ina Bohai Bank deteriorated during 2023. These matters are ind icators of impa irment. Impairment of the investment in China Bohai Bank is determined by comparing the carrying value to the value-in-use (VIU). The VIU is modelled by reference to future cashﬂow forecasts (forecast proﬁt, includ ing a ha ircut for regulatory capital), discount rate and macroeconomic assumptions such as long-term growth rates. The assumptions underpinn ing management’s assessment of China Bohai Bank’s VIU are subject to estimat ion uncerta inty and consequently, there is a risk that if the judgements and assumptions are inappropr iate, the investment in China Bohai Bank may be misstated. The risk of the impa irment has increased in the current year in the context of economic headwinds in Mainland China impact ing the banking sector, as well as Bohai’s deteriorat ing ﬁnancial performance. Basis of accounting We evaluated the facts and circumstances that the Group presented to demonstrate that it exercises sign iﬁcant inﬂuence over China Bohai Bank, through Board representation, membership of Board Committees and sharing of technical advice. Impairment testing The Group impa ired the value of the investment in China Bohai Bank by $850 mill ion in 2023 (2022: $308 mill ion). Th is brings the cumulative impa irment recorded in relation to the Group’s investment in China Bohai Bank to $1,458 mill ion as at 31 December 2023. We assessed the appropriateness of the Group’s VIU methodology for testing the impa irment of the investment in China Bohai Bank for compliance with the accounting standards. We tested the mathematical accuracy of the VIU model and engaged our valuation and modelling special ists to support the audit team in calculating an independent range for the VIU. We performed audit procedures to assess the reasonableness of the Group’s forecast of the future cashﬂows relating to Bohai, by evaluating management’s assessment, benchmarking the forecasts to broker reports published for comparable companies and challenging management with regard to the relevance and reliab il ity of histor ical data, includ ing an evaluation of the public disclosures by Bohai. We assessed the appropriateness of disclosures in the annual report in relation to the impact of reasonably possible changes in key assumptions on the carrying value of the investment in China Bohai Bank. On the basis of the evidence, we concluded that the Group continues to mainta in s ign iﬁcant inﬂuence over China Bohai Bank as at 31 December 2023. We concluded that the Interest in Associate –China Bohai Bank balance was not materially misstated as at 31 December 2023. Management’s carrying value for the investment in Bohai of $700 mill ion is with in EYs independent range. We concluded that the disclosures in the annual report appropriately reﬂect the sensit iv ity of the carrying value to reasonably possible changes in key assumptions in the valuation of the investment in China Bohai Bank. The risk in respect of sign iﬁcant inﬂuence has not changed compared to the prior year. 354 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report Risk Our response to the risk Key observations communicated to the Audit Committee 3. Impairment assessment of goodwill and investments in subsid iary undertak ings a) Impairment of Goodwill: Accounting polic ies (page 424); and Note 17 of the ﬁnancial statements. Refer to the Audit Committee Report (page 40). b) Impairment of investments in subsid iary undertakings: Accounting polic ies (page 452); and Note 32 of the ﬁnancial statements. Refer to the Audit Committee Report (page 46). At 31 December 2023, the Group reported a goodwill balance of $2,429 mill ion (2022: $2,471 mill ion). Dur ing the year no impa irment was recognised for goodwill (2022: $14mill ion). In the Parent Company ﬁnancial statements, the investment in subsid iary undertak ings balance was $60,791 mill ion (2022: $60,975 m ill ion). On an annual basis, management is required to perform an impa irment assessment for goodwill, and to assess for ind icators of impa irment in respect of investments in subsid iary undertak ings. Where ind icators of impa irment are ident iﬁed, the recoverable amount of the investment should be estimated. The impa irment assessment of goodw ill is performed by calculating a value in use (‘VIU’) as the recoverable amount of the related cash generating unit (‘CGU’). The Group ident iﬁed ind icators of impa irment of investments in subsid iary undertak ings, includ ing macroeconomic and geopolit ical factors wh ich have an impact on the ﬁnanc ial pos it ion and performance of the subsid iar ies. In assessing for ind icators of impa irment, among other procedures, management compares the Net Asset Value (‘NAV’) of the subsid iary to the carrying value of each direct subsid iary of the Parent Company. Where the net assets do not support the carrying value, the recoverable amount is estimated by determin ing the higher of VIU or fair value less cost to sell. Where the recoverable amount is based on the VIU, this is modelled by reference to future cashﬂow forecasts (proﬁt forecast includ ing a regulatory capital haircut adjustment), discount rates and macroeconomic assumptions such as long-term growth rates. There is a risk that if the judgements and assumptions underpinn ing the impa irment assessments are inappropr iate, then the goodwill and investments in subsid iar ies balances may be misstated. The level of risk remains consistent with the prior year. We obtained an understanding of management’s process and evaluated the design of controls. Our audit strategy was fully substantive. We assessed the appropriateness of the Group’s methodology for testing the impa irment of goodw ill and investments in subsid iary undertak ings for compliance with accounting standards. For goodwill, we assessed the appropriateness of the cash generating units ident iﬁed by management. We agreed the inputs in the VIU model to their source and tested the mathematical accuracy of the VIU model. We engaged EY special ists to support the audit team in assessing reasonableness of the regulatory haircut adjustment to future proﬁtabil ity forecasts and calculating an independent range for assumptions underlying the VIU calculations, such as the discount rate and long-term growth rate for each cash generating unit. We also reconciled the future proﬁtab il ity forecasts of each CGU to the Group’s approved Corporate Plan (‘the Plan’). We engaged our special ist team to determ ine the reasonableness of the forward macroeconomic inputs used in the Plan. We performed audit procedures to assess the reasonableness of the forecasts by understanding the Group Strategy, challenging key assumptions underpinn ing the Plan, assessing the feasib il ity of management actions necessary to achieve the Plan and testing the reliab il ity of the Group’s histor ical forecasting by comparing with the actual performance. We performed a stand back assessment to evaluate the appropriateness of the audit evidence obtained and our conclusion in relation to these estimates. We agreed the NAV of the subsid iar ies to their carrying value to conﬁrm impa irment or reversal of impa irment recogn ised in the Parent`s Company ﬁnancial results. We assessed the appropriateness of disclosures for impa irment of goodw ill and investments in subsid iary undertak ings in accordance with IAS 36. We concluded that the goodwill balance as at 31 December 2023 and the related disclosures, are not materially misstated. We concluded that the disclosures in the annual report appropriately reﬂect the sensit iv ity of the carrying value of goodwill to reasonably possible changes in key assumptions, noting that these downside scenarios could necessitate an adjustment to the carrying amount of goodwill in future. We also concluded that the investments in subsid iary undertakings balance reported in the Parent Company ﬁnancial statements and the associated disclosures, are not materially misstated as at 31 December 2023. 355 Standard Chartered – Annual Report 2023 Financ ial statements Risk Our response to the risk Key observations communicated to the Audit Committee 4. Valuation of ﬁnanc ial instruments held at fair value with higher risk characterist ics Refer to the Audit Committee Report (page 163); Accounting polic ies (page 390); and Note 13 of the ﬁnancial statements. At 31 December 2023, the Group reported ﬁnancial assets measured at fa ir value of $301,976 mill ion (2022: $282,263 m ill ion), and ﬁnancial l iab il it ies at fa ir value of $139,157 mill ion (2022: $149,765 mill ion), of wh ich ﬁnanc ial assets of $6,714 mill ion (2022: $5,865 m ill ion) and ﬁnancial l iab il it ies of $2,960 m ill ion (2022: $1,878 mill ion) are class if ied as Level 3 in the fair value hierarchy. The fair value of ﬁnanc ial instruments with higher risk characterist ics involves the use of management judgement in the selection of valuation models and techniques, pric ing inputs and assumptions and fair value adjustments. A higher level of estimat ion uncerta inty is involved for ﬁnanc ial instruments valued using complex models, pric ing inputs that have lim ited observab il ity, and fa ir value adjustments, includ ing the Cred it Valuation Adjustment, Funding Valuation Adjustment, Debit Valuation Adjustment and Own Credit Adjustment. We considered the following portfolios presented a higher level of estimat ion uncertainty: Level 3 derivat ives and debt secur it ies in issue and a portfolio of Level 2 ﬁnanc ial instruments whose valuation involves the use of complex models, and Unlisted equity investments, loans at fair value, debt and other ﬁnancial instruments classif ied in Level 3 with unobservable pric ing inputs. The level of risk remains consistent with the prior year. We evaluated the design and operating effectiveness of controls relating to the valuation of ﬁnanc ial instruments, includ ing independent price verif icat ion, model validat ion and approval, fair value adjustments, income statement analysis and reporting. Among other procedures, we engaged our valuation special ists to ass ist the audit team in performing the following testing on a risk-assessed sample basis: • Test complex model-dependent valuations by independently revaluing Level 3 and complex Level 2 derivat ive ﬁnancial instruments and debt securit ies in issue, in order to assess the appropriateness of models and the adequacy of assumptions and inputs used by the Group; • Test valuations of other ﬁnanc ial instruments with higher estimat ion uncerta inty, such as unlisted equity investments, Level 3 loans at fair value, Level 3 debt and other ﬁnanc ial instruments. We compared management’s valuation to our own independently developed range, where appropriate; • Assessed the appropriateness of pric ing inputs as part of the Independent Price Verif icat ion process; and • Compared the methodology used for fair value adjustments to current market practice. We revalued a sample of valuation adjustments, compared funding and credit spreads to third party data and challenged the basis for determin ing ill iqu id credit spreads. Where differences between our independent valuation and management’s valuation were outside our thresholds, we performed addit ional testing to assess the impact on the valuation of ﬁnancial instruments. Throughout our audit procedures we considered the continu ing uncerta inty aris ing from the current macroeconom ic environment. In addit ion, we assessed whether there were any ind icators of aggregate bias in ﬁnanc ial instrument marking and methodology assumptions. We concluded that assumptions used by management to estimate the fair value of ﬁnanc ial instruments with higher risk characterist ics and the recogn it ion of related income were reasonable. We highl ighted the following matters to the Audit Committee: • We did not ident ify mater ial differences aris ing from our independent testing of complex model-dependent valuations; • Fair values of derivat ive transactions, debt securit ies in issue, unlisted equity investments, Level 3 loans, Level 3 debt and other ﬁnancial instruments valued using pric ing informat ion w ith lim ited observab il ity were not materially misstated as at 31 December 2023, based on the output of our independent calculations; and • Valuation adjustments in respect of credit, funding, own credit and other risks applied to derivat ive portfol ios and debt securit ies in issue were appropriate, based on our analysis of market data and benchmarking of pric ing informat ion. 5. Priv ileged Access Management IT General Controls (ITGCs) support the continuous operation of the automated and other IT dependent controls with in the bus iness processes related to ﬁnancial report ing. Effective IT general controls are needed to ensure that IT applicat ions process bus iness data as expected and that changes are made in an appropriate manner. During the 2020, 2021 and 2022 audits, a number of sign iﬁcant infrastructure priv ileged access management control deﬁcienc ies were ident iﬁed by us. S im ilar deﬁcienc ies were ident iﬁed by Group Internal Aud it (GIA) and the predecessor auditor in 2018 and 2019. The possib il ity of users gain ing access priv ileges beyond those necessary to perform their assigned duties may result in breaches in segregation of duties, includ ing inappropr iate manual intervent ion, unauthor ised changes to systems or programmes. The risk has decreased in comparison to prior year due to management’s remediat ion program. We evaluated the results of management’s remediat ion program and r isk assessment for applicat ions in our audit scope. We also tested IT controls (includ ing IT compensating controls) where possible, and also performed addit ional IT substant ive procedures to assess the impact of risks associated with the reported deﬁc ienc ies, on the ﬁnancial statements. We assessed the impact of the results of the above on our audit procedures over the ﬁnancial statements for the year ended 31 December 2023. We communicated the results of our audit procedures to the Audit Committee throughout the audit, in respect of the effectiveness of priv ileged access management controls and explained the results of the addit ional aud it procedures performed and noted an overall improvement in the control environment during the course of the year. As a result of the procedures performed, we have reduced the risk that our audit has not ident iﬁed a mater ial error in the ﬁnancial statements, related to infrastructure priv ileged access management, to an appropriate level. The key audit matters remain consistent from prior year. 356 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report Our applicat ion of mater ial ity We apply the concept of material ity in planning and performing the audit, in evaluating the effect of ident iﬁed misstatements on the audit and in forming our audit opin ion. Material ity The magnitude of an omiss ion or m isstatement that, ind iv idually or in the aggregate, could reasonably be expected to inﬂuence the economic decis ions of the users of the ﬁnancial statements. Mater ial ity prov ides a basis for determin ing the nature and extent of our aud it procedures. We determined material ity for the Group to be $274 m ill ion (2022: $234 mill ion), wh ich is 5% (2022: 5%) of adjusted PBT. This reﬂects actual PBT adjusted for non-recurring items relating to restructuring and the impa irment of Ch ina Bohai Bank. We believe that adjusted PBT provides us with most appropriate measure for the users of the ﬁnanc ial statements, given the Group is proﬁt making, it is consistent with the wider industry, it is the standard for listed and regulated entit ies and we believe it reﬂects the most relevant measure for users of the ﬁnancial statements. We also bel ieve that the adjustments are appropriate as they relate to material non-recurring items. During our audit, we performed a reassessment of our in it ial material ity. Th is assessment resulted in higher ﬁnal material ity calculated based on the actual ﬁnancial performance of the Group for the year. There were no changes to the basis for material ity calculat ion from the planning stage. • Reported proﬁt before tax – $5,093m Starting basis • Add China Bohai Bank Impairment – $850m • Deduct Other restructuring – $460m Adjustments • Totals $5,483m Adjusted PBT • Material ity of $274m (5% of Adjusted PBT) Material ity We determined material ity for the Parent Company to be $247 mill ion (2022: $210 m ill ion), wh ich is 0.5% (2022: 0.4%) of the equity of the Parent Company. We believe that equity provides us with the most appropriate measure for the users of the Parent Company’s ﬁnancial statements, g iven that the Parent Company is primar ily a hold ing company. Performance material ity The applicat ion of mater ial ity at the ind iv idual account or balance level. It is set at an amount to reduce to an appropriately low level the probabil ity that the aggregate of uncorrected and undetected misstatements exceeds material ity. On the basis of our risk assessment, together with our evaluation of the Group’s overall control environment, our judgement was that performance material ity was 50% (2022: 50%) of our planning material ity, namely $137m (2022: $117m). We have set performance material ity at th is percentage based on a variety of risk assessment factors such as the expectation of misstatements, internal control environment considerat ions and other factors such as the global complexity of the Group. Audit work at component locations for the purpose of obtain ing aud it coverage over sign iﬁcant ﬁnancial statement accounts is undertaken based on a percentage of total performance material ity. The performance mater ial ity set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance material ity allocated to components was $11.4 mill ion to $26.2 m ill ion (2022: $8.8 mill ion to $34.1 m ill ion). Reporting threshold An amount below which ident iﬁed m isstatements are considered as being clearly triv ial. We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $14 mill ion (2022: $11 mill ion), wh ich is set at 5% of planning material ity, as well as differences below that threshold that, in our view, warranted reporting on qualitat ive grounds. We evaluate any uncorrected misstatements against both the quantitat ive measures of mater ial ity d iscussed above and in light of other relevant qualitat ive cons iderat ions in forming our opin ion. Other informat ion The other informat ion compr ises the informat ion included in the Annual Report and Accounts, includ ing: the Strateg ic Report, Sustainab il ity Review, Directors’ Report (other than those sections of the Directors Remuneration Report marked as audited), Risk Review and Capital Review (other than those sections marked as audited) and Supplementary Information, other than the ﬁnanc ial statements and our auditor’s report thereon. The directors are responsible for the other informat ion conta ined with in the annual report. Our opin ion on the ﬁnancial statements does not cover the other informat ion and, except to the extent otherw ise explic itly stated in this report, we do not express any form of assurance conclusion thereon. Our responsib il ity is to read the other informat ion and, in doing so, consider whether the other informat ion is materially incons istent w ith the ﬁnanc ial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we ident ify such mater ial incons istenc ies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the ﬁnanc ial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other informat ion, we are required to report that fact. We have nothing to report in this regard. 357 Standard Chartered – Annual Report 2023 Financ ial statements Opin ions on other matters prescr ibed by the Companies Act 2006 In our opin ion, the part of the d irectors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opin ion, based on the work undertaken in the course of the audit: • the informat ion g iven in the strategic report and the directors’ report for the ﬁnanc ial year for wh ich the ﬁnanc ial statements are prepared is consistent with the ﬁnanc ial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not ident iﬁed mater ial misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opin ion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not vis ited by us; or • the Parent Company ﬁnancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specif ied by law are not made; or • we have not received all the informat ion and explanat ions we require for our audit. Corporate Governance Statement We have reviewed the directors’ statement in relation to going concern, longer-term viab il ity and that part of the Corporate Governance Statement relating to the Group and Company’s compliance with the provis ions of the UK Corporate Governance Code specif ied for our rev iew by the List ing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the ﬁnanc ial statements or our knowledge obta ined during the audit: • Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertaint ies ident iﬁed set out on page 218; • Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate set out on pages 88 and 89; • Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liab il it ies set out on page 89; • Directors’ statement on fair, balanced and understandable set out on page 217; • Board’s conﬁrmation that it has carried out a robust assessment of the emerging and princ ipal r isks set out on page 221; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 230 to 343; and • The section describ ing the work of the aud it committee set out on pages 162 to 167. Responsib il it ies of d irectors As explained more fully in the directors’ responsib il it ies statement set out on page 229, the directors are responsible for the preparation of the ﬁnanc ial statements and for be ing satisf ied that they g ive a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of ﬁnanc ial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁnanc ial statements, the d irectors are responsible for assessing the Group and Parent Company’s abil ity to cont inue as a going concern, disclos ing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liqu idate the Group or the Parent Company or to cease operations, or have no realist ic alternat ive but to do so. Auditor’s responsib il it ies for the aud it of the ﬁnancial statements Our objectives are to obta in reasonable assurance about whether the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opin ion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, ind iv idually or in the aggregate, they could reasonably be expected to inﬂuence the economic decis ions of users taken on the bas is of these ﬁnancial statements. Explanation as to what extent the audit was considered capable of detecting irregular it ies, includ ing fraud Irregularit ies, includ ing fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsib il it ies, outl ined above, to detect irregular it ies, includ ing fraud. The r isk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intent ional m isrepresentat ions, or through collus ion. The extent to which our procedures are capable of detecting irregular it ies, includ ing fraud is detailed below. 358 Standard Chartered – Annual Report 2023 Financ ial statements Independent auditor’s report However, the primary responsib il ity for the prevention and detection of fraud rests with both those charged with governance of the Company and management. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most sign iﬁcant are those that relate to the reporting framework (UK-adopted IAS and EU IFRS, the Companies Act 2006 and the UK Corporate Governance Code, the Financ ial Conduct Author ity (FCA) List ing Rules, the Ma in Board List ing Rules of the Hong Kong Stock Exchange), regulations and supervisory requirements of the Prudential Regulation Authority (PRA), FRC, FCA and other overseas regulatory requirements, includ ing but not lim ited to regulat ions in its major markets such as Mainland China, Hong Kong, India, Republic of Korea, Singapore, the United Arab Emirates, the United State of America, and the relevant tax compliance regulations in the jur isd ict ions in which the Group operates. In addit ion, we concluded that there are certain sign iﬁcant laws and regulat ions that may have an effect on the determinat ion of the amounts and disclosures in the ﬁnanc ial statements and those laws and regulations relating to regulatory capital and liqu id ity, conduct, ﬁnancial cr ime includ ing ant i-money laundering, sanctions and market abuse recognis ing the ﬁnancial and regulated nature of the Group’s activ it ies. • We understood how the Group is complying with those frameworks by performing a combinat ion of inqu ir ies of senior management and those charged with governance as required by audit ing standards, rev iew of board and certain committee meeting minutes, gain ing an understanding of the Group’s approach to governance, inspect ion of regulatory correspondence in the year and engaging with internal and external legal counsel. We also engaged EY ﬁnancial cr ime and forensics special ists to perform procedures on areas relating to anti-money laundering, whistleblow ing, and sanct ions compliance. Through these procedures, we became aware of actual or suspected non-compliance. The ident iﬁed actual or suspected non-compliance was not sufﬁc iently s ign iﬁcant to our audit that it would have resulted in it being ident iﬁed as a key audit matter. • We assessed the susceptib il ity of the Group’s ﬁnanc ial statements to material misstatement, includ ing how fraud might occur by consider ing the controls that the Group has established to address risks ident iﬁed by the ent ity, or that otherwise seek to prevent, deter or detect fraud. Our procedures to address the risks ident iﬁed also included incorporation of unpredictab il ity into the nature, tim ing and/or extent of our testing, challenging assumptions and judgements made by management in their sign iﬁcant accounting estimates and journal entry testing. • Based on this understanding, we designed our audit procedures to ident ify non-compl iance with such laws and regulations. Our procedures involved inqu ir ies of the Group’s internal and external legal counsel, money laundering reporting ofﬁcer, internal audit, certain senior management executives and focused testing on a sample basis, includ ing journal entry test ing. We also performed inspect ion of key regulatory correspondence from the princ ipal regulatory author it ies as well as rev iew of board and committee minutes. • For instances of actual or suspected non-compliance with laws and regulations, which have a material impact on the ﬁnancial statements, these were commun icated by management to the Group audit engagement team and component teams (where applicable) who performed audit procedures such as inqu ir ies with management, sending conﬁrmations to external legal counsel, substant ive testing and meeting with regulators. Where appropriate, we involved special ists from our ﬁrm to support the aud it team. • The Group is authorised to provide banking, insurance, mortgages and home ﬁnance, consumer credit, pensions, investments and other activ it ies. The Group operates in the banking industry which is a highly regulated environment. As such, the Senior Statutory Auditor considered the experience and expertise of the Group audit engagement team, the component teams and the shared service centre teams to ensure that the team had the appropriate competence and capabil it ies, which included the use of special ists where appropr iate. A further descript ion of our respons ib il it ies for the aud it of the ﬁnancial statements is located on the Financ ial Reporting Council’s website at https://www.frc.org.uk/ auditorsrespons ib il it ies. This descript ion forms part of our auditor’s report. Other matters we are required to address • Following the recommendation from the Audit Committee, we were re-appointed by the Company at the Annual General Meeting on 3 May 2023 to audit the ﬁnanc ial statements for the year ending 31 December 2023 and subsequent ﬁnancial per iods. • The period of total uninterrupted engagement is four years, covering the years ended 31 December 2020 to 31 December 2023. • The audit opin ion is consistent with the addit ional report to the Audit Committee. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsib il ity to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opin ions we have formed. David Canning-Jones (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 23 February 2024 359 Standard Chartered – Annual Report 2023 Financ ial statements Notes 2023 $mill ion 2022 $mill ion Interest income 27,227 15,252 Interest expense (19,458) (7,659) Net interest income 3 7,769 7,593 Fees and commiss ion income 4,067 3,972 Fees and commiss ion expense (815) (859) Net fee and commiss ion income 4 3,252 3,113 Net trading income 5 6,292 5,310 Other operating income 6 706 302 Operating income 18,019 16,318 Staff costs (8,256) (7,618) Premises costs (422) (401) General admin istrat ive expenses (1,802) (1,708) Depreciat ion and amort isat ion (1,071) (1,186) Operating expenses 7 (11,551) (10,913) Operating proﬁt before impa irment losses and taxat ion 6,468 5,405 Credit impa irment 8 (508) (836) Goodwill, property, plant and equipment and other impa irment 9 (1,008) (439) Proﬁt from associates and jo int ventures 32 141 156 Proﬁt before taxation 5,093 4,286 Taxation 10 (1,631) (1,384) Proﬁt for the year 3,462 2,902 Proﬁt attributable to: Non-controlling interests 29 (7) (46) Parent company shareholders 3,469 2,948 Proﬁt for the year 3,462 2,902 cents cents Earnings per share: Basic earnings per ordinary share 12 108.6 85.9 Diluted earnings per ordinary share 12 106.2 84.3 The notes on pages 367 to 487 form an integral part of these ﬁnanc ial statements. Consolidated income statement For the year ended 31 December 2023 360 Standard Chartered – Annual Report 2023 Financ ial statements Financ ial statements Notes 2023 $mill ion 2022 $mill ion Proﬁt for the year 3,462 2,902 Other comprehensive income: Items that will not be reclassif ied to income statement: 239 (75) Own credit gains/(losses) on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss 212 (56) Equity instruments at fair value through other comprehensive income 181 (75) Actuarial (losses)/gains on retirement beneﬁt obligat ions 30 (47) 41 Taxation relating to components of other comprehensive income 10 (107) 15 Items that may be reclassif ied subsequently to income statement: 562 (3,703) Exchange differences on translation of foreign operations: Net loss taken to equity (734) (2,466) Net gains on net investment hedges 14 215 512 Share of other comprehensive loss from associates and jo int ventures 32 (7) (79) Debt instruments at fair value through other comprehensive income: Net valuation gain/(loss) taken to equity 383 (1,528) Reclassif ied to income statement 6 115 207 Net impact of expected credit losses (48) 118 Cash ﬂow hedges: Net movements in cash ﬂow hedge reserve 14 767 (619) Taxation relating to components of other comprehensive income 10 (129) 152 Other comprehensive income/(loss) for the year, net of taxation 801 (3,778) Total comprehensive income/(loss) for the year 4,263 (876) Total comprehensive income/(loss) attributable to: Non-controlling interests 29 (38) (88) Parent company shareholders 4,301 (788) Total comprehensive income/(loss) for the year 4,263 (876) Consolidated statement of comprehensive income For the year ended 31 December 2023 361 Standard Chartered – Annual Report 2023 Financ ial statements Notes 2023 $mill ion 2022 $mill ion Assets Cash and balances at central banks 13,35 69,905 58,263 Financ ial assets held at fa ir value through proﬁt or loss 13 147,222 105,812 Derivat ive ﬁnancial instruments 13,14 50,434 63,717 Loans and advances to banks 13,15 44,977 39,519 Loans and advances to customers 13,15 286,975 310,647 Investment securit ies 13 161,255 172,448 Other assets 20 47,594 50,383 Current tax assets 10 484 503 Prepayments and accrued income 3,033 3,149 Interests in associates and jo int ventures 32 966 1,631 Goodwill and intang ible assets 17 6,214 5,869 Property, plant and equipment 18 2,274 5,522 Deferred tax assets 10 702 834 Assets classif ied as held for sale 21 809 1,625 Total assets 822,844 819,922 Liab il it ies Deposits by banks 13 28,030 28,789 Customer accounts 13 469,418 461,677 Repurchase agreements and other sim ilar secured borrow ing 13,16 12,258 2,108 Financ ial l iab il it ies held at fa ir value through proﬁt or loss 13 83,096 79,903 Derivat ive ﬁnancial instruments 13,14 56,061 69,862 Debt securit ies in issue 13,22 62,546 61,242 Other liab il it ies 23 39,221 43,527 Current tax liab il it ies 10 811 583 Accruals and deferred income 6,975 5,895 Subordinated liab il it ies and other borrowed funds 13,27 12,036 13,715 Deferred tax liab il it ies 10 770 769 Provis ions for l iab il it ies and charges 24 299 383 Retirement beneﬁt obligat ions 30 183 146 Liab il it ies included in disposal groups held for sale 21 787 1,307 Total liab il it ies 772,491 769,906 Equity Share capital and share premium account 28 6,815 6,930 Other reserves 9,171 8,165 Retained earnings 28,459 28,067 Total parent company shareholders’ equity 44,445 43,162 Other equity instruments 28 5,512 6,504 Total equity excluding non-controlling interests 49,957 49,666 Non-controlling interests 29 396 350 Total equity 50,353 50,016 Total equity and liab il it ies 822,844 819,922 The notes on pages 367 to 487 form an integral part of these ﬁnanc ial statements. These ﬁnancial statements were approved by the Board of d irectors and authorised for issue on 23 February 2024 and signed on its behalf by: José Viñals Bill Winters Diego De Giorg i Group Chairman Group Chief Executive Group Chief Financ ial Ofﬁcer Consolidated balance sheet As at 31 December 2023 362 Standard Chartered – Annual Report 2023 Financ ial statements Financ ial statements Consolidated statement of changes in equity For the year ended 31 December 2023 Ordinary share capital and share premium account $mill ion Preference share capital and share premium account $mill ion Capital and merger reserves 1 $mill ion Own credit adjust- ment reserve $mill ion Fair value through other compre- hensive income reserve – debt $mill ion Fair value through other compre- hensive income reserve – equity $mill ion Cash- ﬂow hedge reserve $mill ion Trans- lation reserve $mill ion Retained earnings $mill ion Parent company share- holders’ equity $mill ion Other equity instru- ments $mill ion Non- controlling interests $mill ion Total $mill ion As at 1 January 2022 5,528 1,494 17,246 (15) 103 249 (34) (5,744) 27,184 46,011 6,254 371 52,636 Proﬁt/(loss) for the year – – – – – – – – 2,948 2,948 – (46) 2,902 Other comprehensive (loss)/income¹¹ – – – (48) (1,219) (43) (530) (1,904) 8 2 (3,736) – (42) (3,778) Distr ibut ions – – – – – – – – – – – (31) (31) Other equity instruments issued, net of expenses – – – – – – – – – – 1,240 – 1,240 Redemption of other equity instruments – – – – – – – – – – (999) – (999) Treasury shares net movement – – – – – – – – (203) (203) – – (203) Share option expenses – – – – – – – – 163 163 – – 163 Div idends on ord inary shares – – – – – – – – (393) (393) – – (393) Div idends on preference shares and AT1 securit ies – – – – – – – – (401) (401) – – (401) Share buyback 3,4 (92) – 92 – – – – – (1,258) (1,258) – – (1,258) Other movements – – – – – – – 12 5 19 5,6 31 9⁵ 98 7 138 As at 31 December 2022 5,436 1,494 17,338 (63) (1,116) 206 (564) (7,636) 28,067 43,162 6,504 350 50,016 Proﬁt/(loss) for the year – – – – – – – – 3,469 3,469 – (7) 3,462 Other comprehensive income/(loss)¹¹ – – – 163 426 124 655 (489) (47) 2 832 – (31) 801 Distr ibut ions – – – – – – – – – – – (26) (26) Redemption of other equity instruments – – – – – – – – – – (1,000) – (1,000) Treasury shares net movement – – – – – – – – (189) (189) – – (189) Share option expenses – – – – – – – – 173 173 – – 173 Div idends on ord inary shares – – – – – – – – (568) (568) – – (568) Div idends on preference shares and AT1 securit ies – – – – – – – – (452) (452) – – (452) Share buyback 8,9 (115) – 115 – – – – – (2,000) (2,000) – – (2,000) Other movements – – – – – – – 12 5 6 5 18 8⁵ 110 10 136 As at 31 December 2023 5,321 1,494 17,453 100 (690) 330 91 (8,113) 28,459 44,445 5,512 396 50,353 1 Includes capital reserve of $5 mill ion, cap ital redemption reserve of $337 mill ion and merger reserve of $17,111 m ill ion 2 Comprises actuarial gain on Group deﬁned beneﬁt schemes 3 On 18 February 2022, the Group announced the buyback programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $56 mill ion, and the total cons iderat ion pa id was $754 mill ion, the buyback completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 4 On 1 August 2022, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $36 mill ion, and the total cons iderat ion pa id was $504 mill ion. The total number of shares purchased was 73,073,837 represent ing 2.5 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 5 Movement related to Translation adjustment and AT1 Securit ies charges 6 Movement mainly related to $21 mill ion NCI on Power2SME Pte. Ltd. and $8 m ill ion on CurrencyFa ir Lim ited & $(9)m ill ion related to AT1 secur it ies charges 7 Movements primar ily from non-controll ing interest pertain ing to Mox Bank L im ited ($39 m ill ion), Trust Bank S ingapore Lim ited ($47 m ill ion) , Zod ia Markets Holdings Lim ited ($3 m ill ion) and Power2SME Pte. Ltd. ($9 m ill ion) 8 On 16 February 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $58 mill ion, and the total cons iderat ion pa id was $1,000 mill ion and the buyback completed on 29 September 2023. The total number of shares purchased was 116,710,492, representing 4.03 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 9 On 28 July 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $57 mill ion, and the total cons iderat ion pa id was $1,000 mill ion and the buyback completed on 6 November 2023. The total number of shares purchased was 112,982,802, representing 3.90 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 10 Movements primar ily from non-controll ing interest pertain ing to Mox Bank L im ited ($48 m ill ion), Trust Bank S ingapore Lim ited ($34 m ill ion) and Zod ia Custody Lim ited ($28 m ill ion) 11 All the amounts are net of tax Note 28 includes a descript ion of each reserve. The notes on pages 367 to 487 form an integral part of these ﬁnanc ial statements. 363 Standard Chartered – Annual Report 2023 Financ ial statements Notes Group Company 2023 $mill ion 2022 (Restated) $mill ion 2023 $mill ion 2022 $mill ion Cash ﬂows from operating activ it ies: Proﬁt before taxation 5,093 4,286 4,269 402 Adjustments for non-cash items and other adjustments included with in income statement 34 3,274 3,549 (2,847) 565 Change in operating assets³ 34 (14,458) 12,989 (3,819) (258) Change in operating liab il it ies 34 1,977 8,786 3,239 (966) Contribut ions to deﬁned beneﬁt schemes 30 (81) (80) – – UK and overseas taxes paid 10 (1,367) (821) – – Net cash (used in)/from operating activ it ies (5,562) 28,709 842 (257) Cash ﬂows from invest ing act iv it ies: Internally generated capital ised software 17 (1,124) (1,096) – – Purchase of property, plant and equipment 18 (159) (835) – – Disposal of property, plant and equipment 18 53 343 – – Disposal of held for sale property, plant and equipment 21 191 79 – – Acquis it ion of investment associates, and jo int ventures, net of cash acquired 32 (47) (26) – – Div idends rece ived from subsid iar ies, associates and joint ventures 32 11 58 4,738 1,047 Disposal of investment in subsid iar ies, associates, and joint ventures, net of cash acqu ired² 32 3,603 – – – Purchase of investment securit ies (229,302) (280,952) (423) – Disposal and maturity of investment securit ies 242,585 259,853 2,000 960 Net cash from/(used in) from invest ing act iv it ies 15,811 (22,576) 6,315 2,007 Cash ﬂows from ﬁnancing act iv it ies: Exercise of share options 26 12 26 12 Purchase of own shares (215) (215) (215) (215) Cancellation of shares includ ing share buyback (2,000) (1,258) (2,000) (1,258) Premises and equipment lease liab il ity princ ipal payment (234) (269) – – Issue of addit ional T ier 1 Capital, net of expenses 28 – 1,240 – 1,240 Redemption of Tier 1 Capital 28 (1,000) (999) (1,000) (999) Gross proceeds from issue of subordinated liab il it ies 34 18 750 – 750 Interest paid on subordinated liab il it ies 34 (563) (667) (545) (619) Repayment of subordinated liab il it ies 34 (2,160) (1,848) (2,160) (1,800) Proceeds from issue of senior debts 34 15,261 11,902 5,105 1,500 Repayment of senior debts 34 (6,471) (7,838) (2,037) (2,980) Interest paid on senior debts 34 (1,145) (845) (434) (506) Net cash inﬂow from non-controlling interest 29 116 88 – – Distr ibut ions and div idends pa id to non-controlling interests, preference shareholders and AT1 Securit ies 11,29 (478) (432) (452) (401) Div idends pa id to ordinary shareholders 11 (568) (393) (568) (393) Net cash from/(used in) ﬁnanc ing act iv it ies 587 (772) (4,280) (5,669) Net increase/(decrease) in cash and cash equivalents 10,836 5,361 2,877 (3,919) Cash and cash equivalents at beginn ing of the year³ 97,595 94,947 7,417 11,336 Effect of exchange rate movements on cash and cash equivalents (796) (2,713) – – Cash and cash equivalents at end of the year 1,3 35 107,635 97,595 10,294 7,417 1 Comprises cash and balances at central banks $69,905 mill ion (31 December 2022: $58,263 m ill ion), treasury b ills and other elig ible b ills $5,931 mill ion (31 December 2022: $12,661 mill ion), loans and advances to banks $11,879 m ill ion (31 December 2022: $10,144 m ill ion), loans and advances to customers $25,829 m ill ion (31 December 2022: $24,586 mill ion) investments $244 mill ion (31 December 2022: $1,114 m ill ion) less restr icted balances $6,153 mill ion (31 December 2022: $9,173 m ill ion) 2 Includes disposal of aviat ion ﬁnance leas ing business ($3,570 mill ion), sale of Metaco SA ($14 m ill ion), Cardspal Pte. Ltd. ($12 m ill ion) and Kozag i ($7 mill ion) 3 Refer to note 34 and 35 for details of the restatement Interest received was $27,136 mill ion (31 December 2022: $14,590 m ill ion), interest paid was $18,379 mill ion (31 December 2022: $6,200 mill ion). Cash ﬂow statement For the year ended 31 December 2023 364 Standard Chartered – Annual Report 2023 Financ ial statements Financ ial statements Company balance sheet For the year ended 31 December 2023 Notes 2023 $mill ion 2022 $mill ion Non-current assets Investments in subsid iary undertak ings 32 60,791 60,975 Current assets Derivat ive ﬁnancial instruments 39 80 61 Financ ial assets held at fa ir value through proﬁt or loss 39 19,425 15,358 Investment securit ies 39 6,944 8,423 Amounts owed by subsid iary undertak ings 39 10,294 7,417 Total current assets 36,743 31,259 Current liab il it ies Derivat ive ﬁnancial instruments 39 1,104 1,343 Amounts owed to subsid iary undertak ings – 2 Financ ial l iab il it ies held at fa ir value through proﬁt or loss 39 16,704 12,842 Other creditors 650 423 Total current liab il it ies 18,458 14,610 Net current assets 18,285 16,649 Total assets less current liab il it ies 79,076 77,624 Non-current liab il it ies Debt securit ies in issue 39 17,142 13,891 Subordinated liab il it ies and other borrowed funds 39 9,248 11,239 Total non-current liab il it ies 26,390 25,130 Total assets less liab il it ies 52,686 52,494 Equity Share capital and share premium account 28 6,815 6,930 Other reserves 17,409 17,271 Retained earnings 22,952 21,791 Total shareholders’ equity 47,176 45,992 Other equity instruments 28 5,510 6,502 Total equity 52,686 52,494 The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its ind iv idual statement of comprehensive income and related notes that form a part of these ﬁnanc ial statements. The Company proﬁt for the period after tax is $4,205 mill ion (31 December 2022: $471 m ill ion). The notes on pages 367 to 487 form an integral part of these ﬁnanc ial statements. These ﬁnancial statements were approved by the Board of d irectors and authorised for issue on 23 February 2024 and signed on its behalf by: José Viñals Bill Winters Diego De Giorg i Group Chairman Group Chief Executive Group Chief Financ ial Ofﬁcer 365 Standard Chartered – Annual Report 2023 Financ ial statements Share capital and share premium account $mill ion Capital and merger reserve 1 $mill ion Own credit adjustment reserve $mill ion Cash ﬂow hedge reserve $mill ion Retained earnings $mill ion Other equity instruments $mill ion Total $mill ion As at 1 January 2022 7,022 17,246 (14) (12) 23,418 6,252 53,912 Proﬁt for the year 2 – – – – 471 – 471 Other comprehensive loss⁸ – – (5) (36) – – (41) Other equity instruments issued, net of expenses – – – – – 1,240 1,240 Treasury shares net movement – – – – (203) – (203) Share option expenses – – – – 163 – 163 Div idends on ord inary shares – – – – (393) – (393) Div idends on preference share and AT1 secur it ies – – – – (401) – (401) Redemption of other equity instruments – – – – – (999) (999) Share buyback 3,4 (92) 92 – – (1,258) (1,258) Other Movements 5 – – – – (6) 9 3 As at 31 December 2022 6,930 17,338 (19) (48) 21,791 6,502 52,494 Proﬁt for the year 2 – – – – 4,205 – 4,205 Other comprehensive income⁸ – – 11 12 – – 23 Treasury shares net movement – – – – (189) – (189) Share option expenses – – – – 170 – 170 Div idends on ord inary shares – – – – (568) – (568) Div idends on preference share and AT1 secur it ies – – – – (452) – (452) Redemption of other equity instruments – – – – – (1,000) (1,000) Share buyback 6,7 (115) 115 – – (2,000) – (2,000) Other Movements 5 – – – – (5) 8 3 As at 31 December 2023 6,815 17,453 (8) (36) 22,952 5,510 52,686 1 Includes capital reserve of $5 mill ion, cap ital redemption reserve of $337 mill ion and merger reserve of $17,111 m ill ion 2 Includes div idend rece ived of $2,789 mill ion (2022: $550 m ill ion) from Standard Chartered Hold ing Lim ited 3 On 18 February 2022, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $56 mill ion, and the total cons iderat ion pa id was $754 mill ion, the buyback completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 4 On 1 August 2022, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $37 mill ion, and the total cons iderat ion pa id was $504 mill ion. The total number of shares purchased was 73,073,837 represent ing 2.5 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 5 Movement mainly related to AT1 securit ies charges 6 On 16 February 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $58 mill ion, and the total cons iderat ion pa id was $1,000 mill ion and the buyback completed on 29 September 2023. The total number of shares purchased was 116,710,492, representing 4.03 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 7 On 28 July 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $57 mill ion, and the total cons iderat ion pa id was $1,000 mill ion and the buyback completed on 6 November 2023. The total number of shares purchased was 112,982,802, representing 3.90 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 8 All the amounts are net of tax Note 28 includes a descript ion of each reserve. The notes on pages 367 to 487 form an integral part of these ﬁnanc ial statements. Company statement of changes in equity For the year ended 31 December 2023 366 Standard Chartered – Annual Report 2023 Financ ial statements Notes to the ﬁnancial statements Contents – Notes to the ﬁnancial statements Section Note Page Basis of preparation 1 Accounting polic ies 367 Performance/return 2 Segmental informat ion 370 3 Net interest income 375 4 Net fees and commiss ion 375 5 Net trading income 378 6 Other operating income 378 7 Operating expenses 379 8 Credit impa irment 380 9 Goodwill, property, plant and equipment and other impa irment 384 10 Taxation 384 11 Div idends 388 12 Earnings per ordinary share 389 Assets and liab il it ies held at fa ir value 13 Financ ial instruments 390 14 Derivat ive ﬁnancial instruments 414 Financ ial instruments held at amortised cost 15 Loans and advances to banks and customers 422 16 Reverse repurchase and repurchase agreements includ ing other sim ilar lend ing and borrowing 422 Other assets and investments 17 Goodwill and intang ible assets 424 18 Property, plant and equipment 427 19 Leased assets 429 20 Other assets 430 21 Assets held for sale and associated liab il it ies 430 Funding, accruals, provis ions, cont ingent liab il it ies and legal proceed ings 22 Debt securit ies in issue 431 23 Other liab il it ies 432 24 Provis ions for l iab il it ies and charges 432 25 Contingent liab il it ies and comm itments 433 26 Legal and regulatory matters 434 Capital instruments, equity and reserves 27 Subordinated liab il it ies and other borrowed funds 435 28 Share capital, other equity instruments and reserves 436 29 Non-controlling interests 441 Employee beneﬁts 30 Retirement beneﬁt obligat ions 442 31 Share-based payments 447 Scope of consolidat ion 32 Investments in subsid iary undertak ings, jo int ventures and assoc iates 452 33 Structured entit ies 457 Cash ﬂow statement 34 Cash ﬂow statement 458 35 Cash and cash equivalents 460 Other disclosure matters 36 Related party transactions 460 37 Post balance sheet events 461 38 Auditor’s remuneration 462 39 Standard Chartered PLC (Company) 462 40 Related undertakings of the Group 465 Financ ial statements Standard Chartered – Annual Report 2023 367 1. Accounting polic ies Statement of compliance The Group ﬁnancial statements consol idate Standard Chartered PLC (the Company) and its subsid iar ies (together referred to as the Group) and equity account the Group’s interests in associates and jo intly controlled ent it ies. The parent company ﬁnancial statements present informat ion about the Company as a separate entity. The Group ﬁnancial statements have been prepared in accordance with UK-adopted internat ional account ing standards and International Financ ial Report ing Standards (IFRS) as adopted by the European Union (EU IFRS). The Company ﬁnancial statements have been prepared in accordance with UK-adopted internat ional account ing standards as applied in conformity with section 408 of the Companies Act 2006. The ﬁnanc ial statements have been prepared in accordance with the requirements of the Companies Act 2006. There are no sign iﬁcant d ifferences between UK-adopted internat ional account ing standards and EU IFRS. The following parts of the Risk review and Capital review form part of these ﬁnancial statements: a) Risk review: Disclosures marked as ‘audited’ from the start of the Credit Risk section (page 234) to the end of Other princ ipal r isks in the same section (page 297). b) Capital review: Tables marked as ‘audited’ from the start of ‘CRD Capital base’ to the end of ‘Movement in total capital’, excluding ‘Total risk-weighted assets’ (page 339 to 340). Basis of preparation The consolidated and Company ﬁnanc ial statements have been prepared on a going concern basis and under the histor ical cost convent ion, as modif ied by the revaluat ion of cash-settled share-based payments, fair value through other comprehensive income, and ﬁnanc ial assets and liab il it ies ( includ ing der ivat ives) at fa ir value through proﬁt or loss. The consolidated ﬁnanc ial statements are presented in United States dollars ($), being the presentation currency of the Group and functional currency of the Company, and all values are rounded to the nearest mill ion dollars, except when otherwise ind icated. Sign iﬁcant and other account ing estimates and judgement In determin ing the carry ing amounts of certain assets and liab il it ies, the Group makes assumpt ions of the effects of uncertain future events on those assets and liab il it ies at the balance sheet date. The Group’s estimates and assumptions are based on histor ical exper ience and expectation of future events and are reviewed period ically. Further informat ion about key assumptions concerning the future, and other key sources of estimat ion uncerta inty and judgement, are set out in the relevant disclosure notes for the areas set out under the relevant headings below: Sign iﬁcant account ing estimates and crit ical judgements Sign iﬁcant account ing estimates and judgements represent those items which have a sign iﬁcant r isk of causing a material adjustment to the carrying amounts of assets and liab il it ies w ith in the next year. S ign iﬁcant account ing estimates and judgements are: • Expected credit loss calculations (Note 8) • Financ ial instruments measured at fair value (Note 13) • Investments in subsid iary undertak ings, jo int ventures and associates – China Bohai associate accounting and impa irment analys is (Note 32) Other areas of accounting estimate and judgement Other areas of accounting estimate and judgement do not meet the deﬁnit ion under IAS 1 of sign iﬁcant account ing estimates or crit ical account ing judgements, but the recognit ion of certa in material assets and liab il it ies are based on assumptions and/or are subject to long-term uncertaint ies. The other areas of account ing estimate and judgement are: • Taxation (Note 10) • Goodwill impa irment (Note 17) • Retirement beneﬁt obligat ions (Note 30) • Share-based payments (Note 31) Climate impact on the Group’s balance sheet Climate, and the impact of climate on the Group’s balance sheet is considered as an area of sign iﬁcant account ing estimate and judgment through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liab il it ies. It is noted that although not currently quantitat ively mater ial, the Group considers climate to be qualitat ively mater ial to the Group. The Group has assessed the impact of climate risk on the ﬁnancial report. Th is is set out with in the Susta inab il ity Review chapter which incorporates the Group’s Climate- related Financ ial D isclosures which align with the recommendations from the Task Force for Climate related Financ ial D isclosures (TCFD). Further risk disclosure has been provided in the Princ ipal R isks and Uncertaint ies sect ion of the Annual Report where the Group has described how it manages climate risk as an Integrated Risk Type. Notes to the ﬁnancial statements Financ ial statements Notes to the ﬁnancial statements 368 Standard Chartered – Annual Report 2023 1. Accounting polic ies continued The areas of impact where judgements and the use of estimates have been applied were credit risk and the impact on lending portfolios; ESG features with in issued loans and bonds; physical risk on our mortgage lending portfolio; and, the corporate plan, in respect of which forward looking cash ﬂows impact the recoverabil ity of certa in assets, includ ing of goodw ill, deferred tax assets and investments in subsid iary undertak ings. This assessment on the corporate loan portfolio was undertaken by consider ing the matur ity proﬁle of the loan portfolio which is major ity shorter term. Trans it ion r isk, as our clients move to lower carbon emitt ing revenues, (e ither by virtue of legislat ion or chang ing end customer preference) is considered with reference to client transit ion pathways and manifests over a longer term than the maturity of the loan book (up to 2050). The setting of net zero targets for our high carbon sectors, which as of this annual report covers 11 of the 12 high carbon sectors as mandated by the Net Zero Banking Alliance, manages transit ion r isk. Net zero targets enable the portfolio managers to work with our clients on their transit ion, deploy cap ital to those clients which are engaged and have adequate transit ion pathways, and ex it clients that refuse to work with the Group on moving from a high carbon present to a low carbon future. All of these actions manage the Group’s transit ion r isk and engage clients before transit ion r isk manifests itself into credit losses. Physical risk is already included with in the majority of our mortgage lending decis ions, and we have appl ied scenario analysis against the pathways of different temperature addit ions and country pol icy scenarios. We also assess the impact of climate risk on the classif icat ion of ﬁnanc ial instruments under IFRS 9, when Environmental, Sustainab il ity or Governance (ESG) triggers may affect the cash ﬂows received by the Group under the contractual terms of the instrument. The Group Climate Risk team have performed a quantitat ive assessment of the impact of climate risk on the IFRS 9 ECL provis ion. Th is assessment has been performed across both the CCIB and CPBB portfolios. The Climate risk impact assessment on IFRS 9 business as usual ECL has been conducted based on newly developed internal climate risk models for four Corporate sectors (Oil and Gas, Power, Steel and Min ing) and Sovere igns, whilst the top-down approach developed in 2022 was used for the remain ing portfol ios. The impact assessment resulted in a marginal ECL increase across CCIB and CPBB, which will not be recorded as an overlay for the 2023 year end. The Group’s corporate plan has a 5 year outlook and considers the high carbon sectors the Group ﬁnances. The majority of the Group h igh carbon sector targets are production/physical intens it ies which allow continued levels of lending as long as the products the client produce have a decreasing carbon cost. For Coal Min ing and O il and Gas, these sectors have absolute targets which represent a decreasing carbon budget. Coal Min ing is an immater ial book, whilst for Oil and Gas lending is being actively monitored towards lower carbon counterparties and technologies. The corporate plan is shorter term than many of the climate scenario outlooks but seeks to capture the nearer term performance as required by recoverabil ity models. The Group has for the second time in the 2024 corporate plan included antic ipated ECL charges l inked to climate for four sectors (Oil and Gas, Metals and Min ing, Power and Transport excluding Aviat ion) over the 5 years. This addit ion of ECL has not in itself, impacted the recoverabil ity of assets supported by d iscounted cash ﬂow models (such as Value in Use) which util ise the Corporate plan. The Group has further progressively strengthened its scenario analysis capabil it ies with the modelling of Climate Risk impact over a 30-year period across multiple dimens ions includ ing scenar io data and pathways. This has been lim ited by ava ilab il ity of client-specif ic data, and modell ing lim itat ions which have required judgements to be made around scenarios chosen, regression and proxies used. Notwithstand ing these challenges, our work to date, us ing certain assumptions and proxies, ind icates that our bus iness is resil ient to all Network of Central Banks and Superv isors for Greening the Financ ial System (NGFS) and bespoke scenarios that were explored. The Group, although acknowledging the lim itat ions of current data available, increas ing soph ist icat ion of models evolving and nascent nature of climate impacts on internal and client assets, considers Climate Risk to have lim ited quantitat ive impact in the immed iate term and as a longer-term risk will be addressed through its business strategy and ﬁnancial plann ing as the Group implements its net zero journey. IFRS and Hong Kong accounting requirements As required by the Hong Kong List ing Rules, an explanat ion of the differences in accounting practices between UK- adopted IFRS and Hong Kong Financ ial Report ing Standards is required to be disclosed. There would be no sign iﬁcant differences had these accounts been prepared in accordance with Hong Kong Financ ial Report ing Standards. Financ ial statements Standard Chartered – Annual Report 2023 369 1. Accounting polic ies continued Comparatives Certain comparatives have been restated in line with current year disclosures. Details of these changes are set out in the relevant sections and notes below: • Cash ﬂow statement • Note 2 Segmental informat ion • Note 12 Earnings per ordinary share • Note 34 Cash ﬂow statement • Note 35 Cash and cash equivalents New accounting standards adopted by the group There were no new accounting standards or interpretat ions that had a material effect on the Group’s Financ ial Statements in 2023. New accounting standards in issue but not yet effective IAS 21 Amendment - Lack of Exchangeabil ity The IAS 21 amendment was issued in August 2023 and is effective for annual reporting periods beginn ing on or after January 1, 2025. This amendment is not yet endorsed for use in the United Kingdom. The amendment provides guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not. The amendment requires disclosure of informat ion that enables users of ﬁnancial statements to understand the impact of a currency not being exchangeable. The Group will apply the IAS 21 Amendment for annual reporting periods beginn ing on January 1, 2025 and is currently assessing the impact on the Group’s ﬁnancial statements but do not expect th is to be material. Going concern These ﬁnancial statements were approved by the Board of directors on 23 February 2024. The directors have made an assessment of the Group’s abil ity to cont inue as a going concern. This assessment has been made having considered the current macroeconomic and geopolit ical headwinds, includ ing: • Review of the Group Strategy and Corporate Plan • An assessment of the actual performance to date, loan book quality, credit impa irment, legal, regulatory and compliance matters, and the updated annual budget • Considerat ion of stress test ing performed, includ ing the Group Recovery Plan (RP) which include the applicat ion of stressed scenarios. Under the tests and through the range of scenarios, the results of these exercises and the RP demonstrate that the Group has sufﬁcient cap ital and liqu id ity to continue as a going concern and meet min imum regulatory cap ital and liqu id ity requirements • Analysis of the capital, funding and liqu id ity posit ion of the Group, includ ing the cap ital and leverage ratios, and ICAAP which summarises the Group’s capital and risk assessment processes, assesses its capital requirements and the adequacy of resources to meet them. Further, funding and liqu id ity was considered in the context of the risk appetite metrics, includ ing the LCR rat io. • The Group’s Internal Liqu id ity Adequacy Assessment Process (ILAAP), which considers the Group’s liqu id ity posit ion, its framework and whether sufﬁc ient l iqu id ity resources are being mainta ined to meet l iab il it ies as they fall due, was also reviewed • The level of debt in issue, includ ing redempt ions and issuances during the year, debt falling due for repayment in the next 12 months and further planned debt issuances, includ ing the appet ite in the market for the Group’s debt • A detailed review of all princ ipal and emerg ing risks Based on the analysis performed, the directors conﬁrm they are satisf ied that the Group has adequate resources to continue in business for a period of at least 12 months from 23 February 2024. For this reason, the Group continues to adopt the going concern basis of accounting for preparing the ﬁnancial statements. Changes in accounting polic ies The Group has changed its accounting policy regarding the determinat ion of the cost of its portfolio of Investment Securit ies held at amort ised cost and Debt securit ies and other elig ible b ills, other than those included with in ﬁnancial instruments held at fair value through proﬁt or loss. Refer to Note 13 Financ ial Instruments. Financ ial statements Notes to the ﬁnancial statements 370 Standard Chartered – Annual Report 2023 2. Segmental informat ion Basis of preparation The analysis reﬂects how the client segments and geographic regions are managed internally. This is described as the Management View (on an underlying basis) and is princ ipally the locat ion from which a client relationsh ip is managed, which may differ from where it is ﬁnanc ially booked and may be shared between bus inesses and/or regions. In certain instances this approach is not appropriate and a Financ ial V iew is disclosed, that is, the location in which the transaction or balance was booked. Typically, the Financ ial V iew is used in areas such as the Market and Liqu id ity Risk reviews where actual booking location is more important for an assessment. Segmental informat ion is therefore on a Management View unless otherwise stated. Segments and regions The Group’s segmental reporting is in accordance with IFRS 8 Operating Segments and is reported consistently with the internal performance framework and as presented to the Group’s Management Team. Restructuring items excluded from underlying results The Group’s reported IFRS performance is adjusted for certain items to arrive at alternative performance measures. These items include proﬁts or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are sign iﬁcant or mater ial in the context of the Group’s normal business earnings for the period and items which management and investors would ordinar ily ident ify separately when assess ing consistent performance period by period. The alternative performance measures are not with in the scope of IFRS and not a substitute for IFRS measures. These adjustments are set out below. Restructuring losses of $14 mill ion pr imar ily relates to ex its in AME and the Aviat ion ﬁnance bus iness performance until actual disposal. The Group is also reclassify ing the movements in the Debit Valuation Adjustment (DVA) into restructuring and other items. Reconcil iat ions between underlying and reported results are set out in the tables below: 2023 Net gain on Goodwill businesses and other Underlying Restructuring disposed of³ Impairment 1 DVA Reported $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 17,378 362 262 – 17 18,019 Operating expenses (11,136) (415) – – – (11,551) Operating proﬁt/(loss) before impa irment losses and taxat ion 6,242 (53) 262 – 17 6,468 Credit impa irment (528) 20 – – – (508) Other impa irment (130) (28) – (850) – (1,008) Proﬁt from associates and jo int ventures 94 47 – – – 141 Proﬁt/(loss) before taxation 5,678 (14) 262 (850) 17 5,093 2022² Net gain on Goodwill businesses and other Underlying Restructuring disposed of Impairment 1 DVA Reported $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 15,762 494 20 – 42 16,318 Operating expenses (10,409) (504) – – – (10,913) Operating proﬁt/(loss) before impa irment losses and taxat ion 5,353 (10) 20 – 42 5,405 Credit impa irment (836) – – – – (836) Other impa irment (39) (78) – (322) – (439) Proﬁt/(loss) from associates and jo int ventures 167 (11) – – – 156 Proﬁt/(loss) before taxation 4,645 (99) 20 (322) 42 4,286 1 Goodwill and other impa irment include $850 mill ion (31 December 2022: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai) 2 Restructuring, DVA and other items for relevant periods in 2022 have been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA from underlying operating performance 3 Net gain on businesses disposed of includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans 371 Standard Chartered – Annual Report 2023 Financ ial statements 2. Segmental informat ion continued Underlying performance by client segment 2023 Corporate, Consumer, Commercial & Private & Central & Institut ional Business other items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 11,218 7,106 156 (1,102) 17,378 External 8,543 3,902 157 4,776 17,378 Inter-segment 2,675 3,204 (1) (5,878) – Operating expenses (5,627) (4,261) (429) (819) (11,136) Operating proﬁt/(loss) before impa irment losses and taxation 5,591 2,845 (273) (1,921) 6,242 Credit impa irment (123) (354) (85) 34 (528) Other impa irment (32) (4) (26) (68) (130) (Loss)/proﬁt from associates and jo int ventures – – (24) 118 94 Underlying proﬁt/(loss) before taxation 5,436 2,487 (408) (1,837) 5,678 Restructuring 32 (60) (4) 18 (14) Goodwill and other impa irment⁴ – – – (850) (850) DVA 17 – – – 17 Other items⁵ 262 – – – 262 Reported proﬁt/(loss) before taxation 5,747 2,427 (412) (2,669) 5,093 Total assets 403,058 128,768 4,009 287,009 822,844 Of which: loans and advances to customers 189,395 126,117 1,035 28,939 345,486 loans and advances to customers 130,897 126,104 1,035 28,939 286,975 loans held at fair value through proﬁt or loss (FVTPL) 2 58,498 13 – – 58,511 Total liab il it ies 464,968 200,263 3,096 104,164 772,491 Of which: customer accounts 3 328,211 195,678 2,825 7,908 534,622 2022¹ Corporate, Consumer, Commercial & Private & Central & Institut ional Business other items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 9,608 5,969 29 156 15,762 External 8,462 4,942 29 2,329 15,762 Inter-segment 1,146 1,027 – (2,173) – Operating expenses (5,193) (4,104) (336) (776) (10,409) Operating proﬁt/(loss) before impa irment losses and taxation 4,415 1,865 (307) (620) 5,353 Credit impa irment (425) (262) (16) (133) (836) Other impa irment – (10) (24) (5) (39) (Loss)/proﬁt from associates and jo int ventures – – (16) 183 167 Underlying proﬁt/(loss) before taxation 3,990 1,593 (363) (575) 4,645 Restructuring 14 (56) (1) (56) (99) Goodwill and other impa irment⁴ – – – (322) (322) DVA 42 – – – 42 Other items – – – 20 20 Reported proﬁt/(loss) before taxation 4,046 1,537 (364) (933) 4,286 Total assets 401,567 133,956 2,451 281,948 819,922 Of which: loans and advances to customers 184,254 130,985 702 41,789 357,730 loans and advances to customers 139,756 130,957 702 39,232 310,647 loans held at fair value through proﬁt or loss (FVTPL) 2 44,498 28 – 2,557 47,083 Total liab il it ies 479,981 185,396 1,658 102,871 769,906 Of which: customer accounts 3 332,176 180,659 1,548 5,846 520,229 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Loans held at FVTPL includes $51,299 mill ion (2022: $40,537 m ill ion) of reverse repurchase agreements 3 Customer accounts includes $17,248 mill ion (2022: $11,706 m ill ion) of FVTPL and $47,956 m ill ion (2022: $46,846 m ill ion) of reverse repurchase agreements 4 Goodwill and other impa irment include $850 mill ion (31 December 2023: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai) 5 Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans Financ ial statements Notes to the ﬁnancial statements 372 Standard Chartered – Annual Report 2023 2. Segmental informat ion continued Operating income by client segment 2023 Corporate, Consumer, Commercial & Private & Central & Institut ional Business other items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 11,218 7,106 156 (1,102) 17,378 Restructuring 291 45 – 26 362 DVA 17 – – – 17 Other items² 262 – – – 262 Reported operating income 11,788 7,151 156 (1,076) 18,019 2022¹ Corporate, Consumer, Commercial & Private & Central & Institut ional Business other items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 9,608 5,969 29 156 15,762 Restructuring 436 47 – 11 494 DVA 42 – – – 42 Other items – – – 20 20 Reported operating income 10,086 6,016 29 187 16,318 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans Underlying performance by region 2023 Central & Africa & Europe & other items Asia Middle East Americas (region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 12,429 2,806 1,397 746 17,378 Operating expenses (7,096) (1,571) (1,733) (736) (11,136) Operating proﬁt/(loss) before impa irment losses and taxation 5,333 1,235 (336) 10 6,242 Credit impa irment (644) 91 19 6 (528) Other impa irment (63) (15) (13) (39) (130) Proﬁt/(loss) from associates and jo int ventures 114 – – (20) 94 Underlying proﬁt/(loss) before taxation 4,740 1,311 (330) (43) 5,678 Restructuring (97) (2) 32 53 (14) Goodwill and other impa irment 1 (850) – – – (850) DVA (16) 26 7 – 17 Other items⁴ 35 (18) 263 (18) 262 Reported proﬁt/(loss) before taxation 3,812 1,317 (28) (8) 5,093 Total assets 505,905 54,140 253,410 9,389 822,844 Of which: loans and advances to customers 256,400 25,870 63,216 – 345,486 loans and advances to customers 233,417 22,774 30,784 – 286,975 loans held at fair value through proﬁt or loss (FVTPL) 2 22,983 3,096 32,432 – 58,511 Total liab il it ies 461,568 40,612 181,417 88,894 772,491 Of which: customer accounts³ 377,020 33,059 124,543 – 534,622 1 Goodwill and other impa irment include $850 mill ion (31 December 2023: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai) 2 Loans held at FVTPL includes $51,299 mill ion (2022: $40,537 m ill ion) of reverse repurchase agreements 3 Customer accounts includes $17,248 mill ion (2022: $11,706 m ill ion) of FVTPL and $47,956m ill ion (2022: $46,846 m ill ion) of reverse repurchase agreements 4 Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans Financ ial statements Standard Chartered – Annual Report 2023 373 2. Segmental informat ion continued 2022¹ Central & Africa & Europe & other items Asia Middle East Americas (region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Operating income 10,912 2,460 2,303 87 15,762 Operating expenses (6,675) (1,551) (1,548) (635) (10,409) Operating proﬁt/(loss) before impa irment losses and taxation 4,237 909 755 (548) 5,353 Credit impa irment (790) (119) 78 (5) (836) Other impa irment (10) 2 1 (32) (39) Proﬁt/(loss) from associates and jo int ventures 179 – – (12) 167 Underlying proﬁt/(loss) before taxation 3,616 792 834 (597) 4,645 Restructuring (46) 21 (13) (61) (99) Goodwill and other impa irment 2 (308) – – (14) (322) DVA 20 8 14 – 42 Other items 20 – – – 20 Reported proﬁt/(loss) before taxation 3,302 821 835 (672) 4,286 Total assets 488,399 53,086 268,960 9,477 819,922 Of which: loans and advances to customers 270,892 23,857 62,981 – 357,730 loans and advances to customers 257,171 21,570 31,906 – 310,647 loans held at fair value through proﬁt or loss (FVTPL) 3 13,721 2,287 31,075 – 47,083 Total liab il it ies 441,349 40,902 219,701 67,954 769,906 Of which: customer accounts 4 346,832 31,860 141,537 – 520,229 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Goodwill and other impa irment include $850 mill ion (31 December 2023: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai) 3 Loans held at FVTPL includes $51,299 mill ion (2022: $40,537 m ill ion) of reverse repurchase agreements 4 Customer accounts includes $17,248 mill ion (2022: $11,706 m ill ion) of FVTPL and $47,956m ill ion (2022: $46,846 m ill ion) of reverse repurchase agreements 5 Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans Operating income by region 2023 Central & Africa & Europe & other items Asia Middle East Americas (region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 12,429 2,806 1,397 746 17,378 Restructuring 203 110 35 14 362 DVA (16) 26 7 – 17 Other items² 35 (18) 263 (18) 262 Reported operating income 12,651 2,924 1,702 742 18,019 2022¹ Central & Africa & Europe & other items Asia Middle East Americas (region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Underlying operating income 10,912 2,460 2,303 87 15,762 Restructuring 304 140 35 15 494 DVA 20 8 14 – 42 Other items 20 – – – 20 Reported operating income 11,256 2,608 2,352 102 16,318 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Other items includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans Financ ial statements Notes to the ﬁnancial statements 374 Standard Chartered – Annual Report 2023 2. Segmental informat ion continued Addit ional segmental informat ion (reported) 2023 Corporate, Consumer, Commercial & Private & Central & Institut ional Business other items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 4,541 4,970 81 (1,823) 7,769 Net fees and commiss ion income 1,753 1,538 43 (82) 3,252 Net trading and other income 5,494 643 32 829 6,998 Operating income 11,788 7,151 156 (1,076) 18,019 2022 Corporate, Consumer, Commercial & Private & Central & Institut ional Business other items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 3,616 3,969 18 (10) 7,593 Net fees and commiss ion income 1,706 1,524 8 (125) 3,113 Net trading and other income 4,764 523 3 322 5,612 Operating income 10,086 6,016 29 187 16,318 2023 Central & Africa & Europe & other items Asia Middle East Americas (region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 5,872 1,584 (545) 858 7,769 Net fees and commiss ion income 2,237 509 553 (47) 3,252 Net trading and other income 4,542 831 1,694 (69) 6,998 Operating income 12,651 2,924 1,702 742 18,019 2022 Central & Africa & Europe & other items Asia Middle East Americas (region) Total $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 5,747 1,299 260 287 7,593 Net fees and commiss ion income 2,224 526 526 (163) 3,113 Net trading and other income 3,285 783 1,566 (22) 5,612 Operating income 11,256 2,608 2,352 102 16,318 2023 Hong Kong Korea China Taiwan Singapore India Indonesia UAE UK US $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 1,946 684 520 154 937 654 110 390 (930) 170 Net fees and commiss ion income 615 171 149 182 576 221 53 81 18 441 Net trading and other income 2,052 216 487 214 929 330 78 330 1,277 263 Operating income 4,613 1,071 1,156 550 2,442 1,205 241 801 365 874 2022 Hong Kong Korea China Taiwan Singapore India Indonesia UAE UK US $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Net interest income 1,843 751 561 171 982 611 89 281 (189) 330 Net fees and commiss ion income 658 157 143 162 553 239 52 81 44 393 Net trading and other income 1,235 237 450 141 380 377 73 268 1,167 306 Operating income 3,736 1,145 1,154 474 1,915 1,227 214 630 1,022 1,029 Financ ial statements Standard Chartered – Annual Report 2023 375 3. Net interest income Accounting policy Interest income for ﬁnanc ial assets held at e ither fair value through other comprehensive income or amortised cost, and interest expense on all ﬁnanc ial l iab il it ies held at amort ised cost is recognised in proﬁt or loss using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the ﬁnancial instrument or, when appropriate, a shorter period, to the net carrying amount of the ﬁnanc ial asset or ﬁnancial liab il ity. When calculating the effective interest rate, the Group estimates cash ﬂows consider ing all contractual terms of the ﬁnancial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. For ﬂoating-rate ﬁnanc ial instruments, period ic re-est imat ion of cash ﬂows that reﬂect the movements in the market rates of interest alters the effective interest rate. Where the estimates of cash ﬂows have been revised, the carrying amount of the ﬁnanc ial asset or l iab il ity is adjusted to reﬂect the actual and revised cash ﬂows, discounted at the instruments orig inal effect ive interest rate. The adjustment is recognised as interest income or expense in the period in which the revis ion is made as long as the change in estimates is not due to credit issues. Interest income for ﬁnanc ial assets that are e ither held at fair value through other comprehensive income or amortised cost that have become credit-impa ired subsequent to in it ial recognit ion (stage 3) and have had amounts wr itten off, is recognised using the credit adjusted effective interest rate. This rate is calculated in the same manner as the effective interest rate except that expected credit losses are included in the expected cash ﬂows. Interest income is therefore recognised on the amortised cost of the ﬁnanc ial asset includ ing expected cred it losses. Should the credit risk on a stage 3 ﬁnancial asset improve such that the ﬁnanc ial asset is no longer considered credit-impa ired, interest income recognit ion reverts to a computation based on the rehabil itated gross carry ing value of the ﬁnanc ial asset. 2023 2022 $mill ion $mill ion Balances at central banks 2,833 765 Loans and advances to banks 2,095 853 Loans and advances to customers 15,518 10,032 Debt securit ies 5,005 2,836 Other elig ible b ills 1,596 630 Accrued on impa ired assets (d iscount unwind) 180 136 Interest income 27,227 15,252 Of which: ﬁnanc ial instruments held at fair value through other comprehensive income 3,445 2,167 Deposits by banks 796 433 Customer accounts 14,292 5,443 Debt securit ies in issue 3,367 1,169 Subordinated liab il it ies and other borrowed funds 951 570 Interest expense on IFRS 16 lease liab il it ies 52 44 Interest expense 19,458 7,659 Net interest income 7,769 7,593 4. Net fees and commiss ion Accounting policy The Group can act as trustee or in other Fiduc iary capac it ies that result in the holding or placing of assets on behalf of ind iv iduals, trusts, retirement beneﬁt plans and other inst itut ions. The assets and income aris ing thereon are excluded from these ﬁnancial statements, as they are not assets and income of the Group. Financ ial statements Notes to the ﬁnancial statements 376 Standard Chartered – Annual Report 2023 4. Net fees and commiss ion continued The Group applies the following practical expedients: • informat ion on amounts of transact ion price allocated to unsatisf ied (or part ially unsatisf ied) performance obl igat ions at the end of the reporting period is not disclosed as almost all fee-earning contracts have an expected duration of less than one year • promised considerat ion is not adjusted for the effects of a sign iﬁcant ﬁnancing component as the per iod between the Group provid ing a serv ice and the customer paying for it is expected to be less than one year • incremental costs of obtain ing a fee-earn ing contract are recognised upfront in ‘Fees and commiss ion expense’ rather than amortised, if the expected term of the contract is less than one year The determinat ion of the serv ices performed for the customer, the transaction price, and when the services are completed depends on the nature of the product with the customer. The main considerat ions on income recognit ion by product are as follows: Transaction Banking The Group recognises fee income associated with transactional trade and cash management at the point in time the service is provided. The Group recognises income associated with trade contingent risk exposures (such as letters of credit and guarantees) over the period in which the service is provided. Payment of fees is usually received at the same time the service is provided. In some cases, letters of credit and guarantees issued by the Group have annual upfront premiums, which are amortised on a straight-line basis to fee income over the year. Financ ial Markets The Group recognises fee income at the point in time the service is provided. Fee income is recognised for a sign iﬁcant non- lending service when the transaction has been completed and the terms of the contract with the customer entitle the Group to the fee. This includes fees such as structuring and advisory fees. Fees are usually received shortly after the service is provided. Syndicat ion fees are recogn ised when the syndicat ion is complete deﬁned as achiev ing the ﬁnal approved hold pos it ion. Fees are generally received before completion of the syndicat ion, or w ith in 12 months of the transact ion date. Securit ies serv ices include custody services, fund accounting and admin istrat ion, and broker clearing. Fees are recognised over the period the custody or fund management services are provided, or as and when broker services are requested. Wealth Management Upfront considerat ion on bancassurance agreements is amortised straight-line over the contractual term. Commiss ions for bancassurance activ it ies are recorded as they are earned through sales of third-party insurance products to customers. These commiss ions are rece ived with in a short t ime frame of the commiss ion be ing earned. Target-linked fees are accrued based on percentage of the target achieved, provided it is assessed as highly probable that the target will be met. Cash payment is received at a contractually specif ied date after ach ievement of a target has been conﬁrmed. Upfront and trail ing comm iss ions for managed investment placements are recorded as they are conﬁrmed. Income from these activ it ies is relatively even throughout the period, and cash is usually received with in a short t ime frame after the commiss ion is earned. Retail Products The Group recognises most income at the point in time the Group is entitled to the fee, since most services are provided at the time of the customer’s request. Credit card annual fees are recognised over the service period. In most of our retail markets there are circumstances under which fees are waived, income recognit ion is adjusted to reﬂect customer’s intent to pay the annual fee. The Group defers the fair value of reward points on its credit card reward programmes, and recognises income and costs associated with fulﬁll ing the reward at the time of redemption. Upfront bancassurance considerat ion amounts are amort ised on a straight-line basis over the contractual period to which the considerat ion relates. Financ ial statements Standard Chartered – Annual Report 2023 377 4. Net fees and commiss ion continued 2023 2022 $mill ion $mill ion Fees and commiss ions income 4,067 3,972 Of which: Financ ial instruments that are not fair valued through proﬁt or loss 1,374 1,306 Trust and other ﬁduciary act iv it ies 508 520 Fees and commiss ions expense (815) (859) Of which: Financ ial instruments that are not fair valued through proﬁt or loss (169) (303) Trust and other ﬁduciary act iv it ies (52) (49) Net fees and commiss ion 3,252 3,113 2023 Corporate, Consumer, Commercial & Private & Central & Institut ional Business other Items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Transaction Banking 1,142 32 – – 1,174 Trade & Working capital 576 25 – – 601 Cash Management 566 7 – – 573 Financ ial Markets 882 – – – 882 Lending & Portfolio Management 141 6 – – 147 Princ ipal F inance (1) – – – (1) Wealth Management – 1,225 – – 1,225 Retail Products – 592 32 – 624 Treasury – – – (15) (15) Others – 2 35 (6) 31 Fees and commiss ion income 2,164 1,857 67 (21) 4,067 Fees and commiss ion expense (411) (319) (24) (61) (815) Net fees and commiss ion 1,753 1,538 43 (82) 3,252 2022 Corporate, Consumer Commercial & Private & Central & Institut ional Business other Items Banking Banking Ventures (segment) Total $mill ion $mill ion $mill ion $mill ion $mill ion Transaction Banking 1,143 32 – – 1,175 Trade & Working capital 594 25 – – 619 Cash Management 549 7 – – 556 Financ ial Markets 958 – – – 958 Lending & Portfolio Management 124 5 – – 129 Wealth Management – 1,127 – – 1,127 Retail Products – 582 12 – 594 Treasury – – – (5) (5) Others – (2) 8 (12) (6) Fees and commiss ion income 2,225 1,744 20 (17) 3,972 Fees and commiss ion expense (519) (220) (12) (108) (859) Net fees and commiss ion 1,706 1,524 8 (125) 3,113 Upfront bancassurance considerat ion amounts are amort ised on a straight-line basis over the contractual period to which the considerat ion relates. Deferred income on the balance sheet in respect of these activ it ies is $474 mill ion (31 December 2022: $549 mill ion). Follow ing renegotiat ion of the contract in 2023, the life of the contract was extended for a further 3 years. Accordingly, the income will be earned evenly over a longer period for the next 8.5 years (31 December 2022: 6.5 years). For the twelve months ended 31 December 2023, $75 mill ion of fee income was released from deferred income (31 December 2022: $84 mill ion). Financ ial statements Notes to the ﬁnancial statements 378 Standard Chartered – Annual Report 2023 5. Net trading income Accounting policy Gains and losses aris ing from changes in the fair value of ﬁnanc ial instruments held at fair value through proﬁt or loss are recorded in net trading income in the period in which they arise. This includes contractual interest receivable or payable. When the in it ial fair value of a ﬁnanc ial instrument held at fair value through proﬁt or loss relies on unobservable inputs, the difference between the in it ial valuation and the transaction price is amortised to net trading income as the inputs become observable or over the life of the instrument, whichever is shorter. Any unamortised ‘day one’ gain is released to net trading income if the transaction is terminated. Income is recognised from the sale and purchase of trading posit ions, marg ins on market making and customer business and fair value changes. 2023 2022 $mill ion $mill ion Net trading income 6,292 5,310 Sign iﬁcant items with in net trad ing income include: Gains on instruments held for trading¹ 4,625 4,942 Gains on ﬁnanc ial assets mandator ily at fair value through proﬁt or loss 4,270 1,087 Gains/(losses) on ﬁnanc ial assets des ignated at fair value through proﬁt or loss 10 (6) Losses on ﬁnancial l iab il it ies des ignated at fair value through proﬁt or loss (2,649) (677) 1 Includes $299 mill ion loss (31 December 2022: $365 m ill ion ga in) from the translation of foreign currency monetary assets and liab il it ies 6. Other operating income 2023 2022 $mill ion $mill ion Other operating income includes: Rental income from operating lease assets 375 421 Net loss on disposal of fair value through other comprehensive income debt instruments (115) (207) Net (loss)/gain on disposal of amortised cost ﬁnanc ial assets 1 (94) 17 Net gain/(loss) on sale of businesses 2 351 (1) Div idend income 15 14 Gain on sale of aircrafts - 21 Others³ 174 37 Other operating income 706 302 1 Includes $47 mill ion loss on sale of a portfol io of aviat ion loans 2 2023 includes $309 mill ion ga in from the sale of the aviat ion ﬁnance leas ing business, $18 mill ion from sale of assoc iate (Metaco SA), $16 mill ion ga in from sale of subsid iary ($9 m ill ion from Cardspal and $7 m ill ion from Kozag i) and $8 mill ion ga in from the sale of Jordan one of the AME regions exit markets 3 2023 mainly includes $59 mill ion tax cred it against Research & Development Expenditure, $38 mill ion ga in on disposal of premises, $21 mill ion income from VISA sponsorship in Hong Kong, $10 mill ion from ga in on lease modif icat ion in Hong Kong and $16 mill ion interest income from tax refund in India Financ ial statements Standard Chartered – Annual Report 2023 379 7. Operating expenses 2023 2022 $mill ion $mill ion Staff costs: Wages and salaries 6,459 6,014 Social security costs 233 210 Other pension costs (Note 30) 431 390 Share-based payment costs (Note 31) 226 199 Other staff costs 907 805 8,256 7,618 Other staff costs include redundancy expenses of $106 mill ion (31 December 2022: $79 m ill ion). Further costs in this category include train ing, travel costs and other staff-related costs. Details of directors’ pay, beneﬁts, pensions and beneﬁts and interests in shares are disclosed in the Directors’ remuneration report (page 195). Transactions with directors, ofﬁcers and other related parties are disclosed in Note 36. 2023 2022 $mill ion $mill ion Premises and equipment expenses: 422 401 General admin istrat ive expenses: UK bank levy 111 102 Provis ion for regulatory matters – 14 Other general admin istrat ive expenses 1,691 1,592 1,802 1,708 Depreciat ion and amort isat ion: Property, plant and equipment: Premises 315 326 Equipment 103 123 Operating lease assets 27 202 445 651 Intangibles: Software 625 531 Acquired on business combinat ions 1 4 1,071 1,186 Total operating expenses 11,551 10,913 Operating expenses include research expenditure of $996 mill ion (31 December 2022: $946 m ill ion), wh ich was recognized as an expense in the year The UK bank levy is applied to chargeable equity and liab il it ies on the balance sheet of UK operat ions. Key exclusions from chargeable equity and liab il it ies include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liab il it ies subject to nett ing. The rates are 0.10 per cent for short-term liab il it ies and 0.05 per cent for long-term liab il it ies. Financ ial statements Notes to the ﬁnancial statements 380 Standard Chartered – Annual Report 2023 8. Credit impa irment Accounting policy Sign iﬁcant account ing estimates and judgements The Group’s expected credit loss (ECL) calculations are outputs of complex models with a number of underlying assumptions. The sign iﬁcant judgements in determin ing expected cred it loss include: • The Group’s criter ia for assess ing if there has been a sign iﬁcant increase in credit risk; • Development of expected credit loss models, includ ing the cho ice of inputs relating to macroeconomic variables; • Determin ing est imates of forward looking macroeconomic forecasts; • Evaluation of management overlays and post-model adjustments; • Determinat ion of probab il ity we ight ings for Stage 3 ind iv idually assessed provis ions The calculation of credit impa irment prov is ions also involves expert credit judgement to be applied by the credit risk management team based upon counterparty informat ion they rece ive from various sources includ ing relat ionsh ip managers and on external market informat ion. Deta ils on the approach for determin ing expected cred it loss can be found in the credit risk section, under IFRS 9 Methodology (page 273). Estimates of forecasts of key macroeconomic variables underlying the expected credit loss calculation can be found with in the Risk review, Key assumptions and judgements in determin ing expected cred it loss (page 275). Expected credit losses An ECL represents the present value of expected cash shortfalls over the residual term of a ﬁnanc ial asset, undrawn commitment or ﬁnanc ial guarantee. A cash shortfall is the difference between the cash ﬂows that are due in accordance with the contractual terms of the instrument and the cash ﬂows that the Group expects to receive over the contractual life of the instrument. Measurement ECL are computed as unbiased, probabil ity-we ighted amounts which are determined by evaluating a range of reasonably possible outcomes, the time value of money, and consider ing all reasonable and supportable informat ion includ ing that which is forward-looking. For material portfolios, the estimate of expected cash shortfalls is determined by multiply ing the probab il ity of default (PD) with the loss given default (LGD) with the expected exposure at the time of default (EAD). There may be multiple default events over the lifet ime of an instrument. Further details on the components of PD, LGD and EAD are disclosed in the Credit risk section. For less material Retail Banking loan portfolios, the Group has adopted less sophist icated approaches based on histor ical roll rates or loss rates. Forward-looking economic assumptions are incorporated into the PD, LGD and EAD where relevant and where they inﬂuence credit risk, such as GDP growth rates, interest rates, house price ind ices and commod ity prices among others. These assumptions are incorporated using the Group’s most likely forecast for a range of macroeconomic assumptions. These forecasts are determined using all reasonable and supportable informat ion, wh ich includes both internally developed forecasts and those available externally, and are consistent with those used for budgeting, forecasting and capital planning. To account for the potential non-linear ity in credit losses, multiple forward-looking scenarios are incorporated into the range of reasonably possible outcomes for all material portfolios. For example, where there is a greater risk of downside credit losses than upside gains, multiple forward-looking economic scenarios are incorporated into the range of reasonably possible outcomes, both in respect of determin ing the PD (and where relevant, the LGD and EAD) and in determin ing the overall ECL amounts. These scenarios are determined using a Monte Carlo approach centred around the Group’s most likely forecast of macroeconomic assumptions. The period over which cash shortfalls are determined is generally lim ited to the max imum contractual period for which the Group is exposed to credit risk. However, for certain revolving credit facil it ies, which include credit cards or overdrafts, the Group’s exposure to credit risk is not lim ited to the contractual per iod. For these instruments, the Group estimates an appropriate life based on the period that the Group is exposed to credit risk, which includes the effect of credit risk management actions such as the withdrawal of undrawn facil it ies. For credit-impa ired ﬁnancial instruments, the estimate of cash shortfalls may require the use of expert credit judgement. Financ ial statements Standard Chartered – Annual Report 2023 381 8. Credit impa irment continued The estimate of expected cash shortfalls on a collateralised ﬁnanc ial instrument reﬂects the amount and tim ing of cash ﬂows that are expected from foreclosure on the collateral less the costs of obtain ing and sell ing the collateral, regardless of whether foreclosure is deemed probable. Cash ﬂows from unfunded credit enhancements held are included with in the measurement of expected cred it losses if they are part of, or integral to, the contractual terms of the instrument (this includes ﬁnanc ial guarantees, unfunded r isk partic ipat ions and other non-derivat ive cred it insurance). Although non-integral credit enhancements do not impact the measurement of expected credit losses, a reimbursement asset is recognised to the extent of the ECL recorded. Cash shortfalls are discounted using the effective interest rate (or credit-adjusted effective interest rate for purchased or orig inated cred it-impa ired instruments (POCI)) on the ﬁnanc ial instrument as calculated at in it ial recognit ion or if the instrument has a variable interest rate, the current effective interest rate determined under the contract. Instruments Location of expected credit loss provis ions Financ ial assets held at amort ised cost Loss provis ions: netted aga inst gross carrying value 1 Financ ial assets held FVOCI – Debt instruments Other comprehensive income (FVOCI expected credit loss reserve) 2 Loan commitments Provis ions for l iab il it ies and charges 3 Financ ial guarantees Provis ions for l iab il it ies and charges 3 1 Purchased or orig inated cred it-impa ired assets do not attract an expected cred it loss provis ion on in it ial recognit ion. An expected cred it loss provis ion w ill be recognised only if there is an increase in expected credit losses from that considered at in it ial recognit ion 2 Debt and treasury securit ies class if ied as fa ir value through other comprehensive income (FVOCI) are held at fair value on the face of the balance sheet. The expected credit loss attributed to these instruments is held as a separate reserve with in other comprehens ive income (OCI) and is recycled to the proﬁt and loss account along with any fair value measurement gains or losses held with in FVOCI when the appl icable instruments are derecognised 3 Expected credit loss on loan commitments and ﬁnanc ial guarantees is recognised as a liab il ity provis ion. Where a ﬁnancial instrument includes both a loan (i.e. ﬁnanc ial asset component) and an undrawn comm itment (i.e. loan commitment component), and it is not possible to separately ident ify the expected credit loss on these components, expected credit loss amounts on the loan commitment are recognised together with expected credit loss amounts on the ﬁnancial asset. To the extent the comb ined expected credit loss exceeds the gross carrying amount of the ﬁnanc ial asset, the expected cred it loss is recognised as a liab il ity provis ion Recognit ion 12 months expected credit losses (stage 1) Expected credit losses are recognised at the time of in it ial recognit ion of a ﬁnancial instrument and represent the lifet ime cash shortfalls ar is ing from poss ible default events up to 12 months into the future from the balance sheet date. Expected credit losses continue to be determined on this basis until there is either a sign iﬁcant increase in the credit risk of an instrument or the instrument becomes credit-impa ired. If an instrument is no longer considered to exhib it a s ign iﬁcant increase in credit risk, expected credit losses will revert to being determined on a 12-month basis. Sign iﬁcant increase in credit risk (Stage 2) Sign iﬁcant increase in credit risk is assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at orig inat ion (after taking into account the passage of time). Sign iﬁcant does not mean statist ically s ign iﬁcant nor is it assessed in the context of changes in expected credit loss. Whether a change in the risk of default is sign iﬁcant or not is assessed using a number of quantitat ive and qual itat ive factors, the we ight of which depends on the type of product and counterparty. Financ ial assets that are 30 or more days past due and not credit-impa ired w ill always be considered to have experienced a sign iﬁcant increase in credit risk. For less material portfolios where a loss rate or roll rate approach is applied to compute expected credit loss, sign iﬁcant increase in credit risk is primar ily based on 30 days past due. Quantitat ive factors include an assessment of whether there has been sign iﬁcant increase in the forward-looking probabil ity of default (PD) since orig inat ion. A forward-looking PD is one that is adjusted for future economic condit ions to the extent these are correlated to changes in credit risk. We compare the residual lifet ime PD at the balance sheet date to the res idual lifet ime PD that was expected at the t ime of orig inat ion for the same point in the term structure and determine whether both the absolute and relative change between the two exceeds predetermined thresholds. To the extent that the differences between the measures of default outlined exceed the deﬁned thresholds, the instrument is considered to have experienced a sign iﬁcant increase in credit risk (see page 282 to 284). Qualitat ive factors assessed include those linked to current credit risk management processes, such as lending placed on non-purely precautionary early alert (and subject to closer monitor ing). A non-purely precautionary early alert account is one which exhib its r isk or potential weaknesses of a material nature requir ing closer mon itor ing, superv is ion, or attent ion by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deteriorat ion of repayment prospects and the l ikel ihood of be ing downgraded. Indicators could include a rapid erosion of posit ion w ith in the industry, concerns over management’s abil ity to manage operat ions, weak/deteriorat ing operat ing results, liqu id ity strain and overdue balances among other factors. Financ ial statements Notes to the ﬁnancial statements 382 Standard Chartered – Annual Report 2023 8. Credit impa irment continued Credit-impa ired (or defaulted) exposures (Stage 3) Financ ial assets that are cred it-impa ired (or in default) represent those that are at least 90 days past due in respect of princ ipal and/or interest. Financ ial assets are also cons idered to be credit-impa ired where the obligors are unlikely to pay on the occurrence of one or more observable events that have a detrimental impact on the estimated future cash ﬂows of the ﬁnanc ial asset. It may not be poss ible to ident ify a s ingle discrete event but instead the combined effect of several events may cause ﬁnanc ial assets to become cred it-impa ired. • Evidence that a ﬁnanc ial asset is credit-impa ired includes observable data about the following events: • Sign iﬁcant ﬁnancial d iff iculty of the issuer or borrower; • Breach of contract such as default or a past due event; • For economic or contractual reasons relating to the borrower’s ﬁnanc ial d iff iculty, the lenders of the borrower have granted the borrower concession/s that lenders would not otherwise consider. This would include forbearance actions (page 257); • Pending or actual bankruptcy or other ﬁnanc ial reorgan isat ion to avo id or delay discharge of the borrower’s obligat ion/s; • The disappearance of an active market for the applicable ﬁnanc ial asset due to ﬁnancial d iff icult ies of the borrower; • Purchase or orig inat ion of a ﬁnanc ial asset at a deep d iscount that reﬂects incurred credit losses Lending commitments to a credit-impa ired obl igor that have not yet been drawn down are included to the extent that the commitment cannot be withdrawn. Loss provis ions aga inst credit-impa ired ﬁnancial assets are determ ined based on an assessment of the present value of expected cash shortfalls (discounted at the instrument’s orig inal effect ive interest rate) under a range of scenarios, includ ing the real isat ion of any collateral held where appropr iate. The Group’s deﬁn it ion of default is aligned with the regulatory deﬁn it ion of default as set out in the UK’s onshored capital requirements regulations (Art 178). Expert credit judgement For Corporate & Institut ional, Commerc ial and Private Banking, borrowers are graded by credit risk management on a credit grading (CG) scale from CG1 to CG14. Once a borrower starts to exhib it cred it deteriorat ion, it will move along the credit grading scale in the performing book and when it is classif ied as CG12 (wh ich is a qualitat ive tr igger for sign iﬁcant increase in credit risk (see page 283)the credit assessment and oversight of the loan will normally be performed by Stressed Assets Risk (SAR). Borrowers graded CG12 exhib it well-deﬁned weaknesses in areas such as management and/or performance but there is no current expectation of a loss of princ ipal or interest in the likely scenario. Where the impa irment assessment ind icates that there will be a loss of princ ipal on a loan in the likely scenario, the borrower is graded a CG14 while borrowers of other credit-impa ired loans are graded CG13. Instruments graded CG13 or CG14 are regarded as stage 3. For ind iv idually sign iﬁcant ﬁnancial assets w ith in stage 3, SAR w ill consider all judgements that have an impact on the expected future cash ﬂows of the asset. These include: the business prospects, industry and geo polit ical cl imate of the customer, quality of realisable value of collateral, the Group’s legal posit ion relat ive to other claimants and any renegotiat ion/ forbearance/ mod if icat ion options. The future cash ﬂow calculation involves sign iﬁcant judgements and estimates. As new informat ion becomes ava ilable and further negotiat ions/ 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 wh ich are not ind iv idually sign iﬁcant, such as the Reta il Banking portfolio or small business loans, which comprise a large number of homogenous loans that share sim ilar character ist ics, stat ist ical est imates and techniques are used, as well as credit scoring analysis. Consumer and Business Banking clients are considered credit-impa ired where they are more 90 days past due, or if the borrower ﬁles for bankruptcy or other forbearance programme, the borrower is deceased or the business is closed in the case of a small business, or if the borrower surrenders the collateral, or there is an ident iﬁed fraud on the account. Add it ionally, if the account is unsecured and the borrower has other credit accounts with the Group that are considered credit-impa ired, the account may be also be credit-impa ired. Techniques used to compute impa irment amounts use models wh ich analyse histor ical repayment and default rates over a time horizon. Where various models are used, judgement is required to analyse the available informat ion prov ided and select the appropriate model or combinat ion of models to use. Expert credit judgement is also applied to determine whether any post-model adjustments are required for credit risk elements which are not captured by the models. Modif ied ﬁnancial instruments Where the orig inal contractual terms of a ﬁnancial asset have been mod if ied for cred it reasons and the instrument has not been derecognised (an instrument is derecognised when a modif icat ion results in a change in cash ﬂows that the Group would consider substantial), the resulting modif icat ion loss is recognised with in cred it impa irment in the income statement with a corresponding decrease in the gross carrying value of the asset. If the modif icat ion involved a concession that the bank would not otherwise consider, the instrument is considered to be credit-impa ired and is considered forborne. Financ ial statements Standard Chartered – Annual Report 2023 383 8. Credit impa irment continued Expected credit loss for modif ied ﬁnancial assets that have not been derecogn ised and are not considered to be credit- impa ired w ill be recognised on a 12-month basis, or a lifet ime bas is, if there is a sign iﬁcant increase in credit risk. These assets are assessed (by comparison to the orig inat ion date) to determine whether there has been a sign iﬁcant increase in credit risk subsequent to the modif icat ion. Although loans may be modif ied for non-cred it reasons, a sign iﬁcant increase in credit risk may occur. In addit ion to the recogn it ion of mod if icat ion gains and losses, the revised carrying value of modif ied ﬁnancial assets will impact the calculation of expected credit losses, with any increase or decrease in expected credit loss recognised with in impa irment. Forborne loans Forborne loans are those loans that have been modif ied in response to a customer’s ﬁnanc ial d iff icult ies. Forbearance strategies assist clients who are temporarily in ﬁnanc ial d istress and are unable to meet their orig inal contractual repayment terms. Forbearance can be in it iated by the client, the Group or a third-party includ ing government sponsored programmes or a conglomerate of credit inst itut ions. Forbearance may include debt restructuring such as new repayment schedules, payment deferrals, tenor extensions, interest only payments, lower interest rates, forgiveness of princ ipal, interest or fees, or relaxation of loan covenants. Forborne loans that have been modif ied (and not derecogn ised) on terms that are not consistent with those readily available in the market and/or where we have granted a concession compared to the orig inal terms of the loans are considered credit-impa ired if there is a detrimental impact on cash ﬂows. The modif icat ion loss (see Classif icat ion and measurement – Modif icat ions) is recognised in the proﬁt or loss with in cred it impa irment and the gross carry ing value of the loan reduced by the same amount. The modif ied loan is disclosed as ‘Loans subject to forbearance – credit-impa ired’. Loans that have been subject to a forbearance modif icat ion, but which are not considered credit-impa ired (not class if ied as CG13 or CG14), are disclosed as ‘Forborne – not credit-impa ired’. Th is may include amendments to covenants with in the contractual terms. Write-offs of credit-impa ired instruments and reversal of impa irment To the extent a ﬁnancial debt instrument is considered irrecoverable, the applicable portion of the gross carrying value is written off against the related loan provis ion. Such loans are wr itten off after all the necessary procedures have been completed, it is decided that there is no realist ic probab il ity of recovery and the amount of the loss has been determ ined. Subsequent recoveries of amounts previously written off decrease the amount of the provis ion for cred it impa irment in the income statement. Loss provis ions on purchased or or ig inated cred it-impa ired instruments (POCI) The Group measures expected credit loss on a lifet ime bas is for POCI instruments throughout the life of the instrument. However, expected credit loss is not recognised in a separate loss provis ion on in it ial recognit ion for POCI instruments as the lifet ime expected cred it loss is inherent with in the gross carry ing amount of the instruments. The Group recognises the change in lifet ime expected cred it losses aris ing subsequent to in it ial recognit ion in the income statement and the cumulative change as a loss provis ion. Where l ifet ime expected cred it losses on POCI instruments are less than those at in it ial recognit ion, then the favourable d ifferences are recognised as impa irment ga ins in the income statement (and as impa irment loss where the expected cred it losses are greater). Improvement in credit risk/curing For ﬁnancial assets that are cred it-impa ired (stage 3), a transfer to stage 2 or stage 1 is only permitted where the instrument is no longer considered to be credit-impa ired. An instrument will no longer be considered credit-impa ired when there is no shortfall of cash ﬂows compared to the orig inal contractual terms. For ﬁnancial assets w ith in stage 2, these can only be transferred to stage 1 when they are no longer cons idered to have experienced a sign iﬁcant increase in credit risk. Where sign iﬁcant increase in credit risk was determined using quantitat ive measures, the instruments will automatically transfer back to stage 1 when the orig inal PD based transfer cr iter ia are no longer met. Where instruments were transferred to stage 2 due to an assessment of qualitat ive factors, the issues that led to the reclassif icat ion must be cured before the instruments can be reclassif ied to stage 1. Th is includes instances where management actions led to instruments being classif ied as stage 2, requ ir ing that act ion to be resolved before loans are reclassif ied to stage 1. A forborne loan can only be removed from being disclosed as forborne if the loan is performing (stage 1 or 2) and a further two-year probation period is met. In order for a forborne loan to become performing, the following criter ia have to be sat isf ied: • At least a year has passed with no default based upon the forborne contract terms • The customer is likely to repay its obligat ions in full without realis ing secur ity • The customer has no accumulated impa irment aga inst amount outstanding (except for ECL) Subsequent to the criter ia above, a further two-year probat ion period has to be fulﬁlled, whereby regular payments are made by the customer and none of the exposures to the customer are more than 30 days past due. Financ ial statements Notes to the ﬁnancial statements 384 Standard Chartered – Annual Report 2023 8. Credit impa irment continued 2023 2022 $mill ion $mill ion Net credit impa irment on loans and advances to banks and customers 606 743 Net credit impa irment on debt secur it ies¹ (50) 122 Net credit impa irment relat ing to ﬁnanc ial guarantees and loan comm itments (48) (27) Net credit impa irment relat ing to other ﬁnanc ial assets – (2) Credit impa irment 508 836 1 Includes impa irment of $1 m ill ion (2022: $13 m ill ion) on or ig inated cred it-impa ired debt secur it ies 9. Goodwill, property, plant and equipment and other impa irment Accounting policy Refer to the below referenced notes for the relevant accounting policy. 2023 2022 $mill ion $mill ion Impairment of goodwill (Note 17) – 14 Impairment of property, plant and equipment (Note 18) 12 50 Impairment of other intang ible assets (Note 17) 112 12 Other¹ 884 363 Property, plant and equipment and other impa irment 1,008 425 Goodwill, property, plant and equipment and other impa irment 1,008 439 1 Other includes $850 mill ion (2022: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai), reﬂecting Bohai’s lower reported net proﬁt in 2023 (compared to 2022), as well as banking industry challenges and property market uncertaint ies in Mainland China, that may impact Bohai’s future proﬁtab il ity 10. Taxation Accounting policy Income tax payable on proﬁts is based on the applicable tax law in each jur isd ict ion and is recognised as an expense in the period in which proﬁts arise. Deferred tax is provided on temporary differences aris ing between the tax bases of assets and l iab il it ies and the ir carrying amounts in the consolidated ﬁnanc ial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted as at the balance sheet date, and that are expected to apply when the related deferred tax asset is realised or the deferred income tax liab il ity is settled. Deferred tax assets are recognised where it is probable that future taxable proﬁt will be available against which the temporary differences can be util ised. Where perm itted, deferred tax assets and liab il it ies are offset on an ent ity basis and not by component of deferred taxation. Current and deferred tax relating to items which are charged or credited directly to equity, is credited or charged directly to equity and is subsequently recognised in the income statement together with the current or deferred gain or loss. Other accounting estimates and judgements • Determin ing the Group’s tax charge for the year involves estimat ion and judgement, wh ich includes an interpretat ion of local tax laws and an assessment of whether the tax authorit ies w ill accept the posit ion taken. These judgements take account of external advice where appropriate, and the Group’s view on settling with the relevant tax authorit ies. • The Group provides for current tax liab il it ies at the best est imate of the amount that is expected to be paid to the tax authorit ies where an outﬂow is probable. In making its estimates the Group assumes that the tax authorit ies w ill examine all the amounts reported to them and have full knowledge of all relevant informat ion. • The recoverabil ity of the Group’s deferred tax assets is based on management’s judgement of the availab il ity of future taxable proﬁts against which the deferred tax assets will be util ised. In prepar ing management forecasts the effect of applicable laws and regulations relevant to the util isat ion of future taxable proﬁts have been considered. Financ ial statements Standard Chartered – Annual Report 2023 385 10. Taxation continued The following table provides analysis of taxation charge in the year: 2023 2022 $mill ion $mill ion The charge for taxation based upon the proﬁt for the year comprises: Current tax: United Kingdom corporation tax at 23.5 per cent (2022: 19 per cent): Current tax charge on income for the year (48) 48 Adjustments in respect of prior years (includ ing double tax rel ief) 14 – Foreign tax: Current tax charge on income for the year 1,695 1,216 Adjustments in respect of prior years (11) 5 1,650 1,269 Deferred tax: Orig inat ion/reversal of temporary differences (22) 144 Adjustments in respect of prior years 3 (29) (19) 115 Tax on proﬁts on ordinary activ it ies 1,631 1,384 Effective tax rate 32.0% 32.3% The tax charge for the year of $1,631 mill ion (31 December 2022: $1,384 m ill ion) on a proﬁt before tax of $5,093 m ill ion (31 December 2022: $4,286 mill ion) reﬂects the impact of tax losses for which no deferred tax assets are recognised, non-deductible expenses, and non-creditable withhold ing taxes and other taxes. These are partly offset by tax exempt income. Foreign tax includes current tax of $201 mill ion (31 December 2022: $35 m ill ion) on the proﬁts assessable in Hong Kong. Deferred tax includes orig inat ion or reversal of temporary differences of $nil mill ion (31 December 2022: $51 m ill ion) prov ided at a rate of 16.5 per cent (31 December 2022: 16.5 per cent) on the proﬁts assessable in Hong Kong. The Group will be in scope of the new Pillar Two global min imum tax rules wh ich were substantively enacted in the UK on 20 June 2023 to apply for periods commencing 1 January 2024. The IAS 12 exception to recognise and disclose informat ion about deferred tax assets and liab il it ies related to P illar Two income taxes has been applied. Based on an in it ial impact assessment undertaken in respect of histor ical ﬁnancial data together w ith corporate plan data available, the Group’s exposure to Pillar Two income taxes are not expected to be material. The Group is closely monitor ing developments to assess potential future impl icat ions and implementat ion efforts. Tax rate: The tax charge for the year is higher than the charge at the rate of corporation tax in the UK, 23.5 per cent. The differences are explained below: 2023 2022 $mill ion % $mill ion % Proﬁt on ordinary activ it ies before tax 5,093 4,286 Tax at 23.5 per cent (2022: 19 per cent) 1,197 23.5 814 19.0 Lower tax rates on overseas earnings (330) (6.5) (122) (2.8) Higher tax rates on overseas earnings 306 6.0 435 10.1 Tax at domestic rates applicable where proﬁts earned 1,173 23.0 1,127 26.3 Non-creditable withhold ing taxes and other taxes¹ 85 1.7 170 4.0 Tax exempt income (131) (2.6) (69) (1.6) Share of associates and jo int ventures (14) (0.3) (27) (0.6) Non-deductible expenses 219 4.3 115 2.7 Bank levy 26 0.5 19 0.4 Non-taxable losses on investments² 64 1.3 51 1.2 Payments on ﬁnancial instruments in reserves (68) (1.3) (56) (1.3) Goodwill impa irment – – 3 0.1 Deferred tax not recognised 278 5.4 77 1.8 Deferred tax rate changes (1) – (9) (0.2) Adjustments to tax charge in respect of prior years 6 0.1 (24) (0.6) Other items 1 (6) (0.1) 7 0.1 Tax on proﬁt on ordinary activ it ies 1,631 32.0 1,384 32.3 1 The comparatives have been reclassif ied by mov ing the effect of other taxes from Other items to Non-creditable withhold ing taxes and other taxes in order to provide more clarity to the reader. The 2022 comparatives have been reclassif ied as follows to al ign with the presentation in the current period: Non-creditable withhold ing taxes and other taxes from $90 m ill ion to $170 m ill ion, and Other items from $87 mill ion to $7 m ill ion. 2 Non-taxable losses on investments includes $140 mill ion (2022: $51 m ill ion) in respect of the tax impact of the impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai). Financ ial statements Notes to the ﬁnancial statements 386 Standard Chartered – Annual Report 2023 10. Taxation continued Factors affecting the tax charge in future years: the Group’s tax charge, and effective tax rate in future years could be affected by several factors includ ing acqu is it ions, disposals and restructuring of our businesses, the mix of proﬁts across jur isd ict ions w ith different statutory tax rates, changes in tax legislat ion and tax rates and resolut ion of uncertain tax posit ions. The evaluation of uncertain tax posit ions involves an interpretat ion of local tax laws wh ich could be subject to challenge by a tax authority, and an assessment of whether the tax authorit ies w ill accept the posit ion taken. The Group does not currently consider that assumptions or judgements made in assessing tax liab il it ies have a s ign iﬁcant r isk of resulting in a material adjustment with in the next ﬁnancial year. 2023 2022 Tax recognised in other Current tax Deferred tax Total Current tax Deferred tax Total comprehensive income $mill ion $mill ion $mill ion $mill ion $mill ion Items that will not be reclassif ied to income statement – (107) (107) – 15 15 Own credit adjustment – (49) (49) – 8 8 Equity instruments at fair value through other comprehensive income – (69) (69) – 27 27 Retirement beneﬁt obligat ions – 11 11 – (20) (20) Items that may be reclassed subsequently to income statement – (129) (129) – 152 152 Debt instruments at fair value through other comprehensive income – (17) (17) – 63 63 Cashﬂow hedges – (112) (112) – 89 89 Total tax credit/(charge) recognised in equity – (236) (236) – 167 167 Current tax: The following are the movements in current tax during the year: 2023 2022 Current tax comprises: $mill ion $mill ion Current tax assets 503 766 Current tax liab il it ies (583) (348) Net current tax opening balance (80) 418 Movements in income statement (1,650) (1,269) Movements in other comprehensive income – – Taxes paid 1,367 821 Other movements 36 (50) Net current tax balance as at 31 December (327) (80) Current tax assets 484 503 Current tax liab il it ies (811) (583) Total (327) (80) Deferred tax: The following are the major deferred tax liab il it ies and assets recogn ised by the Group and movements thereon during the year: At Exchange At 1 January & other (Charge)/credit (Charge)/credit 31 December 2023 adjustments to proﬁt to equity 2023 $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (589) 236 (71) – (424) Impairment provis ions on loans and advances 334 (20) (28) – 286 Tax losses carried forward 212 (106) (9) – 97 Equity instruments at fair value through other comprehensive income (74) (1) – (69) (144) Debt instruments at fair value through other comprehensive income 61 (14) (3) (17) 27 Cashﬂow hedges 89 (2) – (112) (25) Own credit adjustment 5 (27) – (49) (71) Retirement beneﬁt obligat ions 2 2 (11) 11 4 Share-based payments 36 – 7 – 43 Other temporary differences (11) 16 134 – 139 Net deferred tax assets/(liab il it ies) 65 84 19 (236) (68) Financ ial statements Standard Chartered – Annual Report 2023 387 10. Taxation continued At Exchange At 1 January & other (Charge)/credit (Charge)/credit 31 December 2022 adjustments to proﬁt to equity 2022 $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (515) (8) (66) – (589) Impairment provis ions on loans and advances 351 (41) 24 – 334 Tax losses carried forward 263 16 (67) – 212 Equity instruments at fair value through other comprehensive income 1 (96) (6) 1 27 (74) Debt instruments at fair value through other comprehensive income 1 (30) 5 23 63 61 Cashﬂow hedges – – – 89 89 Own credit adjustment (3) – – 8 5 Retirement beneﬁt obligat ions 27 (5) – (20) 2 Share-based payments 32 – 4 – 36 Other temporary differences 30 (7) (34) – (11) Net deferred tax assets/(liab il it ies) 59 (46) (115) 167 65 1 2022 has been reclassif ied to separately d isclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance. Deferred tax comprises assets and liab il it ies as follows: 2023 2022 Total Asset Liab il ity Total Asset Liab il ity $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Deferred tax comprises: Accelerated tax depreciat ion (424) 3 (427) (589) 1 (590) Impairment provis ions on loans and advances 286 282 4 334 339 (5) Tax losses carried forward 97 49 48 212 90 122 Equity instruments at fair value through other comprehensive income 1 (144) (1) (143) (74) – (74) Debt instruments at fair value through other comprehensive income 1 27 29 (2) 61 45 16 Cashﬂow hedges (25) 12 (37) 89 85 4 Own credit adjustment (71) (1) (70) 5 (1) 6 Retirement beneﬁt obligat ions 4 13 (9) 2 15 (13) Share-based payments 43 9 34 36 5 31 Other temporary differences 139 307 (168) (11) 255 (266) (68) 702 (770) 65 834 (769) 1 2022 has been reclassif ied to separately d isclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance. The recoverabil ity of the Group’s deferred tax assets is based on management’s judgement of the availab il ity of future taxable proﬁts against which the deferred tax assets will be util ised. The Group’s total deferred tax assets include $97 mill ion relat ing to tax losses carried forward, of which $48 mill ion ar ises in legal entit ies w ith offsetting deferred tax liab il it ies. The rema in ing deferred tax assets on losses of $49 mill ion are forecast to be recovered before exp iry and with in ﬁve years. Sale of aircraft leasing business during the year, included with in Other operat ing income, resulted in the disposal of $113 mill ion of deferred tax assets relating to losses in Ireland held at 31 December 2022. Unrecognised deferred tax Net Gross Net Gross 2023 2023 2022 2022 $mill ion $mill ion $mill ion $mill ion No account has been taken of the following potential deferred tax assets/(liab il it ies): Withhold ing tax on unrem itted earnings from overseas subsid iar ies and associates (653) (7,685) (507) (6,434) Tax losses 2,242 9,326 1,980 8,231 Held over gains on incorporation of overseas branches (366) (1,389) (346) (1,313) Other temporary differences 397 1,516 544 1,991 Financ ial statements Notes to the ﬁnancial statements 388 Standard Chartered – Annual Report 2023 11. Div idends Accounting policy The Board considers a number of factors prior to div idend declarat ion which includes the rate of recovery in the Group’s ﬁnancial performance, the macroeconom ic environment, and opportunit ies to further invest in our business and grow proﬁtably in our markets. Ordinary equity shares 2023 2022 Cents per share $mill ion Cents per share $mill ion 2022/2021 ﬁnal div idend declared and pa id during the year 14 401 9 274 2023/2022 inter im d iv idend declared and pa id during the year 6 167 4 119 Div idends on ord inary equity shares are recorded in the period in which they are declared and, in respect of the ﬁnal div idend, have been approved by the shareholders. Accordingly, the ﬁnal ordinary equity share div idends set out above relate to the respective prior years. 2023 recommended ﬁnal ordinary equity share div idend The 2023 ordinary equity share div idend recommended by the Board is 21 cents per share. The ﬁnanc ial statements for the year ended 31 December 2023 do not reﬂect this div idend as th is will be accounted for in shareholders’ equity as an appropriat ion of retained proﬁts in the year ending 31 December 2024. The div idend w ill be paid in either pounds sterling, Hong Kong dollars or US dollars on 17 May 2024 to shareholders on the UK register of members at the close of business in the UK on 8 March 2024. Preference shares and Addit ional T ier 1 securit ies Div idends on these preference shares and secur it ies class if ied as equ ity are recorded in the period in which they are declared. 2023 2022 $mill ion $mill ion Non-cumulative redeemable preference shares: 7.014 per cent preference shares of $5 each 53 53 Floating rate preference shares of $5 each¹ 50 20 103 73 Addit ional T ier 1 securit ies: ﬁxed rate resett ing perpetual subordinated contingent convertible securit ies 349 328 452 401 1 Floating rate is based on Secured Overnight Financ ing Rate (SOFR), average rate pa id for ﬂoating preference shares is 6.62% (2022: 2.71%) Financ ial statements Standard Chartered – Annual Report 2023 389 12. Earnings per ordinary share Earnings per share on an underlying basis differs from earnings deﬁned in IAS 33 Earnings per share. Underlying earnings is proﬁt/(loss) attributable to ordinary shareholders 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 sign iﬁcant or material in the context of the Group’s normal business earnings for the year. The table below provides the basis of underlying earnings. 2023 2022¹ $mill ion $mill ion Proﬁt for the period attributable to equity holders 3,462 2,902 Non-controlling interest 7 46 Div idend payable on preference shares and AT1 class if ied as equ ity (452) (401) Proﬁt for the period attributable to ordinary shareholders 3,017 2,547 Items normalised: Restructuring 14 99 Goodwill and other impa irment² 850 322 DVA (17) (42) Net gains on sale of Businesses³ (262) (20) Tax on normalised items (21) (3) Underlying proﬁt 3,581 2,903 Basic – Weighted average number of shares (mill ions) 2,778 2,966 Diluted – Weighted average number of shares (mill ions) 2,841 3,023 Basic earnings per ordinary share (cents) 108.6 85.9 Diluted earnings per ordinary share (cents) 106.2 84.3 Underlying basic earnings per ordinary share (cents) 128.9 97.9 Underlying diluted earnings per ordinary share (cents) 126.0 96.0 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2. Goodwill and other impa irment include $850 mill ion (2022: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai) 3. Includes the sale of the Aviat ion F inance business, of which there was a gain on sale of $309 mill ion on the leas ing business and a loss of $47 mill ion in relation to a sale of a portfolio of Aviat ion loans The calculation of basic earnings per share is based on the proﬁt attributable to equity holders of the parent and the basic weighted average number of shares excluding treasury shares held in employees beneﬁt trust. When calculating diluted earnings per share, the weighted average number of shares in issue is adjusted for the effects of all expected dilut ive potent ial ordinary shares held in respect of Standard Chartered PLC totalling 56 mill ion (2022: 52 m ill ion). The total number of share options outstanding, under schemes considered to be potentially dilut ive, was 7 m ill ion (2022: 5 m ill ion). These opt ions have strike prices ranging from $3.99 to $7.49. Of the total number of employee share options and share awards at 31 December 2023 there were nil share options and awards which were anti dilut ive. The 188 mill ion decrease (2022: 142 m ill ion decrease) in the basic weighted average number of shares is primar ily due to the impact of the share buy-back programmes completed in the year. Financ ial statements Notes to the ﬁnancial statements 390 Standard Chartered – Annual Report 2023 13. Financ ial instruments Classif icat ion and measurement Accounting policy Financ ial assets held at amort ised cost and fair value through other comprehensive income Debt instruments held at amortised cost or held at FVOCI have contractual terms that give rise to cash ﬂows that are solely payments of princ ipal and interest (SPPI) characterist ics. In assessing whether the contractual cash ﬂows have SPPI characterist ics, the Group cons iders the contractual terms of the instrument. This includes assessing whether the ﬁnanc ial asset conta ins a contractual term that could change the tim ing or amount of contractual cash ﬂows such that it would not meet this condit ion. In mak ing the assessment, the Group considers: • Contingent events that would change the amount and tim ing of cash ﬂows • Leverage features • Prepayment and extension terms • Terms that lim it the Group’s cla im to cash ﬂows from specif ied assets (e.g. non-recourse asset arrangements) • Features that modify considerat ion of the t ime value of money – e.g. period ical reset of interest rates. Whether ﬁnancial assets are held at amort ised cost or at FVOCI depends on the object ives of the bus iness models under which the assets are held. A business model refers to how the Group manages ﬁnanc ial assets to generate cash ﬂow. The Group makes an assessment of the objective of a bus iness model in which an asset is held at the ind iv idual product business line, and where applicable with in bus iness lines depending on the way the business is managed and informat ion is provided to management. Factors considered include: • How the performance of the product business line is evaluated and reported to the Group’s management • How managers of the business model are compensated, includ ing whether management is compensated based on the fair value of assets or the contractual cash ﬂows collected • The risks that affect the performance of the business model and how those risks are managed • The frequency, volume and tim ing of sales in prior periods, the reasons for such sales and expectations about future sales activ ity. The Group’s business model assessment is as follows: Business model Business object ive Characterist ics Businesses Products Hold to Intent is to orig inate • Provid ing ﬁnancing and • Corporate Lending • Loans and advances collect ﬁnancial assets and orig inat ing assets to earn interest • Financ ial Markets • Debt securit ies hold them to maturity, income as primary income stream collecting the • Performing credit risk • Transaction Banking contractual cash ﬂows management activ it ies • Retail Lending over the term of the instrument • Costs include funding costs, transaction costs and • Treasury Markets (Loans and impa irment losses Borrowings) Hold to Business object ive met • Portfolios held for liqu id ity needs; • Treasury Markets • Debt securit ies collect through both hold to or where a certain interest yield and sell collect and by selling proﬁle is mainta ined; or that are ﬁnancial assets normally rebalanced to achieve matching of duration of assets and liab il it ies • Income streams come from interest income, fair value changes, and impa irment losses Fair value All other business • Assets held for trading • Financ ial Markets • Derivat ives through objectives, includ ing • Assets that are orig inated, • All other business lines • Equity shares proﬁt or loss trading and managing ﬁnancial assets on a purchased, and sold for proﬁt taking or underwrit ing act iv ity • Trading portfolios fair value basis • Financ ial Markets • Performance of the portfolio is reverse repos evaluated on a fair value basis • Financ ial Markets • Income streams are from fair (FM Bond and Loan value changes or trading gains Syndicat ion) or losses Financ ial statements Standard Chartered – Annual Report 2023 391 13. Financ ial instruments continued Financ ial assets wh ich have SPPI characterist ics and that are held w ith in a bus iness model whose object ive is to hold ﬁnancial assets to collect contractual cashﬂows (hold to collect) are recorded at amort ised cost. Conversely, ﬁnanc ial assets which have SPPI characterist ics but are held w ith in a bus iness model whose object ive is achieved by both collecting contractual cashﬂows and selling ﬁnanc ial assets (Hold to collect and sell) are class if ied as held at FVOCI. Both hold to collect and hold to collect and sell business models involve holding ﬁnanc ial assets to collect the contractual cashﬂows. However, the business models are dist inct by reference to the frequency and s ign iﬁcance that asset sales play in meeting the objective under wh ich a particular group of ﬁnanc ial assets is managed. Hold to collect business models are characterised by asset sales that are inc idental to meet ing the object ives under wh ich a group of assets is managed. Sales of assets under a hold to collect business model can be made to manage increases in the credit risk of ﬁnanc ial assets but sales for other reasons should be infrequent or ins ign if icant. Cashﬂows from the sale of ﬁnancial assets under a hold to collect and sell business model by contrast are integral to achiev ing the objectives under wh ich a particular group of ﬁnanc ial assets are managed. This may be the case where frequent sales of ﬁnanc ial assets are requ ired to manage the Group’s daily liqu id ity requirements or to meet regulatory requirements to demonstrate liqu id ity of ﬁnanc ial instruments. Sales of assets under hold to collect and sell business models are therefore both more frequent and more sign iﬁcant in value than those under the hold to collect model. Equity instruments designated as held at FVOCI Non-trading equity instruments acquired for strategic purposes rather than capital gain may be irrevocably designated at in it ial recognit ion as held at FVOCI on an instrument-by-instrument basis. Div idends rece ived are recognised in proﬁt or loss. Gains and losses aris ing from changes in the fair value of these instruments, includ ing fore ign exchange gains and losses, are recognised directly in equity and are never reclassif ied to proﬁt or loss even on derecogn it ion. Mandatorily classif ied at fa ir value through proﬁt or loss Financ ial assets and l iab il it ies wh ich are mandatorily held at fair value through proﬁt or loss are split between two subcategories as follows: Trading, includ ing: • Financ ial assets and l iab il it ies held for trad ing, which are those acquired princ ipally for the purpose of sell ing in the short-term • Derivat ives Non-trading mandatorily at fair value through proﬁt or loss, includ ing: • Instruments in a business which has a fair value business model (see the Group’s business model assessment) which are not trading or derivat ives • Hybrid ﬁnanc ial assets that conta in one or more embedded derivat ives • Financ ial assets that would otherw ise be measured at amortised cost or FVOCI but which do not have SPPI characterist ics • Equity instruments that have not been designated as held at FVOCI • Financ ial l iab il it ies that const itute contingent considerat ion in a business combinat ion Designated at fair value through proﬁt or loss Financ ial assets and l iab il it ies may be des ignated at fair value through proﬁt or loss when the designat ion el im inates or sign iﬁcantly reduces a measurement or recogn it ion incons istency that would otherw ise arise from measuring assets or liab il it ies on a d ifferent basis (‘accounting mismatch’). Financ ial l iab il it ies may also be des ignated at fair value through proﬁt or loss where they are managed on a fair value basis or have an embedded derivat ive where the Group is not able to bifurcate and separately value the embedded derivat ive component. Financ ial l iab il it ies held at amort ised cost Financ ial l iab il it ies that are not ﬁnancial guarantees or loan comm itments and that are not classif ied as ﬁnancial l iab il it ies held at fair value through proﬁt or loss are classif ied as ﬁnancial l iab il it ies held at amort ised cost. Preference shares which carry a mandatory coupon that represents a market rate of interest at the issue date, or which are redeemable on a specif ic date or at the opt ion of the shareholder are classif ied as ﬁnancial l iab il it ies and are presented in other borrowed funds. The div idends on these preference shares are recogn ised in the income statement as interest expense on an amortised cost basis using the effective interest method. Financ ial statements Notes to the ﬁnancial statements 392 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Financ ial guarantee contracts and loan comm itments The Group issues ﬁnanc ial guarantee contracts and loan comm itments in return for fees. Financ ial guarantee contracts and any loan commitments issued at below-market interest rates are in it ially recognised at their fair value as a ﬁnanc ial liab il ity, and subsequently measured at the higher of the in it ial value less the cumulative amount of income recognised in accordance with the princ iples of IFRS 15 Revenue from Contracts w ith Customers and their expected credit loss provis ion. Loan commitments may be designated at fair value through proﬁt or loss where that is the business model under which such contracts are held. Fair value of ﬁnanc ial assets and l iab il it ies The fair value of ﬁnanc ial instruments is generally measured on the basis of the ind iv idual ﬁnanc ial instrument. However, when a group of ﬁnancial assets and ﬁnancial l iab il it ies is managed on the basis of its net exposure to either market risk or credit risk, the fair value of the group of ﬁnanc ial instruments is measured on a net basis. The fair values of quoted ﬁnanc ial assets and l iab il it ies in active markets are based on current prices. A market is regarded as active if transactions for the asset or liab il ity take place with sufﬁc ient frequency and volume to prov ide pric ing informat ion on an ongoing basis. If the market for a ﬁnanc ial instrument, and for unlisted securit ies, is not active, the Group establishes fair value by using valuation techniques. Init ial recogn it ion Regular way purchases and sales of ﬁnancial assets held at fa ir value through proﬁt or loss, and held at fair value through other comprehensive income are in it ially recognised on the trade date (the date on which the Group commits to purchase or sell the asset). Loans and advances and other ﬁnancial assets held at amort ised cost are recognised on the settlement date (the date on which cash is advanced to the borrowers). All ﬁnancial instruments are in it ially recognised at fair value, which is normally the transaction price, plus directly attributable transaction costs for ﬁnanc ial assets and l iab il it ies wh ich are not subsequently measured at fair value through proﬁt or loss. In certain circumstances, the in it ial fair value may be based on a valuation technique which may lead to the recognit ion of proﬁts or losses at the time of in it ial recognit ion. However, these proﬁts or losses can only be recogn ised when the valuation technique used is based solely on observable market data. Where the in it ially recognised fair value is based on a valuation model that uses unobservable inputs, the difference between the transaction price and the valuation model is not recognised immed iately in the income statement but following the passage of time, or as the inputs become observable, or the transaction matures or is terminated. Subsequent measurement Financ ial assets and ﬁnancial l iab il it ies held at amort ised cost Financ ial assets and ﬁnancial l iab il it ies held at amort ised cost are subsequently carried at amortised cost using the effective interest method (see ‘Interest income and expense’). Foreign exchange gains and losses are recognised in the income statement. Where a ﬁnancial instrument carried at amortised cost is the hedged item in a qualify ing fa ir value hedge relationsh ip, its carrying value is adjusted by the fair value gain or loss attributable to the hedged risk. Financ ial assets held at FVOCI Debt instruments held at FVOCI are subsequently carried at fair value, with all unrealised gains and losses aris ing from changes in fair value (includ ing any related fore ign exchange gains or losses) recognised in other comprehensive income and accumulated in a separate component of equity. Foreign exchange gains and losses on the amortised cost are recognised in income. Changes in expected credit losses are recognised in the proﬁt or loss and are accumulated in equity. On derecognit ion, the cumulat ive fair value gains or losses, net of the cumulative expected credit loss reserve, are transferred to the proﬁt or loss. Equity investments designated at FVOCI are subsequently carried at fair value with all unrealised gains and losses aris ing from changes in fair value (includ ing any related fore ign exchange gains or losses) recognised in other comprehensive income and accumulated in a separate component of equity. On derecognit ion, the cumulat ive reserve is transferred to retained earnings and is not recycled to proﬁt or loss. Financ ial assets and l iab il it ies held at fa ir value through proﬁt or loss Gains and losses aris ing from changes in fair value, includ ing contractual interest income or expense, recorded in the net trading income line in the proﬁt or loss unless the instrument is part of a cash ﬂow hedging relationsh ip. Financ ial statements Standard Chartered – Annual Report 2023 393 13. Financ ial instruments continued Derecognit ion of ﬁnancial instruments Financ ial assets wh ich are subject to commercial reﬁnanc ing where the loan is priced to the market with no payment related concessions regardless of form of legal documentation or nature of lending will be derecognised. Where the Group’s rights to the cash ﬂows under the orig inal contract have exp ired, the old loan is derecognised and the new loan is recognised at fair value. For all other modif icat ions for example forborne loans or restructuring, whether or not a change in the cash ﬂows is ‘substantially different’ is judgemental and will be considered on a case-by-case basis, taking into account all the relevant facts and circumstances. On derecognit ion of a ﬁnancial asset, the d ifference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of the considerat ion rece ived (includ ing any new asset obtained less any new liab il ity assumed) and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in proﬁt or loss except for equity instruments elected FVOCI (see above) and cumulative fair value adjustments attributable to the credit risk of a liab il ity, that are held in other comprehensive income. Financ ial l iab il it ies are derecogn ised when they are extingu ished. A ﬁnancial l iab il ity is extingu ished when the obl igat ion is discharged, cancelled or expires and this is evaluated both qualitat ively and quant itat ively. However, where a ﬁnancial liab il ity has been modif ied, it is derecognised if the difference between the modif ied cash ﬂows and the or ig inal cash ﬂows is more than 10 per cent, or if less than 10 per cent, the Group will perform a qualitat ive assessment to determ ine whether the terms of the two instruments are substantially different. If the Group purchases its own debt, it is derecognised and the difference between the carrying amount of the liab il ity and the considerat ion pa id is included in ‘Other income’ except for the cumulative fair value adjustments attributable to the credit risk of a liab il ity that are held in Other comprehensive income, which are never recycled to the proﬁt or loss. Modif ied ﬁnancial instruments Financ ial assets and ﬁnancial l iab il it ies whose or ig inal contractual terms have been mod if ied, includ ing those loans subject to forbearance strategies, are considered to be modif ied instruments. Modif icat ions may include changes to the tenor, cash ﬂows and or interest rates among other factors. Where derecognit ion of ﬁnancial assets is appropriate (see Derecognit ion), the newly recogn ised residual loans are assessed to determine whether the assets should be classif ied as purchased or or ig inated cred it-impa ired assets (POCI). Where derecognit ion is not appropriate, the gross carrying amount of the applicable instruments is recalculated as the present value of the renegotiated or modif ied contractual cash ﬂows d iscounted at the orig inal effect ive interest rate (or credit adjusted effective interest rate for POCI ﬁnanc ial assets). The d ifference between the recalculated values and the pre-modif ied gross carry ing values of the instruments are recorded as a modif icat ion gain or loss in the proﬁt or loss. Gains and losses aris ing from mod if icat ions for credit reasons are recorded as part of ‘Credit Impairment’ (see Credit Impairment policy). Modif icat ion gains and losses aris ing from non-cred it reasons are recognised either as part of ‘Credit Impairment’ or with in income depending on whether there has been a change in the credit risk on the ﬁnanc ial asset subsequent to the modif icat ion. Modif icat ion gains and losses aris ing on ﬁnancial l iab il it ies are recogn ised with in income. The movements in the applicable expected credit loss loan posit ions are d isclosed in further detail in Risk Review. Financ ial statements Notes to the ﬁnancial statements 394 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued The Group’s classif icat ion of its ﬁnanc ial assets and l iab il it ies is summarised in the following tables. Assets at fair value Non-trading mandatorily Designated Fair value Total Assets Derivat ives at fair value at fair value through other ﬁnancial held at held for through through comprehensive assets at amortised Trading hedging proﬁt or loss proﬁt or loss income fair value cost Total Assets Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks¹ – – – – – – 69,905 69,905 Financ ial assets held at fa ir value through proﬁt or loss Loans and advances to banks² 2,265 – – – – 2,265 – 2,265 Loans and advances to customers² 6,930 – 282 – – 7,212 – 7,212 Reverse repurchase agreements and other sim ilar secured lend ing 16 9,997 – 71,850 – – 81,847 – 81,847 Debt securit ies, alternative tier one and other elig ible b ills 52,776 – 98 78 – 52,952 – 52,952 Equity shares 2,721 – 219 – – 2,940 – 2,940 Other assets – – 6 – – 6 – 6 74,689 – 72,455 78 – 147,222 – 147,222 Derivat ive ﬁnancial instruments 14 48,333 2,101 – – – 50,434 – 50,434 Loans and advances to banks² 15 – – – – – – 44,977 44,977 of which – reverse repurchase agreements and other sim ilar secured lending 16 – – – – – – 1,738 1,738 Loans and advances to customers² 15 – – – – – – 286,975 286,975 of which – reverse repurchase agreements and other sim ilar secured lending 16 – – – – – – 13,996 13,996 Investment securit ies Debt securit ies, alternative tier one and other elig ible b ills – – – – 103,328 103,328 56,935 160,263 Equity shares – – – – 992 992 – 992 – – – – 104,320 104,320 56,935 161,255 Other assets 20 – – – – – – 38,140 38,140 Assets held for sale 21 – – – – – – 701 701 Total at 31 December 2023 123,022 2,101 72,455 78 104,320 301,976 497,633 799,609 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 230 to 343) Financ ial statements Standard Chartered – Annual Report 2023 395 13. Financ ial instruments continued Assets at fair value Non-trading mandatorily Designated Fair value Total Assets Derivat ives at fair value at fair value through other ﬁnancial held at held for through through comprehensive assets at amortised Trading hedging proﬁt or loss proﬁt or loss income fair value cost Total Assets Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks¹ – – – – – – 58,263 58,263 Financ ial assets held at fa ir value through proﬁt or loss Loans and advances to banks² 976 – – – – 976 – 976 Loans and advances to customers² 5,765 – 781 – – 6,546 – 6,546 Reverse repurchase agreements and other sim ilar secured lend ing 16 1,175 – 63,316 – – 64,491 – 64,491 Debt securit ies, alternative tier one and other elig ible b ills 30,162 – 324 76 – 30,562 – 30,562 Equity shares 2,997 – 233 – – 3,230 – 3,230 Other assets – – 7 – – 7 – 7 41,075 – 64,661 76 – 105,812 – 105,812 Derivat ive ﬁnancial instruments 14 60,858 2,859 – – – 63,717 – 63,717 Loans and advances to banks² 15 – – – – – – 39,519 39,519 of which – reverse repurchase agreements and other sim ilar secured lending 16 – – – – – – 978 978 Loans and advances to customers² 15 – – – – – – 310,647 310,647 of which – reverse repurchase agreements and other sim ilar secured lending 16 – – – – – – 24,498 24,498 Investment securit ies Debt securit ies, alternative tier one and other elig ible b ills – – – – 111,926 111,926 59,714 171,640 Equity shares – – – – 808 808 – 808 – – – – 112,734 112,734 59,714 172,448 Other assets 20 – – – – – – 39,295 39,295 Assets held for sale 21 – – – 3 – 3 1,388 1,391 Total at 31 December 2022 101,933 2,859 64,661 79 112,734 282,266 508,826 791,092 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 230 to 343) Financ ial statements Notes to the ﬁnancial statements 396 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Liab il it ies at fa ir value Designated Total Derivat ives at fair value ﬁnancial held for through liab il it ies at Amortised Trading hedging proﬁt or loss fair value cost Total Liab il it ies Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Deposits by banks – – – – 28,030 28,030 Customer accounts – – – – 469,418 469,418 Financ ial l iab il it ies held at fa ir value through proﬁt or loss Deposits by banks – – 1,894 1,894 – 1,894 Customer accounts 39 – 17,209 17,248 – 17,248 Repurchase agreements and other sim ilar secured borrowing 16 1,660 – 39,623 41,283 – 41,283 Debt securit ies in issue 22 – – 10,817 10,817 – 10,817 Short posit ions 11,846 – – 11,846 – 11,846 Other liab il it ies – – 8 8 – 8 13,545 – 69,551 83,096 – 83,096 Derivat ive ﬁnancial instruments 14 52,747 3,314 – 56,061 – 56,061 Repurchase agreements and other sim ilar secured borrowing 16 – – – – 12,258 12,258 Debt securit ies in issue 22 – – – – 62,546 62,546 Other liab il it ies 23 – – – – 38,663 38,663 Subordinated liab il it ies and other borrowed funds 27 – – – – 12,036 12,036 Liab il it ies included in disposal groups held for sale 21 – – – – 726 726 Total at 31 December 2023 66,292 3,314 69,551 139,157 623,677 762,834 Liab il it ies at fa ir value Designated Total Derivat ives at fair value ﬁnancial held for through liab il it ies at Amortised Trading hedging proﬁt or loss fair value cost Total Liab il it ies Notes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Deposits by banks – – – – 28,789 28,789 Customer accounts – – – – 461,677 461,677 Financ ial l iab il it ies held at fa ir value through proﬁt or loss Deposits by banks – – 1,066 1,066 – 1,066 Customer accounts 29 – 11,677 11,706 – 11,706 Repurchase agreements and other sim ilar secured borrowing 16 – – 51,706 51,706 – 51,706 Debt securit ies in issue 22 – – 8,572 8,572 – 8,572 Short posit ions 6,847 – – 6,847 – 6,847 Other liab il it ies – – 6 6 – 6 6,876 – 73,027 79,903 – 79,903 Derivat ive ﬁnancial instruments 14 65,316 4,546 – 69,862 – 69,862 Repurchase agreements and other sim ilar secured borrowing 16 – – – – 2,108 2,108 Debt securit ies in issue 22 – – – – 61,242 61,242 Other liab il it ies 23 – – – – 42,915 42,915 Subordinated liab il it ies and other borrowed funds 27 – – – – 13,715 13,715 Liab il it ies included in disposal groups held for sale 21 5 – – 5 1,230 1,235 Total at 31 December 2022 72,197 4,546 73,027 149,770 611,676 761,446 Financ ial statements Standard Chartered – Annual Report 2023 397 13. Financ ial instruments continued Interest rate benchmark reform During 2023, sign iﬁcant progress was made in support of LIBOR transit ion. New LIBOR-referencing business had ceased and a full suite of Risk Free Rate-referencing derivat ive and cash products were standard offerings across the Group. Having completed the remediat ion of all non-USD LIBOR exposures at the end of 2021 w ith no reliance on synthetic rates, the Programme focused on remediat ing legacy USD LIBOR stock ahead of the USD LIBOR cessat ion date (30 June 2023). The Group made sign iﬁcant progress towards complet ing its remediat ion of legacy exposures over the course of 2023. Clients with legacy USD LIBOR loans were engaged to remediate their contracts via active conversion to alternative rates, or other suitable transit ion mechan isms such as the inclus ion of robust fallbacks. For der ivat ives, the Group adhered to the International Swaps and Derivat ives Assoc iat ion (ISDA) 2020 IBOR Fallbacks Protocol for all its trading entit ies and cont inued to engage clients to do the same or to negotiate remediat ion b ilaterally. The Group also successfully partic ipated in CCP conversion events, includ ing both tranches of the London Clear ing House (LCH) conversions for USD LIBOR and also the SGD/THB conversion, as well as the CME Eurodollar futures and the Hong Kong Exchanges and Clearing (HKEX) USD LIBOR events. This sign iﬁcantly reduced our overall not ional exposure to USD LIBOR, as centrally cleared derivat ives and b ilateral derivat ives w ith fallbacks represented a substantial portion of the Group’s overall USD LIBOR notional exposure. At 31 December 2023, a number of contracts remain subject to remediat ion but these are cons idered immater ial for the Group. The largest population of remain ing exposures are synd icated loans, either on a standalone basis, or where the loans have been hedged with derivat ives. These contracts currently operate under a synthet ic USD LIBOR rate. Risks which the Group is exposed to due to LIBOR transit ion The Group has largely mit igated all mater ial adverse outcomes associated with the cessation of IBOR benchmarks, and these have not required a change to the Group’s risk management strategy. However, the Group will continue to focus on the un-remediated contracts, and manage the risks of the transit ion unt il fully complete. Particular attention will continue to be paid to: legal risk of any contracts that may remain outstanding after the end of synthetic LIBOR (currently scheduled for end of September 2024); conduct risk aris ing from cont inued remediat ion; ﬁnancial and accounting risk in terms of the ﬁnanc ial impact of IBOR transit ion for the outstand ing contracts, and also ﬁnanc ial instruments that may be affected by accounting issues such as accounting for contractual changes due to IBOR reform, fair value measurement and hedge accounting, as well as other risks inherent in the reform. As at 31 December 2022 the Group had the following notional princ ipal exposures to interest rate benchmarks that were subject to interest rate benchmark reform. IBOR exposures by benchmark USD LIBOR GBP LIBOR SGD SOR THB FIX Other IBOR Total IBOR at 31 December 2022 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Loans and advances to banks 145 – – – – 145 Loans and advances to customers 21,395 – 420 – – 21,815 Debt securit ies, AT1 and other el ig ible b ills 2,843 – 15 – – 2,858 24,383 – 435 – – 24,818 Liab il it ies Deposits by banks 332 – – – – 332 Customer accounts 3,066 – – 34 – 3,100 Repurchase agreements and other secured borrowing 671 – – – – 671 Debt securit ies in issue 1,211 – – – – 1,211 Subordinated liab il it ies and other borrowed funds – – – – – – 5,280 – – 34 – 5,314 Derivat ives – Fore ign exchange contracts Currency swaps and options 135,145 – 2,273 959 – 138,377 Derivat ives – Interest rate contracts Swaps 671,534 – 7,512 10,998 – 690,044 Forward rate agreements and options 22,067 – – 9 – 22,076 Exchange traded futures and options 31,922 – – – – 31,922 Equity and stock index options 49 – – – – 49 Credit derivat ive contracts 3,974 – 46 129 – 4,149 Total IBOR derivat ive exposure 864,691 – 9,831 12,095 – 886,617 Total IBOR exposure 894,354 – 10,266 12,129 – 916,749 Loan commitments off-balance sheet 2,798 – 14 – – 2,812 Financ ial statements Notes to the ﬁnancial statements 398 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Offsetting of ﬁnanc ial instruments Financ ial assets and l iab il it ies are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intent ion to settle on a net bas is, or to realise the asset and settle the liab il ity simultaneously. In practice, for credit mit igat ion, the Group is able to offset assets and liab il it ies wh ich do not meet the IAS 32 netting criter ia set out below. Such arrangements include master netting arrangements for derivat ives and global master repurchase agreements for repurchase and reverse repurchase transactions. These agreements generally allow that all outstanding transactions with a particular counterparty can be offset but only in the event of default or other predetermined events. In addit ion, the Group also rece ives and pledges readily realisable collateral for derivat ive transact ions to cover net exposure in the event of a default. Under repurchase and reverse repurchase agreements the Group pledges (legally sells) and obtains (legally purchases) respectively, highly liqu id assets wh ich can be sold in the event of a default. The following tables set out the impact of netting on the balance sheet. This comprises derivat ive transact ions settled through an enforceable netting agreement where we have the intent and abil ity to settle net and wh ich are offset on the balance sheet. 2023 Net amounts Related amount not offset Gross amounts of ﬁnancial in the balance sheet of recognised Impact of instruments ﬁnancial offset in the presented in the Financ ial Financ ial instruments balance sheet balance sheet instruments collateral Net amount $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 99,929 (49,495) 50,434 (39,293) (8,440) 2,701 Reverse repurchase agreements and other sim ilar secured lend ing 109,413 (11,832) 97,581 – (97,581) – At 31 December 2023 209,342 (61,327) 148,015 (39,293) (106,021) 2,701 Liab il it ies Derivat ive ﬁnancial instruments 105,556 (49,495) 56,061 (39,293) (10,337) 6,431 Repurchase agreements and other sim ilar secured borrow ing 65,373 (11,832) 53,541 – (53,541) – At 31 December 2023 170,929 (61,327) 109,602 (39,293) (63,878) 6,431 2022 Net amounts Related amount not offset Gross amounts of ﬁnancial in the balance sheet of recognised Impact of instruments ﬁnancial offset in the presented in the Financ ial Financ ial instruments balance sheet balance sheet instruments collateral Net amount $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 120,799 (57,082) 63,717 (50,133) (9,206) 4,378 Reverse repurchase agreements and other sim ilar secured lend ing 105,891 (15,924) 89,967 – (89,967) – At 31 December 2022 226,690 (73,006) 153,684 (50,133) (99,173) 4,378 Liab il it ies Derivat ive ﬁnancial instruments 126,944 (57,082) 69,862 (50,133) (12,515) 7,214 Repurchase agreements and other sim ilar secured borrowing 69,738 (15,924) 53,814 – (53,814) – At 31 December 2022 196,682 (73,006) 123,676 (50,133) (66,329) 7,214 Related amounts not offset in the balance sheet comprises: • Financ ial instruments not offset in the balance sheet but covered by an enforceable netting arrangement. This comprises master netting arrangements held against derivat ive ﬁnancial instruments and excludes the effect of over-collateralisat ion • Financ ial instruments where a legal opin ion ev idenc ing enforceab il ity of the r ight of offset may not have been sought, or may have been unable to obtain • Financ ial collateral compr ises cash collateral pledged and received for derivat ive ﬁnancial instruments and collateral bought and sold for reverse repurchase and repurchase agreements respectively and excludes the effect of over-collateralisat ion Financ ial statements Standard Chartered – Annual Report 2023 399 13. Financ ial instruments continued Financ ial l iab il it ies des ignated at fair value through proﬁt or loss 2023 2022 $mill ion $mill ion Carrying balance aggregate fair value 69,551 73,027 Amount contractually obliged to repay at maturity 71,240 74,138 Difference between aggregate fair value and contractually obliged to repay at maturity (1,689) (1,111) Cumulative change in fair value accredited to credit risk difference 156 (56) The net fair value loss on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss was $2,649 mill ion for the year (31 December 2022: net loss of $677 mill ion). Further details of the Group’s own credit adjustment (OCA) valuation technique is described later in this Note. Valuation of ﬁnanc ial instruments The Valuation Methodology function is responsible for independent price verif icat ion, oversight of fair value and appropriate value adjustments and escalation of valuation issues. Independent price verif icat ion is the process of determin ing that the valuations incorporated into the ﬁnanc ial statements are val idated independent of the business area responsible for the product. The Valuation Methodology function has oversight of the fair value adjustments to ensure the ﬁnanc ial instruments are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the ﬁnanc ial statements. The market data used for price verif icat ion (PV) may include data sourced from recent trade data involv ing external counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pric ing prov iders. The Valuation Methodology function performs an ongoing review of the market data sources that are used as part of the PV and fair value processes which are formally documented on a semi-annual basis detail ing the su itab il ity of the market data used for price testing. Price verif icat ion uses independently sourced data that is deemed most representative of the market the instruments trade in. To determine the quality of the market data inputs, factors such as independence, relevance, reliab il ity, availab il ity of multiple data sources and methodology employed by the pric ing prov ider are taken into considerat ion. The Valuation and Benchmarks Committee (VBC) is the valuation governance forum consist ing of representat ives from Group Market Risk, Product Control, Valuation Methodology and the business, which meets monthly to discuss and approve the independent valuations of the inventory. For Princ ipal F inance, the Investment Committee meeting is held on a quarterly basis to review investments and valuations. Sign iﬁcant account ing estimates and judgements The Group evaluates the sign iﬁcance of ﬁnancial instruments and material accuracy of the valuations incorporated in the ﬁnancial statements as they involve a high degree of judgement and estimat ion uncerta inty in determin ing the carry ing values of ﬁnancial assets and l iab il it ies at the balance sheet date. • Fair value of ﬁnanc ial instruments is determined using valuation techniques and estimates (see below) which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Changes in the observabil ity of sign iﬁcant valuat ion inputs can materially affect the fair values of ﬁnanc ial instruments. • When establish ing the ex it price of a ﬁnanc ial instrument using a valuation technique, the Group estimates valuation adjustments in determin ing the fa ir value (page 400). • In determin ing the valuat ion of ﬁnanc ial instruments, the Group makes judgements on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 assets, and the sign iﬁcant valuat ion judgements in respect of Level 3 instruments (page 407). • Where the estimated measurement of fair value is more judgemental in respect of Level 3 assets, these are valued based on models that use a sign iﬁcant degree of non-market-based unobservable inputs. Financ ial statements Notes to the ﬁnancial statements 400 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Valuation techniques Refer to the fair value hierarchy explanation – Level 1, 2 and 3 (page 402) • Financ ial instruments held at fair value – Debt securit ies – asset-backed secur it ies: Asset-backed securit ies are valued based on external pr ices obtained from consensus pric ing prov iders, broker quotes, recent trades, arrangers’ quotes, etc. Where an observable price is available for a given security, it is classif ied as Level 2. In instances where third-party prices are not available or reliable, the security is classif ied as Level 3. The fa ir value of Level 3 securit ies is estimated using market standard cash ﬂow models with input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securit ies w ith sim ilar v intage, collateral type, and credit ratings. – Debt securit ies in issue: These debt securit ies relate to structured notes issued by the Group. Where independent market data is available through pric ing vendors and broker sources these pos it ions are class if ied as Level 2. Where such l iqu id external prices are not available, valuations of these debt securit ies are impl ied us ing input parameters such as bond spreads and credit spreads, and are classif ied as Level 3. These input parameters are determined with reference to the same issuer (if available) or proxies from comparable issuers or assets. – Derivat ives: Derivat ive products are class if ied as Level 2 if the valuation of the product is based upon input parameters which are observable from independent and reliable market data sources. Derivat ive products are class if ied as Level 3 if there are sign iﬁcant valuat ion input parameters which are unobservable in the market, such as products where the performance is linked to more than one underlying variable. Examples are foreign exchange basket options, equity options based on the performance of two or more underlying ind ices and interest rate products with quanto payouts. In most cases these unobservable correlation parameters cannot be impl ied from the market, and methods such as histor ical analys is and comparison with histor ical levels or other benchmark data must be employed. – Equity shares – private equity: The majority of pr ivate equity unlisted investments are valued based on earning multiples – Price-to-Earnings (P/E) or enterprise value to earnings before income tax, depreciat ion and amort isat ion (EV/EBITDA) ratios – of comparable listed companies. The two primary inputs for the valuation of these investments are the actual or forecast earnings of the investee companies and earning multiples for the comparable listed companies. To ensure comparabil ity between these unquoted investments and the comparable listed companies, appropriate adjustments are also applied (for example, liqu id ity and size) in the valuation. In circumstances where an investment does not have direct comparables or where the multiples for the comparable companies cannot be sourced from reliable external sources, alternative valuation techniques (for example, discounted cash ﬂow model or net asset value (‘NAV’) or option pric ing model), 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, over-the-counter (OTC) prices) are classif ied as Level 3 on the bas is that the valuation methods involve judgements ranging from determin ing comparable compan ies to discount rates where the discounted cash ﬂow method is applied. – Loans and advances: These primar ily include loans in the FM Bond and Loan Syndicat ion bus iness which were not fully syndicated as of the balance sheet date and other ﬁnanc ing transact ions with in F inanc ial Markets, and loans and advances includ ing reverse repurchase agreements that do not have SPPI cashﬂows or are managed on a fa ir value basis. These loans are generally bilateral in nature and, where available, their valuation is based on observable clean sales transactions prices or market observable spreads. If observable credit spreads are not available, proxy spreads based on comparables with sim ilar cred it grade, sector and region, are used. Where observable transaction prices, credit spreads and market standard proxy methods are available, these loans are classif ied as Level 2. Where there are no recent transactions or comparables, these loans are classif ied as Level 3. – Other debt securit ies: These debt securit ies include convertible bonds, corporate bonds, credit and structured notes. Where quoted prices are available through pric ing vendors, brokers or observable trad ing activ it ies from liqu id markets, these are classif ied as Level 2 and valued us ing such quotes. Where there are sign iﬁcant valuat ion inputs which are unobservable in the market, due to ill iqu id trading or the complexity of the product, these are classif ied as Level 3. The valuations of these debt securit ies are impl ied us ing input parameters such as bond spreads and credit spreads. These input parameters are determined with reference to the same issuer (if available) or proxied from comparable issuers or assets . • Financ ial instruments held at amortised cost The following sets out the Group’s basis for establish ing fa ir values of amortised cost ﬁnanc ial instruments and their classif icat ion between Levels 1, 2 and 3. As certain categories of ﬁnanc ial instruments are not actively traded, there is a sign iﬁcant level of management judgement involved in calculating the fair values: – Cash and balances at central banks: The fair value of cash and balances at central banks is their carrying amounts – Debt securit ies in issue, subordinated liab il it ies and other borrowed funds: The aggregate fair values are calculated based on quoted market prices. For those notes where quoted market prices are not available, a discounted cash ﬂow model is used based on a current market related yield curve appropriate for the remain ing term to matur ity – Deposits and borrowings: The estimated fair value of deposits with no stated maturity is the amount repayable on demand. The estimated fair value of ﬁxed interest-bearing deposits and other borrowings without quoted market prices is based on discounted cash ﬂows using the prevail ing market rates for debts w ith a sim ilar Cred it Risk and remain ing matur ity Financ ial statements Standard Chartered – Annual Report 2023 401 13. Financ ial instruments continued – Investment securit ies: For investment securit ies that do not have d irectly observable market values, the Group util ises a number of valuation techniques to determine fair value. Where available, securit ies are valued us ing input proxies from the same or closely related underlying (for example, bond spreads from the same or closely related issuer) or input proxies from a different underlying (for example, a sim ilar bond but us ing spreads for a particular sector and rating). Certain instruments cannot be proxies as set out above, and in such cases the posit ions are valued us ing non-market observable inputs. This includes those instruments held at amortised cost and predominantly relates to asset-backed securit ies. The fa ir value for such instruments is usually derived from proxy from internal assessments of the underlying cash ﬂows – Loans and advances to banks and customers: For loans and advances to banks, the fair value of ﬂoating rate placements and overnight deposits is their carrying amounts. The estimated fair value of ﬁxed interest-bearing deposits is based on discounted cash ﬂows using the prevail ing money market rates for debts w ith a sim ilar Cred it Risk and remain ing matur ity. The Group’s loans and advances to customers’ portfolio is well divers iﬁed by geography and industry. Approximately a quarter of the portfolio re-prices with in one month, and approx imately half re-prices with in 12 months. Loans and advances are presented net of provis ions for impa irment. The fa ir value of loans and advances to customers with a residual maturity of less than one year generally approximates the carrying value. The estimated fair value of loans and advances with a residual maturity of more than one year represents the discounted amount of future cash ﬂows expected to be received, includ ing assumpt ions relating to prepayment rates and Credit Risk. Expected cash ﬂows are discounted at current market rates to determine fair value. The Group has a wide range of ind iv idual instruments with in its loans and advances portfolio and as a result provid ing quant if icat ion of the key assumptions used to value such instruments is impract ical – Other assets: Other assets comprise primar ily cash collateral and trades pend ing settlement. The carrying amount of these ﬁnancial instruments is considered to be a reasonable approximat ion of fa ir value as they are either short term in nature or re-price to current market rates frequently. Fair value adjustments When establish ing the ex it price of a ﬁnanc ial instrument using a valuation technique, the Group considers adjustments to the modelled price which market partic ipants would make when pr ic ing that instrument. The main valuation adjustments (described further below) in determin ing fa ir value for ﬁnanc ial assets and ﬁnancial l iab il it ies are as follows: Movement Movement 01.01.23 during the year 31.12.23 01.01.22 during the year 31.12.22 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Bid-offer valuation adjustment 118 (3) 115 101 17 118 Credit valuation adjustment 171 (52) 119 165 6 171 Debit valuation adjustment (112) (17) (129) (70) (42) (112) Model valuation adjustment 3 1 4 5 (2) 3 Funding valuation adjustment 46 (13) 33 – 46 46 Other fair value adjustments 23 2 25 20 3 23 Total 249 (82) 167 221 28 249 Income deferrals Day 1 and other deferrals 186 (77) 109 147 39 186 Total 186 (77) 109 147 39 186 Note: Bracket represents an asset and credit to the income statement • Bid-offer valuation adjustment: Generally, market parameters are marked on a mid-market basis in the revaluation systems, and a bid-offer valuation adjustment is required to quantify the expected cost of neutralis ing the bus iness’ posit ions through dealing away in the market, thereby bring ing long pos it ions to b id and short posit ions to offer. The methodology to calculate the bid-offer adjustment for a derivat ive portfol io involves netting between long and short posit ions and the group ing of risk by strike and tenor based on the hedging strategy where long posit ions are marked to b id and short posit ions marked to offer in the systems. • Credit valuation adjustment (CVA): The Group accounts for CVA against the fair value of derivat ive products. CVA is an adjustment to the fair value of the transactions to reﬂect the possib il ity that our counterparties may default and we may not receive the full market value of the outstanding transactions. It represents an estimate of the adjustment a market partic ipant would include when deriv ing a purchase pr ice to acquire our exposures. CVA is calculated for each subsid iary, and with in each ent ity for each counterparty to which the entity has exposure and takes account of any collateral we may hold. The Group calculates the CVA by using estimates of future posit ive exposure, market- impl ied probab il ity of default (PD) and recovery rates. Where market-impl ied data is not readily available, we use market-based proxies to estimate the PD. Wrong- way risk occurs when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty, and the Group has implemented a model to capture this impact for key wrong-way exposures. The Group also captures the uncertaint ies assoc iated with wrong-way risk in the Group’s Prudential Valuation Adjustments framework. Financ ial statements Notes to the ﬁnancial statements 402 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued • Debit valuation adjustment (DVA): The Group calculates DVA adjustments on its derivat ive l iab il it ies to reﬂect changes in its own credit standing. The Group’s DVA adjustments will increase if its credit standing worsens and conversely, decrease if its credit standing improves. For derivat ive l iab il it ies, a DVA adjustment is determined by applying the Group’s probabil ity of default to the Group’s negative expected exposure against the counterparty. The Group’s probabil ity of default and loss expected in the event of default is derived based on bond and CDS spreads associated with the Group’s issuances and market standard recovery levels. The expected exposure is modelled based on the simulat ion of the underly ing risk factors over the expected life of the deal. This simulat ion methodology incorporates the collateral posted by the Group and the effects of master netting agreements. • Model valuation adjustment: Valuation models may have pric ing deﬁcienc ies or lim itat ions that require a valuation adjustment. These pric ing deﬁcienc ies or lim itat ions arise due to the choice, implementat ion and cal ibrat ion of the pric ing model. • Funding valuation adjustment (FVA): The Group makes FVA adjustments against derivat ive products, includ ing embedded derivat ives. FVA reﬂects an est imate of the adjustment to its fair value that a market partic ipant would make to incorporate funding costs or beneﬁts that could arise in relation to the exposure. FVA is calculated by determin ing the net expected exposure at a counterparty level and then applying a funding rate to those exposures that reﬂect the market cost of funding. The FVA for uncollateralised (includ ing part ially collateralised) derivat ives incorporates the estimated present value of the market funding cost or beneﬁt associated with funding these transactions. • Other fair value adjustments: The Group calculates the fair value on the interest rate callable products by calibrat ing to a set of market prices with differ ing matur ity, expiry and strike of the trades. • Day one and other deferrals: In certain circumstances the in it ial fair value is based on a valuation technique which differs to the transaction price at the time of in it ial recognit ion. However, these ga ins can only be recognised when the valuation technique used is based primar ily on observable market data. In those cases where the in it ially recognised fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immed iately in the income statement. The difference is amortised to the income statement until the inputs become observable, or the transaction matures or is terminated. Other deferrals primar ily represent adjustments taken to reﬂect the specif ic terms and cond it ions of certa in derivat ive contracts wh ich affect the terminat ion value at the measurement date. In addit ion, the Group calculates own cred it adjustment (OCA) on its issued debt designated at fair value, includ ing structured notes, in order to reﬂect changes in its own credit standing. Issued debt is discounted util is ing the spread at which sim ilar instruments would be issued or bought back at the measurement date as this reﬂects the value from the perspective of a market partic ipant who holds the ident ical item as an asset. OCA measures the difference between the fair value of issued debt as of reporting date and theoretical fair values of issued debt adjusted up or down for changes in own credit spreads from incept ion date to the measurement date. Under IFRS 9 the change in the OCA component is reported under other comprehensive income. The Group’s OCA reserve will increase if its credit standing worsens in comparison with the incept ion of the trade and, conversely, decrease if its credit standing improves. The Group’s OCA reserve will reverse over time as its liab il it ies mature. Fair value hierarchy – ﬁnanc ial instruments held at fair value The fair values of quoted ﬁnanc ial assets and l iab il it ies in active markets are based on current prices. A market is regarded as active if transactions for the asset or liab il ity take place with sufﬁc ient frequency and volume to prov ide pric ing informat ion on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for ident ical instruments held by the Group. Where quoted market prices are not available, or are unreliable because of poor liqu id ity, fair values have been determined using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Valuation techniques used include discounted cash ﬂow analysis and pric ing models and, where appropr iate, comparison with instruments that have characterist ics s im ilar to those of the instruments held by the Group. Assets and liab il it ies carr ied at fair value or for which fair values are disclosed have been classif ied into three levels according to the observabil ity of the s ign iﬁcant inputs used to determine the fair values. Changes in the observabil ity of s ign iﬁcant valuat ion inputs during the reporting period may result in a transfer of assets and liab il it ies w ith in the fa ir value hierarchy. The Group recognises transfers between levels of the fair value hierarchy when there is a sign iﬁcant change in either its princ ipal market or the level of observabil ity of the inputs to the valuation techniques as at the end of the reporting period. • Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for ident ical assets or liab il it ies. • Level 2: Fair value measurements are those with quoted prices for sim ilar instruments in active markets or quoted prices for ident ical or s im ilar instruments in inact ive markets and ﬁnancial instruments valued using models where all sign iﬁcant inputs are observable. • Level 3: Fair value measurements are those where inputs which could have a sign iﬁcant effect on the instrument’s valuation are not based on observable market data. Financ ial statements Standard Chartered – Annual Report 2023 403 13. Financ ial instruments continued The following tables show the classif icat ion of ﬁnanc ial instruments held at fair value into the valuation hierarchy: Level 1 Level 2 Level 3 Total Assets $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value through proﬁt or loss Loans and advances to banks – 2,265 – 2,265 Loans and advances to customers – 5,252 1,960 7,212 Reverse repurchase agreements and other sim ilar secured lend ing – 79,484 2,363 81,847 Debt securit ies and other el ig ible b ills 27,055 24,635 1,262 52,952 Of which: Issued by central banks & governments 23,465 6,557 – 30,022 Issued by corporates other than ﬁnancial inst itut ions 1 4 4,062 346 4,412 Issued by ﬁnancial inst itut ions 1 3,586 14,016 916 18,518 Equity shares 2,386 370 184 2,940 Derivat ive ﬁnancial instruments 954 49,400 80 50,434 Of which: Foreign exchange 129 42,414 25 42,568 Interest rate 37 6,293 6 6,336 Credit – 438 47 485 Equity and stock index options – 73 2 75 Commodity 788 182 – 970 Investment securit ies Debt securit ies and other el ig ible b ills 55,060 48,196 72 103,328 Of which: Issued by central banks & governments 47,225 18,983 51 66,259 Issued by corporates other than ﬁnancial inst itut ions 1 820 3,236 – 4,056 Issued by ﬁnancial inst itut ions 1 7,015 25,977 21 33,013 Equity shares 199 6 787 992 Other assets – – 6 6 Total ﬁnancial assets at 31 December 2023 85,654 209,608 6,714 301,976 Liab il it ies Financ ial instruments held at fair value through proﬁt or loss Deposits by banks – 1,560 334 1,894 Customer accounts – 15,970 1,278 17,248 Repurchase agreements and other sim ilar secured borrow ing – 41,283 – 41,283 Debt securit ies in issue – 9,776 1,041 10,817 Short posit ions 7,152 4,591 103 11,846 Derivat ive ﬁnancial instruments 749 55,116 196 56,061 Of which: Foreign exchange 122 45,314 10 45,446 Interest rate 46 8,262 5 8,313 Credit – 945 162 1,107 Equity and stock index options – 147 19 166 Commodity 581 448 – 1,029 Other liab il it ies – – 8 8 Total ﬁnancial l iab il it ies at 31 December 2023 7,901 128,296 2,960 139,157 1 Includes covered bonds of $7,509 mill ion, secur it ies issued by Multilateral Development Banks/International Organisat ions of $24,192 m ill ion and State-owned agencies and development banks of $7,564 mill ion The fair value of ﬁnanc ial assets and ﬁnancial l iab il it ies class if ied as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $940 mill ion and $288 m ill ion respect ively. There were no sign iﬁcant changes to valuat ion or levelling approaches during the year 31 December 2023. There were no sign iﬁcant transfers of ﬁnancial assets and l iab il it ies measured at fa ir value between Level 1 and Level 2 during the year 31 December 2023. Financ ial statements Notes to the ﬁnancial statements 404 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Level 1 Level 2 Level 3 Total Assets $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value through proﬁt or loss Loans and advances to banks – 955 21 976 Loans and advances to customers – 4,741 1,805 6,546 Reverse repurchase agreements and other sim ilar secured lend ing 3 62,490 1,998 64,491 Debt securit ies and other el ig ible b ills 14,702 14,707 1,153 30,562 Of which: Issued by central banks & governments 14,086 4,734 – 18,820 Issued by corporates other than ﬁnancial inst itut ions 1 91 3,452 517 4,060 Issued by ﬁnancial inst itut ions 1 525 6,521 636 7,682 Equity shares 3,024 24 182 3,230 Derivat ive ﬁnancial instruments 892 62,781 44 63,717 Of which: Foreign exchange 139 54,020 13 54,172 Interest rate 33 7,351 28 7,412 Credit – 410 1 411 Equity and stock index options – 98 2 100 Commodity 720 902 – 1,622 Investment securit ies Debt securit ies and other el ig ible b ills 56,401 55,525 – 111,926 Of which: Issued by central banks & governments 45,151 22,171 – 67,322 Issued by corporates other than ﬁnancial inst itut ions 1 1,775 4,045 – 5,820 Issued by ﬁnancial inst itut ions 1 9,475 29,309 – 38,784 Equity shares 146 7 655 808 Other assets – – 7 7 Total ﬁnancial assets at 31 December 2022² 75,168 201,230 5,865 282,263 Liab il it ies Financ ial instruments held at fair value through proﬁt or loss Deposits by banks – 778 288 1,066 Customer accounts – 10,734 972 11,706 Repurchase agreements and other sim ilar secured borrow ing – 51,706 – 51,706 Debt securit ies in issue – 8,121 451 8,572 Short posit ions 4,085 2,722 40 6,847 Derivat ive ﬁnancial instruments 642 69,099 121 69,862 Of which: Foreign exchange 101 56,710 12 56,823 Interest rate 29 10,020 12 10,061 Credit – 899 42 941 Equity and stock index options – 191 55 246 Commodity 512 1,279 – 1,791 Other liab il it ies – – 6 6 Total ﬁnancial l iab il it ies at 31 December 2022² 4,727 143,160 1,878 149,765 1 Includes covered bonds of $8,455 mill ion, secur it ies issued by Multilateral Development Banks/International Organisat ions of $11,438 m ill ion , and State-owned agencies and development banks of $9,211 mill ion 2 The above table does not include held for sale assets of $3 mill ion and l iab il it ies of $5 m ill ion. These are reported in Note 21 together with their fair value hierarchy The fair value of ﬁnanc ial assets and ﬁnancial l iab il it ies class if ied as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $888 mill ion and $209 m ill ion respect ively. Financ ial statements Standard Chartered – Annual Report 2023 405 13. Financ ial instruments continued Fair value hierarchy – ﬁnanc ial instruments measured at amortised cost The following table shows the carrying amounts and incorporates the Group’s estimate of fair values of those ﬁnanc ial assets and liab il it ies not presented on the Group’s balance sheet at fa ir value. These fair values may be different from the actual amount that will be received or paid on the settlement or maturity of the ﬁnanc ial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available. Fair value Carrying value Level 1 Level 2 Level 3 Total $mill ion $mill ion $mill ion $mill ion $mill ion Assets Cash and balances at central banks¹ 69,905 – 69,905 – 69,905 Loans and advances to banks 44,977 – 44,921 – 44,921 of which – reverse repurchase agreements and other sim ilar secured lend ing 1,738 – 1,738 – 1,738 Loans and advances to customers 286,975 – 53,472 226,211 279,683 of which – reverse repurchase agreements and other sim ilar secured lend ing 13,996 – 13,827 169 13,996 Investment securit ies² 56,935 – 54,419 33 54,452 Other assets¹ 38,140 – 38,140 – 38,140 Assets held for sale 701 101 541 59 701 At 31 December 2023 497,633 101 261,398 226,303 487,802 Liab il it ies Deposits by banks 28,030 – 28,086 – 28,086 Customer accounts 469,418 – 460,224 – 460,224 Repurchase agreements and other sim ilar secured borrowing 12,258 – 12,258 – 12,258 Debt securit ies in issue 62,546 31,255 30,859 – 62,114 Subordinated liab il it ies and other borrowed funds 12,036 11,119 336 – 11,455 Other liab il it ies¹ 38,663 – 38,663 – 38,663 Liab il it ies held for sale 726 54 672 – 726 At 31 December 2023 623,677 42,428 571,098 – 613,526 Fair value Carrying value Level 1 Level 2 Level 3 Total $mill ion $mill ion $mill ion $mill ion $mill ion Assets Cash and balances at central banks¹ 58,263 – 58,263 – 58,263 Loans and advances to banks 39,519 – 39,488 – 39,488 of which – reverse repurchase agreements and other sim ilar secured lend ing 978 – 924 – 924 Loans and advances to customers 310,647 – 58,663 251,560 310,223 of which – reverse repurchase agreements and other sim ilar secured lend ing 24,498 – 15,727 8,911 24,638 Investment securit ies² 59,714 – 56,444 25 56,469 Other assets¹ 39,295 – 39,295 – 39,295 Assets held for sale 1,388 344 946 98 1,388 At 31 December 2022 508,826 344 253,099 251,683 505,126 Liab il it ies Deposits by banks 28,789 – 28,813 – 28,813 Customer accounts 461,677 – 461,665 – 461,665 Repurchase agreements and other sim ilar secured borrowing 2,108 – 2,108 – 2,108 Debt securit ies in issue 61,242 24,624 36,148 – 60,772 Subordinated liab il it ies and other borrowed funds 13,715 12,445 385 – 12,830 Other liab il it ies¹ 42,915 – 42,914 1 42,915 Liab il it ies held for sale 1,230 398 832 – 1,230 At 31 December 2022 611,676 37,467 572,865 1 610,333 1 The carrying amount of these ﬁnanc ial instruments is considered to be a reasonable approximat ion of fa ir value as they are short-term in nature or reprice to current market rates frequently 2 Includes Government bonds and Treasury bills of $19,422 mill ion at 31 December 2023 and $17,943 m ill ion at 31 December 2022 Financ ial statements Notes to the ﬁnancial statements 406 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued The Group has changed its method of determin ing the cost of its portfolio of Investment Securit ies held at amort ised cost and Debt securit ies and other el ig ible b ills, other than those included with in ﬁnancial instruments held at fair value through proﬁt or loss, from the weighted average cost method to the ﬁrst-in-ﬁrst-out method. This change in accounting policy will affect the calculation of gains or losses on derecognit ion of such instruments and the determinat ion of the in it ial credit risk of these instruments, to better align with the IFRS 9 requirements for recognis ing and measur ing impa irment losses. The change was made prospectively for certain but not all securit ies and transact ions. It is impract icable for the Group to determ ine the impact of this approach for each security and each transaction that was executed in previous periods. Loans and advances to customers by client segment¹ 2023 Carrying value Fair value Stage 1 and Stage 1 and Stage 3 stage 2 Total Stage 3 stage 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Corporate, Commercial & Institut ional Bank ing 1,975 128,430 130,405 1,910 125,841 127,751 Consumer, Private & Business Banking 724 125,335 126,059 721 120,701 121,422 Ventures – 1,033 1,033 – 1,032 1,032 Central & other items 209 29,269 29,478 209 29,269 29,478 At 31 December 2023 2,908 284,067 286,975 2,840 276,843 279,683 2022 Carrying value Fair value Stage 1 and Stage 1 and Stage 3 stage 2 Total Stage 3 stage 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Corporate, Commercial & Institut ional Bank ing 2,481 137,150 139,631 2,525 137,187 139,712 Consumer, Private & Business Banking 677 130,278 130,955 685 131,679 132,364 Ventures – 698 698 – 696 696 Central & other items 230 39,133 39,363 230 37,221 37,451 At 31 December 2022 3,388 307,259 310,647 3,440 306,783 310,223 1 Loans and advances includes reverse repurchase agreements and other sim ilar secured lend ing: carrying value $13,996 mill ion and fa ir value $13,996 mill ion (31 December 2022: $24,498 mill ion and $24,638 m ill ion respect ively) Financ ial statements Standard Chartered – Annual Report 2023 407 13. Financ ial instruments continued Fair value of ﬁnanc ial instruments Level 3 Summary and sign iﬁcant unobservable inputs The following table presents the Group’s primary Level 3 ﬁnanc ial instruments which are held at fair value. The table also presents the valuation techniques used to measure the fair value of those ﬁnanc ial instruments, the sign iﬁcant unobservable inputs, the range of values for those inputs and the weighted average of those inputs: Value as at 31 December 2023 Assets Liab il it ies Princ ipal valuat ion Sign iﬁcant unobservable Weighted Instrument $mill ion $mill ion technique inputs Range 1 average 2 Loans and advances to 1,960 – Discounted cash ﬂows Price/yield 1.7% – 100% 12.0% customers Credit spreads 0.1% – 1.0% 0.6% Reverse repurchase agreements 2,363 – Discounted cash ﬂows Repo curve 5.1% – 7.6% 6.3% and other sim ilar secured lend ing Price/yield (2.7)% – 10.3% 6.0% Debt securit ies, alternat ive tier 1,283 – Discounted cash ﬂows Price/yield (14.0)% – 25.8% 10.1% one and other elig ible secur it ies Recovery rates 0.1% – 1.0% 0.2% Internal pric ing model Equity-Equity correlation 44.1% – 100% 80.7% Equity-FX correlation (35.9)% – 45.5% 14.2% Government bonds and 51 – Discounted cash ﬂows Price/yield 17.7% – 21.8% 20.6% treasury bills Equity shares (includes private 971 – Comparable EV/EBITDA multiples 13.8x – 15.6x 14.9x equity investments) pric ing/y ield EV/Revenue multiples 9.3x – 30.9x 15.8x P/E multiples 10.6x – 51.8x 45.7x P/B multiples 0.3x – 2.7x 1.6x P/S multiples 0.2x – 1.6x 0.3x Liqu id ity discount 7.5% – 20.0% 15.1% Discounted cash ﬂows Discount rates 9.2% – 35.6% 17.0% Option pric ing model Equity value based on 8.4x – 42.5x 27.5x EV/Revenue multiples Equity value based on 3.1x – 3.1x 3.1x EV/EBITDA multiples Equity value based on 21.0% – 65.0% 30.1% volatil ity Other assets 6 – NAV N/A N/A N/A Derivat ive ﬁnancial instruments of which: Foreign exchange 25 10 Option pric ing model Foreign exchange 0.5% – 51% 31.8% option impl ied volat il ity Discounted cash ﬂows Interest rate curves 3.6% – 5.8% 3.8% Foreign exchange 0.6% – 64.2% 12.8% curves Interest rate 6 5 Discounted cash ﬂows Interest rate curves 3.6% – 8.6% 5.0% Credit 47 162 Discounted cash ﬂows Credit spreads 1.0% – 1.0% 1.0% Price/yield 1.7% – 16.3% 8.6% Equity and stock index 2 19 Internal pric ing model Equity-Equity correlation 44.1% – 100% 80.7% Equity-FX correlation (35.9)% – 45.5% 14.2% Deposits by banks – 334 Discounted cash ﬂows Credit spreads 0.1% – 3.4% 1.9% Customer accounts – 1,278 Discounted cash ﬂows Credit spreads 1.0% – 2.0% 1.2% Interest rate curves 2.9% – 8.6% 6.1% Price/yield 4.8% – 15.2% 9.9% Internal pric ing model Equity-Equity correlation 44.1% – 100% 80.7% Equity-FX correlation (35.9)% – 45.5% 14.2% Debt securit ies in issue – 1,041 Discounted cash ﬂows Credit spreads 0.3% – 1.6% 1.1% Price/yield 6.6% – 20.9% 17.9% Interest rate curves 2.9% – 5.3% 4.4% Internal pric ing model Equity-Equity correlation 44.1% – 100% 80.7% Equity-FX correlation (35.9)% – 45.5% 14.2% Bond option impl ied 2.9% – 5.3% 4.4% volatil ity Short posit ions – 103 Discounted cash ﬂows Price/yield 7.1% – 7.1% 7.1% Other liab il it ies – 8 Comparable EV/EBITDA multiples 5.8x – 11.2x 8.5x pric ing/y ield Total 6,714 2,960 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group’s Level 3 ﬁnanc ial instruments as at 31 December 2023. The ranges of values used are reﬂective of the underlying characterist ics of these Level 3 ﬁnancial instruments based on the market condit ions at the balance sheet date. However, these ranges of values may not represent the uncerta inty in fair value measurements of the Group’s Level 3 ﬁnancial instruments 2 Weighted average for non-derivat ive ﬁnancial instruments has been calculated by weight ing inputs by the relative fair value. Weighted average for derivat ives has been prov ided by weight ing inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful ind icator Financ ial statements Notes to the ﬁnancial statements 408 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Value as at 31 December 2022 Assets Liab il it ies Princ ipal valuat ion Sign iﬁcant unobservable Weighted Instrument $mill ion $mill ion technique inputs Range 1 average 2 Loans and advances to banks 21 – Discounted cash ﬂows Price/yield N/A N/A Credit spreads 2.9% 2.9% Loans and advances 1,805 – Discounted cash ﬂows Price/yield 0.3% – 18.2% 5.3% to customers Recovery rates 5.0% – 100% 90.5% Reverse repurchase 1,998 – Discounted cash ﬂows Repo curve 2.3% – 8.0% 6.2% agreements and other sim ilar secured lending Price/yield 1.9%-7.2% 6.0% Debt securit ies, alternat ive tier 1,152 – Discounted cash ﬂows Price/yield 3.1%–48.5% 7.1% one and other elig ible secur it ies Recovery rates 0.0% – 1.0% 0.2% Government bonds and – – Discounted cash ﬂows Price/yield N/A N/A treasury bills Asset-backed securit ies 1 – Discounted cash ﬂows Price/yield 6.8% 6.8% Equity shares (includes private 837 – Comparable pric ing/ EV/EBITDA multiples 7.0x – 13.1x 11.0x equity investments) yield EV/Revenue multiples 8.2x – 23.2x 12.9x P/E multiples 13.4x – 29.7x 17.6x P/B multiples 0.3x – 3.3x 1.3x P/S multiples 2.1x – 2.2x 2.2x Liqu id ity discount 10.0% – 29.7% 17.5% Discounted cash ﬂows Discount rates 7.5% – 16.4% 9.4% Option pric ing model Equity value based on 4.8x – 76.1x 32.9x EV/Revenue multiples Equity value based on 2.6x 2.6x EV/EBITDA multiples Equity value based on 60.0% 60.0% volatil ity Other assets 7 – NAV N/A N/A N/A Derivat ive ﬁnancial instruments of which: Foreign exchange 13 12 Option pric ing model Foreign exchange (21.0)% – 21.0% (2.7)% option impl ied volat il ity Discounted cash ﬂows Foreign exchange (4.6)% – 81.8% 15.9% curves Interest rate 28 12 Discounted cash ﬂows Interest rate curves (2.1)% – 50.2% 10.6% Option pric ing model Bond option impl ied N/A N/A volatil ity Credit 1 42 Discounted cash ﬂows Credit spreads 0.1% – 2.3% 1.4% Price/yield 7.2% – 9.7% 7.2% Equity and stock index 2 55 Internal pric ing model Equity-Equity correlation 30.0% – 96.0% 67.0% Equity-FX correlation (70.0)% – 85.0% 37.0% Deposits by banks – 288 Discounted cash ﬂows Credit spreads 0.9% – 3.4% 1.8% Price/yield 6.0% 6.0% Customer accounts – 972 Discounted cash ﬂows Credit spreads 0.9% – 19.1% 10.3% Internal pric ing model Equity-Equity correlation 30.0% – 96.0% 67.0% Equity-FX correlation (70.0)% – 85.0% 37.0% Discounted cash ﬂows Interest rate curves N/A N/A Price/yield 3.1% – 22.9% 17.8% Debt securit ies in issue – 451 Discounted cash ﬂows Credit spreads 0.3% – 7.0% 4.7% Price/yield 6.8% – 12.4% 9.1% Internal pric ing model Equity-Equity correlation 30.0% – 96.0% 67.0% Equity-FX correlation (70.0)% – 85.0% 37.0% Short posit ion – 40 Discounted cash ﬂows Price/yield 6.8% 6.8% Other liab il it ies – 6 Comparable pric ing/ EV/EBITDA multiples 4.2x – 9.0x 6.1x yield Total 5,865 1,878 1 The ranges of values shown in the above table represent the highest and lowest levels used in the valuation of the Group’s Level 3 ﬁnanc ial instruments as at 31 December 2022. The ranges of values used are reﬂective of the underlying characterist ics of these Level 3 ﬁnancial instruments based on the market condit ions at the balance sheet date. However, these ranges of values may not represent the uncerta inty in fair value measurements of the Group’s Level 3 ﬁnancial instruments 2 Weighted average for non-derivat ive ﬁnancial instruments has been calculated by weight ing inputs by the relative fair value. Weighted average for derivat ives has been prov ided by weight ing inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful ind icator Financ ial statements Standard Chartered – Annual Report 2023 409 13. Financ ial instruments continued The following section describes the sign iﬁcant unobservable inputs ident iﬁed in the valuation technique table: • Comparable price/yield is a valuation methodology in which the price of a comparable instrument is used to estimate the fair value where there are no direct observable prices. Yield is the interest rate that is used to discount the future cash ﬂows in a discounted cash ﬂow model. Valuation using comparable instruments can be done by calculating an impl ied y ield (or spread over a liqu id benchmark) from the pr ice of a comparable instrument, then adjust ing that y ield (or spread) to derive a value for the instrument. The adjustment should account for relevant differences in the ﬁnanc ial instruments such as maturity and/or credit quality. Alternatively, a price-to-price basis can be assumed between the comparable instrument and the instrument being valued in order to establish the value of the instrument (for example, deriv ing a fa ir value for a jun ior unsecured bond from the price of a senior secured bond). An increase in price, in isolat ion, would result in a favourable movement in the fair value of the asset. An increase in yield, in isolat ion, would result in an unfavourable movement in the fair value of the asset • Correlation is the measure of how movement in one variable inﬂuences the movement in another variable. An equity correlation is the correlation between two equity instruments while an interest rate correlation refers to the correlation between two swap rates • Credit spread represents the addit ional y ield that a market partic ipant would demand for tak ing exposure to the Credit Risk of an instrument • Discount rate refers to the rate of return used to convert expected cash ﬂows into present value • Equity-FX correlation is the correlation between equity instrument and foreign exchange instrument • EV/EBITDA multiple is the ratio of Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciat ion and Amort isat ion (EBITDA). EV is the aggregate market capital isat ion and debt minus the cash and cash equivalents. An increase in EV/EBITDA multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • EV/Revenue multiple is the ratio of Enterprise Value (EV) to Revenue. An increase in EV/Revenue multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Foreign exchange curves is the term structure for forward rates and swap rates between currency pairs over a specif ied period • Net asset value (NAV) is the value of an entity’s assets after deducting any liab il it ies • Interest rate curves is the term structure of interest rates and measures of future interest rates at a particular point in time • Liqu id ity discounts in the valuation of unlisted investments are primar ily appl ied to the valuation of unlisted ﬁrms’ investments to reﬂect the fact that these stocks are not actively traded. An increase in liqu id ity discount will result in an unfavourable movement in the fair value of the unlisted ﬁrm • Price-Earnings (P/E) multiple is the ratio of the market value of the equity to the net income after tax. An increase in P/E multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Price-Book (P/B) multiple is the ratio of the market value of equity to the book value of equity. An increase in P/B multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Price-Sales (P/S) multiple is the ratio of the market value of equity to sales. An increase in P/S multiple will result in a favourable movement in the fair value of the unlisted ﬁrm • Recovery rates is the expectation of the rate of return resulting from the liqu idat ion of a particular loan. As the probabil ity of default increases for a given instrument, the valuation of that instrument will increas ingly reﬂect its expected recovery level assuming default. An increase in the recovery rate, in isolat ion, would result in a favourable movement in the fair value of the loan • Repo curve is the term structure of repo rates on repos and reverse repos at a particular point in time • Volatil ity represents an estimate of how much a particular instrument, parameter or index will change in value over time. Generally, the higher the volatil ity, the more expens ive the option will be. Financ ial statements Notes to the ﬁnancial statements 410 Standard Chartered – Annual Report 2023 13. Financ ial instruments continued Level 3 movement tables – ﬁnancial assets The table below analyses movements in Level 3 ﬁnanc ial assets carr ied at fair value. 2023 Held at fair value through proﬁt or loss Investment securit ies Reverse repurchase Debt Debt agreements securit ies, securit ies, and other alternative alternative Loans and Loans and sim ilar tier one and Derivat ive tier one advances advances secured other Equity Other ﬁnancial and other Equity to banks to customers lending elig ible b ills shares Assets instruments elig ible b ills shares Total Assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2023 21 1,805 1,998 1,153 182 7 44 – 655 5,865 Total (losses)/gains recognised in income statement – (35) (107) (292) 4 (1) 12 – – (419) Net interest income – – – – – – – – – – Net trading income – (35) (107) (304) 5 – 12 – – (429) Other operating income – – – 12 (1) (1) – – – 10 Total (losses)/gains recognised in other comprehensive income (OCI) – – – – – – – (1) 101 100 Fair value through OCI reserve – – – – – – – – 108 108 Exchange difference – – – – – – – (1) (7) (8) Purchases 22 1,784 5,902 1,082 8 – 189 21 61 9,069 Sales (22) (1,133) (3,942) (518) (10) – (115) (23) (5) (5,768) Settlements – (442) (1,488) (305) – – (25) – – (2,260) Transfers out 1 (21) (225) – (6) – – (27) (16) (32) (327) Transfers in 2 – 206 – 148 – – 2 91 7 454 At 31 December 2023 – 1,960 2,363 1,262 184 6 80 72 787 6,714 Total unrealised (losses)/ gains recognised in the income statement, with in net trad ing income, relating to change in fair value of assets held at 31 December 2023 – (3) 3 (1) 4 – (12) – – (9) 1 Transfers out includes loans and advances, debt securit ies, alternat ive tier one and other elig ible b ills, equity shares and derivat ive ﬁnancial instruments where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2 2 Transfers in primar ily relates to loans and advances, debt secur it ies, alternat ive tier one and other elig ible b ills, equity shares and derivat ive ﬁnancial instruments where the valuation parameters became unobservable during the year Financ ial statements Standard Chartered – Annual Report 2023 411 13. Financ ial instruments continued The table below analyses movements in Level 3 ﬁnanc ial assets carr ied at fair value. 2022 Held at fair value through proﬁt or loss Investment securit ies Reverse repurchase Debt Debt agreements securit ies, securit ies, and other alternative alternative Loans and Loans and sim ilar tier one Derivat ive tier one advances advances secured and other Equity Other ﬁnancial and other Equity to banks to customers lending elig ible b ills shares Assets instruments elig ible b ills shares Total Assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 9 1,357 1,566 349 186 26 90 40 493 4,116 Total (losses)/gains recognised in income statement (16) (132) 2 7 4 – 30 – – (105) Net interest income – – – – – – – – – – Net trading income (16) (132) 2 7 4 – 30 – – (105) Other operating income – – – – – – – – – – Total losses recognised in other comprehensive income (OCI) – – – – – – – (1) (8) (9) Fair value through OCI reserve – – – – – – – (1) (1) (2) Exchange difference – – – – – – – – (7) (7) Purchases 55 1,605 6,438 1,063 2 8 118 – 166 9,455 Sales (30) (237) (5,484) (342) (10) (10) (99) – (6) (6,218) Settlements (19) (877) (524) (1) – – (80) (39) – (1,540) Transfers out 1 – (160) – – – (17) (29) – – (206) Transfers in 2 22 249 – 77 – – 14 – 10 372 At 31 December 2022 21 1,805 1,998 1,153 182 7 44 – 655 5,865 Total unrealised gains/ (losses) recognised in the income statement, with in net trad ing income, relating to change in fair value of assets held at 31 December 2022 – – – – 3 – (2) – – 1 1 Transfers out includes loans and advances, other assets and derivat ive ﬁnancial instruments where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2 2 Transfers in primar ily relates to loans and advances, debt secur it ies, alternat ive tier one and other elig ible b ills and derivat ive ﬁnancial instruments where the valuation parameters became unobservable during the year 412 Standard Chartered – Annual Report 2023 Financ ial statements Notes to the ﬁnancial statements 13. Financ ial instruments continued Level 3 movement tables – ﬁnancial l iab il it ies 2023 Debt Derivat ive Deposits Customer securit ies ﬁnancial Short Other by banks accounts in issue instruments posit ions liab il it ies Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2023 288 972 451 121 40 6 1,878 Total losses/(gains) recognised in income statement – net trading income 7 (6) 39 (52) 3 3 (6) Issues 628 1,789 1,489 447 100 – 4,453 Settlements (585) (1,491) (1,218) (312) (40) – (3,646) Transfers out 1 (4) (9) (85) (11) – (1) (110) Transfers in 2 – 23 365 3 – – 391 At 31 December 2023 334 1,278 1,041 196 103 8 2,960 Total unrealised (gains)/losses recognised in the income statement, with in net trad ing income, relating to change in fair value of liab il it ies held at 31 December 2023 – (21) 6 (47) – – (62) 2022 Debt Derivat ive Deposits Customer securit ies ﬁnancial Short Other by banks accounts in issue instruments posit ions liab il it ies Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 283 454 821 94 – 1 1,653 Total (gains)/losses recognised in income statement – net trading income (37) (82) (158) 155 (3) 5 (120) Issues 447 1,818 815 179 140 – 3,399 Settlements (400) (1,266) (1,066) (291) (97) – (3,120) Transfers out 1 (5) – (38) (23) – – (66) Transfers in 2 – 48 77 7 – – 132 At 31 December 2022 288 972 451 121 40 6 1,878 Total unrealised gains recognised in the income statement, with in net trad ing income, relating to change in fair value of liab il it ies held at 31 December 2022 (1) (17) (7) (3) – – (28) 1 Transfers out during the year primar ily relates to bank depos its, customer accounts debt securit ies in issue, other liab il it ies and der ivat ive ﬁnancial instruments where the valuation parameters became observable during the year and were transferred to Level 2 ﬁnanc ial l iab il it ies 2 Transfers in during the year primar ily relates to der ivat ive ﬁnancial instruments, customer accounts and debt securit ies in issue where the valuation parameters become unobservable during the year 413 Standard Chartered – Annual Report 2023 Financ ial statements 13. Financ ial instruments continued Sensit iv it ies in respect of the fair values of Level 3 assets and liab il it ies Sensit iv ity analysis is performed on products with sign iﬁcant unobservable inputs. The Group applies a 10 per cent increase or decrease on the values of these unobservable inputs, to generate a range of reasonably possible alternative valuations. The percentage shift is determined by statist ical analys is performed on a set of reference prices based on the composit ion of the Group’s Level 3 inventory as the measurement date. Favourable and unfavourable changes (which show the balance adjusted for input change) are determined on the basis of changes in the value of the instrument as a result of varying the levels of the unobservable parameters. The Level 3 sensit iv ity analysis assumes a one-way market move and does not consider offsets for hedges. Held at fair value through proﬁt or loss Held at fair value through other comprehensive income Favourable Unfavourable Favourable Unfavourable Net exposure changes changes Net exposure changes changes $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Financ ial instruments held at fair value Loans and advances 1,960 1,985 1,918 – – – Reverse repurchase agreements and other sim ilar secured lend ing 2,363 2,390 2,336 – – – Debt securit ies, alternat ive tier one and other elig ible b ills 1,262 1,309 1,193 72 78 66 Equity shares 184 202 166 787 866 708 Other assets 6 7 5 – – – Derivat ive ﬁnancial instruments (116) (75) (157) – – – Customers accounts (1,278) (1,191) (1,365) – – – Deposits by banks (334) (334) (334) – – – Short posit ions (103) (101) (105) – – – Debt securit ies in issue (1,041) (966) (1,115) – – – Other liab il it ies (8) (7) (9) – – – At 31 December 2023 2,895 3,219 2,533 859 944 774 Financ ial instruments held at fair value Loans and advances 1,826 1,851 1,758 – – – Reverse repurchase agreements and other sim ilar secured lend ing 1,998 2,013 1,979 – – – Asset backed securit ies 1 1 1 – – – Debt securit ies, alternat ive tier one and other elig ible b ills 1,152 1,168 1,124 – – – Equity shares 182 200 164 655 715 595 Other assets 7 8 6 – – – Derivat ive ﬁnancial instruments (77) (44) (109) – – – Customers accounts (972) (934) (1,010) – – – Deposits by banks (288) (283) (293) – – – Short posit ions (40) (39) (41) – – – Debt securit ies in issue (451) (419) (482) – – – Other liab il it ies (6) (5) (7) – – – At 31 December 2022 3,332 3,517 3,090 655 715 595 The reasonably possible alternatives could have increased or decreased the fair values of ﬁnanc ial instruments held at fair value through proﬁt or loss and those classif ied as fa ir value through other comprehensive income by the amounts disclosed below. 2023 2022 Financ ial instruments Fair value changes $mill ion $mill ion Held at fair value through proﬁt or loss Possible increase 324 185 Possible decrease (362) (242) Fair value through other comprehensive income Possible increase 85 60 Possible decrease (85) (60) 414 Standard Chartered – Annual Report 2023 Financ ial statements Notes to the ﬁnancial statements 14. Derivat ive ﬁnancial instruments Accounting policy Fair values may be obtained from quoted market prices in active markets, recent market transactions, and valuation techniques, includ ing d iscounted cash ﬂow models and option pric ing models, as appropr iate. Where the in it ially recognised fair value of a derivat ive contract is based on a valuation model that uses inputs which are not observable in the market, it follows the same in it ial recognit ion account ing policy as for other ﬁnanc ial assets and l iab il it ies. All der ivat ives are carr ied as assets when fair value is posit ive and as l iab il it ies when fa ir value is negative. Hedge accounting Under certain condit ions, the Group may des ignate a recognised asset or liab il ity, a ﬁrm commitment, highly probable forecast transaction or net investment of a foreign operation into a formal hedge accounting relationsh ip w ith a derivat ive that has been entered to manage interest rate and/or foreign exchange risks present in the hedged item. The Group applied the ‘Phase 1’ hedge accounting requirements of IAS 39 Financ ial Instruments: Recogn it ion and Measurement and the ‘Phase 2’ amendments to IFRS in respect of interest rate benchmark reform. There are three categories of hedge relationsh ips: • Fair value hedge: to manage the fair value of interest rate and/or foreign currency risks of recognised assets or liab il it ies or ﬁrm commitments • Cash ﬂow hedge: to manage interest rate or foreign exchange risk of highly probable future cash ﬂows attributable to a recognised asset or liab il ity, or a forecasted transaction • Net investment hedge: to manage the structural foreign exchange risk of an investment in a foreign operation. The Group assesses, both at hedge incept ion and on a quarterly bas is, whether the derivat ives des ignated in hedge relationsh ips are h ighly effective in offsetting changes in fair values or cash ﬂows of hedged items. Hedges are considered to be highly effective if all the following criter ia are met: • At incept ion of the hedge and throughout its life, the hedge is prospectively expected to be highly effective in achiev ing offsetting changes in fair value or cash ﬂows attributable to the hedged risk • Prospective and retrospective effectiveness of the hedge should be with in a range of 80–125%. Th is is tested using regression analysis • The regression co-efﬁc ient (R squared), wh ich measures the correlation between the variables in the regression, is at least 80%. In the case of the hedge of a forecast transaction, the transaction must have a high probabil ity of occurr ing and must present an exposure to variat ions in cash ﬂows that are expected to affect reported proﬁt or loss. Fair value hedge Changes in the fair value of derivat ives that are des ignated and qualify as fair value hedging instruments are recorded in net trading income, together with any changes in the fair value of the hedged asset or liab il ity that are attributable to the hedged risk. If the hedge no longer meets the criter ia for hedge account ing, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to the income statement over the remain ing term to maturity of the hedged item. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immed iately in the income statement. For ﬁnanc ial assets class if ied as fa ir value through other comprehensive income, the hedge accounting adjustment attributable to the hedged risk is included in net trading income to match the hedging derivat ive. Cash ﬂow hedge The effective portion of changes in the fair value of derivat ives that are des ignated and qualify as cash ﬂow hedging instruments are in it ially recognised in other comprehensive income, accumulating in the cash ﬂow hedge reserve with in equity. These amounts are subsequently recycled to the income statement in the periods when the hedged item affects proﬁt or loss. Both the derivat ive fa ir value movement and any recycled amount are recorded in the ‘Cashﬂow hedges’ line item in other comprehensive income. The Group assesses hedge effectiveness using the hypothetical derivat ive method, wh ich creates a derivat ive instrument to serve as a proxy for the hedged transaction. The terms of the hypothetical derivat ive match the cr it ical terms of the hedged item and it has a fair value of zero at incept ion. The hypothet ical derivat ive and the actual der ivat ive are regressed to establish the statist ical s ign iﬁcance of the hedge relat ionsh ip. Any ineffect ive port ion of the gain or loss on the hedging instrument is recognised in the net trading income immed iately. If a cash ﬂow hedge is discont inued, the amount accumulated in the cash ﬂow hedge reserve is released to the income statement as and when the hedged item affects the income statement. Should the Group consider the hedged future cash ﬂows are no longer expected to occur due to reasons, the cumulative gain or loss will be immed iately reclass if ied to proﬁt or loss. Net investment hedge Hedges of net investments are accounted for in a sim ilar manner to cash ﬂow hedges, w ith gains and losses aris ing on the effective portion of the hedges recorded in the line ‘Exchange differences on translation of foreign operations’ in other comprehensive income, accumulating in the translation reserve with in equ ity. These amounts remain in equity until the net investment is disposed of. The ineffect ive port ion of the hedges is recognised in the net trading income immed iately. 415 Standard Chartered – Annual Report 2023 Financ ial statements 14. Derivat ive ﬁnancial instruments continued The tables below analyse the notional princ ipal amounts and the pos it ive and negat ive fair values of derivat ive ﬁnancial instruments. Notional princ ipal amounts are the amounts of pr inc ipal underly ing the contract at the reporting date. 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies Derivat ives $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Foreign exchange derivat ive contracts: Forward foreign exchange contracts 3,628,067 30,897 32,601 3,154,440 38,162 39,376 Currency swaps and options 1,145,702 11,671 12,845 1,168,026 16,010 17,447 4,773,769 42,568 45,446 4,322,466 54,172 56,823 Interest rate derivat ive contracts: Swaps 4,841,616 53,735 55,241 3,516,310 62,001 64,005 Forward rate agreements and options 313,253 2,057 2,520 98,465 2,214 2,880 5,154,869 55,792 57,761 3,614,775 64,215 66,885 Exchange traded futures and options 325,051 39 47 324,702 279 258 Credit derivat ive contracts 281,130 485 1,107 249,082 411 941 Equity and stock index options 8,671 75 166 6,788 100 246 Commodity derivat ive contracts 117,436 970 1,029 90,952 1,622 1,791 Gross total derivat ives 10,660,926 99,929 105,556 8,608,765 120,799 126,944 Offset – (49,495) (49,495) – (57,082) (57,082) Total derivat ives 10,660,926 50,434 56,061 8,608,765 63,717 69,862 The Group lim its exposure to cred it losses in the event of default by entering into master netting agreements with certain market counterparties. As required by IAS 32, exposures are only presented net in these accounts where they are subject to legal right of offset and intended to be settled net in the ordinary course of business. The Group applies balance sheet offsetting only in the instance where we are able to demonstrate legal enforceabil ity of the right to offset (e.g. via legal opin ion) and the ab il ity and intent ion to settle on a net bas is (e.g. via operational practice). The Group may enter into economic hedges that do not qualify for IAS 39 hedge accounting treatment, includ ing der ivat ives such as interest rate swaps, interest rate futures and cross-currency swaps to manage interest rate and currency risks of the Group. These derivat ives are measured at fa ir value, with fair value changes recognised in net trading income: refer to Market Risk (page 286). Derivat ives held for hedg ing The Group enters into derivat ive contracts for the purpose of hedg ing interest rate, currency and structural foreign exchange risks inherent in assets, liab il it ies and forecast transact ions. The table below summarises the notional princ ipal amounts and carrying values of derivat ives des ignated in hedge accounting relationsh ips at the report ing date. Included in the table above are derivat ives held for hedg ing purposes as follows: 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ives des ignated as fair value hedges: Interest rate swaps 69,347 1,264 2,397 80,760 2,438 2,939 Currency swaps 115 10 6 1,273 16 48 69,462 1,274 2,403 82,033 2,454 2,987 Derivat ives des ignated as cash ﬂow hedges: Interest rate swaps 41,834 184 537 31,977 100 671 Forward foreign exchange contracts 12,071 420 183 11,987 99 385 Currency swaps 14,321 191 150 11,787 86 362 68,226 795 870 55,751 285 1,418 Derivat ives des ignated as net investment hedges: Forward foreign exchange contracts 15,436 32 41 14,576 120 141 Total derivat ives held for hedg ing 153,124 2,101 3,314 152,360 2,859 4,546 416 Standard Chartered – Annual Report 2023 Financ ial statements Notes to the ﬁnancial statements 14. Derivat ive ﬁnancial instruments continued Fair value hedges The Group issues various long-term ﬁxed-rate debt issuances that are measured at amortised cost, includ ing some denominated in foreign currency, such as unsecured senior and subordinated debt (see Notes 22 and 27). The Group also holds various ﬁxed rate debt securit ies such as government and corporate bonds, includ ing some denom inated in foreign currency (see Note 13). These assets and liab il it ies held are exposed to changes in fair value due to movements in market interest and foreign currency rates. The Group uses interest rate swaps to exchange ﬁxed rates for ﬂoating rates on funding to match ﬂoating rates received on assets, or exchange ﬁxed rates on assets to match ﬂoating rates paid on funding. The Group further uses cross-currency swaps to match the currency of the issued debt or held asset with that of the entity’s functional currency. Hedge ineffect iveness from fa ir value hedges is driven by cross-currency basis risk and interest cashﬂows mismatch between the hedging instruments and underlying hedged items. The amortisat ion of fa ir value hedge adjustments for hedged items no longer designated is recognised in net interest income. At 31 December 2023 the Group held the following interest rate and cross- currency swaps as hedging instruments in fair value hedges of interest and currency risk. Hedging instruments and ineffect iveness 2023 Change in fair value used to Ineffectiveness Carrying amount calculate hedge recognised in Notional Asset Liab il ity ineffect iveness 2 proﬁt or loss Interest rate 1 $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate swaps – debt securit ies/subord inated notes issued 45,455 381 2,267 271 (4) Interest rate swaps – loans and advances 1,203 26 1 (20) – Interest rate swaps – debt securit ies and other elig ible b ills 22,689 857 129 (459) (17) Interest and currency risk 1 Cross-currency swaps – debt securit ies/subord inated notes issued 70 – 6 (2) – Cross-currency swaps – debt securit ies and other elig ible b ills 45 10 – 11 – Total at 31 December 2023 69,462 1,274 2,403 (199) (21) 1 Interest rate swaps are designated in hedges of the fair value of interest rate risk attributable to the hedged item. Cross currency swaps are used to hedge both interest rate and currency risks. All the hedging instruments are derivat ives, w ith changes in fair value includ ing hedge ineffect iveness recorded w ith in net trading income 2 This represents a (loss)/gains change in fair value used for calculating hedge ineffect iveness 2022 Change in fair value used to Ineffectiveness recognised in calculate hedge proﬁt or loss Carrying amount ineffect iveness 2 $mill ion $mill ion Notional Asset Liab il ity Interest rate 1 $mill ion $mill ion $mill ion Interest rate swaps – debt securit ies/subord inated notes issued 41,772 112 2,914 (3,020) (7) Interest rate swaps – loans and advances 1,117 68 – 53 (1) Interest rate swaps – debt securit ies and other elig ible b ills 37,871 2,258 25 3,127 13 Interest and currency risk 1 Cross-currency swaps – debt securit ies/subord inated notes issued 72 – 4 (260) 12 Cross-currency swaps – debt securit ies and other elig ible b ills 1,201 16 44 (9) 4 Total at 31 December 2022 82,033 2,454 2,987 (109) 21 1 Interest rate swaps are designated in hedges of the fair value of interest rate risk attributable to the hedged item. Cross currency swaps are used to hedge both interest rate and currency risks. All the hedging instruments are derivat ives, w ith changes in fair value includ ing hedge ineffect iveness recorded w ith in net trad ing income 2 This represents a (loss)/gains change in fair value used for calculating hedge ineffect iveness 417 Standard Chartered – Annual Report 2023 Financ ial statements 14. Derivat ive ﬁnancial instruments continued Hedged items in fair value hedges 2023 Cumulative balance of Accumulated amount of fair value hedge adjustments included in the carrying amount Change in the value used for calculating fair value adjustments from de- designated Carrying amount hedge hedge Asset Liab il ity Asset Liab il ity ineffect iveness 1 relationsh ips 2 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies /subord inated notes issued – 46,156 – 1,761 (273) 360 Debt securit ies and other el ig ible b ills 21,473 – (553) – 431 744 Loans and advances to customers 1,183 – (20) – 20 13 Total at 31 December 2023 22,656 46,156 (573) 1,761 178 1,117 2022 Cumulative balance of fair value Carrying amount Accumulated amount of fair value hedge adjustments included in the carrying amount Change in fair value used for calculating hedge adjustments designated from de- hedge Asset Liab il ity Asset Liab il ity ineffect iveness 1 relationsh ips 2 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies /subord inated notes issued – 42,702 – 2,756 3,285 414 Debt securit ies and other el ig ible b ills 36,028 – (2,075) – (3,101) 441 Loans and advances to customers 1,051 – (65) – (54) 1 Total at 31 December 2022 37,079 42,702 (2,140) 2,756 130 856 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffect iveness 2 This represents a credit/(debit) to the balance sheet value Income statement impact of fair value hedges 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion Change in fair value of hedging instruments (199) (109) Change in fair value of hedged risks attributable to hedged items 178 130 Net ineffect iveness (loss)/ga in to net trading income (21) 21 Amortisat ion ga in to net interest income 232 141 Cash ﬂow hedges The Group has exposure to market movements in future interest cash ﬂows on portfolios of customer accounts, debt securit ies and loans and advances to customers. The amounts and tim ing of future cash ﬂows, represent ing both princ ipal and interest ﬂows, are projected on the basis of contractual terms and other relevant factors, includ ing est imates of prepayments and defaults. The hedging strategy of the Group involves using interest rate swaps to manage the variab il ity in future cash ﬂows on assets and liab il it ies that have ﬂoat ing rates of interest by exchanging the ﬂoating rates for ﬁxed rates. It also uses foreign exchange contracts and currency swaps to manage the variab il ity in future exchange rates on its assets and liab il it ies and costs in foreign currencies. This is done on both a micro basis whereby a single interest rate or cross-currency swap is designated in a separate relationsh ip w ith a single hedged item (such as a ﬂoating-rate loan to a customer), and on a portfolio basis whereby each hedging instrument is designated against a group of hedged items that share the same risk (such as a group of customer accounts). Hedge ineffect iveness for cash ﬂow hedges is mainly driven by payment frequency mismatch between the hedging instrument and the underlying hedged item. The hedged risk is determined as the variab il ity of future cash ﬂows aris ing from changes in the designated benchmark interest and/or foreign exchange rates. Financ ial statements Notes to the ﬁnancial statements 418 Standard Chartered – Annual Report 2023 14. Derivat ive ﬁnancial instruments continued Hedging instruments and ineffect iveness 2023 Change in Ineffectiveness Amount fair value used Gain gain reclassif ied Carrying amount to calculate hedge recognised recognised in net trading to net trading from reserves Notional Asset Liab il ity ineffect iveness 1 in OCI income income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate risk Interest rate swaps 41,834 184 537 612 609 3 – Currency risk Forward foreign exchange contract 12,071 420 183 104 103 1 – Cross-currency swaps 14,321 191 150 185 183 2 – Total as at 31 December 2023 68,226 795 870 901 895 6 – 2022 Change in Ineffectiveness Amount fair value used (loss) reclassif ied Carrying amount to calculate hedge (Loss)/gain recognised recognised in net trading to net trading from reserves Notional Asset Liab il ity ineffect iveness 1 in OCI income income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Interest rate risk Interest rate swaps 31,977 100 671 (533) (531) (2) – Currency risk Forward foreign exchange contract 11,987 99 385 (141) (141) – – Cross-currency swaps 11,787 86 362 421 426 (5) – Total as at 31 December 2022 55,751 285 1,418 (253) (246) (7) – Hedged items in cash ﬂow hedges 2023 Cumulative balance in the Change in cash ﬂow hedge fair value used reserve from for calculating de-designated hedge Cash ﬂow hedge ineffect iveness 1 hedge reserve relationsh ips $mill ion $mill ion $mill ion Customer accounts (421) (114) 136 Debt securit ies and other el ig ible b ills (98) (22) (15) Loans and advances to customers (312) 134 – Intragroup lending currency hedge (64) – – Intragroup borrowing currency hedge – – – Total at 31 December 2023 (895) (2) 121 2022 Cumulative balance in the Change in cash ﬂow hedge fair value used reserve from for calculating de-designated hedge Cash ﬂow hedge ineffect iveness 1 hedge reserve relationsh ips $mill ion $mill ion $mill ion Customer accounts 244 (444) 108 Debt securit ies and other el ig ible b ills (165) (72) ((30) Loans and advances to customers 315 (191) (18) Intragroup lending currency hedge (135) (6) – Intragroup borrowing currency hedge (13) – – Total at 31 December 2022 246 (713) 60 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffect iveness Financ ial statements Standard Chartered – Annual Report 2023 419 14. Derivat ive ﬁnancial instruments continued Impact of cash ﬂow hedges on proﬁt and loss and other comprehensive income 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion Cash ﬂow hedge reserve balance as at 1 January (564) (34) Gain/(loss) recognised in other comprehensive income on effective portion of changes in fair value of hedging instruments 895 (246) Gain reclassif ied to income statement when hedged item affected net proﬁt (128) (373) Taxation charge relating to cash ﬂow hedges (112) 89 Cash ﬂow hedge reserve balance as at 31 December 91 (564) Net investment hedges Foreign currency exposures arise from investments in subsid iar ies that have a different functional currency from that of the presentation currency of the Group. This risk arises from the ﬂuctuation in spot exchange rates between the functional currency of the subsid iar ies and the Group’s presentation currency, which causes the value of the investment to vary. The Group’s policy is to hedge these exposures only when not doing so would be expected to have a sign iﬁcant impact on the regulatory ratios of the Group and its banking subsid iar ies. The Group uses foreign exchange forwards to manage the effect of exchange rates on its net investments in foreign subsid iar ies. Hedging instruments and ineffect iveness 2023 Changes in Change in the value of fair value used the hedging Amount to calculate instrument Ineffectiveness reclassif ied Carrying amount hedge recognised recognised in from reserves Notional Asset Liab il ity ineffect iveness 1 in OCI proﬁt or loss to income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive forward currency contracts 2 15,436 32 41 215 215 – – 2022 Changes in Change in the value of fair value used the hedging Amount Carrying amount to calculate instrument Ineffectiveness reclassif ied hedge recognised recognised in from reserves Notional Asset Liab il ity ineffect iveness 1 in OCI proﬁt or loss to income $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive forward currency contracts 2 14,576 120 141 512 512 – – 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffect iveness 2 These derivat ive forward currency contracts have a matur ity of less than one year. The hedges are rolled on a period ic bas is Hedged items in net investment hedges 2023 Balances remain ing in the translation reserve from Change in the hedging value used for relationsh ips for calculating which hedge hedge Translation accounting is no ineffect iveness 1 reserve longer applied $mill ion $mill ion $mill ion Net investments (215) (9) – 2022 Balances remain ing in the translation reserve from Change in the hedging value used for relationsh ips for calculating which hedge hedge Translation accounting is no ineffect iveness 1 reserve longer applied $mill ion $mill ion $mill ion Net investments (512) (21) – 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffect iveness Financ ial statements Notes to the ﬁnancial statements 420 Standard Chartered – Annual Report 2023 14. Derivat ive ﬁnancial instruments continued Impact of net investment hedges on other comprehensive income 2023 2022 Income/ Income/ (expense) (expense) $mill ion $mill ion Gains recognised in other comprehensive income 215 512 Maturity of hedging instruments 2023 More than one month Less than and less than One to More than Fair value hedges one month one year ﬁve years ﬁve years Interest rate swap Notional $mill ion 3,242 9,789 41,545 14,771 Cross-currency swap Notional $mill ion – 115 – – Average ﬁxed interest rate (to USD) GBP – 1.33% – – CNH – 3.17% – – Average exchange rate GBP/USD – 0.66 – – CNH/USD – 6.37 – – Cash ﬂow hedges Interest rate swap Notional $mill ion 2,129 27,634 11,664 407 Average ﬁxed interest rate USD 5.10% 3.45% 4.70% 3.16% Cross-currency swap Notional $mill ion 166 10,794 3,361 – Average ﬁxed interest rate HKD – 4.97% 0.21% – KRO 1.96% 3.58% 0.62% – USD – 5.64% – – TWD (3.68)% 0.77% 0.81% – JPY – (0.07)% (0.05)% – Average exchange rate HKD/USD – 7.83 7.85 – KRO/USD 1,192.20 1,320.69 1,284.82 – USD/HKD – 0.13 – – TWD/USD 30.63 31.53 32.22 – JPY/HKD – 17.86 18.09 – Forward foreign exchange contracts Notional $mill ion 2,194 9,877 – – Average exchange rate BRL/USD – 5.17 – – TWD/HKD – 3.81 – – JPY/USD 130.49 136.05 – – Net investment hedges Foreign exchange derivat ives Notional $mill ion 15,436 – – – Average exchange rate CNY/USD 7.12 – – – KRW/USD 1,283.25 – – – AED/USD 3.67 – – – HKD/USD 7.80 – – – Financ ial statements Standard Chartered – Annual Report 2023 421 14. Derivat ive ﬁnancial instruments continued 2022 More than one month Less than and less than One to More than Fair value hedges one month one year ﬁve years ﬁve years Interest rate swap Notional $mill ion 2,462 8,888 53,225 16,185 Cross-currency swap Notional $mill ion – 1,109 164 – Average ﬁxed interest rate (to USD) JPY – (0.62)% – – Average exchange rate JPY/USD – 138.78 – – Cash ﬂow hedges Interest rate swap Notional $mill ion 195 16,465 14,819 498 Average ﬁxed interest rate HKD – 0.35% 1.34% – USD 3.80% 1.82% 1.60% 1.29% Cross-currency swap Notional $mill ion 45 8,466 2,650 626 Average ﬁxed interest rate HKD – 3.93% – 0.21% KRO – 3.26% 3.83% – USD – 4.15% – – TWD (0.61)% (1.38)% 0.32% – Average exchange rate HKD/USD – 7.84 – 7.85 KRO/USD – 1,342.85 1,278.62 1,300.90 USD/HKD – 7.84 – – TWD/USD 27.74 30.77 29.73 – Forward foreign exchange contracts Notional $mill ion 1,246 10,741 – – Average exchange rate JPY/USD 135.18 133.26 – – Net investment hedges Foreign exchange derivat ives Notional $mill ion 14,576 – – – Average exchange rate CNY/USD 6.71 – – – KRW/USD 1,296.95 – – – AED/USD 3.67 – – – HKD/USD 7.83 – – – Interest rate benchmark reform As at 31 December 2023, there are no derivat ive instruments designated in fair value or cash ﬂow hedge accounting relationsh ips that were l inked to IBOR reference rates (31 December 2022: $65,769 mill ion). Financ ial statements Notes to the ﬁnancial statements 422 Standard Chartered – Annual Report 2023 15. Loans and advances to banks and customers Accounting policy Refer to Note 13 Financ ial instruments for the relevant accounting policy. 2023 2022 $mill ion $mill ion Loans and advances to banks 45,001 39,545 Expected credit loss (24) (26) 44,977 39,519 Loans and advances to customers 292,145 316,107 Expected credit loss (5,170) (5,460) 286,975 310,647 Total loans and advances to banks and customers 1 331,952 350,166 1 Includes $3.6 bill ion (31 December 2022: $4.8 b ill ion) of assets pledged as collateral. For more informat ion, please refer to page 127 of P illar 3 disclosures The Group has outstanding resident ial mortgage loans to Korea res idents of $17.2 bill ion (31 December 2022: $19.1 b ill ion) and Hong Kong residents of $32.7 bill ion (31 December 2022: $35 b ill ion). Analysis of loans and advances to customers by geographic region and client segment together with their related impa irment provis ions are set out w ith in the R isk review and Capital review (pages 230 to 343). 16. Reverse repurchase and repurchase agreements includ ing other s im ilar lend ing and borrowing Accounting policy The Group purchases securit ies (a reverse repurchase agreement – ‘reverse repo’) typ ically with ﬁnanc ial inst itut ions subject to a commitment to resell or return the securit ies at a predeterm ined price. These securit ies are not included in the balance sheet as the Group does not acquire the risks and rewards of ownership, however they are recorded off-balance sheet as collateral received. Considerat ion pa id (or cash collateral provided) is accounted for as a loan asset at amortised cost unless it is managed on a fair value basis or designated at fair value through proﬁt or loss. In major ity of cases through the contractual terms of a reverse repo arrangement, the Group as the transferee of the security collateral has the right to sell or repledge the asset concerned. The Group also sells securit ies (a repurchase agreement – ‘repo’) subject to a comm itment to repurchase or redeem the securit ies at a predeterm ined price. The securit ies are reta ined on the balance sheet as the Group retains substantially all the risks and rewards of ownership and these securit ies are d isclosed as pledged collateral. Considerat ion rece ived (or cash collateral received) is accounted for as a ﬁnanc ial l iab il ity at amortised cost unless it is either mandatorily classif ied as fa ir value through proﬁt or loss or irrevocably designated at fair value through proﬁt or loss at in it ial recognit ion. Repo and reverse repo transactions typically entitle the Group and its counterparties to have recourse to assets sim ilar to those provided as collateral in the event of a default. Securit ies sold subject to repos, e ither by way of a Global Master Repurchase Agreement (GMRA), or through a securit ies sale and Total Return Swap (TRS) cont inue to be recognised on the balance sheet as the Group retains substantially the associated risks and rewards of the securit ies (the TRS is not recognised). The counterparty liab il ity is included in deposits by banks or customer accounts, as appropriate. Assets sold under repurchase agreements are considered encumbered as the Group cannot pledge these to obtain funding. Reverse repurchase agreements and other sim ilar secured lend ing 2023 2022 $mill ion $mill ion Banks 32,286 24,932 Customers 65,295 65,035 97,581 89,967 Of which: Fair value through proﬁt or loss 81,847 64,491 Banks 30,548 23,954 Customers 51,299 40,537 Held at amortised cost 15,734 25,476 Banks 1,738 978 Customers 13,996 24,498 Financ ial statements Standard Chartered – Annual Report 2023 423 16. Reverse repurchase and repurchase agreements includ ing other s im ilar lend ing and borrowing continued Under reverse repurchase and securit ies borrow ing arrangements, the Group obtains securit ies under usual and customary terms which permit it to repledge or resell the securit ies to others. Amounts on such terms are: 2023 2022 $mill ion $mill ion Securit ies and collateral rece ived (at fair value) 101,935 124,989 Securit ies and collateral wh ich can be repledged or sold (at fair value) 101,845 123,759 Amounts repledged/transferred to others for ﬁnancing act iv it ies, to satisfy liab il it ies under sale and repurchase agreements (at fair value) 34,154 44,628 Repurchase agreements and other sim ilar secured borrow ing 2023 2022 $mill ion $mill ion Banks 5,585 6,968 Customers 47,956 46,846 53,541 53,814 Of which: Fair value through proﬁt or loss 41,283 51,706 Banks 4,658 5,737 Customers 36,625 45,969 Held at amortised cost 12,258 2,108 Banks 927 1,231 Customers 11,331 877 The tables below set out the ﬁnancial assets prov ided as collateral for repurchase and other secured borrowing transactions: 2023 Fair value Fair value through other through proﬁt comprehensive Off-balance or loss income Amortised cost sheet Total Collateral pledged against repurchase agreements $mill ion $mill ion $mill ion $mill ion $mill ion On-balance sheet Debt securit ies and other el ig ible b ills 4,993 8,157 10,181 – 23,331 Off-balance sheet Repledged collateral received – – – 34,154 34,154 At 31 December 2023 4,993 8,157 10,181 34,154 57,485 2022 Fair value Fair value through other through proﬁt comprehensive Off-balance or loss income Amortised cost sheet Total Collateral pledged against repurchase agreements $mill ion $mill ion $mill ion $mill ion $mill ion On-balance sheet Debt securit ies and other el ig ible b ills 2,956 3,630 4,917 – 11,503 Off-balance sheet Repledged collateral received – – – 44,628 44,628 At 31 December 2022 2,956 3,630 4,917 44,628 56,131 Financ ial statements Notes to the ﬁnancial statements 424 Standard Chartered – Annual Report 2023 17. Goodwill and intang ible assets Accounting policy Goodwill Goodwill on acquis it ions of subsid iar ies is included in intang ible assets. Goodw ill on acquis it ions of associates is included in Investments in associates and jo int ventures. Goodw ill included in intang ible assets is assessed at each balance sheet date for impa irment and carr ied at cost less any accumulated impa irment losses. Ga ins and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Detailed calculations are performed based on forecasting expected cash ﬂows of the relevant cash-generating units (CGUs) and discount ing these at an appropr iate discount rate, the determinat ion of wh ich requires the exercise of judgement. Goodwill is allocated to CGUs for the purpose of impa irment testing. CGUs represent the lowest level with in the Group wh ich generates separate cash inﬂows and at which the goodwill is monitored for internal management purposes. These are equal to or smaller than the Group’s reportable segments (as set out in Note 2) as the Group views its reportable segments on a global basis. The major CGUs to which goodwill has been allocated are set out in the CGU table (page 425). Other accounting estimates and judgements The carrying amount of goodwill is based on the applicat ion of judgements includ ing the bas is of goodwill impa irment calculation assumptions. Judgement is also applied in determinat ion of CGUs. Estimates include forecasts used for determin ing cash ﬂows for CGUs, the appropr iate long-term growth rates to use and discount rates which factor in country risk-free rates and applicable risk premiums. The Group undertakes an annual assessment to evaluate whether the carrying value of goodwill is impa ired. The est imat ion of future cash ﬂows and the level to which they are discounted is inherently uncertain and requires sign iﬁcant judgement and is subject to potential change over time. Acquired intang ibles At the date of acquis it ion of a subsid iary or assoc iate, intang ible assets wh ich are deemed separable and that arise from contractual or other legal rights are capital ised and included with in the net ident iﬁable assets acqu ired. These intang ible assets are in it ially measured at fair value, which reﬂects market expectations of the probabil ity that the future econom ic beneﬁts embodied in the asset will ﬂow to the entity and are amortised on the basis of their expected useful lives (4 to 16 years). At each balance sheet date, these assets are assessed for ind icators of impa irment. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down immed iately to the recoverable amount. Computer software Acquired computer software licences are capital ised on the bas is of the costs incurred to acquire and bring to use the specif ic software. Internally generated software represents substantially all of the total software capital ised. D irect costs of the development of separately ident iﬁable internally generated software are capital ised where it is probable that future economic beneﬁts attributable to the software will ﬂow from its use. These costs include staff remuneration costs such as salaries, statutory payments and share-based payments, materials, service providers and contractors provided their time is directly attributable to the software build. Costs incurred in the ongoing maintenance of software are expensed immed iately when incurred. Internally generated software is amortised over each asset’s useful life to a maximum of 10-years. On an annual basis software assets’ residual values and useful lives are reviewed, includ ing assess ing for ind icators of impa irment. Indicators of impa irment include loss of business relevance, obsolescence, exit of the business to which the software relates, technological changes, change in use of the asset, reduction in useful life, plans to reduce usage or scope. For capital ised software that is internally generated, judgement is required to determine which costs relate to research (expensed) and which costs relate to development (capital ised). Further judgement is required to determine the technical feasib il ity of completing the software such that it will be available for use. Estimates are used to determine how the software will generate probable future economic beneﬁts: these estimates include cost savings, income increases, balance sheet improvements, improved functional ity or improved asset safeguarding. Software as a Service (SaaS) is a contractual arrangement that conveys the right to receive access to the supplier’s software applicat ion over the contract term. As such, the Group does not have control and as a result recogn ises an operating expense for these costs over the contract term. Certain costs, includ ing custom isat ion costs related to implementat ion of the SaaS may meet the deﬁnit ion of an intang ible asset in their own right if it is separately ident iﬁable and control is established. These costs are capital ised if it is expected to provide the Group with future economic beneﬁts ﬂowing from the underlying resource and the Group can restrict others from accessing those beneﬁts. Financ ial statements Standard Chartered – Annual Report 2023 425 17. Goodwill and intang ible assets continued 2023 2022 Acquired Computer Acquired Computer Goodwill intang ibles software Total Goodwill intang ibles software 1 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cost At 1 January 2,471 295 5,178 7,944 2,595 457 4,464 7,516 Exchange translation differences (24) (12) 21 (15) (108) (26) (22) (156) Addit ions – – 1,124 1,124 – – 1,096 1,096 Impairment charge² – – (151) (151) (14) – (7) (21) Disposals and amounts written off (18)¹ (5)¹ (4) (27) – (136) (348) (484) Classif ied as held for sale – – – – (2) – (5) (7) At 31 December 2,429 278 6,168 8,875 2,471 295 5,178 7,944 Provis ion for amort isat ion At 1 January – 276 1,799 2,075 – 437 1,608 2,045 Exchange translation differences – (12) 11 (1) – (29) (11) (40) Amortisat ion – 1 625 626 – 4 531 535 Impairment charge 2 – – (39) (39) – – 5 5 Disposals and amounts written off – – – – – (136) (331) (467) Classif ied as held for sale – – – – – – (3) (3) At 31 December – 265 2,396 2,661 – 276 1,799 2,075 Net book value 2,429 13 3,772 6,214 2,471 19 3,379 5,869 1 Includes disposal of goodwill and other intang ibles relat ing to aviat ion ﬁnance leas ing business. These were classif ied as held for sale dur ing 2023 and sold during the year 2 Computer software impa irment includes $82.8 mill ion (2022: n il) charge relating to write off on SaaS (Software as a Service) applicat ions cap ital ised in previous years At 31 December 2023, accumulated goodwill impa irment losses incurred from 1 January 2005 amounted to $3,331 mill ion (31 December 2022: $3,331 mill ion), of wh ich Nil mill ion was recogn ised in 2023 (31 December 2022: $14 mill ion). Outcome of impa irment assessment An annual assessment is made as to whether the current carrying value of goodwill is impa ired. For the purposes of impa irment testing, goodwill is allocated at the date of acquis it ion to a CGU. Goodwill is considered to be impa ired if the carrying amount of the relevant CGU exceeds its recoverable amount. Indicators of impa irment include changes in the economic performance and outlook of the region, includ ing geopol it ical changes, changes in market value of regional investments, large credit defaults and strategic decis ions to ex it certain regions. The recoverable amounts for all the CGUs were measured based on value in use (VIU). The calculation of VIU for each CGU is calculated using ﬁve-year cashﬂow project ions and an est imated terminal value based on a perpetuity value after year ﬁve. The cashﬂow project ions are based on forecasts approved by management up to 2028. The perpetuity terminal value amount is calculated using year ﬁve cashﬂows using long-term GDP growth rates. All cashﬂows are discounted using discount rates which reﬂect market rates appropriate to the CGU. Post-tax discount rates are used to calculate the VIU using the post-tax cashﬂows. The post-tax discount rate is subsequently grossed up to pre-tax discount rate. The calculated VIU using post-tax and pre-tax discount rate is the same. The goodwill allocated to each CGU and key assumptions used in determin ing the recoverable amounts are set out below and are solely estimates for the purposes of assessing impa irment of acqu ired goodwill. 2023 2022 Long-term Long-term Pre-Tax Discount forecast GDP Pre-Tax Discount forecast GDP Goodwill rates growth rates Goodwill rates growth rates Cash-generating unit $mill ion per cent per cent $mill ion per cent per cent Country CGUs Asia 1,036 1,032 Hong Kong 357 12.9 1.6 357 12.4 1.7 Taiwan 333 12.4 1.5 333 11.3 1.7 Singapore 346 13.9 2.1 342 12.3 2.3 Africa & Middle East 80 85 Pakistan 31 35.5 3.2 36 30.9 5.9 Bahrain 49 12.4 0.5 49 16.6 0.7 Global CGUs 1,313 1,354 Global Private Banking 83 15.3 1.9 83 14.5 2.0 Corporate, Commercial & Institut ional Bank ing 1,230 15.7 2.3 1,271 14.7 2.5 2,429 2,471 Financ ial statements Notes to the ﬁnancial statements 426 Standard Chartered – Annual Report 2023 17. Goodwill and intang ible assets continued The Group has performed sensit iv ity analysis on the key assumptions for each CGU’s recoverable amount. Taiwan CGU is considered sensit ive to the key var iables and any ind iv idual movements on the estimates (cashﬂow, discount rate and GDP growth rate) up to the levels disclosed below would elim inate the current headroom. CGU 2023 Sensit iv it ies Extreme Cash- Downside downside GDP Discount rate Cash ﬂow Cash ﬂow ﬂow scenario scenario GDP -1% GDP -1% DR +1% DR +1% Base Case +1% -1% +1% -1% +10% -10% +20% -20% -30% CF -10% CF -20% Head- Pre-Tax Head- Head- Head- Head- Head- Head- Head- Head- Head- Head- Head- Goodwill room Discount room room room room room room room room room room room $mill ion $mill ion Rate GDP $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Taiwan 333 217 12.4% 1.53% 351 112 73 400 375 60 532 (97) (254) (138) (267) The table above represents reasonably possible scenarios that could occur if either; economic factors (which drive GDP rates and discount rates); country-specif ic cash ﬂows; or a comb inat ion of both are d ifferent from the assumptions used in the goodwill impa irment assessment at 31 December 2023. For there to be no headroom, the pre-tax discount rate will need to increase by 2.02 per cent. Sim ilarly, the GDP rates w ill need to decrease by 2.36 per cent and cashﬂows would need to decrease by 13.8 per cent. Acquired intang ibles These primar ily compr ise those items recognised as part of the acquis it ions of Union Bank (now amalgamated into Standard Chartered Bank (Pakistan) Lim ited), Hs inchu (now amalgamated into Standard Chartered Bank (Taiwan) Lim ited), Pembroke, American Express Bank and ABSA’s custody business in Africa. Maintenance intang ible assets represent the value in the difference between the contractual right under acquired leases to receive aircraft in a specif ied ma intenance condit ion at the end of the lease and the actual physical condit ion of the a ircraft at the date of acquis it ion. The acquired intang ibles are amort ised over periods from four years to a maximum of 16 years. The constituents are as follows: 2023 2022 $mill ion $mill ion Acquired intang ibles compr ise: Aircraft maintenance – 5 Brand names – 1 Customer relationsh ips 1 1 Licenses 12 12 Net book value 13 19 Financ ial statements Standard Chartered – Annual Report 2023 427 18. Property, plant and equipment Accounting policy All property, plant and equipment is stated at cost less accumulated depreciat ion and impa irment losses. Land and build ings compr ise mainly branches and ofﬁces. Freehold land is not depreciated although it is subject to impa irment test ing. Depreciat ion on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: • Owned premises • up to 50 years • Leasehold premises • up to 50 years • Leasehold improvements • shorter of remain ing lease term and 10 years • Equipment and motor vehicles • three to 15 years • Aircraft • up to 18 years • Ships • up to 15 years Where the Group is a lessee of a right-of-use asset, the leased assets are capital ised and included in Property, plant and equipment with a corresponding liab il ity to the lessor recognised in Other liab il it ies. The account ing policy for lease assets is set out in Note 19. 2023 Leased Leased Operating premises equipment Premises Equipment lease assets assets assets Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cost or valuation At 1 January 1,773 840 4,420 1,652 29 8,714 Exchange translation differences (27) (22) – (5) (3) (57) Addit ions 1 45 114 – 286 1 446 Disposals and fully depreciated assets written off (68)² (122)² (4,420)³ (69) (9) (4,688) Classif ied as held for sale 18 – – – – 18 As at 31 December 1,741 810 – 1,864 18 4,433 Depreciat ion Accumulated at 1 January 678 575 1,185 730 24 3,192 Exchange translation differences (21) (17) 1 (25) (1) (63) Charge for the year 77 99 27 238 4 445 Impairment charge 3 – – 9 – 12 Attributable to assets sold, transferred or written off (47)² (122)² (1,213)³ (38) (9) (1,429) Classif ied as held for sale 2 – – – – 2 Accumulated at 31 December 692 535 – 914 18 2,159 Net book amount at 31 December 1,049 275 – 950 – 2,274 1. Refer to the cash ﬂow statement under cash ﬂows from invest ing act iv it ies section for the purchase of property, plant and equipment during the year of $159 mill ion on page 363 2. Disposals for property, plant and equipment during the year of $53 mill ion in the cash ﬂow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the year and the net book value disposed 3. Includes disposal of assets from aviat ion ﬁnance leas ing business and sale of vessels (refer note 32). Financ ial statements Notes to the ﬁnancial statements 428 Standard Chartered – Annual Report 2023 18. Property, plant and equipment continued 2022 Leased Leased Operating premises equipment Premises Equipment lease assets assets assets Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Cost or valuation At 1 January 1,980 901 4,248 1,854 33 9,016 Exchange translation differences (90) (65) – (111) (4) (270) Addit ions 1 87 124 624 339 1 1,175 Disposals and fully depreciated assets written off 2 (142) (102) (452) (425) (1) (1,122) Transfers to assets held for sale (62) (18) – (5) – (85) As at 31 December 1,773 840 4,420 1,652 29 8,714 Depreciat ion Accumulated at 1 January 795 611 1,155 819 20 3,400 Exchange translation differences (39) (39) – (33) (3) (114) Charge for the year 76 116 202 250 7 651 Impairment charge 1 – 40 9 – 50 Attributable to assets sold, transferred or written off 2 (125) (101) (212) (313) – (751) Transfers to assets held for sale (30) (12) – (2) – (44) Accumulated at 31 December 678 575 1,185 730 24 3,192 Net book amount at 31 December 1,095 265 3,235 922 5 5,522 1 Refer to the cash ﬂow statement under cash ﬂows from invest ing act iv it ies section for the purchase of property, plant and equipment during the year of $835 mill ion on page 363 2 Disposals for property, plant and equipment during the year of $343 mill ion in the cash ﬂow statement would include the gains and losses incurred as part of other operating income (Note 6) on disposal of assets during the year and the net book value disposed Operating lease assets The operating lease assets subsection of property, plant and equipment refers to the Group’s aircraft operating leasing business, all leases related to which were disposed on 2 November 2023. As at 31 December 2022, this consisted of 99 commercial aircraft of which 97 were narrow-bodies and 2 were wide-bodies. The leases were classif ied as operat ing leases as they did not transfer substantially all the risks and rewards inc idental to the ownersh ip of the assets. As at 31 December 2022, these assets had a net book value of $3,235 mill ion. Refer note 6 Other operat ing income for the disposal gain and the associated rental income, up to the date of their disposal. Under these leases up to the date of disposal, the lessee was responsible for the maintenance and servic ing of the a ircraft during the lease term while the Group receives rental income and assumes the risks of the residual value of the aircraft at the end of the lease. Financ ial statements Standard Chartered – Annual Report 2023 429 19. Leased assets Accounting policy Where the Group is a lessee and the lease is deemed in scope, it recognises a liab il ity equal to the present value of lease payments over the lease term, discounted using the incremental borrowing rate applicable in the economic environment of the lease. The liab il ity is recognised in ‘Other liab il it ies’. A correspond ing right-of-use asset equal to the liab il ity, adjusted for any lease payments made at or before the commencement date, is recognised in ‘Property, plant and equipment’. The lease term includes any extension options contained in the contract that the Group is reasonably certain it will exercise. The Group subsequently depreciates the right-of-use asset using the straight-line method over the lease term and measures the lease liab il ity using the effective interest method. Depreciat ion on the asset is recognised in ‘Depreciat ion and amortisat ion’, and interest on the lease liab il ity is recognised in ‘Interest expense’. If a leased premise, or a physically dist inct port ion of a premise such as an ind iv idual ﬂoor, is deemed by management to be surplus to the Group’s needs and action has been taken to abandon the space before the lease expires, this is considered an ind icator of impa irment. An impa irment loss is recognised if the right-of-use asset, or portion thereof, has a carrying value in excess of its value-in-use when taking into account factors such as the abil ity and l ikel ihood of obta in ing a subtenant. The judgements in determin ing lease balances are the determ inat ion of whether the Group is reasonably certain that it will exercise extension options present in lease contracts. On in it ial recognit ion, the Group cons iders a range of characterist ics such as premises function, regional trends and the term remain ing on the lease to determ ine whether it is reasonably certain that a contractual right to extend a lease will be exercised. Where a change in assumption is conﬁrmed by the local property management team, a remeasurement is performed in the Group-managed vendor system. The estimates are the determinat ion of incremental borrowing rates in the respective economic environments. The Group uses third-party broker quotes to estimate its USD cost of senior unsecured borrowing, then uses cross currency swap pric ing informat ion to determ ine the equivalent cost of borrowing in other currencies. If it is not possible to estimate an incremental borrowing rate through this process, other proxies such as local government bond yields are used. The Group primar ily enters lease contracts that grant it the right to use premises such as ofﬁce build ings and reta il branches. Exist ing lease l iab il it ies may change in future periods due to changes in assumptions or decis ions to exerc ise lease renewal or terminat ion opt ions, changes in payments due to renegotiat ions of market rental rates as perm itted by those contracts and changes to payments due to rent being contractually linked to an inﬂat ion index. In general the re-measurement of a lease liab il ity under these circumstances leads to an equal change to the right-of-use asset balance, with no immed iate effect on the income statement. The total cash outﬂow during the year for premises and equipment leases was $283 mill ion (2022: $310 m ill ion). The right-of-use asset balances and depreciat ion charges are d isclosed in Note 18. The lease liab il ity balances are disclosed in Note 23 and the interest expense on lease liab il it ies is disclosed in Note 3. Maturity analysis The maturity proﬁle for lease liab il it ies assoc iated with leased premises and equipment assets is as follows: 2023 Between Between One year one year two years More than or less and two years and ﬁve years ﬁve years Total $mill ion $mill ion $mill ion $mill ion $mill ion Other liab il it ies – lease l iab il it ies 248 203 373 410 1234 2022 Between Between One year one year two years More than or less and two years and ﬁve years ﬁve years Total $mill ion $mill ion $mill ion $mill ion $mill ion Other liab il it ies – lease l iab il it ies 272 239 437 310 1,258 Financ ial statements Notes to the ﬁnancial statements 430 Standard Chartered – Annual Report 2023 20. Other assets Other assets include: 2023 2022 $mill ion $mill ion Financ ial assets held at amort ised cost (Note 13): Hong Kong SAR Government certif icates of indebtedness (Note 23)¹ 6,568 7,106 Cash collateral 2 10,337 12,515 Acceptances and endorsements 5,326 5,264 Unsettled trades and other ﬁnancial assets 15,909 14,410 38,140 39,295 Non-ﬁnancial assets: Commodit ies and em iss ions cert if icates 3 8,889 10,598 Other assets 565 490 47,594 50,383 1 The Hong Kong SAR Government certif icates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued 2 Cash collateral are margins placed to collateralize net derivat ive mark-to-market (MTM) pos it ions 3 Physically held commodit ies and em iss ion cert if icates are inventory that is carried at fair value less costs to sell, $5.1 bill ion (31 December 2022: $6 b ill ion) are classif ied as Level 1 and $3.7 b ill ion are class if ied as Level 2 (31 December 2022: $4.6 b ill ion). For commod it ies, the fa ir value is derived from observable spot or short-term futures prices from relevant exchanges. 21. Assets held for sale and associated liab il it ies Accounting Policy Upon reclassif icat ion property, plant and equipment are measured at the lower of their carrying amount and fair value less costs to sell. Financ ial instruments continue to be measured per the accounting polic ies in Note 13 Financ ial instruments. The assets below have been presented as held for sale following the approval of Group management and the transactions are expected to complete in 2024. Assets held for sale The ﬁnancial assets reported below are class if ied under Level 1 $101 m ill ion (31 December 2022: $345 m ill ion), Level 2 $541 m ill ion (31 December 2022: $946 mill ion) and Level 3 $59 m ill ion (31 December 2022: $100 m ill ion). 2023 2022 $mill ion $mill ion Financ ial assets held at fa ir value through proﬁt or loss – 3 Equity shares – 2 Derivat ive ﬁnancial instruments – Assets – 1 Financ ial assets held at amort ised cost 701 1,388 Cash and balances at central banks 246 423 Loans and advances to banks 24 81 Loans and advances to customers 251 508 Debt securit ies held at amort ised cost 180 376 Goodwill and intang ible assets – 4 Property, plant and equipment 59 174 Vessels 43 133 Others 16 41 Others 49 56 809 1,625 During the year, the aviat ion ﬁnance leas ing business, which held 99 commercial aircraft, was classif ied as held for sale. The business was sold to AviLease for a considerat ion of $3,570 m ill ion, and the Group recorded a ga in on sale of $309 mill ion. In addit ion, vessels w ith a carrying value of $83 mill ion were sold (2022: n il) and the Group exited Jordan as part of the exit of AME regions ($108 mill ion carry ing value, with a $8 mill ion ga in on sale). Financ ial statements Standard Chartered – Annual Report 2023 431 21. Assets held for sale and associated liab il it ies continued Liab il it ies held for sale The ﬁnancial l iab il it ies reported below are class if ied under Level 1 $54 m ill ion (2022: $402m ill ion) and Level 2 $672 m ill ion (2022: $833 mill ion). 2023 2022 $mill ion $mill ion Financ ial l iab il it ies held at fa ir value through proﬁt or loss – 5 Derivat ive ﬁnancial instruments – 5 Financ ial l iab il it ies held at amort ised cost 726 1,230 Deposits by banks 3 17 Customer accounts 723 1,213 Other liab il it ies 51 64 Provis ions for l iab il it ies and charges 10 8 787 1,307 22. Debt securit ies in issue Accounting policy Refer to Note 13 Financ ial instruments for the relevant accounting policy. 2023 2022 Certif icates Certif icates of deposit Other debt of deposit Other debt of $100,000 securit ies of $100,000 securit ies or more in issue Total or more in issue Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Debt securit ies in issue 15,533 47,013 62,546 23,457 37,785 61,242 Debt securit ies in issue included with in: Financ ial l iab il it ies held at fa ir value through proﬁt or loss (Note13) – 10,817 10,817 – 8,572 8,572 Total debt securit ies in issue 15,533 57,830 73,363 23,457 46,357 69,814 In 2023, the Company issued a total of $8.1 bill ion sen ior notes for general business purposes of the Group as shown below: Securit ies $mill ion $1,000 mill ion ﬁxed-rate sen ior notes due 2027 (callable 2026) 1,000 EUR 1,000 mill ion ﬁxed-rate sen ior notes due 2031 (callable 2030) 1,105 HKD 784 mill ion ﬁxed-rate sen ior notes due 2026 (callable 2025) 100 $1,000 mill ion ﬁxed-rate sen ior notes due 2034 (callable 2033) 1,000 $1,000 mill ion ﬁxed-rate sen ior notes due 2027 (callable 2026) 1,000 $500 mill ion ﬂoat ing-rate senior notes due 2027 (callable 2026) 500 $400 mill ion ﬂoat ing-rate senior notes due 2028 (callable 2027) 400 $1,500 mill ion ﬁxed-rate sen ior notes due 2029 (callable 2028) 1,500 $750 mill ion ﬁxed-rate sen ior notes due 2030 (callable 2029) 750 $750 mill ion ﬁxed-rate sen ior notes due 2028 (callable 2027) 750 Total senior notes issued 8,105 In 2022, the Company issued a total of $5.2 bill ion sen ior notes for general business purposes of the Group as shown below: Securit ies $mill ion CNH 1,100 mill ion ﬁxed-rate sen ior notes due 2026 (callable 2025) 158 $1,250 mill ion ﬁxed-rate sen ior notes due 2028 (callable 2027) 1,250 $1,000 mill ion ﬁxed-rate sen ior notes due 2026 (callable 2025) 1,000 $500 mill ion ﬂoat ing-rate senior notes due 2026 (callable 2025) 500 SGD 255 mill ion ﬁxed-rate sen ior notes due 2033 (callable 2032) 190 HKD 800 mill ion ﬁxed-rate sen ior notes due 2025 (callable 2024) 102 $1,000 mill ion ﬁxed-rate sen ior notes due 2025 (callable 2024) 1,000 $1,000 mill ion ﬁxed-rate sen ior notes due 2028 (callable 2027) 1,000 Total senior notes issued 5,200 Financ ial statements Notes to the ﬁnancial statements 432 Standard Chartered – Annual Report 2023 23. Other liab il it ies Accounting policy Refer to Note 13 Financ ial instruments for the relevant accounting policy for ﬁnanc ial l iab il it ies, Note 19 Leased assets for the accounting policy for leases, and Note 31 Share-based payments for the accounting policy for cash-settled share-based payments. 2023 2022 $mill ion $mill ion Financ ial l iab il it ies held at amort ised cost (Note 13) Notes in circulat ion 1 6,568 7,106 Acceptances and endorsements 2 5,386 5,264 Cash collateral 3 8,440 9,206 Property leases 4 1,054 1,029 Equipment leases 4 4 8 Unsettled trades and other ﬁnancial l iab il it ies 17,211 20,302 38,663 42,915 Non-ﬁnancial l iab il it ies Cash-settled share-based payments 102 81 Other liab il it ies 456 531 39,221 43,527 1 Hong Kong currency notes in circulat ion of $6,568 m ill ion (31 December 2022: $7,106 m ill ion) that are secured by the Government of Hong Kong SAR cert if icates of indebtedness of the same amount included in Other assets (Note 20) 2 Includes early receipts of funds ($60m) from customer, whereas corresponding liab il ity is due in Jan’24 3 Cash collateral are margins received against collateralize net derivat ive mark-to-market (MTM) pos it ions 4 Other ﬁnancial l iab il it ies include the present value of lease liab il it ies, as requ ired by IFRS 16 from 1 January 2019; refer to Note 19 24. Provis ions for l iab il it ies and charges Accounting policy The recognit ion and measurement of prov is ions for l iab il it ies and charges requ ires sign iﬁcant judgement and the use of estimates about uncertain future condit ions or events. Estimates include the best estimate of the probabil ity of outﬂow of econom ic resources, cost of settling a provis ion and tim ing of settlement. Judgements are requ ired for inherently uncertain areas such as legal decis ions ( includ ing external advice obtained), and outcome of regulator reviews. 2023 2022 Expected credit Expected credit loss for credit Other loss for credit Other commitments 1 provis ions 2 Total commitments 1 provis ions 2 Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 280 103 383 346 107 453 Exchange translation differences (5) 4 (1) (39) (2) (41) (Release)/charge against proﬁt (48) 42 (6) (27) 69 42 Provis ions ut il ized – (71) (71) – (71) (71) Transfer 3 – (6) (6) – – – At 31 December 227 72 299 280 103 383 1 Expected credit loss for credit commitment comprises those undrawn contractually committed facil it ies where there is doubt as to the borrowers’ abil ity to meet their repayment obligat ions. 2 Other provis ions cons ist mainly of provis ions for legal cla ims and regulatory and enforcement invest igat ions and proceedings. 3 Includes the provis ions transferred to held for sale. Financ ial statements Standard Chartered – Annual Report 2023 433 25. Contingent liab il it ies and comm itments Accounting policy Financ ial guarantee contracts and loan comm itments Financ ial guarantee contracts and any loan comm itments issued at below-market interest rates are in it ially recognised at their fair value as a ﬁnanc ial l iab il ity, and subsequently measured at the higher of the in it ial value less the cumulative amount of income recognised and their expected credit loss provis ion. Loan comm itments may be designated at fair value through proﬁt or loss where that is the business model under which such contracts are held. Notional values of ﬁnanc ial guarantee contracts and loan commitments are disclosed in the table below. Financ ial guarantees, trade cred its and irrevocable letters of credit are the notional values of contracts issued by the Group’s Transaction Banking business for which an obligat ion to make a payment has not ar isen at the reporting date. Transaction Banking will issue contracts to clients and counterparties of clients, whereby in the event the holder of the contract is not paid, the Group will reimburse the holder of the contract for the actual ﬁnanc ial loss suffered. These contracts have var ious legal forms such as letters of credit, guarantee contracts and performance bonds. The contracts are issued to facil itate trade through export and import business, provide guarantees to ﬁnanc ial inst itut ions where the Group has a local presence, as well as guaranteeing project ﬁnanc ing involv ing large construct ion projects undertaken by sovereigns and corporates. The contracts may contain performance clauses which require the counterparty performing services or provid ing goods to meet certain condit ions before a r ight to payment is achieved, however the Group does not guarantee this performance. The Group will only guarantee the credit of the counterparty paying for the services or goods. Commitments are where the Group has conﬁrmed its intent ion to prov ide funds to a customer or on behalf of a customer under prespecif ied terms and cond it ions in the form of loans, overdrafts, future guarantees whether cancellable or not and the Group has not made payments at the balance sheet date; those instruments are included in these ﬁnanc ial statements as commitments. Commitments and contingent liab il it ies are generally cons idered on demand as the Group may have to honour them, or the client may draw down at any time. Capital commitments are contractual commitments the Group has entered into to purchase non-ﬁnanc ial assets. The table below shows the contract or underlying princ ipal amounts of unmatured off-balance sheet transact ions at the balance sheet date. The contract or underlying princ ipal amounts ind icate the volume of bus iness outstanding and do not represent amounts at risk. 2023 2022 $mill ion $mill ion Financ ial guarantees and trade cred its Financ ial guarantees, trade cred its and irrevocable letters of credit 74,414 60,410 74,414 60,410 Commitments Undrawn formal standby facil it ies, credit lines and other commitments to lend One year and over 78,356 69,597 Less than one year 33,092 31,688 Uncondit ionally cancellable 70,942 67,383 182,390 168,668 Capital Commitments Contracted capital expenditure approved by the directors but not provided for in these accounts 217 257 As set out in Note 26, the Group has contingent liab il it ies in respect of certain legal and regulatory matters for which it is not practicable to estimate the ﬁnanc ial impact as there are many factors that may affect the range of possible outcomes. Financ ial statements Notes to the ﬁnancial statements 434 Standard Chartered – Annual Report 2023 26. Legal and regulatory matters Accounting policy The Group receives legal claims against it in a number of jur isd ict ions and is subject to regulatory and enforcement invest igat ions and proceedings from time to time. Apart from the matters described below, the Group currently considers none of the ongoing claims, invest igat ions or proceedings to be ind iv idually material. However, in light of the uncertaint ies involved in such matters there can be no assurance that the outcome of a particular matter or matters currently not considered to be material may not ultimately be material to the Group’s results in a particular reporting period depending on, among other things, the amount of the loss resulting from the matter(s) and the results otherwise reported for such period. Since 2014, the Group has been named as a defendant in a series of lawsuits that have been ﬁled in the United States Distr ict Courts for the Southern and Eastern Distr icts of New York aga inst a number of banks on behalf of plaint iffs who are, or are relatives of, vict ims of attacks in Iraq and Afghanistan. The plaint iffs in each of these lawsuits have alleged that the defendant banks aided and abetted the unlawful conduct of parties with connections to terrorist organisat ions in breach of the United States Anti-Terrorism Act. None of these lawsuits specify the amount of damages claimed. The Group continues to defend these lawsuits. In January 2020, a shareholder derivat ive compla int was ﬁled by the City of Philadelph ia in New York State Court against 45 current and former directors and senior ofﬁcers of the Group. It is alleged that the ind iv iduals breached their duties to the Group and caused a waste of corporate assets by permitt ing the conduct that gave r ise to the costs and losses to the Group related to legacy conduct and control issues. In March 2021, an amended complaint was served in which Standard Chartered Bank and seven ind iv iduals were removed from the case. Standard Chartered PLC and Standard Chartered Holdings Lim ited rema ined as named “nominal defendants” in the complaint. In May 2021, Standard Chartered PLC ﬁled a motion to dism iss the compla int. In February 2022, the New York State Court ruled in favour of Standard Chartered PLC’s motion to dism iss the compla int. The plaint iffs are pursu ing an appeal against the February 2022 ruling. A hearing date for the plaint iffs’ appeal is awaited. Since October 2020, four lawsuits have been ﬁled in the English High Court against Standard Chartered PLC on behalf of more than 200 shareholders in relation to alleged untrue and/or mislead ing statements and/or om iss ions in informat ion publ ished by Standard Chartered PLC in its rights issue prospectuses of 2008, 2010 and 2015 and/or public statements regarding the Group’s histor ic sanct ions, money laundering and ﬁnanc ial cr ime compliance issues. These lawsuits have been brought under sections 90 and 90A of the Financ ial Serv ices and Markets Act 2000. These lawsuits are at an early procedural stage. Bernard Madoff’s 2008 confession to running a Ponzi scheme through Bernard L. Madoff Investment Securit ies LLC (BMIS) gave rise to a number of lawsuits against the Group. BMIS and the Fairf ield funds (wh ich invested in BMIS) are in bankruptcy and liqu idat ion, respectively. Between 2010 and 2012, ﬁve lawsuits were brought against the Group by the BMIS bankruptcy trustee and the Fairf ield funds’ l iqu idators, in each case seeking to recover funds paid to the Group’s clients pursuant to redemption requests made prior to BMIS’ bankruptcy ﬁl ing. The total amount sought in these cases exceeds USD 300 mill ion, exclud ing any pre-judgment interest that may be awarded. The four lawsuits commenced by the Fairf ield funds’ l iqu idators have been dism issed and the appeals of those d ism issals by the funds’ l iqu idators are ongo ing. As has been reported in the press, a number of Korean banks, includ ing Standard Chartered Bank Korea, have sold equ ity- linked securit ies (“ELS”) to customers, the redempt ion values of which are determined by the performance of various stock ind ices. Standard Chartered Bank Korea sold relevant ELS to its customers with a notional value of approximately USD900m. Due to the performance of the Hang Seng China Enterprise Index, it is antic ipated that several thousand Standard Chartered Bank Korea customers may redeem their ELS at a loss. The value of Standard Chartered Bank Korea customers’ antic ipated losses is subject to ﬂuctuation as the ELS mature on various dates through 2026 and could total several hundred mill ion USD. Standard Chartered Bank Korea may be faced with claims by customers and its regulator, the Financ ial Superv isory Service, to cover part or all of those antic ipated losses and also may face regulatory penalt ies The Group has concluded that the threshold for recording provis ions pursuant to IAS 37 Prov is ions, Cont ingent Liab il it ies and Contingent Assets is not met with respect to the above matters; however, the outcomes of these matters are inherently uncertain and diff icult to pred ict. In 2023, three legal cases concluded in which allegations of corruption had been made against the Group or its employees, none of which resulted in liab il ity being established. Financ ial statements Standard Chartered – Annual Report 2023 435 27. Subordinated liab il it ies and other borrowed funds 2023 2022 $mill ion $mill ion Subordinated loan capital – issued by subsid iary undertak ings $700 mill ion 8.0 per cent subord inated notes due 2031 (callable 2026)¹ 342 345 NPR2.4 bill ion ﬁxed sub debt rate 10.3 per cent 2,3 18 – 360 345 Subordinated loan capital – issued by the Company 4 Primary capital ﬂoating rate notes: $400 mill ion ﬂoat ing rate undated subordinated notes 5 – 16 $300 mill ion ﬂoat ing rate undated subordinated notes (Series 2) 5 – 69 $400 mill ion ﬂoat ing rate undated subordinated notes (Series 3) 5 – 50 $200 mill ion ﬂoat ing rate undated subordinated notes (Series 4) 5 – 26 £900 mill ion 5.125 per cent subord inated notes due 2034 644 587 $2 bill ion 5.7 per cent subord inated notes due 2044 2,197 2,172 $2 bill ion 3.95 per cent subord inated notes due 2023 – 1,999 $1 bill ion 5.2 per cent subord inated notes due 2024 1,001 1,017 $750 mill ion 5.3 per cent subord inated notes due 2043 697 679 €500 mill ion 3.125 per cent subord inated notes due 2024 536 502 $1.25 bill ion 4.3 per cent subord inated notes due 2027 1,154 1,119 $1 bill ion 3.516 per cent subord inated notes due 2030 (callable 2025) 964 938 $500 mill ion 4.886 per cent subord inated notes due 2033 (callable 2028) 481 473 £96.035 mill ion 7.375 per cent Non-Cum Pref Shares (reclassed as Debt) – Other borrow ings 122 116 £99.250 mill ion 8.25 per cent Non-Cum Pref Shares (reclassed as Debt) – Other borrow ings 126 119 $750 mill ion 3.604 per cent ﬁxed rate reset dated subord inated notes due 2033 648 630 € 1 bill ion 2.5 per cent subord inated debt 2030 1,044 967 $1.25 bill ion 3.265 per cent subord inated notes due 2036 1,040 1,002 €1 bill ion 1.200 per cent ﬁxed rate reset dated subord inated notes due 2031 (callable 2026) 1,022 891 11,676 13,370 Total for Group 12,036 13,715 1 Issued by Standard Chartered Bank 2 Issued by Standard Chartered Bank Nepal Lim ited 3 NPR refers to Nepalese Rupee 4 In the balance sheet of the Company the amount recognised is $11,945 mill ion (2022: 13,684 m ill ion), w ith the difference on accout of hedge accounting achieved on a Group basis 5 These notes were subject to remediat ion under interest rate benchmark reform. Please refer to Note 13 for further informat ion on th is 2023 USD EUR GBP NPR Total $mill ion $mill ion $mill ion $mill ion $mill ion Fixed rate subordinated debt 8,524 2,602 892 18 12,036 Floating rate subordinated debt – – – – – Total 8,524 2,602 892 18 12,036 2022 USD EUR GBP NPR Total $mill ion $mill ion $mill ion $mill ion $mill ion Fixed rate subordinated debt 10,372 2,360 822 – 13,554 Floating rate subordinated debt 161 – – – 161 Total 10,533 2,360 822 – 13,715 Redemptions and repurchases during the year Standard Chartered PLC exercised its right to redeem USD 2 bill ion 3.95 per cent subord inated notes 2023. Further to that outstanding balances of ﬂoating rate undated subordinate notes were redeemed during the year. Issuance during the year On 1st March 2023, Standard Chartered Bank Nepal Lim ited issued NPR 2.4 bill ion 10.3 per cent ﬁxed rate dated subord inated notes due 2028. Financ ial statements Notes to the ﬁnancial statements 436 Standard Chartered – Annual Report 2023 28. Share capital, other equity instruments and reserves Accounting policy Securit ies wh ich carry a discret ionary coupon and have no ﬁxed matur ity or redemption date are classif ied as other equ ity instruments. Interest payments on these securit ies are recogn ised, net of tax, as distr ibut ions from equity in the period in which they are paid. Where the Company or other members of the consolidated Group purchase the Company’s equity share capital, the considerat ion pa id is deducted from the total shareholders’ equity of the Group and/or of the Company as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any considerat ion rece ived is included in shareholders’ equity of the Group and/or the Company. Number of Ordinary Ordinary Preference Total share Other ordinary share Share Share capital and equity shares capital 1 premium premium 2 share premium instruments mill ions $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2022 3,079 1,539 3,989 1,494 7,022 6,254 Cancellation of shares includ ing share buy-back (184) (92) – – (92) – Addit ional T ier 1 equity issuance – – – – – 1,240 Addit ional T ier 1 equity redemption – – – – – (990) At 31 December 2022 2,895 1,447 3,989 1,494 6,930 6,504 Cancellation of shares includ ing share buy-back (230) (115) – – (115) – Addit ional T ier 1 equity issuance – – – – – – Addit ional T ier 1 redemption – – – – – (992) At 31 December 2023 2,665 1,332 3,989 1,494 6,815 5,512 1 Issued and fully paid ordinary shares of 50 cents each 2 Includes preference share capital of $75,000 Share buy-back On 16 February 2023, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $58 mill ion, and the total cons iderat ion pa id was $1 bill ion. The buy-back completed on 29 September 2023. The total number of shares purchased was 116,710,492 representing 4.03 per cent of the ordinary shares in issue as at the commencement of the buy-back. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account. On 28 July 2023, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $57 mill ion, and the total cons iderat ion pa id was $1 bill ion. The buy-back completed on 6 November 2023. The total number of shares purchased was 112,982,802 representing 3.90 per cent of the ordinary shares in issue as at the commencement of the buy-back. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account. The shares were purchased by Standard Chartered PLC on various exchanges not includ ing the Hong Kong Stock Exchange. Average Highest Lowest price paid Aggregate Aggregate Number of price paid price paid per share price paid price paid ordinary shares £ £ £ £ $ February 2023 9,522,684 7.99400 7.41600 7.77508 74,039,628 89,017,672 March 2023 48,672,024 7.94600 5.79000 7.07885 344,541,860 416,300,544 April 2023 9,521,811 6.58200 6.10600 6.30837 60,067,118 74,798,622 May 2023 10,662,964 6.66000 5.92800 6.28592 67,026,502 83,626,929 June 2023 15,515,223 6.92200 6.36000 6.70601 104,045,286 131,601,470 July 2023 10,388,883 7.53200 6.56400 6.81807 70,832,098 90,241,074 August 2023 22,896,567 7.60800 7.10000 7.28931 166,900,079 211,996,912 September 2023 40,542,727 7.64800 6.93600 7.35577 298,222,942 369,007,327 October 2023 52,084,775 7.66600 6.04800 7.20829 375,442,209 457,218,216 November 2023 9,885,636 6.38400 6.12600 6.23095 61,596,915 75,472,633 Ordinary share capital In accordance with the Companies Act 2006, the Company does not have authorised share capital. The nominal value of each ordinary share is 50 cents. During the period, nil shares were issued under employee share plans. Financ ial statements Standard Chartered – Annual Report 2023 437 28. Share capital, other equity instruments and reserves continued Preference share capital At 31 December 2023, the Company has 15,000 $5 non-cumulative redeemable preference shares in issue, with 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 and are classif ied in equity. The available proﬁts of the Company are distr ibuted to the holders of the issued preference shares in prior ity to payments made to holders of the ordinary shares and in prior ity to, or par i passu with, any payments to the holders of any other class of shares in issue. On a wind ing up, the assets of the Company are appl ied to the holders of the preference shares in prior ity to any payment to the ordinary shareholders and in prior ity to, or par i passu with, the holders of any other shares in issue, for an amount equal to any div idends payable (on approval of the Board) and the nom inal value of the shares together with any premium as determined by the Board. The redeemable preference shares are redeemable at the paid up amount (which includes premium) at the option of the Company in accordance with the terms of the shares. The holders of the preference shares are not entitled to attend or vote at any general meeting except where any relevant div idend due is not paid in full or where a resolution is proposed varying the rights of the preference shares. Other equity instruments The table provides details of outstanding Fixed Rate Resetting Perpetual Subordinated Contingent Convertible AT1 securit ies issued by Standard Chartered PLC. All issuances are made for general business purposes and to increase the regulatory capital base of the Group. Conversion Proceeds net Interest price per Issuance date Nominal value of issue costs rate 1 Coupon payment dates 2 First reset dates 3 ordinary share 3 July 2019 SGD 750 mill ion USD 552 mill ion 5.375% 3 April, 3 October each year 3 October 2024 SGD 10.909 26 Jun 2020 USD 1,000 mill ion USD 992 mill ion 6% 26 January, 26 July each year 26 January 2026 USD 5.331 14 January 2021 USD 1,250 mill ion USD 1,239 mill ion 4.75% 14 January, 14 July each year 14 July 2031 USD 6.353 19 August 2021 USD 1,500 mill ion USD 1,490 mill ion 4.30% 19 February, 19 August each year 19 August 2028 USD 6.382 15 August 2022 USD 1,250 mill ion USD 1,239 mill ion 7.75% 15 February, 15 August each year 15 February 2028 USD 7.333 1 Interest rates for the period from (and includ ing) the issue date to (but excluding) the ﬁrst reset date 2 Interest payable semi-annually in arrears 3 Securit ies are resettable each date fall ing ﬁve years, or an integral multiple of ﬁve years, after the ﬁrst reset date Standard Chartered PLC redeemed $1,000m Fixed Rate Resetting Perpetual Contingent Convertible Securit ies on its ﬁrst optional redemption date of 2 April 2023. The AT1 issuances above are primar ily purchased by inst itut ional investors. The princ ipal terms of the AT1 secur it ies are descr ibed below: • The securit ies are perpetual and redeemable, at the opt ion of Standard Chartered PLC in whole but not in part, on the ﬁrst interest reset date and each date falling ﬁve years after the ﬁrst reset date • The securit ies are also redeemable for certa in regulatory or tax reasons on any date at 100 per cent of their princ ipal amount together with any accrued but unpaid interest up to (but excluding) the date ﬁxed for redemption. Any redemption is subject to Standard Chartered PLC giv ing not ice to the relevant regulator and the regulator granting permiss ion to redeem • Interest payments on these securit ies w ill be accounted for as a div idend. • Interest on the securit ies is due and payable only at the sole and absolute discret ion of Standard Chartered PLC, subject to certain addit ional restr ict ions set out in the terms and condit ions. Accord ingly, Standard Chartered PLC may at any time elect to cancel any interest payment (or part thereof) which would otherwise be payable on any interest payment date. • The securit ies convert into ordinary shares of Standard Chartered PLC, at a pre-determined price detailed in the table above, should the fully loaded Common Equity Tier 1 ratio of the Group fall below 7.0 per cent. Approximately 859 mill ion ord inary shares would be required to satisfy the conversion of all the securit ies ment ioned above The securit ies rank beh ind the claims against Standard Chartered PLC of (a) unsubordinated creditors, (b) which are expressed to be subordinated to the claims of unsubordinated creditors of Standard Chartered PLC but not further or otherwise; or (c) which are, or are expressed to be, jun ior to the cla ims of other creditors of Standard Chartered PLC, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank, pari passu with, or jun ior to, the cla ims of holders of the AT1 securit ies in a wind ing–up occurr ing prior to the conversion trigger. Financ ial statements Notes to the ﬁnancial statements 438 Standard Chartered – Annual Report 2023 28. Share capital, other equity instruments and reserves continued Reserves The constituents of the reserves are summarised as follows: • The capital reserve represents the exchange difference on redenominat ion of share cap ital and share premium from sterling to US dollars in 2001. The capital redemption reserve represents the nominal value of share capital and preference shares redeemed • The amounts in the “Capital and Merger Reserve” represents the premium aris ing on shares issued using a cash box ﬁnanc ing structure, which required the Company to create a merger reserve under section 612 of the Companies Act 2006. Shares were issued using this structure in 2005 and 2006 to assist in the funding of Korea ($1.9 bill ion) and Ta iwan ($1.2 bill ion) acqu is it ions, in 2008, 2010 and 2015 for the shares issued by way of a rights issue, primar ily for cap ital maintenance requirements and for the shares issued in 2009 by way of an accelerated book build, the proceeds of which were used in the ordinary course of business of the Group. The funding raised by the 2008, 2010 and 2015 rights issues and 2009 share issue was fully retained with in the Company. Of the 2015 fund ing, $1.5 bill ion was used to subscr ibe to addit ional equ ity in Standard Chartered Bank, a wholly owned subsid iary of the Company. Apart from the Korea, Ta iwan and Standard Chartered Bank funding, the merger reserve is considered realised and distr ibutable. • Own credit adjustment reserve represents the cumulative gains and losses on ﬁnanc ial l iab il it ies des ignated at fair value through proﬁt or loss relating to own credit. On derecognit ion of appl icable instruments the balance of any OCA will not be recycled to the income statement, but will be transferred with in equ ity to retained earnings • Fair value through other comprehensive income (FVOCI) debt reserve represents the unrealised fair value gains and losses in respect of ﬁnancial assets class if ied as FVOCI, net of expected cred it losses. Gains and losses are deferred in this reserve and are reclassif ied to the income statement when the underlying asset is sold, matures or becomes impa ired. • FVOCI equity reserve represents unrealised fair value gains and losses in respect of ﬁnanc ial assets class if ied as FVOCI. Gains and losses are recorded in this reserve and never recycled to the income statement • Cash ﬂow hedge reserve represents the effective portion of the gains and losses on derivat ives that meet the cr iter ia for these types of hedges. Gains and losses are deferred in this reserve and are reclassif ied to the income statement when the underlying hedged item affects proﬁt and loss or when a forecast transaction is no longer expected to occur • Translation reserve represents the cumulative foreign exchange gains and losses on translation of the net investment of the Group in foreign operations. Since 1 January 2004, gains and losses are deferred to this reserve and are reclassif ied to the income statement when the underlying foreign operation is disposed. Gains and losses aris ing from der ivat ives used as hedges of net investments are netted against the foreign exchange gains and losses on translation of the net investment of the foreign operations • Retained earnings represents proﬁts and other comprehensive income earned by the Group and Company in the current and prior periods, together with the after tax increase relating to equity-settled share options, less div idend d istr ibut ions, own shares held (treasury shares) and share buy-backs A substantial part of the Group’s reserves is held in overseas subsid iary undertak ings and branches, princ ipally to support local operations or to comply with local regulations. The maintenance of local regulatory capital ratios could potentially restrict the amount of reserves which can be remitted. In addit ion, if these overseas reserves were to be remitted, further unprovided taxation liab il it ies m ight arise. As at 31 December 2023, the distr ibutable reserves of Standard Chartered PLC (the Company) were $14.7 b ill ion (31 December 2022: $13 bill ion). D istr ibutable reserves of SC PLC were $14.7 b ill ion, wh ich are calculated from the Merger reserve and Retained Earnings with considerat ion for restr icted items in line with sections 830 and 831 of the Companies Act 2006. Financ ial statements Standard Chartered – Annual Report 2023 439 28. Share capital, other equity instruments and reserves continued Own shares Computershare Trustees (Jersey) Lim ited is the trustee of the 2004 Employee Beneﬁt Trust (‘2004 Trust’) and Ocorian Trustees (Jersey) Lim ited has been the trustee of the 1995 Employees’ Share Ownersh ip Plan Trust (‘1995 Trust’). The 1995 Trust was closed on 30 June 2023 as all histor ical awards under th is trust have been satisf ied, and the 2004 Trust w ill be used to satisfy exist ing and future awards. The 2004 Trust is used in conjunct ion w ith the Group’s employee share schemes and other employee share-based payments (such as upfront shares and ﬁxed pay allowances). Group companies fund the 2004 Trust from time to time to enable the trustees to acquire shares in Standard Chartered PLC to satisfy these arrangements. Details of the shares purchased and held by the trusts are set out below. 1995 Trust 2004 Trust Total 2023 2022 2023 2022 2023 2022 Shares purchased during the period – – 29,069,539 30,203,531 29,069,539 30,203,531 Market price of shares purchased ($mill ion) – – 237 218 237 218 Shares held at the end of the period – – 28,095,542 27,525,624 28,095,542 27,525,624 Maximum number of shares held during the period 28,893,930 27,976,046 Except as disclosed, neither the Company nor any of its subsid iar ies has bought, sold or redeemed any Standard Chartered PLC securit ies l isted on The Stock Exchange of Hong Kong Lim ited dur ing the period. Div idend wa ivers The trustees of the 2004 Trust, which holds ordinary shares in Standard Chartered PLC in connection with the operation of its employee share plans, have lodged standing instruct ions in relation to shares held by them that have not been allocated to employees, whereby any div idend is waived on the balance of ordinary shares and recalculated and paid at the rate of 0.01p per share. Changes in share capital and other equity instruments of Standard Chartered PLC subsid iar ies The table below details the transactions in equity instruments (includ ing convert ible and hybrid instruments) of the Group’s subsid iar ies, includ ing issuances, conversions, redemptions, purchase or cancellation. This is required under the Hong Kong List ing requ irements, appendix 16 paragraph 10. Proportion Place of Issued/(redeemed) Issued/(redeemed) of shares Name and registered address incorporation Descript ion of shares capital Shares held (%) The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Standard Chartered I H Lim ited United Kingdom $1.00 Ordinary shares $574,721,653 574,721,653 100 Standard Chartered Holdings Lim ited United Kingdom $2.00 Ordinary shares $574,721,653 287,360,826 100 Standard Chartered Strategic Investments Lim ited United Kingdom $1.00 Ordinary shares $45,886,520 45,886,520 100 SC Ventures Holdings Lim ited United Kingdom $1.00 Ordinary shares $217,712,622 217,712,622 100 Zodia Markets Holdings Lim ited United Kingdom $1.00 Ordinary shares $5,580 5,580 80.46 The following companies have the address of 5th Floor, Holland House 1-4 Bury Street, London, EC3A 5AW, United Kingdom Zodia Holdings Lim ited United Kingdom $1.00 Ordinary-A shares $18,300,000 18,300,000 100 The following companies have the address of Suites 508,509,15th ﬂoor, Al Sarab Tower, Adgm Square, Al Maryah Island, Abu Dhabi, United Arab Emirates Financ ial Inclus ion Technologies Ltd United Arab Emirates $1.00 Ordinary shares $13,500,000 13,500,000 100 The following company has the address of 39/F, Oxford House,Taikoo Place,979 king’s road, Quarry Bay, Hong Kong Mox Bank Lim ited Hong Kong HKD Ordinary shares HKD1,212,100,000 121,210,000 68.29 Financ ial statements Notes to the ﬁnancial statements 440 Standard Chartered – Annual Report 2023 Proportion Place of Issued/(redeemed) Issued/(redeemed) of shares Name and registered address incorporation Descript ion of shares capital Shares held (%) The following company has the address of Second Floor, Indiqube Edge, Khata No. 571/630/6/4, Sy.No.6/4, Ambalipura Village, Varthur Hobli, Marathahalli Sub-Div is ion, Ward No. 150, Bengaluru, 560102, India. Standard Chartered Research and India INR10.00 A Equity Technology India Private Lim ited shares INR135,758,500 13,575,850 90.63 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 Capital Lim ited India INR10.00 Equity shares INR730,222,220 73,022,222 100 The following company has the address of StandardChartered@Chiromo, Number 48, Westlands Road, P. O. Box 30003 – 00100, Nairob i, Kenya Solvezy Technology Kenya Lim ited Kenya KES1,000.00 Ordinary shares KES237,228,000 237,228 100 Tawi Fresh Kenya Lim ited Kenya KES1,000.00 Ordinary shares KES505,560,000 505,560 100 The following companies have the address of 27, Fitzw ill iam Street, Dublin, D02 TP23, Ireland Zodia Custody (Ireland) Lim ited Ireland $1.00 Ordinary shares $1,230,000 1,230,000 72.83 The following company has the address of 77 Robinson Road, #25-00 Robinson 77, 068896, Singapore Trust Bank Singapore Lim ited Singapore SGD Ordinary shares SGD110,000,000 110,000,000 60 EX-26, Ground Floor, Bldg 16-Co Work, Dubai Internet City, Dubai, United Arab Emirates Appro Onboarding Solutions FZ-LLC United Arab AED1,000.00 Ordinary Emirates shares AED25,691,000 25,691 100 The following company has the address of Part of Level 15, Standard Chartered Bank Build ing, Plot 8, Burj Downtown, Dubai, United Arab Emirates myZoi Financ ial Inclus ion Technologies United Arab AED1.00 Ordinary LLC Emirates shares AED25,000,000 25,000,000 100 The following company has the address of Standard Chartered Bank Build ing, 87 Independance Avenue, Ridge, ACCRA, Greater ACCRA, GA-016-4621, Ghana Solvezy Technology Ghana Ltd Ghana GHS Ordinary GHS4,301,000 4,301,000 100 The following company has the address of 8th Floor, Makati Sky Plaza Build ing 6788, Ayala Avenue San Lorenzo, City of Makati, Fourth Distr ict, Nat ional Capi, 1223, Phil ipp ines Standard Chartered Group Services, Manila Incorporated Phil ipp ines PHP1.00 Ordinary PHP108,000,000 108,000,000 100 The following company has the address of 1201 1-2, 15-16, 12/F, Unit No.1, Build ing No.1, No. 1 Dongsanhuan Zhong Road, Chaoyang Distr ict, Be ijing, China Standard Chartered Securit ies (Ch ina) Lim ited China CNY Ordinary CNY1,050,000,000 1,050,000,000 100 28. Share capital, other equity instruments and reserves continued Financ ial statements Standard Chartered – Annual Report 2023 441 Proportion Place of Issued/(redeemed) Issued/(redeemed) of shares Name and registered address incorporation Descript ion of shares capital Shares held (%) The following companies have the address of Rafﬂes Place, #26-01 Republic Plaza, Singapore , 048619, Singapore Autumn Life Pte. Ltd. Singapore $ Ordinary-A shares $2,650,000 2,650,000 96.62 Audax Financ ial Technology Pte. Ltd Singapore $ Ordinary-A shares $94,300,000 94,300,000 100 CashEnable Pte. Ltd. Singapore $ Ordinary-A shares $700,000 700,000 100 Letsbloom Pte. Ltd Singapore $ Ordinary shares $4,599,999 4,599,999 100 The following companies have the address of 9 Rafﬂes Place, #26-01 Republic Plaza, 048619 , Singapore SCV Research and Development Pte. Ltd. Singapore $ Ordinary shares $8,000,000 8,000,000 100 SCV Master Holding Company Pte Ltd Singapore $ Ordinary shares $25,700,000 25,700,000 100 The following companies have the address of 80 Robinson Road, #02-00, 068898, Singapore Solv-India Pte Ltd Singapore $ Ordinary shares $47,000,000 47,000,000 100 The following company has the address of 12th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya , Selangor, Malaysia Solv Sdn. Bhd. Malaysia RM5.00 Ordinary shares RM10,911,120 2,182,224 90.6 Please see Note 22 Debt securit ies in issue for issuances and redemptions of senior notes. Please see Note 27 Subordinated liab il it ies and other borrowed funds for issuance and redemptions of subordinated liab il it ies and AT1 securit ies. Please see Note 40 Related undertakings of the Group for subsid iar ies liqu idated, d issolved or sold during the year. 29. Non-controlling interests $mill ion At 1 January 2022 371 Comprehensive income for the year (88) Income in equity attributable to non-controlling interests (42) Other proﬁts attributable to non-controlling interests (46) Distr ibut ions (31) Other increases 1 98 At 31 December 2022 350 Comprehensive income for the year (38) Income in equity attributable to non-controlling interests (31) Other proﬁts attributable to non-controlling interests (7) Distr ibut ions (26) Other increases 2 110 At 31 December 2023 396 1. Addit ional investment by non-controlling interests mainly in Mox Bank Lim ited ($39 m ill ion), Trust Bank S ingapore Lim ited ($47 m ill ion), Zod ia Markets Holdings Lim ited ($3 m ill ion), Power2SME Pte. Ltd. ($9 m ill ion) 2. Addit ional investment by non-controlling interests mainly in Mox Bank Lim ited ($48 m ill ion), Trust Bank S ingapore Lim ited ($34 m ill ion) and Zod ia Custody Lim ited ($28 mill ion) 28. Share capital, other equity instruments and reserves continued Financ ial statements Notes to the ﬁnancial statements 442 Standard Chartered – Annual Report 2023 30. Retirement beneﬁt obligat ions Accounting policy The Group operates pension and other post-retirement beneﬁt plans around the world, which can be categorised into deﬁned contribut ion plans and deﬁned beneﬁt plans. • For deﬁned contribut ion plans, the Group pays contribut ions to publ icly or privately admin istered pens ion plans on a statutory or contractual basis, and such amounts are charged to operating expenses. The Group has no further payment obligat ions once the contr ibut ions have been pa id. • For deﬁned beneﬁt plans, which promise levels of payments where the future cost is not known with certainty: – the accounting obligat ion is calculated annually by independent actuaries using the projected unit method. – Actuarial gains and losses that arise are recognised in shareholders’ equity and presented in the statement of other comprehensive income in the period they arise. – The Group determines the net interest expense on the net deﬁned beneﬁt liab il ity for the year by applying the discount rate used to measure the deﬁned beneﬁt obligat ion at the beg inn ing of the annual per iod to the net deﬁned beneﬁt liab il ity, taking into account any changes in the net deﬁned beneﬁt liab il ity during the year as a result of contribut ions and beneﬁt payments. Net interest expense, the cost of the accrual of new beneﬁts, beneﬁt enhancements (or reductions) and admin istrat ion expenses met directly from plan assets are recognised in the income statement in the period in which they were incurred. Other accounting estimates and judgements There are many factors that affect the measurement of the retirement beneﬁt obligat ions. Th is measurement requires the use of estimates, such as discount rates, inﬂat ion, pens ion increases, salary increases, and life expectancies which are inherently uncertain. The table below summarises how these assumptions are set: Assumption Detail Discount rate Determined by reference to market yields at the end of the reporting period on high-quality corporate bonds (or, in countries where there is no deep market in such bonds, government bonds) of a currency and term consistent with the currency and term of the post-employment beneﬁt obligat ions. Th is is the approach adopted across all our geographies. Inﬂation Where there are inﬂat ion-l inked bonds available (e.g. United Kingdom and the eurozone), the Group derives inﬂat ion based on the market on those bonds, w ith the market yield adjusted in respect of the United Kingdom to take account of the fact that liab il it ies are l inked to Consumer Price Index inﬂat ion, whereas the reference bonds are l inked to Retail Price Index inﬂat ion. Where no inﬂat ion- linked bonds exist, we determine inﬂat ion assumpt ions based on a combinat ion of long-term forecasts and short-term inﬂat ion data. Salary growth Salary growth assumptions reﬂect the Group’s long-term expectations, taking into account future business plans and macroeconomic data (primar ily expected future long-term inﬂat ion). Demographic assumptions Demographic assumptions, includ ing mortal ity and turnover rates, are typically set based on the assumptions used in the most recent actuarial funding valuation, and will generally use industry standard tables, adjusted where appropriate to reﬂect recent histor ic exper ience and/or future expectations. The sensit iv ity of the liab il it ies to changes in these assumptions is shown in the Note below. Retirement beneﬁt obligat ions compr ise: 2023 2022 $mill ion $mill ion Deﬁned beneﬁt plans obligat ion 166 128 Deﬁned contribut ion plans obl igat ion 17 18 Net obligat ion 183 146 Retirement beneﬁt charge comprises: 2023 2022 $mill ion $mill ion Deﬁned beneﬁt plans 66 58 Deﬁned contribut ion plans 1 365 332 Charge against proﬁt (Note 7) 431 390 1 The Group during the year util ised, aga inst deﬁned contribut ion payments, $4 m ill ion forfe ited pension contribut ions in respect of employees who left before their interests vested fully. The residual balance of forfeited contribut ions is $16 mill ion The Group operates over 60 deﬁned beneﬁt plans across its geographies, many of which are closed to new entrants who now join deﬁned contr ibut ion arrangements. The a im of all these plans is, as part of the Group’s commitment to ﬁnanc ial wellbe ing for employees, to give employees the opportunity to save appropriately for retirement in a way that is consistent with local regulations, taxation requirements and market condit ions. The deﬁned beneﬁt plans expose the Group to currency r isk, interest rate risk, investment risk and actuarial risks such as longevity risk. Financ ial statements Standard Chartered – Annual Report 2023 443 30. Retirement beneﬁt obligat ions continued The material holdings of government and corporate bonds shown partially hedge movements in the liab il it ies result ing from interest rate and inﬂat ion changes. Sett ing aside movements from other drivers such as currency ﬂuctuation, the reduction in discount rates in most countries with material pension liab il it ies over 2023 has led to h igher liab il it ies. Th is has been partly offset by increases in the value of bonds held as well as good performance of growth assets such as equit ies, lead ing to an increase in the pension deﬁc it reported. These movements are shown as actuar ial gains and losses in the tables below. Contribut ions into a number of plans in excess of the amounts required to fund beneﬁts accruing have also partially offset the increase in the net deﬁcit over the year. The disclosures required under IAS 19 have been calculated by independent qualif ied actuar ies based on the most recent full actuarial valuations updated, where necessary, to 31 December 2023. UK Fund The Standard Chartered Pension Fund (the ‘UK Fund’) is the Group’s largest pension plan, representing 53 per cent (31 December 2022: 53 per cent) of total pension liab il it ies. The UK Fund is set up under a trust that is legally separate from the Bank (its formal sponsor) and, as required by UK legislat ion, at least one th ird of the trustee directors are nominated by members; the remainder are appointed by the Bank. The trustee directors have a ﬁduc iary duty to members and are respons ible for governing the UK Fund in accordance with its Trust Deed and Rules. The UK Fund was closed to new entrants from 1 July 1998 and closed to the accrual of new beneﬁts from 1 April 2018: all UK employees are now offered membership of a deﬁned contribut ion plan. The ﬁnancial pos it ion of the UK Fund is regularly assessed by an independent qualif ied actuary. The fund ing valuation as at 31 December 2020 was completed in December 2021 by the Scheme Actuary, T Kripps of Will is Towers Watson, us ing assumptions different from those below, and agreed with the UK Fund trustee. It showed that the UK Fund was 92% funded at that date, revealing a past service deﬁc it of $162 m ill ion (£127 m ill ion). To repair the deﬁc it, three annual cash payments each of $42 m ill ion (£32.9 m ill ion) were agreed, w ith the ﬁrst of these paid in December 2021, and two further instalments to be paid in December 2022 and December 2023. However, the agreement allowed that, if the funding posit ion improves to being at or near a surplus in future years, the payments due in 2022 and 2023 will be reduced or elim inated. Based on the fund ing posit ions at the agreed measurement po int of mid-year, no payment was made in December 2022, and a reduced payment of $8m (£6m) was made in December 2023. As part of the 2020 valuation, in order to provide security for future contribut ions an add it ional $64 m ill ion nom inal gilts (£50 mill ion) were purchased and transferred into the exist ing escrow account of $140 m ill ion g ilts (£110 mill ion), topp ing it up to $204 mill ion. Under the terms of the 2020 valuation agreement, the USD8m payment made in December 2023 is deductible from the funds held in escrow. The Group has not recognised any addit ional l iab il ity under IFRIC 14, as the Bank has control of any pension surplus under the Trust Deed and Rules. Virg in Med ia vs NTL Pension Trustees II Ltd Following the June 2023 ruling in the case of Virg in Med ia vs NTL Pension Trustees II Lim ited, the Bank has cons idered the potential impact of this ruling on the UK Fund and is of the view that any potential impact is not expected to be material. Overseas plans The princ ipal overseas deﬁned beneﬁt arrangements operated by the Group are in Hong Kong, India, Jersey, Korea, Taiwan, United Arab Emirates (UAE) and the United States of America (US). Plans in Hong Kong, India, Korea, Taiwan and UAE remain open for the accrual of future beneﬁts. Key assumptions The princ ipal ﬁnancial assumpt ions used at 31 December 2023 were: 2023 2022 UK Funded Overseas Plans 1 Unfunded Plans 2 UK Funded Overseas Plans 1 Unfunded Plans 2 % % % % % % Discount rate 4.6 1.2 – 4.9 3.1 – 7.4 4.8 1.2 – 5.4 3.7 – 7.6 Price inﬂat ion 2.5 2.0 – 2.9 2.0 – 5.0 2.6 1.0 – 3.1 2.0 – 4.0 Salary increases n/a 3.5 – 4.5 4.0 – 8.5 n/a 3.5 – 4.5 4.0 – 7.8 Pension increases 2.3 2.9 0.0 – 2.3 2.4 3.1 0.0 – 2.4 Post-retirement medical rate 8% in 2023 7% in 2022 reducing by reducing by 0.5% per 0.5% per annum to annum to 5% in 2029 5% in 2026 1 The range of assumptions shown is for the funded deﬁned beneﬁt overseas plans in Hong Kong, Jersey, Korea, Taiwan, and the US. These comprise around 75 per cent of the total liab il it ies of overseas funded plans. 2 The range of assumptions shown is for the main unfunded deﬁned beneﬁt plans in India, Korea, Thailand, UAE, UK and the US. They comprise around 95 per cent of the total liab il it ies of unfunded plans The princ ipal non-ﬁnancial assumpt ions are those made for UK life expectancy. The UK mortality tables are S3PMA for males and S3PFA for females, projected by year of birth with the CMI 2019 improvement model with a 1.25% annual trend and in it ial addit ion parameter of 0.25%. Scal ing factors of 92% for male pensioners, 92% for female pensioners, 92% for male dependants and 82% for female dependants have been applied. Financ ial statements Notes to the ﬁnancial statements 444 Standard Chartered – Annual Report 2023 30. Retirement beneﬁt obligat ions continued The resulting assumptions for life expectancy for the UK Fund are that a male member currently aged 60 will live for 27 years (2022: 27 years) and a female member for 30 years (2022: 30 years) and a male member currently aged 40 will live for 29 years (2022: 29 years) and a female member for 32 years (2022: 32 years) after their 60th birthdays. Both ﬁnancial and non-ﬁnancial assumpt ions can be expected to change in the future, which would affect the value placed on the liab il it ies. For example, changes at the report ing date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the deﬁned beneﬁt obligat ion by the amounts shown below: • If the discount rate increased by 25 basis points the liab il ity would reduce by approximately $35 mill ion for the UK Fund |(2022: $30 mill ion) and $20 m ill ion for the other plans (2022: $15 m ill ion) • If the rate of inﬂat ion increased by 25 basis points the liab il ity, allowing for the consequent impact on pension and salary increases, would increase by approximately $20 mill ion for the UK Fund (2022: $20 m ill ion) and $15 m ill ion for the other plans (2022: $15 mill ion) • If the rate of salary growth relative to inﬂat ion increased by 25 basis points the liab il ity would increase by nil for the UK Fund (2022: nil) and approximately $10 mill ion for the other plans (2022: $10 m ill ion) • If longevity expectations increased by one year the liab il ity would increase by approximately $35 mill ion for the UK Fund (2022: $35 mill ion) and $10 m ill ion for the other plans (2022: $10 m ill ion) Although this analysis does not take account of the full distr ibut ion of cash ﬂows expected, it does provide an approximat ion of the sensit iv ity to the main assumptions. While changes in other assumptions would also have an impact, the effect would not be as sign iﬁcant. Proﬁle of plan obligat ions Funded plans Unfunded UK Fund Overseas plans Duration of the deﬁned beneﬁt obligat ion ( in years) 11 8 8 Duration of the deﬁned beneﬁt obligat ion – 2022 11 9 9 Beneﬁts expected to be paid from plans Beneﬁts expected to be paid during 2024 80 63 19 Beneﬁts expected to be paid during 2025 82 100 17 Beneﬁts expected to be paid during 2026 84 74 17 Beneﬁts expected to be paid during 2027 86 83 17 Beneﬁts expected to be paid during 2028 89 91 18 Beneﬁts expected to be paid during 2029 to 2033 478 444 82 Fund values UK Fund Overseas plans Quoted assets Unquoted assets Total assets Quoted assets Unquoted assets Total assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 31 December 2022 Equit ies 2 – 2 223 – 223 Government bonds 206 – 206 160 – 160 Corporate bonds 309 82 391 116 – 116 Hedge funds – 14 14 – – – Infrastructure – 177 177 – – – Property – 126 126 – – – Derivat ives 2 – 2 – – – Cash and equivalents 257 – 257 35 221 256 Others 7 4 11 – 63 63 Total fair value of assets 1 783 403 1,186 534 284 818 At 31 December 2023 Equit ies 2 – 2 160 – 160 Government bonds 443 – 443 173 – 173 Corporate bonds 360 113 473 179 – 179 Hedge funds – 9 9 – – – Infrastructure – 166 166 – – – Property – 84 84 – – – Derivat ives 2 5 7 – – – Cash and equivalents 66 – 66 37 166 203 Others 7 2 9 – 145 145 Total fair value of assets 1 880 379 1,259 549 311 860 1 Self-investment is monitored closely and is less than $1 mill ion of Standard Chartered equ it ies and bonds for 2023 (31 December 2022: <$1 m ill ion). Self- investment is only allowed where it is not practical to exclude it – for example through investment in index-tracking funds where the Group is a constituent of the relevant index Financ ial statements Standard Chartered – Annual Report 2023 445 30. Retirement beneﬁt obligat ions continued At 31 December 2023 At 31 December 2022 Funded plans Funded plans UK Fund Overseas Plans Unfunded Plans UK Fund Overseas Plans Unfunded Plans $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Total fair value of assets 1,259 860 N/A 1,186 818 N/A Present value of liab il it ies (1,219) (877) (189) (1,138) (817) (177) Net pension plan asset/(obligat ion) 40 (17) (189) 48 1 (177) The pension cost for deﬁned beneﬁt plans was: 2023 Funded plans UK Fund Overseas plans Unfunded plans Total $mill ion $mill ion $mill ion $mill ion 1 Current service cost – 39 11 50 2 Past service cost and curtailments 8 – 1 9 3 Settlement cost – 2 – 2 Interest income on pension plan assets (57) (43) – (100) Interest on pension plan liab il it ies 56 41 8 105 Total charge to proﬁt before deduction of tax 7 39 20 66 Net (gain)/losses on plan assets 4 (18) (52) – (70) (Gains)/losses on liab il it ies 30 79 8 117 Total (gains)/losses recognised directly in statement of comprehensive income before tax 12 27 8 47 Deferred taxation (1) (10) – (11) Total (gains) /losses after tax 11 17 8 36 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion and actuar ial losses of $2 mill ion that are immed iately recogn ised through P&L in line with the requirements of IAS 19. 2 Includes the cost of discret ionary pens ion increases paid to UK pensioners as well as small past service costs in relation to Hong Kong 3 Terminat ion beneﬁts pa id from the pension plan in Indonesia 4 The actual return on the UK Fund assets was a gain of $75 mill ion and on overseas plan assets was a ga in of $95 mill ion Funded plans UK Fund Overseas plans Unfunded plans Total 2022 $mill ion $mill ion $mill ion $mill ion Current service cost 1 – 47 6 53 Past service cost and curtailments 2 – 2 – 2 Interest income on pension plan assets (34) (32) – (66) Interest on pension plan liab il it ies 33 31 5 69 Total charge to proﬁt before deduction of tax (1) 48 11 58 Net (gains)/losses on plan assets 3 486 113 – 599 (Gains)/ losses on liab il it ies (453) (143) (44) (640) Total losses/(gains) recognised directly in statement of comprehensive income before tax 33 (30) (44) (41) Deferred taxation 7 13 – 20 Total (gains)/losses after tax 40 (17) (44) (21) 1 Includes admin istrat ive expenses paid out of plan assets of $ 1 mill ion (2021: $ 1 m ill ion) 2 Includes various small costs and gains from plan amendments and settlements in India, Kenya, Maurit ius, South Korea and Sr i Lanka 3 The actual return on the UK Fund assets was a loss of $452 mill ion and on overseas plan assets was a loss of $82 m ill ion Financ ial statements Notes to the ﬁnancial statements 446 Standard Chartered – Annual Report 2023 30. Retirement beneﬁt obligat ions continued Movement in the deﬁned beneﬁt pension plans deﬁc it dur ing the year comprise: Funded plans UK Fund Overseas plans Unfunded plans Total $mill ion $mill ion $mill ion $mill ion Surplus/(deﬁcit) at January 2023 48 1 (177) (128) ions Contribut 8 59 14 81 Current service cost 1 – (39) (11) (50) Past service cost and curtailments (8) – (1) (9) Settlement costs and transfers impact – (2) – (2) Net interest on the net deﬁned beneﬁt asset/liab il ity 1 2 (8) (5) Actuarial gains/(losses) (12) (27) (8) (47) Assets held for sale 3 – (7) 6 (1) Exchange rate adjustment 3 (4) (4) (5) Surplus/(deﬁcit) at 31 December 2023² 40 (17) (189) (166) 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 2 The deﬁcit total of $166 m ill ion is made up of plans in deﬁc it of $260 m ill ion (31 December 2022: $248 m ill ion) net of plans in surplus with assets totalling $94 mill ion (31 December 2022: $120 mill ion) 3 “Assets held for sale” is an adjustment relating to plans in Cameroon, Cote D’Ivoire and Zimbabwe which is required due to these countries being excluded in the opening and closing assets and liab il it ies, but included in the proﬁt and other comprehensive income items shown. Funded plans UK Fund Overseas plans Unfunded plans Total $mill ion $mill ion $mill ion $mill ion Surplus/(deﬁcit) at January 2022 88 (44) (236) (192) Contribut ions – 67 13 80 Current service cost 1 – (47) (6) (53) Past service cost and curtailments – (2) – (2) Settlement costs and transfers impact – – – – Net interest on the net deﬁned beneﬁt asset/liab il ity 1 1 (5) (3) Actuarial gains/(losses) (33) 30 44 41 Assets held for sale 3 – (4) 2 (2) Exchange rate adjustment (8) – 11 3 Surplus/(deﬁcit) at 31 December 2022² 48 1 (177) (128) 1 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2021: $1 m ill ion) 2 The deﬁcit total of $128 m ill ion is made up of plans in deﬁc it of $248 m ill ion (31 December 2021: $355 m ill ion) net of plans in surplus with assets totalling $120 mill ion (31 December 2021: $163 mill ion) 3 Assets held for sale includes funded and unfunded plans in Cameroon, Cote D’Ivoire, Jordan and Zimbabwe The Group’s expected contribut ion to its deﬁned beneﬁt pension plans in 2024 is $53 mill ion. 2023 2022 Assets Obligat ions Total Assets Obligat ions Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion At 1 January 2,004 (2,132) (128) 2,942 (3,134) (192) Contribut ions 1 82 (1) 81 81 (1) 80 Current service cost 2 – (50) (50) – (53) (53) Past service cost and curtailments – (9) (9) – (2) (2) Settlement costs – (2) (2) (5) 5 – Interest cost on pension plan liab il it ies – (105) (105) – (69) (69) Interest income on pension plan assets 100 – 100 66 – 66 Beneﬁts paid out 2 (161) 161 – (176) 176 – Actuarial gains/(losses) 3 70 (117) (47) (599) 640 41 Assets held for sale 4 (7) 6 (1) (18) 16 (2) Exchange rate adjustment 31 (36) (5) (287) 290 3 At 31 December 2,119 (2,285) (166) 2,004 (2,132) (128) 1 Includes employee contribut ions of $1 m ill ion (31 December 2022: $1 m ill ion) 2 Includes admin istrat ive expenses paid out of plan assets of $1 mill ion (31 December 2022: $1 m ill ion) 3 Actuarial gain on obligat ion compr ises of $50 mill ion loss (31 December 2022: $708 m ill ion ga in) from ﬁnanc ial assumpt ion changes, $1 mill ion loss (31 December 2022: $9 mill ion ga in) from demographic assumption changes and $66 mill ion loss (31 December 2022: $77 m ill ion loss) from exper ience 4 “Assets held for sale” is an adjustment relating to plans in Cameroon, Cote D’Ivoire and Zimbabwe which is required due to these countries being excluded in the opening and closing assets and liab il it ies, but included in the proﬁt and other comprehensive income items shown. Financ ial statements Standard Chartered – Annual Report 2023 447 31. Share-based payments Accounting policy The Group operates equity-settled and cash-settled share-based compensation plans. The fair value of the employee services (measured by the fair value of the awards granted) received in exchange for the grant of the shares and awards is recognised as an expense. For deferred share awards granted as part of an annual performance award, the expense is recognised over the period from the start of the performance period to the vesting date. For example, the expense for three-year awards granted in 2024 in respect of 2023 performance, which vest in 2025-2027, is recognised as an expense over the period from 1 January 2023 to the vesting dates in 2025-2027. For all other awards, the expense is recognised over the period from the date of grant to the vesting date. For equity-settled awards, the total amount to be expensed over the vesting period is determined by reference to the fair value of the shares and awards at the date of grant, which excludes the impact of any non-market vesting condit ions (for example, proﬁtabil ity and growth targets). The fair value of equity instruments granted is based on market prices, if available, at the date of grant. In the absence of market prices, the fair value of the instruments is estimated using an appropriate valuation technique, such as a binom ial opt ion pric ing model. Non-market vest ing condit ions are included in assumptions for the number of shares and awards that are expected to vest. At each balance sheet date, the Group revises its estimates of the number of shares and awards that are expected to vest. It recognises the impact of the revis ion of or ig inal est imates, if any, in the income statement and a corresponding adjustment to equity over the remain ing vest ing period. Forfeitures prior to vesting attributable to factors other than the failure to satisfy service condit ions and non-market vest ing condit ions are treated as a cancellat ion and the remain ing unamort ised charge is debited to the income statement at the time of cancellation. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when awards in the form of options are exercised. Cash-settled awards are revalued at each balance sheet date and a liab il ity recognised on the balance sheet for all unpaid amounts, with any changes in fair value charged or credited to staff costs in the income statement until the awards are exercised. Where forfeitures occur prior to vesting that are attributable to factors other than a failure to satisfy service condit ions or market-based performance cond it ions, the cumulat ive charge incurred up to the date of forfeiture is credited to the income statement. Other accounting estimates and judgements Share-based payments involve judgement and estimat ion uncerta inty in determin ing the expenses and carry ing values of share awards at the balance sheet date. • LTIP awards are determined using an estimat ion of the probab il ity of meet ing certain metrics over a three-year performance period using the Monte Carlo simulat ion model. • Deferred shares are determined using an estimat ion of expected d iv idends. • Sharesave Plan valuations are determined using a binom ial opt ion-pric ing model. The Group operates a number of share-based arrangements for its executive directors and employees. Details of the share- based payment charge are set out below. 2023¹ 2022¹ Cash Equity Total Cash Equity Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Deferred share awards 34 103 137 16 92 108 Other share awards 19 70 89 20 71 91 Total share-based payments² 53 173 226 36 163 199 1 No forfeiture during the year 2 The total Share based payments charge during the year includes costs relating to Business ventures. Business ventures are established as separate legal entit ies with their own employee share ownership plans (ESOP) to attract and incent iv ise talent. ESOPs have been set up with share based payment charges recorded in 2023 with $14 mill ion in Cash settled and $3 mill ion equ ity settled deferred awards spread across 11 entit ies Financ ial statements Notes to the ﬁnancial statements 448 Standard Chartered – Annual Report 2023 31. Share-based payments continued 2021 Standard Chartered Share Plan (the ‘2021 Plan’) and 2011 Standard Chartered Share Plan (the ‘2011 Plan’) The 2021 Plan was approved by shareholders in May 2021 and is the Group’s main share plan, replacing the 2011 Plan for new awards from June 2021. It may be used to deliver various types of share awards to employees and former employees of the Group, includ ing d irectors and former executive directors: • Long Term Incentive Plan (LTIP) awards: granted with vesting subject to performance measures. Performance measures attached to awards granted previously include: relative total shareholder return (TSR); return on tangible equity (RoTE) (with a Common Equity Tier 1 (CET1) underpin); and strategic measures. Each measure is assessed independently over a three-year period. LTIP awards have an ind iv idual conduct gateway requirement that results in the award lapsing if not met. • Deferred awards are used to deliver: – the deferred portion of variable remuneration, in line with both market practice and regulatory requirements. These awards vest in instalments on anniversar ies of the award date spec if ied at the t ime of grant. Deferred awards are not subject to any plan lim it. Th is enables the Group to meet regulatory requirements relating to deferral levels, and is in line with market practice. – replacement buy-out awards to new joiners who forfe it awards on leaving their previous employers. These vest in the quarter most closely following the date when the award would have vested at the previous employer. This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market practice. In line with sim ilar plans operated by our competitors, these awards are not subject to an annual lim it and do not have any performance measures. Under the 2021 Plan and 2011 Plan, no grant price is payable to receive an award. The remain ing l ife of the 2021 Plan during which new awards can be made is eight years. The 2011 Plan has expired and no further awards will be granted under this plan. Valuation – LTIP awards The vesting of awards granted in 2023, 2022 and 2021 is subject to relative TSR performance measures, achievement of a strategic scorecard and satisfact ion of RoTE (subject to a cap ital CET1 underpin). The vesting of awards also have addit ional condit ions under strateg ic measures related to targets set for sustainab il ity linked to business strategy. The fair value of the relative TSR component is calculated using the probabil ity of meet ing the measures over a three-year performance period, using a Monte Carlo simulat ion model. The value of the rema in ing components is based on the expected performance against the RoTE and strategic measures in the scorecard and the resulting estimated number of shares expected to vest at each reporting date. These combined values are used to determine the accounting charge. No div idend equ ivalents accrue for the LTIP awards made in 2023, 2022 or 2021 and the fair value takes this into account, calculated by reference to market consensus div idend y ield. 2023 2022 Grant date 13–March 14–March Share price at grant date (£) 7.40 4.88 Vesting period (years) 3–7 3–7 Expected div ided y ield (%) 3.1 3.4 Fair value (RoTE) (£) 1.91, 1.85 1.24, 1.20 Fair value (TSR) (£) 1.08, 1.04 0.70, 0.68 Fair value (Strategic) (£) 2.54, 2.46 1.65, 1.60 Valuation – deferred shares The fair value for deferred awards which are not granted to material risk takers is based on 100 per cent of the face value of the shares at the date of grant as the share price will reﬂect expectations of all future div idends. For awards granted to mater ial risk takers in 2023, the fair value of awards takes into account the lack of div idend equ ivalents, calculated by reference to market consensus div idend y ield. Deferred share awards – variable remuneration Grant date 2023 18 September 19 June 13 March Share price at grant date (£) 7.43 6.75 7.40 Vesting period (years) Expected Expected Expected div idend y ield Fair value div idend y ield Fair value div idend y ield Fair value (%) (£) (%) (£) (%) (£) 1-3 years N/A 7.43 3.3 6.75 3.1 7.4 1-5 years 3.0 6.51 3.3, 3.3 6.23, 5.83 3.1, 3.1 6.85, 6.65 3-7 years – – – – 3.1, 3.1, 3.1, 3.1 6.65, 6.75, 6.35, 6.16 Financ ial statements Standard Chartered – Annual Report 2023 449 31. Share-based payments continued 2022 Grant date 09 November 20 June 14 March Share price at grant date (£) 5.62 6.04 4.88 Expected Expected Expected div idend y ield Fair value div idend y ield Fair value div idend y ield Fair value Vesting period (years) (%) (£) (%) (£) (%) (£) 1-3 years N/A 5.62 N/A 6.04 N/A 4.88 1-5 years 3.4 5.17 3.4, 3.4 5.56, 5.56 N/A, 3.4, 4.88, 4.48, 3.4, 3.4 4.41, 4.34 3-7 years – – – – 3.4,3.4,3.4 4.48, 4.13, 3.99 Deferred share awards – buy-outs 2023 Grant date 20-Nov 18-Sep 19-Jun 13-Mar Share price at grant date (£) 6.60 7.43 6.75 7.40 Expected Expected Expected Expected div idend div idend div idend div idend yield Fair value yield Fair value yield Fair value yield Fair value Vesting period (years) (%) (£) (%) (£) (%) (£) (%) (£) 3 months 3.0 7.38 3.3 6.7 3.1 7.34 4 months 3.0 6.54 6 months 3.0 7.32 3.3 6.64 7 months 3.0 6.49 9 months 3.0 7.27 3.3 6.48, 6.59 10 months 3.0 6.44 1 year 3.0 6.25, 6.30, 3.0 7.06, 7.11, 3.3 6.18, 6.38, 3.1 7.12, 7.18 6.35, 6.39 7.16, 7.22 6.43, 6.54 2 years 3.0 6.12, 6.16, 3.0 6.85, 6.9, 3.3 5.98, 6.18, 3.1 6.91, 6.96 6.21 6.95, 7.01 6.33 3 years 3.0 5.94, 5.98, 3.0 6.65, 6.7, 3.3 5.98, 5.79, 3.1 6.70, 6.75 6.03 6.8 6.13 4 years 3.0 5.76 3.1 6.50, 6.55 5 years 3.1 6.35 2022 Grant date 28 November 09 November 20 June 14 March Share price at grant date (£) 5.90 5.62 6.04 4.88 Expected Expected Expected Expected div idend Fair value div idend Fair value div idend Fair value div idend Fair value Vesting period (years) yield (%) (£) yield (%) (£) yield (%) (£) yield (%) (£) 4 months 3.4 5.56 1 year 3.4 5.71 3.4 5.44 3.4 5.84 3.4 4.72 1.4 years 3.4 5.38 3.4 3.4 2 years 3.4 5.52 3.4 5.26 3.4 5.65 3.4 4.56 2.4 years 3.4 5.2 3.4 3.4 3 years 3.4 5.34 3.4 5.08 3.4 5.46 3.4 4.41 4 years 3.4 5.16 3.4 4.92 3.4 5.28 3.4 4.27 5 years 3.4 4.99 3.4 5.11 3.4 4.13 6 years 3.4 3.99 Financ ial statements Notes to the ﬁnancial statements 450 Standard Chartered – Annual Report 2023 31. Share-based payments continued All Employee Sharesave Plans Sharesave Plans The 2013 Sharesave Plan expired in May 2023 and a new 2023 Sharesave Plan was approved by shareholders at the Annual General Meeting in May 2023. Under the 2023 Sharesave Plan, employees may open a savings contract. Employees can save up to £250 per month over three years to purchase ordinary shares in the Company at a discount of up to 20 per cent on the share price at the date of inv itat ion (the ‘option exercise price’), after which they have a period of six months to exercise the option. There are no performance measures attached to options granted under the 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 securit ies law and regulatory restr ict ions. In these countr ies, where possible, the Group offers an equivalent cash-based alternative to its employees. The remain ing l ife of the 2023 Sharesave Plan during which new awards can be made is ten years. The 2013 Sharesave Plan has expired and no further awards will be granted under this plan. Valuation – Sharesave: Options under the Sharesave plans are valued using a binom ial opt ion-pric ing model. The same fa ir value is applied to all employees includ ing execut ive directors. The fair value per option granted and the assumptions used in the calculation are as follows: All Employee Sharesave Plan (Sharesave) 2023 2022 Grant date 18 September 28 November Share price at grant date (£) 7.35 5.80 Exercise price (£) 5.88 4.23 Vesting period (years) 3 3 Expected volatil ity (%) 36.7 39.3 Expected option life (years) 3.5 3.33 Risk-free rate (%) 4.48 3.21 Expected div idend y ield (%) 3.0 3.4 Fair value (£) 3.05 2.08 The expected volatil ity is based on histor ical volat il ity over the last three years, or three years pr ior to grant. The expected life is the average expected period to exercise. The risk-free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life. The expected div idend y ield is calculated by reference to market consensus div idend y ield. Lim its An award shall not be granted under the 2021 Plan in any calendar year if, at the time of its proposed grant, it would cause the number of Standard Chartered PLC ordinary shares allocated in the period of 10 calendar years, ending with that calendar year, under the 2021 Plan and under any other discret ionary share plan operated by Standard Chartered PLC to exceed such number as represents 5 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. An award shall not be granted under the 2021 Plan or 2023 Sharesave Plan in any calendar year if, at the time of its proposed grant, it would cause the number of Standard Chartered PLC ordinary shares allocated in the period of 10 calendar years ending with that calendar year, under the 2021 Plan or 2023 Sharesave Plan and under any other employee share plan operated by Standard Chartered PLC to exceed such number as represents 10 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. An award shall not be granted under the 2021 Plan or 2023 Sharesave Plan in any calendar year if, at the time of its proposed grant, it would cause the number of Standard Chartered PLC ordinary shares which may be issued or transferred pursuant to awards then outstanding under the 2021 Plan or 2023 Sharesave Plan as relevant to exceed such number as represents 10 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. The number of Standard Chartered PLC ordinary shares which may be issued pursuant to awards granted under the 2021 Plan in any 12-month period must not exceed such number as represents 1 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. The number of Standard Chartered PLC ordinary shares which may be issued pursuant to awards granted under the 2023 Sharesave Plan in any 12-month period must not exceed such number as represents 1 per cent of the ordinary share capital of Standard Chartered PLC in issue at that time. Standard Chartered PLC has been granted waivers from strict compliance with Rules 17.03A, 17.03B(1), 17.03E and 17.03(18) of the Rules Governing the List ing of Secur it ies on the Stock Exchange of Hong Kong. Deta ils are set out in the market announcements made on 30 March 2023. . In relation to the waiver of strict compliance with Note 1 to 17.03(18), in 2023 no changes to the Plan rules have been proposed and therefore the Board has not been required to exercise its discret ion. Financ ial statements Standard Chartered – Annual Report 2023 451 31. Share-based payments continued Reconcil iat ion of share award movements for the year ending 31 December 2023 Weighted Discret ionary¹ Sharesave average Deferred exercise price LTIP shares Sharesave (£) Outstanding at 1 January 2023 11,339,951 46,449,040 17,109,519 3.81 Granted 2,3 2,142,057 21,668,459 5,668,325 – Lapsed (1,911,931) (1,231,514) (1,407,502) 4.14 Exercised (622,695) (19,817,781) (4,468,125) 3.75 Outstanding at 31 December 2023 10,947,382 47,068,204 16,902,217 4.49 Total number of securit ies ava ilable for issue under the plan 10,947,382 47,068,204 16,902,217 Percentage of the issued shares this represents as at 31 December 2023 0.41 1.76 0.63 4.49 Exercisable as at 31 December 2023 – 685,077 2,482,392 3.16 Range of exercise prices (£)³ – – 3.14 – 5.88 Intrins ic value of vested but not exerc ised options ($ mill ion) – 5.81 11.08 Weighted average contractual remain ing l ife (years) 7.59 8.11 2.30 Weighted average share price for awards exercised during the period (£) 6.94 7.04 6.65 1. Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards. 2. 2,134,238 (LTIP) granted on 13 March 2023, 6,501 (LTIP) granted as a notional div idend on 1 March 2023, 1,318 (LTIP) granted as a not ional div idend on 1 September 2023; 20,828,385 (Deferred shares) granted on 13 March 2023, 121,314 (Deferred shares) granted as a notional div idend on 1 March 2023, 338,583 (Deferred shares) granted on 19 June 2023, 235,186 (Deferred shares) granted on 18 September 2023, 52,082 (Deferred shares) granted as a notional div idend on 1 September 2023, 92,909 (Deferred shares) granted on 20 November 2023; 5,668,325 (Sharesave) granted on 18 September 2023 under the 2023 Sharesave Plan. 3. For Sharesave granted in 2023 the exercise price is £5.88 per share, a 20% discount from the average of the closing prices over the ﬁve days to the inv itat ion date of 21 August 2023. The closing share price on 18 August 2023 was £7.214 Reconcil iat ion of share award movements for the year ending 31 December 2022 Weighted Discret ionary¹ Sharesave average Deferred exercise price LTIP shares Sharesave (£) Outstanding at 1 January 2022 11,627,751 39,718,654 16,897,075 3.95 Granted 2,3 3,066,288 25,037,706 5,777,197 – Lapsed (2,927,828) (1,121,849) (2,700,678) 4.29 Exercised (426,260) (17,185,471) (2,864,075) 5.03 Outstanding at 31 December 2022 11,339,951 46,449,040 17,109,519 3.81 Total number of securit ies ava ilable for issue under the plan 11,339,951 46,449,040 17,109,519 Percentage of the issued shares this represents as at 31 December 2022 0.39 1.60 0.59 3.81 Exercisable as at 31 December 2022 – 1,191,693 1,699,772 4.96 Range of exercise prices (£)³ – – 3.14 – 5.13 – Intrins ic value of vested but not exerc ised options ($ mill ion) 0.02 8.93 2.59 Weighted average contractual remain ing l ife (years) 7.88 8.25 2.27 Weighted average share price for awards exercised during the period (£) 5.09 4.93 5.94 1. Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards. 2. 3,048,826 (LTIP) granted on 14 March 2022, 14,989 (LTIP) granted as a notional div idend on 1 March 2022, 2,473 (LTIP) granted as a not ional div idend on 8 August 2022, 23,434,127 (Deferred shares) granted on 14 March 2022, 77,479 (Deferred shares) granted as a notional div idend on 1 March 2022, 584,322 (Deferred shares) granted on 20 June 2022, 43,918 (Deferred shares) granted as a notional div idend on 8 August 2022, 771,103 (Deferred shares) granted on 9 November 2022, 126,757 (Deferred shares) granted on 28 November 2022 under the 2021 Plan. 5,777,197 (Sharesave) granted on 28 November 2022 under the 2013 Sharesave Plan. 3. For Sharesave granted in 2022 the exercise price is £4.23 per share, a 20% discount from the closing price on 1 November 2022. The closing price on 1 November 2022 was £5.282 Financ ial statements Notes to the ﬁnancial statements 452 Standard Chartered – Annual Report 2023 32. Investments in subsid iary undertak ings, jo int ventures and assoc iates Accounting policy Associates and jo int arrangements The Group did not have any contractual interest in jo int operat ions. Investments in associates and jo int ventures are accounted for by the equ ity method of accounting and are in it ially recognised at cost. The Group’s investment in associates and jo int ventures includes goodwill ident iﬁed on acqu is it ion (net of any accumulated impa irment loss). The Group’s share of its associates’ and jo int ventures’ post-acqu is it ion proﬁts or losses is recognised in the income statement, and its share of post-acquis it ion movements in other comprehensive income is recognised in reserves. The cumulative post-acquis it ion movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or a jo int venture equals or exceeds its interest in the associate, includ ing any other unsecured rece ivables, the Group does not recognise further losses, unless it has incurred obligat ions or made payments on behalf of the assoc iate or joint venture. Unrealised gains and losses on transactions between the Group and its associates and jo int ventures are el im inated to the extent of the Group’s interest in the associates and jo int ventures. At each balance sheet date, the Group assesses whether there is any object ive ev idence of impa irment in the investment in associates and jo int ventures. Such ev idence includes a sign iﬁcant or prolonged decl ine in the fair value of the Group’s investment in an associate or jo int venture below its cost, among other factors. Sign iﬁcant account ing estimates and judgements The Group applies judgement in determin ing if it has control, jo int control or s ign iﬁcant inﬂuence over subsid iar ies, jo int ventures and associates respectively. These judgements are based upon ident ify ing the relevant activ it ies of counterparties, being those activ it ies that sign iﬁcantly affect the ent it ies returns, and further mak ing a decis ion of if the Group has control over those entit ies, joint control, or has s ign iﬁcant inﬂuence (being the power to partic ipate in the ﬁnanc ial and operat ing policy decis ions but not control them). These judgements are at times determined by equity holdings, and the voting rights associated with those holdings. However, further considerat ions includ ing but not l im ited to board seats, adv isory committee members and special ist knowledge of some decis ion-makers are also taken into account. Further judgement is required when determin ing if the Group has de-facto control over an entity even though it may hold less than 50% of the voting shares of that entity. Judgement is required to determine the relative size of the Group’s shareholding when compared to the size and dispers ion of other shareholders. Impairment testing of investments in associates and jo int ventures, and on a Company level investments in subsid iar ies is performed if there is a possible ind icator of impa irment. Judgement is used to determine if there is object ive ev idence of impa irment. Objective ev idence may be observable data such as losses incurred on the investment when applying the equity method, the granting of concessions as a result of ﬁnanc ial d iff iculty, or breaches of contracts/regulatory ﬁnes of the associate or jo int venture. Further judgement is required when consider ing broader ind icators of impa irment such as losses of active markets or ratings downgrades across key markets in which the associate or jo int venture operate in. Impairment testing is based on estimates includ ing forecast ing the expected cash ﬂows from the investments, growth rates, terminal values and the discount rate used in calculation of the present values of those cash ﬂows. The estimat ion of future cash ﬂows and the level to which they are discounted is inherently uncertain and requires sign iﬁcant judgement. Business combinat ions The acquis it ion method of accounting is used to account for the acquis it ion of subsid iar ies by the Group. In the Company’s ﬁnancial statements, investment in subsid iar ies, associates and jo int ventures are held at cost less impa irment and d iv idends from pre-acqu is it ion proﬁts received prior to 1 January 2009, if any. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are elim inated in the Group accounts. 2023 2022 Investments in subsid iary undertak ings $mill ion $mill ion As at 1 January 60,975 60,429 Addit ions 1 1,566 1,545 Disposal 2 (1,750) (999) As at 31 December 60,791 60,975 1 Includes internal Addit ional T ier 1 Issuances of $992 mill ion by Standard Chartered Bank and $575 m ill ion add it ional investment in Standard Chartered Holdings Lim ited (31 December 2022: Add it ional T ier 1 issuances of $1 bill ion by Standard Chartered Bank and $500 m ill ion by Standard Chartered Bank (Hong Kong) Ltd) 2 Includes redemption of Addit ional T ier1 capital of $1 bill ion by Standard Chartered Bank (31 December 2022: Add it ional T ier1 capital of $1 bill ion by Standard Chartered Bank) Financ ial statements Standard Chartered – Annual Report 2023 453 32. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued At 31 December 2023, the princ ipal subs id iary undertak ings, all ind irectly held except for Standard Chartered Bank (Hong Kong) Lim ited, and pr inc ipally engaged in the business of banking and provis ion of other ﬁnancial serv ices, were as follows: Group interest in ordinary share capital Country and place of incorporation or registrat ion Main areas of operation % Standard Chartered Bank, England and Wales United Kingdom, Middle East, South Asia, Asia Pacif ic, Americas and, through Group companies, Africa 100 Standard Chartered Bank (Hong Kong) Lim ited, Hong Kong Hong Kong 100 Standard Chartered Bank (Singapore) Lim ited, S ingapore Singapore 100 Standard Chartered Bank Korea Lim ited, Korea Korea 100 Standard Chartered Bank (China) Lim ited, Ch ina¹ China 100 Standard Chartered Bank (Taiwan) Lim ited, Ta iwan Taiwan 100 Standard Chartered Bank AG, Germany Germany 100 Standard Chartered Bank Malaysia Berhad, Malaysia Malaysia 100 1 Under PRC law, registered as Standard Chartered Bank (China) Lim ited Group interest in ordinary share capital Country and place of incorporation or registrat ion Main areas of operation % Standard Chartered Bank (Thai) Public Company Lim ited, Thailand Thailand 99.87 Standard Chartered Bank (Pakistan) Lim ited, Pak istan Pakistan 98.99 Standard Chartered Bank Botswana Lim ited, Botswana Botswana 75.83 Standard Chartered Bank Kenya Lim ited, Kenya Kenya 74.32 Standard Chartered Bank Nepal Lim ited, Nepal Nepal 70.21 Standard Chartered Bank Ghana PLC, Ghana Ghana 69.42 Mox Bank Lim ited, Hong Kong Hong Kong 68.29 A complete list of subsid iary undertak ing is included in Note 40. The Group does not have any material non-controlling interest except as listed above, which contribute $35 mill ion (31 December 2022: $(6.2) mill ion) of the (loss)/Proﬁt attr ibutable to non-controlling interest and $290 mill ion (31 December 2022: $261 mill ion) of the equ ity attributable to non-controlling interests. During 2023 the Group disposed of its investments in Pembroke Group Lim ited (Isle of Man), Pembroke A ircraft Leasing Holdings Lim ited and Pembroke A ircraft Leasing (Tianjin) Lim ited (Ch ina). The carrying amount was composed of Property, plant and equipment of $3,249 mill ion, Goodw ill and intang ible assets of $23 m ill ion, Other assets of $124 m ill ion and Other l iab il it ies of $292 mill ion. The pr inc ipal act iv ity of these subs id iar ies was the aviat ion ﬁnance leas ing business. In Q1 2023, the aviat ion ﬁnance leasing business was classif ied as held for sale and was subsequently sold on 2nd November 2023 for a total considerat ion of $3,570 m ill ion. The ga in on sale of the business was $309 mill ion. In add it ion the Group d isposed of its wholly owned subsid iar ies Cardspal Pte. Ltd. and Kozagi during 2023. The gain on sale of Cardspal Pte. Ltd. and Kozagi comprised $12 mill ion and $7 m ill ion, respect ively. While the Group’s subsid iar ies are subject to local statutory capital and liqu id ity requirements in relation to foreign exchange remittance, these restrict ions ar ise in the normal course of business and do not sign iﬁcantly restr ict the Group’s abil ity to access or use assets and settle liab il it ies of the Group. The Group does not have sign iﬁcant restr ict ions on its abil ity to access or use its assets and settle its liab il it ies other than those resulting from the regulatory framework with in wh ich the banking subsid iar ies operate. These frameworks require banking operations to keep certain levels of regulatory capital, liqu id assets, exposure l im its and comply w ith other required ratios. These restrict ions are summar ised below: Regulatory and liqu id ity requirements The Group’s subsid iar ies are required to mainta in m in imum cap ital, leverage ratios, liqu id ity and exposure ratios which therefore restrict the abil ity of these subs id iar ies to distr ibute cash or other assets to the parent company. Financ ial statements Notes to the ﬁnancial statements 454 Standard Chartered – Annual Report 2023 32. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued The subsid iar ies are also required to mainta in balances w ith central banks and other regulatory authorit ies in the countries in which they operate. At 31 December 2023, the total cash and balances with central banks was $70 bill ion (31 December 2022: $58 bill ion) of wh ich $6 bill ion (31 December 2022: $9 b ill ion) is restricted. Statutory requirements The Group’s subsid iar ies are subject to statutory requirements not to make distr ibut ions of capital and unrealised proﬁts to the parent company, generally to mainta in solvency. These requ irements restrict the abil ity of subs id iar ies to remit div idends to the Group. Certain subsid iar ies are also subject to local exchange control regulations which provide for restrict ions on export ing capital from the country other than through normal div idends. Contractual requirements The encumbered assets in the balance sheet of the Group’s subsid iar ies are not available for transfer around the Group. Share of proﬁt from investment in associates and jo int ventures compr ises: 2023 2022 $mill ion $mill ion Loss from investment in jo int ventures (13) (7) Proﬁt from investment in associates 154 163 Total 141 156 2023 2022 Interests in associates and jo int ventures $mill ion $mill ion As at 1 January 1,631 2,147 Exchange translation difference 16 (232) Addit ions¹ 64 26 Share of proﬁts 141 156 Div idend rece ived⁴ (11) (58) Disposals – (1) Impairment 2 (872) (336) Share of FVOCI and Other reserves (7) (79) Other movements 3 4 8 As at 31 December 966 1,631 1 Includes $17 mill ion non-cash cons iderat ion (Intellectual Property – r ight to use) from SBI Zodia Custody Co. Ltd 2 Impairment mainly relates to the Group’s investment in its associate China Bohai Bank (Bohai) $850mill ion and CurrencyFa ir Lim ited (Za i) $21 mill ion 3 Movement related to CurrencyFair Lim ited 4 Include distr ibut ion ($7 mill ion) in cash from Ascenta IV During 2023 the Group disposed of its 13.09% share of investment in associate Metaco SA for a total considerat ion of $18 m ill ion. The entire amount was recognised as gain on sale. A complete list of the Group’s interest in associates is included in Note 40. The Group’s princ ipal assoc iates are: Group interest in Nature of Main areas of ordinary share Associate activ it ies operation capital % China Bohai Bank Banking China 16.26 CurrencyFair Lim ited Exchange Ireland Banking Ireland 43.42 The Group’s ownership percentage in China Bohai Bank is 16.26%. Although the Group’s investment in China Bohai Bank is less than 20 per cent , it is considered to be an associate because of the sign iﬁcant inﬂuence the Group is able to exercise over its management and ﬁnanc ial and operat ing polic ies. Th is inﬂuence is exercised through Board representation and the provis ion of techn ical expertise to Bohai. The Group applies the equity method of accounting for investments in associates. Bohai has a statutory year end of 31 December, but publishes its year-end ﬁnanc ial statements after the Group. As it is impract icable for Boha i to prepare ﬁnanc ial statements sooner, the Group recogn ises its share of Bohai’s earnings on a three- month lag basis. Therefore, the Group recognised its share of Bohai’s proﬁts and movements in other comprehensive income for the 12 months ended 30 September 2023 in the Group’s consolidated statement of income and consolidated statement of comprehensive income for the year ended 31 December 2023, respectively. There have been sign iﬁcant developments s ince 2022, which have required an impa irment to the Group’s carry ing amount of the investment in Bohai. These events include Bohai’s lower reported net proﬁt in 2023 (compared to 2022) as well as banking industry challenges and property market uncertaint ies in Mainland China, that may impact Bohai’s future proﬁtab il ity. If the Group did not have sign iﬁcant inﬂuence over Bohai, the investment would be measured at fair value rather than the current carrying value, which is based on the applicat ion of the equ ity method as described in the accounting policy note. Financ ial statements Standard Chartered – Annual Report 2023 455 32. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued Impairment testing At 31 December 2023, the listed equity value of Bohai is below the carrying amount of the Group‘s investment in associate. As a result, the Group assessed the carrying value of its investment in Bohai for impa irment and concluded that an impa irment of $850 mill ion was requ ired in 2023 (2022: $308 mill ion impa irment). Total impa irment is recorded in the ‘Goodwill, property, plant and equipment and other impa irment’ l ine in the Consolidated Income Statement, under Central & other items segment. The carrying value of the Group’s investment in Bohai of $700 mill ion (2022: $1,421 m ill ion) represents the h igher of the value in use and fair value less costs to sell. The ﬁnanc ial forecasts used in the VIU calculation reﬂects Group management’s best estimate of Bohai’s future earnings consider ing the s ign iﬁcant developments expla ined above. 2023 2022 Bohai $mill ion $mill ion VIU 700 1,421 Carrying amount 1 700 1,421 Market capital isat ion 2 418 685 1 The Group’s 16.26% share in the net assets less other equity instruments which the Group does not hold 2 Number of shares held by the Group multipl ied by the quoted share pr ice at 31 December Basis of recoverable amount The impa irment test was performed by compar ing the recoverable amount of Bohai, determined as the higher of VIU and fair value less costs to sell, with its carrying amount. The value in use (‘VIU’) is calculated using a div idend d iscount model (‘DDM’), which estimates the distr ibutable future cashﬂows to the equity holders, after adjust ing for regulatory cap ital requirements, for a 5-year period, after which a terminal value (‘TV’) is calculated based on the ‘Gordon Growth’ model. The key assumptions in the VIU are as follows: • Short to medium term project ions are based on Group management’s best est imates of future proﬁts available to ordinary shareholders and have been determined with reference to the latest published ﬁnanc ial results and h istor ical performance of Bohai • The projections use ava ilable informat ion and include normalised performance over the forecast period, inclus ive of: ( i) asset growth assumptions based on the long-term GDP growth rate for Mainland China; (i i) ECL assumpt ions using Bohai’s histor ical reported ECL, based on the proport ion of ECL from loans and advances to customers and ﬁnanc ial investments measured at amortised cost and FVOCI. This was further adjusted for banking industry challenges and property market uncertaint ies; ( i i i) Net Interest Margin (NIM) increases from 2025 with reference to third party market interest rate forecasts in China; (iv) Net fee income estimated according to the latest available performance of Bohai and contribut ion of the constituent parts (trading and fee income) ; and (v) Effective Tax Rate (ETR) based on Bohai’s histor ical reported results for the short term projection, updated, for the med ium and long term to a more conservative view • The discount rate applied to these cash ﬂows was estimated with reference to transaction and broker data in the local Chinese market, cross-checked to the capital asset pric ing model (CAPM), wh ich includes a long term risk-free rate, beta and company risk premium assumptions for Bohai • A long-term GDP growth rate for Mainland China is used to extrapolate the expected short to medium term earnings to perpetuity to derive a terminal value; and • Capital maintenance ratio consists of a capital haircut taken in order to estimate Bohai’s target regulatory capital requirements over the forecast period. This haircut takes into account movements in risk weighted assets (RWA) projected based on the histor ical proport ion of RWA to total assets and the total capital required (Core CET 1 and Min imum Core CET 1 ratios), includ ing requ ired retained earnings over time to meet the target capital ratios. RWA project ion is adjusted to reﬂect management’s best estimates for the impact of implement ing Basel 3.1, effect ive 1 January 2024 in China. The VIU model was reﬁned during 2023 to include a projected summary balance sheet and more granular income statement assumptions for each period. While it is impract icable for the Group to est imate the impact on future periods, the key changes to the 2023 model are summarised as follows: • Asset growth rates, net interest income margin and ECL assumptions were applied to the relevant balance sheet lines to produce the proﬁt and loss forecasts for each period • RWAs were modelled as a percentage of total assets, to reﬂect the potential capital impact(s) of regulatory changes (e.g., Basel 3.1) in each period. For the purposes of the VIU for 31 December 2023, it was assumed that the min imum CET 1 rat io is 8.0% (2022: 7.5%) over the forecast and terminal periods • Consistent with the model updates explained above, net fee income was modelled separately from net interest income. Prior to its use, the 2023 VIU model was calibrated using the 2022 modelled assumptions. Financ ial statements Notes to the ﬁnancial statements 456 Standard Chartered – Annual Report 2023 32. Investments in subsid iary undertak ings, jo int ventures and assoc iates continued The key assumptions used in the VIU calculation are as follows: 2023 2022 per cent per cent Pre-tax discount rate 13.68 13.03 Long term GDP growth rate 4.00 4.00 Total assets growth rate 4.00 N/A 1 RWA as percentage of total assets 63.87–67.06 N/A 1 Net interest margin 1.21–1.48 1.50–1.84 Net fee income growth rate 4.00 N/A 1 Expected credit losses as a percentage of customer loans 0.80-1.24 0.90-1.45 Expected credit losses as a percentage of ﬁnanc ial investments measured at amortised cost and FVOCI 0.35-0.67 N/A 1 Effective tax rate 12.02–16.00² 16.00 Capital maintenance ratio 3 8.28 8.06 1 These assumptions were not explic itly modelled in 2022, therefore no comparative ﬁgures are presented 2 Bohai’s latest available effective tax rate (12.02%) was only used for the ﬁrst year of the cash ﬂows. Thereafter, 16.00% was applied, consistent with previous periods 3 Core CET 1 reported by Bohai The table below discloses sensit iv it ies to the key assumpt ions of Bohai, according to management judgement of reasonably possible changes. Changes were applied to every cash ﬂow year on an ind iv idual basis. The percentage change to the assumptions reﬂects the level at which management assess the reasonableness of the assumptions used and their impact on the Value in Use. Key assumption change Increase Decrease Headroom/ Headroom/ (Impairment) (Impairment) Sensit iv it ies basis points $ mill ion $ mill ion Discount Rate 100 (126) 169 Long term GDP growth rate¹ 100 135 (100) Total assets growth rate 100 41 (40) RWA as percentage of total assets 100 (26) 26 Net interest margin 10 452 (282)² Net fee income 100 53 (51) Expected credit losses as a percentage of customer loans 10 (275) 275 Expected credit losses as a percentage of ﬁnanc ial investments measured at amortised cost and FVOCI 10 (131) 131 Effective tax rate 100 (25) 25 Capital maintenance ratio 50 (199) 199 1 Changes in long term GDP growth rate applied only to the calculation of the terminal value 2 Market capital isat ion of Bohai at 31 December 2023 was used as impa irment ﬂoor The following table sets out the summarised ﬁnanc ial statements of Ch ina Bohai Bank prior to the Group’s share of the associate’s proﬁt being applied: 30 Sep 2023 30 Sep 2022 $mill ion $mill ion Total assets 246,212 236,396 Total liab il it ies 230,101 220,662 Operating income 1 3,640 3,958 Net proﬁt 1 811 1,186 Other comprehensive income 1 (38) (457) 1 This represents twelve months of earnings (1 October to 30 September) Financ ial statements Standard Chartered – Annual Report 2023 457 33. Structured entit ies Accounting policy Structured entit ies are consol idated when the substance of the relationsh ip between the Group and the structured ent ity ind icates the Group has power over the contractual relevant act iv it ies of the structured entity, is exposed to variable returns, and can use that power to affect the variable return exposure. In determin ing whether to consol idate a structured entity to which assets have been transferred, the Group takes into account its abil ity to d irect the relevant activ it ies of the structured entity. These relevant activ it ies are generally evidenced through a unilateral right to liqu idate the structured ent ity, investment in a substantial proportion of the securit ies issued by the structured entity or where the Group holds specif ic subord inate securit ies that embody certa in controlling rights. The Group may further consider relevant activ it ies embedded with in contractual arrangements such as call opt ions which give the practical abil ity to d irect the entity, special relationsh ips between the structured ent ity and investors, and if a single investor has a large exposure to variable returns of the structured entity. Judgement is required in determin ing control over structured ent it ies. The purpose and des ign of the entity is considered, along with a determinat ion of what the relevant act iv it ies are of the entity and who directs these. Further judgements are made around which investor is exposed to and absorbs the variable returns of the structured entity. The Group will have to weigh up all of these facts to consider whether the Group, or another involved party is acting as a princ ipal in its own right or as an agent on behalf of others. Judgement is further required in the ongoing assessment of control over structured entit ies, specif ically if market condit ions have an effect on the var iable return exposure of different investors. Interests in consolidated structured entit ies: A structured entity is consolidated into the Group’s ﬁnanc ial statements where the Group controls the structured entity, as per the determinat ion in the accounting policy above. The following table presents the Group’s interests in consolidated structured entit ies. 2023 2022 $mill ion $mill ion Aircraft and ship leasing 52 3,531 Princ ipal and other structured ﬁnance 353 330 Total 405 3,861 Interests in unconsolidated structured entit ies: Unconsolidated structured entit ies are all structured ent it ies that are not controlled by the Group. The Group enters into transactions with unconsolidated structured entit ies in the normal course of business to facil itate customer transact ions and for specif ic investment opportunit ies. Th is is predominantly with in the CCIB business segment. An interest in a structured entity is contractual or non-contractual involvement which creates variab il ity of the returns of the Group aris ing from the performance of the structured ent ity. The table below presents the carrying amount of the assets recognised in the ﬁnanc ial statements relat ing to variable interests held in unconsolidated structured entit ies, the max imum exposure to loss relating to those interests and the total assets of the structured entit ies. Max imum exposure to loss is primar ily l im ited to the carry ing amount of the Group’s on-balance sheet exposure to the structured entity. For derivat ives, the max imum exposure to loss represents the on-balance sheet valuation and not the notional amount. For commitments and guarantees, the maximum exposure to loss is the notional amount of potential future losses. 2023 2022 Asset- Princ ipal Asset- Princ ipal backed Structured Finance Other backed Structured Finance Other securit ies Lending ﬁnance funds activ it ies Total securit ies Lending ﬁnance funds activ it ies Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Group’s interest – assets Financ ial assets held at fair value through proﬁt or loss 954 269 143 137 – 1,503 851 – – 136 – 987 Loans and advances/ Investment securit ies at amortised cost 17,795 15,105 13,353 – 190 46,443 18,696 21,667 14,261 – 246 54,870 Investment securit ies (fair value through other comprehensive income) 2,443 – – – – 2,443 2,248 – – – – 2,248 Other assets – – 34 – – 34 – – – 8 – 8 Total assets 21,192 15,374 13,530 137 190 50,423 21,795 21,667 14,261 144 246 58,113 Off-balance sheet – 8,869 6,691 – 20 15,580 – 9,675 8,710 93 – 18,478 Group’s maximum exposure to loss 21,192 24,243 20,221 137 210 66,003 21,795 31,342 22,971 237 246 76,591 Total assets of structured entit ies 191,627 15,374 31,806 250 1,688 240,745 177,194 17,925 35,732 291 1,828 232,970 Financ ial statements Notes to the ﬁnancial statements 458 Standard Chartered – Annual Report 2023 33. Structured entit ies continued The main types of activ it ies for which the Group util ises unconsol idated structured entit ies cover synthet ic credit default swaps for managed investment funds (includ ing spec ial ised Pr inc ipal F inance funds), portfolio management purposes, structured ﬁnance and asset-backed securit ies. These are deta iled as follows: • Asset-backed securit ies (ABS): The Group also has investments in asset-backed securit ies issued by third-party sponsored and managed structured entit ies. For the purpose of market mak ing and at the discret ion of ABS trad ing desk, the Group may hold an immater ial amount of debt secur it ies from structured ent it ies or ig inated by cred it portfolio management. This is disclosed in the ABS column above. • Portfolio management (Group sponsored entit ies): For the purposes of portfol io management, the Group purchased credit protection via synthetic credit default swaps from note-issu ing structured ent it ies. Th is credit protection creates credit risk which the structured entity and subsequently the end investor absorbs. The referenced assets remain on the Group’s balance sheet as they are not assigned to these structured entit ies. The Group cont inues to own or hold all of the risks and returns relating to these assets. The credit protection obtained from the regulatory-compliant securit isat ion only serves to protect the Group against losses upon the occurrence of elig ible cred it events and the underlying assets are not derecognised from the Group’s balance sheet. The Group does not hold any equity interests in the structured entit ies, but may hold an ins ign if icant amount of the issued notes for market making purposes. This is disclosed in the ABS section above. The proceeds of the notes’ issuance are typically held as cash collateral in the issuer’s account operated by a trustee or invested in AAA- rated government-backed securit ies to collateral ise the structured entit ies swap obl igat ions to the Group, and to repay the princ ipal to investors at maturity. The structured entit ies re imburse the Group on actual losses incurred, through the use of the cash collateral or realisat ion of the collateral secur ity. Correspondingly, the structured entit ies wr ite down the notes issued by an equal amount of the losses incurred, in reverse order of senior ity. All fund ing is committed for the life of these vehicles and the Group has no ind irect exposure in respect of the vehicles’ liqu id ity posit ion. The Group has reputat ional risk in respect of certain portfolio management vehicles and investment funds either because the Group is the arranger and lead manager or because the structured entit ies have Standard Chartered brand ing. • Corporate Lending: Corporate Lending comprises secured lending in the normal course of business to third parties through structured entit ies. • Structured ﬁnance: Structured ﬁnance comprises interests in transactions that the Group or, more usually, a customer has structured, using one or more structured entit ies, wh ich provide beneﬁc ial arrangements for customers. The Group’s exposure primar ily represents the prov is ion of fund ing to these structures as a ﬁnanc ial intermed iary, for wh ich it receives a lender’s return. The transactions largely relate to real estate ﬁnanc ing and the prov is ion of a ircraft leasing and ship ﬁnance. • Princ ipal ﬁnance Fund: The Group’s exposure to Princ ipal F inance Funds represents committed or invested capital in unleveraged investment funds, primar ily invest ing in pan-Asian infrastructure, real estate and private equity. • Other activ it ies: Other activ it ies include structured entit ies created to support marg in ﬁnanc ing transact ions, the reﬁnanc ing of exist ing cred it and debt facil it ies, as well as setting up of bankruptcy remote structured entit ies. In the above table, the Group determined the total assets of the structured entit ies us ing following bases: • Asset Backed Securit ies, Pr inc ipal F inance, and Other activ it ies are based on the published total assets of the structured entit ies. • Lending and Structured Finance are estimated based on the Group’s loan values to the structured entit ies 34. Cash ﬂow statement Adjustment for non-cash items and other adjustments included with in income statement Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Amortisat ion of d iscounts and premiums of investment securit ies (704) 237 – – Interest expense on subordinated liab il it ies 951 570 632 615 Interest expense on senior debt securit ies in issue 2,068 794 1,434 696 Other non-cash items (578) (12) 8 301 Pension costs for deﬁned beneﬁt schemes 61 58 – – Share-based payment costs 219 199 – – Impairment losses on loans and advances and other credit risk provis ions 508 836 – – Div idend income from subsid iar ies – – (4,738) (1,047) Other impa irment 1,008 439 – – Gain on disposal of property, plant and equipment (31) (62) – – Loss on disposal of FVOCI and AMCST ﬁnanc ial assets 209 190 – – Depreciat ion and amort isat ion 1,071 1,186 – – Fair value changes taken to Income statement (1,666) (365) (202) – Foreign Currency revaluation 299 (365) 19 – Proﬁt from associates and jo int ventures (141) (156) – – Total 3,274 3,549 (2,847) 565 Financ ial statements Standard Chartered – Annual Report 2023 459 34. Cash ﬂow statement continued Change in operating assets Group Company 2022 2023 (Restated) 2023 2022 $mill ion $mill ion $mill ion $mill ion Decrease/(increase) in derivat ive ﬁnancial instruments 13,061 (11,873) (19) 259 (Increase)/decrease in debt securit ies, treasury b ills and equity shares held at fair value through proﬁt or loss 1 (29,477) 9,067 (4,068) 289 (Increase)/decrease in loans and advances to banks and customers 1 (787) 14,381 – – Net decrease/(increase) in prepayments and accrued income 82 (1,056) – – Net decrease/(increase) in other assets 2,663 2,470 268 (806) Total (14,458) 12,989 (3,819) (258) 1 Decrease in debt securit ies, treasury b ills and equity shares held at fair value through proﬁt or loss for 2022 has been restated by $(821) mill ion and the decrease in loans and advances to banks and customers for 2022 has been restated by $14,355 mill ion (refer note 35) Change in operating liab il it ies Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion (Decrease)/increase in derivat ive ﬁnancial instruments (13,629) 17,145 (239) 1,004 Net increase/(decrease) in deposits from banks, customer accounts, debt securit ies in issue, Hong Kong notes in circulat ion and short posit ions 17,877 (9,259) 4,479 106 Increase in accruals and deferred income 1,106 1,381 153 4 Net decrease in other liab il it ies (3,377) (481) (1,154) (2,080) Total 1,977 8,786 3,239 (966) Disclosures Group Company 2023 2022 2023 2022 $mill ion $mill ion $mill ion $mill ion Subordinated debt (includ ing accrued interest): Opening balance 13,928 16,885 13,895 16,395 Proceeds from the issue 18 750 – 750 Interest paid (563) (667) (545) (619) Repayment (2,160) (1,848) (2,160) (1,800) Foreign exchange movements 146 (338) 146 (337) Fair value changes from hedge accounting 311 (1,502) 271 (1,098) Accrued interest and others 536 648 516 604 Closing balance 12,216 13,928 12,123 13,895 Senior debt (includ ing accrued interest): Opening balance 32,288 29,904 14,080 16,981 Proceeds from the issue 15,261 11,902 5,105 1,500 Interest paid (1,145) (845) (434) (506) Repayment (6,471) (7,838) (2,037) (2,980) Foreign exchange movements (21) (729) (2) (431) Fair value changes from hedge accounting 119 (1,051) 188 (1,014) Accrued interest and others 1,319 945 618 530 Closing balance 41,350 32,288 17,518 14,080 Financ ial statements Notes to the ﬁnancial statements 460 Standard Chartered – Annual Report 2023 35. Cash and cash equivalents Accounting policy Cash and cash equivalents includes: • Cash and balances at central banks’, except for restricted balances; and • Other balances listed in the table below, when they have less than three months’ maturity from the date of acquis it ion, are not subject to contractual restrict ions, are subject to ins ign if icant changes in value, are highly liqu id and are held for the purpose of meeting short-term cash commitments. This includes products such as treasury bills and other elig ible b ills, short-term government securit ies, loans and advances to banks ( includ ing reverse repos), and loans and advances to customers (placements at central banks), which are held for appropriate business purposes. Cash and balances at central banks’ includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of ‘Loans and advances to customers’. Following a reassessment of the nature and purpose of balances held with central banks, customers and banks, the Group’s cash and cash equivalents balance for 31 December 2022 and 1 January 2022 has been restated. The following balances have been ident iﬁed by the Group as be ing cash and cash equivalents based on the criter ia descr ibed above. Group Company 2022 2023 (Restated) 2023 2022 $mill ion $mill ion $mill ion $mill ion Cash and balances at central banks 69,905 58,263 – – Less: restricted balances (6,153) (9,173) – – Treasury bills and other elig ible b ills 5,931 12,661 – – Loans and advances to banks 11,879 10,144 – – Loans and advances to customers 25,829 24,586 – – Investments 244 1,114 – – Amounts owed by and due to subsid iary undertak ings – – 10,294 7,417 Total 107,635 97,595 10,294 7,417 The Group’s cash and cash equivalents balance for 31 December 2022 has been restated to increase the balance by $8,876 mill ion as balances w ith central banks that met the cash and cash equivalents deﬁn it ion were orig inally included in loans and advances to customers ($24,586 mill ion) but not included in cash and cash equivalents and there were balances included in cash and cash equivalents related to loans and advances to banks ($10,414 mill ion), treasury b ills and other elig ible b ills ($5,275 mill ion) as well as Investments ($21 m ill ion) that d id not meet the cash and cash equivalents deﬁn it ion. The cash and cash equivalents balance at the beginn ing of the year for 2022 has also been restated to decrease the balance by $4,659 mill ion. On the 2022 cash ﬂow statement for Group, the change in operating assets has also been restated by $13,534 mill ion as a result of these changes. 36. Related party transactions Directors and ofﬁcers Details of directors’ remuneration and interests in shares are disclosed in the Directors’ remuneration report. IAS 24 Related party disclosures requires the following addit ional informat ion for key management compensat ion. Key management comprises non-executive directors, executive directors of Standard Chartered PLC, the Court directors of Standard Chartered Bank and the persons discharg ing manager ial responsib il it ies (PDMR) of Standard Chartered PLC. 2023 2022 $mill ion $mill ion Salaries, allowances and beneﬁts in kind 42 39 Share-based payments 26 26 Bonuses paid or receivable 5 4 Terminat ion beneﬁts - 1 Total 73 70 Transactions with directors and others At 31 December 2023, the total amounts to be disclosed under the Companies Act 2006 (the Act) and the List ing Rules of the Hong Kong Stock Exchange Lim ited (Hong Kong L ist ing Rules) about loans to d irectors were as follows: 2023 2022 Number $mill ion Number $mill ion Directors 1 4 – 3 – 1 Outstanding loan balances were below $50,000 Financ ial statements Standard Chartered – Annual Report 2023 461 36. Related party transactions continued The loan transactions provided to the directors of Standard Chartered PLC were a connected transaction under Chapter 14A of the Hong Kong List ing Rules. It was fully exempt as ﬁnancial ass istance under Rule 14A.87(1), as it was provided in our ordinary and usual course of business and on normal commercial terms. As at 31 December 2023, Standard Chartered Bank had in place a charge over $68 mill ion (31 December 2022: $89 m ill ion) of cash assets in favour of the independent trustee of its employer ﬁnanced retirement beneﬁt scheme. Other than as disclosed in the Annual Report and Accounts, there were no other transactions, arrangements or agreements outstanding for any director, connected person or ofﬁcer of the Company which have to be disclosed under the Act, the rules of the UK List ing Author ity or the Hong Kong List ing Rules. Details of non-revenue transactions with Temasek Holdings (Private) Lim ited are set out on page 220. Company The Company has received $1,469 mill ion (31 December 2022: $1,012 m ill ion) of net interest income from its subsid iar ies. The Company issues debt externally and lends proceeds to Group companies. The Company has an agreement with Standard Chartered Bank that in the event of Standard Chartered Bank defaulting on its debt coupon interest payments, where the terms of such debt requires it, the Company shall issue shares as settlement for non-payment of the coupon interest. 2023 2022 Standard Standard Chartered Bank Chartered Bank Standard (Hong Kong) Standard (Hong Kong) Chartered Bank Lim ited Others 1 Chartered Bank Lim ited Others 1 $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Due from subsid iar ies 10,208 60 25 6,860 141 255 Derivat ive ﬁnancial instruments 62 12 – 47 – – Debt securit ies 20,524 4,775 1,070 18,787 4,469 526 Total assets 30,794 4,847 1,095 25,694 4,610 781 Liab il it ies Due to subsid iar ies – – – 2 – – Derivat ive ﬁnancial instruments 1,104 – – 1,283 61 – Total liab il it ies 1,104 – – 1,285 61 – 1 Others include Standard Chartered Bank (Singapore) Lim ited, Standard Chartered Hold ings Lim ited and Standard Chartered I H L im ited Associate and jo int ventures The following transactions with related parties are on an arm’s length basis: 2023 $mill ion 2022 $mill ion Assets Loans and advances – 20 Financ ial Assets held at FVTPL 14 Derivat ive assets 12 18 Total assets 26 38 Liab il it ies Deposits 959 610 Other Liab il it ies 2 19 Total liab il it ies 961 629 Loan commitments and other guarantees¹ 113 164 1 The maximum loan commitments and other guarantees during the period were $113 mill ion (2022: $164 m ill ion) 37. Post balance sheet events On 11 January 2024, Standard Chartered PLC issued $1.5 bill ion 6.097 per cent F ixed Rate Reset Notes due 2035. On 19 January 2024, Standard Chartered PLC issued SGD 335 mill ion 4.00 per cent F ixed Rate Reset Notes due 2030 A share buy-back for up to a maximum considerat ion of $1 b ill ion has been declared by the d irectors after 31 December 2023. This will reduce the number of ordinary shares in issue by cancelling the repurchased shares. A ﬁnal div idend for 2023 of 21 cents per ord inary share was declared by the directors after 31 December 2023. Financ ial statements Notes to the ﬁnancial statements 462 Standard Chartered – Annual Report 2023 38. Auditor’s remuneration Auditor’s remuneration is included with in other general adm in istrat ion expenses. The amounts paid by the Group to their princ ipal aud itor, Ernst & Young LLP and its associates (together Ernst & Young LLP), are set out below. All services are approved by the Group Audit Committee and are subject to controls to ensure the external auditor’s independence is unaffected by the provis ion of other serv ices. 2023 2022 $mill ion $mill ion Audit fees for the Group statutory audit 27.8 22.2 Of which fees for the audit of Standard Chartered Bank Group 20.6 16.3 Fees payable to EY for other services provided to the SC PLC Group: Audit of Standard Chartered PLC subsid iar ies 13.4 12.8 Total audit fees 41.2 35.0 Audit-related assurance services 6.0 5.5 Other assurance services 7.0 4.3 Other non-audit services 0.8 0.1 Transaction related services 0.3 0.3 Total non-audit fees 14.1 10.2 Total fees payable 55.3 45.2 The following is a descript ion of the type of serv ices included with in the categor ies listed above: • Audit fees for the Group statutory audit are in respect of fees payable to Ernst & Young LLP for the statutory audit of the consolidated ﬁnanc ial statements of the Group and the separate ﬁnancial statements of Standard Chartered PLC • Audit-related fees consist of fees such as those for services required by law or regulation to be provided by the auditor, reviews of inter im ﬁnancial informat ion, report ing on regulatory returns, reporting to a regulator on client assets and extended work performed over ﬁnancial informat ion and controls author ised by those charged with governance • Other assurance services include agreed-upon-procedures in relation to statutory and regulatory ﬁl ings • Transaction related services are fees payable to Ernst & Young LLP for issu ing comfort letters Expenses incurred in respect of their role as auditor, were reimbursed to EY LLP $0.9 mill ion (2022: $0.6 m ill ion). 39. Standard Chartered PLC (Company) Classif icat ion and measurement of ﬁnanc ial instruments 2023 2022 Non-trading Non-trading mandatorily mandatorily Derivat ives at fair value Derivat ives at fair value held for Amortised through held for Amortised through hedging cost proﬁt or loss Total hedging cost proﬁt or loss Total Financ ial assets $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ives 80 – – 80 61 – – 61 Investment securit ies – 6,944 19,425 1 26,369 – 8,423 15,358 1 23,781 Amounts owed by subsid iary undertakings – 10,294 – 10,294 – 7,417 – 7,417 Total 80 17,238 19,425 36,743 61 15,840 15,358 31,259 1 Standard Chartered Bank, Standard Chartered Bank (Hong Kong) Lim ited, Standard Chartered Bank (Ch ina) Lim ited and Standard Chartered Bank (S ingapore) Lim ited issued Loss Absorbing Capacity (LAC) elig ible debt secur it ies Instruments classif ied as amort ised cost, which include investment securit ies and amounts owed by subs idary undertakings, are recorded in stage 1 for the recognit ion of expected cred it losses. Derivat ives held for hedg ing are held at fair value and are classif ied as Level 2 and Level 3 wh ile the counterparty is Standard Chartered Bank, Standard Chartered Bank (Hong Kong) Lim ited and external counterpart ies. Debt securit ies compr ise securit ies held at amort ised cost issued by Standard Chartered Bank and SC Ventures Holdings Lim ited and have a fair value equal to carrying value of $6,944 mill ion (31 December 2022: $8,423 m ill ion). Financ ial statements Standard Chartered – Annual Report 2023 463 39. Standard Chartered PLC (Company) continued In 2023 and 2022, amounts owed by subsid iary undertak ings have a fair value equal to carrying value. 2023 2022 Designated Designated Derivat ives at fair value Derivat ives at fair value held for Amortised through held for Amortised through hedging cost proﬁt or loss Total hedging cost proﬁt or loss Total Financ ial l iab il it ies $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ives 1,104 – – 1,104 1,343 – – 1,343 Debt securit ies in issue – 17,142 14,007 31,149 – 13,891 10,397 24,288 Subordinated liab il it ies and other borrowed funds – 9,248 2,697 11,945 – 11,239 2,445 13,684 Amounts owed to subsid iary undertakings – – – – – 2 – 2 Total 1,104 26,390 16,704 44,198 1,343 25,132 12,842 39,317 Derivat ives held for hedg ing are held at fair value and are classif ied as Level 2 wh ile the counterparty is Standard Chartered Bank and Standard Chartered Bank (Hong Kong) Lim ited. The fair value of debt securit ies in issue held at amortised cost is $17,195 mill ion (2022: $13,611 m ill ion). The fair value of subordinated liab il it ies and other borrowed funds held at amort ised cost is $8,717 mill ion (2022: $10,434 m ill ion). Derivat ive ﬁnancial instruments 2023 2022 Notional Notional princ ipal princ ipal amounts Assets Liab il it ies amounts Assets Liab il it ies Derivat ives $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Foreign exchange derivat ive contracts: Forward foreign exchange 8,968 32 – 9,351 47 61 Currency swaps 563 – 35 574 – 71 Interest rate derivat ive contracts: Swaps 14,819 43 1,069 15,423 – 1,211 Forward rate agreements and options – – – – – – Credit derivat ive contracts 4,030 5 – 3,256 14 – Total 28,380 80 1,104 28,604 61 1,343 Credit risk 2023 2022 $mill ion $mill ion Derivat ive ﬁnancial instruments 80 61 Debt securit ies 26,369 23,781 Amounts owed by subsid iary undertak ings 10,294 7,417 Total 36,743 31,259 In 2023 and 2022, amounts owed by subsid iary undertak ings were neither past due nor impa ired; the Company had no ind iv idually impa ired loans. In 2023 and 2022, the Company had no impa ired debt secur it ies. The debt secur it ies held by the Company are issued by Standard Chartered Bank, Standard Chartered Bank (Hong Kong) Lim ited, Standard Chartered Bank (Ch ina) Lim ited and Standard Chartered Bank (Singapore) Lim ited, subs id iary undertak ings with credit ratings of A+. There is no material expected credit loss on these instruments as they are Stage 1 assets, and of a high quality. Financ ial statements Notes to the ﬁnancial statements 464 Standard Chartered – Annual Report 2023 39. Standard Chartered PLC (Company) continued Liqu id ity risk The following table analyses the residual contractual maturity of the assets and liab il it ies of the Company on a discounted basis: 2023 Between Between Between Between Between Between More than one month three six months nine months one year two years ﬁve years One month and three months and and nine and one and two and ﬁve and or less months six months months year years years undated Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 32 – – – – 10 27 11 80 Investment securit ies – – – – – 3,853 5,581 16,935 26,369 Amount owed by subsid iary undertakings 1,598 504 1,530 12 1,073 1,082 3,254 1,241 10,294 Investments in subsid iary undertakings – – – – – – – 60,791 60,791 Other assets – – – – – – – – – Total assets 1,630 504 1,530 12 1,073 4,945 8,862 78,978 97,534 Liab il it ies Derivat ive ﬁnancial instruments 11 26 17 – – 93 171 786 1,104 Senior debt – – – – – 7,242 14,020 9,887 31,149 Amount owed to subsid iary undertakings – – – – – – – – – Other liab il it ies 278 202 135 30 5 – – – 650 Subordinated liab il it ies and other borrowed funds 996 51 8 172 440 330 1,952 7,996 11,945 Total liab il it ies 1,285 279 160 202 445 7,665 16,143 18,669 44,848 Net liqu id ity gap 345 225 1,370 (190) 628 (2,720) (7,281) 60,309 52,686 2022 Between Between Between Between Between Between More than one month three six months nine months one year two years ﬁve years One month and three months and and nine and one and two and ﬁve and or less months six months months year years years undated Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Assets Derivat ive ﬁnancial instruments 45 – – – – – 16 – 61 Investment securit ies 2,000 – – – – – 5,351 16,430 23,781 Amount owed by subsid iary undertakings 719 1,250 140 – 840 1,523 2,081 864 7,417 Investments in subsid iary undertakings – – – – – – – 60,975 60,975 Total assets 2,764 1,250 140 – 840 1,523 7,448 78,269 92,234 Liab il it ies Derivat ive ﬁnancial instruments 77 3 – – – 75 330 858 1,343 Senior debt – – – – – 2,090 14,155 8,043 24,288 Other debt securit ies in issue – – – – – – – – – Amount owed to subsid iary undertakings – – – – – – – 2 2 Other liab il it ies 175 134 95 14 5 – – – 423 Subordinated liab il it ies and other borrowed funds 2,004 88 13 248 14 1,900 2,078 7,339 13,684 Total liab il it ies 2,256 225 108 262 19 4,065 16,563 16,242 39,740 Net liqu id ity gap 508 1,025 32 (262) 821 (2,542) (9,115) 62,027 52,494 Financ ial statements Standard Chartered – Annual Report 2023 465 39. Standard Chartered PLC (Company) continued Financ ial l iab il it ies on an und iscounted basis 2023 Between Between Between Between Between Between More than one month three six months nine months one year two years ﬁve years One month and three months and and nine and one and two and ﬁve and or less months six months months year years years undated Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive ﬁnancial instruments 11 26 17 – – 93 171 786 1,104 Debt securit ies in issue 247 57 328 398 278 8,490 16,396 11,279 37,473 Subordinated liab il it ies and other borrowed funds 1,059 134 34 208 556 410 2,304 13,968 18,673 Other liab il it ies 5 91 – – – – – – 96 Total liab il it ies 1,322 308 379 606 834 8,993 18,871 26,033 57,346 2022 Between Between Between Between Between Between More than one month three six months nine months one year two years ﬁve years One month and three months and and nine and one and two and ﬁve and or less months six months months year years years undated Total $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion $mill ion Derivat ive ﬁnancial instruments 77 3 – – – 75 330 858 1,343 Debt securit ies in issue 88 66 262 145 271 2,896 15,676 9,057 28,461 Subordinated liab il it ies and other borrowed funds 2,097 174 33 273 17 2,035 2,552 14,668 21,849 Other liab il it ies 9 15 – – – – – – 24 Total liab il it ies 2,271 258 295 418 288 5,006 18,558 24,583 51,677 40. Related undertakings of the Group As at 31 December 2023, the Group’s interests in related undertakings in accordance with Section 409 of the Companies Act 2006 are disclosed below. Unless otherwise stated, the share capital disclosed comprises ordinary or common shares which are held by subsid iar ies of the Group. Standard Chartered Bank (Hong Kong) Lim ited, Standard Chartered Fund ing (Jersey) Lim ited, Stanchart Nominees Lim ited, Standard Chartered Hold ings Lim ited and Standard Chartered Nom inees Lim ited are d irectly held subsid iar ies, all other related undertakings are held ind irectly. Subsid iary Undertak ings Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom FinVentures UK Lim ited Investment Holding Company United Kingdom US$1.00 Ordinary 100 SC (Secretaries) Lim ited Others United Kingdom £1.00 Ordinary 100 SC Transport Leasing 1 LTD 7,8 Leasing Business United Kingdom £1.00 Ordinary 100 SC Transport Leasing 2 Lim ited 7,8 Leasing Business United Kingdom £1.00 Ordinary 100 SC Ventures G.P. Lim ited Investment Holding Company United Kingdom £1.00 Ordinary 100 SC Ventures Holdings Lim ited Investment Holding United Kingdom US$1.00 Ordinary 100 Company US$1.00 Redeemable Preference 100 SC Ventures Innovation Investment L.P. Investment Holding Company United Kingdom Lim ited Partnersh ip Interest 100 SCMB Overseas Lim ited Investment Holding Company United Kingdom £0.10 Ordinary 100 Shoal Lim ited Dig ital marketplace for sustainable and “green” products. United Kingdom US$1.00 Ordinary 100 Stanchart Nominees Lim ited ⁹ Nominee Services United Kingdom £1.00 Ordinary 100 Standard Chartered Africa Lim ited 7,8 Investment Holding Company United Kingdom £1.00 Ordinary 100 Financ ial statements Notes to the ﬁnancial statements 466 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) Standard Chartered Bank Banking & Financ ial United Kingdom US$0.01 Non-Cumulative Services Irredeemable Preference 100 US$1.00 Ordinary 100 US$5.00 Non-Cumulative Redeemable Preference 100 Standard Chartered Foundation 1 Charity projects United Kingdom Guarantor 100 Standard Chartered Health Trustee (UK) Lim ited Trustee Services United Kingdom £1.00 Ordinary 100 Standard Chartered Holdings Lim ited⁹ Investment Holding Company United Kingdom US$2.00 Ordinary 100 Standard Chartered I H Lim ited Investment Holding Company United Kingdom US$1.00 Ordinary 100 Standard Chartered Leasing (UK) Lim ited 7,8 Leasing Business United Kingdom US$1.00 Ordinary 100 Standard Chartered NEA Lim ited Investment Holding Company United Kingdom US$1.00 Ordinary 100 Standard Chartered Nominees (Private Clients UK) Lim ited Nominee Services United Kingdom US$1.00 Ordinary 100 Standard Chartered Nominees Lim ited⁹ Nominee Services United Kingdom £1.00 Ordinary 100 Standard Chartered Securit ies (Afr ica) Investment Holding Holdings Lim ited 7,8 Company United Kingdom US$1.00 Ordinary 100 Standard Chartered Strategic Investment Holding United Kingdom £1.00 Ordinary 100 Investments Lim ited 7,8 Company US$1.00 Ordinary 100 Standard Chartered Trustees (UK) Lim ited Trustee Services United Kingdom £1.00 Ordinary 100 The BW Leasing Partnership 1 LP 1 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The BW Leasing Partnership 2 LP 1 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The BW Leasing Partnership 3 LP 1 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The BW Leasing Partnership 4 LP 1 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The BW Leasing Partnership 5 LP 1 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The SC Transport Leasing Partnership 1 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The SC Transport Leasing Partnership 2 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The SC Transport Leasing Partnership 3 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The SC Transport Leasing Partnership 4 Leasing Business United Kingdom Lim ited Partnersh ip Interest 100 The following companies have the address of 1 Poultry, London, EC2R 8EJ, United Kingdom Assembly Payments UK Ltd¹ Payment Services Provider United Kingdom US$1.00 Ordinary 100 CurrencyFair (UK) Lim ited¹ Banking & Financ ial Services United Kingdom £1.00 Ordinary 100 Zai Technologies Lim ited 1 Payment Services Provider United Kingdom £1.00 Ordinary 100 The following companies have the address of 2 More London Rivers ide, London , SE1 2JT, United Kingdom Bricks (C&K) LP 1 Lim ited Partnersh ip interest United Kingdom Lim ited Partnersh ip Interest 100 Bricks (T) LP 1 Lim ited Partnersh ip interest United Kingdom Lim ited Partnersh ip Interest 100 Bricks (C) LP 1 Lim ited Partnersh ip interest United Kingdom Lim ited Partnersh ip Interest 100 The following companies have the address of 1 Bartholomew Lane, London, EC2N 2AX, United Kingdom Corrasi Covered Bonds LLP Trustee Services United Kingdom Membership Interest 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued 467 Standard Chartered – Annual Report 2023 Financ ial statements Name and registered address Activ ity Place of incorporation Descript ion of shares Proportion of shares held (%) The following companies have the address of 5th Floor, Holland House 1-4 Bury Street, London, EC3A 5AW, United Kingdom Zodia Custody Lim ited Custody Services United Kingdom US$1.00 Voting Ordinary 95.1 US$2.70 Series A Preferred 15.911 Zodia Holdings Lim ited Investment Holding Company United Kingdom US$1.00 A Ordinary 100 The following companies have the address of 6th Floor, 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Zodia Markets (UK) Lim ited Banking & Financ ial Services United Kingdom US$1.00 Ordinary 100 Zodia Markets Holdings Lim ited Dig ital Venture: Hold ing Company for The Zodia Markets Group United Kingdom US$1.00 Ordinary 80.461 The following company has the address of Edifíc io K ilamba, 8º Andar Avenida 4 de Fevereiro, Marginal, Luanda, Angola Standard Chartered Bank Angola S.A. Banking & Financ ial Services Angola AOK8,742.05 Ordinary 60 The following companies have the address of Level 22, 120 Spencer Street, Melbourne VIC 3000 VIC 3000, Australia Assembly Payments Australia Pty Ltd ¹ Holding Company Australia US$ Ordinary 100 Zai Australia Pty Ltd 1 Payment Service Provider Australia AUD0.01 Ordinary 100 The following company has the address of Milsons Landing, Level 5, 6A Glen Street, Milsons Point NSW NSW 2061, Australia CurrencyFair Australia Pty Ltd ¹ Foreign Currency conversion services. Australia AUD Ordinary 100 The following company has the address of Level 5, 345 George St, Sydney NSW 2000, Australia Standard Chartered Grindlays Pty Lim ited Investment Holding Company Australia AUD Ordinary 100 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 Lim ited Banking & Financ ial Services Botswana BWP Ordinary 75.827 Standard Chartered Bank Insurance Agency (Proprietary) Lim ited Insurance Services Botswana BWP Ordinary 100 Standard Chartered Botswana Education Trust 2 CSR programme. Botswana Trust Interest 100 Standard Chartered Botswana Nominees (Proprietary) Lim ited Nominee Services Botswana BWP Ordinary 100 Standard Chartered Investment Services (Proprietary) Lim ited Nominee Services Botswana BWP Ordinary 100 The following company has the address of Avenida Brigade iro Far ia Lima, no 3.477, 6º andar, conjunto 62 - Torre Norte, Condomin io Pat io Victor Malzoni, CEP 04538-133, Sao Paulo, Brazil Standard Chartered Representação e Partic ipações Ltda Banking & Financ ial Services Brazil BRL1.00 Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 468 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of G01-02, Wisma Haj i Mohd Taha Build ing, , Jalan Gadong, BE4119, Brune i Darussalam Standard Chartered Securit ies (B) Sdn Bhd Investment Management Brunei Darussalam BND1.00 Ordinary 100 The following company has the address of Standard Chartered Bank Cameroon S.A, 1155, Boulevard de la Liberté, Douala, B.P. 1784, Cameroon Standard Chartered Bank Cameroon Banking & Financ ial S.A. Services Cameroon XAF10,000.00 Ordinary 100 The following company has the address of 66 Wellington Street, West, Suite 4100, Toronto Domin ion Centre, Toronto ON M5K 1B7, Canada CurrencyFair (Canada) Ltd ¹ Dig ital Payment platform Canada CAD Common 100 The following company has the address of Maples Corporate Services Lim ited, PO Box 309, Ugland House, Grand Cayman, KY1-1104 , Cayman Islands Cerulean Investments LP Investment Holding Company Cayman Islands Lim ited Partnersh ip Interest 100 The following company has the address of c/o Maples Finance Lim ited, PO Box 1093 GT, Queensgate House, Georgetown, Grand Cayman, Cayman Islands SCB Investment Holding Company Investment Holding Lim ited Company Cayman Islands US$1,000.00 Ordinary-A 99.999 The following company has the address of Room 2619, No 9, Linhe West Road, Tianhe Distr ict, Guangzhou, Ch ina Guangzhou CurrencyFair Information Foreign Currency Technology Lim ited 1,3 conversion services. China CNY Ordinary 100 The following company has the address of 8A, Hony Tower, 1st Financ ial Street, Nanshan Distr ict, Shenzen, Ch ina SC Ventures Investment Management Serve as a fund manager in (Shenzhen) Lim ited China China US$1.00 Ordinary 100 The following company has the address of Units 1101B (Ofﬁce use only), No. 235 Tianhebe i Rd.,, T ianhe Distr ict, Guangzhou City, Guangdong Province, China Standard Chartered (Guangzhou) Business Management Co., Ltd. Business consulting services China US$ Ordinary 100 The following company has the address of Standard Chartered Tower, 201 Century Avenue, Pudong, Shanghai, 200120, China Standard Chartered Bank (China) Lim ited 3 Commercial banking China CNY Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 469 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of Unit 802B, 803, 1001A,100 2B,1003-1005,1101-1105,, 201- 1205,1302C,1303, No. 235 Tianhe North Road, Tianhe Distr ict,, Guangzhou C ity, Guangdong Province, China Standard Chartered Global Business Research, development, Services (Guangzhou) Co., Ltd. 3 other services China US$ Ordinary 100 The following company has the address of No. 35, Xinhuanbe i Road, Teda, T ianjin, 300457, China Standard Chartered Global Business Research, development, Services Co., Ltd 3 other services China US$ Ordinary 100 The following company has the address of 1201 1-2, 15-16, 12/F, Unit No.1, Build ing No.1, No. 1 Dongsanhuan Zhong Road, Chaoyang Distr ict, Be ijing, China Standard Chartered Securit ies (Ch ina) Banking & Financ ial Lim ited Services China CNY Ordinary 100 The following company has the address of No. 188 Yeshen Rd, 11F, A-1161 RM, Pudong New Distr ict, Shangha i, 31, 201308, China Standard Chartered Trading (Shanghai) wholesale of base metal Lim ited 3 and its products China US$15,000,000.00 Ordinary 100 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 Banking & Financ ial SA Services Cote d’Ivoire XOF100,000.00 Ordinary 100 The following company has the address of 8 Ecowas Avenue, Banjul, Gambia Standard Chartered Bank Gambia Banking & Financ ial Lim ited Services Gambia GMD1.00 Ordinary 74.852 The following company has the address of Taunusanlage 16, 60325, Frankfurt am Main, Germany Standard Chartered Bank AG Banking & Financ ial Services Germany € Ordinary 100 The following company has the address of Standard Chartered Bank Build ing, 87 Independance Avenue, Ridge, ACCRA, Greater ACCRA, GA-016-4621, Ghana Solvezy Technology Ghana Ltd Dig ital Venture Ghana GHS Ordinary 100 The following companies have the address of Standard Chartered Bank Build ing, No. 87, Independence Avenue, P.O. Box 768, Accra, Ghana Standard Chartered Bank Ghana PLC Banking & Financ ial Ghana GHS Ordinary 69.416 Services GHS0.52 Non-cumulative Irredeemable Preference 87.043 Standard Chartered Ghana Nominees Lim ited Nominee Services Ghana GHS Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 470 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of Standard Chartered Bank Ghana Lim ited, 87, Independence Avenue, Post Ofﬁce Box 678, Accra, Ghana Standard Chartered Wealth Management Lim ited Company Investment Management Ghana GHS Ordinary 100 The following company has the address of 31/F, Tower 2 Times Square, 1 Matheson St, Causeway Bay, Hong Kong Assembly Payments HK Lim ited ¹ Online payment platform Hong Kong HKD Ordinary 100 The following company has the address of Suites 1103-4 AXA Tower, Landmark East, 100 How Ming Street, Kwun Tong, Hong Kong CurrencyFair Asia Lim ited ¹ Foreign Currency conversion services. Hong Kong HKD Ordinary 100 The following company has the address of 18/F., Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong Horsford Nominees Lim ited Nominee Services Hong Kong HKD Ordinary 100 The following companies have the address of 15/F., Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong Marina Acacia Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Amethyst Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Angelite Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Beryl Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Emerald Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Flax Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Gloxin ia Sh ipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Hazel Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Ilex Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Iridot Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Mimosa Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Moonstone Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Peridot Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Sapphire Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Marina Tourmaline Shipp ing L im ited Leasing Business Hong Kong US$ Ordinary 100 Standard Chartered Securit ies (Hong Corporate Finance & Kong) Lim ited Advisory Services Hong Kong HKD Ordinary 100 Marina Leasing Lim ited Leasing Business Hong Kong US$ Ordinary 100 Standard Chartered Leasing Group Investment Holding Lim ited Company Hong Kong US$ Ordinary 100 Standard Chartered Trade Support (HK) Corporate Finance & Lim ited Advisory Services Hong Kong HKD Ordinary 100 The following company has the address of 39/F., Oxford House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Mox Bank Lim ited Banking & Financ ial Services Hong Kong HKD Ordinary 68.291 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 471 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of 13/F Standard Chartered Bank Build ing, 4-4A Des Voeux Road Central, Hong Kong, Standard Chartered Asia Lim ited Investment Holding Hong Kong HKD Deferred 100 Company HKD Ordinary 100 The following company has the address of 32/F., 4-4A Des Voeux Road, Central , Hong Kong Standard Chartered Bank (Hong Kong) Banking & Financ ial Hong Kong HKD Ordinary-A 100 Lim ited⁹ Services HKD Ordinary-B 100 US$ Ordinary-C 100 US$ Ordinary-D 100 The following company has the address of 14th Floor, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Standard Chartered PF Real Estate (Hong Kong) Lim ited Ultimate Holding Company Hong Kong US$ Ordinary 100 The following company has the address of 13/F Standard Chartered Bank Build ing, 4-4A Des Voeux Road Central, Hong Kong Standard Chartered Private Equity Investment Holding Lim ited Company Hong Kong HKD Ordinary 100 The following companies have the address of 14/F, Standard Chartered Bank Build ing, 4-4A Des Voeux Road , Central, Hong Kong Standard Chartered Trust (Hong Kong) Lim ited Investment Management Hong Kong HKD Ordinary 100 Standard Chartered Trustee (Hong Kong) Lim ited Trustee Services Hong Kong HKD Ordinary 100 The following company has the address of 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong Zodia Custody (Hong Kong) Lim ited Custody Services Hong Kong US$0.01 Ordinary 100 The following company has the address of 2 Floor Sabari Complex 24 Field Marshal, Capriappa RD Shanthala Nagar, Ashok Nagar, Bangalore, Karnataka, 560025, India Assembly Payments India Private Activ it ies auxil iary to Lim ited ¹ ﬁnancial intermed iat ion India INR100.00 Ordinary 100 The following companies have the address of Ground Floor, Crescenzo Build ing, G Block, C 38/39 , Bandra Kurla Complex, Bandra (East) , Mumbai , Maharashtra , 400051, India St Helen’s Nominees India Private Lim ited Nominee Services India INR10.00 Equity 100 Standard Chartered Private Equity Advisory (India) Private Lim ited Support Services India INR1,000.00 Equity 100 The following company has the address of Vaishnav i Seren ity, First Floor, No. 112, Koramangala Industrial Area, 5th Block, Koramangala, Bangalore, Karnataka, 560095, India Standard Chartered (India) Modeling and Analytics Centre Private Lim ited Support Services India INR10.00 Equity 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 472 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) 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 Capital Lim ited Banking & Financ ial Services India INR10.00 Equity 100 The following company has the address of 90 M.G.Road, II Floor, Fort, Mumbai, Maharashtra, 400001, India Standard Chartered Finance Private Lim ited Support Services India INR10.00 Ordinary 98.683 The following company has the address of 1st Floor, Europe Build ing, No.1, Haddows Road, Nungambakkam, Chennai, 600 006, India Standard Chartered Global Business Services Private Lim ited Offshore Support Services India INR10.00 Equity 100 The following company has the address of Second Floor, Indiqube Edge, Khata No. 571/630/6/4, Sy.No.6/4, Ambalipura Village, Varthur Hobli, Marathahalli Sub-Div is ion, Ward No. 150, Bengaluru, 560102, India Standard Chartered Research and Support Services India INR10.00 Compulsory Technology India Private Lim ited Convertible Cumulative Preference 100 INR10.00 Equity Class - A 100 The following company has the address of 2nd Floor, 23-25 M.G. Road, Fort, Mumbai 400 001, India Standard Chartered Securit ies (Ind ia) Banking & Financ ial Lim ited Services India INR10.00 Equity 100 The following company has the address of B001, Metrotech Forest View, Sy.No, 67/5 BSK 6th Stage, Thalaghattapura Bengaluru 560062, Karnataka, India SCV Research and Development Pvt. Ltd. Others India INR 10.00 Ordinary 100 The following company has the address of The Icon Business Park Blok P Nomor 03, RT 03/RW 09Sampora, Kec, Cisauk, Kabupaten Tangerang, Banten, 15345, Indonesia PT Labamu Sejahtera Indonesia Others Indonesia IDR10,000.00 Ordinary 100 The following companies have the address of 91 Pembroke Road, Dublin 4, Ballsbridge, Dublin, DO4 EC42, Ireland CurrencyFair (Canada) Lim ited¹ Dig ital Payment platform Ireland €1.00 Ordinary 100 CurrencyFair Lim ited 1,10 FX transfer services Ireland €0.001 A Ordinary 100 €0.001 Ordinary 27.951 CurrencyFair Nominees Lim ited ¹ Nominee company Ireland €1.00 Ordinary 100 The following company has the address of 27 Fitzw ill iam Street, Dublin, D02 TP23, Ireland Zodia Custody (Ireland) Lim ited Custody Services Ireland US$1.00 Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 473 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of 32 Molesworth Street, Dublin 2, D02Y512, Ireland Zodia Markets (Ireland) Lim ited Banking & Financ ial Services Ireland US$1.00 Ordinary 100 The following companies have the address of 1st Floor, Goldie House, 1-4 Goldie Terrace, Upper Church Street, Douglas, IM1 1EB, Isle of Man Standard Chartered Assurance Lim ited Insurance Services Isle of Man US$1.00 Ordinary 100 US$1.00 Redeemable Preference 100 Standard Chartered Isle of Man Lim ited 5 Insurance & Reinsurance Company Isle of Man US$1.00 Ordinary 100 The following company has the address of 21/F, Sanno Park Tower, 2-11-1 Nagatacho, Chiyoda-ku, Tokyo, 100-6155, Japan Standard Chartered Securit ies (Japan) Banking & Financ ial Lim ited Services Japan JPY Ordinary 100 The following company has the address of 15 Castle Street, St Helier, JE4 8PT, Jersey SCB Nominees (CI) Lim ited Nominee Services Jersey US$1.00 Ordinary 100 The following company has the address of IFC 5, St Helier, JE1 1ST, Jersey Standard Chartered Funding (Jersey) Investment Holding Lim ited 5, ⁹ Company Jersey £1.00 Ordinary 100 The following companies have the address of Standard Chartered@ Chiromo, 48 Westlands Road, P. O. Box 30003 - 00100, Nairob i , Kenya Standard Chartered Bancassurance Intermediary Lim ited Insurance Services Kenya KES100.00 Ordinary 100 Standard Chartered Bank Kenya Lim ited Banking & Financ ial Kenya KES5.00 Ordinary 74.318 Services KES5.00 Preference 100 Standard Chartered Financ ial Serv ices Lim ited Merchant Banking Kenya KES20.00 Ordinary 100 Standard Chartered Investment Services Lim ited Investment services Kenya KES20.00 Ordinary 100 Standard Chartered Kenya Nominees Lim ited1 Nominee Services Kenya KES20.00 Ordinary 100 Standard Chartered Securit ies (Kenya) Corporate Finance & Lim ited Advisory Services Kenya KES10.00 Ordinary 100 Solvezy Technology Kenya Lim ited Dig ital Venture Kenya KES1,000.00 Ordinary 100 Tawi Fresh Kenya Lim ited Dig ital Marketplace, Ecommerce Kenya KES1,000.00 Ordinary 100 The following company has the address of 47, Jong-ro, Jongno-gu, Seoul, 110-702, Korea, Republic of Standard Chartered Bank Korea Lim ited Banking & Financ ial Services Korea, Republic of KRW5,000.00 Ordinary 100 The following company has the address of 2F, 47, Jong-ro, Jongno-gu, Seoul, Korea, Republic of Standard Chartered Securit ies Korea Co., Ltd Asset Management Korea, Republic of KRW5,000.00 Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 474 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of Atrium Build ing, Maarad Street, 3rd Floor, P.O. Box 11-4081 Raid El Solh, Beirut Central Distr ict, Lebanon Standard Chartered Metropolitan Investment Holding Holdings SAL Company Lebanon US$10.00 Ordinary A 100 The following company has the address of Level 13, Menara 1 Sentrum 201, Jalan Tun Sambanthan, Brickf ields, 50470 Kuala Lumpur, Malaysia Assembly Payments Malaysia Sdn. Bhd. ¹ Other ﬁnancial serv ice activ it ies Malaysia RM Ordinary 100 The following companies have the address of Level 25, Equatorial Plaza, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Cartaban (Malaya) Nominees Sdn Berhad Nominee Services Malaysia RM Ordinary 100 Cartaban Nominees (Asing) Sdn Bhd Nominee Services Malaysia RM Ordinary 100 Cartaban Nominees (Tempatan) Sdn Bhd Nominee Services Malaysia RM Ordinary 100 Golden Maestro Sdn Bhd Investment Holding Company Malaysia RM Ordinary 100 Price Solutions Sdn Bhd Direct Sales/Collection Services Malaysia RM Ordinary 100 SCBMB Trustee Berhad Trustee Services Malaysia RM Ordinary 100 Standard Chartered Bank Malaysia Banking & Financ ial Malaysia RM Irredeemable Convertible Berhad Services Preference 100 RM Ordinary 100 Standard Chartered Saadiq Berhad Banking & Financ ial Services Malaysia RM Ordinary 100 The following companies have the address of TMF Trust Labuan Lim ited, Brumby Centre, Lot 42, Jalan Muhibbah, 87000 Labuan F.T., Malaysia Marina Morganite Shipp ing L im ited 6 Ownership and Leasing of vessels Malaysia US$ Ordinary 100 Marina Moss Shipp ing L im ited 6 Ownership and Leasing of vessels Malaysia US$ Ordinary 100 Marina Tanzanite Shipp ing L im ited 6 Ownership and Leasing of vessels Malaysia US$ Ordinary 100 The following company has the address of Suite 18-1, Level 18, Vertical Corporate Tower B, Avenue 10, The Vertical, Bangsar South City , No. 8, Jalan Kerinch i , 59200 Kuala Lumpur, Wilayah Persekutuan, Malaysia Resolution Alliance Sdn Bhd Investment Holding Company Malaysia Ordinary 91 The following company has the address of 12th Floor, Menara Symphony , No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya , Selangor, Malaysia Solv Sdn. Bhd. B2B dig ital platform offering ﬁnanc ial serv ices Malaysia RM5.00 Ordinary 100 The following company has the address of Level 1, Wisma Standard Chartered, Jalan Teknologi 8, , Taman Teknologi Malaysia, Bukit Jalil, , 57000 Kuala Lumpur, Wilayah Persekutuan, Malaysia Standard Chartered Global Business Services Sdn Bhd Offshore Support Services Malaysia RM Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 475 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following companies have the address of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands Marina Angelica Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Aventurine Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Citr ine Sh ipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Dahlia Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Dittany Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Lilac Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Lolite Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Obsid ian Sh ipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Quartz Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Remora Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Turquoise Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 Marina Zircon Shipp ing L im ited 6 Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary 100 The following company has the address of 6th Floor, Standard Chartered Tower , 19, Bank Street, Cybercity, Ebene, 72201, Maurit ius Standard Chartered Bank (Maurit ius) Banking & Financ ial Lim ited Services Maurit ius Ordinary No Par Value 100 The following companies have the address of c/o Ocorian Corporate Services (Maurit ius) Ltd, 6th Floor, Tower A, 1 Cybercity, Ebene, 72201, Maurit ius Standard Chartered Private Equity ius) II L (Maurit im ited Investment Management Maurit ius US$1.00 Ordinary 100 Standard Chartered Private Equity ius) L (Maurit im ited Investment Management Maurit ius US$1.00 Ordinary 100 Standard Chartered Private Equity ius) lll L (Maurit im ited Investment Management Maurit ius US$1.00 Ordinary 100 The following company has the address of Mondial Management Services Ltd, Unit 2L, 2nd Floor Standard Chartered Tower, 19 Cybercity, Ebene, Maurit ius Subcontinental Equit ies L im ited Investment Holding Company Maurit ius US$1.00 Ordinary 100 The following company has the address of IQEQ Corporate Services (Maurit ius) Ltd, 33, Edith Cavell Street, Port Louis, 11324, Maurit ius Actis Treit Holdings (Maurit ius) L im ited 1 Investment Holding Company Maurit ius Class A $1.00 Ordinary 62.001 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 476 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of Standard Chartered Bank Nepal Lim ited, Madan Bhandar i Marg. Ward No.31, Kathmandu Metropolitan City, Kathmandu Distr ict, Bagmat i Province, Kathmandu, 44600, Nepal Standard Chartered Bank Nepal Lim ited Banking & Financ ial Services Nepal NPR100.00 Ordinary 70.21 The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Standard Chartered Holdings (Africa) B.V. 5 Holding Company Netherlands €4.50 Ordinary 100 Standard Chartered Holdings (Asia Pacif ic) B.V. 5 Holding Company Netherlands €4.50 Ordinary 100 Standard Chartered Holdings (International) B.V. 5 Holding Company Netherlands €4.50 Ordinary 100 Standard Chartered MB Holdings B.V. 5 Holding Company Netherlands €4.50 Ordinary 100 The following company has the address of PromisePay, 4 All good Place, Rototuna North, Hamilton, 3210, New Zealand PromisePay Lim ited 1 Payment Services Provider New Zealand NZD Ordinary 100 The following companies have the address of 142, Ahmadu Bello Way, Victor ia Island, Lagos, 101241, N iger ia Standard Chartered Bank Niger ia Banking & Financ ial Niger ia NGN1.00 B Redeemable Lim ited Services Preference 100 NGN1.00 Irredeemable Non Cumulative Preference 100 NGN1.00 Ordinary 100 Standard Chartered Capital & Advisory Corporate Finance & Niger ia L im ited Advisory Services Niger ia NGN1.00 Ordinary 100 Standard Chartered Nominees (Niger ia) Lim ited Custody Services Niger ia NGN1.00 Ordinary 100 The following company has the address of 3rd Floor Main SCB Build ing, I.I Chundrigar Road, Karachi, Sindh, 74000, Pakistan Price Solution Pakistan (Private) Lim ited Banking & Financ ial Services Pakistan PKR10.00 Ordinary 100 The following company has the address of P.O. Box No. 5556, I.I. Chundrigar Road , Karachi , 74000, Pakistan Standard Chartered Bank (Pakistan) Banking & Financ ial Lim ited Services Pakistan PKR10.00 Ordinary 98.986 The following company has the address of 8th Floor, Makati Sky Plaza Build ing 6788, Ayala Avenue San Lorenzo, City of Makati, Fourth Distr ict, Nat ional Capi, 1223, Phil ipp ines Standard Chartered Group Services, Manila Incorporated Offshore Support Services Phil ipp ines PHP1.00 Ordinary 100 The following company has the address of Rondo Ignacego Daszyńskiego 2B, 00-843, Warsaw, Poland Standard Chartered Global Business Services spółka z ograniczoną odpowiedz ialnośc ią Offshore Support Services Poland PLN50.00 Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 477 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of Al Faisal iah Ofﬁce Tower Floor No 7 (T07D) , King Fahad Highway, Olaya Distr ict, R iyadh P.O box 295522 , Riyadh, 11351 , Saudi Arabia Standard Chartered Capital (Saudi Arabia) Custody Services Saudi Arabia SAR10.00 Ordinary 100 The following company has the address of 9 & 11, Lightfoot Boston Street, Freetown, Sierra Leone Standard Chartered Bank Sierra Leone Banking & Financ ial Lim ited Services Sierra Leone SLL1.00 Ordinary 80.656 The following company has the address of 9 Rafﬂes Place, #27-00 Republic Plaza, 048619, Singapore Actis Treit Holdings No.1 (Singapore) Investment Holding Private Lim ited 1 Company Singapore SGD Ordinary 100 Actis Treit Holdings No.2 (Singapore) Investment Holding Private Lim ited 1 Company Singapore SGD Ordinary 100 The following companies have the address of 38 Beach Road, #29-11 South Beach Tower, 189767, Singapore Assembly Payments Pte. Ltd. ¹ Investment Holding Singapore US$ Ordinary 100 Company US$ Preference 100 Assembly Payments SGP Pte. Ltd. ¹ Transaction/Payment Processing Services Singapore SGD Ordinary 100 The following companies have the address of Rafﬂes Place, #26-01 Republic Plaza, Singapore , 048619, Singapore Audax Financ ial Technology Pte. Ltd Support Services Singapore US$ Ordinary-A 100 Autumn Life Pte. Ltd. Support Services Singapore US$ Ordinary-A 96.623 CashEnable Pte. Ltd. Dig ital Venture: F inanc ial Services Singapore US$ Ordinary-A 100 Huma.Eco Pte. Ltd. Support Services Singapore US$ Ordinary 100 Letsbloom Pte. Ltd. Others Singapore US$ Ordinary-A 100 Libeara (Singapore) Pte. Ltd. Dig ital Venture: Investment Services Singapore US$ Ordinary 100 Libeara Pte. Ltd. Dig ital Venture: Investment Services Singapore US$ Ordinary 100 Pegasus Dealmaking Pte. Ltd. Mergers and Acquis it ions (M&A) marketplace Singapore US$ Ordinary 100 The following company has the address of 1 Robinson Road, #17-00, AIA Tower, 048542, Singapore CurrencyFair (Singapore) Pte.Ltd ¹ Foreign Currency conversion services. Singapore SGD Ordinary 100 The following companies have the address of 9 Rafﬂes Place, #26-01 Republic Plaza, 048619 , Singapore SCV Research and Development Pte. Ltd. Others Singapore US$ Ordinary-A 100 Zodia Custody (Singapore) Lim ited Custody Services Singapore US$ Ordinary 100 Inveco Pte. Ltd. Venture: Carbon Credit Marketplace Singapore US$1.00 Ordinary 100 The following companies have the address of 8 Marina Boulevard, Level 26, Marina Bay Financ ial Centre, Tower 1, 018981, Singapore Marina Aquata Shipp ing Pte. Ltd. Leasing Business Singapore US$ Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 478 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) Marina Aruana Shipp ing Pte. Ltd. Leasing Business Singapore SGD Ordinary 100 US$ Ordinary 100 Marina Cobia Shipp ing Pte. Ltd. Leasing Business Singapore SGD Ordinary 100 US$ Ordinary 100 Marina Fatmarin i Sh ipp ing Pte. Ltd. Leasing Business Singapore US$ Ordinary 100 Marina Frabandari Shipp ing Pte. Ltd. Leasing Business Singapore US$ Ordinary 100 Marina Gerbera Shipp ing Pte. Ltd. Leasing Business Singapore US$ Ordinary 100 Marina Opah Shipp ing Pte. Ltd. Leasing Business Singapore SGD Ordinary 100 US$ Ordinary 100 Marina Partawati Shipp ing Pte. Ltd. Leasing Business Singapore US$ Ordinary 100 The following company has the address of Tricor WP Corporate Services Pte Ltd, 80 Robinson Road #02-00, 068898, Singapore Solv-India Pte. Ltd. Investment Holding Entity Singapore US$ Ordinary 100 The following companies have the address of 9 Rafﬂes Place, #26-01 Republic Plaza , Singapore , 048619, Singapore Power2SME Pte. Ltd. Investment Holding Entity Singapore US$ Ordinary 90.6 SCV Master Holding Company Pte. Ltd. Investment Holding Entity Singapore US$ Ordinary 100 The following company has the address of 7 Changi Business Park Crescent, #03-00 Standard Chartered @ Changi, 486028, Singapore Rafﬂes Nominees (Pte.) Lim ited Nominee Services Singapore SGD Ordinary 100 The following companies have the address of 8 Marina Boulevard, #27-01 Marina Bay Financ ial Centre Tower 1, 018981, Singapore SCTS Capital Pte. Ltd Nominee Services Singapore SGD Ordinary 100 SCTS Management Pte. Ltd. Nominee Services Singapore SGD Ordinary 100 Standard Chartered Bank (Singapore) Banking & Financ ial Singapore SGD Non-cumulative Class C Lim ited Services Tier-1 preference 100 SGD Non-cumulative Class D Tier-1 Preference 100 SGD Ordinary-A 100 US$ Non-cumulative Class B Tier-1 Preference 100 US$ Ordinary-A 100 US$ Ordinary-B 100 US$ Ordinary-C 100 Standard Chartered Holdings Investment Holding Singapore SGD Ordinary 100 (Singapore) Private Lim ited Company US$ Ordinary 100 Standard Chartered Nominees (Singapore) Pte Ltd Nominee Services Singapore SGD Ordinary 100 Standard Chartered Trust (Singapore) Lim ited Trustee Services Singapore SGD Ordinary 100 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. Lim ited Investment Management Singapore USD Ordinary 50 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 479 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following companies have the address of 9 Rafﬂes Place, #26-01 Republic Plaza, 048619, Singapore Standard Chartered Private Equity Investment Holding (Singapore) Pte. Ltd Company Singapore US$ Ordinary 100 Standard Chartered Real Estate Investment Holdings (Singapore) Investment Holding Private Lim ited Company Singapore US$ Ordinary 100 The following company has the address of 77 Robinson Road, #25-00 Robinson 77, 068896, Singapore Trust Bank Singapore Lim ited Banking & Financ ial Services Singapore SGD Ordinary 60 The following companies have the address of 2nd Floor, 115 West Street, Sandton, Johannesburg, 2196, South Africa CMB Nominees (RF) PTY Lim ited Nominee Services South Africa ZAR1.00 Ordinary 100 Standard Chartered Nominees South Africa Proprietary Lim ited (RF) Nominee Services South Africa ZAR Ordinary 100 The following company has the address of 6 Fort Street, PO 785848, , Birnam, Sandton, 2196 2146, South Africa Promisepay (PTY) Ltd 1 Payment Services Provider South Africa ZAR1.00 Ordinary 100 The following company has the address of 1F, No.177 & 3F-6F, 17F-19F, No.179, Liaon ing Street, Zhongshan D ist., Taipe i, 104, Taiwan Standard Chartered Bank (Taiwan) Banking & Financ ial Taiwan (Province of Lim ited Services China) TWD10.00 Ordinary 100 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 Banking & Financ ial Tanzania, United TZS1,000.00 Ordinary 100 Lim ited Services Republic of TZS1,000.00 Preference 100 Standard Chartered Tanzania Nominees Nominee Services Tanzania, United Lim ited Republic of TZS1,000.00 Ordinary 100 The following company has the address of No. 140, 11th, 12th and 14th Floor, Wireless Road, Lumpin i, Patumwan, Bangkok, 10330, Thailand Standard Chartered Bank (Thai) Public Banking & Financ ial Company Lim ited Services Thailand THB10.00 Ordinary 99.871 The following company has the address of Buyukdere Cad. Yapi Kredi Plaza C Blok, Kat 15, Levent, Istanbul, 34330, Turkey Standard Chartered Yatir im Bankas i Turk Banking & Financ ial Anonim Sirket i Services Turkey TRL0.10 Ordinary 100 The following company has the address of Standard Chartered Bank Bldg, 5 Speke Road, PO Box 7111, Kampala, Uganda Standard Chartered Bank Uganda Banking & Financ ial Lim ited Services Uganda UGS1,000.00 Ordinary 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 480 Standard Chartered – Annual Report 2023 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of 14 Mackinnon Road, Nakasero, Kampala, 141769, Uganda Furaha Finserve Uganda Lim ited Banking & Financ ial Services Uganda US$1.00 Ordinary 20 The following company has the address of EX-26, Ground Floor, Bldg 16-Co Work, Dubai Internet City, Dubai, United Arab Emirates Appro Onboarding Solutions FZ-LLC IT solutions provider and support service provider. United Arab Emirates AED1,000.00 Ordinary 100 The following company has the address of Suites 508, 509, 15th Floor, Al Sarab Tower, Adgm Square, Al Maryah Island, Abu Dhabi, United Arab Emirates Financ ial Inclus ion Technologies Ltd Dig ital wallet and technology payments platform United Arab Emirates US$ Ordinary-A 100 The following company has the address of Unit GV-00-10-07-OF-02, Level 7, Gate Village Build ing 10, Duba i International Financ ial Centre, Duba i, United Arab Emirates Furaha Holding Ltd Micro-lending Company United Arab Emirates US$1.00 Ordinary 100 The following company has the address of Standard Chartered Bank, 7th Floor, Build ing One, Gate Prec inct, DIFC, PO Box 999, Dubai, United Arab Emirates Global Dig ital Asset Hold ings Lim ited Investment vehicle - Strategic investment United Arab Emirates US$ Ordinary 100 The following company has the address of Part of Level 15, Standard Chartered Bank Build ing, Plot 8, Burj Downtown, Dubai, United Arab Emirates myZoi Financ ial Inclus ion Technologies Dig ital Venture: Act iv ity LLC auxil iary to ﬁnancial intermed iat ion United Arab Emirates AED1.00 Ordinary 100 The following company has the address of 25 Taylor St, San Francisco CA 94102-3916, United States Assembly Escrow Inc 1 Payment Services Provider United States US$0.0001 Ordinary 100 The following company has the address of 251 Little Falls Drive, Wilm ington DE 19808, United States CurrencyFair (USA) Inc¹ Dig ital Payment platform United States US$1.00 Uncertif icated 100 The following company has the address of 1095 Avenue of Americas, New York City NY 10036, United States Standard Chartered Bank International Banking & Financ ial (Americas) Lim ited Services United States US$1,000.00 Ordinary 100 The following companies have the address of Corporation Trust Center, 1209 Orange Street, Wilm ington DE 19801, United States Standard Chartered Holdings Inc. Investment Holding Company United States US$100.00 Common 100 Standard Chartered Securit ies (North Banking & Financ ial America) LLC Services United States Membership Interest 100 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Standard Chartered – Annual Report 2023 481 Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of 50 Fremont Street, San Francisco CA 94105, United States Standard Chartered Overseas Investment, Inc. Ultimate Holding Company United States US$10.00 Ordinary 100 The following company has the address of C/O Corporation Service Company, 251 Little Falls Drive, Wilm ington DE 19808, United States Standard Chartered Trade Services Corporation Trade Services United States US$0.01 Common 100 The following company has the address of Level 3, #CP1.L01 and #CP2.L01, Capital Place, 29 Lieu Gia i Street, Ngoc Khanh Ward, Ba Dinh Distr ict, Ha No i, 10000, Vietnam Standard Chartered Bank (Vietnam) Banking & Financ ial Lim ited Services Vietnam VND Charter Capital 100 The following company has the address of The Company’s Registered Ofﬁce, Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, Virg in Islands, Br it ish Sky Harmony Holdings Lim ited 6 Investment Holding Company Virg in Islands, Br it ish USD1.00 Ordinary 100 The following companies have the address of Stand No. 4642, Corner of Mwaimwena Road and Addis Ababa Dri, Lusaka, 10101, Zambia Standard Chartered Bank Zambia Plc Banking & Financ ial Services Zambia ZMW0.25 Ordinary 90 Standard Chartered Zambia Securit ies Services Nominees Lim ited Nominee Services Zambia ZMW0.0203 Ordinary 100 The following companies have the address of Africa Unity Square Build ing, 68 Nelson Mandela Avenue, Harare, Zimbabwe Africa Enterprise Network Trust 2 Investment Holding Company Zimbabwe Trust Interest 100 Standard Chartered Bank Zimbabwe Banking & Financ ial Lim ited Services Zimbabwe US$1.00 Ordinary 100 Standard Chartered Nominees Zimbabwe (Private) Lim ited Ultimate Holding Company Zimbabwe US$2.00 Ordinary 100 1. The Group has determined that these undertakings are excluded from being consolidated into the Groups accounts, and do not meet the deﬁn it ion of a Subsid iary under IFRS. See note 32 for the consol idat ion pol icy and disclosure of the undertaking. 2. No share capital by virtue of being a trust 3. Lim ited l iab il ity company 4. The Group has determined the prin icpal place of operat ion to be Ireland 5. The Group has determined the prin icpal place of operat ion to be United Kingdom 6. The Group has determined the prin icpal place of operat ion to be Hong Kong 7. Company is exempt from the requirements of the companies Act relating to the audit of ind iv idual accounts by virtue of S479A 8. Company numbers of the subsid iar ies taking an audit exemption are SC Transport Leasing 1 LTD 06787116, SC Transport Leasing 2 Lim ited 06787090, Standard Chartered Leasing (UK) Lim ited 05513184, Standard Chartered Afr ica Lim ited 00002877, Standard Chartered Secur it ies (Afr ica) Holdings Lim ited 05843604 and Standard Chartered Strategic Investments Lim ited 01388304 9 Directly held related undertaking 10 Group’s ultimate ownership for CurrencyFair entit ies is 43.422% 40. Related undertakings of the Group continued Subsid iary undertak ings continued Financ ial statements Notes to the ﬁnancial statements 482 Standard Chartered – Annual Report 2023 40. Related undertakings of the Group continued Joint ventures Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of Tricor WP Corporate Services Pte Ltd, 80 Robinson Road #02-00, 068898, Singapore Olea Global Pte. Ltd. Provis ion of trade ﬁnance Singapore $ Ordinary 41 products and services. $ Preference 100 Associates Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of 41 Luke Street, London, EC2A 4DP, United Kingdom Fintech for International Development Ltd Financ ial intermed iat ion United Kingdom $0.0001 Ordinary-A 58.9 The following company has the address of Bohai Bank Build ing, No.218 Ha i He Dong Lu, Hedong Distr ict, T ianjin, China, 300012, China China Bohai Bank Co., Ltd. General commercial banking businesses China CNY1.00 Ordinary 16.263 The following company has the address of 17/F, 100, Gongpyeong-dong, Jongno-gu, Seoul, Korea, Republic of Ascenta IV Investment making Korea, Republic of Partnership Interest 39.100 The following company has the address of 1 Rafﬂes Quay, #23-01, One Rafﬂes Quay, 048583, Singapore Clifford Capital Holdings Pte. Ltd. Investment Holding Company Singapore $1.00 Ordinary 9.9 The following company has the address of 10 Marina Boulevard #08-08, Marina Bay, Financ ial Centre, 018983, S ingapore Verif ied Impact Exchange Hold ings Pte. Exchange offering liqu id ity Ltd of trade Singapore SGD Ordinary 15 The following company has the address of Victor ia House, State House Avenue, Victor ia, MAHE, Seychelles Seychelles International Mercantile Banking Corporation Lim ited. Commercial Bank Seychelles SCR1,000.00 Ordinary 22 The following company has the address of Gervinusstrasse 17, 60322, Frankfurt am Main, Hesse, Germany SWIAT GmbH Dig ital Venture: F inanc ial Services Germany €1.00 Ordinary 30 The following company has the address of Izumi Garden Tower 19F, 1-6-1 Roppongi, Minato-ku, Tokyo, Japan SBI Zodia Custody Co. Ltd Others Japan JPY50,000.00 Ordinary 100 The following company has the address of 60B, Orchard Road, #06-18, Tower 2, The Atrium @ Orchard, 238891, Singapore Partior Holdings Pte. Ltd. Financ ial Serv ices Singapore SGD1.00 Ordinary 24.999 SGD1.00 Series A Preferred 25.014 Financ ial statements Standard Chartered – Annual Report 2023 483 40. Related undertakings of the Group continued Sign iﬁcant investment holdings and other related undertakings Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of 1 Bartholomew Lane, London, EC2N 2AX, United Kingdom Corrasi Covered Bonds (LM) Lim ited Liqu idat ion member (Bond holders) United Kingdom £1.00 Ordinary 20 The following company has the address of Intertrust Corporate Services (Cayman) Lim ited, 190 Elg in Avenue, George Town, Grand Cayman , KY1- 9005, Cayman Islands ATSC Cayman Holdco Lim ited Investment holding Cayman Islands $0.01 Ordinary-A 5.272 $0.01 Ordinary-B 100 The following companies have the address of Unit 605-07, 6/F Wing On Centre, 111 Connaught Road, Central, Sheung Wan, Hong Kong Actis Temple Stay Holdings (HK) Lim ited Investment holding Hong Kong $ Class A Ordinary 39.689 $ Class B Ordinary 39.689 Actis Rivendell Holdings (HK) Lim ited Investment holding Hong Kong $ Class A Ordinary 39.671 $ Class B Ordinary 39.671 The following company has the address of 1221 A, Devika Tower, 12th Floor, , 6 Nehru Place, New Delhi 110019, New Delhi, 110019, India Mikado Realtors Private Lim ited Other business activ it ies India INR10.00 Ordinary 26 The following company has the address of 4thFloor, 274, Chital ia House, Dr. Cawasji Hormusji Road, Dhob i Talao, Mumbai City, Maharashtra, India 400 002, Mumbai, 400 002, India Industrial Minerals and Chemical Co. Pvt. Ltd Minerals and Chemical India INR100.00 Ordinary 26 The following company has the address of 17F, 47, Jong-ro, Jongno-gu, (17F, 100, Gongpyeong-dong, Jongno-gu), Seoul, Korea, Republic of Ascenta III Investment making Korea KRW1.00 Class B Equity Interest 31 The following company has the address of 3 Jalan Pisang, c/o Watiga Trust Ltd, 199070 Singapore SCIAIGF Liqu idat ing Trust 1 Investment Holding Company Singapore Trust Interest 43.96 The following company has the address of 251 Little Falls Drive, Wilm ington, New Castle DE 19808, United States Paxata, Inc. Data Analytics United States US$0.0001 Series C2 Preferred Stock 40.74 US$0.0001 Series C3 Preferred Stock 8.908 1. The Group has determined the prin icpal place of operat ion to be Singapore Financ ial statements Notes to the ﬁnancial statements 484 Standard Chartered – Annual Report 2023 40. Related undertakings of the Group continued In liqu idat ion Subsid iary Undertak ings Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following companies have the address of C/O Teneo Financ ial Adv isory Lim ited, The Colmore Bu ild ing, 20 Colmore Circus, Queensway, Birm ingham, B4 6AT, Un ited Kingdom Standard Chartered Masterbrand To manage intellectual Licens ing L im ited property for Group United Kingdom $1.00 Ordinary Shares 100 The following companies have the address of Bucktrout House, Glategny Esplanade, St Peter Port, GY1 3HQ, Guernsey Birdsong Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary shares 100 Nominees One Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary shares 100 Nominees Two Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary shares 100 Songbird Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary shares 100 Standard Chartered Secretaries (Guernsey) Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary shares 100 Standard Chartered Trust (Guernsey) Lim ited Fiduc iary Serv ices Guernsey £1.00 Ordinary shares 100 The following company has the address of 30 Rue Schrobilgen, 2526, Luxembourg Standard Chartered Financ ial Serv ices Corporate Finance & (Luxembourg) S.A. Advisory Services Luxembourg €25.00 Ordinary shares 100 The following company has the address of Jiron Huascar 2055, Jesus Maria, Lima 15072, Peru Banco Standard Chartered en Liqu idac ion Banking services Peru $75.133 Ordinary shares 100 The following company has the address of Luis Alberto de Herrera 1248, Torre II, Piso 11, Esc. 1111, Uruguay Standard Chartered Uruguay Financ ial counsell ing Representacion S.A. services Uruguay UYU1.00 Ordinary shares 100 The following company has the address of 555 Washington Av, St Louis, MO, United States of America, 63101 Assembly Payments Inc 1 Payment services provider United States $0.0001 Ordinary 100 The following companies have the address of C/O Teneo Financ ial Adv isory Lim ited, The Colmore Bu ild ing, 20 Colmore Circus, Queensway, Birm ingham, B4 6AT, Un ited Kingdom Standard Chartered Leasing (UK) 3 Lim ited Leasing Business United Kingdom $1.00 Ordinary shares 100 485 Standard Chartered – Annual Report 2023 Financ ial statements 40. Related undertakings of the Group continued Liqu idated/d issolved/sold Subsid iary/Assoc iate undertakings and Sign iﬁcant investment holdings Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following companies have the address of C/O Teneo Financ ial Adv isory Lim ited, 156 Great Charles Street, Queensway, Birm ingham, West Midlands, B3 3HN, United Kingdom Standard Chartered Leasing (UK) 2 Lim ited Leasing Business United Kingdom $1.00 Ordinary shares 100 The following companies have the address of C/o WALKERS CORPORATE LIMITED, 190 Elgin Avenue George Town Grand Cayman KY1-9008 , Cayman Islands Sirat Holdings Lim ited Investment Holding Entity Cayman Islands $0.01 Ordinary shares 100 The following companies have the address of TMF Trust Labuan Lim ited, Brumby Centre, Lot 42,, Jalan Muhibbah, 87000 Labuan F.T., Malaysia Pembroke Leasing (Labuan) 3 Berhad Leasing Business Malaysia $ Ordinary shares 100 The following companies have the address of c/o Ocorian Corporate Services (Maurit ius) Ltd, 6th Floor, Tower A, 1 Cybercity, Ebene, 72201, Maurit ius Standard Chartered Financ ial Hold ings Investment Holding Company Maurit ius $1.00 Ordinary shares 100 The following companies have the address of 142, Ahmadu Bello Way, Victor ia Island, Lagos, 101241, N iger ia Cherroots Niger ia L im ited Investment Holding Company Niger ia NGN1.00 Ordinary Shares 100 The following companies have the address of 80 Robinson Road, #02-00, 068898, Singapore Cardspal Pte. Ltd. Support Services Singapore $ Ordinary shares 100 The following companies have the address of Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, Virg in Islands, Br it ish Sky Favour Investments Lim ited Investment Holding Company Virg in Islands, Br it ish $1.00 Ordinary shares 100 The following companies have the address of 14th Floor, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong. Kozagi Lim ited Investment Holding Company Hong Kong HKD Ordinary shares 100 The following company has the address of Hoogoorddreef 15, 1101 BA, Amsterdam, Netherlands Pembroke Holland B.V. Leasing Business Netherlands €450.00 Ordinary shares 100 486 Standard Chartered – Annual Report 2023 Financ ial statements Notes to the ﬁnancial statements Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following companies have the address of 32 Molesworth Street, Dublin 2, D02Y512, Ireland Inishbrophy Leasing Lim ited Leasing Business Ireland €1.00 Ordinary shares 100 Inishcannon Leasing Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Inishcrean Leasing Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Inishdawson Leasing Lim ited Leasing Business Ireland €1.00 Ordinary shares 100 Inisherk in Leas ing Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Inishoo Leasing Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Nightjar Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 1 Lim ited Leasing Business Ireland €1.00 Ordinary shares 100 Pembroke Aircraft Leasing 2 Lim ited Leasing Business Ireland €1.00 Ordinary shares 100 Pembroke Aircraft Leasing 3 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 4 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 5 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 6 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 7 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 8 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 9 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 10 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 11 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 12 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 13 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 14 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 15 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing 16 Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Aircraft Leasing Holdings Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 Pembroke Capital Lim ited Leasing Business Ireland €1.25 Ordinary shares 100 US$1.00 Ordinary 100 Skua Lim ited Leasing Business Ireland $1.00 Ordinary shares 100 The following company has the address of First Names House, Victor ia Road, Douglas, IM2 4DF, Isle of Man Pembroke Group Lim ited Aircraft leasing, ﬂeet advisory and technical services Isle of Man $0.01 Ordinary shares 100 The following company has the address of No. 1034, Managed by Tianjin Dongjiang Secretar ial Services , Co., Ltd., Room 202, Ofﬁce Area of Inspection Warehouse,, No.6262 Ao Zhou Road, Dongjiang Free Trade Port Zone,, T ianjin Pilot Free Trade Zone, China Pembroke Aircraft Leasing (Tianjin) Lim ited Holding Company China $1.00 Ordinary shares 100 The following company has the address of No. 1035, Managed by Tianjin Dongjiang Secretar ial Services , Co., Ltd., Room 202, Ofﬁce Area of Inspection Warehouse,, No.6262 Ao Zhou Road, Dongjiang Free Trade Port Zone,, T ianjin Pilot Free Trade Zone, China Pembroke Aircraft Leasing Tianjin 1 SPV for Aircraft Operating Lim ited Lease Business China CNY1.00 Ordinary shares 100 40. Related undertakings of the Group continued Subsid iary/Assoc iate undertakings and Sign iﬁcant investment holdings continued 487 Standard Chartered – Annual Report 2023 Financ ial statements Proportion of shares Name and registered address Activ ity Place of incorporation Descript ion of shares held (%) The following company has the address of No. 1036, Managed by Tianjin Dongjiang Secretar ial Services , Co., Ltd., Room 202, Ofﬁce Area of Inspection Warehouse,, No.6262 Ao Zhou Road, Dongjiang Free Trade Port Zone,, T ianjin Pilot Free Trade Zone, China Pembroke Aircraft Leasing Tianjin 2 SPV for Aircraft Operating Lim ited Lease Business China CNY1.00 Ordinary shares 100 The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Pembroke Aircraft Leasing (UK) Lim ited Leasing Business United Kingdom £1.00 Ordinary shares 100 The following companies have the address of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands Marina Alysse Shipp ing L im ited Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares 100 Marina Amandier Shipp ing L im ited Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares 100 Marina Ambroisee Shipp ing L im ited Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares 100 Marina Buxus Shipp ing L im ited Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares 100 Marina Dorado Shipp ing L im ited Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares 100 Marina Protea Shipp ing L im ited Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares 100 The following company has the address of 3, Floor 1, No.1, Shiner Wuxingca iyuan, West Er Huan Rd, , Xi Shan Distr ict, Kunming, Yunnan Province, PRC , China Yunnan Golden Shiner Property Development Co., Ltd. Real Estate Developers China CNY1.00 Ordinary shares 42.5 The following companies has the address of 49, Sungei Kadut Avenue, #03-01 S729673, Singapore Omni Centre Pte. Ltd. Real Estate Owners & Singapore SGD Redeemable Convertible Developers Preference shares 99.998 The following company has the address of 505 Howard St. #201, San Francisco, CA 94105, United States SC Studios, LLC Offshore Support Services United States US$1.00 Membership Interest 100 The following company has the address of Avenue de Tivol i 2, 1007, Lausanne, Switzerland Metaco SA Integrated infrastructure solutions Switzerland CHF 0.01 Preference A Shares 29.505 Save for those disclosed in this Annual Report , there were no other sign iﬁcant investments held, nor were there material acquis it ions or disposals of subsid iar ies during the year under review. Apart from those disclosed in this Annual Report, there were no material investments or addit ions of cap ital assets authorised by the Board at the date of this Annual Report. 40. Related undertakings of the Group continued Subsid iary/Assoc iate undertakings and Sign iﬁcant investment holdings continued Supplementary informat ion 490 Supplementary ﬁnancial informat ion 498 Supplementary people informat ion 504 Supplementary sustainab il ity informat ion 508 2023 Sustainab il ity Aspirat ions 511 TCFD summary and alignment index 517 Shareholder informat ion 522 Main awards and accolades 523 Glossary  Our weather photographers of the year  We are showcasing three of the most strik ing weather and climate photographs captured by our colleagues, as voted for by over 4,000 employees. These pictures were orig inally subm itted as part of the annual Standard Chartered Weather Photographer of the Year competit ion, organ ised by the UK’s Royal Meteorological Society. Climate change will hit hardest in many of the communit ies and markets where we operate. Its impact on the environment and human health sign iﬁcantly affects sustainable economic growth and the future of society. These pictures aim to draw attention to the beauty of the planet and the importance of its conservation. We’re committed to net zero carbon emiss ions in our own operations by 2025, and ﬁnanc ing by 2050. Read more on sc.com/scwpy 488 Standard Chartered – Annual Report 2022 Supplementary informat ion Zhangjiajie Nat ional Forest Park, China Photographer: Irene Yuan 489 Standard Chartered – Annual Report 2023 Supplementary informat ion Kolukkumalai Peak, Tamil Nadu, India Photographer: Akshat Tholia Amboseli, Kenya Photographer: Arvind Karthik 490 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary ﬁnancial informat ion Five-year summary 2023 $mill ion 2022 $mill ion 2021 $mill ion 2020 $mill ion 2019 $mill ion Operating proﬁt before impa irment losses and taxat ion 6,468 5,405 3,777 4,374 4,484 Impairment losses on loans and advances and other credit risk provis ions (508) (836) (254) (2,325) (908) Other impa irment 1 (1,008) (425) (372) (98) (136) Proﬁt before taxation 5,093 4,286 3,347 1,613 3,713 Proﬁt attributable to shareholders 3,469 2,948 2,315 724 2,303 Loans and advances to banks 2 44,977 39,519 44,383 44,347 53,549 Loans and advances to customers 2 286,975 310,647 298,468 281,699 268,523 Total assets 822,844 819,922 827,818 789,050 720,398 Deposits by banks 2 28,030 28,789 30,041 30,255 28,562 Customer accounts 2 469,418 461,677 474,570 439,339 405,357 Shareholders’ equity 44,445 43,162 46,011 45,886 44,835 Total capital resources 3 62,389 63,731 69,282 67,383 66,868 Information per ordinary share Basic earnings per share 108.6c 85.9c 61.3c 10.4c 57.0c Underlying earnings per share 128.9c 97.9c 85.8c 36.1c 75.7c Div idends per share 4 27.0c 18.0c 12.0c – 22.0c Net asset value per share 1,629.0c 1,453.3c 1,456.4c 1,409.3c 1,358.3c Net tangible asset value per share 1,393.0c 1,249.0c 1,277.0c 1,249.0c 1,192.5c Return on assets 5 0.4% 0.4% 0.3% 0.1% 0.3% Ratios Reported return on ordinary shareholders' equity 7.2% 6.0% 4.2% 0.8% 4.2% Reported return on ordinary shareholders' tangible equity 8.4% 6.8% 4.8% 0.9% 4.8% Underlying return on ordinary shareholders’ equity 8.7% 6.9% 5.9% 2.6% 5.6% Underlying return on ordinary shareholders’ tangible equity 10.1% 7.7% 6.8% 3.0% 6.4% Reported cost to income ratio (excluding UK Bank Levy) 63.5% 66.3% 73.6% 68.1% 68.7% Reported cost to income ratio (includ ing UK Bank Levy) 64.1% 66.9% 74.3% 70.4% 70.9% Underlying cost to income ratio (excluding UK Bank levy) 63.4% 65.5% 69.8% 66.4% 65.9% Underlying cost to income ratio (includ ing UK Bank levy) 64.1% 66.2% 70.5% 68.7% 68.2% Capital ratios: CET 1 6 14.1% 14.0% 14.1% 14.4% 13.8% Total capital 6 21.2% 21.7% 21.3% 21.2% 21.2% 1 Other Impairment includes $850 mill ion (2022: $308 m ill ion) impa irment charge relat ing to the Group’s investment in its associate China Bohai Bank (Bohai) 2 Excludes amounts held at fair value through proﬁt or loss 3 Shareholders’ funds, non-controlling interests and subordinated loan capital 4 Div idend pa id during the year per share 5 Represents proﬁt attributable to shareholders div ided by the total assets of the Group 6 Unaudited Supplementary ﬁnancial informat ion 491 Standard Chartered – Annual Report 2023 Supplementary informat ion Analysis of underlying performance by key market The following tables provide informat ion for key markets in which the Group operates. The numbers are prepared on a management view. Refer to Note 2 for details. 2023 Hong Kong $mill ion Korea $mill ion China $mill ion Taiwan $mill ion Singapore $mill ion India $mill ion Indonesia $mill ion UAE $mill ion UK $mill ion US $mill ion Operating income 4,167 1,074 1,158 558 2,455 1,206 241 794 102 870 Operating expenses (1,927) (731) (894) (331) (1,214) (865) (191) (392) (870) (634) Operating proﬁt/(loss) before impa irment losses and taxat ion 2,240 343 264 227 1,241 341 50 402 (768) (236) Credit impa irment (372) (48) (113) (42) (48) (31) (8) 24 14 12 Other impa irment (17) 1 (5) (5) (14) (11) (2) (5) (15) (5) Proﬁt from associates and joint ventures – – 114 – – – – – – – Underlying proﬁt/(loss) before taxation 1,851 296 260 180 1,179 299 40 421 (769) 243 Total assets employed 190,484 56,638 41,508 21,638 102,724 33,781 5,470 20,376 149,982 88,113 Of which: loans and advances to customers 1 87,590 33,443 15,882 11,634 62,030 13,832 2,533 8,495 31,067 27,434 Total liab il it ies employed 183,112 46,666 38,252 20,365 109,825 26,532 4,355 17,214 92,168 72,583 Of which: customer accounts 1 155,446 37,032 31,211 18,621 86,282 18,709 3,024 13,924 72,610 40,846 2022² Hong Kong $mill ion Korea $mill ion China $mill ion Taiwan $mill ion Singapore $mill ion India $mill ion Indonesia $mill ion UAE $mill ion UK $mill ion US $mill ion Operating income 3,441 1,140 1,154 473 1,909 1,222 214 621 1,013 1,031 Operating expenses (1,816) (733) (844) (336) (1,082) (766) (183) (369) (742) (603) Operating proﬁt before impa irment losses and taxat ion 1,625 407 310 137 827 456 31 252 271 428 Credit impa irment (579) (55) (200) (15) 84 (31) 4 81 36 13 Other impa irment (1) (1) (3) (1) (2) (1) – – 35 – Proﬁt from associates and joint ventures – – 179 – – – – – – – Underlying proﬁt before taxation 1,045 351 286 121 909 424 35 333 342 441 Total assets employed 171,086 68,903 39,508 21,919 97,914 30,412 5,237 19,624 187,832 67,019 Of which: loans and advances to customers 1 85,359 49,264 15,652 11,283 59,872 15,025 2,403 7,913 39,356 19,951 Total liab il it ies employed 165,499 58,992 33,124 20,216 104,318 23,210 4,257 16,256 140,160 64,825 Of which: customer accounts 1 138,713 43,620 24,347 18,509 79,409 15,199 2,924 12,710 104,482 28,424 1. Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 492 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary ﬁnancial informat ion Analysis of operating income by product and segment The following tables provide a breakdown of the Group’s underlying operating income by product and client segment. 2023 Corporate, Commercial & Institut ional Banking $mill ion Consumer, Private & Business Banking $mill ion Ventures $mill ion Central & other items (segment) $mill ion Total $mill ion Transaction Banking 5,656 181 – – 5,837 Trade & Working capital 1,246 48 – – 1,294 Cash Management 4,410 133 – – 4,543 Financ ial Markets 5,099 – – – 5,099 Macro Trading 2,827 – – – 2,827 Credit Markets 1,803 – – – 1,803 Credit Trading 554 – – – 554 Financ ing Solut ions & Issuance² 1,249 – – – 1,249 Financ ing & Secur it ies Serv ices² 469 – – – 469 Lending & Portfolio Management 469 29 – – 498 Wealth Management – 1,944 – – 1,944 Retail Products 1 4,927 41 – 4,969 CCPL and other unsecured lending – 1,068 93 – 1,161 Deposits 1 3,488 (52) – 3,437 Mortgage & Auto – 236 – – 236 Other Retail Products – 135 – – 135 Treasury – – 30 (932) (902) Other (7) 25 85 (170) (67) Total underlying operating income 11,218 7,106 156 (1,102) 17,378 2022 (Restated)¹ Corporate, Commercial & Institut ional Banking 1 $mill ion Consumer, Private & Business Banking 1 $mill ion Ventures $mill ion Central & other items (segment) $mill ion Total $mill ion Transaction Banking 3,751 123 – – 3,874 Trade & Working capital 1,288 55 – – 1,343 Cash Management 2,463 68 – – 2,531 Financ ial Markets 5,345 – – – 5,345 Macro Trading 2,965 – – – 2,965 Credit Markets 1,761 – – – 1,761 Credit Trading 488 – – – 488 Financ ing Solut ions & Issuance² 1,273 – – – 1,273 Financ ing & Secur it ies Serv ices² 619 – – – 619 Lending & Portfolio Management 521 37 – – 558 Wealth Management 1 1,795 – – 1,796 Retail Products 1 4,013 13 – 4,027 CCPL and other unsecured lending – 1,180 22 – 1,202 Deposits 1 2,029 (9) – 2,021 Mortgage & Auto – 633 – – 633 Other Retail Products – 171 – – 171 Treasury – – 5 332 337 Other (11) 1 11 (176) (175) Total underlying operating income 9,608 5,969 29 156 15,762 1 Underlying income for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (i i) Av iat ion F inance and (i i i) DVA. No change to reported performance 2 Shipp ing F inance is now reported under “Financ ing Solut ions & Issuance” which was reported under “Financ ing & Secur it ies Serv ices” in Q1‘23 493 Standard Chartered – Annual Report 2023 Supplementary informat ion Insured and uninsured deposits SCB operates and provides services to customers across many countries and insured deposit is determined on the basis of lim its enacted with in local regulat ions. 2023 2022 Bank deposits $mill ion Customer accounts $mill ion Bankdeposits $mill ion Customer accounts $mill ion Insured deposits 10 66,753 28 60,008 Current accounts 9 15,767 8 16,373 Savings deposits – 27,376 – 26,973 Time deposits 1 23,517 20 16,599 Other deposits – 93 – 63 Uninsured deposits 35,500 467,868 36,795 460,221 Current accounts 20,969 150,559 22,425 144,931 Savings deposits – 91,425 – 90,937 Time deposits 8,295 176,977 6,870 176,090 Other deposits 6,236 48,907 7,500 48,263 Total 35,510 534,621 36,823 520,229 UK and non-UK deposits The following table summarises the split of Bank and Customer deposits into UK and Non-UK deposits for respective account lines based on the domic ile or res idence of the clients. 2023 2022 Bank deposits $mill ion Customer accounts $mill ion Bank deposits $mill ion Customer accounts $mill ion UK deposits 2,918 29,318 4,163 38,557 Current accounts 925 7,062 903 8,955 Savings deposits – 330 – 420 Time deposits 310 5,412 1,004 6,760 Other deposits 1,683 16,514 2,256 22,422 Non-UK deposits 32,592 505,303 32,660 481,672 Current accounts 20,053 159,264 21,530 152,349 Savings deposits – 118,471 – 117,490 Time deposits 7,986 195,082 5,886 185,929 Other deposits 4,553 32,486 5,244 25,904 Total 35,510 534,621 36,823 520,229 494 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary ﬁnancial informat ion Contractual maturity of Loans, Investment securit ies and Depos its 2023 Loans and advances to banks $mill ion Loans and advances to customers $mill ion Investment securit ies – Treasury and other elig ible B ills $mill ion Investment securit ies – Debt securit ies $mill ion Investment securit ies – Equity shares $mill ion Bank deposits $mill ion Customer accounts $mill ion One year or less 72,717 197,125 38,877 59,023 – 31,333 485,908 Between one and ﬁve years 3,975 52,532 4 69,075 – 4,174 46,365 Between ﬁve and ten years 837 19,184 1 18,804 – 2 567 Between ten years and ﬁfteen years 35 14,084 – 9,276 – – 1,341 More than ﬁfteen years and undated 226 62,561 – 18,155 3,932 – 441 Total 77,790 345,486 38,882 174,333 3,932 35,509 534,622 Total amortised cost and FVOCI exposures 44,977 286,975 Fixed interest rate exposures 38,505 168,697 Floating interest rate exposures 6,472 118,278 2022 Loans and advances to banks $mill ion Loans and advances to customers $mill ion Investment securit ies – Treasury and other elig ible B ills $mill ion Investment securit ies – Debt securit ies $mill ion Investment securit ies – Equity shares $mill ion Bank deposits $mill ion Customer accounts $mill ion One year or less 60,132 208,691 42,269 47,193 – 35,240 508,125 Between one and ﬁve years 3,630 52,563 482 63,523 – 1,576 10,281 Between ﬁve and ten years 411 18,067 – 20,078 – 7 694 Between ten years and ﬁfteen years 92 13,305 – 12,921 – – 598 More than ﬁfteen years and undated 184 65,104 – 15,720 4,037 – 531 Total 64,449 357,730 42,751 159,435 4,037 36,823 520,229 Total amortised cost and FVOCI exposures 39,519 310,647 Fixed interest rate exposures 36,218 170,609 Floating interest rate exposures 3,301 140,038 Maturity and yield of Debt securit ies, alternat ive tier one and other elig ible b ills held at amortised cost One year or less Between one and ﬁve years Between ﬁve and ten years More than ten years Total $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % Central and Central and other government agencies – US 1,861 1.39 9,171 1.61 5,799 1.67 4,524 3.89 21,355 2.09 – UK 39 2.75 85 1.06 101 0.67 – – 225 1.18 – Other 5,045 2.72 9,560 2.80 2,289 3.12 81 4.74 16,975 2.84 Other debt securit ies 2,487 6.45 2,658 5.37 2,262 5.44 10,973 5.13 18,380 5.38 As at 31 December 2023 9,432 3.44 21,474 2.61 10,451 2.79 15,578 4.77 56,935 3.37 One year or less Between one and ﬁve years Between ﬁve and ten years More than ten years Total $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % $mill ion Yield % Central and other government agencies – US 2,208 1.58 5,437 1.41 6,317 1.32 4,498 3.47 18,460 1.90 – UK – – 85 1.98 60 0.50 47 0.90 192 1.26 – Other 3,599 2.71 9,659 1.98 3,541 2.24 44 4.00 16,843 2.19 Other debt securit ies 4,752 4.53 2,869 5.07 1,454 4.09 15,144 3.55 24,219 3.96 As at 31 December 2022 10,559 3.29 18,050 2.30 11,372 1.96 19,733 3.53 59,714 2.82 The maturity distr ibut ions are presented in the above table on the basis of residual contractual maturity dates. The weighted average yield for each range of maturit ies is calculated by div id ing the annualised interest income for the year by the book amount of debt securit ies at that date. 495 Standard Chartered – Annual Report 2023 Supplementary informat ion Average balance sheets and yields and volume and price variances Average balance sheets and yields The following tables set out the average balances and yields for the Group’s assets and liab il it ies for the per iods ended 31 December 2023 and 31 December 2022 under the revised deﬁn it ion of net interest margin. For the purpose of these tables, average balances have been determined on the basis of daily balances, except for certain categories, for which balances have been determined less frequently. The Group does not believe that the informat ion presented in these tables would be sign iﬁcantly d ifferent had such balances been determined on a daily basis. Average assets 2023 Average non-interest earning balance $mill ion Average interest earning balance $mill ion Interest income $mill ion Gross yield % Gross yield total balance % Cash and balances at central banks 10,466 67,634 2,833 4.19 3.63 Gross loans and advances to banks 34,743 44,161 2,095 4.74 2.66 Gross loans and advances to customers 55,235 301,570 15,698 5.20 4.40 Impairment provis ions aga inst loans and advances to banks and customers – (5,894) – – – Investment securit ies – Treasury and Other El ig ible B ills 7,955 32,026 1,596 4.98 3.99 Investment securit ies – Debt Secur it ies 29,912 133,023 5,005 3.76 3.07 Investment securit ies – Equ ity Shares 3,190 – – – – Property, plant and equipment and intang ible assets 8,861 – – – – Prepayments, accrued income and other assets 126,539 – – – – Investment associates and jo int ventures 1,628 – – – – Total average assets 278,529 572,520 27,227 4.76 3.20 Average assets 2022 Average non-interest earning balance $mill ion Average interest earning balance $mill ion Interest income $mill ion Gross yield % Gross yield total balance % Cash and balances at central banks 19,700 54,503 765 1.40 1.03 Gross loans and advances to banks 29,576 42,953 853 1.99 1.18 Gross loans and advances to customers 61,480 306,880 10,168 3.31 2.76 Impairment provis ions aga inst loans and advances to banks and customers – (5,867) – – – Investment securit ies – Treasury and Other El ig ible B ills 5,564 25,924 630 2.43 2.00 Investment securit ies – Debt Secur it ies 23,618 140,977 2,836 2.01 1.72 Investment securit ies – Equ ity Shares 4,152 – – – – Property, plant and equipment and intang ible assets 8,821 – – – – Prepayments, accrued income and other assets 142,599 – – – – Investment associates and jo int ventures 2,152 – – – – Total average assets 297,662 565,370 15,252 2.70 1.77 496 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary ﬁnancial informat ion Average liab il it ies Average liab il it ies 2023 Average non-interest bearing balance $mill ion Average interest bearing balance $mill ion Interest expense $mill ion Rate paid % Rate paid total balance % Deposits by banks 14,238 24,066 796 3.31 2.08 Customer accounts: Current accounts 41,911 132,537 3,619 2.73 2.07 Savings deposits – 112,046 1,981 1.77 1.77 Time deposits 15,345 186,287 8,204 4.40 4.07 Other deposits 44,211 6,527 488 7.48 0.96 Debt securit ies in issue 12,259 65,579 3,367 5.13 4.33 Accruals, deferred income and other liab il it ies 132,442 1,009 52 5.15 0.04 Subordinated liab il it ies and other borrowed funds – 12,299 951 7.73 7.73 Non-controlling interests 373 – – – – Shareholders’ funds 49,920 – – – – 310,699 540,350 19,458 3.60 2.29 Adjustment for Financ ial Markets fund ing costs and ﬁnancial guarantee fees on interest earning assets (1,778) Total average liab il it ies and shareholders’ funds 310,699 540,350 17,680 3.27 2.08 Average liab il it ies 2022 Average non-interest bearing balance $mill ion Average interest bearing balance $mill ion Interest expense $mill ion Rate paid % Rate paid total balance % Deposits by banks 17,039 27,241 433 1.59 0.98 Customer accounts: Current accounts 51,375 132,709 1,480 1.12 0.80 Savings deposits – 131,571 832 0.63 0.63 Time deposits 11,586 152,118 3,021 1.99 1.85 Other deposits 52,962 5,094 110 2.16 0.19 Debt securit ies in issue 6,720 60,559 1,169 1.93 1.74 Accruals, deferred income and other liab il it ies 147,814 1,065 44 4.13 0.03 Subordinated liab il it ies and other borrowed funds – 14,994 570 3.80 3.80 Non-controlling interests 312 – – – – Shareholders’ funds 49,873 – – – – 337,681 525,351 7,659 1.46 0.89 Adjustment for Financ ial Markets fund ing costs and ﬁnancial guarantee fees on interest earning assets (383) Total average liab il it ies and shareholders’ funds 337,681 525,351 7,276 1.38 0.84 Net interest margin 2023 $mill ion 2022 $mill ion Interest income (Reported) 27,227 15,252 Average interest earning assets 572,520 565,370 Gross yield (%) 4.76 2.70 Interest expense (Reported) 19,458 7,659 Adjustment for Financ ial Markets fund ing costs and ﬁnanc ial guarantee fees on interest earning assets (1,778) (383) Interest expense adjusted for Financ ial Markets trad ing book funding costs and ﬁnanc ial guarantee fees on interest-earning assets 17,680 7,276 Average interest-bearing liab il it ies 540,350 525,351 Rate paid (%) 3.27 1.38 Net yield (%) 1.49 1.32 Net interest income adjusted for Financ ial Markets fund ing costs and Financ ial guarantee fees on interest earing assets 9,547 7,976 Net interest margin (%) 1.67 1.41 497 Standard Chartered – Annual Report 2023 Supplementary informat ion Volume and price variances The following table analyses the estimated change in the Group’s net interest income attributable to changes in the average volume of interest-earning assets and interest-bearing liab il it ies, and changes in their respective interest rates for the years presented. Volume and rate variances have been determined based on movements in average balances and average exchange rates over the year and changes in interest rates on average interest-earning assets and average interest-bearing liab il it ies. 2023 versus 2022 (Decrease)/increase in interest due to: Net increase/ (decrease) in interest $mill ion Volume $mill ion Rate $mill ion Cash and unrestricted balances at central banks 550 1,518 2,068 Loans and advances to banks 57 1,185 1,242 Loans and advances to customers (284) 5,814 5,530 Investment securit ies (74) 3,209 3,135 Total interest earning assets 249 11,726 11,975 Interest bearing liab il it ies Subordinated liab il it ies and other borrowed funds (208) 589 381 Deposits by banks (105) 468 363 Customer accounts: Current accounts and savings deposits (458) 3,769 3,311 Time and other deposits 1,601 3,945 5,546 Debt securit ies in issue 258 1,940 2,198 Total interest bearing liab il it ies 1,088 10,711 11,799 2022 versus 2021 (Decrease)/increase in interest due to: Net increase/ (decrease) in interest $mill ion Volume $mill ion Rate $mill ion Interest earning assets Cash and unrestricted balances at central banks (21) 694 673 Loans and advances to banks (60) 423 363 Loans and advances to customers (17) 2,611 2,594 Investment securit ies 228 1,148 1,376 Total interest earning assets 130 4,876 5,006 Interest bearing liab il it ies Subordinated liab il it ies and other borrowed funds (58) 131 73 Deposits by banks (3) 300 297 Customer accounts: Current accounts and savings deposits 18 1,428 1,446 Time and other deposits 157 1,635 1,792 Debt securit ies in issue 27 576 603 Total interest bearing liab il it ies 141 4,070 4,211 498 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary people informat ion Supplementary people informat ion Global 1 2023 2022 2021 % change Full-time equivalent (FTE) 84,958 83,195 81,904 2.1 Headcount (year end) 85,007 83,266 81,957 2.1 Employed workers (permanent) 84,073 82,319 80,605 2.1 of which female 37,598 37,259 36,644 0.9 Fixed term workers (temporary) 934 947 1,352 (1.4) of which female 453 429 637 5.6 Non-employed workers (NEW) 12,537 13,962 13,845 (10.2) Non-outsourced NEW 2 4,925 5,873 6,130 (16.1) Outsourced NEW 3 7,612 8,089 7,715 (5.9) Headcount (12-month average) 85,353 82,987 82,736 2.9 Male FTE 45,993 44,709 44,033 2.9 Headcount 46,004 44,734 44,045 2.8 Full-time 45,975 44,683 44,002 2.9 Part-time 29 51 43 (43.1) Female FTE 38,014 37,642 37,240 1.0 Headcount 38,051 37,688 37,281 1.0 Full-time 37,926 37,551 37,138 1.0 Part-time 125 137 143 (8.8) Undisclosed 4 FTE 950 844 631 12.6 Headcount 952 844 631 12.8 Full-time 944 843 630 12.0 Part-time 8 1 1 700.0 National it ies 129 131 132 (1.5) Posit ion type 2023 2022 2021 % change Management team 13 13 15 – of which female 7 6 5 16.7 of which female (%) 53.8% 46.2% 33.3% 16.7 Management team and their direct reports 5 133 131 116 1.5 of which female 48 43 33 11.6 of which female (%) 36.1% 32.8% 28.4% 9.9 Senior leadership 6 4,541 4,422 4,227 2.7 of which female 1,474 1,420 1,299 3.8 of which female (%) 32.5% 32.1% 30.7% 1.1 Rest of Employees 80,466 78,844 77,730 2.1 of which female 36,577 36,268 35,982 0.9 of which female (%) 45.5% 46.0% 46.3% (1.2) of which who have supervisory responsib il it ies 11,009 11,067 11,109 (0.5) of which female 3,905 3,995 4,009 (2.3) of which female (%) 35.5% 36.1% 36.1% (1.7) Business FTE 7 29,909 30,589 30,921 (2.2) Business headcount 29,929 30,619 30,940 (2.3) of which female 15,335 15,794 15,997 (2.9) Support services FTE 7 55,049 52,607 50,983 4.6 Support services headcount 55,078 52,647 51,017 4.6 of which female 22,716 21,894 21,284 3.8 499 Standard Chartered – Annual Report 2023 Supplementary informat ion Region 2023 2022 2021 % change Asia FTE 71,097 69,329 67,840 2.6 Asia headcount 71,123 69,364 67,870 2.5 Asia female headcount 32,452 32,033 31,470 1.3 Asia employed workers headcount 70,394 68,585 66,968 2.6 Asia ﬁxed term workers headcount 729 779 902 (6.4) Asia full time headcount 71,051 69,257 67,774 2.6 Asia part time headcount 72 107 96 (32.7) AME FTE 8,575 8,905 9,372 (3.7) AME headcount 8,577 8,921 9,373 (3.9) AME female headcount 3,766 3,918 4,100 (3.9) AME employed workers headcount 8,432 8,813 8,999 (4.3) AME ﬁxed term workers headcount 145 108 374 34.3 AME full time headcount 8,574 8,917 9,369 (3.8) AME part time headcount 3 4 4 (25.0) EA FTE 5,286 4,962 4,691 6.5 EA headcount 5,307 4,981 4,714 6.5 EA female headcount 1,833 1,737 1,711 5.5 EA employed workers headcount 5,247 4,921 4,638 6.6 EA ﬁxed term workers headcount 60 60 76 – EA full time headcount 5,220 4,903 4,627 6.5 EA part time headcount 87 78 87 11.5 Age 2023 2022 2021 % change < 30 years FTE 13,168 13,826 14,063 (4.8) < 30 years headcount 13,176 13,836 14,069 (4.8) < 30 years female headcount 6,848 7,397 7,623 (7.4) 30-50 years FTE 63,309 61,651 60,891 2.7 30-50 years headcount 63,334 61,691 60,919 2.7 30-50 years female headcount 27,432 26,870 26,583 2.1 > 50 years FTE 8,480 7,718 6,949 9.9 > 50 years headcount 8,497 7,739 6,969 9.8 > 50 years female headcount 3,771 3,421 3,075 10.2 500 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary people informat ion Talent management ⁸ 2023 2022 2021 % change Global voluntary turnover – FTE 8,200 12,645 10,214 (35.1) Global turnover – FTE 9,712 14,388 13,160 (32.5) Global voluntary turnover rate (%) 9.7% 15.5% 12.6% (37.1) Global turnover rate (%) 11.5% 17.6% 16.2% (34.5) Male turnover FTE 5,214 8,021 7,332 (35.0) Male (%) 11.4% 18.2% 16.7% (37.2) Female turnover FTE 4,394 6,230 5,736 (29.5) Female (%) 11.6% 16.8% 15.6% (30.9) Female as a % of global turnover FTE 45.2% 43.3% 43.6% 4.5 Asia turnover FTE 8,293 12,501 11,004 (33.7) Asia (%) 11.8% 18.4% 16.4% (35.9) AME turnover FTE 858 1,046 1,454 (18.0) AME (%) 9.9% 11.7% 15.4% (15.1) EA turnover FTE 562 841 703 (33.2) EA (%) 10.9% 17.7% 15.5% (38.5) < 30 years turnover FTE 2,593 4,137 3,712 (37.3) < 30 years (%) 19.2% 30.5% 26.1% (37.3) 30-50 years turnover FTE 6,242 9,303 8,144 (32.9) 30-50 years (%) 9.9% 15.2% 13.5% (34.8) > 50 years turnover FTE 878 947 1,304 (7.3) > 50 years (%) 11.0% 13.1% 19.3% (16.5) Average tenure (years) – Male 7.3 7.1 7.2 2.8 Average tenure (years) – Female 7.9 7.6 7.7 3.9 Global new hires – FTE 12,145 17,432 12,660 (30.3) Global new hire rate (%) 14.2% 21.0% 15.3% (32.3) Male new hire FTE 6,875 9,683 6,758 (29.0) Male (%) 14.9% 21.7% 15.2% (31.2) Female new hire FTE 5,044 7,384 5,580 (31.7) Female (%) 13.2% 19.6% 14.9% (32.9) Female as a % of global new hires FTE 41.5% 42.4% 44.1% (1.9) Asia new hire FTE 10,653 15,441 11,387 (31.0) Asia (%) 14.9% 22.4% 16.7% (33.2) AME new hire FTE 615 934 431 (34.2) AME (%) 7.0% 10.2% 4.3% (31.7) EA new hire FTE 877 1,056 842 (17.0) EA (%) 16.8% 21.9% 18.2% (23.4) < 30 years new hire FTE 4,963 7,673 5,857 (35.3) < 30 years (%) 35.5% 54.7% 39.6% (35.1) 30-50 years new hire FTE 6,841 9,357 6,514 (26.9) 30-50 years (%) 10.8% 15.2% 10.7% (28.8) > 50 years new hire FTE 341 401 290 (15.1) > 50 years (%) 4.2% 5.4% 4.2% (23.3) Roles ﬁlled internally (%) 32.3% 37.3% 40.8% (13.5) of which ﬁlled by females (%) 41.6% 41.0% 42.8% 1.5 Absenteeism rate 9 (%) 1.3% 1.4% 1.6% (2.9) Employee job satisfact ion (%) 83.0% 80.0% 81.0% 3.7 501 Standard Chartered – Annual Report 2023 Supplementary informat ion Learning 10 2023 2022 2021 % change Employees receiv ing tra in ing (%) 99.5% 99.5% 99.4% 0.0 Employees receiv ing tra in ing for personal development (%) 96.2% 91.6% 91.7% 5.0 Female (%) 95.8% 90.0% 91.2% 6.4 Senior leadership (%) 6 93.4% 94.9% 96.2% (1.5) Average number of train ing hours per employee 38.0 36.9 37.8 3.1 Female 37.0 35.4 37.1 4.5 Male 38.8 38.1 38.3 1.8 Employed workers 38.1 37.1 37.9 2.7 Fixed term workers 33.3 21.9 34.1 52.3 Average cost of train ing per employee ($) 11 730 743 708 (1.8) Divers ity 2023 2022 2021 % change % of women remained employed 12 months after their return from parental leave 75.2% 72.4% 78.9% 3.9 % of Information Technology (IT) and/or Engineer ing roles ﬁlled by women 12 24.2% 24.0% 23.8% 0.7 % of senior leadership and managerial roles ﬁlled by women 6,13 34.6% 35.0% 34.6% (0.9) % of middle management roles ﬁlled by women 13 35.5% 36.1% 36.1% (1.6) % of non-managerial posit ions ﬁlled by women 13 47.0% 47.6% 48.0% (1.2) % of women total promotions 46.0% 46.1% 45.3% (0.2) Executive and non-executive directors 14 Men 8 8 9 – Women 5 6 4 (16.7) % of men 61.5% 57.1% 69.2% 7.7 % of women 38.5% 42.9% 30.8% (10.3) White Brit ish or other Wh ite (includ ing m inor ity-Wh ite groups) 9 11 10 (18.2) Asian/Asian Brit ish 4 3 3 33.3 Black/African/Caribbean/Black Brit ish 0 0 0 – Mixed/Multiple Ethnic Groups 0 0 0 – White Brit ish or other Wh ite (includ ing m inor ity-Wh ite groups) (%) 69.2% 78.6% 76.9% (11.9) Asian/Asian Brit ish (%) 30.8% 21.4% 23.1% 43.6 Black/African/Caribbean/Black Brit ish (%) 0.0% 0.0% 0.0% – Mixed/Multiple Ethnic Groups (%) 0.0% 0.0% 0.0% – Number of senior posit ions (CEO, CFO, SID and Cha ir) 15 Men 3 3 3 – Women 1 1 1 – White Brit ish or other Wh ite (includ ing m inor ity-Wh ite groups) 4 4 4 – Asian/Asian Brit ish 0 0 0 – Black/African/Caribbean/Black Brit ish 0 0 0 – Mixed/Multiple Ethnic Groups 0 0 0 – 502 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary people informat ion Divers ity 2023 2022 2021 % change % of Board members that have a cultural background different from the location of the corporate headquarters 16 38.5% 35.7% 38.5% 7.7 Executive management 17 14 14 16 – Men 7 8 11 (12.5) Women 7 6 5 16.7 % of men 50.0% 57.1% 68.8% (12.5) % of women 50.0% 42.9% 31.3% 16.7 White Brit ish or other Wh ite (includ ing m inor ity-Wh ite groups) 5 6 9 (16.7) Asian/Asian Brit ish 6 6 5 – Black/African/Caribbean/Black Brit ish 1 1 – – Mixed/Multiple Ethnic Groups – – 1 – Not specif ied/prefer not to say 2 1 1 100.0 White Brit ish or other Wh ite (includ ing m inor ity-Wh ite groups) (%) 35.7% 42.9% 56.3% (16.7) Asian/Asian Brit ish (%) 42.9% 42.9% 31.3% – Black/African/Caribbean/Black Brit ish (%) 7.1% 7.1% 0.0% – Mixed/Multiple Ethnic Groups (%) 0.0% 0.0% 6.3% – Not specif ied/prefer not to say (%) 14.3% 7.1% 6.3% 100.0 UK senior leadership 6, 18 (% declared) UK Black Ethnic ity 2.5% 2.5% 2.7% (0.2) UK Black, Asian and Minor ity Ethn ic ity 27.8% 26.4% 22.1% 5.2 US senior leadership 6, 18 (% declared) US Black Ethnic ity 4.0% 4.7% 3.8% (13.8) US Hispan ic or Lat inx Ethnic ity 10.1% 9.9% 10.2% 2.1 Work-related Health & Safety 2023 2022 2021 % change Fatalit ies 19 2 1 0 100.0 Fatalit ies (rate per m ill ion hours worked) 0.010 0.005 0.000 100.0 Major in juries 19,20, 21, 22 16 20 24 (20.0) Major in juries (rate per mill ion hours worked 23 ) 0.08 0.11 0.13 (27.3) Recordable work-related injuries 24 108 83 79 30.1 Recordable work-related injuries (rate per mill ion hours worked 23 ) 0.56 0.44 0.43 27.6 Work-related ill-health (fatalit ies) 0 0 0 – 503 Standard Chartered – Annual Report 2023 Supplementary informat ion 1 Excludes 699 employees (headcount) from Dig ital Ventures ent it ies (Appro, Audax, Autumn, Letsbloom, MyZo i, Solv Ghana, Solv India, Solv Kenya, Solv Malaysia, TASConnect, Tawi, Zodia Custody, Zodia Markets). Excludes 412 Person of Interest (headcount) following a recategorisat ion of worker types from 2022, i.e. independent non-executive directors, advisors, external auditors and regulators. Includes employees operating in discont inued/restructured bus inesses. Percentage change refers to the percentage change from 2022 to 2023. All ﬁgures above are presented to 1 decimal place and the corresponding percentage changes are derived from actual data without rounding to 1 decimal place to remain as accurate as possible. 2 Non-outsourced NEWs are resources engaged on a time and materials basis where task selection and supervis ion is the responsib il ity of the Bank, such as agency workers. 3 Outsourced NEWs are arrangements with a third party vendor where the delivery is based on a specif ic serv ice or outcome at an agreed price, irrespect ive of the number of resources required to perform the service. These resources are not considered as the Group’s headcount. 4 The disclosure of gender informat ion is not mandatory in some markets. 5 Management team (MT) and colleagues who report to them, excluding admin istrat ive or executive support roles (personal assistant, business planning managers). 6 Senior leadership is deﬁned as Managing Directors and Bands 4 (includ ing Management Team). 7 Business is deﬁned as employees directly under the remit of the businesses. Support services include employees who support businesses’ operations or investments where costs are fully recharged to the businesses. Increase in support services in 2023 is mainly due to increase in business demand for investment support resources and transfer of approximately 670 employees from CCIB business. 8 Turnover metrics are based on permanent employed workers only. New hire metrics are based on external new hires. Turnover and new hire metrics are based on average 12 month FTE. These metrics are not shown for the undisclosed gender population due to a small population size. Turnover in 2023 declined. Voluntary turnover in 2022 was at a histor ical h igh as experienced by many other organisat ions in the aftermath of Covid-19 pandemic. As turnover declined, the need for hir ing reduced accord ingly compared to 2022, resulting in lower new hires. 9 Represents health and disab il ity related absence. Excludes Korea 10 Learning metrics exclude non-employed workers (NEWs). Train ing for personal development is deﬁned as all train ing exclud ing mandatory or role specif ic train ing. Average tra in ing hours ( includ ing mandatory tra in ing) has been updated to include self-declared external train ing hours and pr ior periods have been restated for comparison. 11 Average cost of train ing per employee includes cost of learning management system. 12 Represents the % of Information Technology (IT) and/or Engineer ing roles ﬁlled by women. IT and/or eng ineer ing roles is deﬁned as employees who work in the IT job function, includ ing eng ineer ing roles (exclud ing Innovation, Transformation & Ventures) and/or certain job famil ies in the Data and Analytics job function. 13 Represents the percentage of women that are in the respective population groups. For the purpose of this metric, managerial/middle management roles are considered as roles which have people leader responsib il it ies exclud ing senior leadership. Non-managerial roles do not have people leader responsib il it ies 14 Executive and non-executive directors refer to the UK PLC Board. Data has been collected by way of the directors’ annual self-declarations. 15 For the purpose of this metric, senior posit ions in the Board include the Group Chairman, Group Chief Executive, Group Chief Financ ial Ofﬁcer and Sen ior Independent Director 16 Percentage of Board Members whose cultural background (national ity) is different from the location of the corporate headquarters (UK) 17 For the purpose of this metric, executive management refers to Management team plus Group Company Secretary as deﬁned by UK List ing Rules 18 Ethnic ity % has been der ived based on colleagues who have declared their ethnic ity aga inst the overall UK/US population respectively (includ ing colleagues who have not made a declaration). 19 Includes commuting and contractors (2023 one fatality was a contractor commuting accident, one was a staff road accident) 20 Per UK HSE deﬁnit ion. 21 Most common types of major in jury are fractures (75%) 22 2023 includes 5 contractor/vis itor. 2022 includes 1 contractor/vis itor. 2021 includes 4 contractors/vis itors. 23 2023 hours worked = 192,870,120. 2022 hours worked = 188,758,285. 2021 hours worked = 184,997,097 24 2023 includes 31 contractor/vis itors. 2022 includes 18 contractors/vis itors. 2021 includes 23 contractors/vis itors. 504 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary sustainab il ity informat ion Supplementary sustainab il ity informat ion Environmental and Social Risk Management (ESRM) 2023 2022 2021 Number of partic ipants in ESRM train ing sess ions 1 2,609² 4,944³ 1,280 Number of transactions reviewed 708 550 547 Number of clients reviewed 1,341 1,170 786 Client exits due to non-compliance with Posit ion Statements 41 14 – Equator Princ iples report ing Project ﬁnance mandates Project-related corporate loans Project-related reﬁnance 7 Project advisory mandates Cat A 4 Cat B 5 Cat C 6 Cat A Cat B Cat C Cat A Cat B Cat C Cat A Cat B Cat C Total 2021 8 12 3 1 6 – – 1 – – – – Total 2022 6 7 1 2 3 4 – – – – – – Total 2023 11 22 3 1 4 1 – – 1 – 1 – 2023 Project ﬁnance mandates Project-related corporate loans Project-related reﬁnance Project advisory mandates A B C A B C A B C A B C Sector Min ing – – – – – – – – – – – – Infrastructure – 6 3 1 – 1 – – 1 – 1 – Oil and Gas 2 – – – 1 – – – – – – – Power 9 15 – – 1 – – – – – – – Others 8 – 1 – – 2 – – – – – – – Region Americas 1 2 – – – – – – 1 – – – Asia-Pacif ic 6 11 1 – 2 – – – – – – – Europe, Middle East and Africa 4 9 2 1 2 1 – – – – 1 – Designat ion 9 Designated Country 3 10 1 – 1 – – – 1 – – – Non-Designated Country 8 12 2 1 3 1 – – – – 1 – Independent Review Yes 10 17 – 1 2 – – – – – 1 – No 1 5 3 – 2 1 – – 1 – – – 1 Metric was updated in 2023 as all partic ipants are counted for each l ive train ing or e-learn ing session. An employee may attend either or both types of train ing during the year. 2 Includes 1,338 partic ipants in live train ing sess ions and 1,271 partic ipants who completed e-learn ing sessions. 3 Figure in 2022 was higher as the Group’s mandatory Sustainable Finance Foundation train ing was launched in this year, incorporating ESRM as part of the curriculum. Frontline colleagues were ﬁrst required to complete the train ing in 2022, for other functions the timel ine extended into 2023. 4 Cat A or Category A are projects with potential sign iﬁcant adverse env ironmental and social risks and/or impacts that are diverse, irrevers ible or unprecedented. 5 Cat B or Category B are projects with potential lim ited adverse env ironmental and social risks and/or impacts that are few in number, generally site-specif ic, largely reversible and readily addressed through mit igat ion measures. 6 Cat C or Category C are projects with min imal or no adverse env ironmental and social risks and/or impacts. 7 In line with Equator Princ iples (EP4), Standard Chartered now reports those transact ions that trigger project-related reﬁnance. 8 Sectors covered under “Others” include Agro-industr ies, Transport, Chem icals and Manufacturing. 9 Designat ion is split into Designated and Non-Designated Countries. Designated Countries are deemed by the Equator Princ iples to have robust env ironmental and social governance, legislat ion systems and inst itut ional capacity designed to protect their people and the natural environment. Non-Designated Countries are countries that are not found on the list of Designated Countries. The list of countries can be found at www.equator-princ iples.com. 505 Standard Chartered – Annual Report 2023 Supplementary informat ion Environment Units Footnote 2023 2022 2021 2022–2023 % change Measured Scaled up Measured Scaled up Measured Scaled up Reporting coverage of data Ofﬁces reporting No. of ofﬁces 762 875 838 (13) Net internal area of occupied property m 2 864,932 880,515 930,327 946,234 976,520 998,571 (7) Annual operating income from 1 October to 30 September $mill ion 1 17,414 15,863 14,541 10 Scope 1 and 2 GHG emiss ions 1, 2, 4 Scope 1 emiss ions tCO 2 e 12 8,454 8,488 2,027 2,071 2,834 2,902 310 Scope 2 emiss ions (location-based) tCO 2 e 3 84,741 85,741 88,450 89,410 94,564 96,256 (4) Scope 2 emiss ions (market-based) tCO 2 e 13 25,469 26,246 41,492 47,363 73,016 82,761 (45) Total Scope 1 and 2 emiss ions (market-based) tCO 2 e 33,923 34,734 43,519 49,434 75,850 85,663 (30) Scope 1 and 2 emiss ions (UK and offshore area only) tCO 2 e 248 - - 100 Scope 3 GHG emiss ions 1, 2 Category 1: Purchased goods and services (other) tCO 2 e 5 286,304 380,732 330,244 (25) Category 1: Purchased goods and services (data centres) tCO 2 e 5 4,431 7,060 43,132 (37) Category 2: Capital goods tCO 2 e 42,707 34,496 47,217 24 Category 3: Fuel- and energy-related activ it ies tCO 2 e 6 nm nm nm nm Category 4: Upstream transportation and distr ibut ion tCO 2 e 24,125 20,300 20,949 19 Category 5: Waste generated in operations tCO 2 e 7, 8 520 747 (30) Category 6: Business travel (air travel) tCO 2 e 60,279 39,107 3,654 54 Category 6: Business travel (miscellaneous other than air travel) tCO 2 e 8,918 2,654 4,994 236 Category 7: Employee commuting tCO 2 e 8 71,228 61,917 15 Category 8: Upstream leased assets tCO 2 e 6 nm nm nm nm Category 9: Downstream transportation and distr ibut ion tCO 2 e 6 nm nm nm nm Category 10: Processing of sold products tCO 2 e 6 nm nm nm nm Category 11: Use of sold products tCO 2 e 6 nm nm nm nm Category 12: End-of-life treatment of sold products tCO 2 e 6 nm nm nm nm Category 13: Downstream leased assets (real estate) tCO 2 e 8, 9 7,898 8,594 (8) Category 14: Franchises tCO 2 e 6 nm nm nm nm Category 15: Investments (ﬁnanced emiss ions) tCO 2 e 10, 14 41,944,000 49,512,000 45,200,000 (15) Total Scope 3 tCO 2 e 42,450,410 50,067,607 45,650,190 (15) Total Scope 1, 2 and 3 tCO 2 e 42,485,144 50,117,041 45,735,853 (15) 506 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary sustainab il ity informat ion Units Footnote 2023 2022 2021 2022–2023 % change Measured Scaled up Measured Scaled up Measured Scaled up Scope 1 and 2 GHG emiss ions (market-based) intens ity tCO 2 e/ $ mill ion 2 3 6 (36) Environmental resource efﬁciency Energy Indirect non-renewable energy consumption GWh 139 142 140 142 139 142 – Indirect renewable energy consumption GWh 16 16 23 24 27 28 (33) Direct non-renewable energy consumption GWh 13 13 10 10 12 12 30 Direct renewable energy consumption GWh 2 2 1 1 1 1 100 Energy consumption GWh 170 173 174 177 179 183 (2) Energy consumption intens ity kWh/m 2 11 196 187 183 5 Energy consumption (UK and offshore area only) GWh 6 6 5 – Water Water consumption Mill ion l itres 289 393 265 385 256 384 2 Water intens ity m 3 /m 2 11 0.45 0.41 0.38 10 Waste Waste generated kg 998,407 1,575,954 3,633,870 (37) Waste intens ity kg/m 2 11 1.1 1.7 3.6 (32) Waste reused or recycled % 52 35 32 49 1 The reporting period for carbon emiss ions is 1 October to 30 September. This only differs for Category 1: Purchased Goods (other); Category 2: Capital Goods; Category 4: Upstream transportation and distr ibut ion; Category 6: Business travel (miscellaneous other than air travel) and Category 15: Investments where a period of 1 January to 31 December is used. Emiss ions data for these categor ies is also on a one-year lag with emiss ions reported in 2023 based on 2022 emiss ions data. 2 Scope 1 ﬁgure includes fugit ive em iss ions for the ﬁrst t ime in 2023. For more informat ion on the methodology and assumpt ions used to calculate GHG emiss ions, please refer to the Environmental Reporting Criter ia at sc.com/sustainab il ityhub . 3 Location based emiss ions have been restated for pr ior comparative periods. Emiss ions erroneously included renewable energy certif icates and power purchase agreements. Other scope 2 reductions outside clean power are attributed to footprint reduction and efﬁc iency ga ins. 4 We use an independent third-party assurance provider to verify our Scope 1 and 2 GHG emiss ions. In 2023, l im ited assurance was completed by Global Documentation Ltd, excluding fugit ive em iss ions in this ﬁrst reporting year. 5 Scope 3 Category 1: Purchased goods and services is made up of third-party on-premise data centres (data centres) and all other purchased goods and services (other). Purchased goods and services (data centres) have been restated from 706tCO 2 e to 7,060tCO 2 e due to an error in converting the unit of emiss ions. 6 Scope 3 Category 3, Category 8, Category 9, Category 10, Category 11, Category 12 and Category 14 are not relevant for the Group due to the nature of our business, products and services and operations. GHG emiss ions assoc iated with these categories are not deemed as relevant and/or material. 7 Scope 3 Category 5: Waste generated from operations emiss ions have been restated for the 2022 report ing period due to an out of date emiss ions factor be ing used in prior year. 8 Emiss ions for Scope 3 Category 5: Waste generated in operations, Category 7: Employee commuting and Category 13: Downstream leased assets were measured and reported for the ﬁrst time in 2022. 9 Reporting of emiss ions assoc iated with downstream leased aircrafts related to the Group’s aircraft leasing business has been paused following the sale of this business during 2023. 10 Scope 3 Category 15 emiss ions includes ﬁnanced emiss ions assoc iated with the Group’s transactions with clients. 2022 absolute emiss ions have been restated from 58.5MtCO 2 e to 49.5MtCO 2 e. This is due to (i) reduction in shipp ing absolute em iss ions as improved data has resulted in ind iv idual ship-level fair values being obtained, (i i) paus ing of aviat ion em iss ions report ing due to the sale of the Group’s aviat ion leas ing and lending business, (i i i) decreases in Automotive Manufacturers’ emiss ions due to changes in the industry emiss ions report ing methodology referenced earlier, (iv) decreases in emiss ions from the ‘Others’ sector where improved data has been obtained to calculate emiss ions and (v) the sectoral basel in ing of em iss ions report ing for the Cement and Commercial Real Estate as separate high-emitt ing sectors. 11 Energy intens ity metr ic updated to kWh per square meter in the current year from kWh per headcount in 2022. Water intens ity metr ic updated to cubic litres of water per square meter in the current year from cubic litres of water per headcount in 2022. Waste intens ity metr ic updated to cubic kilograms of waste per square meter in the current year from cubic metres of waste per headcount in 2022. 12 Scope 1 ﬁgure includes fugit ive em iss ions for the ﬁrst t ime in 2023 (2023: 5,266 tCO2e). Prior year data was not available for fugit ive em iss ions. For more informat ion on the methodology and assumptions used to calculate GHG emiss ions, please refer to the Env ironmental Reporting Criter ia at sc.com/sustainab il ityhub . 13 Market based emiss ions has decreased from 2022 to 2023 due to footpr int reduction, efﬁc iency ga ins and the purchase of addit ional energy attr ibut ion certif icates by the Group. 14 Financed emiss ions are included on page 110. A facil itated em iss ions basel ine was measured for the ﬁrst time during the year. Refer to page 112 for more details. Environment continued 507 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplier spend Portion of total third-party spend 1,2 Number of supplier organisat ions with spend in 2023 1,2 Number of local suppliers by payment market 1,2 Number of global 4 suppliers (by payment market) 1,2 Top 10 sourcing locations by % overall spend Singapore 36% 1,447 966 481 United Kingdom 14% 881 563 318 India 11% 2,256 2,080 176 Hong Kong 11% 761 483 278 China³ 5% 936 813 123 Korea 3% 497 472 25 United Arab Emirates 3% 408 241 167 Malaysia 2% 565 427 138 United States 2% 294 161 133 Taiwan 2% 492 416 76 Regional spend Asia 74% 8,936 7,225 1,711 Europe and Americas 18% 1,704 1,041 663 Africa and the Middle East 8% 3,409 2,507 902 Category spend Technology 43% 1,578 1,346 232 Professional Services 16% 2,066 1,870 196 Property 13% 2,490 2,431 59 Marketing 13% 1,913 1,823 90 Human Resources 7% 1,503 1,395 108 Banking Operations 3% 362 338 24 Travel 3% 485 443 42 Ofﬁce Supplies 1% 786 753 33 Others 1% 380 374 6 1 Suppliers are counted by generic name (e.g. all DHL legal entit ies are counted as one DHL). 2 The same supplier may be used in more than one market. 3 ‘China’ refers to the People’s Republic of China and, for the purposes of this document only, excludes Hong Kong Special Admin istrat ive Region (Hong Kong), Macau Special Admin istrat ive Region (Macau) and Taiwan, ‘Korea’ or ‘South Korea’. 4 Suppliers with payments in more than one market. Charitable giv ing 2023 $mill ion 2022 $mill ion 2021 $mill ion Cash contribut ions 31.2 23.7 28.2 Employee time (non-cash item) 28.7 17.5 11.4 Gifts in-kind (non-cash item) 1 0.4 0.3 2.6 Management costs 5.4 5.0 4.7 Total (direct contribut ions by Group) 65.7 46.5 46.9 Leverage 2 2.9 4.8 1.9 Total (includ ing leverage) 68.6 51.3 48.8 Percentage of prior year operating proﬁt (PYOP) 1.6 1.5 3.0 1 Gifts in-kind comprises all non-monetary donations. 2 Leverage relates to the proceeds from staff and other fundrais ing. 508 Standard Chartered – Annual Report 2022 Supplementary informat ion Supplementary sustainab il ity informat ion 1. Mobil ise Susta inable Finance Pillar Key performance ind icators Period Status 2023 progress update Sustainable Finance Mobil ise $300 b ill ion in Sustainable Finance (SF)¹ 2021–2030 Mobil ised $87.2bn between January 2021 and September 2023. Strong progress in 2023. We antic ipate that mob il isat ion of SF will not be linear and will likely increase over time as the market matures and we help our clients transit ion. We rema in on track for overall target in 2030. 2. Operational ise inter im 2030 ﬁnanced em iss ions targets to meet our 2050 net zero amb it ion Pillar Key performance ind icators Period Status 2023 progress update Operations Net zero in our operations (Scope 1 and 2 GHG) 2019–2025 We reduced our Scope 1 and 2 emiss ions by 30% to 34,734 tCO 2 e during 2023. Our measured real estate decreased by 7% during that time. The Group purchased and retired carbon credits for our residual operational Scope 1 and 2 emiss ions. We remain on track for overall target 2025. Increase renewable energy sourcing to 100% by 2025 (RE100 compliant) 2022–2025 66% of our electric ity came from renewable sources across our portfolio after matching consumption with Renewable Energy Certif icates (RECs). We remain on track for overall target 2025. Achieve and mainta in ﬂ ight emiss ions 28% lower than our 2019 baseline of 94,000 tCO 2 e 2021–2023 Achieved 36% reduction in ﬂight emiss ions compared to 2019 baseline. Divert 90% of waste from the landﬁll by 2030 2020–2030 In 2023, we reduced our overall waste generated by 37% and achieved 52% avoidance of landﬁll (up from 31%). Financed Emiss ions Achieve 2030 inter im ﬁnanced em iss ions reduction in our most carbon-intens ive sectors²: • -29% in Oil and Gas (absolute) • -45–67% in Power (production intens ity) • -20–30% in Steel (production intens ity) • -85% emiss ions reduct ion in Thermal Coal Min ing (absolute) • Mainta in product ion-intens ity in Alumin ium • Reduce our alignment delta in Shipp ing to 0% • -53–82% in Automotive Manufacturers (physical intens ity) 2020/ 2021–2030 During the year, Oil and Gas sector's revenue-based target was changed to absolute target, effectively placing a carbon budget on the sector. Power and Steel sector targets changed from revenue-based to production-based intens ity targets, which are considered best in class for these sectors. We remain on track for all inter im 2030 sectoral science-based targets; however, transit ion al ignment is needed for Shipp ing and Cement. For further informat ion on the progress aga inst each sector-specif ic 2030 target, refer to pages 109-117. Set and disclose 2030 ﬁnanced emiss ion targets for high-emitt ing and carbon- intens ive sectors in line with Net-Zero Banking Alliance (NZBA) guidel ines: • 2023: Develop targets for Commercial Real Estate, Cement, Resident ial Mortgages, and Alumin ium to be communicated in our 2023 Annual Report • 2024: Develop 2030 target for Agriculture to be communicated in our 2024 Annual Report 2021–2024 Targets have been set for Commercial Real Estate, Cement, Resident ial Mortgages and Alum in ium and presented in this Annual Report, refer to pages 109-117. Target for Agriculture will be developed in 2024. We remain on track for overall target for 2024. 1 Mobil isat ion of Sustainable Finance is deﬁned as any investment or ﬁnanc ial serv ice provided to clients that supports: (i) the preservation and/or improvement of biod ivers ity, nature or the environment; (i i) the long-term avo idance/decrease of GHG emiss ions, includ ing the al ignment of a client’s business and operations with a 1.5 degree Celsius trajectory (known as transit ion ﬁnance); ( i i i) a social purpose; or (iv) incent iv ises our clients to meet their own sustainab il ity object ives (known as sustainab il ity-linked ﬁnance). 2 Refer to the Group’s ‘Net zero methodological white paper – The journey continues’ via sc.com/sustainab il ityhub and aligned with our Posit ion Statements available at sc.com/sustainab il ityhub . For Aviat ion, the Group completed the sale of its global aviat ion ﬁnance leas ing business and the major ity of its aviat ion lending book in August 2023. Noting the distort ive effects that the sale of th is business would create in our emiss ions proﬁle for th is sector, the progress against this target has been paused for year-end 2023. This will be re-assessed based on the size and material ity of the rema in ing portfol io in 2024. 2023 Sustainab il ity Aspirat ions 509 Standard Chartered – Annual Report 2022 Supplementary informat ion 3. Enhance and deepen leadership with in the susta inab il ity ecosystem Pillar Key performance ind icators Period Status 2023 progress update Market Integrity, Trust, Conduct and Compliance Partnering to lead the ﬁght against ﬁnancial cr imes: • Partic ipat ing in public–private partnerships to contribute to understanding most recent developments, share intell igence and good practices • Contribute to developing typologies and red ﬂags for ﬁnancial ﬂows Ongoing During 2023, the Group undertook a series of engagements across multiple jur isd ict ions in furtherance of this aspirat ion. The Group cont inued engagement with internat ional and reg ional standard-setters, such as the Financ ial Act ion Task Force and Wolfsberg Group. In many jurisd ict ions, the Group contributed, either directly or via trade bodies, to reform of ﬁnancial cr ime legislat ion and regulat ion, and to public–private partnerships to tackle ﬁnanc ial crime. The Group has partic ipated in a number of ﬁnancial cr ime conferences across our footprint - chair ing and lead ing many panel discuss ions, and contribut ing subject–matter expert ise whenever possible. In addit ion, the Group has been engaged in planning discuss ions w ith countries and bodies seeking to establish new partnerships and informat ion-shar ing arrangements. Develop and deliver a targeted outreach programme, includ ing through key internat ional platforms, a imed at safely and transparently reducing barriers to capital mobil isat ion for sustainable development 2022–2024 The Group continued to proactively engage in policy discuss ions v ia a number of major internat ional and regional platforms and conferences. Through these activ it ies, the Group sought to promote robust policy and regulatory frameworks to ensure the credib il ity and integr ity of susta inable investments and to support capital mobil isat ion for sustainable ﬁnance. 4. Drive social impact with our clients and communit ies Pillar Key performance ind icators Period Status 2023 progress update People Increase gender representation to 35% women in senior roles³ 2016–2025 Women leadership representation at the end of 2023 was 32.5%. We remain on track for our overall target in 2025. Create Supplier Divers ity and Inclus ion Plans for all in-scope markets with Supply Chain Management (SCM) team presence to support 40 per cent of our newly onboarded suppliers being diverse⁴ 2022–2025 100% of in-scope markets have Supplier Divers ity and Inclusion Plans and 40% of our newly onboarded suppliers were diverse. Increase our Culture of Inclusion score to 84.5%⁵ 2020–2024 83.23% of employees reported posit ive sent iments around our culture of inclus ion. We rema in on track for our overall 2024 target. Grow our employee MyVoice score to the question “The way we operate day-to-day is aligned with our sustainab il ity strategy” from 2021 baseline of 84% to 88% 2022–2024 86% of employees have said the way we operate day to day is aligned with our sustainab il ity strategy. We remain on track for our overall 2024 target. 3 Senior roles refer to roles thatare at least at the level of Executive Director (Band 4) and Managing Directors (Band 3) as of 31 December of each reporting year. 4 For Standard Chartered diverse suppliers are deﬁned as: • Small Enterprise (10-49 employees + turnover <USD10 mill ion) • Micro Enterprise (<10 employees + turnover <USD2 mill ion) • Medium Enterprise (50-249 employees + turnover <USD50 mill ion) • Women Owned (51 per cent or more owned by Women (South Africa 30 per cent owned by women as per local government regulations)) • Ethnic Minor ity (Owned 51 per cent owned by ethn ic minor it ies) • Veteran Owned (51 per cent or more owned by veterans) • Disabled Owned (51 per cent or more owned by differently abled people) • LGBT+ Owned (Owned 51 per cent owned by LGBT+ (not possible in some countries due to local legal regulations)) • Social Enterprises (NGOs and Charit ies) 5 The ‘Culture of Inclusion’ score is based on several questions in MyVoice employee engagement survey that relate to different concepts of inclus ion, includ ing being respected and valued for contribut ions, be ing heard and involved in decis ions, career development and opportun it ies, and work l ife balance. 510 Standard Chartered – Annual Report 2023 Supplementary informat ion Supplementary sustainab il ity informat ion Pillar Key performance ind icators Period Status 2023 progress update Communit ies Invest 0.75% of prior year operating proﬁt (PYOP) in our communit ies Ongoing Achieved 1.6% PYOP, refer to page 509 for addit ional details. Education: Reach one mill ion g irls and young women through Goal 2006–2023 Goal projects reported strong results in 2023 with the programme reaching over 200,000 young girls, enabling the programme to successfully surpass the longstanding target to reach one mill ion g irls by December 2023. Employabil ity: Reach 275,000 young people 2019–2023 A new aspirat ional target was set in 2022 to reach 275,000 young people by December 2023. We have achieved as the pace of implementat ion for employabil ity projects cont inued to increase in 2023, includ ing large projects in China and India deliver ing both intens ive and non- intens ive (l ighter touch) intervent ions. 165,056 young people part ic ipated in employabil ity programmes in 2023. Entrepreneurship: Reach 125,000 young people 2019–2023 A new aspirat ional target was set in 2022 to reach 125,000 young people by 2023. We have achieved and exceeded this target as Futuremakers entrepreneurship projects more than doubled the number of young people reached in 2023, primar ily dr iven by non- intens ive tech-enabled solut ions and online learning materials that allowed projects to access a much larger number of partic ipants. 378,108 young people partic ipated in entrepreneurship programmes in 2023. Increase partic ipat ion for employee volunteering (EV) to 55% 2020–2023 We achieved and surpassed our target of 55% with an outstanding EV partic ipat ion rate of 61% as of end of December 2023. 52,377 volunteers have logged 76,126 days of EV leave. Going forward, we aim to shift the focus of EV to skills-based volunteering, for which we have included the target for 2024 of 75,000 hours. Concluded in the year Ongoing aspirat ions Achieved Not achieved On track Not on track 4. Drive social impact with our clients and communit ies continued 511 Standard Chartered – Annual Report 2023 Supplementary informat ion The following table sets out the recommendations and recommended disclosures of the Taskforce on Climate–related Financ ial Disclosures (TCFD) and summarises where informat ion can be found in this Annual Report. Recommendation Response Disclosure location Governance a) Describe the Board’s oversight of climate–related risks and opportunit ies Process and frequency of communicat ion to the Board • The Board and its supporting committees are responsible for the oversight of climate- and sustaianb ilt iy-related risks and opportunit ies. • The Board Risk Committee (BRC) receives Climate Risk updates in Group Chief Risk Ofﬁcer (GCRO) reports six times a year and reviews the Climate Risk Information Report quarterly. • The Audit Committee (AC) is responsible for oversight of the Group’s quantitat ive reporting metrics and controls over those metrics. The AC is updated annually in the fourth quarter and more frequently if any material disclosures are made outside of the Group’s annual reporting cycle. • The Culture and Sustainab il ity Committee (CSC) reviews the Group’s overall sustainab il ity strategy and monitors the implementat ion of the Group’s publ ic commitment to net zero ﬁnanced emiss ions by 2050. The CSC rece ived updates three times during 2023. Strategic report – page 76 Sustainab il ity review – pages 120-123 Directors’ report – pages 162-176 Risk review and Capital review – pages 298-313 Incorporation of climate–related issues into Board and Board committee planning and decis ions • The Board reviewed and approved our sustainab il ity strategy includ ing progress on our roadmap to achieve net zero ﬁnanced emiss ions by 2050, key performance ind icators and publ ic commitments. • The BRC reviewed, discussed, and challenged the Group’s (i) progress on embedding climate risk in line with PRA SS 3/19; (i i) the results of the Group’s ﬁrst bespoke short–term base case and tail risk scenarios; (i i i) development of the Group’s internal modelling capabil it ies; and (iv) key focus areas for 2024. Sustainab il ity review – pages 120-123 Board oversight of climate–related goals and targets • The Board oversees the Group’s overall net zero 2050 ambit ion and in 2023 reviewed progress on delivery against the Group’s net zero roadmap. • It approved the Group’s Climate Risk Appetite Statement and related Board-level metrics. Any breaches to the risk appetite metrics are reported to the Group Risk Committee and the Board Risk Committee. Sustainab il ity review – pages 120-123 b) Describe management’s role in assessing and managing climate-related risks and opportunit ies Roles and responsib il it ies for climate-related risks and opportunit ies • Each member of the Group Management Team (MT) is responsible for strategically driv ing cl imate considerat ions w ith in the ir geography, business segment or function in line with our net zero roadmap. • Responsib il ity for ident ify ing and managing ﬁnanc ial r isks from climate change sits with the GCRO as the appropriate Senior Management Function (SMF) under the Senior Managers Regime (SMR). • The Global Head, ESG and Reputational Risk is responsible for ensuring and executing the delivery of the Climate Risk workplan. • The Chief Sustainab il ity Ofﬁcer’s (CSO) organisat ion, as led by the CSO, is responsible for creating the Group-wide sustainab il ity strategy and working across business segments and functional teams to deliver on our goals, targets and net zero roadmap. • Roles and responsib il it ies assoc iated with climate-related risks and opportunit ies have been set out in the “Climate and sustainab il ity-related governance” section of this Annual Report. Sustainab il ity review – pages 120-123 Processes used to inform management • Management is informed by several committees and forums, with climate- and sustainab il ity-related informat ion commun icated via reports and committee papers. • This includes channels includ ing our Cl imate Risk Information Reports, and updates to the Sustainab il ity Executive Committee and CCIB and CPBB management teams. Sustainab il ity review – pages 120-123 TCFD summary and alignment index 512 Standard Chartered – Annual Report 2023 TCFD summary and alignment index Supplementary informat ion Recommendation Response Disclosure location Strategy a) Describe the climate-related risks and opportunit ies the organ isat ion has ident iﬁed over the short, med ium and long term Relevant short, medium and long-term time horizons • In our strategic business planning, we consider “short-term” to be less than two years, “medium-term” to be two to ﬁve years and “long-term” to be beyond this. • For climate scenario analysis, we can run 30-year scenarios for both physical and transit ion r isk. Some elements of our physical risk scenario analysis can also extend to 2100. • In 2023, we sign iﬁcantly strengthened our stress test ing and scenario analysis abil it ies for a range of short, medium and long-term management scenarios that are more plausible, includ ing the ﬁrst bespoke short-term base case and tail risk scenarios. Risk review and Capital review – pages 298-313 Processes used to determine material risks and opportunit ies • We util ise a range of tools and methodolog ies to assess transit ion and phys ical Climate Risk, which we apply to our clients, portfolios and our own operations. These include: scenario analysis, location-based hazard and risk scores and temperature alignment scores. • In addit ion, we engage w ith our corporate clients to understand their transit ion and physical risks, as well as their plans to prepare for climate change. • Detailed processes to determine material risks across the impacted risk types are discussed in more detail with in the “R isk review and Capital review” section. Risk review and Capital review – pages 298-313 Climate-related risks and opportunit ies ident iﬁed • The Group is exposed to Climate Risk through our clients, our own operations, our suppliers and from the industr ies and markets we operate in. The Group deﬁnes Climate Risk as the potential for ﬁnanc ial loss and non-ﬁnancial detr iments aris ing from climate change and society’s response to it. • Physical risk may arise from increas ing sever ity and frequency of climate- and weather-related events, which can damage property and other infrastructure, disrupt supply chains, and impact food production. It may also reduce asset valuations leading to lower proﬁtab il ity for companies. Indirect effects on the macroeconomic environment, such as lower output and productiv ity may exacerbate these direct impacts. • Transit ion r isk may arise from the adjustment towards a carbon-neutral economy, which will require sign iﬁcant structural changes to the economy. These changes w ill prompt a reassessment of a wide range of asset values, a change in energy prices, and a fall in income and creditworth iness of some borrowers. In turn, th is entails credit losses for lenders and market losses for investors. • Our work to scale Sustainable and Transit ion F inance is an opportunity for the Group to create resil ience aga inst transit ion r isks and help provide capital and ﬁnancing for our cl ients’ transit ion to a low carbon economy. Through support ing our clients on their decarbonisat ion journeys as they adapt the ir business models to be less carbon-intens ive over t ime, we help manage their, and our transit ion r isk. We aim to achieve Sustainable Finance income of $1 bill ion by 2025, mob il ise $300 bill ion of Susta inable Finance between 2021 and 2030, and continue to grow the Sustainable Finance asset and liab il ity books. Strategic report – pages 76-78 Sustainab il ity review – pages 126-129 Risk review and Capital review – pages 298-313 Note 1 sign iﬁcant judgement and estimates – pages 367-369 Sign iﬁcant concentrations of credit exposure to carbon-related assets • We aim to become net zero in our ﬁnanced emiss ions by 2050, and have set inter im 2030 targets set for 11 high-emitt ing sectors in line with Net-Zero Banking Alliance (NZBA) Guidance: Alumin ium; Automot ive Manufacturers, Aviat ion, Cement; Commercial Real Estate, Oil and Gas, Power, Resident ial Mortgages, Sh ipp ing, Steel and Thermal Coal Min ing. The 12 th sector, Agriculture, will have a target developed in 2024. • We have disclosed our exposures to high-emitt ing sectors, wh ich are ident iﬁed and grouped as per the International Standard Industrial Classif icat ion (ISIC) system and exposure numbers have been updated to include all in-scope ISIC codes used for target setting among the high-carbon sectors. • The full exposure does not provide an ind icat ion of how many clients have net zero pathways in alignment with our own, and hence can be banked as they transit ion and/or decarbonise their business models . Sustainab il ity review – pages 108-117 Risk review and Capital review – pages 298-305 513 Standard Chartered – Annual Report 2023 Supplementary informat ion Recommendation Response Disclosure location Strategy continued b) Describe the impact of climate-related risks and opportunit ies on the organ isat ion’s bus inesses, strategy and ﬁnanc ial plann ing Impact of climate- related risks and opportunit ies on business areas Enterprise Risk • We manage Climate Risk according to the characterist ics of the impacted risk types and are embedding climate-risk considerat ions into relevant frameworks and processes. Details on the risks ident iﬁed such as sectors vulnerable to cl imate risks, loan impa irment intens it ies, client-level climate risk grading, exposure concentration to physical risk hazards for resident ial mortgage portfol ios and across our own operations are discussed in more detail with in the “R isk review and Capital review” section. Products and services • We have Product Programme Guidance documents which underpin each Sustainable Finance product that we offer, signed off by a delegate of the Sustainable Finance Governance Committee (SFGC) following approval of the product construct by the SFGC. The SFGC is our forum for review ing Susta inable Finance products and derives its authority from the Group Reputational and Responsib il ity Risk Committee. SFGC is our foremost committee on greenwashing risk in Sustainable Finance product design and labelling. • Our Green and Sustainable Product Framework governs all activ it ies we as an organisat ion v iew as green or sustainable. It is publicly available and externally verif ied by Morn ingstar Sustainalyt ics. • The Sustainab il ity Bond Framework provides the basis for issuance of Green, Social and Sustainab il ity bonds, drawing on the activ it ies that we view as green or sustainable. • Informed by the IEA NZE Energy 2050 scenario, we outline what assets and activ it ies qualify for labelling as “transit ion” in our Transit ion F inance Framework. In our own operations • Since 2018 we have been actively targeting a reduction in our Scope 1 and 2 greenhouse gas (GHG) emiss ions. We a im to optim ise our ofﬁce and branch network by retir ing unused or ineff ic ient space and creating a working environment that matches ofﬁce and hybrid-working patterns of our workforce. • We are actively seeking to increase the proportion of our electric ity usage that comes from renewable sources. These can take the form of power purchase agreements, clean energy contracts, on-site solar installat ions and renewable energy certif icates. In our supply chain • Through our Supplier Charter, we expect our suppliers to support and promote environmental protection, and to comply with local environmental laws and regulations. We expect our suppliers to promote the development and distr ibut ion of environmentally friendly technologies and manage environmental concerns in their own supply chains. • With 11,563 suppliers, we recognise our contribut ion to cl imate impacts through the goods and services we procure. Severe weather events could result in material disrupt ions to our supply cha in that may potentially impact our abil ity to serve our clients. As such, we work to gather site locations for our material suppliers to assess their physical risk exposures, such that suitable continu ity plans can be developed. • We continue to engage with our suppliers to collect emiss ions data, d irectly from them, thereby improv ing the accuracy of our Scope 3 Categor ies 1, 2, 4 and 6 (miscellaneous other than air travel) emiss ions calculat ions and reporting. Strategic report – pages 70; 76-78 Sustainab il ity review – pages 105-107; 126-129 Directors’ report – pages 226-227 Risk review and Capital review – pages 298-313 Incorporating climate-related inputs into the ﬁnancial plann ing process • In 2023, climate-related risks and opportunit ies were cons idered as part of our formal annual corporate plan, strategy, and ﬁnancial plann ing process, and included if considered material. • In addit ion, we developed management scenar ios with an aim to strengthen business strategy and ﬁnanc ial plann ing to support the Group’s net zero roadmap. • From a capital perspective, Climate Risk considerat ions have been part of our Internal Capital Adequacy Assessment Process (ICAAP) submiss ions. Strategic report – page 78 Sustainab il ity review – page 129 Risk review and Capital review – pages 298-313 Note 1 sign iﬁcant judgement and estimates – pages 367-369 514 Standard Chartered – Annual Report 2023 TCFD summary and alignment index Supplementary informat ion Recommendation Response Disclosure location Strategy continued c) Describe the resil ience of the organ isat ion’s strategy, tak ing into considerat ion d ifferent climate-related scenarios, includ ing a two degrees Celsius or lower scenario Approach to scenario analysis • Over recent years, we have progressively strengthened our scenario analysis capabil it ies and developed our infrastructure and capabil it ies to incorporate Climate Risk into data, modelling and analysis. • Our work to date, using current assumptions and proxies, ind icates that our bus iness is resil ient to three scenar ios from Network of Central Banks and Supervisors for Greening the Financ ial System (NGFS) and three in-house bespoke scenarios that were explored. Risk review and Capital review – pages 309-313 Scenarios used • In 2023, we developed bespoke internal modelling capabil it ies to provide greater transparency of scenarios and models. • We assessed the impact on our CCIB corporate client portfolio based on three Phase 3 scenarios from the NGFS and three in-house bespoke scenarios. • We also assessed the impact of sea level rises under various Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathways (RCP) scenarios to explore the physical risk impacts on the Consumer, Private & Business Banking (CPBB) resident ial mortgage portfol io over short- and long-term time horizons for internal risk management purposes. • The results of scenario analyses have provided further validat ion to the act ions we are taking as a Group in terms of our net zero ambit ions and strategy. Risk review and Capital review – pages 309-313 Impact of climate- related risks and opportunit ies on business strategy • We are working with clients in high-emitt ing and carbon- intens ive sectors, a im ing to support their transit ion to a low carbon economy, includ ing through the adopt ion of emiss ion reduct ion plans and new technological solutions. • Our work to scale our Sustainable Finance franchise, along with our targets to (i) mobil ise $300 b ill ion Susta inable Finance between 2021 and 2030, and (i i) scale Sustainable Finance income to $1 bill ion by 2025, supported by our Susta inable Finance frameworks are elements of a robust response to transit ion r isks in the short term, strengthening our resil ience towards a two degrees Cels ius or lower transit ion scenario. Strategic report – page 70 Sustainab il ity review – pages 96; 99-101 Risk Management a) Describe the organisat ion’s processes for ident ify ing and assessing climate-related risks Processes for ident ify ing and assessing risk • We manage Climate Risk according to the characterist ics of the impacted risk types and are embedding climate-risk considerat ions into relevant frameworks and processes. • To support the management and monitor ing of cl imate-related physical and transit ion r isks, we continue to conduct case level reviews for enhanced due dil igence on h igh ‘Climate Credit Risk’ and ‘Climate and Reputational and Sustainab il ity Risk’ for our corporate clients. • We continuously monitor the Risk Appetite metrics that aim to measure and manage ﬁnancial and non-ﬁnancial r isks aris ing from cl imate change. • To assess climate-related risks and opportunit ies in the short-, medium- and long-term, we use scenario analysis to consider how risks and opportunit ies may evolve under different situat ions. Strategic report – pages 76-78 Sustainab il ity review – pages 126-129 Risk review and Capital review – pages 298-313 Exist ing and emerging regulatory requirements related to climate change • Key ﬁnancial regulators across our footpr int have proposed or set supervisory expectations on climate and environmental risk management. Those expectations are broadly aligned with the Basel Committee princ iples for the management of climate-related ﬁnanc ial r isks, but local implementat ions vary. • We have been actively engaging with industry bodies and regulators to drive consistency in policymak ing across our markets. A process has been establ ished for tracking various Climate Risk-related regulatory developments and obligat ions set by both ﬁnancial and non-ﬁnancial serv ice regulators at Group, regional and country level, with roles and responsib il it ies set out in the Group’s Climate Risk Policy. Regulatory requirements or enhancements needed are recorded through workplans across various teams. The workplans are coordinated and monitored through various working groups by having the relevant accountable executives partic ipate in the relevant forums. Strategic report – page 78 Characteris ing climate-related risks in the context of tradit ional bank ing industry risk categories • We have ident iﬁed seven Pr inc ipal R isk Types (PRT) that are most materially impacted by potential climate risks and describe transmiss ion channels for Climate Risk manifest ing as ﬁnancial and non-ﬁnancial r isk. Strategic report – page 78 Risk review and Capital review – pages 298-309 515 Standard Chartered – Annual Report 2023 Supplementary informat ion Recommendation Response Disclosure location Risk Management continued b) Describe the organisat ion’s processes for manag ing climate-related risks Processes for managing and mit igat ing risks • We manage Climate Risk according to the characterist ics of these seven PRTs and are embedding climate-risk considerat ions into the relevant frameworks and processes as well as setting risk appetites. Detailed processes for managing and mit igat ing climate risks across the impacted risk types are discussed in more detail with in the ‘R isk review and Capital review’ section of this Annual Report. • Our Climate Risk Appetite Statement (RAS) is approved annually by the Board and any breaches are reported to the Group Risk Committee and the Board Risk Committee. We regularly review the scope and coverage of our Risk Appetite metrics for enhanced risk ident iﬁcation and management. Add it ional metr ics to address our public targets across key sectors and a stress loss metric built on scenario outcomes have been ident iﬁed and are be ing monitored in 2024. Strategic report – pages 76-78 Sustainab il ity review – pages 126-129 Risk review and Capital review – pages 298-313 c) Describe how processes for ident ify ing, assessing and managing climate-related risks are integrated into the organisat ion’s overall risk management Integration into Enterprise Risk Management Framework • Climate Risk is recognised in the Group Enterprise Risk Management Framework (ERMF) as manifest ing through ex ist ing r isk types and is managed in line with the impacted risk type frameworks. In 2023, we have continued to build Climate Risk into exist ing r isk-management processes, focusing on ident ify ing, assessing, and monitor ing across r isk types. Strategic report – pages 76-78 Sustainab il ity review – pages 127-129 Risk review and Capital review – pages 298-313 Metrics and Targets a) Disclose the metrics used by the organisat ion to assess cl imate-related risk and opportunit ies in line with its strategy and risk management process Key metrics used to measure and manage climate- related risks and opportunit ies as well as metrics used to assess the impact of (transit ion and physical) climate- related risks on their lending and other ﬁnancial intermed iary business activ it ies • We disclose the following metrics in order to measure and manage climate-related risks and opportunit ies: GHG emiss ions: • Scope 1, Scope 2 and relevant Categories of Scope 3 emiss ions, in particular Category 15 – Investments (ﬁnanced emiss ions). Climate-related transit ion r isks: • Loan impa irment intens it ies for the corporate portfolio and key sectors across a range of scenarios. • Transit ion r isk exposure concentration for resident ial mortgages us ing Energy Performance Certif icate (EPC). • Client-level Climate Risk Assessment (CRA) scores by region for measuring gross transit ion r isk and mit igat ion plans. • Distr ibut ion of climate risk grading across key markets. • Weighted Average Temperature Alignment (WATA) scores by sectors and regions. • Gross Country Risk exposure distr ibut ion . Climate-related physical risks: • Exposure concentration of gross ﬂood and sea level rise risk for resident ial mortgage portfolio by regions. • Physical risk vulnerabil it ies of our own operating locations across a range of acute and chronic physical risk events. • Client-level CRA scores by region for measuring gross physical risk and adaptation measures. • Gross Country Risk exposure distr ibut ion. Climate-related opportunit ies: • Sustainable Finance income. • Green and Social ﬁnance assets. • Sustainable liab il it ies. • Sustainab il ity-Linked assets. Capital deployment: • Mobil isat ion of Sustainable Finance. Strategic report – pages 68; 72 Sustainab il ity review – pages 94; 99-101; 105; 110-117; 126-129 Risk review and Capital review – pages 298-313 Climate-related incent ive structures • Selected sustainab il ity measures aligned with the Group’s Sustainab il ity Aspirat ions and Sustainab il ity Strategic Pillars continue to be incorporated into the Group scorecard which informs variable remuneration for the major ity of employees. • Sustainab il ity-related targets continue to be also included in the 2024–2026 Long-Term Incentive Plan (LTIP) performance measures. Members of the Group Management Team are elig ible for LTIP awards, wh ich may also be granted to other employees in the Group. Sustainab il ity review – page 124 Risk review and Capital review – pages 202-207 516 Standard Chartered – Annual Report 2023 TCFD summary and alignment index Supplementary informat ion Recommendation Response Disclosure location Metrics and Targets continued b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emiss ions and the related r isks In our own operations • We reduced our Scope 1 and 2 emiss ions by 30% to 34,734 tCO 2 e. Our measured real estate decreased by 7% during this time. This was possible through investments into energy-efﬁc iency and ut il is ing 66% of electric ity from renewable sources across our portfolio after matching consumption with Renewable Energy Certif icates (RECs). During the year, we started measuring the fugit ive em iss ions from our own operations. Sustainab il ity review – pages 105-106 Supplementary sustainab il ity informat ion – pages 505-506 In our supply chain • We continued to partner with an independent climate consultancy using a hybrid methodology (supplier-specif ic data and spend em iss ions factors) to measure our supplier emiss ions for Scope 3 Categor ies 1, 2, 4 and 6 (miscellaneous other than air travel). These emiss ions are reported on a one-year lag. • Overall, our emiss ions assoc iated with the products, services and equipment that we purchase and those related to business travel (excluding air travel) – Scope 3 Categories 1, 2, 4 and 6 (miscellaneous other than air travel) – have shown an estimated 17% year-on-year reduction to a total of 362,054 tCO 2 e since the previous reporting year, excluding Scope 3 category 1 data centres. We continued to improve the accuracy of our supply chain emiss ions data collect ion by increas ing the number of primary data sources and updating the CEDA emiss ions factor calculat ions. Our 2023 reported emiss ions are based on 2022 suppl ier spend. • Our Scope 3 Category 6 (air travel) emiss ions totalled 60,279 tCO 2 e. We have seen an increase in emiss ions assoc iated with air travel since the previous reporting year. Nonetheless, the Group was able to exceed its target and managed to reduce these emiss ions by 36% compared to its 2019 baseline. Sustainab il ity review – page 109 Supplementary sustainab il ity informat ion – pages 505-506 Measuring our ﬁnanced emiss ions • Analysing our exposure to high-emitt ing sectors is the starting point of our ﬁnanced emiss ion calculat ions. • The Group has set targets for 11 of the 12 high-emitt ing sectors as mandated by the NZBA with targets for Alumin ium, Cement, Commerc ial Real Estate, and Resident ial Mortgages set during the year. • The Group has further set a baseline for facil itated em iss ions in 2023. Strategic report – pages 73-74 Sustainab il ity review – pages 105; 108-117 c) Describe the targets used by the organisat ion to manage cl imate-related risks and opportunit ies and performance aga inst targets Details of targets set and whether they are absolute or intens ity based • The targets we have set for climate-related risks are primar ily our net zero, across Scopes 1, 2 and specif ically 3 ﬁnanced em iss ions, start ing in 2030, with thermal coal targets in the shorter term from 2024. Our progress is set out in the Financed emiss ions sect ion. • On climate-related opportunit ies, we have $1 b ill ion of Susta inable Finance income and $300 bill ion mob il isat ion of Sustainable Finance targets for 2025 and 2030 respectively. • During the year, we revised the measurement of our Oil and Gas sector emiss ions from an income-based carbon intens ity metr ic to absolute ﬁnanced emiss ions to better reﬂect the sector emiss ion proﬁle, effect ively creating a carbon budget for the sector that is intended to decrease over time. In addit ion to th is, our Power target was revised from an income-based carbon intens ity to a product ion intens ity target. Target methodologies have evolved in the Shipp ing and Automot ive Manufacturers sectors which has led us to restate some of our exist ing targets to better align them with the latest scient iﬁc v iews in those sectors. • In 2023, we continued to expand the coverage of our ﬁnanced emiss ions targets with four addit ional targets for Alum in ium, Cement, Commerc ial Real Estate and Resident ial Mortgages. Strategic report – pages 68; 70; 72; 74 Sustainab il ity review – pages 94; 99-101; 106; 107; 110-111 A descript ion of the methodologies used to calculate targets and measures • The methodologies used to calculate baseline emiss ions are set out in the updated ‘Net zero methodological white paper – The journey continues’, available at sc.com/sustainab il ityhub . Sustainab il ity review – pages 109-117 Other key performance ind icators used • The Group’s approach to sustainab il ity is underpinned by our Sustainab il ity Aspirat ions. Dur ing 2023, we refreshed and consolidated our Sustainab il ity Aspirat ions into four overarching long-term goals, each supported by key performance ind icators. Sustainab il ity review – pages 94-98 2023 Sustainab il ity Aspirat ions – pages 508-510 517 Standard Chartered – Annual Report 2023 Supplementary informat ion Shareholder informat ion Div idend and interest payment dates Ordinary shares Final div idend Results and div idend announced 23 February 2024 Ex-div idend date 7 (UK) 6 (HK) March 2024 Record date for div idend 8 March 2024 Last date to amend currency election instruct ions for cash d iv idend* 23 April 2024 Div idend payment date 17 May 2024 * In either United States dollars, sterling or Hong Kong dollars Preference shares 1st half yearly div idend 2nd half yearly div idend 7 3 ∕ 8 per cent non-cumulative irredeemable preference shares of £1 each 1 April 2024 1 October 2024 8 1 ∕ 4 per cent non-cumulative irredeemable preference shares of £1 each 1 April 2024 1 October 2024 6.409 per cent non-cumulative redeemable preference shares of $5 each 30 January and 30 April 2024 30 July and 30 October 2024 7.014 per cent non-cumulative redeemable preference shares of $5 each 30 January 2024 30 July 2024 Annual General Meeting The Annual General Meeting (AGM) will be held on Friday 10 May 2024 at 11:00 UK time (18:00 Hong Kong time). Further details regarding the format, location and business to be transacted at the meeting will be disclosed with in the 2024 Notice of AGM. Details of voting at the Company’s AGM and of proxy votes cast can be found on the Company’s website at sc.com/agm Interim results The inter im results w ill be announced to the London Stock Exchange and the Stock Exchange of Hong Kong Lim ited and put on the Company’s website. Country-by-Country Reporting In accordance with the requirements of the Capital Requirements (Country-by-Country Reporting) Regulations 2013, the Group will publish addit ional country-by-country informat ion in respect of the year ended 31 December 2023, on or before 31 December 2024. We have also published our approach to tax and tax policy. This informat ion w ill be available on the Group’s website at sc.com Pillar 3 Reporting In accordance with the Pillar 3 disclosure requirements, the Group will publish the Pillar 3 Disclosures in respect of the year ended 31 December 2023, on or before 23 February 2024. This informat ion w ill be available on the Group’s website at sc.com ShareCare ShareCare is available to shareholders on the Company’s UK register who have a UK address and bank account. It allows you to hold your Standard Chartered PLC shares in a nominee account. Your shares will be held in electronic form so you will no longer have to worry about keeping your share certif icates safe. If you join ShareCare, you w ill still be inv ited to attend the Company’s AGM and you will receive any div idend at the same time as everyone else. ShareCare is free to jo in and there are no annual fees to pay. If you would like to receive more informat ion, please v is it our website at https://www.sc.com/sharecare or contact the shareholder helpline on 0370 702 0138 Donating shares to ShareGift Shareholders who have a small number of shares often ﬁnd it uneconomical to sell them. An alternative is to consider donating them to the charity ShareGift (registered charity 1052686), which collects donations of unwanted shares until there are enough to sell and uses the proceeds to support UK charit ies. There is no impl icat ion for capital gains tax (no gain or loss) when you donate shares to charity and UK taxpayers may be able to claim income tax relief on the value of their donation. Further informat ion can be obta ined from the Company’s registrars or from ShareGift on 020 7930 3737 or from sharegift.org Bankers’ Automated Clearing System (BACS) Div idends can be pa id straight into your bank or build ing society account. Please register online at investorcentre.co.uk or contact our registrar for a div idend mandate form Registrars and shareholder enquir ies If you have any enquir ies relat ing to your shareholding and you hold your shares on the UK register, please contact our registrar at investorcentre.co.uk and click on the ‘ASK A QUESTION’ link at the bottom of the page. Alternatively, please contact Computershare Investor Services PLC, The Pavil ions, Br idgwater Road, Bristol, BS99 6ZZ or call the shareholder helpline number on 0370 702 0138. If you hold your shares on the Hong Kong branch register and you have enquir ies, please contact Computershare Hong Kong Investor Services Lim ited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong. You can check your shareholding at computershare.com/hk/investors 518 Standard Chartered – Annual Report 2023 Supplementary informat ion Shareholder informat ion Substantial shareholders The Company and its shareholders have been granted partial exemption from the disclosure requirements under Part XV of the Securit ies and Futures Ord inance (SFO). As a result of this exemption, shareholders, directors and chief executives, no longer have an obligat ion under Part XV of the SFO (other than Div is ions 5, 11 and 12 thereof) to notify the Company of substantial shareholding interests, and the Company is no longer required to mainta in a reg ister of interests of substantial shareholders under section 336 of the SFO, nor a register of directors’ and chief executives’ interests under section 352 of the SFO. The Company is, however, required to ﬁle with The Stock Exchange of Hong Kong Lim ited any disclosure of interests made in the UK. Taxation No tax is currently withheld from payments of div idends by Standard Chartered PLC. Shareholders and prospective purchasers should consult an appropriate independent professional adviser regarding the tax consequences of an investment in shares in light of their particular circumstances, includ ing the effect of any nat ional, state or local laws. Previous div idend payments (unadjusted for the impact of the 2015/2010/2008 rights issues) Div idend and ﬁnancial year Payment date Div idend per ord inary share Cost of one new ordinary share under share div idend scheme Final 2008 15 May 2009 42.32c/28.4693p/HK$3.279597 £8.342/$11.7405 Interim 2009 8 October 2009 21.23c/13.25177p/HK$1.645304 £13.876/$22.799 Final 2009 13 May 2010 44.80c/29.54233p/HK$3.478306 £17.351/$26.252 Interim 2010 5 October 2010 23.35c/14.71618p/HK$1.811274/INR0.984124 1 £17.394/$27.190 Final 2010 11 May 2011 46.65c/28.272513p/HK$3.623404/INR1.9975170 1 £15.994/$25.649 Interim 2011 7 October 2011 24.75c/15.81958125p/HK$1.928909813/INR1.13797125 1 £14.127/$23.140 Final 2011 15 May 2012 51.25c/31.63032125p/HK$3.9776083375/INR2.6667015 1 £15.723/$24.634 Interim 2012 11 October 2012 27.23c/16.799630190p/HK$2.111362463/INR1.349803950 1 £13.417/$21.041 Final 2012 14 May 2013 56.77c/36.5649893p/HK$4.4048756997/INR2.976283575 1 £17.40/$26.28792 Interim 2013 17 October 2013 28.80c/17.8880256p/HK$2.233204992/INR1.6813 1 £15.362/$24.07379 Final 2013 14 May 2014 57.20c/33.9211444p/HK$4.43464736/INR3.354626 1 £11.949/$19.815 Interim 2014 20 October 2014 28.80c/17.891107200p/HK$2.2340016000/INR1.671842560 1 £12.151/$20.207 Final 2014 14 May 2015 57.20c/37.16485p/HK$4.43329/INR3.514059 1 £9.797/$14.374 Interim 2015 19 October 2015 14.40c/9.3979152p/HK$1.115985456/INR0.86139372 1 £8.5226/$13.34383 Final 2015 No div idend declared N/A N/A Interim 2016 No div idend declared N/A N/A Final 2016 No div idend declared N/A N/A Interim 2017 No div idend declared N/A N/A Final 2017 17 May 2018 11.00c/7.88046p/HK$0.86293/INR0.653643340 1 £7.7600/$10.83451 Interim 2018 22 October 2018 6.00c/4.59747p/HK$0.46978/INR0.3696175 1 £6.7104/$8.51952 Final 2018 16 May 2019 15.00c/11.569905p/HK$1.176260/INR0.957691650 1 N/A Interim 2019 21 October 2019 7.00c/5.676776p/HK$0.548723/INR0.425028600 1 N/A Final 2019 Div idend w ithdrawn N/A N/A Interim 2020 No div idend declared N/A N/A Final 2020 20 May 2021 9.00c/6.472413p/HK$0.698501 N/A Interim 2021 22 October 2021 3.00c/2.204877p/HK$0.233592 N/A Final 2021 12 May 2022 9.00c/6.894144p/HK$0.705772 N/A Interim 2022 14 October 2022 4.00c/3.675912p/HK$0.313887 N/A Final 2022 11 May 2023 14.00c/11.249168p/HK$1.098083 N/A Interim 2023 13 October 2023 6.00c/4.910412p/HK$0.469085 N/A 1 The INR div idend is per Indian Depository Receipt. In March 2020, the Group announced the terminat ion of the IDR programme. The IDR programme was formally delisted from the BSE Lim ited (formerly the Bombay Stock Exchange) and Nat ional Stock Exchange of India Lim ited w ith effect from 22 July 2020 Chinese translation If you would like a Chinese language version of the 2023 Annual Report, please contact Computershare Hong Kong Investor Services Lim ited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong. 二〇二三年年報之中文譯本可向香港中央證券登記有限公司索取，地址：香港灣仔皇后大道東183號合和中心17M樓。 Shareholders on the Hong Kong branch register who have asked to receive corporate communicat ions in either Chinese or English can change this election by contacting Computershare. If there is a dispute between any translation and the English version of this Annual Report, the English text shall prevail. Electronic communicat ions If you hold your shares on the UK register and in future you would like to receive the Annual Report electronically rather than by post, please register online at: investorcentre.co.uk. Click on ‘register now’ and follow the instruct ions. You w ill need to have your Shareholder or ShareCare reference number to hand. You can ﬁnd this on your share certi ﬁcate or ShareCare statement. Once you have registered and conﬁrmed your email communicat ion preference, you w ill receive future notif icat ions via email enabling you to submit your proxy vote online. In addit ion, as a member of Investor Centre, you w ill be able to manage your shareholding online and change your bank mandate or address informat ion. 519 Standard Chartered – Annual Report 2023 Supplementary informat ion Important notices Forward-looking statements The informat ion included in this document may contain ‘forward-looking statements’ based upon current expectations or beliefs as well as statements formulated with assumptions about future events. Forward-looking statements include, without lim itat ion, project ions, est imates, commitments, plans, approaches, ambit ions and targets (includ ing, w ithout lim itat ion, ESG commitments, ambit ions and targets). Forward-looking statements often use words such as ‘may’, ‘could’, ‘will’, ‘expect’, ‘intend’, ‘estimate’, ‘antic ipate’, ‘bel ieve’, ‘plan’, ‘seek’, ‘aim’, ‘continue’ or other words of sim ilar mean ing to any of the foregoing. Forward- looking statements may also (or addit ionally) be ident iﬁed by the fact that they do not relate only to histor ical or current facts. By their very nature, forward-looking statements are subject to known and unknown risks and uncertaint ies and other factors that could cause actual results, and the Group’s plans and objectives, to d iffer materially from those expressed or impl ied in the forward-looking statements. Readers should not place reliance on, and are cautioned about relying on, any forward-looking statements. There are several factors which could cause the Group’s actual results and its plans and object ives to d iffer materially from those expressed or impl ied in forward-looking statements. The factors include (but are not lim ited to): changes in global, polit ical, econom ic, business, competit ive and market forces or condit ions, or in future exchange and interest rates; changes in environmental, geopolit ical, soc ial or physical risks; legal, regulatory and policy developments, includ ing regulatory measures addressing climate change and broader sustainab il ity-related issues; the development of standards and interpretat ions, includ ing evolv ing requirements and practices in ESG reporting; the abil ity of the Group, together with governments and other stakeholders to measure, manage, and mit igate the impacts of climate change and broader sustainab il ity-related issues effectively; risks aris ing out of health crises and pandemics; risks of cyber-attacks, data, informat ion or secur ity breaches or technology failures involv ing the Group; changes in tax rates or policy; future business combinat ions or d ispos it ions; and other factors specif ic to the Group, includ ing those ident iﬁed in this Annual Report and ﬁnancial statements of the Group. To the extent that any forward-looking statements contained in this document are based on past or current trends and/or activ it ies of the Group, they should not be taken as a representation that such trends or activ it ies will continue in the future. No statement in this document is intended to be, nor should be interpreted as, a proﬁt forecast or to imply that the earnings of the Group for the current year or future years will necessarily match or exceed the histor ical or publ ished earnings of the Group. Each forward-looking statement speaks only as of the date that it is made. Except as required by any applicable laws or regulations, the Group expressly discla ims any obl igat ion to rev ise or update any forward- looking statement contained with in th is document, regardless of whether those statements are affected as a result of new informat ion, future events or otherw ise. Please refer to this Annual Report and the ﬁnanc ial statements of the Group for a discuss ion of certa in of the risks and factors that could adversely impact the Group’s actual results, and cause its plans and object ives, to d iffer materially from those expressed or impl ied in any forward- looking statements. Financ ial instruments Nothing in this document shall constitute, in any jur isd ict ion, an offer or solic itat ion to sell or purchase any securit ies or other ﬁnancial instruments, nor shall it constitute a recommendation or advice in respect of any securit ies or other ﬁnancial instruments or any other matter. Basis of Preparation and Caution Regarding Data Lim itat ions This section is specif ically relevant to, amongst others, the sustainab il ity and climate models, calculations and disclosures throughout this report. The informat ion conta ined in this document has been prepared on the following basis: i. disclosures in the Strategic report, Sustainab il ity review, Directors’ report, Risk review and Capital review and Supplementary informat ion are unaud ited unless otherwise stated; i i. all informat ion, pos it ions and statements set out in this document are subject to change without notice; i i i. the informat ion included in this document does not constitute any investment, accounting, legal, regulatory or tax advice or an inv itat ion or recommendation to enter into any transaction; iv. the informat ion included in this document may have been prepared using models, methodologies and data which are subject to certain lim itat ions. These lim itat ions include: the lim ited ava ilab il ity of reliable data, data gaps, and the nascent nature of the methodologies and technologies underpinn ing th is data; the lim ited standard isat ion of data (given, amongst other things, lim ited internat ional coordinat ion on data and methodology standards); and future uncertainty (due, amongst other things, to changing project ions relat ing to technological development and global and regional laws, regulations and polic ies, and the current inab il ity to make use of strong histor ical data); v. models, external data and methodologies used in informat ion included in this document are or could be subject to adjustment which is beyond our control; vi. any opin ions and est imates should be regarded as ind icat ive, prelim inary and for illustrat ive purposes only. Expected and actual outcomes may differ from those set out in this document (as explained in the “Forward-looking statements” section above); vi i. some of the related informat ion appear ing in this document may have been obtained from public and other sources and, while the Group believes such informat ion to be reliable, it has not been independently verif ied by the Group and no representation or warranty is made by the Group as to its quality, completeness, accuracy, ﬁtness for a particular purpose or noninfr ingement of such informat ion; vi i i. for the purposes of the informat ion included in this document, a number of key judgements and assumptions have been made. It is possible that the assumptions drawn, and the judgement exercised may subsequently turn out to be inaccurate. The judgements and data presented in this document are not a substitute for judgements and analysis made independently by the reader; 520 Standard Chartered – Annual Report 2023 Supplementary informat ion Shareholder informat ion ix. any opin ions or v iews of third parties expressed in this document are those of the third parties ident iﬁed, and not of the Group, its afﬁl iates, d irectors, ofﬁcers, employees or agents. By incorporating or referring to opin ions and v iews of third parties, the Group is not, in any way, endorsing or supporting such opin ions or v iews; x. whilst the Group bears primary responsib il ity for the informat ion included in this document, it does not accept responsib il ity for the external input provided by any third parties for the purposes of developing the informat ion included in this document; xi. the data contained in this document reﬂects available informat ion and est imates at the relevant time; xi i. where the Group has used any methodology or tools developed by a third party, the applicat ion of the methodology or tools (or consequences of its applicat ion) shall not be interpreted as conﬂict ing w ith any legal or contractual obligat ions and such legal or contractual obligat ions shall take precedence over the appl icat ion of the methodology or tools; xi i i. where the Group has used any underlying data provided or sourced by a third party, the use of the data shall not be interpreted as conﬂict ing w ith any legal or contractual obligat ions and such legal or contractual obl igat ions shall take precedence over the use of the data; xiv. this Important Notice is not lim ited in applicab il ity to those sections of the document where lim itat ions to data, metrics and methodologies are ident iﬁed and where th is Important Notice is referenced. This Important Notice applies to the whole document; xv. further development of reporting, standards or other princ iples could impact the informat ion included in this document or any metrics, data and targets included in this document (it being noted that ESG reporting and standards are subject to rapid change and development); and xvi. while all reasonable care has been taken in preparing the informat ion included in this document, neither the Group nor any of its afﬁl iates, d irectors, ofﬁcers, employees or agents make any representation or warranty as to its quality, accuracy or completeness, and they accept no responsib il ity or liab il ity for the contents of this informat ion, includ ing any errors of fact, om iss ion or opin ion expressed. You are advised to exercise your own independent judgement (with the advice of your professional advisers as necessary) with respect to the risks and consequences of any matter contained in this document. The Group, its afﬁl iates, d irectors, ofﬁcers, employees or agents expressly discla im any l iab il ity and responsib il ity for any decis ions or act ions which you may take and for any damage or losses you may suffer from your use of or reliance on the informat ion conta ined in this document. Copyright in all materials, text, articles and informat ion contained in this document (other than third party materials, text, articles and informat ion) is the property of, and may only be reproduced with permiss ion of an author ised signatory of, the Group. Copyright in materials, text, articles and informat ion created by third parties and the rights under copyright of such parties are hereby acknowledged. Copyright in all other materials not belonging to third parties and copyright in these materials as a compilat ion vests and shall rema in at all times copyright of the Group and should not be reproduced or used except for business purposes on behalf of the Group or save with the express prior written consent of an authorised signatory of the Group. All rights reserved. 521 Standard Chartered – Annual Report 2023 Supplementary informat ion Main awards and accolades in 2023 Asian Banker • Best Frict ionless Customer Exper ience Init iat ive Award, China Asian Banking and Finance Retail Banking Awards • International Retail Bank of the Year, Singapore • Investment Innovation Product of the Year, Taiwan • Wealth Management Platform of the Year, Brunei • International Retail Bank of the Year, Hong Kong Asiamoney • Best International Bank, Bangladesh • Best Bank for Dig ital Solutions, Hong Kong • Best Bank for Corporate Social Responsib il ity, Hong Kong Bloomberg Businessweek Awards • Excellence Award for ‘Bank of the Year’, Hong Kong • Excellence Award for ‘Retail Bank of the Year’, Hong Kong • Excellence Award for ‘ESG Sustainab il ity of the Year’, Hong Kong Dig ital Banker CX Awards • Best Retail Bank for Dig ital CX (Highly Acclaimed), Hong Kong • Best Hybrid CX (Highly Acclaimed), Hong Kong • Best Retail Bank for Dig ital CX, Pakistan Dig ital Banker Global Reta il Banking Innovation Awards • Best Dig ital Bank, Hong Kong ESG Business Awards • Renewable Energy Adoption Award, Bangladesh Euromoney Global Private Banking Awards • Best Domestic Private Bank, United Kingdom • Best for ESG Investing, Korea & United Kingdom European Chamber of Commerce • Best ESG Communicat ions, S ingapore Forbes • Ranked 1st in the World’s Best Banks 2023 list, China Fortune India – Grant Thornton Bharat Study on India’s Best Banks 2023 • Best Foreign Bank, India Global Finance Magazine • Best Bank in Sustainable Finance, Saudi Arabia • Global Outstanding Leadership in Sustainable Finance, Global International Business Magazine Awards • Best Corporate and Social Responsib il ity Bank, Bangladesh • Most Innovative Dig ital Bank, Bangladesh International Finance Awards • Most Innovative Wealth Management Bank, Ghana MEA Finance Awards • Best Global Bank, Middle East • Best Cash Management Bank, United Arab Emirates The Dig ital Banker • Outstanding Dig ital Cl ient Experience, China • Best Mobile Banking Project, China The Asset Triple A Awards • Best RMB Bank Across East Africa, Kenya • Best Service Providers for Trade Finance, Sri Lanka The Asset Triple A Dig ital Awards • Dig ital Bank of the Year, Bangladesh The Asset Triple A Islamic Finance Awards • Best Investment Bank, United Arab Emirates • Best Retail Bank, United Arab Emirates • Best Retail Bank, Standard Chartered Saadiq Bangladesh • Sukuk Adviser of the Year, Saudi Arabia • Islamic Bank of the Year, Middle East • Islamic Bank of the Year, Standard Chartered Saadiq Bangladesh • Best Supply Chain Bank, Middle East The Asset Triple A Sustainable Investing Awards • Best Domestic Custodian, Indonesia The Asset Triple A Treasurise Awards • Best RMB Bank, Indonesia • Best ESG Solution for Liqu id ity and Investments, Malaysia, Taiwan & the Phil ipp ines • Best Payments and Collections Solution, Malaysia, Taiwan & the Phil ipp ines • Best Trade and Working Capital Finance Bank in South Asia, India – ﬁfth consecutive year • Best Transaction Bank, Hong Kong • Best Cash Management Bank, Hong Kong • Best E-Solutions Partner Bank, Hong Kong 522 Standard Chartered – Annual Report 2023 Supplementary informat ion Awards Wallstreetcn • Excellent Foreign Bank of the Year, China WealthBrief ing Europe Awards • Best UK International Clients Team (Private Bank), United Kingdom • Best UK Client Service (Private Bank), United Kingdom Women in Marketing Communicat ions Conference Awards • Award for the Most Committed Brand Supporting Women-Owned Tech Businesses, Niger ia Divers ity & Inclus ion and Employer awards Asiamoney • Best Bank for Divers ity and Inclus ion, Hong Kong, Taiwan, the Phil ipp ines and Malaysia Asian Banking and Finance Retail Banking Awards • Employer of the Year (Regional Gold), Hong Kong Brit ish Chamber of Commerce • Divers ity and Inclus ion Champion of the Year, Singapore & United Kingdom Equileap • Ranked 15th for Gender Equality, Globally • Ranked 3rd for Gender Equality, United Kingdom Great Place to Work Accreditat ion • Certif ied, Poland • Certif ied, Un ited Kingdom • Certif ied, Un ited States • Certif ied, Ind ia • Certif ied, Sr i Lanka India Workplace Equality Index • Gold Employer of the Year, India LGBT+ Inclusion Index - Presented by Community Business • Ranked 4th for the Top Employers, Hong Kong • Ranked 2nd for Top Organisat ions in Financ ial Serv ices, Hong Kong LinkedIn Top Companies List • Ranked 2nd, Singapore LinkedIn’s Top 25 Workplaces to Grow Your Career List • Ranked 8th, Kenya Newsweek • Listed in the Top 100 Most Loved Workplaces, United States Points of Light • The Civ ic 50: Most Commun ity- Minded Company Honoree, United States Prior ity for the D isabled • Won the Top Award, Korea Seramount • Best Company for Multicultural Women, United States The Straits Times • Named as one of the Best Employers, Singapore Top Employers Institute China • Named Top Employer, China Financ ial T imes • Listed in the Financ ial T imes European Divers ity Leaders for Workplace Inclusion, Europe – 4th consecutive year 523 Standard Chartered – Annual Report 2023 Supplementary informat ion Glossary Absolute ﬁnanced emiss ions GHG emiss ions attr ibuted to the Group’s lending activ it ies expressed in CO 2 e and reported in the Group’s emiss ions table under Scope 3, Category 15. AT1 or Addit ional T ier 1 capital Addit ional T ier 1 capital consists of instruments other than Common Equity Tier 1 that meet the condit ions set out in Article 52(1) of the Capital Requirements Regulation (as it forms part of UK domestic law), as well as the share premium accounts related to those instruments. Addit ional value adjustment See Prudent valuation adjustment. Advanced Internal Rating Based (AIRB) approach The AIRB approach under the Basel framework is used to calculate credit risk capital based on the Group’s own estimates of prudential parameters. Alignment delta Alignment delta is a variant on the physical emiss ions intens ity approach. It measures the coefﬁcient of al ignment against a particular reference scenario expressed in percentage terms i.e., how much a particular portfolio is above or below the net zero reference scenario. Alternative performance measures A ﬁnancial measure of h istor ical or future ﬁnancial performance, ﬁnancial posit ion, or cash ﬂows, other than a ﬁnancial measure deﬁned or spec if ied in the applicable ﬁnanc ial report ing framework. ASEAN Associat ion of South East As ian Nations (ASEAN) which includes the Group’s operations in Brunei, Indonesia, Malaysia, Phil ipp ines, Singapore, Thailand and Vietnam. AUM or Assets under management Total market value of assets such as deposits, securit ies and funds held by the Group on behalf of the clients. Basel II The capital adequacy framework issued by the Basel Committee on Banking Supervis ion (BCBS) in June 2006 in the form of the International Convergence of Capital Measurement and Capital Standards. Basel III The global regulatory standards on bank capital adequacy and liqu id ity, orig inally issued in December 2010 and updated in June 2011. In December 2017, the BCBS published a document setting out the ﬁnalisat ion of the Basel III framework. The latest requirements issued in December 2017 have been implemented from 2022. BCBS or Basel Committee on Banking Supervis ion A forum on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are ofﬁcials from 45 central banks or prudential supervisors from 27 countries and territor ies. Basic earnings per share (EPS) Represents earnings div ided by the basic weighted average number of shares. Basis point (bps) One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent. CRD or Capital Requirements Direct ive An EU capital adequacy legislat ive package largely implemented or onshored into UK law. The package comprises the Capital Requirements Direct ive and the Cap ital Requirements Regulation (CRR) and implements the Basel III framework together with transit ional arrangements for some of its requirements. CRD IV came into force on 1 January 2014. The EU CRR II and CRD V amending the exist ing package came into force in June 2019 with most changes starting to apply from 28 June 2021. Only those parts of the EU CRR II that applied on or before 31 December 2020, when the UK was a member of the EU, have been implemented. The PRA has recently implemented the UK’s version of CRR II. Capital-lite income Income derived from products with low RWA consumption or products which are non-funding in nature. Capital resources Sum of Tier 1 and Tier 2 capital after regulatory adjustments. CGU or Cash-generating unit The smallest ident iﬁable group of assets that generates cash inﬂows that are largely independent of the cash inﬂows from other assets or groups of assets. Cash shortfall The difference between the cash ﬂows that are due in accordance with the contractual terms of the instrument and the cash ﬂows that the Group expects to receive over the contractual life of the instrument. Clawback An amount an ind iv idual is required to pay back to the Group, which has to be returned to the Group under certain circumstances. Commercial real estate Includes ofﬁce build ings, industr ial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multi-family housing build ings, warehouses, garages, and industr ial properties. Commercial real estate loans are those backed by a package of commercial real estate assets. CET1 or Common Equity Tier 1 capital Common Equity Tier 1 capital consists of the items, includ ing the common shares issued by the Group and related share premium, retained earnings, accumulated other comprehensive income and other disclosed reserves, elig ible non-controll ing interests and regulatory adjustments required in the calculation of Common Equity Tier 1, set out in Article 26(1) of the Capital Requirements Regulation (as it forms part of UK domestic law), capable of being available to the inst itut ion for unrestricted and immed iate use to absorb losses as soon as these occur. 524 Standard Chartered – Annual Report 2023 Supplementary informat ion Glossary CET1 ratio A measure of the Group’s CET1 capital as a percentage of risk-weighted assets. Contractual maturity Contractual maturity refers to the ﬁnal payment date of a loan or other ﬁnancial instrument, at which point all the remain ing outstand ing princ ipal and interest is due to be paid. Countercyclical capital buffer The countercyclical capital buffer (CCyB) is part of a set of macroprudential instruments, designed to help counter procyclical ity in the ﬁnancial system. CCyB as deﬁned in the Basel III standard provides for an addit ional cap ital requirement of up to 2.5 per cent of risk-weighted assets in a given jur isd ict ion. The Bank of England’s Financ ial Pol icy Committee has the power to set the CCyB rate for the United Kingdom. Each bank must calculate its ‘inst itut ion-specif ic’ CCyB rate, deﬁned as the weighted average of the CCyB rates in effect across the jurisd ict ions in which it has credit exposures. The inst itut ion-specif ic CCyB rate is then applied to a bank’s total risk-weighted assets. Counterparty credit risk The risk that a counterparty defaults before satisfy ing its obligat ions under a derivat ive, a secur it ies ﬁnancing transaction (SFT) or a sim ilar contract. CCF or Credit conversion factor An estimate of the amount the Group expects a customer to have drawn further on a facil ity l im it at the po int of default. This is either prescribed by CRR or modelled by the bank. CDS or Credit default swaps A credit derivat ive is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a deﬁned credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency. Credit grade A standard alphanumeric Credit Risk grade system is used for CCIB Client Coverage. The numeric grades run from 1 to 14 and some of the grades are further sub-classif ied. Lower numer ic credit grades are ind icat ive of a lower likel ihood of default. Cred it grades 1 to 12 are assigned to performing customers, while credit grades 13 and 14 are assigned to nonperforming or defaulted customers Credit inst itut ions An inst itut ion whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account. Credit risk mit igat ion Credit risk mit igat ion is a process to mit igate potent ial credit losses from any given account, customer or portfolio by using a range of tools such as collateral, netting agreements, credit insurance, credit derivat ives and guarantees. CVA or Credit valuation adjustments An adjustment to the fair value of derivat ive contracts that reﬂects the possib il ity that the counterparty may default such that the Group would not receive the full market value of the contracts. Customer accounts Money deposited by all ind iv iduals and companies which are not credit inst itut ions includ ing secur it ies sold under repurchase agreement (see repo/ reverse repo). Such funds are recorded as liab il it ies in the Group’s balance sheet under customer accounts. Days past due One or more days that interest and/or princ ipal payments are overdue based on the contractual terms. DVA or Debit valuation adjustment An adjustment to the fair value of derivat ive contracts that reﬂects the possib il ity that the Group may default and not pay the full market value of contracts. Debt securit ies Debt securit ies are assets on the Group’s balance sheet and represent certif icates of indebtedness of credit inst itut ions, public bodies or other undertakings excluding those issued by central banks. Debt securit ies in issue Debt securit ies in issue are transferable certif icates of indebtedness of the Group to the bearer of the certif icate. These are liab il it ies of the Group and include certif icates of depos its. Deferred tax asset Income taxes recoverable in future periods in respect of deductible temporary differences between the accounting and tax base of an asset or liab il ity that will result in tax deductible amounts in future periods, the carry- forward of tax losses or the carry- forward of unused tax credits. Deferred tax liab il ity Income taxes payable in future periods in respect of taxable temporary differences between the accounting and tax base of an asset or liab il ity that will result in taxable amounts in future periods. Default Financ ial assets in default represent those that are at least 90 days past due in respect of princ ipal or interest and/or where the assets are otherwise considered to be unlikely to pay, includ ing those that are cred it-impa ired. Deﬁned beneﬁt obligat ion The present value of expected future payments required to settle the obligat ions of a deﬁned beneﬁt scheme resulting from employee service. Deﬁned beneﬁt scheme Pension or other post-retirement beneﬁt scheme other than a deﬁned contribut ion scheme. Deﬁned contribut ion scheme A pension or other post-retirement beneﬁt scheme where the employer’s obligat ion is lim ited to its contribut ions to the fund. 525 Standard Chartered – Annual Report 2023 Supplementary informat ion Delinquency A debt or other ﬁnancial obl igat ion is considered to be in a state of delinquency when payments are overdue. Loans and advances are considered to be delinquent when consecutive payments are missed. Also known as arrears. Deposits by banks Deposits by banks comprise amounts owed to other domestic or foreign credit inst itut ions by the Group includ ing secur it ies sold under repo. Diluted earnings per share (EPS) Represents earnings div ided by the weighted average number of shares that would have been outstanding assuming the conversion of all dilut ive potential ordinary shares. Div idend per share Represents the entitlement of each shareholder in the share of the proﬁts of the Company. Calculated in the lowest unit of currency in which the shares are quoted. Early alert, purely and non- purely precautionary A borrower’s account which exhib its risks or potential weaknesses of a material nature requir ing closer monitor ing, superv is ion, or attent ion by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deteriorat ion of repayment prospects and the likel ihood of being downgraded to credit grade 12 or worse. When an account is on early alert, it is classif ied as e ither purely precautionary or non-purely precautionary. A purely precautionary account is one that exhib its early alert characterist ics, but these do not present any imm inent cred it concern. If the symptoms present an imm inent credit concern, an account will be considered for classif icat ion as non-purely precautionary. Effective tax rate The tax on proﬁt/ (losses) on ordinary activ it ies as a percentage of proﬁt/(loss) on ordinary activ it ies before taxation. Encumbered assets On-balance sheet assets pledged or used as collateral in respect of certain of the Group’s liab il it ies. EU or European Union The European Union (EU) is a polit ical and economic union of 27 member states that are located primar ily in Europe. Eurozone Represents the 19 EU countries that have adopted the euro as their common currency. ECL or Expected credit loss Represents the present value of expected cash shortfalls over the residual term of a ﬁnanc ial asset, undrawn commitment or ﬁnanc ial guarantee. Expected loss The Group measure of antic ipated loss for exposures captured under an internal ratings-based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of antic ipated loss based on probabil ity of default, loss given default and exposure at default, with a one-year time horizon. Exposures Credit exposures represent the amount lent to a customer, together with any undrawn commitments. EAD or Exposure at default The estimat ion of the extent to wh ich the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the princ ipal, so that exposure is typically less than the approved loan lim it. ECAI or External Credit Assessment Institut ion External credit ratings are used to assign risk-weights under the standardised approach for sovereigns, corporates and inst itut ions. The external ratings are from credit rating agencies that are registered or certif ied in accordance with the credit rating agencies regulation or from a central bank issu ing cred it ratings which is exempt from the applicat ion of th is regulation. ESG Environmental, Social and Governance. FCA or Financ ial Conduct Authority The Financ ial Conduct Author ity 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 ﬁnanc ial d iff icult ies. The Group classif ies such mod if ied loans as e ither ‘Forborne – not impa ired loans’ or ‘Loans subject to forbearance – impa ired’. Once a loan is categorised as either of these, it will remain in one of these two categories until the loan matures or satisf ies the ‘cur ing’ condit ions descr ibed in Note 8 to the ﬁnanc ial statements. Forborne – not impa ired loans Loans where the contractual terms have been modif ied due to ﬁnancial diff icult ies of the borrower, but the loan is not considered to be impa ired. See ‘Forbearance’. Funded/unfunded exposures Exposures where the notional amount of the transaction is funded or unfunded. Represents exposures where a commitment to provide future funding is made but funds have been released/ not released. 526 Standard Chartered – Annual Report 2023 Supplementary informat ion Glossary FVA or Funding valuation adjustments FVA reﬂects an adjustment to fair value in respect of derivat ive contracts that reﬂects the funding costs that the market partic ipant would incorporate when determin ing an ex it price. G-SIBs or Global Systemically Important Banks Global banking ﬁnanc ial inst itut ions whose size, complexity and systemic interconnectedness mean that their distress or failure would cause sign iﬁcant disrupt ion to the w ider ﬁnanc ial system and economic activ ity. The l ist of G-SIBs is assessed under a framework established by the FSB and the BCBS. In the UK, the G-SIB framework is implemented via the CRD and G-SIBs are referred to as Global Systemically Important Institut ions (G-SIIs). G-SII buffer A CET1 capital buffer which results from designat ion as a G-SII. The G-SII buffer is between 1 per cent and 3.5 per cent, depending on the allocation to one of ﬁve buckets based on the annual scoring. In the UK, the G-SII buffer is implemented via the CRD as Global Systemically Important Institut ions (G-SII) buffer requirement. Green and Sustainable Product Framework Sets out the elig ible themes and activ it ies that may be considered as ‘green’, ‘social’ and ‘sustainable’ at Standard Chartered. The Framework has been developed with support from Morningstar Sustainalyt ics and is updated on an annual basis in collaboration with them. It is informed by industry princ iples and superv isory standards such as the ICMA Green Bond Princ iples and the EU Taxonomy for sustainable activ it ies. Hong Kong regional hub Standard Chartered Bank (Hong Kong) Lim ited and its subsid iar ies includ ing the primary operating entit ies in China, Korea and Taiwan. Standard Chartered PLC is the ultimate parent company of Standard Chartered Bank (Hong Kong) Lim ited. Interest rate risk The risk of an adverse impact on the Group’s income statement due to changes in interest rates. IRB or internal ratings-based approach Risk-weight ing methodology in accordance with the Basel Capital Accord where capital requirements are based on a ﬁrm’s own estimates of prudential parameters. Internal model approach The approach used to calculate market risk capital and RWA with an internal market risk model approved by the PRA under the terms of CRD/CRR. IAS or International Accounting Standard A standard that forms part of the International Financ ial Report ing Standards framework. IASB or International Accounting Standards Board An independent standard-setting body responsible for the development and publicat ion of IFRS, and approv ing interpretat ions of IFRS standards that are recommended by the IFRS Interpretations Committee (IFRIC). IFRS or International Financ ial Reporting Standards A set of internat ional account ing standards developed and issued by the International Accounting Standards Board, consist ing of pr inc iples-based guidance contained with in IFRSs and IASs. All companies that have issued publicly traded securit ies in the EU are required to prepare annual and inter im reports under IFRS and IAS standards that have been endorsed by the EU. IFRIC The IFRS Interpretations Committee supports the IASB in provid ing authoritat ive gu idance on the accounting treatment of issues not specif ically dealt w ith by exist ing IFRSs and IASs. Investment grade A debt security, treasury bill or sim ilar instrument with a credit rating measured by external agencies of AAA to BBB. Leverage ratio A ratio introduced under CRD IV that compares Tier 1 capital to total exposures, includ ing certa in exposures held off-balance sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk-based backstop measure. Liqu idat ion portfolio A portfolio of assets which is beyond our current risk appetite metrics and is held for liqu idat ion. LCR or Liqu id ity coverage ratio The ratio of the stock of high-quality liqu id assets to expected net cash outﬂows under stressed condit ions over the following 30 days. High-quality liqu id assets should be unencumbered, liqu id in markets during a time of stress and, ideally, be central bank elig ible. Loan exposure Loans and advances to customers reported on the balance sheet held at amortised cost or FVOCI, non- cancellable credit commitments and cancellable credit commitments for credit cards and overdraft facil it ies. Loans and advances to customers This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument. 527 Standard Chartered – Annual Report 2023 Supplementary informat ion Loans and advances to banks Amounts loaned to credit inst itut ions includ ing secur it ies bought under Reverse repo. LTV or loan-to-value ratio A calculation which expresses the amount of a ﬁrst mortgage lien as a percentage of the total appraised value of real property. The loan-to- value ratio is used in determin ing the 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 includ ing those on wh ich partial payments are being made. Loans subject to forbearance – impa ired Loans where the terms have been renegotiated on terms not consistent with current market levels due to ﬁnancial d iff icult ies of the borrower. Loans in this category are necessarily impa ired. See ‘Forbearance’. Loss rate Uses an adjusted gross charge-off rate, developed using monthly write-off and recoveries over the preceding 12 months and total outstanding balances. LGD or Loss given default The percentage of an exposure that a lender expects to lose in the event of obligor default. Low returning clients See ‘Perennial sub-optimal clients’. Malus An arrangement that permits the Group to prevent vesting of all or part of the amount of an unvested variable remuneration award, due to a specif ic crystallised risk, behaviour, conduct or adverse performance outcome. Master netting agreement An agreement between two counterparties that have multiple derivat ive contracts w ith each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or terminat ion of, any one contract. Mezzanine capital Financ ing that comb ines debt and equity characterist ics. For example, a loan that also confers some proﬁt partic ipat ion to the lender. MREL or min imum requirement for own funds and elig ible l iab il it ies A requirement set by resolution authorit ies to set a m in imum requirement for own funds and elig ible liab il it ies for banks, implement ing the FSB’s Total Loss Absorbing Capacity (TLAC) standard. MREL is intended to ensure that there is a min imum amount of equity and subordinated debt to support an effective resolution. Net asset value (NAV) per share Ratio of net assets (total assets less total liab il it ies) 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 impa irment prov is ions, restricted balances with central banks, derivat ives (net of master nett ing agreements), investment debt and equity securit ies, and letters of cred it and guarantees. Net zero roadmap The commitment to reaching net zero carbon emiss ions in our operations by 2025 and in our ﬁnanced emiss ions by 2050. NII or Net interest income The difference between interest received on assets and interest paid on liab il it ies. NSFR or Net stable funding ratio The ratio of available stable funding to required stable funding over a one-year time horizon, assuming a stressed scenario. It is a longer-term liqu id ity measure designed to restrain the amount of wholesale borrowing and encourage stable funding over a one-year time horizon. NPLs or non-performing loans An NPL is any loan that is more than 90 days past due or is otherwise ind iv idually impa ired. Th is excludes Retail loans renegotiated at or after 90 days past due, but on which there has been no default in interest or princ ipal payments for more than 180 days since renegotiat ion, and against which no loss of princ ipal is expected. Non-linear ity Non-linear ity of expected cred it loss occurs when the average of expected credit loss for a portfolio is higher than the base case (median) due to the fact that bad economic environment could have a larger impact on ECL calculation than good economic environment. Normalised items See ‘Underlying/Normalised’ on page 87. Operating expenses Staff and premises costs, general and admin istrat ive expenses, depreciat ion and amortisat ion. Underly ing operating expenses exclude expenses as described in ‘Underlying earnings’. A reconcil iat ion between underlying and reported earnings is contained in Note 2 to the ﬁnancial statements. 528 Standard Chartered – Annual Report 2023 Supplementary informat ion Glossary Operating income or operating proﬁt Net interest, net fee and net trading income, as well as other operating income. Underlying operating income represents the income line items above, on an underlying basis. See ‘Underlying earnings’. OTC or Over-the-counter derivat ives A bilateral transaction (e.g. derivat ives) that is not exchange traded and that is valued using valuation models. OCA or Own credit adjustment An adjustment to the Group’s issued debt designated at fair value through proﬁt or loss that reﬂects the possib il ity that the Group may default and not pay the full market value of the contracts. Perennial sub-optimal clients Clients that have returned below 3% return on risk-weighted assets for the last three years Physical risks The risk of increased extreme weather events includ ing ﬂood, drought and sea level rise. Pillar 1 The ﬁrst pillar of the three pillars of the Basel framework which provides the approach to calculation of the min imum capital requirements for credit, market and operational risk. Min imum cap ital requirements are 8 per cent of the Group’s risk-weighted assets. Pillar 2 The second pillar of the three pillars of the Basel framework which requires banks to undertake a comprehensive assessment of their risks and to determine the appropriate amounts of capital to be held against these risks where other suitable mit igants are not available. Pillar 3 The third pillar of the three pillars of the Basel framework which aims to provide a consistent and comprehensive disclosure framework that enhances comparabil ity between banks and further promotes improvements in risk practices. Prior ity Bank ing Prior ity Bank ing customers are ind iv iduals who have met certain criter ia for depos its, AUM, mortgage loans or monthly payroll. Criter ia var ies by country. Private equity investments Equity securit ies in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or inst itut ional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. PD or Probabil ity of default PD is an internal estimate for each borrower grade of the likel ihood that an obligor will default on an obligat ion over a given time horizon. Physical/production emiss ion intens ity GHG emiss ions per a spec if ic phys ical or production unit, for example: tCO 2 e/ tonne steel, kgCO 2 e/square metre. Probabil ity we ighted Obtained by consider ing the values the metric can assume, weighted by the probabil ity of each value occurr ing. Proﬁt (loss) attributable to ordinary shareholders Proﬁt (loss) for the year after non- controlling interests and div idends declared in respect of preference shares classif ied as equ ity. PVA or Prudent valuation adjustment An adjustment to CET1 capital to reﬂect the difference between fair value and prudent value posit ions, where the applicat ion of prudence results in a lower absolute carrying value than recognised in the ﬁnanc ial statements. PRA or Prudential Regulation Authority The Prudential Regulation Authority is the statutory body responsible for the prudential supervis ion of banks, bu ild ing societ ies, cred it unions, insurers and a small number of sign iﬁcant investment ﬁrms in the UK. The PRA is a part of the Bank of England. Regulatory consolidat ion The regulatory consolidat ion of Standard Chartered PLC differs from the statutory consolidat ion in that it includes Ascenta IV, Olea Global group, Seychelles International Mercantile Banking Corporation Lim ited., and all of the legal entit ies in the Currency Fair group on a proportionate consolidat ion bas is. These entit ies are considered associates for statutory accounting purposes. The regulatory consolidat ion further excludes the following entit ies, which are consolidated for statutory accounting purposes; Audax Financ ial Technology Pte. Ltd, Cardspal Pte. Ltd. Letsbloom Pte. Ltd, SCV Research and Development Pte. Ltd., Standard Chartered Assurance Lim ited, Standard Chartered Isle of Man Lim ited, Corrasi Covered Bonds LLP, Pegasus Dealmaking Pte. Ltd., Solv Sdn. Bhd., Standard Chartered Botswana Education Trust, Standard Chartered Bancassurance Intermediary Lim ited, Standard Chartered Bank Insurance Agency (Proprietary) Lim ited, Standard Chartered Research and Technology India Private Lim ited, Standard Chartered Trading (Shanghai) Lim ited, Tawi Fresh Kenya Lim ited. Repo/reverse repo A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell a ﬁnancial asset, such as asset-backed securit ies or government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future), it is a reverse repurchase agreement or reverse repo. 529 Standard Chartered – Annual Report 2023 Supplementary informat ion Reported performance/results Reported performance/results with in this report means amounts reported under UK-adopted IAS and EU IFRS. In prior periods Reported performance/ results were described as Statutory performance/results. Resident ial mortgage A loan to purchase a resident ial property 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. RoRWA or Return on risk- weighted assets Proﬁt before tax for year as a percentage of RWA. Proﬁt may be reported or underlying and is specif ied where used. See ‘RWA’ and ‘Underlying earnings’. Income RoRWA calculated as income for year as a percentage of RWA. RWA or Risk-weighted assets A measure of a bank’s assets adjusted for their associated risks, expressed as a percentage of an exposure value in accordance with the applicable standardised or IRB approach provis ions. Risks-not-in-VaR (RNIV) A framework for ident ify ing and quantify ing marg inal types of market risk that are not captured in the Value at Risk (VaR) measure for any reason, such as being a far-tail risk or the necessary histor ical market data not being available. Roll rate Uses a matrix that gives average loan migrat ion rate from del inquency states from period to period. A matrix multipl icat ion is then performed to generate the ﬁnal PDs by delinquency bucket over different time horizons. Scope 1 emiss ions Direct GHG emiss ions that occur from sources owned or controlled by the Group - i.e., emiss ions from combust ion in owned or controlled boilers, furnaces, vehicles, as well as fugit ive em iss ions from pressure contain ing equ ipment at Group locations. Scope 2 emiss ions Indirect GHG emiss ions from the generation of purchased or acquired electric ity, steam, heat ing, or cooling consumed by the Group. Scope 3 emiss ions All ind irect GHG em iss ions (not included in Scope 2) that occur in the value chain of the Group, aris ing from sources not controlled by the Group. This comprises of both upstream and downstream value chain emiss ions and includes absolute ﬁnanced emiss ions. Secured (fully and partially) A secured loan is a loan in which the borrower pledges an asset as collateral for a loan which, in the event that the borrower defaults, the Group is able to take possession of. All secured loans are considered fully secured if the fair value of the collateral is equal to or greater than the loan at the time of orig inat ion. All other secured loans are considered to be partly secured. Securit isat ion Securit isat ion is a process by which credit exposures are aggregated into a pool, which is used to back new securit ies. Under trad it ional securit isat ion transactions, assets are sold to a structured entity which then issues new securit ies to investors at different levels of senior ity (cred it tranching). This allows the credit quality of the assets to be separated from the credit rating of the orig inat ing inst itut ion and transfers risk to external investors in a way that meets their risk appetite. Under synthetic securit isat ion transactions, the transfer of risk is achieved by the use of credit derivat ives or guarantees, and the exposures being securit ised rema in exposures of the orig inat ing inst itut ion. Senior debt Debt that takes prior ity over other unsecured or otherwise more ‘jun ior’ debt owed by the issuer. Senior debt has greater senior ity in the issuer’s capital structure than subordinated debt. In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment. SICR or Sign iﬁcant increase in credit risk Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at orig inat ion (after consider ing the passage of t ime). Solo The solo regulatory group as listed in the Prudential Regulation Authority waiver written notice dated 21 August 2023. This differs from Standard Chartered Bank in that it includes the full consolidat ion of three subs id iar ies, namely Standard Chartered Holdings (International) B.V, Standard Chartered Grindlays PTY Lim ited, SCMB Overseas Lim ited. Sovereign exposures Exposures to central governments and central government departments, central banks and entit ies owned or guaranteed by the aforementioned. Sovereign exposures, as deﬁned by the European Banking Authority, include only exposures to central governments. Stage 1 Assets have not experienced a sign iﬁcant increase in credit risk since orig inat ion and impa irment recogn ised on the basis of 12 months expected credit losses. Stage 2 Assets have experienced a sign iﬁcant increase in credit risk since orig inat ion and impa irment is recognised on the basis of lifet ime expected cred it losses. Stage 3 Assets that are in default and considered credit-impa ired (non-performing loans). 530 Standard Chartered – Annual Report 2023 Supplementary informat ion Glossary Standardised approach In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institut ions (ECAI) rat ings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital requirement by the applicat ion of a supervisory deﬁned percentage charge to the gross income of eight specif ied bus iness lines. Structured note An investment tool which pays a return linked to the value or level of a specif ied asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equit ies, interest rates, funds, commodit ies and fore ign currency. Subordinated liab il it ies Liab il it ies wh ich, in the event of insolvency or liqu idat ion of the issuer, are subordinated to the claims of depositors and other creditors of the issuer. Sustainab il ity Aspirat ions The Group’s approach to sustainab il ity is underpinned by our Sustainab il ity Aspirat ions, our long-term susta inab il ity goals. Each Sustainab il ity Aspirat ion encompasses a number of key performance ind icators that we use to measure our progress and outcomes in areas in which we can make a contribut ion to the del ivery of the UN Sustainable Development Goals (SDGs). Sustainable Finance assets Assets from clients whose business activ it ies are aligned with the Sustainab il ity Bond Framework, those generated from transactions for which the use of proceeds will be util ised towards elig ible themes and act iv it ies set out with in the Susta inab il ity Bond Framework, or assets generated through Standard Chartered’s own lending activ it ies to small and medium sized enterprises (SMEs) in elig ible markets as per the criter ia set out in the Sustainab il ity Bond Framework. Sustainable Finance income Income generated from Sustainable Finance products as listed in the Green and Sustainable Product Framework. Addit ional products may be approved throughout the year by the Sustainable Finance Governance Committee. Sustainable Finance mobil ised Mobil isat ion of Sustainable Finance is deﬁned as any investment or ﬁnanc ial service provided to clients that supports: (i) the preservation and/or improvement of biod ivers ity, nature or the environment; (i i) the long-term avoidance/decrease of GHG emiss ions, includ ing the al ignment of a client’s business and operations with a 1.5 degree Celsius trajectory (known as transit ion ﬁnance); ( i i i) a social purpose; or (iv) incent iv ises our clients to meet their own sustainab il ity object ives (known as sustainab il ity-linked ﬁnance). Tier 1 capital The sum of Common Equity Tier 1 capital and Addit ional T ier 1 capital. Tier 1 capital ratio Tier 1 capital as a percentage of risk-weighted assets. Tier 2 capital Tier 2 capital comprises qualify ing subordinated liab il it ies and related share premium accounts. TLAC or Total loss absorbing capacity An internat ional standard for TLAC issued by the FSB, which requires G-SIBs to have sufﬁcient loss-absorb ing and recapital isat ion capacity available in resolution, to min im ise impacts on ﬁnancial stab il ity, ma inta in the continu ity of cr it ical funct ions and avoid exposing public funds to loss. Transit ion r isks The risk of changes to market dynamics or sectoral economics due to governments’ response to climate change. UK bank levy A levy that applies to certain UK banks and the UK operations of foreign banks. The levy is payable each year based on a percentage of the chargeable equit ies and liab il it ies on the Group’s UK tax resident entit ies’ balance sheets. Key exclusions from chargeable equit ies and liab il it ies include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liab il it ies subject to nett ing. Unbiased Not overly optim ist ic or pessim ist ic, represents informat ion that is not slanted, weighted, emphasised, de-emphasised or otherwise manipulated to increase the probabil ity that the ﬁnancial informat ion w ill be received favourably or unfavourably by users. Unlikely to pay Indicat ions of unl ikel iness to pay shall include placing the credit obligat ion on non-accrued status; the recognit ion of a specif ic cred it adjustment resulting from a sign iﬁcant perce ived decline in credit quality subsequent to the Group taking on the exposure; selling the credit obligat ion at a mater ial credit-related economic loss; the Group consenting to a distressed restructuring of the credit obligat ion where th is is likely to result in a dim in ished ﬁnanc ial obl igat ion caused by the material forgiveness, or postponement, of princ ipal, interest or, where relevant fees; ﬁling for the obligor’s bankruptcy or a sim ilar order in respect of an obligor’s credit obligat ion to the Group; the obligor has sought or has been placed in bankruptcy or sim ilar protection where this would avoid or delay repayment of a credit obligat ion to the Group. VaR or Value at Risk A quantitat ive measure of market r isk estimat ing the potent ial loss that will not be exceeded in a set time period at a set statist ical conﬁdence level. 531 Standard Chartered – Annual Report 2023 Supplementary informat ion ViU or Value-in-Use The present value of the future expected cash ﬂows expected to be derived from an asset or CGU. Write-downs After an advance has been ident iﬁed as impa ired and is subject to an impa irment prov is ion, the stage may be reached whereby it is concluded that there is no realist ic prospect of further recovery. 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 derivat ive ﬁnancial instruments. See ‘CVA’, ‘DVA’ and ‘FVA’. 532 Standard Chartered – Annual Report 2023 Designed and produced by Friend www.friendstud io.com Printed by Park Communicat ions a cert if ied Carbon Neutral print company. Park works to the EMAS standard and its Environmental Management System is certif ied to ISO 14001. This publicat ion has been manufactured us ing 100% offshore wind electric ity sourced from UK w ind. This is a certif ied cl imate neutral print product for which carbon emiss ions have been calculated and offset by supporting recognised carbon offset projects. The carbon offset projects are audited and certif ied according to internat ional standards and demonstrably reduce emiss ions. The cl imate neutral label includes a unique ID number specif ic to th is product which can be tracked at www.climatepartner.com, giv ing deta ils of the carbon offsetting process includ ing informat ion on the emiss ions volume and the carbon offset project being supported. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remain ing 1% used to generate energy. This document is printed on Nautilus Superwhite 100% Recycled paper contain ing 100% recycled ﬁbre. The FSC ® label on this product ensures responsible use of the world’s forest resources. © Standard Chartered PLC. All rights reserved. The STANDARD CHARTERED word mark, its logo device and associated product brand names are owned by Standard Chartered PLC and centrally licensed to its operating entit ies. Registered Ofﬁce: 1 Basinghall Avenue, London EC2V 5DD. Telephone +44 (0) 20 7885 8888. Princ ipal place of bus iness in Hong Kong: 32nd Floor, 4-4A Des Voeux Road, Central, Hong Kong. Registered in England No. 966425. Global headquarters Standard Chartered Group 1 Basinghall Avenue London, EC2V 5DD United Kingdom telephone: +44 (0)20 7885 8888 facsim ile: +44 (0)20 7885 9999 Dig ital Annual Report sc.com/annualreport Shareholder enquir ies ShareCare informat ion website: sc.com/shareholders helpline: +44 (0)370 702 0138 ShareGift informat ion website: ShareGift.org helpline: +44 (0)20 7930 3737 Registrar informat ion UK Computershare Investor Services PLC The Pavil ions Bridgwater Road Bristol, BS99 6ZZ helpline: +44 (0)370 702 0138 Hong Kong Computershare Hong Kong Investor Services Lim ited 17M Floor, Hopewell Centre 183 Queen’s Road East Wan Chai Hong Kong website: computershare.com/hk/ investors Chinese translation Computershare Hong Kong Investor Services Lim ited 17M Floor, Hopewell Centre 183 Queen’s Road East Wan Chai Hong Kong Register for electronic communicat ions website: investorcentre.co.uk LSE stock code: STAN.LN HKSE stock code: 02888

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