Standard Chartered PLC — Audit Report / Information 2018

May 2, 2018

Standard Chartered PLC Pillar 3 Disclosures 31 March 2018

Incorporated in England with registered number 966425 Principal Office: 1 Basinghall Avenue, London, EC2V 5DD, England

CONTENTS

1.	Purpose and basis of preparation1
2.	Frequency 1
3.	Verification 1
4.	Capital and leverage2
	Table 1: Key Metrics for the Group (KM1) 2
	Table 2: Capital base3
	Table 3 UK and CRR leverage ratio4
	Table 4: Overview of RWA (OV1)5
	Movement analysis for RWA6 Table 5:
	Table 6: RWA flow statements of credit risk exposures under IRB (CR8)6
	Table 7: RWA flow statements of market risk exposures under an IMA (MR2-B) 6
5.	Forward looking statements7

1 PURPOSE AND BASIS OF PREPARATION

The Pillar 3 disclosures comprise information on the underlying drivers of risk-weighted assets (RWA), capital, leverage and liquidity ratios as at 31 March 2018 in accordance with the European Union's (EU) Capital Requirements Regulation (CRR) and the Prudential Regulation Authority's (PRA) Rulebook.

The disclosures have been prepared in line with the disclosure templates introduced by the European Banking Authority's (EBA) guidelines on disclosure requirements (EBA/GL/2016/11) published in December 2016.

This report presents the quarterly Pillar 3 disclosures of Standard Chartered PLC ('the Group') as at 31 March 2018 and should be read in conjunction with the Group's Q1 2018 Interim Management Statement: Balance sheet, capital and leverage.

The information presented in this Pillar 3 report is not required to be, and has not been, subjected to external audit.

2 FREQUENCY

In accordance with Group policy the Pillar 3 Disclosures are made quarterly as at 31 March, 30 June, 30 September and 31 December in line with the EBA guidelines on materiality, proprietary and confidentiality and on disclosure frequency under Articles 432(1), 432(2) and 433 of Regulation (EU) No 575/2013, and the Guidelines on disclosure requirements under Part Eight of Regulation (EU) No 575/2013 (EBA/GL/2014/14 and EBA/GL/2016/11). Disclosures are published on the Standard Chartered PLC website aligning with the publication date of the Group's Interim, Half Year and Annual Report and Accounts.

3 VERIFICATION

Whilst the 31 March 2018 Pillar 3 Disclosures are not required to be externally audited, the document has been verified internally in accordance with the Group's policies on disclosure and its financial reporting and governance processes. Controls comparable to those for the Group's Q1 2018 Interim Management Statement have been applied to confirm compliance with PRA regulations.

4 CAPITAL AND LEVERAGE

Table 1: Key metrics for the Group (KM1)

	31.03.2018	31.12.2017
	\$million	\$million
Available capital amounts
Common Equity Tier 1 (CET1)	38,813	38,162
Common Equity Tier 1 (CET1) as if IFRS 9 or analogous ECLs transitional arrangements had not
been applied	38,411	N/A
Tier 1	45,522	44,861
Tier 1 as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	45,120	N/A
Total capital	59,892	58,758
Total capital as IFRS 9 or analogous ECLs transitional arrangements had not been applied	59,415	N/A
Risk-weighted asset amounts
Total risk-weighted assets (RWA)	280,205	279,748
Total risk-weighted assets if IFRS 9 or analogous ECLs transitional arrangements had not been
applied	280,350	N/A
Risk-based capital ratios as a percentage of RWA
Common Equity Tier 1 ratio	13.9%	13.6%
Common Equity Tier 1 ratio as if IFRS 9 or analogous ECLs transitional arrangements had not
been applied	13.7%	N/A
Tier 1 ratio	16.2%	16.0%
Tier 1 ratio as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	16.1%	N/A
Total capital ratio	21.3%	21.0%
Total capital ratio as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	21.2%	N/A
Additional CET1 buffer requirements as a percentage of RWA
Capital conservation buffer requirement (2.5% from 2019)	1.90%	1.25%
Countercyclical buffer requirement	0.2%	0.2%
Bank G-SIB and/or D-SIB additional requirements	0.8%	0.5%
Total of bank CET1 specific buffer requirements	2.9%	1.9%
CET1 available after meeting the bank's minimum capital requirements	7.7%	7.5%
UK leverage ratio
Total UK leverage ratio exposure measure	742,013	717,344
UK leverage ratio	5.9%	6.0%
UK leverage ratio as if IFRS 9 or analogous ECLs transitional arrangements had not been applied	5.8%	N/A
Liquidity Coverage Ratio
Total HQLA	143,252	144,280
Total net cash outflow	96,571	97,438
LCR ratio	148.4%	148.2%

Standard Chartered has decided to apply the transitional arrangements as permitted by Regulation (EU) 2017/2395 of the European Parliament and of the Council, including paragraph 4 of that regulation that introduces the transitional arrangement to accounting provisions recognised after 1 January 2018 under IFRS 9.

Under this approach, the balance of Expected Credit Loss (ECL) provisions in excess of the regulatory defined Expected Loss (EL) and additional ECL on standardised portfolios, net of related tax, are phased into the CET1 capital base over five years.

The proportion phased in for the balance at each reporting period is: 2018, 5 per cent; 2019, 15 per cent; 2020, 30 per cent; 2021, 50 per cent; and 2022, 75 per cent. From 2023 onwards there is no transitional relief. The application of the transitional relief results in a negligible effect on the CET1 ratio as the capital impact of ECL on the standardised portfolio, net of tax, has been largely offset. As there is no capital impact from additional provisions on advanced IRB portfolios, the related deferred tax asset continues to be recognised in full in CET1.

Table 2: Capital Base

	31.03.18	31.12.17
CET1	13.9%	13.6%
Tier 1 capital	16.1%	16.0%
Total capital	21.3%	21.0%

	31.03.18	31.12.17
	\$million	\$million
CET1 instruments and reserves
Capital instruments and the related share premium accounts	5,606	5,603
of which: share premium accounts	3,958	3,957
Retained earnings	25,930	25,316
Accumulated other comprehensive income (and other reserves)	12,983	12,766
Non-controlling interests (amount allowed in consolidated CET1)	821	850
Independently reviewed interim and year-end profits/(losses)	781	1,227
Foreseeable dividends net of scrip	(683)	(399)
CET1 capital before regulatory adjustments	45,438	45,363
CET1 regulatory adjustments
Additional value adjustments (prudential valuation adjustments)	(553)	(574)
Intangible assets (net of related tax liability)	(5,091)	(5,112)
Deferred tax assets that rely on future profitability (excludes those arising from temporary differences)	(128)	(125)
Fair value reserves related to net losses on cash flow hedges	(6)	45
Deduction of amounts resulting from the calculation of excess expected loss	(433)	(1,142)
Net gains on liabilities at fair value resulting from changes in own credit risk	(147)	(53)
Defined-benefit pension fund assets	(47)	(40)
Fair value gains arising from the institution's own credit risk related to derivative liabilities	(81)	(59)
Exposure amounts which could qualify for risk weighting of 1,250%	(139)	(141)
of which: securitisation positions	(121)	(125)
of which: free deliveries	(18)	(16)
Total regulatory adjustments to CET1	(6,625)	(7,201)
CET1 capital	38,813	38,162
Additional Tier 1 capital (AT1) instruments	6,729	6,719
AT1 regulatory adjustments	(20)	(20)
Tier 1 capital	45,522	44,861
Tier 2 capital instruments	14,325	13,927
Tier 2 regulatory adjustments	(30)	(30)
Tier 2 capital	14,295	13,897
Total capital	59,817	58,758
Total risk-weighted assets	280,205	279,748

UK Leverage Ratio

During 2017, the PRA adopted the Bank of England's Financial Policy Committee (FPC) proposed changes to the UK leverage ratio framework. UK banks are now subject to a minimum leverage ratio of 3.25 per cent, an increase of 0.25 per cent from the previous 3.0 per cent minimum. In addition, a supplementary leverage ratio buffer is applicable, set at 35 per cent of the corresponding G-SII capital buffer and the countercyclical capital buffer, as those buffers are applicable to individual banks and are phased in.

The FPC also made a recommendation to the PRA to exclude qualifying claims on central bank exposures from the leverage exposure measure in the UK leverage ratio framework and to compensate for the resulting reduction in capital required by increasing the minimum leverage requirement from 3.0 per cent to 3.25 per cent.

Following the waiver granted by the PRA, the Group has been reporting the leverage ratio on a UK basis (excluding qualifying claims on central banks exposures) from March 2017 and does not expect any material impact arising from the proposed increase in minimum requirements.

Table 3 below presents both the Group's UK, and CRR leverage ratios.

Table 3: UK and CRR leverage ratio

	31.03.2018	31.12.2017
	\$million	\$million
Tier 1 capital (end point)	43,754	43,103
UK leverage exposure	742,013	717,344
UK leverage ratio	5.9%	6.0%
CRR leverage exposure	787,091	759,518
CRR leverage ratio	5.6%	5.7%
UK leverage exposure quarterly average	734,743	723,508
UK leverage ratio quarterly average	5.9%	6.0%
Countercyclical leverage ratio buffer	0.1%	0.1%
G-SII additional leverage ratio buffer	0.3%	0.2%
	Fully phased	Fully phased
Choice on transitional arrangements for the definition of the capital measure	in	in

The UK Leverage ratio decreased by 10 basis points in Q1 2018 mainly due to an increase in loans and advances and investment securities partially offset by an increase in Tier 1 capital.

Table 4 below presents the RWA and the regulatory capital requirements calculated at 8 per cent of RWA for each risk type and approach.

Table 4: Overview of RWA (OV1)

	31.03.18			31.12.17
	Risk weighted assets	Regulatory capital requirement1	Risk weighted assets \$million	Regulatory capital requirement1 \$million
Credit risk (excluding counterparty credit risk)2	\$million	\$million
	203,245 157,127	16,260 12,570	200,702 156,602	16,056 12,528
Of which advanced IRB approach Of which standardised approach	46,117	3,689	44,100	3,528
Counterparty credit risk3	15,161	1,213	15,517	1,241
Of which mark to market method	11,121	890	11,952	956
Of which risk exposure amount for
contributions to the default fund of a CCP	95	8	81	6
Of which CVA	450	36	503	40
Settlement risk	23	2	18	1
Securitisation exposures in the banking book	2,326	186	2,687	215
Of which IRB ratings-based approach	1,844	148	2,205	176
Of which IRB supervisory formula approach	482	39	482	39
Of which standardised approach	-	- -	-	-
Market risk	24,154	1,932	23,040	1,843
Of which internal model approaches	14,266	1,141	12,776	1,022
Of which standardised approach	9,888	791	10,264	821
Large exposures	-	-	-	-
Operational risk4	28,050	2,244	30,478	2,438
Of which standardised approach	28,050	2,244	30,478	2,438
Amounts below the thresholds for deduction (subject to 250% risk weight)	7,247	580	7,306	584
Floor Adjustment	-	-	-	-
Total	280,205	22,416	279,748	22,380

1 The regulatory capital requirement is calculated as 8 per cent of the risk-weighted assets, and represents the minimum total capital ratio in accordance with CRR Article 92(1)

2 Credit risk (excluding counterparty credit risk) includes non-credit obligation assets

3 Counterparty credit risk includes assets which are assessed under IRB and Standardised approaches

4 To calculate operational risk standardised risk-weighted assets, a regulatory defined beta co-efficient is applied to average gross income for the previous three years, across each of the eight business lines prescribed in the CRR

Total RWA increased by \$0.5 billion in the quarter to approximately \$280 billion. This was mainly driven by credit risk with increases in asset size across Lending and Financial Markets and Treasury Markets. These increases were partially offset by IRB model updates (see table 5), which are largely in relation to loss given default (LGD) model changes.

Further details on RWA movements by risk type, and for credit risk IRB (excluding counterparty credit risk) and market risk IMA exposures can be found in tables 5, 6 and 7 respectively.

Table 5: Movement analysis for RWA

	Credit risk IRB2	Credit risk SA	Credit risk Total	Counterparty Credit risk	Total Credit & Counterparty Credit risk	Operational risk	Market risk	Total
	\$million	\$million	\$million	\$million	\$million	\$million	\$million	\$million
As at 1 January 2018	159,289	51,424	210,713	15,517	226,230	30,478	23,040	279,748
Asset size	2,036	2,629	4,665	149	4,814	-	-	4,814
Asset quality	(535)	-	(535)	13	(522)	-	-	(522)
Model updates	(1,959)	(94)	(2,053)	(470)	(2,523)	-	(1,138)	(3,661)
Methodology and policy	-	-	-	-	-	-	-	-
Acquisitions and disposals	-	(626)	(626)	-	(626)	-	-	(626)
Foreign exchange movements	622	54	676	92	768	-	-	768
Other, including non-credit risk
movements1	-	-	-	(140)	(140)	(2,428)	2,252	(316)
As at 31 March 2018	159,453	53,387	212,840	15,161	228,001	28,050	24,154	280,205

1 RWA efficiencies are disclosed against 'Other, including non-credit risk movements'

2 See Table 5: Overview of RWA (OV1). To note that 'Securitisation', 'Settlement risk' and 'Amounts below the threshold for deduction (subject to 250% risk-

Table 6: RWA flow statements of credit risk exposures under IRB (CR8)

As at 31 March 20182	159,453	12,756
Foreign exchange movements	622	50
Disposals	-	-
Methodology and policy	-	-
Model updates	(1,959)	(157)
Asset quality	(535)	(43)
Asset size	2,036	163
As at 1 January 2018	159,289	12,743
	\$million	\$million
	Risk-weighted assets1	Regulatory capital requirement1

1 Includes securitisation and non-credit obligation assets, but excludes counterparty credit risk

2 See Table 5: Overview of RWA (OV1). Comprises advanced IRB credit risk \$157,127 million and securitisation of \$2,326 million

Table 7: RWA flow of market risk exposures under an IMA approach (MR2-B)

	VaR	SVaR	IRC	CRM	Other1	Total RWA	Total capital requirement
	\$million	\$million	\$million	\$million	\$million	\$million	\$million
At 1 January 2018	1,978	8,083	-	-	2,715	12,776	1,022
Regulatory adjustment	-	-	-	-	-	-	-
RWAs post adjustment at 1 January 2018	1,978	8,083	-	-	2,715	12,776	1,022
Movement in risk levels	(80)	749	-	-	821	1,490	119
Model updates/changes	-	-	-	-	-	-	-
Methodology and policy	-	-	-	-	-	-	-
Acquisitions and disposals	-	-	-	-	-	-	-
Foreign exchange movements	-	-	-	-	-	-	-
Other	-	-	-	-	-	-	-
At 31 March 2018	1,898	8,832	-	-	3,536	14,266	1,141
Regulatory adjustment
RWAs post adjustment at 31 March 2018	1,898	8,832	-	-	3,536	14,266	1,141

1. Other IMA capital add-ons for market risks not fully captured in either VaR or SVaR

5 FORWARD LOOKING STATEMENTS

This document may contain 'forward-looking statements' that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'may', 'could', 'will', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek', 'continue' or other words of similar meaning. By their very nature, such statements are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. Recipients should not place reliance on, and are cautioned about relying on, any forward-looking statements.

There are several factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. The factors that could cause actual results to differ materially from those described in the forward-looking statements include (but are not limited to) changes in global, political, economic, business, competitive, market and regulatory forces or conditions, future exchange and interest rates, changes in tax rates, future business combinations or dispositions and other factors specific to the Group. Any forward-looking statement contained in this document is based on past or current trends and/or activities of the Group and should not be taken as a representation that such trends or activities will continue in the future. No statement in this document is intended to be 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 historical or published earnings of the Group. Each forward-looking statement speaks only as of the date of the particular statement.

Except as required by any applicable laws or regulations, the Group expressly disclaims any obligation to revise or update any forward looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Nothing in this document shall constitute, in any jurisdiction, an offer or solicitation to sell or purchase any securities or other financial instruments, nor shall it constitute a recommendation or advice in respect of any securities or other financial instruments or any other matter.