48CF Hsbc Bk.5.844%

We conduct our business to support the sustained success of our customers, employees and other stakeholders.

Our approach

We are guided by HSBC Group's purpose: to open up a world of opportunity for our customers, colleagues, and communities. Our purpose is underpinned by the HSBC Group's values: we value difference; we succeed together; we take responsibility; and we get it done.

The HSBC Group's approach to ESG is shaped by its purpose and values and a desire to create sustainable long-term value for our stakeholders. As an international bank with significant breadth and scale, we understand that our economies, societies, supply chains and people's lives are interconnected. The HSBC Group recognises it can play an important role in helping to tackle ESG challenges. The HSBC Group focuses its efforts on three areas: the transition to net zero, building inclusion and resilience, and acting responsibly.

Good outcomes

We are focused on running a strong and sustainable business that puts the customer first, values good governance, and gives our stakeholders confidence in how we do what we do.

Since July 2023, FCA Consumer Duty rules and guidance have required firms to consider the needs, characteristics and objectives of their customers at every stage of the customer journey. Regular reporting will be made available to the HSBC Bank plc Executive Committee and Board to help ensure we operate in an environment in which good outcomes for customers are considered when doing business.

Our conduct approach helps to guide us to do the right thing and to focus on the impact we have on our customers and the financial markets in which we operate. Details on our Conduct Framework are available at www.hsbc.com/Conduct. Our section 172 statement, detailing our Directors' responsibility to stakeholders, can be found on page 10.

Our colleagues

We aspire to open up a world of opportunity for our colleagues and build an inspiring, dynamic culture where the best talent wants to work. We value difference and continue to build an inclusive workforce representative of the communities we serve. We set and report on progress made against the HSBC Group-wide gender and ethnic diversity goals. Understanding the experience of colleagues is central to our efforts. Through the HSBC Group employee Snapshot survey, we capture our colleagues' views on topics such as hybrid working and well-being. In 2023, over 9,000 colleagues responded to the survey across Europe, a participation rate of 62%. Developing the skills of colleagues is critical to energising our organisation. We foster a learning culture through various resources, providing colleagues with many educational materials and development opportunities.

Net zero ambition

The HSBC Group has continued to take steps to implement its ambition to become net zero in its operations and its supply chain by 2030, and align its financed emissions to net zero by 2050.

In January 2024, the HSBC Group published its first net zero transition plan, which is an important milestone in our journey to achieving our net zero ambition - helping our people, customers, investors and other stakeholders to understand our long-term vision, the challenges, uncertainties and dependencies that exist, the progress we are making and what we plan to do in the future.

Engaging with our stakeholders

Engaging with our stakeholders is core to being a responsible business. To determine material topics that our stakeholders are interested in, we conduct a number of activities throughout the year, including engagements outlined in the table below.

Supporting our stakeholders facing a rising cost of living

We know that many of our customers continue to face difficult financial circumstances due to the increasing cost of living pressures, and we are working to support them.

During 2023, proactive frontline contact was made by trained staff to customers in the Channel Islands & Isle of Man ('CIIOM') identified as being most at risk of being financially impacted by a rise in mortgage repayments. In CIIOM, HSBC offers differential mortgage pricing for existing customers due to the challenging cost of living environment, and we complete monthly analysis to identify customers most likely to experience mortgage rate shocks at the end of their current mortgage rate term.

Our ESG metrics and targets

The HSBC Group has established targets that guide how we do business, including how we operate and how we serve our customers. These include targets designed to track the progress against our environment and social sustainability goals.

They also help us to improve employee advocacy, the diversity of senior leadership and to strengthen our market conduct.

The targets for these measures are linked to the pillars of our ESG strategy: transitioning to net zero, building inclusion and resilience, and acting responsibly.

To help us achieve our ESG ambitions, measures are included in the annual incentive scorecards of the Europe Chief Executive and Executive Committee members.

Below we set out how we have made progress against the ESG-related ambitions and targets.

Environmental - Transition to net zero

Since 1 January 2020, HSBC Bank plc has provided and facilitated $110.7bn of sustainable finance and $26.6bn of ESG and sustainable investing, as defined in the HSBC's Group's Sustainable Finance and Investment Data Dictionary 2023.

At the end of 2023, we achieved a 48% reduction in emissions from our energy consumption and travel compared with a 2019 baseline in France, Germany, Switzerland, Malta and Bermuda. HSBC Bank plc continues to work to support the Group's ambition to achieve net zero in its own operations and supply chain by 2030.

Social - Build inclusion and resilience

-   Our Snapshot Employee Engagement score was 54% at the end of 2023, an increase of 8 points compared with 2022;¹

-   Our current representation of black heritage colleagues in senior leadership roles is 2.8%, an increase of 0.4% from 2022. This includes all colleagues based in the UK;^2,3 and

-   In 2023, senior leadership roles held by women increased to 25.3%, an improvement of 0.2% from 2022.⁴

Governance - Acting responsibly

In 2023, 75% of HSBC Bank plc staff completed conduct training, which covers Conduct and Regulatory Compliance topics including market abuse, conflicts of interest and treating customers fairly. The current completion rate is lower than prior years (96% of staff completed conduct training in 2022) due to technical and translation issues which delayed the launch of the training, but is expected to rise in line with completion rates in prior years.⁵

1   The Employee Engagement Index is our headline measure of how employees feel about HSBC. HSBC Bank plc's score is lower than the HSBC Group's, with a key contributing factor being our ongoing regional transformation. However, the relatively low engagement is consistent with findings in Gallup's 2023 State of the Global Workplace Report, which showed significant regional variations in Employee Engagement across all sectors and industries globally. Europe scored lower relative to other regions on employee engagement. Nevertheless, we are seeing year-on-year improvements and will continue to embed a positive and inclusive culture where our colleagues can thrive.

2   Senior leadership is classified as those at band 3 and above in the HSBC Group's global career band structure.

3   Our 2023 ethnicity goal of 2.9% black heritage colleagues in senior leadership roles is set at the UK level, and includes all colleagues based in the UK including those in the ringfenced bank (HBUK).

4   Our 2023 gender diversity target of 26.8% is cascaded by HSBC Group and inclusive of our operations in Bermuda; with HSBC Bank plc achieving 25.3% by end of 2023 at the regional level. We missed our 2023 target, therefore our focus on improving gender balance in senior leadership across Europe remains a priority for the HSBC Bank plc executive committee for 2024.

5   The completion rate shown relates to the 2023 'Taking Responsibility' Compliance training module which is categorised as 'required' learning for Global employees. Unlike with mandatory training, a formal target is not established for 'required' learning modules and non-completion is performance managed.

Responsible Business Culture

We have a responsibility to help protect our customers, our communities and the integrity of the financial system.

Employee matters

We are opening up a world of opportunity for our colleagues through building an inclusive organisation that values difference, takes responsibility and seeks different perspectives for the overall benefit of our customers.

We promote an environment where our colleagues can expect to be treated with dignity and respect. We are an organisation that acts where we find behaviours that fall short. The employee Snapshot index measuring colleagues' confidence in speaking up is at 70% in 2023.

At times, our colleagues may need to speak up about behaviours in the workplace. We encourage colleagues to speak to their line manager in the first instance, and the annual employee Snapshot survey showed 76% feel able to speak up when they see behaviour that is wrong. We recognise that at times people may not feel comfortable speaking up through the usual channels. HSBC Confidential is a global whistleblowing channel, allowing our colleagues past and present to raise concerns confidentially and, if preferred, anonymously (subject to local laws).

We aspire to be an organisation that is representative of the communities which we serve. To achieve this, we set goals that will build sustainable lasting change. We are focused on increasing women and Black heritage colleagues in senior leadership roles and while we have made progress, we know there is more to be done. 

To support our ambition, we encourage our colleagues to self-identify their ethnicity data where legally permissible. At a European level, we are limited in our collection of ethnicity data and can only report in: UK, Channel Islands, Bermuda, the Isle of Man, and South Africa. However, we are continuing to drive open dialogue and action to strengthen our employee networks and improved our diversity data where possible.

In 2024, HSBC in France, Germany, Italy, Luxembourg, Poland and Spain was recognised as a Top Employer by the Top Employers Institute, recognising excellence in Human Resources practices.

Social matters

The HSBC Group has a long-standing commitment to help support the communities in which it operates. It aims to empower people and communities to develop the skills and knowledge needed to thrive in the future.

We work with charity partners to initiate programmes that help people and communities respond to opportunities and challenges as economies transition towards a low-carbon future. We also work with our charity partners to strengthen the resilience of disadvantaged communities. For HSBC Bank plc, in 2023, these included:

-   In France, HSBC Continental Europe partnered with Article 1 to help young people from deprived communities succeed in higher education through mentoring programmes and workshop facilitation.

-   HSBC Continental Europe also supported 'Rewilding Europe' through the Together Challenge, which involved more than 2,000 employees, to strengthen our commitment to sustainability.

-   In Bermuda, we are the lead sponsor for the Ignite Young Adult Entrepreneurship programme. The programme offers participants first-hand experience and insight into how to structure and develop early-stage companies.

-   In Malta, the HSBC Malta Foundation continued to support the Prince's Trust International Achieve Programme which surpassed its targeted reach this year with 299 newly enrolled students.

HSBC Bank plc's charitable giving in 2023 was £2.8m and was further supported by our employees' contribution of over 2,000 volunteer hours to community activities during work hours.

Human rights

As set out in the HSBC Group's Human Rights Statement, we recognise the role of business in respecting human rights. The HSBC Group's approach is guided by the UN Guiding Principles on Business and Human Rights ('UNGPs') and the Organisation for Economic Co-operation and Development ('OECD') Guidelines for Multinational Enterprises on Responsible Business Conduct. The HSBC Group's Human Rights Statement and annual statements under the UK Modern Slavery Act are available on https://www.hsbc.com/who-we-are/esg-and-responsible-business/esg-reporting-centre

Anti-corruption and anti-bribery

We require compliance with all applicable anti-bribery and corruption laws in every market and jurisdiction in which we operate, including the UK Bribery Act and France's 'Sapin II' law, while focusing on the spirit of relevant laws and regulations to demonstrate our commitment to ethical behaviours and conduct as part of our approach to ESG.

HSBC provides annual mandatory training on the prevention of money laundering, bribery and corruption and tax evasion to all staff and carries out regular risk assessments, monitoring and testing of its programmes incorporating applicable findings within the annual policy refresh. HSBC also maintains clear whistleblowing policies and processes, to ensure that individuals can confidentially report concerns.

Environmental matters

More information about the HSBC Group's assessment of climate risk can be found in the HSBC Holdings plc Annual Report and Accounts 2023.

Non-Financial Information Statement

Disclosures required pursuant to the Companies, Partnerships and HSBC Group's (Accounts and Non-Financial Reporting) Regulations 2016 can be found on the following pages:

HSBC creates value by providing products and services to meet our customers' needs. We aim to do so in a way that fits seamlessly into their lives. This helps us to build long-lasting relationships with our customers. HSBC maintains trust by striving to protect our customers' data and information, and delivering fair outcomes for them and if things go wrong, we need to address complaints in a timely manner.

Operating with high standards of conduct is central to our long-term success and underpins our ability to serve our customers. Our Conduct Framework guides activities to strengthen our business and increases our understanding of how the decisions we make affect
customers and other stakeholders. Details on our Conduct Framework are available at www.hsbc.com/Conduct.

Section 172 statement

This section, from pages 10 to 11 forms our section 172 statement and addresses the requirements of the Companies (Miscellaneous Reporting) Regulations 2018. It describes how the Directors have performed their duty to promote the success of the bank, including how they have considered and engaged with stakeholders and, in particular, how they have taken account of the matters set out in section 172(1)(a) to (f) of the Companies Act 2006 (the 'Act').

The Board considered a range of factors when making decisions and is supported in the discharge of its responsibilities by:

-   an induction programme and ongoing training for Directors to provide an understanding of our business and financial performance and prospects;

-   management processes which help ensure that proposals presented to Board and committee meetings for decision include information relevant to determine the action that would most likely promote the success of the bank and involve engagement with stakeholders where relevant, to support appropriate decision making;

-   agenda planning for Board and committee meetings to provide sufficient time for the consideration and discussion of key matters:  and

-   engagement with key stakeholders which allows the Board to gain valuable insight on various perspectives, and in turn, inform their deliberations and decision making in Board and committee meetings.

Stakeholder Engagement

The Board understands the importance of effective engagement with its six key stakeholders, namely customers, employees, shareholders and investors, regulators and governments, suppliers, and communities and is committed to open and constructive dialogue with such stakeholders. Engagement with stakeholders takes place at the holding company level and at the operational level. On certain issues, the Board may engage directly with stakeholders. The outcomes from such stakeholder engagement feed into Board discussions and decision making. This approach allows the Board to better understand the impact of the bank's actions on its stakeholders and respond to the challenges facing the bank. The relevance of each stakeholder group to an issue considered by the Board,varies depending on the specific decision being taken by the Board. Not every decision the Board makes will necessarily result in a positive outcome for all stakeholders.

As a result of both its direct stakeholder interactions and the reporting and information on stakeholder engagement it receives about its stakeholders, the Board seeks to understand, and have regard to, the interests and priorities of these stakeholders.

The two examples provided below of principal discussions and decisions taken by the Board in 2023 show how the Directors and Board respectively discharged their individual and collective responsibility for promoting the long-term success of the bank and took different stakeholder considerations into account in reaching a decision or forming a view.

For further details regarding the role of the Board and the way in which it makes decisions, including key activities during 2023, please see page 89.

Customers

As one of Europe's largest banking and financial services organisations, our corporate and institutional customers are at the core of the bank's business model: without customers there would be no bank. We have a clear vision to be the leading international wholesale bank in Europe, complemented by a targeted wealth and personal banking business. The Board strives to ensure it has a broad understanding of HSBC Bank plc's customers, their needs and challenges, and to give full consideration to them when its approval is sought on matters such as material acquisitions, disposals,

investments, large scale change or transformation programmes. How we have served and supported our customers during 2023 is covered in the 'Purpose and Strategy' section on page 5 in the Strategic Report.

Throughout 2023, continued geopolitical and economic uncertainty has created additional challenges for our customers and senior management have engaged directly with customers to better understand their issues and difficulties and how the bank can respond to them. During this period, the Board has been provided with customer feedback and key performance indicators, such as net promoter scores, customer complaints, customer on-boarding times and satisfaction survey results.

The Board schedule also included Commercial Banking, Wealth and Personal Banking, Global Banking and Markets and Digital Business Services overview strategy sessions which incorporated discussions on customer interactions, customer surveys, complaints feedback and product developments to meet customers' needs.

Employee (Workforce Engagement)

Employees are critical to the success of the bank, its sustainability and long-term future. Understanding employee sentiment and how we are addressing feedback is a key area of Board focus. During the year, the Board received regular updates from senior management on the progression of our people priorities covering various employee-focused initiatives across culture, leadership, talent, skills, inclusion, wellbeing and colleague experience. Further information on people priorities can be found under Employees at pages 94 to 95.

Feedback from employees is gathered via various mechanisms including surveys, exchange meetings and 'speak up' channels and reported to the Board. The Board is also presented annually with the results of the Snapshot survey and a culture dashboard which has been developed to track progress in embedding a positive and inclusive culture across the business. Board focus on employees was heightened due to the ongoing transformation programme and the need for continuing consideration of the impact on employees when making Board decisions.

In 2023, the Board extended its engagement with colleagues in Europe and each non-executive Director met individually with a small group of the bank's 'rising star' top talent to deepen their understanding of and familiarity with those employees in the talent pool. Further details of the bank's engagement with employees can be found on pages 10 to 11 and 94 to 95.

Shareholders and Investors

The bank is a wholly-owned subsidiary of HSBC Holdings plc and, as such, the Board took into account the implications of its decisions with regard to its shareholder, HSBC Holdings plc, and its debt security investors. Examples of how it did this include:

-   the Board Chair and Committee Chairs engaged with HSBC Group counterparts and attended Group forums and Group committee meetings, together with Executive Directors, to engage on common issues and strategic priorities;

-   Board review and approval of HSBC Bank plc specific components of Group programmes;

-   Board consideration of the strength of the balance sheet to ensure that the ability to pay principal or interest on its debt securities was not at risk; and

-   engaging with HSBC Holdings plc Board members to showcase the business and its people.

Regulators and Governments

During the year, the Directors met regularly with regulators both in the UK and Europe. It is central to the success of the bank that it has constructive relationships with regulators and governments and that there is a mutual understanding of expectations and challenges and their impact on customers, the business model and the bank's strategy.

The Board receives regular updates on how HSBC interacts with regulators globally and at the European level. Understanding regulators' views and priorities shapes and influences Board discussions and decision making. Board engagement with regulators
during 2023 also included participation by Directors in industry and regulator forums and round table events.

Suppliers

Suppliers are critical to supporting the infrastructure and operations of the business and we work with suppliers to ensure mutually beneficial relationships. Board engagement with suppliers during 2023 included reviewing and overseeing management reporting on progress against the Operational Resiliency regulatory requirements, including how the bank oversees the health of the services provided by our critical third-party suppliers and how we work together with our suppliers to mitigate impacts to customers.

Communities

We have a long-standing commitment to support the communities in which we operate. The bank is conscious of the need to manage the societal and environmental impact of its business when making decisions. During the year the Board received regular updates on matters spanning human rights and environmental and climate issues.

Principal Decisions

Set out below are two of the principal decisions made by the Board during 2023. In each case, in taking such decisions, the Directors exercised their statutory duty under section 172(1) (a)-(f) of the Companies Act 2006.

Establishment of a new HSBC Private Bank (Suisse) SA, Guernsey Branch ('PBRSGSY') and transfer of existing Private Banking business in Guernsey

As a result of the Capital Requirements Directive (2013/36/EU) ('CRD V') non-EU headquartered banking groups like HSBC with significant EU operations were required to establish an EU Intermediate Parent Undertaking ('EU IPU') structure by the end of 2023 to hold its relevant EU-based credit institutions and investment firms to facilitate holistic supervision and resolution within the EU.

As a result, the HSBC Group has been restructuring its legal entity structure across Europe, including the designation of a subsidiary entity of the bank, HSBC Continental Europe, as the HSBC Group's EU IPU. The impact of these mandated transfers has created the need for funding solutions in some areas.

In support of finding a strategic funding solution for HSBC Private Bank (Suisse) SA ('PBRS') during 2023, management considered several options to address PBRS challenges and a proposal to transfer the existing Private Banking business in Guernsey from the bank's branch to a new PBRSGSY was considered by the Board.

Prior to approval, the Board reviewed and assessed options presented by management to achieve compliance with the CRD V requirements while also ensuring that PBRS remained a sustainable enterprise. The Board constructively engaged with management to consider the financial and regulatory implications and the likely consequence of the proposal on the bank's key stakeholders, as appropriate.

The implications of the transaction for several key stakeholders were considered. Management outlined engagement with customers impacted, noting that, as an intragroup exercise, client offering and the majority of contracts would not be impacted by the change in ownership. While impacts on employees were minimal, associated staff engagement was undertaken given the required novation of employment contracts to the new entity, PBRSGSY.

Associated engagement with regulators resulted in no objections being raised in respect of the proposal.

Mindful of longer-term consequences of decisions and the impact on operations, the Board also carefully considered the approach to valuation and purchaser protections in connection with the transaction. In reaching its decision the Board acknowledged the strategic rationale for the proposal in ensuring the financial sustainability of PBRS and the full mitigation of any financial impacts on the bank. Having taken all these and other factors into account, the Board approved the transaction.

Acquisition of HSBC Bank Bermuda Limited ('HBBM')

To simplify the structure of the HSBC Group, the Board considered a proposal for the bank to acquire the shares in HBBM that were held

by an unregulated holding company and direct subsidiary of HSBC Holdings plc. Oversight of Bermuda entities was already within the bank's management perimeter and therefore the Board considered the benefits of a transfer of the entity to the bank's legal perimeter.

The proposal was first endorsed at the Group Executive Committee for further consideration and decision making by the Board. Key to decision making was HBBM's strategic fit and profitability. HBBM serves both domestic and international clients, managing its activities through three Global businesses: Wholesale Banking, Wealth and Personal Banking and Markets and Securities Services.

The benefits of the proposal included simplifying the HSBC Group structure and improving the bank's diversification of business. Furthermore, the transaction would promote alignment of management and investors' views of the Europe business and its returns.

In reaching its decision, the Board constructively engaged with management to consider the financial and regulatory implications and any impacts on the bank's key stakeholders, as appropriate. While HBBM is one of two systematically important banks in Bermuda, with both retail and wholesale clients, the change in ownership would have no impact on customers with the client product offering remaining unchanged.

Similarly, the change in ownership did not create any employee impact or changes in functional reporting as the bank's management already had a delegation from HSBC Group to oversee the business. The Board recognised the complexity associated with the existing management arrangements which required preparing multiple views of financial and operational performance and how this would be overcome, post-acquisition, when management oversight would be aligned to legal ownership and deployment of capital.

Prior to the Board's approval, engagement with the relevant regulators was undertaken to secure approval of the change of control with no issues raised by the regulators. Having taken these factors into consideration, including an assessment of the financial merits and risks, regulatory engagement, and the absence of impact on employees and investors, the Board approved the proposal and the transaction completed on 1 October 2023.

Tax

Our approach to tax

We are committed to applying both the letter and the spirit of the law in all territories where we operate, and have adopted the UK Code of Practice for the Taxation of Banks. As a consequence, we seek to pay our fair share of tax in the countries in which we operate. We continue to strengthen our processes to help ensure our banking services are not associated with any arrangements known or suspected to facilitate tax evasion.

HSBC continues to apply global initiatives to improve tax transparency such as:

-   the US Foreign Account Tax Compliance Act ('FATCA');

-   the Organisation for Economic Co-operation and Development ('OECD') Standard for Automatic Exchange of Financial Account Information (also known as the Common Reporting Standard);

-   the CRD IV Country by Country Reporting;

-   the OECD Base Erosion and Profit Shifting ('BEPS') initiative; and

-   the UK legislation on the corporate criminal offence ('CCO') of failing to prevent the facilitation of tax evasion.

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