Pensions and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2012

HSBC North America Pension Plan [Member]

Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]

The table below reflects the portion of pension expense and its related components of the HSBC North America Pension Plan which has been allocated to us and is recorded in our consolidated statement of income (loss).



Year Ended December 31,	2012			2011			2010
	(in millions)
Service cost – benefits earned during the period	$	15		$	14		$	23
Interest cost on projected benefit obligation	67			74			72
Expected return on assets	(91		)	(81		)	(71		)
Amortization of prior service cost (benefit)	(5		)	(6		)	(5		)
Recognized losses	46			38			46
Curtailment benefit recognized	(31		)	—			—
Pension expense	$	1		$	39		$	65

Schedule of Assumptions Used

The assumptions used in determining pension expense of the HSBC North America Pension Plan are as follows:



	2012		2011		2010
Discount rate	4.60	%	5.30	%	5.60	%
Salary increase assumption	2.75		2.75		2.90
Expected long-term rate of return on Plan assets	7.00		7.25		7.70

The assumptions used in determining the projected benefit obligation of the HSBC North America Pension Plan at December 31 are as follows:



	2012		2011		2010
Discount rate	3.95	%	4.60	%	5.45	%
Salary increase assumption	2.75		2.75		2.75

Schedule of Changes in Fair Value of Plan Assets

A reconciliation of beginning and ending balances of the fair value of net assets associated with the HSBC North America Pension Plan is shown below.



Year Ended December 31,	2012			2011
	(in millions)
Fair value of net Plan assets at beginning of year	$	3,130		$	2,564
Cash contributions by HSBC North America	181			357
Actual return on Plan assets	395			393
Benefits paid	(221		)	(184		)
Fair value of net Plan assets at end of year	$	3,485		$	3,130

Schedule of Allocation of Plan Assets

The target sector allocations of Plan assets at December 31, 2012 are as follows:



	Percentage of Plan Assets at December 31, 2012
Domestic Large/Mid-Cap Equity	11.5	%
Domestic Small Cap Equity	3.0
International Large Cap Equity	11.5
International Small Cap Equity	3.0
Global Equity	5.5
Emerging Market Equity	5.5
Fixed Income Securities	59.0
Cash or Cash Equivalents	1.0
Total	100.0	%

The following table presents the fair values associated with the major categories of Plan assets and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair values as of December 31, 2012 and 2011.



	Fair Value Measurement at December 31, 2012
	Total			(Level 1)			(Level 2)		(Level 3)
	(in millions)
Investments at Fair Value:
Cash and short term investments	$	74		$	74		$	—	$	—
Equity Securities
U.S. Large-cap⁽¹⁾	378			374			4		—
U.S. Small-cap⁽²⁾	109			109			—		—
International Large-cap⁽³⁾	401			150			251		—
Global	189			53			136		—
Emerging Market	207			—			207		—
U.S. Treasury	829			829			—		—
U.S. Government agency issued or guaranteed	82			7			75		—
Obligations of U.S. states and political subdivisions	70			—			70		—
Asset-backed securities	44			—			1		43
U.S. corporate debt securities⁽⁴⁾	754			—			752		2
Corporate stocks – preferred	4			4			—		—
Foreign debt securities	211			4			186		21
Other investments	103			—			103		—
Accrued interest	20			6			14		—
Total investments	3,475			1,610			1,799		66
Receivables:
Receivables from sale of investments in process of settlement	89			89			—		—
Derivative financial assets	7			—			7		—
Total receivables	96			89			7		—
Total Assets	3,571			1,699			1,806		66
Liabilities	(86		)	(86		)	—		—
Total Net Assets	$	3,485		$	1,613		$	1,806	$	66



	Fair Value Measurement at December 31, 2011
	Total			(Level 1)			(Level 2)		(Level 3)
	(in millions)
Investments at Fair Value:
Cash and short term investments	$	97		$	97		$	—	$	—
Equity Securities
U.S. Large-cap⁽¹⁾	347			342			5		—
U.S. Small-cap⁽²⁾	159			158			1		—
International⁽³⁾	282			117			165		—
Global	174			86			88		—
Emerging Market	175			—			175		—
U.S. Treasury	861			861			—		—
U.S. Government agency issued or guaranteed	70			7			63		—
Obligations of U.S. states and political subdivisions	50			—			42		8
Asset-backed securities	37			—			1		36
U.S. corporate debt securities⁽⁴⁾	598			—			598		—
Corporate stocks – preferred	4			3			1		—
Foreign debt securities	169			2			159		8
Other investments	61			—			61		—
Accrued interest	20			7			13		—
Total investments	3,104			1,680			1,372		52
Receivables:
Receivables from sale of investments in process of settlement	28			28			—		—
Derivative financial assets	26			—			26		—
Total receivables	54			28			26		—
Total Assets	3,158			1,708			1,398		52
Liabilities	(28		)	(28		)	—		—
Total Net Assets	$	3,130		$	1,680		$	1,398	$	52


⁽¹⁾	This category comprises actively managed enhanced index investments that track the S&P 500 and actively managed U.S. investments that track the Russell 1000.


⁽²⁾	This category comprises actively managed U.S. investments that track the Russell 2000.

⁽³⁾

This category comprises actively managed equity investments in non-U.S. and Canada developed markets that generally track the MSCI EAFE index. MSCI EAFE is an equity market index of 22 developed market countries in Europe, Australia, Asia and the Far East including Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.


⁽⁴⁾	This category represents predominantly investment grade bonds of U.S. issuers from diverse industries.


⁽⁵⁾	This category is comprised completely of interest rate swaps.

Schedule of Credit Ratings

The following table provides additional detail regarding the rating of our U.S. corporate debt securities at December 31, 2012:



	Level 2		Level 3		Total
	(in millions)
AAA to AA⁽¹⁾	$	40	$	—	$	40
A+ to A-⁽¹⁾	274		—		274
BBB+ to Unrated⁽¹⁾	438		2		440
Total	$	752	$	2	$	754


⁽¹⁾	We obtain ratings on our U.S. corporate debt securities from both Moody’s Investor Services and Standard and Poor’s Corporation. In the event the ratings we obtain from these agencies differ, we utilize the lower of the two ratings.

Schedule of Effect of Significant Unobservable Inputs, Changes in Plan Assets

The following table summarizes additional information about changes in the fair value of Level 3 assets during 2012 and 2011



			Total Gains and (Losses) Included in																	Current Period Unrealized Gains (Losses)
	Jan 1, 2012		Income		Other Comp. Income			Purchases		Settlement			Transfers Into Level 3		Transfers Out of Level 3			Dec. 31, 2012		Current Period Unrealized Gains (Losses)
	(in millions)
Obligations of U.S. states and political subdivisions	$	8	$	—	$	—		$	—	$	(1	)	$	—	$	(7	)	$	—	$	—
Asset-backed securities	36		—		3			9		(5		)	—		—			43		4
U.S. corporate debt securities	—		—		—			2		—			—		—			2		—
Foreign debt securities	8		—		(2		)	17		—			—		(2		)	21		1
Total assets	$	52	$	—	$	1		$	28	$	(6	)	$	—	$	(9	)	$	66	$	5



			Total Gains and (Losses) Included in																Current Period UnrealizedGains (Losses)
	Jan 1, 2011		Income		Other Comp. Income			Purchases		Settlement			Transfers Into Level 3		Transfers Out of Level 3		Dec. 31, 2011		Current Period UnrealizedGains (Losses)
	(in millions)
Obligations of U.S. states and political subdivisions	$	—	$	—	$	—		$	2	$	—		$	6	$	—	$	8	$	1
Asset-backed securities	28		—		—			11		(4		)	1		—		36		—
Foreign debt securities	17		—		(2		)	—		(7		)	—		—		8		—
Total assets	$	45	$	—	$	(2	)	$	13	$	(11	)	$	7	$	—	$	52	$	1

Schedule of Changes in Projected Benefit Obligations

A reconciliation of beginning and ending balances of the projected benefit obligation of the defined benefit pension plan is shown below and reflects the projected benefit obligation of the merged HSBC North American plan.



	2012			2011
	(in millions)
Projected benefit obligation at beginning of year	$	3,923		$	3,384
Service cost	39			45
Interest cost	168			178
Actuarial losses	465			466
Plan amendments⁽¹⁾	—			34
Benefits paid	(221		)	(184		)
Projected benefit obligation at end of year	$	4,374		$	3,923


⁽¹⁾	The Plan Amendments relate to the approval in December 2010 effective January 1, 2011 to amend the benefit formula, thus increasing the benefits associated with services provided by certain employees in past periods and to the approval in the first quarter of 2010 to cease all future benefit accruals for legacy participants under the final average pay formula effective January 1, 2011.

Schedule of Expected Benefit Payments

Estimated future benefit payments for the HSBC North America Pension Plan are as follows:



	HSBC North America
	(in millions)
2013	$	183
2014	186
2015	189
2016	193
2017	196
2018-2022	1,031

Schedule of Accumulated and Projected Benefit Obligations

A reconciliation of the beginning and ending balances of the accumulated postretirement benefit obligation is as follows:



	2012			2011
	(in millions)
Accumulated benefit obligation at beginning of year	$	85		$	79
Service cost	1			1
Interest cost	3			4
Actuarial losses	(2		)	6
Plan curtailments	(8		)	—
Benefits paid	(9		)	(5		)
Accumulated benefit obligation at end of year	$	70		$	85

Postretirement Plans Other Than Pensions [Member]

Defined Benefit Plans and Other Postretirement Benefit Plans [Line Items]

Components of Net Periodic Benefit Cost

The net postretirement benefit cost included the following components:



Year Ended December 31,	2012		2011		2010
	(in millions)
Service cost – benefits earned during the period	$	1	$	1	$	1
Interest cost	3		4		4
Amortization of transition obligation	2		2		2
Net periodic postretirement benefit cost	$	6	$	7	$	7

Schedule of Assumptions Used

The assumptions used in determining the net periodic postretirement benefit cost for our postretirement benefit plans are as follows:



	2012		2011		2010
Discount rate	4.25	%	4.95	%	5.20	%
Salary increase assumption	2.75		2.75		2.90

The assumptions used in determining the benefit obligation of our postretirement benefit plans at December 31 are as follows:



	2012		2011
Discount rate	3.35	%	4.25	%
Salary increase assumption	2.75		2.75

Schedule of Expected Benefit Payments

Estimated future benefit payments for our postretirement benefit plans are summarized in the following table.



	(in millions)
2013	$	7
2014	7
2015	7
2016	7
2017	7
2018-2022	31

Schedule of Effect of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates

Assumed health care cost trend rates have an effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would increase (decrease) service and interest costs and the postretirement benefit obligation as follows:



	One Percent Increase		One Percent Decrease
	(in millions)
Effect on total of service and interest cost components	$	—	$	—
Effect on accumulated postretirement benefit obligation	1		(1		)