Retained Earnings and Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2022

Retained Earnings Note Disclosure [Abstract]

Retained Earnings and Regulatory Capital Requirements

Retained Earnings and Regulatory Capital RequirementsBank dividends are one of the sources of funds used for payment of shareholder dividends and other HSBC USA cash needs. Approval from the Office of the Comptroller of the Currency ("OCC") is required if the total of all dividends HSBC Bank USA declares in any year exceeds the cumulative net income for that year, combined with the net income for the two preceding years reduced by dividends attributable to those years. OCC approval also is required for a reduction of permanent capital of HSBC Bank USA. Under a separate restriction, payment of dividends is prohibited in amounts greater than undivided profits then on hand, after deducting actual losses and bad debts. Bad debts are debts due and unpaid for a period of six months unless well secured, as defined, and in the process of collection.

We are subject to regulatory capital rules issued by U.S. banking regulators including Basel III (the "Basel III rule"). A bank or bank holding company's failure to meet minimum capital requirements can result in certain mandatory actions and possibly additional discretionary actions by its regulators. The following table summarizes the capital amounts and ratios of HSBC USA and HSBC Bank USA, calculated in accordance with the Basel III rule at September 30, 2022 and December 31, 2021:

	September 30, 2022							December 31, 2021
	Capital Amount		Well-Capitalized  Ratio(1)			Actual Ratio		Capital Amount		Well-Capitalized Ratio(1)			Actual Ratio
	(dollars are in millions)
Common equity Tier 1 ratio:
HSBC USA	$	14,892	4.5	%	(2)	14.0	%	$	15,341	4.5	%	(2)	15.1	%
HSBC Bank USA	17,334		6.5			16.6		17,665		6.5			17.6
Tier 1 capital ratio:
HSBC USA	16,157		6.0			15.2		16,606		6.0			16.3
HSBC Bank USA	19,834		8.0			19.0		20,165		8.0			20.1
Total capital ratio:
HSBC USA	18,471		10.0			17.3		18,821		10.0			18.5
HSBC Bank USA	21,915		10.0			21.0		22,157		10.0			22.1
Tier 1 leverage ratio:
HSBC USA	16,157		4.0		(2)	9.5		16,606		4.0		(2)	8.5
HSBC Bank USA	19,834		5.0			11.9		20,165		5.0			10.5
Risk-weighted assets:(3)
HSBC USA	106,582							101,827
HSBC Bank USA	104,294							100,363
Adjusted quarterly average assets:(4)
HSBC USA	169,575							194,469
HSBC Bank USA	166,258							192,521

(1)HSBC USA and HSBC Bank USA are categorized as "well-capitalized," as defined by their principal regulators. To be categorized as well-capitalized under regulatory guidelines, a banking institution must maintain capital equal to or in excess of the ratios reflected in the above table, and must not be subject to a directive, order, or written agreement to meet and maintain specific capital levels.

(2)There are no common equity Tier 1 or Tier 1 leverage ratio components in the definition of a well-capitalized bank holding company. The ratios shown are the regulatory minimums.

(3)Calculated using the Standardized Approach.

(4)Represents the Tier 1 leverage ratio denominator which reflects quarterly average assets adjusted for amounts permitted to be deducted from Tier 1 capital.

In response to the COVID-19 pandemic, the federal banking agencies issued a final rule that provided the option to transition in the regulatory capital impacts of the current expected credit loss accounting standard over a five-year period. In 2020, HSBC North America and HSBC Bank USA elected the five-year transition option and, as a result, our capital ratios were being reported in accordance with the transition rules in the final rule. However, as of December 31, 2021, there was no remaining impact to regulatory capital under the transition rules and, therefore, there are no amounts being phased into regulatory capital in subsequent periods.

During the third quarter of 2022, HSBC USA received a common stock return of capital of $1.0 billion from its subsidiary, HSBC Bank USA, and paid a distribution on its common stock of $1.0 billion from surplus capital to its parent, HSBC North America.