Reference Number ZC18
Directors’ Report and Financal Statements
Incorporated in England with limted liablity by Royal Charter 1853
Princpal Office: 1 Basinghall Avenue, London, EC2V 5DD, England
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
Contents
Page
Strategic report
1 – 48
Our business 1
Market environment 8
Business model 11
Our strategy 14
Client segment reviews 17
Regional reviews 18
Financal review 20
Underlying versus statutory results reconcilations 24
Risk review 29
Stakeholders and responsiblites 37
Directors’ report
49 – 53
Statement of directors’ responsiblites
54
Risk review and Capital review
55 – 154
Financal Statements and Notes
155 – 324
Independent auditors’ report 155
Consolidated income statement 167
Consolidated statement of comprehensive income 168
Balance sheets 169
Consolidated statement of changes in equity 170
Cash flow statements 171
Company statement of changes in equity 172
Notes to the financal statements 173
Glossary
325-334
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
1
Strategic report
Our business
The bank for the new economy
We are the bank for the new economy – of people and ideas, of technology
and trade.
We have built a strong foundation in the world’s most dynamic markets, serving the people and businesses that drive their
growth. We thrive at the frontline of today’s biggest challenges and are taking a stand for impact – on climate change,
economic particpation and globalisaton. Our collaborative approach to innovaton and drive to be diverse and inclusve
mean we can do more, better and faster.
Our purpose to drive commerce and prosperity through our unique diversty, and our heritage and values are expressed in our
brand promise, Here for good.
The following are company designatons as described in the document:
Standard Chartered Bank Group (Group) – being Standard Chartered Bank and its subsidaries
Standard Chartered PLC Group (PLC Group) – being the ultimate parent and its subsidaries
Standard Chartered Bank (Company) – being the standalone Bank legal entity
About this report
Sustainablity reporting – We adopt an integrated approach to corporate reporting, embedding non-financal informaton throughout our Annual Report.
Alternative performance measures – The Group uses a number of alternative performance measures in the discusson of its performance. These measures exclude certain
items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. They provide the
reader with insght into how management measures the performance of the business.
For more informaton please vist sc.com
linkedn.com/company/standard-chartered-bank
facebook.com/standardchartered
Unless another currency is specifed, 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.
All disclosures in the Strategic Report, Directors’ Report and the Risk Review and Capital Review are unaudited unless otherwise stated.
Unless the context requires, withn this document, ‘China’ refers to the People’s Republic of China and, for the purposes of this document only, excludes Hong Kong Special
Adminstrative Region (Hong Kong), Macau Special Adminstrative 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, Philppines, Singapore, Sri Lanka, Thailand and Vietnam; Africa and Middle
East (AME) includes Angola, Bahrain, Botswana, Cameroon, Côte d’Ivoire, Egypt, The Gambia, Ghana, Iraq, Jordan, Kenya, Lebanon, Mauritus, Nigera, Oman, Pakistan,
Qatar, Saudi Arabia, Sierra Leone, South Africa, Tanzania, the United Arab Emirates (UAE), Uganda, Zambia and Zimbabwe; and Europe and Americas (EA) includes
Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Ireland, Jersey, Poland, Sweden, Turkey, the UK and the US.
Withn the tables in this report, blank spaces indcate that the number is not disclosed, dashes indcate that the number is zero and nm stands for not meaningful.
Standard Chartered Bank is incorporated in England and Wales with limted liablity and is headquartered in London. The Group’s head office provides guidance on
governance and regulatory standards.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
2
Strategic report continued
Our business
Confidence in our purpose and strategy
Despite external challenges, we have continued to make good progress against the strategy we set out in February 2019 and
are on track to deliver our objectves. As highlghted in last year’s report, we refreshed our 2019 strategy into four strategic
priorties and three enablers to guide us from our transformational phase to becoming a leader in global finance. In light of
the pandemic, we have reviewed our strategy and are confident that it remains fit for purpose and will enable us to realise
our ambitons.
We measure our progress against Group key performance indcators (KPIs), a selection of which are below. Our Group KPIs
include non-financal measures reflecting our commitment to sustainable social and economic development across our
business, operations and communites. Our Sustainablity Aspiratons, aligned to the UN Sustainable Development Goals,
provide tangible targets to drive sustainable business outcomes.
Urgent climate change, stark inequalty and unfair aspects of globalisaton impact everyone and the planet. We are setting
long-term ambitons to play our part in tackling these issues. Together with the people and businesses we serve, we can be
central to the transiton to a fair, sustainable future.
This is why we have committed to three Stands: Accelerating Zero, Liftng Particpation and Resetting Globalisaton.
FINANCIAL KPIs AND MEASURES
Underlying basis
Statutory basis
Return on tangible equity
6.9%
645bps
Read more on (page 20)
Return on tangible equity
5.5%
747bps
Read more on (page 21)
Operating income
$8,914m
4%
Read more on (page 20)
Operating income
$8,860m
4%
Read more on (page 21)
Profit before tax
$2,748m
131%
Read more on (page 20)
Profit before tax
$2,381m
344%
Read more on (page 21)
Common Equity Tier 1 ratio
12.3%
41bps
Read more on (page 20)
NON-FINANCIAL KPIs
Diversty and incluson: Women in senior roles
28.7%
1.7 ppt
Basis point (bps) and percentage movements are in relation to 31 December 2020, with brackets representing
negative movements
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
Our business
Standard Chartered Bank is authorised by the Prudential Regulation Authority (PRA) and regulated by the PRA and by the
Financal Conduct Authority (FCA). The PRA is the consolidated supervisor in respect of the Group (of which PLC is the
ultimate parent).
Standard Chartered Bank is a material subsidary of the PLC Group for the purposes of the Bank of England led single point of
entry preferred resolution strategy for the PLC Group. The Group is a core part of, and critcal provider of essential services to
the PLC Group and is fundamental to the delivery of the PLC Group’s purpose, franchise and strategy. The formation of an
ASEAN hub was completed in 2021, following the transfers of Malaysia, Thailand and Vietnam subsidaries under our existng
Singapore subsidary entity, which itself remains under Standard Chartered Bank.
Clients
• The Group remains the largest CCIB orignation hub supporting a signficant part of CCIB revenues and is key to
the global network propositon
• The Group is the relationshp hub for the majorty of key CCIB clients, particularly Organisaton for Economic
Co-operation and Development (OECD) clients
• The Group holds the majorty of the PLC Group’s corporate and financal insttutions deposits, a signficant part of
the PLC Group’s USD funding base
Capabilties
• The Group holds key licenses and hosts infrastructure vital for the global franchise such as global USD & EUR clearing
• The Group is the main Financal Markets (FM) booking centre supporting the majorty of global FM revenues
• The Group remains a main access point to high quality USD funding
Critcal
infrastructure
• The Group is the key liqudity management centre: holding the majorty of the PLC Group’s high-quality liqud assets
for regulatory purposes
• The Group provides functional support on a global basis
• The Group operates global business services hubs for the benefit of the PLC Group includng shared service centres
and centres of excellence
Investors
• The Group’s UK domicle underpins a unique investor propositon: emerging markets access from a
UK regulated platform
• A signficant number of PLC Group’s equity and debt investors are based in the Group’s footprint
Recovery and
resolution
• Standard Chartered Bank is the largest material subsidary for the purposes of minmum requirement for own
funds and eligble liablites (MREL) and total loss-absorbing capital (TLAC)
• The Group is critcal to the delivery of capital and liqudity generating management actions in PLC Group’s
recovery planning
• The Group houses various critcal services and critcal functions in resolution and resolution management
The Group’s Credit Ratings
The Group remains a highly rated insttution (in both absolute and relative terms) with the following long and short-term
issuer ratings all with a stable outlook. S&P upgraded Standard Chartered Bank in December 2021 to A+ from A. The upgrade
was driven by a methodology change, supported by strengthened risk management, COVID-19 resilence and an increase in
loss-absorbing capacity.
S&P Moody’s Fitch
Long Term A+ A1 A+
Short Term A-1 P-1 F1
Outlook Stable Stable Negative
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
4
Our business
Who we are and what we do
Our purpose is to drive commerce and create prosperity through our unique diversty. We serve two client segments in three
regions, supported by nine global functions.
Our client segments
Corporate, Commercial & Institutonal Banking
Corporate, Commercial and Institutonal Banking supports
clients with their transaction banking, financal markets,
corporate finance and borrowing needs across our
markets. We provide solutions to our clients in some of the
world’s fastest-growing economies and most active trade
corridors.
Operating income
$5,703m $5,670m
Underlying basis Statutory basis
Consumer, Private & Business Banking
Consumer, Private and Business Banking serves indviduals
and small businesses, with a focus on affluent and
emerging affluent in many of the world’s fastest
growing cites.
Operating income
$2,679m $2,679m
Underlying basis Statutory basis
Central & other items
Operating income
$532m $511m
Underlying basis Statutory basis
Total operating income
Operating income
$8,914m $8,860m
Underlying basis Statutory basis
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
5
Our business
Our regions
Asia
Our largest markets by income are Singapore and India.
Operating income
$4,274m $4,263m
Underlying basis Statutory basis
Europe & Americas
Centred in London, with a growing presence across
continental Europe, and New York, with presence in both
North America and several markets in Latin America. A key
income generator for the Group.
Operating income
$2,006m $1,975m
Underlying basis Statutory basis
Africa & Middle East
Present in 25 markets, of which the most sizeable by
income are United Arab Emirates (UAE), Nigera and
Kenya.
Operating income
$2,435m $2,438m
Underlying basis Statutory basis
Central & other items (region)
Operating income
$199m $184m
Underlying basis Statutory basis
Total operating income
Operating income
$8,914m $8,860m
Underlying basis Statutory basis
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
6
Global functions
Guidng and supporting our businesses
Our client-facing businesses are supported by our global functions, which work together to ensure the Group’s operations
run smoothly and consistently
Human Resources
Maximses the value of our investment in people through recruitment, development and employee engagement.
Legal
Enables sustainable business and protects the Group from legal-related risk.
Technology & Innovation
Responsible for the Group’s systems development and technology infrastructure.
Risk
Responsible for the sustainablity of our business through good management of risk by providng oversight and challenge,
ensuring that business is conducted in line with regulations.
Operations
Responsible for all client operations end-to-end and ensures meeting the needs of our clients is at the heart of our
operational framework. The function’s strategy is supported by consistent performance metrics, standards and practices
that are aligned to client outcomes.
Group CFO
Comprises seven support functions: Finance, Treasury, Strategy, Investor Relations, Corporate Development, Supply Chain
Management and Property.
Corporate Affairs & Brand and Marketing
Manages the Group’s communicatons and engagement with stakeholders to protect our reputation and promote our
brand and services.
Group Internal Audit
An independent function whose primary role is to help the Court and Executive Management to protect the assets,
reputation and sustainablity of the Group.
Conduct, Financal Crime and Compliance
Enables sustainable business by deliverng the right outcomes for our clients and our markets by drivng the highest standards
in conduct, compliance and fightng financal crime.
Valued behaviours
Our valued behaviours demand that we do things differently, in order for us to succeed. Only then will we realise our potential
and truly be Here for good.
Never settle
•
Continuously improve and innovate
•
Simplfy
•
Learn from your successes and failures
Better together
•
See more in others
•
“How can I help?”
•
Build for the long term
Do the right thing
•
Live with integrty
•
Think client
•
Be brave, be the change
Strategic report continued
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Directors’ Report and Financal Statements 2021
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Strategic report continued
Where we operate
Our unique footprint connects emerging and high-growth markets with more established economies, allowing us to channel
capital where it’s needed most. These are the markets we call home, and our deep roots in them enable us to make things
happen. For over 160 years, we have used the power of our network to help customers who trade, operate or invest in these
regions. Our deep roots in our markets enable us to make things happen. We are shaping our bank to drive their success –
and ours – in the new economy of the future. What sets us apart is our diversty – of people, cultures and networks.
We are present in 58 markets.
Asia
We have a long-standing and deep franchise across some of the world’s fastest-growing economies in Asia. The two markets
contributng the highest income are Singapore and India.
Australia
Japan
Philppines
Bangladesh
Laos
Singapore
Brunei
Macau
Sri Lanka
Cambodia
Mainland China
TaiwanHong Kong
Malaysia
Thailand
India Myanmar
Vietnam
Indonesia
Nepal
Africa & Middle East
We have a deep-rooted heritage, in Africa & Middle East and have been present in the region for more than 160 years. We
are present in the largest number of sub-Saharan African markets of any internatonal banking group.
Angola
Jordan
Sierra Leone
Bahrain
Kenya
South Africa
Botswana
Lebanon
Tanzania
Cameroon
Mauritus
UAE
Cote d’Ivoire
Nigera
Uganda
Egypt
Oman
ZambiaThe Gambia
Pakistan Zimbabwe
Ghana
Qatar
Iraq
Saudi Arabia
Europe & Americas
We support clients in Europe & Americas through hubs in London and New York and also have a strong presence in several
European and Latin American markets.
Argentina
France
Poland
Brazil
Germany
Sweden
Colombia
Ireland
Turkey
Falkland Islands
Jersey
UK
US
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
8
Market environment
Macroeconomic factors affecting the global landscape
Global macro trends
Trends in 2021
•
Global GDP recovered sharply in 2021, likely by 5.8 per cent, following the 3.3 per cent contraction in 2020.
•
Asia was the best performing region, recording growth of 7.2 per cent, driven by positve growth in China of 8.1 per cent.
•
Amongst the majors, the US recorded growth of 5.7 per cent helped by signficant fiscal stimulus. The UK recorded the
strongest growth (likely 7.5 per cent), following a near-10 per cent contraction in 2020.
•
The euro-area economy grew by 5.2 per cent in 2021 following a 6.4 per cent contraction in 2020; the economic activty was
constrained in Q1 as COVID-19 cases were elevated, but improved into Q2 and Q3 as the vaccine rollout picked up
momentum, allowing restrictons to be eased.
•
Policy makers continued to provide signficant emergency support, but risng inflaton across the world as a result of supply
chain disruptons and energy shortages has prompted some central banks to begin tightenng policy and others to
accelerate their timetables.
Outlook for 2022
•
Global growth is expected to moderate to 4.4 per cent in 2022.
•
Asia will remain the fastest growing region in the world and will continue to drive global growth, expanding by 5.7 per cent.
•
Amongst the majors, the euro-area is expected to record a larger bounce (4.0 per cent) than the US (3.4 per cent) but
largely as there will still be spare capacity to unwind.
•
The COVID-19 outbreak is likely to remain a drag on growth in regions where vaccinaton rates are low but should become a
secondary risk for most developed markets.
•
Policy support will be scaled back as more central banks shift towards tightenng policy to counter inflaton, and fiscal
programmes are eased as governments shift their focus towards returning public finances to a sustainable footing.
•
There are several downside risks to this outlook includng further delays to the roll-out of COVID-19 vaccines in emerging
markets, longer-than-expected supply chain disruptons, higher inflaton becoming embedded in households’ and firms’
expectations, or a geopolitcal event risk resulting in another commodity price spike.
Medium and long-term view
Legacy of COVID-19
•
Better vaccine access has helped developed markets recover faster than emerging markets. As the pace of vaccinatons
improves in emerging markets, allowing greater resumption of economic activty, growth in emerging markets will improve
over the medium-term
•
Inflation concerns are likely to fade over the medium-term as energy prices likely moderate and supply chain bottlenecks
are resolved. This is likely to mean only limted policy tightenng by central banks that should be broadly supportive of
growth
•
Fiscal policy might turn from a tailwnd to a headwind for growth. High public debt and government deficts also mean
that most economies are looking to tighten fiscal policy over the medium-term following the signficant stimulus that
accompanied COVID-19
•
COVID-19 has brought a renewed focus on supply chain concentration risks. Companies are likely to continue to accelerate
the shortening and simplfying of supply chains
•
As companies aim to reduce concentration risks, they may diversfy production away from China, the world’s mega-trader.
However, Global research surveys of firms in the Greater Bay area indcate that China remains a preferred destinaton for
most, followed by Associaton of South East Asian Nation (ASEAN) economies
Strategic report continued
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Directors’ Report and Financal Statements 2021
9
Strategic report continued
Broader global trends
•
The world economy could see a permanent loss of economic output or ‘scarring’ due to the recession that followed the
pandemic. This would make it harder for emerging markets to catch-up with developed markets
•
COVID-19 has accelerated the pace of digtalisaton of economies. Higher capex and moves towards digtalisaton could
boost productivty growth, proving an anti-dote to economic scarring concerns. Withn emerging markets, countries in Asia
are best placed to take advantage of digtalisaton
•
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
•
Relatively younger populations, as well as the adoption of digtal technology, will allow emerging markets to become
increasngly important to global growth
•
Risng nationalsm, anti-globalisaton and protectionsm are a threat to long-term growth prospects in emerging markets
Regional outlooks
Actual and projected growth by country in 2021 and 2022 per cent
2022
2021
Asia China 5.3 per cent
8.1 per cent
Hong Kong 2.3 per cent
6.3 per cent
Korea 2.9 per cent
3.9 per cent
India 8.0 per cent
9.5 per cent
Indonesia 4.8 per cent
3.6 per cent
Singapore 4.1 per cent
7.0 per cent
Africa & Middle East Nigera 3.1 per cent
2.5 per cent
UAE 3.0 per cent
2.5 per cent
Europe & Americas UK 5.0 per cent
7.5 per cent
US 3.4 per cent
5.7 per cent
Trends and outlook for our three regions
Asia
•
China’s GDP grew by 8.1 per cent in 2021, benefitng from strong external demand and a low base. We forecast 2022
growth at 5.3 per cent, closer to the lower bound of its estimated potential growth range of 5-6 per cent. We see upside risk
from an easing of auto chip shortages and downside risk from prolonged weak housing demand amid expectations of a
price correction.
•
While innovaton, decarbonisaton and common prosperity rank high on China’s long-term agenda, the government has
put growth stabilsation as the top priorty in 2022. We expect macro polices to be eased, especially in H1, and the pace
and intensty of regulatory tightenng to be finetuned to bolster domestic demand.
•
We expect Hong Kong’s economy to grow by 2.3 per cent in 2022 supported by global (and especially China) trade as
post-COVID normalisaton broadens, and the continued improvement in the local job market supporting domestic
consumption. We expect South Korea’s economy to grow 2.9 per cent in 2022 supported by economic reopening and
external trade.
•
We expect ASEAN as a region to play catch up in terms of economic growth recovery versus developed markets (DMs) in
2022. Economic growth should improve as restrictons are eased and as higher vaccinaton rates limt the severity of any
new lockdowns. The recovery may however be bumpy, especially in economies where current vaccinaton rates are still
below herd levels, for example, Indonesia, and Philppines
•
We expect inflaton in ASEAN to remain manageable for most regional economies although upside risk comes from
prolonged supply side disruptons and as demand recovers in the region through 2022. This should allow monetary policy to
remain accommodative in H1-2022.
•
India is likely to clock two successive years of high single digt growth buoyed by favourable base effect and recovering
economic activty. We expect FY23 GDP growth of 8 per cent as more contact intensve sectors revert to normalised activty
with increased vaccinaton coverage continued fiscal policy support and better real wages. Inflation has been persistently
high since late 2019 and better recovery is likely to push policy rate normalisaton in 2022.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
10
Strategic report continued
Africa & Middle East
•
We expect the continuaton of a modest economic recovery in the Sub-Saharan Africa (SSA) region, with our coverage
economies growing at an average of 3.1 per cent in 2022, from c.3.8 per cent in 2021.
•
Although the pace of vaccine adminstration has been slower in SSA compared with elsewhere, economic reopening in
trading partners, risng global demand, and higher commodity prices have helped to provide firmer underpinnngs to SSA
growth. We do not expect signficant new containment measures in 2022, with earlier lockdowns and curfews having an
increasngly less severe impact on the economy.
•
Despite risng inflaton on higher food and fuel prices, we expect monetary policy in the region to remain largely
accommodative, with modest normalisaton measures in most markets.
•
Given that the COVID-shock left most SSA economies with elevated public debt ratios, fiscal policy consolidaton will
remain a key ambiton, as SSA economies attempt to safeguard market access. In the case of East African economies,
adoption of IMF programmes is meant to send a signal on the intent to pursue fiscal consolidaton in order to stabilse
debt ratios.
•
The Middle East region is likely to be on a divergent recovery path with oil exporting countries bouncing back faster versus
oil importng countries, which remain constrained by high levels of debt. The pace of vaccinaton rollout proved more rapid
among oil exporters, with countries like the UAE leading the charge. The strong outlook for hydrocarbon prices and
expected relaxation of targets for OPEC members is set to underpin the region’s liqudity prospects in 2022. Improvements
in oil exporters’ fiscal and current account balances will boost the region’s reserve positon, leading to lower funding needs
and preserving $ currency pegs.
Europe & Americas
•
Growth in Europe and Americas is likely to slow in 2022 as output gaps shrink and policy support is gradually eased back.
•
COVID-19 will still present risks in early 2022 given the threat of new variants, and as booster vaccine programmes will take
time to fully roll out, but supply chain disruptons (along with higher energy costs and potential shortages in Europe) will be
the major headwind to growth.
•
We expect inflatonary pressures to remain high at least through H1 2022, but disnflation should kick in heading into H2.
•
A further escalation in tensions between Russia and Ukraine and the potential introducton of sanctions could have a
negative impact on European economies and banks.
•
The Fed is likely to begin hikng rates by Q1 2022, but only gradually thereafter, with one more hike in June 2022 and two
further 25bps hikes expected in 2023. The European Central Bank (ECB) is likely to begin rate hikes in H2-2022. Both the Fed
and ECB are in the process of tapering their assets purchase programmes.
•
The trade environment is likely to continue improvng, but there are risks to the EU-UK trade agreement amid a broader rise
in politcal tensions.
•
In Latin America, we expect growth to moderate in 2022 as domestic demand normalizes, while exports are expected to
remain strong amid high commodity prices and improved supply-side constraints.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
11
Business model
We help internatonal companies to connect across our global network and help indviduals and local business grow
their wealth.
Our business
Corporate, Commercial and Institutonal Banking (CCIB)
We support companies across the world, from small and medium-sized enterprises to large corporates and insttutions,
both digtally and in person.
Consumer, Private and Business Banking (CPBB)
We support small businesses and indviduals, from mass retail clients to affluent and high-net-worth indviduals, both digtally
and in person.
Starting Q1 2022, we will be disclosng SC Ventures and related entites as a separate client segment.
Our products and services
Financal Markets
•
Project and transportation finance
•
Debt capital markets and leveraged finance
•
Macro, commodites and credit trading
•
Financng and securites services
•
Sales and structuring
Transaction Banking
•
Cash management
•
Trade finance
•
Working capital
Wealth Management
•
Investments
•
Insurance
•
Wealth advice
•
Portfolio management
Retail Products
•
Deposits
•
Mortgages
•
Credit cards
•
Personal loans
How we generate returns
We earn net interest on the margin for loans and deposit products, fees on the provison of advisory and other services and
trading income from providng risk management in financal markets.
Income
•
Net interest income
•
Fee income
•
Trading income
Profits
•
Income gained from providng our products and services minus expenses and imparments
Return on tangible equity
•
Profit generated relative to tangible equity invested
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
12
Strategic report continued
What makes us different
Our purpose is to drive commerce and prosperity through our unique diversty – this is underpinned by our brand promise,
Here for good. Our Stands – aimed at tackling the world’s biggest issues – Accelerating Zero, Liftng Particpation and
Resetting Globalisaton, challenge us to use our unique positon to help.
Client focus
Our clients are our business. We build long-term client relationshps through trusted advice, expertise and best-in-class
capabilties.
Robust risk management
We are here for the long-term. Effective risk management allows us to grow a sustainable business.
Distnct propositon
Our understanding of the markets and our extensive internatonal network allow us to offer a tailored propositon to our
clients, combinng global expertise and local knowledge.
Sustainable and responsible business
We’re committed to sustainable social and economic development across our business, operations and communites.
How we are shaping our future
We are continuously looking for ways to improve our business model to accelerate returns
In January 2021, we further streamlined our Corporate, Commercial & Institutonal Banking (CCIB) segment, integratng our
Corporate Finance and Financal Markets businesses. The integraton will create a simplfied orignation and distrbution
engine drivng balance sheet velocity and an improved client offering.
In additon, we remain focused on productivty. In 2021, we have digtised businesses, drivng process improvements through
automation and simplficaton, optimsed target operating models, reduced property space and changed the way we work,
to achieve productivty improvements and cost reduction. We continue to seek further opportunites to generate productivty
saves to continue to ensure we remain benchmarked against peers.
Going forward, we aim to deliver a return on tangible equity (RoTE) of around 10%, by focusing on drivng improved returns in
CCIB, transforming profitablity in CPBB, improvng efficency through creating operational leverage and deliverng
sustainable shareholder distrbutions.
We are committng resources to grow our franchise in the large and high-returns markets, sustainng and accelerating
progress in the three optimal” markets announced in February 2019 (India, UAE, Indonesia). We have also stepped up our
review of each of our client segments, markets and products and services.
The sources of value we rely on
We aim to use resources in a sustainable way, to achieve the goals of our strategy.
Human capital
Diversty differentates us. Deliverng our Purpose and Stands rests on how we continue to invest in our people, the employee
experience we further enhance and the culture we strengthen.
How we’re enhancing our resources
•
More than 16,500 colleagues have completed learning courses in 2021 to build the future skills that we need – includng
analytics, data, digtal, cybersecurity and sustainable finance
•
We continue to create a work environment that supports resilence, innovaton and incluson, with ongoing focus on mental,
physical, social and financal well-being. This includes rolling out hybrid-working arrangements across our markets.
Strong brand
We are a leading internatonal banking group with more than 160 years of history. In many of our markets we are a household
name.
How we’re enhancing our resources
•
In 2021 we evolved our brand identty to become a digtal-first brand, reflecting the innovaton that drives our business
forward. The refreshed Standard Chartered identty is modern, dynamic and agile, adapted for the digtal world and
representing our commitment to stay relevant to our clients and their evolving needs
•
We have been successful in leveraging brand and insghts to support business growth. The Group successfully improved its
reputation in 2021, exceeding the average score for the banking sector, and ranking top three in the majorty of our key
markets over 2021
International network
We have an unparalleled internatonal network, connecting companies, insttutions, and indviduals to, and in, some of the
world’s fastest growing and most dynamic regions.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
13
Strategic report continued
How we’re enhancing our resources
•
We continue to invest in transforming our core business into a leading digtal first and data-driven platform, positoning us
to deliver superior client experiences, access new high-growth segments, grow wallet with existng clients and create new
business model opportunites
•
Our network remains one of our key competitve advantages and we continue to leverage our network to drive growth in
Trade from “West to East” corridors and financal markets solutions for our clients
Local expertise
We have a deep knowledge of our markets and an understanding of the drivers of the real economy, offering us insghts that
help our clients achieve their ambitons.
How we’re enhancing our resources
•
We continue to support small and medium businesses (SMEs), providng them with much needed funding to restart and
grow their businesses amid the re-opening of economies.
•
We increased our focus on SMEs particpating in the New Economy, in particular those who are part of e-commerce
ecosystems
Financal strength
With $545 billon in assets on our balance sheet, we are a strong, trusted partner for our clients.
How we’re enhancing our resources
•
Stronger capital and much more resilent balance sheet with growth in high quality deposits.
•
Common Equity Tier 1 (CET1) ratio at 12.3 per cent
Technology
We possess leading technological capabilties to enable best-in-class customer experience, operations and risk
management.
How we’re enhancing our resources
•
We value the engineerng excellence culture. Globally over 10,000 engineers are designng and buildng the best-in-class
technology stack which is highly scalable and supports a fast turnaround of ideas into service
•
We are accelerating our cloud transformation journey, moving signficant applicatons to be cloud-based includng our core
banking, payment and trading systems and new digtal ventures
•
We adopt next-generation technologies to better serve our customers, improves efficencies and deliver new business
opportunites.
The value we create
We aim to create long-term value for a broad range of stakeholders in a sustainable way
Clients
We want to deliver easy, everyday banking solutions to our clients in a simple and cost-effective way, and with a great
customer experience. We enable indviduals to grow and protect their wealth; we help businesses trade, transact, invest, and
expand; and we also help a variety of financal insttutions, includng banks, public sector and development organisatons,
with their banking needs.
Employees
We believe great employee experience drives great client experience. We want all our people to pursue their ambitons,
deliver with purpose and have a rewarding career enabled by great people leaders.
Society
We strive to operate as a sustainable and responsible company, drivng prosperity through our core business, and
collaborating with local partners to promote social and economic development.
Suppliers
We engage diverse suppliers, both locally and globally, to provide efficent and sustainable goods and services for our
business.
Regulators and governments
We engage with relevant authorites to play our part in supporting the effective functionng of the financal system and the
broader economy.
Investors
We aim to deliver robust returns and long-term sustainable value for our investors.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
14
Our strategy
To become a leader in global finance
Over the past several years, we have conducted a bottom-up review of our strategy. While we could have done more in a few
areas, such as faster tackling of low returning risk weighted assets (RWA) in CCIB, further simplfying the way we operate, and
being even more aggressive in transforming our business processes and generating additonal savings, we still believe our
strategy is the right one. We have made good progress in the year, and are on track to deliver our objectves.
Going forward, we remain committed to these objectves to achieve PLC Group’s ambitons by 2025:
•
To be the number one wholesale digtal banking platform
•
To be among the top three affluent brands
•
Double our mass presence
•
Become a market leader in sustainablity
We will continue to focus on:
•
Four strategic priorties: wholesale network business, affluent client business, mass retail business and sustainablity
•
Three critcal enablers: people and culture, new ways of working and innovaton
We are anchoring our strategic priorties and enablers are in our three Stands. They are: Accelerating Zero; Liftng
Particpation and Resetting Globalisaton. More details on our Stands are described on pages 15 – 16. Throughout this section,
we will highlght the linkages of our strategic priorties to our Stands.
Strategic priorties
Wholesale network business
Through our unique network, we faciltate investment, trade and capital flows, providng a starting point in achievng our
stand of resetting globalisaton. We have also started on our journey towards our stand of accelerating zero, by focusing on
sustainable finance.
We are the one of the leading internatonal wholesale banks in our emerging markets footprint through:
•
Taking leading positons in high-returning, high-growth sectors
•
Deliverng a market-leading digtal platform by continung to invest in core digtal capabilties
•
Drivng ‘capital lite’ products while buildng a sustainable finance franchise and expanding our orignation and distrbution
ecosystem e.g. accelerating our Financal markets growth
•
Speeding up growth in large markets while expanding in growing markets and corridors e.g. intra-Asia and East-West
Affluent client business
We offer outstanding personalised advice and exceptional experiences for our Private,Priorty and Premium Banking clients
to help them grow and prosper internatonally and at home. Providng access to sustainable investments is a key
differentator, supporting our Stand of Accelerating Zero.
As a leading internatonal wealth manager in Asia across the Affluent continuum, we are:
•
Unlocking the value of the Affluent client continuum across Asia, Africa and the Middle East, with suitable client
propositons, coverage models and advisory capabilties
•
Maximsing the reach of our diverse network through internatonal banking, complemented by a strong focus on
developing Hong Kong and Singapore as key internatonal wealth centres
•
Continung to grow our wealth business, which saw double digt asset growth over the last three years, with propositons
anchored in investment thought leadership, an open architecture approach, personalised advice at scale and an
integrated digtal-hybrid experience
Mass retail business
We help our clients prosper and deliver everyday banking solutions by integratng our services into their digtal lives.
New digtal solutions, strategic partnerships and advanced analytics are instrumental to our business, enabling us to
signficantly increase our reach and relevance to serve clients in a meaningful way, supporting our stand of liftng
particpation. We are:
•
Transforming to a digtal first model and buildng enablers to be the partner of choice to leading global and
regional companies
•
Enhancing our value propositon and deepening our capabilties across digtal sales and marketing as well as data
and analytics
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
15
•
Growing the share of our mass retail client income from new innovatve business models
Sustainablity
In Sustainablity, we continue to focus on sustainable and transiton finance, supporting our stand of accelerating zero. We
provide access to finance, networks and trainng to young people, contributng to our stand of liftng particpation of
communites across our network. We support companies in improvng social, environmental and governance standards,
supporting our stand of resetting globalisaton.
Our goal is to become the world’s most sustainable and responsible bank and the leading private sector catalyser of finance
for UN Sustainable Development Goals (SDGs) where it matters most – in Asia, Africa and Middle East we are:
•
Leveraging climate risk management to support clients in managing climate risk and identfying transiton opportunites
e.g. mobilse green and transiton finance
•
Integrating sustainable finance as a core component of our customer value propositon and deliverng sustainable
finance solutions
•
Continung to promote economic incluson and tackle inequalty in our footprint through Futuremakers by
Standard Chartered
•
Targeting net zero carbon emissons from our operations by 2025, and from our financng by 2050
People and culture
We are continung to invest in our people to build future-ready skills, provide them a differentated experience and
strengthen our culture of innovaton and incluson. This includes:
•
Expanding hybrid working across our footprint, with 83% of colleagues across 25 markets already on hybrid-working
arrangements in 2021
•
Embedding our refreshed approach to performance, reward and recogniton that puts greater focus on outperformance
through collaboration and innovaton
•
Increasing re-skillng and upskillng opportunites towards future roles that are aligned with the business strategy and
indviduals’ aspiratons
•
Focusing on well-being to enhance indvidual resilence, productivty and performance
New ways of working
We continue to embrace client first, mature our operating rhythm in organizatonal agilty and empower our people to
continuously improve the way we work. We are working on identfying ways to track derived value and enhance our speed of
decison making and delivery, as a key source of competitve advantage.
Innovation
We have a three-pronged innovaton approach to transform the bank, to achieve our goal of 50% income from new
businesses.
•
Transform our core via digtizaton
•
Leverage partnerships to drive scale and extend reach
•
Build new business models to create value
We will also establish SC Ventures and related entites as a separate client segment in 2022, to further drive innovaton
differentation and disruptve growth.
Our Stands
The severe impacts of climate change, stark inequalty and unfair aspects of globalisaton impact everyone on the planet.
We are taking a stand, setting long-term ambitons for our role on these issues where they matter most. This works in unison
with our strategy, stretching our thinkng, our action and our leadership to accelerate our growth.
•
We have defined three ‘stands’ – which is our name for long-term ambitons on societal challenges
•
These are not separate from our strategy. They are integral to deliverng and accelerating our strategy, because they will
stretch our thinkng, our action and our leadership
•
We will use our unique abilties to connect the capital, people and ideas needed to address the signficant socio-economic
challenges and opportunites of our time
•
Each of these stands will impact how we engage with our clients and define the future of our societes
•
We already have signficant progress to show in each area and we will be setting long-term goals as we deliver near term
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
16
Strategic report continued
•
This is not philanthropy: we will drive scalable, sustainable commercial growth and transform our franchise. You will see us
increasngly active in these areas
Accelerating Zero
We’re helping emerging markets in our footprint reduce carbon emissons as fast as possible, without slowing development,
putting the world on a sustainable path to net zero by 2050. We stand for a rapid, just transiton to net zero where it matters
most. Our plan to achieve net zero targets has three aims: reduce emissons, catalyse finance and partnerships, and
accelerate new solutions.
•
The world needs to reach net zero by 2050 or face a climate catastrophe with increasng extreme weather events and
climate-induced migraton
•
We have a unique role to play in faciltating a just transiton to net zero carbon where it matters most: across Asia, Africa
and the Middle East
•
We aim to reduce the emissons associated with our financng activties to net zero by 2050, with 2030 interm targets in our
most carbon-intensve sectors
•
We aim to reduce absolute financed thermal coal-minng emissons by 85 per cent by 2030, in additon to a prohibtion on
financng new or expanding coal-fired power plants, and revenue based carbon-intensty of 63 per cent for power, 33 per
cent respectively for steel and minng (excluding thermal coal minng), 30 per cent for oil and gas
•
We aim to catalyse finance and partnerships to scale impact, capital and climate solutions to where they are needed most,
includng a plan for PLC Group to mobilse USD300 billon in green and transiton finance between 2021 and 2030
•
We aim to accelerate new solutions to support a just transiton in our markets, includng a new dedicated Transiton
Acceleration Team to support clients in high-emittng sectors, and launch sustainable products
•
We aim to reach net zero carbon emissons from our own operations by 2025
Liftng Particpation
We’re determined to improve the lives of 1 billon people and their communites by unleashing the financal potential of
women and small businesses in our core markets. We stand for equitable access to financal support for women and small
business.
•
Inequality, along with gaps in economic incluson in our key markets, means that many young people, women and small
businesses struggle to gain access to the financal system to save for their futures and grow their businesses. We want to
democratise wealth management and make it easily accessible to the mass segment at low cost
•
Through partnerships and technology, we can expand the reach and scale of financal services – drivng accessible banking
at scale and connecting clients to opportunites that promote access to finance and economic incluson. By developing
new digtal business models, we’re able to grow our business while unleashing opportunity for millons more people
Resetting Globalisaton
It’s PLC Group’s goal to support 500,000 companies to improve working and environmental standards and give everyone the
chance to particpate in the world economy, so growth becomes fairer and more balanced. We stand for a new model of
globalisaton based on transparency, incluson and dialogue.
Globalisaton has lifted millons out of poverty, but too many people have been left behind, and divsion and inequalty have
grown, along with negative impacts on our planet.
We believe in the potential of globalisaton to enable economic growth and increase particpation in the world economy –
but in its current form, it must be reimagned to ensure that it best serves all people, everywhere.
We advocate a new, more inclusve model of globalisaton based on transparency and fairness, buildng trust, and promoting
the exchange of views and innovaton to solve the world’s toughest problems.
As a leading trade bank, we can connect the capital, expertise and ideas needed to drive new standards and create
innovatve solutions for more equitable and sustainable growth.
Specifcally, we aim to:
•
Increase transparency across supply chains to enable consumer choice and drive responsible trade
•
Bring enhanced levels of security, tracking and confidence to financal activty
•
Provide access to the best and most innovatve solutions to both private and public sector
•
Support several companies to improve working and environmental standards and givng everyone the chance to
particpate in the world economy, so growth becomes fairer and more balanced
•
Make global trade more equitable by improvng access to finance for smaller suppliers who often lack adequate financng
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
17
Client segment reviews
Corporate, Commercial & Institutonal Banking
Profit before taxation
$2,289m $2,181m
Underlying basis Statutory basis
Segment overview
Corporate, Commercial & Institutonal Banking supports clients with their transaction banking, financal markets, corporate
finance and borrowing needs across 49 markets. We provide solutions to several clients in some of the world’s fastest-growing
economies and most active trade corridors.
Our clients include governments, banks, investors and local and large corporations operating or investng mainly in Asia,
Africa and the Middle East. Our strong and deep local presence across these markets enables us to help co-create bespoke
financng solutions and to connect our clients multi-laterally to investors, suppliers, buyers and sellers, enabling them 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 & Institutonal Banking is at the heart of the Group’s shared purpose to drive commerce and
prosperity through our unique diversty.
We are committed to Sustainable Finance, deliverng on our ambitons to increase support and funding for financal products
and services that have a positve impact on our communites and the environment and support sustainable economic
growth.
Performance highlghts
•
Underlying operating profit before taxation of $2,289 millon up 91 per cent, primarly driven by credit imparment releases
partially offset by lower income and higher expenses
•
Underlying operating income of $5,703 millon was down 3 per cent primarly due to lower Macro Trading income on the
back of reduced market volatilty and tighter spreads as well as lower Cash management income impacted by a low
interest rate environment. This was partially offset by strong performance in Credit Markets and Trade.
•
Credit imparment is a net writeback, driven by ECL releases, due to improved macro conditons, lower Stage 3 imparments
and loan recoveries
•
Good balance sheet momentum with total assets up by 4 per cent. Total Liablites down marginally
Consumer, Private & Business Banking
Profit before taxation
$502m $455m
Underlying basis Statutory basis
Segment overview
Consumer, Private and Business Banking serves indviduals and small businesses, with a focus on affluent and emerging
affluent in many of the world’s fastest-growing cites. We provide digtal banking services with a human touch to our clients,
with services spanning across deposits, payments, financng products and Wealth Management. We also support our clients
with their business banking needs. Private Banking offers a full range of investment, credit and wealth planning products to
grow, and protect, the wealth of high net-worth indviduals. We are closely integrated with the Group’s other client segments;
for example, we offer employee banking services to Corporate, Commercial & Institutonal Banking clients, and Consumer,
Private and Business Banking also provides a source of high-quality liqudity for the Group. Increasing levels of wealth across
Asia, Africa and the Middle East support our opportunity to grow the business sustainably. We aim to uplift client experience,
improvng productivty by drivng digtisaton and cost efficencies, and simplfying processes.
Performance highlghts
•
Underlying profit before taxation of $502 millon up $399m driven by higher income and lower credit imparments.
•
Expenses were up 1 per cent year-on-year but were down excluding our investment in our digtal Ventures business
•
Underlying operating income of $2,679 millon was up 2 per cent, primarly on account strong performance in Wealth
Management and Mortgages, partly offset by margin compression in Retail deposits due to lower interest rates
•
Credit imparment dropped 68% due to lower expected credit loss provisons, reflecting improvement in macroeconomic
conditons
•
Total assets and liablites grew 11 per cent and 6 per cent respectively
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
18
Strategic report continued
Regional reviews
Asia
Profit before taxation
$1,527m $1,443m
Underlying basis Statutory basis
Region overview
The Asia region has a long-standing and deep franchise across the markets and some of the world’s fastest-growing
economies. The region generated 48 per cent of the Group’s income benefittng from our extensive network of markets. Of
these, the two markets in the region contributng the highest income are Singapore and India, underpinned by a diversfied
franchise and deeply rooted presence. The region is highly interconnected, with China’s economy at its core. Our global
footprint and strong regional presence, distnctive propositon and continued investment positon us strongly to capture
opportunites as they arise from the continung opening up of China’s economy. The region is benefitng from risng trade
flows, includng activty generated from the Belt & Road intiatve, continued strong investment, and a risng middle class
which is drivng consumption growth and improvng digtal connectivty.
Performance highlghts
•
Underlying operating profit before tax of $1,527 millon was up 100 per cent mainly due to lower credit imparment.
•
Underlying operating income of $4,274 millon down 1 per cent, due to margin compression in cash management and retail
deposits and lower treasury product income, partially offset by strong performance in Wealth Management.
•
Credit imparment down 90 per cent, due to material specifc provisons taken in previous year, and release of ECL
provisons on the back of improved macroeconomic environment
•
Strong balance sheet momentum with assets up 5 per cent and liablites up 9 per cent
Africa & Middle East
Profit before taxation
$858m $832m
Underlying basis Statutory basis
Region overview
We have a deep-rooted heritage in Africa & Middle East and are present in 25 markets, of which the UAE, Nigera, Pakistan,
Kenya, and Ghana are the largest by income. We are present in the largest number of sub-Saharan African markets of any
internatonal banking group.
A rich history, deep client relationshps and a unique footprint in the region, as well as across centres in Asia, Europe and the
Americas enable us to seamlessly support our clients. Africa & Middle East is an important element of global trade and
investment corridors, includng those on China’s Belt and Road intiatve and we are well placed to faciltate these flows. We
have strengthened our footprint with a branch set-up in Saudi Arabia in 2021. Positve macro-tends (oil, commodity and UAE
property prices) & market opportunites, but challenges and uncertaintes remain. We’re confident that the opportunites in
the region will support long-term sustainable growth for the Group. We continue to invest selectively and drive efficencies.
Performance highlghts
•
Underlying operating profit before tax of $858millon was the highest since 2015, driven by reduced credit imparments,
higher income and lower expenses
•
Signficant turnaround in UAE with a return to profitablity in 2021
•
Underlying operating income of $2,435 millon was up 3 per cent mainly due to growth in Financal Markets and Wealth
Management income.
•
Total assets were down 1 per cent and total liablites were up 3 per cent
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
19
Strategic report continued
Europe & Americas
Profit before taxation
$715m $626m
Underlying basis Statutory basis
Region overview
The Group supports clients in Europe & 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 capabilties.
The region generates signficant income for the Group’s Corporate, Commercial & Institutonal Banking business. In additon
to being a key orignation centre for Corporate, Commercial & Institutonal Banking, the region offers local, on-the-ground
expertise and solutions to help internatonally minded clients grow across Europe & Americas. The region is home to the
Group’s two biggest payment clearing centres and the largest trading floor. More than 80 per cent of the region’s income
derives from Financal Markets and Transaction Banking products.
Our Private Banking business focuses on serving clients with links to our footprint markets.
Performance highlghts
•
Underlying operating profit before taxation of $715 millon improved 16 per cent driven by lower imparments, partly offset
by lower income and higher costs
•
Underlying operating income of $2,006 millon was down 3 per cent largely due to lower Financal Markets performance
and lower realisaton gains from Treasury, partly offset by higher Trade and Lending income
•
Expenses increased 12 per cent due to normalisaton of performance-related pay, and increased investment and
technology expense
•
Total assets and liablites grew 9 per cent year-on-year
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
20
Financal review
Summary of financal performance
2021
$millon
2020
$millon
Change
%
Net Interest income (1)
4,056
4,100Other income (6)
4,858
5,185Underlying operating income 8,914
9,285 (4)
Other underlying expenses (2)
(6,104)
(5,963)UK bank levy 70
(100)
(331)Underlying operating expenses (6,204)
(6,294) 1
Underlying operating profit before imparment and taxation 2,710
2,991 (9)
Credit imparment release/(charge) 101
28
(1,948)Other imparment release (94)
9
147Profit from associates and jont ventures –
1
1Underlying profit before taxation 2,748
1,191 131
Restructuring (19)
(325)
(272)Goodwill imparment nm¹
–
(403)Other items nm¹
(42)
20Statutory profit before taxation 2,381
536 344
Taxation (45)
(743)
(514)Profit after tax 1,638
22 nm¹
Underlying return on tangible equity (%)
6.9
0.4Common Equity Tier 1 (%)
12.3
12.71 Not meaningful
Operating income
declined 4 per cent primarly with both net interest income and other income down year-on-year.
Net interest income
decreased 1 per cent with increased volumes more than offset by a 7 per cent or 9 basis point reduction in
net interest margin. Net interest income included a positve $163millon IFRS9 interest income catch-up adjustment in respect
of interest earned on historcally impared assets, increasng the net interest margin by 5 basis points.
Other income
reduced 6 per cent, due to lower Financal Markets and lower realisaton gains in Treasury
Operating expenses
excluding the UK bank levy are up 2 per cent primarly reflecting the Group’s continued investment in
transformational digtal capabilties and the normalisaton of an increase in performance related pay. The cost-to-income
ratio (excluding the UK bank levy) increased 4 percentage points to 68 per cent. The UK bank levy decreased by $231 millon
to $100 millon reflecting a change in basis of calculation as it is now chargeable only on the Group’s UK balance sheet.
Credit imparment
is a net credit of $28m and declined by $1,976 millon from prior year. This is driven primarly by lower stage 3
imparment, loan recoveries and release of expected credit loss provisons, reflecting an improvement in macroeconomic
conditons.
Other imparment
down 94 per cent due to non-recurrence of benefit arisng from reversal of previously impared assets in
previous year.
Charges
relating to restructuring and other items increased by $53 millon and $62 millon respectively and was more than
offset by a non-repeat of $403millon goodwill imparment primarly relating to India and UAE booked in 2020.
Taxation
of $743 millon for the year represents an effective tax rate of 31 per cent and is lower than FY2020’s effective tax
rate of 96 per cent.
Return on tangible equity
increased by 645 basis points to 6.9 per cent driven by higher profits.
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
21
Strategic report continued
Statutory financal performance summary
2021
$millon
2020
$millon
Change
%
Net Interest income (1)
4,052
4,100Other income (6)
4,808
5,136Statutory operating income 8,860
9,236 (4)
Statutory operating expenses –
(6,480)
(6,463)Statutory operating profit before imparment and taxation 2,380
2,773 (14)
Credit imparment release/(charge) 102
30
(1,976)Goodwill & Other imparment 89
(30)
(262)Profit from associates and jont ventures –
1
1Statutory profit before taxation 2,381
536 344
Taxation (45)
(743)
(514)Profit after tax 1,638
22 nm¹
Statutory return on tangible equity (%)
5.5
(2.0)1 Not meaningful
Underlying profit/(loss) before tax by client segment and geographic region
2021
$millon
2020
(Restated)¹
$millon
Change
%
Corporate, Commercial & Institutonal Banking
1
2,289
1,196 91
Consumer, Private & Business Banking
1
502
103 387
Central & other items (client) 60
(43)
(108)Underlying profit before taxation 2,748
1,191 131
Asia 100
1,527
762Africa & Middle East nm
858
16Europe & Americas 16
715
616Central & other items (geographic) (73)
(352)
(203)Underlying profit before taxation 2,748
1,191 131
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients
Net Interest Margin
2021
$millon
2020
$millon
Change
1
$millon
Adjusted net interest income
2
4,052
4,100 (1)
Average interest-earning assets 4
323,145
311,146Average interest-bearing liablites 1
258,360
254,620Gross yield (%)
3
1.91
2.51 (59)
Rate paid (%)
3
0.83
1.49 (66)
Net interest margin (%)
4
1.26
1.35 (9)
1 Variance is better/(worse) other than assets and liablites which is increase/(decrease)
2 Adjusted net interest income is statutory net interest income less funding costs for the trading book and financal guarantee fees on interest earning assets
3 Change in the basis points (bps) difference between two periods rather than the percentage change
4 Adjusted net interest income divded by average interest-earning assets, annualised
Adjusted net interest income was down 1 per cent driven by a 7 per cent decline in net interest margin which fell 9 basis point
year-on-year, reflecting the continued low interest rate environment following the cut in policy rates which occurred in early
2020. Excluding the $163 millon benefit from IFRS9 income adjustments booked during the year, the net interest margin in
2021 would have averaged 121 basis points.
Average interest-earning assets increased 4 per cent driven by higher investment securites balances. Gross yields declined 59
basis points compared to the average in 2020 predominantly reflecting the impact of continued compression of key interest
rates.
Average interest-bearing liablites increased 1 per cent driven by growth in customer accounts. The rate paid on liablites
decreased by 66 basis points year-on-year reflecting interest rates movements.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
22
Strategic report continued
Credit quality
The solid risk management foundations that the Group has built over time has allowed the Group to focus on emerging
strongly from the COVID-19 pandemic, despite the uneven recovery across markets and industres. In spite of the challenging
conditons that remain, the Group has seen improvement in number of credit metrics with the stock of high-risk assets
reducing over 6 consecutive quarters and a $1.9 billon reduction in credit imparment year-on-year. The Group is well
positoned to support our clients as economies recover but continues to remain viglant to the continued impact of COVID-19.
2021
$millon
2020
$millon
Gross loans and advances to customers
1
149,672
146,778
Of which stage 1
129,990
122,883Of which stage 2
12,741
15,606Of which stage 3
6,941
8,289Expected credit loss provisons (4,873)
(5,917)
Of which stage 1
(266)
(331)Of which stage 2
(381)
(619)Of which stage 3
(4,226)
(4,967)Net loans and advances to customers 144,799
140,861
Of which stage 1
129,724
122,552Of which stage 2
12,360
14,987Of which stage 3
2,715
3,322Cover ratio of stage 3 before/after collateral (%)
61 / 78
60 / 77Credit grade 12 accounts ($millon)
1,639
2,039Early alerts ($millon)
4,285
8,526Investment grade corporate exposures (%)
71
631 Includes reverse repurchase agreements and other simlar secured lending held at amortised cost of $3,764 millon at 31 December 2021 (2020: $2,919 millon)
Restructuring and other items
The Group’s statutory 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 signficant or material in the
context of the Group’s normal business earnings for the period and items which management and stakeholders would
ordinarly identfy separately when assessing underlying performance period-by period.
Restructuring charges of $325 millon for 2021 reflect the impact of actions to transform the organisaton to improve
productivty, primarly redundancy related charges. Other items include a $62 millon regulatory financal penalty and a
$20millon fair value gain relating to a SC Ventures investment.
2021
$millon
2020
$millon
Restructuring Goodwill Other items
Restructuring Goodwill Other items
Operating income – 6
(74) – 20
(55)Operating expenses – 14
(214) – (62)
(183)Credit imparment – –
2 – –
(28)Other imparment (403) –
(39) – –
(6)(Loss)/profit before taxation (325) – (42)
(272) (403) 20
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
23
Strategic report continued
Balance sheet and liqudity
2021
$millon
2020
(Restated)¹
$millon
Assets
Loans and advances to banks
29,999
27,666Loans and advances to customers
144,799
140,861Other assets
369,993
345,066Total assets 544,791
513,593
Liablites
Deposits by banks
25,205
23,761Customer accounts
242,331
216,719Other liablites
241,818
239,884¹Total liablites 509,354
480,364
Equity
35,437
33,229Total equity and liablites 544,791
513,593
Advances-to-deposits ratio (%)
1,2
52%
57%
SC Bank is not regulated for Liqudity Coverage Ratio (LCR), however, the bank and material subsidaries in the consolidaton have standalone LCR ratios above
100 per cent.
1 Includes correction of $81 millon fair value hedge accounting adjustment
2 In calculating the advances-to-deposits ratio, the Group now excludes $15,168 millon held with central banks (2020: $14,296 millon) that have been confirmed as
repayable at the point of stress
The Group’s balance sheet is strong, highly liqud and diversfied.
Loans and advances to customers increased 6 per cent since December 2020 to $145 billon driven mainly by growth in
Financal Markets.
Customer accounts of $242 billon increased 12 per cent since December 2020 driven largely by an increase in operating
account balances withn Cash Management
Other assets increased 7 percent since December 2020 while other liablites were 1 percent higher. The growth in other assets
was driven by increased revenue purchase agreement volumes and an increase in investment securites held withn Treasury
Markets. The growth in other liablites reflects increased repurchase agreements and issued debt securites offset by reduced
derivatve balances
The advances-to-deposits ratio reduced from 57 per cent to 52 per cent year on year as the Group continued to focus on
improvng the quality and mix of its liablites
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
24
Strategic report continued
Capital base and ratios
2021
$millon
2020¹
$millon
CET1 capital
23,884
23,898Additonal Tier 1 capital (AT1)
5,872
4,551Tier 1 capital
29,756
28,449Tier 2 capital
12,075
12,263Total capital
41,831
40,712CET1 capital ratio (%)
12.3%
12.7%Total capital ratio (%)
21.6%
21.7%Leverage ratio (%)
4.5%
4.7%1 Restatement of 2020 includes correction of fair value hedge accounting adjustment of $81 millon.
Standard Chartered Bank is authorised by the PRA and regulated by the Financal Conduct Authority and the PRA as
Standard Chartered Bank (Solo Consolidated).
The Group successfully completed the formation of an ASEAN hub during 2021 in which the Group’s existng businesses in
Malaysia, Thailand and Vietnam were moved under the Group’s existng Singapore subsidary entity, which itself remains
under Standard Chartered Bank. Standard Chartered Bank continues to operate through its branches and a number of
subsidaries, all of which remain well capitalsed in line with their applicable Court-approved Risk Appetites which takes into
account local regulations, Pillar 1 and 2 requirements and regulatory and management buffers as applicable.
The Group’s CET1 capital ratio remained strong at 12.3 per cent at FY2021 with leverage at 4.5 per cent. The Group maintans
high levels of loss absorbing capacity. Compared to 31 December 2020, the Group’s CET1 capital ratio decreased 41 basis
points mainly due to RWA increasng by $6.1 billon to $194.0 billon.
Underlying versus statutory results reconcilations
Reconcilations between underlying and statutory results are set out in the tables below:
Operating income by client segment
2021
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income
5,703 2,679 532 8,914
Restructuring
(33) – (41) (74)
Other items
– – 20 20
Statutory operating income 5,670 2,679 511 8,860
2020 (Restated)¹
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income 5,858 2,619 808 9,285
Restructuring (41) – (14) (55)
Other items – – 6 6
Statutory operating income
5,817 2,619 800 9,236
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
25
Strategic report continued
Operating income by region
2021
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income
4,274 2,435 2,006 199 8,914
Restructuring
(11) 3 (31) (35) (74)
Other items
– – – 20 20
Statutory operating income 4,263 2,438 1,975 184 8,860
2020 (Restated)¹
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income 4,337 2,356 2,065 527 9,285
Restructuring (3) (1) – (51) (55)
Other items – – – 6 6
Statutory operating income
4,334 2,355 2,065 482 9,236
1 Following the Group’s change in organisatonal structure, there has been an integraton of Greater China & North Asia and ASEAN & South Asia to Asia. Prior year has
been restated.
Profit before taxation (PBT)
2021
Underlying
$millon
Regulatory Fine
$millon
Restructuring
$millon
Net gain on
businesses
disposed/held
for sale
$millon
Goodwill
imparment
$millon
Statutory
$millon
Operating income
8,914 – (74) 20 – 8,860
Operating expenses
(6,204) (62) (214) – – (6,480)
Operating profit/(loss) before imparment
losses and taxation 2,710 (62) (288) 20 – 2,380
Credit imparment release
28 – 2 – – 30
Other imparment release/(charge)
9 – (39) – – (30)
Profit from associates and jont ventures
1 – – – – 1
Profit/(loss) before taxation 2,748 (62) (325) 20 – 2,381
2020
Underlying
$millon
Regulatory fine
$millon
Restructuring
$millon
Net gain on
businesses
disposed/held
for sale
$millon
Goodwill
imparment
$millon
Statutory
$millon
Operating income 9,285 – (55) 6 – 9,236
Operating expenses (6,294) 14 (183) – – (6,463)
Operating profit/(loss) before imparment
losses and taxation
2,991 14 (238) 6 – 2,773
Credit imparment (1,948) – (28) – – (1,976)
Other imparment release/(charge) 147 – (6) – (403) (262)
Profit from associates and jont ventures 1 – – – – 1
Profit/(loss) before taxation
1,191 14 (272) 6 (403) 536
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
26
Strategic report continued
Profit before taxation (PBT) by client segment
2021
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Operating income 5,703 2,679 532 8,914
External
5,560 2,322 1,032 8,914
Inter-segment
143 357 (500) –
Operating expenses (3,591) (2,008) (605) (6,204)
Operating profit/(loss) before imparment losses and taxation 2,112 671 (73) 2,710
Credit imparment release/(charge)
216 (169) (19) 28
Other imparment (charge)/release
(39) – 48 9
Profit from associates and jont ventures
– – 1 1
Underlying profit/(loss) before taxation 2,289 502 (43) 2,748
Restructuring
(108) (47) (170) (325)
Goodwill imparment & other items
– – (42) (42)
Statutory profit/(loss) before taxation 2,181 455 (255) 2,381
2020 (Restated)¹
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Operating income
5,858 2,619 808 9,285
External 6,046 2,119 1,120 9,285
Inter-segment (188) 500 (312) –
Operating expenses
(3,538) (1,983) (773) (6,294)
Operating profit before imparment losses and taxation
2,320 636 35 2,991
Credit imparment (1,402) (523) (23) (1,948)
Other imparment release/(charge) 278 (10) (121) 147
Profit from associates and jont ventures – – 1 1
Underlying profit/(loss) before taxation
1,196 103 (108) 1,191
Restructuring (142) (49) (81) (272)
Goodwill imparment & other items – – (383) (383)
Statutory profit/(loss) before taxation
1,054 54 (572) 536
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients.
Profit before taxation (PBT) by region
2021
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Operating income 4,274 2,435 2,006 199 8,914
Operating expenses (2,635) (1,610) (1,444) (515) (6,204)
Operating profit/(loss) before imparment losses and taxation 1,639 825 562 (316) 2,710
Credit imparment (charge)/release
(112) 34 120 (14) 28
Other imparment (charge)/release
– (1) 33 (23) 9
Profit from associates and jont ventures
– – – 1 1
Underlying profit/(loss) before taxation 1,527 858 715 (352) 2,748
Restructuring
(84) (26) (89) (126) (325)
Goodwill imparment & other items
– – – (42) (42)
Statutory profit/(loss) before taxation 1,443 832 626 (520) 2,381
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
27
Strategic report continued
2020 (Restated)¹
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Operating income
4,337 2,356 2,065 527 9,285
Operating expenses
(2,608) (1,672) (1,286) (728) (6,294)
Operating profit/(loss) before imparment losses and taxation
1,729 684 779 (201) 2,991
Credit imparment (charge)/release (1,130) (654) (171) 7 (1,948)
Other imparment release/(charge) 163 (14) 8 (10) 147
Profit from associates and jont ventures – – – 1 1
Underlying profit/(loss) before taxation
762 16 616 (203) 1,191
Restructuring (41) (87) (32) (112) (272)
Goodwill imparment & other items – – – (383) (383)
Statutory profit/(loss) before taxation
721 (71) 584 (698) 536
1 Following the Group’s change in organisatonal structure, there has been an integraton of Greater China & North Asia and ASEAN & South Asia to Asia. Prior period has
been restated.
Return on tangible equity (RoTE)
2021
$millon
2020
$millon
Average parent company Shareholders’ Equity
29,204
28,790Less Preference share premium
(1,500)
(1,500)Less Average intangble assets
(3,618)
(3,406)Average Ordinary Shareholders’ Tangible Equity 24,086
23,884
Profit for the year attributable to equity holders 1,638
22
Non-controlling interests
(29)
(47)Divdend payable on preference shares and AT1 classifed as equity
(292)
(458)Profit/(loss) for the year attributable to ordinary shareholders 1,317
(483)
Items normalised:
Regulatory fine
62
(14)Restructuring
325
272Goodwill Impairment
–
403Net gains on sale of Businesses
(20)
(6)Tax on normalised items
(27)
(71)Underlying profit for the year attributable to ordinary shareholders 1,657
101
Underlying Return on Tangible Equity 6.9%
0.4%
Statutory Return on Tangible Equity 5.5%
(2.0)%
2021
%
2020
%
Underlying RoTE 6.9
0.4
Regulatory fine
(0.3)
0.1Restructuring
Of which: Income
(0.3)
(0.2)Of which: Expenses
(0.9)
(0.8)Of which: Credit imparment
–
(0.1)Of which: Other imparment
(0.1)
–Net gains on disposal of available for sale instruments
0.1
–Goodwill imparment
–
(1.7)Tax on normalised items
0.1
0.3Statutory RoTE 5.5
(2.0)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
28
Strategic report continued
Alternative performance measures
An alternative performance measure is a financal measure of historcal or future financal performance, financal positon, or
cash flows, other than a financal measure defined or specifed in the applicable financal reporting framework. The following
are key alternative performance measures used by the Group to assess financal performance and financal positon.
Measure Defintion
Constant
currency basis
A performance measure on a constant currency basis (ccy) is presented such that comparative periods are
adjusted for the current year’s functional currency rate. The following balances are presented on a constant
currency basis when described as such:
• Operating income
• Operating expenses
• Profit before tax
• RWAs or Risk-weighted assets
Underlying/
Normalised
A performance measure is described as underlying/normalised if the statutory result has been adjusted for
restructuring and other items representing 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 signficant
or material in the context of the Group’s normal business earnings for the period, and items which management
and investors would ordinarly identfy separately when assessing performance period-by-period. A reconcilation
between underlying/normalised and statutory performance is contained in Note 2 to the financal statements.
The following balances and measures are presented on an underlying basis when described as such:
• Operating income
• Operating expense
• Profit before tax
• Earnings per share (basic and diluted)
• Cost-to-income ratio
• Jaws
• RoTE or Return on tangible equity
Advances-to-
deposits/customer
advances-to-
deposits (ADR) ratio
The ratio of total loans and advances to customers relative to total customer accounts, excluding approved
balances held with central banks, confirmed as repayable at the point of stress. A low advances-to-deposits ratio
demonstrates that customer accounts exceed customer loans resulting from emphasis placed on generating a
high level of stable funding from customers.
Cost-to-income ratio
The proportion of total operating expenses to total operating income.
Cover ratio
The ratio of imparment provisons for each stage to the gross loan exposure for each stage.
Cover ratio after
collateral/cover ratio
includng collateral
The ratio of imparment provisons for Stage 3 loans and realisable value of collateral held against these non-
performing loan exposures to the gross loan exposure of Stage 3 loans.
Gross yield
Statutory interest income divded by average interest earning assets.
Jaws
The difference between the rates of change in revenue and operating expenses. Positve jaws occurs when the
percentage change in revenue is higher than, or less negative than, the corresponding rate for operating
expenses.
Loan loss rate
Total credit imparment for loans and advances to customers over average loans and advances to customers.
Net tangible asset
value per share
Ratio of net tangible assets (total tangible assets less total liablites) to the number of ordinary shares
outstanding at the end of a reporting period.
Net yield
Gross yield less rate paid.
NIM or Net interest
margin
Net interest income adjusted for interest expense incurred on amortised cost liablites used to fund the Financal
Markets business, divded by average interest-earning assets excluding financal assets measured at fair value
through profit or loss.
RAR per FTE or Risk
adjusted revenue per
full-time equivalent
Risk adjusted revenue (RAR) is defined as underlying operating income less underlying imparment over the past
12 months. RAR is then divded by the 12 month rolling average full-time equivalent (FTE) to determine RAR per
FTE.
Rate paid
Statutory interest expense adjusted for interest expense incurred on amortised cost liablites used to fund
financal instruments held at fair value through profit or loss, divded by average interest bearing liablites.
RoE or Return on
equity
The ratio of the current year’s profit available for distrbution to ordinary shareholders to the weighted average
ordinary shareholders’ equity for the reporting period.
RoTE or Return on
ordinary shareholders’
tangible equity
The ratio of the current year’s profit available for distrbution to ordinary shareholders, to the weighted average
tangible equity, being ordinary shareholders’ equity less the average goodwill and intangble assets for the
reporting period. Where a target RoTE is stated, this is based on profit and equity expectations for future periods.
TSR or Total
shareholder return
The total return of the Group’s equity (share price growth and divdends) to investors.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
29
Risk review
“Staying viglant in the face of an uneven global economic recovery”
2021 was a challenging year on the macroeconomic front, driven by the ongoing pandemic. The COVID-19 recovery has
continued to be uneven, with unbalanced vaccine roll-outs between developed markets and emerging markets and easing
of restrictons in some markets even as other locations and sectors continued to lag. The potential impact from new variants
has also contributed to further uncertainty. Multiple sectors of the global economy have been impacted by the pandemic,
and liqudity pressures in the commercial real estate sector in China have arisen during the year, although the long-term
impact remains to be seen. A rapid recovery in demand following the easing of restrictons, and existng supply chain
disruptons has in turn contributed to elevated inflaton levels, with many markets seeing a signficant rise in prices. The
accumulation of worldwide debt could also pose further risks to the economic environment.
The Group has built a strong foundation with solid risk fundamentals, and we are focussed on emerging strongly from the
pandemic. We continue to scan the horizon for emerging risks and collaborate with internal and external partners to
proactively mitgate risks as they are identfied.
Asset quality has improved, as evidenced by the increase in percentage of investment grade corporate exposure (2021: 71 per
cent, 2020: 63 per cent), among others, though we remain watchful in the face of ongoing uncertainty. We continue to
demonstrate resilence as evidenced by strong capital and liqudity metrics. As a result of the changes in internal and external
operating environment due to the pandemic, non-financal risk areas such as Fraud, Information and Cyber Security, Privacy
and Conduct remain heightened. We continue to enhance our operational resilence and defences against these risks,
especially as we adapt to more agile ways of working. The PLC Group is also working to ensure a successful transiton from
the Interbank Offered Rate (IBOR) to alternative risk-free rates.
Digtalisaton and technological development remain key items on the Group’s agenda. We continue to ensure that our
control frameworks and Risk Appetite evolve accordingly to keep pace with new business developments and asset classes.
Earlier in the year, we defined three Stands to use our unique abilty to work across boundaries and connect capital, people,
ideas and best practices to help address some key socio-economic challenges of our time. Accelerating Zero is one of the
Stands, and our aim is to reduce the emissons associated with our financng activties to net zero by 2050, which includes
interm 2030 targets for the most carbon-intensve sectors. We are supporting our clients in the transiton to a low-carbon
economy by developing transiton frameworks and sustainable financng solutions. We have integrated ESG Risk
management into our Reputational Risk Type Framework. Sustainablity is a core part of our strategy and our ambiton to
become the world’s most sustainable and responsible bank.
Further details on our overall approach to net zero can be found at
sc.com/netzero
.
To support Liftng Particpation, we are helping our clients by buildng partnerships to expand their access to financal
services. For these new business intiatves, we have developed new risk management and risk assessment approaches
across our Princpal Risk Types to address these unique risks. We further support our clients by promoting financal wellbeing
through financal education and personalised services includng digtalised solutions for lending and wealth management.
We are also focused on drivng customer awareness of environmental sustainablity concerns through green products. As
part of our aim to Reset Globalisaton, we welcome digtal-asset-related opportunites. The PLC Group has enhanced its
Digtal Asset Risk management approach and policy to ensure that digtal asset activties across PLC Group are
appropriately managed, and withn overall PLC Group Risk Appetite.
An update on our key risk priorties
2021 presented a challenging risk landscape, however, we faced this from an intrnsically strong positon. Our risk
management approach is at the heart of our business and is core to us achievng sustainable growth and performance. We
have made progress on the key priorties set out at half year, as follows.
Strengthening the Group’s risk culture and conduct: We remain committed to promoting a healthy risk culture and drivng the
highest standards in conduct. Both risk culture and conduct are integral components of our Risk Management Framework
(RMF). Our RMF sets out the guidng princples for our colleagues, enabling us to have integrated and holistc risk
conversations across the Group and the three lines of defence. It underpins an enterprise-level abilty to identfy and assess,
openly discuss, and take prompt action to address existng and emerging risks. Senior management across the Group
promote a healthy risk culture by rewarding risk-based thinkng (includng in remuneration decisons), challenging status quo,
and creating a transparent and safe environment for employees to communicate risk concerns.
We strive to uphold the highest standards of conduct through delivery of conduct outcomes, acknowledging that while
incdents cannot be entirely avoided, the Group has no appetite for wilful or negligent misconduct. More broadly, we are
continung to focus on strengthening first-line Conduct Risk ownership, includng helping to draw enhanced Conduct Risk
insghts through the development of better conduct analytics as part of the new Conduct Risk management approach.
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
30
Strategic report continued
As part of the PLC Group’s Future of Work Now intiatve, moving to large-scale working from home arrangements has been
formalised and rolled out to the majorty of the PLC Group’s markets. Risks arisng from the new working model have been
assessed, with controls strengthened where appropriate. We remain viglant to the need to increase staff awareness of fraud
and cyber security risks, alongside other targeted mitgating actions to improve oversight and internal controls.
Enhancing informaton and cyber security (ICS) capabilties:
The Group remains focused on pursuing a culture of cyber
resilence as we progress with more agile ways of working. We are focused on maintaning client services and protecting our
most critcal assets, remainng viglant to evolving cyber threats. Our cyber security framework has been further enhanced to
underpin our management and mitgation of ICS Risk and support of our businesses and functions in their adoption of key
controls. We plan to further enhance our key ICS Risk metrics to support strategic oversight and decison-making.
Strengthening our oversight of third-party ICS Risk also remains an area of focus, considerng external threats and the
continued prevalence of third-party ICS incdents. We are ensuring we develop our internal talent pool and recruit external
talent where required to support these critcal capabilties.
Embedding Climate Risk management:
The PLC Group has continued to embed Climate Risk management, starting with,
among others, understanding the impact of physical and transiton risks on our credit portfolio and climate-related
reputational risks for clients in high transiton sectors. In 2022, PLC Group will extend this to cover other relevant Princpal Risk
Types. Climate scenario analysis across our markets, includng the Bank of England’s 2021 Biennal Exploratory Scenario, have
helped improve our understanding in identfying key portfolios vulnerable to Climate Risk. At the PLC Group level, we reached
out to around 2,000 of our clients globally, to understand their transiton and physical risk profiles, adaptation plans,
mitgation measures and approach to disclosure, enhancing the granularity of data available for risk identficaton and
deepening client engagement. Climate Risk assessments are now considered as part of Reputational and Sustainablity
transaction reviews for impacted clients in high-carbon sectors, and a first phase of integraton into credit decisoning for the
transaction review process is under way for our Corporate, Commercial and Institutonal Banking business. As our experience
of quantifyng Climate Risk grows, we are moving from measurement to management, while working closely with external
partners, industry and academia to move forward on Climate Risk together. As part of the ongoing partnership with Imperial
College London, the PLC Group supported new climate research on the potential for nature-based solutions (actions to
protect, restore and enhance ecosystems) to tackle the interlnkages between agriculture, land-use and climate change. The
2021 Task Force on Climate-related Financal Disclosures (TCFD) Report released provides further details on the PLC Group’s
progress in managing climate risks and opportunites, includng the PLC Group’s net zero target by 2050.
++More details on the Group’s approach to Climate Risk can be found at
sc.com/tcfd
Managing our ESG risk:
The Group remains committed to being the world’s most sustainable and responsible bank. At the
start of the year the PLC Group expanded the Reputational Princpal Risk Type by adding Sustainablity and proposed new
Risk Appetite metrics covering environmental and social (E&S) risks as well as ensuring no Modern Slavery risks in our supply
chain.
We continue to invest in infrastructure and technology to keep pace with the emerging ESG regulatory obligatons across our
markets. The PLC Group has developed an internal Environmental and Social Risk Catalogue that will be piloted to ensure
that risk identficaton, assessment and enhanced due dilgence, are underpinned by a standard classifcation system. Using
the Catalogue, an intial heatmap of E&S risks has been developed for our clients and suppliers on an industry-portfolio level
through a top-down risk assessment approach. The assessment is used to identfy key areas of priorty for E&S risks where
safeguards could be further strengthened. From 2022 onwards, we plan to incorporate the findngs of this risk assessment in
our regular review of our PLC Group positon statements and supply chain onboarding to ensure that our businesses and
supply chains continue to support our sustainablity ambiton.
Managing Financal Crime Risks:
External developments continue to create new risks and control challenges, particularly with
respect to rapidly changing geopolitcal events. There is a heightened level of Fraud Risk in the environment due to new
methods, schemes and technology, and we continue to increase our investment in fraud prevention and detection
capabilties to protect the Group and our clients. Our Financal Crime Compliance team continues to identfy and prevent
fraud and money laundering using next-generation surveillance and financal crime monitorng infrastructure and machine
learning. We are focused on strengthening our three lines of defence by transitoning certain responsiblites for financal
crime surveillance from the second line to the first line while reinforcng the oversight and monitorng role of the second line.
The Group continues to partner to lead the fight against financal crime through informaton sharing about threats to protect
clients and the wider financal system. We continue an active industry engagement to address new regulatory and statutory
intiatves, focusing on enhancing the effectiveness of financal crime compliance and contributng useful informaton to law
enforcement. We have made continued progress in resolving long-standing enforcement actions and related remediaton,
and continue to work to strengthen compliance and improve customer experience in areas of greater implementaton
challenge such as records management and transaction monitorng.
++More informaton about the Group’s commitment to fightng financal crime can be found at
sc.com/fightngfinancalcrime
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
31
Strategic report continued
Innovation – Risk and CFCC infrastructure:
We continue to focus on simplfying our approach to enable more effective
first-line risk management, supported with SmartBot-enabled self-service platforms. Flexible strategic risk reporting with
centralised data and advanced analytical capabilties enabled a timely and an agile response to the challenges of COVID-19.
Continued integraton of our risk aggregation platform with front office data provides near real-time bespoke exposure
analysis for financal risks, decisoning and reporting, and our stress testing scenarios have been expanded to include the
impact of the pandemic and Climate Risks. We are implementng an Enterprise GRC (Governance, Risk and Compliance)
platform to integrate data and processes across Operational Risk, polices and standards, compliance and assurance
activties, and have made signficant progress in the year. We have clear priorties to build a more digtal and data-driven
control function with scalable self-service solutions and partnerships with our internal innovaton centre, SC Ventures. Hubs
continue to be utilsed for centralised specialst knowledge and delivery of data visualsation, reporting, change
management, model development, validaton and governance, with automation of supporting processes to reduce
operational risks.
Embedding Model Risk management:
Model Risk management has seen a notable step forward in 2021. The PLC Group
enhanced its risk management framework earlier in the year to strengthen model issue management and the governance
framework for artifcial intellgence and machine learning. The Model Inventory across the PLC Group has undergone many
enhancements through the year to be an industry-level model inventory tool, enabling increased coverage of informaton
with a higher level of accuracy. Regulatory model delivery has been a key focus area related to new European Banking
Authority standards and the cessation of IBOR. We have adopted the PLC Group’s Model Risk Type Framework and
implemented Group level Model Risk Appetite and this will continue to be an area of focus to ensure we effectively embed
awareness of Model Risk management across the Group.
Our risk profile and performance in 2021
Despite the challenges of the ongoing pandemic, our solid foundation has helped us to deliver a good performance with a
resilent risk profile and improved asset quality. 2021 demonstrates our commitment to strong and sustainable growth, with
continued improvements across several metrics reflecting our robust risk management during the pandemic. We remain
viglant to the continued impact of COVID-19 and an uneven recovery across markets and industres.
In 2021, we have seen a 50 per cent decrease in early alerts exposure (2021: $4.3 billon, 2020: $8.5 billon), mainly due to
reductions in counterparty exposure and clients being removed from early alert. While early alerts have decreased compared
with December 2020, the Group remains viglant in view of persistent challenging conditons in some markets and sectors.
Credit Grade 12 balances reduced to $1.6 billon due to repayments and outflows to non-performing loans, that were partially
offset by sovereign rating downgrades.
The percentage of investment grade corporate exposure has also increased to 71 per cent compared with 63 per cent a year
ago, reflecting an increase in repurchase agreement balances and high-quality orignations.
The total credit imparment charge is a release of $28 millon compared to a charge of $1.9 billon last year. Stage 3
imparment decreased by $1.3 billon, of which majorty is from releases in Corporate, Commercial and Institutonal Banking.
Stage 1 and 2 imparment decreased by $762 millon, due to reduction in exposures from lower levels of early alert portfolio,
new guarantees and improvement in probabilty of default, with the remainder due to improvng macroeconomic forecasts
and reduction in COVID-19 management overlays.
Overall stage 3 loans and advances to customers decreased from $8.3 billon to $6.9 billon, while stage 3 provisons were
lower by $0.7 billon at $4.2 billon. The stage 3 cover ratio (excluding collateral) in the total customer loan book increased to 61
per cent (2020: 60 per cent).
Average Group Value at Risk (VaR) in 2021 was 38.5 per cent lower at $41.1 millon (2020: $66.9 millon), driven by the extreme
market movements from 2020 dropping out of the one-year VaR time horizon. However, volatilty started to increase in the
second half of 2021 driven by the impact of new COVID variants.
> Further details of the risk performance for 2021 are set out in the Risk profile section.
An update on our risk management approach
Our RMF outlines how we manage risk across the Group, consistent with the PLC Group’s risk management and governance
approach. It gives us the structure to manage existng risks effectively in line with our Risk Appetite, as well as allowing for
holistc risk identficaton. As part of the annual review of the RMF, we have repositoned our Cross-Cutting Risks to Integrated
Risk Types (IRT), which are defined as “risks that are signficant in nature and materialse primarly through the relevant
Princpal Risk Types (PRT)”. The RMF sets out the roles and responsiblites and minmum governance requirements for the
management of IRTs. Additonally, the Capital and Liqudity Princpal Risk Type has been renamed to Treasury Risk and the
scope of the risk type has been expanded to cover Interest Rate Risk in the Banking Book (IRRBB).
Given their integrated nature, Digtal Asset and Third-Party Risks, have been newly identfied as IRTs in the RMF, in additon to
Climate Risk. As outlined in the Group RMF, we manage and control our PRTs as well as IRTs in line with the PLC Group’s Risk
Type Frameworks, which are implemented at the Company level via an addendum.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
32
Princpal and Integrated Risk Types
Princpal risks are risks inherent in our strategy and business model. These are formally defined in our RMF which provides a
structure for monitorng and controlling these risks through the Court-approved Risk Appetite. We will not compromise
adherence to our Risk Appetite in order to pursue revenue growth or higher returns. The table below provides an overview of
the Group’s princpal and integrated risks and how these are managed. In additon to princpal risks, the Group has defined a
Risk Appetite Statement for Climate Risk and will give consideraton to standalone Risk Appetite Statements for additonal
integrated risks in 2022.
Further details can be found on pages 129 to 143 of our 2021 Annual Report.
Princpal Risk Types How these are managed
Credit Risk
The Group manages its credit exposures following the princple of diversficaton across products, geographies,
client segments and industry sectors
Traded Risk
The Group should control its trading portfolio and activties to ensure that Traded Risk losses (financal or
reputational) do not cause material damage to the Group or PLC Group’s franchise
Treasury Risk
Indivdual regulated entites withn the Group should maintan a strong capital and liqudity positon and meet
their minmum capital and liqudity requirements
Operational and
Technology Risk
The Group aims to control Operational and Technology Risks to ensure that operational losses (financal or
reputational), includng any related to conduct of business matters, do not cause material damage to the
Group or PLC Group’s franchise
Information and
Cyber Security Risk
The Group seeks to minmise ICS Risk from threats to the Group’s most critcal informaton assets and systems,
and has a low appetite for material incdents affecting these or the wider operations and reputation of the
Group and PLC Group
Compliance Risk
The Group has no appetite for breaches in laws and regulations related to regulatory non-compliance;
recognisng that whilst incdents are unwanted, they cannot be entirely avoided
Financal Crime Risk
The Group has no appetite for breaches in laws and regulations related to Financal Crime, recognisng that
while incdents are unwanted, they cannot be entirely avoided
Model Risk
The Group has no appetite for material adverse implcations arisng from misuse of models or errors in the
development or implementaton of models; whilst accepting model uncertainty
Reputational and
Sustainablity Risk
The Group aims to protect the franchise from material damage to its reputation by ensuring that any business
activty is satisfactorly assessed and managed by the appropriate level of management and governance
oversight. This includes a potential failure to uphold responsible business conduct or lapses in our commitment to
do no signficant environmental and social harm.
Integrated Risk Types How these are managed
Climate Risk
The Group aims to measure and manage financal and non-financal risks from climate change, and reduce
emissons related to our own activties and those related to the financng of clients, in alignment with the
Paris Agreement
Digtal Asset Risk
This IRT is currently supported by Risk Appetite metrics embedded withn relevant Princpal Risk Types
Third Party Risk
This IRT is currently supported by Risk Appetite metrics embedded withn relevant Princpal Risk Types
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
33
Emerging risks
Emerging risks refer to unpredictable and uncontrollable events with the potential to materially impact our business. As part
of our continuous risk identficaton process, we have updated the Group’s emerging risks from those disclosed in the 2020
Annual Report. A detailed explanation of the changes to our emerging risks compared with 2020 can be found on page 144.
The table below summarises our current list of emerging risks, outlinng the risk trend changes since the end of 2020, the
reasons for any changes and the mitgating actions we are taking based on our current knowledge and assumptions. This
reflects the latest internal assessment as identfied by senior management. The list is not exhaustive and there may be
additonal risks which could have an adverse effect on the Group. Our mitgation approach for these risks may not elimnate
them but shows the Group’s attempt to reduce or manage the risk. As certain risks develop and materialse over time,
management will take appropriate steps to mitgate the risk based on its impact on the Group.
Emerging Risks
Risk trend since
December 2020
1
Key risk trend drivers How these are mitgated
Expanding
array of global
tensions
Relations between China and the West
remain fragile and tensions are increasng
regarding Russia’s presence on the Ukrainan
border. There has also been increasng
fricton between historc allies on issues such
as the withdrawal from Afghanistan and
AUKUS, as well as protectionst polices in the
wake of COVID-19
Global supply chain disrupton could tip the
balance of power towards producers and
potentially lead to an increased focus on
local security over global collaboration
• Sharp slowdowns in the US, China, and more broadly,
world trade and global growth are a feature of PLC
Group, Solo
²
and country level stress scenarios. The Group
relies on these stress tests to assess key Group level
vulnerabilties and to be able to implement timely
interventons
• Detailed portfolio reviews are conducted at a PLC Group,
country and business level on an ongoing basis, most
recently regarding increasng tensions around Ukraine,
and action is taken where necessary
• We are closely monitorng the China-G7 relationshp and
assessing the impact on our business with dedicated
teams in the first and second line of defence
• We remain viglant in monitorng geopolitcal
relationshps. Increased scrutiny is applied when
onboarding clients in sensitve industres and in ensuring
compliance with sanctions requirements
Energy security
Increased industral demand and an
accelerated transiton to cleaner energy
sources have put a strain on supply lines. This
has increased tensions between nations as
power shifts towards energy exporters, and
energy security decreases across developed
markets and emerging markets alike. A lack
of investment by oil producers as we
transiton could also lead to an increase in oil
prices in the short term
• The Group relies on stress tests conducted at a PLC Group,
Solo and country level, where an oil shock scenario was
developed
• Sovereign ratings, outlooks and country risk limts are
regularly monitored with periodc updates to senior
stakeholders
• The PLC Group is implementng a Climate Risk work plan
and aims to embed Climate Risks across all relevant
Princpal Risks in 2022. This includes scenario analysis and
stress-testing capabilty to understand financal risks and
opportunites from climate change
Crystallisaton
of inflaton
fears
Interest rates have already increased or are
likely to rise in several countries as central
banks respond to inflatonary pressure
Drivers of price increases include recent
shortages of materials and labour, and
long-term monetary stimulus and there is
growing acceptance that the inflatonary
shock will last longer than intially expected
Nevertheless, there is still a lack of firm
consensus withn the industry on some key
inflaton questions, as well as other potential
scenarios such as slow economic growth and
risng prices leading to stagflation
• The Group relies on stress tests conducted at a PLC Group,
Solo and country level to assess the impact of a severe
stress in the global economy associated with a sharp
slow-down.
• Both PLC Group-wide management and Traded Risk
scenarios are being developed to examine the impact of a
rapid build-up in inflatonary pressures around the world
• Sovereign ratings, outlooks and country risk limts are
regularly monitored with periodc updates to senior
stakeholder
Strategic report continued
1 The risk trend refers to the overall risk score trend, which is a combinaton of potential impact, likelhood and velocity of change
2 The solo regulatory group as defined in the Prudential Regulation Authority waiver letter dated 10 August 2020 differs from Standard Chartered Bank Company in that
it includes the full consolidaton of nine subsidaries,namely Standard Chartered Holdings (International) B.V., Standard Chartered MB Holdings B.V., Standard
Chartered UK Holdings Limted, Standard Chartered Grindlays PTY Limted, SCMB Overseas Limted, Standard Chartered Capital Management (Jersey) LLC, Cerulean
Investments L.P., SC Ventures Innovation Investment L.P. and SC Ventures G.P. Limted.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
34
Strategic report continued
Emerging Risks
Risk trend since
December 2020
1
Key risk trend drivers How these are mitgated
Adapting to
endemic
COVID-19 and
a K-shaped
recovery
2
Although countries with higher vaccinaton
rates are moving towards accepting
COVID-19 as endemic, the threat of new
variants and increased restrictons remains
Vast differences in the pace and scale of
vaccine roll-outs and financal resources have
widened the recovery gap and threaten a
K-shaped global recovery, where countries or
sectors recover at a different rate depending
on their abilty to adapt to a post-COVID
world
There are deeper structural impacts on
traditonal economic systems, includng shifts
in labour demographics
• A severe stress in the global economy associated with a
sharp slow-down is a feature of the stress tests conducted
at a PLC Group, Solo and country level
• Sensitve sectors (e.g. aviaton and hospitalty) are
regularly reviewed and exposures to these sectors are
actively managed as part of Credit Risk reviews
• Exposures that could result in material credit imparment
charges and RWA inflaton under stress tests are regularly
reviewed and actively managed
• The Group’s priorty remains the health and safety of our
clients and employees and continuaton of normal
operations by leveraging our robust Business Continuty
Plans which enable the majorty of our colleagues to work
remotely where possible
Supply chain
dislocatons
A combinaton of supply and demand
factors, some transitory and some more
structural, have led to global supply chain
disruptons, especially as some markets have
started to emerge from the pandemic
There may also be a fundamental shift in
supply chains of the future, with increased
contingency costs and potential shifts to
move production closer to consumers
• Exposures that may result in material credit imparment
and increased RWA are closely monitored and actively
managed
• Sectors which exhibt high supply chain pressure and
vulnerabilty are regularly reviewed and exposures to
these sectors are actively managed as part of Credit Risk
reviews
• We actively utilse Credit Risk mitgation techniques
includng credit insurance and collateral
Emerging
markets
sovereign risk
COVID-19 has caused liqudity and potential
solvency issues for some of the world’s
poorest countries, with several negative
sovereign rating actions observed
Tightenng of financal conditons in
developed markets may lead to local
currency depreciatons against the US dollar,
pushing up debt reservicng costs
• Exposures that may result in material credit imparment
and increased RWA are closely monitored and actively
managed
• We rely on stress tests and portfolio reviews conducted at
a PLC Group, Solo, country, and business level to assess
the impact of extreme but plausible events and manage
the portfolio accordingly
• We actively utilse Credit Risk mitgation techniques
includng credit insurance and collateral
• We actively track the particpation of our footprint
countries in G20’s Common Framework Agreement and
Debt Service Suspension Initative for Debt Treatments
and the associated exposure
1 The risk trend refers to the overall risk score trend, which is a combinaton of potential impact, likelhood and velocity of change
2 A K-shaped global recovery occurs where countries or sectors recover at different rates following a recession
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
35
Emerging Risks
Risk trend since
December 2020
1
Key risk trend drivers How these are mitgated
Expanding
stakeholder
expectations
for
environmental,
social and
corporate
governance
There are risks if the Group is unable to adapt
to new regulation quickly, as well as meeting
publicly stated sustainablity goals and
helping clients transiton
Environmental targets are being
incorporated into many countries’ domestic
polices and corporations’ business models
with increased pressure to set ambitous
sustainablity goals. This includes an increase
in disclosure requirements
There is fragmentation in the pace and scale
of adoption around the world, which adds
complexity in managing a global business.
There is a risk that focus on environmental
goals over social and governance concerns,
as well as fragmentation in ESG taxonomies,
may lead to unintended consequences
• We remain committed to being a responsible bank,
minmisng our environmental impact and embedding our
values through our strengthened Positon Statements for
sensitve sectors and a list of prohibted activties that the
Group will not finance
• The PLC Group is proactively particpating in industry
intiatves and framework development on both climate
and biodversity, to help inform our internal efforts and
capabilties. Increased scrutiny is applied to environmental
and social standards in providng services to clients
• We rely on detailed portfolio reviews and stress tests
conducted at a PLC Group, Solo and country level to test
resilence to climate-related risks in line with local
regulatory requirements and take action where necessary
• The PLC Group has released net zero targets and specifc
emisson reduction targets for carbon-sensitve sectors.
The PLC Group’s TCFD Report includes more details on
climate risk and net zero
• Our Green and Sustainable Product Framework,
developed with the support of Sustainalytcs, has been
informed by industry and supervisory princples and
standards such as the Green Bond Princples and EU
Taxonomy for sustainable activties
• We have defined three Stands to use our unique abilty to
work across boundaries and connect capital, people,
ideas and best practices to help address some key
socioeconomc challenges and enable a just transiton
• The PLC Group is developing an approach to further
integrate ESG risk management across the ERMF
Social unrest
COVID-19 has restricted the abilty to
demonstrate in some markets, although the
prolonged nature of the pandemic and
imposed vaccine and lockdown mandates
have led to tensions in some countries
Inequality has increased as a result of the
pandemic, which may give rise to societal
disturbances. Other causes such as climate
and social justce also remain a focus
• The Group is committed to managing human rights
impacts through our social safeguards in our Positon
Statements
• The PLC Group’s Human Rights Working Group has
developed an approach to monitor, report and escalate
human rights issues to our Management Team for
consideraton with PLC Group’s strategy
• We continue to support our operations and communites
who are greatly impacted by COVID-19 through various
aid programmes and financng
• The Group relies on portfolio reviews at a PLC Group,
country and business level to assess the impact of extreme
but plausible geopolitcal events
Data and
digtal
Regulatory requirements and client
expectations relating to data management,
data protection, data sovereignty and
privacy are increasng, includng the ethical
use of data and artifcial intellgence. The
Group, as well as the industry, continues to
face challenges to keep pace with the
volume of data-related regulatory change
Rapid adoption and increased sophistcation
of new technologies may expose the Group
to new technology-related risks, includng
heightened cyber security risks
Data is becoming more concentrated in the
hands of governments and big private
companies. There are also relatively few
providers of new technologies such as cloud
computing services
• There is active monitorng, both in house and through
external counsel, of regulatory developments in relation to
data management, includng records management, data
protection and privacy, data sovereignty and artifcial
intellgence
• The PLC Group has further embedded the existng risk
control framework for data management risks, which has
strengthened and streamlined risk oversight
• Strict processes exist withn the Group to ensure that only
authorised indviduals with sound justficaton are given
access to Group client data. These processes are
continuously refined to ensure efficacy and compliance
with current legislaton
• The PLC Group has established a dedicated Data and
Privacy Operations team and mobilsed a Groupwide
transformation programme to build data management
capabilties and expertise across the Group to ensure
compliance with data management regulations
Strategic report continued
1 The risk trend refers to the overall risk score trend, which is a combinaton of potential impact, likelhood and velocity of change
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
36
Strategic report continued
Emerging Risks
Risk trend since
December 2020
1
Key risk trend drivers How these are mitgated
New business
structures,
channels and
competiton
There are signficant shifts in customer value
propositons. Fintechs are deliverng digtal-
only banking offerings with a growing usage
of machine learning to provide highly
personalised services
In additon, digtal assets are gainng
adoption and linked business models are
increasng in prominence. These present
material opportunites as well as risks.
Failure to adapt and harness new
technologies and new business models would
place banks at a competitve disadvantage.
There is an increasng usage of partnerships
and alliances by banks to respond to
disrupton and changes in the industry.
However, this exposes banks to third-party
risks
• We monitor emerging trends, opportunites and risk
developments in technology that may have implcations
for the banking sector
• We are enhancing capabilties to ensure our systems are
resilent, we remain relevant and can capitalse quickly on
technology trends
• Enhanced digtal capabilties have been rolled out in
Consumer, Private and Business Banking, particularly
around onboarding, sales and marketing
• A risk management approach to address the specifc risks
arisng from digtal asset activties, as well as internal
guidance on how to leverage existng risk management
practices for new activties and nascent risks, is developed
and implemented at the PLC Group
• Strategic partnerships and alliances are being set up with
fintechs to better compete in the markets in which we
operate
• Third-Party Risk management polices, procedures and
governance are being reviewed to ensure adequate
coverage across all PLC Group activties
Talent pools
of the future
COVID-19 accelerated the move towards
remote working for employees. However, this
has raised concerns around effective
mitgation and management of Operational,
ICS, Compliance, and Conduct Risks.
The extended nature of the COVID-19
pandemic is continung to restrict employees’
abilty to operate in their preferred hybrid
working location format (between home and
office), causing potential risks to wellbeing,
ease of collaboration and learning from
others
A shortage of key skills is drivng a war for
talent which, combined with cross-border
mobilty restrictons and government
protectionst polices, will especially intensfy
competiton for local talent
• We assess and manage people-related risks, for example,
organisaton, capabilty, conduct and culture, as part of
our Group risk management framework and our People
Strategy
• The PLC Group undertook a Future of Work change risk
assessment which considered Operational, Compliance,
Data Privacy and ICS Risks, in additon to wellbeing,
culture and leadership
• The Group has rolled out hybrid-working options in 25
markets and over 83 per cent of employees in these
locations are now on flexi-working arrangements. Toolkits
have been provided to managers and employees on
managing ‘macro’ and ‘micro’ moments in a hybrid-
working world
• Wellbeing is one of the key pillars of the Group’s diversty
and incluson strategy and we have embedded multiple
tools and resources to support colleague wellbeing. These
include toolkits for managers and employees, a
confidental Employee Assistance Programme, an online
programme to support physical wellbeing, increased
trainng for Mental Health First Aiders, an on-the-go
mobile app and proactive trainng in resilence
• The PLC Group has embarked on a multi-year journey
focused on upskillng and re-skillng our workforce by
buildng a culture of continuous learning and leveraging
technology to enable employees to build future-ready
skills through content and cross-functional experiences
Summary
We remain fully committed to robust risk management, embracing innovaton while ensuring that we achieve the right risk
outcomes when adopting new technologies and digtal capabilties. The COVID-19 pandemic dominated the economic
climate throughout 2021 and recovery remains uneven. Continued focus on enhancing risk management capabilties and
leveraging technology will help the Group to emerge stronger from the pandemic, as a more sustainable, innovatve, resilent
and client-centred bank.
1 The risk trend refers to the overall risk score trend, which is a combinaton of potential impact, likelhood and velocity of change
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
37
Strategic report continued
Stakeholders and responsiblites
As an internatonal bank working in 58 markets, stakeholder engagement is central in ensuring we understand local, regional
and global perspectives and trends that inform our approach to doing business.
This section forms our Section 172 disclosure, describng how the directors 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.
This section sets out how:
•
we engage stakeholders to understand their interests
•
we engage employees and respond to their interests
•
we respond to stakeholder interests through sustainable and responsible business
•
the Court considers stakeholders interests
This section also forms our key non-financal disclosures in relation to sections 414CA and 414CB of the Companies Act. Our
non-financal informaton statement can be found at the end of this section.
Princpal Court decison – net zero pathway
As part of the consideraton process for approving the net zero pathway, the Court had to ensure it was comfortable with the
methodology, the potential outcome of applying the methodology and the substance of the pathway, all set withn the
context of an agreed and robust risk management framework.
Stakeholder consideratons were taken into account in the Court’s discusson of the net zero pathway amongst many other
factors. The Court, cognisant of the methodological approach and interest in the pathway by shareholders and other
stakeholders, approved the recommended pathway and communicatons plan.
Engaging stakeholders
Listenng and responding to stakeholder priorties and concerns is critcal to achievng our purpose and deliverng on our
brand promise, Here for good. We strive to maintan open and constructive relationshps with a wide range of stakeholders
includng regulators, lawmakers, clients, investors, civl society, and community groups.
In 2021, our engagement took many forms, includng one-to-one sessions 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 enable us to operate as a responsible and sustainable business.
Stakeholder feedback is communicated internally to senior management through the relevant forums and governing
committees such as the Sustainablity Forum, and to the PLC Board’s Culture and Sustainablity Committee (CSC) which
oversees the PLC Group’s approach to its main relationshps with stakeholders.
We communicate progress regularly to external stakeholders through channels such as sc.com and this report. More detailed
informaton on material sustainablity topics can be found in the Sustainable and Responsible Business section.
Clients
How we create value
We want to deliver easy, everyday banking solutions to our clients in a simple and cost-effective way, and with a great
customer experience. We enable indviduals to grow and protect their wealth; we help businesses to trade, transact, invest
and expand; and we also help a variety of financal insttutions, includng banks, public sector and development
organisatons with their banking needs.
How we serve and engage
Clients are at the heart of everything we do. In 2021, we used regular surveys, experience forums and digtal channels to
continue to strengthen our abilty to understand and meet client needs as they emerge.
In Corporate, Commercial and Institutonal Banking (CCIB) we strengthened our annual feedback process by capturing how
clients feel about what we offer them (advice, service, digtal channels, etc) and ensuring our relationshp managers can then
engage with their clients to address their feedback. We also launched a ‘Voice of Client’ e-learning module to train our
colleagues to obtain and leverage client insghts and respond with enhanced innovatve propositons.
In Consumer, Private and Business Banking (CPBB) we take seriously our responsiblity to support our more vulnerable clients.
A global framework is in place to ensure the fair treatment of vulnerable customers in product development and throughout
the whole customer journey. Trainng is provided to front-line staff across our branch, contact centre and digtal channels to
identfy and appropriately handle vulnerable clients, and we have also implemented an educational trainng programme for
those clients who require assistance in navigatng online and mobile channels.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
In order to act in the best interests of our clients, we use our client insghts, alongside our robust polices, procedures and the
Group risk appetite to design and offer products and services which meet client needs, regulatory requirements and Group
performance targets whilst contributng to a sustainable and resilent environment.
For example, through understanding the challenges some of our clients face in balancing their financal management needs
with their growing commitments to sustainablity, in 2021 we launched a market-first sustainable trade finance propositon to
support sustainable supply chains for our clients. We also launched our Sustainable Account in the UK and UAE, a new
solution that enables corporate clients to contribute to sustainable development, while maintaning daily access to their
cash.
All new products are subject to a comprehensive approvals process to test design effectiveness and robustness of the
implementaton process. For investment products sold to indviduals, this includes risk scores which aid our assessment of
client suitablity.
For indvidual clients, we consider each client’s financal needs and personal circumstances to assist us in offering suitable
product recommendations.
We achieve this using a globally consistent methodology that takes into consideraton local regulatory requirements to
review product risks against the client’s risk appetite, considerng financal objectves, financal abilty and knowledge. Clients
are also provided with clear and simple documentation that outlines key product features and risks prior to executing a
transaction.
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, accurate interest rates charged, fees and
other charges as billed to clients are monitored and assessed locally, with global oversight. Triggers for outlier prices are
defined and subject to annual review. A process is in place to review complaints prior to amendments to annual interest, fees
and charges. We also continuously assess our product portfolio for new risks to ensure they remain appropriate for client
needs and aligned to emerging regulation. These quantitatve and qualitatve assessments enable a complete view of
whether to continue, grow or retire products.
Throughout 2021 we also maintaned our sharp focus on improvng client experience across the Bank. In CCIB, we focused on
deliverng a consistent global experience for larger clients across our proprietary platforms. Deploying our agile working
practices have enabled us to increase our speed of decison-making and change delivery to meet client needs faster.
Where concerns are found, we have processes and guidelnes in place, specifc to each of our client businesses, to understand
and respond to client issues and promptly resolve complaints.
In 2022, we will continue to strengthen our digtal transformation and innovaton capabilties.
Their interests
•
Differentated product and service offering
•
Digtally enabled and positve experience
•
Sustainable finance
Regulators and Governments
How we create value
We engage with public authorites to play our part in supporting the effective functionng of the financal system and the
broader economy.
How we serve and engage
We actively engage with governments, regulators and policymakers at global, regional and national levels to share insghts
and support the development of best practice and adoption of consistent approaches across our markets.
In 2021, we engaged with regulators, government officals and trade associatons on a broad range of topics that included
recovery from COVID-19, internatonal trade, sustainable finance, data, cybersecurity, digtal adoption, and innovaton. We
also engaged with officals on the financal services regulatory environment, in particular prudential, conduct, markets and
financal crime polices.
In support of this, we have a unifed Public and Regulatory Affairs team responsible for engagement as well as identfying
and analysing relevant polices, legislaton and regulation. This work is overseen by several governance forums withn the
Bank which comprise senior executives representing business and control functions to ensure alignment between advocacy
and business strategies.
We meet all relevant transparency requirements and engage through ongoing dialogue with regulators and governments,
submittng responses to formal consultations and by particpating in industry working groups.
We comply with legislaton, rules and other regulatory requirements applicable to our businesses and operations in the
jursdictons withn which we operate. This ensures that the PLC Group meets its obligatons and supports the resilence and
effective functionng of the broader financal system and economy.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
In 2022, we expect to engage on regulation and legislaton associated with recovery from COVID-19, internatonal trade,
Sustainable Finance digtal innovaton, data, privacy, artifcial intellgence and cybersecurity.
Their interests
•
Strong capital base and liqudity positon
•
Robust standards for conduct and financal crime
•
Healthy economies and competitve markets
•
Positve sustainable development
•
Digtal innovaton in financal services
Debt investors and credit rating agencies
How we create value
We aim to deliver robust returns and long-term sustainable value for our investors.
How we serve and engage
Our Debt Investor Relations team has primary responsiblity for managing the Group’s relationshps with debt investors and
the three major rating agencies, with local market chief executives and chief financal officers leading on smaller subsidary
ratings.
In 2021, management met mostly virtually with debt investors across Europe, North America and Asia, and maintaned a
regular dialogue with rating agencies. It is important that the Group, as an issuer of senior debt, such as commercial paper
and certifcates of deposit, maintans regular contact with investors and other counterparts to support continued appetite
for the Group’s credit. The Group’s credit ratings are a key part of the external perception of our financal strength and
creditworthness.
Their interests
•
Safe, strong and sustainable financal performance
•
Opportunites for sustainable investment
Suppliers
How we create value
We engage diverse suppliers, both locally and globally, to provide efficent and sustainable goods and services for our
business.
How we serve and engage
We follow a comprehensive and transparent vendor selection process, guided by the PLC Group’s Supplier Charter, which sets
out our expectations in relation to ethics, human rights, Diversty and Inclusion (D&I) and environmental performance. Our
suppliers must recommit to the Charter annually, and performance monitorng is built into our contracts, procurement
practices and standards.
In 2021 we made tangible progress against our supply chain sustainablity agenda and began to integrate environmental
and social risks into our third-party risk management framework.
In pursuit of the Group’s ambiton to be net zero in our operations by 2025, we offset emissons from our business flights, and in
2021 we developed a methodology to estimate our Scope 3 emissons from suppliers. Using this, we engaged our highest
emittng vendors to agree a pathway for transparent supply chain emissons measurement. We also began to embed
emissons-related clauses into relevant supplier contracts, such as printng services, to reduce our consumption and mitgate
remainder emissons.
Our Stands have served to further embed our Supplier Diversty & Inclusion approach, and the majorty of our markets now
have supplier D&I objectves to take action, and accelerate progress and impact, and supplier diversty targets have been
defined in key global procurement categories. In additon, we established partnerships with multiple local and global NGOs
to identfy and onboard more sustainable and diverse-owned vendors across all our markets. Our efforts were rewarded with
internal and external recogniton, includng the Supplier Diversty Programme of the Year in the European Diversty Awards.
During 2021 we also partnered with several suppliers to provide additonal benefits to our organisaton and clients. For
example, we partnered with Doconomy, an innovatve fintech supplier, to introduce a digtal app to help indvidual clients
track, measure and manage their impact on both carbon emissons and freshwater consumption based on the goods and
services they have purchased, as identfied through their credit and debit card transactions. The app provides enriched
customer data and automatically calculates the CO
2
footprint for every transaction, as well as providng the abilty for clients
to select and purchase offsetting options for each transaction all withn the app. The technology is currently being piloted in
Pakistan with further global release planned in 2022. The Standard Chartered - Doconomy collaboration has the potential to
allow millons of consumers over time to learn how their consumption behaviours impact the climate.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
In 2022, supply chain sustainablity will continue to be a primary focus as we roll out intiatves to address and control social
risk, and further reduce carbon emissons withn our own operations and supply chain.
Our Supplier Charter can be viewed at sc.com/suppliercharter
Read more about our supplier diversty standard: sc.com/supplierdversity
Their interests
•
Sustainablity and diversty
•
Open, transparent and consistent tendering process
•
Willngness to adopt supplier driven innovatons
•
Accurate and on-time payments
Society
How we create value
We strive to operate as a sustainable and responsible company, collaborating with local partners to promote social and
economic development.
How we serve and engage
We engage with a wide range of civl society and internatonal and local non-governmental organisatons (NGOs), from
those focused on environmental and public policy issues to partners deliverng our community programmes. To shape our
strategy, we aim for constructive dialogue that helps ensure we understand alternative perspectives and that our approach
to doing business is understood. This includes working with NGOs who approach us about a specifc client transaction or
policy.
In 2021, climate change, the Group’s net zero roadmap, human rights, and biodversity continued to underpin many of our
conversations. We also ran a pilot survey on sustainablity which targeted selected suppliers, think tanks and NGOs, and
intend to conduct a broader survey during 2022.
In additon, we continued to engage NGOs, charites, and other organisatons to promote youth economic incluson through
Futuremakers by Standard Chartered, the Group’s global intiatve to tackle inequalty by promoting greater economic
incluson in our markets.
We hosted a second editon of the Futuremakers Forum, bringng Futuremakers particpants together with business leaders,
policy experts and clients to build partnerships and create economic opportunites focused on young people.
As the global pandemic escalated across our markets in 2021, we continued to deliver COVID-19 economic recovery projects
to support young people.
Their interests
•
Positve social and economic contributon
•
COVID-19 longer-term economic recovery support
•
Climate change and environmental issues
Employees
How we create value
We recognise that our workforce is a signficant source of value that drives our performance and productivty and that the
diversty of our people, cultures and networks sets us apart. To lead the way in addressing the evolving needs of our clients
and the advances in technology, we are developing a workforce that is future-ready and are co-creating with our employees
a culture that is inclusve, collaborative, and innovatve.
How we serve and engage
By engaging employees and fostering a positve experience for them, we can better serve our clients and deliver on our
purpose and Stands. An inclusve culture enables us to unlock innovaton, make better decisons, deliver our business strategy,
live our valued behaviours, and embody our brand promise Here for good. We proactively assess and manage people-
related risks, for example, organisaton, capabilty, and culture, as part of the PLC Group’s risk management framework. Our
People Strategy, as approved by the PLC Board in July 2019, continues to stay relevant and future-focused, with the ongoing
pandemic having accelerated many of the future of work trends which informed our approach.
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Directors’ Report and Financal Statements 2021
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Strategic report continued
Their interests
In 2018, we conducted research to understand our Employee Value Propositon (EVP) – the value that employees, or potential
employees, feel they gain from being part of our organisaton. Our employees told us they want to: have interestng and
impactful jobs; innovate withn a unique set of markets and clients; cultivate a brand that sustainably drives commerce and
offers enrichng careers and development; and be supported by great people leaders. They want these elements to be
anchored in competitve rewards and a positve work-life balance. The EVP is a key input to our People Strategy which
supports the delivery of our business strategy.
Listenng to employees
Frequent feedback from employee surveys helps us identfy and close gaps between colleagues’ expectations and their
experience. In additon to our annual survey, in 2021 we have started deploying continuous listenng mechanisms that capture
colleague sentiment more frequently such as a continuous listenng culture survey and surveys at moments-that-matter, such
as at onboarding and exit. This year our annual My Voice survey was conducted in June and July.
Our key measures of employee satisfacton indcate that we have continued to improve as a place to work over the duration
of deliverng on our People Strategy. Key measures of employee satisfacton fell in 2021, includng the employee engagement
index and the employee net promoter score (which measures how likely employees are to recommend working for us).
Employee engagement had signficantly improved in 2020 as people rallied to address the challenges created by the
pandemic, but the prolonged nature of the criss has seen many of these positve emotions being balanced out.
We remain encouraged that 96 per cent of employees feel committed to doing what is required to help the Bank succeed, 90
per cent feel proud about working for the Bank and 81 per cent say the Bank meets or exceeds their expectations.
Investments in people leader capabilty and the way in which our people leaders have responded to the pandemic has also
translated into a three point increase in our manager net promoter score in the 2021 My Voice survey – buildng leadership
capabilty continues to be important as the demands on our people leaders increase.
Based on the positve lessons learnt from the pandemic around productivty and employee experience as well as listenng to
our employees’ preferences on flexiblity, in 2021 we implemented a hybrid working model in a phased manner across our
markets, combinng virtual and office-based working with greater flexiblity in working patterns and locations. This is a
signficant step towards being more inclusve of the diverse needs of our workforce and supporting their wellbeing by
consciously balancing indvidual choice and flexiblity with business and client needs. While we continue to roll out the model
across our markets, enforced absence from offices during the pandemic has also highlghted the benefit of face-to-face
interacton and we continue to value our physical workspaces as hubs of teamwork, collaboration and learning. Toolkits and
guidance have been provided to colleagues and leaders to help navigate hybrid ways of working, especially at key moments
such as onboarding new team members, returning from parental leave and during performance conversations, as well as to
help re-create ‘water cooler’ moments in hybrid work environments.
As employees operated in a variety of these hybrid-working formats through 2021 – either as part of our flexi-working
programs or due to ongoing pandemic restrictons – supporting their wellbeing, health, safety and resilence continued to be
a key priorty. In some markets, that were acutely impacted by the pandemic during 2021, such as India, the Philppines, Sri
Lanka, Nigera and Zimbabwe, we provided additonal financal assistance to employees, includng access to increased credit
facilties and extended medical coverage, in some cases also for extended to familes. Teams partnered across our markets to
organize emergency medical support for colleagues and their extended familes, and at locations where permissble, in
partnership with government intiatves, we organized camps to accelerate vaccinaton.
Further, with our aim to provide employees the skills, tools and motivaton to manage their wellbeing proactively and to deal
with challenges effectively, we continue to drive awareness of our wellbeing resources that are available to all globally. These
include a mental health app, a physical wellbeing online platform, an upgraded employee assistance programme, wellbeing
toolkits, learning programmes on mental health and resilence as well as an expanded network of trained Mental Health First
Aiders. In parallel, we are seeking to mitgate the causes of work-related stress and encourage a focus on supportive
behaviours withn existng processes and all decison making.
In additon to leveraging inputs from employee surveys, the Court also engages with and listens to the views of the colleagues
through virtual, interactve engagement sessions.
Developing skills of future strategic value
The world of work continues to change rapidly. Our employees need a combinaton of human and technical skills to succeed
both today and in the future. We’re buildng a culture of continuous learning, empowering employees to grow, follow their
aspiratons and embrace the skills needed for the future. Employees are actively using our online learning platform diSCover
that we had launched in 2020, and which is now accessible via a mobile app as well, includng to build future skills around
Data & Analytics, Digtal, Cyber, Client Advisory and Sustainable Finance.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
We have focussed over 2021 on designng and deploying targeted upskillng and re-skillng pilot programmes directed
towards critcal ‘future’ roles where our Strategic Workforce Planning analysis has predicted the increasng need for talent,
such as universal banker, cloud security engineerng, data translator and cyber security analyst. This approach has united our
recruitment, talent management and learning efforts to target, upskill and deploy employees into new roles.
Creating a Culture of Inclusion and Innovation
We believe that incluson is how we will enable our diverse talent to truly deliver impact. As the pandemic extended into 2021,
the need to lead inclusvely in a hybrid-working set-up continued to be a key expectation of our people leaders. With the
focus on buildng a culture of incluson, colleagues are undertaking the ‘ When We’re all included’ learning programme,
centred on increasng awareness around diversty and incluson princples, tackling issues such as unconscious bias and micro
behaviours as well as emphasizng the importance of creating an inclusve environment. As we listened to employee
feedback and responded to the need to better develop psychological safety, we also released an inclusve language guide
and continue to review business terms to be more inclusve moving forward. In our annual My Voice survey, 79.46 per cent of
employees reported positve sentiments around our culture of incluson.
Read our inclusve language guide at sc.com/inclusvelanguageguide
Our commitment to Diversty & Inclusion (D&I) is now supported by more than 50 employee resource groups (ERGs) across our
markets that help provide learning, development and networking opportunites. The ERGs align to our focus areas of gender,
ethnicty and nationalty, generations, sexual orientaton, disablity and wellbeing.
Our gender diversty continues to grow with more female leaders moving up to more senior roles. By the numbers, females
currently represent 31 per cent of the Court, and female representation in senior leadership roles increased by 1.7 percentage
points to 28.7 per cent at the end of 2021.
We remain focused on buildng a workforce that is truly representative of our client base and footprint, and we have
developed strategic partnerships in the US and extended our Futuremakers RISE programme to increase the diversty of our
talent pipelnes. As we work towards achievng our 2025 UK and US ethnicty senior leadership aspiratons which were
defined last year, we continue focus on nurturing local talent in markets across Asia, Africa and Middle East to ensure we
reflect the diversty of our global clients. In 2021, we provided employees, where legally permissble, the abilty to self-identfy
ethnicty data through our online systems and started educating on the value and purpose of collecting this informaton. We
expect increased particpation and self-declaration of ethnicty to allow us additonal insghts towards buildng an even more
representative workforce.
We recognise six key
¹
D&I dates across the year and use these as focal points to faciltate open dialogue on incluson
internally and externally. Through these global campaigns we have engaged and strengthened relationshps with clients
and external stakeholders collectively raisng awareness, promoting best practices and committng to take practical steps to
advance the D&I agenda in the community.
Our progress continues to be recognised externally – we are the first financal services organisaton to achieve the second
highest level of EDGE Strategy Certifcation in Sri Lanka; we have ranked as a Diversty Leader for the second consecutive
year in the Financal Times report on Diversty and Inclusion in Europe, ranked for the first time withn the Top 100
organisatons Refintiv (formerly Thomson Reuters) Diversty and Inclusion Index; ranked as one of the World’s Best Employers
in Forbes for the first time and also recognised at the European Diversty Awards for Supplier Diversty Programme.
As the Bank continues to transform to achieve our strategic ambitons, we are also refreshing the way we manage and
recognise performance. Moving forward, we aim to build an even stronger culture of high performance by focusing on
continuous feedback, coaching, and open two-way performance and development conversations. We will place greater
emphasis on recognisng outperformance driven by collaboration and innovaton, encourage more flexiblity and aspiraton
during goal setting, and remove indvidual performance ratings. During 2021, we piloted aspects of this refreshed approach
with a select first adopter population of employees and will be further embedding the approach across the organizaton in
2022.
1 International Day Against Homophobia, Transphobia and Biphoba, International Day of Persons with Disablites, International Men’s Day, International Women’s Day,
and World Day for Cultural Diversty for Dialogue and Development, World Mental Health Day.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
Sustainable and responsible business
Our core markets represent unique challenges and opportunites, with rapid urbanisaton, heightened vulnerabilty from
climate change, and signficant social and economic disrupton brought by the COVID-19 pandemic. Yet these regions only
receive a fraction of the capital flows they urgently need.
At Standard Chartered, we have the financal expertise, governance frameworks, technology and geographical reach to
unlock capital for sustainable development, where it matters most.
We have set ourselves the vison to become the world’s most sustainable and responsible bank, committed to sustainable
social and economic development through our
business
,
and operations
communites
.
In pursuit of this, and in alignment with stakeholder priorties, in 2021 we formally elevated sustainablity to be a pillar of our
strategy.
We have also set long-term ambitons for our role in tackling the severe impacts of climate change, stark inequalty and
unfair aspects of globalisaton that impact everyone and the planet.
This enhanced focus ensures sustainablity is embedded across our business and integrated into all our decison making, with
robust governance provided by the PLC Board. Management Team and multiple supporting sub-committees.
Our Sustainablity Aspiratons
Our approach is underpinned by a suite of Sustainablity Aspiratons at PLC Group level, that set out how we aim to promote
social and economic development, and deliver sustainable outcomes in the areas in which we can make the most material
contributon to the delivery of the UN Sustainable Development Goals (SDGs).
We review and refresh our Sustainablity Aspiratons annually to ensure they reflect our stakeholders’ priorties and evolving
strategy. For example, in 2021, we committed to consult with shareholders, investors, clients and civl society to develop a
defintion, methodology, targets and timelne to develop our ambiton to measuring, managing and reducing emissons
associated with our financng of clients to support our objectve to achieve net zero by 2050.
We measure progress against the targets set out in our Sustainablity Aspiratons and incorporate selected Aspiratons into
the PLC Group Scorecard to drive widespread awareness and support delivery.
The following pages set out our approach and progress towards our most material sustainable and responsible business
topics. Further informaton on our approach to climate change can also be read in our 2021 Task Force on Climate-related
Financal Disclosures report at sc.com/tcfd in Q1 2022.
Pillar 1: Business
Our main impact on the environment and society is through the business activties we finance. Through our core business, we
promote sustainable finance in our markets, expanding renewables, and financng and investng in sustainable infrastructure
where it is needed most. We want to make the world a better, cleaner and safer place and minmise the negative impact of
our financng. In other words, do more good and less harm.
Do more good – promoting Sustainable Finance
We create and offer sustainable finance products that support sustainable development. PLC Group’s Green and Sustainable
Product Framework guides our labelling of sustainable assets internally. The Framework was developed, and is reviewed
annually, in collaboration with the leading provider of ESG and corporate governance research, Sustainalytcs.
In 2021, this review led to the Framework being updated to include additonal green buildngs certifcations as well as
tightenng eligbilty critera where market expectations have evolved.
Alongside our net zero approach in October 2021, we also launched our new Transiton Finance Framework. This outlines the
activties that we consider eligble for labelling as ‘transiton’ and is intended to support our clients in their journey to a lower
carbon future.
In 2022, we expect growth of our sustainable finance asset base to continue at pace, both as the market develops and also
as we further expand and embed our sustainable finance product offering with our clients.
Read our Sustainable Finance Impact Report: sc.com/SFimpactreport
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Strategic report continued
Do less harm – managing Environmental and Social risk
We have a comprehensive approach to managing Environmental and Social(E&S) risk. We work with clients, regulators and
peers across the finance sector to continuously improve E&S standards and mitgate the impact that stems from our
financng decisons.
We have a suite of detailed policy frameworks and our Positon Statements draw on global best practice, includng the
International Finance Corporation (IFC) Performance Standards and the Equator Princples (EP), to outline the cross-sector
standards we expect of ourselves and our clients. Sector-specifc guidance is also provided for clients operating in sectors
with high environmental or social impact potential, and our Prohibted Activties list sets out the activties we do not finance.
We will not provide financal services to clients who breach, or show insuffcient progress in alignng with our positon
statements.
In 2021, we updated our Positon Statements covering all sensitve sectors. We introduced enhanced requirements which will
become effective from 2022, with the exception of additonal restrictons placed on thermal coal dependent clients, which
were effective immedately.
We identfy and assess (E&S) risks related to our Corporate & Institutonal, Commercial and Business Banking clients, and
embed our E&S risk framework directly into our credit approval process. Where required, we proactively engage with clients
to mitgate identfied risks and impacts and support them to improve their environmental and social performance over time.
All relationshp managers and credit officers are provided with access to detailed online resources and E&S guidelnes and
offered trainng in assessing E&S risk against our critera.
Our approach remains to work with clients to improve their E&S performance with specifc timebound action plans. Where
clients are unable or unwillng to meet our requirements, we will ultimately exit those relationshps.
During 2021, the PLC Group continued to hold the positon of Chair of the EP Associaton, and member of the Board of
Governors of the Roundtable for Sustainable Palm Oil. In additon, PLC Group adopted the Poseidon Princples.
In 2022, we will priortise our approach to biodversity, and update our Environmental and Social Risk Management
Framework in support of our ambiton to become the world’s most responsible and sustainable bank. We will also further
expand our capacity to conduct E&S due dilgence on clients by leveraging our Global Business Service centre in Warsaw.
Read more about our positon statements: sc.com/positonstatements
Read more about our prohibted activties at sc.com/prohibtedactivties.
Read more about PLC Group’s reporting against the Equator Princples:
https://www.sc.com/en/sustainablity/positon-statements/our-framework/equator-princples-reporting/
Responding to climate change
We believe that climate change is one of the greatest challenges facing the world today and that its impact will hit hardest
in the communites and markets where we operate, namely Asia, the Middle East and Africa.
Our climate strategy is structured around three pillars: accelerating sustainable finance; reducing our direct and financed
emissons; and managing the financal risk from climate change. These focus areas reflect the ways in which we contribute
and are exposed to the risks arisng from climate change.
Accelerating sustainable finance
The need for a just transiton to an inclusve, net-zero economy brings with it a huge opportunity for innovaton and growth for
our clients and our Bank. We are uniquely placed to help by directng capital to markets that have both the greatest
opportunity to adopt low-carbon technology, and some of the toughest transiton-financng and climate challenges.
Reducing our direct and financed emissons
Since 2018, we have been working on alignng the emissons from both our own operations and our financng activties to the
Paris Agreement goal of below two degrees of global warming. During 2021, we set out our plan to reach net zero in our
financng by 2050, with ambitous interm targets to substantially reduce our financed carbon emissons by 2030.
To achieve this, the PLC Group has set out a roadmap to reduce financed emissons, finance transiton projects and
accelerate new solutions. Read more about our approach to net zero at Net zero | Standard Chartered (sc.com).
We continue to innovate and strive to accelerate new solutions to climate change, such as launching and growing
sustainable products; reporting on wealth management emissons; and deploying a new Transiton Acceleration Team to
provide our clients in carbon-intensve sectors with deep expertise on how to accelerate their low-carbon transitons, and
tools to measure their progress.
We have also set out our plan to reducing the emissons we produce, and in 2021 we advanced our target to achieve net zero
in our operations from 2030 to 2025.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
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Strategic report continued
We also recognise that we have signficant indrect contributon and exposure to climate impacts through the goods and
services we procure from our suppliers. In 2021, we developed a methodology to measure our supplier Scope 3 emissons and
used this to engage our top emittng suppliers to understand their climate-related actions, goals and overall alignment with
our Sustainablity agenda.
As a result, sustainablity factors have been embedded into our Spend Category Plans, includng targeting specifc areas to
drive emisson reductions. We also began to embed emissons-related clauses into relevant supplier contracts to reduce our
consumption and mitgate remainder emissons.
Managing the financal risk from climate change
Managing the financal risks from climate change remains a key priorty for the organisaton. Throughout 2021 we continued
to embed climate risk management into our Enterprise Risk Management Framework, with a particular focus on financal risk.
Climate stress tests across our markets, includng the Bank of England’s 2021 Biennal Exploratory Scenario, have improved our
understanding of climate risk, strengthened our scenario analysis capabilties and deepened client engagement. In
partnership with peers, industry and academia, we are transitoning from measurement to management of climate risk.
Through ongoing partnership with Imperial College London, we supported the publicaton of a new climate research which
revealed the potential for nature-based solutions to tackle the interlnkages between agriculture, land-use and climate
change.
Standard Chartered PLC Group has publicly committed to the recommendations of the Financal Stabilty Board’s Task Force
on Climate-related Financal Disclosures (TCFD) recommendations since 2017. Our comprehensive TCFD disclosure is
published in a standalone report which provides informaton in a readily identfiable and accessible format for all interested
stakeholders. This can be accessed at sc.com/tcfd.
Pillar 2: Operations
We strive to be a responsible business, drawing on our purpose, brand promise, valued behaviours and Code of Conduct to
help us fight financal crime, minmise our impact and embed our values across our business.
Drivng good conduct and ethics
Good conduct is critcal to deliverng positve outcomes for our clients, markets and stakeholders. In 2021, Conduct Risk
became an integral component of the Enterprise Risk Management Framework, ensuring it is considered withn each
princpal risk type. A new management approach using targeted metrics, analytics and data to enhance our conduct risk
identficaton and mitgation will be rolled out in phases across 2022.
In October 2021 we updated our operational risk management system, introducng a new field to tag each issue logged with
the most appropriate conduct outcome. This has enabled the data to be included as a baseline conduct metric in the PLC’s
Group Conduct Dashboard to faciltate data and insght analysis. The PLC’s Group Conduct Dashboard collates a diverse
array of data to present a visual summary of potential Conduct Risks.
The PLC’s Group Code of Conduct (the Code) remains the primary tool through which we set our conduct expectations. The
Code supports all our polices, setting out minmum standards and reinforcng our valued and expected behaviours. It also
outlines a decison-marking framework to help colleagues make good decisons. To reinforce our shared commitment to the
highest possible standards of conduct, each year we ask our colleagues to reconsider what the Code means to them through
a refresher e-learning, and recommit to it. In 2021, 99.5% per cent of our colleagues completed this.
The abilty to raise concerns is essential to upholding the PLC Group’s Here for good brand and valued behaviours. Early
disclosure of concerns reduces the risk of financal and reputational loss caused by misconduct. We encourage colleagues,
contractors, suppliers and members of the public to raise concerns to our Speaking Up whistleblowng programme which
offers secure, independent and confidental channels to report any concerns without fear of retaliaton. Examples of
whistleblowng concerns include breaches of regulatory requirements, breaches of Group policy and/or standards, or
behaviour that has adverse effects on colleagues or on the Group’s reputation.
In 2021, we united our Conduct and Speaking Up teams to form a new Conduct & Ethics (C&E) team. This enables us to
leverage synergies and apply increased focus on the prevention of misconduct alongside our detection capabilties. In 2022,
we will continue to enhance our conduct polices and standards so that they remain current, clear and effective. We will also
roll out C&E engagement intiatves to unite colleagues and lift particpation across the Group ensuring a Group-wide focus
on livng the Group Code of Conduct.
Furthermore, we will continue to develop our Group Conduct Dashboard to derive deeper conduct insghts that will enable us
to drive action and remediaton in a more targeted manner across the Conduct Programme.
Download our Group Code of Conduct at sc.com/codeofconduct and vist sc.com/speakingup to find more about how our
Speaking Up programme works
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
46
Strategic report continued
Fightng financal crime
Our ambiton is to tackle some of today’s most damaging crimes by making the financal system a hostile environment for
crimnals and terrorists.
Our Conduct, Financal Crime & Compliance (CFCC) team leads our financal crime risk management activties. We
safeguard against money laundering, terrorist financng, sanctions, fraud and other risks, applying core controls such as client
due-dilgence screening and monitorng. In additon, anti-bribery and corruption (ABC) polices aim to prevent colleagues, or
third parties working on our behalf, from engaging in bribery.
We frequently inform and alert clients about the fraud threats and have robust controls and processes in place to help clients
identfy false actors and alert us should they encounter any phishng or fraudulent transaction attempts.
Withn CPBB, we are continuously investng in product systems upgrades to enhance our capabilties with respect to fraud
detection, and embed preventative controls across new product sales and client transactions.
We have invested signficantly to ensure our employees are properly equipped to combat financal crime. In 2021, 99.9 per
cent of colleagues completed trainngs on ABC trainng, anti-money laundering and sanctions and fraud. In additon to
internal trainng, our Supplier Charter sets out our expectations and minmum standards related to ABC.
In 2021, we continued our viglance around COVID-19 related risks, leveraging controls implemented in 2020 to identfy red
flags in relation to fraud, money laundering, bribery and corruption and share insghts with our clients, colleagues, and
partners. Aside from our response to the pandemic we have continued to strengthen our controls by innovaton and
investment in technology.
In 2022, we will continue to adapt our controls to emerging threats by ensuring we have highly trained and experienced
employees working with new technologies to detect any abuse of the financal system. We will also continue to partner with,
and educate, peer banks and clients in the detection and control of financal crime risks.
For more vist sc.com/fightngfinancalcrime
Respecting human rights
We are committed to respecting human rights and ensuring they are not adversely impacted in our role as an employer,
financal services provider and procurer of goods and services.
We recognise that our footprint and supply chain give us the opportunity to raise awareness of human rights and modern
slavery in a wide range of markets and industres.
The PLC Group’s Positon Statement on Human Rights outlines our approach, reflecting frameworks includng the
International Bill of Human Rights, the UN Guidng Princples and the UK Modern Slavery Act. This is embedded across a
range of internal polices and risk management frameworks, includng our Group Code of Conduct and Supplier Charter.
The PLC Group’s Modern Slavery Statement details the actions we are taking to tackle modern slavery and human traffickng
in our business and operations.
In 2021, we commissoned an external consultancy to review our human rights practices and, following their recommendation,
we updated our E&S risk assessment process. We now require additonal due dilgence checks for those clients identfied as
having a heightened modern slavery risk. A human rights specialst consultancy database was established to assist in
conducting this due dilgence and to support clients to implement corrective action plans when human rights allegations are
flagged. We also produced guidance for clients to support the development of their own human rights polices and
procedures.
Withn our supply chain, we provided trainng, digtal documents and internal communicatons to raise awareness of modern
slavery across all Supply Chain Category Managers and Contract Owners. Modern slavery risk is now highlghted at the
vendor onboarding stage, and Procurement Category Plans have been enhanced for all supplier categories found to have
heightened risk. For those suppliers determined by our internal modern slavery risk review to require additonal due dilgence
as a conditon to continue with the supplier engagement, on-site audits are also conducted.
To promote human rights in our workforce, we updated our Human Rights Positon Statement to incorporate new
frameworks and practices relating to the human rights of our employees. We also updated our Supplier Charter to encourage
our suppliers to promote fair pay practices withn their workforce, includng the development of their own understanding of
livng wage.
Read our 2021 Modern Slavery Statement at sc.com/modernslavery
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
47
Strategic report continued
Managing our environmental footprint
We are committed to improvng our environmental performance and reducing the direct environmental impact of our
branches and offices. To do this, we measure and manage energy, water efficency and greenhouse gas (GHG) emissons
closely, verifyng our performance through third-party assurance.
We also measure the amount of non-hazardous waste our branches and offices generate and recycle. We do not produce or
handle, and therefore do not report informaton on, material quantites of hazardous waste.
We have measured and reduced our GHG emissons since 2008. Our Scope 1 and 2 emisson reduction target has been
validated by the Science-based Targets Initative (SBTi) as being in line with a well below two degrees centigrade scenario.
Through our Sustainablity Aspiratons, we have set more ambitous targets to achieve net zero emissons and ensure we only
consume renewable energy across our portfolio by 2025. In partnership with our long-term strategic real estate suppliers such
as CBRE and JLL, we are continually reviewng our direct fuels, on-site renewable energy sources and constantly improvng our
facilties to deliver the efficency improvements needed across our properties to meet these challenging targets.
Water availablity remains a growing challenge in many of our markets. Although we did not face any issues sourcing potable
water in 2021, we continue to take a sustainable and responsible approach to managing water across the Group.
We are committed to reducing waste in all its forms and since 2019, have been committed to reducing waste to 40 kilograms
per employee and recycling 90 per cent of our waste by 2025. Each year, we prevent more than one millon disposable cups
going to landfill and non-recyclable waste is sent for energy generation or compost to limt our impact on landfill where
possible.
In 2021, energy and emissons reductions intiatves included clean power purchase agreements, water recycling, solar
rooftops and on-site waste composting. These direct intiatves reduced our CO
2
emissons by 33 per cent, and our energy
consumption by 25 per cent year-on-year to 121 GWh. Specifcally, investment in energy efficent products accounted for 8
GWh of this reduction, resulting in a lower carbon and more efficent portfolio.
During 2022 we will intiate a new True Zero Waste certifcation programme in our Changi Business Park campus, Singapore.
True Zero Waste certifes 90 per cent of waste diverted from landfill or incneration and will require a signficant step up in
waste management and avoidance. This will be in additon to certifyng more single-use-plastic free buildngs and reducing
paper consumption globally.
Our reporting critera sets out the princples and methodology for measuring our emissons, and our PLC Group Scope 1 and 2
emissons, as well as water and waste data, are independently assured by Global Documentation.
Read the princples and methodology for measuring our greenhouse gas emissons at sc.com/environmentcritera
Pillar 3: Communites
Stakeholders: Society, Regulators and Governments
We aim to create more inclusve economies by sharing our skills and expertise and developing community programmes that
transform lives.
We continue to support our communites through Futuremakers by Standard Chartered, our global intiatve to tackle youth
economic incluson and enable the next generation to learn, earn and grow. In 2021, our employees and partners continued to
support Futuremakers and its related COVID-19 economic recovery projects.
Goal, our Futuremakers girls’ empowerment programme to tackle negative gender and social norms, implemented face-to-
face sessions where possible and combined these with a digtal curriculum delivered through phone messaging, radio or
online. We also supported the FREE (Financal Resilence and Economic Empowerment) Fund, a funding mechanism led by
our Goal partner Women Win, to further long-term investment in the economic empowerment of adolescent girls and young
women who have been heavily impacted by COVID-19.
Through additonal funding allocated in 2020 to support COVID-19 economic recovery, this year we signficantly scaled-up
our livelhood programmes.
The second editon of our virtual Futuremakers Forum to create partnerships and opportunites for young people engaged
particpants includng business leaders and policy experts in collective skills and knowledge-sharing on the future of work.
The event was an opportunity for us to seek out best practice to support the livelhoods of young people and find business
leaders who are committed to ensuring that the next generation is prepared for success.
Despite COVID-19 restrictons limting face to face volunteering, 17 per cent of employees volunteered, contributng more than
16,260 volunteering days with many contributng through new opportunites for virtual volunteering.
During 2022, we will continue to deliver and expand Futuremakers programmes, realign our Community Aspiratons to reflect
the growth of Futuremakers, launch new partnerships to increase employee volunteering, release a Futuremakers impact
report and host the third Futuremakers Forum, focused on entrepreneurs and liftng particpation.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
48
Non-financal informaton statement
This table sets out where shareholders and stakeholders can find informaton about key non-financal matters in this report,
in compliance with the non-financal reporting requirements contained in sections 414CA and 414 CB of the Companies Act
2006. Further disclosures are available on sc.com and in our 2021 ESG report released in Q1 2022.
Reporting requirement
Where to read more in this report about polices, impact
(includng risks, policy embedding, due dilgence and outcomes)
Business model Pages 11 to 13
Non-financal KPIs Page 2
Risk Review (princpal and
emerging risks) Pages 129 to 152
Environment
• Sustainable & Responsible Business Pages 42 to 47
• Directors Report Pages 49 to 54
Employees Pages 40 to 42
Human rights Page 45
Social matters Page 43
Anti-corruption and anti-bribery Page 45
Authority
The strategic report up to page 48 has been issued by order of the Court.
Bill Winters
Director
17 February 2022
Company Reference Number: ZC18
Strategic report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
49
Directors’ Report
The directors present their report and the audited financal statements of Standard Chartered Bank and its subsidaries (the
‘Group’) and Standard Chartered Bank (the ‘Company’) for the year ended 31 December 2021.
Activties
The activties of the Group are banking and providng other financal services. The Group comprises a network of branches
and offices in 58 markets. The Financal Review on pages 20 to 24 contains a review of the business during 2021.
Key stakeholders
The long-term success of the Group is dependent on its relationshps with its key stakeholders. On pages 37 to 47 we outline
the ways in which we have engaged with key stakeholders, the material issues that they have raised with us, and how these
issues have been taken into account in the Court’s decison-making processes.
Results and divdends
The results for the year are given in the income statement on page 167.
Divdends of $1,511 millon were paid during the year to ordinary shareholders (2020 $Nil).
Share capital
Details of the Company’s share capital are given in Note 27 to the accounts.
Loan capital
Details of the loan capital are given in Note 26 to the accounts.
Property, plant and equipment
Details of the property, plant and equipment of the Company are given in Note 17 to the accounts.
Financal instruments
Details of financal instruments are given in Note 12 to the accounts.
Details of exposure to credit, traded, liqudity and funding risk can be found in the Risk Profile section of the accounts.
Post balance sheet events
Details of post balance sheet events are given in Note 36 to the accounts.
Research and development
During the year, the Group invested in research and development, primarly relating to the planning, analysis, design,
development, testing, integraton, deployment and intial support of technology systems.
Future developments in the business of the Group
An indcation of likely future developments in the business of the Group is provided in the Strategic report.
Directors and their interests
The directors of the Company during the year were as follows:
Mr A N Halford
Mr M Smith
Mr W T Winters, CBE
Mr D P Conner
Ms G Huey Evans, CBE
Mr N Kheraj
Dr N Okonjo-Iweala (Resigned 28 February 2021)
Mr D Tang
Mr C Tong
Dr J Viñals
Ms J M Whitbread
Mr P Rivett
Ms M Ramos (Appointed 1 January 2021)
Ms A Mcfadyen (Appointed 23 February 2021)
Following her appointment as the new Director-General of the World Trade Organizaton, Dr Ngozi Okonjo-Iweala stepped
down from the Court on 28 February 2021.
None of the directors have a benefical or non-benefical interest in the shares of the Company or in any of its subsidary
undertakings.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
50
Directors’ Report continued
Details of directors’ pay and benefits are disclosed in Note 38 to the accounts.
All of the directors as at 31 December 2021, except Mr Smith, Ms Mcfadyen and Dr Ngozi Okonjo-Iweala (who stepped down
from the Court on 28 February 2021) are directors of the Company’s ultimate holding company, Standard Chartered PLC.
Going concern
In considerng the going concern status of the Group, the directors have assessed the key factors, includng the current and
anticpated impact of COVID-19 likely to affect the Group’s business model and strategic plan, future performance, capital
adequacy, solvency and liqudity taking into account the emerging risks as well as the princpal risks.
This year, the primary focus has been on the evolving macro-financal stress caused by the response of governments,
businesses and indviduals to COVID-19, with scenario analysis focused on mild, moderate, severe and extreme variants across
the Group’s footprint markets to ensure that the Group has sufficent capital to withstand this shock.
Under this range of scenarios, the results of these stress tests demonstrate that the Company and the Group as a whole have
sufficent capital and liqudity to continue as a going concern and meet regulatory minmum capital and liqudity
requirements.
Having made appropriate enquires, the Court is satisfed that the Company and the Group as a whole have adequate
resources to continue operational businesses for a period of 12 months from 17 February 2022 and therefore continue to adopt
the going concern basis in preparing the financal statements.
Politcal donations
The Group has a policy in place which prohibts donations being made that would: (i) improperly influence legislaton or
regulation, (i) promote politcal views or ideologes, (ii) fund politcal causes. In alignment to this, no politcal donations were
made in the year ended 31 December 2021.
Qualifyng Third Party Indemnites
The Company has granted indemnties to all of its directors on terms consistent with the applicable statutory provisons.
Qualifyng third-party indemnty provisons for the purposes of section 234 of the Companies Act 2006 were accordingly in
force during the course of the financal year ended 31 December 2021 and remain in force at the date of this report.
Qualifyng Pension Scheme Indemnites
Qualifyng pension scheme indemnty provisons (as defined by section 235 of the Companies Act 2006) were in force during
the course of the financal year ended 31 December 2021 for the benefit of the directors of the UK’s pension fund corporate
trustee (Standard Chartered Trustees (UK) Limted) and remain in force at the date of this report.
Areas of operation
The Company operates through branches and subsidaries in 58 markets across Asia, the Middle East, Africa, Europe and the
Americas.
Related party transactions
Details of transactions with directors and officers and other related parties are set out in Note 35 to the financal statements.
Corporate Governance Statement
Following the consolidaton of the Greater China and North Asia Hub (“GCNA”) and the ASEAN and South Asia Hub (“ASA”)
which formed the Asia Hub in 2021, countries in the Asia Hub have operated under an Asia governance model. However, as
the Group continues to cover the vast majorty of PLC Group’s total footprint, the governance arrangements of the Company
and PLC simlarly reflect this overlap and are represented by a predominately mirrored board structure between PLC and the
Company.
By virtue of the continued alignment with PLC, and the mirrored boards, the Company follows a modifed version of UK
Corporate Governance Code 2018 (the “Code”) based on its positon as a wholly-owned subsidary of a listed PLC and its
governance structure as a company established by Royal Charter, and complies with expectations set for premium listed
companies with respect to board leadership, responsiblites, compositon (includng succession) to ensure that the Group is
well managed, with appropriate oversight and control. Princples under the Code relating to certain matters, such as
remuneration, values, and external audit, are set at PLC Group level and considered or approved, if appropriate, by the Court.
The reason for these departures from the Code is because it is considered more appropriate for the purposes of Group wide
consistency that these princples are set at PLC Board level and then dissemnated through the Group to be approved by
subsidary boards.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
51
Directors’ Report continued
The Court is supported by four primary committees: Audit Committee; Risk Committee; Nominaton Committee; and US Risk
Committee. Each of the primary committees and the Court have implemented clear lines of responsiblity and polices to
support the Court in its effective decison making. The Court also has a Standing Committee with a remit to approve matters,
on behalf of the Court, where a formal resolution is required for legal and regulatory purposes. The Court, and its Audit and
Risk Committees have simlar membership as the Board of PLC and its Audit and Risk Committees, with the appropriate
balance, skills, background and experience to make a valued contributon. For further informaton on how the Audit
Committee and Risk Committee operate (includng in respect of their compliance with the Code), please see pages 116 to 122
and 123 to 129 of PLC’s 2021 Annual Report.
The Court, together with the PLC Group, are committed to high standards of engagement with employees, suppliers and
other stakeholders. For a descripton of how the directors engaged with stakeholders, includng as to how such engagement
has been considered in the Court’s decison making, please refer to page 37 to 47.
Employee involvement
We work hard to ensure that our employees are kept informed about matters affecting or of interest to them, but more
importantly to provide opportunites for feedback and dialogue.
We continue to listen and act on feedback from colleagues to ensure internal communicatons remain impactful and
meaningful, in support of the Group’s strategy and transformation. In additon to the Bridge (our internal business
collaboration platform) which allows colleagues to receive key timely updates, exchange ideas and provide feedback, we
also leverage a range of channels includng email broadcasts, newsletters with customised content for each employee
segment, audio and video calls, town halls and other staff engagement and recogniton events. To continue to improve the
way we communicate and ensure our employee communicatons remains relevant, we also periodcally analyse and measure
the impact of our communicatons through a range of survey and feedback tools.
Our senior leaders and People Leaders continue to play a critcal 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. Our People Leaders
also provide guidance and help colleagues understand their role in executing and deliverng on the bank’s strategy. With the
ongoing impact of the global pandemic, the bank has also endeavoured to dissemnate timely informaton that has enabled
our colleagues to stay informed of the various national/internatonal developments and more importantly, to ensure they are
supported in terms of their physical and mental safety and wellbeing.
Across the organisaton, regular team meetings with People Leaders, one-to-ones and various management meetings
provide an important platform for colleagues to discuss and clarify key issues. The bank’s senior leadership (Group Chairman,
CEO, Board) also regularly shares global, regional and country updates on financal performance, strategy, structural
changes, HR programmes, performance reviews and campaigns.
The Court engages with and listens to the views of the workforce through several sources, includng through virtual,
interactve engagement sessions.
Employees, past, present and future can follow our progress through the Group’s LinkedIn network and Facebook page, and
other social network channels, which collectively have over 2.2 millon followers.
The diverse range of communicaton tools and channels we have put in place, ensures that all our colleagues regardless of
where they sit withn our organisatonal network receive timely and relevant informaton (in channels of their choosing) to
support them in being effective in their various roles.
The wellbeing of our employees is central to our thinkng about benefits and support, so they can thrive at work and in their
personal lives. Our Group minmum standards provide employees with a range of flexible working options, and, in terms of
leave, at least 30 days’ leave (through annual leave and public holidays), a minmum of 20 calendar weeks’ fully paid
maternity leave, a minmum of two calendar weeks of leave for spouses or partners, and two calendar weeks for adoption
leave. Combined, this is above the International Labour Organisaton minmum standards.
We seek to build productive and enduring partnerships with various employee representative bodies (includng unions and
work councils). In our recogniton and interactons, we are heavily influenced by the 1948 United Nations Universal Declaration
of Human Rights (UDHR), and several International Labour Organisaton (ILO) conventions includng the Right to Organise
and Collective Bargainng Convention, 1949 (No. 98) and the Freedom of Associaton and Protection of the Right to Organise
Convention, 1948 (No. 87).
The PLC Group Grievance Standard provides a formal framework to deal with concerns that employees have in relation to
their employment or another colleague, which affects them directly, and cannot be resolved through informal mechanisms,
such as counselling, coaching or mediaton. This can include issues of bullying, harassment, discrminaton and victmizaton,
as well as concerns around conditons of employment (e.g. health and safety, new working practices or the working
environment). There is a distnct Speaking Up Policy which covers instances where an employee wishes to ‘blow the whistle’
on actual, planned or potential wrongdoing by another employee or the Group.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
52
Directors’ Report continued
The Group is committed to creating a fair, consistent, and transparent approach to making decisons in a discplinary context.
This commitment is codifed in our Fair Accountabilty Princples, which underpins our PLC Group Discplinary Standard.
Dismssals due to misconduct issues and/or performance (where required by law to follow a discplinary process) are
governed by the PLC Group Discplinary Standard. Where local law or regulation requires a different process with regards to
dismssals and other discplinary outcomes, we have country variatons in place.
Diversty and Inclusion
Our PLC Group Diversty and Inclusion Standard has been developed to ensure a respectful workplace, with fair and equal
treatment, diversty and incluson, and the provison of opportunites for employees to particpate fully and reach their full
potential in an appropriate working environment. All indviduals are entitled to be treated with dignty and respect, and to be
free from harassment, bullying, discrminaton and victmisaton. This helps to support productive working conditons,
decreased staff attriton, positve employee morale and engagement, and maintans employee wellbeing, and reduced risk.
The Group aims to operate diversty and incluson polices, standards and practices that provide equality of opportunity for
all, protect the dignty of employees and promote respect at work. All employees and contractors are required to take
personal and indvidual responsiblity to comply with the Standard, behave in a non-discrminatory way and not to
particpate in acts of inapproprate behaviour or conduct, harassment or bullying.
The Group is committed to provide equal opportunites and fair treatment in employment. We do not accept unlawful
discrminaton in our recruitment or employment practices on any grounds includng but not limted to; sex, race, colour,
nationalty, ethnic, national or indgenous orign, disablity, age, marital or civl partner status, pregnancy or maternity, sexual
orientaton, gender identty, expression or reassignment, HIV or AIDS status, parental status, miltary and veterans status,
flexiblity of working arrangements, religon or belief.
We strive for recruitment, employment, redundancy and redeployment, trainng, development, succession planning and
promotion practices that are inclusve and accessible; and that do not directly or indrectly discrminate.
Recruitment, employment, trainng, development and promotion decisons are based on the skills, knowledge and behaviour
required to perform the role to the PLC Group’s standards. Implied in all employment terms is the commitment to provide
equal pay for equal work. We also make reasonable workplace adjustments (includng during the hirng process), to ensure all
indviduals feel supported and are able to particpate fully and reach their full potential. If employees become disabled, we
will proactively seek to support them with appropriate trainng and workplace adjustments where possible and explore every
opportunity to ensure their employment continues.
Health and safety
Our Health, Safety and Wellbeing (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 minmum. Compliance rates are reported at least biannually to each country’s management team.
HSW performance and risks are reported annually to the PLC Group Risk Committee and Bank Court Risk Committee. We use
a health and safety management system across all countries to ensure a consistently high level of health and safety
reporting for all our colleagues and clients.
The Bank sponsors medical and healthcare services for all employees, except in markets where cover is provided through
State-mandated healthcare, which represent less than 0.5 per cent of the PLC Group’s employees. All staff also have access
to professional counselling via our Employee Assistance Program.
Furthermore, we consider and treat mental health issues requirng first aid in the same way that we would treat physical
inuries. Our global Mental Health First Aid (MHFA) program offers help to someone developing a mental health problem,
experiencng a worsening of an existng mental illness or a mental health criss. The mental health support is given until
appropriate professional help is received, or the criss resolved.
In 2021, we worked with an external certifed provider to develop our previously classroom-based MHFA trainng program into
a virtual program which can be accessed by any colleague regardless of their location.
In 2021, we recorded no work-related fatalites or serious long-term work-related health issues in our staff.
Throughout 2021, the COVID-19 pandemic continued to impact health, safety and wellbeing. With lockdowns and restrictons
continung across our markets throughout the year, we accelerated our Future Workplace Now plans and the majorty of
colleagues adopted working from home arrangements. Workplace closures and restricted operations resulted in a reduction
in workplace accidents and incdents; however, home working introduced new and emerging risks to manage across health,
safety and wellbeing. A H&S inspecton checklist is available for staff to assess their working area for hazards, and virtual
assessments by H&S experts are organised if required. All staff opting to work flexibly receive an allowance to purchase
ergonomic office equipment. Our work inury insurance covers all staff working from home.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
53
Directors’ Report continued
Supply Chain Management
To support the operation of our branches, offices, businesses and functions we source a variety of goods and services. The
majorty of our expenditure is on services and is managed through a third-party governance framework which ensures that
we follow the highest standards in terms of sourcing, awarding and onboarding suppliers.
For informaton about how the PLC Group engages with suppliers on environmental and social matters, please see our
Supplier Charter and Supplier Diversty and Inclusion Standard.
As set out under the UK Modern Slavery Act 2015, the PLC Group is required to publish a Modern Slavery Statement annually.
The PLC Group’s 2021 Modern Slavery Statement will be issued at the same time as the Annual Report. This document will
give further detail on how the PLC Group has prevented modern slavery and human traffickng in its operations, financng
and supply chain during 2021.
Our Supplier Charter and Supplier Diversty and Inclusion standard can be viewed at https://www.sc.com/en/group/
suppliers/
Product Responsiblity
We aim to design and offer products based on client needs to ensure fair treatment and outcomes for clients.
The PLC Group has in place a risk framework, comprisng polices and standards, to support these objectves in alignment
with our Conduct Risk Framework. This framework covers sales practices, client communicatons, appropriateness and
suitablity, and post-sales practice. As part of this, we ensure products sold are suitable for clients and comply with relevant
laws and regulations.
We have processes and guidelnes specifc to each of our client businesses, to promptly resolve client complaints, understand
and respond to client issues. Conduct consideratons are given signficant weightng in front-line incentve structures to drive
the right behaviours.
For more informaton on our approach to product design, product pricng, treating customers fairly and protecting vulnerable
customers, and incentvisng our frontline employees, see pages 37 to 42. For more informaton on fraud identficaton see
page 45.
Environmental impact of our operations
We aim to minmise the environmental impact of our operations as part of our commitment to be a responsible company.
We report on energy, water and non-hazardous waste data which become the basis of our Greenhouse Gas (GHG) emissons
management, as well as the targets we have set to reduce energy, water and waste consumption.
In 2021, energy and emissons reductions intiatves included clean power purchase agreements, water recycling, solar
rooftops and on-site waste composting. These direct intiatves reduced our CO2 emissons by 33 per cent, and our energy
consumption by 25 per cent year-on-year to 121 GWh. Specifcally, investment in energy efficent products accounted for 8
GWh of this reduction, resulting in a lower carbon and more efficent portfolio.
Our reporting critera document sets out the princples and methodology used to calculate the GHG emissons of the PLC
Group. For more informaton, review the reporting critera at sc.com/environmentcritera
Reporting period
The reporting period of our environmental data is from 1 October 2020 to 30 September 2021. This allows sufficent time for
independent assurance to be gained prior to the publicaton of results. Accordingly, the operating income used in this
inventory corresponds to the same time period rather than the calendar year used in financal reporting.
Auditor
The Audit Committee reviews the appointment of the Group statutory auditor, its effectiveness and its relationshp with the
Group, which includes monitorng our use of the auditors for non-audit services and the balance of audit and non-audit fees
paid. Each director believes that there is no relevant informaton of which our Group statutory auditor is unaware. Each has
taken all reasonable steps necessary as a director to be aware of any relevant audit informaton and to establish that Ernst &
Young LLP (EY) is made aware of any pertinent informaton. A resolution to re-appoint EY as auditor will be proposed at the
2022 PLC Annual General Meeting.
By order of the Court
Bill Winters
Director
17 February 2022
Company Reference Number: ZC18
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
54
Statement of directors’ responsiblites
The directors are responsible for preparing the Directors’ Report and the Group and Company Financal Statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and Company financal statements for each financal year. Under that
law they are required to prepare the Group financal statements in accordance with UK - adopted internatonal accounting
standards in conformity with the requirements of the Companies Act 2006.
•
The Group financal statements have been prepared in accordance with UK adopted internatonal accounting standards
and International Financal Reporting Standards as adopted by the European Union;
•
The Company financal statements have been properly prepared in accordance with UK adopted internatonal accounting
standards as applied in accordance with section 408 of the Companies Act 2006; and
•
The financal statements have been prepared in accordance with the requirements of the Companies Act 2006.
Under company law the directors must not approve the financal statements unless they are satisfed that they give 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 financal statements, the directors are required to:
•
Select suitable accounting polices 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 and EU IFRS;
•
Assess the Group and the Company’s abilty to continue as a going concern, disclosng, as applicable, matters related to
going concern; and
•
Use the going concern basis of accounting unless they either intend to liqudate the Group or the Company or to cease
operations or have no realistc alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficent to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financal positon of the Company and
enable them to ensure that its financal statements comply with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the preparation of financal statements that are free from material
misstatement, whether due to fraud or error, and have general responsiblity 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 irregularties.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and Directors’
Report that complies with that law and those regulations.
Responsiblity statement of the directors in respect of the Directors’ Report and Financal Statements
We confirm that to the best of our knowledge:
•
The financal statements, prepared in accordance with the applicable set of accounting standards, give a true and fair
view of the assets, liablites, financal positon and profit or loss of the Company and the undertakings included in the
consolidaton taken as a whole; and
•
The Strategic Report includes a fair review of the development and performance of the business and the positon of the
Company and the undertakings included in the consolidaton taken as a whole, together with a descripton of the
emerging risks and uncertaintes that they face.
We consider the Directors’ Report and Financal Statements, taken as a whole, is fair, balanced and understandable and
provides the informaton necessary to assess the Group’s positon and performance, business model and strategy.
By order of the Court
Andy Halford
Director
17 February 2022
Directors’ Report continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
55
Risk Index
Annual Report
and Accounts Pillar 3 Report
Risk profile Our Risk Profile
57
Credit Risk
58 109-118
Basis of preparation 58
Credit Risk overview 58
IFRS 9 expected credit loss princples and approaches 58
Maximum exposure to Credit Risk 61
Analysis of financal instrument by stage 63
Credit quality analysis 67 115-117
• Credit quality by client segment 68
Movement in gross exposures and credit imparment for loans and advances,
debt securites, undrawn commitments and financal guarantees
72
Movement of debt securites, alternative Tier 1 and other eligble bills 75
Credit imparment charge 80
COVID-19 relief measures 81
Problem credit management and provisoning 83
• Forborne and other modifed loans by client segment 83
• Credit-impared (stage 3) loans and advances by client segment 84
Credit Risk mitgation 85 118
• Collateral 85
• Collateral held on loans and advances 86
• Collateral – Corporate, Commercial and Institutonal Banking 88
• Collateral – Consumer, Private and Business Banking 89
• Mortgage loan-to-value ratios by geography 89
• Collateral and other credit enhancements possessed or called upon 90
• Other credit risk mitgation 90
Other portfolio analysis 91
• Maturity analysis of loans and advances by client segment 91
• Credit quality by industry 92
• Debt securites and other eligble bills 97
IFRS 9 expected credit loss methodology 99
Traded Risk
108
Market risk changes 108
Counterparty Credit Risk 110
Derivatve financal instruments Credit Risk mitgation 110
Liqudity and Funding Risk
111
Liqudity and Funding Risk metrics 111
Liqudity analysis of the Group’s balance sheet 113
Interest Rate Risk in the Banking Book
119
Operational and Technology Risk
120
Operational Risk profile 120
Operational Risk events and losses
121
Other princpal risks
121
Risk management
approach
Risk Management Framework 122
Princpal Risks 129
Emerging Risks 144
Capital
Capital Summary 153
Capital ratios 153
CRD Capital base 154 107-108
Risk-weighted asset 154
Leverage ratio 154 121
Risk review and Capital review
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
56
The following parts of the Risk review and Capital review form part of these financal statements:
•
a) Risk review:
Disclosures marked as ‘audited’ from the start of Credit Risk section (page 58) to the end of other princpal
risks in the same section (page 121)
•
b) Capital review:
‘CRD Capital base’ to the end of ‘Total capital’ (page 154).
Risk review and Capital review continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
57
Our risk profile in 2021
Our Risk Management Framework (RMF) enables us to closely manage enterprise-wide risks with the objectve of maximsing
risk-adjusted returns while remainng withn our Risk Appetite. Identifcation and assessment of potentially adverse risk events
is an essential first step in managing the risks of any business or activty and in order to faciltate that, the Group maintans a
dynamic risk-scanning process with inputs from the internal and external risk environment, as well as potential threats and
opportunites from the business and client perspectives, enabling us to proactively manage our portfolio. The Group
maintans a taxonomy of the Princpal Risk Types (PRTs), Integrated Risk Types (IRTs) and risk sub-types that are inherent to
the strategy and business model; as well as an emerging risks inventory that includes near-term risks as well as longer-term
uncertaintes.
Despite the challenges brought on by the ongoing pandemic, we have built a strong foundation that has helped us to deliver
a sustained strong performance with a resilent risk profile. Our corporate portfolios remain predominantly short-tenor and
diversfied across industry sectors, products and geographies. We have seen improvements in a number of our metrics that
reflect our robust risk management during the pandemic. We remain viglant to the continued impact of COVID-19 and an
uneven recovery across markets and industres.
The table below highlghts the Group’s overall risk profile associated with our business strategy.
We have a robust risk management
approach supported through our
well-established RMF
Our portfolios exhibt a resilent
risk profile despite a challenging
macroeconomic environment
Our capital and liqudity positons
continue to be at healthy levels
• Cross-cutting risks have been repositoned
as IRTs and are defined as risks that are
signficant in nature and materialse
primarly through the relevant PRTs
• Given their integrated nature, Digtal Asset
Risk and Third-Party Risk, in additon to
Climate Risk, have been categorised as
IRTs in the RMF
• The Capital and Liqudity PRT has been
renamed to Treasury Risk and the scope of
the risk type has been expanded to cover
Interest Rate Risk in the Banking Book
• Self-assessment performed at Group level
affirms the overall effectiveness of the
RMF adoption
• The Group aims to further strengthen its
risk management practices in 2022,
through further improvng on the
management of non-financal risks withn
its businesses, functions and across the
footprint, as well as management of risks
which are integrated in nature
Further details on the RMF can be found in
the Risk management approach section
(Page 122 to 128)
• The proportion of the Group’s loans and
advances to customers in stage 1 and 2
has improved to 87 per cent and 9 per cent
respectively (from 84 per cent and
11 per cent respectively in 2020)
• Exposure to investment grade
clients has increased to 71 per cent
(2020: 63 per cent) reflecting an increase
in repurchase agreement balances and
high-quality orignations
• There has been a 50 per cent decrease to
$4.3 billon (2020: $8.5 billon) in early
alerts exposure, mainly due to reductions
in counterparty exposure and clients being
removed from early alert
• The total credit imparment charge is a
release of $28 millon compared to a
charge last year (2020: $1.9 billon)
• Stage 3 loans decreased to $6.9 billon
(2020: $8.3 billon), with the overall
contributon to the total reduced to
5 per cent (2020: 6 per cent). The overall
Stage 3 cover ratio increased to 61 per cent
(2020: 60 per cent)
• The majorty of our Consumer, Private and
Business Banking products continue to be
fully secured loans (stable at 84 per cent
of the portfolio). The overall average
loan-to-value of the mortgage portfolio is
low at 46.5 per cent
• Our capital and liqudity positons remain
above current requirements
• Our Liqudity Coverage Ratio continues
to be above 100 per cent
• Our advances-to-deposits ratio decreased
by 4.7 per cent to 52.1 per cent, driven by
an increase in overall deposits
• Our customer deposit base is diversfied by
type and maturity
Risk profile
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
58
Credit Risk
Basis of preparation
Unless otherwise stated the balance sheet and income statement informaton presented withn this section is based on the
Group’s management view. This is princpally the location from which a client relationshp is managed, which may differ from
where it is financally 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, as per Note 14 Reverse repurchase and repurchase agreements includng other
simlar secured lending and borrowing.
Credit Risk overview
Credit Risk is the potential for loss due to the failure of a counterparty to meet its obligatons to pay the Group. Credit
exposures arise from both the banking and trading books.
Impairment model
IFRS 9 requires an imparment model that requires the recogniton of expected credit losses (ECL) on all financal debt
instruments held at amortised cost, fair value through other comprehensive income (FVOCI), undrawn loan commitments
and financal guarantees.
Staging of financal instruments
Financal instruments that are not already credit-impared are orignated into stage 1 and a 12-month expected credit loss
provison is recognised.
Instruments will remain in stage 1 until they are repaid, unless they experience signficant credit deterioraton (stage 2) or they
become credit-impared (stage 3).
Instruments will transfer to stage 2 and a lifetme expected credit loss provison recognised when there has been a signficant
change in the credit risk compared to what was expected at orignation.
The framework used to determine a signficant increase in credit risk is set out below.
Stage 1 Stage 2 Stage 3
• 12-month ECL
• Performing
• Lifetme expected credit loss
• Performing but has exhibted signficant
increase in Credit risk (SICR)
• Credit-impared
• Non-performing
IFRS 9 expected credit loss princples and approaches
The main methodology princples and approach adopted by the Group are set out in the following table.
Title Descripton Supplementary informaton Page
Approach to
determinng
expected
credit losses
For material loan portfolios, the Group has adopted a statistcal
modelling approach for determinng expected credit losses that
makes extensive use of credit modelling. These models leveraged
existng advanced Internal Ratings Based (IRB) models, where these
were available. Where model performance breaches model monitorng
thresholds or validaton standards, a post model adjustment may be
required to correct for identfied model issues, which will be removed
once those issues have been remedied.
IFRS 9 methodology
Determinng lifetme expected
credit loss for revolving products
99
99
Incorporation of
forward-looking
informaton
The determinaton of expected credit loss includes various
assumptions and judgements in respect of forward-looking
macroeconomic informaton. Refer to page 100 for incorporation
of forward-looking informaton, forecast of key macroeconomic
variables underlying the expected credit loss calculation and the
impact on non-linearty and sensitvity of expected credit loss
calculation to macroeconomic variables.
Management overlays may also be used to capture risks not identfied
in the models.
Incorporation of forward-looking
informaton
Forecast of key macroeconomic
variables underlying the expected
credit loss calculation
Management overlay and
sensitvity to macroeconomic
variables
100
100
102
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
59
Risk profile continued
Title Descripton Supplementary informaton Page
Signficant
increase in
credit risk (SICR)
Expected credit loss for financal assets will transfer from a 12-month
basis (stage 1) to a lifetme basis (stage 2) when there is a signficant
increase in credit risk (SICR) relative to that which was expected
at the time of orignation, or when the asset becomes credit-impared.
On transfer to a lifetme basis, the expected credit loss for those
assets will reflect the impact of a default event expected to occur
over the remainng lifetme of the instrument rather than just over the
12 months from the reporting date.
SICR is assessed by comparing the risk of default of an exposure at the
reporting date with the risk of default at orignation (after considerng
the passage of time). ‘Signficant’ does not mean statistcally
signficant nor is it reflective of the extent of the impact on the Group’s
financal statements. Whether a change in the risk of default is
signficant or not is assessed using quantitatve and qualitatve critera,
the weight of which will depend on the type of product and
counterparty.
Quantitatve critera
Signficant increase in credit
risk thresholds
Specifc qualitatve and
quantitatve critera per segment:
Corporate, Commercial &
Institutonal Banking clients
Consumer and Business Banking
clients
Private Banking clients
Debt securites
104
104
104
105
105
105
106
Assessment of
credit-impared
financal assets
Credit-impared (stage 3) financal assets comprise those assets that
have experienced an observed credit event and are in default. Default
represents those assets that are at least 90 days past due in respect of
princpal and interest payments and/or where the assets are otherwise
considered unlikely to pay. This defintion is consistent with internal
credit risk management and the regulatory defintion of default.
Unlikely to pay factors include objectve conditons such as bankruptcy,
debt restructuring, fraud or death. It also includes credit-related
modifcations of contractual cashflows due to signficant financal
diffculty (forbearance) where the Group has granted concessions
that it would not ordinarly consider.
Interest income for stage 3 assets is recognised by applying the orignal
effective interest rate to the net asset amount (that is, net of credit
imparment provisons). When financal assets are transferred from
stage 3 to stage 2, any contractual interest recovered in excess of the
interest income recognised while the asset was in stage 3 is reported
withn the credit imparment line.
Consumer and Business Banking
clients
Corporate, Commercial &
Institutonal Banking clients
106
106
Transfers
between stages
Assets will transfer from stage 3 to stage 2 when they are no longer
considered to be credit-impared. Assets will not be considered
credit-impared only if the customer makes payments such that they
are paid to current in line with the orignal contractual terms.
Assets may transfer to stage 1 if they are no longer considered to have
experienced a signficant increase in credit risk. This will be immedate
when the orignal PD based transfer critera are no longer met (and as
long as none of the other transfer critera apply). Where assets were
transferred using other measures, the assets will only transfer back to
stage 1 when the conditon that caused the signficant increase in
credit risk no longer applies (and as long as none of the other transfer
critera apply).
Movement in loan exposures
and expected credit losses
72
Modifed
financal assets
Where the contractual terms of a financal instrument have been
modifed, and this does not result in the instrument being derecognised,
a modifcation gain or loss is recognised in the income statement
representing the difference between the orignal cashflows and the
modifed cashflows, discounted at the effective interest rate. The
modifcation gain/loss is directly applied to the gross carrying amount
of the instrument.
If the modifcation is credit related, such as forbearance or where the
Group has granted concessions that it would not ordinarly consider,
then it will be considered credit-impared. Modifcations that are not
credit related will be subject to an assessment of whether the asset’s
credit risk has increased signficantly since orignation by comparing
the remainng lifetme PD based on the modifed terms with the
remainng lifetme PD based on the orignal contractual terms.
COVID-19 relief measures
Forbearance and other modifed
loans
81
83
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
60
Risk profile continued
Title Descripton Supplementary informaton Page
Governance
and applicaton
of expert credit
judgement in
respect of
expected
credit losses
The models used in determinng ECL are reviewed and approved by
the PLC Group Credit Model Assessment Committee and have been
validated by Group model validaton, which is independent of the
business.
A quarterly model monitorng process is in place that uses recent data
to compare the differences between model predictons and actual
outcomes against approved thresholds. Where a model’s performance
breaches the monitorng thresholds then an assessment of whether an
ECL adjustment is required to correct for the identfied model issue is
completed.
The determinaton of expected credit losses requires a signficant
degree of management judgement which had an impact on
governance processes, with the output of the expected credit models
assessed by the IFRS 9 Impairment Committee.
PLC Group Credit Model
Assessment Committee
IFRS 9 Impairment Committee
107
107
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
61
Risk profile continued
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
financal instruments as at 31 December 2021, before and after taking into account any collateral held or other Credit
Risk mitgation.
The Group’s on-balance sheet maximum exposure to Credit Risk increased by $26 billon to $517 billon (2020: $491 billon).
This was largely driven by an increase of $16 billon in Investment securites debt and an increase of $20 billon in fair value
through profit and loss instruments offset by a reduction of derivatve instruments of $16 billon.
Off-balance sheet instruments increased by $5.6 billon, of which undrawn commitments increased by $1.8 billon and
financal guarantee, trade credit and irrevocable letters of credit increased by $3.8 billon from additonal commitments
provided to clients.
Group
2021
2020
Maximum
exposure
$millon
Credit risk management
Net
Exposure
$millon
Maximum
exposure
$millon
Credit risk management
Net
exposure
$millon
Collateral
8
$millon
Master
netting
agreements
$millon
Collateral
8
$millon
Master
netting
agreements
$millon
On-balance sheet
Cash and balances at central banks 58,117
61,963 61,963
58,117Loans and advances to banks
1
29,999 956 29,043
27,666 809 26,857
of which – reverse repurchase
agreements and other simlar
secured lending⁷ 809 –
956 956 –
809Loans and advances to customers
1
144,799 43,172 101,627
140,861 41,936 98,925
of which – reverse repurchase
agreements and other simlar
secured lending
7
3,764 3,764 –
2,919 2,919 –
Investment securites – debt securites
and other eligble bills
2
101,705 101,705
85,759 85,759
Fair value through profit or loss
3, 7
101,944 78,986 – 22,958
81,917 62,807 – 19,110
Loans and advances to banks 2,771
3,622 3,622
2,771Loans and advances to customers 3,213
3,932 3,932
3,213Reverse repurchase agreements
and other simlar lending
7
78,986 78,986 –
62,807 62,807 –
Investment securites – debt
securites and other eligble bills
2
15,404 15,404
13,126 13,126
Derivatve financal instruments
4,7
53,245 7,757 42,577 2,911
69,225 9,184 52,308 7,733
Accrued income 1,088
996 996
1,088Assets held for sale 83
52 52
83Other assets
5
22,281 22,281
25,873 25,873
Total balance sheet 516,984 130,871 42,577 343,536
490,589 114,736 52,308 323,545
Off-balance sheet
6
Undrawn commitments 2,663 96,219
100,686 2,658 98,028
98,882Financal guarantees and
other equivalents 1,742 43,676
49,235 1,813 47,422
45,418Total off-balance sheet 149,921 4,471 – 145,450
144,300 4,405 – 139,895
Total 666,905 135,342 42,577 488,986
634,889 119,141 52,308 463,440
1 Net of credit imparment. An analysis of credit quality is set out in the credit quality analysis section (page 67). Further details of collateral held by client segment and
stage are set out in the collateral analysis section (page 85)
2 Excludes equity and other investments of $575millon (31 December 2020: $328 millon). Further details are set out in Note 12 Financal instruments
3 Excludes equity and other investments of $4,585millon (31 December 2020: $3,037millon). Further details are set out in Note 12 Financal 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
positve and negative mark-to-market values of applicable derivatve transactions
5 Other assets include cash collateral, and acceptances, in additon to unsettled trades and other financal assets
6 Excludes ECL allowances which are reported under Provisons for liablites and charges
7 Collateral capped at maximum exposure (over-collateralised)
8 Adjusted for over-collateralisaton, which has been determined with reference to the drawn and undrawn component as this best reflects the effect on the amount
arisng from expected credit losses. Loans and advances to customers collateral now re-presented between on and off -balance sheet as it also includes guarantees
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
62
Risk profile continued
Company
2021
2020
Maximum
exposure
$millon
Credit risk management
Net
Exposure
$millon
Maximum
exposure
$millon
Credit risk management
Net
exposure
$millon
Collateral⁸
$millon
Master
netting
agreements
$millon
Collateral⁸
$millon
Master
netting
agreements
$millon
On-balance sheet
Cash and balances at central banks 46,476
48,165 48,165
46,476Loans and advances to banks
1
16,117 438 15,679
14,997 55 14,942
of which – reverse repurchase
agreements and other simlar
secured lending
7
438 438 –
55 55 –
Loans and advances to customers
1
71,161 17,053 54,108
72,969 17,854 55,115
of which – reverse repurchase
agreements and other simlar
secured lending
7
3,047 3,047 –
2,283 2,283 –
Investment securites – debt securites
and other eligble bills
2
86,028 86,028
70,872 70,872
Fair value through profit or loss
3,7
95,284 77,655 – 17,629
77,715 62,262 – 15,453
Loans and advances to banks 2,771
3,570 3,570
2,771Loans and advances to customers 2,581
3,207 3,207
2,581Reverse repurchase agreements and
other simlar lending
7
77,655 77,655 –
62,262 62,262 –
Investment securites – debt
securites and other eligble bills
2
10,852 10,852
10,101 10,101
Derivatve financal instruments⁴
,7
53,478 7,033 43,788 2,657
68,910 8,581 53,091 7,238
Accrued income 733
659 659
733Assets held for sale 83
49 49
83Other assets
5
19,860 19,860
23,495 23,495
Total balance sheet 390,801 102,179 43,788 244,834
376,250 88,752 53,091 234,407
Off-balance sheet
6
Undrawn commitments 2,008 67,882
66,678 1,820 64,858
69,890Financal guarantees and
other equivalents 1,534 34,608
37,465 1,581 35,884
36,142Total off-balance sheet 104,143 3,401 – 100,742
106,032 3,542 – 102,490
Total 494,944 105,580 43,788 345,576
482,282 92,294 53,091 336,897
1 Net of credit imparment. An analysis of credit quality is set out in the credit quality analysis section (page 67). Further details of collateral held by client segment and
stage are set out in the collateral analysis section (page 85)
2 Excludes equity and other investments of $361millon (31 December 2020: $230millon). Further details are set out in Note 12 Financal instruments
3 Excludes equity and other investments of $4,421millon (31 December 2020: $2,911millon). Further details are set out in Note 12 Financal 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
positve and negative mark-to-market values of applicable derivatve transactions
5 Other assets include cash collateral, and acceptances, in additon to unsettled trades and other financal assets
6 Excludes ECL allowances which are reported under Provisons for liablites and charges
7 Collateral capped at maximum exposure (over-collateralised)
8 Adjusted for over-collateralisaton, which has been determined with reference to the drawn and undrawn component as this best reflects the effect on the amount
arisng from expected credit losses. Loans and advances to customers collateral now re-presented between on and off -balance sheet as it also includes guarantees
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
63
Risk profile continued
Analysis of financal instrument by stage (audited)
This table shows financal instruments and off-balance sheet commitments by stage, along with the total credit imparment
loss provison against each class of financal instrument.
The proportion of financal instruments held withn stage 1 increased to 93 per cent (2020: 92 per cent). Total stage 1 balances
increased by $30 billon, of which around $14 billon is in Debt Securites and other eligble bills and a $9 billon increase in loans
and advances. Off-balance sheet exposures also increased, up $7 billon, in undrawn commitments and financal guarantees,
trade credits and irrevocable letters of credit.
Stage 2 financal instruments decreased to 5 per cent (2020: 6 per cent) from exposures changes and upgrades to stage 1
mostly Early Alert and in High Risk clients.
Stage 3 financal instruments was at 1.5 per cent (2020:1.9 per cent) due to repayments and write-offs during the year.
Group
2021
Stage 1 Stage 2 Stage 3 Total
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Cash and
balances at
central banks
61,901 – 61,901 66 (4) 62 – – – 61,967 (4) 61,963
Loans and
advances
to banks
(amortised cost)
29,422 (11) 29,411 561 (4) 557 31 – 31 30,014 (15) 29,999
Loans and
advances to
customers
(amortised cost)
129,990 (266) 129,724 12,741 (381) 12,360 6,941 (4,226) 2,715 149,672 (4,873) 144,799
Debt securites
and other
eligble bills
5
96,350 (58) 5,315 (42) 113 (66) 101,778 (166)
Amortised cost
28,978 (10) 28,968 196 3 199 113 (66) 47 29,287 (73) 29,214
FVOCI
2
67,372 (48) 5,119 (45) – – 72,491 (93)
Accrued income
(amortised cost)
4
996 – 996 – – – – – – 996 – 996
Assets held
for sale
4
52 – 52 – – – – – – 52 – 52
Other assets
4
22,281 – 22,281 – – – 3 (3) – 22,284 (3) 22,281
Undrawn
commitments
3
94,170 (23) 6,516 (53) – – 100,686 (76)
Financal
guarantees, trade
credits and
irrevocable letters
of credit
3
45,916 (12) 2,522 (21) 797 (207) 49,235 (240)
Total 481,078 (370) 27,721 (505) 7,885 (4,502) 516,684 (5,377)
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 provison in respect of debt securites measured at FVOCI is held withn the OCI reserve
3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financal liablity and therefore there is no “net carrying amount”. ECL
allowances on off-balance sheet instruments are held as liablity provisons to the extent that the drawn and undrawn components of loan exposures can be
separately identfied. Otherwise they will be reported against the drawn component
4 Stage 1 ECL is not material
5 Stage 3 includes $33 millon orignated credit-impared debt securites
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
64
Risk profile continued
2020
Stage 1 Stage 2 Stage 3 Total
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Cash and
balances at
central banks 58,054 – 58,054 67 (4) 63 – – – 58,121 (4) 58,117
Loans and
advances
to banks
(amortised cost) 27,356 (10) 27,346 323 (3) 320 – – – 27,679 (13) 27,666
Loans and
advances to
customers
(amortised cost) 122,883 (331) 122,552 15,606 (619) 14,987 8,289 (4,967) 3,322 146,778 (5,917) 140,861
Debt securites
and other
eligble bills
5
82,230 (50) 3,488 (26) 114 (58) 85,832 (134)
Amortised cost 14,219 (13) 14,206 177 (2) 175 114 (58) 56 14,510 (73) 14,437
FVOCI
2
68,011 (37) 3,311 (24) – – 71,322 (61)
Accrued income
(amortised cost)
4
1,088 – 1,088 – – – – – – 1,088 – 1,088
Assets held
for sale
4
83 – 83 – – – – – – 83 – 83
Other assets 25,873 – 25,873 – – – 3 (3) – 25,876 (3) 25,873
Undrawn
commitments
3
91,641 (23) 7,240 (73) 1 – 98,882 (96)
Financal
guarantees, trade
credits and
irrevocable letters
of credit
3
41,479 (16) 3,175 (25) 764 (194) 45,418 (235)
Total
450,687 (430) 29,899 (750) 9,171 (5,222) 489,757 (6,402)
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 provison in respect of debt securites measured at FVOCI is held withn the OCI reserve
3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financal liablity and therefore there is no “net carrying amount”. ECL
allowances on off-balance sheet instruments are held as liablity provisons to the extent that the drawn and undrawn components of loan exposures can be
separately identfied. Otherwise they will be reported against the drawn component
4 Stage 1 ECL is not material
5 Stage 3 includes $38 millon orignated credit-impared debt securites
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
65
Risk profile continued
Company
2021
Stage 1 Stage 2 Stage 3 Total
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Cash and
balances at
central banks
48,165 – 48,165 – – – – – – 48,165 – 48,165
Loans and
advances
to banks
(amortised cost)
15,882 (9) 15,873 247 (3) 244 – – – 16,129 (12) 16,117
Loans and
advances to
customers
(amortised cost)
59,760 (151) 59,609 9,795 (235) 9,560 5,019 (3,027) 1,992 74,574 (3,413) 71,161
Debt securites
and other
eligble bills
5
82,388 (32) 3,603 (21) 82 (36) 86,073 (89)
Amortised cost
25,828 (8) 25,820 130 (1) 129 82 (36) 46 26,040 (45) 25,995
FVOCI
2
56,560 (24) 3,473 (20) – – 60,033 (44)
Accrued income
(amortised cost)
4
659 – 659 – – – – – – 659 – 659
Assets held
for sale
4
49 – 49 – – – – – – 49 – 49
Other assets
4
19,860 – 19,860 – – – – – – 19,860 – 19,860
Undrawn
commitments
3
61,792 (9) 4,886 (35) – – 66,678 (44)
Financal
guarantees, trade
credits and
irrevocable letters
of credit
3
34,709 (9) 2,047 (17) 709 (175) 37,465 (201)
Total
6
323,264 (210) 20,578 (311) 5,810 (3,238) 349,652 (3,759)
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 provison in respect of debt securites measured at FVOCI is held withn the OCI reserve
3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financal liablity and therefore there is no “net carrying amount”. ECL
allowances on off-balance sheet instruments are held as liablity provisons to the extent that the drawn and undrawn components of loan exposures can be
separately identfied. Otherwise they will be reported against the drawn component
4 Stage 1 ECL is not material
5 Stage 3 includes $33 millon orignated credit-impared debt securites
6 Excludes 'Amounts due from subsidary undertakings and other related parties' of $10,741 millon. The amounts are held withn stage 1 and rated as 'strong' at 31
December 2021 and is net of an expected credit loss of $26 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
66
Risk profile continued
2020
Stage 1 Stage 2 Stage 3 Total
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Gross
balance
1
$millon
Total credit
imparment
$millon
Net
carrying
value
$millon
Cash and
balances at
central banks 46,476 – 46,476 – – – – – – 46,476 – 46,476
Loans and
advances
to banks
(amortised cost) 14,829 (5) 14,824 174 (1) 173 – – – 15,003 (6) 14,997
Loans and
advances to
customers
(amortised cost) 60,252 (188) 60,064 10,891 (387) 10,504 5,993 (3,592) 2,401 77,136 (4,167) 72,969
Debt securites
and other eligble
bills
5
68,742 (19) 2,083 (10) 84 (29) 70,909 (58)
Amortised cost 12,713 (8) 12,705 116 – 116 84 (29) 55 12,913 (37) 12,876
FVOCI
2
56,029 (11) 1,967 (10) – – 57,996 (21)
Accrued income
(amortised cost)
4
733 – 733 – – – – – – 733 – 733
Assets held
for sale
4
83 – 83 – – – – – – 83 – 83
Other assets
4
23,495 – 23,495 – – – – – – 23,495 – 23,495
Undrawn
commitments
3
64,701 (15) 5,188 (61) 1 – 69,890 (76)
Financal
guarantees, trade
credits and
irrevocable letters
of credit
3
33,037 (10) 2,422 (17) 683 (191) 36,142 (218)
Total
6
312,348 (237) 20,758 (476) 6,761 (3,812) 339,867 (4,525)
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 provison in respect of debt securites measured at FVOCI is held withn the OCI reserve
3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financal liablity and therefore there is no “net carrying amount”. ECL
allowances on off-balance sheet instruments are held as liablity provisons to the extent that the drawn and undrawn components of loan exposures can be
separately identfied. Otherwise they will be reported against the drawn component
4 Stage 1 ECL is not material
5 Stage 3 includes $38 millon orignated credit-impared debt securites
6 Excludes 'Amounts due from subsidary undertakings and other related parties' of $10,885 millon. The amounts are held withn stage 1 and rated as 'strong' at 31
December 2020 and is net of an expected credit loss of $61 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
67
Risk profile continued
Credit quality analysis (audited)
Credit quality by client segment
For the Corporate, Commercial & Institutonal Banking portfolios, exposures are analysed by credit grade (CG), which plays a
central role in the quality assessment and monitorng of risk. All loans are assigned a CG, which is reviewed periodcally 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 (defaulted) clients. The mapping of credit
quality is as follows.
Mapping of credit quality
The Group uses the following internal risk mapping to determine the credit quality for loans.
Credit quality
descripton
Corporate, Commercial & Institutonal Banking Private Banking
1
Consumer and Business Banking
Internal
Grade mapping
S&P external
ratings
equivalent
Regulatory PD
range (%) Internal ratings Number of days past due
Strong 1A to 5B AAA to BB+ 0 to 0.425 Class I and Class IV Current loans (no past dues nor impared)
Satisfactory 6A to 11C BB to B-/CCC
2
0.426 to 15.75 Class II and Class III Loans past due till 29 days
Higher Risk Grade 12 CCC/C 15.751-99.999 GSAM 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 facilties with liqud collateral, such as cash and marketable securites. Class II
represents unsecured/partially secured facilties and those with illquid collateral, such as equity in private enterprises. Class III represents facilties with residental or
commercial real estate collateral. Class IV covers margin trading facilties
2 Rating for Corporate/NBFIs. Banks’ rating: BB to CCC/C
The table overleaf sets out the gross loans and advances held at amortised cost, expected credit loss provisons 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.
Stage 1
Stage 1 gross loans and advances to customers increased by $7 billon compared with 31 December 2020 and represent
87 per cent of loans and advances to customers (2020: 84 per cent).
In Corporate, Commercial & Institutonal Banking the percentage of stage 1 loans rated as strong is higher at 61 per cent
(2020: 55 per cent) as the Group continues to focus on the orignation of investment grade lending. Stage 1 loans increased
by $1.6 billon, primarly in the Financng, insurance and non-banking and Manufacturing sector offset by reduction in
Commercial real estate and Transport, telecom and utilties sector. Central and other items increased by $1 billon from
exposures to Government sector.
Consumer, Private & Business Banking stage 1 loans increased by $4 billon primarly driven by new lending in
mortgage products and secured wealth products. The proportion rated as strong increased by 2 per cent to 93 per cent
(2020: 91 per cent).
The stage 1 coverage ratio decreased 10 basis points to 0.2 per cent compared with 31 December 2020.
Stage 2
Stage 2 loans and advances to customers decreased by $2.9 billon compared with 31 December 2020, with the proportion of
stage 2 loans decreasing 2.5 per cent to 8.5 per cent. This was largely due to a $2.3 billon decrease in Corporate, Commercial
& Institutonal Banking in Manufacturing and Commercial real estate offset by Transport, telecoms and utilties sector.
Stage 2 loans to customers classifed as ‘Higher risk’ decreased by $0.8 billon, with the majorty of the decrease in Corporate,
Commercial & Institutonal Banking from repayments.
Consumer, Private & Business Banking stage 2 loans saw a decrease of $0.6 billon to $1.2 billon mainly driven by mortgage
loans movement from stage 2 to stage 1 due to forward-looking macroeconomic outlook improvement.
The overall stage 2 cover ratio decreased by 1 per cent.
Stage 3
Stage 3 loans and advances to customers decreased by $1.3 billon and Stage 3 provisons reduced by $0.7 billon to $4.2
billon. The stage 3 cover ratio (excluding collateral) increased by 1 percentage point to 61 per cent, largely driven by new
provisons in Consumer, Private & Business Banking.
In Corporate, Commercial & Institutonal Banking, gross stage 3 loans decreased by $1.4 billon driven by repayments and
write-offs. Stage 3 cover ratio remained stable at 62 per cent.
Consumer, Private & Business Banking stage 3 loans remained broadly stable at $1.2 billon. Cover Ratio increased by 7 per
cent due to a new provison taken on a Business Banking client.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
68
Risk profile continued
Loans and advances by client segment (audited)
Group
Amortised cost
2021
Banks
$millon
Customers
Undrawn
commitments
$millon
Financal
Guarantees
$millon
Corporate,
Commercial
&
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Central &
other items
$millon
Customer
Total
$millon
Stage 1 29,422 66,471 44,645 18,874 129,990 94,170 45,916
–
Strong
17,582 40,699 41,598 18,768 101,065 82,108 31,200
–
Satisfactory
11,840 25,772 3,047 106 28,925 12,062 14,716
Stage 2 561 11,421 1,210 110 12,741 6,516 2,522
–
Strong
119 2,016 673 – 2,689 1,787 580
–
Satisfactory
104 8,214 251 – 8,465 3,737 1,387
–
Higher risk
338 1,191 286 110 1,587 992 555
Of which (stage 2):
–
Less than 30 days past due
– 77 251 – 328 – –
–
More than 30 days past due
– 49 286 – 335 – –
Stage 3, credit-impared financal assets
31 5,750 1,191 – 6,941 – 797
Gross balance¹ 30,014 83,642 47,046 18,984 149,672 100,686 49,235
Stage 1
(11) (54) (212) – (266) (23) (12)
–
Strong
(3) (23) (129) – (152) (10) (3)
–
Satisfactory
(8) (31) (83) – (114) (13) (9)
Stage 2
(4) (258) (123) – (381) (53) (21)
–
Strong
(3) (2) (62) – (64) (5) (1)
–
Satisfactory
(1) (158) (28) – (186) (40) (9)
–
Higher risk
– (98) (33) – (131) (8) (11)
Of which (stage 2):
–
Less than 30 days past due
– (2) (28) – (30) – –
–
More than 30 days past due
– (3) (33) – (36) – –
Stage 3, credit-impared financal assets
– (3,563) (663) – (4,226) – (207)
Total credit imparment (15) (3,875) (998) – (4,873) (76) (240)
Net carrying value 29,999 79,767 46,048 18,984 144,799
Stage 1
0.0% 0.1% 0.5% 0.0% 0.2% 0.0% 0.0%
–
Strong
0.0% 0.1% 0.3% 0.0% 0.2% 0.0% 0.0%
–
Satisfactory
0.1% 0.1% 2.7% 0.0% 0.4% 0.1% 0.1%
Stage 2
0.7% 2.3% 10.2% 0.0% 3.0% 0.8% 0.8%
–
Strong
2.5% 0.1% 9.2% 0.0% 2.4% 0.3% 0.2%
–
Satisfactory
1.0% 1.9% 11.2% 0.0% 2.2% 1.1% 0.6%
–
Higher risk
0.0% 8.2% 11.5% 0.0% 8.3% 0.8% 2.0%
Of which (stage 2):
–
Less than 30 days past due
0.0% 2.6% 11.2% 0.0% 9.1% 0.0% 0.0%
–
More than 30 days past due
0.0% 6.1% 11.5% 0.0% 10.7% 0.0% 0.0%
Stage 3, credit-impared financal assets (S3)
0.0% 62.0% 55.7% 0.0% 60.9% 0.0% 26.0%
Cover ratio 0.0% 4.6% 2.1% 0.0% 3.3% 0.1% 0.5%
Fair value through profit or loss
Performing
22,330 62,398 – 1,774 64,172 – –
–
Strong
19,888 48,426 – 1,772 50,198 – –
–
Satisfactory
2,442 13,972 – 2 13,974 – –
–
Higher risk
– – – – – – –
Defaulted (CG13-14)
– 38 – – 38 – –
Gross balance (FVTPL)
2
22,330 62,436 – 1,774 64,210 – –
Net carrying value (incl FVTPL) 52,329 142,203 46,048 20,758 209,009 – –
1 Loans and advances includes reverse repurchase agreements and other simlar secured lending of $3,764 millon under Customers and of $956 millon under Banks, held
at amortised cost
2 Loans and advances includes reverse repurchase agreements and other simlar secured lending of $60,278 millon under Customers and of $18,708 millon under Banks,
held at fair value through profit or loss
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
69
Risk profile continued
Group
Amortised cost
2020 (Restated)
Banks
$millon
Customers
Undrawn
commitments
$millon
Financal
Guarantees
$millon
Corporate,
Commercial
&
Institutonal
Banking
3
$millon
Consumer,
Private &
Business
Banking
3
$millon
Central &
other items
$millon
Customer
Total
$millon
Stage 1 27,356 64,878 40,550 17,455 122,883 91,641 41,479
–
Strong
4
19,073 35,905 36,952 17,194 90,051 76,849 25,663
–
Satisfactory
4
8,283 28,973 3,598 261 32,832 14,792 15,816
Stage 2 323 13,747 1,859 – 15,606 7,240 3,175
–
Strong 92 1,787 896 – 2,683 2,155 238
–
Satisfactory 210 9,942 581 – 10,523 4,465 2,256
–
Higher risk 21 2,018 382 – 2,400 620 681
Of which (stage 2):
–
Less than 30 days past due – 179 579 – 758 – –
–
More than 30 days past due 5 148 392 – 540 – –
Stage 3, credit-impared financal assets – 7,110 1,179 – 8,289 1 764
Gross balance¹
27,679 85,735 43,588 17,455 146,778 98,882 45,418
Stage 1 (10) (69) (261) (1) (331) (23) (16)
–
Strong⁴ (4) (26) (183) – (209) (10) (10)
–
Satisfactory⁴ (6) (43) (78) (1) (122) (13) (6)
Stage 2 (3) (430) (189) – (619) (73) (25)
–
Strong – (32) (67) – (99) (2) (3)
–
Satisfactory (3) (246) (75) – (321) (40) (18)
–
Higher risk – (152) (47) – (199) (31) (4)
Of which (stage 2):
–
Less than 30 days past due – (6) (75) – (81) – –
–
More than 30 days past due – (6) (47) – (53) – –
Stage 3, credit-impared financal assets – (4,389) (578) – (4,967) – (194)
Total credit imparment
(13) (4,888) (1,028) (1) (5,917) (96) (235)
Net carrying value
27,666 80,847 42,560 17,454 140,861
Stage 1 0.0% 0.1% 0.6% 0.0% 0.3% 0.0% 0.0%
–
Strong 0.0% 0.1% 0.5% 0.0% 0.2% 0.0% 0.0%
–
Satisfactory 0.1% 0.1% 2.2% 0.4% 0.4% 0.1% 0.0%
Stage 2 0.9% 3.1% 10.2% 0.0% 4.0% 1.0% 0.8%
–
Strong 0.0% 1.8% 7.5% 0.0% 3.7% 0.1% 1.3%
–
Satisfactory 1.4% 2.5% 12.9% 0.0% 3.1% 0.9% 0.8%
–
Higher risk 0.0% 7.5% 12.3% 0.0% 8.3% 5.0% 0.6%
Of which (stage 2):
–
Less than 30 days past due 0.0% 3.4% 13.0% 0.0% 10.7% 0.0% 0.0%
–
More than 30 days past due 0.0% 4.1% 12.0% 0.0% 9.8% 0.0% 0.0%
Stage 3, credit-impared financal assets (S3) 0.0% 61.7% 49.0% 0.0% 59.9% 0.0% 25.4%
Cover ratio
0.0% 5.7% 2.4% 0.0% 4.0% 0.1% 0.5%
Fair value through profit or loss
Performing 20,976 47,757 – 12 47,769 – –
–
Strong 17,045 24,822 – 8 24,830 – –
–
Satisfactory 3,931 22,853 – 4 22,857 – –
–
Higher risk – 82 – – 82 – –
Defaulted (CG13-14) – 46 – – 46 –
–
Gross balance (FVTPL)
2
20,976 47,803 – 12 47,815 – –
Net carrying value (incl FVTPL)
48,642 128,650 42,560 17,466 188,676 – –
1 Loans and advances includes reverse repurchase agreements and other simlar secured lending of $2,919 millon under Customers and of $809 millon under Banks, held
at amortised cost
2 Loans and advances includes reverse repurchase agreements and other simlar secured lending of $44,602 millon under Customers and of $18,205 millon under Banks,
held at fair value through profit and loss
3 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated.
4 FY 2020 Consumer, Private & Business Banking Stage 1 Gross: Strong restated from $35,826 millon to $36,952 millon and Satisfactory restated from $4,724 millon to
$3,598 millon. Stage 1 ECL: Strong restated from $161 millon to $183 millon and Satisfactory restated from $100 millon to $78 millon.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
70
Risk profile continued
Loans and advances by client segment (audited)
Company
Amortised cost
2021
Banks
$millon
Customers
Undrawn
commitments
$millon
Financal
Guarantees
$millon
Corporate,
Commercial
&
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Central &
other items
$millon
Customer
Total
$millon
Stage 1 15,882 45,659 11,612 2,489 59,760 61,792 34,709
–
Strong
8,566 28,908 9,767 2,412 41,087 52,276 24,136
–
Satisfactory
7,316 16,751 1,845 77 18,673 9,516 10,573
Stage 2 247 9,194 491 110 9,795 4,886 2,047
–
Strong
81 1,609 271 – 1,880 1,144 512
–
Satisfactory
38 6,750 94 – 6,844 3,006 1,045
–
Higher risk
128 835 126 110 1,071 736 490
Of which (stage 2):
–
Less than 30 days past due
– 69 94 – 163 – –
–
More than 30 days past due
– 36 126 – 162 – –
Stage 3, credit-impared financal assets
– 4,353 666 – 5,019 – 709
Gross balance¹ 16,129 59,206 12,769 2,599 74,574 66,678 37,465
Stage 1
(9) (30) (121) – (151) (9) (9)
–
Strong
(3) (13) (63) – (76) (5) (4)
–
Satisfactory
(6) (17) (58) – (75) (4) (5)
Stage 2
(3) (178) (57) – (235) (35) (17)
–
Strong
(2) (4) (22) – (26) (2) –
–
Satisfactory
(1) (115) (11) – (126) (28) (7)
–
Higher risk
– (59) (24) – (83) (5) (10)
Of which (stage 2):
–
Less than 30 days past due
– (2) (11) – (13) – –
–
More than 30 days past due
– – (24) – (24) – –
Stage 3, credit-impared financal assets
– (2,637) (390) – (3,027) – (175)
Total credit imparment (12) (2,845) (568) – (3,413) (44) (201)
Net carrying value 16,117 56,361 12,201 2,599 71,161
Stage 1
0.1% 0.1% 1.0% 0.0% 0.3% 0.0% 0.0%
–
Strong
0.0% 0.0% 0.6% 0.0% 0.2% 0.0% 0.0%
–
Satisfactory
0.1% 0.1% 3.1% 0.0% 0.4% 0.0% 0.0%
Stage 2
1.2% 1.9% 11.6% 0.0% 2.4% 0.7% 0.8%
–
Strong
2.5% 0.2% 8.1% 0.0% 1.4% 0.2% 0.0%
–
Satisfactory
2.6% 1.7% 11.7% 0.0% 1.8% 0.9% 0.7%
–
Higher risk
0.0% 7.1% 19.0% 0.0% 7.7% 0.7% 2.0%
Of which (stage 2):
–
Less than 30 days past due
0.0% 2.9% 11.7% 0.0% 8.0% 0.0% 0.0%
–
More than 30 days past due
0.0% 0.0% 19.0% 0.0% 14.8% 0.0% 0.0%
Stage 3, credit-impared financal assets (S3)
0.0% 60.6% 58.6% 0.0% 60.3% 0.0% 24.7%
Cover ratio 0.1% 4.8% 4.4% 0.0% 4.6% 0.1% 0.5%
Fair value through profit or loss
Performing
21,950 60,672 – 1,774 62,446 – –
–
Strong
19,543 46,971 – 1,772 48,743 – –
–
Satisfactory
2,407 13,701 – 2 13,703 – –
–
Higher risk
– – – – – – –
Defaulted (CG13-14)
– 36 – – 36 – –
Gross balance (FVTPL)
2
21,950 60,708 – 1,774 62,482 – –
Net carrying value (incl FVTPL) 38,067 117,069 12,201 4,373 133,643 – –
1 Loans and advances include reverse repurchase agreements and other simlar secured lending for $3,047 millon under Customers and for $438 millon under Banks,
held at amortised cost
2 Loans and advances include reverse repurchase agreements and other simlar secured lending for $59,275 millon under Customers and for $18,380 millon under Banks,
held at fair value through profit and loss
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
71
Company
Amortised cost
2020 (Restated)
Banks
$millon
Customers
Undrawn
commitments
$millon
Financal
Guarantees
$millon
Corporate,
Commercial
&
Institutonal
Banking
3
$millon
Consumer,
Private &
Business
Banking
3
$millon
Central &
other items
$millon
Customer
Total
$millon
Stage 1 14,829 46,565 11,382 2,305 60,252 64,701 33,037
–
Strong
4
9,792 27,809 9,155 2,059 39,023 52,927 20,668
–
Satisfactory
4
5,037 18,756 2,227 246 21,229 11,774 12,369
Stage 2 174 10,280 611 – 10,891 5,188 2,422
–
Strong 27 1,303 360 – 1,663 1,567 75
–
Satisfactory 126 7,301 79 – 7,380 3,303 1,787
–
Higher risk 21 1,676 172 – 1,848 318 560
Of which (stage 2):
–
Less than 30 days past due – 122 77 – 199 – –
–
More than 30 days past due 5 71 182 – 253 – –
Stage 3, credit-impared financal assets – 5,290 703 – 5,993 1 683
Gross balance¹
15,003 62,135 12,696 2,305 77,136 69,890 36,142
Stage 1 (5) (43) (145) – (188) (15) (10)
–
Strong (2) (16) (102) – (118) (7) (6)
–
Satisfactory (3) (27) (43) – (70) (8) (4)
Stage 2 (1) (300) (87) – (387) (61) (17)
–
Strong – (24) (58) – (82) (1) (1)
–
Satisfactory (1) (157) (7) – (164) (33) (14)
–
Higher risk – (119) (22) – (141) (27) (2)
Of which (stage 2):
–
Less than 30 days past due – – (7) – (7) – –
–
More than 30 days past due – (2) (22) – (24) – –
Stage 3, credit-impared financal assets – (3,244) (348) – (3,592) – (191)
Total credit imparment
(6) (3,587) (580) – (4,167) (76) (218)
Net carrying value
14,997 58,548 12,116 2,305 72,969 – –
Stage 1 0.0% 0.1% 1.3% 0.0% 0.3% 0.0% 0.0%
–
Strong 0.0% 0.1% 1.1% 0.0% 0.3% 0.0% 0.0%
–
Satisfactory 0.1% 0.1% 1.9% 0.0% 0.3% 0.1% 0.0%
Stage 2 0.6% 2.9% 14.2% 0.0% 3.6% 1.2% 0.7%
–
Strong 0.0% 1.8% 16.1% 0.0% 4.9% 0.1% 1.3%
–
Satisfactory 0.8% 2.2% 8.9% 0.0% 2.2% 1.0% 0.8%
–
Higher risk 0.0% 7.1% 12.8% 0.0% 7.6% 8.5% 0.4%
Of which (stage 2):
–
Less than 30 days past due 0.0% 0.0% 9.1% 0.0% 3.5% 0.0% 0.0%
–
More than 30 days past due 0.0% 2.8% 12.1% 0.0% 9.5% 0.0% 0.0%
Stage 3, credit-impared financal assets (S3) 0.0% 61.3% 49.5% 0.0% 59.9% 0.0% 28.0%
Cover ratio
0.0% 5.8% 4.6% 0.0% 5.4% 0.1% 0.6%
Fair value through profit or loss
Performing 20,654 46,911 – 12 46,923 – –
–
Strong 16,723 24,202 – 8 24,210 – –
–
Satisfactory 3,931 22,627 – 4 22,631 – –
–
Higher risk – 82 – – 82 – –
Defaulted (CG13-14) – 37 – –
37 – –
Gross balance (FVTPL)
2
20,654 46,948 – 12 46,960 – –
Net carrying value (incl FVTPL)
35,651 105,496 12,116 2,317 119,929 – –
1 Loans and advances include reverse repurchase agreements and other simlar secured lending of $2,283 millon under Customers and of $55 millon under Banks, held at
amortised cost
2 Loans and advances include reverse repurchase agreements and other simlar secured lending of $44,379 millon under Customers and of $17,883 millon under Banks,
held at fair value through profit and loss
3 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated.
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
72
Movement in gross exposures and credit imparment for loans and advances, debt securites, undrawn
commitments and financal guarantees (audited)
The tables overleaf set out the movement in gross exposures and credit imparment by stage in respect of amortised cost
loans to banks and customers, undrawn commitments, financal guarantees and debt securites classifed at amortised cost
and FVOCI. The tables are presented for the Group and debt securites and other eligble bills.
Methodology
The movement lines withn the tables are an aggregation of monthly movements over the year and will therefore reflect the
accumulation of multiple trades during the year. The credit imparment charge in the income statement comprises the
amounts withn 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 financal instruments only.
The approach for determinng the key line items in the tables is set out below.
•
Transfers
– transfers between stages are deemed to occur at the beginnng of a month based on prior month closing
balances
•
Net remeasurement from stage changes
– the remeasurement of credit imparment provisons arisng from a change in
stage is reported withn the stage that the assets are transferred to. For example, assets transferred into stage 2 are
remeasured from a 12-month to a lifetme expected credit loss, with the effect of remeasurement reported in stage 2. For
stage 3, this represents the intial remeasurement from specifc provisons recognised on indvidual assets transferred into
stage 3 in the year
•
Net changes in exposures
– new business written less repayments in the year. Withn stage 1, new business written will
attract up to 12 months of expected credit loss charges. Repayments of non-amortisng loans (primarly withn Corporate,
Commercial & Institutonal Banking) will have low amounts of expected credit loss provisons attributed to them, due to the
release of provisons over the term to maturity. In stages 2 and 3, the amounts princpally reflect repayments although
stage 2 may include new business written where clients are on non-purely precautionary early alert, are a credit grade 12, or
when non-investment grade debt securites are acquired.
•
Changes in risk parameters
– for stages 1 and 2, this reflects changes in the probabilty of default (PD), loss given default
(LGD) and exposure at default (EAD) of assets during the year, which includes the impact of releasing provisons over the
term to maturity. It also includes the effect of changes in forecasts of macroeconomic variables during the year and
movements in management overlays. In stage 3, this line represents additonal specifc provisons recognised on exposures
held withn stage 3
•
Interest due but not paid
– change in contractual amount of interest due in stage 3 financal instruments but not paid,
being the net of accruals, repayments and write-offs, together with the corresponding change in credit imparment
Changes to ECL models, which incorporates changes to model approaches and methodologies, is not reported as a separate
line item as it has an impact over a number of lines and stages.
Movements during the year
Stage 1 gross exposures increased by $30 billon to $396 billon when compared with 31 December 2020. About half of the
increase in exposures was in debt securites. Corporate, Commercial & Institutonal Banking increased by $8 billon from new
orignations and transfers from stage 2. There was a $6 billon increase in Consumer, Private & Business Banking which was
mainly driven by new orignations in mortgage and secured wealth products.
Total stage 1 provisons decreased by $60 millon to $370 millon, primarly in Consumer, Private & Business Banking unsecured
lending, due to an improvement in macroeconomic forecasts and remeasurement of balances from upgrades into stage 1.
Corporate, Commercial & Institutonal Banking provisons declined by $19 millon primarly due to improvement in probabilty
of default.
Stage 2 gross exposures decreased by $2 billon to $28 billon, primarly driven by $3 billon of net outflows from exposure
changes and transfers to stage 1 in Corporate, Commercial & Institutonal Banking, particularly in the Manufacturing and
Commercial real estate sectors. Consumer, Private & Business Banking exposures decreased by $0.7 billon, of which $0.4
billon was from the secured portfolio and $0.3 billon was from unsecured portfolios. Debt securites increased by $1.8 billon
mainly due to the Sri Lanka sovereign downgrade.
Stage 2 provisons decreased by $245 millon compared to 31 December 2020, $192 millon of which was in Corporate,
Commercial & Institutonal Banking as a result of exposure changes and transfers to stage 1, repayment of exposures and a
net reduction of $81 millon in judgemental management overlays (which are reported in 'Changes in risk parameters' in the
table) as early alert balances fell. Consumer, Private & Business Banking provisons decreased by $70 millon, mainly in
unsecured lending from improvement in macroeconomic forecasts, lower delinquences as conditons normalised in a number
of our markets and decline in judgemental management overlays of $31 millon.
Stage 3 exposures decreased by $1.3 billon to $7.9 billon, primarly in Corporate, Commercial & Institutonal Banking driven by
repayments and write-offs. Stage 3 provisons also decreased by $0.7 billon to $4.5 billon, also due to repayments and
write-offs.
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
73
All segments – Group (audited)
Amortised cost
and FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
As at
1 January 2020
364,769 (332) 364,437 28,639 (345) 28,294 7,351 (4,883) 2,468 400,759 (5,560) 395,199
Transfers to
stage 1 31,468 (440) 31,028 (31,427) 440 (30,987) (41) – (41) – – –
Transfers to
stage 2 (59,857) 376 (59,481) 59,954 (377) 59,577 (97) 1 (96) – – –
Transfers to
stage 3
(450) – (450) (3,916) 177 (3,739) 4,366 (184) 4,182 – (7) (7)
Net change
in exposures 27,828 (99) 27,729 (24,983) 109 (24,874) (1,261) 216 (1,045) 1,584 226 1,810
Net
remeasurement
from stage
changes – 82 82 – (319) (319) – (705) (705) – (942) (942)
Changes in risk
parameters – 43 43 – (507) (507) – (955) (955) – (1,419) (1,419)
Write-offs – – – – – – (1,508) 1,508 – (1,508) 1,508 –
Interest due
but unpaid – – – – – – 228 (228) – 228 (228) –
Discount unwind
– – – – – – – 77 77 – 77 77
Exchange
translation
differences and
other
movements¹ 1,831 (60) 1,771 1,565 76 1,641 130 (66) 64 3,526 (50) 3,476
As at
31 December
2020²
365,589 (430) 365,159 29,832 (746) 29,086 9,168 (5,219) 3,949 404,589 (6,395) 398,194
Income
statement ECL
(charge)/
release
3
26 (717) (1,444) (2,135)
Recoveries of
amounts
previously
written off – – 157 157
Total credit
imparment
(charge)/
release
26 (717) (1,287) (1,978)
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
74
Amortised cost
and FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
As at
1 January 2021
365,589 (430) 365,159 29,832 (746) 29,086 9,168 (5,219) 3,949 404,589 (6,395) 398,194
Transfers to
stage 1
18,004 (452) 17,552 (17,956) 452 (17,504) (48) – (48) – – –
Transfers to
stage 2
(40,145) 145 (40,000) 40,465 (154) 40,311 (320) 9 (311) – – –
Transfers to
stage 3
(126) 1 (125) (2,166) 216 (1,950) 2,292 (217) 2,075 – – –
Net change in
exposures
5
60,165 (87) 60,078 (22,135) 99 (22,036) (2,180) 617 (1,563) 35,850 629 36,479
Net
remeasurement
from stage
changes
– 46 46 – (129) (129) – (99) (99) – (182) (182)
Changes in risk
parameters
– 51 51 – 98 98 – (752) (752) – (603) (603)
Write-offs
– – – – – – (957) 957 – (957) 957 –
Interest due
but unpaid
– – – – – – (187) 187 – (187) 187 –
Discount
unwind⁶
– – – – – – – 211 211 – 211 211
Exchange
translation
differences and
other
movements¹
(7,639) 356 (7,283) (385) (337) (722) 114 (193) (79) (7,910) (174) (8,084)
As at
31 December
2021² 395,848 (370) 395,478 27,655 (501) 27,154 7,882 (4,499) 3,383 431,385 (5,370) 426,015
Income
statement ECL
(charge)/
release
3
10 68 (234) (156)
Recoveries of
amounts
previously
written off
– – 186 186
Total credit
imparment
(charge)/
release
4
10 68 (48) 30
1 Includes fair value adjustments and amortisaton on debt securites
2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets
3 Does not include $Nil (31 December 2020: $2 millon release) relating to Other assets
4 Statutory basis
5 Stage 3 gross includes $33 millon (31 December 2020: $38 millon) orignated credit-impared debt securites
6 Includes $163 millon adjustment in relation to interest earned on impared assets
7 The gross balance includes the notional amount of off balance sheet instruments
Risk profile continued
All segments – Group (audited) continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
75
Of which movement of debt securites, alternative Tier 1 and other eligble bills (audited)
Amortised cost
and FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
3
$millon
As at
1 January 2020
84,609 (47) 84,562 4,607 (23) 4,584 75 (45) 30 89,291 (115) 89,176
Transfers to
stage 1 1,732 (28) 1,704 (1,732) 28 (1,704) – – – – – –
Transfers to
stage 2 (1,151) 18 (1,133) 1,151 (18) 1,133 – – – – – –
Transfers to
stage 3 – – – – – – – – – – – –
Net change in
exposures (4,665) (28) (4,693) (452) 11 (441) 39 – 39 (5,078) (17) (5,095)
Net
remeasurement
from stage
changes – 16 16 – (26) (26) – – – – (10) (10)
Changes in risk
parameters – 11 11 – (11) (11) – (6) (6) – (6) (6)
Write-offs – – – – – – – – – – – –
Interest due
but unpaid – – – – – – – – – – – –
Exchange
translation
differences and
other movements
1
1,705 8 1,713 (86) 13 (73) – (7) (7) 1,619 14 1,633
As at
31 December
2020
82,230 (50) 82,180 3,488 (26) 3,462 114 (58) 56 85,832 (134) 85,698
Income
statement ECL
(charge)/release (1) (26) (6) (33)
Recoveries of
amounts
previously
written off – – – –
Total credit
imparment
(charge)/release
(1) (26) (6) (33)
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
76
Amortised cost
and FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
3
$millon
As at
1 January 2021 82,230 (50) 82,180 3,488 (26) 3,462 114 (58) 56 85,832 (134) 85,698
Transfers to
stage 1
403 (11) 392 (403) 11 (392) – – – – – –
Transfers to
stage 2
(2,358) 16 (2,342) 2,358 (16) 2,342 – – – – – –
Transfers to
stage 3
– – – – – – – – – – – –
Net change in
exposures
2
18,789 (42) 18,747 (136) (18) (154) – 1 1 18,653 (59) 18,594
Net
remeasurement
from stage
changes
– 13 13 – (26) (26) – – – – (13) (13)
Changes in risk
parameters
– 18 18 – 34 34 – (3) (3) – 49 49
Write-offs
– – – – – – – – – – – –
Interest due
but unpaid
– – – – – – – – – – – –
Exchange
translation
differences
and other
movements
1
(2,714) (2) (2,716) 8 (1) 7 (1) (6) (7) (2,707) (9) (2,716)
As at 31
December 2021 96,350 (58) 96,292 5,315 (42) 5,273 113 (66) 47 101,778 (166) 101,612
Income
statement ECL
(charge)/release
(11) (10) (2) (23)
Recoveries of
amounts
previously
written off
– – – –
Total credit
imparment
(charge)/release (11) (10) (2) (23)
1 Includes fair value adjustments and amortisaton on debt securites
2 Stage 3 gross includes $33 millon (31 December 2020: $38 millon) orignated credit-impared debt securites
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 is $101,705 millon
(31 December 2020: $85,759 millon). Refer to the Analysis of financal instrument by stage table on page 63
Risk profile continued
Of which movement of debt securites, alternative Tier 1 and other eligble bills (audited) continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
77
All segments – Company (audited)
Amortised cost and
FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
As at
1 January 2020
245,350 (176) 245,174 16,893 (181) 16,712 5,838 (3,924) 1,914 268,081 (4,281) 263,800
Transfers to
stage 1 21,378 (229) 21,149 (21,338) 229 (21,109) (40) – (40) – – –
Transfers to
stage 2 (41,156) 142 (41,014) 41,215 (143) 41,072 (59) 1 (58) – – –
Transfers to
stage 3
(150) 1 (149) (2,683) 112 (2,571) 2,833 (113) 2,720 – – –
Net change
in exposures 15,439 (25) 15,414 (14,878) 68 (14,810) (962) 125 (837) (401) 168 (233)
Net
remeasurement
from stage
changes – 50 50 – (121) (121) – (209) (209) – (280) (280)
Changes in risk
parameters – 6 6 – (418) (418) – (436) (436) – (848) (848)
Write-offs – – – – – – (1,018) 1,018 – (1,018) 1,018 –
Interest due
but unpaid – – – – – – 185 (185) – 185 (185) –
Discount unwind – – – – – – – 46 46 – 46 46
Exchange
translation
differences and
other movements¹
700 (6) 694 1,549 (22) 1,527 (16) (135) (151) 2,233 (163) 2,070
As at
31 December
2020²
241,561 (237) 241,324 20,758 (476) 20,282 6,761 (3,812) 2,949 269,080 (4,525) 264,555
Income
statement ECL
(charge)/release 31 (471) (520) (960)
Recoveries
of amounts
previously
written off – – 69 69
Total credit
imparment
(charge)/release
31 (471) (451) (891)
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
78
Amortised cost and
FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance⁷
$millon
Total credit
imparment
$millon
Net
$millon
As at
1 January 2021 241,561 (237) 241,324 20,758 (476) 20,282 6,761 (3,812) 2,949 269,080 (4,525) 264,555
Transfers to
stage 1
13,549 (223) 13,326 (13,501) 223 (13,278) (48) – (48) – – –
Transfers to
stage 2
(29,383) 47 (29,336) 29,594 (56) 29,538 (211) 9 (202) – – –
Transfers to
stage 3
(94) 1 (93) (1,598) 171 (1,427) 1,692 (172) 1,520 – – –
Net change in
exposures
4
34,059 (56) 34,003 (14,441) 80 (14,361) (1,611) 407 (1,204) 18,007 431 18,438
Net
remeasurement
from stage
changes
– 14 14 – (57) (57) – (79) (79) – (122) (122)
Changes in risk
parameters
– 18 18 – 93 93 – (449) (449) – (338) (338)
Write-offs
– – – – – – (592) 592 – (592) 592 –
Interest due
but unpaid
– – – – – – (143) 143 – (143) 143 –
Discount unwind⁶
– – – – – – – 170 170 – 170 170
Exchange
translation
differences and
other movements¹
(5,161) 226 (4,935) (234) (289) (523) (38) (47) (85) (5,433) (110) (5,543)
As at 31
December 2021² 254,531 (210) 254,321 20,578 (311) 20,267 5,810 (3,238) 2,572 280,919 (3,759) 277,160
Income
statement ECL
(charge)/release
(24) 116 (121) (29)
Recoveries
of amounts
previously
written off
– – 67 67
Total credit
imparment
(charge)/release
3
(24) 116 (54) 38
1 Includes fair value adjustments and amortisaton on debt securites
2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets
3 Does not include $Nil (31 December 2020: $2 millon release) relating to Other assets
4 Statutory basis
5 Stage 3 gross includes $33 millon (31 December 2020: $38 millon) orignated credit-impared debt securites
6 Includes $137 millon adjustment in relation to interest earned on impared assets
7 The gross balance includes the notional amount of off balance sheet instruments
Risk profile continued
All segments – Company (audited) continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
79
Of which Movement of debt securites – Company (audited)
Amortised cost
and FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
As at
1 January 2020
70,515 (29) 70,486 1,117 (5) 1,112 43 (17) 26 71,675 (51) 71,624
Transfers to
stage 1 41 (19) 22 (41) 19 (22) – – – – – –
Transfers to
stage 2 (537) 11 (526) 537 (11) 526 – – – – – –
Transfers to
stage 3 – – – – – – – – – – – –
Net change
in exposures (2,717) (6) (2,723) 556 1 557 39 – 39 (2,122) (5) (2,127)
Net
remeasurement
from stage
changes – 3 3 – (10) (10) – – – – (7) (7)
Changes in risk
parameters – 12 12 – 4 4 – (6) (6) – 10 10
Write-offs – – – – – – – – – – – –
Interest due
but unpaid – – – – – – – – – – – –
Exchange
translation
differences and
other movements
1
1,440 9 1,449 (86) (8) (94) 2 (6) (4) 1,356 (5) 1,351
As at
31 December
2020
68,742 (19) 68,723 2,083 (10) 2,073 84 (29) 55 70,909 (58) 70,851
Income
statement ECL
(charge)/release 9 (5) (6) (2)
Recoveries
of amounts
previously
written off – – – –
Total credit
imparment
(charge)/release
9 (5) (6) (2)
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
80
Amortised cost
and FVOCI
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
$millon
As at
1 January 2021 68,742 (19) 68,723 2,083 (10) 2,073 84 (29) 55 70,909 (58) 70,851
Transfers to
stage 1
265 (6) 259 (265) 6 (259) – – – – – –
Transfers to
stage 2
(1,740) 5 (1,735) 1,740 (5) 1,735 – – – – – –
Transfers to
stage 3
– – – – – – – – – – – –
Net change in
exposures
2
17,227 (25) 17,202 110 (1) 109 – – – 17,337 (26) 17,311
Net
remeasurement
from stage
changes
– 4 4 – (16) (16) – – – – (12) (12)
Changes in risk
parameters
– 19 19 – (5) (5) – (4) (4) – 10 10
Write-offs
– – – – – – – – – – – –
Interest due
but unpaid
– – – – – – – – – – – –
Exchange
translation
differences and
other movements
1
(2,106) (10) (2,116) (65) 10 (55) (2) (3) (5) (2,173) (3) (2,176)
As at
31 December 2021 82,388 (32) 82,356 3,603 (21) 3,582 82 (36) 46 86,073 (89) 85,984
Income
statement ECL
(charge)/release
(2) (22) (4) (28)
Recoveries of
amounts
previously
written off
– – – –
Total credit
imparment
(charge)/release (2) (22) (4) (28)
1 Includes fair value adjustments and amortisaton on debt securites
2 Stage 3 gross includes $33 millon (31 December 2020: $38 millon) orignated credit-impared debt securites
3 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 $86,028 millon
(31 December 2020: $70,872 millon). Refer to the Analysis of financal instrument by stage table on page 65
Credit imparment charge (audited)
The underlying credit imparment charge is a release of $28 millon compared to a charge of $1.9 billon in 2020.
Stage 3 is charge of $48 millon mainly driven by charge-offs in Consumer, Private & Business Banking of $192 millon in
Bangladesh, Malaysia and India. This is offset by release of $144 millon in Corporate, Commercial & Institutonal Banking
from client repayments during the year.
Stage 1 & 2 is release of $76 millon with release of $74 millon in Corporate, Commercial & Institutonal Banking, release of $23
millon in Consumer, Private & Business Banking and charge of $21 millon in Central and other items.
Corporate, Commercial & Institutonal Banking stage 1 and 2 release is due to reduction in management overlay $81 millon,
repayments, decline in stage 2 exposures and improvement in probabilty of defaults offset by charge from multiple
economic scenarios post model adjustment of $25 millon and macroeconomic variables charge of $9 millon.
Consumer, Private & Business Banking stage 1 and 2 imparments reduced to a release of $23 millon at the end of 2021 (2020:
$316 milon) mainly due to ECL reversals as the forward looking macroeconomic outlook improved in relative terms.
Risk profile continued
Of which Movement of debt securites – Company (audited) continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
81
Risk profile continued
Central and other items charge of $21 millon is mainly due to multiple economic scenarios post model adjustment
2021
2020 (Restated)
Stage 1 & 2
$millon
Stage 3
$millon
Total
$millon
Stage 1 & 2
$millon
Stage 3
$millon
Total
$millon
Ongoing business portfolio
Corporate, Commercial & Institutonal Banking
1
(74) (144) (218)
343 1,058 1,401
Consumer, Private & Business Banking
1
(23) 192 169
316 208 524
Central & other items (5) 22
21 – 21
27Credit imparment charge/(release) (76) 48 (28)
686 1,261 1,947
Restructuring business portfolio
Others
2
(2) – (2)
2 27 29
Credit imparment charge/(release) (2) – (2)
2 27 29
Total credit imparment charge/(release) (78) 48 (30)
688 1,288 1,976
1 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Further, certain clients have been moved between the
two new client segments. Prior period has been restated
2 There was a net ($2) millon imparment release ( 31 December 2020: $29 millon) from the Group’s discontnued businesses
COVID-19 relief measures
COVID-19 payment-related relief measures have been in place across most of our markets during 2020 and 2021, particularly
focused on Consumer, Private & Business Banking customers. Measures in most markets have now expired, although
moratoria schemes in certain Africa & Middle East countries have been extended to 30 June 2022.
These schemes are generally intiated by country regulators and governments. These measures include princpal and/or
interest moratoria and term extensions and are generally available to eligble borrowers (those that are current or less than
30 days past due, unless local regulators have specifed different critera). Certain schemes may be restricted to those in
industres signficantly impacted by COVID-19, such as aviaton or consumer services, but are not borrower-specifc in nature.
Relief measures are generally mandated or supported by regulators and governments and are available to all eligble
customers who request it. However in a number of countries, particularly in Asia and Africa & Middle East, compulsory
(regulatory approved) moratoria reliefs are applied to all eligble loans unless a customer has specifcally asked to opt out.
In most major Consumer, Private & Business Banking markets, the intial period of relief provided was between 6 and 12
months. In some smaller markets, the intial period of relief was for 3 months.
COVID-19 related tenor extensions have also been made available to Corporate, Commerical & Institutonal Banking clients,
primarly for periods between 3 to 9 months, if they are expected to return to normal payments withn 12 months.
Assessment for expected credit losses
COVID-19 payment reliefs that are generally available to a market or industry as a whole and are not borrower-specifc in
nature have not, on their own, resulted in an automatic change in stage (that is, indvidual customers are not considered
to have experienced a signficant increase in credit risk or an improvement in credit risk) nor have they been considered to
be forborne.
A customer’s stage and past due status reflects their status immedately prior to the granting of the relief, with past due
amounts assessed based on the new terms as set out in the temporary payment reliefs.
If a customer requires additonal support after the expiry of generally available payment reliefs, these will be considered at a
borrower level, after taking into account their indvidual circumstances. Depending on the type of subsequent support
provided, these customers may be classifed withn stage 2 or stage 3.
Where client level government guarantees are in place, these do not affect staging but are taken into account when
determinng the level of credit imparment.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
82
Risk profile continued
Impact from temporary changes to loan contractual terms
Approximately $1.3 billon of outstanding loan balances have been subject to payment relief measures. This represents
0.4 per cent of the Group’s gross loans and advances to banks and customers.
The granting of COVID-19 payment-related relief measures may cause a time value of money loss for the Group where
interest is not permitted to be compounded (that is, interest charged on interest) or where interest is not permitted to be
charged or accrued during the relief period. As set out above, such reliefs do not impact a customer’s stage and are not
considered to be forborne even though a time value of money loss arises. As the relief periods are relatively short-term in
nature, and a small percentage of the total loans outstanding, this has not resulted in a material impact for the Group.
The table below sets out the extent to which payment reliefs are in place across the Group’s loan portfolio based on the
amounts outstanding at 31 December 2021.
The total exposure of the Consumer, Private & Business Banking portfolio under moratoria is $1.0 billon, of which $0.5 billon
(50 per cent) is from residental mortgage. A large part of moratoria has ended with the remainng balance primarly
concentrated in Asia, which are largely secured. 30 per cent of the total amounts approved are to Business Banking
customers, concentrated in industres that have been materially disrupted, of which over 79 per cent is collateralised by
commercial immovable property.
In Corporate, Commercial & Institutonal Banking, around 64 per cent of the amounts approved are for tenor extensions of
90 days or less. Around 17 per cent of the reliefs granted are to clients in vulnerable sectors.
Segment/Product
Total Asia Africa & Middle East
1
Europe &
Americas
Outstanding
$ millon
% of
portfolio
2
Outstanding
$ millon
% of
portfolio
2
Outstanding
$ millon
% of
portfolio
2
Outstanding
$ millon
Credit Cards & Personal Loans 205 3.2% 62 1.7% 143 7.7%
Mortgages & Auto 521 2.1% 511 2.6% 10 0.6%
Business Banking 304 7.0% 304 7.2% – 0.0%
Total Consumer, Private &
Business Banking 1,030 1.0% 877 2.7% 153 3.1%
Corporate, Commercial &
Institutonal Banking 445 0.3% 322 113 10
Total at 31 December 2021 1,475 0.4% 1,199 266 10
Total Consumer, Private &
Business Banking 1,720 3.9% 1,554 166
Corporate, Commercial &
Institutonal Banking 882 0.7% 433 429 20
Total at 31 December 2020 2,602 1.5% 1,987 595 20
1 Bahrain's moratoria scheme expired on 31 December 2021. The scheme has been further extended to 30 June 2022 on an opt-in basis. Amount includes $151 millon of
customers who were under moratoria schemes that expired on 31 December 2021 have opted to continue under the extended scheme up to 31 January 2022.
2 Percentage of portfolio represents the outstanding amount at 31 December 2021 as a percentage of the gross loans and advances to banks and customers by product
and segment and total loans and advances to banks and customers at 31 December 2021 and 2020.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
83
Risk profile continued
Problem credit management and provisoning
Forborne and other modifed loans by client segment (audited)
A forborne loan arises when a concession has been made to the contractual terms of a loan in response to a customer’s
financal diffculties.
Net forborne loans decreased by $481 millon compared with 31 December 2020, $718 millon of which was in performing
forborne loans offset by an increase of $236 millon in non-performing forborne. For net performing forborne loans, just over
half of the total decrease in forborne loans was in Corporate, Commercial & Institutonal Banking primarly driven by cures out
of performing forborne loans, with the remainder of the decrease due to lower performing forborne loans in Consumer,
Private & Business Banking mainly driven by one big ticket sized account in Private Banking which was fully repaid.
The table below presents loans with forbearance measures by segment.
Group
Amortised cost
2021
2020 (Restated)
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Total
$millon
Corporate,
Commercial &
Institutonal
Banking³
$millon
Consumer,
Private &
Business
Banking³
$millon
Total
$millon
All loans with forbearance measures 2,334 271 2,605
2,685 521 3,206
Credit imparment (stage 1 and 2) (4) – (4)
(3) (1) (4)
Credit imparment (stage 3) (1,159) (126) (1,285)
(1,294) (111) (1,405)
Net carrying value 1,171 145 1,316
1,388 409 1,797
Included withn the above table
Gross performing forborne loans 238 53 291
676 334 1,010
Modifcation of terms and conditons¹ 238 53 291
674 334 1,008
Refinancng² – – –
2 – 2
Impairment provisons (3) – (3)
(3) (1) (4)
Modifcation of terms and conditons
1
(3) – (3)
(3) (1) (4)
Refinancng
2
– – –
– – –
Net performing forborne loans 235 53 288
673 333 1,006
Collateral 36 56 92
315 23 338
Gross non-performing forborne loans 2,095 218 2,313
2,009 187 2,196
Modifcation of terms and conditons¹ 1,937 218 2,155
1,841 187 2,028
Refinancng² 158 – 158
168 – 168
Impairment provisons (1,159) (126) (1,285)
(1,294) (111) (1,405)
Modifcation of terms and conditons¹ (1,028) (126) (1,154)
(1,164) (111) (1,275)
Refinancng² (131) – (131)
(130) – (130)
Net non-performing forborne loans 936 92 1,028
715 76 791
Collateral 208 53 261
261 35 296
1 Modifcation of terms is any contractual change apart from refinancng, as a result of credit stress of the counterparty, i.e. interest reductions, loan covenant waivers
2 Refinancng is a new contract to a lender in credit stress, such that they are refinanced and can pay other debt contracts that they were unable to honour
3 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
84
Risk profile continued
Company
Amortised cost
2021
2020 (Restated)
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Total
$millon
Corporate,
Commercial &
Institutonal
Banking³
$millon
Consumer,
Private &
Business
Banking³
$millon
Total
$millon
All loans with forbearance measures 1,630 34 1,664
1,962 328 2,290
Credit imparment (stage 1 and 2) (2) – (2)
(1) (1) (2)
Credit imparment (stage 3) (789) (2) (791)
(892) (7) (899)
Net carrying value 839 32 871
1,069 320 1,389
Included withn the above table
Gross performing forborne loans 164 18 182
618 314 932
Modifcation of terms and conditons¹ 164 18 182
618 314 932
Refinancng² – – –
– – –
Impairment provisons (2) – (2)
(1) – (1)
Modifcation of terms and conditons1 (2) – (2)
(1) – (1)
Refinancng
2
– – –
– – –
Net performing forborne loans 162 18 180
617 314 931
Collateral 32 18 50
296 3 299
Gross non-performing forborne loans 1,466 16 1,482
1,344 14 1,358
Modifcation of terms and conditons¹ 1,313 16 1,329
1,182 14 1,196
Refinancng² 153 – 153
162 – 162
Impairment provisons (789) (2) (791)
(892) (6) (898)
Modifcation of terms and conditons¹ (662) (2) (664)
(766) (6) (772)
Refinancng² (127) – (127)
(126) – (126)
Net non-performing forborne loans 677 14 691
452 8 460
Collateral 130 13 143
175 8 183
1 Modifcation of terms is any contractual change apart from refinancng, as a result of credit stress of the counterparty, i.e. interest reductions, loan covenant waivers
2 Refinancng is a new contract to a lender in credit stress, such that they are refinanced and can pay other debt contracts that they were unable to honour
3 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated.
Credit-impared (stage 3) loans and advances by client segment (audited)
Gross Stage 3 loans for the Group decreased by $1.3 billon from $8.3 billon in 2020 to $6.9 billon in 2021 primarly driven by
repayments in Asian and South Asia region in Corporate, Commercial & Institutonal Banking. Corporate, Commercial &
Institutonal Banking stage 3 loans decreased $1.4 billon from $7.1 billon to $5.8 billon.
Consumer, Private & Business Banking stage 3 loans remained broadly stable at $1.2 billon
Stage 3 cover ratio (audited)
The stage 3 cover ratio measures the proportion of stage 3 imparment provisons to gross stage 3 loans, and is a metric
commonly used in considerng imparment trends. This metric does not allow for variatons in the compositon of stage 3
loans and should be used in conjuncton with other Credit Risk informaton provided, includng the level of collateral cover.
The balance of stage 3 loans not covered by stage 3 imparment provisons represents the adjusted value of collateral held
and the net outcome of any workout or recovery strategies.
Collateral provides risk mitgation to some degree in all client segments and supports the credit quality and cover ratio
assessments post imparment provisons. Further informaton on collateral is provided in the Credit Risk mitgation section.
The Corporate, Commercial & Institutonal Banking cover ratio remains broadly stable at 62 per cent as coverage reduced
from repayments offset by write-offs and new downgrades. Cover ratio after collateral remained stable at 74 per cent.
The Consumer, Private & Business Banking cover ratio improved by 7 per cent to 56 per cent as a new provison was taken on a
Business Banking client. Cover Ratio after collateral increased by 2 per cent to 97 per cent due to additonal stage 3 provisons.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
85
Risk profile continued
Group
Amortised cost
2021
2020 (Restated)
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Total
$millon
Corporate,
Commercial &
Institutonal
Banking¹
$millon
Consumer,
Private &
Business
Banking¹
$millon
Total
$millon
Gross credit-impared 1,179 8,289
5,750 1,191 6,941
7,110Credit imparment provisons (578) (4,967)
(3,563) (663) (4,226)
(4,389)Net credit-impared 2,187 528 2,715
2,721 601 3,322
Cover ratio 62% 56% 61%
62% 49% 60%
Collateral ($ millon) 539 1,418
700 487 1,187
879Cover ratio (after collateral) 74% 97% 78%
74% 95% 77%
1 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated.
Company
Amortised cost
2021
2020 (Restated)
Corporate,
Commercial &
Institutonal
Banking
$millon
Consumer,
Private &
Business
Banking
$millon
Total
$millon
Corporate,
Commercial &
Institutonal
Banking¹
$millon
Consumer,
Private &
Business
Banking¹
$millon
Total
$millon
Gross credit-impared 703 5,993
4,353 666 5,019
5,290Credit imparment provisons (348) (3,592)
(2,637) (390) (3,027)
(3,244)Net credit-impared 1,716 276 1,992
2,046 355 2,401
Cover ratio 61% 59% 60%
61% 50% 60%
Collateral ($ millon) 342 934
479 241 720
592Cover ratio (after collateral) 72% 95% 75%
73% 98% 76%
1 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated.
Credit risk mitgation
Potential credit losses from any given account, customer or portfolio are mitgated using a range of tools such as collateral,
netting arrangements, credit insurance and credit derivatves, taking into account expected volatilty and guarantees.
The reliance that can be placed on these mitgants is carefully assessed in light of issues such as legal certainty and
enforceabilty, market valuation correlation and counterparty risk of the guarantor.
Collateral (audited)
The requirement for collateral is not a substitute for the abilty to repay, which is the primary consideraton for any lending
decisons.
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 mitgation policy and for the
effect of over-collateralisaton. The extent of over-collateralisaton has been determined 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 arisng from expected credit losses. We have remained prudent in the way we assess the value of collateral, which is
calibrated for a severe downturn and 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. In the Consumer, Private & Business Banking
segments, 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.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
86
Risk profile continued
Collateral held on loans and advances (audited)
The table below details collateral held against exposures, separately disclosng stage 2 and stage 3 exposure and
corresponding collateral.
Group
Amortised cost
2021
Net amount outstanding Collateral Net exposure
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
2
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Corporate,
Commercial
&
Institutonal
Banking
1
109,766 11,720 2,218 18,463 3,479 700 91,303 8,241 1,518
Consumer,
Private &
Business
Banking
46,048 1,087 528 27,322 707 487 18,726 380 41
Central &
other items
18,984 110 – 2,814 – – 16,170 110 –
Total 174,798 12,917 2,746 48,599 4,186 1,187 126,199 8,731 1,559
Amortised
cost
2020 (Restated)
Net amount outstanding Collateral Net exposure
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
2
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Corporate,
Commercial
&
Institutonal
Banking
1,3
108,513 13,637 2,721 18,214 4,509 879 90,299 9,128 1,842
Consumer,
Private &
Business
Banking
3
42,560 1,670 601 26,883 1,101 539 15,677 569 62
Central &
other items 17,454 – – 2,053 – – 15,401 – –
Total
168,527 15,307 3,322 47,150 5,610 1,418 121,377 9,697 1,904
1 Includes loans and advances to banks
2 Adjusted for over-collateralisaton based on the drawn and undrawn components of exposures
3 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
87
Risk profile continued
Company
Amortised cost
2021
Net amount outstanding Collateral Net exposure
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
2
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Corporate,
Commercial
&
Institutonal
Banking
1
72,478 9,260 1,716 12,892 2,840 479 59,586 6,420 1,237
Consumer,
Private &
Business
Banking
12,201 434 276 5,913 295 241 6,288 139 35
Central &
other items
2,599 110 – 2,087 – – 512 110 –
Total 87,278 9,804 1,992 20,892 3,135 720 66,386 6,669 1,272
Amortised
cost
2020 (Restated)
Net amount outstanding Collateral Net exposure
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
2
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Total
$millon
Stage 2
financal
assets
$millon
Credit-
impared
financal
assets
$millon
Corporate,
Commercial
&
Institutonal
Banking
1,3
73,545 10,153 2,046 12,969 3,416 592 60,576 6,737 1,454
Consumer,
Private &
Business
Banking
3
12,116 524 355 7,132 428 342 4,984 96 13
Central &
other items 2,305 – – 1,350 – – 955 – –
Total
87,966 10,677 2,401 21,451 3,844 934 66,515 6,833 1,467
1 Includes loans and advances to banks
2 Adjusted for over-collateralisaton based on the drawn and undrawn components of exposures
3 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
88
Risk profile continued
Collateral – Corporate, Commercial & Institutonal Banking (audited)
Collateral held against Corporate, Commercial & Institutonal Banking exposures amounted to $18 billon.
65 per cent of tangible collateral held comprises physical assets or is property based, with the remainder largely in cash and
investment securites.
Non-tangible collateral such as guarantees and standby letters of credit is also held against corporate exposures, although
the financal effect of this type of collateral is less signficant in terms of recoveries. However, this is considered when
determinng probabilty of default and other credit-related factors. Collateral is also held against off-balance sheet
exposures, includng undrawn commitments and trade-related instruments.
The following table provides an analysis of the types of collateral held against Corporate, Commercial & Institutonal Banking
loan exposures.
Group
Corporate, Commercial & Institutonal Banking (restated²)
Amortised cost
2021
$millon
2020
$millon
Maximum exposure
109,766
108,513Property
4,004
5,660Plant, machinery and other stock
1,331
1,559Cash
2,595
1,686Reverse repos
1,920
1,734A- to AA+
–
–BBB- to BBB+
483
742Unrated
1,437
992Financal guarantees and insurance
5,513
4,354Commodites
36
46Ships and aircraft
3,064
3,175Total value of collateral
1
18,463
18,214
Net exposure 91,303
90,299
Company
Corporate, Commercial & Institutonal Banking (restated²)
Amortised cost
2021
$millon
2020
$millon
Maximum exposure
72,478
73,545Property
2,253
3,639Plant, machinery and other stock
876
1,073Cash
1,979
1,224Reverse repos
1,387
974A- to AA+
–
–BBB- to BBB+
2
1Unrated
1,385
973Financal guarantees and insurance
4,327
3,991Commodites
35
45Ships and aircraft
2,035
2,023Total value of collateral
1
12,892
12,969
Net exposure 59,586
60,576
1 Adjusted for over-collateralisaton based on the drawn and undrawn components of exposures
2 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking Prior period has been restated
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
89
Risk profile continued
Group
Collateral – Consumer, Private & Business Banking (audited)
In Consumer, Private & Business Banking, the portfolio remains stable with 84 per cent of the portfolio is fully secured,
2 per cent partially secured and the remainng 14 per cent is unsecured.
The following table presents an analysis of loans to indviduals by product; split between fully secured, partially secured
and unsecured:
Amortised cost
2021
2020
Fully secured
$millon
Partially
secured
$millon
Unsecured
$millon
Total
$millon
Fully secured
$millon
Partially
secured
$millon
Unsecured
$millon
Total
$millon
Maximum exposure 38,916 856 6,276 46,048
36,251 444 5,865 42,560
Loans to indviduals
Mortgages – – 22,914
23,915 – – 23,915
22,914CCPL – 5,766 5,908
148 – 5,738 5,886
142Auto – – 536
542 – – 542
536Secured wealth products – – 12,550
14,196 – – 14,196
12,550Other 444 99 652
115 856 538 1,509
109Total collateral
1
27,322
26,883
Net exposure
2
18,726
15,677
Percentage of total loans 84% 2% 14%
85% 1% 14%
1 Collateral values are adjusted where appropriate in accordance with our risk mitgation policy and for the effect of over-collateralisaton
2 Amounts net of ECL
Company
Collateral – Consumer, Private & Business Banking (audited)
In Consumer, Private & Business Banking, the portfolio remains stable with 72 per cent of the portfolio is fully secured,
7 per cent partially secured and the remainng 21 per cent is unsecured.
The following table presents an analysis of loans to indviduals by product; split between fully secured, partially secured
and unsecured:
Amortised cost
2021
2020
Fully secured
$millon
Partially
secured
$millon
Unsecured
$millon
Total
$millon
Fully secured
$millon
Partially
secured
$millon
Unsecured
$millon
Total
$millon
Maximum exposure 8,781 841 2,579 12,201
9,469 444 2,203 12,116
Loans to indviduals
Mortgages – – 5,377
4,802 – – 4,802
5,377CCPL – 2,184 2,327
148 – 2,229 2,377
143Auto – – 58
38 – – 38
58Secured wealth products – – 3,891
3,786 – – 3,786
3,891Other 444 19 463
7 841 350 1,198
–Total collateral
1
5,913
7,132
Net exposure
2
6,288
4,984
Percentage of total loans 72% 7% 21%
78% 4% 18%
1 Collateral values are adjusted where appropriate in accordance with our risk mitgation policy and for the effect of over-collateralisaton
2 Amounts net of ECL
Mortgage loan-to-value ratios by geography (audited)
Loan-to-value (LTV) ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties
on which they are secured.
In mortgages, the value of property held as security signficantly exceeds the value of mortgage loans. The average LTV of
the overall mortgage portfolio is low at 46.5 per cent. Singapore, which represents 65 per cent of the mortgage portfolio as at
31 December 2021 has an average LTV of 43.2 per cent.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
90
Risk profile continued
An analysis of LTV ratios by geography for the mortgage portfolio is presented in the table below.
Amortised cost
2021
Asia
%
Gross
Africa &
Middle East
%
Gross
Europe &
Americas
%
Gross
Total
%
Gross
Less than 50 per cent
43.9 27.6 16.8 40.7
50 per cent to 59 per cent
20.3 18.6 19.9 20.3
60 per cent to 69 per cent
20.2 19.6 37.5 21.4
70 per cent to 79 per cent
12.5 16.5 17.1 13.1
80 per cent to 89 per cent
2.5 9.1 8.7 3.4
90 per cent to 99 per cent
0.4 4.8 – 0.7
100 per cent and greater
0.2 3.8 – 0.4
Average portfolio loan-to-value
44.3 61.9 60.8 46.5
Loans to indviduals – mortgages ($millon) 20,455 1,651 1,808 23,914
Amortised cost
2020 (Restated)
Asia
1
%
Gross
Africa &
Middle East
%
Gross
Europe &
Americas
%
Gross
Total
%
Gross
Less than 50 per cent 41.5 22.1 16.4 37.6
50 per cent to 59 per cent 18.1 15.0 28.0 18.8
60 per cent to 69 per cent 21.0 19.6 29.0 21.6
70 per cent to 79 per cent 16.3 20.7 21.7 17.2
80 per cent to 89 per cent 2.2 7.4 3.7 2.8
90 per cent to 99 per cent 0.5 6.0 0.6 0.9
100 per cent and greater 0.4 9.2 0.6 1.1
Average portfolio loan-to-value 52.2 64.7 60.4 53.8
Loans to indviduals – mortgages ($millon)
18,887 1,871 2,156 22,914
1 Following the Group’s change in organisatonal structure, there has been an integraton of Greater China & North Asia and ASEAN & South Asia to Asia. Prior period has
been restated
Collateral and other credit enhancements possessed or called upon
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 securites acquired may be held by the Group for investment purposes and are classifed as fair value through
profit or loss, and the related loan written off. The carrying value of collateral possessed and held by the Group as at 31
December 2021 is $11.8 millon (2020: $23.2 millon).
2021
$millon
2020
$millon
Property, plant and equipment
5.8
18.2Guarantees
6.0
4.8Other
0.0
0.2Total 11.8
23.2
Other Credit Risk mitgation (audited)
Other forms of Credit Risk mitgation 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 $12.1 billon (2020: $10.5 billon). These credit default swaps are accounted for as financal 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 and Foreign
Exchange Risk on these assets.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
91
Risk profile continued
Credit linked notes
The Group has issued credit linked notes for portfolio management purposes, referencing loan assets with a notional value of
$10.0 billon (2020: $8.0 billon). The Group continues to hold the underlying assets for which the credit linked notes provide
mitgation.
Derivatve financal 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 positve and negative mark-to-market values of applicable derivatve
transactions. These are set out in more detail under Derivatve financal instruments Credit Risk Mitgation (page 110).
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 of loans and advances by business segment.
Maturity analysis of loans and advances by client segment (audited)
Loans and advances to the Corporate, Commercial & Institutonal Banking segments remain predominantly short-term, with
64 per cent (2020: 58 per cent) maturing in less than one year. 97 per cent (2020: 96 per cent) of loans to banks mature in less
than one year. Shorter maturites give us the flexiblity to respond promptly to events and rebalance or reduce our exposure to
clients or sectors that are facing increased pressure or uncertainty.
The Consumer, Private & Business Banking loan book continues to be longer-term in nature with 49 per cent (2020: 51 per
cent) of the loans maturing over five years, as mortgages constitute the majorty of this portfolio.
Group
Amortised cost
2021
One year
or less
$millon
One to
five years
$millon
Over
five years
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
53,449 20,973 9,220 83,642
Consumer, Private & Business Banking
18,702 5,471 22,873 47,046
Central & other items
18,758 222 4 18,984
Gross loans and advances to customers 90,909 26,666 32,097 149,672
Impairment provisons
(4,409) (355) (109) (4,873)
Net loans and advances to customers 86,500 26,311 31,988 144,799
Net loans and advances to banks 29,060 785 154 29,999
Amortised cost
2020 (Restated)
One year
or less
$millon
One to
five years
$millon
Over
five years
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
1
49,878 25,158 10,699 85,735
Consumer, Private & Business Banking
1
16,160 5,324 22,104 43,588
Central & other items 17,013 441 1 17,455
Gross loans and advances to customers
83,051 30,923 32,804 146,778
Impairment provisons (5,191) (608) (118) (5,917)
Net loans and advances to customers
77,860 30,315 32,686 140,861
Net loans and advances to banks
26,559 1,105 2 27,666
1 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
92
Risk profile continued
Company
Amortised cost
2021
One year
or less
$millon
One to
five years
$millon
Over
five years
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
36,691 14,561 7,954 59,206
Consumer, Private & Business Banking
5,840 3,045 3,884 12,769
Central & other items
2,598 – 1 2,599
Gross loans and advances to customers 45,129 17,606 11,839 74,574
Impairment provisons
(3,093) (235) (85) (3,413)
Net loans and advances to customers 42,036 17,371 11,754 71,161
Net loans and advances to banks 15,321 642 154 16,117
Amortised cost
2020 (Restated)
One year
or less
$millon
One to
five years
$millon
Over
five years
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
1
35,388 18,037 8,710 62,135
Consumer, Private & Business Banking
1
5,592 2,858 4,246 12,696
Central & other items 2,055 250 – 2,305
Gross loans and advances to customers
43,035 21,145 12,956 77,136
Impairment provisons (3,649) (439) (79) (4,167)
Net loans and advances to customers
39,386 20,706 12,877 72,969
Net loans and advances to banks
14,052 943 2 14,997
1 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated
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 imparment and
net basis.
From an industry perspective, loans and advances increased by $2.9 billon compared with 31 December 2020, of which $3.5
billon increase is in Consumer, Private & Business Banking offset by $0.5 billon decrease in Corporate, Commercial &
Institutonal Banking.
In Stage 1, the increase in the corporate book is largely a $3 billon in lending to Manufacturing, Financng, insurance and non
banking sector offset by Commercial real estate and Transport and telecom sectors. In Stage 2, the decrease of $2.2 billon is
largely in Manufacturing and Commercial real estate due to exposure changes and upgrades to stage 1.
The Mortgage portfolio continues to be the largest portion of the Consumer, Private & Business Banking portfolio. Mortgages
form 51 per cent and Secured wealth products form 31 per cent of total Consumer, Private & Business Banking portfolio. The
increase of $3.5 billon in Consumer, Private & Business Banking is from Mortgages and secured wealth products with increase
in stage 1 of $4 billon offset by reduction in stage 2 exposures of $0.7 billon.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
93
Risk profile continued
Group
Amortised cost
2021
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Industry:
Energy
9,219 (14) 9,205 1,898 (71) 1,827 889 (629) 260 12,006 (714) 11,292
Manufacturing
10,837 (6) 10,831 788 (26) 762 757 (510) 247 12,382 (542) 11,840
Financng,
insurance and
non-banking
15,338 (6) 15,332 720 (11) 709 247 (206) 41 16,305 (223) 16,082
Transport,
telecom
and utilties
6,691 (3) 6,688 4,368 (47) 4,321 938 (282) 656 11,997 (332) 11,665
Food and
household
products
6,048 (7) 6,041 563 (26) 537 370 (266) 104 6,981 (299) 6,682
Commercial
real estate
5,876 (8) 5,868 695 (10) 685 385 (211) 174 6,956 (229) 6,727
Minng and
quarrying
2,887 (2) 2,885 419 (19) 400 261 (179) 82 3,567 (200) 3,367
Consumer
durables
2,203 (2) 2,201 251 (8) 243 360 (323) 37 2,814 (333) 2,481
Construction
1,171 (1) 1,170 491 (19) 472 914 (624) 290 2,576 (644) 1,932
Trading
companies &
distrbutors
554 – 554 20 (6) 14 159 (131) 28 733 (137) 596
Government
21,663 (2) 21,661 624 (2) 622 155 (8) 147 22,442 (12) 22,430
Other
2,860 (3) 2,857 694 (13) 681 316 (194) 122 3,870 (210) 3,660
Retail Products:
Mortgage
23,156 (19) 23,137 506 (19) 487 449 (159) 290 24,111 (197) 23,914
CCPL and other
unsecured
lending
5,678 (141) 5,537 373 (75) 298 244 (193) 51 6,295 (409) 5,886
Auto
541 (1) 540 2 – 2 – – – 543 (1) 542
Secured
wealth products
13,821 (44) 13,777 254 (9) 245 441 (267) 174 14,516 (320) 14,196
Other
1,447 (7) 1,440 75 (20) 55 56 (44) 12 1,578 (71) 1,507
Total value
(customers)¹ 129,990 (266) 129,724 12,741 (381) 12,360 6,941 (4,226) 2,715 149,672 (4,873) 144,799
1 Includes reverse repurchase agreements and other simlar secured lending held at amortised cost of $3,764 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
94
Risk profile continued
Amortised cost
2020
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Industry:
Energy 9,429 (20) 9,409 1,651 (78) 1,573 932 (702) 230 12,012 (800) 11,212
Manufacturing 9,379 (8) 9,371 1,895 (60) 1,835 1,415 (968) 447 12,689 (1,036) 11,653
Financng,
insurance and
non-banking 13,339 (5) 13,334 427 (2) 425 258 (209) 49 14,024 (216) 13,808
Transport,
telecom
and utilties 8,348 (10) 8,338 3,326 (112) 3,214 1,009 (467) 542 12,683 (589) 12,094
Food and
household
products 6,042 (6) 6,036 646 (24) 622 515 (334) 181 7,203 (364) 6,839
Commercial
real estate 6,464 (7) 6,457 1,247 (20) 1,227 366 (172) 194 8,077 (199) 7,878
Minng and
quarrying 2,796 (5) 2,791 738 (19) 719 269 (190) 79 3,803 (214) 3,589
Consumer
durables 1,725 (2) 1,723 657 (29) 628 465 (378) 87 2,847 (409) 2,438
Construction 1,301 (2) 1,299 806 (29) 777 1,059 (526) 533 3,166 (557) 2,609
Trading
companies &
distrbutors 481 (1) 480 157 (7) 150 289 (225) 64 927 (233) 694
Government 20,487 (1) 20,486 883 (2) 881 220 (11) 209 21,590 (14) 21,576
Other 2,542 (3) 2,539 1,314 (48) 1,266 313 (207) 106 4,169 (258) 3,911
Retail Products:
Mortgage 21,750 (16) 21,734 951 (35) 916 441 (177) 264 23,142 (228) 22,914
CCPL and other
unsecured
lending 5,549 (198) 5,351 628 (147) 481 255 (179) 76 6,432 (524) 5,908
Auto 531 (1) 530 5 – 5 1 – 1 537 (1) 536
Secured
wealth products 12,111 (43) 12,068 249 (6) 243 442 (203) 239 12,802 (252) 12,550
Other 609 (3) 606 26 (1) 25 40 (19) 21 675 (23) 652
Total value
(customers)¹
122,883 (331) 122,552 15,606 (619) 14,987 8,289 (4,967) 3,322 146,778 (5,917) 140,861
1 Includes reverse repurchase agreements and other simlar secured lending held at amortised cost of $2,919 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
95
Risk profile continued
Company
Amortised cost
2021
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Industry:
Energy
6,519 (13) 6,506 1,518 (61) 1,457 559 (339) 220 8,596 (413) 8,183
Manufacturing
5,929 (3) 5,926 583 (16) 567 628 (402) 226 7,140 (421) 6,719
Financng,
insurance and
non-banking
13,229 (4) 13,225 440 (1) 439 204 (167) 37 13,873 (172) 13,701
Transport,
telecom and
utilties
3,674 (1) 3,673 4,004 (43) 3,961 696 (152) 544 8,374 (196) 8,178
Food and
household
products
3,310 (2) 3,308 342 (13) 329 174 (152) 22 3,826 (167) 3,659
Commercial
real estate
3,934 (2) 3,932 436 (5) 431 353 (205) 148 4,723 (212) 4,511
Minng and
quarrying
2,133 (1) 2,132 296 (17) 279 160 (152) 8 2,589 (170) 2,419
Consumer
durables
1,363 (1) 1,362 156 (3) 153 315 (280) 35 1,834 (284) 1,550
Construction
847 (1) 846 410 (6) 404 804 (547) 257 2,061 (554) 1,507
Trading
companies &
distrbutors
246 – 246 9 (5) 4 75 (74) 1 330 (79) 251
Government
4,993 (1) 4,992 615 (2) 613 155 (7) 148 5,763 (10) 5,753
Other
1,971 (1) 1,970 495 (6) 489 231 (159) 72 2,697 (166) 2,531
Retail Products:
Mortgage
4,468 (7) 4,461 205 (16) 189 259 (107) 152 4,932 (130) 4,802
CCPL and other
unsecured
lending
2,336 (86) 2,250 161 (34) 127 38 (38) – 2,535 (158) 2,377
Auto
37 – 37 1 – 1 – – – 38 – 38
Secured
wealth products
3,601 (23) 3,578 94 (6) 88 354 (234) 120 4,049 (263) 3,786
Other
1,170 (5) 1,165 30 (1) 29 14 (12) 2 1,214 (18) 1,196
Total value
(customers)¹ 59,760 (151) 59,609 9,795 (235) 9,560 5,019 (3,027) 1,992 74,574 (3,413) 71,161
1 Includes reverse repurchase agreements and other simlar secured lending held at amortised cost of $3,047 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
96
Risk profile continued
Amortised cost
2020
Stage 1 Stage 2 Stage 3 Total
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Gross
balance
$millon
Total credit
imparment
$millon
Net
carrying
amount
$millon
Industry:
Energy 6,827 (13) 6,814 1,202 (52) 1,150 531 (420) 111 8,560 (485) 8,075
Manufacturing 6,285 (5) 6,280 1,406 (49) 1,357 1,157 (765) 392 8,848 (819) 8,029
Financng,
insurance and
non-banking 10,866 (2) 10,864 349 (2) 347 215 (170) 45 11,430 (174) 11,256
Transport,
telecom and
utilties 5,780 (6) 5,774 2,662 (103) 2,559 636 (277) 359 9,078 (386) 8,692
Food and
household
products 3,754 (3) 3,751 277 (8) 269 285 (196) 89 4,316 (207) 4,109
Commercial
real estate 4,288 (5) 4,283 838 (11) 827 317 (158) 159 5,443 (174) 5,269
Minng and
quarrying 2,039 (4) 2,035 608 (16) 592 159 (142) 17 2,806 (162) 2,644
Consumer
durables 1,105 (1) 1,104 474 (17) 457 403 (328) 75 1,982 (346) 1,636
Construction 905 (1) 904 731 (25) 706 949 (457) 492 2,585 (483) 2,102
Trading
companies &
distrbutors 230 – 230 72 (1) 71 187 (146) 41 489 (147) 342
Government 5,172 (1) 5,171 806 (1) 805 220 (11) 209 6,198 (13) 6,185
Other 1,619 (2) 1,617 855 (15) 840 231 (174) 57 2,705 (191) 2,514
Retail Products:
Mortgage 4,871 (8) 4,863 377 (28) 349 296 (131) 165 5,544 (167) 5,377
CCPL and other
unsecured
lending 2,320 (117) 2,203 172 (57) 115 38 (29) 9 2,530 (203) 2,327
Auto 58 (1) 57 1 – 1 – – – 59 (1) 58
Secured
wealth products 3,676 (18) 3,658 59 (2) 57 363 (187) 176 4,098 (207) 3,891
Other 457 (1) 456 2 – 2 6 (1) 5 465 (2) 463
Total value
(customers)¹
60,252 (188) 60,064 10,891 (387) 10,504 5,993 (3,592) 2,401 77,136 (4,167) 72,969
1 Includes reverse repurchase agreements and other simlar secured lending held at amortised cost of $2,283 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
97
Risk profile continued
Debt securites and other eligble bills (audited)
This section provides further detail on gross debt securites and treasury bills.
The standard credit ratings used by the Group are those used by Standard & Poor’s or its equivalent. Debt securites held that
have a short-term rating are reported against the long-term rating of the issuer. For securites that are unrated, the Group
applies an internal credit rating, as described under the credit rating and measurement section (page 130).
Total gross debt securites and other eligble bills increased by $15.9 billon to $101.8 billon. The increase in holdings of debt
securites and other eligble bills is mainly due to Treasury Markets utilsing excess liqudity from the growth in the Group's
balance sheet. Of the total increase, 89 per cent is in stage 1 with the remainng 11 per cent in stage 2. Most securites held are
highly rated to meet liqudity regulatory requirement. This can be observed in the increase of stage 1 securites rated A- and
above of $14.9 billon.
Group
Amortised cost and FVOCI
2021
2020
Gross
$millon
ECL
$millon
Net
2
$millon
Gross
$millon
ECL
$millon
Net
2
$millon
Stage 1 96,350 (58) 96,292
82,230 (50) 82,180
AAA (7) 49,714
58,836 (18) 58,818
49,721AA- to AA+ (1) 8,323
12,584 (5) 12,579
8,324A- to A+ (1) 6,597
8,142 (2) 8,140
6,598BBB- to BBB+ (31) 12,041
11,071 (27) 11,044
12,072Lower than BBB- (1) 397
1,123 (1) 1,122
398Unrated (9) 5,108
4,594 (5) 4,589
5,117Stage 2 5,315 (42) 5,273
3,488 (26) 3,462
AAA – 24
641 (7) 634
24AA- to AA+ – –
592 (3) 589
–A- to A+ (2) 48
22 (1) 21
50BBB- to BBB+ (7) 2,686
2,869 (9) 2,860
2,693Lower than BBB- (11) 386
809 (20) 789
397Unrated (6) 318
382 (2) 380
324Stage 3 113 (66) 47
114 (58) 56
Lower than BBB- – –
– – –
–Unrated (58) 56
113 (66) 47
114Gross balance¹ 101,778 (166) 101,612
85,832 (134) 85,698
1 Stage 3 includes $33 millon orignated credit-impared debt securites
2 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 is $101,705 millon
(31 December 2020: $85,759 millon). Refer to the Analysis of financal instrument by stage table on page 63
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
98
Risk profile continued
Company
Amortised cost and FVOCI
2021
2020
Gross
$millon
ECL
$millon
Net²
$millon
Gross
$millon
ECL
$millon
Net²
$millon
Stage 1 82,388 (32) 82,356
68,742 (19) 68,723
AAA (6) 45,354
56,041 (17) 56,024
45,360AA- to AA+ (1) 8,035
10,585 (5) 10,580
8,036A- to A+ (1) 4,783
6,450 (2) 6,448
4,784BBB- to BBB+ (7) 7,384
6,263 (6) 6,257
7,391Lower than BBB- (1) 382
1,123 (1) 1,122
383Unrated (3) 2,785
1,926 (1) 1,925
2,788Stage 2 3,603 (21) 3,582
2,083 (10) 2,073
AAA – 24
641 (7) 634
24AA- to AA+ – –
592 (3) 589
–A- to A+ (2) 48
22 (1) 21
50BBB- to BBB+ (4) 1,666
1,672 (2) 1,670
1,670Lower than BBB- (4) 221
589 (7) 582
225Unrated – 114
87 (1) 86
114Stage 3 82 (36) 46
84 (29) 55
Lower than BBB- – –
– – –
–Unrated (29) 55
82 (36) 46
84Gross balance¹ 86,073 (89) 85,984
70,909 (58) 70,851
1 Stage 3 includes $33 millon orignated credit-impared debt securites
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 $86,028 millon
(31 December 2020: $70,872 millon). Refer to the Analysis of financal instrument by stage table on page 65
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
99
Risk profile continued
IFRS 9 expected credit loss methodology (audited)
Approach for determinng expected credit losses
Credit loss terminology
Component Defintion
Probabilty of default
(PD)
The probabilty that a counterparty will default, over the next 12 months from the reporting date (stage 1) or over
the lifetme 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 lifetme (or term structure) PDs are
based on statistcal models, calibrated using historcal 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 financal asset, taking 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
lifetme of the exposure. This incorporates the impact of drawdowns of facilties with limts, repayments of
princpal and interest and amortisaton.
To determine the expected credit loss, these components are multipled together: PD for the reference period (up to
12 months or lifetme) x LGD x EAD and discounted 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 & Institutonal Banking business on a
global basis, in line with their respective portfolios. However, for some of the key countries, country-specifc models have also
been developed.
The calibraton of forward-looking informaton is assessed at a country or region level to take into account local
macroeconomic conditons.
Retail expected credit loss models are country and product specifc given the local nature of the retail business.
For less material retail portfolios, the Group has adopted less sophistcated approaches based on historcal 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 migraton
rate between delinquency states from period to period. A matrix multiplcation 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 informaton, to the extent that there are signficant
changes in the macroeconomic forecasts an assessment will be completed on whether an adjustment to the modelled
output is required.
For a limted number of exposures, proxy parameters or approaches are used where the data is not available to calculate the
orignation PDs for the purpose of applying the SICR critera; or for some retail portfolios where a full history of LGD data is not
available, estimates based on the loss experience from simlar portfolios 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 monitorng that uses recent data to compare the differences between model predictons and actual
outcomes against approved thresholds.
•
Annual independent validatons of the performance of material models by Group Model Valuation (GMV); an abridged
validaton is completed for non-material models.
Applicaton of lifetme
Expected credit loss is estimated based on the period over which the Group is exposed to Credit Risk. For the majorty of
exposures this equates to the maximum contractual period. For retail credit cards and corporate overdraft facilties 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.
In 2021, the behavioural life for corporate overdraft facilties was re-estimated using recent data, and it was confirmed that
the existng lifetme of 24 months remains appropriate.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
100
Risk profile continued
Key assumptions and judgements in determinng expected credit loss
Incorporation of forward-looking informaton
The evolving economic environment is a key determinant of the abilty of a bank’s clients to meet their obligatons as they fall
due. It is a fundamental princple of IFRS 9 that the provisons banks hold against 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 anticpate a sharp slowdown in the world economy over the coming year, it
should hold more provisons 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 informaton in the form of forecasts of the values of economic variables and asset prices that are likely to have an
effect on the repayment abilty of the Group’s clients.
The ‘Base Forecast’ of the economic variables and asset prices is based on management’s view of the five-year outlook,
supported by projectons from the Group’s in-house research team and outputs from a third-party model that project specifc
economic variables and asset prices. The research team takes consensus views into consideraton and senior management
reviews projectons for some core country variables against consensus when forming their view of the outlook. For the period
beyond five years, management utilses the in-house research view and third-party model outputs, which allow for a
reversion to long-term growth rates or norms. All projectons are updated on a quarterly basis.
Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact
on non-linearty
In the Base Forecast – management’s view of the most likely outcome –the world economy is expected to grow by just over 4
per cent in 2022, easing from an almost 6 per cent expansion in 2021. The strong growth last year was driven by vaccine
rollouts and government stimulus and follows a contraction of more than 3 per cent in 2020, the worst performance since the
Great Depression of 1929-31. Currently the near-term recovery momentum is being curtailed by supply side disruptons and
elevated inflaton. Despite this, world GDP growth in 2022 is still expected to be above the average of 3.7 per cent for the 10
years between 2010 and 2019.
Vaccines against COVID-19 have allowed economies to reopen, but constantly evolving virus strains have resulted in
intermttent recoveries, and sectors like hospitalty and tourism remain under pressure. In general, developed markets have
been much better than emerging markets in rolling out vaccines; it is therefore not surprisng that developed markets have
led the recovery so far. The improvement in vaccine access in emerging markets in recent months should help to narrow the
growth gap in 2022.
The balance of risks to the 2022 growth forecast is to the downside. The emergence of the new Omicron variant across many
markets is likely to be felt in slowing the pace of reopening of economies or the re-introducton of restrictons limting public
contact and movement. This will pose downside risks to economic activty and employment. A delayed employment recovery
would likely extend supply chain disruptons, weakening growth and keeping inflaton elevated for longer. This combinaton
will create challenges for policy makers globally as they attempt to strike a delicate balance between responding to upward
inflatonary pressures and managing downside risks to the economic outlook.
While the quarterly Base Forecasts inform the Group’s strategic plan, one key requirement of IFRS 9 is that the assessment of
provisons should consider multiple future economic environments. For example, the global economy may grow more quickly
or more slowly than the Base Forecast, and these variatons would have different implcations for the provisons that the
Group should hold today. As the negative impact of an economic downturn on credit losses tends to be greater than the
positve impact of an economic upturn, if the Group sets provisons only on the ECL under the Base Forecast it might maintan
a level of provisons that does not appropriately capture the range of potential outcomes. To address this property of
skewness (or non-linearty), IFRS 9 requires reported ECL to be a probabilty-weighted ECL calculated over a range of possible
outcomes.
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 simulaton, which addresses the challenges of crafting many realistc alternative scenarios in the many
countries in which the Group operates by means of a model, which produces these alternative scenarios while considerng
the degree of historcal uncertainty (or volatilty) observed from Q1 1990 to Q3 2020 around economic outcomes and how
these outcomes have tended to move in relation to one another (or correlation). This naturally means that each of the 50
scenarios do not have a specifc narrative, although collectively they explore a range of hypothetical alternative outcomes for
the global economy, includng scenarios that turn out better than expected and scenarios that amplify anticpated stresses.
The table on page 101 provides a summary of the Group’s Base Forecast for key markets, alongside the corresponding range
seen across the multiple scenarios. The peak/trough amounts in the table show the highest and lowest points withn the Base
Forecast.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
101
Risk profile continued
China’s growth is expected to ease from over 8 per cent in 2021 to 5.6 per cent in 2022. After excluding the COVID-19 related
weakness of 2020 when the economy grew by 2.3 per cent this will be the slowest pace of expansion since 1990 when GDP
grew by 3.9 per cent. Headwinds to China’s outlook include the spread of the new variant of COVID-19 and concerns over the
real estate sector. In Singapore and India growth rates are also expected to ease in 2022 but will remain relatively robust at
3.6 per cent and 8 per cent, respectively. In Singapore progress with border reopening and a high domestic vaccinaton rate
should support economic activty. Simlarly in India a rapid pick-up in vaccine distrbution, along with expansionary polices
will support the recovery there. Growth in the United Arab Emirates is expected to pick up to over 4 per cent from 2.5 per cent
in 2021, with growth supported by EXPO 2020, high vaccinaton rate and increased oil production.
Momentum from the strong rebound in 2021 is also expected ease in western economies. The United States is facing
increasng headwinds in 2022. This follows robust growth last year as the rapid pace of vaccinatons in the first half of 2021
allowed activty to normalise. US GDP growth is expected to moderate to 3.7 per cent in 2022 from 5.7 per cent in 2021 as
supply-side constraints start to bite and high inflaton squeezes real incomes. Europe also faces simlar challenges with the
growth in the eurozone expected to ease to around 4 per cent from 4.9 per cent in 2021.
The slowdown in world GDP growth will translate to a softening in the growth of demand for commodites in 2022. Supply
disruptons from COVID-19 are also expected to dimnish this year. The tightness in the supply-demand balance in the oil
market is therefore likely to ease and the price of Brent Crude oil is expected to average $66.6 in 2022 compared with $70.0
in 2021.
2021
China UAE Singapore India
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
GDP growth
(YoY%)
5.4 6.1/ 4.7 2.6 8.3 3.7 6.5/1.3 1.8 8.2 2.5 4.8/1.8 (4.0) 9.4 6.4 10.5
16.6/4.2
2.0Unemployment
(%)
3.4 3.4/3.4 3.3 3.5 N/A N/A N/A N/A 3.1 3.4/3.0 2.1 4.5 N/A N/A N/A N/A
3 month
interest rates (%)
2.8 3.1/2.1 1.3 4.6 1.5 2.2/0.6 0.0 4.4 1.4 2.2/0.5 0.1 4.2 5.4 6.2/4.0 3.2 8.8
House prices
(YoY%)
4.0 4.5/1.8 (2.8) 11.1 1.4 0.6/(1.0) (4.4) 11.9 3.6 4.2/3.3 (4.1) 15.4 7.1 7.2/5.8 (1.9) 24.9
2020
China UAE Singapore India
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
5 yr
average
base
forecast
Base
forecast
peak/
trough Low
2
High
3
GDP growth
(YoY%)
6.0 19.4/3.2 1.9 20.4 3.0 9.0/(3.7) 0.9 12.0 2.8 17.5 6.4 32.6/0.0 (2.1) 34.9
13.7/(2.3)
(5.4)Unemployment
(%)
3.4 3.7/3.4 3.3 3.7 N/A N/A N/A N/A 3.5 4.3/3.1 2.0 5.5 N/A N/A N/A N/A
3 month
interest rates (%)
2.3 2.4/2.2 0.9 4.5 0.8 1.2/0.6 (0.1) 3.3 0.7 1.2/0.5 0.0 2.2 4.3 5.4/3.3 2.0 6.9
House prices
(YoY%)
5.8 6.2/4.7 1.2 8.7 0.9 2.0/(6.4) (5.1) 6.5 4.0 4.3/1.5 (4.4) 16.9 6.7 7.2/4.8 (4.1) 21.8
2021
2020
5 yr average
base forecast
Base forecast
peak/trough Low
2
High
3
5 yr average
base forecast
Base forecast
peak/trough Low
2
High
3
Brent Crude, $ pb 60.9/39.0 22 116
63.7 73.5/60.0 8.9 211.4
53.81 N/A – Not available
2 Represents the 10th percentile in the range of economic scenarios used to determine non-linearty
3 Represents the 90th percentile in the range of economic scenarios used to determine non-linearty
4 Base forecasts are evaluated from Q1 2022 to Q4 2026. The forward-looking simulaton starts from Q1 2022
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
102
Risk profile continued
Management overlay
As at 31 December 2021, the Group held a $233 millon (31 December 2020: $322 millon) management overlay relating to
uncertaintes as a result of the COVID-19 pandemic, $93 millon (31 December 2020: $174 millon) of which relates to Corporate,
Commercial & Institutonal Banking and $140 millon (31 December 2020: $148 millon) to Consumer, Private & Business
Banking.
The overlay is re-assessed quarterly and are reviewed and approved by the IFRS 9 Impairment Committee.
COVID-19 overlay
Corporate, Commercial & Institutonal Banking
Although the amount of loans placed on non-purely precautionary early alert has decreased compared with 31 December
2020, balances remain higher than before the pandemic. The impact of the rapid deterioraton in the economic environment
in 2020 has not yet been fully observed in customers’ financal performance, in part due to ongoing government support
measures across the Group’s markets. Accordingly, we have not yet seen a signficant increase in the level of stage 3 loans
relating to COVID-19 up to 31 December 2021. To take account of the heightened Credit Risk and the continung uncertaintes
in the pace and timng of economic recovery, a judgemental overlay has been taken by estimatng the impact of further
deterioraton to the non-purely precautionary early alert portfolio. The overlay is held in stage 2.
Consumer, Private and Business Banking
A number of components contribute to the judgemental overlay for Consumer, Private & Business Banking. Withn Business
Banking, the Group has evaluated those sectors that have been adversely impacted by COVID-19, both through internal
credit processes as well as through a ‘Voice of Customer’ survey to understand how customers have been affected. The
Group has also considered the extent to which lockdowns have impacted collections and recoveries, and the extent to which
payment reliefs may mask underlying credit risks, particularly in those markets in ASEAN & South Asia where compulsory
moratoria schemes were in place. For those markets, the Group has estimated the impact of increased delinquences and
flows to defaults when the moratoria are lifted as well, as the extent to which customers in stage 1 may have experienced a
signficant increase in credit risk if not for the moratoria. The Group assessment also considered employee banking
relationshps with high-impact sectors, such as airlnes, and the impact on Mortgages in Africa & the Middle East which
generally have high LTVs. $80 millon of the overlay is held in stage 1, $39 millon in stage 2 and $21 millon in stage 3.
Stage 3 assets
Credit-impared assets managed by Group Special Assets Management incorporate forward-looking economic assumptions
in respect of the recovery outcomes identfied, and are assigned indvidual probabilty weightngs. These assumptions are not
based on a Monte Carlo simulaton but are informed by the Base Forecast.
Sensitvity of expected credit loss calculation to macroeconomic variables
The ECL calculation relies on multiple variables and is inherently non-linear and portfolio-dependent, which imples that no
single analysis can fully demonstrate the sensitvity of the ECL to changes in the macroeconomic variables. The Group has
conducted a series of analyses with the aim of identfying the macroeconomic variables which might have the greatest
impact on overall ECL. These encompassed single variable and multi-variable exercises, using simple up/down variaton and
extracts from actual calculation data, as well as bespoke scenario design and assessments.
The primary conclusion of these exercises is that no indvidual macroeconomic variable is materially influental. 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 uninfluental; rather, that the Group believes that consideraton of macroeconomics 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 uncertaintes surrounding the macroeconomic
outlook. To explore this, a sensitvity 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 the first scenario the current supply chain
disruptons prove more persistent than expected. Labour and material shortages persist throughout 2022 and higher
commodity and other input prices add to inflatonary pressure. The global recovery in investment and consumption
disapponts and financal markets weaken. The impact on the global economy is temporary, however. Supply chain
disruptons ease signficantly from 2023. In the second scenario, new COVID-19 virus variants are assumed to lead to a new
infecton wave in emerging markets and developing economies, resulting in the re-introducton of severe lockdown measures.
Travel restrictons signficantly impact the Aviaton and Hotels & Tourism sectors.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
103
Risk profile continued
Baseline Supply chain disrupton New COVID-19 variant
Five year
average Peak/Trough
Five year
average Peak/Trough
Five year
average Peak/Trough
China GDP 5.4 6.1/4.7 5.0 5.5/3.6 5.2 13.4/(5.2)
China unemployment 3.4 3.4/3.4 3.5 4.0/3.4 4.1 5.9/3.4
China property prices 4.0 4.5/1.8 3.4 4.5/(1.5) 3.8 6.6/(1.6)
UAE GDP 3.7 6.5/1.3 3.6 6.2/1.0 3.7 10.3/(2.3)
UAE property prices 1.4 2.0/(1.0) 1.2 2.6/(3.2) 1.3 7.3/(6.8)
US GDP 2.3 4.7/1.7 1.6 4.0/(0.4) 2.0 13.1/(11.6)
Singapore GDP 2.5 4.8/1.8 1.9 3.3/(0.2) 2.2 11.1/(8.9)
India GDP 6.4 16.6/4.2 5.4 15.0/1.4 6.0 19.3/(12.4)
Crude Oil 63.7 73.5/60.0 66.3 76.2/62.0 49.4 57.0/32.7
The total reported stage 1 and 2 ECL provisons (includng both on and off-balance sheet instruments) would be
approximately $95 millon higher under the supply chain disrupton scenario and $417 millon higher under the new COVID-19
variant scenario than the baseline ECL provisons (which excluded the impact of multiple economic scenarios and
management overlays which may already capture some of the risks in these scenarios). The proportion of stage 2 assets
would increase from 4.5 per cent to 4.9 per cent and 7.6 per cent respectively under the supply chain disrupton and new
COVID-19 variant 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 majorty of the increase was in Corporate, Commercial & Institutonal Banking with the main
corporate portfolios in the United Kingdom and the United States being impacted. For the Consumer, Private and Business
Banking portfolios most of the increases came from the big unsecured retail portfolios with the Malaysia and Singapore
Credit Cards portfolios impacted.
There was no material change in modelled stage 3 provisons as these primarly relate to unsecured retail exposures for which
the LGD is not sensitve to changes in the macroeconomic forecasts. There is also no material change for non-modelled stage
3 exposures as these are more sensitve to client specifc factors than to alternative macroeconomic scenarios.
The actual outcome of any scenario may be materially different due to, among other factors, the effect of management
actions to mitgate potential increases in risk and changes in the underlying portfolio.
Modelled provisons
Supply chain
disrupton
increase
$m
New
COVID-19
variant
$m
Corporate, Commercial & Institutonal Banking 60 314
Consumer, Private & Business Banking 33 92
Central & other items 2 10
Total 95 416
Proportion of assets in stage 2
¹
Base
Forecast
scenario
%
Moderate
downside
scenario
%
Severe
downside
scenario
%
Corporate, Commercial & Institutonal Banking 6.3 7.2 12.5
Consumer, Private & Business Banking 3.9 4.2 5.3
Central & other items 2.4 2.5 2.5
Total 4.5 4.9 7.6
1 Excludes cash and balances at central banks, accrued income, assets held for sale and other assets
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
104
Risk profile continued
Signficant increase in credit risk (SICR)
Quantitatve critera
SICR is assessed by comparing the risk of default at the reporting date to the risk of default at orignation. Whether a change
in the risk of default is signficant or not is assessed using quantitatve and qualitatve critera. These quantitatve signficant
deterioraton thresholds 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 lifetme probabilty of default over the residual term of the exposure.
The absolute measure of increase in credit risk is used to capture instances where the PDs on exposures are relatively low at
intial recogniton as these may increase by several multiples without representing a signficant increase in credit risk. Where
PDs are relatively high at intial recogniton, a relative measure is more appropriate in assessing whether there is a signficant
increase in credit risk, as the PDs increase more quickly.
The SICR thresholds have been calibrated based on the following princples:
•
Stabilty – The thresholds are set to achieve a stable stage 2 population at a portfolio level, trying to minmise 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 PDs rather than relying on backward-looking backstops such as arrears
•
Relationshp with business and product risk profiles – The thresholds reflect the relative risk differences between different
products, and are aligned to business processes
For Corporate, Commercial & Institutonal Banking clients, the relative threshold is a 100 per cent increase in PD and the
absolute change in PD is between 50 and 100 bps.
For Consumer Private and Business Banking clients, the relative threshold is a 100 per cent increase in PD and the absolute
change in PD is between 100 and 350 bps depending on the product. Certain countries have a higher absolute threshold
reflecting the lower default rate withn their personal loan portfolios compared with the Group’s other personal loan
portfolios.
Private Banking clients are assessed qualitatvely, based on a delinquency measure relating to collateral top-ups or sell-
downs.
Debt securites orignated before 1 January 2018 with an internal credit rating mapped to an investment grade equivalent are
allocated to stage 1 and all other debt securites to stage 2. Debt securites orignated after 1 January 2018 apply the same
approach and thresholds as for Corporate, Commercial & Institutonal Banking clients.
Qualitatve critera
Qualitatve factors that indcate that there has been a signficant 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 princpal and/or interest
that have not been captured by the critera above are considered to have experienced a signficant increase in credit risk.
Expert credit judgement may be applied in assessing signficant increase in credit risk to the extent that certain risks may not
have been captured by the models or through the above critera. Such instances are expected to be rare, for example due to
events and material uncertaintes arisng close to the reporting date.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
105
Risk profile continued
Corporate, Commercial & Institutonal Banking clients
Quantitatve critera
Exposures are assessed based on both the absolute and the relative movement in the PD from orignation to the reporting
date as described above.
To account for the fact that the mapping between internal credit grades (used in the orignation process) and PDs is non-
linear (e.g. a one-notch downgrade in the investment grade universe results in a much smaller PD increase than in the
sub-investment grade universe), the absolute thresholds have been differentated by credit quality at orignation, as
measured by internal credit grades being investment grade or sub-investment grade.
Qualitatve critera
All assets of clients that have been placed on early alert (for non-purely precautionary reasons) are deemed to have
experienced a signficant increase in credit risk.
An account is placed on non-purely precautionary early alert if it exhibts risk or potential weaknesses of a material nature
requirng closer monitorng, supervison or attention by management. Weaknesses in such a borrower’s account, if left
uncorrected, could result in deterioraton of repayment prospects and the likelhood of being downgraded. Indicators could
include a rapid erosion of positon withn the industry, concerns over management’s abilty to manage operations, weak/
deterioratng operating results, liqudity 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
signficant increase in credit risk. Accounts rated CG12 are managed by the GSAM unit. All Corporate, Commercial &
Institutonal Banking 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
Quantitatve critera
Material portfolios (defined as a combinaton of country and product) for which a statistcal model has been built, are
assessed based on both the absolute and relative movement in the PD from orignation to the reporting date as described
previously (page 103). For these portfolios, the orignal lifetme PD term structure is determined based on the orignal
Applicaton Score or Risk Segment of the client.
Qualitatve critera
Accounts that are 30 DPD that have not been captured by the quantitatve critera are considered to have experienced a
signficant increase in credit risk. For less material portfolios, which are modelled based on a roll-rate or loss-rate approach,
SICR is primarly assessed through the 30 DPD trigger.
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’).
Qualitatve critera
For all Private Banking classes, in line with risk management practice, an increase in credit risk is deemed to have occurred
where marginng or loan-to-value covenants have been breached.
For Class I assets (lending against diversfied liqud collateral), if these marginng requirements have not been met withn 30
days of a trigger, a signficant increase in credit risk is assumed to have occurred.
For Class I and Class III assets (real-estate lending), a signficant 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 withn five days of a trigger.
Class II assets are typically unsecured or partially secured, or secured against illquid collateral such as shares in private
companies. Signficant credit deterioraton of these assets is deemed to have occurred when any early alert trigger has been
breached.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
106
Risk profile continued
Debt securites
Quantitatve critera
For debt securites orignated before 1 January 2018, the bank is utilsing the low credit risk simplfied approach, where debt
securites with an internal credit rating mapped to an investment grade equivalent are allocated to stage 1 and all other debt
securites are allocated to stage 2. Debt securites orignated after 1 January 2018 are assessed based on the absolute and
relative movements in PD from orignation to the reporting date.
Qualitatve critera
Debt securites utilse the same qualitatve critera as the Corporate, Commercial & Institutonal Banking client segments,
includng being placed on early alert or being classifed as CG12.
Assessment of credit-impared financal assets
Consumer and Business Banking clients
The core components in determinng credit-impared expected credit loss provisons are the value of gross charge off and
recoveries. Gross charge off and/or loss provisons are recognised when it is established that the account is unlikely to pay
through the normal process. Recovery of unsecured debt post credit imparment is recognised based on actual cash
collected, either directly from clients or through the sale of defaulted loans to third-party insttutions. Release of credit
imparment provisons for secured loans is recognised if the loan outstanding is paid in full (release of full provison), or the
provison is higher than the loan outstanding (release of the excess provison).
Corporate, Commercial & Institutonal Banking, and Private Banking clients
Credit-impared accounts are managed by the Group’s specialst recovery unit, Group Special Assets Management (GSAM),
which is independent from its main businesses. Where any amount is considered irrecoverable, a stage 3 credit imparment
provison is raised. This stage 3 provison is the difference between the loan-carrying amount and the probabilty-weighted
present value of estimated future cash flows, reflecting a range of scenarios (typically the best, worst and most likely recovery
outcomes). Where the cash flows include realisable collateral, the values used will incorporate the impact of forward-looking
economic informaton.
The indvidual circumstances of each client are considered when GSAM estimates future cash flows and the timng of future
recoveries which involves signficant judgement. All available sources, such as cash flow arisng from operations, selling assets
or subsidaries, realisng collateral or payments under guarantees are considered. In any decison relating to the raisng of
provisons, the Group attempts to balance economic conditons, local knowledge and experience, and the results of
independent asset reviews.
Write-offs
Where it is considered that there is no realistc prospect of recovering a portion of an exposure against which an imparment
provison has been raised, that amount will be written off.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
107
Risk profile continued
Governance and applicaton of expert credit judgement in respect of expected credit losses
The Group applies PLC Group’s Credit Policy and Standards framework which details the requirements for continuous
monitorng to identfy any changes in credit quality and resultant ratings, as well as ensuring a consistent approach to
monitorng, managing and mitgating credit risks. The framework aligns with the governance of ECL estimaton through the
early recogniton of signficant deterioratons in ratings which drive stage 2 and 3 ECL.
The Group relies on the PLC Group committees for the assessment of ECL. The models used in determinng expected credit
losses are reviewed and approved by the PLC Group Credit Model Assessment Committee (CMAC) which is appointed by the
PLC Group Model Risk Committee. CMAC has the responsiblity to assess and approve the use of models and to review all
IFRS 9 interpretatons related to models. CMAC also provides oversight on operational matters related to model
development, performance monitorng and model validaton activties includng standards, regulatory and Group Internal
Audit matters.
Prior to submisson to CMAC for approval, the models are validated by Group Model Validaton (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 validaton, review of the model development and calibraton process, out-of-sample
performance testing, and assessment of compliance review against IFRS 9 rules and internal standards.
A quarterly model monitorng process is in place that uses recent data to compare the differences between model
predictons and actual outcomes against approved thresholds. Where a model’s performance breaches the monitorng
thresholds an assessment of whether a PMA is required to correct for the identfied model issue is completed.
Key inputs into the calculation and resulting expected credit loss provisons are subject to review and approval by the IFRS 9
Impairment Committee (IIC) which is appointed by the PLC 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 provisons 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 Princpal and Interest (SPPI) tests;
•
Reviews and approves expected credit loss for financal assets classifed as stages 1, 2 and 3 for each financal
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 financal assets;
•
Reviews, challenges and approves base macroeconomic forecasts and the multiple macroeconomic scenarios approach
that are utilsed 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
projectons and multiple 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
jursdictons.
PMAs may be applied to account for identfied weaknesses in model estimates. The processes for identfying the need for,
calculating the level of, and approving PMAs are prescribed in the Credit Risk IFRS9 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 remediaton plan to fix the identfied model weakness,
and these plans are reported to and tracked at CMAC.
In additon, Risk 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.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
108
Risk profile continued
Traded Risk
Traded Risk is the potential for loss resulting from activties undertaken by the Group in financal markets. The PLC Group’s
Traded Risk Type Framework, which is adopted by the Company through an addendum, brings together Market Risk,
Counterparty Credit Risk and Algorithmc Trading. Traded Risk Management is the core risk management function
supporting market-facing businesses, predominantly Financal Markets and Treasury Markets.
Market Risk (audited)
Market Risk is the potential for loss of economic value due to adverse changes in financal market rates or prices. The Group’s
exposure to Market Risk arises predominantly from the following sources:
•
Trading book: The Group provides clients access to financal markets, faciltation of which entails the Group taking
moderate Market Risk positons. All trading teams support client activty; there are no proprietary trading teams. Hence,
income earned from Market Risk-related activties is primarly driven by the volume of client activty rather than risk-taking.
•
Non-trading book:
–
The Treasury Markets desk is required to hold a liqud assets buffer, much of which is held in high-quality marketable debt
securites
–
The Group has capital invested and related income streams denominated in currencies other than US dollars. To the
extent that these are not hedged, the Group is subject to Structural Foreign Exchange Risk which is reflected in reserves
A summary of our current polices and practices regarding Market Risk management is provided in the Princpal risks section
(page 132 to 133).
The primary categories of Market Risk for the Group are:
•
Interest Rate Risk: arisng from changes in yield curves and impled volatilties on interest rate options
•
Foreign Exchange Rate Risk: arisng from changes in currency exchange rates and impled volatilties on foreign
exchange options
•
Commodity Risk: arisng from changes in commodity prices and impled volatilties on commodity options; covering energy,
precious metals, base metals and agriculture as well as commodity baskets
•
Credit Spread Risk: arisng from changes in the price of debt instruments and credit-linked derivatves, driven by factors
other than the level of risk-free interest rates
•
Equity Risk: arisng from changes in the prices of equites, equity indces, equity baskets and impled volatilties on
related options
Market risk changes (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
1
. The scope of instruments included in the VaR was changed in 2021 to exclude instruments held at amortised cost. The
2020 VaR numbers presented reflect the revised scope.
The average level of total trading and non-trading VaR in 2021 was $41.1 millon, 38.5 per cent lower than in 2020 ($66.9
millon). The actual level of total trading and non-trading VaR as at the end of 2021 was $30.2 millon, 67.2 per cent lower than
in 2020 ($92.1 millon). The decrease in total average VaR was driven by the extreme market movements from 2020 dropping
out of the one-year VaR timeseres. However, during the second half of 2021 volatilty started to increase driven by the impact
of new COVID variants.
For the trading book, the average level of VaR in 2021 was $15.6 millon, 1.9 per cent lower than in 2020 ($15.9 millon). Trading
activties have remained relatively unchanged and client-driven.
Daily value at risk (VaR at 97.5%, one day) (audited)
Trading and non-trading
1
2021
2020
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Interest Rate Risk⁶
24.9 53.9
13.2
19.3
24.5
30.2
15.9
26.7
Credit Spread Risk⁶
27.7
82.4
12.1
15.9
56.8
85.9 15.9
66.1
Foreign Exchange Risk
6.9
16.5
4.0
7.0
5.6
13.9
3.0
13.9Commodity Risk
4.5
10.8
2.3
3.8
2.4
5.2
0.8
5.2Equity Risk
1.3
1.7
1.0
1.4
2.6
5.4
1.5 1.5
Total
3
41.1
99.9
20.9
30.2
66.9 96.9
20.2
92.1
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
109
Risk profile continued
Trading
4
2021
2020
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Interest Rate Risk⁶
7.1
9.4
5.1
6.2
7.8
12.1
4.3 5.7
Credit Spread Risk⁶
7.4 17.0
3.9
5.0
11.5
17.7
4.0 14.0
Foreign Exchange Risk
6.9
16.5
4.0
7.0
5.6
13.9
3.0
13.9Commodity Risk
4.5
10.8
2.3
3.8
2.4
5.2
0.8
5.2Equity Risk
0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0
Total
3
15.6
28.7
11.4
14.0
15.9
26.4
7. 7
26.1
Non-trading
1
2021
2020
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Interest Rate Risk⁶
26.8
52.3
14.9
18.3
22.9
31.3
13.6
29.3
Credit Spread Risk⁶
22.7
61.3
11.3
14.9
43.9
66.5
14.6
46.8
Equity Risk
5
1.3
1.7
1.0
1.4
2.6
5.4 1.4
1.5
Total
3
36.3
78.7
19.5
28.8
53.4
71.0
20.9
58.7
1 The non-trading book VaR does not include syndicated loans. 2020 non-trading book VaR is restated to reflect the revised scope.
2 Highest and lowest VaR for each risk factor are independent and usually occur on different days
3 The Total VaR is not equal to the sum of the component risks due to offsets between them
4 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 positons
permitted in the trading book
Non-trading Equity risk VaR includes only listed equites
6 Comparative informaton for 2020 has been represented to reflect the split between Interest Rate Risk and Credit Spread Risk
The following table sets out how trading and non-trading VaR is distrbuted across the Group’s products:
2021
2020
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Average
$millon
High
2
$millon
Low
2
$millon
Year End
$millon
Trading and non-trading
1
41.1
99.9
20.9
30.2
66.9 96.9
20.2
92.1
Trading
4
Rates
6.4
6.79.1
4.7
6.0
10.4
3.76.8
Foreign Exchange
6.9
16.5
4.0
7.0
5.6
13.9
3.0
13.9Credit Trading &
Capital Markets
6.8
18.2
3.5
4.9
7. 6
14.3
3.1
9.2
Commodites
4.6
10.8
2.4
3.8
2.4
5.2
0.8
5.2Equites
0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0
XVA
5.1
10.3
2.8
2.9
8.1
12.7
3.18.7
Total
3
15.6
28.7
11.4
14.0
15.9
26.4
7. 7
26.1
Non-trading
1
Treasury Markets
29.5
64.0
16.5
26.7
40.9
63.2
19.8
45.1
Treasury Capital
Management
9.2
22.7
4.9
6.510.2
14.9
4.6
14.4
Global Credit
12.4
24.8
4.1
8.7
29.1
58.0
0.8
14.4
Listed Private Equity
1.3
1.7
1.0
1.4
2.6
5.4 1.4
1.5
Total
3
36.3
78.7
19.5
28.8
53.4
71.0
20.9
58.7
1 The non-trading book VaR does not include syndicated loans. 2020 non-trading book VaR is restated to reflect the revised scope.
2 Highest and lowest VaR for each risk factor are independent and usually occur on different days
3 The Total VaR is not equal to the sum of the component risks due to offsets between them
4 Trading book for Market Risk is defined in accordance with the EU Capital Requirements Regulation (CRD IV/CRR) Part 3 Title I Chapter 3 (as it forms part of UK domestic
law), which restricts the positons permitted in the trading book
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
110
Risk profile continued
Average daily income earned from Market Risk-related activties
¹
Trading
2
2021
$millon
2020
$millon
Interest Rate Risk
1.6
1.7
Credit Spread Risk
0.6
0.6
Foreign Exchange Risk
3.4
3.8
Commodity Risk
0.6
0.6
Equity Risk
–
–
Total 6.2
6.7
Non-trading
2
$millon
$millon
Interest Rate Risk
0.3
1.2
Credit Spread Risk
(0.1)
(0.1)
Equity Risk
–
–
Total
0.2
1.1
1 Reflects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and other income which
are generated from Market Risk-related activties. Rates, XVA and Treasury income are included under Interest Rate Risk whilst Credit Trading income is included under
Credit Spread Risk
2 2020 figures have been restated to exclude income from non fair value positons
Structural foreign exchange exposures
The table below sets out the princpal structural foreign exchange exposures (net of investment hedges) of the Group.
2021
$millon
2020
$millon
Indian rupee
4,323
4,223
Renminb
36
35
Singapore dollar
2,228
2,543
Taiwanese dollar
49
50
UAE dirham
643
1,863
Malaysian ringgt
1,532
1,575
Thai baht
775
892
Indonesian rupiah
289
332
Pakistan rupee
429
466
Other
4,976
4,437
15,280
16,416
As at 31 December 2021, the Group had taken net investment hedges using derivatve financal investments to partly cover its
exposure to the UAE dirham of $1,198 millon (2020: Nil), Singapore dollar of $729 millon (2020: Nil) and Indian rupee of $656
millon (2020: $652 millon). An analysis 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 positons above would be an increase of $156 millon (2020: $147 millon). Changes in the valuation of these positons
are taken to reserves.
For analysis of the Group’s capital positon and requirements, refer to the Capital Review (page 153).
Counterparty credit risk
Counterparty Credit Risk is the potential for loss in the event of the default of a derivatve counterparty, after taking into
account the value of eligble collaterals and risk mitgation techniques. The Group’s counterparty credit exposures are
included in the Credit Risk section.
Derivatve financal instruments credit risk mitgation
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 positve and negative mark-to-market values of applicable derivatve
transactions. The value of exposure under master netting agreements is $42,577 millon (2020: $52,308 millon).
In additon, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary
or desirable mitgant to the exposure. Cash collateral includes collateral called under a variaton margin process from
counterparties if total uncollateralised mark-to-market exposure exceeds the threshold and minmum transfer amount
specifed in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to-
market values of positons are in the counterparty’s favour and exceed an agreed threshold.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
111
Risk profile continued
Liqudity and Funding risk
Liqudity and Funding Risk is the risk that we may not have sufficent stable or diverse sources of funding to meet our
obligatons as they fall due.
The Group follows the PLC Group’s Liqudity and Funding Risk framework, which requires each country to ensure that it
operates withn predefined liqudity limts and remains in compliance with PLC’s Group liqudity polices and practices, as well
as local regulatory requirements.
The table below shows the compositon of liablites in which customer deposits make up 56 per cent of total liablites and
equity as at 31 December 2021, the majorty of which are current accounts, savings accounts and time deposits. Our largest
customer deposits base by geography is Europe & Americas which holds 51 per cent of Group customer accounts.
Compositon of liablites and equity
Percentage
Geographic distrbution of customer accounts balances
Percentage
Equity
6.5%
Asia
37.9%
Subordinated liablites and other borrowed funds
2.7%
Africa & Middle East
11.4%
Debt securites in issue
7.4%
Europe & Americas50.7%
Derivatve financal instruments
9.8%
Total
100.0%
Customer accounts
56.1%
Deposit by banks
5.6%
Other liablites
11.9%
Total
100.0%
Liqudity and Funding risk metrics
We monitor key liqudity metrics regularly on a country basis across the Group.
The following liqudity and funding Board Risk Appetite metrics define the maximum amount and type of risk that the Group
is willng to assume in pursuit of its strategy: liqudity coverage ratio (LCR), liqudity stress survival horizons, external wholesale
borrowing, and advances-to-deposits ratio. As of January 2022, the Net Stable Funding Ratio will also be included withn
Board Risk Appetite.
Liqudity coverage ratio (LCR)
The Liqudity Coverage Ratio (LCR) aims to ensure that a bank has sufficent unencumbered high-quality liqud assets to
meet its liqudity needs in a 30-calendar-day liqudity stress scenario. SC Bank is not regulated for LCR, however, the bank and
material subsidaries in the consolidaton have standalone LCR ratios above 100 per cent at 31 December 2021, calculated
under UK onshored Commisson Delegated Regulation 2015/61.
Stressed coverage
Stress testing and scenario analysis are used to assess the financal and management capabilty to continue to operate
effectively under extreme, but plausible, operating conditons and to understand the potential threats to the PLC Group’s
liqudity and other financal resources.
The PLC Group’s internal liqudity stress testing framework covers the following stress scenarios:
Standard Chartered-specifc – Captures the liqudity impact from an idosyncratic event affecting Standard Chartered only
i.e. the rest of the market is assumed to operate normally.
Market wide – Captures the liqudity impact from a market wide criss affecting all particpants in a country, region or globally.
Combined – Assumes both Standard Chartered-specifc and Market-wide events affecting the PLC Group simultaneously
and hence is the most severe scenario.
All scenarios include, but are not limted 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 deterioraton of a firm’s credit
rating.
As of 31 December 2021, all entites withn the Group follow a consistent approach and met their indvidual stress test
requirements withn Risk appetite, and as a result, ensure Group has surplus liqudity when combined.
External wholesale borrowing
This metric seeks to prevent excessive reliance on wholesale borrowing. Limts/targets are applied to branches and operating
subsidaries in the Group.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
112
Risk profile continued
Advances-to-deposits ratio
This is defined as the ratio of total loans and advances to customers relative to total customer accounts. An advances-to-
deposits ratio of 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. Limts/targets are applied to all branches and operating
subsidaries in the Group.
Advances-to-deposits ratio has decreased by 4.7 per cent to 52.1 per cent, driven primarly by robust growth in deposits from
corporate customers.
2021
$millon
2020
$millon
Total loans and advances to customers
1,2
129,799
126,859
Total customer accounts
3
249,299
223,472
Advances-to-deposits ratio
52.1%
56.8%
1 Excludes reverse repurchase agreement and other simlar secured lending of $3,764 millon and includes loans and advances to customers held at fair value through
profit and loss of $3,932 millon
2 Loans and advances to customers for the purpose of the advances-to-deposits ratio excludes $15,168 millon of approved balances held with central banks, confirmed
as repayable at the point of stress (31 December 2020: $14,296 millon)
3 Includes customer accounts held at fair value through profit or loss of $6,968 millon (31 December 2020: $6,753 millon)
Net stable funding ratio (NSFR)
The NSFR is a balance sheet metric which requires insttutions to maintan a stable funding profile in relation to an assumed
duration of their assets and off-balance sheet activties 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
liablites and capital, based on their perceived stabilty and the amount of stable funding they provide. Likewse, RSF factors
are applied to assets and off-balance sheet exposures according to the amount of stable funding they require. SC Bank is not
regulated for NSFR, however, the bank and material subsidaries in the consolidaton have standalone NSFR ratios above 100
per cent at 31 December 2021, calculated under UK onshored Commisson Delegated Regulation 2015/61.
Liqudity pool
The liqudity value of the Group’s LCR eligble liqudity pool at the reporting date was $131 billon. The figures in the below table
account for haircuts, currency convertiblity and portabilty constraints, and therefore are not directly comparable with the
consolidated balance sheet. Liqudity pool is held to offset stress outflows as defined in UK onshored Commisson Delegated
Regulation 2015/61.
Group
2021
Asia
$ millon
Africa &
Middle East
$ millon
Europe &
Americas
$ millon
Total
$ millon
Level 1 securites
Cash and balances at central banks
20,626
890
46,973
68,489Central banks, governments/public sector entites
13,607
2,096
27, 389
43,092
Multilateral development banks and internatonal organisatons
727
356
7, 366
8,449
Other
– –
478 478
Total Level 1 securites
34,960
3,342 82,206
120,508
Level 2A securites
3,447
187
5,047
8,681
Level 2B securites
114
–
1,620
1,734
Total LCR eligble assets
38,521 3,529
88,873
130,923
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
113
Risk profile continued
2020 (Restated)
Asia¹
$ millon
Africa &
Middle East
$ millon
Europe &
Americas
$ millon
Total
$ millon
Level 1 securites
Cash and balances at central banks
21,878
1,421
42,502
65,801
Central Banks, governments/public sector entites
9,627
1,569
33,65244,848
Multilateral development banks and internatonal organisatons
453
236
6,818
7, 507
Other
–
14
1,645 1,659
Total Level 1 securites
31,958
3,240
84,617
119,815
Level 2A securites
1,878
79
2,891
4,848
Level 2B securites
207
–
287
494
Total LCR eligble assets
34,043
3,319
87,795
125,157
Company
2021
Asia
$ millon
Africa &
Middle East
$ millon
Europe &
Americas
$ millon
Total
$ millon
Level 1 securites
Cash and balances at central banks
3,801
476
40,983
45,260
Central banks, governments/public sector entites
6,599
1,608
27,388
35,595
Multilateral development banks and internatonal organisatons
–
356
7, 3 66 7,72 2
Other
– –
478 478
Total Level 1 securites
10,400
2,440
76,215
89,055
Level 2A securites
695
187
5,047
5,929
Level 2B securites
– –
1,618 1,618
Total LCR eligble assets
11,095
2,627
82,880
96,602
2020 (Restated)
Asia¹
$ millon
Africa &
Middle East
$ millon
Europe &
Americas
$ millon
Total
$ millon
Level 1 securites
Cash and balances at central banks
6,166
1,065
37,501
44,732Central Banks, governments /public sector entites
5,410
1,493
33,651
40,554
Multilateral development banks and internatonal organisatons
– 236
6,818
7,054
Other
–
14
1,645 1,659
Total Level 1 securites
11,576
2,808
79,615
93,999
Level 2A securites
454
79
2,891
3,424
Level 2B securites
– –
286 286
Total LCR eligble assets
12,030
2,887 82,792
97, 709
1 Following the Group’s change in organisatonal structure, there has been an integraton of Greater China & North Asia and ASEAN & South Asia to Asia. Prior period has
been restated
Liqudity analysis of the Group’s balance sheet (audited)
Contractual maturity of assets and liablites
The following table presents assets and liablites by maturity groupings based on the remainng period to the contractual
maturity date as at the balance sheet date on a discounted basis. Contractual maturites do not necessarily reflect actual
repayments or cashflows.
Withn the tables below, cash and balances with central banks, interbank placements and investment securites that are fair
value through other comprehensive income are used by the Group princpally for liqudity management purposes.
As at the reporting date, assets remain predominantly short-dated, with 67 per cent maturing in under one year. Our less than
three-month cumulative net funding positon remained in surplus and the scale of the surplus increased from the previous
year, largely due to an increase in customer accounts as the Group focused on improvng the quality of its deposit base. In
practice, these deposits are recognised as stable and have behavioural profiles that extend beyond their contractual
maturites.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
114
Risk profile continued
Group
2021
One month
or less
$millon
Between one
month and
three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between one
year and two
years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Assets
Cash and balances at
central banks
58,904
– – – – – –
3,059
61,963
Derivatve financal
instruments
16,174
9,643
6,531
3,159
2,509
4,246
5,927
53,2455,056
Loans and advances
to banks
1,2
15,511
16,075
2959,535
4,018
4,145
1,308
1,442
52,329
Loans and advances
to customers
1,2
64,975
51,711
31,99117,984
6,8176,639
11,320
17, 572
209,009
Investment securites
4,143
8,488
42,1086,516
6,046
5,624
13,489
35,855
122,269
Other assets
16,757 16,438
702
66
288
34
32 5,424
39,741
Due from subsidary
undertakings and other
related parties
6,235
– – – – – – –
6,235Total assets
182,699
102,355
60,82841,268
20,106
19,205
30,397
87,933
544,791
Liablites
Deposits by banks
1,3
28,048
849
1,032
83
224
96
22
2
30,356
Customer accounts
1,4
233,858
38,901
17,994
6,069
4,111
3,433
1,139
334
305,839
Derivatve financal
instruments
16,149
10,433
6,503
3,488
2,513
4,429
6,521
3,550
53,586
Senior debt⁵
187
473
563
5,641314
299
456
1,289
2,060
Other debt securites
in issue
1
2,210
12,470
7,16 8
2,892 3,248
3,132
3,022
637
34,779
Due to parent companies
and other related
undertakings
30,998
– – – – – – –
30,998Other liablites
9,440
17,583
598
166
759354
861
3,779
33,540
Subordinated liablites
and other borrowed funds
4
35
96
113
1,063
2,348
1,076
9,880
14,615
Total liablites
320,894
80,744
33,954
13,125
11,812
13,93014,653
20,242
509,354
Net liqudity gap
(138,195)
21,611
7, 314 393
6,981
7,15,744
67,69146,898
35,437
1 Loans and advances, investment securites, deposits by banks, customer accounts and debt securites in issue include financal instruments held at fair value through
profit or loss, see Note 12 Financal instruments pages 198 to 241
2 Loans and advances include reverse repurchase agreements and other simlar secured lending of $83.7 billon
3 Deposits by banks include repurchase agreements and other simlar secured borrowing of $5.1 billon
4 Customer accounts include repurchase agreements and other simlar secured borrowing of $56.5 billon
5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
115
Risk profile continued
2020
One month
or less
$millon
Between
one month
and three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between
one year and
two years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Assets
Cash and balances at
central banks
55,434
– – – – – –
2,683
58,117
Derivatve financal
instruments
12,478
20,593
7,948
5,0914,907
3,423
8,571
6,214
69,225
Loans and advances
to banks
1,2
19,881
13,572
6,956
3,612
2,058 1,083 1,203
27748,642
Loans and advances
to customers
1,2
61,175 34,171
17,37 5
5,1505,714
10,570
21,731
32,790
188,676
Investment securites
4,357
9,466
5,507
7, 240
6,181
14,630
28,803 26,066
102,250
Other assets
16,318
16,371 1,039
187
3753
40
7,026
41,071
Due from subsidary
undertakings and
other related parties
5,612
– – – – – – –
5,612Total assets
175,255
94,173
38,825
21,096
17,429
513,59331,414
60,345 75,056
Liablites
Deposits by banks
1,3
26,015 201
989
1372,249
21
1
42
29,655
Customer accounts
1,4
200,223
39,776
11,319
3,868
4,496
4,599
608
265,027138
Derivatve financal
instruments
13,575
19,765
8,338
4,773
3,580
5,351
10,066
3,620
69,068
Senior debt⁵
214
1,742
299
79
168
327 6,063
1,149
2,085Other debt securites
in issue¹
1,207
6,751
9,842
2,697 329
2,422
1,2083,197
27,653
Due to parent companies
and other related
undertakings
32,326
– – – – – – –
32,326Other liablites⁶
11,927
16,693
2,272288
109
483
214
3,707
35,693
Subordinated liablites
and other borrowed funds
– – – – –
960
2,037
11,882 14,879
Total liablites
285,487
85,716
34,319
11,842
15,28310,976
14,938
21,803 480,364
Net liqudity gap
(110,232)
8,457
4,506
6,4539,254
16,476
45,062
53,253
33,229
1 Loans and advances, investment securites, deposits by banks, customer accounts and debt securites in issue include financal instruments held at fair value through
profit or loss, see Note 12 Financal instruments pages 198 to 241
2 Loans and advances include reverse repurchase agreements and other simlar secured lending of $66.5 billon
3 Deposits by banks include repurchase agreements and other simlar secured borrowing of $5.8 billon
4 Customer accounts include repurchase agreements and other simlar secured borrowing of $41.5 billon
5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group
6 Includes correction of fair value hedge accounting adjustment $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
116
Risk profile continued
Company
2021
One month
or less
$millon
Between one
month and
three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between one
year and two
years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Assets
Cash and balances at
central banks
47,0 04
– – – – – –
1,161 48,165
Derivatve financal
instruments
11,901
10,740
7,06 8
3,506
2,820
4,7346,974
5,73553,478
Loans and advances
to banks
1,2
10,742
12,682
6,314
2,817
2,810
2951,133
1,274
38,067
Loans and advances
to customers
1,2
49,367
31,122
13,598
4,733
3,595
8,802
10,672
11,754
133,643
Investment securites
2,257
4,479 4,418
4,335
101,6624,091
10,367
31,343
40,372
Investment in subsidary
undertaking
– – – – – – –
9,694 9,694
Other assets
16,128
10,465
367
52
233
31
21
3,130
30,427
Due from subsidary
undertakings and other
related parties
10,741
– – – – – – –
10,741Total assets
148,140
69,488
31,765
15,443
13,549
25,067
50,284
72,141
425,877
Liablites
Deposits by banks
1,3
21,971
364
991
80
23,666188
52
20
–
Customer accounts
1,4
145,292
27,787
15,276
4,380
2,420
2,130911
323
198,519
Derivatve financal
instruments
11,941
11,743
6,9853,894
2,666
4,888
7,488
4,230 53,835
Senior debt⁵
152 396
368
200
364299
1,187
2,041
5,007
Other debt securites
in issue
1
2,010
12,447
6,184
2,892 3,248
1,682
3,022
1,42032,905
Due to parent companies
and other related
undertakings
40,745
– – – – – – –
40,745Other liablites
8,474
11,262 25,477
516
3,477130
309
643
666
Subordinated liablites
and other borrowed funds
4
35
96
113
1,063
2,348
1,076
9,341
14,076Total liablites
230,589
64,034
30,416
11,689
10,193 12,107
14,370
20,832
394,230
Net liqudity gap
(82,449)
5,454
1,3493,754
3,356
51,30912,960 35,914
31,647
1 Loans and advances, investment securites, deposits by banks, customer accounts and debt securites in issue include financal instruments held at fair value through
profit or loss, see Note 12 Financal instruments pages 198 to 241
2 Loans and advances include reverse repurchase agreements and other simlar secured lending of $81.1 billon
3 Deposits by banks include repurchase agreements and other simlar secured borrowing of $4.7 billon
4 Customer accounts include repurchase agreements and other simlar secured borrowing of $56.4 billon
5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
117
Risk profile continued
2020
One month
or less
$millon
Between
one month
and three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between
one year and
two years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Assets
Cash and balances at
central banks
45,544
– – – – – –
932
46,476
Derivatve financal
instruments
13,786
13,945 68,910
9,372
6,9965,515
9,9843,714
5,598
Loans and advances
to banks
1,2
14,263
11,239
9794,379 2,081
1,388
1,045
277
35,651
Loans and advances
to customers
1,2
42,805
20,654
14,471
3,0583,804
7,226
14,931 12,980
119,929
Investment securites
1,800
7,423
4,288
6,120
5,545
11,055
23,321
24,562
84,114
Investment in subsidary
undertaking
– – – – – – –
8,258 8,258
Other assets
15,980 12,908
430
178
58
35
27
4,084
33,700
Due from subsidary
undertakings and other
related parties
10,885
– – – – – – –
10,885Total assets
145,063
66,169
58,08932,940
17,698
13,763
24,893
49,308
407,923
Liablites
Deposits by banks
1,3
20,934
741
2,205122
20182
– 40
24,244
Customer accounts
1,4
120,212
34,388
1,2378,497
2,689
2,594
514
124
170,255
Derivatve financal
instruments
14,382
13,118
9,576
5,478
3,843
5,684
11,498
4,844
68,423
Senior debt⁵
30
1,055
198
32279
168
1,023
2,0134,888
Other debt securites
in issue
1
1,207
6,751
9,842
2,697
2,412
1,2081,747
1,112
26,976
Due to parent companies
and other related
undertakings
43,012
– – – – – – –
43,012Other liablites⁶
11,415
11,962
713
238
80
364
178
2,295
2 7, 245
Subordinated liablites
and other borrowed funds
– – – – –
960
2,037
11,342
14,339
Total liablites
211,192
68,015 31,031 11,303
9,279
10,33416,458
21,770
379,382
Net liqudity gap
(66,129)
(1,846)
1,909
4,4846,395
14,559
28,54132,850
36,319
1 Loans and advances, investment securites, deposits by banks, customer accounts and debt securites in issue include financal instruments held at fair value through
profit or loss, see Note 12 Financal instruments pages 198 to 241
2 Loans and advances include reverse repurchase agreements and other simlar secured lending of $64.6 billon
3 Deposits by banks include repurchase agreements and other simlar secured borrowing of $5.7 billon
4 Customer accounts include repurchase agreements and other simlar secured borrowing of $41.5 billon
5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group
6 Includes correction of fair value hedge accounting adjustment $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
118
Risk profile continued
Behavioural maturity of financal assets and liablites
The cashflows presented in the previous section reflect the cashflows that will be contractually payable over the residual
maturity of the instruments. However, contractual maturites do not necessarily reflect the timng of actual repayments or
cashflow. In practice, certain assets and liablites behave differently 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 qualitatve and quantitatve techniques, includng
analysis of observed customer behaviour over time.
Maturity of financal liablites on an undiscounted basis
The following table analyses the contractual cashflows payable for the Group’s financal liablites by remainng contractual
maturites on an undiscounted basis. The financal liablity balances in the table below will not agree to the balances
reported in the consolidated balance sheet as the table incorporates all contractual cashflows, on an undiscounted basis,
relating to both princpal and interest payments. Derivatves not treated as hedging derivatves are included in the ‘On
demand’ time bucket and not by contractual maturity.
Withn the ‘More than five years and undated’ maturity band are undated financal liablites, the majorty of which relate to
subordinated debt, on which interest payments are not included as this informaton would not be meaningful, given the
instruments are undated. Interest payments on these instruments are included withn the relevant maturites up to five year.
Group
2021
One month
or less
$millon
Between one
month and
three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between one
year and two
years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Deposits by banks
28,048
850
1,032
83
224
96
22
3
30,358
Customer accounts
233,879
38,922
18,017
6,084
4,145
3,461
1,152334
305,994
Derivatve financal
instruments
1
53,377
7 3
19
523
73
79
53,586
Debt securites in issue
2,414
12,946
7,752
3,221
3,572
3,652
4,428
6,875
44,860
Due to parent companies
and other related
undertakings
30,998
– – – – – – –
30,998Subordinated liablites and
other borrowed funds
37
59
129 125
21,5971,089
2,423
1,252
16,483
Other liablites
12,992
17,561
589
166
354
759
861
1,201
34,483
Total liablites
361,745
70,345
27,538 78 8
9,684 9,387
7,10,414
24,975
521,876
2020
One month
or less
$millon
Between
one month
and three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between
one year and
two years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Deposits by banks
26,032
992
2012,250
138
22
1
41
29,677
Customer accounts
200,420
39,820
11,338
3,879
4,531
4,609
611
138 265,346
Derivatve financal
instruments
1
68,628
4
21
33
24
33101
22469,068
Debt securites in issue
1,422
8,349
10,153
2,784
2,600
3,558 2,398
33,7102,446
Due to parent companies
and other related
undertakings
32,326
– – – – – – –
32,326Subordinated liablites and
other borrowed funds
–
71
100
71
236
1,438
3,282
22,43017, 2 32
Other liablites²
11,910
16,670
2,272
287
109
481
217
1,548
33,494
Total liablites
340,738
65,906
26,134
7,192 7,701
10,209
6,733
486,05121,438
1 Derivatves are on a discounted basis
2 Includes correction of fair value hedge accounting adjustment $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
119
Risk profile continued
Company
2021
One month
or less
$millon
Between one
month and
three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between one
year and two
years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Deposits by banks
21,971
364
991
80
188
23,66852
22
–
Customer accounts
145,311
27,80 0
15,289 4,391
2,429
2,151
322915
198,608
Derivatve financal
instruments
1
53,634 53,835
5 3
8019
519
70
Debt securites in issue
2,179
12,846
6,570
3,105
3,572
2,110
4,326
38,1983,490
Due to parent companies
and other related
undertakings
40,745
– – – – – – –
40,745Subordinated liablites
and other borrowed funds
37
59
129 125
1,089
2,423
1,252
15,353
20,467
Other liablites
11,716
11,249
717516
130
309
643
666
25,946
Total liablites
275,593
52,323
23,514
7, 836 7,590
7,398
7,251
19,962
401,467
2020
One month
or less
$millon
Between
one month
and three
months
$millon
Between
three
months and
six months
$millon
Between six
months and
nine months
$millon
Between
nine months
and one year
$millon
Between
one year and
two years
$millon
Between
two years
and five
years
$millon
More than
five years
and undated
$millon
Total
$millon
Deposits by banks
20,936
744
2,206123
182
21
– 40
24,252
Customer accounts
120,276
34,417
2,6988,508
2,604
1,243
516
124170,386
Derivatve financal
instruments
1
68,043
4
2029
22
73
199
33
68,423
Debt securites in issue
1,237
7,662
10,0522,784
2,590
2,103
2,273
3,15731,858
Due to parent companies
and other related
undertakings
43,012
– – – – – – –
43,012Subordinated liablites
and other borrowed funds
–
71
100
71
236
1,438
3,274
16,288
21,478
Other liablites²
11,337
11,940
713
238
79881
363
18125,651
Total liablites
264,841
54,838
5,24121,599
5,943
5,715
6,443
20,440 385,060
1 Derivatves are on a discounted basis
2 Includes correction of fair value hedge accounting adjustment $81 millon
Interest Rate Risk in the Banking Book
The following table provides the estimated impact to a hypothetical base case projecton of the Group’s earnings under the
following scenarios:
•
A 50 basis point parallel interest rate shock (up and down) to the current market-impled path of rates, across all yield
curves.
•
A 100 basis point parallel interest rate shock (up) to the current market-impled path of rates, across all yield curves.
These interest rate shock scenarios assume all other economic variables remain constant. The sensitvites shown represent
the estimated change in base case projected net interest income (NII), plus the change in interest rate impled income and
expense from FX swaps used to manage Banking Book currency positons, under the different interest rate shock scenarios.
The interest rate sensitvites are indcative and based on simplfied scenarios, estimatng the aggregate impact of an
instantaneous parallel shock across all yield curves over a one-year horizon, includng the time taken to implement changes
to pricng before becoming effective. The assessment assumes that non-interest rate sensitve aspects of the size and mix of
the balance sheet remain constant and that there are no specifc management actions in response to the change in rates.
Furthermore, revenue associated with trading book income positons is recognised in trading book income and is therefore
excluded from the reported sensitvites. No assumptions are made in relation to the impact on credit spreads in a changing
rate environment.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
120
Risk profile continued
Signficant modelling and behavioural assumptions are made regarding scenario simplficaton, market competiton, pass-
through rates, asset and liablity re-pricng tenors, and price flooring. In particular, the assumption that interest rates of all
currencies and maturites shift by the same amount concurrently, and that no actions are taken to mitgate the impacts
arisng from this are considered unlikely. Reported sensitvites will vary over time due to a number of factors includng
changes in balance sheet compositon, market conditons, customer behaviour and risk management strategy and should
therefore not be considered an income or profit forecast.
Estimated one-year impact to earnings from a parallel shift in yield curves at the
beginnng of the period of:
2021
USD bloc
$millon
SGD bloc
$millon
Other
currency bloc
$millon
Total
$millon
+ 50 basis points
140
70
90
300
- 50 basis points
(120)
(70)
(60)
(250)
+ 100 basis points
260
120 200
580
Estimated one-year impact to earnings from a parallel shift in yield curves at the
beginnng of the period of:
2020
USD bloc
1
$millon
SGD bloc
$millon
Other
currency bloc
$millon
Total
1
$millon
+ 50 basis points
70
50
40
160
- 50 basis points
(100)
(60)
(50)(210)
+ 100 basis points
140
100
80
320
1 Sensitvity for 2020 has been restated due to correction of interest rate basis for certain USD denominated interest rate swaps
As at 31 December 2021, 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 $300 millon. The equivalent impact from a parallel decrease of 50 basis
points would result in a reduction in projected NII of $250 millon. The Group estimates the one-year impact of an
instantaneous, parallel increase across all yield curves of 100 basis points to increase projected NII by $580 millon.
The benefit from risng interest rates is primarly from reinvestng at higher yields and from assets re-pricng faster and to a
greater extent than deposits. NII sensitvity in all scenarios has increased versus 31 December 2020 due to changes in
modelling assumptions to reflect expected re-pricng activty on Retail and Transaction Banking current accounts and
savings accounts in the current interest rate environment, and to recognise the interest rate sensitvity of banking book
income when providng funding to the trading book.
The incluson of this item now aligns the measurement scope to that used for the calculation of the Group’s net interest
margin and has increased the reported sensitvity to the 50 basis point parallel shocks by $130 millon, and to a 100 basis
point parallel up shock by $260 millon, primarly in US dollars.
The asymmetry between the up and down 50 basis point shock is primarly due to the low level of interest rates, which may
constrain the Group’s abilty to reprice assets and liablites should rates fall by a further 50 basis points, as well as differng
behavioural assumptions, which are scenario specifc. The level of asymmetry has changed since 31 December 2020 due to
an increase in the proportion of the Group’s assets whose pricng is assumed to be floored under the 50 basis point parallel
down shock, and which now more than offset the assumed impact of flooring liablity pricng under the same scenario. The
decison to pass on changes in interest rates is highly subjectve and depends on a range of factors includng market
environment and competitor behaviour.
Operational and Technology Risk
Operational Risk is defined as the “Potential for loss from inadequate or failed internal processes, technology, human error, or
from the impact of external events (includng legal risks)”. It is inherent in the Group carrying out business and can be
impacted from a range of operational risks.
Operational Risk profile
In 2021, the PLC Group has taken steps for further embedding of the enhanced framework to augment the management of
operational risk with the aim of ensuring that risk is managed withn Risk Appetite and we continue to deliver services to our
clients. The PLC Group’s Framework has been adopted by the Group via an addendum.
The Group has continued to provide a stable level of service to clients during the period of COVID-19 and adapted swiftly to
changes in operations brought by the pandemic. As a result of the changes in internal and external operating environment
due to COVID-19, particular areas of focus are Fraud, Information & Cyber Security, Privacy, Conduct and Resilence.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
121
Risk profile continued
Operational Risk events and losses
Operational losses are one indcator of the effectiveness and robustness of the non-financal risk control environment. As at
31 December 2021, recorded impact from operational losses for the year was higher than 2020, primarly driven by the
regulatory penalty of $61.7 millon imposed by the PRA on the back of liqudity misreportng between 2018 and 2019 due to
execution delivery and process management issues.
The Group’s profile of operational loss events in 2021 and 2020 is summarised in the table below. It shows the percentage
distrbution of gross operational losses by Basel business line.
Distrbution of Operational Losses by Basel business line
% Loss
2021
2020¹
Agency Services
0.0%
0.3%
Asset Management
0.0%
–
Commercial Banking
6.6%
20.7%
Corporate Finance
–
–
Corporate Items
42.6%
28.0%
Payment and Settlements
38.6%
18.9%
Retail Banking
7.1%
20.8%
Retail Brokerage
0.0%
0.3%
Trading and Sales
5.2%
11.0%
1 Losses in 2020 have been restated to include incremental events recognised in 2021
The Group’s profile of operational loss events in 2021 and 2020 is also summarised by Basel event type in the table below. It
shows the percentage distrbution of gross operational losses by Basel event type.
Distrbution of Operational Losses by Basel event type
% Loss
2021
2020¹
Business disrupton and system failures
3.9%
2.0%
Clients products and business practices
0.1%
3.8%
Damage to physical assets
0.0%
0.1%
Employment practices and workplace safety
0.0%
0.4%
Execution delivery and process management
80.6%
76.4%
External fraud
7.5%
16.9%
Internal fraud
7.9%
0.4%
1 Losses in 2020 have been restated to include incremental events recognised in 2021
Other princpal risks
Losses arisng from operational failures for other princpal risks are reported as operational losses. Operational losses do not
include Operational Risk-related credit imparments.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
122
Risk profile continued
Risk Management Framework
Effective risk management is essential in deliverng consistent and sustainable performance for all of our stakeholders and is
a central part of the financal and operational management of the Group. The Group adds value to clients and the
communites in which they operate by taking and managing appropriate levels of risk, which in turn generates returns for
shareholders.
The Risk Management Framework (RMF) enables the Group to manage enterprise-wide risks, with the objectve of
maximsing risk-adjusted returns while remainng withn our Risk Appetite. The RMF has been designed in accordance with
the PLC Group’s Enterprise Risk Management Framework (ERMF), and since its approval in June 2020, it has been
implemented with the explict goal of improvng the Group’s risk management.
In 2021, we completed a comprehensive review of the RMF, and the following changes were approved by the Court:
•
Cross-cutting risks have been repositoned as Integrated Risk Types (IRT) and are defined as “risks that are signficant in
nature and materialse primarly through the relevant Princpal Risk Types”. The RMF sets out the roles and responsiblites
and minmum governance requirements for management of IRTs.
•
Given their integrated nature, Digtal Asset Risk and Third-Party Risk, in additon to Climate Risk, have been categorised as
Integrated Risk Types in the RMF.
•
The Capital and Liqudity Princpal Risk Type has been renamed to Treasury Risk and the scope of the risk type expanded to
cover Interest Rate Risk in the Banking Book (IRRBB).
The revised RMF was approved in February 2022 and will become effective in March 2022.
Risk culture
The Group’s risk culture provides guidng princples for the behaviours expected from our people when managing risk. The
Court has approved a risk culture statement that encourages the following behaviours and outcomes:
•
An enterprise-level abilty to identfy and assess current and future risks, openly discuss these and take prompt actions.
•
The highest level of integrty by being transparent and proactive in disclosng and managing all types of risks.
•
A constructive and collaborative approach in providng oversight and challenge, and taking decisons in a timely manner.
•
Everyone to be accountable for their decisons and feel safe in using their judgement to make these considered decisons.
We acknowledge that banking inherently involves risk-taking and undesired outcomes will occur from time to time; however,
we shall take the opportunity to learn from our experience and formalise what we can do to improve. We expect managers
to demonstrate a high awareness of risk and control by self-identfying issues and managing them in a manner that will
deliver lasting change.
Strategic risk management
The Group approaches strategic risk management as follows:
•
By conducting an impact analysis on the risk profile from growth plans, strategic intiatves and business model
vulnerabilties, with the aim of proactively identfying and managing new risks or existng risks that need to be repriortised
as part of the strategy review process.
•
By confirmng that growth plans and strategic intiatves can be delivered withn the approved Risk Appetite and/or
proposing additonal Risk Appetite for Court consideraton as part of the strategy review process.
•
By validatng the Corporate Plan against the approved or proposed Risk Appetite Statement to the Court. The Court
approves the strategy review and the five-year Corporate Plan with a confirmaton from the Group Chief Risk Officer that it
is aligned with the RMF and the Group Risk Appetite Statement where projectons allow.
•
Country Risk management approach and Country Risk reviews are used to ensure the country limts and exposures are
reasonable and in line with Group strategy, country strategy, and the operating environment, considerng the identfied
risks. The Group leverages the PLC Group’s framework for country risk management.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
123
Risk profile continued
Roles and responsiblites
Senior Managers Regime¹
Roles and responsiblites under the RMF are aligned to the objectves of the Senior Managers Regime. The Group Chief Risk
Officer is responsible for the overall development and maintenance of the Group’s RMF and for identfying material risk types
to which the Group may be potentially exposed. The Group Chief Risk Officer delegates effective implementaton of the PLC
Group Risk Type Frameworks (RTFs) through the RMF to Risk Framework Owners who provide second line of defence
oversight for the Princpal Risk Types (PRTs). In additon, the Group Chief Risk Officer has been formally identfied as the
relevant senior manager responsible for the development of the Group’s Digtal Asset Risk Assessment Approach, as well as
the senior manager responsible for Climate Risk management as it relates to financal and non-financal risks to the Group
arisng from climate change. This does not include elements of corporate social responsiblity, the Group’s contributon to
climate change and the Sustainable Finance strategy supporting a low-carbon transiton, which are the responsiblity of
other relevant senior managers.
The Risk function
The Risk function is responsible for the sustainablity of our business through good management of risk across the Group by
providng oversight and challenge, thereby ensuring that business is conducted in line with regulatory expectations.
The Group Chief Risk Officer directly manages the Risk function, which is separate and independent from the orignation,
trading and sales functions of the businesses. The Risk function is responsible for:
•
Maintaning the RMF, ensuring that it remains relevant and appropriate to the Group’s business activties, and is effectively
communicated and implemented across the Group, and adminstering related governance and reporting processes
•
Upholding the overall integrty of the Group’s risk and return decisons to ensure that risks are properly assessed, that these
decisons are made transparently on the basis of proper assessments and that risks are controlled in accordance with the
PLC Group’s standards and Risk Appetite
•
Overseeing and challenging the management of Princpal Risk Types and Integrated Risk Types under the RMF
The independence of the Risk function ensures that the necessary balance in making risk and return decisons is not
compromised by short-term pressures to generate revenues.
In additon, the Risk function is a centre of excellence that provides specialst capabilties of relevance to risk management
processes in the broader organisaton.
The Risk function supports the Group’s commitment to be ‘Here for good’ by buildng a sustainable framework that places
regulatory and compliance standards and a culture of appropriate conduct at the forefront of the Group’s agenda, in a
manner proportionate to the nature, scale and complexity of the Group’s business.
Conduct, Financal Crime and Compliance (CFCC), under the Management Team leadership of the Group Head, CFCC, works
alongside the Risk function withn the framework of the RMF to deliver a unifed second line of defence.
1 Senior managers refer to indviduals designated as senior management functions under the FCA and PRA Senior Managers Regime (SMR).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
124
Risk profile continued
Three lines of defence model
Roles and responsiblites for risk management are defined under a three lines of defence model. Each line of defence has a
specifc set of responsiblites for risk management and control as shown in the table below.
Lines of defence Defintion Key responsiblites include
1st The businesses and functions engaged in or
supporting revenue-generating activties
that own and manage the risks
• Propose the risks required to undertake revenue-generating activties
• Identify, assess, monitor and escalate risks and issues to the second
line and senior management
1
and promote a healthy risk culture and
good conduct
• Validate and self-assess compliance to RTFs and polices, confirm the
quality of validaton, and provide evidence-based affirmaton to the
second line
• Manage risks withn Risk Appetite, set and execute remediaton plans
and ensure laws and regulations are being complied with
• Ensure systems meet risk data aggregation, risk reporting and data
quality requirements set by the second line
2nd The control functions independent of the first
line that provide oversight and challenge of
risk management to provide confidence to
the Group Chief Risk Officer, senior
management and the Court
• Identify, monitor and escalate risks and issues to the Group Chief Risk
Officer, senior management and the Court and promote a healthy risk
culture and good conduct
• Oversee and challenge first-line risk-taking activties and review first-line
risk proposals
• Propose Risk Appetite to the Court, monitor and report adherence to Risk
Appetite and intervene to curtail business if it is not in line with existng or
adjusted Risk Appetite, there is material non-compliance with policy
requirements or when operational controls do not effectively manage risk
• Set risk data aggregation, risk reporting and data quality requirements
• Ensure that there are appropriate controls to comply with applicable
laws and regulations, and escalate signficant non-compliance matters
to senior management and the appropriate committees
3rd The Internal Audit function provides
independent assurance on the effectiveness
of controls that support first line’s risk
management of business activties, and the
processes maintaned by the second line
• Independently assess whether management has identfied the key risks in
the businesses and whether these are reported and governed in line with
the established risk management processes
• Independently assess the adequacy of the design of controls and their
operating effectiveness
1 Senior management in this table refers to indviduals designated as senior management functions under the FCA and PRA Senior Managers Regime (SMR).
Risk Appetite and profile
We recognise the following constraints which determine the risks that we are willng 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 capabilties and resources, before
breaching constraints determined by capital and liqudity requirements and internal operational capabilty (includng but
not limted to technical infrastructure, risk management capabilties, expertise), or otherwise failng to meet the
expectations of regulators and law enforcement agencies
•
Risk Appetite is defined by the Group and approved by the Court. It is the maximum amount and type of risk the Group is
willng to assume in pursuit of its strategy. Risk Appetite cannot exceed risk capacity
The Court has approved a Risk Appetite Statement, which is underpinned by a set of financal and operational control
parameters known as Risk Appetite metrics and their associated thresholds. These directly constrain the aggregate risk
exposures that can be taken across the Group.
The Group Risk Appetite is reviewed at least on an annual basis to ensure that it is fit for purpose and aligned with strategy,
and focus is given to emerging or new risks. The Risk Appetite Statement is supplemented by an overarching statement
outlinng the Group’s Risk Appetite princples.
Risk Appetite princples
The Group Risk Appetite is defined in accordance with risk management princples that inform our overall approach to risk
management and our risk culture. We follow the highest ethical standards and ensure a fair outcome for our clients, as well
as faciltating the effective operation of financal markets, while at the same time meeting expectations of regulators and
law enforcement agencies. We set our Risk Appetite to enable us to grow sustainably and to avoid shocks to earnings or our
general financal health, as well as manage our Reputational Risk in a way that does not materially undermine the
confidence of our investors and all internal and external stakeholders.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
125
Risk profile continued
Risk Appetite Statement
The Group will not compromise adherence to its Risk Appetite in order to pursue revenue growth or higher returns. The Group
Risk Appetite is supplemented by risk control tools such as granular level limts, polices, standards and other operational
control parameters that are used to keep the Group’s risk profile withn Risk Appetite. The Group’s risk profile is its overall
exposure to risk at a given point in time, covering all applicable risk types. Status against Risk Appetite is reported to the
Court, Court Risk Committee and the Standard Chartered Bank Executive Risk Committee, includng the status of breaches
and remediaton plans where applicable.
In additon to Risk Appetite Statements for the Princpal Risk Types, the Group also has a Risk Appetite Statement for Climate
Risk which is an Integrated Risk Type that can manifest through other risk types. Consideraton for standalone Risk Appetite
Statements will be given in 2022 for additonal integrated risks such as Third-Party Risk and Digtal Asset Risk. Where relevant,
these risk types are currently supported by Risk Appetite metrics embedded withn the respective PRTs. The Standard
Chartered Bank Executive Risk Committee and the Solo & Standard Chartered Bank UK (Branch) Asset and Liablity
Management Committee are responsible for ensuring that our risk profile is managed in compliance with the Risk Appetite
set by the Court. The Court Risk Committee advises the Court on and monitors the Group’s compliance with the Risk Appetite
Statement.
The indvidual Princpal Risk Types’ Risk Appetite Statements approved by the Court are set out in the
Princpal Risks
section
(pages 129 to 143])
Risk identficaton and assessment
Identifcation and assessment of potentially adverse risk events is an essential first step in managing the risks of any business
or activty. To ensure consistency in communicaton we use Princpal Risk Types to classify our risk exposures.
Nevertheless, we also recognise the need to maintan a holistc perspective since a single transaction or activty may give 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. There are also sources of risk that arise beyond our
own operations such as the Group’s dependency on suppliers for the provison of services and technology.
As the Group remains accountable for risks arisng from the actions of such third parties, failure to adequately monitor and
manage these relationshps could materially impact the Group’s abilty to operate and could have an impact on our abilty to
continue to provide services that are material to the Group.
To faciltate risk identficaton and assessment, the Group leverages the PLC Group’s dynamic risk-scanning process with
inputs from the internal and external risk environment, as well as potential threats and opportunites from the business and
client perspectives. The Group maintans a taxonomy of the Princpal Risk Types, Integrated Risk Types and risk sub-types that
are inherent to the strategy and business model; as well as an emerging risks inventory that includes near-term as well as
longer-term uncertaintes. Near-term risks are those that are on the horizon and can be measured and mitgated to some
extent, while uncertaintes are longer-term matters that should be on the radar but are not yet fully measurable.
The Group Chief Risk Officer and the Standard Chartered Bank Executive Risk Committee review regular reports on the risk
profile for the Princpal Risk Types, adherence to the approved Risk Appetite and the Group risk inventory includng emerging
risks. They use this informaton to escalate material developments in each risk event and make recommendations to the
Court annually on any potential changes to our Corporate Plan.
Further informaton on the Group’s
emerging risks
can be found on
(pages 144 to 152)
Stress testing
Stress tests are performed at PLC Group, Solo, country, business and portfolio level under a wide range of risks and at varying
degrees of severity. Unless set by the Bank of England, scenario design is a bespoke process that aims to explore risks that can
adversely impact the PLC Group.
The objectve of stress testing is to support the PLC 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 sufficent financal resources to withstand severe but plausible scenarios
•
Has the financal flexiblity to respond to extreme but plausible scenarios
•
Understands the key business model risks and considers what kind of event might crystallise those risks - even if extreme
with a low likelhood of occurring - and identfies as required, actions to mitgate the likelhood or impact as required
The PLC Group enterprise stress tests incorporate Capital and Liqudity Adequacy Stress Tests, includng in the context of
capital adequacy, recovery and resolution, and stress tests that assess scenarios where our business model becomes
challenged, such as the BoE Biennal Exploratory Scenario, or unviable, such as reverse stress tests.
The Group relies on these stress tests to understand the Group level vulnerabilties. Based on the stress test results, the Group
Chief Financal Officer and Group Chief Risk Officer can recommend strategic actions to the Court to ensure that the Group
strategy remains withn the Court-approved Risk Appetite.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
126
Risk profile continued
Princpal Risk Types
Princpal Risk Types are risks that are inherent in our strategy and business model and have been formally defined in the
Group’s RMF. These risks are managed in line with the PLC Group RTFs which are adopted by the Company via an addendum
to each RTF.
The Princpal Risk Types and associated Risk Appetite Statements are approved by the Court.
The Group currently recognises Climate Risk, Digtal Asset Risk and Third-Party Risk as Integrated Risk Types. Climate Risk is
defined as “the potential for financal loss and non-financal detriments arisng from climate change and society’s response
to it”; Digtal Asset Risk is defined as “the potential for regulatory penalties, financal loss and or reputational damage to the
Group resulting from digtal asset exposure or digtal asset related activties arisng from the Group’s Clients, Products and
Projects” and Third-Party Risk is defined as “the potential for loss or adverse impact from failure to manage multiple risks
arisng from the use of third-parties, and is the aggregate of these risks.”
In line with the Group’s strategy to explore digtal-asset related opportunites, the Group has continued to develop and
enhance its Digtal Asset Risk Management approach during 2021 in order to further embed risk management practices and
ensure that digtal asset activties across the Group are appropriately risk managed, and withn the Group’s Risk Appetite. The
approach requires comprehensive assessments of risks arisng from such intiatves and seeks to integrate the approach
withn existng risk management practices. The approach recognises the need for digtal asset subject matter experts to
assess and advise on the specifc risks presented by digtal assets. The Group applies the PLC Group Digtal Assets Risk
Management policy for the management of Digtal Asset Risk and relies on the PLC Group committee to oversee digtal asset
related risks.
In future reviews, we will continue to consider if existng Princpal Risk Types or incremental risks should be treated as
Integrated Risk Types. The table below shows the Group’s current Princpal Risk Types.
Princpal Risk Types Defintion
Credit Risk
• Potential for loss due to the failure of a counterparty to meet its agreed obligatons to pay the Group
Traded Risk
• Potential for loss resulting from activties undertaken by the Group in financal markets
Treasury Risk
• Treasury Risk is formed of Capital and Liqudity Risk, and Interest Rate Risk in the Banking Book. Capital Risk is
the potential for insuffcient level, compositon or distrbution of capital, own funds and eligble liablites to
support our normal activties. Liqudity Risk is the risk that we may not have sufficent stable or diverse sources of
funding to meet our obligatons as they fall due. Interest Rate Risk in the Banking Book is the potential for a
reduction in earnings or economic value due to movements in interest rates on banking book assets, liablites
and off-balance sheet items
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 (includng legal risks)
Information and Cyber
Security Risk
• Risk to the Group’s assets, operations and indviduals due to the potential for unauthorised access, use,
disclosure, disrupton, modifcation, or destruction of informaton assets and/or informaton systems
Compliance Risk
• Potential for penalties or loss to the Group or for an adverse impact to our clients, stakeholders or to the
integrty of the markets we operate in through a failure on our part to comply with laws or regulations
Financal Crime Risk
• Potential for legal or regulatory penalties, material financal loss or reputational damage resulting from the
failure to comply with applicable laws and regulations relating to internatonal sanctions, anti-money
laundering, anti-bribery and corruption and Fraud
Model Risk
• Potential loss that may occur as a consequence of decisons or the risk of misestmation that could be
princpally based on the output of models, due to errors in the development, implementaton or use of such
models
Reputational and
Sustainablity Risk
• Potential for damage to the franchise (such as loss of trust, earnings or market capitalsation) because of
stakeholders taking a negative view of the Group through actual or perceived actions or inactons, includng a
failure to uphold responsible business conduct or lapses in our commitment to do no signficant environmental
and social harm through our client, third-party relationshps or our own operations
Further details of our princpal risks and how these are being managed are set out in the
Princpal Risks
section
(pages 129 to 143)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
127
Risk profile continued
RMF effectiveness reviews
Effectiveness review of the RMF is managed as part of the PLC Group ERMF effectiveness review. At Group level, a self-
assessment is conducted to assess the overall effectiveness of the RMF, and the results are taken into consideraton in the
ERMF effectiveness review. The Group Chief Risk Officer is responsible for annually affirmng the effectiveness of the RMF to
the Court Risk Committee.
The RMF effectiveness review is conducted annually since its implementaton in 2020 and enables measurement of progress
against the 2020 baseline.
Over the course of 2022, the Group aims to further strengthen its risk management practices through further improvng on
the management of non-financal risks and risks which are integrated in nature.
Executive and Court risk oversight
Overview
The Court comprises of the independent non-executive directors from the PLC Board (“Dual Non-executive Directors”),
executive directors from the PLC Board (“Dual Executive Directors”) and executive directors who are appointed solely to
the Court (“Independent Executive Directors”) with the specifc purpose of providng independent decison making at the
Court meetings.
The Court discharges its responsiblites directly or, in order to assist it in carrying out its function of ensuring effective
independent oversight, delegates specifc responsiblites to its four primary committees. The Court has ultimate responsiblity
for risk management and approves the RMF based on the recommendation from the Court Risk Committee, which also
recommends the Group Risk Appetite Statement for all Princpal Risk Types.
Court and Executive level risk committee governance structure
The Committee governance structure below presents the view as of 2021.
COURT
COURT LEVEL COMMITTEES¹
Court Risk Committee
Court Audit Committee
Combined United States
Operations
and Risk Committee
(US Risk Committee)
Court Nominaton
Committee
Court Risk Committee:
The Court Risk Committee is concerned with the oversight and review of princpal risks.
Court Audit Committee:
The Court Audit Committee is concerned with the oversight and review of financal, audit, internal control and non-financal
crime issues.
Combined United States Operations and Risk Committee (US Risk Committee):
The US Risk Committee is required to meet the requirements of the Dodd-Frank Act Section 165 Enhanced Prudential
Standard Final Rules as released by the Federal Reserve Bank. It has prescribed responsiblites in relation to overseeing the
risk management framework, approving and overseeing the implementaton of the risk management polices and also
specifc review and approval responsiblites in relation to liqudity risk management. Membership of the Committee is
comprised of directors of the Company or PLC, includng at least one independent non-executive director and one with
signficant risk management experience.
1 The Court also has a Standing Committee with a remit to approve matters, on behalf of the Court, where a formal resolution is required for legal and
regulatory purposes.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
128
Risk profile continued
Standard Chartered Bank
Executive
Risk Committee
Solo & Standard Chartered
Bank UK (Branch)
Asset and Liablity
Management Committee
EXECUTIVE LEVEL COMMITTEES
The Company’s Management Team comprises of the members of the PLC Group Management Team includng the Group
Chief Executive Officer, the Group Chief Risk Officer and the Group Chief Financal Officer. Their responsiblites under the
Senior Managers Regime cover both the PLC Group and the Group.
The Company has two management level committees, namely the Standard Chartered Bank Executive Risk Committee and
Solo & Standard Chartered Bank UK (Branch) Asset and Liablity Management Committee.
Standard Chartered Bank Executive Risk Committee
The Standard Chartered Bank Executive Risk Committee is responsible for ensuring the effective management of risk
throughout the Group in support of the Group’s strategy. The Group Chief Risk Officer chairs the Committee, whose members
are drawn from the PLC Group’s Management Team. The Committee determines the RMF, includng the delegation of any
part of its authorites to appropriate indviduals or properly constituted sub-committees. The Group relies key PLC Group level
committees to provide oversight of the Princpal Risk Types across clients, businesses, products and functions. The Committee
requests and receives relevant informaton to fulfil its governance mandates relating to the risks to which the Group is
exposed. As with the Court Risk Committee, the Standard Chartered Bank Executive Risk Committee and Solo & Standard
Chartered Bank UK (Branch) Asset and Liablity Management Committee receive reports that include informaton on risk
measures, Risk Appetite metrics and thresholds, risk concentrations, forward-looking assessments, updates on specifc risk
situatons and actions agreed by these committees to reduce or manage risk.
Solo & Standard Chartered Bank UK (Branch) Asset and Liablity Management Committee
The Solo & Standard Chartered Bank UK (Branch) Asset and Liablity Management Committee is chaired by the CEO,
Corporate, Commercial & Institutonal Banking, Europe & Americas. The Committee is responsible for determinng the Group’s
approach to balance sheet management and ensuring that, in executing the Group’s strategy, the Group operates withn
internally approved Risk Appetite and external requirements relating to capital, loss-absorbing capacity, liqudity, leverage,
Interest Rate Risk in the Banking Book, Banking Book Basis Risk and Structural Foreign Exchange Risk, and meets internal and
external recovery planning requirements.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
129
Risk profile continued
Princpal risks
We manage and control our Princpal Risk Types in line with the PLC Group Risk Type Frameworks, polices and Court-
approved Risk Appetite. These are implemented at the Company level via addenda to the PLC Group Risk Type Frameworks.
Credit Risk
The Group defines Credit Risk as the potential for loss due to the failure of a counterparty to meet its agreed obligatons to
pay the Group.
Risk Appetite Statement
The Group manages its credit exposures following the princple of diversficaton across products, geographies, client
segments and industry sectors.
Roles and responsiblites
The Company addenda to the Credit Risk Type Frameworks for the Group are set and owned by the Chief Risk Officers for the
business segments. The Credit Risk function is the second-line control function responsible for independent challenge,
monitorng and oversight of the Credit Risk management practices of the business and functions engaged in or supporting
revenue- generating activties which constitute the first line of defence. In additon, they ensure that credit risks are properly
assessed and transparent; and that credit decisons are controlled in accordance with the Group’s Risk Appetite, PLC Group’s
credit polices and standards.
Mitgation
We apply segment-specifc PLC Group polices for the management of Credit Risk. The Credit Policy for Corporate,
Commercial and Institutonal Banking Client Coverage sets the princples that must be followed for the end-to-end credit
process includng credit intiaton, credit grading, credit assessment, product structuring, Credit Risk mitgation, monitorng
and control, and documentation.
The Consumer, Private and Business Banking Credit Risk Management Policy sets the princples for the management of
Consumer, Private and Business Banking segments, that must be followed for end-to-end credit process includng credit
intiaton, credit assessment and monitorng for lending to these segments.
In additon, there are other PLC Group-wide polices integral to Credit Risk management such as those relating to Risk
Appetite, Model Risk, Stress Testing, and Impairment Provisoning.
We also apply the PLC Group standards for the eligbilty, enforceabilty and effectiveness of Credit Risk mitgation
arrangements. Potential credit losses from a given account, client or portfolio are mitgated using a range of tools such as
collateral, netting agreements, credit insurance, credit derivatves and guarantees.
Risk mitgants are also carefully assessed for their market value, legal enforceabilty, correlation and counterparty risk of the
protection provider.
Collateral must be valued prior to drawdown and regularly thereafter as required, to reflect current market conditons, the
probabilty of recovery and the period of time to realise the collateral in the event of liqudation. We also seek to diversfy our
collateral holdings across asset classes and markets.
Where guarantees, credit insurance, standby letters of credit or credit derivatves are used as Credit Risk mitgation, the
creditworthness of the protection provider is assessed and monitored using the same credit approval process applied to the
obligor.
Governance committee oversight
At Court level, the Court Risk Committee oversees the effective management of Credit Risk.
At the executive level, the Standard Chartered Bank Executive Risk Committee is responsible for the management of Credit
Risk for the Group, and relies on other key PLC Group committees – in particular the Corporate, Commercial and Institutonal
Banking Risk Committee (CCIBRC), Consumer, Private and Business Banking Risk Committee (CPBBRC), and the regional risk
committees for Asia, and Africa & Middle East.
These committees are responsible for overseeing the Credit Risk profile of the Group withn the respective business areas and
regions.
Decison-making authorites and delegation
The Credit Risk Type Frameworks are the formal mechanism which delegate Credit Risk authorites cascading from the Group
Chief Risk Officer, as the Senior Manager of the Credit Risk Type, to indviduals such as the business segments’ Chief Risk
Officers. Named indviduals further delegate credit authorites to indvidual credit officers based on risk-adjusted scales by
customer type or portfolio. The decison-making authorites and delegations are set out at the Group level via the Company
addenda to the Credit Risk Type Frameworks.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
130
Credit Risk authorites are reviewed at least annually to ensure that they remain appropriate. In Corporate, Commercial and
Institutonal Banking Client Coverage, the indviduals delegating the Credit Risk authorites perform oversight by reviewng a
sample of the limt applicatons approved by the delegated credit officers on a monthly basis. In Consumer, Private and
Business Banking, in most cases credit decison systems and tools (e.g. applicaton scorecards) are used for credit decisoning.
Where manual or discretonary credit decisons are applied, these are subject to periodc quality control assessment and
assurance checks.
Monitorng
We regularly monitor credit exposures, portfolio performance, and external trends that may impact risk management
outcomes. Internal risk management reports that are presented to risk committees contain informaton on key politcal and
economic trends across major portfolios and countries, portfolio delinquency and loan imparment performance.
The Industry Portfolio Mandate, developed jontly by the Corporate, Commercial and Institutonal Banking Client Coverage
business and the Risk function, provides a forward- looking assessment of risk using a platform from which business strategy,
risk consideratons and client planning are performed with one consensus view of the external industry outlook, portfolio
overviews, Risk Appetite, underwritng princples and stress test insghts.
In Corporate, Commercial and Institutonal Banking Client Coverage, clients and portfolios are subjected to additonal review
when they display signs of actual or potential weakness; for example, where there is a decline in the client’s positon withn
the industry, financal deterioraton, a breach of covenants, or non-performance of an obligaton withn the stipulated period.
Such accounts are subjected to a dedicated process overseen by the Credit Issues Committees in the relevant countries
where client account strategies and credit grades are re-evaluated. In additon, remedial actions, includng exposure
reduction, security enhancement or exitng the account, could be undertaken, and certain accounts could also be transferred
into the control of Group Special Assets Management (GSAM), which is our specialst recovery unit for Corporate, Commercial
and Institutonal Banking Client Coverage that operates independently from our main business.
For Consumer, Private and Business Banking, exposures and collateral monitorng are performed at the counterparty and/or
portfolio level across different client segments to ensure transactions and portfolio exposures remain withn Risk Appetite.
Portfolio delinquency trends are monitored on an ongoing basis. Accounts that are past due (or perceived as high risk but not
yet past due) are subject to a collections or recovery process managed by a specialst function independent from the
orignation function. In some countries, aspects of collections and recovery activties are outsourced. Oversight and assurance
are undertaken in risk committees and various governance forums. For discretonary lending portfolios, simlar processes as of
Commercial client coverage are followed.
In additon, an independent Credit Risk Review team (part of Enterprise Risk Management) performs judgement-based
assessments of the Credit Risk profiles at various portfolio levels, with 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 Corporate, Commercial and Institutonal Banking and Consumer, Private and Business Banking are well
managed withn our Risk Appetite and polices through prompt and forward-looking mitgating actions.
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, includng willngness, abilty and capacity to repay. The primary lending consideraton is based on the client’s credit
quality and the repayment capacity from operating cashflows for counterparties; and personal income or wealth for
indvidual borrowers. The risk assessment gives due consideraton to the client’s liqudity and leverage positon. Where
applicable, the assessment includes a detailed analysis of the Credit Risk mitgation arrangements to determine the level of
reliance on such arrangements as the secondary source of repayment in the event of a signficant deterioraton in a client’s
credit quality leading to default.
Risk measurement plays a central role, along with judgement and experience, in informng risk-taking and portfolio
management decisons. Since 1 January 2008, we have used the advanced internal ratings-based approach under the Basel
regulatory framework to calculate Credit Risk capital requirements. The PLC Group has also established a global programme
to undertake a comprehensive assessment of capital requirements necessary to be implemented to meet the latest revised
Basel III finalsation (Basel IV) regulations.
A standard alphanumeric Credit Risk grade system is used for Corporate, Commercial and Institutonal Banking Client
Coverage. The numeric grades run from 1 to 14 and some of the grades are further sub-classifed. Lower numeric credit grades
are indcative of a lower likelhood 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.
Consumer, Private and Business Banking internal ratings-based portfolios use applicaton and behavioural credit scores that
are calibrated to generate a probabilty of default and then mapped to the standard alphanumeric Credit Risk grade system.
We refer to external ratings from credit bureaus (where these are available); however, we do not rely solely on these to
determine CPBB credit grades. Risk Decison Framework (RDF) as a credit rating system supports the delivery of optimum
risk-adjusted-returns with controlled volatilty and is used to define the portfolio/new booking segmentation, shape and
decison critera for unsecured consumer business segment.
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
131
Risk profile continued
Advanced internal ratings-based models cover a substantial majorty of our exposures and are used in assessing risks at a
customer and portfolio level, setting strategy and optimsing our risk-return decisons. Material internal ratings-based risk
measurement models are approved by the PLC Group Model Risk Committee. Prior to review and approval, all internal
ratings- based models are validated in detail by a model validaton team, which is separate from the teams that develop and
maintan the models. Models undergo annual validaton by an independent model validaton team. Reviews are also
triggered if the performance of a model deteriorates materially against predetermined thresholds during the ongoing model
performance monitorng process which takes place between the annual validatons.
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 limts set for a counterparty or a group of connected counterparties based on control and economic
dependence critera. Risk Appetite metrics are set at portfolio level and monitored to control concentrations, where
appropriate, by industry, specifc products, tenor, collateralisaton level, top clients 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 Standard Chartered Bank Executive Risk Committee and Court Risk
Committees.
Credit imparment
Expected credit losses (ECL) are determined for all financal assets that are classifed as amortised cost or fair value through
other comprehensive income. ECL is computed as an unbiased, probabilty-weighted provison determined by evaluating a
range of plausible outcomes, the time value of money, and forward-looking informaton such as critcal global or country-
specifc macroeconomic variables. For more detailed informaton on macroeconomic data feeding into IFRS 9 ECL
calculations, please refer to page 99.
At the time of orignation or purchase of a non-credit- impared financal asset (stage 1), ECL represent cash shortfalls arisng
from possible default events up to 12 months into the future from the balance sheet date. ECL continue to be determined on
this basis until there is a signficant increase in the Credit Risk of the asset (stage 2), in which case an ECL is recognised for
default events that may occur over the lifetme of the asset. If there is observed objectve evidence of credit imparment or
default (stage 3), ECL continue to be measured on a lifetme basis.
In Corporate, Commercial and Institutonal Banking Client Coverage, a loan is considered credit- impared where analysis and
review indcate that full payment of either interest or princpal, includng the timelness of such payment, is questionable, or as
soon as payment of interest or princpal is 90 days overdue. These credit-impared accounts are managed by our specialst
recovery unit (GSAM). Where appropriate, non-material credit-impared accounts are co-managed with the business under
the supervison of GSAM.
In Consumer, Private and Business Banking, a loan is considered credit-impared as soon as payment of interest or princpal is
90 days overdue or meets other objectve evidence of imparment such as bankruptcy, debt restructuring, fraud or death.
Financal assets are written-off when it meets certain threshold conditons which are set at the point where empircal
evidence suggests that the client is unlikely to meet their contractual obligatons, or a loss of princpal is expected.
Estimatng the amount and timng of future recoveries involves signficant judgement and considers the assessment of
matters such as future economic conditons and the value of collateral, for which there may not be a readily accessible
market. The total amount of the Group’s imparment provison is inherently uncertain, being sensitve to changes in economic
and credit conditons across the regions in which the Group operates. For further details on sensitvity analysis of expected
credit losses under IFRS 9, please refer to page 102.
Stress testing
Stress testing is a forward-looking risk management tool that constitutes a key input into the identficaton, monitorng and
mitgation of Credit Risk, as well as contributng to Risk Appetite calibraton. Periodc stress tests are performed on credit
portfolios/segments to anticpate vulnerabilties from stressed conditons and intiate timely right-sizng and mitgation plans.
Additonally, multiple enterprise-wide and country-level stress tests are mandated by regulators to assess the abilty of the
PLC Group and its subsidaries to continue to meet their capital requirements during a plausible, adverse shock to the
business. These regulatory stress tests are conducted in line with the princples stated in the Enterprise Stress Testing Policy.
The Group relies on these stress tests to understand the Group level vulnerabilties given the signficant overlap between
Group and PLC Group credit risk profile.
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Directors’ Report and Financal Statements 2021
132
Traded Risk
The Group defines Traded Risk as the potential for loss resulting from activties undertaken by the Group in financal markets
Risk Appetite Statement
The Group should control its trading portfolio and activties to ensure that Traded Risk losses (financal or reputational) do not
cause material damage to the Group’s or PLC Group’s franchise.
The Company addendum to the Traded Risk Type Framework (TRTF) brings together all risk sub-types exhibting risk features
common to Traded Risk. These risk sub-types include Market Risk, Counterparty Credit Risk and Algorithmc Trading. Traded
Risk Management (TRM) is the core risk management function supporting market-facing businesses, specifcally Financal
Markets and Treasury.
Roles and responsiblites
The Company addendum to the TRTF, which sets the roles and responsiblites in respect of Traded Risk for the Group, is
owned by the Global Head, Traded Risk Management. The business, acting as first line of defence, is responsible for the
effective management of risks withn the scope of its direct organisatonal responsiblites set by the Court. The TRM function
is the second-line control function that performs independent challenge, monitorng and oversight of the Traded Risk
management practices of the first line of defence. The first and second lines of defence are supported by the organisaton
structure, job descriptons and authorites delegated by Traded Risk control owners.
Mitgation
We apply the PLC Group polices for management of Traded Risk
The Group controls its trading portfolio and activties withn Risk Appetite by assessing the various Traded Risk factors. These
are captured and analysed using proprietary analytical tools, in additon to risk managers’ specialst market and product
knowledge.
The Group’s Traded Risk exposure is aligned with its Risk Appetite for Traded Risk, and assessment of potential losses that
might be incurred by the Group as a consequence of extreme but plausible events.
All businesses incurrng Traded Risk must be in compliance with the TRTF. The Company addendum to the TRTF requires that
Traded Risk limts are defined at a level appropriate to ensure that the Group remains withn Traded Risk Appetite.
The Company addendum to the TRTF, and underlying polices and standards ensure that these Traded Risk limts are
implemented. All Traded Risk exposures throughout the Group aggregate up to TRM’s Group-level reporting. This
aggregation approach ensures that the limts structure across the Group is consistent with the Group’s Risk Appetite.
The Company addendum to the TRTF and Enterprise Stress Testing Policy ensure that adherence to stress-related Risk
Appetite metrics is achieved. Stress testing aims at supplementing other risk metrics used withn the Group by providng a
forward-looking view of positons and an assessment of their resilence to stressed market conditons. Stress testing is
performed on all Group businesses with Traded Risk exposures, either where the risk is actively traded or where material risk
remains. This additonal informaton is used to inform the management of the Traded Risk taken withn the Group. The
outcome of stress tests is discussed across the various business lines and management levels so that existng and potential
risks can be reviewed, and related management actions can be decided upon where appropriate.
Governance committee oversight
At Court level, the Court Risk Committee oversees the effective management of Traded Risk. At the executive level, the
Standard Chartered Bank Executive Risk Committee is responsible for the governance and oversight of Traded Risk for the
Group, and relies on other key PLC Group committees for the management of Traded Risk – in particular CCIBRC and Model
Risk Committee. Where Traded Risk limts are set at a country level, committee governance is:
•
Subsidary authority for setting Traded Risk limts, where applicable, is delegated from the local board to the local risk
committee, Country Chief Risk Officer and Traded Risk managers.
•
Branch authority for setting Traded Risk limts remains with TRM which retains responsiblity for monitorng and reporting
excesses.
Decison-making authorites and delegation
The Group’s Risk Appetite Statement, along with the key associated Risk Appetite metrics, is approved by the Court.
The Group Chief Risk Officer delegates authority for all Traded Risk limts to the TRTF Owner (Global Head, TRM) who in turn
delegates approval authorites to indvidual Traded Risk managers.
Additonal limts are placed on specifc instruments, positons, and portfolio concentrations where appropriate. Authorites
are reviewed at least annually to ensure that they remain appropriate and to assess the quality of decisons taken by the
authorised person. Key risk-taking decisons are made only by certain indviduals with the skills, judgement and perspective to
ensure that the Group’s control standards and risk-return objectves are met. Authority delegators are responsible for
monitorng the quality of the risk decisons taken by their delegates and the ongoing suitablity of their authorites.
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
133
Risk profile continued
Market Risk
The Group uses a Value at Risk (VaR) model to measure the risk of losses arisng from future potential adverse movements in
market rates, prices and volatilties. VaR is a quantitatve measure of Market Risk that applies recent historcal market
conditons to estimate the potential future loss in market value that will not be exceeded in a set time period at a set
statistcal 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:
•
Historcal simulaton: this involves the revaluation of all existng positons to reflect the effect of historcally observed
changes in Market Risk factors on the valuation of the current portfolio. This approach is applied for general Market Risk
factors and the majorty of specifc (credit spread) risk VaRs
•
Monte Carlo simulaton: this methodology is simlar to historcal simulaton but with considerably more input risk factor
observations. These are generated by random sampling techniques, but the results retain the essential variablity and
correlations of historcally observed risk factor changes. This approach is applied for some of the specifc (credit spread) risk
VaRs in relation to idosyncratic exposures in credit markets
A one-year historcal observation 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 (RNIVs) are subject to capital add-ons.
Counterparty Credit Risk
The Counterparty Credit Risk arisng from activties in financal markets is in scope of the Risk Appetite set by the Group for
Traded Risk.
The Group uses a Potential Future Exposure (PFE) model to measure the credit exposure arisng from the positve mark-to-
market of traded products and future potential movements in market rates, prices and volatilties. PFE is a quantitatve
measure of Counterparty Credit Risk that applies recent historcal market conditons to estimate 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, simulaton-based, which is predominantly used, and an add-on based PFE
methodology.
Monitorng
TRM monitors the overall portfolio risk and ensures that it is withn specifed limts and therefore Risk Appetite. Limts are
typically reviewed twice a year.
Most of the Traded Risk exposures are monitored daily against approved limts. Traded Risk limts apply at all times, unless
separate intra-day limts have been set. Limt excess approval decisons are based on an assessment of the circumstances
drivng the excess and of the proposed remediaton plan.
Limts and excesses can only be approved by a Traded Risk manager with the appropriate delegated authority.
TRM reports and monitors limts applied to stressed exposures. Stress scenario analysis is performed on all Traded Risk
exposures in financal markets and in portfolios outside financal markets such as syndicated loans and princpal finance.
Stress loss excesses are discussed with the business and approved where appropriate, based on delegated authority levels.
Stress testing
The VaR and PFE measurements are complemented by weekly stress testing of Market Risk and Counterparty Credit Risk to
highlght the potential risk that may arise from severe but plausible market events.
Stress testing is an integral part of the Traded Risk management framework and considers both historcal market events and
forward-looking scenarios. A consistent stress testing methodology is applied to trading and non- trading books. The stress
testing methodology assumes that scope for management action would be limted during a stress event, reflecting the
decrease in market liqudity that often occurs.
Regular stress test scenarios are applied to interest rates, credit spreads, exchange rates, commodity prices and equity prices.
This covers all asset classes in the Financal Markets and Treasury books. Ad hoc scenarios are also prepared, reflecting
specifc market conditons and for particular concentrations of risk that arise withn the business.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
134
Stress scenarios are regularly updated to reflect changes in risk profile and economic events. The TRM function reviews stress
testing results and, where necessary, enforces reductions in overall Traded Risk exposures. The Standard Chartered Bank
Executive Risk Committee considers the results of stress tests as part of its supervison of Risk Appetite.
Where required, PLC Group and business-wide stress testing will be supplemented by entity stress testing at a country level.
This stress testing is coordinated at the country level and subject to the relevant local governance.
Treasury Risk
Treasury Risk is formed of Capital and Liqudity Risk, and Interest Rate Risk in the Banking Book. Capital Risk is the potential for
an insuffcient level, compositon or distrbution of capital, own funds and eligble liablites to support our normal activties.
Liqudity Risk is the risk that we may not have sufficently stable or diverse sources of funding to meet our obligatons as they
fall due. Interest Rate Risk in the Banking Book is the potential for a reduction in earnings or economic value due to
movements in interest rates on banking book assets, liablites, and off-balance sheet items.
Risk Appetite Statement
Indivdual regulated entites withn the Group should maintan a strong capital and liqudity positon and meet their minmum
capital and liqudity requirements.
Roles and responsiblites
The Global Head, Enterprise Risk Management is the Risk Framework Owner for Treasury Risk under the Risk Management
Framework.
The Group Treasurer is supported by teams in Treasury and Finance to implement the Treasury Risk Type Framework as the
first line of defence, and is responsible for managing Treasury Risk.
From 2022, the second line of defence responsiblity for Pension risk sub-type will move from Traded Risk to Treasury Risk and
the risk will be governed under the Treasury Risk Type Framework.
Mitgation
We apply the PLC Group polices for the management of material Treasury risks and closely monitor our risk profile through
Risk Appetite metrics set at Solo and country level.
Capital Risk
In order to manage Capital Risk, strategic business and capital plans are drawn up covering a five-year horizon and are
approved by the Court annually. The capital plan ensures that adequate levels of capital, includng loss-absorbing capacity,
and an efficent mix of the different components of capital are maintaned 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.
Solo level Risk Appetite metrics includng capital and minmum requirement for own funds and eligble liablity (MREL) are
assessed withn the Corporate Plan to ensure that our business plan can be achieved withn risk tolerances.
Structural FX Risk
The Group’s structural positon results from the Company’s non-US dollar investment in the share capital and reserves of
subsidaries and branches. The FX translation gains, or losses are recorded in the Company’s translation reserves with a direct
impact on the PLC Group and Solo’s Common Equity Tier 1 ratio.
Structural FX positon is monitored and managed at PLC Group level as part of overall PLC Group foreign exchange exposure.
Liqudity and Funding Risk
At Solo and country level we implement various risk appetite metrics and monitor these against limts and management
action triggers. This ensures that the Group entites maintan an adequate and well-diversfied liqudity buffer, as well as a
stable funding base, and that they meet their liqudity and funding regulatory requirements.
Interest Rate Risk in the Banking Book
This risk arises from differences in the repricng profile, interest rate basis, and optionalty of banking book assets, liablites
and off-balance sheet items. IRRBB represents an economic and commercial risk to the Group and its capital adequacy.
Recovery and Resolution Planning
In line with PRA requirements, the PLC Group maintans a Recovery Plan which is a live document to be used by management
in the event of stress in order to restore the PLC Group to a stable and sustainable positon. The Recovery Plan includes a set
of Recovery Indicators, an escalation framework, and a set of management actions capable of being implemented in a
stress. A Recovery Plan is also maintaned withn each major entity includng those under Solo, and all recovery plans are
subject to periodc fire-drill testing. The Group follows the PLC Group’s Recovery Plan.
As the UK resolution authority, the Bank of England (BoE) is required to set a preferred resolution strategy for the PLC Group.
The BoE’s preferred resolution strategy is whole PLC Group single point of entry bail-in at the ultimate holding company level
(Standard Chartered PLC) and would be led by the BoE as the PLC Group’s home resolution authority. In support of this
strategy, the PLC Group has been developing a set of capabilties, arrangements and resources to achieve the required
outcomes. The PLC Group expects to disclose a summary of its preparations in 2022, alongside a public statement from the
BoE on the resolvabilty of each in-scope firm.
Risk profile continued
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Risk profile continued
Governance committee oversight
At Court level, the Court Risk Committee oversees the effective management of Treasury Risk. At the executive level, the Solo
& Standard Chartered Bank UK (Branch) Asset and Liablity Management Committee ensures the effective management of
risk throughout the Group in support of the Group’s strategy, guides the Group’s strategy on balance sheet optimsation and
ensures that the Group operates withn the internally approved Risk Appetite and other internal and external treasury
requirements. Regional and country oversight resides with regional and country Asset and Liablity Committees. Regions and
countries must ensure that they remain in compliance with PLC Group Treasury polices and practices, as well as local
regulatory requirements.
Decison-making authorites and delegation
The Group Chief Financal Officer has responsiblity for capital, funding and liqudity under the Senior Managers Regime. The
Group Chief Risk Officer has delegated the Risk Framework Owner responsiblites associated with Treasury Risk to the Global
Head, Enterprise Risk Management. The Global Head, Enterprise Risk Management delegates second-line oversight and
challenge responsiblites to relevant and suitably qualifed Treasury Chief Risk Officer and Country Chief Risk Officers.
Monitorng
On a day-to-day basis, the management of Treasury Risk is performed by the Group Treasurer, Country Chief Executive
Officer and Treasury Markets. The Group regularly reports and monitors Treasury Risk inherent in its business activties and
those that arise from internal and external events.
Internal risk management reports covering the balance sheet and the capital and liqudity positon are presented to the Solo
& Standard Chartered Bank UK (Branch) Asset and Liablity Management Committee. The reports contain key informaton
on balance sheet trends, exposures against Risk Appetite and supporting risk measures which enable members to make
informed decisons around the overall management of the balance sheet.
In additon, an independent Treasury Chief Risk Officer as part of Enterprise Risk Management reviews the prudency and
effectiveness of Treasury Risk management.
Stress Testing
Stress testing and scenario analysis are an integral part of the Treasury Risk framework and are used to ensure that the PLC
Group and Solo’s internal assessment of capital and liqudity considers the impact of extreme but plausible scenarios on its
risk profile. A number of stress scenarios, some designed internally, some required by regulators, are run periodcally.
They provide an insght into the potential impact of signficant adverse events on the PLC Group and Solo’s capital and
liqudity positon and how this could be mitgated through appropriate management actions to ensure that the PLC Group
and Solo remain withn the approved Risk Appetite and regulatory limts.
Daily liqudity stress scenarios are also run to ensure that the PLC Group and Solo hold sufficent high-quality liqud assets to
withstand extreme liqudity events. The Group relies on these stress tests to understand the Group level vulnerabilties given
the signficant overlap between the Group and PLC Group’s Treasury Risk.
Operational and Technology Risk
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 (includng legal risks)
Risk Appetite Statement
The Group aims to control operational and technology risks to ensure that operational losses (financal or reputational),
includng any related to conduct of business matters, do not cause material damage to the Group or PLC Group’s franchise
Roles and responsiblites
The Company addendum to the Operational and Technology Risk Type Framework (O&T RTF) sets the roles and
responsiblites in respect of Operational Risk for the Group, and is owned by the Global Head of Risk, Functions and
Operational Risk (GHRFOR). This framework collectively defines the Group’s Operational Risk sub-types which have not been
classifed as Princpal Risk Types (PRTs) and sets standards for the identficaton, control, monitorng and treatment of risks.
These standards are applicable across all PRTs and risk sub-types in the O&T RTF. These risk sub-types relate to execution
capabilty, governance, reporting and obligatons, legal enforceabilty, and operational resilence (includng client service,
change management, people management, safety and security, and technology risk).
The O&T RTF reinforces clear accountabilty for managing risk throughout the PLC Group and delegates second line of
defence responsiblites to identfied subject matter experts. For each risk sub-type, the expert sets polices and standards for
the organisaton to comply with, and provides guidance, oversight and challenge over the activties of the PLC Group. They
ensure that key risk decisons are only taken by indviduals with the requiste skills, judgement, and perspective to ensure that
the PLC Group’s risk-return objectves are met.
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Mitgation
The Company addendum to the O&T RTF sets out the Group’s overall approach to the management of Operational Risk in
line with the Group’s Operational and Technology Risk Appetite. This is supported by Risk and Control Self-Assessment (RCSA)
which defines roles and responsiblites for the identficaton, control and monitorng of risks (applicable to all PRTs and risk
sub-types).
The RCSA is used to determine the design strength and reliablity of each process, and requires:
•
the recording of processes run by client segments, products, and functions into a process universe
•
the identficaton of potential breakdowns to these processes and the related risks of such breakdowns
•
an assessment of the impact of the identfied risks based on a consistent scale
•
the design and monitorng of controls to mitgate priortised risks
•
assessments of residual risk and timely actions for elevated risks.
Risks that exceed the Group’s Operational and Technology Risk Appetite require treatment plans to address underlying
causes.
Governance committee oversight
At Court level, the Court Risk Committee oversees the effective management of Operational Risk. At the executive level, the
Standard Chartered Bank Executive Risk Committee is responsible for the governance and oversight of Operational Risk for
the Group, monitors the Group’s Operational and Technology Risk Appetite and relies on other key PLC Group committees for
the management of Operational Risk in particular the PLC Group Non-Financal Risk Committee (GNFRC).
Regional business segments and functional committees also provide enterprise oversight of their respective processes and
related operational risks. In additon, Country Non-Financal Risk Committees (CNFRCs) oversee the management of
Operational Risk at the country (or entity) level. In smaller countries, the responsiblites of the CNFRC may be exercised
directly by the Country Risk Committee (for branches) or Executive Risk Committee (for subsidaries).
Decison-making authorites and delegation
The Company addendum to the O&T RTF is the formal mechanism through which the delegation of Operational Risk
authorites is made. The GHRFOR places reliance on the respective Senior Managers who are outside the Risk function for
second-line oversight of the risk sub-types through this Company addendum. The Senior Managers may further delegate
their second-line responsiblites to designated indviduals at a global business, product and function level, as well as regional
or country level.
Monitorng
To deliver services to clients and to particpate in the financal services sector, the Group runs processes which are exposed to
operational risks. The Group priortises and manages risks which are signficant to clients and to the financal services sectors.
Control indcators are regularly monitored to determine the residual risk the Group is exposed to.
The residual risk assessments and reporting of events form the Group’s Operational Risk profile. The completeness of the
Operational Risk profile ensures appropriate priortisaton and timelness of risk decisons, includng risk acceptances with
treatment plans for risks that exceed acceptable thresholds.
The Court is informed on adherence to Operational and Technology Risk Appetite through metrics reported for selected risks.
These metrics are monitored, and escalation thresholds are devised based on the materialty and signficance of the risk.
These Operational and Technology Risk Appetite metrics are consolidated on a regular basis and reported to the Standard
Chartered Bank Executive Risk Committee and Court Risk Committee. This provides senior management with the relevant
informaton to inform their risk decisons.
Stress testing
Stress testing and scenario analysis are used to assess capital requirements for operational risks. This approach considers the
impact of extreme but plausible scenarios on the PLC Group’s Operational Risk profile. A number of scenarios have been
identfied to test the robustness of the PLC Group’s processes and assess the potential impact on the PLC Group. These
scenarios include anti-money laundering, sanctions, as well as informaton and cyber security. The Group relies on these stress
tests to understand the Group-level vulnerabilties given the signficant overlap between the Group and PLC Group
operational risk profile.
Information and Cyber Security Risk
The Group defines Information and Cyber Security Risk as the risk to the Group’s assets, operations and indviduals due to the
potential for unauthorised access, use, disclosure, disrupton, modifcation, or destruction of informaton assets and/or
informaton systems.
Risk Appetite Statement
The Group seeks to minmise ICS risk from threats to the Group’s most critcal informaton assets and systems, and has a low
appetite for material incdents affecting these or the wider operations and reputation of the Group.
Risk profile continued
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Risk profile continued
Roles and responsiblites
The Company addendum to the PLC Group’s Information and Cyber Security Risk Type Framework (ICS RTF) defines the roles
and responsiblites of first and second lines of defence in managing and governing ICS Risk respectively across the Group
with emphasis on business ownership and indvidual accountabilty.
The Group Chief Operating Officer has overall first line of defence responsiblity for ICS Risk and holds accountabilty for the
Group’s ICS strategy. The Group Chief Information Security Officer (CISO) leads the development and execution of the ICS
strategy.
The Group Chief Information Security Risk Officer (CISRO) function withn Group Risk, led by the Group CISRO, operates as the
second line of defence and sets the strategy and methodology for assessing, scoring and priortisng ICS risks across the
Group. This function has overall responsiblity for governance, oversight and independent challenge of ICS Risk.
Mitgation
The Group applies the PLC Group polices for the management of ICS Risk. ICS Risk is managed through a structured ICS Risk
framework comprisng a risk assessment methodology and supporting policy, standards and methodologies which are
aligned to industry best practice models.
In 2021, the ICS RTF was extended to include ICS end-to-end Risk Management and Governance and an enhanced threat-led
risk assessment. The Group CISRO function monitors compliance to the ICS framework through the review of the ICS risk
assessments conducted by Group CISO. All key ICS risks, breaches and risk treatment plans are managed under Group CISRO
oversight and assurance. ICS Risk posture, Risk Appetite breaches and remediaton status are reported at key Group, business,
functional and country governance committees.
Governance committee oversight
At Court level, the Court Risk Committee oversees the effective management of ICS Risk. The Standard Chartered Bank
Executive Risk Committee is responsible for the governance and oversight of ICS Risk for the Group, and relies on other key
PLC Group Committees and fora to ensure effective implementaton of the ICS RTF - in particular, the PLC Group Non-
Financal Risk Committee and the CyberSecurity Advisory Forum. The Standard Chartered Bank Executive Risk Committee
and PLC Group GNFRC are responsible for oversight of ICS Risk posture and Risk Appetite breaches rated very high and high.
Sub-committees of the GNFRC have oversight of ICS Risk management arisng from business, country and functional areas.
Decison-making authorites and delegation
The Company addendum to the ICS RTF defines how ICS Risk Management will operate withn the Group. The Group CISRO
delegates authority to designated indviduals through the ICS Risk Type Framework, includng second-line ownership at a
business and function level as well as regional or country level.
The Group CISO is responsible for implementng and operating ICS Security Risk Management withn the Group, leveraging
business Heads of ICS to extend ICS risk management into the businesses, functions, countries and Information Asset and
System owners to comply with the ICS RTF, policy and standards.
Monitorng
The risk assessment is performed by Group CISO to identfy key ICS risks, breaches and weaknesses, and to ascertain the
severity of the Risk posture.
The Risk postures of all businesses, functions and countries are consolidated to present a holistc Group-level ICS Risk posture
for ongoing ICS Risk monitorng.
During these reviews, the status of each risk is assessed to identfy any changes to materialty, impact and likelhood, which in
turn affects the overall ICS Risk score and rating. Risks which exceed defined thresholds are reviewed with Group CISRO for
approval, and escalated to appropriate Group governance committees.
Monitorng and reporting on the ICS Risk Appetite profile ensures that performance which falls outside the approved Risk
Appetite is highlghted and reviewed at the appropriate governance committee or authority levels and ensures that
adequate remediaton actions are in place where necessary.
Stress Testing
The Group’s cyber resilence testing approach entails:
•
The Group CISRO is responsible for risk based, intellgence led, scenario driven assessments that simulate the actions of
real-world cyber adversaries targeting the organisaton. This layered testing approach is used to validate the effectiveness
of the measures taken to prevent, detect and respond to cyber threats targeting our critcal business.
•
Group CISO is responsible for supporting control improvement and risk reduction by emulating cyber attacks in
collaboration with ICS defence and business-facing teams to enhance the Group’s cyber defence capabilties.
The Group relies on these testing to understand Group-level vulnerabilties given the signficant overlap between the Group
and PLC Group ICS risk profile.
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Compliance Risk
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 integrty of the markets which 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; recognisng that
whilst incdents are unwanted, they cannot be entirely avoided.
Roles and responsiblites
The Group Head, Conduct, Financal Crime and Compliance (Group Head, CFCC) as Risk Framework Owner for Compliance
Risk provides support to senior management on regulatory and compliance matters.
The Company addendum to the PLC Group Compliance RTF sets out the Group’s overall approach to the management of
Compliance Risk and the roles and responsiblites in respect of Compliance Risk for the Group. All activties 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 is the second-line that provides oversight and challenge of the first-line risk management activties that relate
to Compliance Risk.
Where Compliance Risk arises, or could arise, from failure to manage another Princpal Risk Type or sub-type, the Compliance
RTF outlines that the responsiblity rests with the respective Risk Framework Owner or control function to ensure that effective
oversight and challenge of the first line can be provided by the appropriate second-line function.
Each of the assigned second-line functions has responsiblites includng monitorng relevant regulatory developments from
Non-Financal Services regulators at both Group and country levels, policy development, implementaton, and validaton as
well as oversight and challenge of first-line processes and controls.
In additon, the Compliance RTF has been simplfied in 2021 via rationalzation of the Compliance Risk types.
Mitgation
We apply the PLC Group’s polices for management of Compliance Risk. The CFCC function develops and deploys relevant
polices and standards setting out requirements and controls for adherence by the Group to ensure continued compliance
with applicable laws and regulations. Through a combinaton of standard setting, risk assessment, control monitorng and
assurance activties, the Compliance Risk Framework Owner seeks to ensure that all polices are operating as expected to
mitgate the risk that they cover. The installaton of appropriate processes and controls is the primary tool for the mitgation
of Compliance Risk. In this, the requirements of the Operational and Technology Risk Type Framework are followed to ensure
a consistent approach to the management of processes and controls. Deployment of technological solutions to improve
efficencies and simplfy processes has continued in 2021. These include further expansion of digtal chatbots.
Governance committee oversight
At a management level, the Standard Chartered Bank Executive Risk Committee is responsible for the governance and
oversight of Compliance Risk, and relies on other key PLC Group level committees for the management of Compliance Risk
– in particular, the PLC Group Non-Financal Risk Committee and the Risk and CFCC Non-Financal Risk Committee.
Compliance Risk and the risk of non-compliance with laws and regulations resulting from failed processes and controls are
overseen by the respective Country, Business, Product and Function Non-Financal Risk Committees includng the Risk and
CFCC Non- Financal Risk Committee for CFCC owned processes. Relevant matters, as required, are further escalated to the
PLC Group Non-Financal Risk Committee and Standard Chartered Bank Executive Risk Committee. The Group also relies on
the PLC Group CFCC Oversight Group, while not a formal committee, to provide oversight of CFCC risks includng the effective
implementaton of the Compliance RTF.
At Court level, oversight of Compliance Risk is primarly provided by the Court Audit Committee, and also by the Court Risk
Committee for relevant issues.
Decison-making authorites and delegation
The Company addendum to the Compliance Risk Type Framework is the formal mechanism through which the delegation of
Compliance Risk authorites is made. The Group Head, CABM has the authority to delegate second-line responsiblites withn
the CFCC function to relevant and suitably qualifed indviduals.
Monitorng
The monitorng of controls designed to mitgate the risk of regulatory non-compliance in processes is governed in line with
the Operational and Technology Risk Type Framework. The Group has a monitorng and reporting process in place for
Compliance Risk, which includes escalation and reporting to Risk and CFCC Non-Financal Risk Committee, PLC Group
Non-Financal Risk Committee, Standard Chartered Bank Executive Risk Committee, Court Risk Committee and Court Audit
Committee, as appropriate.
Risk profile continued
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Risk profile continued
Stress testing
Stress testing and scenario analysis are used to assess capital requirements for Compliance Risk and form part of the overall
scenario analysis portfolio managed under the Operational and Technology Risk Type Framework. Specifc scenarios are
developed annually with collaboration between the business, which owns and manages the risk, and the CFCC function,
which is second line to incorporate signficant Compliance Risk tail events. This approach considers the impact of extreme but
plausible scenarios on the PLC Group’s Compliance Risk profile. The Group relies on these stress tests to understand the
Group-level vulnerabilties given the signficant overlap between the Group and PLC Group activties.
Financal Crime Risk
The Group defines Financal Crime Risk as the potential for legal or regulatory penalties, material financal loss or reputational
damage resulting from the failure to comply with applicable laws and regulations relating to internatonal sanctions,
anti-money laundering, anti-bribery & corruption, and fraud.
Risk Appetite Statement
The Group has no appetite for breaches in laws and regulations related to financal crime, recognisng that while incdents
are unwanted, they cannot be entirely avoided.
Roles and responsiblites
The Group Head, CFCC has overall responsiblity for Financal Crime Risk and is responsible for the establishment and
maintenance of effective systems and controls to meet legal and regulatory obligatons in respect of Financal Crime Risk.
The Group Head, CFCC is the Group’s Compliance and Money-Laundering Reporting Officer and performs the Financal
Conduct Authority (FCA) controlled function and senior management function in accordance with the requirements set out
by the FCA, includng those set out in their handbook on systems and controls. As the first line, the business unit process
owners have responsiblity for the applicaton of policy controls and the identficaton and measurement of risks relating to
financal crime. Business units must communicate risks and any policy non-compliance to the second line for review and
approval following the model for delegation of authority.
Mitgation
We apply the four PLC Group polices in support of the Financal Crime Risk Type Framework
•
Group Anti-Bribery and Corruption Policy
•
Group Anti-Money Laundering and Counter Terrorist Financng Policy
•
Group Sanctions Policy
•
Group Fraud Risk Management Policy
The PLC Group operates risk-based assessments and controls in support of its Financal Crime Risk programme, includng (but
not limted to):
•
Group Risk Assessment-the PLC Group monitors enterprise-wide Financal Crime Risks through the CFCC Risk Assessment
process consistng of Financal Crime Risk and Compliance Risk assessments. The Financal Crime Risk assessment is a PLC
Group-wide risk assessment undertaken annually to assess the inherent Financal Crime Risk exposures, and the associated
processes and controls by which these exposures are mitgated.
•
Financal Crime Surveillance – risk-based systems and processes to prevent and detect financal crime.
The strength of controls is tested and assessed through the PLC Group’s Operational and Technology RTF, in additon to
oversight by CFCC Assurance and Group Internal Audit.
Governance committee oversight
At Court level, the Court Risk Committee oversees the effective management of Financal Crime Risk. At the executive level,
the Standard Chartered Bank Executive Risk Committee is responsible for the governance and oversight of Financal Crime
Risk for the Group, and relies on other key PLC Group committees for the management of Financal Crime Risk, in particular
the PLC Group Financal Crime Risk Committee and the PLC Group Non-Financal Risk Committee for Fraud Risk. Both
committees are responsible for ensuring effective oversight of Operational Risk relating to Financal Crime Risk and Fraud
Risk, respectively, throughout the PLC Group.
Decison-making authorites and delegation
The Company addendum to the PLC Group Financal Crime Risk Type Framework is the formal mechanism through which the
delegation of Financal Crime Risk authorites is made. The Group Head, CFCC is the Risk Framework Owner for Financal
Crime Risk under the Group’s Risk Management Framework. Certain aspects of Financal Crime Compliance, second-line
oversight and challenge, are delegated withn the CFCC function. Approval frameworks are in place to allow for risk-based
decisons on client onboarding, potential breaches of sanctions regulation or policy, situatons of potential money laundering
(and terrorist financng), bribery and corruption or internal and external fraud.
Monitorng
The Group monitors Financal Crime Risk compliance against a set of Risk Appetite metrics that are approved by the Court.
These metrics are reviewed periodcally and reported regularly to the Standard Chartered Bank Executive Risk Committee
and Court Risk Committee.
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Stress testing
The assessment of Financal Crime vulnerabilties under stressed conditons or extreme events with a low likelhood of
occurring is carried out through enterprise stress testing conducted at PLC Group level. The Group relies on these stress tests
to understand the Group level vulnerabilties given the signficant overlap between the Group and PLC Group activties.
Model Risk
The Group defines Model Risk as potential loss that may occur as a consequence of decisons or the risk of mis-estimaton
that could be princpally based on the output of models, due to errors in the development, implementaton or use of such
models.
Risk Appetite Statement
The Group has no appetite for material adverse implcations arisng from misuse of models or errors in the development or
implementaton of models; whilst accepting model uncertainty.
Roles and responsiblites
The Global Head, Enterprise Risk Management is the Risk Framework Owner for Model Risk under the Group’s Risk
Management Framework. Responsiblity for the oversight and implementaton of the Model Risk Type Framework is
delegated to the Global Head, Model Risk Management.
The PLC Group’s Model Risk Type Framework sets out clear accountabilty and roles for Model Risk management through a
three lines of defence model. First-line ownership of Model Risk resides with Model Sponsors, who are the business or function
heads and assign a Model Owner for each model. Model Owners mainly represent model developers and users, and are
responsible for end-to-end model development, ensuring model performance through regular model monitorng, and
communicatng model limtations, model assumptions and risks. Model Owners also coordinate the submisson of models for
validaton and approval and ensure appropriate model implementaton and use. Second-line oversight is provided by Model
Risk Management, which comprises Group Model Validaton and Model Risk Policy and Governance.
Group Model Validaton independently reviews and grades models, in line with design objectves, business uses and
compliance requirements, and highlghts identfied model risks by raisng model related issues. The Model Risk Policy and
Governance team provide oversight of Model Risk activties, performing regular Model Risk Assessment and risk profile
reporting to senior management.
We will rely on the PLC Group’s workplan and embed model risk into the Group’s risk management approach accordingly.
Mitgation
We apply the PLC Group polices for Model Risk Management. The Model Risk policy and standards define requirements for
model development and validaton activties, includng regular model performance monitorng. Any model issues or
deficencies identfied through the validaton process are mitgated through the applicaton of model monitorng, model
overlays and/or a model redevelopment plan, which undergo 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 Risk Type Framework, with remediaton plans
implemented where necessary.
Governance committee oversight
At Court level, the Court Risk Committee exercises oversight of Model Risk withn the Group. At the executive level, the
Standard Chartered Bank Executive Risk Committee is responsible for the governance and oversight of Model Risk for the
Group and relies on other PLC Group committees to ensure effective measurement and management of Model Risk, in
particular the Model Risk Committee. Sub-committees such as the Credit Model Assessment Committee and Traded Risk
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.
Decison-making authorites and delegation
The Company addendum to the PLC Group Model Risk Type Framework is the formal mechanism through which the
delegation of Model Risk authorites is made. The Global Head, Enterprise Risk Management delegates authorites to
designated indviduals or Policy Owners through the Company addendum to RTF. 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 and indvidual designated model approvers for less material models.
Monitorng
The Court approved the Risk Appetite metrics for Model Risk in 2021. Adherence to Model Risk Appetite and any threshold
breaches will be reported regularly to the Court Risk Committee and SC Bank Executive Risk Committee. These metrics and
thresholds will be reviewed on an annual basis to ensure that threshold calibraton remains appropriate and the themes are
adequately covering the current risks.
Models undergo regular monitorng based on their level of perceived Model Risk, with monitorng 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, identfied model issues and remediaton plans.
These are presented for discusson at the Model Risk governance committees on a regular basis.
Risk profile continued
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Risk profile continued
Stress testing
Models play an integral role in the PLC Group’s stress testing and are rigorously user-tested to ensure that they are fit-for-use
under stressed market conditons. Compliance with Model Risk management requirements and regulatory guidelnes are
also assessed as part of each stress test, with any identfied gaps mitgated through model overlays and defined remediaton
plans.
Reputational & Sustainablity Risk
The Group defines Reputational and Sustainablity Risk as the potential for damage to the franchise (such as loss of trust,
earnings or market capitalsation), because of stakeholders taking a negative view of the Group through actual or perceived
actions or inactons, includng a failure to uphold responsible business conduct or lapses in our commitment to do no
signficant environmental and social harm through our client, third-party relationshps or our own operations.
Risk Appetite Statement
The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activty is
satisfactorly assessed and managed by the appropriate level of management and governance oversight. This includes a
potential failure to uphold responsible business conduct or lapses in our commitment to do no signficant environmental and
social harm.
Sustainablity Risk continues to be an area of growing importance, drivng a need for strategic transformation across business
activties and risk management to ensure that we uphold the princples of Responsible Business Conduct and continue to do
the right thing for our stakeholders, the environment and affected communites. Throughout 2021, the PLC Group has laid the
foundation to integrate Sustainablity Risk management for clients, third parties and our operations and continued to invest
in infrastructure and technology to keep pace with emerging ESG regulatory obligatons and accelerating commitments
across our markets.
Roles and responsiblites
The Global Head, Enterprise Risk Management is the Risk Framework Owner for Reputational and Sustainablity Risk under
the Group’s Risk Management Framework.
The responsiblity for Reputational and Sustainablity Risk management is delegated to Reputational and Sustainablity Risk
Leads in ERM as well as Chief Risk Officers at region, country and client-business levels. They constitute the second line of
defence, overseeing and challenging the first line of defence, which resides with the Chief Executive Officers, Business Heads,
Product Heads and Function Heads in respect of risk management activties of reputational and sustainablity-related risks
respectively. The Environmental and Social Risk Management team (ESRM), which is in the first line of defence, also provides
dedicated support on the management of environmental and social risks and impacts arisng from the Group’s client
relationshps and transactions.
Mitgation
In line with the princples of Responsible Business Conduct and Do No Signficant Harm, the Group deems Reputational and
Sustainablity Risk to be driven by:
•
negative shifts in stakeholder perceptions due to decisons related to clients, products, transactions, third parties and
strategic coverage
•
potential material harm or degradation to the natural environment (environmental) through actions/inactons of
the Group
•
potential material harm to indviduals or communites (social) risks through actions/inactons of the Group
We apply the PLC Group’s polices for management of Reputational and Sustainablity Risk. The PLC Group’s Reputational
Risk policy sets out the princpal sources of Reputational Risk driven by negative shifts in stakeholder perceptions as well as
responsiblites, control and oversight standards for identfying, assessing, escalating and effectively managing Reputational
Risk. The PLC Group takes a structured approach to the assessment of risks associated with how indvidual client, transaction,
product and strategic coverage decisons may affect perceptions of the organisaton and its activties, based on explict
princples includng, but not limted to gambling, defence and dual use goods. Whenever potential for stakeholder concerns is
identfied, issues are subject to prior approval by a management authority commensurate with the materialty of matters
being considered. Such authorites may accept or decline the risk or impose conditons upon proposals, to protect the PLC
Group’s reputation.
The PLC Group’s Sustainablity Risk policy sets out the requirements and responsiblites for managing environmental and
social risks for the Group’s operations, clients and third parties, as guided by various industry standards such as the OECD’s
Due Dilgence Guidance for Responsible Business Conduct, Equator Princples, UN Sustainable Development Goals and the
Paris Agreement.
Through our operations, the PLC Group seeks to minmise its impact on the environment and have targets to reduce energy,
water and waste. Clients are expected to adhere to minmum regulatory and compliance requirements, includng critera
from the PLC Group’s Positon Statements. Suppliers must comply with the PLC Group’s Supplier Charter which sets out the PLC
Group’s expectations on ethics, anti-bribery and corruption, human rights, environmental, health and safety standards,
labour and protection of the environment.
Standard Chartered Bank
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142
Governance committee oversight
The PLC’s Culture and Sustainablity Committee provides oversight across PLC Group for our Sustainablity strategy while the
Court Risk Committee oversees Reputational and Sustainablity Risk as part of the Group RMF. The Standard Chartered Bank
Executive Risk Committee provides executive-level committee oversight and relies on other key PLC Group committees for the
effective management of Reputational and Sustainablity Risk, in particular the PLC Group Responsiblity and Reputational
Risk Committee (GRRRC), the Sustainable Finance Governance Committee and the PLC Group Non-Financal Risk Committee.
Decison-making authorites and delegation
The Company addendum to the PLC Group’s Reputational and Sustainablity RTF is the formal mechanism through which the
delegation of Reputational and Sustainablity Risk authorites is made. The Global Head, Enterprise Risk Management
delegates risk acceptance authorites for stakeholder perception risks to designated indviduals 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 must review and
support the risk assessments for clients and transactions and escalate to the Reputational and Sustainablity Risk leads as
required.
Monitorng
Reputational and Sustainablity Risk polices and standards are applicable to all PLC Group entites. However, local regulators
in some markets may impose additonal requirements on how banks manage and track Reputational and Sustainablity Risk.
In such cases, these are complied with in additon to PLC Group polices and standards.
Exposure to stakeholder perception risks arisng from transactions, clients, products and strategic coverage are monitored
through established triggers outlined in risk materialty matrices to prompt the right levels of risk-based consideraton by the
first line and escalations to the second line where necessary. Risk acceptance decisons and thematic trends are also being
reviewed on a periodc basis.
Exposure to Sustainablity Risk is monitored through triggers embedded withn the first-line processes where environmental
and social risks are considered for clients and transactions via the Environmental and Social Risk Assessments; and
considered for vendors in our supply chain through the Modern Slavery questionnares.
In 2021, the Group has approved new Risk Appetite metrics for Environmental and Social risks. New metrics for modern slavery
risks in our supply chain was also introduced at PLC Group level.
Stress testing
Reputational Risk outcomes are taken into account in enterprise stress tests, and incorporated into the PLC Group’s stress
testing scenarios. For example, the PLC Group might consider what impact a hypothetical event leading to loss of confidence
among liqudity providers in a particular market might have, or what the implcations might be for supporting part of the
organisaton in order to protect the brand. As Sustainablity Risk continues to evolve as an area of emerging regulatory focus
with various markets developing ESG regulatory guidance, we are keeping pace with external developments to enable us to
explore meaningful scenario analysis with the aim of advancing Reputational and Sustainablity Risk management.
Climate Risk
The Group recognises Climate Risk as an Integrated Risk Type. Climate Risk is defined as the potential for financal loss and
non-financal detriments arisng from climate change and society’s response to it.
Risk Appetite Statement
The Group aims to measure and manage financal and non-financal risks from climate change, and reduce emissons
related to our own activties and those related to the financng of clients in alignment with the Paris Agreement.
Climate Risk has been recognised by the PLC Group as an emerging risk since 2017 and was elevated to an Integrated Risk
Type (previously known as material cross-cutting risk) withn the RMF our central risk framework in 2019. The PLC Group has
introduced Climate Risk into mainstream risk management in alignment with the Bank of England’s Supervisory Statement
3/19 requirements and in 2021 greatly improved our scenario analysis and stress testing abilties to deliver the 2021 Climate
Biennal Exploratory Scenario (CBES). However, it is still a relatively nascent risk area which will mature and stabilse over the
years to come. We will rely on the PLC Group’s workplan and integrate Climate Risk into the Group’s risk management
approach accordingly.
Roles and responsiblites
The three lines of defence model as per the Group’s Risk Management Framework applies to Climate Risk. The Group Chief
Risk Officer (GCRO) has the ultimate second-line and senior management responsiblity for Climate Risk. The GCRO is
supported by the Global Head, Enterprise Risk Management who has day-to-day oversight and central responsiblity for
second-line Climate Risk activties. As Climate Risk is integrated into the relevant Princpal Risk Types (PRTs), second-line
responsiblites lie with the Risk Framework Owner (at Group, regional and country level), with subject matter expertise
support from the central Climate Risk team.
Risk profile continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
143
Risk profile continued
Mitgation
As an Integrated Risk Type manifests through other PRTs, risk mitgation activties are specifc to indvidual PRTs. The Group
has undertaken intial development and integraton of Climate Risk into PRT processes. Climate Risk assessments are
considered as part of Reputational and Sustainablity transaction reviews for clients and transactions in high carbon sectors.
We have directly engaged with clients on their adaptation and mitgation plans using client level Climate Risk questionnares
and a first phase of integraton into credit decisoning process is underway for CCIB Credit Risk. As part of quarterly credit
portfolio reviews in CPBB, physical risk assessments for the residental mortgage portfolios are also being monitored for
concentration levels. Withn Traded Risk, a physical risk scenario is now part of their stress testing framework. While the focus
for Operational and Technology Risk, has been on Resilence and Third-Party Risk management. Relevant polices and
standards across PRTs have been updated to factor in Climate Risk consideratons and a focus area in 2022 will be to deliver
the implementaton of these requirements. The Group will adopt changes to the relevant polices and standards across PRTs
to factor in climate risk consideratons, where applicable, via the Company addenda.
Governance committee oversight
Court-level oversight is exercised through the Court Risk Committee (CRC), and regular Climate Risk updates are provided to
the Court and CRC. At the executive level, the Standard Chartered Bank Executive Risk Committee oversees implementaton
of the Climate Risk workplan and relies on other key PLC Group committees and fora for the management of Climate Risk,
includng the Climate Risk Management Forum. The Climate Risk Management Forum, appointed by the GCRO, consists of
senior representatives from the business, risk, strategy and other functions such as sustainablity and legal. The Climate Risk
Management Forum meets quarterly to discuss development and implementaton of the Climate Risk as it continues moves
from development to BAU, and to provide structured governance around engagement with the relevant PRTs impacted by
Climate Risk. Through 2022, the PLC Group will strengthen country and regional governance oversight for the Climate Risk
profile across our key markets.
Tools and methodologies
Applying existng risk management tools to quantify Climate Risk is challenging given inherent data and methodology
challenges, includng the need to be forward-looking over long time horizons. To quantify climate physical and transiton risk
we leverage and have invested in a number of areas, includng tools and partnerships at the PLC Group level:
•
Munich Re – we are using Munich Re’s physical risk assessment tool, which is built on extensive re-insurance experience
•
Baringa Partners – we are using Baringa’s flagship climate models to understand climate scenarios, and compute transiton
risk and temperature alignment
•
Standard & Poor – we are leveraging S&P and Trucost’s wealth of climate data covering asset locations, energy mixes and
emissons
•
Imperial College – we are leveraging Imperial’s academic expertise to advance our understanding of climate science, upskill
our staff and senior management, and progress the state of independent research on climate risks with an acute focus on
emerging markets
Decison-making authorites and delegation
The Global Head, Enterprise Risk Management is supported by a centralised Climate Risk team withn the ERM function. The
Global Head, Climate Risk and Net Zero Oversight is responsible for ensuring and executing the delivery of the Climate Risk
workplan which will define decison-making authorites and delegations across the PLC Group.
Monitorng
The Climate Risk Appetite Statement is approved and reviewed annually by the Court.
The PLC Group has developed its first-generation Climate Risk reporting and Management Team Level Risk Appetite metrics.
The first version of these metrics was shared with the relevant committees as part of the PLC Group Risk Information Report
and Board Risk Information Report, respectively, in September 2021. The management informaton is also being progressively
rolled out at the regional and country level and will be considered for roll out at the Group level accordingly.
Stress testing
Climate Risk intensfies over time, and future global temperature rises depend on today’s transiton pathway. Considerng
different transiton scenarios is crucial to assessing Climate Risk over the next 10, 20 and 50 years. Stress testing and scenario
analysis are used to assess capital requirements for Climate Risk and since 2020 physical and transiton risks have been
included in the PLC Group Internal Capital Adequacy Assessment Process (ICAAP). In 2021, the PLC Group undertook a
number of Climate Risk stress tests, includng by the Hong Kong Monetary Authority and the Bank of England’s Climate
Biennal Exploratory Scenario (CBES). This required signficant client engagement and helped grow our understanding and
management of Climate Risk. We will rely on these stress tests to understand the Group level vulnerabilties given the
signficant overlap between the Group and PLC Group’s activties.
In 2022, the PLC Group intends to develop management scenarios, strengthening business strategy and financal planning
and supporting the PLC Group’s net zero journey.
Details on the PLC Group’s Taskforce on Climate-related Financal Disclosures can be found on sc.com/tcfd
Standard Chartered Bank
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144
Risk profile continued
Emerging Risks
In additon to our Princpal Risk Types that we manage in line with the PLC Group Risk Type Frameworks, polices and the
Court approved Risk Appetite, we also maintan an inventory of emerging risks. Emerging risks refer to unpredictable and
uncontrollable events with the potential to materially impact our business. These include near-term risks that are on the
horizon and can be measured or mitgated to some extent, as well as longer-term uncertaintes that are on the radar but not
yet fully measurable.
In 2021, we undertook a thorough review of our Emerging Risks, using the approach described in the Risk Management
Framework section (page 122 to 128). The key results of the review are detailed below.
Key changes to our emerging risks:
The following items have been removed as emerging risks:
•
‘Middle East geopolitcal tensions’ – The risk has been removed as the immedate impact to the Group’s credit portfolio is
manageable
•
‘Interbank Offered Rate discontnuation and transiton’ – This risk has been removed given the PLC Group has a well-
established global IBOR Transiton Programme to consider all aspects of the transiton and how risks from the transiton
can be mitgated
The following items have been amended or added as new emerging risks:
•
‘Crystallisaton of inflaton fears’ - Interest rates have already increased or are likely to rise in several countries as central
banks respond to inflatonary pressure. Drivers of price increases include shortages of materials and labour, increased
demand as economic recoveries take hold and long-term monetary stimulus, with growing acceptance that the
inflatonary shock will last longer than intially expected
•
‘Energy security’ - Increased industral demand and accelerated transitons to cleaner energy sources have put a strain on
supply lines. This has increased tensions between nations as power shifts towards energy exporters, and energy security
becomes questionable across developed markets and emerging markets alike. A lack of investment by oil producers as we
transiton could also lead to an increase in oil prices in the short term
•
‘Supply chain dislocatons’ - Global supply chains have been disrupted both by COVID-19 lockdowns and deglobalisaton.
As economies recover there are shortages in some key source materials and delivery delays which are affecting many
industres’ abilty to meet the rapid increase in demand
•
‘Expanding stakeholder expectations for environmental, social and corporate governance (ESG)’ – Added as an emerging
risk to reflect the broader sustainablity agenda of the Group and capture ESG concerns beyond Climate Risk such as
biodversity loss and depletion of natural resources, which are increasng areas of focus for regulators, investors and
non-governmental organisatons. The speed of transiton to meet the requirements could be faster in developed markets
•
‘Expanding array of global tensions’ – Expanded to cover a proliferaton of global politcal and economic agenda items
that create disrupton and potential flashpoints between countries. These are reshaping global politcal alliances and
disruptng traditonal economic corridors
•
‘Adapting to endemic COVID-19 and a K-shaped recovery’ - Encapsulates the shift towards livng with COVID-19 and what
the new post-COVID normal will look like. Varying vaccinaton rates and levels of economic stimulus have widened the
recovery gap and threatened a K-shaped global recovery, where countries and sectors recover at different rates
depending on their abilty to adapt to a post-COVID world
•
‘New business structures, channels and competiton’ - Reflects the linkage between the Group’s increasng reliance on
partnerships and alliances in exploring new technologies and digtal enhancement, and the heightened risks that are
intrnsically linked to such activties. Digtal assets are also covered withn this emerging risk
•
‘Talent pools of the future’ – Expanded to consider the risks of widenng skills gaps and shiftng expectations of the future
workforce, beyond just the practical challenges of increased remote working
Our list of emerging risks, based on our current knowledge and assumptions, is set out below, with our subjectve assessment
of their impact, likelhood and velocity of change. This reflects the latest internal assessment of material risks that the Group
faces as identfied by senior management. This list is not designed to be exhaustive and there may be additonal risks which
could materialse or have an adverse effect on the Group.
Our mitgation approach for these risks may not elimnate them but shows the Group’s attempt to reduce or manage the risk.
As certain risks develop and materialse over time, management will take appropriate steps to mitgate the risk based on its
impact on the Group.
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Risk profile continued
Geopolitcal consideratons (Risk ranked according to severity)
Emerging Risk
Risk trend since
2020
1
Context How these are mitgated/next steps
Expanding
array of global
tensions
2
Potential
impact:
High
Likelhood:
Medium
Velocity of
change:
Moderate
• Relations between China and the West remain fragile.
The US and China are engaged in a security competiton
that has ramifcations across many aspects of their
complex interdependences
• There has also been increasng volatilty withn China, with
turbulence in the property development sector and
targeted legislaton for specifc industres such as
education, technology and real estate, which could have
spillover effects into other markets given the size of
China’s economy
• Tensions are also increasng regarding Russia’s presence
on the Ukrainan border. Although the Group’s exposure to
the region is limted, the potential impact on the rest of
the world from economic or miltary action could be
signficant, and cause further fractures between East and
West
• In additon, tensions are risng between historc allies
withn NATO and the G7, around flashpoints such as the
withdrawal from Afghanistan, the launch of AUKUS, and
tensions on the Korean peninsula. These may intensfy
with elections due in some major countries in 2022
• Areas of collaboration exist – such as agreements made
at the COP26 climate summit – but there are a number of
issues that remain, includng public health and safety,
trade, national security, sovereignty, and territoral
disputes
• A focus on domestic recovery in the wake of COVID-19 has
led to protectionst polices and disrupton to global supply
chains
• Some governments have used the pandemic as an
opportunity to consolidate power, which could lead to
further tension and potential retaliatory actions
• Increased demand has created shortages in some key
sectors, such as electronics and energy, which could tip the
balance of power towards producers. Investment in local
technological infrastructure has become a key focus to
reduce dependence on external counterparties and
ensure national security
• The PLC Group, with its notable exposure and presence in
China, faces a high risk of being caught in the crossfire of
escalating geopolitcal tensions between the East and
West
• The Group also derives signficant revenues from
supporting cross-border trade and material offshore
support operations
• Sharp slowdowns in the US, China, and
more broadly, world trade and global
growth are a feature of PLC Group, Solo
and country level stress scenarios. The
Group relies on these stress tests to assess
key Group level vulnerabilties and to be
able to implement timely interventons.
• Detailed portfolio reviews are conducted
at a PLC Group, country and business level
on an ongoing basis, most recently
regarding increasng tensions around
Ukraine, and action is taken where
necessary
• We are closely monitorng the China-G7
relationshp and assessing the impact on
our business with teams in the first and
second line of defence
• We remain viglant in monitorng
geopolitcal relationshps
• Increased scrutiny is applied when
onboarding clients in sensitve industres
and in ensuring compliance with sanctions
requirements
Energy security
Potential
impact:
High
Likelhood:
Medium
Velocity of
change:
Fast
• Increased demand for energy, bottlenecks in the
production of renewables and pressure to accelerate the
transiton to new clean sources are drivng an emerging
energy supply shortage, causing price inflaton and
exacerbating disruptons in global supply chains
• Emerging markets which rely on imports of energy risk
being disadvantaged due to the massive energy needs
required to develop
• Developed nations also face a trade-off, as pressure to
adopt clean energy has constrained their abilty to rely on
traditonal sources to meet demand, likely leading to
signficant price volatilty until production capacity for
renewable sources is sufficent to meet the energy gap
• There are increasng geopolitcal tensions as the balance
of power shifts towards energy exporters. The reluctance
of some nations to commit to climate goals also adds to
pressure for a global transiton, and the politcal
advantage accruing to traditonal oil-producing nations
may further complicate the goals of a net zero economy
• The Group relies on stress tests conducted
at a PLC Group, Solo and country level,
where an oil shock scenario was developed
• Sovereign ratings, outlooks and country risk
limts are regularly monitored with periodc
updates to senior stakeholders
• The PLC Group is implementng a Climate
Risk work plan and aims to embed climate
risks across all relevant princpal risks in
2022. This includes scenario analysis and
stress testing capabilty to understand
financal risks and opportunites from
climate change
1 The risk trend refers to the overall risk score trend, which is a combinaton of potential impact, likelhood and velocity of change
2 This theme was previously covered under ‘US-China trade tensions driven by geopolitcs and trade imbalance’
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Risk profile continued
Macroeconomic consideratons (Risk ranked according to severity)
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
Crystallisaton
of inflaton
fears
3
Potential
impact:
High
Likelhood:
High
Velocity of
change:
Moderate
• In the second part of 2021 several key developed
economies experienced rates of inflaton that far
exceeded central bank forecasts. Several central banks
have acknowledged their surprise and altered their stance
on monetary policy, starting to raise rates or signallng
their willngness to do so
• There is a risk that the confluence of supply and demand
pressures could have effects on inflaton that are longer-
lasting than expected
• The easing of COVID-19 restrictons has created a
demand surge in developed markets economies that have
reopened, and labour supply shortages have
compounded price pressures
• There is still a lack of firm consensus withn the industry on
some key inflaton questions, such as whether it is
transitory or unlikely to ease in the near future, caused by
excess demand or limted supply, and whether it is limted
to specifc industres or a general problem for the
economy. Risng interest rates also introduce a risk of a
stagflation in 2022 where economic growth is muted but
inflaton persists
• It is possible that monetary policy tightenng in Western
countries could lead to a depreciaton in emerging
markets currencies versus the US dollar, increasng debt
refinancng costs for emerging market economies. Sharp
increases in the price of energy and agricultural products
also pose risks to emerging markets that will face higher
import costs, feeding into higher domestic inflaton
• The prices of risky financal assets have been artifcially
supported through the criss following multi-trillon dollar
central bank asset purchases and record low interest
rates. As fiscal and monetary support is withdrawn and
countries start to raise interest rates, there is an elevated
risk of widespread price corrections
• The Group relies on stress tests conducted
at a PLC Group, Solo and country level to
assess the impact of a severe stress in the
global economy associated with a sharp
slow-down
• Both PLC Group-wide management and
Traded Risk scenarios are being developed
to examine the impact of a rapid build-up
in inflatonary pressures around the world.
• Sovereign ratings, outlooks and Country
Risk limts are regularly monitored with
periodc updates to senior stakeholders
3 This theme was previously covered under ‘Unintended consequences of accommodative monetary policy and the risk of asset bubbles and inflaton’
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Risk profile continued
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
Adapting to
endemic
COVID-19 and
a K-shaped
recovery
4,5
Potential
impact:
High
Likelhood:
High
Velocity of
change:
Moderate
• Countries with high vaccinaton rates are moving towards
accepting COVID-19 as endemic. Nevertheless, domestic
polices on managing the spread of the virus differ vastly
among nations, and the longer-term impacts (includng
health and mental wellbeing) are still uncertain
• The effectiveness of vaccines is confirmed to dimnish
after several months, thus the policy response to new
waves of infecton or new variants tends to quickly revert
to forms of restricton, includng lockdowns, as seen with
the recent Omicron variant
• COVID-19 continues to disrupt economies, however
another notable emerging effect is on politcs. The
COVID-19 theme is increasngly inter-woven with both
domestic social unrest and the geopolitcal agenda
• Differences in the pace and scale of vaccine rollouts and
disparties in financal resources have widened the
recovery gap and threaten a K-shaped global recovery,
where countries or sectors recover at a different rate
depending on their abilty to adapt to a post-COVID
world
• Emerging markets have lagged behind in their abilty to
combat the pandemic which may result in longer-term
economic scarring. There has been limted fiscal stimulus
for the third world, and short-term support may take
precedence over longer-term structural transformation,
which is especially relevant for the Group’s footprint
• Deeper structural transformations of traditonal economic
systems are being observed. A shift in priorties,
particularly among younger generations, may lead to
fundamental changes in the workforce, includng a
permanent drop in the labour supply and a desire to move
away from traditonal industres. Vaccine mandates are
causing domestic tensions, and may lead to labour
shortages in some states or industres
• There is a risk that further variants or other diseases may
emerge
• A severe stress in the global economy
associated with a sharp slow-down is a
feature of the stress tests conducted at a
PLC Group, Solo and country level
• Sensitve sectors (e.g. aviaton and
hospitalty) are regularly reviewed and
exposures to these sectors are actively
managed as part of Credit Risk reviews
• Exposures that could result in material
credit imparment charges and risk
weighted asset inflaton under stress tests
are regularly reviewed and actively
managed
• The Group’s priorty remains the health
and safety of our clients and employees
and continuaton of normal operations by
leveraging our robust Business Continuty
Plans which enable the majorty of our
colleagues to work remotely where
possible
Supply chain
dislocatons
6
Potential
impact:
High
Likelhood:
Medium
Velocity of
change:
Moderate
• The emergence of supply chain disruptons can be
attributed to a combinaton of demand and supply
factors, some of which may prove to be transitory while
others remain more entrenched. A key risk is that supply
chain disruptons raise inflaton expectations on a
sustained basis, prompting central banks to tighten
monetary policy
• Pandemic-related changes, such as a surge in demand for
electronics and furniture, has resulted in a rundown of
inventores. Furthermore, the shift towards online
shopping tends to be more import intensve and Asia-
focused, thereby exacerbating shippng backlogs
• Severe weather events have caused a reduction in
supplies of natural gas and some agricultural products.
Supply of goods such as semi-conductors has also been
hampered by labour lockdowns and shortages, licensng
regulations and backlogs at ports
• As well as disrupton to existng chains, there may be a
fundamental shift in the supply chains in the future.
Companies may be required to set up parallel supply
chains as contingences, as well as moving production
closer to the end user. Some of this may also be mandated
by protectionst polices which drive fragmentation for
strategic industres
• Exposures that may result in material credit
imparment and increased risk-weighted
assets are closely monitored and actively
managed
• Sectors which exhibt high supply chain
pressure and vulnerabilty (e.g. electronics)
are regularly reviewed and exposures to
these sectors are actively managed as part
of Credit Risk reviews
• We actively utilse Credit Risk mitgation
techniques includng credit insurance and
collateral
4 A K-shaped global recovery occurs when countries or sectors recover at different rates following a recession
5 This theme was previously covered under ‘The COVID-19 outbreak and the emergence of new diseases’
6 This theme was previously covered under ‘Rise of populism and nationalsm driven by unemployment and a shift in global supply chains’
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Risk profile continued
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
Emerging
markets
sovereign risk
7
Potential
impact:
Medium
Likelhood:
Medium
Velocity of
change:
Moderate
• COVID-19, and the response to it, have exacerbated
already deterioratng market conditons, causing liqudity
and potentially solvency issues for a number of the world’s
poorest countries
• Declinng government revenue combined with higher
spending, has raised government deficts and debt to
unprecedented levels across all country income groups
• Several Emerging Markets have seen negative sovereign
rating and country risk limt actions, reflecting the higher
level of sovereign risk as compared to pre-pandemic levels
• 48 countries have requested particpation in the G20 Debt
Service Suspension Initative (DSSI), while three countries
(Zambia, Ethiopa, Chad) have requested debt
restructuring as part of the Common Framework beyond
DSSI
• A sharp tightenng of financal conditons, possibly
triggered by a rise in bond yields in advanced economies
or a deterioraton in global risk sentiment, could push up
debt-servicng costs for emerging markets
• Exposures that may result in material credit
imparment and increased risk-weighted
assets are closely monitored and actively
managed
• We rely on stress tests and portfolio
reviews conducted at a PLC Group, Solo,
country, and business level to assess the
impact of extreme but plausible events
and manage the portfolio accordingly.
• We actively utilse Credit Risk mitgation
techniques includng credit insurance and
collateral
• We actively track the particpation of our
footprint countries in G20’s Common
Framework Agreement and Debt Service
Suspension Initative for Debt Treatments
and the associated exposure
7 This theme was previously covered under ‘Risng sovereign default risk and private sector creditor particpation in the Common Framework Agreement’
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
149
Risk profile continued
Environmental and social consideratons (Risk ranked according to severity)
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
Expanding
stakeholder
expectations
for
environmental,
social and
corporate
(ESG)
governance
Potential
impact:
High
Likelhood:
High
Velocity of
change:
Fast
• There are risks if the Group is unable to adapt to new
regulation quickly, as well as meeting publicly stated
sustainablity goals and helping clients transiton
• Environmental targets are being incorporated into many
countries’ domestic policy, with increased pressure to set
ambitous sustainablity goals. However, complexity
remains in drivng sustainablity across diverse markets
which priortise topics differently
• Climate change is a factor in biodversity loss, pollution
and depletion of resources. This poses a risk to food and
health systems, energy security and the disrupton of
supply chains. Understanding of other environmental risks
remains limted
• Sustainable Finance and Climate Risk continue as a core
focus of regulatory policy making across all jursdictons,
enhanced by COP26-related intiatves. Corporations are
expected to incorporate environmental risks and
sustainablity in their business models. This exposes the
Group to transiton risks and emerging themes in
regulatory compliance
• Disclosure requirements are increasng each year as
regulators and other stakeholders require greater
transparency. There is a clear trend toward mandatory
disclosures with developed markets leading the way. We
expect the regulatory focus to gradually expand beyond
climate to other environmental risks. There is risk of
fragmentation of requirements across regions over time
• The speed of transiton to meet requirements could be
faster for UK entites than those in emerging markets, and
we are already observing fragmentation in the pace and
scale of adoption around the world
• Banks are already making commercial decisons on
account of emissons and lack of credible reduction
targets. At the same time, companies are being
celebrated for progress around reducing emissons despite
the presence of other social and governance risks –
highlghting a tension between Environmental and Social
risk assessments. This ‘carbon-tunnel-vison’, combined
with increasng fragmentation in ESG taxonomies, may
lead to unintended consequences
• The COVID-19 pandemic, climate change and geopolitcal
risk have underscored the importance of supply chain
transparency. This is creating pressure to expand supply
chain metrics to include greater visbilty around human
rights issues, carbon emissons, and governance factors
• We remain committed to being a
responsible bank, minmisng our
environmental impact and embedding our
values through our strengthened Positon
Statements for sensitve sectors and a list
of Prohibted Activties that the Group will
not finance
• The PLC Group proactively particpates in
industry intiatves and framework
development on both climate and
biodversity, to help inform our internal
efforts and capabilties. Increased scrutiny
is applied to environmental and social
standards in providng services to clients
• We rely on detailed portfolio reviews and
stress tests conducted at a PLC Group, Solo
and country level to test the resilence to
climate-related risks in line with local
regulatory requirements and take action
where necessary
• The PLC Group has released net zero
ambitons and specifc emisson reduction
targets for carbon sensitve sectors. The
PLC Group’s TCFD report includes more
details on Climate Risk and net zero
• Our Green and Sustainable Product
Framework, developed with the support of
Sustainalytcs, has been informed by
industry and supervisory princples and
standards such as the Green Bond
Princples and EU Taxonomy for
sustainable activties
• We have defined three Stands to use
unique abilty to work across boundaries
and connect capital, people, ideas and
best practices to help address some key
socioeconomc challenges and enable a
just transiton
• The PLC Group is developing an approach
to further integrate ESG risk management
across the ERMF
+ Read more about our positon statements:
sc.com/positonstatements
Social unrest
8
Potential
impact:
Medium
Likelhood:
Medium
Velocity of
change:
Moderate
• Governmental restrictons on movement as a result of the
COVID-19 pandemic, combined with longer-term trends of
resurgent nationalsm and ideology, have heightened
existng social tensions
• Vaccine mandates are causing domestic tensions and
may lead to labour shortages in some states or industres
such as healthcare and aviaton. There have also been
tensions in some markets where lockdowns have been
reintroduced despite higher vaccinaton rates
• In additon, COVID-19 has continued to exacerbate
economic equality, includng reducing the availablity or
quality of work. Collectively, these issues have given rise to
societal disturbances in a number of markets. There have
also been thematic disturbances connected to a common
cause such as Black Lives Matter, or climate protests
around high-profile events such as the COP26 climate
summit
• Longer term impacts of climate change may force mass
relocation in some areas which could heighten local
tensions
• The Group is committed to managing
human rights impacts through our social
safeguards in our Positon Statements.
• The PLC Group’s Human Rights Working
Group has developed an approach to
monitor, report and escalate human rights
issues to our Management Team for
consideraton with our PLC Group’s
strategy
• We continue to support our operations
and communites who are greatly
impacted by COVID-19 through various aid
programmes and financng
• The Group relies on portfolio reviews
conducted at a PLC Group, country, and
business level to assess the impact of
extreme but plausible geopolitcal events
8 This theme was previously covered under ‘Social unrest driven by economic downturns, water crises, medical provison and food security’
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
150
Risk profile continued
Technological consideratons (Risk ranked according to severity)
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
Data and
digtal
9
Potential
impact:
High
Likelhood:
High
Velocity of
change:
Moderate
• Regulatory requirements and client expectations are
increasng in areas such as data management, data
protection and data sovereignty and privacy, includng
the ethical use of data and artifcial intellgence
• The Group, as well as the industry, continues to face
challenges to keep pace with the volume of data related
regulatory change. Regulatory drivers such as BCBS 239’s
requirements on effective risk data aggregation and risk
reporting require enhanced controls over data lineage
and quality. There has been increased use of powers
afforded under data legislaton by regulators to impose
punitve fines or to demand data disclosures. Regulatory
drivers and requirements vary by market, and the risk of
fragmentation of requirements across our markets is
growing over time
• There are increased bilateral geopolitcal disputes,
prompting some governments to issue data sovereignty
legislaton, in some cases extraterritoral in nature, which
may impact Group processes. In some instances there is
conflictng guidance from different regulatory authorites
withn the same jursdicton
• Rapid adoption of new technologies such as Big Data
requires that we need to determine how the Group’s Data
Management Polices, Standards and Controls are
updated and applied
• As informaton assumes an increasngly fundamental role
and the migraton to Cloud infrastructure continues, data
is becoming concentrated in the hands of governments
and large private companies. Data related risks need to
be continuously gauged to ensure Group processes and
controls are effective
• There is an increasng trend of highly organised threat
actors, both state sponsored and through organised
crime. Tactics are becoming more sophistcated and
attacks more targeted over time. New techniques and
developments of weapons such as ransomware are
available as a service, reducing the cost of complex attack
methods
• Increasing connectivty is drivng growth and new
technologies, but also increasng the Group’s cyber-attack
surface and possible entry points for cyber crimnals
• The PLC Group accepts invtations from its
regulators to lead on specifc data and
artifcial intellgence (AI) related industry
consultations and also actively work with
AI industry bodies to help influence AI
regulations
• There is active monitorng, both in house
and through external counsel, of regulatory
developments in relation to data
management, includng records
management, data protection and
privacy, data sovereignty and AI
• The PLC Group has further embedded the
existng risk control framework for data
management risks, which has
strengthened and streamlined risk
oversight
• Given the growth of AI tools and the
inherent risks, the deployment and release
into PLC Group operational processes is
monitored through an AI Council
• Controls from the cyber and cloud domains
are leveraged for data management risks
where appropriate
• The PLC Group established a dedicated
Data and Privacy Operations team and
mobilsed a Groupwide transformation
programme to build data management
capabilties and expertise to ensure
compliance with data management
regulations
• We have an inflght programme of work to
drive compliance to BCBS 239 requirements
on effective risk data aggregation and risk
reporting
• We continue to deliver new controls and
capabilties to increase our abilty to
identfy, detect, protect and respond to ICS
threats
9 This theme was previously covered under ‘Increased data privacy and security risks from strategic and wider use of data’
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
151
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
New business
structures,
channels and
competiton
10
Potential
impact:
High
Likelhood:
High
Velocity of
change:
Fast
• There is increasng usage of partnerships and alliances by
banks to respond to disrupton and changes to the
industry, particularly from new technologies. Thus
partnerships and alliances are integral to banks’ emerging
business models and value propositon to clients. However,
this also exposes the banks to third-party risks. There are
also new business models such as Revenue Sharing
Partnerships that present new risks and due dilgence
consideratons
• Technological advances such as AI, Machine Learning
(ML) and cloud-based systems are creating new
opportunites but also bringng new challenges. There is
also a risk that failure to expediently adapt and harness
such technologies would place the Group at a competitve
disadvantage
• As new technologies grow in sophistcation and become
further embedded across the banking and financal
services industry, banks may become more susceptible to
technology-related risks. Banks may also face increased
risks of business model disrupton as new products and
technologies continue to emerge. There is also potential
for inadequate risk assessment for new and unfamilar
activties
• The health and social impact of COVID-19, the economic
fallout and associated increased cyber threats have
impacted companies globally, resulting in signficant
pressure on the financal health and security of suppliers,
vendors and other third parties that the Group relies on
• A remote workforce introduces new vulnerabilties which
were easier to manage in an office environment. Particular
focus should be given to highly privleged or high-risk roles
• The Group is subject to signficant competiton from local
banks and other internatonal banks in the markets in
which it operates, includng competitors that may have
greater financal and other resources. In additon, the
Group may experience increased competiton from new
entrants such as fintechs deliverng digtal-only banking
offerings with a differentated user experience, value
propositon and product pricng
• In Corporate, Commercial and Institutonal Banking, there
is an increasng focus on process digtisaton to provide
scalable and personalised solutions for corporate clients.
There are a growing number of use cases for blockchain
technologies
• In additon, digtal assets are gainng adoption and linked
business models are increasng in prominence. These
present material opportunites as well as risks
• We monitor emerging trends,
opportunites and risk developments in
technology that may have implcations on
the banking sector
• We are enhancing capabilties to ensure
our systems are resilent, we remain
relevant and can capitalse quickly on
technology trends
• Enhanced digtal capabilties have been
rolled out in Consumer, Private and
Business Banking, particularly around
onboarding, sales, and marketing
• A risk management approach to address
the specifc risks arisng from digtal asset
activties, as well as internal guidance on
how to leverage existng risk management
practices for new activties and nascent
risks, is developed and implemented at the
PLC Group
• Strategic partnerships and alliances are
being set up with fintechs to better
compete in the markets in which we
operate. A tiered security model has been
established to ensure appropriate security
oversight and governance is in place for
different types of strategic partnerships
• Third-Party Risk management polices,
procedures and governance are being
reviewed to ensure adequate coverage
across all PLC Group activties
10 This theme was previously covered under ‘Third-party dependency’ and ‘New technologies and digtisaton’
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
152
Risk profile continued
Emerging Risk
Risk trend
since 2020
1
Context How these are mitgated/next steps
Talent pool of
the future
11
Potential
impact:
Medium
Likelhood:
High
Velocity of
change:
Moderate
• COVID-19 accelerated the move towards remote working
for employees. While this intially enabled better safety
and was found to benefit productivty, it also raised
concerns around effective mitgation and management of
operational, informaton and cyber security, compliance,
and conduct risks
• The extended nature of the COVID-19 pandemic is
continung to restrict employees’ abilty to operate in their
preferred hybrid working location format (between home
and office), causing potential risks to wellbeing, ease of
collaboration and learning from others
• As demand for new skills and capabilties gains
momentum with the rapid change in technology and new
ways of working, the shortage of key skills is drivng a war
for talent in the financal services industry. This, combined
with cross-border mobilty restrictons and government
protectionst polices, will especially intensfy competiton
for local talent. A compelling purpose, combined with
flexible and agile working models, upskillng and reskillng
opportunites and career mobilty options becomes critcal
to attract, motivate and retain talent
• Hybrid-working at-scale also demands concerted efforts
towards inclusve behaviours and actions to ensure a
consistent experience for employees working remotely, in
office or hybrid, as well as those representing our diverse
workforce or dealing with challenges that may not be
visble or may be accentuated when working remotely
• We proactively assess and manage
people-related risks; for example,
organisaton, capabilty, conduct and
culture, as part of our Group Risk
Management framework and our People
Strategy
• The PLC Group undertook a Future of Work
change risk assessment which considered
operational, compliance, data privacy and
cyber security risks in additon to wellbeing,
culture and leadership
• The Group has rolled out hybrid-working
options across 25 markets and over 83 per
cent of colleagues in these locations are
now on flexi-working arrangement
contracts
• Wellbeing is one of the key pillars of the
Group’s Diversty and Inclusion strategy
and we have embedded multiple tools and
resources to support colleague wellbeing.
These include toolkits for managers and
employees, a confidental Employee
Assistance Programme, an online
programme to support physical wellbeing,
increased trainng for Mental Health First
Aiders, an on-the-go mobile app and
proactive trainng in resilence
• The PLC Group has embarked on a
multi-year journey focused on upskillng
and re-skillng our workforce by buildng a
culture of continuous learning and
leveraging technology to enable
employees to build future ready skills
through content and cross-functional
experiences
11 This theme was previously covered under ‘Increase in long-term remote working providng new challenges’
Potential impact
Refers to the extent to which a risk event
might affect the Group
Likelhood
Refers to the possiblity that a given event
will occur
Velocity of change
Refers to when the risk event might
materialse
High (signficant financal or
non-financal risk)
High (almost certain) Fast (risk of sudden developments with
limted time to respond)
Medium (some financal or
non-financal risk)
Medium (likely or possible) Moderate (moderate pace of
developments for which we expect
there will be time to respond)
Low (marginal financal or non-financal risk) Low (unlikely or rare) Steady (gradual or orderly developments)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
153
Capital management and governance
The Group’s capital and leverage positon is managed withn the Court-approved Risk Appetite framework. Further detail is
provided withn the Risk Management Framework section on page 122.
Standard Chartered Bank is authorised by the PRA and regulated by the Financal Conduct Authority and the PRA as
Standard Chartered Bank (Solo Consolidated). The Group successfully completed the formation of an ASEAN hub during
2021 in which the Group’s existng businesses in Malaysia, Thailand and Vietnam were moved under the Group’s existng
Singapore subsidary entity, which itself remains under Standard Chartered Bank. Standard Chartered Bank continues to
operate through its branches and a number of subsidaries, all of which remain well capitalsed in line with their applicable
Court-approved Risk Appetites which takes into account local regulations, Pillar 1 and 2 requirements and regulatory and
management buffers as applicable.
The Group’s CET1 ratio remained strong at 12.3 per cent at FY2021 with leverage at 4.5 per cent. The Group maintans high
levels of loss absorbing capacity. Compared to 31 December 2020, the Group’s CET1 ratio decreased 41 basis points as RWA
increased by $6.1 billon to $194.0 billon. CET1 capital was flat compared to FY2020 as profits of $1.6 billon were offset by
distrbutions of $0.6 billon, a foreign currency translation impact of $0.5 billon, movement in other comprehensive income of
$0.2 billon and an increase in regulatory deductions of $0.4 billon.
On 9 July 2021, the PRA published a policy statement on implementng Basel standards which confirmed that qualifyng
software assets would need to be deducted from CET1 from January 2022. As at 31 December 2021, the current treatment of
software assets provided around 32 basis points of benefit to the CET1 ratio.
From 1 January 2022 RWA increases due to post model adjustments following new PRA rules on IRB models and the
introducton of standardised rules for Counterparty Credit Risk on derivatves and other instruments.
Capital ratios
2021
restated¹
2020
CET1 12.3%
12.7%
Tier 1 capital 15.3%
15.1%
Total Capital 21.6%
21.7%
1 Restatement of 2020 includes correction of fair value hedge adjustment of $81 millon
Capital review
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
154
Capital review continued
CRD Capital base¹ (audited)
2021
$millon
restated
4
2020
$millon
CET1 capital instruments and reserves
Capital instruments and the related share premium accounts
20,893
19,620Of which: share premium accounts
296
296Retained earnings
2
9,831
11,674
Accumulated other comprehensive income (and other reserves)
(4,245)
(3,512)Non-controlling interests (amount allowed in consolidated CET1)
179
160Independently audited year-end profits
1,639
(32)Foreseeable divdends
(186)
(162)CET1 capital before regulatory adjustments
28,111
27,748CET1 regulatory adjustments
Additonal value adjustments (prudential valuation adjustments)
(453)
(354)Intangible assets (net of related tax liablity)
3
(3,037)
(2,943)
Deferred tax assets that rely on future profitablity (excludes those arisng from temporary differences)
(141)
(133)Fair value reserves related to net losses on cash flow hedges
11
(5)Deduction of amounts resulting from the calculation of excess expected loss
(416)
(377)Net gains on liablites at fair value resulting from changes in own credit risk
3
28Defined-benefit pension fund assets
(114)
(13)Fair value gains arisng from the insttution’s own credit risk related to derivatve liablites
(51)
(32)Exposure amounts which could qualify for risk weightng of 1250%
(29)
(21)Total regulatory adjustments to CET1
(4,227)
(3,850)CET1 capital 23,884
23,898
Additonal Tier 1 capital (AT1) instruments 5,892
4,571
AT1 regulatory adjustments (20)
(20)
Tier 1 capital 29,756
28,449
Tier 2 capital instruments 12,105
12,293
Tier 2 regulatory adjustments (30)
(30)
Tier 2 capital 12,075
12,263
Total capital 41,831
40,712
Total risk-weighted assets (unaudited) 193,988
187,901
1 CRD capital is prepared on the regulatory scope of consolidaton
2 Retained earnings include IFRS9 capital relief (Transitonal) of $299 millon includng dynamic relief of $88 millon
3 The deduction of intangble assets includes software deduction relief of $714 millon, available as per CRR ‘Quick Fix’ measures (2020 software deduction relief
of$464millon)
4 Restatement of 2020 includes correction of fair value hedge adjustment of $81 millon.
Leverage ratio
Capital and total exposures
2021
$millon
restated
1
2020
$millon
Tier 1 capital 29,258
27,453
Total leverage ratio exposures 653,396
587,570
Leverage ratio 4.5%
4.7%
1 Restatement of 2020 includes correction of fair value hedge adjustment of $81 millon.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
155
Independent Auditor’s report
to the members of Standard Chartered Bank
Opinon
In our opinon:
•
the financal statements of Standard Chartered Bank (the ‘Company’) and its subsidaries (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 2021 and of the Group’s profit for the year
then ended;
•
the Group financal statements have been properly prepared in accordance with UK adopted internatonal accounting
standards (IAS) and International Financal Reporting Standards (IFRS) as adopted by the European Union (EU IFRS);
•
the Company financal statements been properly prepared in accordance with UK adopted internatonal accounting
standards as applied in accordance with section 408 of the Companies Act 2006; and
•
the financal statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financal statements of the Group and the Company for the year ended 31December 2021 which
comprise:
Group Company
Consolidated balance sheet as at 31 December 2021 Balance sheet as at 31 December 2021
Consolidated income statement for the year then ended
Cash flow statement for the year then ended
Consolidated statement of comprehensive income for the year
then ended
Statement of changes in equity for the year ended
31December 2021
Consolidated statement of changes in equity for the year then ended Related notes 1 to 40 to the financal statements includng
asummary of signficant accounting polices
Consolidated cash flow statement for the year then ended
Related notes 1 to 40 to the financal statements, includng a summary
ofsignficant accounting polices
Risk and capital disclosures marked as ‘audited’ from page 55 to page154
The financal reporting framework that has been applied in their preparation is applicable law and UK adopted IAS, and
asregard to the Group financal statements, EU IFRS, and as regards the Company financal statements, as applied in
accordance with section 408 of the Companies Act 2006.
Basis for opinon
We conducted our audit in accordance with International Standards on Auditng (UK) (ISAs (UK)) and applicable law. Our
responsiblites under those standards are further described in the Auditor’s responsiblites for the audit of the financal
statements section of our report. We are independent of the Group and Company in accordance with the ethical
requirements that are relevant to our audit of the financal statements in the UK, includng the Financal Reporting council's
(FRC’s) Ethical Standard as applied to listed public interest entites, and we have fulfilled our other ethical responsiblites in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficent and appropriate to provide a basis for our opinon.
Conclusions relating to going concern
In auditng the financal statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financal statements is appropriate. Our evaluation of the directors’ assessment of the Group and
Company’s abilty to continue to adopt the going concern basis of accounting included:
•
Understanding management’s going concern assessment process, includng the impact of the COVID-19 pandemic
(COVID-19);
•
Review of the Corporate Plan, includng assessing the reasonableness of assumptions and historcal forecasting accuracy;
•
Assessing the results of management’s stress testing, includng consideraton of princpal and emerging risks, on funding,
liqudity and regulatory capital;
•
Reviewng correspondence with prudential regulators and authorites for matters that may impact the going concern
assessment; and
•
Evaluating the appropriateness of the going concern disclosure included in Note 1 to the financal statements.
Based on the work we have performed, we have not identfied any material uncertaintes relating to events or conditons
that, indvidually or collectively, may cast signficant doubt on the Group and Company’s abilty to continue as a going
concern for a period of twelve months from 17 February 2022.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
156
Independent Auditor’s report
to the members of Standard Chartered Bank continued
Our responsiblites and the responsiblites of the directors with respect to going concern are described in the relevant
sections of this report. However, because not all future events or conditons can be predicted, this statement is not a
guarantee as to the Group’s abilty to continue as a going concern.
Audit scope
• We performed an audit of the complete financal informaton of 14 components across 10 countries and audit
procedures on specifc balances for a further 4 components across 3 countries.
• The components where we performed full or specifc audit procedures accounted for 76% of absolute adjusted
profit before tax ( PBT) measure used to calculate materialty, 83% of absolute operating income and 93% of
Total assets.
Key audit matters
• Credit imparment
• User access management
• Impairment of non-financal assets (Investments in subsidary undertakings and Goodwill)
• Valuation of financal instruments held at fair value with higher risk characteristcs
Materialty
• Overall Group materialty of $137m which represents 5% of adjusted PBT.
Overview of our audit approach
An overview of the scope of the Company and Group audits
Tailorng the scope
Our assessment of audit risk, our evaluation of materialty and our allocation of performance materialty determine our audit
scope for each component withn the Group. Taken together, this enables us to form an opinon on the consolidated financal
statements. We took into account the size, risk profile, the organisaton of the Group and effectiveness of Group control
environment, changes in the business environment and other factors such as material issues or 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 consolidated financal statements, and to ensure we had adequate
quantitatve coverage of signficant accounts in the financal statements, of the 283 reporting components of the Group, we
selected 18 components across 13 countries covering entites withn Bangladesh, Germany, India, Indonesia, Japan, Kenya,
Malaysia, Nigera, Pakistan, Singapore, United Arab Emirates, United Kingdom, and the United States of America, which
represent the princpal business units withn the Group. The defintion of a component is aligned with the structure of the
Group’s consolidaton system, typically these are either a branch, group of branches, group of subsidaries, a subsidary or an
associate.
We took a centralised approach to auditng certain processes and controls, as well as the substantive testing of specifc
balances. This included audit work over Global Business Services, Commercial, Corporate and Institutonal Banking, Credit
Impairment and Technology.
Of the 18 components selected in 13 countries, we performed an audit of the complete financal informaton of 14
components in 10 countries ('full scope components') which were selected based on their size or risk characteristcs. For the
remainng 4 components in 3 countries ('specifc scope components'), we performed audit procedures on specifc accounts
withn that component that we considered had the potential for the greatest impact on the signficant accounts in the
financal statements either because of the size of these accounts or their risk profile.
The reporting components where we performed audit procedures accounted for 76% (2020: 81%) of the Group’s absolute
adjusted PBT, 83% (2020: 83%) of the Group’s absolute operating income and 93% (2020: 95%) of the Group’s Total assets. For
the current year, the full scope components contributed 68% (2020: 77%) of the Group’s absolute adjusted PBT, 73% (2020:
76%) of the Group’s absolute operating income and 82% (2020: 85%) of the Group’s Total assets. The specifc scope
component contributed 8% (2020: 4%) of the Group’s absolute adjusted PBT, 10% (2020: 7%) of the Group’s absolute
operating income and 11% (2020: 10%) of the Group’s Total assets. The audit scope of these components may not have
included testing of all signficant accounts of the component but will have contributed to the coverage of signficant
accounts tested for the Group.
Of the remainng 265 components that together represent 24% of the Group’s absolute adjusted PBT, none are indvidually
greater than 2.5% of the Group’s absolute adjusted PBT. For these components, we performed other procedures at a Group
level which included, performing analytical reviews at a Group financal statement line item level, testing entity level controls,
performing audit procedures on the centralised shared service centres, testing of consolidaton journals and intercompany
elimnations, inquring with local component teams and assessing the outcome of prior year local statutory audits to respond
to any potential risks of material misstatement to the Group financal statements.
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The charts below illustrate the coverage obtained from the work performed by our audit teams.
Absolute adjusted PBT
68% Full scope components
8% Specifc scope components
24% Other procedures
Total assets
82% Full scope components
11% Specifc scope components
7% Other procedures
Absolute operating income
73% Full scope components
10% Specifc scope components
17% Other procedures
Changes from the prior year
We assessed our 2021 audit scope with consideraton of history or expectation of unusual or complex transactions and
potential for or history of material misstatements. We also kept our audit scope under review throughout the year.
A total of 4 components in 3 countries which were previously included in our prior year audit scope, that together represent
2% of the Prior year adjusted absolute PBT have now been excluded from the Group audit scope in the current year based on
our updated risk assessment.
Bangladesh which was a full scope component in the prior year is designated as a specifc scope component in the current
year based on our updated risk assessment.
Involvement with component teams
In establishng our overall approach to the Group audit, we determined the type of work that needed to be undertaken at
each of the components by us, as the Group audit engagement team, or by component auditors from other EY global
network firms operating under our instructon.
Of the 14 full scope components, audit procedures were performed on 1 of these (the audit of the Company) directly by the
Group audit engagement team (EY London) in the United Kingdom. For the 4 specifc scope components, where the work
was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that
sufficent audit evidence had been obtained as a basis for our opinon on the Group as a whole. In additon, the Group has
centralised processes and controls over key areas in its shared service centres. Members of the Group audit engagement
team provide direct oversight, review and coordinaton of our shared service centre audits.
Standard Chartered Bank
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to the members of Standard Chartered Bank continued
Our programme of planned vists to components and shared service centres in several locations was impacted by the travel
restrictons and other imposed government measures which are still in place from the prior year as a result of the ongoing
COVID-19 pandemic. The audit was performed remotely at both Group audit engagement team and component locations
supported through the use of EY software collaboration platforms for the secure and timely delivery of requested audit
evidence. We also undertook virtual engagement vists with local audit teams and management. These virtual meetings
involved discussng the audit approach with the component and shared service centres team and any issues arisng from
their work, meeting with local management, attending meetings with the key audit partners of material components,
attending interm and closing meetings and performing remote reviews of key audit workpapers. Furthermore, the Senior
Statutory Auditor visted Singapore as it is the location where a signficant element of the work on risk areas such as credit
and financal instrument valuation is performed. He attended key meetings with management and held discussons on the
audit approach and any issues arisng from the work of the Singapore component and Shared Service Centre teams.
As a result of COVID-19, we maintaned continuous involvement and oversight of the component teams. This includes the
Group audit engagement partners and senior members of the primary audit team increasng regular interactons through
calls and video conferences during various stages of the audit process, increasng our written communicatons to and
reporting from the component teams and invting component teams to our virtual planning event and subsequent virtual
events dedicated to specifc areas of the audit.
For the majorty of the signficant and fraud risk areas, substantial elements of the audit work were led centrally, either withn
the Group audit engagement team, or withn other teams performing centralised procedures.
This, together with the additonal procedures performed at Group level, gave us appropriate evidence for our opinon on the
Group financal statements.
Climate change
There has been increasng interest from stakeholders as to how climate change will impact the banking industry. The Group
has determined climate risk to be a Primary Integrated Risk Type and the assessment of this risk is explained in the Risk
Review section of the Strategic Report (the ‘Climate Disclosures’).
The Climate Disclosures form part of the ‘Other informaton,’ rather than the audited financal statements. Our procedures on
the Climate Disclosures therefore consisted solely of considerng whether they are materially inconsstent with the financal
statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated.
Governmental and societal responses to climate change risks are still developing and are interdependent upon each other;
accordingly, financal statements cannot capture all possible future outcomes as these are not yet known. The degree of
uncertainty of these climate change risks may also mean that they cannot be taken into account when determinng asset
and liablity valuations and the timng of future cash flows under the requirements of UK adopted IAS and EU IFRS.
Our audit effort in considerng climate change risk was focused on evaluating whether the Group’s assessment of the effects
of material climate change risks disclosed withn Basis of Preparation on page 174, have been appropriately reflected in the
valuation of assets and liablites, where these can be reliably measured. This was in the context of the Group’s process over
this emerging area being limted, as a result of limtations in the availablity of data and sophistcated models, and as the
Group considers how it further embeds its climate ambitons into the planning process.
We also understood the Directors’ consideratons of climate change in their assessment of going concern and the
associateddisclosures.
Whilst the Group has stated its commitment to the aspiratons of the Paris Agreement to achieve net zero emissons by 2050,
the Group considers Climate Risk as a longer-term risk and will address the risk through its business strategy and financal
planning as the Group implements its net zero journey. As set out above and on page 174 withn Basis of Preparation, the
Group’s process is currently limted, and accordingly, the potential impacts of Climate Risk may not be fully incorporated in
these financal statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most signficance in our audit of the financal
statements of the current period and include the most signficant assessed risks of material misstatement (whether or not
due to fraud) that we identfied. These matters included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directng the efforts of the engagement team. These matters were addressed in
the context of our audit of the financal statements as a whole, and in our opinon thereon, and we do not provide a separate
opinon on these matters.
Standard Chartered Bank
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Independent Auditor’s report
to the members of Standard Chartered Bank continued
Risk Our response to the risk
Key observations communicated
to the Audit Committee
1. Credit Impairment
Accounting polices (page 187); Note 8 of the
financal statements; and relevant credit risk
disclosures (includng pages 63 and 65)
At 31 December 2021, the Group reported
total credit imparment balance sheet
provison of $5,377 millon (2020: $6,402
millon).
Management’s judgements and estimates
are especially subjectve due to signficant
uncertainty associated with the assumptions
used. Assumptions with increased complexity
in respect of the timng and measurement of
expected credit losses (ECL) include:
•
Staging
– Allocation of assets to stage 1, 2, or 3 on a timely basis using critera in
accordance with IFRS 9;
•
Model output and adjustments
– Accounting interpretatons, modelling
assumptions and data used to build and
run the models that calculate the ECL,
includng the appropriateness,
completeness and valuation of post-model
adjustments applied to model output to
address risks not fully captured by the
models;
•
Economic scenarios –
Signficant judgements involved with the
determinaton of parameters used in
Monte Carlo Simulaton and the evaluation
of the appropriateness of using Monte
Carlo Simulaton with regards to whether
the simulaton can sufficently capture the
non-linearty of ECL and appropriately
generate a wide enough range of possible
outcomes;
•
Management overlays –
Appropriateness, completeness and valuation of risk event
overlays to capture risks not identfied by
the credit imparment models, includng
the consideraton of the risk of
management override; and
•
Indivdually assessed ECL allowances
–
Measurement of indvidual provisons
includng the assessment of probabilty
weighted recovery scenarios, exit
strategies, collateral valuations and time
to collect.
The above complexites are further
exacerbated by the ongoing COVID-19
pandemic, particularly due to its dynamic
nature and the diversty of its impact across
geographies and time. The most notable risk
in this respect remains the appropriateness
of the management COVID-19 overlay
recognised withn the ECL.
We evaluated the design and operating effectiveness of
controls relevant to the Group’s processes over material
ECL balances, includng the judgements and estimates
noted, involvng EY specialsts to assist us in performing
ourprocedures to the extent it was appropriate. These
included:
•
credit monitorng;
•
controls over the allocation of assets into stages such
asmanagement’s monitorng of stage effectiveness;
•
completeness and accuracy of data;
•
review and approval of multiple economic scenarios;
•
model governance, includng model monitorng, model
validaton and review and approval of post model
adjustments;
•
review and approval of management overlays; and
•
review and approval of the indvidually assessed ECL.
In evaluating the controls, we obtained the relevant papers
and minutes of the executive forums that discuss and
approve the credit models and ECL allowances for
evidence of executive review and challenge.
We performed an overall stand-back assessment of the
ECL allowance levels by stage to determine if they were
reasonable by considerng the overall credit quality of the
Group’s portfolios, risk profile, impact of COVID-19 includng
geographic consideratons and vulnerable sectors. We also
assessed the effect of government support measures in key
locations (e.g., payment deferrals), which may delay or
mask stage migratons. Our assessment also included the
evaluation of the macroeconomic environment by
considerng trends in the economies and industres to
which the Group is exposed.
We performed peer benchmarking where available to
assess overall staging and provison coverage levels.
Staging –
We evaluated the critera used to allocate
financal assets to stage 1, 2 or 3 in accordance with
IFRS 9. We reperformed the staging distrbution for a
sample of assets and assessed the reasonableness of
staging downgrades applied by management.
To test credit monitorng which largely drives the
probabilty of default estimates used in the staging
calculation, we challenged the risk ratings for a sample of
performing accounts and other accounts exhibting risk
characteristcs such as financal diffculties, deferment of
payment, late payment and watchlist. We also considered
the vulnerable sectors (as defined by the Group) impacted
by COVID-19.
Modelled output and adjustments –
We performed a risk
assessment on models involved in the ECL calculation to
select a sample of models to test. We engaged our
modelling specialsts to evaluate a sample of ECL models
by assessing the reasonableness of underpinnng
assumptions, inputs and formulae used. This included a
combinaton of assessing the appropriateness of model
design and formulae, and algorithms, alternative modelling
techniques and recalculating the Probabilty of Default,
Loss Given Default and Exposure at Default parameters.
Together with our modelling specialsts, we also assessed
material post-model adjustments which were applied
as a response to risks not fully captured by the models,
includng the completeness and appropriateness of
these adjustments, for which we considered the applied
judgments and methodology, and governance thereon.
We concluded that
management’s methodology,
judgements and assumptions
used in calculating credit
imparment are in accordance
with the accounting standard.
We highlghted the following
matters to the Audit
Committee:
• a number of control
findngs in relation to the
model governance
framework;
• some instances of over and
under estimaton;
• benchmarking impact of
non-linearty from the
baseline ECL against UK
peers; and
• the need for to continuously
assess the compositon of
the CPBB COVID-19 overlay
to reflect the everchanging
market uncertaintes.
Overall modelled ECL levels,
staging and indvidually
assessed provisons were
reasonable. We concluded
that the Group’s ECL
allowances were reasonable
and recognised in accordance
with IFRS 9.
Standard Chartered Bank
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Independent Auditor’s report
to the members of Standard Chartered Bank continued
Risk Our response to the risk
Key observations communicated
to the Audit Committee
1. Credit Impairment (continued)
In response to the new models implemented this year to
address known weaknesses in previous models, we
performed substantive testing procedures, includng code
review and implementaton testing.
To evaluate data quality, we agreed a sample of ECL
calculation data points to source systems, includng,
among other data points, 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. We included COVID-19 specifc
data points in this testing.
Economic scenarios –
For material models, in collaboration
with our economists and modelling specialsts, we also
challenged the completeness and appropriateness of the
macroeconomic variables used as inputs to these models.
Additonally, we involved our economic specialsts to assist
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 external sources.
Furthermore, we have assessed the reasonableness of the
Furthermore, we assessed the reasonableness of the
non-linearty impact on ECL allowances. By engaging our
economists and modelling specialsts, we assessed the
Group’s choice of scenarios and chosen weights used, and
the underlying mechanics and formulae to determine the
uplift in ECL. We also performed a stand-back assessment
by benchmarking the uplift and overall ECL charge and
provison coverage to peers.
Management overlays –
We challenged the completeness
and appropriateness of overlays used for risks not captured
by the models, particularly the uncertaintes as a result of
the COVID-19 pandemic and observed in the China
Commercial Real Estate sector. Our procedures included
evaluating the underpinnng assumptions and judgments
as to whether they are appropriate in prevailng market
conditons.
Indivdually assessed ECL allowances –
Our procedures
included challenging management's forward-looking
economic assumptions of the recovery outcomes identfied
and assigned indvidual probabilty weightngs, and
recalculating a sample of indvidually assessed provisons.
We also engaged our valuation specialsts to test the value
of the collateral used in management’s calculations. Our
sample was based on quantitatve thresholds and
qualitatve factors includng vulnerable sectors. We
considered the impact COVID-19 had on collateral
valuations and time to collect. We also considered whether
planned exit strategies remained viable under COVID-19.
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to the members of Standard Chartered Bank continued
Risk Our response to the risk
Key observations communicated
to the Audit Committee
2. User access management - privleged
access management
IT General Controls (ITGCs) support the
continuous operation of the automated and
other IT dependent controls withn the
business processes related to financal
reporting. Effective IT general controls are
needed to ensure that IT applicatons
process business data as expected and that
changes are made in an appropriate
manner.
During the 2020 audit, a number of
signficant privleged identty management
(PIM) control deficencies were identfied by
us. Simlar deficencies were identfied by
Group Internal Audit (GIA) and the
predecessor auditor in 2018 and 2019.
The possiblity of IT applicaton users gainng
access privleges beyond those necessary to
perform their assigned duties may result in
breaches in segregation of duties, includng
inapproprate manual interventon,
unauthorised changes to systems or
programmes.
These deficencies are still in the process of
being fully remediated. During the current
year audit, we made further observations
relating to the effectiveness of remediaton
activties.
The risk has decreased in the current year
due to management’s remediaton program,
which is still in progress as at the year-end
date.
We reviewed the results of management’s remediaton
program and risk assessment for applicatons in our audit
scope and assessed the impact on the financal
statements for the year ended 31 December 2021.
We tested IT compensating controls where possible, and
also performed additonal IT substantive procedures to
assess the impact of risks associated with the reported
deficencies, on the financal statements.
Where required, we tested business compensating
controls and performed additonal business substantive
procedures.
• We communicated a
weakness in internal control
to the Audit Committee
throughout the audit, in
respect of the effectiveness
of privleged identty
management.
• We explained the
additonal procedures
performed, includng IT
substantive testing, testing
of IT and business
compensating controls, and
where required, additonal
substantive testing over
impacted account
balances.
As a result of the procedures
performed, we have reduced
the risk that our audit has not
identfied a material error in
the Group and Company
financal statements, related
to user privleged access
management, to an
appropriate level.
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to the members of Standard Chartered Bank continued
Risk Our response to the risk
Key observations communicated
to the Audit Committee
3. Impairment assessment of non-financal
assets
a) Impairment of Goodwill: Accounting
polices (page 265); and Note 16 of the
financal statements and
b) Impairment of Investments in subsidary
undertakings: Accounting polices (page
298); and Note 31 of the financal statements
COVID-19 continues to have a signficant
economic impact globally. As a result, the
Group assessed for imparment its various
non-financal assets during 2021, the most
signficant of which are set out below.
The Group performed an imparment test on
goodwill amounting to $1,379 millon (2020:
$1,408 millon) and, in the Company financal
statements, Investments in subsidary
undertakings amounting to $9,694 millon
(2020: $8,258 millon).
Impairment of goodwill and investments in
subsidary undertakings is determined by
comparing the carrying value to recoverable
amount. Where the recoverable amount is
based on value-in-use (VIU), this is modelled
by reference to future cashflow forecasts
(profit forecast includng a regulatory capital
haircut adjustment), discount rates and
macroeconomic assumptions such as
long-term growth rates.
Consequently, there is a risk that if the
judgements and assumptions underpinnng
the imparment assessments are
inapproprate, then the goodwill and
investments in subsidaries balances may be
misstated.
The level of risk remains consistent with the
prior year.
We obtained an understanding of management’s
processes for assessing imparment and evaluated the
design of controls. We took a fully substantive approach.
We assessed the appropriateness of the Group’s
methodology for testing the imparment of goodwill and
investments in subsidary undertaking for compliance with
the accounting standards.
For goodwill, we assessed the appropriateness of the
cash-generating units identfied by management,
includng the change as a result of the Group’s
organisatonal structure effective 1 January 2021.
We tested the mathematical accuracy of the VIU model
and engaged our specialsts to support the audit team in
assessing reasonableness of the regulatory haircut
adjustment¹ to future profitablity forecasts and
calculatingan independent range for assumptions
underlying the VIU calculations, such as the discount
rateand long-term growth rate for each cash generating
unit. We also reconciled the future profitablity forecasts
tothe Group’s approved Corporate Plan (‘the Plan’).
We performed audit procedures to assess the
reasonableness of the forecasts by reviewng the Group
Strategy, challenging key assumptions underpinnng the
Plan, reviewng the feasiblity of management actions
necessary to achieve the Plan, testing the reliablity of the
Group’s historcal forecasting and benchmarking key
metrics against broker reports published for comparable
businesses.
We performed a stand back test to evaluate the
appropriateness of the audit evidence obtained and our
conclusion in relation to these estimates.
We performed sensitvity analysis to identfy the cash
generating units that were most sensitve to potential
changes in the assumptions set out above.
We assessed the appropriateness of goodwill disclosures
inaccordance with IAS 36.
¹ The forecast profits are haircut using an internal risk appetite and
forecast RWA, to reflect the amount of capital to be retained by each
CGU before profits may be distrbuted.
We concluded that the
goodwill balance as at 31
December 2021 is not
materially misstated. We
alsoconcluded that the
Investments in subsidary
undertakings in Company
financal statements is not
materially misstated. We are
satisfed that the change in
cash-generating units,
management methodologies,
judgements and assumptions
supporting the carrying value
were reasonable and in
accordance with internatonal
accounting standards.
We concluded that the
disclosures were appropriate.
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to the members of Standard Chartered Bank continued
Risk Our response to the risk
Key observations communicated
to the Audit Committee
4. Valuation of financal instruments held at
fair value with higher risk characteristcs
Refer to Accounting polices (page 198);
Note12 of the financal statements.
At 31 December 2021, the Group reported
financal assets measured at fair value of
$232,840 millon, and financal liablites at
fair value of $129,138 millon, of which
financal assets of $2,883 millon and financal
liablites of $1,264millon are classifed as
Level 3 in the fair value hierarchy.
The fair value of financal instruments with
higher risk characteristcs involves the use of
management judgement in the selection of
valuation models and techniques, pricng
inputs and assumptions and fair value
adjustments.
A higher level of estimaton uncertainty is
involved for financal instruments valued
using complex models, pricng inputs that
have limted observabilty, and fair value
adjustments, includng the Credit Valuation
Adjustment and Debit Valuation Adjustment,
in relation to derivatve transactions with
counterparties where credit spreads are less
readily able to be determined.
We considered the following portfolios
presented a higher level of estimaton
uncertainty:
• Level 3 derivatve financal instruments and
a portfolio of Level 2 derivatve financal
instruments due to the use of complex
models or illquid pricng inputs, and
• Unlisted equity investments, loans at fair
value, debt and other financal instruments
classifed in Level 3 with unobservable
pricng 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 financal instruments,
includng independent price verifcation, model review and
approval, fair value adjustments, income statement
analysis and reporting.
Among other procedures, we engaged valuation
specialsts to assist the audit team in performing the
following procedures:
• Test complex model-dependent valuations by
independently revaluing a sample of Level 3 and
complex Level 2 derivatve financal instruments, in order
to assess the appropriateness of models and the
adequacy of assumptions and inputs used by the Group;
• Test valuations of other financal instruments with higher
estimaton uncertainty, such as unlisted equity
investments, loans at fair value, debt and other financal
instruments. We compared management’s valuation to
our own independently developed range, where
appropriate;
• Assessed the appropriateness of pricng inputs as part
ofthe Independent Price Verifcation 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 determinng illquid credit spreads.
Where material differences between our independent
valuation and management’s valuation were outside our
thresholds, we performed additonal testing to assess the
impact on the valuation of financal instruments.
We concluded that
assumptions used by
management to estimate the
fair value of financal
instruments with higher risk
characteristcs and the
recogniton of related income
were reasonable. We
highlghted the following
matters to the Audit
Committee:
• Complex model-dependent
valuations were
appropriate based on the
output of our independent
revaluations;
• Fair values of derivatve
transactions, unlisted equity
investments, loans, debt
and other financal
instruments valued using
pricng informaton with
limted observabilty were
not materially misstated as
at 31 December 2021, based
on the output of our
independent calculations;
and
Valuation adjustments in
respect of credit, funding and
other risks applied to
derivatve portfolios and debt
securites issued were
appropriate, based on our
analysis of market data and
benchmarking of pricng
informaton
Our applicaton of materialty
We apply the concept of materialty in planning and performing the audit, in evaluating the effect of identfied
misstatements on the audit and in forming our audit opinon.
Materialty
The magnitude of an omisson or misstatement that, indvidually or in the aggregate, could reasonably be expected to
influence the economic decisons of the users of the financal statements. Materialty provides a basis for determinng the
nature and extent of our audit procedures.
We determined materialty for the Group to be $137 millon (2020: $88 millon), which is 5% (2020: 5%) of Adjusted PBT. This
reflects actual PBT adjusted for non-recurring item relating to restructuring, regulatory fines and net gain on businesses
disposed/held for sale. We believe that adjusted PBT provides us with the most appropriate measure for the users of the
financal statements, given the Group is profit making; it is consistent with the wider industry and is the standard for listed
and regulated entites and we believe it reflects the most useful measure for users of the financal statements. We also
believe that the adjustments are appropriate as they relate to material non-recurring items.
Standard Chartered Bank
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Independent Auditor’s report
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•
Statutory profit before tax – $2,381m
Starting basis
•
Restructuring – $325m
•
Regulatory fine – $62m
•
Net gain on businesses disposed/held for sale –
($20m)
Adjustments
•
Totals $2,748m Adjusted PBT
•
Materialty of $137m (5% of Adjusted PBT)
Materialty
We determined materialty for the Company to be $137 millon (2020: $88 millon), which is aligned to the materialty of the
Group since the financal statements covers both the Group and Company.
Performance materialty
The applicaton of materialty at the indvidual account or balance level. It is set at an amount to reduce to an appropriately
low level the probabilty that the aggregate of uncorrected and undetected misstatements exceeds materialty.
On the basis of our risk assessment, together with our assessment of the Group’s overall control environment, our judgement
was that performance materialty was 50% (2020: 50%) of our planning materialty, namely $69m (2020: $44m). We have set
performance materialty at this percentage based on a variety of risk assessment factors such as the expectation of
misstatements, internal control environment consideratons and other factors such as the global complexity of the Group.
Audit work at component locations for the purpose of obtainng audit coverage over signficant financal statement accounts
is undertaken based on a percentage of total performance materialty. The performance materialty 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 materialty allocated to components was
$8m to $18m (2020: $7m to $13m).
Reporting threshold
An amount below which identfied misstatements are considered as being clearly trival.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $7m (2020:
$5m), which is set at 5% of planning materialty, as well as differences below that threshold that, in our view, warranted
reporting on qualitatve grounds.
We evaluate any uncorrected misstatements against both the quantitatve measures of materialty discussed above and in
light of other relevant qualitatve consideratons in forming our opinon.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
165
Other informaton
The other informaton comprises the informaton included in the annual report includng the Strategic report (page 1 to 48),
the Directors’ report (page 49 to 53) and the informaton not marked as ‘audited’ in the Risk and capital review section (page
55 to 154), other than the financal statements and our auditor’s report thereon. The directors are responsible for the other
informaton contained withn the annual report.
Our opinon on the financal statements does not cover the other informaton and, except to the extent otherwise explictly
stated in this report, we do not express any form of assurance conclusion thereon.
Our responsiblity is to read the other informaton and, in doing so, consider whether the other informaton is materially
inconsstent with the financal statements or our knowledge obtained in the course of the audit or otherwise appears to be
materially misstated. If we identfy such material inconsstencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financal statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other informaton, we are required to report that
fact. We have nothing to report in this regard.
Opinons on other matters prescribed by the Companies Act 2006
In our opinon, based on the work undertaken in the course of the audit:
•
the informaton given in the strategic report and the directors’ report for the financal year for which the financal
statements are prepared is consistent with the financal statements; and
•
the strategic report and 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 Company and its environment obtained in the course
of the audit, we have not identfied material 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 opinon:
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visted by us; or
•
the Company financal statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specifed by law are not made; or
•
we have not received all the informaton and explanations we require for our audit
Responsiblites of directors
As explained more fully in the Statement of Directors’ Responsiblites on page 54, the directors are responsible for the
preparation of the financal statements and for being satisfed that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financal statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financal statements, the directors are responsible for assessing the Group and Company’s abilty to continue
as a going concern, disclosng, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liqudate the Group or the Company or to cease operations, or have no
realistc alternative but to do so.
Auditor’s responsiblites for the audit of the financal statements
Our objectves are to obtain reasonable assurance about whether the financal 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 opinon. 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, indvidually
or in the aggregate, they could reasonably be expected to influence the economic decisons of users taken on the basis of
these financal statements.
Explanation as to what extent the audit was considered capable of detecting irregularties, includng fraud
Irregularites, includng fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsiblites, outlined above, to detect irregularties, includng fraud. The risk 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 intentonal misrepresentatons, or through collusion. The extent to which our procedures are capable
of detecting irregularties, includng fraud is detailed below.
However, the primary responsiblity for the prevention and detection of fraud rests with both those charged with governance
of the company and management.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
166
Independent Auditor’s report
to the members of Standard Chartered Bank continued
•
We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined
that the most signficant are those that relate to the reporting framework (UK-adopted IAS and EU IFRS, the Companies
Act 2006, regulations and supervisory requirements of the Prudential Regulation Authority (PRA), FRC, FCA and other
overseas regulatory requirements, includng but not limted to regulations in its major markets such as India, Singapore, the
United States of America, and the relevant tax compliance regulations in the jursdictons in which the Group operates. In
additon, we concluded that there are certain signficant laws and regulations that may have an effect on the
determinaton of the amounts and disclosures in the financal statements and those laws and regulations relating to
regulatory capital and liqudity, conduct, financal crime includng anti-money laundering, sanctions and market abuse
recognisng the financal and regulated nature of the Group’s activties.
•
We understood how the Group is complying with those frameworks by performing a combinaton of inquries of senior
management and those charged with governance as required by auditng standards, review of board and committee
meeting minutes, gainng an understanding of the Group’s approach to governance, inspecton of regulatory
correspondence in the year and engaging with internal and external legal counsel. We also engaged EY financal crime
and forensics specialsts to perform procedures on areas relating to anti-money laundering, whistleblowng, and sanctions.
Through these procedures, we became aware of actual or suspected non-compliance. The identfied actual or suspected
non-compliance was not sufficently signficant to our audit that would have resulted in them being identfied as a key
auditmatter.
•
We assessed the susceptiblity of the Group’s financal statements to material misstatement, includng how fraud might
occur by considerng the controls that the Group has established to address risks identfied by the entity, or that otherwise
seek to prevent, deter or detect fraud. Our procedures to address the risks identfied also included incorporation of
unpredictablity into the nature, timng and/or extent of our testing, challenging assumptions and judgements made by
management in their signficant accounting estimates and journal entry testing.
•
Based on this understanding, we designed our audit procedures to identfy non-compliance with such laws and
regulations. Our procedures involved inquries 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, includng
journal entry testing. We also performed inspecton of key regulatory correspondence from the relevant regulatory
authorites as well as review of board and committee minutes.
•
For instances of actual or suspected non-compliance with laws and regulations, which have a material impact on the
financal statements, these were communicated by management to the Group audit engagement team and component
teams (where applicable) who performed audit procedures such as inquries with management and external legal counsel,
sending confirmatons to external lawyers, substantive testing and meeting with regulators. Where appropriate, we
involved specialsts from our firm to support the audit team.
•
The Group is authorised to provide banking, insurance, mortgages and home finance, consumer credit, pensions,
investments and other activties. 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
capabilties, which included the use of specialsts where appropriate.
A further descripton of our responsiblites for the audit of the financal statements is located on the Financal Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsbilties. This descripton forms part of our auditor’s report.
Other matters we are required to address
•
Following the recommendation from the Audit Committee, we were appointed by the Company on 31 March 2020, and
were appointed by the Company at the Annual General Meeting on 12 May 2021, to audit the financal statements for the
year ending 31 December 2021 and subsequent financal periods.
•
The period of total uninterrupted engagement is two years, covering the years ended 31 December 2020 to 31 December 2021.
•
The audit opinon is consistent with the additonal 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 responsiblity to anyone other than the Company and the Company’s members as a body, for our audit
work, for this report, or for the opinons we have formed.
David Canning-Jones (Senior statutory auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
London
17 February 2022
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
167
Consolidated income statement
For the year ended 31 December 2021
Notes
2021
$millon
2020
$millon
Interest income 6,185 7,807
Interest expense 3,707 )
(2,133 )
(Net interest income 4,052 4,100
3
Fees and commisson income 2,972 2,601
Fees and commisson expense 596 )
(576 )
(Net fee and commisson income 2,396 2,005
4
Net trading income 5 2,280 2,606
Other operating income 6 132 525
Operating income 8,860 9,236
Staff costs 5,128 )
(5,591 )
(Premises costs 249 )
(224 )
(General adminstrative expenses 414 )
(71 )
(Depreciaton and amortisaton 672 )
(594 )
(Operating expenses 6,480 )
7
((6,463 )
Operating profit before imparment losses and taxation 2,380 2,773
Credit imparment 8 30 (1,976 )
Goodwill, property, plant and equipment and other imparment 9 262 )
(30 )
(Profit from associates and jont ventures 31 1 1
Profit before taxation 2,381 536
Taxation 10 514 )
(743 )
(Profit for the year 1,638 22
Profit attributable to:
Non-controlling interests 28 29 47
Parent company shareholders 1,609 (25 )
Profit for the year 1,638 22
The notes on pages 174 to 324 form an integral part of these financal statements.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
168
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Notes
2021
$millon
2020
$millon
Profit for the year 1,638 22
Other comprehensive (loss)/income
Items that will not be reclassifed to income statement: 270
(14 )
Own credit gains/(losses) on financal liablites designated at fair value through profit or loss 28 (54 )
Equity instruments at fair value through other comprehensive income 161 71
Actuarial gains/(losses) on retirement benefit obligatons 29 157 (17 )
Taxation relating to components of other comprehensive income 10 14 )
(76 )
(Items that may be reclassifed subsequently to income statement: (869 ) 280
Exchange differences on translation of foreign operations:
Net losses taken to equity 213 )
(502 )
(Net losses on net investment hedges 11 )
(19 )
(Reclassifed to income statement on sale of jont venture – 246
Share of other comprehensive income from associates and jont ventures 3 –
Debt instruments at fair value through other comprehensive income:
Net valuation (losses)/gains taken to equity 639
(331 )
Reclassifed to income statement 353 )
(96 )
(Net impact of expected credit losses 29 19
Cash flow hedges:
Net losses taken to equity 9 )
(35 )
(Reclassifed to income statement 13 14 9
Taxation relating to components of other comprehensive income 10 68 (47 )
Other comprehensive (loss)/income for the year, net of taxation (599 ) 266
Total comprehensive income for the year 1,039 288
Total comprehensive income attributable to:
Non-controlling interests 28 4 44
Parent company shareholders 1,035 244
Total comprehensive income for the year 1,039 288
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
169
Consolidated balance sheet
As at 31 December 2021
Notes
Group Company
2021
$millon
2020
(Restated)¹
$millon
2021
$millon
2020
(Restated)¹
$millon
Assets
Cash and balances at central banks 12, 34 61,963 58,117
48,165
46,476Financal assets held at fair value through profit or loss 12 106,529 84,954
99,705
80,626Derivatve financal instruments 12, 13 53,245 69,225
53,478
68,910Loans and advances to banks 12, 14 29,999 27,666
16,117
14,997Loans and advances to customers 12, 14 144,799 140,861
71,161
72,969Investment securites 12 102,280 86,087
86,389
71,102Other assets 19 31,970 33,390
25,688
28,896Due from subsidary undertakings and other related parties 6,235 5,612
10,741
10,885Current tax assets 10 648 808
487
605Prepayments and accrued income 1,317 1,357
905
958Interests in associates and jont ventures 31 156 79
–
–Investments in subsidary undertakings 31 – –
9,694
8,258Goodwill and intangble assets 16 3,800 3,496
2,121
1,958Property, plant and equipment 17 1,071 1,201
627
708Deferred tax assets 10 681 648
508
486Assets classifed as held for sale 20 98 92
91
89Total assets 544,791 513,593 425,877
407,923
Liablites
Deposits by banks 12 25,205 23,761
18,870
18,482Customer accounts 12 242,331 216,719
135,478
122,061Repurchase agreements and other simlar secured borrowing 12 325 20
283
–Financal liablites held at fair value through profit or loss 12 75,552 59,714
73,902
59,101Derivatve financal instruments 12, 13 53,586 69,068
53,835
68,423Debt securites in issue 12,21 36,060 29,356
33,826
27,661Other liablites 22 26,013 29,788
20,460
23,434Due to parent companies, subsidary undertakings & other related
parties 30,998 32,326
40,745
43,012Current tax liablites 10 336 345
168
250Accruals and deferred income 3,064 2,990
1,550
1,411Subordinated liablites and other borrowed funds 12, 26 14,615 14,879
14,076
14,339Deferred tax liablites 10 669 579
583
505Provisons for liablites and charges 23 396 400
298
336Retirement benefit obligatons 29 204 419
156
367Total liablites 509,354 480,364 394,230
379,382
Equity
Share capital and share premium account 27 22,393 21,120
22,393
21,120Other reserves 3,512 )
(4,231 )
((2,089)
(1,736)Retained earnings 11,278 11,367 ¹
6,594
6,157¹Total parent company shareholders’ equity 29,440 28,975 26,898
25,541
Other equity instruments 27 4,749 3,000
4,749
3,000Total equity excluding non-controlling interests 34,189 31,975 31,647
28,541
Non-controlling interests 28 1,248 1,254
–
–Total equity 35,437 33,229 31,647
28,541
Total equity and liablites 544,791 513,593 425,877
407,923
1 Includes correction of fair value hedge accounting adjustment $81 millon
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its indvidual
statement of comprehensive income and related notes that form a part of these financal statements. The Company profit
for the year after tax is $2,146 millon (31 December 2020: loss after tax $141 millon).
The notes on pages 174 to 324 form an integral part of these financal statements.
These financal statements were approved by the Court of Directors and authorised for issue on 17 February 2022 and signed
on its behalf by:
Bill Winters
, Director
Andy Halford
, Director
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
170
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share
capital
and share
premium
account
$millon
Capital
and
merger
reserves
$millon
Own credit
adjustment
reserve
$millon
Fair value
through other
comprehensive
income reserve
– debt
$millon
Fair value
through other
comprehensive
income reserve
– equity
$millon
Cash flow
hedge
reserve
$millon
Translation
reserve
$millon
Retained
earnings
$millon
Parent
company
shareholders’
equity
$millon
Other equity
instruments
$millon
Non-
controlling
interests
$millon
Total
$millon
As at 1 January 2020 20,820 40 ¹ 24 202 38 (11 ) (4,106 ) 11,826 ² 28,833 5,000 1,289 35,122
(Loss)/profit for the year
– – – – – – – (25 ) (25 ) – 47 22
Other comprehensive (loss)/
income
– – (52 ) 240 44 16 29 (8 )³ 269 – (3 ) 266
Distrbutions
– – – – – – – – – – (79 ) (79 )
Shares issued, net of expenses 300 – – – – – – – 300 – – 300
Redemption of other equity
instruments
– – – – – – – – – (2,000 ) – (2,000 )
Share option expenses
– – – – – – – 124 124 – – 124
Divdends on preference shares
and AT1 securites
– – – – – – – (458 ) (458 ) – – (458 )
Deemed distrbution to parent
4
– – – – – – – (111 ) (111 ) – – (111 )
Other movements
– – – – – – 24 19 ⁵ 43 – – 43
As at 31 December 2020 21,120 40 (28 ) 442 82 5 (4,053 ) 11,367 28,975 3,000 1,254 33,229
Profit for the year
– – – – – – – 1,609 1,609 – 29 1,638
Other comprehensive
income/(loss)
– – 25 (330 ) 93 (16 ) (501 ) 155 ³ (574 ) – (25 ) (599 )
Distrbutions
– – – – – – – – – – (83 ) (83 )
Shares issued, net of expenses 1,273 – – – – – – – 1,273 – – 1,273
Other equity instruments issued,
net of expenses
– – – – – – – – – 2,750 – 2,750
Redemption of other
equityinstruments
– – – – – – – (41 ) (41 ) (1,001 ) – (1,042 )
Share option expenses
– – – – – – – 137 137 – – 137
Divdends on ordinary shares
– – – – – – – (1,511 ) (1,511 ) – – (1,511 )
Divdends on preference shares
and AT1 securites
– – – – – – – (292 ) (292 ) – – (292 )
Deemed distrbution to parent
4
– – – – – – – (136 ) (136 ) – – (136 )
Other movements
– – – – – – 10 ⁶ (10 ) – – 73 ⁷ 73
As at 31 December 2021 22,393 40 (3 ) 112 175 (11 ) (4,544 ) 11,278 29,440 4,749 1,248 35,437
1 Includes capital reserve of $35 millon, capital redemption reserve of $5 millon
2 Includes to correction of fair value hedge accounting adjustment $81 millon
3 Comprises actuarial (loss)/gain, net of taxation on Group defined benefit schemes
4 Relates to deemed capital contributon from parent company arisng from share-based payment net of taxation of $136 millon (31 December 2020: $111 millon deemed
capital contributon arisng from share-based payment net of taxation)
5 Includes $24 millon loss related to prior period adjustments to reclass FX movements from translation reserve to retained earnings related to FX movements for
monetary items, which were considered structural positons, offset by $34 millon relating to prior year opening reserves adjustment
6 Movement related to translation adjustment
7 Movements related to non-controlling interest from Trust Bank Singapore Limted ($70 millon) and Zodia Markets Holdings Limted ($3 millon)
Note 27 includes a descripton of each reserve.
The notes on pages 174 to 324 form an integral part of these financal statements.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
171
Notes
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Cash flows from operating activties:
Profit before taxation 2,381 536
2,496
255Adjustments for non-cash items and other adjustments included
withn income statement 33 472 2,651
(659)
1,462Change in operating assets 33 15,363 )
(13,366 )
((1,178)
(3,622)Change in operating liablites 33 37,603 21,612
18,902
13,290Contributons to defined benefit schemes 29 87 )
(94 )
((82)
(75)UK and overseas taxes paid 10 689 )
(557 )
((274)
(418)Net cash from operating activties 26,439 8,660 19,205
10,892
Cash flows from investng activties:
Internally generated Capitalsed Software 16 –
(738 )
(503)
–Purchase of property, plant and equipment 17 170 )
(134 )
((67)
(69)Disposal of property, plant and equipment 17 25 25
6
20Acquistion of investment in subsidaries, associates, and jont
ventures, net of cash acquired 32 41 )
(35 )
(–
–Divdends received from subsidaries, associates and jont ventures 32 – –
1,626
403Disposal of jont ventures, net of cash acquired 20 – 1,066
–
1,281Purchase of investment securites 169,673 )
(171,609 )
((131,168)
(139,256)Disposal and maturity of investment securites 153,093 175,603
113,905
141,611Net cash from/(used in)investng activties (19,398 ) 6,810 (16,201)
3,990
Cash flows from financng activties:
Issue of ordinary and preference share capital, net of expenses 27 1,273 300
1,273
300Premises and equipment lease liablity princpal payment 113 )
(112 )
((72)
(92)Issue of Additonal Tier 1 capital, net of expenses 2,750 – 2,750 –
Redemption of Tier 1 capital 27 2,000 )
(1,042 )
((1,042)
(2,000)Gross proceeds from issue of subordinated liablites 33 – 4,630
–
4,630Interest paid on subordinated liablites 33 503 )
(479 )
((456)
(480)Repayment of subordinated liablites 33 2,869 )
(16 )
((16)
(2,869)Proceeds from issue of senior debts 33 2,833 1,984
660
650Repayment of senior debts 33 1,310 )
(3,250 )
((422)
(577)Interest paid on senior debts 33 15 )
(16 )
((16)
(14)Investment from non-controlling interests 73 –
–
–Divdends paid to non-controlling interests, preference
shareholders and AT1 securites 537 )
(375 )
((292)
(458)Divdends paid to ordinary shareholders –
(1,511 )
(1,511)
–Net cash from/(used in)financng activties 128
(433 )
856(910)
Net increase in cash and cash equivalents 7,169 15,037 3,860
13,972
Cash and cash equivalents at beginnng of the year 75,910 60,155
56,151
41,873Effect of exchange rate movements on cash and cash equivalents 718
(1,652 )
(605)
306Cash and cash equivalents at end of the year 81,427 75,910 59,406
56,151
For Bank Group, interest received was $6,063 millon (31 December 2020: $8,120 millon), interest paid was $2,216 millon
(31 December 2020: $4,006 millon).
For Bank Company, interest received was $3,583 millon (31 December 2020: $5,332 millon), interest paid was $1,627 millon
(31 December 2020: $2,901 millon).
Cash flow statement
For the year ended 31 December 2021
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
172
Company statement of changes in equity
For the year ended 31 December 2021
Share
capital
and share
premium
account
$millon
Capital
and
merger
reserves
$millon
Own credit
adjustment
reserve
$millon
Fair value
through other
comprehensive
income reserve
– debt
$millon
Fair value
through other
comprehensive
income reserve
– equity
$millon
Cash flow
hedge
reserve
$millon
Translation
reserve
$millon
Retained
earnings
$millon
Parent
company
shareholders’
equity
$millon
Other
equity
instruments
$millon
Non-
controlling
interests
$millon
Total
$millon
As at 1 January 2020
20,820 40¹ 27 28 65 (27) (2,039) 6,881² 25,795 5,000 – 30,795
Loss for the year
– – – – – – – (141) (141) – – (141)
Other comprehensive
(loss)/income
– – (52) 140 11 (5) (56) (4)³ 34 – – 34
Shares issued, net of expenses
300 – – – – – – – 300 – – 300
Redemption of other equity
instruments
– – – – – – – – – (2,000) – (2,000)
Share option expenses
– – – – – – – 76 76 – – 76
Divdends on preference shares
and AT1 securites
– – – – – – – (458) (458) – – (458)
Deemed distrbution to parent
4
– – – – – – – (65) (65) – – (65)
Other movements
– – – – – – 132 (132)⁵ – – – –
As at 31 December 2020
21,120 40 (25) 168 76 (32) (1,963) 6,157 25,541 3,000 – 28,541
Profit for the year
– – – – – – – 2,146 2,146 – – 2,146
Other comprehensive
income/(loss)
– – 26 (258) 72 (7) (186) 146³ (207) – – (207)
Shares issued, net of expenses
1,273 – – – – – – – 1,273 – – 1,273
Other equity instruments issued,
net of expenses
– – – – – – – – – 2,750 – 2,750
Redemption of other equity
instruments
– – – – – – – (41) (41) (1,001) – (1,042)
Share option expenses
– – – – – – – 86 86 – – 86
Divdends on ordinary shares
– – – – – – – (1,511) (1,511) – – (1,511)
Divdends on preference shares
and AT1 securites
– – – – – – – (292) (292) – – (292)
Deemed distrbution to parent
4
– – – – – – – (85) (85) – – (85)
Other movements
– – – – – – – (12)⁶ (12) – – (12)
As at 31 December 2021
22,393 40 1 (90) 148 (39) (2,149) 6,594 26,898 4,749 – 31,647
1 Includes capital reserve of $35 millon, capital redemption reserve of $5 millon
2 Includes correction of fair value hedge accounting adjustment $81 millon
3 Comprises actuarial (loss) /gain, net of taxation on Group defined benefit schemes
4 Relates to deemed capital contributon from parent company arisng from share-based payment net of taxation of $85 millon (31 December 2020: $65 millon deemed
capital contributon arisng from share-based payment net of taxation)
5 Relates to prior period adjustments to reclass FX movements from translation reserve to retained earnings related to FX movements for monetary items, which were
considered structural positons
6 Standard Chartered Bank Saudi Arabia branch start-up costs $(12) millon
Note 27 includes a descripton of each reserve.
The notes on pages 174 to 324 form an integral part of these financal statements.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
173
Section Note Page
Basis of preparation
1 Accounting polices 174
Performance/return
2 Segmental informaton 176
3 Net interest income 182
4 Net fees and commisson 183
5 Net trading income 185
6 Other operating income 185
7 Operating expenses 185
8 Credit imparment 187
9 Goodwill, property, plant and equipment and other imparment 191
10 Taxation 192
11 Divdends 197
Assets and liablites held at fair value
12 Financal instruments 198
13 Derivatve financal instruments 242
Financal instruments held at amortised cost
14 Loans and advances to banks and customers 261
15 Reverse repurchase and repurchase agreements includng other
simlar lending and borrowing
261
Other assets and investments
16 Goodwill and intangble assets 265
17 Property, plant and equipment 269
18 Leased assets 272
19 Other assets 273
20 Assets held for sale and associated liablites 274
Funding, accruals, provisons, contingent
liablites and legal proceedings
21 Debt securites in issue 275
22 Other liablites 276
23 Provisons for liablites and charges 276
24 Contingent liablites and commitments 277
25 Legal and regulatory matters 279
Capital instruments, equity and reserves
26 Subordinated liablites and other borrowed funds 280
27 Share capital, other equity instruments and reserves 281
28 Non-controlling interests 283
Employee benefits
29 Retirement benefit obligatons 284
30 Share-based payments 294
Scope of consolidaton
31 Investments in subsidary undertakings, jont ventures and associates 298
32 Structured entites 302
Cash flow statement
33 Cash flow statement 304
34 Cash and cash equivalents 305
Other disclosure matters
35 Related party transactions 306
36 Post balance sheet events 308
37 Auditor’s remuneration 309
38 Remuneration of directors 309
39 Related undertakings of the Group 311
40 Group Reorganisaton 324
Contents – Notes to the financal statements
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
174
Notes to the financal statements
1. Accounting polices
Statement of compliance
The Group financal statements consolidate Standard Chartered Bank (the Company) and its subsidaries (together referred
to as the Group) and equity account the Group’s interests in associates and jontly controlled entites. The Company financal
statements present informaton about the Company as a separate entity.
The Group financal statements have been prepared in accordance with UK -adopted internatonal accounting standards
and International Financal Reporting Standards (IFRS) as adopted by the European Union (EU IFRS). The Company financal
statements have been prepared in accordance with UK-adopted internatonal accounting standards as applied in
conformity with section 408 of the Companies Act 2006. The financal statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis of preparation
The Group and Company financal statements have been prepared on a going concern basis and under the historcal cost
convention, as modifed by the revaluation of cash-settled share-based payments, fair value through other comprehensive
income, and financal assets and liablites (includng derivatves) at fair value through profit or loss.
The consolidated financal 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 millon dollars, except when
otherwise indcated.
The Group has assessed the impact of climate risk on the Group’s financal report. The areas of impact were credit risk and
the impact on lending portfolios; ESG features withn 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 recoverabilty of certain assets, includng
of goodwill, deferred tax assets and investments in subsidary undertakings.
This assessment was undertaken by considerng the maturity profile of the loan portfolio which is majorty shorter term.
Transiton risk, as our clients move to lower carbon emittng revenues is considered with reference to client transiton
pathways and manifests over a longer term than the maturity of the loan book (up to 2050). Physical risk is already included
withn the majorty of our mortgage lending and we have applied scenario analysis against the pathways of different
temperature additons and country policy scenarios. We also assess the impact of climate risk on the classifcation of
financal instruments under IFRS 9, when Environmental, Sustainablity or Governance (ESG) triggers may affect the cash
flows received by the Group under the contractual terms of the instrument.
Our corporate plan has a 5 year outlook and already includes where we have set target to transiton away from certain high
carbon sectors (i.e. coal), offset by transiton finance opportunites. This is shorter term than many of the climate scenario
outlooks but seeks to capture the nearer term performance as required by recoverabilty models.
Our process was limted in the context of this being an emerging area, particularly given of the availablity of data and the
sophistcation of models, and so the potential impact of Climate Risk may not be fully reflected in these financal statements.
The Group considers Climate Risk to have limted impact in the immedate term and as a longer term risk will be addressed
through its business strategy and financal planning as the Group implements its net zero journey.
Signficant accounting estimates and judgements
In determinng the carrying amounts of certain assets and liablites, the Group makes assumptions of the effects of uncertain
future events on those assets and liablites at the balance sheet date. The Group’s estimates and assumptions are based on
historcal experience and expectation of future events and are reviewed periodcally. Further informaton about key
assumptions concerning the future, and other key sources of estimaton uncertainty and judgement, are set out in the
relevant disclosure notes for the following areas:
•
Credit imparment, includng evaluation of management overlays and post-model adjustments, and determinaton of
probabilty weightngs for Stage 3 indvidually assessed provisons (Note 8)
•
Taxation (Note 10)
•
Financal instruments measured at fair value (Note 12)
•
Goodwill imparment (Note 16)
•
Provisons for liablites and charges (Note 23)
•
Investments in subsidary undertakings, jont ventures and associates (Note 31)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
175
Notes to the financal statements continued
1. Accounting polices continued
Comparatives
Certain comparatives have been represented in line with current year disclosures. Details of these changes are set out in the
relevant sections and notes below:
•
Risk review: various credit risk tables for change in segment policy
•
Statement of changes in Equity
•
Note 2 Segmental informaton
•
Note 12 Financal instruments
•
Note 16 Goodwill and intangble assets
New accounting standards adopted by the Group
Amendments to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021
The Group has adopted amendments to IFRS 16 that permit the Group not to assess whether a rent concession granted as a
direct consequence of the COVID-19 pandemic is accounted for as a lease modifcation. In March 2021 the IASB extended the
availablity of the practical expedient by one year and this was endorsed by the UK Endorsement Board on 12 May 2021,
therefore a rent concession is deemed to be a direct consequence of COVID-19 if and only if all the following critera are met:
•
A change in lease payments results in revised consideraton for the lease that is substantially the same as, or less than, the
consideraton for the lease immedately preceding the change;
•
Any reduction in lease payments affects only payments orignally due up to and includng 30 June 2022 (this includes
thecase where the change results in reduced lease payments before this date and increased lease payments after this
date); and
•
There is no substantive change to other terms and conditons of the lease
The amendments have not had a material effect on the Group’s financal statements.
New accounting standards in issue but not yet effective
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017 to replace IFRS 4 Insurance Contracts and to establish a comprehensive
standard for inceptors of insurance polices. The effective date is 1 January 2023. The Group is assessing the likely
implementaton impact on adopting the standards on its financal statements.
Amendments to IFRS 9 Financal Instruments: Fees in the ’10 per cent’ test for derecogniton of financal liablites
In May 2020 the IASB published its 2018-2020 annual improvements process which provides non-urgent but necessary
amendments to IFRS. This publicaton included changes to IFRS 9 that will be effective prospectively from 1 January 2022, with
early adoption permitted. Under these amendments, when assessing changes in terms of a financal liablity, the only fees
considered in the assessment of whether the terms of a new or modifed financal liablity are substantially different (i.e. a
change in present value of more than 10 per cent) from the terms of the orignal financal liablity are fees paid or received
between the borrower or lender. This includes fees paid or received by either the borrower or lender on the other’s behalf. The
effect of these amendments is not expected to be material to the Group’s financal statements.
Going concern
These financal statements were approved by the Court of directors on 17 February 2022. The directors have made an
assessment of the Group’s abilty to continue as a going concern. This assessment has been made having considered the
impact of COVID-19, macroeconomic and geopolitcal headwinds, includng:
•
A review of the Group Strategy and Corporate plan, both of which cover a year from the date of signng the annual report.
•
An assessment of the actual performance to date, loan book quality, credit imparment, legal, regulatory and compliance
matters, and the updated annual revised budget.
•
Consideraton of stress testing performed by management, includng COVID additonal waves with the accompanying
economic shocks, credit impact and short-term liqudity shocks, across the PLC Group’s footprint markets (Which includes
the Group) to ensure that the Group has sufficent capital to withstand this shock, under a range of scenarios, the results of
these stress tests demonstrate that the PLC Group has sufficent capital and liqudity to continue as a going concern and
meet minmum regulatory capital and liqudity requirements.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
176
Notes to the financal statements continued
1. Accounting polices continued
•
Analysis of the capital, funding and liqudity positon of the Group, includng the capital 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 liqudity was considered in the context of the risk appetite metrics,
includng the ADR and LCR ratios
•
The Group’s Internal Liqudity Adequacy Assessment Process (ILAAP), which considers the Group’s liqudity positon,
itsframework and whether sufficent liqudity resources are being maintaned to meet liablites as they fall due, was
alsoreviewed
•
The level of debt in issue, includng redemptions and issuances during the year, debt falling due for repayment in the next 12
months and further planned debt issuances, includng the appetite in the market for the Group’s debt
•
A detailed review of all princpal and emerging risks
Based on the analysis performed, the directors confirm they are satisfed that the Group has adequate resources to continue
in business for a period of 12 months from the 17 February 2022. For this reason, the Group continues to adopt the going
concern basis of accounting for preparing the financal statements.
2. Segmental informaton
Accounting policy
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. The two client segments are
Corporate, Commercial & Institutonal Banking and Consumer, Private and Business Banking. The three geographic regions
are Asia, Africa & Middle East, and Europe & Americas. Activties not directly related to a client segment and/or geographic
region are included in Central & other items. These mainly include Corporate Centre costs, treasury markets, treasury
activties, certain strategic investments and the UK bank levy.
The following should also be noted:
•
Transactions and funding between the segments are carried out on an arm’s-length basis
•
Corporate Centre costs represent stewardship and central management services roles and activties that are not directly
attributable to business or country operations
•
Treasury markets, jont ventures and associate investments are managed in the regions and are included withn the
applicable region. However, they are not managed directly by a client segment and are therefore included in the Central &
other items segment
•
In additon to treasury activties, Corporate Centre costs and other Group related functions, Central & other items for
regions includes globally run businesses or activties that are managed by the client segments but not directly by
geographic management. These include Princpal Finance, SC Ventures and Portfolio Management
•
The Group allocated central costs (excluding Corporate Centre costs) relating to client segments and geographic regions
using appropriate business drivers (such as in proportion to the direct cost base of each segment before allocation of
indrect costs) and these are reported withn operating expenses
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
177
Notes to the financal statements continued
2. Segmental informaton continued
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 princpally the location from which a client relationshp is managed, which
may differ from where it is financally booked and may be shared between businesses and/or regions. In certain instances this
approach is not appropriate and a Financal View is disclosed, that is, the location in which the transaction or balance was
booked. Typically, the Financal View is used in areas such as the Market and Liqudity Risk reviews where actual booking
location is more important for an assessment. Segmental informaton is therefore on a Management View unless
otherwisestated.
Restructuring items excluded from underlying results
The Group incurred net restructuring charges of $325 millon in 2021 (2020: $272 millon), of which $214 millon
(2020: $183 millon) related to planned intiatves to reduce ongoing costs.
Reconcilations between underlying and statutory results are set out in the tables below:
Profit before taxation (PBT)
2021
Underlying
$millon
Regulatory
fine
$millon
Restructuring
$millon
Net gains on
disposal of
available for
sale
instruments
$millon
Goodwill
imparment
$millon
Statutory
$millon
Operating income
8,914 – (74) 20 – 8,860
Operating expenses
(6,204) (62) (214) – – (6,480)
Operating profit/(loss) before imparment losses
andtaxation 2,710 (62) (288) 20 – 2,380
Credit imparment
28 – 2 – – 30
Other imparment
9 – (39) – – (30)
Profit from associates andjont ventures
1 – – – – 1
Profit/(loss) before taxation 2,748 (62) (325) 20 – 2,381
2020
Underlying
$millon
Regulatory
fine
$millon
Restructuring
$millon
Net gains on
disposal of
available for
sale
instruments
$millon
Goodwill
imparment
$millon
Statutory
$millon
Operating income 9,285 – (55) 6 – 9,236
Operating expenses (6,294) 14 (183) – – (6,463)
Operating profit/(loss) before imparment losses
andtaxation
2,991 14 (238) 6 – 2,773
Credit imparment (1,948) – (28) – – (1,976)
Other imparment 147 – (6) – (403) (262)
Profit from associates and jont ventures 1 – – – – 1
Profit/(loss) before taxation
1,191 14 (272) 6 (403) 536
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
178
Notes to the financal statements continued
2. Segmental informaton continued
Underlying performance by client segment
2021
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Operating income 5,703 2,679 532 8,914
External
5,560 2,322 1,032 8,914
Inter-segment
143 357 (500) –
Operating expenses (3,591) (2,008) (605) (6,204)
Operating profit before imparment losses and taxation 2,112 671 (73) 2,710
Credit imparment
216 (169) (19) 28
Other imparment
(39) – 48 9
Profit from associates and jont ventures
– – 1 1
Underlying profit/(loss) before taxation 2,289 502 (43) 2,748
Restructuring
(108) (47) (170) (325)
Goodwill imparment & other items
– – (42) (42)
Statutory profit/(loss) before taxation 2,181 455 (255) 2,381
Total assets
299,608 47,548 197,635 544,791
Total liablites
340,801 65,771 102,782 509,354
2020¹
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Operating income
5,858 2,619 808 9,285
External 6,046 2,119 1,120 9,285
Inter-segment (188) 500 (312) –
Operating expenses
(3,538) (1,983) (773) (6,294)
Operating profit before imparment losses and taxation
2,320 636 35 2,991
Credit imparment (1,402) (523) (23) (1,948)
Other imparment 278 (10) (121) 147
Profit from associates and jont ventures – – 1 1
Underlying profit before taxation
1,196 103 (108) 1,191
Restructuring (142) (49) (81) (272)
Goodwill imparment & other items – – (383) (383)
Statutory profit/(loss) before taxation
1,054 54 (572) 536
Total assets 287,164 42,734 183,695 513,593
Total liablites 341,770 61,758 76,836 480,364
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients
Operating income by client segment
2021
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income
5,703 2,679 532 8,914
Restructuring
(33)
–(41) (74)
Other items
– – 20 20
Statutory operating income 5,670 2,679 511 8,860
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
179
Notes to the financal statements continued
2. Segmental informaton continued
2020 (restated)
1
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income 5,858 2,619 808 9,285
Restructuring (41) – (14) (55)
Other items – – 6 6
Statutory operating income
5,817 2,619 800 9,236
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients
Underlying performance by region
2021
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Operating income 4,274 2,435 2,006 199 8,914
Operating expenses (2,635) (1,610) (1,444) (515) (6,204)
Operating profit/(loss) before imparment losses and taxation 1,639 825 562 (316) 2,710
Credit imparment
(112) 34 120 (14) 28
Other imparment
– (1) 33 (23) 9
Profit from associates and jont ventures
– – – 1 1
Underlying profit/(loss) before taxation 1,527 858 715 (352) 2,748
Restructuring
(84) (26) (89) (126) (325)
Goodwill imparment & other items
– – – (42) (42)
Statutory profit/(loss) before taxation 1,443 832 626 (520) 2,381
Total assets
163,441 57,404 287,372 36,574 544,791
Total liablites
146,644 41,257 238,220 83,233 509,354
2020 (restated)¹
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Operating income
4,337 2,356 2,065 527 9,285
Operating expenses
(2,608) (1,672) (1,286) (728) (6,294)
Operating profit before imparment losses and taxation
1,729 684 779 (201) 2,991
Credit imparment (1,130) (654) (171) 7 (1,948)
Other imparment 163 (14) 8 (10) 147
Profit from associates and jont ventures – – – 1 1
Underlying profit before taxation
762 16 616 (203) 1,191
Restructuring (41) (87) (32) (112) (272)
Goodwill imparment & other items – – – (383) (383)
Statutory profit/(loss) before taxation
721 (71) 584 (698) 536
Total assets 155,961 58,068 263,258 36,306 513,593
Total liablites 134,859 39,977 217,964 87,564 480,364
1 Following the Group’s change in organisatonal structure, there has been an integraton of Greater China & North Asia and ASEAN & South Asia to Asia. Prior year has
been restated.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
180
Notes to the financal statements continued
2. Segmental informaton continued
Operating income by region
2021
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income
4,274 2,435 2,006 199 8,914
Restructuring
(11) 3 (31) (35) (74)
Other items
– – – 20 20
Statutory operating income 4,263 2,438 1,975 184 8,860
2020 (restated)
1
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Underlying operating income 4,337 2,356 2,065 527 9,285
Restructuring (3) (1) – (51) (55)
Other items – – – 6 6
Statutory operating income
4,334 2,355 2,065 482 9,236
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients
Additonal segmental informaton (statutory)
2021
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Net interest income
2,267 1,464 321 4,052
Net fees and commisson income
1,325 1,076 (5) 2,396
Net trading and other income
2,078 139 195 2,412
Operating income 5,670 2,679 511 8,860
2020 (restated)
1
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Net interest income 2,329 1,546 225 4,100
Net fees and commisson income 1,095 916 (6) 2,005
Net trading and other income 2,393 157 581 3,131
Operating income
5,817 2,619 800 9,236
1 Following an organisatonal restructure that came into effect on 1 January 2021, the new structure results in the creation of two new client segments: Corporate,
Commercial & Institutonal Banking, serving larger companies and insttutions, and Consumer, Private & Business Banking, serving Indivdual and business clients
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
181
Notes to the financal statements continued
2. Segmental informaton continued
Operating income by Region
2021
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Net interest income
2,130 1,188 502 232 4,052
Net fees and commisson income
1,234 605 563 (6) 2,396
Net trading and other income
899 645 910 (42) 2,412
Operating income 4,263 2,438 1,975 184 8,860
2020 (restated)
1
Asia
$millon
Africa &
Middle East
$millon
Europe &
Americas
$millon
Central &
other items
$millon
Total
$millon
Net interest income 2,058 1,224 336 482 4,100
Net fees and commisson income 1,010 525 523 (53) 2,005
Net trading and other income 1,266 606 1,206 53 3,131
Operating income
4,334 2,355 2,065 482 9,236
1 Following the Group’s change in organisatonal structure, there has been an integraton of Greater China & North Asia and ASEAN & South Asia to Asia. Prior period has
been restated
Operating income by Key Countries
2021
Singapore
$millon
India
$millon
UAE
$millon
UK
$millon
US
$millon
Net interest income
730 705 228 227 198
Net fees and commisson income
664 231 100 21 428
Net trading and other income
187 337 215 671 201
Operating income 1,581 1,273 543 919 827
2020
Singapore
$millon
India
$millon
UAE
$millon
UK
$millon
US
$millon
Net interest income 664 664 281 82 170
Net fees and commisson income 522 195 111 54 379
Net trading and other income 350 379 173 946 241
Operating income
1,536 1,238 565 1,082 790
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
182
Notes to the financal statements continued
3. Net interest income
Accounting Policy
Interest income for financal assets held at either fair value through other comprehensive income or amortised cost, and
interest expense on all financal liablites held at amortised cost is recognised in profit or loss using the effective interest
method.
The effective interest method is a method of calculating the amortised cost of a financal asset or a financal liablity and of
allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that
discounts estimated future cash payments or receipts through the expected life of the financal instrument or, when
appropriate, a shorter period, to the net carrying amount of the financal asset or financal liablity. When calculating the
effective interest rate, the Group estimates cash flows considerng all contractual terms of the financal 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. Where the estimates of cash flows have been revised, the carrying amount of the financal asset or
liablity is adjusted to reflect the actual and revised cash flows, discounted at the instruments orignal effective interest rate.
The adjustment is recognised as interest income or expense in the period in which the revison is made.
Interest income for financal assets that are either held at fair value through other comprehensive income or amortised cost
that have become credit-impared subsequent to intial recogniton (stage 3), is recognised using the orignal effective interest
rate applied to the net carrying value. Interest income is therefore recognised on the amortised cost of the financal asset
includng expected credit losses. Should the credit risk on a stage 3 financal asset improve such that the financal asset is no
longer considered credit-impared, interest income recogniton reverts to a computation based on the gross carrying value of
the financal asset.
2021
$millon
2020
$millon
Balances at central banks
67
90Loans and advances to banks
321
552Loans and advances to customers
4,061
5,052Debt securites
1,240
1,614Other eligble bills
285
423Accrued on impared assets (discount unwind)
211¹
76Interest income 6,185
7,807
Of which: financal instruments held at fair value through other comprehensive income
1,018
1,397Deposits by banks
68
156Customer accounts
1,927
2,721Debt securites in issue
98
251Subordinated liablites and other borrowed funds
6
540Interest expense on IFRS 16 lease liablites
34
39Interest expense 2,133
3,707
Net interest income 4,052
4,100
1 Includes a $163 millon adjustment in relation to interest earned on impared assets as required by IFRS9 Financal Instruments Recogniton and Measurement
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
183
Notes to the financal statements continued
4. Net fees and commisson
Accounting policy
Fees and commissons charged for services provided by the Group are recognised as or when the service is completed or
signficant act performed.
Loan syndicaton fees are recognised as revenue when the syndicaton has been completed and the Group retained no part
of the loan package for itself, or retained a part at the same effective interest rate as for the other particpants.
The Group can act as trustee or in other fiducary capacites that result in the holding or placing of assets on behalf of
indviduals, trusts, retirement benefit plans and other insttutions. The assets and income arisng thereon are excluded from
these financal statements, as they are not assets and income of the Group.
The Group applies the following practical expedients:
•
informaton on amounts of transaction price allocated to unsatisfed (or partially unsatisfed) performance obligatons 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 consideraton is not adjusted for the effects of a signficant financng component as the period between the
Group providng a service and the customer paying for it is expected to be less than one year
•
incremental costs of obtainng a fee-earning contract are recognised upfront in 'Fees and commisson expense' rather
thanamortised, if the expected term of the contract is less than one year
The determinaton of the services 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 consideratons on income recogniton by product are
asfollows:
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.
Financal Markets
The Group recognises fee income at the point in time the service is provided. Fee income is recognised for a signficant
non-lending service when the transaction has been completed and the terms of the contract with the customer entitle the
Group to the fee. Fees are usually received shortly after the service is provided.
Syndicaton fees are recognised when the syndicaton is complete. Fees are generally received before completion of the
syndicaton, or withn 12 months of the transaction date.
Securites services include custody services, fund accounting and adminstration, 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 consideraton on bancassurance agreements is amortised straight-line over the contractual term. Commissons for
bancassurance activties are recorded as they are earned through sales of third-party insurance products to customers.
These commissons are received withn a short time frame of the commisson being 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 specifed date after achievement of a target has been confirmed.
Upfront and trailng commissons for managed investment placements are recorded as they are confirmed. Income from
these activties is relatively even throughout the period, and cash is usually received withn a short time frame after the
commisson 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 at the time the fee is received since in most of our retail markets there are contractual
circumstances under which fees are waived, so income recogniton is constrained until the uncertaintes associated with the
annual fee are resolved. The Group defers the fair value of reward points on its credit card reward programmes, and
recognises income and costs associated with fulfillng the reward at the time of redemption.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
184
Notes to the financal statements continued
4. Net fees and commisson continued
2021
$millon
2020
$millon
Fees and commissons income
2,972
2,601Of which:
Financal instruments that are not fair valued through profit or loss
962
873Trust and other fiducary activties
276
127Fees and commissons expense
(576)
(596)Of which:
Financal instruments that are not fair valued through profit or loss
(182)
(175)Trust and other fiducary activties
(9)
(4)Net fees and commisson 2,396
2,005
2021
Corporate,
Commercial&
Institutonal
Banking
$millon
Consumer
Private &
Business
Banking
$millon
Central &
other items
$millon
Total
$millon
Transaction Banking
936 27 – 963
Trade
489 18 – 507
Cash Management
447 9 – 456
Financal Markets
290 – – 290
Lending and Portfolio Management
104 1 – 105
Princpal Finance
(5) – – (5)
Wealth Management
– 832 – 832
Retail Products
– 236 – 236
Treasury
– – (21) (21)
Others
– (20) 16 (4)
Net fees and commisson 1,325 1,076 (5) 2,396
2020 (Restated)1
Corporate,
Commercial&
Institutonal
Banking¹
$millon
Consumer
Private &
Business
Banking¹
$millon
Central &
other items
$millon
Total
$millon
Transaction Banking 825 21 – 846
Trade 430 13 – 443
Cash Management 395 8 – 403
Financal Markets 213 1 – 214
Lending and Portfolio Management 56 – – 56
Princpal Finance 1 – – 1
Wealth Management – 692 – 692
Retail Products – 202 – 202
Treasury – – (1) (1)
Others – – (5) (5)
Net fees and commisson
1,095 916 (6) 2,005
1 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Further, certain clients have been moved between
the two new client segments. Prior period has been restated
Upfront bancassurance consideraton amounts are amortised on a straight-line basis over the contractual period to which
the consideraton relates. Deferred income on the balance sheet in respect of these activties is $634 millon (31 December
2020: $718 millon). The income will be earned evenly over the next 7.5 years (31 December 2020: 8.5 years). For the twelve
months ended 31 December 2021, $84 millon of fee income was released from deferred income (31 December 2020:
$84millon).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
185
Notes to the financal statements continued
5. Net trading income
Accounting policy
Gains and losses arisng from changes in the fair value of financal 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.
Income is recognised from the sale and purchase of trading positons, margins on market making and customer business and
fair value changes.
When the intial fair value of a financal instrument held at fair value through profit or loss relies on unobservable inputs, the
difference between the intial 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.
2021
$millon
2020
$millon
Net trading income
2,280
2,606Signficant items withn net trading income include:
Gains on instruments held for trading
1
2,291
2,205
Gains on financal assets mandatorily at fair value through profit or loss
136
619Losses on financal assets designated at fair value through profit or loss
(5)
(5)Losses on financal liablites designated at fair value through profit or loss
(53)
(171)1 Includes $187 millon gain (31 December 2020: $275 millon loss) from the transaction of foreign currency monetary assets and liablites
6. Other operating income
Accounting policy
Operating lease income is recognised on a straight-line basis over the period of the lease unless another systematic basis is
more appropriate.
Divdends on equity instruments are recognised when the Group’s right to receive payment is established.
On disposal of fair value through other comprehensive income debt instruments, the cumulative gain or loss recognised in
other comprehensive income is recycled to the profit or loss in other operating income/expense.
When the Group loses control of the subsidary or disposal group, the difference between the consideraton received and the
carrying amount of the subsidary or disposal group is recognised as a gain or loss on sale of the business.
2021
$millon
2020
$millon
Other operating income includes:
Rental income from operating lease assets
2
2Gains less losses on disposal of fair value through other comprehensive income debt instruments
96
353Gains less losses on amortised cost financal assets
34
2Net gain on sale of businesses
12
6Divdend income
11
56Other
(23)
106Other operating income 132
525
7. Operating expenses
Accounting policy
Short-term employee benefits: salaries and social security expenses are recognised over the period in which the employees
provide the service. Variable compensation is included withn share-based payments costs and wages and salaries. Further
details are disclosed in the Directors’ remuneration report (pages 309 to 310).
Pension costs: contributons to defined contributon pension schemes are recognised in profit or loss when payable. For
defined benefit plans, net interest expense, service costs and expenses are recognised in the income statement. Further
details are provided in Note 29.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
186
Notes to the financal statements continued
7. Operating expenses continued
Share-based compensation: the Group operates equity-settled and cash-settled share-based payment compensation plans.
The fair value of the employee services (measured by the fair value of the option granted) received in exchange for the grant
of the options is recognised as an expense. Further details are provided in Note 30.
2021
$millon
2020
$millon
Staff costs:
Wages and salaries
4,360
3,957Social security costs
144
116Other pension costs (Note 29)
274
263Share-based payment costs
148
119Other staff costs
665
6735,591
5,128
Other staff costs include redundancy expenses of $88 millon (31 December 2020: $125 millon). Further costs in this category
include trainng, travel costs and other staff related costs.
The following table summarises the number of employees withn the Group and Company:
Group
2021
2020
Business
Support
services Total
Business
Support
services Total
At 31 December 43,343 65,850
19,515 45,758 65,273
22,507Average for the year 42,740 66,462
19,986 45,481 65,467
23,722Company
2021
2020
Business
Support
services Total
Business
Support
services Total
At 31 December 11,918 21,485
8,032 12,534 20,566
9,567Average for the year 12,073 21,832
8,211 12,618 20,829
9,759Details of directors’ pay, benefits, pensions and benefits and interests in shares are disclosed in Note 38 Remuneration
ofDirectors’ (page 309). Transactions with directors, officers and other related parties are disclosed in Note 35.
2021
$millon
2020
$millon
Premises and equipment expenses
224
249General adminstrative expenses:
UK bank levy
100
331Regulatory fine
62
(14)Other general adminstrative expenses¹
(91)
9771
414
Depreciaton and amortisaton:
Property, plant and equipment:
Premises
160
168Equipment
90
91250
259
Intangibles:
Software
339
409Acquired on business combinatons
5
4594
672
Total operating expenses 6,480
6,463
1 Includes cost recoveries for services rendered to other Group entites
Operating expenses include research expenditure of $705 millon (31 December 2020: $589 millon) recognised as an expense
in the year.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
187
Notes to the financal statements continued
7. Operating expenses continued
The UK bank levy is applied on the chargeable equity and liablites on the Group’s consolidated balance sheet. Key
exclusions from chargeable equity and liablites include Tier 1 capital, insured or guaranteed retail deposits, repos secured on
certain sovereign debt and liablites subject to netting. The rate of the levy for 2020 was 0.14 per cent for chargeable short-
term liablites, with a lower rate of 0.07 per cent generally applied to chargeable equity and long-term liablites (i.e. liablites
with a remainng maturity greater than one year). From 1 January 2021 the rates are 0.10 per cent for short-term liablites and
0.05 per cent for long-term liablites. In additon, the scope of the UK bank levy is restricted to the balance sheet of UK
operations only from this date.
8. Credit imparment
Accounting policy
Signficant accounting estimates and judgements
The Group’s expected credit loss (ECL) calculations are outputs of complex models with a number of underlying assumptions.
The signficant judgements in determinng expected credit loss include:
•
The Group’s critera for assessing if there has been a signficant increase in credit risk;
•
Development of expected credit loss models, includng the choice of inputs relating to macroeconomic variables;
•
Evaluation of management overlays and post-model adjustments;
•
Determinaton of probabilty weightngs for Stage 3 indvidually assessed provisons
The calculation of credit imparment provisons also involves expert credit judgement to be applied by the credit risk
management team based upon counterparty informaton they receive from various sources includng relationshp managers
and on external market informaton. Details on the approach for determinng expected credit loss can be found in the credit
risk section, under IFRS 9 Methodology (page 58).
Estimates of forecasts of key macroeconomic variables underlying the expected credit loss calculation can be found withn
the Risk review, Key assumptions and judgements in determinng expected credit loss (page 100).
Expected credit losses
Expected credit losses are determined for all financal debt instruments that are classifed at amortised cost or fair value
through other comprehensive income, undrawn commitments and financal guarantees.
An expected credit loss represents the present value of expected cash shortfalls over the residual term of a financal asset,
undrawn commitment or financal 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
Expected credit losses are computed as unbiased, probabilty-weighted amounts which are determined by evaluating a
range of reasonably possible outcomes, the time value of money, and considerng all reasonable and supportable
informaton includng that which is forward-looking.
For material portfolios, the estimate of expected cash shortfalls is determined by multiplyng the probabilty 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 lifetme 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 sophistcated approaches based on
historcal 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 indces and commodity 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 informaton, which 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-linearty 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 determinng the PD (and where relevant, the LGD and EAD) and in determinng the overall
expected credit loss 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 limted to the maximum contractual period for which the
Group is exposed to credit risk. However, for certain revolving credit facilties, which include credit cards or overdrafts, the
Group’s exposure to credit risk is not limted to the contractual period. 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 facilties.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
188
Notes to the financal statements continued
8. Credit imparment continued
For credit-impared financal instruments, the estimate of cash shortfalls may require the use of expert credit judgement. The
estimate of expected cash shortfalls on a collateralised financal instrument reflects the amount and timng of cash flows
that are expected from foreclosure on the collateral less the costs of obtainng and selling the collateral, regardless of
whether foreclosure is deemed probable.
Cash flows from unfunded credit enhancements held are included withn the measurement of expected credit losses if they
are part of, or integral to, the contractual terms of the instrument (this includes financal guarantees, unfunded risk
particpations and other non-derivatve credit 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 expected credit losses
recorded.
Cash shortfalls are discounted using the effective interest rate (or credit-adjusted effective interest rate for purchased or
orignated credit-impared instruments (POCI)) on the financal instrument as calculated at intial recogniton or if the
instrument has a variable interest rate, the current effective interest rate determined under the contract.
Instruments Location of expected credit loss provisons
Financal assets held at amortised cost Loss provisons: netted against gross carrying value
1
Financal assets held FVOCI – Debt instruments Other comprehensive income (FVOCI expected credit loss reserve)
2
Loan commitments Provisons for liablites and charges
3
Financal guarantees Provisons for liablites and charges
3
1 Purchased or orignated credit-impared assets do not attract an expected credit loss provison on intial recogniton. An expected credit loss provison will be
recognised only if there is an increase in expected credit losses from that considered at intial recogniton
2 Debt and treasury securites classifed as fair 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 withn other comprehensive income (OCI) and is recycled to the profit and loss account along
with any fair value measurement gains or losses held withn FVOCI when the applicable instruments are derecognised
3 Expected credit loss on loan commitments and financal guarantees is recognised as a liablity provison. Where a financal instrument includes both a loan
(i.e.financalasset component) and an undrawn commitment (i.e. loan commitment component), and it is not possible to separately identfy the expected credit
losson these components, expected credit loss amounts on the loan commitment are recognised together with expected credit loss amounts on the financal asset.
Totheextent the combined expected credit loss exceeds the gross carrying amount of the financal asset, the expected credit loss is recognised as a liablity provison
Recogniton
12 months expected credit losses (Stage 1)
Expected credit losses are recognised at the time of intial recogniton of a financal instrument and represent the lifetme
cash shortfalls arisng from possible 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 signficant increase in the credit risk of an
instrument or the instrument becomes credit-impared. If an instrument is no longer considered to exhibt a signficant
increase in credit risk, expected credit losses will revert to being determined on a 12-month basis.
Signficant increase in credit risk (Stage 2)
If a financal asset experiences a signficant increase in credit risk (SICR) since intial recogniton, an expected credit loss
provison is recognised for default events that may occur over the lifetme of the asset.
Signficant 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 orignation (after taking into account the passage of time). Signficant does not mean statistcally signficant nor is
it assessed in the context of changes in expected credit loss. Whether a change in the risk of default is signficant or not is
assessed using a number of quantitatve and qualitatve factors, the weight of which depends on the type of product and
counterparty. Financal assets that are 30 or more days past due and not credit-impared will always be considered to have
experienced a signficant increase in credit risk. For less material portfolios where a loss rate or roll rate approach is applied to
compute expected credit loss, signficant increase in credit risk is primarly based on 30 days past due.
Quantitatve factors include an assessment of whether there has been signficant increase in the forward-looking probabilty
of default (PD) since orignation. A forward-looking PD is one that is adjusted for future economic conditons to the extent
these are correlated to changes in credit risk. We compare the residual lifetme PD at the balance sheet date to the residual
lifetme PD that was expected at the time of orignation 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
signficant increase in credit risk.
Qualitatve 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 monitorng).
A non-purely precautionary early alert account is one which exhibts risk or potential weaknesses of a material nature
requirng closer monitorng, supervison, or attention by management. Weaknesses in such a borrower’s account, if left
uncorrected, could result in deterioraton of repayment prospects and the likelhood of being downgraded. Indicators could
include a rapid erosion of positon withn the industry, concerns over management’s abilty to manage operations, weak/
deterioratng operating results, liqudity strain and overdue balances among other factors.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
189
Notes to the financal statements continued
8. Credit imparment continued
Credit-impared (or defaulted) exposures (Stage 3)
Financal assets that are credit-impared (or in default) represent those that are at least 90 days past due in respect of
princpal and/or interest. Financal assets are also considered to be credit-impared 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
financal asset. It may not be possible to identfy a single discrete event but instead the combined effect of several events
may cause financal assets to become credit-impared.
•
Evidence that a financal asset is credit-impared includes observable data about the following events:
•
Signficant financal diffculty 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 financal diffculty, the lenders of the borrower have granted
the borrower concession/s that lenders would not otherwise consider. This would include forbearance actions (page 83);
•
Pending or actual bankruptcy or other financal reorganisaton to avoid or delay discharge of the borrower’s obligaton/s;
•
The disappearance of an active market for the applicable financal asset due to financal diffculties of the borrower;
•
Purchase or orignation of a financal asset at a deep discount that reflects incurred credit losses
Lending commitments to a credit-impared obligor that have not yet been drawn down are included to the extent that the
commitment cannot be withdrawn. Loss provisons against credit-impared financal assets are determined based on an
assessment of the recoverable cash flows under a range of scenarios, includng the realisaton of any collateral held where
appropriate. The loss provisons held represent the difference between the present value of the expected cash shortfalls,
discounted at the instrument’s orignal effective interest rate, and the gross carrying value (includng contractual interest due
but not paid) of the instrument prior to any credit imparment. The Group’s defintion of default is aligned with the regulatory
defintion of default as set out in the UK’s onshored Capital Requirements Regulation (Article 178) and related guidelnes
Expert credit judgement
For Corporate, Commercial & Institutonal Banking, Consumer, Private and Business Banking, borrowers are graded by credit
risk management on a credit grading (CG) scale from CG1 to CG14. Once a borrower starts to exhibt credit deterioraton, it
will move along the credit grading scale in the performing book and when it is classifed as CG12 the credit assessment and
oversight of the loan will normally be performed by Group Special Assets Management (GSAM).
Borrowers graded CG12 exhibt well-defined weaknesses in areas such as management and/or performance but there is no
current expectation of a loss of princpal or interest. Where the imparment assessment indcates that there will be a loss of
princpal on a loan, the borrower is graded a CG14 while borrowers of other credit-impared loans are graded CG13.
Instruments graded CG13 or CG14 are regarded as stage 3.
For indvidually signficant financal assets withn stage 3, GSAM will consider all judgements that have an impact on the
expected future cash flows of the asset. These include: the business prospects, industry and geo politcal climate of the
customer, quality of realisable value of collateral, the Group’s legal positon relative to other claimants and any renegotiaton/
forbearance/ modifcation options. The future cash flow calculation involves signficant judgements and estimates. As new
informaton becomes available and further negotiatons/ 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 financal assets which are not indvidually signficant, such as the Retail Banking portfolio or small business loans, which
comprise a large number of homogenous loans that share simlar characteristcs, statistcal estimates and techniques are
used, as well as credit scoring analysis.
Retail Banking clients are considered credit-impared where they are more 90 days past due. Retail Banking products are also
considered credit-impared 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 identfied fraud
on the account. Additonally, if the account is unsecured and the borrower has other credit accounts with the Group that are
considered credit-impared, the account may be also be credit-impared.
Techniques used to compute imparment amounts use models which analyse historcal repayment and default rates over a
time horizon. Where various models are used, judgement is required to analyse the available informaton provided and select
the appropriate model or combinaton 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.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
190
Notes to the financal statements continued
8. Credit imparment continued
Modifed financal instruments
Where the orignal contractual terms of a financal asset have been modifed for credit reasons and the instrument has not
been derecognised (an instrument is derecognised when a modifcation results in a change in cash flows that the Group
would consider substantial), the resulting modifcation loss is recognised withn credit imparment in the income statement
with a corresponding decrease in the gross carrying value of the asset. If the modifcation involved a concession that the
bank would not otherwise consider, the instrument is considered to be credit-impared and is considered forborne.
Expected credit loss for modifed financal assets that have not been derecognised and are not considered to be credit-
impared will be recognised on a 12-month basis, or a lifetme basis, if there is a signficant increase in credit risk. These assets
are assessed (by comparison to the orignation date) to determine whether there has been a signficant increase in credit risk
subsequent to the modifcation. Although loans may be modifed for non-credit reasons, a signficant increase in credit risk
may occur. In additon to the recogniton of modifcation gains and losses, the revised carrying value of modifed financal
assets will impact the calculation of expected credit losses, with any increase or decrease in expected credit loss recognised
withn imparment.
Forborne loans
Forborne loans are those loans that have been modifed in response to a customer’s financal diffculties. Forbearance
strategies assist clients who are temporarily in financal distress and are unable to meet their orignal contractual repayment
terms. Forbearance can be intiated by the client, the Group or a third-party includng government sponsored programmes or
a conglomerate of credit insttutions. Forbearance may include debt restructuring such as new repayment schedules,
payment deferrals, tenor extensions, interest only payments, lower interest rates, forgiveness of princpal, interest or fees, or
relaxation of loan covenants.
Forborne loans that have been modifed (and not derecognised) on terms that are not consistent with those readily available
in the market and/or where we have granted a concession compared to the orignal terms of the loans are considered
credit-impared if there is a detrimental impact on cash flows. The modifcation loss (see Classifcation and measurement –
Modifcations) is recognised in the profit or loss withn credit imparment and the gross carrying value of the loan reduced by
the same amount. The modifed loan is disclosed as ‘Loans subject to forbearance – credit-impared’.
Loans that have been subject to a forbearance modifcation, but which are not considered credit-impared (not classifed as
CG13 or CG14), are disclosed as ‘Forborne – not credit-impared’. This may include amendments to covenants withn the
contractual terms.
Write-offs of credit-impared instruments and reversal of imparment
To the extent a financal debt instrument is considered irrecoverable, the applicable portion of the gross carrying value is
written off against the related loan provison. Such loans are written off after all the necessary procedures have been
completed, it is decided that there is no realistc probabilty of recovery and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off decrease the amount of the provison for credit imparment in the
income statement.
Loss provisons on purchased or orignated credit-impared instruments (POCI)
The Group measures expected credit loss on a lifetme basis for POCI instruments throughout the life of the instrument.
However, expected credit loss is not recognised in a separate loss provison on intial recogniton for POCI instruments as the
lifetme expected credit loss is inherent withn the gross carrying amount of the instruments. The Group recognises the
change in lifetme expected credit losses arisng subsequent to intial recogniton in the income statement and the cumulative
change as a loss provison. Where lifetme expected credit losses on POCI instruments are less than those at intial
recogniton, then the favourable differences are recognised as imparment gains in the income statement (and as
imparment loss where the expected credit losses are greater).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
191
Notes to the financal statements continued
8. Credit imparment continued
Improvement in credit risk/curing
A period may elapse from the point at which instruments enter lifetme expected credit losses (stage 2 or stage 3) and are
reclassifed back to 12-month expected credit losses (stage 1). For financal assets that are credit-impared (stage 3), a transfer
to stage 2 or stage 1 is only permitted where the instrument is no longer considered to be credit-impared. An instrument will
no longer be considered credit-impared when there is no shortfall of cash flows compared to the orignal contractual terms.
For financal assets withn stage 2, these can only be transferred to stage 1 when they are no longer considered to have
experienced a signficant increase in credit risk.
Where signficant increase in credit risk was determined using quantitatve measures, the instruments will automatically
transfer back to stage 1 when the orignal PD based transfer critera are no longer met. Where instruments were transferred
to stage 2 due to an assessment of qualitatve factors, the issues that led to the reclassifcation must be cured before the
instruments can be reclassifed to stage 1. This includes instances where management actions led to instruments being
classifed as stage 2, requirng that action to be resolved before loans are reclassifed 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 critera have to be satisfed:
•
At least a year has passed with no default based upon the forborne contract terms
•
The customer is likely to repay its obligatons in full without realisng security
•
The customer has no accumulated imparment against amount outstanding (except for ECL)
Subsequent to the critera above, a further two-year probation 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.
2021
$millon
2020
$millon
Net credit imparment on loans and advances to banks and customers
(30)
1,858Net credit imparment against profit or loss during the period relating to debt securites
23
32Net credit imparment relating to financal guarantees and loan commitments
(23)
88Net credit imparment relating to other financal assets – (2)
Credit imparment
1
(30)
1,976
1 No material purchased or orignated credit-impared (POCI) assets
9. Goodwill, property, plant and equipment and other imparment
Accounting policy
Refer to the below referenced notes for the relevant accounting policy
2021
$millon
2020
$millon
Impairment of goodwill (Note 16)
–
403Impairment of property, plant and equipment (Note 17)
39
–Impairment of other intangble assets (Note 16)
3
15Other
(12)
(156)1
Plant and equipment and other imparment 30
(141)
Goodwill, property, plant and equipment and other imparment 30
262
1 Includes a reversal in 2020 of $165 millon as a result of a recovery on a disputed derivatve receivable, following a favourable court ruling
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
192
Notes to the financal statements continued
10. Taxation
Accounting policy
Income tax payable on profits is based on the applicable tax law in each jursdicton and is recognised as an expense in the
period in which profits arise.
Deferred tax is provided on temporary differences arisng between the tax bases of assets and liablites and their carrying
amounts in the consolidated financal 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 liablity 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 utilsed. Where permitted, deferred tax assets and liablites are offset on an entity 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.
Signficant accounting estimates and judgements
•
Determinng the Group’s tax charge for the year involves estimaton and judgement, which includes an interpretaton of
local tax laws and an assessment of whether the tax authorites will accept the positon taken. These judgements take
account of external advice where appropriate, and the Group’s view on settling with the relevant tax authorites
•
The Group provides for current tax liablites at the best estimate of the amount that is expected to be paid to the tax
authorites where an outflow is probable. In making its estimates, the Group assumes that the tax authorites will examine
all the amounts reported to them and have full knowledge of all relevant informaton
•
The recoverabilty of the Group’s deferred tax assets is based on management’s judgement of the availablity of future
taxable profits against which the deferred tax assets will be utilsed. In preparing management forecasts the effect of
applicable laws and regulations relevant to the utilsation of future taxable profits have been considered.
The following table provides analysis of taxation charge in the year:
2021
$millon
2020
$millon
The charge for taxation based upon the profit for the year comprises:
Current tax:
United Kingdom corporation tax at 19 per cent (2020:19 per cent):
Current tax charge on income for the year
(1)
–Adjustments in respect of prior years (includng double tax relief)
–
(44)Foreign tax:
Current tax charge on income for the year
737
709Adjustments in respect of prior years
(40)
(337)696
328
Deferred tax:
Orignation/reversal of temporary differences
112
(117)Adjustments in respect of prior years
(65)
30347
186
Tax on profits on ordinary activties 743
514
Effective tax rate 31.2%
95.9%
The tax charge for the year of $743 millon (31 December 2020: $514 millon) on a profit before tax of $2,381 millon (31
December 2020: $536 millon) reflects the impact of non-deductible expenses, non-creditable withholdng tax and the
impact of countries with tax rates higher or lower than the UK, the most signficant of which is India. The 2020 charge
included adjustments in respect of prior years of $288 millon, between current and deferred tax, relating to the treatment
ofloan imparments in India as deductible in the period they are impared.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
193
Notes to the financal statements continued
10. Taxation continued
Tax rate: The tax charge for the year is higher than the charge at the rate of corporation tax in the UK, 19 per cent.
Thedifferences are explained below:
2021 2020
$millon
%
$millon
%
Profit on ordinary activties before tax 2,381
536
Tax at 19 per cent (2020: 19 per cent) 19.0
452 19.0
102Lower tax rates on overseas earnings (4.1)
(81) (3.4)
(22)Higher tax rates on overseas earnings 50.2
333 14.0
269Tax at domestic rates applicable where profits earned 65.1
704 29.6
349Non-creditable withholdng taxes 22.6
103 4.3
121Tax exempt income (12.9)
(24) (1.0)
(69)Non-deductible expenses¹ 22.9
106 4.4
123Regulatory fine –
12 0.5
–Bank levy 11.8
19 0.8
63Non-taxable (gains)/losses on investments 2.6
(1) –
14Payments on financal instruments in reserves (13.6)
(43) (1.8)
(73)Goodwill imparment 14.4
– –
77Deferred tax not recognised 1.3
2 0.1
7Deferred tax assets written-off 2.8
1 –
15Deferred tax rate changes (9.5)
– –
(51)Adjustments to tax charge in respect of prior years (14.6)
(105) (4.4)
(78)Other items¹ 3.0
(31) (1.3)
16Tax on profit on ordinary activties 743 31.2
514 95.9
1 The 2020 comparatives have been reclassifed as follows to align with presentation in the current period: non-deductible expenses by $96 millon from $219 millon to
$123 millon and other items by $96 millon from $(80) millon to $16 millon.
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 includng acquistions, disposals and restructuring of our businesses, the mix of profits across
jursdictons with different statutory tax rates, changes in tax legislaton and tax rates and resolution of uncertain
taxpositons.
The evaluation of uncertain tax positons involves an interpretaton of local tax laws which could be subject to challenge by a
tax authority, and an assessment of whether the tax authorites will accept the positon taken. The Group does not currently
consider that assumptions or judgements made in assessing tax liablites have a signficant risk of resulting in a material
adjustment withn the next financal year.
Tax recognised in other comprehensive income
2021
2020
Current tax
$millon
Deferred tax
$millon
Total
$millon
Current tax
$millon
Deferred tax
$millon
Total
$millon
Items that will not be reclassifed to income statement (14) (14)
– (76) (76)
–Own credit adjustment 2 2
– (3) (3)
–Equity instruments at fair value through other
comprehensive income (26) (26)
– (58) (58)
–Retirement benefit obligatons 10 10
– (15) (15)
–Items that may be reclassed subsequently to income
statement (46) (47)
– 68 68
(1)Debt instruments at fair value through other
comprehensive income (62) (63)
– 63 63
(1)Cash flow hedges 16 16
– 5 5
–Total tax charge recognised in equity – (8) (8)
(1) (60) (61)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
194
Notes to the financal statements continued
10. Taxation continued
Current tax:
The following are the movements in current tax during the year:
Current tax comprises:
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Current tax assets
808
532605
326Current tax liablites
(345)
(449)(250)
(259)Net current tax opening balance
463
83355
67Movements in income statement
(696)
(328)(302)
(145)Movements in other comprehensive income
–
(1)–
–Taxes paid
557
689274
418Other movements
(12)
20(8)
15Net current tax balance as at 31 December
312
463319
355Current tax assets
648
808487
605Current tax liablites
(336)
(345)(168)
(250)Total 312
463
319355
Deferred tax:
The following are the major deferred tax liablites and assets recognised by the Group and movements
thereon during the year:
Group
At 1 January
2021
$millon
Exchange
&other
adjustments
$millon
(Charge)/
credit
to profit
$millon
(Charge)/
credit
to equity
$millon
At 31
December
2021
$millon
Deferred tax comprises:
Accelerated tax depreciaton
(252) 5 (28) – (275)
Impairment provisons on loans and advances
305 7 (69) – 243
Tax losses carried forward
143 (3) 9 – 149
Fair value through other comprehensive income assets
(122) 3 (2) 5 (116)
Cash flow hedges
(7) – – 5 (2)
Own credit adjustment
1 (1) – (3) (3)
Retirement benefit obligatons
29 9 (5) (15) 18
Share-based payments
14 – 11 – 25
Other temporary differences
(42) (22) 37 – (27)
Net deferred tax assets 69 (2) (47) (8) 12
At 1 January
2020
$millon
Exchange
&other
adjustments
$millon
(Charge)/
credit
to profit
$millon
(Charge)/
credit
to equity
$millon
At 31
December
2020
$millon
Deferred tax comprises:
Accelerated tax depreciaton (302) (1) 51 – (252)
Impairment provisons on loans and advances 854 (19) (530) – 305
Tax losses carried forward 94 (2) 51 – 143
Fair value through other comprehensive income assets (33) 1 (2) (88) (122)
Cash flow hedges (22) (1) – 16 (7)
Own credit adjustment (2) 1 – 2 1
Retirement benefit obligatons 18 – 1 10 29
Share-based payments (1) 1 14 – 14
Other temporary differences (273) 1 229 1 (42)
Net deferred tax assets
333 (19) (186) (59) 69
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
195
Notes to the financal statements continued
10. Taxation continued
Deferred tax comprises assets and liablites as follows:
2021
2020
Total
$millon
Asset
$millon
Liablity
$millon
Total
$millon
Asset
$millon
Liablity
$millon
Deferred tax comprises:
Accelerated tax depreciaton 25 (277)
(275) 18 (293)
(252)Impairment provisons on loans and advances 277 28
243 300 (57)
305Tax losses carried forward 137 6
149 148 1
143Fair value through other comprehensive income assets (37) (85)
(116) (14) (102)
(122)Cash flow hedges (3) (4)
(2) (3) 1
(7)Own credit adjustment – 1
(3) – (3)
1Retirement benefit obligatons 27 2
18 13 5
29Share-based payments (1) 15
25 (1) 26
14Other temporary differences 223 (265)
(27) 220 (247)
(42)12 681 (669)
69 648 (579)
Deferred tax:
The following are the major deferred tax liablites and assets recognised by the Company and movements
thereon during the year:
Company
At 1 January
2021
$millon
Exchange
&other
adjustments
$millon
(Charge)/
credit
to profit
$millon
(Charge)/
credit
to equity
$millon
At 31
December
2021
$millon
Deferred tax comprises:
Accelerated tax depreciaton
(251) 5 (8) – (254)
Impairment provisons on loans and advances
226 11 (61) – 176
Tax losses carried forward
106 – 8 – 114
Fair value through other comprehensive income assets
(89) 1 – 2 (86)
Cash flow hedges
(3) – – – (3)
Own credit adjustment
1 – – (4) (3)
Retirement benefit obligatons
21 10 (4) (13) 14
Share-based payments
4 – 5 – 9
Other temporary differences
(34) (20) 12 – (42)
Net deferred tax liablites (19) 7 (48) (15) (75)
At 1 January
2020
$millon
Exchange
&other
adjustments
$millon
(Charge)/
credit
to profit
$millon
(Charge)/
credit
to equity
$millon
At 31
December
2020
$millon
Deferred tax comprises:
Accelerated tax depreciaton (288) (4) 41 – (251)
Impairment provisons on loans and advances 814 (19) (569) – 226
Tax losses carried forward 72 – 34 – 106
Fair value through other comprehensive income assets (26) (1) – (62) (89)
Cash flow hedges (21) 1 – 17 (3)
Own credit adjustment (2) – – 3 1
Retirement benefit obligatons 10 – 1 10 21
Share-based payments (1) – 5 – 4
Other temporary differences (279) 9 236 – (34)
Net deferred tax liablites
279 (14) (252) (32) (19)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
196
Notes to the financal statements continued
10. Taxation continued
Deferred tax comprises assets and liablites as follows:
2021
2020
Total
$millon
Asset
$millon
Liablity
$millon
Total
$millon
Asset
$millon
Liablity
$millon
Deferred tax comprises:
Accelerated tax depreciaton 10 (261)
(254) 9 (263)
(251)Impairment provisons on loans and advances 216 10
176 234 (58)
226Tax losses carried forward 106 –
114 113 1
106Fair value through other comprehensive income assets (20) (69)
(86) (5) (81)
(89)Cash flow hedges (3) –
(3) (3) –
(3)Own credit adjustment – 1
(3) – (3)
1Retirement benefit obligatons 22 (1)
14 9 5
21Share-based payments (1) 5
9 (1) 10
4Other temporary differences 156 (190)
(42) 152 (194)
(34)(75) 508 (583)
(19) 486 (505)
Group
As at 31 December 2021, the Group has net deferred tax asset of $12 millon (31 December 2020: $69 millon). The recoverabilty
of the Group’s deferred tax assets is based on management’s judgement of the availablity of future taxable profits against
which the deferred tax assets will be utilsed.
Of the Group’s total deferred tax assets, $149 millon relates to tax losses carried forward. These tax losses have arisen in
indvidual legal entites and will be offset as future taxable profits arise in those entites.
•
$112 millon of the deferred tax assets relating to losses has arisen in the US. Management forecasts show that the losses
are expected to be fully utilsed over a period of three years.
The remainng deferred tax assets of $37 millon relating to losses have arisen in other jursdictons and are expected to be
recovered in less than 10 years.
Company
As at 31 December 2021, the Company has net deferred tax liablity of $(75) millon (31 December 2020: $(19) millon). The
recoverabilty of the Company’s deferred tax assets is based on management’s judgement of the availablity of future
taxable profits against which the deferred tax assets will be utilsed.
Of the Company’s total deferred tax liablity, $114 millon asset relates to tax losses carried forward. These tax losses have
arisen in indvidual legal entites and will be offset as future taxable profits arise in those entites.
•
$112 millon of the deferred tax assets relating to losses has arisen in the US. Management forecasts show that the losses
are expected to be fully utilsed over a period of three years.
The remainng deferred tax assets of $2 millon relating to losses have arisen in other jursdictons and are expected to be
recovered in less than 10 years.
Unrecognised deferred tax
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
No account has been taken of the following potential deferred tax
assets/(liablites):
Withholdng tax on unremitted earnings from overseas subsidaries
andassociates
(170)
(159)(82)
(67)Tax losses
991
566945
508Held over gains on incorporation of overseas branches
(218)
(180)(218)
(180)Other temporary differences
196
204196
204The aggregate temporary differences relating to unrecognised deferred tax of the Group arisng on unremitted earnings
from overseas subsidaries and associates at the balance sheet date was $(1,433) millon (31 December 2020: $(1,345) millon),
the gross value of the unrecognised tax losses (includng capital losses) was $3,643 millon (31 December 2020: $2,645 millon),
gross value of held over gains on incorporation of overseas branches $(660) millon (31 December 2020: $(665) millon), and
other temporary differences $741 millon (31 December 2020: $856 millon).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
197
Notes to the financal statements continued
10. Taxation continued
The aggregate temporary differences relating to unrecognised deferred tax of the Company arisng on unremitted earnings
from overseas subsidaries and associates at the balance sheet date was $(649) millon (31 December 2020: $(525) millon),
the gross value of the unrecognised tax losses (includng capital losses) was $3,432 millon (31 December 2020: $2,411 millon),
gross value of held over gains on incorporation of overseas branches $(660) millon (31 December 2020: $(665) millon), and
other temporary differences $742 millon (31 December 2020: $856 millon).
11. Divdends
Accounting policy
Divdends on ordinary shares and preference shares classifed as equity are recognised in equity in the year in which they
aredeclared.
Divdends on ordinary equity shares are recorded in the year in which they are declared and, in respect of the final divdend,
have been approved by the shareholders.
The Court considers a number of factors which include the rate of recovery in the Group’s financal performance, the
macroeconomic environment, and opportunites to further invest in our business and grow profitably in our markets.
Ordinary equity shares
2021
Cents per
share $millon
Interim divdend declared and paid during the year
1
2 300
Interim divdend declared and paid during the year
2
6 1,211
1 Interim divdend declared and paid on 31st March 2021
2 Interim divdend declared and paid on 1st September 2021
Divdends on ordinary equity shares are recorded in the period in which they are declared and, in respect of the final divdend,
have been approved by the shareholders.
Preference shares and Additonal Tier 1 securites
Divdends on these preference shares and securites classifed as equity are recorded in the period in which they are declared
2021
$millon
2020
$millon
Non-cumulative redeemable preference shares:
7.014 per cent preference shares of $5 each
52
536.409 per cent preference shares of $5 each
13
2065
73
Additonal Tier 1 securites: Fixed rate resetting perpetual subordinated contingent convertible securites
227
385292
458
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
198
Notes to the financal statements continued
12. Financal instruments
Classifcation and measurement
Accounting policy
The Group classifes its financal assets into the following measurement categories: amortised cost; fair value through other
comprehensive income(FVOCI); and fair value through profit or loss. Financal liablites are classifed as either amortised cost,
or held at fair value through profit or loss. Management determines the classifcation of its financal assets and liablites at
intial recogniton of the instrument or, where applicable, at the time of reclassifcation.
Financal assets held at amortised 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 princpal and interest (SPPI) characteristcs. Princpal is the fair value of the financal asset at intial recogniton
but this may change over the life of the instrument as amounts are repaid. Interest consists of consideraton for the time value
of money, for the credit Risk associated with the princpal amount outstanding during a particular period and for other basic
lending risks and costs, as well as a profit margin.
In assessing whether the contractual cash flows have SPPI characteristcs, the Group considers the contractual terms of the
instrument. This includes assessing whether the financal asset contains a contractual term that could change the timng or
amount of contractual cash flows such that it would not meet this conditon. In making the assessment, the Group considers:
•
Contingent events that would change the amount and timng of cash flows
•
Leverage features
•
Prepayment and extension terms
•
Terms that limt the Group’s claim to cash flows from specifed assets (e.g. non-recourse asset arrangements);
•
Features that modify consideraton of the time value of money – e.g. periodcal reset of interest rates
Whether financal assets are held at amortised cost, FVTPL or at FVOCI depends on the objectves of the business models
under which the assets are held. A business model refers to how the Group manages financal assets to generate cash flows.
The Group makes an assessment of the objectve of a business model in which an asset is held at the indvidual product
business line, and where applicable withn business lines, depending on the way the business is managed and informaton 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, includng 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 timng of sales in prior periods, the reasons for such sales and expectations about future
salesactivty
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
199
Notes to the financal statements continued
12. Financal instruments continued
The Group’s business model assessment is as follows:
Business model Business objectve Characteristcs Businesses Products
Hold to collect
Intent is to orignate financal
assets and hold them to
maturity, collecting the
contractual cash flows over
the term of the instrument
• Providng financng and orignating
assets to earn interest income as
primary income stream
• Performing credit risk management
activties
• Costs include funding costs,
transaction costs and
imparmentlosses
• Corporate Lending
• Financal Markets
• Transaction
Banking
• Retail Lending
• Treasury Markets
(Loans and
Borrowings)
• Loans and
advances
• Debt securites
Hold to collect
andsell
Business objectve met
through both hold to collect
and by selling financal assets
• Portfolios held for liqudity needs; or
where a certain interest yield profile
is maintaned; or that are normally
rebalanced to achieve matching of
duration of assets and liablites
• Income streams come from interest
income, fair value changes, and
imparment losses
• Treasury Markets • Derivatves
• Debt securites
Fair value through
profit or loss
All other business objectves,
includng trading and
managing financal assets on
a fair value basis
• Assets held for trading
• Assets that are orignated,
purchased, and sold for profit taking
or underwritng activty
• Performance of the portfolio is
evaluated on a fair value basis
• Income streams are from fair value
changes or trading gains or losses
• Financal Markets
• Syndicaton
• All other business
lines
• Derivatves
• Trading portfolios
• Financal Markets
reverse repos
• Financal Markets
(FM Bond and Loan
Syndicaton)
Financal assets which have SPPI characteristcs and that are held withn a business model whose objectve is to hold financal
assets to collect contractual cash flows (“Hold to collect”) are recorded at amortised cost. Conversely, financal assets which
have SPPI characteristcs but are held withn a business model whose objectve is achieved by both collecting contractual
cash flows and selling financal assets (“Hold to collect and sell”) are classifed as held at FVOCI.
Both hold to collect business and a hold to collect and sell business model involve holding financal assets to collect the
contractual cash flows. However, the business models are distnct by reference to the frequency and signficance that asset
sales play in meeting the objectve under which a particular group of financal assets is managed. Hold to collect business
models are characterised by asset sales that are incdental to meeting the objectves under which 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
financal assets but sales for other reasons should be infrequent or insgnifcant.
Cash flows from the sale of financal assets under a hold to collect and sell business model by contrast are integral to
achievng the objectves under which a particular group of financal assets are managed. This may be the case where
frequent sales of financal assets are required to manage the Group’s daily liqudity requirements or to meet regulatory
requirements to demonstrate liqudity of financal instruments. Sales of assets under hold to collect and sell business models
are therefore both more frequent and more signficant 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
intial recogniton as held at FVOCI on an instrument-by-instrument basis. Divdends received are recognised in profit or loss.
Gains and losses arisng from changes in the fair value of these instruments, includng foreign exchange gains and losses, are
recognised directly in equity and are never reclassifed to profit or loss even on derecogniton.
Financal assets and liablites held at fair value through profit or loss
Financal assets which are not held at amortised cost or that are not held at FVOCI are held at fair value through profit or loss.
Financal assets and liablites held at fair value through profit or loss are either mandatorily classifed fair value through profit
or loss or irrevocably designated at fair value through profit or loss at intial recogniton.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
200
Notes to the financal statements continued
12. Financal instruments continued
Mandatorily classifed at fair value through profit or loss
Financal assets and liablites which are mandatorily held at fair value through profit or loss are split between two
subcategories as follows:
Trading, includng:
•
Financal assets and liablites held for trading, which are those acquired princpally for the purpose of selling in the short-
term
•
Derivatves
Non-trading mandatorily at fair value through profit or loss, includng
•
Instruments in a business which has a fair value business model (see the Group’s business model assessment) which are not
trading or derivatves
•
Hybrid financal assets that contain one or more embedded derivatves
•
Financal assets that would otherwise be measured at amortised cost or FVOCI but which do not have SPPI characteristcs
•
Equity instruments that have not been designated as held at FVOCI
•
Financal liablites that constitute contingent consideraton in a business combinaton
Designated at fair value through profit or loss
Financal assets and liablites may be designated at fair value through profit or loss when the designaton elimnates or
signficantly reduces a measurement or recogniton inconsstency that would otherwise arise from measuring assets or
liablites on a different basis (‘accounting mismatch’).
Financal liablites may also be designated at fair value through profit or loss where they are managed on a fair value basis or
have a embedded derivatve where the Group is not able to bifurcate and separately value the embedded derivatve
component.
Financal liablites held at amortised cost
Financal liablites that are not financal guarantees or loan commitments and that are not classifed as financal liablites
held at fair value through profit or loss are classifed as financal liablites held at amortised 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 specifc date or at the option of the shareholder are classifed as financal liablites and are presented in
other borrowed funds. The divdends on these preference shares are recognised in the income statement as interest expense
on an amortised cost basis using the effective interest method.
Financal guarantee contracts and loan commitments
The Group issues financal guarantee contracts and loan commitments in return for fees. Financal guarantee contracts and
any loan commitments issued at below-market interest rates are intially recognised at their fair value as a financal liablity,
and subsequently measured at the higher of the intial value less the cumulative amount of income recognised in accordance
with the princples of IFRS 15 Revenue from Contracts with Customers and their expected credit loss provison. 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 financal assets and liablites
Fair value is the price that would be received to sell an asset or paid to transfer a liablity in an orderly transaction between
market particpants at the measurement date in the princpal market for the asset or liablity, or in the absence of a princpal
market, the most advantageous market to which the Group has access at the date. The fair value of a liablity includes the
risk that the bank will not be able to honour its obligatons.
The fair value of financal instruments is generally measured on the basis of the indvidual financal instrument. However,
when a group of financal assets and financal liablites is managed on the basis of its net exposure to either market Risk or
credit Risk, the fair value of the group of financal instruments is measured on a net basis.
The fair values of quoted financal assets and liablites in active markets are based on current prices. A market is regarded as
active if transactions for the asset or liablity take place with sufficent frequency and volume to provide pricng informaton
on an ongoing basis. If the market for a financal instrument, and for unlisted securites, is not active, the Group establishes fair
value by using valuation techniques.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
201
Notes to the financal statements continued
12. Financal instruments continued
Inital recogniton
Purchases and sales of financal assets and liablites held at fair value through profit or loss, and debt securites classifed as
financal assets held at fair value through other comprehensive income are intially recognised on the trade-date (the date on
which the Group commits to purchase or sell the asset). Loans and advances and other financal assets held at amortised
cost are recognised on the settlement date (the date on which cash is advanced to the borrowers).
All financal instruments are intially recognised at fair value, which is normally the transaction price, plus directly attributable
transaction costs for financal assets which are not subsequently measured at fair value through profit or loss.
In certain circumstances, the intial fair value may be based on a valuation technique which may lead to the recogniton of
profits or losses at the time of intial recogniton. However, these profits or losses can only be recognised when the valuation
technique used is based solely on observable market data. In those cases where the intially 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 immedately in the income statement but is amortised or released to the income statement as the inputs
become observable, or the transaction matures or is terminated.
Subsequent measurement
Financal assets and financal liablites held at amortised cost
Financal assets and financal liablites held at amortised 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 financal instrument carried at amortised cost is the hedged item in a qualifyng fair value hedge relationshp, its
carrying value is adjusted by the fair value gain or loss attributable to the hedged risk.
Financal assets held at FVOCI
Debt instruments held at FVOCI are subsequently carried at fair value, with all unrealised gains and losses arisng from
changes in fair value (includng any related foreign 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 profit or loss and are accumulated in equity. On derecogniton,
the cumulative 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 arisng
from changes in fair value (includng any related foreign exchange gains or losses) recognised in other comprehensive income
and accumulated in a separate component of equity. On derecogniton, the cumulative reserve is transferred to retained
earnings and is not recycled to profit or loss.
Financal assets and liablites held at fair value through profit or loss
Financal assets and liablites mandatorily held at fair value through profit or loss and financal assets designated at fair
value through profit or loss are subsequently carried at fair value, with gains and losses arisng from changes in fair value,
includng 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 relationshp.
Financal liablites designated at fair value through profit or loss
Financal liablites designated at fair value through profit or loss are held at fair value, with changes in fair value recognised in
the net trading income line in the profit or loss, other than that attributable to changes in credit risk. Fair value changes
attributable to credit risk are recognised in other comprehensive income and recorded in a separate category of reserves
unless this is expected to create or enlarge an accounting mismatch, in which case the entire change in fair value of the
financal liablity designated at fair value through profit or loss is recognised in profit or loss.
Derecogniton of financal instruments
Financal assets are derecognised when the rights to receive cash flows from the financal assets have expired or where the
Group has transferred substantially all risks and rewards of ownership. If substantially all the risks and rewards have been
neither retained nor transferred and the Group has retained control, the assets continue to be recognised to the extent of the
Group's continung involvement.
Where financal assets have been modifed, the modifed terms are assessed on a qualitatve and quantitatve basis to
determine whether a fundamental change in the nature of the instrument has occurred, such as whether the derecogniton
of the pre-existng instrument and the recogniton of a new instrument is appropriate.
On derecogniton of a financal asset, the difference between the carrying amount of the asset (or the carrying amount
allocated to the portion of the asset derecognised) and the sum of the consideraton received (includng any new asset
obtained, less any new liablity 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 liablity that are held in other comprehensive income.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
202
Notes to the financal statements continued
12. Financal instruments continued
Financal liablites are derecognised when they are extingushed. A financal liablity is extingushed when the obligaton is
discharged, cancelled or expires and this is evaluated both qualitatvely and quantitatvely. However, where a financal
liablity has been modifed, it is derecognised if the difference between the modifed cash flows and the orignal cash flows is
more than 10 percent, or if less than 10 per cent, the Group will perform a qualitatve assessment to determine 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 liablity and
the consideraton paid is included in 'Other income' except for the cumulative fair value adjustments attributable to the credit
risk of a liablity that are held in other comprehensive income which are never recycled to the profit or loss.
Modifed financal instruments
Financal assets and financal liablites whose orignal contractual terms have been modifed, includng those loans subject to
forbearance strategies, are considered to be modifed instruments. Modifcations may include changes to the tenor, cash
flows and or interest rates, among other factors.
Where derecogniton of financal assets is appropriate (see Derecogniton), the newly recognised residual loans are assessed
to determine whether the assets should be classifed as purchased or orignated credit-impared assets (POCI).
Where derecogniton is not appropriate, the gross carrying amount of the applicable instruments is recalculated as the
present value of the renegotiated or modifed contractual cash flows discounted at the orignal effective interest rate (or
credit adjusted effective interest rate for POCI financal assets). The difference between the recalculated values and the
pre-modifed gross carrying values of the instruments are recorded as a modifcation gain or loss in the profit or loss.
Gains and losses arisng from modifcations for credit reasons are recorded as part of ‘Credit Impairment’ (see Credit
Impairment Policy). Modifcation gains and losses arisng for non-credit reasons are recognised either as part of “Credit
Impairment or withn income depending on whether there has been a change in the credit risk on the financal asset
subsequent to the modifcation. Modifcation gains and losses arisng on financal liablites are recognised withn income.
The movements in the applicable expected credit loss loan positons are disclosed in further detail in Risk Review.
Under the Phase 2 Interest Rate Benchmark Reform amendments to IFRS 9, changes to the basis for determinng contractual
cash flows as a direct result of interest rate benchmark reform are treated as changes to a floating interest rate to that
instrument, provided that the transiton from the IBOR benchmark rate to the alternative RFR takes place on an economically
equivalent basis. Where the instrument is measured at amortised cost or FVOCI, this results in a change in the instrument’s
effective interest rate, with no change in the amortised cost value of the instrument. If the change to the instrument does not
meet these critera, the Group applies judgement to assess whether the changes are substantial and if they are, the financal
instrument is derecognised and a new financal instrument is recognised. If the changes are not substantial, the Group
adjusts the gross carrying amount of the financal instrument by the present value of the changes not covered by the
practical expedient, discounted using the revised effective interest rate.
Reclassifcations
Financal liablites are not reclassifed subsequent to intial recogniton. Reclassifcations of financal assets are made when,
and only when, the business model for those assets changes. Such changes are expected to be infrequent and arise as a
result of signficant external or internal changes such as the terminaton of a line of business or the purchase of a subsidary
whose business model is to realise the value of pre-existng held for trading financal assets through a hold to collect model.
Financal assets are reclassifed at their fair value on the date of reclassifcation and previously recognised gains and losses
are not restated. Moreover, reclassifcations of financal assets between financal assets held at amortised cost and financal
assets held at fair value through other comprehensive income do not affect effective interest rate or expected credit loss
computations.
Reclassifed from amortised cost
Where financal assets held at amortised cost are reclassifed to financal assets held at fair value through profit and loss, the
difference between the fair value of the assets at the date of reclassifcation and the previously recognised amortised cost is
recognised in profit or loss.
For financal assets held at amortised cost that are reclassifed to fair value through other comprehensive income, the
difference between the fair value of the assets at the date of reclassifcation and the previously recognised gross carrying
value is recognised in other comprehensive income. Additonally, the related cumulative expected credit loss amounts
relating to the reclassifed financal assets are reclassifed from loan loss provisons to a separate reserve in other
comprehensive income at the date of reclassifcation.
Reclassifed from fair value through other comprehensive income
Where financal assets held at fair value through other comprehensive income are reclassifed to financal assets held at fair
value through profit or loss, the cumulative gain or loss previously recognised in other comprehensive income is transferred to
the profit or loss.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
203
Notes to the financal statements continued
12. Financal instruments continued
For financal assets held at fair value through other comprehensive income that are reclassifed to financal assets held at
amortised cost, the cumulative gain or loss previously recognised in other comprehensive income is adjusted against the fair
value of the financal asset such that the financal asset is recorded at a value as if it had always been held at amortised cost.
In additon, the related cumulative expected credit losses held withn other comprehensive income are reversed against the
gross carrying value of the reclassifed assets at the date of reclassifcation.
Reclassifed from fair value through profit or loss
Where financal assets held at fair value through profit and loss are reclassifed to financal assets held at fair value through
other comprehensive income or financal assets held at amortised cost, the fair value at the date of reclassifcation is used to
determine the effective interest rate on the financal asset going forward. In additon, the date of reclassifcation is used as
the date of intial recogniton for the calculation of expected credit losses. Where financal assets held at fair value through
profit or loss are reclassifed to financal assets held at amortised cost, the fair value at the date of reclassifcation becomes
the gross carrying value of the financal asset.
The Group’s classifcation of its financal assets and liablites is summarised in the following tables.
Group
Assets Notes
Assets at fair value
Assets
heldat
amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Non-trading
mandatorily
at fair value
through
profit or loss
$millon
Designated
at fair value
through
profit or
loss
$millon
Fair value
through other
comprehensive
income
$millon
Total
financal
assets at
fair value
$millon
Cash and balances at
centralbanks
– – – – – – 61,963 61,963
Financal assets held at fair value
through profit orloss
Loans and advances to banks
1
1,315 – 2,307 – – 3,622 – 3,622
Loans and advances
tocustomers
1
2,812 – 1,120 – – 3,932 – 3,932
Reverse repurchase
agreementsand other
simlarsecured lending 15
– – 78,986 – – 78,986 – 78,986
Debt securites, alternative tier
one and other eligble bills
14,301 – 1,103 – – 15,404 – 15,404
Equity shares
4,465 – 120 – – 4,585 – 4,585
22,893 – 83,636 – – 106,529 – 106,529
Derivatve financal instruments 13
52,609 636 – – – 53,245 – 53,245
Loans and advances to banks
1
14
– – – – – – 29,999 29,999
of which – reverse repurchase
agreements and other simlar
secured lending 15
– – – – – – 956 956
Loans and advances to customers
1
14
– – – – – – 144,799 144,799
of which – reverse repurchase
agreements and other simlar
secured lending 15
– – – – – – 3,764 3,764
Investment securites
Debt securites, alternative tier
one and other eligble bills
– – – – 72,491 72,491 29,214 101,705
Equity shares
– – – – 575 575 – 575
– – – – 73,066 73,066 29,214 102,280
Other assets 19
– – – – – – 22,281 22,281
Assets held for sale 20
– – – 43 – 43 52 95
Total at 31 December 2021 75,502 636 83,636 43 73,066 232,883 288,308 521,191
1 Further analysed in Risk review and Capital review (pages [ ] to [
])
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
204
Notes to the financal statements continued
12. Financal instruments continued
Assets Notes
Assets at fair value
Assets
heldat
amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Non-trading
mandatorily
at fair value
through
profit or loss
$millon
Designated
at fair value
through
profit
or loss
$millon
Fair value
through other
comprehensive
income
$millon
Total
financal
assets at
fair value
$millon
Cash and balances at central
banks – – – – – – 58,117 58,117
Financal assets held at fair value
through profit or loss
Loans and advances to banks
1
1,133 – 1,638 – – 2,771 – 2,771
Loans and advances
tocustomers¹ 1,883 – 1,251 79 – 3,213 – 3,213
Reverse repurchase
agreementsand other
simlarsecured lending 15 – – 62,807 – – 62,807 – 62,807
Debt securites, alternative tier
one and other eligble bills 11,998 – 1,128 – – 13,126 – 13,126
Equity shares 2,892 – 145 – – 3,037 – 3,037
17,906 – 66,969 79 – 84,954 – 84,954
Derivatve financal instruments 13 68,457 768 – – – 69,225 – 69,225
Loans and advances to banks
1
14 – – – – – – 27,666 27,666
of which – reverse repurchase
agreements and other simlar
secured lending 15 – – – – – – 809 809
Loans and advances to customers
1
14 – – – – – – 140,861 140,861
of which – reverse repurchase
agreements and other simlar
secured lending 15 – – – – – – 2,919 2,919
Investment securites
Debt securites, alternative tier
one and other eligble bills – – – – 71,322 71,322 14,437 85,759
Equity shares – – – – 328 328 – 328
– – – – 71,650 71,650 14,437 86,087
Other assets 19 – – – – – – 25,873 25,873
Assets held for sale 20 – – – 5 – 5 83 88
Total at 31 December 2020 86,363 768 66,969 84 71,650 225,834 267,037 492,871
1 Further analysed in Risk review and Capital review (pages 55 to 154)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
205
Notes to the financal statements continued
12. Financal instruments continued
Company
Assets Notes
Assets at fair value
Assets
heldat
amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Non-trading
mandatorily
at fair value
through
profit or loss
$millon
Designated
at fair value
through
profit or
loss
$millon
Fair value
through other
comprehensive
income
$millon
Total
financal
assets at
fair value
$millon
Cash and balances at central
banks
– – – – – – 48,165 48,165
Financal assets held at fair value
through profit or loss
Loans and advances to banks
1
1,293 – 2,277 – – 3,570 – 3,570
Loans and advances
tocustomers
1
2,759 – 448 – – 3,207 – 3,207
Reverse repurchase
agreementsand other
simlarsecured lending 15
– – 77,655 – – 77,655 – 77,655
Debt securites, alternative tier
one and other eligble bills
9,367 – 1,485 – – 10,852 – 10,852
Equity shares
4,419 – 2 – – 4,421 – 4,421
17,838 – 81,867 – – 99,705 – 99,705
Derivatve financal instruments 13
52,847 631 – – – 53,478 – 53,478
Loans and advances to banks
1
14
– – – – – – 16,117 16,117
of which – reverse repurchase
agreements and other simlar
secured lending 15
– – – – – – 438 438
Loans and advances to customers
1
14
– – – – – – 71,161 71,161
of which – reverse repurchase
agreements and other simlar
secured lending 15
– – – – – – 3,047 3,047
Investment securites
Debt securites, alternative
tierone and other eligble bills
– – – – 60,033 60,033 25,995 86,028
Equity shares
– – – – 361 361 – 361
– – – – 60,394 60,394 25,995 86,389
Other assets 19
– – – – – – 19,860 19,860
Assets held for sale 20
– – – 42 – 42 49 91
Total at 31 December 2021 70,685 631 81,867 42 60,394 213,619 181,347 394,966
1 Further analysed in Risk review and Capital review (pages 55 to 154)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
206
Notes to the financal statements continued
12. Financal instruments continued
Assets Notes
Assets at fair value
Assets
heldat
amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Non-trading
mandatorily
at fair value
through
profit or loss
$millon
Designated
at fair value
through
profit
or loss
$millon
Fair value
through other
comprehensive
income
$millon
Total
financal
assets at
fair value
$millon
Cash and balances at central
banks – – – – – – 46,476 46,476
Financal assets held at fair value
through profit or loss
Loans and advances to banks
1
1,133 – 1,638 – – 2,771 – 2,771
Loans and advances
tocustomers
1
1,472 – 1,030 79 – 2,581 – 2,581
Reverse repurchase
agreementsand other
simlarsecured lending 15 – – 62,262 – – 62,262 – 62,262
Debt securites, alternative tier
one and other eligble bills 8,374 – 1,727 – – 10,101 – 10,101
Equity shares 2,891 – 20 – – 2,911 – 2,911
13,870 – 66,677 79 – 80,626 – 80,626
Derivatve financal instruments 13 68,154 756 – – – 68,910 – 68,910
Loans and advances to banks
1
14 – – – – – – 14,997 14,997
of which – reverse repurchase
agreements and other simlar
secured lending 15 – – – – – – 55 55
Loans and advances to customers
1
14 – – – – – – 72,969 72,969
of which – reverse repurchase
agreements and other simlar
secured lending 15 – – – – – – 2,283 2,283
Investment securites
Debt securites, alternative tier
one and other eligble bills – – – – 57,996 57,996 12,876 70,872
Equity shares – – – – 230 230 – 230
– – – – 58,226 58,226 12,876 71,102
Other assets 19 – – – – – – 23,495 23,495
Assets held for sale 20 – – – 5 – 5 83 88
Total at 31 December 2020 82,024 756 66,677 84 58,226 207,767 170,896 378,663
1 Further analysed in Risk review and Capital review (pages 55 to 154)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
207
Notes to the financal statements continued
12. Financal instruments continued
Group
Liablites Notes
Liablites at fair value
Amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Designated at
fair value
through profit
or loss
$millon
Total financal
liablites at
fair value
$millon
Financal liablites held at fair value
through profit or loss
Deposits by banks
– – 59 59 – 59
Customer accounts
198 – 6,770 6,968 – 6,968
Repurchase agreements and other
simlar secured borrowing 15
– – 61,307 61,307 – 61,307
Debt securites in issue 21
– – 4,360 4,360 – 4,360
Short positons
2,852 – – 2,852 – 2,852
Other liablites
6 – – 6 – 6
3,056 – 72,496 75,552 – 75,552
Derivatve financal instruments 13
53,344 242 – 53,586 – 53,586
Deposits by banks
– – – – 25,205 25,205
Customer accounts
– – – – 242,331 242,331
Repurchase agreements and other
simlar secured borrowing 15
– – – – 325 325
Debt securites in issue 21
– – – – 36,060 36,060
Other liablites 22
– – – – 25,650 25,650
Subordinated liablites and other
borrowed funds 26
– – – – 14,615 14,615
Total at 31 December 2021 56,400 242 72,496 129,138 344,186 473,324
Liablites Notes
Liablites at fair value
Amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Designated at
fair value
through profit
or loss
$millon
Total financal
liablites at
fair value
$millon
Financal liablites held at fair value
through profit or loss
Deposits by banks – – 70 70 – 70
Customer accounts – – 6,753 6,753 – 6,753
Repurchase agreements and other
simlar secured borrowing 15 – – 47,359 47,359 – 47,359
Debt securites in issue 21 – – 4,360 4,360 – 4,360
Short positons 1,172 – – 1,172 – 1,172
Other liablites – – – – – –
1,172 – 58,542 59,714 – 59,714
Derivatve financal instruments 13 68,584 484 – 69,068 – 69,068
Deposits by banks – – – – 23,761 23,761
Customer accounts – – – – 216,719 216,719
Repurchase agreements and other
simlar secured borrowing 15 – – – – 20 20
Debt securites in issue 21 – – – – 29,356 29,356
Other liablites¹ 22 – – – – 29,500 29,500
Subordinated liablites and other
borrowed funds 26 – – – – 14,879 14,879
Total at 31 December 2020 69,756 484 58,542 128,782 314,235 443,017
1 Includes correction of fair value hedge accounting adjustment of $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
208
Notes to the financal statements continued
12. Financal instruments continued
Company
Liablites Notes
Liablites at fair value
Amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Designated at
fair value
through profit
or loss
$millon
Total financal
liablites at
fair value
$millon
Financal liablites held at fair value
through profit or loss
Deposits by banks
– – 59 59 – 59
Customer accounts
– – 6,598 6,598 – 6,598
Repurchase agreements and other
simlar secured borrowing 15
– – 60,897 60,897 – 60,897
Debt securites in issue 21
– – 4,086 4,086 – 4,086
Short positons
2,256 – – 2,256 – 2,256
Other liablites
6 – – 6 – 6
2,262 – 71,640 73,902 – 73,902
Derivatve financal instruments 13
53,621 214 – 53,835 – 53,835
Deposits by banks
– – – – 18,870 18,870
Customer accounts
– – – – 135,478 135,478
Repurchase agreements and other
simlar secured borrowing 15
– – – – 283 283
Debt securites in issue 21
– – – – 33,826 33,826
Other liablites 22
– – – – 20,125 20,125
Subordinated liablites and other
borrowed funds 26
– – – – 14,076 14,076
Total at 31 December 2021 55,883 214 71,640 127,737 222,658 350,395
Liablites Notes
Liablites at fair value
Amortised
cost
$millon
Total
$millon
Trading
$millon
Derivatves
held for
hedging
$millon
Designated at
fair value
through profit
or loss
$millon
Total financal
liablites at
fair value
$millon
Financal liablites held at fair value
through profit or loss
Deposits by banks – – 70 70 – 70
Customer accounts – – 6,639 6,639 – 6,639
Repurchase agreements and other
simlar secured borrowing 15 – – 47,247 47,247 – 47,247
Debt securites in issue 21 – – 4,203 4,203 – 4,203
Short positons 942 – – 942 – 942
Other liablites – – – – – –
942 – 58,159 59,101 – 59,101
Derivatve financal instruments 13 68,000 423 – 68,423 – 68,423
Deposits by banks – – – – 18,482 18,482
Customer accounts – – – – 122,061 122,061
Repurchase agreements and other
simlar secured borrowing 15 – – – – – –
Debt securites in issue 21 – – – – 27,661 27,661
Other liablites¹ 22 – – – – 23,224 23,224
Subordinated liablites and other
borrowed funds 26 – – – – 14,339 14,339
Total at 31 December 2020 68,942 423 58,159 127,524 205,767 333,291
1 Includes correction of fair value hedge accounting adjustment of $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
209
Notes to the financal statements continued
12. Financal instruments continued
Interest rate benchmark reform
In 2017, the FCA announced that it had reached an agreement with LIBOR panel banks to contribute to LIBOR until the end
of2021, after which there would be a transiton from LIBORs to risk-free rates (RFRs). Since then, there have been further
updates, particularly with respect to the cessation date for certain USD LIBOR tenors being deferred from 31 December 2021
to 30 June 2023.
How the Group is managing the transiton to alternative benchmark rates
In 2018, the Group established its IBOR Transiton Programme, with Senior Manager oversight from the Group Chief Operating
Officer, to manage the transiton away from LIBOR. The Programme’s strategic bank-wide approach aims to support clients
throughout the transiton, whilst ensuring key risks and issues are identfied and effectively managed. The Programme is
governed by a princpal Programme Steering Committee that oversees sixteen workstreams aligned to the Group’s
businesses and functions. Withn the Programme, separate committee meetings are held for each workstream, with all
workstreams having dedicated accountable executives.
Additonal governance is supported by regular updates provided to senior risk committees, includng the Group Risk
Committee, Board Risk Committee and the Corporate, Commercial and Institutonal Banking Risk Committee.
From an industry and regulatory perspective, the Group actively particpates in and contributes to RFR working groups,
industry associatons and business forums that focus on different aspects of the transiton. The Group monitors the
developments at these forums and reflects, then aligns signficant decisons into its broader transiton plans.
Progress during 2021
Supported by a number of system enhancements, the Group has successfully enabled the transiton to RFR products, with
end-to-end capabilties developed across a full suite of derivatve and cash products. The Group maintaned full adherence
to all the interm GBP LIBOR cessation milestones set by the Bank of England’s Working Group on Sterling Risk-Free Reference
Rates. Activty in products referencing RFRs continued to grow throughout the year.
The Group has adhered to the International Swaps and Derivatves Associaton (ISDA) 2020 IBOR Fallbacks Protocol for all its
trading entites and engaged clients that had not adhered to negotiate remediaton of non-USD LIBOR contracts by 31
December 2021. The conversion events at the London Clearing House were successfully completed for cleared derivatves. As
at the end of 2021, remediaton of all cleared and uncleared derivatve contracts referencing ceasing LIBORs was complete.
Clients with legacy non-USD LIBOR loans were engaged to remediate their contracts via active conversions to alternative
rates, fallbacks, or other suitable transiton mechanisms. As at end of 2021, all negotiatons for drawn non-USD LIBOR
exposures were concluded, and all but four loans having their documentation completed (it is expected the documentation
will be finalsed prior to the respective next fixng dates).
The Group is well-positoned to support the transiton to Secured Overnight Financng Rate (SOFR) for the USD LIBOR
transiton. The Group is operationally ready and is actively offering SOFR products, in line with the regulatory prohibtions on
new USD LIBOR financal instruments. Preparations are also underway to ensure that the Group is ready to remediate legacy
USD LIBOR transactions. Over the course of 2021, the Group made considerable progress in automating IBOR-related data,
and increasng process automation remains a priorty for 2022.
Frontline and client engagement, includng internal and client communicatons, frontline trainng, and client webinars were a
key feature of the Programme throughout 2021. This allowed for a smooth client experience during the transiton of non-USD
LIBOR to RFRs, and this approach will continue in 2022 for USD LIBOR. Following an intial USD LIBOR-focused client outreach
and internal communicatons in early December 2021, the Group has already started engaging clients to ascertain their level
of readiness, and to secure an indcative timelne for remediaton activties.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
210
Notes to the financal statements continued
12. Financal instruments continued
Risks which the Group is exposed to due to IBOR transiton
The Group has largely mitgated all material adverse outcomes associated with the cessation of LIBOR benchmarks, and
these have not required a change to the Group’s risk management strategy. However, the Group will continue to focus on the
remediaton required for other benchmarks, and will continue to monitor and manage the inherent risks of the transiton, with
particular attention being paid to the following:
•
Legal risk: LIBOR transiton introduces signficant legal risks and the Group has taken action to mitgate them where
possible. These include risks around contracts that reference USD LIBOR and other LIBORs such as GBP and JPY. Steps
havebeen taken to either insert robust fallbacks or actively convert transactions from the relevant LIBOR to the new
RFR-based options.
•
Conduct risk: The Group considers conduct risk to be a signficant area of non-financal risk management throughout
thetransiton. Our risk appetite statement on conduct risk strives to maintan appropriate outcomes by continuously
demonstrating that we are ‘Doing the Right Thing’ in the way we do business. Accordingly, we recognise that the
identficaton and mitgation of conduct risks arisng in respect of the transiton are fundamental to the successful
transitonto new RFR based rates by 30 June 2023. The Group has therefore taken actions in this regard as an integral
partof its IBORTransiton Programme, includng an extensive outreach programme.
•
Operational risk: The Group has recognised the importance of the ongoing identficaton and management of operational
risk as a result of LIBOR transiton. The Programme has adopted the Group’s existng Operational Risk Framework in its
approach to identfying, quantifyng, and mitgating the impact of operational risks resulting from the transiton.
•
Market risk: As trades are transitoned from IBOR to RFR, the business-as-usual metrics, limt structure and controls will
continue to apply. Limts for value at risk and market risk sensitvites are in accordance with the Group Risk Appetite
Statement. New limts will be set following engagement with the business, to consider client demand and market liqudity
in RFR-linked products, as well as the regulatory expectations and interm milestones agreed by the industry.
•
Financal and credit risk: As part of the ‘Data collection on exposures’ exercise undertaken for the PRA and FCA, the Group
set out its view of the impact of LIBOR transiton on its financal risk profile, includng its credit risk and funding profile. At
present, the Group has yet to see any material change to any of these categories. However, all of these risks will continue to
be monitored as part of the Programme across business and functional workstreams.
•
Accounting risk: The Group has identfied the financal instruments that may be affected by accounting issues such as
accounting for contractual changes due to IBOR reform, fair value measurement and hedge accounting. We continue to
monitor and contribute to industry developments on tax and accounting changes.
At 31 December 2021, the Group and Company had the following notional princpal exposures to interest rate benchmarks
that are expected to be subject to interest rate benchmark reform. The Group and Company have excluded financal
instruments linked to USD LIBOR maturing before 30 June 2023 as it is assumed these will not require reform due to USD
LIBOR no longer being published beyond this date. The Group has excluded $3.5 billon of exposures and Company has
excluded $3.1 billon of exposures that transitoned under fallback clauses immedately after 31 December 2021.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
211
Notes to the financal statements continued
12. Financal instruments continued
Group
IBOR exposures by benchmark as of 31 December 2021
USD LIBOR
$millon
GBP LIBOR
$millon
SGD SOR
$millon
THB FIX
$millon
Other IBOR
$millon
Total IBOR
$millon
Assets
Loans and advances to banks
787 – – – – 787
Loans and advances to customers
18,932 123¹ 1,479 15 58 20,607
Debt securites, AT1 and other eligble bills
2,007 237¹ 18 – – 2,262
21,726 360 1,497 15 58 23,656
Liablites
Deposits by banks
6,636 – 8 – – 6,644
Customer accounts
3,057 – 1 36 – 3,094
Repurchase agreements and other secured borrowing
671 – – – – 671
Debt securites in issue
295 – – – – 295
Subordinated liablites and other borrowed funds
160 – – – – 160
10,819 – 9 36 – 10,864
Derivatves – Foreign exchange contracts
Currency swaps and options
155,567 – 6,008 1,725 – 163,300
Derivatves – Interest rate contracts
Swaps
738,979 – 14,053 52,808 – 805,840
Forward rate agreements and options
29,221 1 74 124 – 29,420
Exchange traded futures and options
24,236 – – – – 24,236
Equity and stock index options
74 – – – – 74
Credit derivatve contracts
4,056 – 215 277 – 4,548
Total IBOR derivatve exposure 952,133 1 20,350 54,934 – 1,027,418
Total IBOR exposure 984,678 361 21,856 54,985 58 1,061,938
Loan commitments off balance sheet 3,291 271 179 – 964 4,705
1 Residual GBP LIBOR exposures are mainly due to debt security assets where the issuers have yet to confirm revised instrument terms, and loans to customers where the
terms of remediaton have been agreed but legal documentation is not complete. It is expected that these exposures will be remediated before their next interest rate
fixng, however should this not be achieved a ‘synthetic LIBOR’ based on Term SONIA will apply
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
212
Notes to the financal statements continued
12. Financal instruments continued
IBOR exposures by benchmark as at 31 December 2020
USD LIBOR
$millon
GBP LIBOR
$millon
SGD SOR
$millon
THB FIX
$millon
Other IBOR
$millon
Total IBOR
$millon
Assets
Loans and advances to banks 1,774 55 – – – 1,829
Loans and advances to customers 23,959 2,129 1,967 33 645 28,733
Debt securites, AT1 and other eligble bills 3,027 1,386 365 0 170 4,948
28,760 3,570 2,332 33 815 35,510
Liablites
Deposits by banks 8,982 402 12 – – 9,396
Customer accounts 3,665 19 2 42 189 3,917
Repurchase agreements and other secured borrowing 1,195 – – – – 1,195
Debt securites in issue 40 – – – – 40
Subordinated liablites and other borrowed funds 160 15 – – – 175
14,042 436 14 42 189 14,723
Derivatves – Foreign exchange contracts
Currency swaps and options 204,120 34,879 7,194 1,998 21,827 270,018
Derivatves – Interest rate contracts
Swaps 903,517 112,195 77,268 28,121 43,914 1,165,015
Forward rate agreements and options 22,108 523 76 55 2,527 25,289
Exchange traded futures and options 63,239 1,445 – – – 64,684
Equity and stock index options 75 2 – – – 77
Credit derivatve contracts 2,843 – – 134 – 2,977
Total IBOR derivatve exposure
1,195,902 149,044 84,538 30,308 68,268 1,528,060
Total IBOR exposure
1,238,704 153,050 86,884 30,383 69,272 1,578,293
Loan commitments off balance sheet
6,240 729 206 1 1,423 8,599
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
213
Notes to the financal statements continued
12. Financal instruments continued
Company
IBOR exposures by benchmark as of 31 December 2021
USD LIBOR
$millon
GBP LIBOR
$millon
SGD SOR
$millon
THB FIX
$millon
Other IBOR
$millon
Total IBOR
$millon
Assets
Loans and advances to banks
680 – – – – 680
Loans and advances to customers
14,444 123¹ – – 58 14,625
Debt securites, AT1 and other eligble bills
1,726 237¹ – – – 1,963
16,850 360 – – 58 17,268
Liablites
Deposits by banks
5,087 – – – – 5,087
Customer accounts
2,809 – – – – 2,809
Repurchase agreements and other secured borrowing
471 – – – – 471
Debt securites in issue
275 – – – – 275
Subordinated liablites
160 – – – – 160
8,802 – – – – 8,802
Derivatves – Foreign exchange contracts
Currency swaps and options
145,302 – 2,334 – – 147,636
Derivatves – Interest rate contracts
Swaps
718,980 – 9,971 48,543 – 777,494
Forward rate agreements and options
28,429 1 74 – – 28,504
Exchange traded futures and options
24,236 – – – – 24,236
Equity and stock index options
74 – – – – 74
Credit derivatve contracts
3,867 – – – – 3,867
Total IBOR derivatve exposure 920,888 1 12,379 48,543 – 981,811
Total IBOR exposure 946,540 361 12,379 48,543 58 1,007,881
Loan commitments off balance sheet 2,900 263 7 – 879 4,049
1 Residual GBP LIBOR exposures are mainly due to debt security assets where the issuers have yet to confirm revised instrument terms, and loans to customers where the
terms of remediaton have been agreed but legal documentation is not complete. It is expected that these exposures will be remediated before their next interest rate
fixng, however should this not be achieved a ‘synthetic LIBOR’ based on Term SONIA will apply
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
214
Notes to the financal statements continued
12. Financal instruments continued
IBOR exposures by benchmark as at 31 December 2020
USD LIBOR
$millon
GBP LIBOR
$millon
SGD SOR
$millon
THB FIX
$millon
Other IBOR
$millon
Total IBOR
$millon
Assets
Loans and advances to banks 1,308 55 – – – 1,363
Loans and advances to customers 18,428 1,271 – – 586 20,285
Debt securites, AT1 and other eligble bills 2,777 1,373 – – 170 4,320
Liablites
Deposits by banks 7,890 402 – – – 8,292
Customer accounts 3,520 19 – – 189 3,728
Repurchase agreements and other secured borrowing 1,095 – – – – 1,095
Debt securites in issue 16 – – – – 16
Subordinated liablites and other borrowed funds 160 15 – – – 175
Derivatves – Foreign exchange contracts
Currency swaps and options 189,525 34,375 2,602 – 21,633 248,135
Derivatves – Interest rate contracts
Swaps 880,284 106,401 72,456 23,142 43,861 1,126,144
Forward rate agreements and options 21,658 523 76 30 2,527 24,814
Exchange traded futures and options 63,239 1,445 – – – 64,684
Equity and stock index options 75 2 – – – 77
Credit derivatve contracts 2,832 – – – – 2,832
Total IBOR derivatve exposure
1,157,613 142,746 75,134 23,172 68,021 1,466,686
Total IBOR exposure
1,192,807 145,881 75,134 23,172 68,966 1,505,960
Loan commitments off balance sheet
5,816 637 10 – 1,407 7,870
Offsetting of financal instruments
Financal assets and liablites 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 intenton to settle on a net basis, or to realise the asset
and settle the liablity simultaneously.
In practice, for credit mitgation, the Group is able to offset assets and liablites which do not meet the IAS 32 netting critera
set out below. Such arrangements include master netting arrangements for derivatves 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 additon, the Group also receives and pledges readily realisable collateral for derivatve transactions 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 liqud assets which can be sold in the event of a default.
The following tables set out the impact of netting on the balance sheet. This comprises derivatve transactions settled
through an enforceable netting agreement where we have the intent and abilty to settle net and which are offset on the
balance sheet.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
215
Notes to the financal statements continued
12. Financal instruments continued
Group
2021
Gross
amounts of
recognised
financal
instruments
$millon
Impact of
offset in the
balance sheet
$millon
Net amounts
of financal
instruments
presented in
the balance
sheet
$millon
Related amount not offset in
the balance sheet
Net amount
$millon
Financal
instruments
$millon
Financal
collateral
$millon
Assets
Derivatve financal instruments
79,128 (25,883) 53,245 (42,577) (7,757) 2,911
Reverse repurchase agreements and other simlar
secured lending
91,132 (7,426) 83,706 – (83,706) –
At 31 December 2021 170,260 (33,309) 136,951 (42,577) (91,463) 2,911
Liablites
Derivatve financal instruments
79,469 (25,883) 53,586 (42,577) (8,244) 2,765
Repurchase agreements and other simlar
securedborrowing
69,058 (7,426) 61,632 – (61,632) –
At 31 December 2021 148,527 (33,309) 115,218 (42,577) (69,876) 2,765
2020
Gross
amounts of
recognised
financal
instruments
$millon
Impact of
offset in the
balance sheet
$millon
Net amounts
of financal
instruments
presented in
the balance
sheet
$millon
Related amount not offset in
the balance sheet
Net amount
$millon
Financal
instruments
$millon
Financal
collateral
$millon
Assets
Derivatve financal instruments 111,737 (42,512) 69,225 (52,308) (9,184) 7,733
Reverse repurchase agreements and other simlar
secured lending 74,454 (7,919) 66,535 – (66,535) –
At 31 December 2020
186,191 (50,431) 135,760 (52,308) (75,719) 7,733
Liablites
Derivatve financal instruments 111,580 (42,512) 69,068 (52,308) (10,940) 5,820
Repurchase agreements and other simlar
securedborrowing 55,298 (7,919) 47,379 – (47,379) –
At 31 December 2020
166,878 (50,431) 116,447 (52,308) (58,319) 5,820
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
216
Notes to the financal statements continued
12. Financal instruments continued
Company
2021
Gross
amounts of
recognised
financal
instruments
$millon
Impact of
offset in the
balance sheet
$millon
Net amounts
of financal
instruments
presented in
the balance
sheet
$millon
Related amount not offset in
the balance sheet
Net amount
$millon
Financal
instruments
$millon
Financal
collateral
$millon
Assets
Derivatve financal instruments
79,361 (25,883) 53,478 (43,788) (7,033) 2,657
Reverse repurchase agreements and other simlar
secured lending
88,566 (7,426) 81,140 – (81,140) –
At 31 December 2021 167,927 (33,309) 134,618 (43,788) (88,173) 2,657
Liablites
Derivatve financal instruments
79,718 (25,883) 53,835 (43,788) (7,780) 2,267
Repurchase agreements and other simlar
securedborrowing
68,606 (7,426) 61,180 – (61,180) –
At 31 December 2021 148,324 (33,309) 115,015 (43,788) (68,960) 2,267
2020
Gross
amounts of
recognised
financal
instruments
$millon
Impact of
offset in the
balance sheet
$millon
Net amounts
of financal
instruments
presented in
the balance
sheet
$millon
Related amount not offset in
the balance sheet
Net amount
$millon
Financal
instruments
$millon
Financal
collateral
$millon
Assets
Derivatve financal instruments 111,422 (42,512) 68,910 (53,091) (8,581) 7,238
Reverse repurchase agreements and other simlar
secured lending 72,519 (7,919) 64,600 – (64,600) –
At 31 December 2020
183,941 (50,431) 133,510 (53,091) (73,181) 7,238
Liablites
Derivatve financal instruments 110,935 (42,512) 68,423 (53,091) (10,385) 4,947
Repurchase agreements and other simlar
securedborrowing 55,166 (7,919) 47,247 – (47,247) –
At 31 December 2020
166,101 (50,431) 115,670 (53,091) (57,632) 4,947
Related amounts not offset in the balance sheet comprises:
•
Financal instruments not offset in the balance sheet but covered by an enforceable netting arrangement. This comprises
master netting arrangements held against derivatve financal instruments and excludes the effect of over-collateralisaton
•
Financal instruments where a legal opinon evidencng enforceabilty the right of offset may not have sought, or may have
been unable to obtain
•
Financal collateral comprises cash collateral pledged and received for derivatve financal instruments and
collateralbought and sold for reverse repurchase and repurchase agreements respectively and excludes the effect
ofover-collateralisaton
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
217
Notes to the financal statements continued
12. Financal instruments continued
Financal liablites designated at fair value through profit or loss
2021
$millon
2020
$millon
Carrying balance aggregate fair value
72,496
58,542Amount contractually obliged to repay at maturity
72,710
58,355Difference between aggregate fair value and contractually obliged to repay at maturity
(214)
187Cumulative change in fair value accredited to credit risk difference
14
(16)The net fair value loss on financal liablites designated at fair value through profit or loss was $53 millon for the year (31
December 2020: net loss of $171 millon). Further details of the Group’s own credit adjustment (OCA) valuation technique is
described later in this note.
Valuation of financal instruments
The fair values of quoted financal assets and liablites in active markets are based on current prices. A market is regarded as
active if transactions for the asset or liablity take place with sufficent frequency and volume to provide pricng informaton
on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active
markets for identcal instruments held by the Group. Where quoted market prices are not available, or are unreliable because
of poor liqudity, 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 pricng models and, where appropriate, comparison with instruments that have characteristcs simlar to
those of the instruments held by the Group.
The Valuation Methodology function is responsible for independent price verifcation, oversight of fair value and appropriate
value adjustments and escalation of valuation issues. Independent price verifcation is the process of determinng that the
valuations incorporated into the financal statements are validated independent of the business area responsible for the
product. The Valuation Methodology function has oversight of the fair value adjustments to ensure the financal instruments
are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the financal
statements. The market data used for price verifcation may include data sourced from recent trade data involvng external
counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pricng providers. Valuation Methodology
perform an ongoing review of the market data sources that are used as part of the price verifcation and fair value processes
which are formally documented on a semi-annual basis detailng of the suitablity of the market data used for price testing.
Price verifcation 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, reliablity, availablity of
multiple data sources and methodology employed by the pricng provider are taken into consideraton.
The Valuation and Benchmarks Committee (VBC) is the valuation governance forum consistng of representatives 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 Princpal Finance, the Investment Committee meeting is held on a quarterly
basis to review investments and valuations.
Signficant accounting estimates and judgements
The Group evaluates the signficance of financal instruments and material accuracy of the valuations incorporated in the
financal statements as they involve a high degree of judgement and estimaton uncertainty in determinng the carrying
values of financal assets and liablites at the balance sheet date.
•
Fair value of financal 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 observabilty
of signficant valuation inputs can materially affect the fair values of financal instruments
•
When establishng the exit price of a financal instrument using a valuation technique, the Group estimates valuation
adjustments in determinng the fair value (page 218)
•
In determinng the valuation of financal 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 signficant valuation judgements in respect
of Level 3 instruments (page 221)
•
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 signficant degree of non-market-based unobservable inputs
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
218
Notes to the financal statements continued
12. Financal instruments continued
Valuation techniques
Refer to the fair value hierarchy explanation – Level 1, 2 and 3 (page 221)
•
Financal instruments held at fair value
–
Debt securites – asset-backed securites:
Asset-backed securites are valued based on external prices obtained from
consensus pricng providers, broker quotes, recent trades, arrangers’ quotes, etc. Where an observable price is available
for a given security, it is classifed as Level 2. In instances where third-party prices are not available or reliable, the security
is classifed as Level 3. The fair value of Level 3 securites is estimated using market standard cash flow models with input
parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable
securites with simlar vintage, collateral type, and credit ratings
–
Debt securites in issue:
These debt securites relate to structured notes issued by the Group. Where independent market
data is available through pricng vendors and broker sources these positons are classifed as Level 2. Where such liqud
external prices are not available, valuations of these debt securites are impled using input parameters such as bond
spreads and credit spreads, and are classifed as Level 3. These input parameters are determined with reference to the
same issuer (if available) or proxies from comparable issuers or assets
–
Derivatves:
Derivatve products are classifed as Level 2 if the valuation of the product is based upon input parameters
which are observable from independent and reliable market data sources. Derivatve products are classifed as Level 3
ifthere are signficant valuation 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 indces and interest rate products with quanto payouts.
Inmost cases these unobservable correlation parameters cannot be impled from the market, and methods such as
historcal analysis and comparison with historcal levels or other benchmark data must be employed
–
Equity shares – private equity:
The majorty of private equity unlisted investments are valued based on earning multiples
– Price-to-Earnings (P/E) or enterprise value to earnings before income tax, depreciaton and amortisaton (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
comparabilty between these unquoted investments and the comparable listed companies, appropriate adjustments
are also applied (for example, liqudity 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 models), 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 classifed as Level 3 on the basis that the valuation methods involve judgements ranging from
determinng comparable companies to discount rates where the discounted cash flow method is applied
–
Loans and advances:
These primarly include loans in the FM Bond and Loan Syndicaton business which were not
syndicated as of the balance sheet date and other financng transactions withn Financal Markets and loans and
advances includng reverse repurchase agreements that do not have SPPI cash flows or are managed on a fair 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 comparable loans with simlar credit grade, sector and region, are used. Where observable credit spreads and
market standard proxy methods are available, these loans are classifed as Level 2. Where there are no recent
transactions or comparable loans, these loans are classifed as Level 3
–
Other debt securites:
These debt securites include convertible bonds, corporate bonds, credit and structured notes.
Where quoted prices are available through pricng vendors, brokers or observable trading activties from liqud markets,
these are classifed as Level 2 and valued using such quotes. Where there are signficant valuation inputs which are
unobservable in the market, due to illquid trading or the complexity of the product, these are classifed as Level 3. The
valuations of these debt securites are impled using 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
orassets
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
219
Notes to the financal statements continued
12. Financal instruments continued
•
Financal instruments held at amortised cost
The following sets out the Group’s basis for establishng fair values of amortised cost financal instruments and their
classifcation between Levels 1, 2 and 3. As certain categories of financal instruments are not actively traded, there is a
signficant 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 securites in issue, subordinated liablites 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 remainng term to maturity
–
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
pricesis based on discounted cash flows using the prevailng market rates for debts with a simlar Credit Risk and
remainng maturity
–
Investment securites:
For investment securites that do not have directly observable market values, the Group utilses a
number of valuation techniques to determine fair value. Where available, securites are valued using 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 simlar bond but using spreads for a particular sector and rating). Certain
instruments cannot be proxies as set out above, and in such cases the positons are valued using non-market observable
inputs. This includes those instruments held at amortised cost and predominantly relates to asset-backed securites. The
fair value for such instruments is usually proxies 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 prevailng money market rates for debts with a simlar Credit Risk and
remainng maturity. The Group’s loans and advances to customers’ portfolio is well diversfied by geography and industry.
Approximately a quarter of the portfolio re-prices withn one month, and approximately half re-prices withn 12 months.
Loans and advances are presented net of provisons for imparment. The fair 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, includng assumptions 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 indvidual instruments
withn its loans and advances portfolio and as a result providng quantifcation of the key assumptions used to value such
instruments is impractcal
–
Other assets:
Other assets comprise primarly of cash collateral and trades pending settlement. The carrying amount of
these financal instruments is considered to be a reasonable approximaton of fair value as they are either short-term in
nature or re-price to current market rates frequently
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
220
Notes to the financal statements continued
12. Financal instruments continued
Fair value adjustments
When establishng the exit price of a financal instrument using a valuation technique, the Group considers adjustments to
the modelled price which market particpants would make when pricng that instrument. The main valuation adjustments
(described further below) in determinng fair value for financal assets and financal liablites are as follows:
01.01.21
$millon
Movement
during the
year
$millon
31.12.21
$millon
01.01.20
$millon
Movement
during the
year
$millon
31.12.20
$millon
Bid-offer valuation adjustment 28 93
93 (6) 87
65Credit Valuation adjustment 50 169
169 (163) 6
119Debit Valuation adjustment (9) (45)
(45) 45 –
(36)Model valuation adjustment (1) 5
5 (2) 3
6Funding Valuation adjustment (7) 15
15 (15) –
22Other fair value adjustments (16) 27
27 (14) 13
43Total 264 (155) 109 219 45 264
Income deferrals
Day 1 and other deferrals 16 97
97 (13) 84
81Total 97 (13) 84 81 16 97
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 neutralisng the business’
positons through dealing away in the market, thereby bringng long positons to bid and short positons to offer. The
methodology to calculate the bid-offer adjustment for a derivatve portfolio involves netting between long and short
positons and the grouping of risk by strike and tenor based on the hedging strategy where long positons are marked to
bid and short positons marked to offer in the systems
•
Credit valuation adjustment (CVA):
The Group accounts for CVA against the fair value of derivatve products. CVA is an
adjustment to the fair value of the transactions to reflect the possiblity 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
particpant would include when derivng a purchase price to acquire our exposures. CVA is calculated for each subsidary,
and withn each entity 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 positve exposure, market-impled probabilty of default
(PD) and recovery rates. Where market-impled 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 uncertaintes associated with wrong-way risk in the Group’s Prudential Valuation Adjustments framework
•
Debit valuation adjustment (DVA):
The Group calculates DVA adjustments on its derivatve liablites 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 derivatve liablites, a DVA adjustment is determined by applying the Group’s probabilty of
default to the Group’s negative expected exposure against the counterparty. The Group’s probabilty 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 simulaton of the underlying risk factors
over the expected life of the deal. This simulaton methodology incorporates the collateral posted by the Group and the
effects of master netting agreements
•
Model valuation adjustment:
Valuation models may have pricng deficencies or limtations that require a valuation
adjustment. These pricng deficencies or limtations arise due to the choice, implementaton and calibraton of the
pricngmodel
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
221
Notes to the financal statements continued
12. Financal instruments continued
•
Funding valuation adjustment (FVA):
The Group makes FVA adjustments against derivatve products. FVA reflects an
estimate of the adjustment to its fair value that a market particpant would make to incorporate funding costs or benefits
that could arise in relation to the exposure. FVA is calculated by determinng 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 (includng partially collateralised) derivatves 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 calibratng to a
set of market prices with differng maturity, expiry and strike of the trades
•
Day one and other deferrals:
In certain circumstances the intial fair value is based on a valuation technique which differs to
the transaction price at the time of intial recogniton. However, these gains can only be recognised when the valuation
technique used is based primarly on observable market data. In those cases where the intially 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 immedately 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 primarly represent adjustments taken to reflect the specifc terms and conditons of certain derivatve contracts
which affect the terminaton value at the measurement date
In additon, the Group calculates own credit adjustment (OCA) on its issued debt designated at fair value, includng
structured notes, in order to reflect changes in its own credit standing. Own issued note liablites are discounted utilsing
spreads as at the measurement date. These spreads consist of a market level of funding component and an idosyncratic
own credit component. Under IFRS 9 the change in the own credit component (OCA) is reported under other comprehensive
income. The Group’s OCA reserve will increase if its credit standing worsens and conversely, decrease if its credit standing
improves. The Group’s OCA reserve will reverse over time as its liablites mature. The OCA at 31 December 2021 is a gain of $14
millon, (31 December 2020: $14 millon loss).
Fair value hierarchy – financal instruments held at fair value
Assets and liablites carried at fair value or for which fair values are disclosed have been classifed into three levels according
to the observabilty of the signficant inputs used to determine the fair values. Changes in the observabilty of signficant
valuation inputs during the reporting period may result in a transfer of assets and liablites withn the fair value hierarchy. The
Group recognises transfers between levels of the fair value hierarchy when there is a signficant change in either its princpal
market or the level of observabilty 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 identcal assets or
liablites
•
Level 2:
Fair value measurements are those with quoted prices for simlar instruments in active markets or quoted prices for
identcal or simlar instruments in inactve markets and financal instruments valued using models where all signficant
inputs are observable
•
Level 3:
Fair value measurements are those where inputs which could have a signficant effect on the instrument’s valuation
are not based on observable market data
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
222
Notes to the financal statements continued
12. Financal instruments continued
The following tables show the classifcation of financal instruments held at fair value into the valuation hierarchy:
Group
Assets
Level 1
$millon
Level 2
$millon
Level 3
$millon
Total
$millon
Financal instruments held at fair value through profit or loss
Loans and advances to banks
– 3,613 9 3,622
Loans and advances to customers
– 3,522 410 3,932
Reverse repurchase agreements and other simlar secured lending
– 77,431 1,555 78,986
Debt securites and other eligble bills
4,845 10,247 312 15,404
Of which:
Issued by central banks & governments
4,641 5,343 – 9,984
Issued by corporates other than financal insttutions
1
1 2,343 74 2,418
Issued by financal insttutions
1
203 2,561 238 3,002
Equity shares
4,449 38 98 4,585
Derivatve financal instruments
1,061 52,117 67 53,245
Of which:
Foreign exchange
156 43,136 12 43,304
Interest rate
9 5,821 50 5,880
Credit
– 2,242 2 2,244
Equity and stock index options
– 90 3 93
Commodity
896 828 – 1,724
Investment securites
Debt securites and other eligble bills
29,433 43,018 40 72,491
Of which:
Issued by central banks & governments
21,431 16,588 40 38,059
Issued by corporates other than financal insttutions
1
– 1,344 – 1,344
Issued by financal insttutions
1
8,002 25,086 – 33,088
Equity shares
166 17 392 575
Total financal instruments at 31 December 2021
2
39,954 190,003 2,883 232,840
Liablites
Financal instruments held at fair value through profit or loss
Deposits by banks
– 37 22 59
Customer accounts
– 6,603 365 6,968
Repurchase agreements and other simlar secured borrowing
– 61,307 – 61,307
Debt securites in issue
– 3,579 781 4,360
Short positons
597 2,255 – 2,852
Derivatve financal instruments
940 52,550 96 53,586
Of which:
Foreign exchange
160 43,127 5 43,292
Interest rate
7 5,927 16 5,950
Credit
– 2,363 41 2,404
Equity and stock index options
– 119 34 153
Commodity
773 1,014 – 1,787
Other liablites
– 6 – 6
Total financal instruments at 31 December 2021
2
1,537 126,337 1,264 129,138
1 Includes covered bonds of $5,513 millon, securites issued by Multilateral Development Banks/International Organisatons of $8,716 millon and State-owned agencies
and development banks of $7,430 millon
2 The above table does not include held for sale assets of $43 millon and liablites of $nil. These are reported in Note 20 together with their fair value hierarchy
There were no signficant changes to valuation or levelling approaches in 2021.
There were no signficant transfers of financal assets and liablites measured at fair value between Level 1 and Level 2 during
the year.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
223
Notes to the financal statements continued
12. Financal instruments continued
Assets
Level 1
$millon
Level 2
$millon
Level 3
$millon
Total
$millon
Financal instruments held at fair value through profit or loss
Loans and advances to banks – 2,571 200 2,771
Loans and advances to customers – 2,749 464 3,213
Reverse repurchase agreements and other simlar secured lending – 61,743 1,064 62,807
Debt securites and other eligble bills 2,440 10,491 195 13,126
Of which:
Issued by central banks & governments
1
2,366 6,228 52 8,645
Issued by corporates other than financal insttutions
1,2
– 1,311 122 1,434
Issued by financal insttutions
1,2
74 2,952 21 3,047
Equity shares 2,720 193 124 3,037
Derivatve financal instruments 463 68,753 9 69,225
Of which:
Foreign exchange 107 51,820 4 51,931
Interest rate 30 14,222 2 14,254
Credit – 1,684 2 1,686
Equity and stock index options – 55 1 56
Commodity 326 972 – 1,298
Investment securites
Debt securites and other eligble bills 35,713 35,569 40 71,322
Of which:
Issued by central banks & governments
1
27,209 16,355 40 43,604
Issued by corporates other than financal insttutions
1,2
260 670 – 930
Issued by financal insttutions
1,2
8,244 18,545 – 26,789
Equity shares 68 5 255 328
Total financal instruments at 31 December 2020
3
41,404 182,074 2,351 225,829
Liablites
Financal instruments held at fair value through profit or loss
Deposits by banks – 70 – 70
Customer accounts – 6,756 (3) 6,753
Repurchase agreements and other simlar secured borrowing – 47,359 – 47,359
Debt securites in issue – 4,236 124 4,360
Short positons 151 1,021 – 1,172
Derivatve financal instruments 401 68,550 117 69,068
Of which:
Foreign exchange 109 53,441 4 53,554
Interest rate 5 12,487 26 12,518
Credit – 1,932 82 2,014
Equity and stock index options – 151 5 156
Commodity 287 539 – 826
Other liablites – – – –
Total financal instruments at 31 December 2020
3
552 127,992 238 128,782
1 Represented to reflect correct classifcation of counterparty types. There has been no change to the levelling approach or between FVTPL and Investment securites
categories due to the restatement
2 Includes covered bonds of $4,594 millon, securites issued by Multilateral Development Banks/International Organisatons of $8,081 millon (represented from $8,237
millon) and State-owned agencies and development banks of $4,298 millon (represented from $2,771 millon)
3 The above table does not include held for sale assets of $5 millon and liablites of $nil. These are reported in Note 20 together with their fair value hierarchy
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
224
Notes to the financal statements continued
12. Financal instruments continued
Company
Assets
Level 1
$millon
Level 2
$millon
Level 3
$millon
Total
$millon
Financal instruments held at fair value through profit or loss
Loans and advances to banks
– 3,561 9 3,570
Loans and advances to customers
– 3,125 82 3,207
Reverse repurchase agreements and other simlar secured lending
– 76,100 1,555 77,655
Debt securites and other eligble bills
3,683 6,966 203 10,852
Of which:
Issued by central banks & governments
3,495 2,763 – 6,258
Issued by corporates other than financal insttutions
1
– 1,539 5 1,544
Issued by financal insttutions
1
188 2,664 198 3,050
Equity shares
4,419 2 – 4,421
Derivatve financal instruments
1,047 52,362 69 53,478
Of which:
Foreign exchange
142 41,415 14 41,571
Interest rate
9 7,707 50 7,766
Credit
– 2,244 2 2,246
Equity and stock index options
– 47 3 50
Commodity
896 949 – 1,845
Investment securites
Debt securites and other eligble bills
25,521 34,226 286 60,033
Of which:
Issued by central banks & governments
17,956 9,287 25 27,268
Issued by corporates other than financal insttutions
1
– 1,226 – 1,226
Issued by financal insttutions
1
7,565 23,713 261 31,539
Equity shares
151 2 208 361
Total financal instruments at 31 December 2021
2
34,821 176,344 2,412 213,577
Liablites
Financal instruments held at fair value through profit or loss
Deposits by banks
– 37 22 59
Customer accounts
– 6,306 292 6,598
Repurchase agreements and other simlar secured borrowing
– 60,897 – 60,897
Debt securites in issue
– 3,472 614 4,086
Short positons
462 1,794 – 2,256
Derivatve financal instruments
933 52,797 105 53,835
Of which:
Foreign exchange
153 41,642 16 41,811
Interest rate
7 7,694 15 7,716
Credit
– 2,328 41 2,369
Equity and stock index options
– 38 33 71
Commodity
773 1,095 – 1,868
Other liablites
– 6 – 6
Total financal instruments at 31 December 2021
2
1,395 125,309 1,033 127,737
1 Includes covered bonds of $5,100 millon, securites issued by Multilateral Development Banks/International Organisatons of $8,245 millon and State-owned agencies
and development banks of $7,356 millon.
2 The above table does not include held for sale assets of $42 millon and liablites of $nil. These are reported in Note 20 together with their fair value hierarchy
There were no signficant changes to valuation or levelling approaches in 2021.
There were no signficant transfers of financal assets and liablites measured at fair value between Level 1 and Level 2 during
the year.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
225
Notes to the financal statements continued
12. Financal instruments continued
Assets
Level 1
$millon
Level 2
$millon
Level 3
$millon
Total
$millon
Financal instruments held at fair value through profit or loss
Loans and advances to banks – 2,571 200 2,771
Loans and advances to customers – 2,306 275 2,581
Reverse repurchase agreements and other simlar secured lending – 61,198 1,064 62,262
Debt securites and other eligble bills 2,075 7,891 135 10,101
Of which:
Issued by central banks & governments¹ 2,001 3,592 52 5,645
Issued by corporates other than financal insttutions
1,2
– 982 62 1,044
Issued by financal insttutions
1,2
74 3,317 21 3,412
Equity shares 2,719 192 – 2,911
Derivatve financal instruments 462 68,437 11 68,910
Of which:
Foreign exchange 106 52,272 6 52,384
Interest rate 30 13,611 2 13,643
Credit – 1,672 2 1,674
Equity and stock index options – 35 1 36
Commodity 326 847 – 1,173
Investment securites
Debt securites and other eligble bills 31,569 26,399 28 57,996
Of which:
Issued by central banks & governments¹ 23,554 9,111 28 32,693
Issued by corporates other than financal insttutions
1,2
259 478 – 738
Issued by financal insttutions
1,2
7,755 16,810 – 24,565
Equity shares 58 – 172 230
Total financal instruments at 31 December 2020³ 36,883 168,994 1,885 207,762
Liablites
Financal instruments held at fair value through profit or loss
Deposits by banks – 70 – 70
Customer accounts – 6,642 (3) 6,639
Repurchase agreements and other simlar secured borrowing – 47,247 – 47,247
Debt securites in issue – 4,079 124 4,203
Short positons 149 793 – 942
Derivatve financal instruments 400 67,933 90 68,423
Of which:
Foreign exchange 108 53,341 15 53,464
Interest rate 5 12,197 26 12,228
Credit – 1,817 44 1,861
Equity and stock index options – 98 5 103
Commodity 287 480 – 767
Other liablites – – – –
Total financal instruments at 31 December 2020³ 549 126,764 211 127,524
1 Represented to reflect correct classifcation of counterparty types. There has been no change to the levelling approach or between FVTPL and Investment securites
categories due to the restatement
2 Includes covered bonds of $4,168 millon, securites issued by Multilateral Development Banks/International Organisatons of $7,969 millon(represented from $8,155
millon) and State-owned agencies and development banks of $4,298 millon(represented from $2,771 millon)
3 The above table does not include held for sale assets of $5 millon and liablites of $nil. These are reported in Note 20 together with their fair value hierarchy
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
226
Notes to the financal statements continued
12. Financal instruments continued
Fair value hierarchy – financal instruments measured at amortised cost
The following table shows the carrying amounts and incorporates the Group's estimate of fair values of those financal assets
and liablites not presented on the Group’s balance sheet at fair value. These fair values may be different from the actual
amount that will be received or paid on the settlement or maturity of the financal instrument. For certain instruments, the fair
value may be determined using assumptions for which no observable prices are available.
Group
Carrying value
$millon
Fair value
Level 1
$millon
Level 2
$millon
Level 3
$millon
Total
$millon
Assets
Cash and balances at central banks
1
61,963 – 61,963 – 61,963
Loans and advances to banks
29,999 – 29,999 – 29,999
of which – reverse repurchase agreements and other simlar
secured lending
956 – 956 – 956
Loans and advances to customers
144,799 – 42,050 102,756 144,806
of which – reverse repurchase agreements and other simlar
secured lending
3,764 – 3,764 – 3,764
Investment securites
2
29,214 – 29,749 – 29,749
Other assets
1
22,281 – 22,280 1 22,281
Assets held for sale
52 – – 52 52
At 31 December 2021 288,308 – 186,041 102,809 288,850
Liablites
Deposits by banks
25,205 – 25,205 – 25,205
Customer accounts
242,331 – 242,297 – 242,297
Repurchase agreements and other simlar secured borrowing
325 – 325 – 325
Debt securites in issue
36,060 – 36,061 – 36,061
Subordinated liablites and other borrowed funds
14,615 – 14,579 – 14,579
Other liablites
1
25,650 – 25,649 1 25,650
At 31 December 2021 344,186 – 344,116 1 344,117
Carrying value
$millon
Fair value
Level 1
$millon
restated
Level 2
$millon
Level 3
$millon
restated
Total
$millon
Assets
Cash and balances at central banks
1
58,117 – 58,117 – 58,117
Loans and advances to banks 27,666 – 27,667 4 27,671
of which – reverse repurchase agreements and other simlar
secured lending 809 – 815 – 815
Loans and advances to customers 140,861 – 29,147 111,628 140,775
of which – reverse repurchase agreements and other simlar
secured lending 2,919 – 2,922 – 2,922
Investment securites
2
14,437 – 15,308 7 15,315
Other assets
1
25,873 – 25,873 – 25,873
Assets held for sale 83 – 25 58 83
At 31 December 2020
267,037 – 156,137 111,697 267,834
Liablites
Deposits by banks 23,761 – 23,794 – 23,794
Customer accounts 216,719 – 216,670 – 216,670
Repurchase agreements and other simlar secured borrowing 20 – 20 – 20
Debt securites in issue 29,356 – 29,356 – 29,356
Subordinated liablites and other borrowed funds 14,879 – 14,821 – 14,821
Other liablites
1,3
29,500 – 29,500 – 29,500
At 31 December 2020
314,235 – 314,161 – 314,161
1 The carrying amount of these financal instruments is considered to be a reasonable approximaton of fair value as they are short-term in nature or reprice to current
market rates frequently
2 Includes Government bonds and Treasury bills of $15,152 millon at 31 December 2021 and $7,072 millon at 31 December 2020
3 Includes correction of fair value hedge accounting adjustment $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
227
Notes to the financal statements continued
12. Financal instruments continued
Company
Carrying value
$millon
Fair value
Level 1
$millon
Level 2
$millon
Level 3
$millon
Total
$millon
Assets
Cash and balances at central banks
1
48,165 – 48,165 – 48,165
Loans and advances to banks
16,117 – 16,117 – 16,117
of which – reverse repurchase agreements and other simlar
secured lending
438 – 438 – 438
Loans and advances to customers
71,161 – 19,600 51,368 70,968
of which – reverse repurchase agreements and other simlar
secured lending
3,047 – 3,047 – 3,047
Investment securites
2
25,995 – 26,529 – 26,529
Other assets
1
19,860 – 19,860 – 19,860
Assets held for sale
49 – – 49 49
At 31 December 2021 181,347 – 130,271 51,417 181,688
Liablites
Deposits by banks
18,870 – 18,870 – 18,870
Customer accounts
135,478 – 135,444 – 135,444
Repurchase agreements and other simlar secured borrowing
283 – 283 – 283
Debt securites in issue
33,826 – 33,827 – 33,827
Subordinated liablites and other borrowed funds
14,076 – 14,039 – 14,039
Other liablites
1
20,125 – 20,125 – 20,125
At 31 December 2021 222,658 – 222,588 – 222,588
Carrying value
$millon
Fair value
Level 1
$millon
restated
Level 2
$millon
Level 3
$millon
restated
Total
$millon
Assets
Cash and balances at central banks
1
46,476 – 46,476 – 46,476
Loans and advances to banks 14,997 – 14,998 – 14,998
of which – reverse repurchase agreements and other simlar
secured lending 55 – 55 – 55
Loans and advances to customers 72,969 – 10,252 62,602 72,854
of which – reverse repurchase agreements and other simlar
secured lending 2,283 – 2,283 – 2,283
Investment securites
2
12,876 – 13,754 – 13,754
Other assets
1
23,495 – 23,495 – 23,495
Assets held for sale 83 – 25 58 83
At 31 December 2020
170,896 – 109,000 62,660 171,660
Liablites
Deposits by banks 18,482 – 18,482 – 18,482
Customer accounts 122,061 – 121,889 – 121,889
Repurchase agreements and other simlar secured borrowing – – – – –
Debt securites in issue 27,661 – 27,661 – 27,661
Subordinated liablites and other borrowed funds 14,339 – 14,281 – 14,281
Other liablites
1,3
23,224 – 23,224 – 23,224
At 31 December 2020
205,767 – 205,537 – 205,537
1 The carrying amount of these financal instruments is considered to be a reasonable approximaton of fair value as they are short-term in nature or reprice to current
market rates frequently
2 Includes Government bonds and Treasury bills of $13,827 millon as at 31 December 2021 and $6,548 millon as at 31 December 2020
3 Includes correction of fair value hedge accounting adjustment $81 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
228
Notes to the financal statements continued
12. Financal instruments continued
Loans and advances to customers by client segment
1
Group
2021
Carrying value Fair value
Stage 3
$millon
Stage 1 and
stage 2
$millon
Total
$millon
Stage 3
$millon
Stage 1 and
stage 2
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
2,187 77,580 79,767 2,278 77,330 79,608
Consumer, Private & Business Banking
528 45,520 46,048 528 45,687 46,215
Central & other items
– 18,984 18,984 – 18,983 18,983
At 31 December 2021 2,715 142,084 144,799 2,806 142,000 144,806
2020
Carrying value Fair value
Stage 3
$millon
Stage 1 and
stage 2
2
$millon
Total
$millon
Stage 3
$millon
Stage 1 and
stage 2
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
2
2,721 78,126 80,847 2,787 77,981 80,768
Consumer, Private & Business Banking
2
601 41,959 42,560 608 41,944 42,552
Central & other items – 17,454 17,454 – 17,455 17,455
At 31 December 2020
3,322 137,539 140,861 3,395 137,380 140,775
1 Loans and advances includes reverse repurchase agreements and other simlar secured lending: carrying value $3,764 millon and fair value $3764 millon (31 December
2020: $2,919 millon and $2,922 millon respectively)
2 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated
Company
2021
Carrying value Fair value
Stage 3
$millon
Stage 1 and
stage 2
$millon
Total
$millon
Stage 3
$millon
Stage 1 and
stage 2
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking
1,716 54,645 56,361 1,748 54,419 56,167
Consumer, Private & Business Banking
276 11,925 12,201 276 11,928 12,204
Central & other items
– 2,599 2,599 – 2,597 2,597
At 31 December 2021 1,992 69,169 71,161 2,024 68,944 70,968
2020
Carrying value Fair value
Stage 3
$millon
Stage 1 and
stage 2
2
$millon
Total
$millon
Stage 3
$millon
Stage 1 and
stage 2
$millon
Total
$millon
Corporate, Commercial & Institutonal Banking² 2,046 56,502 58,548 2,113 56,293 58,406
Consumer, Private & Business Banking² 355 11,761 12,116 362 11,781 12,143
Central & other items – 2,305 2,305 – 2,305 2,305
At 31 December 2020
2,401 70,568 72,969 2,475 70,379 72,854
1 Loans and advances includes reverse repurchase agreements and other simlar secured lending: carrying value $3047 millon and fair value $3047 millon
(31December2020: $2,283 millon and fair value $2,283 millon)
2 Following the Group’s change in organisatonal structure, there has been an integraton of Corporate & Institutonal Banking and Commercial Banking to Corporate,
Commercial & Institutonal Banking; Private Banking and Retail Banking to Consumer, Private & Business Banking. Prior period has been restated
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
229
Notes to the financal statements continued
12. Financal instruments continued
Fair value of financal instruments
Level 3 Summary and signficant unobservable inputs
The following table presents the Group’s primary Level 3 financal instruments which are held at fair value. The table also
presents the valuation techniques used to measure the fair value of those financal instruments, the signficant unobservable
inputs, the range of values for those inputs and the weighted average of those inputs:
Group
Instrument
Value as at 31 December 2021
Princpal valuation technique
Signficant
unobservableinputs Range
1
Weighted
average
2
Assets
$millon
Liablites
$millon
Loans and advances
tobanks
9 –
Discounted cash flows Recovery rates 87.3%-100% 93.6%
Loans and advances
tocustomers
410 –
Discounted cash flows Price/yield 2.0%-11.8% 5.2%
Recovery rates 10.6%-100.0% 77.8%
Reverse repurchase
agreements and other
simlar secured lending
1,555 –
Discounted cash flows Repo curve 0.3%-3.0% 2.4%
Debt securites,
alternativetier one and
other eligble securites
312 –
Discounted cash flows Price/yield 6.6%-12.4% 7.8%
Recovery rates 0.01%-1.0% 0.2%
Government bonds
andtreasury bills
40 –
Discounted cash flows Price/yield 2.7%-5.5% 3.7%
Asset-backed securites Price/yield N/A N/A
– –
Discounted cash flowsEquity shares (includes
private equity investments)
490 –
Comparable
pricng/yield
EV/EBITDA multiples 6.1x-15.3x 8.6x
EV/Revenue multiples 10.1x-10.1x 10.1x
P/E multiples 12.6x-25.3x 14.9x
P/B multiples 0.4x-3.3x 1.5x
P/S multiples 1.8x-2.6x 1.8x
Liqudity discount 7.9%-29.2% 16.1%
Discounted cash flows Discount rates 6.0%-17.4% 8.3%
Option pricng model Equity value based on
EV/Revenue multiples
4.0x-85.5x 12.1x
Equity value based
onvolatilty
55.0%-65.0% 60.3%
Derivatve financal
instruments of which:
Foreign exchange Foreign exchange
12 5
Option pricng modeloption impled
volatilty
3.1% to 6.1% 5.1%
Discounted cash flows Foreign exchange
curves
(16.4)%-57.3% 9.5%
Interest rate Interest rate curves (16.4)%-18.8% 5.3%
50 16
Discounted cash flowsOption pricng model Bond option impled
volatilty
15.0%-32.0% 21.1%
Credit Credit spreads 0.1%-3.4% 1.4%
2 41
Discounted cash flowsPrice/yield 5.9%-7.3% 1.1%
Equity and stock index Equity correlation 8.0%-96.0% 70.0%
3 34
Internal pricng modelEquity-FX correlation (70.0)%-85.0% (33.0)%
Deposits by banks Price/Yield 6.8%-8.3% 7.5%
– 22
Discounted cash flowsCustomer accounts Interest rate curves 0.9%-5.6% 4.9%
– 365
Discounted cash flowsPrice/yield 8.9%-12.1% 10.1%
Debt securites in issue Credit spreads 0.9%-2.2% 1.0%
– 781
Discounted cash flowsInterest rate curves 0.9%-5.6%
4.9%
Internal pricng model Equity correlation 8.0%-96.0%
70.0%
Equity-FX correlation (70.0)%-85.0%
(33.0)%
Total 2,883 1,264
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 financal instruments as at 31
December 2021. The ranges of values used are reflective of the underlying characteristcs of these Level 3 financal instruments based on the market conditons at the
balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 financal instruments
2 Weighted average for non-derivatve financal instruments has been calculated by weightng inputs by the relative fair value. Weighted average for derivatves has
been provided by weightng inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indcator
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
230
Notes to the financal statements continued
12. Financal instruments continued
Instrument
Value as at 31 December 2020
Princpal valuation technique
Signficant
unobservableinputs Range
1
Weighted
average
2
Assets
$millon
Liablites
$millon
Loans and advances
tobanks
200 – Discounted cash flows Price/yield 12.7%-12.9% 12.8%
Loans and advances
tocustomers
464 – Discounted cash flows Price/yield 0.9%-11.5% 5.0%
Recovery rates 34.2%-100% 74.7%
Reverse repurchase
agreements and other
simlar secured lending
1,064 – Discounted cash flows Repo curve 1.0%-3.2% 2.8%
Debt securites,
alternativetier one and
other eligble securites
132 – Discounted cash flows Price/yield 4.7%-11.5% 10.8%
Government bonds
andtreasury bills
40 – Discounted cash flows Price/yield 2.8%-5.5% 3.6%
Asset-backed securites 63 – Discounted cash flows Price/yield 8.3%-12.0% 11.7%
Equity shares (includes
private equity investments)
379 – Comparable
pricng/yield
EV/EBITDA multiples 3.3x 3.3x
P/E multiples N/A N/A
P/B multiples 0.5x-0.8x 62.0%
P/S multiples N/A N/A
Liqudity discount 20.0% 20.0%
Discounted cash flows Discount rates 8.4%-16.2% 9.5%
Option pricng model Equity value based on
EV/Revenue multiples
13.5x-130.9x 114.9x
Derivatve financal
instruments of which:
Foreign exchange 4 4 Option pricng model Foreign exchange
option impled
volatilty
N/A N/A
Discounted cash flows Foreign exchange
curves
2.7%-5.6% 4.1%
Interest rate 2 26 Discounted cash flows Interest rate curves (5.2)%-18.6% 9.6%
Option pricng model Bond option impled
volatilty
20.0%-30.0% 24.2%
Credit 2 82 Discounted cash flows Credit spreads 1.0%-2.0% 2.0%
Price/yield 0.9%-12.0% 11.5%
Equity and stock index 1 5 Internal pricng model Equity correlation 20.0%-90.0% 49.0%
Equity-FX correlation (70.0)%-80.0% (59.0)%
Customer accounts – (3) Discounted cash flows Credit spreads N/A N/A
Interest rate curves (0.4)%-7.7% 3.9%
Recovery rates N/A N/A
Debt securites in issue – 124 Discounted cash flows Credit spreads 0.11%-2.0% 1.2%
Internal pricng model Equity correlation 20.0%-90.0% 49.0%
Equity-FX correlation (70.0)%-80.0% (59.0)%
Total 2,351 238
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 financal instruments as at 31
December 2020. The ranges of values used are reflective of the underlying characteristcs of these Level 3 financal instruments based on the market conditons at the
balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 financal instruments
2 Weighted average for non-derivatve financal instruments has been calculated by weightng inputs by the relative fair value. Weighted average for derivatves has
been provided by weightng inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indcator
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
231
Notes to the financal statements continued
12. Financal instruments continued
Company
Instrument
Value as at 31 December 2021
Princpal valuation technique
Signficant
unobservableinputs Range
1
Weighted
average
2
Assets
$millon
Liablites
$millon
Loans and advances
tobanks
9 –
Discounted cash flows Recovery rates 87.3%-100% 93.6%
Loans and advances
tocustomers
82 –
Discounted cash flows Price/yield 2.0%-3.9% 2.3%
Recovery rates 29.7%-100% 83.4%
Reverse repurchase
agreements and other
simlar secured lending
1,555 –
Discounted cash flows Repo curve 0.3%-3.0% 2.4%
Debt securites,
alternativetier one and
other eligble securites
464 –
Discounted cash flows Price/yield 6.6%-12.4% 7.1%
Recovery rates 0.01%-0.03% 0.02%
Government bonds
andtreasury bills
25 –
Discounted cash flows Price/yield 2.70%-4.36% 3.5%
Asset-backed securites N/A N/A N/A
– –
N/AEquity shares (includes
private equity investments)
208 –
Comparable
pricng/yield
EV/EBITDA multiples N/A N/A
EV/Revenue multiples 10.1x-10.1x 10.1x
P/E multiples 12.6x-25.3x 13.2x
P/B multiples 0.6x-1.0x 0.6x
P/S multiples 1.8x-2.6x 1.8x
Liqudity discount 20.0% 20.0%
Discounted cash flows Discount rates 6.0%-17.4% 6.9%
Option pricng model Equity value based on
EV/Revenue multiples
4.0x-85.5x 12.1x
Equity value based
onvolatilty
55.0%-65.0% 60.3%
Derivatve financal
instruments of which:
Foreign exchange Foreign exchange
14 16
Option pricng modelOption impled
volatilty
3.1%-6.1% 5.1%
Discounted cash flows Foreign exchange
curves
(16.4)%-57.3% 9.5%
Interest rate Interest rate curves (16.4)%-18.8% 5.2%
50 15
Discounted cash flowsOption pricng model Bond option impled
volatilty
15.0%-21.0% 19.4%
Credit Credit spreads 0.1%-3.4% 1.1%
2 41
Discounted cash flowsPrice/yield 5.9%-7.3% 6.6%
Equity and stock index Equity correlation 8.0%-96.0% 70.0%
3 33
Internal pricng modelEquity-FX correlation (70.0)%-85.0% (33.0)%
Deposits by banks Price/yield 6.8%-8.3% 7.5%
– 22
Discounted cash flows Customer accounts Interest rate curves 0.9%-5.6% 4.9%
– 292
Discounted cash flows Price/yield 8.9%-10.8% 9.8%
Debt securites in issue Credit spreads 0.9%-2.2% 1.0%
– 614
Discounted cash flows Interest rate curves 0.9%-5.6%
4.9%
Internal pricng model Equity correlation N/A
N/A
Equity-FX correlation N/A
N/A
Total 2,412 1,033
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 financal instruments as at 31
December 2021. The ranges of values used are reflective of the underlying characteristcs of these Level 3 financal instruments based on the market conditons at the
balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 financal instruments
2 Weighted average for non-derivatve financal instruments has been calculated by weightng inputs by the relative fair value. Weighted average for derivatves has
been provided by weightng inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indcator
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
232
Notes to the financal statements continued
12. Financal instruments continued
Instrument
Value as at 31 December 2020
Princpal valuation technique
Signficant
unobservable inputs Range
¹
Weighted
average
2
Assets
$millon
Liablites
$millon
Loans and advances
tobanks
200 – Discounted cash flows Price/yield 12.7%-12.9% 12.8%
Loans and advances
tocustomers
275 – Discounted cash flows Price/yield 0.9%-11.5% 6.3%
Recovery rates 34.2%-100% 69.6%
Reverse repurchase
agreements and other
simlar secured lending
1,064 – Discounted cash flows Repo curve 1.0%-3.2% 2.8%
Debt securites,
alternativetier one and
other eligble securites
72 – Discounted cash flows Price/yield 4.7%-11.5% 10.7%
Government bonds
andtreasury bills
28 – Discounted cash flows Price/yield 2.8%-5.5% 3.4%
Asset-backed securites 63 – Discounted cash flows Price/yield 8.3%-12.0% 11.7%
Recovery rates NA NA
Equity shares (includes
private equity investments)
172 – Comparable
pricng/yield
EV/EBITDA multiples 3.3x 3.3x
P/E multiples N/A N/A
P/B multiples 0.5x-0.8x 0.6x
P/S multiples N/A N/A
Liqudity discount 20.0% 20.0%
Discounted cash flows Discount rates N/A N/A
Option pricng model Equity value based
on EV/Revenue
multiples
13.5x-130.9x 114.9x
Derivatve financal
instruments of which:
Foreign exchange 6 15 Option pricng model Foreign exchange
option impled
volatilty
N/A N/A
Discounted cash flows Foreign exchange
curves
2.7%-5.6% 4.1%
Interest rate 2 26 Discounted cash flows Interest rate curves (5.2)%-18.6% 9.7%
Option pricng model Bond option impled
volatilty
20.0%-30.0% 24.2%
Credit 2 44 Discounted cash flows Credit spreads 1.0%-2.0% 1.0%
Price/yield 2.0%-12.0% 12.0%
Equity and stock index 1 5 Internal pricng model Equity correlation 20.0%-90.0% 49.0%
Equity-FX correlation (70.0)%-80.0%
(59.0)%
Customer accounts – (3) Discounted cash flows Credit spreads NA
NA
Interest rate curves (0.4)%-7.7%
3.9%
Recovery rates N/A
N/A
Debt securites in issue – 124 Discounted cash flows Credit spreads 0.11%-2.0%
1.2%
Internal pricng model Equity correlation 20.0%-90.0%
49.0%
Equity-FX correlation (70.0)%-80.0%
(59.0)%
Total 1,885 211
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 financal instruments as at 31
December 2020. The ranges of values used are reflective of the underlying characteristcs of these Level 3 financal instruments based on the market conditons at the
balance sheet date. However, these ranges of values may not represent the uncertainty in fair value measurements of the Group’s Level 3 financal instruments
2 Weighted average for non-derivatve financal instruments has been calculated by weightng inputs by the relative fair value. Weighted average for derivatves has
been provided by weightng inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indcator
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
233
Notes to the financal statements continued
12. Financal instruments continued
The following section describes the signficant unobservable inputs identfied 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 impled yield (or
spread over a liqud benchmark) from the price of a comparable instrument, then adjustng that yield (or spread) to derive
a value for the instrument. The adjustment should account for relevant differences in the financal 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, derivng a fair value for a
junor unsecured bond from the price of a senior secured bond). An increase in price, in isolaton, would result in a favourable
movement in the fair value of the asset. An increase in yield, in isolaton, 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 additonal yield that a market particpant would demand for taking 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, Depreciaton and Amortisaton
(EBITDA). EV is the aggregate market capitalsation and debt minus the cash and cash equivalents. An increase in EV/
EBITDA multiples, 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
inafavourable 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
aspecifedperiod
•
Net asset value (NAV)
is the value of an entity's assets after deducting any liablites
•
Interest rate curves
is the term structure of interest rates and measure of future interest rates at a particular point in time
•
Liqudity discounts in the valuation of unlisted investments
primarly applied to the valuation of unlisted firms’ investments
to reflect the fact that these stocks are not actively traded. An increase in liqudity discount will result an unfavourable
movement in the fair value of the unlisted firm
•
Price-Earnings (P/E) multiples
is the ratio of the market value of 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
are the expectation of the rate of return resulting from the liqudation of a particular loan. As the probabilty
of default increases for a given instrument, the valuation of that instrument will increasngly reflect its expected recovery
level assuming default. An increase in the recovery rate, in isolaton, 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.
•
Volatilty
represents an estimate of how much a particular instrument, parameter or index will change in value over time.
Generally, the higher the volatilty, the more expensive the option will be
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
234
Notes to the financal statements continued
12. Financal instruments continued
Level 3 movement tables – financal assets
The table below analyses movements in Level 3 financal assets carried at fair value.
Group
Assets
Held at fair value through profit or loss
Derivatve
financal
instruments
$millon
Investment securites
Total
$millon
Loans and
advances to
banks
$millon
Loans and
advances to
customers
$millon
Reverse
repurchase
agreements
and other
simlar
secured
lending
$millon
Debt
securites,
alternative
tier one and
other
eligble bills
$millon
Equity
shares
$millon
Debt
securites,
alternative
tier one and
other
eligble bills
$millon
Equity
shares
$millon
At 1 January 2021
200 464 1,064 195 124 9 40 255 2,351
Total gains/(losses)
recognised in income
statement
1 (80) 2 (32) (4) 9 – – (104)
Net trading income
1 (80) 2 (31) (4) 9 – – (103)
Other operating income
– – – (1) – – – – (1)
Total gains recognised
inother comprehensive
income (OCI)
– – – – – – 3 60 63
Fair value through
OCIreserve
– – – – – – 4 61 65
Exchange difference
– – – – – – (1) (1) (2)
Purchases
9 339 4,962 387 10 92 – 94 5,893
Sales
– (301) (4,392) (202) (16) (31) – (9) (4,951)
Settlements
(201) (161) (81) (60) – (5) (13) – (521)
Transfers out
1
– (41) – – (16) (11) – (8) (76)
Transfers in
2
– 190 – 24 – 4 10 – 228
At 31 December 2021 9 410 1,555 312 98 67 40 392 2,883
Total unrealised gains/
(losses) recognised in the
income statement, withn
net trading income,
relating tochange in fair
value ofassets held at
31December 2021
– – – – 12 (2) – – 10
1 Transfers out includes equity shares, derivatve financal instruments and loans and advances where the valuation parameters became observable during the year and
were transferred to Level 1 and Level 2.
2 Transfers in primarly relate to debt securites, alternative tier one and other eligble bills, derivatve financal instruments and loans and advances where the valuation
parameters become unobservable during the year
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
235
Notes to the financal statements continued
12. Financal instruments continued
The table below analyses movements in Level 3 financal assets carried at fair value.
Assets
Held at fair value through profit or loss
Derivatve
financal
instruments
$millon
Investment securites
Total
$millon
Loans and
advances to
banks
$millon
Loans and
advances to
customers
$millon
Reverse
repurchase
agreements
and other
simlar
secured
lending
$millon
Debt
securites,
alternative
tier one and
other eligble
bills
$millon
Equity
shares
$millon
Debt
securites,
alternative
tier one and
other eligble
bills
$millon
Equity
shares
$millon
At 1 January 2020 365 156 – 170 46 15 38 201 991
Total gains/(losses)
recognised in income
statement 16 (8) 1 (21) (48) (6) – – (66)
Net trading income 16 (8) 1 (19) (48) (6) – – (64)
Other operating income – – – (2) – – – – (2)
Total gains recognised
inother comprehensive
income (OCI) – – – – – – 6 28 34
Fair value through
OCIreserve – – – – – – 7 28 35
Exchange difference – – – – – – (1) – (1)
Purchases 321 465 1,165 43 7 117 36 33 2,187
Sales (164) (28) (102) (110) (16) (70) – (4) (494)
Settlements (416) (466) – (22) – (7) – – (911)
Transfers out
1
– (113) – (37) (1) (40) (40) (3) (234)
Transfers in
2
78 458 – 172 136 – – – 844
At 31 December 2020 200 464 1,064 195 124 9 40 255 2,351
Total unrealised (losses)/
gains recognised in the
income statement, withn
net trading income,
relating tochange in fair
value ofassets held at
31December 2020 – (2) – 4 – – – – 2
1 Transfers out includes debt securites, alternative tier one and other eligble bills, equity shares, derivatve financal instruments and loans and advances where the
valuation parameters became observable during the year and were transferred to Level 1 and Level 2. Transfers in of $62 millon further relates to equity shares moved
from held for sale
2 Transfers in primarly relate to debt securites, alternative tier one and other eligble bills, equity shares and loans and advances where the valuation parameters
become unobservable during the year
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
236
Notes to the financal statements continued
12. Financal instruments continued
Level 3 movement tables – financal assets
The table below analyses movements in Level 3 financal assets carried at fair value.
Company
Assets
Held at fair value through profit or loss
Derivatve
financal
instruments
$millon
Investment securites
Total
$millon
Loans and
advances to
banks
$millon
Loans and
advances to
customers
$millon
Reverse
repurchase
agreements
and other
simlar
secured
lending
$millon
Debt
securites,
alternative
tier one and
other
eligble bills
$millon
Equity
shares
$millon
Debt
securites,
alternative
tier one and
other
eligble bills
$millon
Equity
shares
$millon
At 1 January 2021
200 275 1,064 135 – 11 28 172 1,885
Total gains/(losses)
recognised in income
statement
1 (36) 2 (18) – 9 – – (42)
Net trading income
1 (36) 2 (17) – 9 – – (41)
Other operating income
– – – (1) – – – – (1)
Total gains recognised
inother comprehensive
income (OCI)
– – – – – – – 26 26
Fair value through
OCIreserve
– – – – – – – 26 26
Exchange difference
– – – – – – – – –
Purchases
9 48 4,962 256 – 91 – 12 5,378
Sales
– (235) (4,392) (170) – (30) – (2) (4,829)
Settlements
(201) (140) (81) – – (5) (13) – (440)
Transfers out
1
– (20) – – – (11) – – (31)
Transfers in
2
– 190 – – – 4 271 – 465
At 31 December 2021 9 82 1,555 203 – 69 286 208 2,412
Total unrealised losses
recognised in the income
statement, withn net
trading income, relating to
change in fair value of
assets held at 31December
2021
– – – – – (3) – – (3)
1 Transfers out includes derivatve financal instruments and loans and advances where the valuation parameters became observable during the year and were
transferred to Level 1 and Level 2.
2 Transfers in primarly relate to debt securites, alternative tier one and other eligble bills, derivatve financal instruments and loans and advances where the valuation
parameters become unobservable during the year
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
237
Notes to the financal statements continued
12. Financal instruments continued
Assets
Held at fair value through profit or loss
Derivatve
financal
instruments
$millon
Investment securites
Total
$millon
Loans and
advances to
banks
$millon
Loans and
advances to
customers
$millon
Reverse
repurchase
agreements
and other
simlar
secured
lending
$millon
Debt
securites,
alternative
tier one and
other eligble
bills
$millon
Equity
shares
$millon
Debt
securites,
alternative
tier one and
other eligble
bills
$millon
Equity
shares
$millon
At 1 January 2020 365 121 – 99 – 17 591 170 1,363
Total gains/(losses)
recognised in income
statement 16 (6) 1 (24) – (6) – – (19)
Net trading income 16 (6) 1 (24) – (6) – – (19)
Other operating income – – – – – – – – –
Total losses recognised
inother comprehensive
income (OCI) – – – – – – – (6) (6)
Fair value through
OCIreserve – – – – – – – (6) (6)
Exchange difference – – – – – – – – –
Purchases 321 34 1,165 42 – 118 36 15 1,731
Sales (164) (4) (102) (57) – (70) (563) (4) (964)
Settlements (416) (5) – – – (7) – – (428)
Transfers out
1
– (108) – (37) – (41) (36) (3) (225)
Transfers in
2
78 243 – 112 – – – – 433
At 31 December 2020 200 275 1,064 135 – 11 28 172 1,885
Total unrealised gains
recognised in the income
statement, withn net
trading income, relating
tochange in fair value
ofassets held at
31December 2020 1 – – – – 3 – – 4
1 Transfers out includes debt securites, alternative tier one and other eligble bills, equity shares, derivatve financal instruments and loans and advances where the
valuation parameters became observable during the year and were transferred to Level 1 and Level 2
2 Transfers in primarly relate to loans and advances and debt securites, alternative tier one and other eligble bills where the valuation parameters become
unobservable during the year
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
238
12. Financal instruments continued
Level 3 movement tables – financal liablites
Group
2021
Deposits
bybanks
$millon
Customer
accounts
$millon
Debt
securites
inissue
$millon
Derivatve
financal
instruments
$millon
Total
$millon
At 1 January 2021
– (3) 124 117 238
Total gains recognised in income statement – net trading income
– (2) (12) (8) (22)
Issues
22 492 1,508 151 2,173
Settlements
– (122) (882) (177) (1,181)
Transfers out
1
– – (49) (6) (55)
Transfers in
2
– – 92 19 111
At 31 December 2021 22 365 781 96 1,264
Total unrealised (gains)/losses recognised in the income statement,
withn net trading income, relating to change in fair value of
liablites held at 31 December 2021
– – – – –
2020
Deposits
bybanks
$millon
Customer
accounts
$millon
Debt
securites
inissue
$millon
Derivatve
financal
instruments
$millon
Total
$millon
At 1 January 2020 – 40 358 45 443
Total (gains)/losses recognised in income statement – net trading
income – (1) (11) 12 –
Issues – 11 505 197 713
Settlements – (61) (505) (104) (670)
Transfers out
1
– – (223) (53) (276)
Transfers in
2
– 8 – 20 28
At 31 December 2020 – (3) 124 117 238
Total unrealised losses recognised in the income statement, withn
net trading income, relating to change in fair value of liablites held
at 31 December 2020 – 1 – 1 2
1 Transfers out during the year primarly relates to debt securites in issue and derivatve financal instruments where the valuation parameters became observable
during the year and were transferred to Level 2 financal liablites
2 Transfers in during the year primarly relates to debt securites in issue and derivatve financal instruments where the valuation parameters became unobservable
during the year
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
239
12. Financal instruments continued
Company
2021
Deposits
bybanks
$millon
Customer
accounts
$millon
Debt
securites
inissue
$millon
Derivatve
financal
instruments
$millon
Total
$millon
At 1 January 2021
– (3) 124 90 211
Total gains recognised in income statement – net trading income
–
(1)
(8) (7) (16)
Issues
22 309 1,135 147 1,613
Settlements
–
(13)
(680) (138) (831)
Transfers out
1
– – (49) (5) (54)
Transfers in
2
– – 92 18 110
At 31 December 2021 22 292 614 105 1,033
Total unrealised (gains)/losses recognised in the income statement,
withn net trading income, relating to change in fair value of
liablites held at 31 December 2021
– – – – –
2020
Deposits
bybanks
$millon
Customer
accounts
$millon
Debt
securites
inissue
$millon
Derivatve
financal
instruments
$millon
Total
$millon
At 1 January 2020 – – 358 46 404
Total (gains)/losses recognised in income statement – net trading
income – – (11) 8 (3)
Issues – (3) 426 161 584
Settlements – – (427) (92) (519)
Transfers out
1
– – (223) (53) (276)
Transfers in
2
– – 1 20 21
At 31 December 2020 – (3) 124 90 211
Total unrealised (gains)/losses recognised in the income statement,
withn net trading income, relating to change in fair value of
liablites held at 31 December 2020 – – – – –
1 Transfers out during the year primarly relates to debt securites in issue and derivatve financal instruments where the valuation parameters became observable
during the year and were transferred to Level 2 financal liablites
2 Transfers in during the year primarly relates to debt securites in issue and derivatve financal instruments where the valuation parameters become unobservable
during the year
Sensitvites in respect of the fair values of Level 3 assets and liablites
Sensitvity analysis is performed on products with signficant 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 statistcal analysis performed on a set of reference prices based on the compositon 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 sensitvity analysis assumes a one-way market move and does not
consider offsets for hedges.
Notes to the financal statements continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
240
12. Financal instruments continued
Group
Held at fair value through profit or loss
Fair value through other comprehensive
income
Net
exposure
$millon
Favourable
changes
$millon
Unfavourable
changes
$millon
Net
exposure
$millon
Favourable
changes
$millon
Unfavourable
changes
$millon
Financal instruments held at fair value
Loans and advances
419 435 399 – – –
Reverse Repurchase agreements and other simlar
securedlending
1,555 1,568 1,538 – – –
Asset-backed securites
– – – – – –
Debt securites, alternative tier one and other eligble bills
312 325 299 40 41 38
Equity shares
98 107 88 392 430 351
Derivatve financal instruments
(29) (13) (45) – – –
Customer accounts
(365) (358) (372) – – –
Deposits by banks
(22) (17) (26) – – –
Debt securites in issue
(781) (723) (838) – – –
At 31 December 2021 1,187 1,324 1,043 432 471 389
Financal instruments held at fair value
Loans and advances 664 689 618 – – –
Reverse Repurchase agreements and other simlar
securedlending 1,064 1,089 1,040 – – –
Asset-backed securites 63 68 59 – – –
Debt securites, alternative tier one and other eligble bills 132 140 123 40 40 39
Equity shares 124 137 112 255 280 231
Derivatve financal instruments (108) (97) (120) – – –
Customer accounts 3 5 1 – – –
Deposits by banks – – – – – –
Debt securites in issue (124) (118) (131) – – –
At 31 December 2020
1,818 1,913 1,702 295 320 270
The reasonably possible alternatives could have increased or decreased the fair values of financal instruments held at
fairvalue through profit or loss and those classifed as fair value through other comprehensive income by the amounts
disclosed below.
Financal instruments Fair value changes
2021
$millon
2020
$millon
Held at fair value through profit or loss Possible increase
137
95Possible decrease
(144)
(116)Fair value through other comprehensive income Possible increase
39
25Possible decrease
(43)
(25)Standard Chartered Bank
Directors’ Report and Financal Statements 2021
241
12. Financal instruments continued
Company
Held at fair value through profit or loss
Fair value through other comprehensive
income
Net
exposure
$millon
Favourable
changes
$millon
Unfavourable
changes
$millon
Net
exposure
$millon
Favourable
changes
$millon
Unfavourable
changes
$millon
Financal instruments held at fair value
Loans and advances
91 94 86 – – –
Reverse Repurchase agreements and other simlar
securedlending
1,555 1,568 1,539 – – –
Asset-backed securites
– – – – – –
Debt securites, alternative tier one and other eligble bills
203 211 196 286 312 260
Equity shares
– – – 208 227 189
Derivatve financal instruments
(36) (15) (57) – – –
Customer accounts
(292) (290) (294) – – –
Deposits by banks
(22) (17) (26) – – –
Debt securites in issue
(614) (556) (672) – – –
At 31 December 2021 885 995 772 494 539 449
Financal instruments held at fair value
Loans and advances 475 500 437 – – –
Reverse Repurchase agreements and other simlar
securedlending 1,064 1,089 1,040 – – –
Asset-backed securites 63 68 59 – – –
Debt securites, alternative tier one and other eligble bills 72 74 69 28 28 28
Equity shares – – – 172 188 156
Derivatve financal instruments (79) (67) (91) – – –
Customer accounts 3 5 1 – – –
Deposits by banks – – – – – –
Debt securites in issue (124) (118) (131) – – –
At 31 December 2020
1,474 1,551 1,384 200 216 184
The reasonably possible alternatives could have increased or decreased the fair values of financal instruments held at
fairvalue through profit or loss and those classifed as fair value through other comprehensive income by the amounts
disclosed below.
Financal instruments Fair value changes
2021
$millon
2020
$millon
Held at fair value through profit or loss Possible increase
110
77Possible decrease
(113)
(90)Fair value through other comprehensive income Possible increase
45
16Possible decrease
(45)
(16)Notes to the financal statements continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
242
Notes to the financal statements continued
13. Derivatve financal instruments
Accounting policy
Derivatves are financal instruments that derive their value in response to changes in interest rates, financal instrument
prices, commodity prices, foreign exchange rates, credit risk and indces. Derivatves are categorised as trading unless they
are designated as hedging instruments.
Derivatves are intially recognised and subsequently measured at fair value, with revaluation gains recognised in profit or loss
(except where cash flow or net investment hedging has been achieved, in which case the effective portion of changes in fair
value is recognised withn other comprehensive income).
Fair values may be obtained from quoted market prices in active markets, recent market transactions, and valuation
techniques, includng discounted cash flow models and option pricng models, as appropriate. Where the intially recognised
fair value of a derivatve contract is based on a valuation model that uses inputs which are not observable in the market, it
follows the same intial recogniton accounting policy as for other financal assets and liablites. All derivatves are carried as
assets when fair value is positve and as liablites when fair value is negative.
Hedge accounting
Under certain conditons, the Group may designate a recognised asset or liablity, a firm commitment, highly probable
forecast transaction or net investment of a foreign operation into a formal hedge accounting relationshp with a derivatve
that has been entered to manage interest rate and/or foreign exchange risks present in the hedged item. The Group applies
the ‘Phase 1’ hedge accounting requirements of IAS 39 Financal Instruments: Recogniton and Measurement, and the ‘Phase
2’ amendments to IFRS in respect of interest rate benchmark reform. There are three categories of hedge relationshps:
•
Fair value hedge: to manage the fair value of interest rate and/or foreign currency risks of recognised assets or liablites 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 liablity, or a forecasted transaction
•
Net investment hedge: to manage the structural foreign exchange risk of an investment in a foreign operation
The Group formally documents at the incepton of the transaction the relationshp between hedging instruments and
hedged items, as well as its risk management objectve and strategy for undertaking hedge transactions. This is described
inmore detail in the categories of hedges below.
The Group assesses, both at hedge incepton and on a quarterly basis, whether the derivatves designated in hedge
relationshps are highly effective in offsetting changes in fair values or cash flows of hedged items. Hedges are considered
tobe highly effective if all the following critera are met:
•
At incepton of the hedge and throughout its life, the hedge is prospectively expected to be highly effective in achievng
offsetting changes in fair value or cash flows attributable to the hedged risk
•
Actual results of the hedge are withn a range of 80–125%. This is tested using regression analysis
•
The regression co-efficent (R squared), which measures the correlation between the variables in the regression,
isatleast80%
•
In the case of the hedge of a forecast transaction, the transaction must have a high probabilty of occurring and must
present an exposure to variatons in cash flows that are expected to affect reported profit or loss. The Group assumes that
any interest rate benchmarks on which hedged item cash flows are based are not altered by IBOR reform
The Group discontnues hedge accounting in any of the following circumstances:
•
The hedging instrument is not, or has ceased to be, highly effective as a hedge
•
The hedging instrument has expired, is sold, terminated or exercised
•
The hedged item matures, is sold or repaid
•
The forecast transaction is no longer deemed highly probable
•
The Group elects to discontnue hedge accounting voluntarily
For interest rate benchmarks deemed in scope of IBOR reform, if the actual result of a hedge is outside the 80-125% range, but
the hedge passes the prospective assessment, then the Group will not de-designate the hedge relationshp.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
243
Notes to the financal statements continued
13. Derivatve financal instruments continued
Under the Phase 2 Interest Rate Benchmark Reform amendments to IFRS 9 and IAS 39, the Group may change hedge
designatons and corresponding documentation without the hedge being discontnued where there is a change in interest
rate benchmark of the hedged item, hedging instrument or designated hedged risk. Permitted changes include the right to:
•
Redefine the descripton of the hedged item and/or hedging instrument
•
Redefine the hedged risk to reference an alternative risk-free rate
•
Change the method for assessing hedge effectiveness due to modifcations required by IBOR reform
•
Elect, on a hedge-by-hedge basis, to reset the cumulative fair value changes in the assessment of retrospective hedge
effectiveness to zero
A hedge designaton may be modifed more than once, each time a relationshp is affected as a direct result of IBOR reform.
Fair value hedge
Changes in the fair value of derivatves that are designated 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 liablity that are attributable to the
hedged risk. If the hedge no longer meets the critera for hedge accounting, 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 remainng term
tomaturity of the hedged item. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised
immedately in the income statement. For financal assets classifed as fair value through other comprehensive income, the
hedge accounting adjustment attributable to the hedged risk is included in net trading income to match the hedging
derivatve.
Cash flow hedge
The effective portion of changes in the fair value of derivatves that are designated and qualify as cash flow hedging
instruments are intially recognised in other comprehensive income, accumulating in the cash flow hedge reserve withn
equity. These amounts are subsequently recycled to the income statement in the periods when the hedged item affects
profit or loss. Both the derivatve fair 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 derivatve method, which creates a derivatve instrument to
serve as a proxy for the hedged transaction. The terms of the hypothetical derivatve match the critcal terms of the hedged
item and it has a fair value of zero at incepton. The hypothetical derivatve and the actual derivatve are regressed to
establish the statistcal signficance of the hedge relationshp. Any ineffectve portion of the gain or loss on the hedging
instrument is recognised in the net trading income immedately.
If a cash flow hedge is discontnued, 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.
For interest rate benchmarks deemed in scope of IBOR reform, the Group will retain the cumulative gain or loss in the cash
flow hedge reserve for designated cash flow hedges even though there is uncertainty arisng from these reforms with respect
to the timng and amount of the cash flows of the hedged items. Should the Group consider the hedged future cash flows are
no longer expected to occur due to reasons other than IBOR reform, the cumulative gain or loss will be immedately
reclassifed to profit or loss.
Net investment hedge
Hedges of net investments are accounted for in a simlar manner to cash flow hedges, with gains and losses arisng 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 withn equity. These amounts remain in equity until the net
investment is disposed of. The ineffectve portion of the hedges is recognised in the net trading income immedately.
The tables below analyse the notional princpal amounts and the positve and negative fair values of derivatve financal
instruments. Notional princpal amounts are the amounts of princpal underlying the contract at the reporting date.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
244
Notes to the financal statements continued
13. Derivatve financal instruments continued
Derivatves
Group
Derivatves
2021
2020
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Foreign exchange derivatve contracts:
Forward foreign exchange contracts 34,813 35,905
3,353,471 32,966 32,597
3,009,523Currency swaps and options 17,118 17,649
1,333,095 10,338 10,695
1,422,4404,686,566 43,304 43,292
4,431,963 51,931 53,554
Interest rate derivatve contracts:
Swaps 54,943 52,988
3,294,078 30,294 29,849
3,226,968Forward rate agreements and options 1,590 1,858
125,200 1,313 1,852
609,074Exchange traded futures and options 233 184
294,712 156 132
260,8343,713,990 31,763 31,833
4,096,876 56,766 55,030
Credit derivatve contracts 1,686 2,014
182,161 2,244 2,404
140,189Equity and stock index options 56 156
7,124 93 153
4,360Commodity derivatve contracts 1,298 826
109,543 1,724 1,787
68,802Gross total derivatves 111,737 111,580
8,699,384 79,128 79,469
8,742,190Offset (42,512) (42,512)
– (25,883) (25,883)
–Total derivatves 8,699,384 53,245 53,586
8,742,190 69,225 69,068
Company
Derivatves
2021
2020
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Foreign exchange derivatve contracts:
Forward foreign exchange contracts 35,991 36,423
3,887,220 30,604 30,387
3,064,437Currency swaps and options 16,393 17,041
1,362,078 10,967 11,424
1,386,4805,249,298 41,571 41,811
4,450,917 52,384 53,464
Interest rate derivatve contracts:
Swaps 54,355 52,719
3,597,413 31,993 31,543
3,204,279Forward rate agreements and options 1,567 1,837
127,709 1,500 1,924
606,794Exchange traded futures and options 233 184
294,712 156 132
260,8344,019,834 33,649 33,599
4,071,907 56,155 54,740
Credit derivatve contracts 1,674 1,861
185,189 2,246 2,369
138,339Equity and stock index options 36 103
5,342 50 71
3,523Commodity derivatve contracts 1,173 767
113,855 1,845 1,868
66,854Gross total derivatves 111,422 110,935
9,573,518 79,361 79,718
8,731,540Offset (42,512) (42,512)
– (25,883) (25,883)
–Total derivatves 9,573,518 53,478 53,835
8,731,540 68,910 68,423
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
245
Notes to the financal statements continued
13. Derivatve financal instruments continued
The Group limts exposure to credit 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 enforceabilty of the
right to offset (e.g. via legal opinon) and the abilty and intenton to settle on a net basis (e.g. via operational practice).
The Group has in prior years applied fair value hedge accounting to a debt instrument which changed its interest rate from
afixed to a floating rate. As a result of this the fair value adjustment to the interest rate component of the hedged item was
calculated in error. This resulted in an understatement of P&L and overstatement of the liablity of $81m up to the end of 2020.
Thishave been corrected in retained earnings.
The Group may enter into economic hedges that do not qualify for IAS 39 hedge accounting treatment, includng derivatve
such as interest rate swaps, interest rate futures and cross currency swaps to manage interest rate and currency risks of the
Group. These derivatves are measured at fair value, with fair value changes recognised in net trading income: refer to Market
risk (page 108).
The Derivatves and Hedging sections of the Risk review and Capital review (page 118 - 119) explain the Group’s risk
management of derivatve contracts and applicaton of hedging.
Derivatves held for hedging
The Group enters into derivatve contracts for the purpose of hedging interest rate, currency and structural foreign exchange
risks inherent in assets, liablites and forecast transactions. The table below summarises the notional princpal amounts and
carrying values of derivatves designated in hedge accounting relationshps at the reporting date.
Group
2021
2020
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Derivatves designated as fair value hedges:
Interest rate swaps 727 411
53,621 623 181
43,822Currency swaps 8 9
202 6 12
15153,823 629 193
43,973 735 420
Derivatves designated as cash flow hedges:
Interest rate swaps 12 21
2,651 5 10
1,441Forward foreign exchange contracts 21 –
72 2 –
164Currency swaps – 12
226 – 12
2782,949 7 22
1,883 33 33
Derivatves designated as net investment hedges:
Forward foreign exchange contracts – 31
2,611 – 27
685Total derivatves held for hedging 59,383 636 242
46,541 768 484
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
246
Notes to the financal statements continued
13. Derivatve financal instruments continued
Company
2021
2020
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Notional
princpal
amounts
$millon
Assets
$millon
Liablites
$millon
Derivatves designated as fair value hedges:
Interest rate swaps 727 350
52,444 618 174
41,833Currency swaps 8 9
202 6 12
15152,646 624 186
41,984 735 359
Derivatves designated as cash flow hedges:
Interest rate swaps – 21
2,651 5 10
541Forward foreign exchange contracts 21 –
72 2 –
164Currency swaps – 12
69 – 2
2782,792 7 12
983 21 33
Derivatves designated as net investment hedges:
Forward foreign exchange contracts – 31
1,871 – 16
685Total derivatves held for hedging 756 423
57,309 631 214
43,652Fair value hedges
The Group issues various long-term fixed rate debt issuances that are measured at amortised cost, includng 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 securites such as government and corporate bonds, includng some denominated in foreign
currency (see Note 13). These assets and liablites 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 ineffectveness from fair value hedges is driven by cross currency basis risk. The amortisaton of fair value hedge
adjustments for hedged items no longer designated is recognised in net trading income. In future periods hedge relationshps
linked to an interest rate benchmark deemed in scope of benchmark reform may experience ineffectveness due to market
particpants’ expectations for when the change from the existng IBOR benchmark to an alternative risk-free rate will occur,
since the transiton may occur at different times for the hedged item and hedging instrument.
At 31 December 2021 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 ineffectveness
Group
Interest rate
1
2021
Notional
$millon
Carrying amount Change in fair
value used to
calculate hedge
ineffectveness
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Asset
$millon
Liablity
$millon
Interest rate swaps – issued notes
18,694 322 106 (384) (3)
Interest rate swaps – loans and advances
855 4 3 7 –
Interest rate swaps – debt securites and other eligble bills
34,072 297 72 547 (1)
Interest and currency risk
1
Cross currency swaps – subordinated notes issued
48 – 11 (2) 1
Cross currency swaps – debt securites and other eligble bills
154 6 1 1 –
Total at 31 December 2021 53,823 629 193 169 (3)
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 derivatves, with changes in fair value includng hedge ineffectveness recorded withn net trading income
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
247
Notes to the financal statements continued
13. Derivatve financal instruments continued
Interest rate
1
2020
Notional
$millon
Carrying amount Change in fair
value used to
calculate hedge
ineffectveness
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Asset
$millon
Liablity
$millon
Interest rate swaps – issued notes 15,256 707 14 232 1
Interest rate swaps – loans and advances 613 – 12 (6) –
Interest rate swaps – debt securites and other eligble bills 27,954 20 385 (715) 2
Interest and currency risk
1
Cross currency swaps – subordinated notes issued 48 – 9 5 2
Cross currency swaps – debt securites and other eligble bills 102 8 – (5) (1)
Total at 31 December 2020
43,973 735 420 (489) 4
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 derivatves, with changes in fair value includng hedge ineffectveness recorded withn net trading income
Hedged items in fair value hedges
2021
Carrying amount
Accumulated amount of
fair value hedge adjustments
included in the
carrying amount
Change in the
value used for
calculating
hedge
ineffectveness
$millon
Cumulative
balance of fair
value
adjustments
from
de-
designated
hedge
relationshps¹
$millon
Asset
$millon
Liablity
$millon
Asset
$millon
Liablity
$millon
Issued notes
– 18,850 – 134 384 53
Debt securites and other eligble bills
34,062 – (286) – (549) (7)
Loans and advances to customers
853 – (2) – (8) (1)
Total at 31 December 2021 34,915 18,850 (288) 134 (173) 45
2020
Carrying amount
Accumulated amount of
fair value hedge adjustments
included in the
carrying amount
Change in fair
value used for
calculating
hedge
ineffectveness
$millon
Cumulative
balance of fair
value
adjustments
from
de-
designated
hedge
relationshps¹
$millon
Asset
$millon
Liablity
$millon
Asset
$millon
Liablity
$millon
Issued notes – 15,051 – 585 (237) 3
Debt securites and other eligble bills 28,853 – 299 – 722 (74)
Loans and advances to customers 623 – 10 – 6 (1)
Total at 31 December 2020
29,476 15,051 309 585 491 (72)
1 This represents a credit/(debit) to the balance sheet value
Income statement impact of fair value hedges
2021
$millon
Income/
(expense)
2020
$millon
Income/
(expense)
Change in fair value of hedging instruments
169
(489)Change in fair value of hedged risks attributable to hedged items
(173)
491Net ineffectveness (loss)/gain to net trading income
(4)
2Amortisaton gain/(loss) to net interest income
55
(55)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
248
Notes to the financal statements continued
13. Derivatve financal instruments continued
Hedging instruments and ineffectveness
Company
Interest rate
1
2021
Notional
$millon
Carrying amount Change in fair
value used to
calculate hedge
ineffectveness
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Asset
$millon
Liablity
$millon
Interest rate swaps – issued notes
18,694 322 105 (384) (4)
Interest rate swaps – loans and advances
826 3 3 6 –
Interest rate swaps – debt securites and other eligble bills
32,924 293 66 534 (1)
Interest and currency risk¹
Cross currency swaps – subordinated notes issued
48 – 11 (2) 1
Cross currency swaps – debt securites and other eligble bills
154 6 1 1 –
Total at 31 December 2021 52,646 624 186 155 (4)
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 derivatves, with changes in fair value includng hedge ineffectveness recorded withn net trading income
Interest rate
1
2020
Notional
$millon
Carrying Amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Asset
$millon
Liablity
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Interest rate swaps – issued notes 15,257 707 14 232 1
Interest rate swaps – loans and advances 463 – 12 (6) –
Interest rate swaps – debt securites and other eligble bills 26,114 20 324 (675) 2
Interest and currency risk¹
Cross currency swaps – subordinated notes issued 48 – 9 5 –
Cross currency swaps – debt securites and other eligble bills 102 8 – (5) (1)
Total at 31 December 2020 41,984 735 359 (449) 2
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 derivatves, with changes in fair value includng hedge ineffectveness recorded withn net trading income
Hedged Items in fair value hedges
2021
Carrying amount
Accumulated amount of
fair value hedge adjustments
included in the
carrying amount Change in the
value used for
calculating
hedge
ineffectveness
$millon
Cumulative
balance of fair
value
adjustments
from de-
designated
hedge
relationshps¹
$millon
Asset
$millon
Liablity
$millon
Asset
$millon
Liablity
$millon
Issued notes
– 18,850 – 134 384 53
Debt securites and other eligble bills
32,907 – (287) – (535) –
Loans and advances to customers
825 – (1) – (8) (1)
Total at 31 December 2021 33,732 18,850 (288) 134 (159) 52
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
249
Notes to the financal statements continued
13. Derivatve financal instruments continued
2020
Carrying amount
Accumulated amount of
fair value hedge adjustments
included in the
carrying amount Change in fair
value used for
calculating
hedge
ineffectveness
$millon
Cumulative
balance of fair
value
adjustments
from de-
designated
hedge
relationshps¹
$millon
Asset
$millon
Liablity
$millon
Asset
$millon
Liablity
$millon
Issued notes – 15,051 – 585 (237) 3
Debt securites and other eligble bills 26,957 – 246 – 681 (65)
Loans and advances to customers 473 – 10 – 6 (1)
Total at 31 December 2020 27,430 15,051 256 585 450 (63)
1 This represents a credit/(debit) to the balance sheet value
Income statement impact of fair value hedges
2021
$millon
Income/
(expense)
2020
$millon
Income/
(expense)
Change in fair value of hedging instruments
155
(449)Change in fair value of hedged risks attributable to hedged items
(159)
450Net ineffectveness (loss)/gain to net trading income
(4)
1Amortisaton gain/(loss) to net interest income
49
(49)Cash flow hedges
The Group has exposure to market movements in future interest cash flows on portfolios of customer accounts, debt
securites and loans and advances to customers. The amounts and timng of future cash flows, representing both princpal
and interest flows, are projected on the basis of contractual terms and other relevant factors, includng estimates of
prepayments and defaults.
The hedging strategy of the Group involves using interest rate swaps to manage the variablity in future cash flows on assets
and liablites that have floating rates of interest by exchanging the floating rates for fixed rates. It also uses foreign exchange
contracts and currency swaps to manage the variablity in future exchange rates on its assets and liablites 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 relationshp with 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).
The hedged risk is determined as the variablity of future cash flows arisng from changes in the designated benchmark
interest rate.
Hedging instruments and ineffectveness
Group
2021
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Gain/(loss)
recognised in
OCI
$millon
Ineffectiveness
gain/(loss)
recognised in
net trading
income
$millon
Amount
reclassifed
from reserves to
income
$millon
Asset
$millon
Liablity
$millon
Interest rate risk
Interest rate swaps
2,651 5 10 14 14 – –
Currency risk
Forward foreign exchange
contract
72 2 – 2 2 – –
Cross currency swaps
226 – 12 (3) (3) – –
Total as at 31 December 2021 2,949 7 22 13 13 – –
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
250
Notes to the financal statements continued
13. Derivatve financal instruments continued
2020
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Gain/(loss)
recognised in
OCI
$millon
Ineffectiveness
gain/(loss)
recognised in
net trading
income
$millon
Amount
reclassifed from
reserves to
income
$millon
Asset
$millon
Liablity
$millon
Interest rate risk
Interest rate swaps 1,441 12 21 9 9 – –
Currency risk
Forward foreign exchange
contract 164 21 – 14 14 – –
Cross currency swaps 278 – 12 39 39 – –
Total as at 31 December 2020 1,883 33 33 62 62 – –
Hedged items in cash flow hedges
2021
Change in fair
value used for
calculating
hedge
ineffectveness
$millon
Cash flow
hedge reserve
$millon
Cumulative
balance in the
cash flow hedge
reserve from
de-designated
hedge
relationshps
$millon
Customer accounts
(13) (6) –
Debt securites and other eligble bills
2 (2) –
Loans and advances to customers
1 (1) –
Forecast cashflow currency hedge
– – –
Intragroup borrowing currency hedge
– – –
Total at 31 December 2021 (10) (9) –
2020
Change in fair
value used for
calculating
hedge
ineffectveness
$millon
Cash flow
hedge reserve
$millon
Cumulative
balance in the
cash flow hedge
reserve from
de-designated
hedge
relationshps
$millon
Customer accounts 19 (19) –
Debt securites and other eligble bills 1 – –
Loans and advances to customers (22) 9 2
Forecast cashflow currency hedge (14) 21 –
Intragroup lending currency hedge (46) 1 –
Total at 31 December 2020 (62) 12 2
Impact of cash flow hedges on profit and loss and other comprehensive income
2021
Income/
(expense)
$millon
2020
Income/
(expense)
$millon
Cash flow hedge reserve balance as at 1 January
5
(11)Losses recognised in other comprehensive income on effective portion of changes in fair value of hedging
instruments
(35)
(9)Gains reclassifed to income statement when hedged item affected net profit
14
9Taxation credit relating to cash flow hedges
4
16Cash flow hedge reserve balance as at 31 December
(12)
5
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
251
Notes to the financal statements continued
13. Derivatve financal instruments continued
Hedging instruments and ineffectveness
Company
2021
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Gain/(loss)
recognised in
OCI
$millon
Ineffectiveness
gain/(loss)
recognised in
net trading
income
$millon
Amount
reclassifed
from reserves to
income
$millon
Asset
$millon
Liablity
$millon
Interest rate risk
Interest rate swaps
2,651 5 10 14 14 – –
Currency risk
Forward foreign exchange
contract
72 2 – 2 2 – –
Cross currency swaps
69 – 2 – – – –
Total as at 31 December 2021 2,792 7 12 16 16 – –
2020
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Gain/(loss)
recognised in
OCI
$millon
Ineffectiveness
gain/(loss)
recognised in
net trading
income
$millon
Amount
reclassifed from
reserves to
income
$millon
Asset
$millon
Liablity
$millon
Interest rate risk
Interest rate swaps 541 – 21 (12) (12) – –
Currency risk
Forward foreign exchange
contract 164 21 – 14 14 – –
Cross currency swaps 278 – 12 40 40 – –
Total as at 31 December 2020 983 21 33 42 42 – –
Hedged items in cash flow hedges
2021
Change in fair
value used for
calculating
hedge
ineffectveness
$millon
Cash flow
hedge reserve
$millon
Cumulative
balance in the
cash flow hedge
reserve from
de-designated
hedge
relationshps
$millon
Customer accounts
(13) (6) –
Debt securites and other eligble bills
(2) 2 –
Loans and advances to customers
1 (1) –
Forecast cashflow currency hedge
– – –
Intragroup lending currency hedge
– – –
Total at 31 December 2021 (14) (5) –
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
252
Notes to the financal statements continued
13. Derivatve financal instruments continued
2020
Change in fair
value used for
calculating
hedge
ineffectveness
$millon
Cash flow
hedge reserve
$millon
Cumulative
balance in the
cash flow hedge
reserve from
de-designated
hedge
relationshps
$millon
Customer accounts 19 (19) –
Debt securites and other eligble bills – – –
Loans and advances to customers – – –
Forecast cashflow currency hedge (14) 21 –
Intragroup lending currency hedge (46) 1 –
Total at 31 December 2020
(41) 3 –
Impact of cash flow hedges on profit and loss and other comprehensive income
2021
Income/
(expense)
$millon
2020
Income/
(expense)
$millon
Cash flow hedge reserve balance as at 1 January
(32)
(27)(Loss) recognised in other comprehensive income on effective portion of changes in fair value of hedging
instruments
(8)
(23)Gains reclassifed to income statement when hedged item affected net profit
–
1Taxation credit relating to cash flow hedges
1
17Cash flow hedge reserve balance as at 31 December (39)
(32)
Net investment hedges
Foreign currency exposures arise from investments in subsidaries 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 subsidaries 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 signficant impact on the
regulatory ratios of the Group and its banking subsidaries. The Group uses foreign exchange forwards to manage the effect
of exchange rates on its net investments in foreign subsidaries.
Hedging instruments and ineffectveness
Group
2021
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Changes in the
value of the
hedging
instrument
recognised in
OCI
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Amount
reclassifed
from reserves to
income
$millon
Asset
$millon
Liablity
$millon
Derivatve forward currency
contracts¹
2,611 – 27 (31) (31) – –
2020
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Changes in the
value of the
hedging
instrument
recognised in
OCI
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Amount
reclassifed from
reserves to
income
$millon
Asset
$millon
Liablity
$millon
Derivatve forward currency
contracts¹ 685 – 31 (11) (11) – –
1 These derivatve forward currency contracts have a maturity of less than one year. The hedges are rolled on a periodc basis
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
253
Notes to the financal statements continued
13. Derivatve financal instruments continued
Hedged items in net investment hedges
2021
Change in the
value used for
calculating
hedge
ineffectveness
$millon
Translation
reserve
$millon
Balances
remainng in the
translation
reserve from
hedging
relationshps for
which hedge
accounting is no
longer applied
$millon
Net investments
31 (27) –
2020
Change in the
value used for
calculating
hedge
ineffectveness
$millon
Translation
reserve
$millon
Balances
remainng in the
translation
reserve from
hedging
relationshps for
which hedge
accounting is no
longer applied
$millon
Net investments 14 (14) –
Impact of net investment hedges on other comprehensive income
2021
Income/
(expense)
$millon
2020
Income/
(expense)
$millon
Losses recognised in other comprehensive income
(19)
(11)Hedging instruments and ineffectveness
Company
2021
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Changes in the
value of the
hedging
instrument
recognised in
OCI
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Amount
reclassifed
from reserves to
income
$millon
Asset
$millon
Liablity
$millon
Derivatve forward currency
contracts¹
1,871 – 16 (19) (19) – –
2020
Notional
$millon
Carrying amount
Change in fair
value used to
calculate hedge
ineffectveness
$millon
Changes in the
value of the
hedging
instrument
recognised in
OCI
$millon
Ineffectiveness
recognised in
profit or loss
$millon
Amount
reclassifed from
reserves to
income
$millon
Asset
$millon
Liablity
$millon
Derivatve forward currency
contracts¹ 685 – (31) (11) (11) – –
1 These derivatve forward currency contracts have a maturity of less than one year. The hedges are rolled on a periodc basis
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
254
Notes to the financal statements continued
13. Derivatve financal instruments continued
Hedged items in net investment hedges
2021
Change in the
value used for
calculating
hedge
ineffectveness
$millon
Translation
reserve
$millon
Balances
remainng in the
translation
reserve from
hedging
relationshps for
which hedge
accounting is no
longer applied
$millon
Net investments
19 (16) –
2020
Change in the
value used for
calculating
hedge
ineffectveness
$millon
Translation
reserve
$millon
Balances
remainng in the
translation
reserve from
hedging
relationshps for
which hedge
accounting is no
longer applied
$millon
Net investments 11 (31) –
Impact of net investment hedges on other comprehensive income
2021
Income/
(expense)
$millon
2020
Income/
(expense)
$millon
Losses recognised in other comprehensive income
(19)
(11)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
255
Notes to the financal statements continued
13. Derivatve financal instruments continued
Maturity of hedging instruments
Group
Fair value hedges
2021
Less than
one month
More than
one month
and less than
one year
One to
five years
More than
five years
Interest rate swap
Notional $millon
2,415 5,465 33,921 11,820
Average fixed interest rate USD
2.00% 0.61% 0.86% 1.41%
EUR
– 0.12% (0.09)% (0.11)%
Cross currency swap
Notional $millon
48 – 154 –
Average fixed interest rate (to USD) GBP
4.35% – 1.33% –
HKD
– – 0.22% –
Average exchange rate GBP/USD
0.57 – 0.66 –
HKD/USD
– – 7.77 –
Cash flow hedges
Interest rate swap
Notional $millon
– 1,666 781 204
Average fixed interest rate USD
– 0.08% 2.26% 1.26%
Cross currency swap
Notional $millon
– 69 157 –
Average fixed interest rate INO
– 3.85% 9.00% –
Average exchange rate INO/USD
– 68.85 72.66 –
Forward foreign exchange contracts
Notional $millon
– – 72 –
Average exchange rate CLO/USD
– – 868.10 –
Net investment hedges
Foreign exchange derivatves
Notional $millon
673 1,938 – –
Average exchange rate INR¹/USD
76.17 – – –
SGD/USD
– 1.37 – –
AED/USD
– 3.67 – –
1 Offshore currency
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
256
Notes to the financal statements continued
13. Derivatve financal instruments continued
Fair value hedges
2020
Less than
one month
More than
one month
and less than
one year
One to
five years
More than
five years
Interest rate swap
Notional $millon 1,154 9,273 26,549 6,847
Average fixed interest rate USD 1.41% 1.15% 1.29% 1.82%
EUR – (0.52)% (0.18)% (0.08)%
Cross currency swap
Notional $millon – 55 96 –
Average fixed interest rate (to USD) GBP – 3.75% 5.26% –
Average exchange rate GBP/USD – 0.66 0.61 –
Cash flow hedges
Interest rate swap
Notional $millon – 551 890 –
Average fixed interest rate USD – 0.96% 1.38% –
Cross currency swap
Notional $millon – 207 71 –
Average fixed interest rate INR¹ – 4.00% 3.85% –
Average exchange rate KRW¹/USD – 75.56 68.85 –
Forward foreign exchange contracts
Notional $millon 27 137 – –
Average exchange rate GBP/USD 0.84 0.84 – –
Net investment hedges
Foreign exchange derivatves
Notional $millon 685 – – –
Average exchange rate INR¹/USD 76.67 – – –
1 Offshore currency
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
257
Notes to the financal statements continued
13. Derivatve financal instruments continued
Maturity of hedging instruments
Company
Fair value hedges
2021
Less than
one month
More than
one month
and less than
one year
One to
five years
More than
five years
Interest rate swap
Notional $millon
2,415 5,340 32,869 11,820
Average fixed interest rate USD
2.00% 0.63% 0.85% 1.41%
EUR
– 0.12% (0.09)% (0.11)%
Cross currency swap
Notional $millon
48 – 154 –
Average fixed interest rate (to USD) GBP
4.35% – 1.33% –
HKD
– – 0.22% –
Average exchange rate GBP/USD
0.57 – 0.66 –
HKD/USD
– – 7.77 –
Cash flow hedges
Interest rate swap
Notional $millon
– 1,666 781 204
Average fixed interest rate USD
– 0.08% 2.26% 1.26%
Cross currency swap
Notional $millon
– 69 – –
Average fixed interest rate INO
– 3.85% – –
Average exchange rate 68.85 – –
INO/USD
–Forward foreign exchange contracts
Notional $millon
– – 72 –
Average exchange rate CLO/USD
– – 868.10 –
Net investment hedges
Foreign exchange derivatves
Notional $millon
673 1,198 – –
Average exchange rate INR¹/USD
76.17 – – –
AED/USD
– 3.67 – –
1 Offshore currency
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
258
Notes to the financal statements continued
13. Derivatve financal instruments continued
Fair value hedges
2020
Less than
one month
More than
one month
and less than
one year
One to
five years
More than
five years
Interest rate swap
Notional $millon 1,150 8,750 25,109 6,824
Average fixed interest rate USD 1.41% 1.14% 1.25% 1.82%
EUR – – (0.18)% (0.08)%
Cross currency swap
Notional $millon – 55 96 –
Average fixed interest rate (to USD) GBP – 3.75% 5.26% –
Average exchange rate GBP/USD – 0.66 0.61 –
Cash flow hedges
Interest rate swap
Notional $millon – 251 290 –
Average fixed interest rate GBP – 0.45% – –
USD – 1.02% 2.26% –
Cross currency swap
Notional $millon – 207 71 –
Average fixed interest rate INO – 4.00% 3.85% –
Average exchange rate INO/USD – 75.56 68.85 –
Forward foreign exchange contracts
Notional $millon 27 137 – –
Average exchange rate GBP/USD 0.84 0.84 – –
Net investment hedges
Foreign exchange derivatves
Notional $millon 685 – – –
Average exchange rate INR¹/USD 76.67 – – –
1 Offshore currency
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
259
Notes to the financal statements continued
13. Derivatve financal instruments continued
Interest rate benchmark reform
The Group applies the Phase 1 ‘Interest Rate Benchmark Reform Amendments to IFRS 9, IAS 39 and IFRS 7’ which allow the
Group to assume that the interest rate benchmark on which cash flows for the hedged item and/or hedging instrument are
based is are altered as a result of IBOR reform for the following activties:
•
Prospective hedge assessment
•
Determinng whether a cash flow or forecast transaction for a cash flow hedge is highly probable. However, the Group
otherwise assesses whether the cash flows are considered highly probable
•
Determinng when cumulative balances in the cash flow hedge reserve from de-designated hedges should be recycled to
the income statement
The Group will not de-designate a hedge relationshp of a benchmark in scope of IBOR reform if the retrospective hedge
result is outside the required 80-125% range, but the hedge passes the prospective assessment. Any hedge ineffectveness
continues to be recorded in net trading income.
For hedges of non-contractually specifed benchmark portions of an interest rate (such as fair value hedges of interest rate
risk on fixed rate debt instruments) the Group only assesses whether the designated benchmark is separately identfiable at
hedge incepton. The choice of designated benchmark is not revisted for existng hedge relationshps
In applying these amendments the Group has made the following key assumptions for the period end, to be reviewed on an
ongoing basis:
•
The interest rate benchmarks applicable to the Group that are in scope of the IFRS amendments are all LIBOR’s, EONIA,
Singapore Swap Offer Rate (SGD SOR) and Thai Baht Interest Rate fixng (THB FIX)
•
EURIBOR is not in scope of the IFRS amendments because its revised methodology incorporates market transaction data,
hence the benchmark is expected to continue to exist in future reporting periods
•
The Group assumes that the uncertainty arisng from USD LIBOR will be present until 30 June 2023, at which time the
amendments to IFRS no longer apply
As at 31 December 2021, the following notional princpal amounts of derivatve instruments designated in fair value or cash
flow hedge accounting relationshps were linked to IBOR reference rates:
Group
Fair value
hedges
$millon
Cash flow
hedges
$millon
Total
$millon
Weighted
average
exposure
$millon
Interest rate swaps
USD LIBOR
32,543 753 33,296 3.5
GBP LIBOR
47 – 47 0.1
JPY LIBOR
463 – 463 0.1
33,053 753 33,806 3.4
Cross currency swaps
USD LIBOR vs Fixed rate foreign currency
202 – 202 1.9
Total notional of hedging instruments in scope of IFRS amendments as at
31December 2021 33,255 753 34,008 3.4
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
260
Notes to the financal statements continued
13. Derivatve financal instruments continued
Fair value
hedges
$millon
Cash flow
hedges
$millon
Total
$millon
Weighted
average
exposure
$millon
Interest rate swaps
USD LIBOR 27,542 1,195 28,737 2.6
GBP LIBOR 352 89 441 1.7
JPY LIBOR 1,707 – 1,707 3.4
SGD SOR 483 – 483 1.2
30,084 1,284 31,368 2.6
Cross currency swaps
USD LIBOR vs Fixed rate foreign currency 151 – 151 1.1
Total notional of hedging instruments in scope of IFRS amendments as at
31December 2020
30,235 1,284 31,519 2.6
Company
Fair value
hedges
$millon
Cash flow
hedges
$millon
Total
$millon
Weighted
average
exposure
$millon
Interest rate swaps
USD LIBOR
31,520 753 32,273 3.5
GBP LIBOR
47 – 47 0.1
JPY LIBOR
463 – 463 0.1
32,030 753 32,783 3.4
Cross currency swaps
USD LIBOR vs Fixed rate foreign currency
202 – 202 1.9
Total notional of hedging instruments in scope of IFRS amendments as at
31December 2021 32,232 753 32,985 3.4
Fair value
hedges
$millon
Cash flow
hedges
$millon
Total
$millon
Weighted
average
exposure
$millon
Interest rate swaps
USD LIBOR 26,289 295 26,584 2.7
GBP LIBOR 352 89 441 1.7
JPY LIBOR 1,707 – 1,707 3.4
28,348 384 28,732 2.7
Cross currency swaps
USD LIBOR vs Fixed rate foreign currency 151 – 151 1.8
Total notional of hedging instruments in scope of IFRS amendments as at
31December 2020
28,499 384 28,883 2.7
The Group’s primary exposure is to USD LIBOR due to the extent of fixed rate debt security assets and issued notes
denominated in USD that are designated in fair value hedge relationshps. Where fixed rate instruments are in other
currencies, cross currency swaps are used to achieve an equivalent floating USD exposure.
Exposures in GBP LIBOR and JPY LIBOR are short-dated basis swaps created per the LCH’s methodology for converting
derivatves to alternative benchmark rates. Under this methodology, if an interest rate swap referencing either of these
benchmarks would have had a fixng between its conversion date and 31 December 2021, the orignal swap is replaced with a
RFR swap of the same maturity and a LIBOR versus RFR basis swap that matures at the end of the last LIBOR fixng period set
before 31 December 2021. This replacement is treated as continuaton of the orignal LIBOR swap as the new bookings do not
alter or amend the legal rights and obligatons under the orignal derivatve. The Group has applied the Phase 2 amendments
to IAS 39 to redefine the descripton of the hedging instrument and hedged risk to reference the alternative benchmark rate
in order to continue these hedge relationshps.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
261
Notes to the financal statements continued
14. Loans and advances to banks and customers
Accounting policy
Refer to Note 12 Financal instruments for the relevant accounting policy
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Loans and advances to banks
30,014
27,67916,129
15,003Expected credit loss
(15)
(13)(12)
(6)29,999
27,666
16,11714,997
Loans and advances to customers
149,672
146,77874,574
77,136Expected credit loss
(4,873)
(5,917)(3,413)
(4,167)144,799
140,861
71,16172,969
Total loans and advances to banks and customers 174,798
168,527
87,27887,966
Analysis of loans and advances to customers by client segments and related imparment provisons as set out withn the Risk
review and Capital review (page 228).
15. Reverse repurchase and repurchase agreements includng other simlar lending and borrowing
Accounting policy
The Group purchases securites (a reverse repurchase agreement – ‘reverse repo’) typically with financal insttutions subject
to a commitment to resell or return the securites at a predetermined price. These securites 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. Consideraton paid (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 the majorty 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 securites (a repurchase agreement – ‘repo’) subject to a commitment to repurchase or redeem the
securites at a predetermined price. The securites are retained on the balance sheet as the Group retains substantially all the
risks and rewards of ownership and these securites are disclosed as pledged collateral. Consideraton received (or cash
collateral received) is accounted for as a financal liablity at amortised cost, unless it is either mandatorily classifed as fair
value through profit or loss or irrevocably designated at fair value through profit or loss at intial recogniton.
Financal assets are pledged as collateral as part of sales and repurchases, securites borrowing and securitsation
transactions under terms that are usual and customary for such activties. The Group is obliged to return equivalent securites.
Repo and reverse repo transactions typically entitle the Group and its counterparties to have recourse to assets simlar to
those provided as collateral in the event of a default. Securites sold subject to repos, either by way of a Global Master
Repurchase Agreement (GMRA), or through a securites sale and Total Return Swap (TRS) continue to be recognised on the
balance sheet as the Group retains substantially the associated risks and rewards of the securites (the TRS is not recognised).
The counterparty liablity 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.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
262
Notes to the financal statements continued
15. Reverse repurchase and repurchase agreements includng other simlar lending and borrowing
continued
Reverse repurchase agreements and other simlar secured lending
Group
2021
$millon
2020
$millon
Banks
19,664
19,014Customers
64,042
47,52183,706
66,535
Of which:
Fair value through profit or loss
78,986
62,807Banks
18,708
18,205Customers
60,278
44,602Held at amortised cost
4,720
3,728Banks
956
809Customers
3,764
2,919Under reverse repurchase and securites borrowing arrangements, the Group obtains securites on terms which permit it to
repledge or resell the securites to others. Amounts on such terms are:
2021
$millon
2020
$millon
Securites and collateral received (at fair value)
113,892
98,525Securites and collateral which can be repledged or sold (at fair value)
113,736
98,431Amounts repledged/transferred to others for financng activties, to satisfy liablites under sale and
repurchase agreements (at fair value)
57,879
46,209Company
2021
$millon
2020
$millon
Banks
18,818
17,938Customers
62,322
46,66281,140
64,600
Of which:
Fair value through profit or loss
77,655
62,262Banks
18,380
17,883Customers
59,275
44,379Held at amortised cost
3,485
2,338Banks
438
55Customers
3,047
2,283Under reverse repurchase and securites borrowing arrangements, the Company obtains securites on terms which permit it
to repledge or resell the securites to others. Amounts on such terms are:
2021
$millon
2020
$millon
Securites and collateral received (at fair value)
110,558
96,113Securites and collateral which can be repledged or sold (at fair value)
110,462
96,091Amounts repledged/transferred to others for financng activties, to satisfy liablites under sale and
repurchase agreements (at fair value)
57,826
46,180
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
263
Notes to the financal statements continued
15. Reverse repurchase and repurchase agreements includng other simlar lending and borrowing
continued
Repurchase agreements and other simlar secured borrowing
Group
2021
$millon
2020
$millon
Banks
5,092
5,824Customers
56,540
41,55561,632
47,379
Of which:
Fair value through profit or loss
61,307
47,359Banks
4,768
5,804Customers
56,539
41,555Held at amortised cost
325
20Banks
324
20Customers
1
–The tables below set out the financal assets provided as collateral for repurchase and other secured borrowing transactions:
Collateral pledged against repurchase agreements
2021
Fair value
through profit
or loss
$millon
Fair value
through other
comprehensive
income
$millon
Amortised
cost
$millon
Off-balance
sheet
$millon
Total
$millon
On-balance sheet
Debt securites and other eligble bills
2,318 483 1,778 – 4,579
Off-balance sheet
Repledged collateral received
– – – 57,879 57,879
At 31 December 2021 2,318 483 1,778 57,879 62,458
Collateral pledged against repurchase agreements
2020
Fair value
through profit
or loss
$millon
Fair value
through other
comprehensive
income
$millon
Amortised
cost
$millon
Off-balance
sheet
$millon
Total
$millon
On-balance sheet
Debt securites and other eligble bills 1,324 201 355 – 1,880
Off-balance sheet
Repledged collateral received – – – 46,209 46,209
At 31 December 2020 1,324 201 355 46,209 48,089
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
264
Notes to the financal statements continued
15. Reverse repurchase and repurchase agreements includng other simlar lending and borrowing
continued
Company
2021
$millon
2020
$millon
Banks
4,737
5,692Customers
56,443
41,55561,180
47,247
Of which:
Fair value through profit or loss
60,897
47,247Banks
4,455
5,692Customers
56,442
41,555Held at amortised cost
283
–Banks
282
–Customers
1
–The tables below set out the financal assets provided as collateral for repurchase and other secured borrowing transactions:
Collateral pledged against repurchase agreements
2021
Fair value
through profit
or loss
$millon
Fair value
through other
comprehensive
income
$millon
Amortised
cost
$millon
Off-balance
sheet
$millon
Total
$millon
On-balance sheet
Debt securites and other eligble bills
2,085 318 1,776 – 4,179
Off-balance sheet
Repledged collateral received
– – – 57,826 57,826
At 31 December 2021 2,085 318 1,776 57,826 62,005
Collateral pledged against repurchase agreements
2020
Fair value
through profit
or loss
$millon
Fair value
through other
comprehensive
income
$millon
Amortised
cost
$millon
Off-balance
sheet
$millon
Total
$millon
On-balance sheet
Debt securites and other eligble bills 1,222 201 355 – 1,778
Off-balance sheet
Repledged collateral received – – – 46,180 46,180
At 31 December 2020 1,222 201 355 46,180 47,958
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
265
Notes to the financal statements continued
16. Goodwill and intangble assets
Accounting policy
Goodwill
Goodwill represents the excess of the cost of an acquistion over the fair value of the Group’s share of the identfiable net
assets and contingent liablites of the acquired subsidary, associate or jont venture at the date of acquistion. Goodwill on
acquistions of subsidaries is included in intangble assets. Goodwill on acquistions of associates is included in Investments in
associates. Goodwill included in intangble assets is assessed at each balance sheet date for imparment and carried at cost
less any accumulated imparment losses. Gains 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 discountng expected cash flows of the
relevant cash generating units (CGUs) and discountng these at an appropriate discount rate, the determinaton of which
requires the exercise of judgement. Goodwill is allocated to CGUs for the purpose of imparment testing. CGUs represent the
lowest level withn the Group which generate 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 267 to 268).
Signficant accounting estimates and judgements
The carrying amount of goodwill is based on the applicaton of judgements includng the basis of goodwill imparment
calculation assumptions. Judgement is also applied in determinaton of cash generating units.
Estimates include forecasts used for determinng cash flows for CGUs and, the appropriate long term growth rates to use and
discount rates which factor in country risk-free rates and applicable risk premiums. These estimates are periodcally assessed
for appropriateness. The Group undertakes an annual assessment to evaluate whether the carrying value of goodwill is
impared. The estimaton of future cash flows and the level to which they are discounted is inherently uncertain and requires
signficant judgement and is subject to potential change over time.
Acquired intangbles
At the date of acquistion of a subsidary or associate, intangble assets which are deemed separable and that arise from
contractual or other legal rights are capitalsed and included withn the net identfiable assets acquired. These intangble
assets are intially measured at fair value, which reflects market expectations of the probabilty that the future economic
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 indcators of imparment. In the event that an asset’s
carrying amount is determined to be greater than its recoverable amount, the asset is written down immedately.
Computer software
Acquired computer software licences are capitalsed if the princples of development are met, on the basis of the costs
incurred to acquire and bring to use the specifc software. Internally generated software represents substantially all of the
total software capitalsed. Direct costs of the development of separately identfiable internally generated software are
capitalsed where it is probable that future economic benefits attributable to the asset will flow from its use (internally
generated software). These costs include salaries and wages, materials, service providers and contractors, and directly
attributable overheads. Costs incurred in the ongoing maintenance of software are expensed immedately when incurred.
Internally generated software is amortised over each assets useful life to a maximum of a 10 year time period. On an annual
basis software assets’ residual values and useful lives are reviewed, includng assessing for indcators of imparment.
Indicators of imparment include loss of business relevance, obsolescence of asset, 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 capitalsed software, judgement is required to determine which costs relate to research (and therefore expensed) and
which costs relate to development (capitalsed). Further judgement is required to determine the technical feasiblity 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 functionalty or improved asset safeguarding.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
266
Notes to the financal statements continued
16. Goodwill and intangble assets continued
Group
2021
2020
Goodwill
$millon
Acquired
intangbles
$millon
Computer
software
$millon
Total
$millon
Goodwill
$millon
Acquired
intangbles
$millon
Computer
software
$millon
Total
$millon
Cost
At 1 January 1,408 132 3,017 4,557
1,828 137 2,738 4,703
Exchange translation
differences (5) 41 19
(29) (4) (58) (91)
(17)Additons – 623 623
– 20 738 758
–Impairment – – (403)
– – – –
(403)Amounts written off – (385) (385)
– – (128) (128)
–At 31 December 1,379 148 3,569 5,096
1,408 132 3,017 4,557
Provison for amortisaton
At 1 January – 117 944 1,061
– 119 841 960
Exchange translation
differences (6) 10 4
– (4) (20) (24)
–Amortisaton 4 409 413
– 5 339 344
–Impairment charge – 15 15
– – 3 3
–Amounts written off – (331) (331)
– – (88) (88)
–At 31 December – 118 1,178 1,296
– 117 944 1,061
Net book value 1,379 30 2,391 3,800
1,408 15 2,073 3,496
At 31 December 2021, accumulated goodwill imparment losses incurred from 1 January 2005 amounted to $3,227 millon
(31December 2020: $3,227millon), of which $nil was recognised in 2021 (31 December 2020: $403).
Company
2021
2020
Goodwill
$millon
Acquired
intangbles
$millon
Computer
software
$millon
Total
$millon
Goodwill
$millon
Acquired
intangbles
$millon
Computer
software
$millon
Total
$millon
Cost
At 1 January 79 32 2,647 2,758
344 33 2,509 2,886
Exchange translation
differences (1) 38 29
– (2) (48) (50)
(8)Additons – 445 445
– – 503 503
–Impairment – – (257)
– – – –
(257)Amounts written off – (345) (345)
– – (105) (105)
–At 31 December 79 30 2,997 3,106
79 32 2,647 2,758
Provison for amortisaton
At 1 January – 18 782 800
– 17 752 769
Exchange translation
differences (1) 10 9
– (2) (15) (17)
–Amortisaton 2 322 324
– 2 271 273
–Impairment charge – 13 13
– – 2 2
–Amounts written off – (315) (315)
– – (73) (73)
–At 31 December – 18 967 985
– 18 782 800
Net book value 79 12 2,030 2,121
79 14 1,865 1,958
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
267
Notes to the financal statements continued
16. Goodwill and intangble assets continued
Software amortisaton change in estimate
During the period the Group has reassessed the useful economic life for software assets to reflect the period over which the
assets are expected to be available for use by the Group. As a result of this change in estimate, the Group has recorded a
decrease in software amortisaton of approximately $74 millon for the year when compared to the previous estimate.
Goodwill
Outcome of imparment assessment
Change in cash- generating units (CGUs)
Goodwill is allocated to CGUs, which are considered the level at which goodwill is managed and which generate
independent cash inflows. At year-end 2021, the Group had two global CGUs representing Corporate, Commercial &
Institutonal Banking (CCIB) and Private Banking (PB), along with 4 indvidual country CGUs representing Retail Banking (RB)
for each country.
Following the changes in the Group’s organisatonal structure as described in Note 2 – Operating Segments which has
resulted in two new business segments, CCIB and CPBB, the CGUs have changed. Goodwill relating to CB ($198m), which was
previously allocated to country CGUs, has been reallocated to the global CCIB CGU. The CB goodwill has been allocated on a
relative value basis with reference to the ratio of RB and CB risk-weighted assets in the indvidual country at 1 January 2021.
The changes above require comparative periods to be restated.
Testing of goodwill for imparment
An annual assessment is made as to whether the current carrying value of goodwill is impared. For the purposes of
imparment testing, goodwill is allocated at the date of acquistion to a CGU. Goodwill is considered to be impared if the
carrying amount of the relevant CGU exceeds its recoverable amount. Indicators of imparment include changes in the
economic performance and outlook of the region includng geopolitcal changes, changes in market value of regional
investments, large credit defaults and strategic decisons to exit 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 cash flow
projectons and an estimated terminal value based on a perpetuity value after year five. The cash flow projectons are based
on forecasts approved by management up to 2026. The perpetuity terminal value amount is calculated using year five cash
flows using long-term GDP growth rates. All cash flows are discounted using discount rates which reflect market rates
appropriate to the CGU.
The goodwill allocated to each CGU and key assumptions used in determinng the recoverable amounts are set out below
and are solely estimates for the purposes of assessing imparment of acquired goodwill.
Group
Cash generating unit
1
2021
2020
Goodwill
$millon
Pre tax
Discount
Rates
per cent
Long-term
forecast GDP
growth rates
per cent
Goodwill
$millon
Pre tax
Discount
Rates
per cent
Long-term
forecast GDP
growth rates
per cent
Country CGUs
Africa & Middle East 76
81
Pakistan 20.2 5.1
42 22.2 6.0
47Bahrain 14.2 2.8
34 13.1 3.0
34ASIA 290
295
Singapore 12.0 3.0
280 11.6 2.4
285Bangladesh 19.6 7.2
10 15.0 7.3
10Global CGUs 1,013
1,032
Global Private Banking 12.6 3.6
84 12.2 2.5
84Global Corporate, Commercial & Institutonal
Banking 13.0 3.0
929 12.3 3.0
9481,379
1,408
1 Following the Group’s change in organisatonal structure, there has been an integraton of segments (CIB and CB to CCIB and PB and RB to CPBB) and regions (Greater
China & North Asia and ASEAN & South Asia to Asia). Prior periods have been restated
In the current year there are no CGUs that are sensitve to any indvidual movement on key estimates (cashflow, discount rate
and GDP growth rate). This is primarly due to increased anticpated cash flows as economic uncertainty caused by the
COVID-19 pandemic has abated and the change in CGUs as described above.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
268
Notes to the financal statements continued
16. Goodwill and intangble assets continued
Company
Acquired intangbles primarly comprise those recognised as part of the acquistions of American Express Bank, Tradewinds,
Australia and New Zealand Project Finance and Grindlays.
Signficant items of goodwill arisng on acquistions have been allocated to the following cash generating units for the
purposes of imparment testing:
Cash generating unit
1
2021
$millon
2020
$millon
Country CGUs
Bahrain
17
17Bangladesh
6
6Global CGUs
Global Corporate, Commercial & Institutonal Banking
56
5679
79
1 Following the Group’s change in organisatonal structure, there has been an integraton of segments (CIB and CB to CCIB and PB and RB to CPBB) and regions (Greater
China & North Asia and ASEAN & South Asia to Asia). Prior periods have been restated
Acquired intangbles
These primarly comprise those items recognised as part of the acquistions of Union Bank (now amalgamated into
StandardChartered Bank (Pakistan) Limted), American Express Bank and ABSA’s custody business in Africa.
The acquired intangbles are amortised over periods from four years to a maximum of 16 years. The constituents are
asfollows:
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Acquired intangbles comprise:
Customer relationshps
3
73
4Licences
27
89
10Net book value 30
15
1214
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
269
Notes to the financal statements continued
17. Property, plant and equipment
Accounting policy
All property, plant and equipment is stated at cost less accumulated depreciaton and imparment losses. Cost includes
expenditure that is directly attributable to the acquistion of the assets. Subsequent costs are included in the asset’s carrying
amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the item can be measured reliably.
At each balance sheet date the assets’ residual values and useful lives are reviewed, and adjusted if appropriate, includng
assessing for indcators of imparment. In the event that an asset’s carrying amount is determined to be greater than its
recoverable amount, the asset is written down to the recoverable amount. Gains and losses on disposals are included in the
income statement.
Repairs and maintenance are charged to the income statement during the financal period in which they are incurred.
Land and buildngs comprise mainly branches and offices. Freehold land is not depreciated although it is subject to
imparment testing.
Depreciaton 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:
•
Buildngs up to 50 years
•
Leasehold improvements life of lease up to 50 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 capitalsed and included in Property, plant and
equipment with a corresponding liablity to the lessor recognised in Other liablites, in accordance with the Group’s leased
assets accounting policy in Note 18.
All other repairs and maintenance are charged to the income statement during the financal period in which they
areincurred.
Group
2021
Premises
$millon
Equipment
$millon
Leased
premises
assets
$millon
Leased
equipment
assets
$millon
Total
$millon
Cost or valuation
At 1 January 666 570 862 6 2,104
Exchange translation differences
(28) (7) (32) 2 (65)
Additons
1
43 91 83 1 218
Disposals and fully depreciated assets written off
2
(14) (88) (34) (1) (137)
Transfers to assets held for sale
(4) – – – (4)
As at 31 December 663 566 879 8 2,116
Depreciaton
Accumulated at 1 January 282 368 249 4 903
Exchange translation differences
(8) (4) (14) – (26)
Charge for the year
33 89 127 1 250
Impairment (release)/charge
– – 39 – 39
Attributable to assets sold, transferred or written off
2
(9) (87) (25) – (121)
Accumulated at 31 December 298 366 376 3 1,045
Net book amount at 31 December 365 200 503 3 1,071
1 Refer to the cash flow statement under cash flows from investng activties section for the purchase of property, plant and equipment during the year of $134 millon on
page 171
2 Disposals for property, plant and equipment during the year of $25 millon 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
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
270
Notes to the financal statements continued
17. Property, plant and equipment continued
2020
Premises
$millon
Equipment
$millon
Leased
premises
assets
$millon
Leased
equipment
assets
$millon
Total
$millon
Cost or valuation
At 1 January
706 520 846 2 2,074
Exchange translation differences (17) (8) (7) 2 (30)
Additons 18 90 60 2 170
Disposals and fully depreciated assets written off (38) (32) (37) – (107)
Transfers to assets held for sale (3) – – – (3)
As at 31 December
666 570 862 6 2,104
Depreciaton
Accumulated at 1 January
287 316 139 2 744
Exchange translation differences (6) (5) (5) – (16)
Charge for the year 36 89 132 2 259
Attributable to assets sold, transferred or written off (34) (32) (17) – (83)
Transfers to assets held for sale (1) – – – (1)
Accumulated at 31 December
282 368 249 4 903
Net book amount at 31 December
384 202 613 2 1,201
1 Refer to the cash flow statement under cash flows from investng activties section for the purchase of property, plant and equipment during the year of $170 millon on
page 171
2 Disposals for property, plant and equipment during the year of $25 millon 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
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
271
Notes to the financal statements continued
17. Property, plant and equipment continued
Company
2021
Premises
$millon
Equipment
$millon
Leased
premises
assets
$millon
Leased
equipment
assets
$millon
Total
$millon
Cost or valuation
At 1 January 313 262 576 1 1,152
Exchange translation differences
(10) 5 (2) – (7)
Additons
1
17 50 39 – 106
Disposals, transfers and fully depreciated assets written off2
(6) (8) (17) – (31)
As at 31 December 314 309 596 1 1,220
Depreciaton
Accumulated at 1 January 137 140 166 1 444
Exchange translation differences
– (2) (5) – (7)
Charge for the year
15 51 77 – 143
Impairment (release)/charge
– – 38 – 38
Attributable to assets sold, transferred or written off
2
(2) (7) (16) – (25)
Accumulated at 31 December 150 182 260 1 593
Net book amount at 31 December 164 127 336 – 627
1 Refer to the cash flow statement under cash flows from investng activties section for the purchase of property, plant and equipment during the year of $67 millon on
page 171
2 Disposals for property, plant and equipment during the year of $6 millon 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
2020
Premises
$millon
Equipment
$millon
Leased
premises
assets
$millon
Leased
equipment
assets
$millon
Total
$millon
Cost or valuation
At 1 January
322 241 590 1 1,154
Exchange translation differences (9) (1) – – (10)
Additons 11 41 17 – 69
Disposals and fully depreciated assets written off (11) (19) (31) – (61)
As at 31 December
313 262 576 1 1,152
Depreciaton
Accumulated at 1 January
130 113 96 1 340
Exchange translation differences (3) – 1 – (2)
Charge for the year 17 46 82 – 145
Attributable to assets sold, transferred or written off (7) (19) (13) – (39)
Accumulated at 31 December
137 140 166 1 444
Net book amount at 31 December
176 122 410 – 708
1 Refer to the cash flow statement under cash flows from investng activties section for the purchase of property, plant and equipment during the year of $69 millon on
page 171
2 Disposals for property, plant and equipment during the year of $20 millon 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
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
272
Notes to the financal statements continued
18. Leased assets
Accounting policy
The Group assesses whether a contract is a lease in scope of this policy by determinng whether the contract gives it the right
to use a specifed underlying physical asset for a lease term greater than 12 months, unless the underlying asset is of low
value.
Where the Group is a lessee and the lease is deemed in scope, it recognises a liablity 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 liablity is recognised in ‘Other liablites’. A corresponding right-of-use asset equal to the liablity, 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 liablity using the effective interest method. Depreciaton on the asset is recognised in ‘Depreciaton and
amortisaton’, and interest on the lease liablity is recognised in ‘Interest expense’.
If a leased premise, or a physically distnct portion of a premise such as an indvidual 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
indcator of imparment. An imparment 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 abilty and likelhood of obtainng a subtenant.
The judgements in determinng lease balances are the determinaton of whether the Group is reasonably certain that it will
exercise extension options present in lease contracts. On intial recogniton, the Group considers a range of characteristcs
such as premises function, regional trends and the term remainng on the lease to determine 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 were the determinaton 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 pricng
informaton to determine 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 primarly enters lease contracts that grant it the right to use premises such as office buildngs and retail branches.
Existng lease liablites may change in future periods due to changes in assumptions or decisons to exercise lease renewal or
terminaton options, changes in payments due to renegotiatons of market rental rates as permitted by those contracts and
changes to payments due to rent being contractually linked to an inflaton index. In general the re-measurement of a lease
liablity under these circumstances leads to an equal change to the right-of-use asset balance, with no immedate effect on
the income statement.
The total cash outflow during the year for premises and equipment leases was $148 millon for Group and $94 millon for
Company.
The total expense during the year in respect of leases with a term less than or equal to 12 months was less than $1 millon for
Group.
The right-of-use asset balances and depreciaton charges are disclosed in Note 17. The lease liablity balances are disclosed in
Note 22 and the interest expense on lease liablites is disclosed in Note 3.
Maturity analysis
The maturity profile for lease liablites associated with leased premises and equipment assets is as follows:
Group
2021
One year
or less
$millon
Between
one year and
two years
$millon
Between
two years and
five years
$millon
More than
five years
$millon
Total
$millon
Other liablites – lease liablites
137 119 282 84 622
2020
One year
or less
$millon
Between
one year and
two years
$millon
Between
two years and
five years
$millon
More than
five years
$millon
Total
$millon
Other liablites – lease liablites 163 137 333 163 796
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
273
Notes to the financal statements continued
18. Leased assets continued
Company
2021
One year
or less
$millon
Between
one year and
two years
$millon
Between
two years and
five years
$millon
More than
five years
$millon
Total
$millon
Other liablites – lease liablites
92 88 225 40 445
2020
One year
or less
$millon
Between
one year and
two years
$millon
Between
two years and
five years
$millon
More than
five years
$millon
Total
$millon
Other liablites – lease liablites 89 85 238 99 511
19. Other assets
Accounting policy
Refer to Note 12 Financal instruments for the relevant accounting policy.
Commodites represent physical holdings where the Group has title and exposure to the Market Risk associated with the
holding.
Commodites and emissons certifcates are fair valued with the fair value derived from observable spot or short-term futures
prices from relevant exchanges.
Group
Other assets include:
2021
$millon
2020
$millon
Financal assets held at amortised cost (Note 12):
Cash collateral
8,244
10,940Acceptances and endorsements
3,047
4,087Unsettled trades and other financal assets
10,990
10,84622,281
25,873
Non-financal assets:
Commodites and emissons certifcates
1
9,265
7,239
Other assets
424
27831,970
33,390
1 Commodites and emisson certifcates are carried at fair value less costs to sell, $5.7 billon are classifed as Level 1 and $3.6 billon are classifed as Level 2
Company
Other assets include:
2021
$millon
2020
$millon
Financal assets held at amortised cost (Note 12):
Cash collateral
7,780
10,385Acceptances and endorsements
2,329
3,285Unsettled trades and other financal assets
9,751
9,82519,860
23,495
Non-financal assets:
Commodites and emissons certifcates
1
5,475
5,182
Other assets
353
21925,688
28,896
1 Commodites and emisson certifcates are carried at fair value less costs to sell, $1.9 billon are classifed as Level 1 and $3.6 billon are classifed as Level 2
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
274
Notes to the financal statements continued
20. Assets held for sale and associated liablites
Accounting policy
Financal instruments can be reclassifed as held for sale if they are non-current assets or if they are part of a disposal group;
however, in these circumstances financal instruments continue to be measured per the requirements of IFRS 9 Financal
Instruments. Refer to Note 12 Financal instruments for the relevant accounting policy.
Non-current assets are classifed as held for sale and measured at the lower of their carrying amount and fair value less cost
to sell when:
a) Their carrying amounts will be recovered princpally through sale;
b) They are available for immedate sale in their present conditon; and
c) Their sale is highly probable.
Immediately before the intial classifcation as held for sale, the carrying amounts of the assets are measured in accordance
with the applicable accounting polices related to the asset or liablity before reclassifcation as held for sale.
The assets below have been presented as held for sale following the approval of Group management and the transactions
are expected to complete in 2021.
The financal assets reported below are classifed under Level 1 $ nil millon (31 December 2020: $nil millon), Level 2 $ nil millon
(31 December 2020: $25 millon) and Level 3 $95 millon (31 December 2020: $63 millon).
Group
Assets held for sale
2021
$millon
2020
$millon
Financal assets held at fair value through profit or loss
43
5Loans and advances to customers
20
5Equity shares
23
–Financal assets held at amortised cost
52
83Loans and advances to customers
52
83Debt securites held at amortised cost
–
–Property, plant and equipment
3
4Others
3
498
92
Company
Assets held for sale
2021
$millon
2020
$millon
Financal assets held at fair value through profit or loss
42
5Loans and advances to customers
20
5Equity shares
22
–Financal assets held at amortised cost
49
83Loans and advances to customers
49
83Debt securites held at amortised cost
–
–Property, plant and equipment
–
1Others
–
191
89
On the 20 May 2020 the Group completed the sale of its 44.56 per cent equity interest in PT Bank Permata Tbk to Bangkok
Bank Public Company Limted for cash consideraton of IDR 17 trillon ($1,072 millon).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
275
Notes to the financal statements continued
21. Debt securites in issue
Accounting policy
Refer to Note 12 Financal instruments for the relevant accounting policy.
Group
2021
2020
Certifcates
of deposit of
$100,000
or more
$millon
Other debt
securites
in issue
$millon
Total
$millon
Certifcates
of deposit of
$100,000
or more
$millon
Other debt
securites
in issue
$millon
Total
$millon
Debt securites in issue 9,996 29,356
22,498 13,562 36,060
19,360Debt securites in issue included withn:
Financal liablites held at fair value through
profit or loss (Note 12) 4,360 4,360
– 4,360 4,360
–Total debt securites in issue 22,498 17,922 40,420
19,360 14,356 33,716
Company
2021
2020
Certifcates
of deposit of
$100,000
or more
$millon
Other debt
securites
in issue
$millon
Total
$millon
Certifcates
of deposit of
$100,000
or more
$millon
Other debt
securites
in issue
$millon
Total
$millon
Debt securites in issue 8,311 27,661
21,799 12,027 33,826
19,350Debt securites in issue included withn:
Financal liablites held at fair value through
profit or loss (Note 12) 4,203 4,203
– 4,086 4,086
–Total debt securites in issue 21,799 16,113 37,912
19,350 12,514 31,864
In 2021, the Company issued a total of $3.1 billon senior notes for general business purposes of the Group as shown below:
Securites $millon
$1500 millon callable fixed rate senior notes due 2025 (callable 2024)
1,500
$1000 millon callable fixed rate senior notes due 2025 (callable 2024)
1,000
EUR 500 millon callable fixed rate senior notes due 2029 (callable 2028)
569
Total Senior Notes issued
3,069
In 2020, the Company issued a total of $1.8 billon senior notes for general business purposes of the Group as shown below:
Securites
$millon
EUR 750 millon callable fixed rate senior notes due 2028 (callable 2027) 917
$500 millon callable floating rate senior notes due 2023 (callable 2022) 500
$400 millon callable fixed rate senior notes due 2023 (callable 2022) 400
Total Senior Notes issued 1,817
Where a debt instrument is callable, the issuer has the right to call.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
276
Notes to the financal statements continued
22. Other liablites
Accounting policy
Refer to Note 12 Financal instruments for the relevant accounting policy for financal liablites, Note 18 Leased assets
fortheaccounting policy for leases and Note 30 Share-based payments for the accounting policy for cash-settled
share-based payments.
Group
2021
$millon
2020
$millon
Financal liablites held at amortised cost (Note 12)
Acceptances and endorsements
3,047
4,087Cash collateral
7,757
9,184Property leases
1
611
673
Equipment leases
1
6
4
Unsettled trades and other financal liablites
2
14,229
15,552
25,650
29,500
Non-financal liablites
Other liablites
363
28826,013
29,788
Company
2021
$millon
2020
$millon
Financal liablites held at amortised cost (Note 12)
Acceptances and endorsements
2,329
3,285Cash collateral
7,033
8,581Property leases
1
417
450
Equipment leases
1
–
–
Unsettled trades and other financal liablites
2
10,346
10,908
20,125
23,224
Non-financal liablites
Other liablites
335
21020,460
23,434
1 Other financal liablites include the present value of lease liablites, as required by IFRS 16 from 1 January 2019; refer to Note 18
2 Includes correction of fair value hedge accounting adjustment $81 millon
23. Provisons for liablites and charges
Accounting policy
The Group recognises a provison for a present legal or constructive obligaton resulting from a past event when it is more
likely than not that it will be required to transfer economic benefits to settle the obligaton and the amount of the obligaton
can be estimated reliably. Where a liablity arises based on particpation in a market at a specifed date, the obligaton is
recognised in the financal statements on that date and is not accrued over the period.
Signficant accounting estimates and judgements
The recogniton and measurement of provisons for liablites and charges requires signficant judgement and the use of
estimates about uncertain future conditons or events.
Estimates include the best estimate of the probabilty of outflow of economic resources, cost of settling a provison and timng
of settlement. Judgements are required for inherently uncertain areas such as legal decisons (includng external advice
obtained), and outcome of regulator reviews.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
277
Notes to the financal statements continued
23. Provisons for liablites and charges continued
Group
2021
2020
Provison
for credit
commitments
$millon
Other
provisons
$millon
Total
$millon
Provison
for credit
commitments
$millon
Other
provisons
$millon
Total
$millon
At 1 January 331 69 400
297 105 402
Exchange translation differences (4) (55)
8 (1) 7
(51)Transfer 9 9
– 2 2
–(Release)/charge against profit (1) 87
(23) 30 7
88Provisons utilsed (40) (43)
– (20) (20)
(3)At 31 December 316 80 396
331 69 400
Company
2021
2020
Provison
for credit
commitments
$millon
Other
provisons
$millon
Total
$millon
Provison
for credit
commitments
$millon
Other
provisons
$millon
Total
$millon
At 1 January 294 42 336
410 88 498
Exchange translation differences (2) (53)
(9) – (9)
(51)Transfer 2 2
– 1 1
–(Release)/charge against profit (16) (81)
(40) 18 (22)
(65)Provisons utilsed (30) (30)
– (8) (8)
–At 31 December 42 336
245 53 298
294Provison for credit commitment comprises those undrawn contractually committed facilties where there is doubt as to the
borrowers’ abilty to meet their repayment obligatons.
Other provisons consist mainly of provisons for regulatory settlements and legal claims, the nature of which are described in
Note 25. (page 279).
24. Contingent liablites and commitments
Accounting policy
Financal guarantee contracts and loan commitments
The Group issues financal guarantee contracts and loan commitments in return for fees. Financal guarantee contracts and
any loan commitments issued at below-market interest rates are intially recognised at their fair value as a financal liablity,
and subsequently measured at the higher of the intial value less the cumulative amount of income recognised in accordance
with the princples of IFRS 15 Revenue from Contracts with Customers and their expected credit loss provison. Loan
commitments 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 financal guarantee contracts and loan commitments are disclosed in the table below.
Financal guarantees, trade credits and irrevocable letters of credit are the notional values of contracts issued by the Group’s
Transaction Banking business for which an obligaton to make a payment has not arisen 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 financal loss suffered. These contracts have various legal
forms such as letters of credit, guarantee contracts and performance bonds. The contracts are issued to faciltate trade
through export and import business, provide guarantees to financal insttutions where the Group has a local presence, as
well as guaranteeing project financng involvng large construction projects undertaken by sovereigns and corporates. The
contracts may contain performance clauses which require the counterparty performing services or providng goods to meet
certain conditons before a right 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 intenton to provide funds to a customer or on behalf of a customer
under prespecifed terms and conditons 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 financal statements
as commitments. Commitments and contingent liablites are generally considered on demand as the Group may have to
honour them, or the client may draw down at any time.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
278
Notes to the financal statements continued
24. Contingent liablites and commitments continued
Capital commitments are contractual commitments the Group has entered into to purchase non-financal assets.
The table below shows the contract or underlying princpal amounts of unmatured off-balance sheet transactions at the
balance sheet date. The contract or underlying princpal amounts indcate the volume of business outstanding and do not
represent amounts at risk.
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Financal guarantees and trade credits
Financal guarantees, trade and irrevocable letters of credit
49,235
45,41837,465
36,14249,235
45,418
37,46536,142
Commitments
Undrawn formal standby facilties, credit lines and other commitments to lend
One year and over
53,128
54,75545,801
50,335Less than one year
17,608
15,21814,353
12,736Unconditonally cancellable
29,950
28,9096,524
6,819100,686
98,882
66,67869,890
Capital commitments
Contracted capital expenditure approved by the directors but not provided for in
these accounts
8
6–
–The table below shows the contract or underlying princpal amounts and risk-weighted amounts of unmatured Group
off-balance sheet transactions at the balance sheet date. The contract or underlying princpal amounts indcate the volume
of business outstanding and do not represent amounts at risk.
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Financal guarantees and trade credits (Group)
Financal guarantees, trade and irrevocable letters of credit
2,120
2,1177,542
4,1762,120
2,117
7,5424,176
Commitments(Group)
Undrawn commitments
5
37261
3565
37
261356
Please refer to Note 19 for further details. As set out in Note 25, the Group has contingent liablites in respect of certain legal
and regulatory matters for which it is not practicable to estimate the financal impact as there are many factors that may
affect the range of possible outcomes.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
279
Notes to the financal statements continued
25. Legal and regulatory matters
Accounting policy
Where appropriate, the Group recognises a provison for liablites when it is probable that an outflow of economic resources
embodying economic benefits will be required and for which a reliable estimate can be made of the obligaton. The
uncertaintes inherent in legal and regulatory matters affect the amount and timng of any potential outflows with respect to
which provisons have been established. These uncertaintes also mean that it is not possible to give an aggregate estimate
of contingent liablites arisng from such legal and regulatory matters.
The Group receives legal claims against it in a number of jursdictons and is subject to regulatory and enforcement
investgations and proceedings from time to time. Apart from the matters described below, the Group currently considers
none of the ongoing claims, investgations or proceedings to be material. However, in light of the uncertaintes 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 Distrct
Courts for the Southern and Eastern Distrcts of New York against a number of banks (includng Standard Chartered Bank or
its affilates) on behalf of plaintffs who are, or are relatives of, victms of various terrorist attacks in Iraq and Afghanistan. The
most recent lawsuit was filed in August 2021 and concerns terrorist attacks that occurred in Afghanistan between 2011 and
2016. The plaintffs in each of these lawsuits have alleged that the defendant banks aided and abetted the unlawful conduct
of U.S. sanctioned parties in breach of the U.S. Anti-Terrorism Act. While the courts have ruled in favour of the banks’ motions
to dismss in five of these lawsuits, plaintffs’ have appealed or are expected to appeal against certain of these judgements.
The remainng cases are at an early procedural stage and, except for the lawsuit filed in August 2021, have been stayed
pending the outcomes of the appeals in the dismssed cases. None of these lawsuits have specifed the amount of damages
claimed.
In January 2020, a shareholder derivatve complaint was filed by the City of Philadelpha in New York State Court against 45
current and former directors and senior officers of the Group. It is alleged that the indviduals breached their duties to the
Group and caused a waste of corporate assets by permittng the conduct that gave rise 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 SCB and seven
indviduals were removed from the case. Standard Chartered PLC and Standard Chartered Holdings Limted remained as
named “nominal defendants” in the complaint. In May 2021, Standard Chartered PLC filed a motion to dismss the complaint.
On 2 February 2022, the New York State Court ruled in favour of Standard Chartered PLC’s motion to dismss the complaint.
The plaintffs have a right of appeal.
Bernard Madoff’s 2008 confession to running a Ponzi scheme through Bernard L. Madoff Investment Securites LLC (BMIS)
gave rise to a number of lawsuits against the Group. BMIS and the Fairfeld funds (which invested in BMIS) are in bankruptcy
and liqudation, respectively. Between 2010 and 2012, five lawsuits were brought against the Group by the BMIS bankruptcy
trustee and the Fairfeld funds’ liqudators, in each case seeking to recover funds paid to the Group’s clients pursuant to
redemption requests made prior to BMIS’ bankruptcy filng. The total amount sought in these cases exceeds USD 300 millon,
excluding any pre-judgment interest that may be awarded. The four lawsuits commenced by the Fairfeld funds’ liqudators
have been dismssed and the appeals of those dismssals by the funds’ liqudators are ongoing. The lawsuit brought against
the Group by the BMIS bankruptcy trustee had been stayed pending a ruling by the US Second Circut Court of Appeals in
related cases brought by the BMIS bankruptcy trustee against other defendants that had been dismssed. In August 2021, the
US Court of Appeals issued its ruling in the related cases with the result that the BMIS bankruptcy trustee's lawsuit against the
Group is no longer stayed and is now ongoing. While the Group continues to vigorously defend these lawsuits, there is a
range of possible outcomes in this litgation.
Based on the facts currently known, it is not possible for the Group to predict the outcome of these lawsuits.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
280
Notes to the financal statements continued
26. Subordinated liablites and other borrowed funds
Accounting policy
Subordinated liablites and other borrowed funds are classifed as financal instruments. Refer to Note 12 Financal
instruments for the accounting policy.
All subordinated liablites are unsecured, unguaranteed and subordinated to the claims of other creditors includng without
limtation, customer deposits and deposits by banks. The Group has the right to settle these debt instruments in certain
circumstances as set out in the contractual agreements. Where a debt instrument is callable, the issuer has the right to call.
2021
$millon
2020
$millon
Subordinated loan capital – issued by subsidary undertakings
$540 millon floating rate subordinated notes due 2030 (callable 2025)
1
540
540
540
540
Subordinated loan capital – issued by the Company
£200 millon 7.75 per cent subordinated notes due (callable 2022)
48
52$960 millon floating rate subordinated notes due 2022
960
960$700 millon 8.0 per cent subordinated notes due 2031
418
454$2 billon floating rate subordinated notes due 2023
2,000
2,000$500 millon floating rate subordinated notes due 2043
500
500$2 billon floating rate subordinated notes due 2044 (callable 2039)
2,000
2,000$250 millon floating rate subordinated notes due 2048 (callable 2043)
250
250$1 billon floating rate subordinated notes due 2029 (callable 2024)
1,000
1,000$1.25 billon floating rate subordinated notes due 2032 (callable 2027)
1,250
1,250$1 billon 3.516 per cent subordinated notes due 2030 (callable 2025)
956
1,066£504 millon floating subordinated debt 2043 (callable 2038)
682
688$2 billon 5.3 per cent subordinated debt 2035 (callable 2030)
2,000
2,000£527 millon floating rate subordinated debt 2039 (callable 2034)
713
719€1 billon 2.5 per cent subordinated debt 2030 (callable 2025)
1,137
1,22313,914
14,162
Primary capital floating rate notes
$400 millon floating rate undated subordinated notes
16
16$300 millon floating rate undated subordinated notes (Series 2)
69
69$400 millon floating rate undated subordinated notes (Series 3)
50
50$200 millon floating rate undated subordinated notes (Series 4)
26
26£150 millon floating rate undated subordinated notes
–
16161
177
Total for Group 14,615
14,879
1 Issued by Standard Chartered Bank (Singapore) Limted
2021
USD
$millon
GBP
$millon
EUR
$millon
Others
$millon
Total
$millon
Fixed rate subordinated debt
3,374 48 1,137 – 4,559
Floating rate subordinated debt
8,661 1,395 – – 10,056
Total
12,035 1,443 1,137 – 14,615
2020
USD
$millon
GBP
$millon
EUR
$millon
Others
$millon
Total
$millon
Fixed rate subordinated debt 3,520 52 1,223 – 4,795
Floating rate subordinated debt 8,661 1,423 – – 10,084
Total 12,181 1,475 1,223 – 14,879
Redemptions and repurchases during the year
Standard Chartered Bank exercised its right to redeem the remainng USD 16 millon £ 150 millon Undated Primary Capital
Floating Rate Notes.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
281
Notes to the financal statements continued
27. Share capital, other equity instruments and reserves
Accounting policy
Financal instruments issued are classifed as equity when there is no contractual obligaton to transfer cash, other financal
assets or issue available number of own equity instruments. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds.
Securites which carry a discretonary coupon and have no fixed maturity or redemption date are classifed as other equity
instruments. Interest payments on these securites are recognised, net of tax, as distrbutions 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
consideraton paid 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 consideraton received is included in
shareholders’ equity of the Group and/or the Company.
Group and Company
Number of
ordinary
shares
millons
Ordinary
share
capital
1
millons
Ordinary
share
premium
millons
Preference
share
premium
2
millons
Total share
capital and
share
premium
millons
Other equity
instruments
millons
At 1 January 2020 19,024 19,024 296 1,500 20,820 5,000
Shares issued 300 300 – – 300 –
Additonal Tier 1 redemption – – – – – (2,000)
At 31 December 2020 19,324 19,324 296 1,500 21,120 3,000
Shares issued
1,273 1,273 – – 1,273 –
Additonal Tier 1 equity issuance
– – – – – 2,750
Additonal Tier 1 redemption
– – – – – (1,001)
At 31 December 2021 20,597 20,597 296 1,500 22,393 4,749
1 Issued and fully paid ordinary shares of $1 each
2 Includes preference share capital of $75,000
Ordinary share capital
The authorised share capital of the Company at 31 December 2021 was $26,789 millon and TWD 1,225 millon (31 December
2020: $26,789 millon and TWD 1,225 millon) made up of 26,782 millon ordinary shares of $1 each, 2.4 millon non-cumulative
irredeemable preference shares of $0.01 each, 1 millon non-cumulative preference shares of $5 each, 15,000 non-cumulative
redeemable preference shares of $5 each, 462,500 non-cumulative redeemable 8.125% preference shares of $5 each and 50
millon non-cumulative redeemable preference shares of TWD24.50 each.
The issued share capital of the Company at 31 December 2021 was $20,597 millon (31 December 2020: $19,324 millon) made
up of: 20,597 millon ordinary shares of $1 each.
The issued ordinary share capital of the Company increased by 1,273 millon shares during the year. The Company has one
class of ordinary shares, which carries no rights to fixed income. Subject to any special rights or restrictons as to voting
attached to any shares in accordance with the Company’s Royal Charter Bye-Laws and Rules, on a show of hands every
member present at a general meeting by a representative or proxy shall have one vote. On a poll, every member holding
shares or stock of less than the nominal amount of US$25 shall not have any vote, but every other member who is present in
person or by proxy shall have votes in accordance with the following scale:
Nominal amount of Shares or Stock held Number of Votes
US$25 or more but less than US$50 1 vote
US$50 or more but less than US$100 2 votes
US$100 or more but less than US$250 3 votes
US$250 or more but less than US$375 4 votes
US$375 or more but less than US$500 5 votes
US$500 or more but less than US$750 6 votes
US$750 or more but less than US$1,000 7 votes
US$1,000 or more but less than US$1,250 8 votes
US$1,250 or more but less than US$1,500 9 votes
US$1,500 or more 10 votes
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
282
Notes to the financal statements continued
27. Share capital, other equity instruments and reserves continued
Preference share capital
7,500 non-cumulative redeemable preference shares issued on 8 December 2006 with a nominal value of $5 each and 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 in whole or in part on 31 Jan 2027 and on any quarterly divdend payment date falling on or
around ten-year intervals thereafter. The amount payable on redemption will be the paid up amount of $100,000 per
preference share to be redeemed, plus an amount equal to the accrued but unpaid divdend thereon up to but excluding the
redemption date; and;7,500 non-cumulative redeemable preference shares issued on 25 May 2007 with a nominal value of
$5 each and 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 on 30 July 2037 and on any quarterly divdend payment date falling on or around
ten-year intervals thereafter. The amount payable on redemption will be the paid-up amount of $100,000 per preference
share to be redeemed, plus an amount equal to the accrued but unpaid divdend thereon up to but excluding the redemption
date.
Other equity instruments
The table provides details of outstanding Fixed Rate Resetting Perpetual Subordinated Contingent Convertible AT1 securites
issued by Standard Chartered Bank. All issuances are made for general business purposes and to increase the regulatory
capital base of the Group.
Issuance date Nominal value Interest rate
2
Coupon payment dates
3
First reset dates
4
18 August 2016 USD 999 millon
1
7.50% 2 April, 2 October each year 2 April 2022
18 January 2017 USD 1,000 millon 7.75% 2 April, 2 October each year 2 April 2023
14 January 2021 USD 1,250 millon 4.75% 14 January, 14 July each year 14 July 2031
19 August 2021 USD 1,500 millon 4.30% 19 February, 19 August each year 19 August 2028
1 During the period, the entity repurchased around USD 1,001 millon of these securites via a tender offer
2 Interest rates for the period from (and includng) the issue date to (but excluding) the first reset date
3 Interest payable semi-annually in arrears
4 Securites are resettable each date falling five years, or an integral multiple of five years, after the first reset date
The princpal terms of the AT1 securites are described below:
•
The securites are perpetual and redeemable, at the option of the Company in whole but not in part, on the first call date or
on any fifth anniversary after the first call date
•
The securites are also redeemable for certain regulatory or tax reasons on any date at 100 per cent of their princpal
amount together with any accrued but unpaid interest up to (but excluding) the date fixed for redemption. Any
redemption is subject to the Company givng notice to the relevant regulator and the regulator granting permisson to
redeem
•
interest payments on these securites will be accounted for as a divdend
•
Interest on the securites is due and payable only at the sole and absolute discreton of the Company, subject to certain
additonal restrictons set out in the terms and conditons. Accordingly, the Company may at any time elect to cancel any
interest payment (or part thereof) which would otherwise be payable on any interest payment date
•
The securites will be written down in full should the fully loaded Common Equity Tier 1 ratio of the issuer fall below 7.0 per
cent (a Loss Absorption Event).
The securites rank behind the claims against the Company of: (a) unsubordinated creditors; (b) claims which are expressed
to be subordinated to the claims of unsubordinated creditors of the Company but not further or otherwise; or (c) claims which
are, or are expressed to be, junor to the claims of other creditors of the Company, whether subordinated or unsubordinated,
other than claims which rank, or are expressed to rank, pari passu with, or junor to, the claims of holders of the AT1 securites
in a windng-up occurring prior to the Loss Absorption Event.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
283
Notes to the financal statements continued
27. 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 redenominaton of share capital and share premium from
sterling to US dollars in 2001. The capital redemption reserve represents the nominal value of preference shares redeemed
•
Own credit adjustment reserve represents the cumulative gains and losses on financal liablites designated at fair value
through profit or loss relating to own credit. Gains and losses on financal liablites designated at fair value through profit or
loss relating to own credit in the year have been taken through other comprehensive income into this reserve. On
derecogniton of applicable instruments, the balance of any OCA will not be recycled to the income statement, but will be
transferred withn equity to retained earnings
•
Fair value through other comprehensive income (FVOCI) debt reserve represents the unrealised fair value gains and losses
in respect of financal assets classifed as FVOCI, net of expected credit losses and taxation. Gains and losses are deferred
in this reserve and are reclassifed to the income statement when the underlying asset is sold, matures or becomes
impared
•
FVOCI equity reserve represents unrealised fair value gains and losses in respect of financal assets classifed as FVOCI, net
of taxation. 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 derivatves that meet the critera for
these types of hedges. Gains and losses are deferred in this reserve and are reclassifed 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 reclassifed to the
income statement when the underlying foreign operation is disposed. Gains and losses arisng from derivatves 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 divdend distrbutions
and own shares held (treasury shares)
A substantial part of the Group’s reserves is held in overseas subsidary undertakings and branches, princpally 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 additon, if these overseas reserves were to be remitted, further
unprovided taxation liablites might arise.
As at 31 December 2021, the distrbutable reserves of Standard Chartered Bank (the Company) were $5.5 billon (2020:
$5.0billon). These comprised of retained earnings. Distrbution of reserves is subject to maintaning minmum capital
requirements.
28. Non-controlling interests
Accounting policy
Non-controlling interests are measured at the non-controlling interest’s proportionate share of the acquiree’s identfiable
net assets.
$millon
At 1 January 2020 1,289
Loss attributable to non-controlling interests (3)
Profits attributable to non-controlling interests 47
Comprehensive income for the year 44
Distrbutions (79)
At 31 December 2020
1,254
Loss attributable to non-controlling interests
(25)
Profits attributable to non-controlling interests
29
Comprehensive income for the year
4
Distrbutions
(83)
Other increases
1
73
At 31 December 2021 1,248
1 Movements related to non-controlling interest from Trust Bank Singapore Limted ($70 millon), Zodia Markets Holdings Limted ($3 millon)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
284
Notes to the financal statements continued
29. Retirement benefit obligatons
Accounting policy
The Bank Group operates pension and other post-retirement benefit plans around the world, which can be categorised into
defined contributon plans and defined benefit plans. For defined contributon plans, the Bank Group pays contributons to
publicly or privately adminstered pension plans on a statutory or contractual basis, and such amounts are charged to
operating expenses. The Bank Group has no further payment obligatons once the contributons have been paid.
For funded defined benefit plans, the liablity recognised in the balance sheet is the present value of the defined benefit
obligaton at the balance sheet date less the fair value of plan assets. For unfunded defined benefit plans the liablity
recognised at the balance sheet date is the present value of the defined benefit obligaton.
The defined benefit obligaton 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 Bank Group determines the net interest expense on the net defined
benefit liablity for the year by applying the discount rate used to measure the defined benefit obligaton at the beginnng of
the annual period to the net defined benefit liablity, taking into account any changes in the net defined benefit liablity
during the year as a result of contributons and benefit payments. Net interest expense, the cost of the accrual of new
benefits, benefit enhancements (or reductions) and adminstration expenses met directly from plan assets are recognised in
the income statement in the period in which they were incurred.
Signficant accounting estimates and judgements
There are many factors that affect the measurement of the retirement benefit obligatons. This measurement requires the
use of estimates, such as discount rates, inflaton, pension increases, salary increases, and life expectancies which are
inherently uncertain.
Discount rates are 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 obligatons. This is the approach adopted across our
geographies. Where there are inflaton-linked bonds available (e.g. United Kingdom and the eurozone), the Bank Group
derives inflaton based on the market on those bonds, with the market yield adjusted in respect of the United Kingdom to
take account of the fact that liablites are linked to Consumer Price Index inflaton, whereas the reference bonds are linked to
Retail Price Index inflaton. Where no inflaton-linked bonds exist, we determine inflaton assumptions based on long-term
forecasts and short-term inflaton data. Salary growth assumptions reflect the Bank Group’s long-term expectations, taking
into account future business plans and macroeconomic data (primarly expected future long-term inflaton). Demographic
assumptions, includng mortality 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
historc experience and/or future expectations. The sensitvity of the liablites to changes in these assumptions is shown in the
Note below.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
285
Notes to the financal statements continued
29. Retirement benefit obligatons continued
Group
Retirement benefit obligatons comprise:
2021
$millon
2020
$millon
Defined benefit plans obligaton
187
411Defined contributon plans obligaton
17
8Net obligaton 204
419
Retirement benefit charge comprises:
2021
$millon
2020
$millon
Defined benefit plans
31
46Defined contributon plans
243
217Charge against profit (Note 7) 274
263
The Bank Group operates over 50 defined benefit plans across its geographies, many of which are closed to new entrants
who now jon defined contributon arrangements. The aim of all these plans is, as part of the Group’s commitment to financal
wellbeing 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 conditons. The defined benefit plans expose the Group to currency
risk, interest rate risk, investment risk and actuarial risks such as longevity risk.
The material holdings of government and corporate bonds shown on page 287 partially hedge movements in the liablites
resulting from interest rate and inflaton changes. Setting aside movements from other drivers such as currency fluctuation,
the increases in discount rates in most geographies over 2021 have led to lower liablites. These have been partly offset by
decreases in the value of bonds held and good stock market performance has led to assets broadly holding level over the
year resulting in a material fall in the person defict reported. These movements are shown as actuarial gains in the table
below. Contributons into a number of plans in excess of the amounts required to fund benefits accruing have also helped to
reduce the net defict over the year.
The disclosures required under IAS 19 have been calculated by independent qualifed actuaries based on the most recent full
actuarial valuations updated, where necessary, to 31 December 2021.
UK Fund
The Standard Chartered Pension Fund (the ‘UK Fund’) is the Bank Group’s largest pension plan, representing 70 per cent
(31December 2020: 71 per cent) of total pension liablites. The UK Fund is set up under a trust that is legally separate from the
Bank (its formal sponsor) and, as required by UK legislaton, at least one-third of the trustee directors are nominated by
members; the remainder are appointed by the Bank. The trustee directors have a fiducary duty to members and are
responsible 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
employees are now offered membership of a defined contributon plan.
The financal positon of the UK Fund is regularly assessed by an independent qualifed actuary. The funding valuation as at
31 December 2020 was completed in December 2021 by the then Scheme Actuary, T Kripps of Wills Towers Watson, using
assumptions different from those on page 286, and agreed with the UK Fund trustee. It showed that the UK Fund was 92%
funded at that date, revealing a past service defict of $172 millon (£127 millon).
To repair the defict, three annual cash payments of $45 millon (£32.9 millon) were agreed, with the first of these paid in
December 2021, and two further instalments to be paid in December 2022 and December 2023. The agreement allows that if
the funding positon improves to being at or near a surplus in future years, the payments due in December 2022 and 2023 will
be reduced or elimnated. In additon, an additonal payment of $68 millon (£50 millon) has been made to top up the
existng escrow account of $149 millon (£110 millon) which exists to provide security for future contributons.
The Bank Group has not recognised any additonal liablity under IFRIC 14 as the Bank has control of any pension surplus
under the Trust Deed and Rules.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
286
Notes to the financal statements continued
29. Retirement benefit obligatons continued
Overseas plans
The princpal overseas defined benefit arrangements operated by the Bank Group are in Germany, India, Jersey, United Arab
Emirates (UAE) and the United States of America (US). Plans in Germany, India and UAE remain open for accrual of future
benefits.
Key assumptions
The princpal financal assumptions used at 31 December 2021 were:
Funded plans
UK Fund Overseas Plans
1
2021
%
2020
%
2021
%
2020
%
Discount rate
2.0
1.41.0 – 6.7
0.6 – 6.3Price Inflation
2.6
2.22.0 – 4.0
1.4 – 4.0Salary increases
n/a
n/a3.5 – 7.0
2.9 – 7.0Pension increases
2.5
2.10.0 – 3.1
0.0 – 2.71 The range of assumptions shown is for the main defined benefit overseas plans in Germany, India, Jersey, and the US. These comprise around 75 per cent of the total
liablites of overseas defined benefit plans
Unfunded plans
US post-retirement medical Other
1
2021
%
2020
%
2021
%
2020
%
Discount rate
3.1
2.82.0 – 6.7
1.4 – 6.3Price inflaton
2.5
2.52.0 – 4.0
2.0 – 4.0Salary increases
N/A
n/a3.7 – 7.0
3.5 – 7.0Pension increases
N/A
n/a0.0 – 2.6
0.0 – 2.1Post-retirement medical rate
7% in 2021
reducing by
0.5% per
annum to
5% in 2025
7% in 2020
reducing by
0.5% per
annum to
5% in 2024
n/a
n/a
1 The range of assumptions shown is for the main unfunded plans in Bahrain, India, Thailand, UAE and the UK. They comprise around 85 per cent of the total liablites of
unfunded plans
The princpal non-financal assumptions are those made for UK life expectancy. The assumptions for life expectancy for the
UK Fund are that a male member currently aged 60 will live for 27 years (31 December 2020: 27 years) and a female member
for 30 years (31 December 2020: 30 years) and a male member currently aged 40 will live for 29 years (31 December 2020: 29
years) and a female member for 31 years (31 December 2020: 31 years) after their 60th birthdays.
Both financal and non-financal assumptions can be expected to change in the future, which would affect the value placed
on the liablites. For example, changes at the reporting date to one of the relevant actuarial assumptions, holding other
assumptions constant, would have affected the defined benefit obligaton by the amounts shown below:
•
If the discount rate increased by 25 basis points, the liablity would reduce by approximately $65 millon for the UK Fund (31
December 2020: $75 millon) and $25 millon for the other plans (31 December 2020: $30 millon)
•
If the rate of inflaton increased by 25 basis points, the liablity allowing for the consequent impact on pension and salary
increases, would increase by approximately $45 millon for the UK Fund (31 December 2020 $50 millon) and $10 millon for
the other plans (31 December 2020: $15 millon)
•
If the rate salaries increase compared with inflaton increased by 25 basis points, the liablity would increase by nil for the
UK Fund (31 December 2020: $nil millon) and approximately $5 millon for the other plans (31 December 2020: $10 millon)
•
If longevity expectations increased by one year, the liablity would increase by approximately $80 millon for the UK Fund (31
December 2020: $70 millon) and $15 millon for the other plans (31 December 2020: $20 millon)
Although this analysis does not take account of the full distrbution of cash flows expected under the UK Fund, it does provide
an approximaton of the sensitvity to the main assumptions. While changes in other assumptions would also have an
impact, the effect would not be as signficant.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
287
Notes to the financal statements continued
29. Retirement benefit obligatons continued
Profile of plan obligatons
Funded plans Unfunded plans
UK Fund Overseas
Post-
retirement
medical Other
Duration of the defined benefit obligaton (in years)
15 13 9 11
(Duration of the defined benefit obligaton – 2020) 15 14 10 11
Benefits expected to be paid from plans
Benefits expected to be paid during 2022 86 34 1 15
Benefits expected to be paid during 2023 88 31 1 14
Benefits expected to be paid during 2024 90 32 1 13
Benefits expected to be paid during 2025 93 33 1 14
Benefits expected to be paid during 2026 95 33 1 14
Benefits expected to be paid during 2027 to 2031 514 204 5 68
Fund values:
The fair value of assets and present value of liablites of the plans attributable to defined benefit members were:
At 31 December
2021
2020
Funded plans Unfunded plans
Funded plans Unfunded plans
UK Fund
$millon
Overseas
plans $millon
Post-
retirement
medical
$millon Other $millon
UK Fund
$millon
Overseas
plans $millon
Post-
retirement
medical
$millon
Other
$millon
Equites 159 N/A N/A
145 149 N/A N/A
118Government bonds 120 N/A N/A
695 150 N/A N/A
844Corporate bonds 87 N/A N/A
610 119 N/A N/A
508Absolute Return Fund – N/A N/A
91 – N/A N/A
94Hedge funds
1
19 – N/A N/A
89 – N/A N/A
Insurance linked funds
1
11 – N/A N/A
36 – N/A N/A
Property 9 N/A N/A
127 11 N/A N/A
74Derivatves 4 N/A N/A
10 – N/A N/A
20Cash and equivalents 77 N/A N/A
108 83 N/A N/A
141Others
1
94 2 N/A N/A
10 9 N/A N/A
Total fair value of assets
2
1,910 514 N/A N/A
1,934 465 N/A N/A
Present value of liablites (1,822) (560) (13) (215)
(1,982) (573) (16) (239)
Net pension plan
obligaton 88 (46) (13) (215)
(48) (108) (16) (239)
1 Unquoted assets
2 Self-investment is monitored closely and is less than $1 millon of Standard Chartered equites and bonds for 2021 (31 December 2020: <$1 millon). Self-investment is only
allowed where it is not practical to exclude it – for example through investment in index-tracking funds where the Bank Group is a constituent of the relevant index
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
288
Notes to the financal statements continued
29. Retirement benefit obligatons continued
The pension cost for defined benefit plans was:
2021
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Current service cost
1
– 21 – 8 29
Past service cost and curtailments²
– (1) – (4) (5)
Interest income on pension plan assets
(26) (19) – – (45)
Interest on pension plan liablites
27 21 – 4 52
Total charge to profit before deduction of tax 1 22 – 8 31
Net (gains)/losses on plan assets
3
(6) (34) – – (40)
(Gains)/losses on liablites
(87) (18) (2) (10) (117)
Total (gains)/losses recognised directly in statement of
comprehensive income before tax (93) (52) (2) (10) (157)
Deferred taxation
– 15 – – 15
Total (gains)/losses after tax (93) (37) (2) (10) (142)
1 Includes adminstrative expenses paid out of plan assets of $1 millon (31 December 2020: $2 millon)
2 Past service costs arose due to plan amendments in India, Kenya and Sri Lanka
3 The actual return on the UK Fund assets was a gain of $32 millon and on overseas plan assets was a gain of $53 millon
The pension cost for defined benefit plans was:
2020
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Current service cost
1
– 15 – 6 21
Past service cost and curtailments
2
– – – 14 14
Interest income on pension plan assets (32) (18) – – (50)
Interest on pension plan liablites 35 20 1 5 61
Total charge to profit before deduction of tax
3 17 1 25 46
Net (gains)/losses on plan assets
3
(160) (42) – – (202)
(Gains)/losses on liablites 131 68 (1) 21 219
Total (gains)/losses recognised directly in statement of
comprehensive income before tax
(29) 26 (1) 21 17
Deferred taxation – (10) – – (10)
Total (gains)/losses after tax
(29) 16 (1) 21 7
1 Includes adminstrative expenses paid out of plan assets of $2 millon (31 December 2019: $2 millon)
2 Past service costs arose primarly due to recogniton of a legacy UK long term sick plan which has been clarifed as technically representing a defined benefit
3 The actual return on the UK Fund assets was a gain of $192 millon and on overseas plan assets was a loss of $60 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
289
Notes to the financal statements continued
29. Retirement benefit obligatons continued
Movement in the defined benefit pension plans and post-retirement medical defict during the year comprise:
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Surplus/(defict) at 1 January 2021 (48) (108) (16) (239) (411)
Contributons
45 31 1 17 94
Current service cost
– (21) – (8) (29)
Past service cost and curtailments
– 1 – 4 5
Settlement costs and transfers impact
– – – – –
Net interest on the net defined benefit asset/liablity
(1) (2) – (4) (7)
Actuarial (losses)/gains
93 52 2 10 157
Exchange rate adjustment
(1) – – 5 4
Surplus/defict at 31 December 2021¹ 88 (47) (13) (215) (187)
1 The defict total of $187 millon is made up of plans in defict of $305 millon (31 December 2020: $411 millon) net of plans in surplus with assets totalling $118 millon
(31December 2020: $14 millon)
Movement in the defined benefit pension plans and post-retirement medical defict during the year comprise:
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Surplus/defict at 1 January 2020
(117) (79) (16) (205) (417)
Contributons 44 27 – 16 87
Current service cost – (15) – (6) (21)
Past service cost and curtailments – – – (14) (14)
Settlement costs and transfers impact – (5) – – (5)
Net interest on the net defined benefit asset/liablity (3) (2) (1) (5) (11)
Actuarial (losses)/gains 29 (26) 1 (21) (17)
Exchange rate adjustment (1) (8) – (4) (13)
Surplus/defict at 31 December 2020¹
(48) (108) (16) (239) (411)
1 The defict total of $411 millon is made up of plans in defict of $425 millon (31 December 2019: $429 millon) net of plans in surplus with assets totalling $14 millon (31
December 2019: $12 millon)
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
290
Notes to the financal statements continued
29. Retirement benefit obligatons continued
The Bank Group’s expected contributon to its defined benefit pension plans in 2020 is $88 millon.
2021
2020
Assets
$millon
Obligatons
$millon
Total
$millon
Assets
$millon
Obligatons
$millon
Total
$millon
At 1 January (2,538) (417)
2,399 (2,810) (411)
2,121Contributons
1
95 (1) 94
87 – 87
Current service cost
2
– (29) (29)
– (21) (21)
Past service cost and curtailments (14) (14)
– 5 5
–Settlement costs & transfers
3
10 (10) –
18 (23) (5)
Interest cost on pension plan liablites (61) (61)
– (52) (52)
–Interest income on pension plan assets – 50
45 – 45
50Benefits paid out
2
(142) 142 –
(128) 128 –
Actuarial (losses)/gains
4
40 117 157
202 (219) (17)
Exchange rate adjustment (62) (13)
(23) 27 4
49At 31 December 2,424 (2,611) (187)
2,399 (2,810) (411)
1 Includes employee contributon of $1 millon (31 December 2020: nil)
2 Includes adminstrative expenses paid out of plan assets of $1 millon (31 December 2019: $2 millon)
3 Impact of transfers relates to a defined contributon plan in Zambia which was included withn IAS 19 Disclosures for the first time this year due to the existence of
investment guarantees which constitute a defined benefit under IAS 19. Previously, this plan was accounted for as a pure defined contributon plan.
4 Actuarial gain on obligaton comprises of $118 millon gain (31 December 2020: $235 millon loss) from financal assumption changes, $5 millon gain (31 December 2020:
$21 millon gain) from demographic assumption changes and $5 millon loss (31 December 2020: $5 millon loss) from experience.
Company
Retirement benefit obligatons comprise:
2021
$millon
2020
$millon
Defined benefit plans obligaton
152
367Defined contributon plans obligaton
4
–Net obligaton 156
367
Retirement benefit charge comprises:
2021
$millon
2020
$millon
Defined benefit plans
20
37Defined contributon plans
116
104Charge against profit 136
141
UK Fund
See the Bank Group section on the UK Fund in this note (page 285). There are no differences between Bank Group and
Company in respect of the Fund.
Overseas Plans
The princpal overseas defined benefit arrangements operated by the Company are in Germany, Jersey, India, United Arab
Emirates (UAE) and the United States of Americas (US).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
291
Notes to the financal statements continued
29. Retirement benefit obligatons continued
All Plans
The disclosures required under IAS 19 have been calculated by qualifed independent actuaries based on the most recent full
actuarial valuations updated, where necessary, to 31 December 2021.
The financal assumptions used at 31 December 2021 as shown below. Sensitvites are recorded on page 286 of the Bank
Group accounts and those for non-UK Fund plans are applicable in proportion to the lower liablites of the Company.
Funded plans
UK Fund Overseas Plans
1
2021
%
2020
%
2021
%
2020
%
Discount rate
2.0
1.41.0 – 6.7
0.6 – 6.3Price inflaton
2.6
2.22.0 – 4.0
1.4 – 4.0Salary increases
n/a
n/a3.5 – 7.0
2.9 – 7.0Pension increases
2.5
2.10.0 – 3.1
0.0 – 2.71 The range of assumptions shown is for the main funded defined benefit overseas plans in Germany, India, Jersey and the US. These comprise around 80 per cent of the
total liablites of funded overseas plans
Unfunded plans
US Post-retirement medical
1
Other
1
2021
%
2020
%
2021
%
2020
%
Discount rate
3.1
2.82.0 – 6.7
1.4 – 6.3Price inflaton
2.5
2.52.5 – 4.0
2.0 – 4.0Salary increases
N/A
n/a4.0 – 7.0
3.5 – 7.0Pension increases
N/A
n/a0.0 – 2.6
0.0 – 2.1Post-retirement medical rate
7% in 2021
reducing by
0.5% per
annum to
5% in 2025
7% in 2020
reducing by
0.5% per
annum to
5% in 2024
n/a
n/a
1 The range of assumptions shown is for the main unfunded plans in India, UAE and the UK. These comprise around 85 per cent of the total liablites of unfunded plans
Fund values:
The fair value of assets and present value of liablites of the plans attributable to defined benefit members were:
At 31 December
2021
2020
Funded plans Unfunded plans
Funded plans Unfunded plans
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Equites 154 N/A N/A
145 128 N/A N/A
118Government bonds 114 N/A N/A
695 137 N/A N/A
844Corporate bonds 86 N/A N/A
610 115 N/A N/A
508Absolute return Fund – N/A N/A
91 – N/A N/A
94Hedge funds
1
19 – N/A N/A
89 – N/A N/A
Insurance linked funds
1
11 – N/A N/A
36 – N/A N/A
Property – N/A N/A
127 – N/A N/A
74Derivatves 4 N/A N/A
10 – N/A N/A
20Cash and equivalents 45 N/A N/A
108 46 N/A N/A
141Others¹ 9 N/A N/A
94 – N/A N/A
10Total fair value of assets
2
1,910 426 N/A N/A
1,934 412 N/A N/A
Present value of liablites (1,822) (449) (13) (204)
(1,982) (491) (16) (224)
Net pension plan
obligaton 88 (23) (13) (204)
(48) (79) (16) (224)
1 Unquoted assets
2 Self investment is monitored closely and is less than $1 millon of Standard Chartered equites and bonds for 2021 (31 December 2020: <$1 millon). Self-investment is only
allowed where it is not practical to exclude it – for example through investment in index-tracking funds where the Bank is a constituent of the relevant index
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
292
Notes to the financal statements continued
29. Retirement benefit obligatons continued
The pension cost for defined benefit plans was:
2021
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Current service cost
1
– 11 – 5 16
Past service cost and curtailments
– (1) – (2) (3)
Interest income on pension plan assets
(26) (13) – – (39)
Interest on pension plan liablites
27 15 – 4 46
Total charge to profit before deduction of tax 1 12 – 7 20
Net (gains)/losses on plan assets
2
(6) (17) – – (23)
(Gains)/losses on liablites
(87) (34) (2) (9) (132)
Total (gains)/losses recognised directly in statement of
comprehensive income before tax (93) (51) (2) (9) (155)
Deferred taxation
– 13 – – 13
Total (gains)/losses after tax (93) (38) (2) (9) (142)
1 Includes adminstrative expenses paid out of plan assets of $1 millon (31 December 2020: $2 millon)
2 The actual return on the UK Fund assets was a gain of $32 millon and on overseas plan assets was a gain of $30 millon
2020
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Current service cost
1
– 9 – 4 13
Past service cost and curtailments
2
– – – 14 14
Interest on pension plan liablites 35 16 1 5 57
Total charge to profit before deduction of tax
3 10 1 23 37
Net (gains)/losses on plan assets
3
(160) (22) – – (182)
(Gains)/losses on liablites 131 45 (1) 21 196
Total (gains)/losses recognised directly in statement of
comprehensive income before tax
(29) 23 (1) 21 14
Deferred taxation – (10) – – (10)
Total (gains)/losses after tax
(29) 13 (1) 21 4
1 Includes adminstrative expenses paid out of plan assets of $2 millon (31 December 2019: $2 millon)
2 Past service costs arose primarly due to recogniton of a legacy UK long term sick plan which has been clarifed as technically representing a defined benefit
3 The actual return on the UK Fund assets was a gain of $192 millon and on overseas plan assets was a gain of $37 millon
Movement in the defined benefit pension plans and post-retirement medical defict during the year comprise:
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Surplus/defict at 1 January 2021
(48) (79) (16) (224) (367)
Contributons
45 20 1 17 83
Current service cost
– (11) – (5) (16)
Past service cost and curtailments²
– 1 – 2 3
Net interest on the net defined benefit asset/liablity
(1) (2) – (4) (7)
Actuarial (losses)/gains
93 51 2 9 155
Exchange rate adjustment
(1) (3) – 1 (3)
Surplus/defict at 31 December 2021¹ 88 (23) (13) (204) (152)
1 The defict total of $152 millon is made up of plans in defict of $266 millon (2020: $367 millon) net of plans in surplus with assets totalling $114 millon (2020: $11 millon)
2 Past service costs and gains arose due to plan amendments in India, Kenya and Sri Lanka
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
293
Notes to the financal statements continued
29. Retirement benefit obligatons continued
Movement in the defined benefit pension plans and post-retirement medical defict during the year comprise:
Funded plans Unfunded plans
Total
$millon
UK Fund
$millon
Overseas
plans
$millon
Post-
retirement
medical
$millon
Other
$millon
Surplus/defict at 1 January 2020 (117) (61) (16) (191) (385)
Contributons 44 17 – 14 75
Current service cost – (9) – (4) (13)
Past service cost and curtailments
2
– – – (14) (14)
Net interest on the net defined benefit asset/liablity (3) (1) (1) (5) (10)
Actuarial (losses)/gains 29 (23) 1 (21) (14)
Other (1) (2) – (3) (6)
Surplus/defict at 31 December 2020¹
(48) (79) (16) (224) (367)
1 The defict total of $367 millon is made up of plans in defict of $378 millon (2019: $395 millon) net of plans in surplus with assets totalling $11 millon (2019: $10 millon)
2 Past service costs arose primarly due to recogniton of a legacy UK long term sick plan which has been clarifed as technically representing a defined benefit
The Company’s expected contributon to its defined benefit pension plans in 2020 is $73 millon
2021
2020
Assets
$millon
Obligatons
$millon
Total
$millon
Assets
$millon
Obligatons
$millon
Total
$millon
At 1 January (2,482) (385)
2,346 (2,713) (367)
2,097Contributons
1
83 – 83
75 – 75
Current service cost
2
– (16) (16)
– (13) (13)
Past service cost and curtailments (14) (14)
– 3 3
–Interest cost on pension plan liablites (57) (57)
– (46) (46)
–Interest income on pension plan assets – 47
39 – 39
47Benefits paid out
2
(134) 134 –
(123) 123 –
Actuarial (losses)/gains
3
23 132 155
182 (196) (14)
Exchange rate adjustment (74) (6)
(21) 18 (3)
68At 31 December 2,336 (2,488) (152)
2,346 (2,713) (367)
1 Includes employee contributons of nil (31 December 2020: nil)
2 Includes adminstrative expenses paid out of plan assets of $1 millon (31 December 2020: $2 millon)
3 Actuarial gain on obligaton comprises of $115 millon gain (31 December 2020: $232 millon loss) from financal assumption changes, $5 millon gain (31 December 2020:
$21 millon gain) from demographic assumption changes and $12 millon gain (31 December 2020: $15 millon gain) from experience
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
294
Notes to the financal statements continued
30. 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 2022 in respect of 2021 performance, which vest in 2023-2025, is recognised as an expense over
the period from 1 January 2021 to the vesting dates in 2023-2025. 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 conditons (for
example, profitablity 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 binomal option pricng model. Non-market vesting conditons 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 revison of orignal estimates, if any, in the income statement and a corresponding adjustment to
equity over the remainng vesting period. Forfeitures prior to vesting attributable to factors other than the failure to satisfy
service conditons and non-market vesting conditons are treated as a cancellation and the remainng unamortised 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 liablity 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
conditons or market-based performance conditons, the cumulative charge incurred up to the date of forfeiture is credited to
the income statement. Any revaluation related to cash-settled awards is recorded as an amount due from subsidary
undertakings.
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.
2021
$millon
2020
$millon
Deferred share awards
87
67Other share awards
63
65Total share-based payments
1, 2
150
132
1 No forfeiture assumed
2 Includes $2 millon (2020: $13 millon) of share-based payments reported in ‘other staff costs’. This reflects Bank Group’s requirement under IFRS 2 to account for
cash-settled awards made to employees of Bank Group settled by Standard Chartered PLC with payments linked to PLC’s share price as equity-settled awards
2011 Standard Chartered Share Plan (the ‘2011 Plan’)
The 2011 Plan was approved by shareholders in May 2011 and is the Group’s main share plan. Since approval, it has been used
to deliver various types of share awards:
•
Long Term Incentive Plan (LTIP) awards: granted with vesting subject to performance measures. Performance measures
attached to awards granted previously include: total shareholder return (TSR); return on equity (RoE) and return on
tangible equity (RoTE) (in the case of both RoE and RoTE, with a Common Equity Tier 1 (CET1) underpin); strategic measures;
earnings per share (EPS) growth; and return on risk-weighted assets (RoRWA). Each measure is assessed independently
over a three-year period. Awards granted from 2016 have an indvidual 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 anniversares of the award date specifed at the time of
grant. Deferred awards are not subject to any plan limt. This enables the Group to meet regulatory requirements relating
to deferral levels, and is in line with market practice
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
295
Notes to the financal statements continued
30. Share-based payments continued
•
Restricted share awards, made outside of the annual performance process as replacement buy-out awards to new joners
who forfeit awards on leaving their previous employers, vest in instalments on the anniversares of the award date specifed
at the time of grant. This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market
practice. In line with simlar plans operated by our competitors, restricted share awards are not subject to an annual limt
and do not have any performance measures
Under the 2011 Plan, no grant price is payable to receive an award. The remainng life of the 2011 Plan during which new
awards can be made is one year.
Valuation – LTIP awards
The vesting of awards granted in both 2021 and 2020 is subject to relative TSR performance measures, achievement of a
strategic scorecard and satisfacton of RoTE (subject to a capital CET1 underpin). The vesting of awards granted in 2021 has
additonal conditons under strategic measures related to targets set for sustainablity linked to business strategy. The fair
value of the TSR component is calculated using the probabilty of meeting the measures over a three-year performance
period, using a Monte Carlo simulaton model. The number of shares expected to vest is evaluated at each reporting date,
based on the expected performance against the RoTE and strategic measures in the scorecard, to determine the accounting
charge.
No divdend equivalents accrue for the LTIP awards made in 2020 or 2021 and the fair value takes this into account,
calculated by reference to market consensus divdend yield.
2021
2020
Grant date
15 March
09 MarchShare price at grant date (£)
4.90
5.20Vesting period (years)
3-7
3-7Expected divded yield (%)
3.4
4.2Fair value (RoTE) (£)
1.25, 1.20
1.40, 1.34Fair value (TSR) (£)
0.72, 0.71
0.75, 0.72Fair value (Strategic) (£)
1.66, 1.60
1.40, 1.34Deferred shares and restricted 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 divdends. For awards granted to
material risk takers in 2021, the fair value of awards takes into account the lack of divdend equivalents, calculated by
reference to market consensus divdend yield.
Deferred share awards
2021
Grant date 22 June 30 March
Share price at grant date (£)
4.69 4.90
Vesting period (years)
Expected divdend
yield (%) Fair value (£)
Expected divdend
yield (%) Fair value (£)
1-3 years
N/A,3.4 4.69,4.24 N/A,3.4,3.4 4.90,4.58,4.43
1-5 years
3.4 4.17 3.4,3.4,3.4 4.43,4.36,4.29
3-7 years
– – 3.4,3.4 4.15,4.01
2020
Grant date
22 June 30 March 9 March
Share price at grant date (£) 4.27 4.67 5.20
Vesting period (years)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
1-3 years N/A 4.27 N/A,4.2 4.67,4.13 N/A,4.2,4.2 5.20,4.79,4.59
1-5 years – – 4.2 4.04 4.2,4.2 4.59,4.50
3-7 years – – – – 4.2,4.2 4.23,4.06
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
296
Notes to the financal statements continued
30. Share-based payments continued
Other restricted share awards
2021
Grant date 30 September 22 June 9 March
Share price at grant date (£)
4.37 4.69 4.90
Vesting period (years)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
1 year
3.4 4.23 3.4 4.53 3.4 4.74
2 years
3.4 4.09 3.4 4.38 3.4 4.58
3 years
3.4 3.95 3.4 4.24 3.4 4.43
4 years
3.4 3.82 3.4 4.10 3.4 4.29
5 years
3.4 3.70 – – – –
2020
Grant date 26 November 30 September 22 June 9 March
Share price at grant date
(£) 4.71 3.52 4.27 5.20
Vesting period (years)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
Expected
divdend yield
(%) Fair value (£)
1 year 4.2 4.34,4.52 4.2 3.38 4.2 4.10 4.2 4.99
2 years 4.2 4.16,4.34 4.2 3.24 4.2 3.93 4.2 4.79
3 years 4.2 4.16 4.2 3.11 4.2 3.77 4.2 4.59
4 years 4.2 4.00 4.2 2.98 4.2 3.62 4.2 4.41
5 years – – – – 4.2 3.48 4.2 4.23
All Employee Sharesave Plans
2013 Sharesave Plan
Under the 2013 Sharesave Plan, employees may open a savings contract. Withn a maturity period of six months after the
third anniversary, employees may 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 invtation (this is known as the ‘option exercise price’). There
are no performance measures attached to options granted under the 2013 Sharesave Plan 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 securites law and regulatory restrictons. In these countries, where possible, the Group offers an equivalent cash-based
plan to its employees.
The 2013 Sharesave Plan was approved by shareholders in May 2013 and all future Sharesave invtations are made under this
plan. The remainng life of the 2013 Sharesave Plan is two years.
Valuation – Sharesave:
Options under the Sharesave plans are valued using a binomal option-pricng model. The same fair value is applied to all
employees includng executive directors. The fair value per option granted and the assumptions used in the calculation are
asfollows:
2021
2020
Grant date
30
September
30
September
Share price at grant date (£)
4.37
3.52Exercise price (£)
3.67
3.14Vesting period (years)
3
3Expected volatilty (%)
35.1
31.8Expected option life (years)
3.33
3.33Risk-free rate (%)
0.42
(0.07)Expected divdend yield (%)
3.4
4.2Fair value (£)
1.11
0.69The expected volatilty is based on historcal volatilty over the last three years, or three years prior 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
aterm consistent with the assumed option life. The expected divdend yield is calculated by reference to market consensus
divdend yield.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
297
Notes to the financal statements continued
30. Share-based payments continued
Limts
An award shall not be granted under the 2011 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 2011 Plan and under any other discretonary 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 2011 Plan or 2013 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 2011 Plan or 2013 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 2011 Plan or 2013 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 2011 Plan or 2013 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 2011
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 2013 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.
Reconcilation of share award movements for the year to 31 December 2021
2011 Plan
Sharesave
Weighted average
Sharesave exercise price (£)LTIP
Deferred/
Restricted
shares¹
Outstanding at 1 January 2021
22,402,580 34,672,825 10,878,090 4.57
Granted
2,
3,775,615 14,546,571 2,675,125 –
Lapsed
(14,765,454) (786,117) (3,491,017) 5.33
Exercised
(320,964) (14,229,007) (3,740) 3.62
Outstanding as at 31 December 2021
11,091,777 34,204,272 10,058,458 4.07
Exercisable as at 31 December 2021
3,952 1,534,479 2,293,424 5.11
Range of exercise prices (£)³
– – 3.14 – 6.20
Intrinsc value of vested but not exercised options ($ millon)
0.02 9.31 0.05
Weighted average contractual remainng life (years)
7.82 8.08 2.04
Weighted average share price for awards exercised
during the period (£)
4.95 4.88 4.69
1 Employees does not contribute towards the cost of these awards and are covered under the 2011 and 2021 share plan rules
2 14,208,239 (DRSA/RSA) granted on 15 March 2021, 78,811 (DRSA/RSA) granted as notional divdend on 01 March 2021, 3,761,387 (LTIP) granted on 15 March 2021, 10,954
(LTIP) granted as notional divdend on 01 March 2021, 158,767 (DRSA/RSA) granted on 21 June 2021. 27,785 (DRSA/RSA) granted as notional divdend on 13 August 2021,
3,274 (LTIP) granted as notional divdend on 13 August 2021, 72,969 (RSA) granted on 30 September 2021, 2,675,125 (Sharesave) granted on 30 September 2021. LTIP and
DRSA/RSA awards granted in March 2021 were granted under the 2011 Plan, and DRSA/RSA awards granted in June and September 2021 were granted under the 2021
Plan. Notional divdends were granted under the 2011 Plan. Sharesave options granted in 2021 were granted under the 2013 Sharesave Plan.
3 For Sharesave options granted in 2021 the exercise price is £3.67 per share, which was a 20% discount to the closing share price on 27 August 2021. The closing share price
on 27 August 2021 was £4.578.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
298
Notes to the financal statements continued
30. Share-based payments continued
Reconcilation of share award movements for the year to 31 December 2020
2011 Plan
Sharesave
Weighted average Sharesave
exercise price (£)LTIP
Deferred/
Restricted
shares¹
Outstanding at 1 January 2020 20,550,048 25,529,031 10,198,118 5.35
Granted
2
2,933,189 20,324,709 3,702,169 –
Lapsed (824,269) (558,540) (2,865,637) 5.44
Exercised (256,388) (10,622,375) (156,560) 5.30
Outstanding at 31 December 2020 22,402,580 34,672,825 10,878,090 4.57
Exercisable as at 31 December 2020 26,059 2,193,792 1,545,932 6.17
Range of exercise prices (£)
3
– – 3.14 – 6.20
Intrinsc value of vested but not exercised options ($ millon) 0.17 13.95 0.01
Weighted average contractual remainng life (years) 6.26 8.32 2.16
Weighted average share price for awards exercised
during the period (£) 4.28 4.54 6.76
1. Employees do not contribute towards the cost of these awards
2. 19,081,191 (DRSA/RSA) granted on 09 March 2020, 171,578 (DRSA/RSA) granted as notional divdend on 06 March 2020, 2,872,132 (LTIP) granted on 09 March 2020, 56,805
(LTIP) granted as notional divdend on 06 March 2020, 172,893 (DRSA/RSA) granted on 22 June 2020, 4,252 (LTIP) granted as notional divdend on 25 August 2020,
460,311 (DRSA/RSA) granted on 30 September 2020, 3,720,169 (Sharesave) granted on 30 September 2020, 438,728 (DRSA/RSA) granted on 26 November 2020
3. For Sharesave granted in 2020 the exercise price is £3.14 per share, which was a 20% discount to the closing share price on 28 August 2020. The closing share price on 28
August 2020 was of £3.924.
31. Investments in subsidary undertakings, jont ventures and associates
Accounting policy
Subsidaries
Subsidaries are all entites, includng structured entites, which the Group controls. The Group controls an entity when it is
exposed to, and has rights to, variable returns from its involvement with the entity and has the abilty to affect those returns
through its power over the investee. The assessment of power is based on the Group’s practical abilty to direct the relevant
activties of the entity unilaterally for the Group’s own benefit and is subject to reassessment if and when one or more of the
elements of control change. Subsidaries are fully consolidated from the date on which the Group effectively obtains control.
They are deconsolidated from the date that control ceases, and where any interest in the subsidary remains, this is
remeasured to its fair value and the change in carrying amount is recognised in the income statement.
Associates and jont arrangements
Joint arrangements are where two or more parties either have rights to the assets, and obligatons of the jont arrangement
(jont operations), or have rights to the net assets of the jont arrangement (jont venture). The Group evaluates the
contractual terms of jont arrangements to determine whether a jont arrangement is a jont operation or a jont venture.
TheGroup did not have any contractual interest in jont operations.
An associate is an entity over which the Group has signficant influence.
Investments in associates and jont ventures are accounted for by the equity method of accounting and are intially
recognised at cost. The Group’s investment in associates and jont ventures includes goodwill identfied on acquistion (net of
any accumulated imparment loss).
The Group’s share of its associates’ and jont ventures’ post-acquistion profits or losses is recognised in the income statement,
and its share of post-acquistion movements in other comprehensive income is recognised in reserves. The cumulative
post-acquistion movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in
an associate or a jont venture equals or exceeds its interest in the associate, includng any other unsecured receivables, the
Group does not recognise further losses, unless it has incurred obligatons or made payments on behalf of the associate or
jont venture.
Unrealised gains and losses on transactions between the Group and its associates and jont ventures are elimnated to the
extent of the Group’s interest in the associates and jont ventures. At each balance sheet date, the Group assesses whether
there is any objectve evidence of imparment in the investment in associates and jont ventures. Such evidence includes a
signficant or prolonged decline in the fair value of the Group’s investment in an associate or jont venture below its cost,
among other factors.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
299
Notes to the financal statements continued
31. Investments in subsidary undertakings, jont ventures and associates continued
Signficant accounting estimates and judgements
The Group applies judgement in determinng if it has control, jont control or signficant influence over subsidaries, jont
ventures and associates respectively. These judgements are based upon identfying the relevant activties of counterparties,
being those activties that signficantly affect the entites returns, and further making a decison of if the Group has control
over those entites, jont control, or has signficant influence (being the power to particpate in the financal and operating
policy decisons but not control them).
These judgements are at times determined by equity holdings, and the voting rights associated with those holdings.
However, further consideratons includng but not limted to board seats, advisory committee members and specialst
knowledge of some decison-makers are also taken into account. Further judgement is required when determinng 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 disperson of
other shareholders.
Impairment testing of investments in associates and jont ventures is performed if there is a possible indcator of imparment.
Judgement is used to determine if there is objectve evidence of imparment. Objectve evidence may be observable data
such as losses incurred on the investment when applying the equity method, the granting of concessions as a result of
financal diffculty, or breaches of contracts/regulatory fines of the associate or jont venture. Further judgement is required
when considerng broader indcators of imparment such as losses of active markets or ratings downgrades across key
markets in which the associate or jont venture operate in.
Impairment testing is based on estimates includng forecasting 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 estimaton of future
cash flows and the level to which they are discounted is inherently uncertain and requires signficant judgement.
Business combinatons
The acquistion method of accounting is used to account for the acquistion of subsidaries by the Group. The cost of an
acquistion is measured as the fair value of the assets given, equity instruments issued and liablites incurred or assumed at
the date of exchange, together with the fair value of any contingent consideraton payable. The excess of the cost of
acquistion over the fair value of the Group’s share of the identfiable net assets and contingent liablites acquired is recorded
as goodwill (see Note 16 for details on goodwill recognised by the Group). If the cost of acquistion is less than the fair value of
the net assets and contingent liablites of the subsidary acquired, the difference is recognised directly in the income
statement.
Where the fair values of the identfiable net assets and contingent liablites acquired have been determined provisonally,
orwhere contingent or deferred consideraton is payable, adjustments arisng from their subsequent finalsation are not
reflected in the income statement if (i) they arise withn 12 months of the acquistion date (or relate to acquistions completed
before 1 January 2014) and (i) the adjustments arise from better informaton about conditons existng at the acquistion date
(measurement period adjustments). Such adjustments are applied as at the date of acquistion and, if applicable, prior year
amounts are restated. All changes that are not measurement period adjustments are reported in income other than changes
in contingent consideraton not classifed as financal instruments, which are accounted for in accordance with the
appropriate accounting policy, and changes in contingent consideraton classifed as equity, which is not remeasured.
Changes in ownership interest in a subsidary, which do not result in a loss of control, are treated as transactions between
equity holders and are reported in equity. Where a business combinaton is achieved in stages, the previously held equity
interest is remeasured at the acquistion date fair value with the resulting gain or loss recognised in the income statement.
In the Company’s financal statements, investment in subsidaries, associates and jont ventures are held at cost less
imparment and divdends from pre-acquistion profits received prior to 1 January 2009, if any. Inter-company transactions,
balances and unrealised gains and losses on transactions between Group companies are elimnated in the Group accounts.
Investments in subsidary undertakings
2021
$millon
2020
$millon
As at 1 January 8,258
9,227
Additons
1
3,077
141
Disposal
2
(1,639)
(716)
Impairment
(2)
(394)As at 31 December 9,694
8,258
1 Includes issuances of $1,273 millon by Standard Chartered Holdings (Singapore) Private Limted and $1,066 millon by Standard Chartered Bank (Singapore) Limted
2 Disposal of Standard Chartered Bank (Thai) Public Company Limted ($782 millon), Standard Chartered Bank (Vietnam) Limted ($327 millon) from Standard
Chartered Bank to Standard Chartered Bank (Singapore) Limted and $530 millon repaid by Standard Chartered Holdings (Singapore) Private Limted to holding
company Impairment primarly consists of $72m on Standard Chartered (Thai) Public Company Limted as a result of a decrease in net asset value due to losses for the
year, divdends paid and foreign exchange movements, offset by reversals of imparment of various subsidaries, primarly Standard Chartered UK Holdings Limted and
Standard Chartered Holdings Inc, as a result of increases in the recoverable amounts.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
300
Notes to the financal statements continued
31. Investments in subsidary undertakings, jont ventures and associates continued
At 31 December 2021, the princpal subsidary undertakings, all indrectly held except for Standard Chartered Bank AG,
Standard Chartered Bank (Pakistan) Limted, Standard Chartered Bank (Mauritus) Limted and 13.6 per cent of Standard
Chartered Bank (Singapore) Limted, and princpally engaged in the business of banking and provison of other financal
services, were as follows:
Country and place of incorporation or registraton
Main areas of
operation
Group interest
in ordinary
share capital
%
Standard Chartered Bank (Singapore) Limted, Singapore Singapore 100
Standard Chartered Bank AG, Germany
Germany,
Sweden and
France 100
Standard Chartered Bank Malaysia Berhad, Malaysia Malaysia 100
Standard Chartered Bank Nigera Limted, Nigera Nigera 100
Standard Chartered Bank (Vietnam) Limted, Vietnam Vietnam 100
Standard Chartered Bank (Mauritus) Limted, Mauritus Mauritus 100
Country and place of incorporation or registraton
Main areas of
operation
Group interest
in ordinary
share capital
%
Standard Chartered Bank (Thai) Public Company Limted, Thailand Thailand 99.87
Standard Chartered Bank (Pakistan) Limted, Pakistan Pakistan 98.99
Standard Chartered Bank Zambia PLC, Zambia Zambia 90.00
Standard Chartered Bank Botswana Limted, Botswana Botswana 75.83
Standard Chartered Bank Kenya Limted, Kenya Kenya 74.32
Standard Chartered Bank Ghana PLC, Ghana Ghana 69.42
A complete list of subsidary undertaking is included in Note 39.
The Group does not have any material non-controlling interest except as listed above, which contribute $44 millon
(31December 2020: $41 millon) of the profit attributable to non-controlling interest and $213 millon
(31 December 2020: $213 millon) of the equity attributable to non-controlling interests.
While the Group’s subsidaries are subject to local statutory capital and liqudity requirements in relation to foreign exchange
remittance, these restrictons arise in the normal course of business and do not signficantly restrict the Group’s abilty to
access or use assets and settle liablites of the Group.
The Group does not have signficant restrictons on its abilty to access or use its assets and settle its liablites other than
those resulting from the regulatory framework withn which the banking subsidaries operate. These frameworks require
banking operations to keep certain levels of regulatory capital, liqud assets, exposure limts and comply with other required
ratios. These restrictons are summarised below:
Regulatory and liqudity requirements
The Group’s subsidaries are required to maintan minmum capital, leverage ratios, liqudity and exposure ratios which
therefore restrict the abilty of these subsidaries to distrbute cash or other assets to the parent company.
The subsidaries are also required to maintan balances with central banks and other regulatory authorites in the countries in
which they operate. At 31 December 2021, the total cash and balances with central banks was $62 billon (31 December 2020:
$58 billon) of which $3 billon (31 December 2020: $3 billon) is restricted.
Statutory requirements
The Group’s subsidaries are subject to statutory requirements not to make distrbutions of capital and unrealised profits to
the parent company, generally to maintan solvency. These requirements restrict the abilty of subsidaries to remit divdends
to the Group. Certain subsidaries are also subject to local exchange control regulations which provide for restrictons on
exporting capital from the country other than through normal divdends.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
301
Notes to the financal statements continued
31. Investments in subsidary undertakings, jont ventures and associates continued
Contractual requirements
The encumbered assets in the balance sheet of the Group’s subsidaries are not available for transfer around the Group.
Share of profit from investment in associates and jont ventures comprises:
2021
$millon
2020
$millon
Profit from investment in jont ventures
(2)
(3)Profit from investment in associates
3
4Total 1
1
Interests in associates and jont ventures
2021
$millon
2020
$millon
As at 1 January 79
44
Exchange translation differences
(1)
(7)Additons
90
41Share of profits
1
1Disposals¹
(16)
–Share of fair value through other comprehensive income
3
–As at 31 December 156
79
1 Sale of Assembly payments to Currency fair has been reported
Company
Bank Company has an Investment in Trade Information Network (associate) and the carrying value of the investment is
$1 millon (31 December 2020: $Nil millon)
A complete list of the Group's interest in associates and jont ventures is included in Note 39. The princpal associate is:
Associate
Nature of
activties
Main areas
of operation
Group interest
in ordinary
share capital
%
CurrencyFair Limted Exchange Ireland Banking Ireland 43.42
On the 10th September 2021, the Group, through its subsidary Standard Chartered UK Holdings Limted completed its
investment in acquistion of CurrencyFair Limted, an Irish foreign exchange payments platform.
The Group invested in CurrencyFair through the contributon of its existng investment in its jont venture, Assembly Payments
Pte. Limted and a cash inection into CurrencyFair of $35 millon, which provided the Group with equity of 43.42% in
CurrencyFair.
This equity ownership, along with seats on the board of directors resulted in the Group having signficant influence over
CurrencyFair and as such will equity method account the investment.
The transaction will faciltate creation of a combined payments and foreign exchange products franchise, combinng the
customer base, staff, expertise and capabilties of both CurrencyFair and Assembly Payments.
The fair value of consideraton for the investment as follows:
Consideraton
$millon
Fair value of the Group’s investment in Assembly Payments
1
36
Cash consideraton
35
Total consideraton/Investment in Associate 71
1 The fair value of Assembly Payments was determined to be $60m, of which the Group’s equity ownership on transfer was 59.63%. The Group carried this investment
under the equity method at a balance of $16m resulting in a profit on disposal of $20m
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
302
Notes to the financal statements continued
32. Structured entites
Accounting policy
A structured entity is an entity that has been designed so that voting or simlar rights are not the dominant factor in decidng
who controls the entity. Contractual arrangements determine the rights and therefore relevant activties of the structured
entity. Structured entites are generally created to achieve a narrow and well-defined objectve with restrictons around their
activties. Structured entites are consolidated when the substance of the relationshp between the Group and the structured
entity indcates the Group has power over the contractual relevant activties of the structured entity, is exposed to variable
returns, and can use that power to affect the variable return exposure.
In determinng whether to consolidate a structured entity to which assets have been transferred, the Group takes into
account its abilty to direct the relevant activties of the structured entity. These relevant activties are generally evidenced
through a unilateral right to liqudate the structured entity, investment in a substantial proportion of the securites issued by
the structured entity or where the Group holds specifc subordinate securites that embody certain controlling rights. The
Group may further consider relevant activties embedded withn contractual arrangements such as call options which give
the practical abilty to direct the entity, special relationshps between the structured entity and investors, and if a single
investor has a large exposure to variable returns of the structured entity.
Judgement is required in determinng control over structured entites. The purpose and design of the entity is considered,
along with a determinaton of what the relevant activties 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 princpal in its own right or
as an agent on behalf of others. Judgement is further required in the ongoing assessment of control over structured entites,
specifcally if market conditons have an effect on the variable return exposure of different investors.
The Group has involvement with both consolidated and unconsolidated structured entites, which may be established by the
Group as a sponsor or by a third-party.
Interests in consolidated structured entites:
A structured entity is consolidated into the Group’s financal statements where
the Group controls the structured entity, as per the determinaton in the accounting policy above.
The following table presents the Group's interests in consolidated structured entites.
2021
$millon
2020
$millon
Princpal and other structured finance
173
225Total 173
225
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
303
Notes to the financal statements continued
32. Structured entites continued
Interests in unconsolidated structured entites:
Unconsolidated structured entites are all structured entites that are not
controlled by the Group. The Group enters into transactions with unconsolidated structured entites in the normal course of
business to faciltate customer transactions and for specifc investment opportunites. An interest in a structured entity is
contractual or non-contractual involvement which creates variablity of the returns of the Group arisng from the
performance of the structured entity.
The table below presents the carrying amount of the assets recognised in the financal statements relating to variable
interests held in unconsolidated structured entites, the maximum exposure to loss relating to those interests and the total
assets of the structured entites. Maximum exposure to loss is primarly limted to the carrying amount of the Group’s on-
balance sheet exposure to the structured entity. For derivatves, the maximum 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.
2021
2020
Asset-backed
securites
$millon
Princpal
Finance funds
$millon
Other
activties
$millon
Total
$millon
Asset-backed
securites
$millon
Princpal
Finance funds
$millon
Other
activties
$millon
Total
$millon
Group’s interest – assets
Financal assets held at fair
value through profit or loss 91 – 586
664 82 – 746
495Loans and advances/
Investment securites at
amortised cost 267 – 5,491
9,234 – – 9,234
5,224Investment securites
(fair value through other
comprehensive income) – – 1,985
1,368 – – 1,368
1,985Other assets – – –
– 1 – 1
–Total assets 11,266 83 – 11,349
7,704 358 – 8,062
Off-balance sheet 64 – 64
– 99 – 99
–Group’s maximum
exposure to loss 11,266 182 – 11,448
7,704 422 – 8,126
Total assets of
structured entites 138,014 872 2 138,888
134,363 2,274 2 136,639
The main types of activties for which the Group utilses unconsolidated structured entites cover synthetic credit default
swaps for managed investment funds (includng specialsed Princpal Finance funds), portfolio management purposes,
structured finance and asset-backed securites. These are detailed as follows:
•
Asset-backed securites (ABS):
The Group also has investments in asset-backed securites issued by third-party sponsored
and managed structured entites. For the purpose of market making and at the discreton of ABS trading desk, the Group
may hold an immateral amount of debt securites from structured entites orignated by credit portfolio management. This
is disclosed in the ABS column above.
•
Portfolio management (Group sponsored entites):
For the purposes of portfolio management, the Group purchased credit
protection via synthetic credit default swaps from note-issung structured entites. This 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 entites. The Group continues to own or hold all of the risks and
returns relating to these assets. The credit protection obtained from the regulatory-compliant securitsation only serves to
protect the Group against losses upon the occurrence of eligble credit 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 entites, but
may hold an insgnifcant 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 securites to collateralise the structured entites swap obligatons to the
Group, and to repay the princpal to investors at maturity. The structured entites reimburse the Group on actual losses
incurred, through the use of the cash collateral or realisaton of the collateral security. Correspondingly, the structured
entites write down the notes issued by an equal amount of the losses incurred, in reverse order of seniorty. All funding is
committed for the life of these vehicles and the Group has no indrect exposure in respect of the vehicles’ liqudity positon.
The Group has reputational 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 entites have Standard Chartered branding.
•
Princpal Finance Fund:
The Group’s exposure to Princpal Finance Funds represents committed or invested capital in
unleveraged investment funds, primarly investng in pan-Asian infrastructure, real estate and private equity.
•
Other activties:
Other activties include structured entites created to support margin financng transactions, the
refinancng of existng credit and debt facilties, as well as setting up of bankruptcy remote structured entites.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
304
Notes to the financal statements continued
33. Cash flow statement
Adjustment for non-cash items and other adjustments included withn income statement
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Amortisaton of discounts and premiums of investment securites
94
(568)243
(305)Interest expense on subordinated liablites
6
540401
525Interest expense on senior debt securites in issue
60
54(35)
38Other non-cash items
(67)
(87)1
(52)Pension costs for defined benefit schemes
31
4620
37Share-based payment costs
148
11999
73Impairment losses on loans and advances and other credit risk provisons
(30)
1,976(38)
888Divdend income from subsidaries
–
–(1,626)
(403)Other imparment
30
26230
670 Gain on disposal of property, plant and equipment
(10)
(1)–
2 Gain on disposal of FVOCI & AMCST financal assets
(130)
(355)(69)
(236) Depreciaton and amortisaton
594
672416
470Fair value changes taken to PL
(67)
–(34)
–Foreign Currency revaluation
(188)
–(67)
–
Net gain on derecogniton of investment in associate
–
(6)–
(245)Profit from associates and jont ventures
1
(1)–
–Total 472
2,651
(659)1,462
Change in operating assets
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Decrease/(Increase) in derivatve financal instruments
12,730
(16,281)12,999
(15,481)Increase in debt securites, treasury bills and equity shares held at fair value
through profit or loss
(3,581)
(1,920)(1,245)
(1,472)(Increase)/decrease in loans and advances to banks and customers
(24,206)
2,872(15,951)
6,499Net decrease in prepayments and accrued income
19
46844
427Net decrease/(increase) in other assets
1,672
(502)2,975
6,405Total (13,366)
(15,363)
(1,178)(3,622)
Change in operating liablites
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
(Decrease)/Increase in derivatve financal instruments
(12,245)
16,052(12,158)
15,093Net increase/(decrease) in deposits from banks, customer accounts, debt
securites in issue, Hong Kong notes in circulaton and short positons
54,022
4,71236,056
(4,272)Increase/(decrease) in accruals and deferred income
113
(609)159
(336)Decrease in amount due to parents/subsidaries/other related
(498)
(3,385)(1,693)
(727)Net (decrease)/increase in other liablites
(3,789)
4,842(3,462)
3,532Total 37,603
21,612
18,90213,290
In 2020, $445m of additons to internally generated capitalsed software were included in the cash flows from operating
activties section of the cash flow statement withn change in operating assets. In 2021, $503m of additons to internally
generated capitalsed software are included in cash flows from investng activties as a separate line item. The 2020
comparative cash flow statement has not been adjusted for this change in classifcation.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
305
Notes to the financal statements continued
33. Cash flow statement continued
Disclosures
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Subordinated debt (includng accrued interest):
Opening balance
14,885
13,04314,345
12,502Proceeds from the issue
–
4,630–
4,630Interest paid
(479)
(503)(456)
(480)Repayment
(16)
(2,869)(16)
(2,869)Foreign exchange movements
(98)
2(98)
2Fair value changes
(150)
86(150)
86Other
479
496456
474Closing balance 14,621
14,885
14,08114,345
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Senior debt (includng accrued interest):
Opening balance
1,706
1,164686
742Proceeds from the issue
2,833
1,984660
650Interest paid
(16)
(15)(16)
(14)Repayment
(3,250)
(1,310)(422)
(577)Foreign exchange movements
(8)
(6)(2)
–Fair value changes
(1)
––
–Other
25
(111)17
(115)Closing balance 1,289
1,706
923686
34. Cash and cash equivalents
Accounting policy
For the purposes of the cash flow statement, cash and cash equivalents comprise cash, on demand and overnight balances
with central banks (unless restricted) and balances with less than three months’ maturity from the date of acquistion,
includng treasury bills and other eligble bills, loans and advances to banks, and short-term government securites.
The following balances with less than three months' maturity from the date of acquistion have been identfied by the Group
as being cash and cash equivalents.
Group Company
2021
$millon
2020
$millon
2021
$millon
2020
$millon
Cash and balances at central banks
61,963
58,11748,165
46,476Less: restricted balances
(3,063)
(2,683)(1,160)
(932)Treasury bills and other eligble bills
3,635
2,6641,627
723Loans and advances to banks
18,672
16,84410,643
9,865Trading securites
220
968132
19Total 81,427
75,910
59,40656,151
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
306
Notes to the financal statements continued
35. Related party transactions
Directors and officers
Details of directors’ remuneration and interests in shares are disclosed in the Note 38 Remuneration of Directors.
IAS 24 Related party disclosures requires the following additonal informaton for key management compensation. Key
management comprises non-executive directors, executive directors of Standard Chartered PLC, the Court directors of
Standard Chartered Bank and the persons dischargng managerial responsiblites (PDMR) of Standard Chartered PLC.
2021
$millon
2020
$millon
Salaries, allowances and benefits in kind
40
35Share-based payments
28
26Bonuses paid or receivable
4
1Total 72
62
Transactions with directors and others
At 31 December 2021, the total amounts to be disclosed under the Companies Act 2006 (the Act) and the Listng Rules of the
Hong Kong Stock Exchange Limted (HK Listng Rules) about loans to directors were as follows:
2021
2020
Number $millon
Number $millon
Directors –
3 –
3The loan transactions provided to the directors of Standard Chartered PLC were a connected transaction under Chapter 14A
of the HK Listng Rules. It was fully exempt as financal assistance under Rule 14A.87(1), as it was provided in our ordinary and
usual course of business and on normal commercial terms.
Other than as disclosed in these financal statements, there were no other transactions, arrangements or agreements
outstanding for any director of the Company which have to be disclosed under the Act.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
307
Notes to the financal statements continued
35. Related party transactions continued
Group
2021
2020
Due from/to
subsidary
undertakings
and other
related
parties
$millon
Derivatve
financal
instruments
$millon
Subordinated
liablites and
other
borrowed
funds
$millon
Debt
Securites
$millon
Due from/to
subsidary
undertakings
and other
related parties
$millon
Derivatve
financal
instruments
$millon
Subordinated
liablites and
other
borrowed
funds
$millon
Debt
Securites
$millon
Assets
Ultimate parent company 664 – –
380 691 – –
409Fellow subsidaries of SC
PLC Group 8,183 – 807
5,855 4,521 – 737
4,9886,235 5,212 – 737
5,397 8,847 – 807
Liablites
Ultimate parent company 1,150 14,373 4,005
11,264 617 14,148 5,286
12,262Fellow subsidaries of SC
PLC Group 7,210 – 667
19,734 4,696 – 667
19,84830,998 5,313 14,148 5,953
32,110 8,360 14,373 4,672
2021
Fees and
commisson
income
$millon
Fees and
commisson
expense
$millon
Interest
income
$millon
Interest
expense
$millon
Ultimate parent company
– – 7 776
Fellow subsidaries of SC PLC Group
71 104 34 49
71 104 41 825
2020
Fees and
commisson
income
$millon
Fees and
commisson
expense
$millon
Interest
income
$millon
Interest
expense
$millon
Ultimate parent company – – 28 816
Fellow subsidaries of SC PLC Group 66 139 37 108
66 139 65 924
The Group contributes to employee pension funds and provides banking services free of charge to the UK fund. For details of
the funds (see Note 29).
The Group’s employees particpate in the Standard Chartered PLC group’s share-based compensation plans (see Note 30).
The cost of the compensation is recharged from Standard Chartered PLC to the Group’s branches and subsidaries.
Associates and jont ventures
The following transactions with related parties are on an arm’s length basis:
2021
$millon
2020
$millon
Assets
Loans and advances
–
5Total assets –
5
Liablites
Deposits
47 11¹
Derivatve liablites
1
5Total liablites 48
16
Loan commitments and other guarantees
2
80
55
1 Prior year has been restated
2 The maximum loan commitments and other guarantees during the year was $80 millon
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
308
Notes to the financal statements continued
35. Related party transactions continued
Company
2021
2020
Due from/to
subsidary
undertakings
and other
related
parties
$millon
Derivatve
financal
instruments
$millon
Subordinated
liablites and
other
borrowed
funds
$millon
Debt
Securites
$millon
Due from/to
subsidary
undertakings
and other
related parties
$millon
Derivatve
financal
instruments
$millon
Subordinated
liablites and
other
borrowed
funds
$millon
Debt
Securites
$millon
Assets
Ultimate parent company 664 – –
380 691 – –
409Subsidaries and fellow
subsidaries of SC PLC
Group 10,591 – 1,869
10,361 7,067 – 1,784
9,73210,741 7,758 – 1,784
10,141 11,255 – 1,869
Liablites
Ultimate parent company 1,150 13,833 4,005
11,262 617 13,609 5,286
12,258Subsidaries and fellow
subsidaries of SC PLC
Group 9,095 – –
29,483 7,266 – –
30,00940,745 7,883 13,609 5,286
42,267 10,245 13,833 4,005
2021
Fees and
commisson
income
$millon
Fees and
commisson
expense
$millon
Interest
income
$millon
Interest
expense
$millon
Divdend
income
$millon
Ultimate parent company
– – 7 765 –
Subsidaries and fellow subsidaries of SC PLC Group
130 133 66 76 1,626
130 133 73 841 1,626
2020
Fees and
commisson
income
$millon
Fees and
commisson
expense
$millon
Interest
income
$millon
Interest
expense
$millon
Divdend
income
$millon
Ultimate parent company – – 28 796 –
Subsidaries and fellow subsidaries of SC PLC Group 84 103 111 165 403
84 103 139 961 403
As at 31 December 2021, Standard Chartered Bank had created a charge over $100 millon (31 December 2020: $89 millon) of
cash assets in favour of the non-consolidated independent trustee of its employer financed retirement benefit scheme.
The Company contributes to employee pension funds and provides banking services free of charge to the UK fund. For
details of the funds see note 29.
The Company’s employees particpate in the Standard Chartered PLC group’s share-based compensation plans
(see note 30).
The Company has an agreement with Standard Chartered PLC that in the event of the Company defaulting on its debt
coupon interest payments, where the terms of such debt requires it, Standard Chartered PLC shall issue shares as settlement
for non-payment of the coupon interest.
36. Post balance sheet events
On the 12 January 2022, Standard Chartered Bank issued $1,250 millon 3.603 per cent subordinated debt security due 2033
(callable 2032).
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
309
Notes to the financal statements continued
37. Auditor’s remuneration
Auditor’s remuneration is included withn other general adminstration expenses. The amounts paid by the Group to their
princpal auditor, Ernst & Young LLP (EY LLP) and its associates (together EY 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
provison of other services.
2021
$millon
2020
$millon
Audit fees for the Standard Chartered PLC Group statutory audit
15.9
11.0Of which fees for the statutory audit of Standard Chartered Bank Group
11.8
8.1Fees payable to EY for other services provided to the Standard Chartered Bank Group:
Audit of Standard Chartered Bank subsidaries
7.0
5.9Total Audit fees 22.9
16.9
Audit -related assurance services
2.8
3.2Other assurance services
2.8
1.9Other non-audit services
0.1
0.1Total fees payable 28.6
22.2
The following is a descripton of the type of services included withn the categories listed above:
•
Audit fees for the Group statutory audit are in respect of fees payable to EY LLP for the statutory audit of the consolidated
financal statements of the Group and the separate financal 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 interm financal informaton, reporting on regulatory returns, reporting to a regulator on client assets and
extended work performed over financal informaton and controls authorised by those charged with governance
•
Other assurance services include agreed-upon-procedures in relation to statutory and regulatory filngs
•
Corporate finance transaction services are fees payable to EY LLP for issung comfort letters
Expenses incurred in respect of their role as auditors were reimbursed to EY($0.2m). Such expenses did not exceed 1% of total
fees charged above.
38. Remuneration of Directors
This table sets out salary (includng salary shares), pension and benefits received in 2021 and variable remuneration awards
received in respect of 2021.
2021¹
£000
2020²
£000
Salaries and fees
8,588
9,384Pension
553
615Benefits
420
608Annual incentve
3,688
2,298Vesting of LTIP awards
1,282
1,411Total
14,531
14,3161. M Ramos and A McFadyen joned the Board on 1 January and 23 February 2021 respectively
2. The values of vesting LTIP awards for 2020 have been restated based on the actual share price of £5.03 when the awards vested in March 2021
Additonal informaton on the remuneration elements in the above single total figure table.
Salaries and fees
The total salaries of the four directors as at 1 January 2021 were £5,090,200. For two of the directors, salary is paid part in cash
and part in shares which are subject to a retention period and released pro rata over five years. The number of salary shares
allocated is determined based on the monetary value and the prevailng market price of the Group’s shares on the date of
allocation.
The total annualised fees of the Chairman and directors as at 1 January 2021 (or the date of appointment, if later) were
£3,055,000.
There is no apportionment of remuneration between Standard Chartered Bank and Standard Chartered PLC.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
310
Notes to the financal statements continued
38. Remuneration of Directors continued
Share awards
Three directors exercised share awards over Standard Chartered PLC during the year.
Pension and benefits
An explanation of pension and benefits for those directors who are also executive directors of the SC PLC Group can be found
in the SC PLC Group’s 2021 Directors’ remuneration report on pages 141 to 180. The two directors who are also employees of
the SC PLC Group received a flexible benefits allowance in alignment with the UK workforce to include a mixture of core
pension and benefits provison, includng private medical cover, life assurance and permanent health insurance. Some
directors occasionally use a Group car service for travelling and, in some circumstances, were accompanied by their spouses
to attend events.
For those directors who are also employees of the SC PLC Group, annual incentves in respect of 2021 are delivered upfront
with at least 50 per cent paid in shares subject to a minmum twelve-month retention period.
Vesting of LTIP awards
The long-term incentve plan (LTIP) awards granted in March 2018 vested in March 2021, based on performance over the
years 2018 to 2020. 26 per cent of these awards vested. The LTIP awards granted in March 2019 are due to vest in March 2022,
based on performance over the years 2019 to 2021. Following an estimated assessment of the performance measures (RoTE
with CET1 underpin, relative TSR and strategic measures), 23 per cent of these awards will vest. The final assessment of the
relative TSR performance will be conducted in March 2022, the end of the three-year performance period. Based on a share
price of £4.55, the three-month average to 31 December 2021, the estimated value to be delivered to the directors is £1,281,647.
Other disclosures
The remuneration policy and practices applying to the Material Risk Taker employees of the Bank are the same as those
applied by the SC PLC Group which are set out in the SC PLC Group’s 2021 Directors’ remuneration report on pages 141 to 180.
Further informaton on the remuneration for those directors who are also executive directors of the SC PLC Group can be
round in the SC PLC Group’s 2021 Directors’ remuneration report on pages 141 to 180.
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
311
Notes to the financal statements continued
39. Related undertakings of the Group
As at 31 December 2021, the Group’s interests in related undertakings are disclosed below. Unless otherwise stated, the share
capital disclosed comprises ordinary or common shares which are held by subsidaries of the Group. Unless otherwise
indcated, all related undertakings are held indrectly. Unless otherwise stated, the princpal country of operation of each
subsidary is the same as its country of incorporation. Note 31 details undertakings that have a signficant contributon to the
Group’s net profit or net assets.
Subsidary undertakings
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following companies have the address of
1 Basinghall Avenue, London, EC2V 5DD, United Kingdom
SC (Secretaries) Limted¹ United Kingdom £1.00 Ordinary shares 100
SC Transport Leasing 1 LTD United Kingdom £1.00 Ordinary shares 100
SC Transport Leasing 2 Limted United Kingdom £1.00 Ordinary shares 100
SC Ventures Innovation Investment L.P. United Kingdom Limted Partnership interest 100
SCMB Overseas Limted¹ United Kingdom £0.10 Ordinary shares 100
Standard Chartered Africa Limted United Kingdom £1.00 Ordinary shares 100
Standard Chartered Bank United Kingdom $0.01 Non-Cumulative
Irredeemable Preference
shares
100
$5.00 Non-Cumulative
Redeemable Preference
shares
100
$1.00 Ordinary shares 100
Standard Chartered Foundation
1, 2
United Kingdom Guarantor 100
Standard Chartered Health Trustee (UK) Limted¹ United Kingdom £1.00 Ordinary shares 100
Standard Chartered Leasing (UK) 3 Limted¹ United Kingdom $1.00 Ordinary shares 100
Standard Chartered Leasing (UK) Limted¹ United Kingdom $1.00 Ordinary shares 100
Standard Chartered Nominees (Private Clients UK) Limted¹ United Kingdom $1.00 Ordinary shares 100
Standard Chartered Overseas Holdings Limted¹ United Kingdom £1.00 Ordinary shares 100
Standard Chartered Securites (Africa) Holdings Limted United Kingdom $1.00 Ordinary shares 100
Standard Chartered Trustees (UK) Limted¹ United Kingdom £1.00 Ordinary shares 100
Standard Chartered UK Holdings Limted¹ United Kingdom £10.00 Ordinary shares 100
The SC Transport Leasing Partnership 1 United Kingdom Limted Partnership interest 100
The SC Transport Leasing Partnership 2 United Kingdom Limted Partnership interest 100
The SC Transport Leasing Partnership 3 United Kingdom Limted Partnership interest 100
The SC Transport Leasing Partnership 4 United Kingdom Limted Partnership interest 100
The BW Leasing Partnership 1 LP
2
United Kingdom Limted Partnership interest 100
The BW Leasing Partnership 2 LP
2
United Kingdom Limted Partnership interest 100
The BW Leasing Partnership 3 LP
2
United Kingdom Limted Partnership interest 100
The BW Leasing Partnership 4 LP
2
United Kingdom Limted Partnership interest 100
The BW Leasing Partnership 5 LP
2
United Kingdom Limted Partnership interest 100
The following companies have the address of
2 More London Riversde, London SE1 2JT, United Kingdom
Bricks (C&K) LP
2
United Kingdom Limted Partnership interest 100
Bricks (C) LP
2
United Kingdom Limted Partnership interest 100
Bricks (T) LP
2
United Kingdom Limted Partnership interest 100
Bricks (M) LP
2
United Kingdom Limted Partnership interest 100
The following companies have the address of 8th Floor,
20Farringdon Street, London, EC4A 4AB, United Kingdom.
SC Ventures G.P. Limted¹ United Kingdom £1.00 Ordinary shares 100
Assembly Payments UK Ltd United Kingdom £1.00 Ordinary shares 100
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
312
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of
1 Bartholomew Lane, London, EC2N 2AX, United Kingdom
Corrasi Covered Bonds LLP¹ United Kingdom Membership Interest 50
The following companies have the address of Thomas House,
84 Eccleston Square, London, SW1V 1PX, United Kingdom
Zodia Custody Limted United Kingdom $1.00 Ordinary shares 100
Zodia Holdings Limted United Kingdom $1.00 Ordinary shares 100
The following company has the address of TMF Group,
8thFloor, 20 Farringdon Street, London, EC4A 4AB, United
Kingdom.
Zodia Markets (UK) Limted United Kingdom $1.00 Ordinary shares 100
The following company has the address of Spaces, 25 Wilton
Road, Victora, London, SW1V 1LW, United Kingdom
Zodia Markets Holdings Limted United Kingdom $1.00 Ordinary shares 75.01
The following company has the address of Robert Denholm
House, Beltchingley Road, Nutfield, Redhill, RH1 4HW, United
Kingdom
CurrencyFair (UK) Limted United Kingdom £1.00 Ordinary shares 100
The following company has the address Edifíco Kilamba,
7Andar Avenida 4 de Fevereiro, Marginal, Luanda, Angola
Standard Chartered Bank Angola S.A. Angola AOK8,742.05 Ordinary shares 60
The following company has the address of Level 5, 345
George St, Sydney NSW 2000, Australia
Standard Chartered Grindlays Pty Limted¹ Australia AUD Ordinary shares 100
The following company has the address of 17/31 Queen Street,
Melbourne VIC 3000, Australia
Assembly Payments Australia Pty Ltd Australia $ Ordinary shares 100
The following company has the address of Wilsons Landing,
Level 5, 6A Glen Street, Milsons Point NSW 2061, Australia
CurrencyFair Australia Pty Ltd Australia AUD Ordinary 100
The following company has the address of Level 20, 31Queen
Street, Melbourne VIC 3000, Australia
Zai Australia Pty Ltd Australia AUD0.01 Ordinary shares 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 Insurance Agency (Proprietary)
Limted
Botswana BWP Ordinary shares 100
Standard Chartered Investment Services (Proprietary) Limted Botswana BWP Ordinary shares 100
Standard Chartered Bank Botswana Limted Botswana BWP Ordinary shares 75.8
Standard Chartered Botswana Nominees (Proprietary)
Limted
Botswana BWP Ordinary shares 100
Standard Chartered Botswana Education Trust
1,3
Botswana Interest in Trust 100
The following companies have the address of Avenida
Brigadero Faria Lima, no 3.477, 6 andar, conjunto 62 – Torre
Norte, Condomino Patio Victor Malzoni, CEP 04538-133, Sao
Paulo, Brazil
Standard Chartered Particpacoes Ltda¹ Brazil BRL1.00 Ordinary shares 100
Standard Chartered Representação Ltda¹ Brazil BRL1.00 Ordinary shares 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
313
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of G01-02, Wisma
Haj Mohd Taha Buildng, Jalan Gadong, BE4119, Brunei
Darussalam
Standard Chartered Securites (B) Sdn Bhd¹ Brunei Darussalam BND1.00 Ordinary shares 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 S.A. Cameroon XAF10,000.00 Ordinary
shares
100
The following company has the address of 66 Wellington
Street, West, Suite 4100, Toronto Dominon Centre, Toronto
ON M5K 1B7, Canada
CurrencyFair (Canada) Ltd Canada CAN$ Common shares 100
The following company has the address of Maples Corporate
Services Limted, PO Box 309, Ugland House, Grand Cayman
KY1-1104, Cayman Islands
Cerulean Investments LP Cayman Islands Limted Partnership interest 100
The following company has the address of Maples Finance
Limted, PO Box 1093 GT, Queensgate House, Georgetown,
Grand Cayman, Cayman Islands
SCB Investment Holding Company Limted¹ Cayman Islands $1,000.00 A Ordinary shares 100
The following company has the address of Walkers Corporate
Limted, Cayman Corporate Centre, 27 Hospital Road George
Town, Grand Cayman KY1-9008, Cayman Islands
Sirat Holdings Limted
5
Cayman Islands $0.01 Ordinary shares 100
The following company has the address of No. 35, Xinhuanbe
Road, TEDA, Tianin, 300457, China
Standard Chartered Global Business Services Co., Ltd
1, 4
China $ Ordinary shares 100
The following companies have the address of Units 61-65
(Office use only), Self-numbered Room 01-04, Room 901, No 6,
Zhujang East Road, Tianhe Distrct, Guangzhou City,
Guangdong Province, China
Standard Chartered Global Business Services (Guangzhou)
Co., Ltd.
1, 4
China $ Ordinary shares 100
The following company has the address of Room 2619, No 9,
Linhe West Road, Tianhe Distrct, Guangzhou, China
Guangzhou CurrencyFair Information Technology Limted China CNY Ordinary shares 100
The following company has the address of Standard
Chartered Bank Cote d'Ivoire, 23 Boulevard de la République,
Abidan 17, 17 B.P. 1141, Cote d'Ivoire
Standard Chartered Bank Cote d' Ivoire SA Cote d'Ivoire XOF100,000.00 Ordinary
shares
100
The following company has the address of 8 Ecowas Avenue,
Banjul, Gambia
Standard Chartered Bank Gambia Limted Gambia GMD1.00 Ordinary shares 74.85
The following company has the address of Taunusanlage 16,
60325, Frankfurt am Main, Germany
Standard Chartered Bank AG¹ Germany € Ordinary shares 100
The following companies have the address of Standard
Chartered Bank Buildng, 87 Independence Avenue, P.O. Box
768, Accra,Ghana
Standard Chartered Bank Ghana PLC Ghana GHS Ordinary shares 69.4
Standard Chartered Ghana Nominees Limted Ghana GHS Ordinary shares 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
314
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of Standard
Chartered Bank Ghana Limted, 87, Independence Avenue,
Post Office Box 678, Accra, Ghana
Standard Chartered Wealth Management Limted Company Ghana GHS Ordinary shares 100
The following companies have the address of 14th Floor, One
Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong.
Kozagi Limted Hong Kong HKD Ordinary shares 100
Standard Chartered PF Real Estate (Hong Kong) Limted Hong Kong $ Ordinary shares 100
The following company has the address of 13/F Standard
Chartered Bank Buildng, 4-4A Des Voeux Road Central, Hong
Kong
Standard Chartered Private Equity Limted Hong Kong HKD Ordinary shares 100
The following company has the address of 21/F, Standard
Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon,
Hong Kong
Standard Chartered Asia Limted Hong Kong HKD Deferred shares 100
HKD Ordinary shares 100
The following company has the address of 31/F, Tower 2
Times Square, 1 Matheson St, Causeway Bay, Hong Kong
Assembly Payments HK Limted Hong Kong HKD Ordinary Shares 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 Limted Hong Kong HKD Ordinary shares 100
The following company has the address of 1st Floor, Europe
Buildng, No.1, Haddows Road, Nungambakkam, Chennai, 600
006, India
Standard Chartered Global Business Services Private Limted¹ India INR10.00 Equity shares 100
The following company has the address of 90 M.G.Road, II
Floor, Fort, Mumbai, Maharashtra, 400 001, India
Standard Chartered Finance Private Limted¹ India INR10.00 Ordinary shares 98.68
The following company has the address of Ground Floor,
Crescenzo Buildng, G Block, C 38/39 , Bandra Kurla Complex,
Bandra (East) , Mumbai , Mumbai , Maharashtra , 400051,
India
Standard Chartered Private Equity Advisory (India) Private
Limted
India INR1,000.00 Ordinary shares 99.996
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-Divsion, Ward No.
150, Bengaluru, 560102, India.
Standard Chartered Research and Technology India Private
Limted
India INR10.00 A Equity shares 100
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 Limted¹ India INR10.00 Equity shares 100
The following company has the address of 2nd Floor, 23-25
M.G. Road, Fort, Mumbai, 400 001, India
Standard Chartered Securites (India) Limted India INR10.00 Equity shares 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
315
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of Ground Floor,
Crescenzo Buildng, G Block, C 38/39 , Bandra Kurla Complex,
Bandra (East) , Mumbai , Mumbai , Maharashtra , 400051,
India
St Helen's Nominees India Private Limted¹ India INR10.00 Equity shares 100
The following company has the address of Vaishnav Serenity,
First Floor, No. 112, Koramangala Industrial Area, 5th Block,
Koramangala, Bangalore, Karnataka, 560095, India
Standard Chartered (India) Modeling and Analytics Centre
Private Limted¹
India INR10.00 Equity shares 100
The following companies have the address of 91 Pembroke
Road, Dublin 4, Ballsbridge, Dublin, DO4 EC42, Ireland
CurrencyFair (Canada) Limted Ireland €1.00 Ordinary 100
CurrencyFair Nominees Limted Ireland €1.00 Ordinary 100
The following companies have the address of TMF, 3rd Floor,
Kilmore House, Park Lane, Spencer Dock , Dublin 1, Ireland
Zodia Custody (Ireland) Limted Ireland $1.00 Ordinary shares 100
Zodia Markets (Ireland) Limted Ireland $1.00 Ordinary shares 100
The following company has the address of 91 Pembroke Road,
Dublin 4, Ballsbridge, Dublin, DO4 EC42, Ireland
CurrencyFair Limted Ireland €0.001 A Ordinary shares 100
€0.001 Ordinary shares 27.952
The following companies have the address of 1st Floor, Goldie
House, 1-4 Goldie Terrace, Upper Church Street, Douglas,
IM11EB, Isle of Man
Standard Chartered Assurance Limted¹ Isle of Man $1.00 Ordinary shares 100
shares
100
Standard Chartered Insurance Limted
1, 6
Isle of Man $1.00 Ordinary shares 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 Securites (Japan) Limted¹ Japan JPY50,000 Ordinary shares 100
The following company has the address of 15 Castle Street,
StHelier, JE4 8PT, Jersey
SCB Nominees (CI) Limted¹ Jersey $1.00 Ordinary shares 100
The following companies have the address of
StandardChartered@Chiromo, Number 48, Westlands Road,
P. O. Box 30003 – 00100, Nairob, Kenya
Standard Chartered Bancassurance Intermediary Limted Kenya KES100.00 Ordinary shares 100
Standard Chartered Investment Services Limted Kenya KES20.00 Ordinary shares 100
Standard Chartered Bank Kenya Limted Kenya KES5.00 Ordinary shares 74.32
Standard Chartered Securites (Kenya) Limted Kenya KES10.00 Ordinary shares 100
Standard Chartered Financal Services Limted Kenya KES20.00 Ordinary shares 100
Standard Chartered Kenya Nominees Limted Kenya KES20.00 Ordinary shares 100
The following company has the address of Atrium Buildng,
Maarad Street, 3rd Floor, P.O.Box: 11-4081 Riad El Solh, Beirut,
Beirut Central Distrct, Lebanon
Standard Chartered Metropolitan Holdings SAL Lebanon $10.00 Ordinary A shares 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
316
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following companies have the address of Level 26,
Equatorial Plaza, Jalan Sultan Ismail, 50250 Kuala Lumpur,
Malaysia
Cartaban (Malaya) Nominees Sdn Berhad Malaysia RM Ordinary shares 100
Cartaban Nominees (Asing) Sdn Bhd Malaysia RM Ordinary shares 100
Cartaban Nominees (Tempatan) Sdn Bhd Malaysia RM Ordinary shares 100
Golden Maestro Sdn Bhd Malaysia RM Ordinary shares 100
Price Solutions Sdn Bhd Malaysia RM Ordinary shares 100
SCBMB Trustee Berhad Malaysia RM Ordinary shares 100
Standard Chartered Bank Malaysia Berhad Malaysia RM Irredeemable Convertible
Preference shares
100
Standard Chartered Saadiq Berhad Malaysia RM Ordinary shares 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 , 59200 Kuala Lumpur,
Wilayah Persekutuan, Malaysia
Resolution Alliance Sdn Bhd Malaysia RM Ordinary shares 91
shares
100
The following company has the address of Level 1, Wisma
Standard Chartered, Jalan Teknologi 8, Taman Teknologi
Malaysia, 57000 Bukit Jalil, Kuala Lumpur, Wilayah
Persekutuan, Malaysia
Standard Chartered Global Business Services Sdn Bhd¹ Malaysia RM Ordinary shares 100
The following company has the address of 10th Floor, Menara
Hap Seng, No. 1&3, Jalan P. Ramlee, 50250 Kuala Lumpur,
Malaysia
Assembly Payments Malaysia Sdn. Bhd. Malaysia RM Ordinary shares 100
The following company has the address of 6/F, Standard
Chartered Tower, 19, Bank Street, Cybercity, Ebene, 72201,
Mauritus
Standard Chartered Bank (Mauritus) Limted¹ Mauritus $ Ordinary shares 100
The following companies have the address of c/o Ocorian
Corporate Services (Mauritus) Ltd, 6th Floor, Tower A,
1Cybercity, Ebene, 72201, Mauritus
Standard Chartered Financal Holdings¹ Mauritus $1.00 Ordinary shares 100
Standard Chartered Private Equity (Mauritus) Limted¹ Mauritus $1.00 Ordinary shares 100
Standard Chartered Private Equity (Mauritus) II Limted Mauritus $1.00 Ordinary shares 100
Standard Chartered Private Equity (Mauritus) lll Limted Mauritus $1.00 Ordinary shares 100
The following company has the address of Mondial
Management Services Ltd, Unit 2L, 2nd Floor Standard
Chartered Tower, 19 Cybercity, Ebene, Mauritus
Subcontinental Equites Limted Mauritus $1.00 Ordinary shares 100
The following company has the address of SGG Corporate
Services (Mauritus) Ltd, 33, Edith Cavell Street, Port Louis,
11324, Mauritus
Actis Treit Holdings (Mauritus) Limted
2
Mauritus Class A $1.00 Ordinary shares 62.001
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
317
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of Standard
Chartered Bank Nepal Limted, Madan Bhandari Marg, Ward
No.34, Kathmandu Metropolitan City, Kathmandu Distrct,
Bagmati Zone, Kathmandu, Nepal
Standard Chartered Bank Nepal Limted Nepal NPR100.00 Ordinary shares 70.21
The following companies have the address of 1 Basinghall
Avenue, London, EC2V 5DD, United Kingdom
Standard Chartered Holdings (Africa) B.V.
6
Netherlands €4.50 Ordinary shares 100
Standard Chartered Holdings (Asia Pacifc) B.V.
6
Netherlands €4.50 Ordinary shares 100
Standard Chartered Holdings (International) B.V.
6
Netherlands €4.50 Ordinary shares 100
Standard Chartered MB Holdings B.V.
6
Netherlands €4.50 Ordinary shares 100
The following company has the address of 4 All good Place,
Rototuna North, Hamilton, New Zealand, 3210
PromisePay Limted New Zealand NZD Ordinary shares 100
The following companies have the address of 142, Ahmadu
Bello Way, Victora Island, Lagos, 101241, Nigera
Cherroots Nigera Limted Nigera NGN1.00 Ordinary Shares 100
Standard Chartered Bank Nigera Limted Nigera NGN1.00 Irredeemable Non
Cumulative Preference shares
100
NGN1.00 Ordinary shares 100
Preference shares
100
Standard Chartered Capital & Advisory Nigera Limted Nigera NGN1.00 Ordinary shares 100
Standard Chartered Nominees (Nigera) Limted Nigera NGN1.00 Ordinary shares 100
The following company has the address of P.O. Box No. 5556I.I.
Chundrigar Road, Karachi, 74000, Pakistan
Standard Chartered Bank (Pakistan) Limted¹ Pakistan PKR10.00 Ordinary shares 98.99
The following company has the address of Rondo Ignacego
Daszyńskiego 2B, 00-843, Warsaw, Poland
Standard Chartered Global Business Services spółka z
ograniczoną odpowiedzalnością¹
Poland PLN50.00 Ordinary shares 100
The following company has the address of Al Faisalah Office
Tower Floor No 7 (T07D) , King Fahad Highway, Olaya Distrct,
Riyadh P.O box 295522 , Riyadh, 11351 , Saudi Arabia
Standard Chartered Capital (Saudi Arabia)¹ Saudi Arabia SAR10.00 Ordinary shares 100
The following company has the address of 9 & 11, Lightfoot
Boston Street, Freetown, Sierra Leone
Standard Chartered Bank Sierra Leone Limted Sierra Leone SLL1.00 Ordinary shares 80.7
The following companies have the address of 9 Raffles Place,
#27-00 Republic Plaza, 048619, Singapore
Actis Treit Holdings No.1 (Singapore) Private Limted
2
Singapore SGD Ordinary 100
Actis Treit Holdings No.2 (Singapore) Private Limted
2
Singapore SGD Ordinary 100
The following company has the address of 8 Marina
Boulevard, Level 26, Marina Bay Financal Centre, Tower 1,
018981, Singapore
Raffles Nominees (Pte.) Limted Singapore SGD Ordinary shares 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
318
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
The following companies have the address of 8 Marina
Boulevard, #27-01 Marina Bay Financal Centre Tower 1,
018981, Singapore
SCTS Capital Pte. Ltd Singapore SGD Ordinary shares 100
SCTS Management Pte. Ltd. Singapore SGD Ordinary shares 100
Standard Chartered Bank (Singapore) Limted Singapore SGD Ordinary shares 100
SGD Non-cumulative
Preference shares
100
SGD Non-cumulative Class C
Preference shares
100
$ Ordinary shares 100
$ Preference shares 100
Standard Chartered Trust (Singapore) Limted¹ Singapore SGD Ordinary shares 100
Standard Chartered Holdings (Singapore) Private Limted¹ Singapore SGD Ordinary shares 100
$ Ordinary shares 100
Standard Chartered Nominees (Singapore) Pte Ltd¹ Singapore SGD Ordinary shares 100
The following companies have the address of 80 Robinson
Road, #02-00, 068898, Singapore
Autumn Life Pte. Ltd. Singapore $ Ordinary shares 100
Cardspal Pte. Ltd. Singapore $ Ordinary shares 100
Nexco Pte. Ltd. Singapore $ Ordinary shares 100
Discovery Technology Services Pte. Ltd. Singapore $ Ordinary shares 100
SCV Research and Development Pte. Ltd. Singapore $ Ordinary shares 100
Power2SME Pte. Ltd. Singapore $ Ordinary shares 100
SCV Master Holding Company Pte. Ltd. Singapore $ Ordinary shares 100
Pegasus Dealmaking Pte. Ltd. Singapore $ Ordinary shares 100
Solv-India Pte. Ltd. Singapore $ Ordinary shares 100
The following companies have the address of 140 Robinson
Road, #17-01, Crown At Robinson, Singapore, 068907,
Singapore
Trust Bank Singapore Limted Singapore SGD Ordinary shares 60
CurrencyFair (Singapore) Pte.Ltd Singapore SGD Ordinary shares 100
The following companies have the address of 38 Beach Road,
#29-11 South Beach Tower, 189767, Singapore
Assembly Payments SGP Pte. Ltd. Singapore SGD Ordinary shares 100
Assembly Payments Pte. Ltd. Singapore $ Ordinary shares 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.
Limted¹
Singapore $ Ordinary 50
The following companies have the address of 2nd Floor, 115
West Street, Sandton, Johannesburg, 2196, South Africa
CMB Nominees (RF) PTY Limted¹ South Africa ZAR1.00 Ordinary shares 100
Standard Chartered Nominees South Africa Proprietary
Limted (RF)¹
South Africa ZAR Ordinary shares 100
The following company has the address of 6 Fort Street, PO
785848, , Birnam, Sandton, 2196 2146, South Africa
Promisepay (PTY) Ltd South Africa ZAR1.00 Ordinary 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
319
Notes to the financal statements continued
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
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 Limted Tanzania, Republic of TZS1,000.00 Ordinary shares 100
TZS1,000.00 Preference
shares 100
Standard Chartered Tanzania Nominees Limted Tanzania, Republic of TZS1,000.00 Ordinary shares 100
The following company has the address of 100 North Sathorn
Road, Silom, Bangrak Bangkok , 10500, Thailand
Standard Chartered Bank (Thai) Public Company Limted Thailand THB10.00 Ordinary shares 99.90
The following company has the address of Buyukdere Cad.
Yapi Kredi Plaza C Blok, Kat 15, Levent, Istanbul, 34330, Turkey
Standard Chartered Yatirm Bankasi Turk Anonim Sirket¹ Turkey TRL0.10 Ordinary shares 100
The following company has the address of Standard
Chartered Bank Bldg, 5 Speke Road, PO Box 7111, Kampala,
Uganda
Standard Chartered Bank Uganda Limted Uganda UGS1,000.00 Ordinary shares 100
The following company has the address of 251 Little Falls
Drive, Wilmngton DE 19808, United States
CurrencyFair (USA) Inc United States US$1.00 Uncertifcated Shares 100
The following company has the address of 505 Howard St.
#201, San Francisco, CA 94105, United States
SC Studios, LLC¹ United States Membership Interest 100
The following company has the address of Standard
Chartered Bank, 37F, 1095 Avenue of the Americas, New York
10036, United States
Standard Chartered Bank International (Americas) Limted¹ United States $1,000.00 Ordinary shares 100
The following companies have the address of Corporation
Trust Centre, 1209 Orange Street, Wilmngton DE 19801,
United States
Standard Chartered Holdings Inc.¹ United States $100.00 Common shares 100
Standard Chartered Securites (North America) LLC United States Membership Interest 100
The following company has the address of 50 Fremont Street,
San Francisco CA 94105, United States
Standard Chartered Overseas Investment, Inc. United States $10.00 Ordinary shares 100
The following company has the address of C/O Corporation
Service Company, 251 Little Falls Drive, Wilmngton DE 19808,
United States
Standard Chartered Trade Services Corporation United States $0.01 Common shares 100
The following company has the address of 25 Taylor St,
SanFrancisco, CA, 94102-3916
Assembly Escrow Inc United States $0.0001 Ordinary 100
The following company has the address of 555 Washington
Av, St Louis, MO, United States of America, 63101
Assembly Payments, Inc United States $0.0001 Ordinary 100
The following company has the address of Room 1810-1815,
Level 18, Buildng 72, Keangnam Hanoi Landmark Tower,
Pham Hung Road, Cau Giay New Urban Area, Me Tri Ward,
Nam Tu Liem Distrct, Hanoi10000, Vietnam
Standard Chartered Bank (Vietnam) Limted Vietnam VND Charter Capital shares 100
The following companies have the address of Vistra
Corporate Services Centre, Wickhams Cay II, Road Town,
Tortola, VG1110, Virgn Islands, Britsh
Sky Favour Investments Limted
7
Virgn Islands, Britsh $1.00 Ordinary shares 100
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
320
Name and registered address Country of incorporation Descripton of shares
Proportion of
shares held
(%)
Sky Harmony Holdings Limted
7
Virgn Islands, Britsh $1.00 Ordinary shares 100
The following companies have the address of Stand No. 4642,
Corner of Mwaimwena Road and Addis Ababa Dri, Lusaka,
Zambia, 10101, Zambia
Standard Chartered Bank Zambia Plc Zambia ZMW0.25 Ordinary shares 90
Standard Chartered Zambia Securites Services Nominees
Limted Zambia ZMW1.00 Ordinary shares 100
The following companies have the address of Africa Unity
Square Buildng, 68 Nelson Mandela Avenue, Harare,
Zimbabwe
Africa Enterprise Network Trust
3
Zimbabwe Interest in Trust 100
Standard Chartered Bank Zimbabwe Limted Zimbabwe $1.00 Ordinary shares 100
Standard Chartered Nominees Zimbabwe (Private) Limted Zimbabwe $2.00 Ordinary shares 100
1 Directly held related undertaking
2 The Group has determined that these undertakings are excluded from being consolidated into the Groups accounts, and do not meet the defintion of a Subsidary
under IFRS. See notes 31 and 32 for the consolidaton policy and disclosure of the undertaking.
3 No share capital by virtue of being a trust
4 Limted liablity company
5 The Group has determined the princpal place of operation to be Singapore
6 The Group has determined the princpal place of operation to be United Kingdom
7 The Group has determined the princpal place of operation to be Hong Kong
Joint ventures
Name Country of Incorporation Descripton of shares
Proportion 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. Singapore $ Ordinary shares 50
$ Preference shares 100
Associates
Name Country of Incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of Work.Life,
33 Foley Street , London, W1W 7TL, United Kingdom
Fintech for International Development Ltd United Kingdom $0.0001 Ordinary-A 58.901
The following company has the address of 3 More London
Riversde,London, England, SE1 2AQ, United Kingdom
Trade Information Network Limted¹ United Kingdom $1.00 Ordinary shares 16.667
The following company has the address of 1 Raffles Quay,
#23-01, One Raffles Quay, 048583, Singapore
Clifford Capital Holdings Pte. Ltd. Singapore $1.00 Ordinary shares 9.9
The following company has the address of 10 Marina
Boulevard #08-08, Marina Bay, Financal Centre, 018983,
Singapore
Verifed Impact Exchange Holdings Pte. Ltd
Singapore
$ Ordinary shares 15
$ Redeemable Convertible
Preference shares
28.571
The following company has the address of Victora House,
State House Avenue, Victora, MAHE, Seychelles
Seychelles International Mercantile Banking Corporation
Limted.
Seychelles SCR1,000.00 Ordinary shares 22
The following company has the address of Avenue de Tivol 2,
1007, Lausanne, Switzerland
Metaco SA Switzerland CHF 0.01 Preference A Shares 29.505
1 Directly held related undertaking
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
321
Notes to the financal statements continued
Signficant investment holdings and other related undertakings
Name Country of Incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of 1 Bartholomew
Lane, London, EC2N 2AX, United Kingdom
Corrasi Covered Bonds (LM) Limted¹ United Kingdom £1.00 Ordinary 20
The following company has the address of Intertrust
Corporate Services (Cayman) Limted, 190 Elgin Avenue,
George Town, Grand Cayman , KY1-9005, Cayman Islands
ATSC Cayman Holdco Limted Cayman Islands $0.01 Ordinary-A shares 5.272
The following company has the address of 3, Floor 1, No.1,
Shiner Wuxingcayuan, West Er Huan Rd, , Xi Shan Distrct,
Kunming, Yunnan Province, PRC , China
Yunnan Golden Shiner Property Development Co., Ltd. China CNY1.00 Ordinary shares 42.5
The following companies have the address of Unit 605-08,
6/F Wing On Centre, 111 Connaught Road, Central, Sheung
Wan, Hong Kong
Actis Carrock Holdings (HK) Limted Hong Kong $ Class A Ordinary shares 39.689
Actis Temple Stay Holdings (HK) Limted Hong Kong $ Class A Ordinary shares 39.689
Actis Jack Holdings (HK) Limted Hong Kong $ Class A Ordinary shares 39.689
Actis Rivendell Holdings (HK) Limted Hong Kong $ Class A Ordinary shares 39.689
Actis Young City Holdings (HK) Limted Hong Kong $ Class A Ordinary shares 39.689
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 Limted India INR10.00 Ordinary shares 26
The following company has the address of 4thFloor, 274,
Chitala House, Dr. Cawasj Hormusj Road, Dhobi Talao,
Mumbai City, Maharashtra, India 400 002, Mumbai, 400 002,
India
Industrial Minerals and Chemical Co. Pvt. Ltd India INR100.00 Ordinary shares 26
The following company has the address of 17F, 100,
Gongpyeong-dong, Jongno-gu, Seoul, Korea, Republic of
Korea
Ascenta III Korea KRW Class B Equity Interest 31
The following company has the address of 49, Sungei Kadut
Avenue, #03-01 S729673, Singapore
Omni Centre Pte. Ltd. Singapore SGD Redeemable Convertible
Preference shares
99.998
The following companies have the address of 251 Little Falls
Drive, Wilmngton, New Castle DE 19808, United States
Paxata, Inc. United States US$0.0001 Series C2 Preferred
Stock
40.74
US$0.0001 Series C2 Preferred
Stock
10.11
1 Directly held related undertaking
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
322
In liqudation
Subsidary undertakings
Name Country of Incorporation Descripton of shares
Proportion of
shares held
(%)
The following companies have the address of C/O Teneo
Restructuring Limted 156 Great Charles Street Queensway
Birmngham West Midlands B3 3HN
Compass Estates Limted¹ United Kingdom £1.00 Ordinary shares 100
Standard Chartered Masterbrand Licensng Limted¹ 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 Limted Guernsey £1.00 Ordinary shares 100
Nominees One Limted Guernsey £1.00 Ordinary shares 100
Nominees Two Limted Guernsey £1.00 Ordinary shares 100
Songbird Limted Guernsey £1.00 Ordinary shares 100
Standard Chartered Secretaries (Guernsey) Limted Guernsey £1.00 Ordinary shares 100
Standard Chartered Trust (Guernsey) Limted¹ Guernsey £1.00 Ordinary shares 100
The following company has the address of 8/Floor, Gloucester
Tower , The Landmark, 15 Queen's Road Central, Hong Kong
Leopard Hong Kong Limted¹ Hong Kong $ Ordinary shares 100
The following company has the address of Menara Standard
Chartered, 3rd Floor, Jl. Prof.Dr. Satrio no. 164, Setiabud,
Jarkarta Selatan, Indonesia
PT Solusi Cakra Indonesia (dalam likudasi)¹ Indonesia IDR23,809,600.00 Ordinary
shares
99
The following company has the address of No. 157 – 157 A,
Jakarta Barat, 11130, Indonesia.
PT. Price Solutions Indonesia (dalam likudasi) Indonesia $100.00 Ordinary shares 100
The following company has the address of Standard
Chartered@Chiromo, Number 48, Westlands Road, P. O. Box
30003 – 00100, Nairob, Kenya
Standard Chartered Management Services Limted Kenya KES20.00 Ordinary shares 100
The following company has the address of 30 Rue
Schrobilgen, 2526, Luxembourg
Standard Chartered Financal Services (Luxembourg) S.A.¹ Luxembourg €25.00 Ordinary shares 100
The following company has the address of Level 26,
Equatorial Plaza, Jalan Sultan Ismail, 50250 Kuala Lumpur,
Malaysia
Popular Ambience Sdn Bhd Malaysia RM Ordinary shares 100
The following company has the address of C/o IQ EQ
Corporate Services (Mauritus) Ltd, 33 Edith Cavell Street, Port
Louis, 11324, Mauritus
FAI Limted Mauritus US$1.00 Ordinary shares 76.60
The following company has the address of Jiron Huascar
2055, Jesus Maria, Lima 15072, Peru
Banco Standard Chartered en Liqudacion¹ Peru $75.133 Ordinary shares 100
The following company has the address of 8 Marina
Boulevard, Level 27, Marina Bay Financal Centre, Tower 1,
018981, Singapore
Standard Chartered (2000) Limted Singapore SGD1.00 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 Representacion S.A.¹ Uruguay UYU1.00 Ordinary shares 100
1 Directly held related undertaking
Notes to the financal statements continued
39. Related undertakings of the Group continued
Standard Chartered Bank
Directors’ Report and Financal Statements 2021
323
Signficant investment holdings and other related undertakings
Name Country of Incorporation Descripton of shares
Proportion of
shares held
(%)
The following company has the address of Lot 6.05, Level 6,
KPMG Tower, 8 First Avenue, Bandar Utama, 47800 Petaling
Jaya, Selangor, Malaysia
House Network SDN BHD Malaysia RM1.00 Ordinary shares 25
Liqudated/dissolved/sold
Subsidary undertakings
Name Country of Incorporation Descripton of shares
Proportion of
shares held
(%)
SC Leaseco Limted¹ United Kingdom $1.00 Ordinary shares 100
Standard Chartered APR Limted United Kingdom $1.00 Ordinary shares 100
Standard Chartered Finance (Brunei) Bhd Brunei Darussalam BND1.00 Ordinary shares 100
Standard Chartered Princpal Finance (Cayman) Limted¹ Cayman Islands $0.0001 Ordinary shares 100
Sunflower Cayman SPC¹ Cayman Islands $1.00 Management shares 100
Ori Private Limted Hong Kong $ Ordinary shares 100
S C Learning Limted Hong Kong HKD Ordinary shares 100
Standard Chartered Sherwood (HK) Limted Hong Kong HKD Ordinary shares 100
Resolution Alliance Korea Ltd² Korea, Republic of KRW5,000.00 Ordinary
shares
100
Actis Asia Real Estate (Mauritus) Limted Mauritus Class A $1.00 Ordinary shares 100
Kwang Hua Mocatta Company Ltd. Taiwan
TWD1,000.00 Ordinary shares
97.92Actis RE Investment 1 Private Limted Singapore SGD Ordinary shares 100
Actis RE Investment 2 Private Limted Singapore SGD Ordinary shares 100
Actis RE Investment 3 Private Limted Singapore SGD Ordinary shares 100
Actis RE Investment 4 Private Limted Singapore SGD Ordinary shares 100
Standard Chartered Capital Management (Jersey), LLC United States $ Ordinary shares 100
Standard Chartered International (USA) LLC United States Membership Interest 100
StanChart Securites International LLC United States Membership Interest 100
1 Directly held related undertaking
2 The Group has determined the princpal country of operation to be Singapore
Notes to the financal statements continued
39. Related undertakings of the Group continued
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324
40. Group reorganisaton
The PLC Group has completed a Group reorganisaton. The purpose of the reorganisaton is to form a holding company
structure (a “Singapore Hub”) with Standard Chartered Bank (Singapore) Limted (“SCB SL”) acquirng ownership of 100% of
Standard Chartered Bank Malaysia Berhad (“SCB MY”) and Standard Chartered Bank (Vietnam) Limted (“SCB VN”), and
99.871% of Standard Chartered Bank (Thai) Public Company Limted (“SCB TH”). The Group will not change with SCB SL still
consolidated into the Group.
On 1 September 2021, SCB SL purchased SCB MY from Standard Chartered Holdings (Asia Pacifc) B.V. (“SCHAP”) for a fair
value $1,273m in cash, resulting in a profit on sale for SCHAP of $1,064m. SCHAP is a wholly owned subsidary of the Group.
SCHAP following the sale of SCB MY distrbuted a divdend of $1,211m up the chain to the Company. The Company further
distrbuted this divdend up to its parent Standard Chartered Holdings limted .
On 1 November 2021, SCB SL purchased SCB TH directly from the Company for the issuance of SCB SL share capital. SCB SL
paid a fair value of $733m, resulting in a loss on sale for the Company of $50m. The Company concurrently received $530m in
cash as a result of a share buy-back transaction of its subsidary Standard Chartered Holdings Singapore Limted.
On 1 December 2021, SCB SL purchased SCB VN directly from the Company for the issuance of SCB SL share capital. SCB SL
paid a fair value of $333m, resulting in a profit on sale for the Company of $6m.
Notes to the financal statements continued
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Directors’ Report and Financal Statements 2021
325
AT1 or Additonal Tier 1 capital
Additonal Tier 1 capital consists of instruments other than Common Equity Tier 1 that meet the Capital Requirements
Regulation (CRR) critera for incluson in Tier 1 capital.
Additonal 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.
Alternative performance measures
A financal measure of historcal or future financal performance, financal positon, or cash flows, other than a financal
measure defined or specifed in the applicable financal reporting framework.
ASEAN
Associaton of South East Asian Nations (ASEAN) which includes the Group’s operations in Brunei, Indonesia, Malaysia,
Philppines, Singapore, Thailand and Vietnam.
AUM or Assets under management
Total market value of assets such as deposits, securites and funds held by the Group on behalf of the clients.
Basel II
The capital adequacy framework issued by the Basel Committee on Banking Supervison (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 liqudity, orignally issued in December 2010 and updated in
June 2011. In December 2017, the BCBS published a document setting out the finalsation of the Basel III framework. The latest
requirements issued in December 2017 will be implemented from 2022.
BCBS or Basel Committee on Banking Supervison
A forum on banking supervisory matters which develops global supervisory standards for the banking industry. Its members
are officals from 45 central banks or prudential supervisors from 27 countries and territores.
Basis point (bps)
One hundredth of a per cent (0.01 per cent); 100 basis points is 1 per cent.
CRD or Capital Requirements Directve
A capital adequacy legislatve package adopted by the PRA. CRD comprises the Capital Requirements Directve and the UK
onshored Capital Requirements Regulation (CRR). The package implements the Basel III framework together with transitonal
arrangements for some of its requirements. CRD IV came into force on 1 January 2014. The EU CRR II and CRD V amending the
existng 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 recently finalsed the UK’s version of the CRR II for implementaton on 1 January 2022.
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 identfiable 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.
Glossary
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Glossary continued
Clawback
An amount an indvidual is required to pay back to the Group, which has to be returned to the Group under certain
circumstances.
Commercial real estate
Includes office buildngs, industral property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multi-
family housing buildngs, warehouses, garages, and industral 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 common shares issued by the Group and related share premium, retained
earnings, accumulated other comprehensive income and other disclosed reserves, eligble non-controlling interests and
regulatory adjustments required in the calculation of Common Equity Tier 1.
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 financal instrument, at which point all the remainng
outstanding princpal 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
procyclicalty in the financal system. CCyB as defined in the Basel III standard provides for an additonal capital requirement
of up to 2.5 per cent of risk-weighted assets in a given jursdicton. The Bank of England’s Financal Policy Committee has the
power to set the CCyB rate for the United Kingdom. Each bank must calculate its ‘insttution-specifc’ CCyB rate, defined as
the weighted average of the CCyB rates in effect across the jursdictons in which it has credit exposures. The insttution-
specifc CCyB rate is then applied to a bank’s total risk-weighted assets.
Counterparty credit risk
The risk that a counterparty defaults before satisfyng its obligatons under a derivatve, a securites financng transaction
(SFT) or a simlar contract.
CCF or Credit conversion factor
An estimate of the amount the Group expects a customer to have drawn further on a facilty limt at the point of default. This
is either prescribed by CRR or modelled by the bank.
CDS or Credit default swaps
A credit derivatve 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 insttutions
An insttution whose business is to receive deposits or other repayable funds from the public and to grant credits for its own
account.
Credit risk mitgation
Credit risk mitgation is a process to mitgate potential credit losses from any given account, customer or portfolio by using a
range of tools such as collateral, netting agreements, credit insurance, credit derivatves and guarantees.
CVA or Credit valuation adjustments
An adjustment to the fair value of derivatve contracts that reflects the possiblity 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 indviduals and companies which are not credit insttutions includng securites sold under repurchase
agreement (see repo/reverse repo). Such funds are recorded as liablites in the Group’s balance sheet under customer
accounts.
Days past due
One or more days that interest and/or princpal payments are overdue based on the contractual terms.
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Glossary continued
DVA or Debit valuation adjustment
An adjustment to the fair value of derivatve contracts that reflects the possiblity that the Group may default and not pay
the full market value of contracts.
Debt securites
Debt securites are assets on the Group’s balance sheet and represent certifcates of indebtedness of credit insttutions, public
bodies or other undertakings excluding those issued by central banks.
Debt securites in issue
Debt securites in issue are transferable certifcates of indebtedness of the Group to the bearer of the certifcate. These are
liablites of the Group and include certifcates of deposits.
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 liablity 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 liablity
Income taxes payable in future periods in respect of taxable temporary differences between the accounting and tax base of
an asset or liablity that will result in taxable amounts in future periods.
Default
Financal assets in default represent those that are at least 90 days past due in respect of princpal or interest and/or where
the assets are otherwise considered to be unlikely to pay, includng those that are credit-impared.
Defined benefit obligaton
The present value of expected future payments required to settle the obligatons of a defined benefit scheme resulting from
employee service.
Defined benefit scheme
Pension or other post-retirement benefit scheme other than a defined contributon scheme.
Defined contributon scheme
A pension or other post-retirement benefit scheme where the employer’s obligaton is limted to its contributons to the fund.
Delinquency
A debt or other financal obligaton 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 insttutions by the Group includng securites
sold under repo.
Divdend 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 exhibts risks or potential weaknesses of a material nature requirng closer monitorng,
supervison, or attention by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in
deterioraton of repayment prospects and the likelhood of being downgraded to credit grade 12 or worse. When an account
is on early alert, it is classifed as either purely precautionary or non-purely precautionary. A purely precautionary account is
one that exhibts early alert characteristcs, but these do not present any immnent credit concern. If the symptoms present an
immnent credit concern, an account will be considered for classifcation as non-purely precautionary.
Effective tax rate
The tax on profit/(losses) on ordinary activties as a percentage of profit/(loss) on ordinary activties before taxation.
Encumbered assets
On-balance sheet assets pledged or used as collateral in respect of certain of the Group’s liablites.
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Glossary continued
EU or European Union
The European Union (EU) is a politcal and economic union of 27 member states that are located primarly 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 financal asset, undrawn commitment or
financal guarantee.
Expected loss
The Group measure of anticpated 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 anticpated loss based on probabilty 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 estimaton of the extent to which 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 princpal, so that exposure is typically less than the approved loan limt.
ECAI or External Credit Assessment Instituton
External credit ratings are used to assign risk-weights under the standardised approach for sovereigns, corporates and
insttutions. The external ratings are from credit rating agencies that are registered or certifed in accordance with the credit
rating agencies regulation or from a central bank issung credit ratings which is exempt from the applicaton of this
regulation.
FCA or Financal Conduct Authority
The Financal Conduct Authority regulates the conduct of financal firms and, for certain firms, prudential standards in the UK.
It has a strategic objectve 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 financal
diffculties. The Group classifes such modifed loans as either ‘Forborne – not impared loans’ or ‘Loans subject to forbearance
– impared’. Once a loan is categorised as either of these, it will remain in one of these two categories until the loan matures or
satisfes the ‘curing’ conditons described in Note 8 to the financal statements.
Forborne – not impared loans
Loans where the contractual terms have been modifed due to financal diffculties of the borrower, but the loan is not
considered to be impared. 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.
FVA or Funding valuation adjustments
FVA reflects an adjustment to fair value in respect of derivatve contracts that reflects the funding costs that the market
particpant would incorporate when determinng an exit price.
G-SIBs or Global Systemically Important Banks
Global banking financal insttutions whose size, complexity and systemic interconnectedness mean that their distress or
failure would cause signficant disrupton to the wider financal system and economic activty. The list 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 Institutons (G-SIIs).
G-SIB buffer
A CET1 capital buffer which results from designaton as a G-SIB. The G-SIB 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 EU, the G-SIB buffer is implemented via
CRD IV as Global Systemically Important Institutons (G-SII) buffer requirement.
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Glossary continued
Hong Kong regional hub
Standard Chartered Bank (Hong Kong) Limted and its subsidaries includng the primary operating entites in China, Korea
and Taiwan. Standard Chartered PLC is the ultimate parent company of Standard Chartered Bank (Hong Kong) Limted.
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-weightng 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 Financal Reporting Standards framework.
IASB or International Accounting Standards Board
An independent standard-setting body responsible for the development and publicaton of IFRS, and approving
interpretatons of IFRS standards that are recommended by the IFRS Interpretations Committee (IFRIC).
IFRS or International Financal Reporting Standards
A set of internatonal accounting standards developed and issued by the International Accounting Standards Board,
consistng of princples-based guidance contained withn IFRSs and IASs. All companies that have issued publicly traded
securites in the EU are required to prepare annual and interm reports under IFRS and IAS standards that have been
endorsed by the EU.
IFRIC
The IFRS Interpretations Committee supports the IASB in providng authoritatve guidance on the accounting treatment of
issues not specifcally dealt with by existng IFRSs and IASs.
Investment grade
A debt security, treasury bill or simlar 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, includng certain exposures held off-balance
sheet as adjusted by stipulated credit conversion factors. Intended to be a simple, non-risk-based backstop measure.
Liqudation portfolio
A portfolio of assets which is beyond our current risk appetite metrics and is held for liqudation.
LCR or Liqudity coverage ratio
The ratio of the stock of high-quality liqud assets to expected net cash outflows over the following 30 days. High-quality
liqud assets should be unencumbered, liqud in markets during a time of stress and, ideally, be central bank eligble.
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 facilties.
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.
Loans and advances to banks
Amounts loaned to credit insttutions includng securites 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 determinng the appropriate level of risk for the loan and therefore the correct
price of the loan to the borrower.
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Glossary continued
Loans past due
Loans on which payments have been due for up to a maximum of 90 days includng those on which partial payments are
being made.
Loans subject to forbearance – impared
Loans where the terms have been renegotiated on terms not consistent with current market levels due to financal diffculties
of the borrower. Loans in this category are necessarily impared. 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 specifc crystallised risk, behaviour, conduct or adverse performance outcome.
Master netting agreement
An agreement between two counterparties that have multiple derivatve contracts with 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 terminaton of, any one
contract.
Mezzanine capital
Financng that combines debt and equity characteristcs. For example, a loan that also confers some profit particpation to
the lender.
MREL or minmum requirement for own funds and eligble liablites
A requirement under the Bank Recovery and Resolution Directve for EU resolution authorites to set a minmum requirement
for own funds and eligble liablites for banks, implementng the FSB’s Total Loss Absorbing Capacity (TLAC) standard. MREL
is intended to ensure that there is sufficent equity and specifc types of liablites to faciltate an orderly resolution that
minmises any impact on financal stabilty and ensures the continuty of critcal functions and avoids exposing taxpayers to
loss.
Net asset value (NAV) per share
Ratio of net assets (total assets less total liablites) 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 imparment provisons, restricted
balances with central banks, derivatves (net of master netting agreements), investment debt and equity securites, and
letters of credit and guarantees.
NII or Net interest income
The difference between interest received on assets and interest paid on liablites.
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 liqudity 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 indvidually impared. This excludes Retail loans
renegotiated at or after 90 days past due, but on which there has been no default in interest or princpal payments for more
than 180 days since renegotiaton, and against which no loss of princpal is expected.
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Glossary continued
Non-linearty
Non-linearty of expected credit 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 176.
Operating expenses
Staff and premises costs, general and adminstrative expenses, depreciaton and amortisaton. Underlying operating
expenses exclude expenses as described in ‘Underlying earnings’. A reconcilation between underlying and statutory earnings
is contained in Note 2 to the financal statements.
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 derivatves
A bilateral transaction (e.g. derivatves) 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 possiblity 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 includng 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 minmum capital
requirements for credit, market and operational risk. Minmum capital 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
mitgants 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 comparabilty between banks and further promotes improvements in risk practices.
Priorty Banking
Priorty Banking customers are indviduals who have met certain critera for deposits, AUM, mortgage loans or monthly
payroll. Critera varies by country.
Private equity investments
Equity securites 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 insttutional
investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed
investments and mezzanine capital.
PD or Probabilty of default
PD is an internal estimate for each borrower grade of the likelhood that an obligor will default on an obligaton over a given
time horizon.
Probabilty weighted
Obtained by considerng the values the metric can assume, weighted by the probabilty of each value occurring.
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Glossary continued
Profit (loss) attributable to ordinary shareholders
Profit (loss) for the year after non-controlling interests and divdends declared in respect of preference shares classifed as
equity.
PVA or Prudent valuation adjustment
An adjustment to CET1 capital to reflect the difference between fair value and prudent value positons, where the applicaton
of prudence results in a lower absolute carrying value than recognised in the financal statements.
PRA or Prudential Regulation Authority
The Prudential Regulation Authority is the statutory body responsible for the prudential supervison of banks, buildng
societes, credit unions, insurers and a small number of signficant investment firms in the UK. The PRA is a part of the Bank of
England.
Regulatory consolidaton
The regulatory consolidaton of Standard Chartered PLC differs from the statutory consolidaton in that it includes Ascenta IV,
Olea Global Pte.Ltd. Seychelles International Mercantile Banking Corporation Limted.,and all of the legal entites in the
Currency Fair group on a proportionate consolidaton basis. These entites are considered associates for statutory accounting
purposes.
The regulatory consolidaton further excludes the following entites, which are consolidated for statutory accounting
purposes;, Autumn Life Pte. Ltd., Cardspal Pte. Ltd. Discovery Technology Services Pte. Ltd, Nexco Pte. Ltd, SCV Research and
Development Pte. Ltd., Standard Chartered Assurance Limted, Standard Chartered Insurance Limted, Corrasi Covered
Bonds LLP, Pegasus Dealmaking Pte. Ltd., Standard Chartered Botswana Education Trust, Standard Chartered
Bancassurance Intermediary Limted, Standard Chartered Bank Insurance Agency (Proprietary) Limted, Standard Chartered
Research and Technology India Private Limted, Standard Chartered Trading (Shanghai) Limted.
Repo/reverse repo
A repurchase agreement or repo is a short-term funding agreement, which allows a borrower to sell a financal asset, such as
asset-backed securites 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.
Residental mortgage
A loan to purchase a residental 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 statutory or underlying and is specifed where used. See
‘RWA’ and ‘Underlying earnings’.
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 provisons.
Risks-not-in-VaR (RNIV)
A framework for identfying and quantifyng marginal 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 historcal market data not being available.
Roll rate
Uses a matrix that gives average loan migraton rate from delinquency states from period to period. A matrix multiplcation is
then performed to generate the final PDs by delinquency bucket over different time horizons.
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 orignation. All other secured loans are considered to be partly secured.
Securitsation
Securitsation is a process by which credit exposures are aggregated into a pool, which is used to back new securites. Under
traditonal securitsation transactions, assets are sold to a structured entity which then issues new securites to investors at
different levels of seniorty (credit tranching). This allows the credit quality of the assets to be separated from the credit rating
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Glossary continued
of the orignating insttution and transfers risk to external investors in a way that meets their risk appetite. Under synthetic
securitsation transactions, the transfer of risk is achieved by the use of credit derivatves or guarantees, and the exposures
being securitsed remain exposures of the orignating insttution.
Senior debt
Debt that takes priorty over other unsecured or otherwise more ‘junor’ debt owed by the issuer. Senior debt has greater
seniorty 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 Signficant increase in credit risk
Assessed by comparing the risk of default of an exposure at the reporting date to the risk of default at orignation (after
considerng the passage of time).
Solo
The solo regulatory group as defined in the Prudential Regulation Authority waiver letter dated 10 August 2020 differs from
Standard Chartered Bank Company in that it includes the full consolidaton of nine subsidaries, namely Standard Chartered
Holdings (International) B.V., Standard Chartered MB Holdings B.V., Standard Chartered UK Holdings Limted, Standard
Chartered Grindlays PTY Limted, SCMB Overseas Limted, Standard Chartered Capital Management (Jersey) LLC, Cerulean
Investments L.P., SC Ventures Innovation Investment L.P. and SC Ventures G.P. Limted.
Sovereign exposures
Exposures to central governments and central government departments, central banks and entites owned or guaranteed by
the aforementioned.
Stage 1
Assets have not experienced a signficant increase in credit risk since orignation and imparment recognised on the basis of
12 months expected credit losses.
Stage 2
Assets have experienced a signficant increase in credit risk since orignation and imparment is recognised on the basis of
lifetme expected credit losses.
Stage 3
Assets that are in default and considered credit-impared (non-performing loans).
Standardised approach
In relation to credit risk, a method for calculating credit risk capital requirements using External Credit Assessment Institutons
(ECAI) ratings and supervisory risk weights. In relation to operational risk, a method of calculating the operational capital
requirement by the applicaton of a supervisory defined percentage charge to the gross income of eight specifed business
lines.
Structured note
An investment tool which pays a return linked to the value or level of a specifed asset or index and sometimes offers capital
protection if the value declines. Structured notes can be linked to equites, interest rates, funds, commodites and foreign
currency.
Subordinated liablites
Liablites which, in the event of insolvency or liqudation of the issuer, are subordinated to the claims of depositors and other
creditors of the issuer.
Tier 1 capital
The sum of Common Equity Tier 1 capital and Additonal Tier 1 capital.
Tier 1 capital ratio
Tier 1 capital as a percentage of risk-weighted assets.
Tier 2 capital
Tier 2 capital comprises qualifyng subordinated liablites and related share premium accounts.
TLAC or Total loss absorbing capacity
An internatonal standard for TLAC issued by the FSB, which requires G-SIBs to have sufficent loss-absorbing and
recapitalsation capacity available in resolution, to minmise impacts on financal stabilty, maintan the continuty of critcal
functions and avoid exposing public funds to loss.
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Directors’ Report and Financal Statements 2021
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Glossary continued
Transiton risks
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 equites and liablites on the Group’s UK tax resident entites’ balance sheets. Key exclusions
from chargeable equites and liablites include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain
sovereign debt and liablites subject to netting.
Unbiased
Not overly optimstic or pessimstic, represents informaton that is not slanted, weighted, emphasised, de-emphasised or
otherwise manipulated to increase the probabilty that the financal informaton will be received favourably or unfavourably
by users.
Unlikely to pay
Indicatons of unlikelness to pay shall include placing the credit obligaton on non-accrued status; the recogniton of a
specifc credit adjustment resulting from a signficant perceived decline in credit quality subsequent to the Group taking on
the exposure; selling the credit obligaton at a material credit-related economic loss; the Group consenting to a distressed
restructuring of the credit obligaton where this is likely to result in a dimnished financal obligaton caused by the material
forgiveness, or postponement, of princpal, interest or, where relevant fees; filng for the obligor's bankruptcy or a simlar order
in respect of an obligor's credit obligaton to the Group; the obligor has sought or has been placed in bankruptcy or simlar
protection where this would avoid or delay repayment of a credit obligaton to the Group.
VaR or Value at Risk
A quantitatve measure of market risk estimatng the potential loss that will not be exceeded in a set time period at a set
statistcal confidence level.
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 identfied as impared and is subject to an imparment provison, the stage may be reached
whereby it is concluded that there is no realistc 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 derivatve financal
instruments. See ‘CVA’, ‘DVA’ and ‘FVA’.