Guarantee Arrangements As part of our normal operations, we enter into credit derivatives and various off-balance sheet guarantee arrangements with affiliates and third parties. These arrangements arise principally in connection with our lending and client intermediation activities and include standby letters of credit and certain credit derivative transactions. The contractual amounts of these arrangements represent our maximum possible credit exposure in the event we are required to fulfill the maximum obligation under the contractual terms of the guarantee.

The following table presents total carrying value and contractual amounts of our sell protection credit derivatives and major off-balance sheet guarantee arrangements. Following the table is a description of the various arrangements. See Note 24, "Guarantee Arrangements, Pledged Assets and Repurchase Agreements," in our 2025 Form 10-K for a more detailed discussion of these arrangements.


	June 30, 2026				December 31, 2025
	Carrying Value		Notional / Maximum Exposure to Loss		Carrying Value		Notional / Maximum Exposure to Loss
	(in millions)
Credit derivatives(1)(2)	$	64	$	7,910	$	61	$	6,560
Financial standby letters of credit, net of participations(3)(4)	—		6,028		—		5,206
Performance standby letters of credit, net of participations(3)(4)	—		4,910		—		4,099
Total	$	64	$	18,848	$	61	$	15,865

(1)Includes $1,200 million and $677 million of notional issued for the benefit of HSBC affiliates at June 30, 2026 and December 31, 2025, respectively.

(2)For credit derivatives, the maximum loss is represented by the notional amounts without consideration of mitigating effects from collateral or recourse arrangements.

(3)Includes $1,807 million and $1,682 million of both financial and performance standby letters of credit issued for the benefit of HSBC affiliates at June 30, 2026 and December 31, 2025, respectively.

(4)For standby letters of credit, maximum loss represents losses to be recognized assuming the letters of credit have been fully drawn and the obligors have defaulted with zero recovery.

Credit derivatives We manage our credit derivative exposures on a net basis using offsetting hedge positions and, where appropriate, risk transfer through the issuance of structured credit products. As a result, we generally retain a limited net position. The following table summarizes our credit derivative positions:


	June 30, 2026				December 31, 2025
	Carrying / Fair Value		Notional		Carrying / Fair Value		Notional
	(in millions)
Sell-protection credit derivative positions	$	64	$	7,910	$	61	$	6,560
Buy-protection credit derivative positions	(121)		16,019		(141)		15,985
Net position(1)	$	(57)	$	8,109	$	(80)	$	9,425

(1)Positions are presented net in the table above to provide a complete analysis of our exposure and depict the way we manage the portfolio. The offset of the sell-protection derivatives against the buy-protection derivatives may not be legally binding in the absence of master netting agreements with the same counterparty. Furthermore, the credit loss triggering events for individual sell-protection derivatives may not be the same or occur in the same period as those of the buy-protection derivatives thereby not providing an exact offset.

Standby letters of credit Standby letters of credit are subject to our credit approval and collateral processes, and we charge fees for issuing letters of credit commensurate with the client's credit evaluation and nature of any collateral. Included in other liabilities are deferred fees on standby letters of credit amounting to $59 million and $71 million at June 30, 2026 and December 31, 2025, respectively. Also included in other liabilities is an allowance for credit losses on unfunded standby letters of credit of $43 million and $18 million at June 30, 2026 and December 31, 2025, respectively.

The following table summarizes the credit ratings related to guarantees including the ratings of counterparties against which we sold credit protection and issued standby letters of credit at June 30, 2026 as an indicative proxy of payment risk:


	Average Life (in years)	Credit Ratings of the Obligors
Notional/Contractual Amounts		Investment Grade		Non-Investment Grade		Total
		(dollars are in millions)
Sell-protection credit derivatives:(1)
Single name credit default swaps	1.0	$	1,204	$	348	$	1,552

Index credit derivatives	4.4	5,713		645		6,358

Subtotal		6,917		993		7,910
Standby letters of credit(2)	0.8	8,057		2,881		10,938
Total		$	14,974	$	3,874	$	18,848

(1)The credit ratings in the table represent external credit ratings for classification as investment grade and non-investment grade.

(2)External ratings for most of the obligors are not available. Presented above are our internal credit ratings which are developed using similar methodologies and rating scale equivalent to external credit ratings for purposes of classification as investment grade and non-investment grade.

Our internal credit ratings are assigned using HSBC's risk rating systems and processes which grade clients based on a scale that ranks their risk of default. These ratings are used for managing risk and determining credit exposure appetite, and consider factors such as the client's operating performance, liquidity, capital structure and debt service ability. We also incorporate qualitative judgment, including industry trends, peer comparisons and management quality. Where available, we compare our internal ratings to external rating agency benchmark data at the time of formal review and monitor on a regular basis.

A non-investment grade rating of a referenced obligor has a negative impact on the fair value of a credit derivative and increases the likelihood that we will be required to perform under the contract. We value credit derivatives using market-based inputs, including observable credit spreads where available. We believe these market indicators provide a more timely measure of payment/performance risk than external credit ratings, which may lag behind changes in market conditions.

See Note 24, "Guarantee Arrangements, Pledged Assets and Repurchase Agreements," in our 2025 Form 10-K for a discussion of our non-credit-risk-related guarantees and other arrangements. There have been no significant changes in these arrangements since December 31, 2025.


	June 30, 2026		December 31, 2025
	(in billions)
Interest bearing deposits with banks(1)	$	.4	$	.7
Trading assets(2)	4.4		4.0
Securities available-for-sale(3)	14.1		14.6
Securities held-to-maturity(3)	12.8		12.7
Loans(4)	21.1		21.6
Other assets(5)	1.0		.7
Total	$	53.8	$	54.3

(1)Represents gross amount of cash on deposit with banks primarily related to derivative collateral-support agreements, of which a majority has been netted against derivative liabilities on the consolidated balance sheet.

(3)Securities are primarily pledged against derivatives, public fund deposits, trust deposits and various short-term and long term borrowings, as well as providing capacity for potential secured borrowings from the FHLB and the Federal Reserve Bank of New York.

(4)Loans are primarily residential mortgage loans pledged against current and potential borrowings from the FHLB and the Federal Reserve Bank of New York.

(5)Represents gross amount of cash on deposit with non-banks primarily related to derivative collateral support agreements, of which a majority has been netted against derivative liabilities on the consolidated balance sheet.

Debt securities pledged as collateral under repurchase agreements that can be sold or repledged by the secured party continue to be reported on the consolidated balance sheet. The fair value of securities available-for-sale that could be sold or repledged was

$0.4 billion and $0.0 billion at June 30, 2026 and December 31, 2025, respectively. The fair value of trading assets that could be sold or repledged was $4.3 billion and $3.5 billion at June 30, 2026 and December 31, 2025, respectively.

The fair value of collateral we accepted under security resale agreements but was not reported on the consolidated balance sheet was $7.2 billion and $11.5 billion at June 30, 2026 and December 31, 2025, respectively. Of this collateral, $6.6 billion and $10.8 billion could be sold or repledged at June 30, 2026 and December 31, 2025, respectively, of which $0.0 billion and $0.1 billion, respectively, had been sold or repledged as collateral under repurchase agreements or to cover short sales.

We enter into purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to repurchase (repurchase agreements) identical or substantially the same securities. Resale and repurchase agreements are accounted for as secured lending and secured borrowing transactions, respectively.

Repurchase agreements may require us to deposit cash or other collateral with the lender. In connection with resale agreements, it is our policy to obtain possession of collateral, which may include the securities purchased, with market value in excess of the principal amount loaned. The market value of the collateral subject to the resale and repurchase agreements is regularly monitored, and additional collateral is obtained or provided when appropriate, to ensure appropriate collateral coverage of these secured financing transactions.



	Gross Amounts Recognized		Gross Amounts Offset in the Balance Sheet(1)		Net Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet(2)		Net Amount(3)
	(in billions)
At June 30, 2026
Assets:
Securities purchased under resale agreements	$	7.3	$	2.8	$	4.5	$	4.5	$	—
Liabilities:
Securities sold under repurchase agreements	$	4.8	$	2.8	$	2.0	$	2.0	$	—

At December 31, 2025
Assets:
Securities purchased under resale agreements	$	11.7	$	2.4	$	9.3	$	9.3	$	—
Liabilities:
Securities sold under repurchase agreements	$	3.7	$	2.4	$	1.3	$	1.3	$	—

(1)Represents recognized amount of resale and repurchase agreements with counterparties subject to legally enforceable netting agreements that meet the applicable netting criteria as permitted by generally accepted accounting principles.

The following table provides the class of collateral pledged and remaining contractual maturity of repurchase agreements accounted for as secured borrowings:


	Overnight and Continuous		Up to 30 Days		31 to 90 Days		91 Days to One Year		Greater Than One Year		Total
	(in billions)
At June 30, 2026
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	2.3	$	—	$	.5	$	2.0	$	—	$	4.8



At December 31, 2025
U.S. Treasury, U.S. Government sponsored and U.S. Government agency securities	$	1.4	$	.5	$	.7	$	1.1	$	—	$	3.7