Standard Chartered
Annual Report 2023

Plain-text annual report

Annual Report 2023 [[Connecting the world’s most dynamic markets]] Strategic report We are a leading international cross-border bank Standard Chartered connects the world’s most dynamic markets, serving the businesses that are the engines of global growth and supporting people to meet their ambitions. Every day, we help clients to manage and invest their finances safely and seamlessly, and grow their businesses and wealth with confidence. Over our 170 year history, and across a unique geographical footprint that connects Asia, Africa and the Middle East to each other and the world, we’ve built a bank like no other, with diverse capabilities and partnerships that set us apart. Inspired by our brand promise, we are here for good. Financial KPIs1 Non-financial KPIs 2 Return on tangible equity Common Equity Tier 1 ratio Diversity and inclusion: women in senior roles4 10.1% 240bps Underlying basis 8.4% 160bps Reported basis 14.1% 10bps Above our 13-14 per cent target range Total shareholder return 9.4% 2022: 41.4% 32.5% 0.4ppt Mobilising Sustainable Finance $ $87.2bn $29.8bn Employee net promoter score (eNPS) 25.86 8.31 points Other financial measures1, 3 Operating income Profit before tax Earnings per share Tangible net asset value per ordinary share $17,378m 13% Underlying basis $5,678m Underlying basis 27% 128.9cents 31.0 cents Underlying basis $13.93 12% $18,019m 10% Reported basis $5,093m 24% Reported basis 108.6cents 22.7 cents Reported basis Stakeholders Throughout this report, we use these icons to represent the different stakeholder groups for whom we create value. Clients Regulators and governments Investors Suppliers Society Employees 1 Reconciliations from underlying to reported and definitions of alternative performance measures can be found on pages 80 to 87 2 For more information on our culture of inclusion see page 24, and for more on our Sustainability Aspirations see page 66 3 Year-on-Year growth on Operating Income and Profit before tax is on constant currency basis 4 Senior leadership is defined as Managing Directors and Band 4 roles (including Management Team) In this report Strategic report 02 Who we are and what we do 04 Where we operate 06 Group Chairman’s statement 10 Group Chief Executive’s review 14 Key performance indicators 16 Market environment 20 Business model 24 Our strategy 26 Our Stands 28 Client segment reviews Regional reviews 31 Group Chief Financial 34 Officer’s review 44 Group Chief Risk Officer’s review Stakeholders and Sustainability 52 overview Underlying versus reported results reconciliations 80 86 Alternative performance measures 88 Viability statement Client segment reviews Sustainability review Sustainability review 92 Sustainability Aspirations 94 Sustainability Strategic Pillars 99 Climate- and sustainability-related 120 governance Managing Environmental and Social Risk 125 126 Managing Climate Risk 130 Integrity, conduct and ethics Directors’ report 136 Group Chairman’s governance overview 137 Board of Directors 142 Management Team 145 Corporate governance 182 Directors’ remuneration report 208 217 Other disclosures 229 Additional remuneration disclosures Statement of Directors’ responsibilities Risk review and Capital review 234 Risk profile 298 Climate risk 314 Enterprise Risk Management Framework 320 Principal risks 338 Capital review Independent Auditor’s report Financial statements 346 359 Financial statements 366 Notes to the financial statements Supplementary information 490 498 504 Supplementary financial information Supplementary people information Supplementary sustainability information Shareholder information 517 521 Main awards and accolades in 2023 523 Glossary Regional reviews p31 Group Chief Executive’s review p28 Our strategy p52 p24 Stakeholders and Sustainability overview p10 About this report Sustainability and ESG reporting The Group includes Environmental, Social and Governance (ESG) and sustainability information in this Annual Report, providing investors and stakeholders with an understanding of the implications of relevant sustainability-related risks and opportunities, and progress against our objectives. We have observed our obligations under: (i) sections 414CA and 414CB of the UK Companies Act 2006; (ii) the UK’s Financial Conduct Authority’s Listing Rules in respect of climate-related disclosures; and (iii) the ESG Reporting Guide contained in Appendix C2 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. We have made disclosures consistent with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations and recommended disclosures throughout this Annual Report. In preparing this report we have given consideration to (but do not align in full with) the guidance provided by the International Sustainability Standards Board (ISSB) Standards finalised in 2023: IFRS S1 and IFRS S2, noting that IFRS S2, although largely based on TCFD, requires a more granular level of disclosure. IFRS S1 and S2 are voluntary standards and compliance is not yet required in the Group’s listing locations. Additionally, we publish an ESG reporting index against the voluntary Global Reporting Initiative (GRI) Universal Standards and select GRI Topic Standards, and the World Economic Forum Stakeholder Capitalism Metrics framework. The Group’s sustainability-related disclosures can be accessed via sc.com/sustainabilityhub Alternative performance measures The Group uses a number of alternative performance measures in the discussion of its performance. These measures exclude certain items which management believes are not representative of the underlying performance of the business and which distort period-on-period comparison. They provide the reader with insight into how management measures the performance of the business. For more information on Standard Chartered please visit sc.com All information presented in the Chairman, CEO and CFO statements are on an underlying basis unless otherwise stated. A reconciliation from underlying to reported and definitions of alternative performance measures can be found on pages 80 to 87. Unless another currency is specified, 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. Disclosures in the Strategic report, Sustainability review, Directors’ report, Risk review and Capital review and Supplementary information are unaudited unless otherwise stated. Unless context requires within the document, ‘China’ refers to the People’s Republic of China and, for the purposes of this document only, excludes Hong Kong Special Administrative Region (Hong Kong), Macau Special Administrative 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, Philippines, Singapore, Sri Lanka, Thailand, Vietnam, Mainland China, Hong Kong, Japan, Korea, Macau, Taiwan; Africa and Middle East (AME) includes Bahrain, Botswana, Côte d’Ivoire, Egypt, Ghana, Iraq, Kenya, Mauritius, Nigeria, Oman, Pakistan, Qatar, Saudi Arabia, South Africa, Tanzania, UAE, Uganda, and Zambia; and Europe & Americas (EA) include Argentina, Brazil, Colombia, Falkland Islands, France, Germany, Israel, Jersey, Poland, Sweden, Türkiye, the UK, and the US. Within the tables in this report, blank spaces indicate that the number is not disclosed, dashes indicate that the number is zero and ‘nm’ stands for not meaningful. Standard Chartered PLC is incorporated in England and Wales with limited liability, and is headquartered in London. The Group’s head office provides guidance on governance and regulatory standards. Standard Chartered PLC. Stock codes are: LSE STAN.LN and HKSE 02888. 01 Standard Chartered – Annual Report 2023Strategic report Who we are Who we are and what we do Our Purpose is to drive commerce and prosperity through our unique diversity. We serve three client segments in three regions, supported by eight global functions. Our client segments 3. 1. Total operating income $17,378m Underlying basis $18,019m Reported basis 2. Enabling and supporting our businesses 1. Corporate, Commercial & Institutional Banking Supporting clients with their transaction 1. banking, financial markets, corporate finance and borrowing needs, Corporate, Commercial & Institutional Banking provides solutions to nearly 20,000 clients in the world’s fastest-growing economies and most active trade corridors. 4. 3. 2. Consumer, Private & Business Banking Serving more than 11 million individuals and small businesses, Consumer, Private & Business Banking focuses on the affluent and emerging affluent in many of the world’s fastest-growing economies. 2. 3. Ventures Ventures promotes innovation, invests in disruptive financial technology and explores alternative business models. It represents a diverse portfolio of over 30 ventures and more than 20 investments 4. Central and other items Operating income $11,218m Underlying basis $11,788m Reported basis $7,106m Underlying basis $7,151m Reported basis $156m Underlying basis $156m Reported basis $(1,102)m Underlying basis $(1,076)m Reported basis Our client-facing businesses are supported by our global functions, which work together to ensure the Group’s operations run smoothly and consistently. Group Chief Financial Officer Legal Global functions Conduct, Financial Crime and Compliance Partners internally and externally to achieve the highest standards in conduct and compliance to enable a sustainable business and to fight financial crime. Corporate Affairs, Brand and Marketing Comprises seven support functions: Finance, Treasury, Strategy, Investor Relations, Corporate Development, Supply Chain Management and Property. The leaders of these functions report directly to the Group Chief Financial Officer. Group Internal Audit Manages the Group’s marketing and communications and engagement with stakeholders to promote and protect the Group’s reputation, brand and services. An independent function whose primary role is to help the Board and Management Team protect the assets, reputation and sustainability of the Group. Human Resources Maximises the value of investment in people through recruitment, development and employee engagement. 02 Provides legal advice and support to the Group to manage legal risks and issues. Risk Responsible for the overall second- line-of-defence responsibilities related to risk management, which involves oversight and challenge of risk management actions of the first line. Transformation, Technology & Operations Responsible for leading bank-wide transformation and for reshaping the Group’s systems and technology platforms to ensure we provide robust, responsive, and innovative technology and digital solutions. Also manages all client operations, seeking to provide an optimal client service and experience across the board. Standard Chartered – Annual Report 2023Strategic report 3. 1. 2. Our regions 4. 1. 3. Total operating income $17,378m Underlying basis $18,019m Reported basis 2. 1. Asia We are present in 21 markets, including Hong Kong and Singapore which contribute the highest income. 2. Africa and Middle East We have a presence in 18 markets of which the most sizeable by income are UAE, Pakistan, Kenya, Nigeria, South Africa and Ghana. 3. Europe and the Americas Centred in London, with a growing presence across continental Europe, and New York, we operate in both North America and several markets in Latin America. 4. Central and other items Operating income $12,429m Underlying basis $12,651m Reported basis $2,806m Underlying basis $2,924m Reported basis $1,397m Underlying basis $1,702m Reported basis $746m Underlying basis $742m Reported basis Enabling and supporting our businesses Valued behaviours Our valued behaviours are the guiding principles for how we work together, and the way we do business, every day. Never settle Better together Do the right thing • Continuously improve and innovate • See more in others • Live with integrity • Simplify • “How can I help?” • Think client • Learn from your successes and failures • Build for the long term • Be brave, be the change 03 Standard Chartered – Annual Report 2023Strategic report Asia We have a long-standing and deep franchise in some of the world’s fastest- growing economies. Our Asia region generates two-thirds of our income. The two markets contributing the highest income are Hong Kong and Singapore. Australia Bangladesh Brunei Cambodia Hong Kong India Indonesia Japan Korea Laos Macau Mainland China Malaysia Myanmar Nepal Philippines Singapore Sri Lanka Thailand Vietnam Taiwan Read more on page 31 Where we operate Where we operate We operate in the world’s most dynamic markets which set the pace for global growth and prosperity. Our unique geographic footprint connects high-growth and emerging markets in Asia, Africa and the Middle East with more established economies in Europe and the Americas, allowing us to channel capital to where it’s needed most. For more than 170 years, we have used the power of our network to maximise opportunities for people and businesses who trade, operate or invest in these regions. Our diverse experience, capabilities and culture set us apart. [[We are present in 52 markets]] 04 Standard Chartered – Annual Report 2023Strategic reportAfrica and the Middle East Europe and the Americas We have a deep-rooted heritage in Africa and the Middle East. The United Arab Emirates, Pakistan, Kenya, Nigeria, South Africa, and Ghana are our largest markets by income. We support clients in Europe and the Americas through hubs in London and New York and have a strong presence in several European and Latin American markets. Bahrain Botswana Côte d’Ivoire Egypt Ghana Iraq Kenya Mauritius Nigeria Oman Pakistan Qatar Saudi Arabia South Africa Tanzania UAE Uganda Zambia Argentina Brazil Colombia Falkland Islands France Germany Israel Jersey Poland Sweden Türkiye UK US Read more on page 32 Read more on page 33 05 Standard Chartered – Annual Report 2023Strategic reportStrategic report Group Chairman’s statement Group Chairman’s statement [[Embedding a culture of excellence to deliver sustained value]] Dr José Viñals Group Chairman 06 Standard Chartered – Annual Report 2023 During 2023, the Group continued to improve profitability, delivering on our objective to achieve a double-digit return on tangible equity (RoTE) for the full year. Our high-growth markets, where we are intent on making further investment, continue to deliver strongly despite an uncertain picture for the global economy. This performance came against a backdrop of rising interest rates in many large economies, which undoubtedly gave a strong tailwind for the business. However, it is also a product of our clear strategy, discipline and tireless execution – a significant achievement for our colleagues, led by our Group Chief Executive, Bill Winters, and his Management Team. Their skills and dedication remain essential to our performance, and my deepest thanks go to all of them. We have recently bid a fond farewell to Andy Halford, who formally stepped down as Group Chief Financial Officer on 3 January 2024. Since his arrival in the role in 2014, Andy has been a much-valued colleague and friend and made a phenomenal contribution by helping to steer the business through a challenging external environment. Under his watch we strengthened our foundations, reset our risk appetite and redefined the Group’s strategy. He leaves with our very best wishes, and will continue in an advisory role until his retirement in August. It is with pleasure that we welcome Diego De Giorgi who joins us as Andy’s successor. I am looking forward to working closely with Diego and Bill to drive further excellence for clients and higher value for shareholders. Advancing our strategic and financial goals I have said before that our objective is to grow income in a strong, safe and sustainable manner, while maintaining both cost and capital discipline, and I am delighted to say that was the case last year. We are confident that our improved RoTE, which reached 10.1 per cent in 2023, will be a milestone on the way to further long-term success for the Group, underpinned by strong performance across the business. We grew income 13 per cent on a constant currency basis while maintaining a strong capital and liquidity position and positive income-to- cost jaws. We expect our RoTE to steadily increase from 10 per cent, and are targeting 12 per cent in 2026 and to progress thereafter. The strength of our financial performance affirms that the strategy that we set out in 2021 is working. We remain focused on investment in high-growth markets and have made significant progress against our strategic priorities across Network, Affluent, Mass Retail, and Sustainability. I am acutely aware of the underperformance of our share price in recent months, which I believe does not reflect the progress we are making. Both the Board and the Management Team are absolutely focused on delivering sustained, long-term value for our shareholders. I believe our solid performance in 2023 gives us a good base from which to do this. As Bill details in the following pages, we have further sharpened the actions we will take to accelerate performance and future growth. ‘We remain focused on investment in high-growth markets and have made significant progress against our strategic priorities’ Firstly, we will continue to rely on our stronger capabilities to further enhance returns in our Corporate, Commercial & Institutional Banking and Consumer, Private & Business Banking businesses, with a focus on driving income growth in high-returning areas. Secondly, we will improve operational leverage within the Group, addressing structural inefficiencies and complexities whilst protecting income. Finally, we will continue to return substantial capital to shareholders. This year, we are pleased to be able to provide an increased full-year dividend of 27 cents per share and are announcing a further share buyback of $1 billion. Alongside the importance of delivering improved financial performance, our Purpose and brand promise to be here for good remain cornerstones of our business. We are keenly aware of our role in supporting our clients and communities as they anticipate and respond to economic and social challenges. This is why we remain true to our Stands – Accelerating Zero, Resetting Globalisation and Lifting Participation – which are delivered through the execution of our strategy, and which give us an active framework for positive impact across our footprint. We updated our net zero roadmap in April 2023, committing to an absolute emissions target and trajectory for the oil and gas sector. In this year’s Annual Report, we disclose the targets and science-based methodologies for our financed emissions in 11 of the 12 high-emitting sectors identified as decarbonisation priorities by the Net Zero Banking Alliance, demonstrating our commitment to support the transition of the real-world economy. We have also recently announced our decision to become an early adopter of the Taskforce on Nature-related Financial Disclosures, highlighting the rising importance of nature and biodiversity as a necessary consideration in sustainability. Given that our footprint represents some of the most complex and diverse natural capital in the world, working across our business and with our clients to preserve, restore and enhance nature is critically important. It is my honour to be able to act as a voice for our Stands on behalf of the Group as Co-Chair of the United Nations’ Global Investors for Sustainable Development Alliance, as well as at various global platforms and by engaging with stakeholders across our markets. Driving higher standards The Board remains committed to firmly embedding a culture of excellence across the organisation, building high standards through a ‘one bank’ culture of ambition, action and accountability that puts our clients at the heart of all we do. We are at our best when we harness the full talent and potential of the diverse markets in which we operate. Both the Board and the Management Team are dedicated to maintaining our status as an employer of choice. That means offering our colleagues a variety of ways to build their skillset, attracting the best talent through our doors with a diverse set of career paths within the Group and progressive employee policies, such as the standardised parental leave announced last year. As the world continues to change around us, we also recognise the ongoing importance of technology and continuous improvement in maintaining our competitive edge, and in building an innovation-led culture that allows colleagues to try new things within an effective and comprehensive risk management framework. We are intent on capturing the benefits of new, game-changing technologies like artificial intelligence, whilst protecting the information and financial security of our clients. 07 Standard Chartered – Annual Report 2023Strategic reportStrategic report Group Chairman’s statement Group Chairman’s statement continued It has been an extremely active year for the Board, with frequent in-depth briefings on geopolitical, cyber and sectoral risks, and a sharp focus on corporate governance. We continue to build out our resilience in both the financial and non-financial dimensions of risk and compliance across our varied markets. This gives us the confidence to achieve our strategic goals and act decisively to grasp new business opportunities. We continue to maintain a diverse range of skillsets and backgrounds on our Board. Jasmine Whitbread, a long- standing director and impactful former chair of the Culture and Sustainability Committee, stepped down from the Board at last year’s AGM. As announced on 16 February 2024, Gay Huey Evans will step down from the Board with effect from 29 February 2024 after serving nine years and contributing significantly to the Board and its Committees, especially as Chair of the former Board Financial Crime Risk Committee. Carlson Tong, another much-valued Board member, will step down from the Board on 9 May 2024, ahead of the AGM. I would like to thank Jasmine, Gay and Carlson for their many contributions during their time with us. On 16 February 2024, we announced that Diane Jurgens will join the Board from 1 March 2024. Diane is a highly experienced and respected technologist who will bring significant technology and transformation expertise and insight to the Board having operated across a variety of sectors and the Group’s key markets. Our dynamic markets In 2023 I continued to spend time across our markets, seeing their dynamism first-hand and experiencing the ambition of our colleagues as they work together for greater growth. Guided by our Purpose – to drive commerce and prosperity through our unique diversity – we are investing heavily in fast-growing economies and trade corridors in Asia, Africa and the Middle East, and bringing innovative digital products to new clients. A good example of this is Solv, our e-commerce platform for small and medium-size enterprises. We’re also positioning ourselves to be a positive force in the expansion of sectors that will deliver a more sustainable global economy, like renewables and electric vehicles. I’m more confident than ever that we are investing in the right places for strong, safe and sustainable growth, and in our role as a connector bank in an ever more complex and fragmenting world. We provide our clients with the right solutions gained from deep experience of our markets, and continue to be a trusted partner for them as they look to seize opportunities across our footprint. ‘I’m more confident than ever that we’re investing in the right places for strong, safe and sustainable growth, and in our role as a connector bank in an ever more complex, fragmenting world’ 08 Looking ahead with confidence We expect to see a ‘soft landing’ for the world economy in 2024. This is no small achievement as we have witnessed the most aggressive period of monetary policy tightening in decades. This, plus other favourable supply side developments have led to a fall in inflation in most countries, engendering expectations of official interest rate cuts in many economies this year. Growth, in turn, remains resilient, with emerging markets expected to keep growing considerably faster than developed economies, and Asia continuing to lead global growth. However, one cannot be complacent about the years ahead. The ‘last mile’ of inflation may prove stickier than expected, and geopolitical risks abound. As we begin 2024, the war between Ukraine and Russia continues, increasing uncertainty for nations in Europe and elsewhere. We see renewed conflict in the Middle East, bringing tragedy to many communities and disruption to the Red Sea, a key chokepoint in global supply chains. 2024 is also a year of major elections in the United States, India and probably the United Kingdom, as well as other markets in our footprint. These all have the potential to affect the economic situation. With so much at stake, we must take care not to needlessly damage the means of growth and wealth creation. I have frequently spoken in defence of open, rules-based trade as a lynchpin of global economic growth. This year, the challenges around it remain powerful, with the risk of further fragmentation. I believe the system of global trade that has been created with such care over many decades is one of humanity’s foremost achievements. It is not perfect by any means, but it has arguably brought more opportunity and prosperity to a greater number of people than any other force in history. Like every intricate system, it is easy to damage and hard to rebuild. Safeguarding and making it more inclusive and sustainable requires constant vigilance and cooperation from policymakers, legislators, and the private sector in an evolved, modernised multilateral system. While the external landscape remains uncertain, we are confident that we are well positioned to navigate the challenges and seize the opportunities ahead. Our results in 2023 show we are doing just that. We remain focused on continuing to deliver excellence for our clients, and sustained value for shareholders, in 2024 and beyond. Dr José Viñals Group Chairman 23 February 2024 Standard Chartered – Annual Report 2023S S t t r r a a t t e e g g i i c c r r e e p p o o r r t t [[Standard Chartered and IFC aim to boost global trade by more than $6 billion]] In April, we signed a deal to invest $700 million in the IFC’s Global Trade Liquidity Programme, which is expected to support up to $6.4 billion in trade over three years across Asia, the Middle East, Africa, and Latin America. The deal is a renewal of a facility first launched in 2009 and has supported $20.5 billion in global trade through more than 150 Emerging Market Issuing Banks in 37 countries. Read more at sc.com/IFC Standard Chartered – Annual Report 2023 09 Strategic report Group Chief Executive’s review Group Chief Executive’s review [[Delivering sustainably higher returns]] Bill Winters Group Chief Executive 10 Standard Chartered – Annual Report 2023 We produced strong results in 2023, demonstrating the value of our franchise and delivering our target to push past the 10 per cent Return on Tangible Equity (‘RoTE’) milestone. But 10 per cent is not the extent of our ambition. We have the right strategy, business model and intent to build on this momentum. We have set out clear actions to deliver sustainably higher returns, with RoTE increasing steadily from 10 per cent, targeting 12 per cent in 2026, and to progress thereafter. Full year 2023 income of $17.4 billion was up 13 per cent on a constant currency basis, benefitting not only from rising interest rates but also encouraging underlying business momentum. Good cost discipline has enabled us to generate significantly positive income-to-cost jaws of 4 per cent for the year, even with continued underlying investment. Loan impairment declined, primarily due to reduced impairments from China commercial real estate and sovereign risks, with the overall portfolio remaining resilient. All this has helped us grow underlying profit before tax 27 per cent year-on-year, to $5.7 billion, the highest level for ten years. We remain highly liquid and strongly capitalised. We finished the year with a Common Equity Tier 1 (‘CET1’) ratio of 14.1 per cent, above the top of our target range, allowing us to increase our full year ordinary dividend by 50 per cent to 27 cents per share. We undertook in February 2022 to return over $5 billion to shareholders by the end of 2024. With this full year dividend and the $1 billion share buyback announced today, we will have exceeded that target well ahead of schedule. As we start the new year, I would like to take a moment to thank my friend and much valued colleague, Andy Halford, who decided to retire this year. Andy has been a great partner to me and the Board and has successfully helped steer the Group over the last ten years. I’d also like to extend a warm welcome to Diego De Giorgi as he takes over as the Group Chief Financial Officer. Diego brings with him over 30 years of financial services experience and I am sure he will continue to build on the progress we have made. Our strategy is driving success Our strategy is designed to deliver our Purpose: to drive commerce and prosperity through our unique diversity. We set out four strategic priorities in early 2021: continue to grow our Network and Affluent client businesses, return to growth in Mass Retail and advance on all fronts of our Sustainability agenda. We are making good progress in every area. • Income from our cross-border Network business grew 31 per cent in 2023, with standout growth rates in our China offshore corridors to the Middle East and ASEAN, up 67 per cent and 53 per cent respectively • We increased the total number of Affluent clients to 2.3 million. This helped drive significantly higher levels of net new money in 2023, with net inflows of $29 billion, up 50 per cent, year-on-year, and deliver 24 per cent growth in income from this client segment • We grew our Mass Retail client base by over 1 million to 9.5 million. We have continued to grow our digital banks, Mox in Hong Kong and Trust in Singapore. They remain two of the fastest growing digital banks globally and underline our ability to partner and launch differentiated customer propositions. The Mass Retail business also serves a valuable strategic purpose as a pipeline for future Affluent clients, with 224,000 of our Mass Retail clients moving up to Affluent clients in 2023 • Our dedicated Chief Sustainability Office unit acts as a centre of excellence and a catalyst for the execution of the Group-wide Sustainability strategy and the achievement of our net zero roadmap, further details of which are set out in the Annual Report. Our Sustainable Finance franchise generated over $0.7 billion income in 2023, a year-on-year growth rate of 42 per cent and we are well on our way to deliver a billion dollars in income by 2025. We have mobilised $87 billion of sustainable finance since the beginning of 2021, making good progress as we advance towards our $300 billion target by 2030 Great execution on our 2022 strategic actions We set out five actions in 2022 designed to accelerate delivery of double-digit RoTE. The strong execution of these actions over the last two years, where we have either achieved our targets ahead of plan or they are well on track, has enabled us to reach that milestone in 2023. • We are ahead of schedule to drive improved returns in Corporate, Commercial & Institutional Banking (‘CCIB’). We targeted around 160 basis points improvement in income return on risk-weighted assets (‘IRoRWA’) to 6.5 per cent in 2024. The team exceeded this target in 2023, delivering an IRoRWA of 7.8 per cent. This was driven by particularly strong growth in income from Financial Institution clients, which now accounts for 49 per cent of CCIB income, delivering close to the 50 per cent target one year early. The team has also successfully executed $24 billion in risk-weighted assets optimisation over the last two years, exceeding the target of $22 billion. The completion of the sale of the Aviation Finance business also created further capacity for CCIB to grow higher returning business • We are also ahead of our 2024 target to transform profitability in Consumer, Private and Business Banking (‘CPBB’). The team has achieved its 60 per cent cost-to- income target one year ahead of plan, with a nine- percentage point improvement in 2023. They have delivered $0.4 billion of structural expense savings from rationalising the branch network, process re-engineering, headcount efficiencies and further automation • We have continued to seize the China opportunity, with our China-related business performing well, despite post-COVID domestic recovery tracking below expectations. We set a target of doubling the operating profit before tax of our onshore and offshore China business by the end of 2024 and we almost achieved that in 2023, generating $1.3 billion. This was driven primarily by offshore-related income, which delivers significantly higher returns, growing 42 per cent. Our onshore income, despite the domestic headwinds, grew 4 per cent. Looking forward, we continue to be confident in the long-term opportunities that China re-opening will generate for our unique franchise • We continued to create operational leverage, and are on track to deliver the three-year $1.3 billion expense savings target, which has helped us absorb inflationary pressure and continue to invest. Our cost-to-income ratio is down 7 percentage points since the end of 2021 to 63 per cent for 2023, so we are well advanced towards our target of around 60 per cent by 2024 • Our equity generation and discipline on risk-weighted assets this year have created capacity for us to continue to deliver substantial shareholder distributions. With the final ordinary share dividend for 2023 and a new $1 billion share buyback programme starting imminently, means we are well ahead of our total target of returning in excess of $5 billion by the end of 2024. We will continue to actively manage the Group’s capital position with the target of a further capital return of at least $5 billion over the next three years 11 Standard Chartered – Annual Report 2023Strategic reportStrategic report Group Chief Executive’s review Group Chief Executive’s review continued Building on our achievements to deliver sustainably higher returns Our unique footprint across the world’s most dynamic markets gives us a strategic advantage and underpins my confidence that we can continue to grow even in a less supportive interest rate environment. Our objective is to ensure that income growth translates into structurally higher profitability, striking a balance between maintaining the diversity that our clients value, while taking out unnecessary complexity that slows us and drags returns. We are therefore taking further action in each of our three client businesses to drive income growth: • In CCIB, we will seek to drive growth in high-returning businesses such as cross-border income, targeting an 8 to 10 per cent underlying growth rate over the next three years. Additionally, building on our strength as a top two network trade bank, we are targeting to grow Trade and Working Capital income by 6 to 8 per cent between 2024 and 2026. The team is also driving growth in financing related income (Global Credit and Lending) with a particular focus on accelerating the originate to distribute strategy, targeting an 8 to 10 per cent CAGR to 2026 • In CPBB, we will build on our strengths in the Affluent client business, targeting to attract over $80 billion of net new money over the next three years, a 19 per cent increase from the previous three years. We also intend on accelerating the growth in our international client business, with the target of increasing the number of international Affluent clients from 274,000 to over 375,000 by 2026 • Building on the remarkable momentum in our two digital banks, Mox and Trust, we are targeting for the Ventures segment to be RoTE accretive by 2026 By executing these actions, we expect to grow income at a compound annual rate of between 5 and 7 per cent over the next three years, well above the anticipated rate of growth for the global economy. We are also taking action to transform the way we operate, addressing structural inefficiencies and complexity whilst protecting income. Starting this year, we will run a bank-wide programme called Fit for Growth, to accelerate our previous efforts to simplify, standardise and digitise our business. We will fundamentally improve our productivity, client and employee experience and create capacity to reinvest in incremental growth initiatives. This programme will save around $1.5 billion of cumulative expenses over the next three years and we expect to incur a similar amount in terms of the cost to achieve these permanent organisational and financial benefits. This will help us to deliver positive income-to-cost jaws in each of the next three years and keep operating expenses below $12 billion in 2026. Continuing to deliver strong income growth, combined with improving operational leverage and maintaining our responsible approach to risk and capital, means we expect RoTE to increase steadily from 10 per cent, targeting 12 per cent in 2026 and to progress thereafter. 12 Uniquely positioned and confident in the future We are in a privileged position to take advantage of significant growth opportunities that will continue to come from the markets in our footprint, generating value for our clients and the communities in which we operate. Whilst we expect global growth to stay below potential at 2.9 per cent in 2024, as high interest rates put a drag on consumers as well as investment spending, Asia is likely to be the fastest-growing region continuing to drive global growth, expanding by 4.9 per cent. Easing inflation is likely to allow major central banks to start cutting rates in the second half of 2024, with a focus on supporting softening economic activity. Downside risks to this outlook include a sharper than expected slowdown in major economies, sustained inflationary pressures, a sluggish housing market in China and increased geopolitical tensions. But we also see significant opportunities emerging: • Higher capex to meet sustainability targets and moves towards digitalisation could boost productivity growth • Within emerging markets, countries in Asia are best placed to take advantage of digitalisation, including generative AI • Relatively younger populations, as well as the adoption of digital technology, will allow emerging markets to become increasingly important to global growth Our share price reflects little of our optimism about prospects and seems heavily influenced by the downside concerns mentioned above. The concerns are real, and we take them seriously. We maintain a strong capital position and liquidity to absorb any adverse impact on us and our clients. We believe that the value of our franchise will become increasingly clear to the broader market as we continue to grow our profits and exceed market expectations in those very areas of most concern. In conclusion: significant progress with ambition for more We delivered a strong performance in 2023, achieving our 10 per cent RoTE milestone, while maintaining a strong balance sheet and a robust capital position. But we know we must do more. We have made significant progress on our five strategic actions, with most targets either delivered ahead of plan or well on track, providing a strong platform to grow and drive sutainably higher returns. And while much external uncertainty persists, we are optimistic for the markets and strength of our businesses in our footprint. But we are far from complacent, and my Management Team and I remain focused on delivering on our targets, seizing the growth opportunities we have, driving a culture of excellence and creating exceptional long-term value for our clients, shareholders and communities. Finally, I would like to acknowledge the remarkable efforts of our colleagues again this year. Their impressive dedication to our customers and the communities that we serve help to manifest our brand promise to be here for good. Bill Winters Group Chief Executive 23 February 2024 Standard Chartered – Annual Report 2023Management Team 1. 5. 9. 2. 6. 3. 7. 4. 8. 10. 11. 12. 13. 14. 1. 2. 3. 4. 5. Bill Winters Group Chief Executive Diego De Giorgi Group Chief Financial Officer Simon Cooper CEO, Corporate, Commercial & Institutional Banking and Europe & Americas Claire Dixon Group Head, Corporate Affairs, Brand and Marketing Judy Hsu CEO, Consumer, Private and Business Banking 6. 7. 8. 9. Mary Huen CEO, Hong Kong and Cluster CEO for Hong Kong, Taiwan and Macau Benjamin Hung CEO, Asia Tanuj Kapilashrami Group Head, Human Resources Sunil Kaushal CEO, Africa & Middle East 10. Roel Louwhoff Chief Technology, Operations and Transformation Officer 11. Tracey McDermott, CBE Group Head, Conduct, Financial Crime and Compliance 12. Sandie Okoro Group General Counsel 13. Sadia Ricke Group Chief Risk Officer 14. Paul Day* Group Head, Internal Audit * Paul represents Group Internal Audit as an invitee at Management Team meetings 13 Standard Chartered – Annual Report 2023Strategic reportStrategic report Key performance indicators Key performance indicators We measure our progress against Group key performance indicators (KPIs), as detailed below, as well as client KPIs, which can be found on pages 28 to 30. Our Group KPIs include non-financial measures reflecting our commitment to build an engaged, diverse and inclusive culture and support social and environmental outcomes. Financial KPIs Underlying return on tangible equity (RoTE)1,2 % Alignment to remuneration Common Equity Tier 1 ratio % Alignment to remuneration +240bps +10bps 2023 20222 20212 2020 2019 10.1% 7.7% 6.5% 3.0% 6.4% 2023 2022 2021 2020 2019 14.1% 14.0% 14.1% 14.4% 13.8% Aim Deliver sustainable improvement in the Group’s profitability as a percentage of the value of shareholders’ tangible equity. Progress in 2023 Our strategy to drive improved levels of return on tangible equity (RoTE) is working. RoTE for the year of 10.1 per cent is 240 basis points higher year-on-year. 1 The underlying profit attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders’ tangible equity. 2 2021-2022 have been restated to reflect market and business exits announced in 1Q’23. Aim Maintain a strong capital base and Common Equity Tier 1 (CET1) ratio. Progress in 2023 The Group remains well capitalised and highly liquid with a CET1 ratio of 14.1 per cent above our target range, enabling the Board to announce a 50 per cent increase in the full-year dividend and a further $1 billion share buyback programme to start imminently. The components of the Group’s capital are summarised in the Capital review on page 338 to 343. Total shareholder return (TSR)¹ % 9.4% 2023 2022 2021 2020 2019 14 Standard Chartered – Annual Report 2023 Alignment to remuneration Aim Deliver a positive return on shareholders’ investment through share price appreciation and dividends paid. Progress in 2023 Our TSR for the full year was 9.4%. 1 Combines simple share price appreciation with dividends paid to show the total return to the shareholder and is expressed as a percentage total return to shareholders. 9.4% 41.4% (2.0)% (34.6)% 20.2% Alignment to remuneration Reward for all Group employees, including executive directors, continues to be aligned to the Group’s strategic priorities, through our annual and long-term incentive scorecards. Our approach to remuneration is consistent for all employees and is designed to create alignment with our Fair Pay Charter, which applies globally. However, our pay structures may vary according to location (to comply with local requirements). Variable remuneration falls into two categories: annual incentive and a long-term incentive plan (LTIP) which are aligned to the KPIs indicated: Annual incentive is based on measurable performance criteria linked to the Group’s strategy and assessed over a period of one year. LTIP awards are granted to senior executives who have the ability to influence the long-term performance of the Group. Awards are performance dependent based on measurable, long-term criteria. Read more in our Directors’ Remuneration Report on pages 182 to 216 S t r a t e g i c r e p o r t Non-financial KPIs Diversity and inclusion: Women in senior roles1 % +0.4ppt 2023 2022 2021 2020 2019 Alignment to remuneration Mobilisation of Sustainable Finance1,2 $ Alignment to remuneration +$29.8bn 2023 2022 2021 The Group announced this target in Q4 2021. $87.2bn^ $57.4bn 32.5% 32.1% 30.7% 29.5% 28.5% Aim Increase representation of women in senior leadership roles¹ to 35 per cent by 2025. Aim Cumulative progress towards $300 billion mobilisation target between 2021 and 2030. Progress in 2023 In 2023, the proportion of senior leadership roles occupied by women has increased to 32.5 per cent. This is up by 0.4 percentage points from December 2022 (32.1 per cent) and 7 percentage points since December 2016 (25.3 per cent). 1 Senior leadership is defined as Managing Director and Band 4 roles (including Management Team). Progress in 2023 We made strong progress against this target during the year, see more on page 94. 1 Defined as any investment or financial service provided to clients which supports: (i) the preservation, and/or improvement of biodiversity, nature or the environment; (ii) the long-term avoidance/decrease of GHG emissions, including the alignment of a client’s business and operations with a 1.5 degree Celsius trajectory (known as transition finance); (iii) a social purpose ; or (iv) incentivising our clients to meet their own sustainability objectives (known as sustainability-linked finance) 2 Figures reflect cumulative Sustainable Finance mobilised since January 2021 up to September of each year. Values noted with a caret symbol (^) are subject to independent limited assurance by EY, report available at sc.com/sustainabilityhub. Alignment to remuneration Employee net promoter score (eNPS)1 +8.31points 2023 2022 2021 2020 2019 25.86 17.55 12.94 17.51 11.51 Aim Improve the overall employee experience across the Group by creating a better work environment for our colleagues that should translate into an improved client experience. Progress in 2023 The eNPS score is up by 8.31 points to 25.86, which is our highest ever score. 1 eNPS ranges from -100 to +100 and is based on a single question which measures whether colleagues would recommend working for the Bank. It is calculated by deducting percentage of detractors from percentage of promoters. Standard Chartered – Annual Report 2023 15 Strategic report Market environment Market environment Macroeconomic factors affecting the global landscape Global macro trends Trends in 2023 Outlook for 2024 Medium- and long- term view • Global GDP growth continued to slow in 2023, likely to 3.1 per cent, from 3.5 per cent in 2022, as central banks continue to tighten policy and the boost from post-pandemic reopening of economies faded. • Asia was the best-performing region, recording growth of 5.1 per cent, on strong momentum in India and favourable base effects in China. Sub- Saharan Africa likely saw growth of 3 per cent in 2023, nearly unchanged from 2022, supported by domestic reform momentum in key economies. • Among the majors, despite a banking-sector crisis in the first half of the year, the US recorded annual growth of 2.5 per cent on the back of resilient domestic demand, while growth slowed sharply in the UK to 0.1 per cent. • Global growth is likely to stay below-trend at 2.9 per cent in 2024 as high interest rates drag on consumers as well as investment spending. • Asia will likely be the fastest-growing region and will continue to drive global growth, expanding by 4.9 per cent. Among the majors, the US is expected to experience below-trend growth of 1.8 per cent in 2024, the UK will grow just 0.1%, while the euro area is likely to see an overall modest expansion of 0.6 per cent. • Easing inflation is likely to allow major central banks to start cutting rates from Q2 2024, with a focus on supporting softening economic activity. • The euro-area economy grew by 0.5 per cent in 2023 following 3.4 per cent growth in 2022, supported by household demand and a positive contribution from exports in H1. • In most majors, labour markets remained strong, with low unemployment rates that helped support consumer confidence. • Major central banks like the Fed and ECB continued to tighten monetary policy in the first three quarters of 2023 with a view to bringing inflation back to target levels. Fiscal policy remained accommodative as governments tried to shield consumers and businesses from still elevated prices. • Unfavourable global liquidity conditions are likely to make it difficult for some emerging markets to access international financing, forcing them to seek multilateral support. • Downside risks to this outlook include a sharper than expected slowdown in major economies, sustained inflationary pressures, a sluggish housing market in China, and another flare-up of geopolitical tensions. High interest rate environment • Trade fragmentation and heightened geopolitical risks and related supply disruptions together with still resilient labour markets have the potential to keep inflation elevated over the medium term. • Concerns about inflation are likely to see central banks adopting a cautious approach to monetary easing, with the risk that rates stay elevated for an extended period of time. • Fiscal policy might also turn from a tailwind to a headwind for growth. High public debt and government deficits also mean that most economies are looking to tighten fiscal policy over the medium term. • There may be adverse environmental, agricultural, and economic consequences of a severe El Niño weather cycle. South Asia and Sub-Saharan Africa economies are most at risk from the impact on agricultural production; and although El Niño has varying impacts on GDP growth, it is inflationary for most economies. Broader global trends • The world economy could see a permanent loss of economic output or ‘scarring’ due to the recession following the pandemic. This would make it harder for emerging markets to catch up with developed markets. • 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. • Rising nationalism, anti-globalisation and protectionism are threats to long-term growth prospects in emerging markets. • However, there are potential offsets. Higher capex to meet sustainability targets, and moves towards digitalisation could boost productivity growth, proving an antidote to economic scarring concerns. Within emerging markets, countries in Asia are best placed to take advantage of digitalisation, including generative artificial intelligence (AI). • Growing trade fragmentation could undermine the resilience of globalisation, driving up consumer prices, and slowing the pace of economic convergence for emerging markets. • Relatively younger populations, and the adoption of digital technology, will allow emerging markets to become increasingly important to global growth. • In order to meet net zero targets, energy-related spending will have to increase significantly; headwinds include insufficient funds across emerging markets, labour shortages and supply chain constraints. 16 Standard Chartered – Annual Report 2023Regional outlook Asia • China’s economic activity remains below potential, leaving room for further recovery. We forecast 2024 growth at 4.8 per cent. The post-COVID recovery has been disappointing, due to continuing contraction of the property sector, a negative contribution from foreign trade, and a lack of confidence on the part of consumers and private businesses. While GDP growth picked up to 5.2 per cent in 2023 on the reopening boost, policy support and a favourable base, economic activity is currently 2–3 percentage points below trend according to our estimate. We expect the government to set a growth target of around 5 per cent in 2024, the same as in 2023, to narrow the negative output gap and prevent deflation expectation from becoming entrenched. • While housing market adjustment will likely continue, we expect it to exert less of a drag on growth next year. The authorities have turned more supportive of the sector since the July Politburo meeting, relaxing purchase restrictions, lowering mortgage rates, accelerating renovation of urban villages, and pledging to meet reasonable financing need from eligible property developers. Consumption is likely to remain the key driver of the economy, with consumers showing renewed willingness to draw on their excess savings. The easing bias of macro policies is likely to remain to consolidate the recovery. We expect the People’s Bank of China to increasingly rely on expansion of its balance sheet to inject ample liquidity, keeping the credit condition relatively easy. The official budget deficit may exceed the implicit ceiling of 3 per cent of GDP, with the central government more willing to share the debt burden. However, the upside is likely to be capped by private sector’s hesitation to expand investment. • Hong Kong’s outlook remains challenging. We expect growth to slow to 2.9 per cent in 2024 from 3.2 per cent in 2023, a reflection of still cautious household and business sentiment. The positive factors, including a continued normalisation in tourist arrivals and a persistently tight labour market, may not be sufficient to offset a weak property market and elevated US interest rates that keep weighing on investment appetite. We expect Korea’s growth to accelerate to 2.1 per cent from 1.4 per cent in 2023, benefiting from a potential upcycle of semiconductors, but prolonged high-interest rates and rising commodity prices will adversely affect Korean consumption and construction investment. • In India, we expect FY25 (year beginning April 2024) GDP growth to likely moderate to 6.3 per cent vs 6.8 per cent for FY24 amid slower global growth, higher interest rates and slowing consumer demand . However, the growth dynamics are likely to stay strong. Rising real wages are likely to support rural demand and we expect private capex recovery post national elections in April/May 2024; the current ruling party is widely expected to return to power. Meanwhile, inflation pressures are expected to ease slightly to 5 per cent in FY25 vs 5.4 per cent in FY24. Hence, we see a shallow rate cut cycle of 50 bps starting June 2024 amid easing global rates. Ample foreign exchange (FX) reserves and yet another year of balance of payment surplus led by index inclusion related inflows, remain a strong buffer for the economy and are likely to limit FX market volatility. The key risks to our view can emanate from higher oil prices and/or tighter global financial conditions. Actual and projected growth by market in 2023 and 2024 % China 2024 2023 Hong Kong 2024 Korea India 2023 2024 2023 2024 2023 Indonesia 2024 2023 Singapore 2024 2023 4.8% 5.2% 2.9% 3.2% 2.1% 1.4% 6.3% 6.8% 5.2% 5.1% 2.6% 1.1% • While global demand may remain soft in 2024, we expect the external drag on externally oriented economies in Association of South East Asian Nations (ASEAN), including Singapore, Vietnam, Malaysia and Thailand, to be more moderate due to favourable base effects. In addition, a bottoming of the global electronics cycle may help these economies, though we do not expect a significant recovery given weak external demand and uncertainty. Domestic activity may see consumption and investment sentiment partly affected by higher interest rates and still-high inflation earlier in the year. But potential rate cuts and easing inflation in H2 and likely stable labour markets should provide support. Election spending in Indonesia may also provide a boost to consumption earlier in the year. Tourism recovery may continue to bolster growth in 2024 but the support may be fading. Inflation is expected to moderate in 2024 on favourable base effects and tighter monetary policies but upside risks arise from potentially higher food and energy prices, especially with the latest developments in the Middle East. • Monetary policy in the region may remain tight for longer given upside risks to inflation, and this poses a downside risk to economic growth, but some easing is expected in H2 which will help support growth sentiment. On balance, growth may remain somewhat subdued and similar to 2023, but lower inflation and rate cuts in H2 may help offset a weaker H1. See our regional performance on page 31 17 Standard Chartered – Annual Report 2023Strategic reportStrategic report Market environment Market environment continued Regional outlook continued Africa and the Middle East Europe and the Americas Actual and projected growth by market in 2023 and 2024 % Actual and projected growth by market in 2023 and 2024 % Nigeria 2024 UAE 2023 2024 2023 UK USA 3.5% 2.7% 4.0% 2.7% 2024 2023 2024 2023 0.1% 0.1% 1.8% 2.5% • For Sub-Saharan Africa, external factors remain a key headwind. Constrained or more expensive access to external financing is a challenge, especially given a concentration of external debt maturities in the years ahead. Scaled-up multilateral support for emerging and frontier economies is likely to be a partial mitigant. Whether the US can avoid a hard landing will be key to risk appetite. FX liquidity remains an issue, although encouragingly FX reforms are now underway in key markets. Higher oil prices may increase pressures. Common Framework debt restructuring progress in Zambia and Ghana remains key to economic prospects, as they look to build resilience to further shocks. • In Nigeria, with a new cabinet and central bank leadership in place, we expect fuel subsidy and FX reforms to be completed in 2024. New investment in LNG production and a scaling up of domestic refining capacity should add to economic resilience. In South Africa, while load shedding has improved, port and rail bottlenecks may hold back growth. In Kenya, increased concessional financing and a partial refinancing of the 2024 Eurobond have eased external liquidity concerns, but fiscal consolidation will be key to stabilising high debt levels. • Higher for longer rates, higher commodity prices and elevated regional tensions highlight the divergence between MENAP oil exporting and oil importing economies. The Gulf Cooperation Council (GCC) is likely to continue using oil windfalls to reverse the deterioration in government balance sheets stemming from the late-2014 and 2020 oil price shocks. The UAE, Oman and Qatar have committed to de-leveraging alongside the rebuilding of external buffers. In Saudi Arabia, drawdowns at the Central Bank continue to support growing Public Investment Fund assets; robust domestic investment and execution of giga-projects aim to expand potential in the non-oil economy. Headline growth in Saudi Arabia may be modest, given extension of oil output cuts. However, GCC non-oil growth remains robust against external headwinds, aided by lower levels of domestic inflation. See our regional performance on page 32 • The US economy has been resilient in the face of sustained monetary policy tightening. But as credit growth slows, housing affordability weakens and delinquencies rise as higher rates feed through to the real economy, and we expect a slowdown in growth over the course of 2024. In the euro area, we expect growth to be elusive until rate cuts start in Q2, before picking up modestly in H2. • Headline inflation has fallen sharply for both the US and Euro area, but core inflation still remains off target. Central banks will remain alert to any signs of renewed upside risks to inflation, stemming from ongoing tight labour markets and geopolitical tensions. • The Fed and ECB have likely completed their rate-hiking cycles. Lower inflation leaves room for cuts from both central banks beginning in Q2; we expect the Fed to deliver 100bps and the ECB to deliver 125bps by end-2024. • There is likely to be less of a tailwind to growth in Europe from fiscal policy as new fiscal rules and higher interest rates force consolidation of budget deficits, and programmes introduced during the 2022–2023 energy crisis come to an end. The US economy has benefitted from fiscal support for infrastructure investment, but this impulse is likely to fade in 2024. • In Latin America, weakening domestic demand, and a downtrend in inflation should support further monetary easing by the region’s central banks, most of which have already started rate cuts. Lower interest rates are likely to support better recovery in H2 2024, although sluggish external demand and tight global financial conditions could be headwinds. See our regional performance on page 33 18 Standard Chartered – Annual Report 2023Strategic reportStrategic report Section heading S t r a t e g i c r e p o r t [[Zodia Custody and Zodia Markets flourish in 2023]] SC Ventures backed, UK-based Zodia Custody and Zodia Markets both continued to grow in 2023. Zodia Custody – an institution first digital asset custodian – launched in Australia, Hong Kong, Japan, Luxembourg and Singapore and secured $36 million in Series A funding. Meanwhile, Zodia Markets – a digital asset brokerage and exchange platform - expanded into UAE and was registered as a Virtual Asset Service Provider with the Central Bank of Ireland. Read more at zodiamarkets.com and zodia.io Standard Chartered – Annual Report 2023 19 19 Standard Chartered – Annual Report 2023Strategic report Strategic report Business model Business model Our business We help corporates and financial institutions connect and maximise opportunities across our global network, and we support individuals and local businesses in growing their wealth. Corporate, Commercial and Institutional Banking (CCIB) Consumer, Private and Business Banking (CPBB) We support large corporates and financial institutions across the world’s most dynamic markets, helping unlock growth opportunities and create sustainable value. We support small and medium-sized enterprises and individuals, from Mass Retail clients to Affluent including high-net-worth individuals, both digitally and in person. Ventures We promote innovation, invest in disruptive financial technology and explore alternative business models. Our diverse portfolio of ventures includes two market-leading digital banks in Singapore and Hong Kong. Our products and services Financial Markets Transaction Banking Wealth Management Retail Products • Macro, commodities and credit trading • Financing and • Debt capital markets and leveraged finance securities services • Project and export • Sales and structuring finance • Cash management • Investments • Deposits • Trade finance • Insurance • Mortgages • Working capital • Wealth advice • Credit cards • Portfolio management • Personal loans How we generate returns We earn net interest income on loans and deposit products, fee income on financing solutions, advisory and other services, and trading income from providing risk management in financial markets. Income Net interest income Fee income Trading income Profit after tax Income gained from providing our products and services minus expenses, impairments and taxes Return on tangible equity Profit after tax generated relative to tangible equity invested 20 Standard Chartered – Annual Report 2023What makes us different Our Purpose is to drive commerce and prosperity through our unique diversity – this is underpinned by our brand promise, here for good. Our Stands – aimed at tackling some of the world’s biggest issues – Accelerating Zero, Lifting Participation and Resetting Globalisation (see page 26 for more) challenge us to use our unique position articulated below. Client focus Our clients are our business. We build long-term relationships through trusted advice, expertise and best-in- class capabilities. Distinct proposition Our understanding of our markets and our extensive international network allow us to offer a tailored proposition to our clients, combining global expertise and local knowledge. Robust risk management We are here for the long term. Effective risk management allows us to grow a sustainable business. Sustainable and responsible business We are committed to sustainable social and economic development across our business, operations and communities. 1 2022 figures restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) Debit Valuation Adjustment (DVA) 2 Compound Annual Growth Rate How we are shaping our future We have progressed strongly in delivering our strategy to accelerate returns. In 2022, we set out to uplift our return on tangible equity (RoTE) to 10% by 2024. In 2023, we have improved our RoTE to 10.1%, with strong progress in delivering against the five strategic actions we set out to accelerate our returns: • Driving improved returns in CCIB: income return on risk weighted assets further enhanced to 7.8% (20221: 6.2%) and plan to reduce $22bn of risk weighted assets between 2022 and 2024 fully delivered early during the year • Transforming profitability in CPBB: cost-to-income ratio further improved to 60% (20221: 69%), supported by the continuous delivery of business savings and digitisation programme • Seizing opportunities in China: China onshore and offshore profit before tax grown to $1.3bn (increased 1.6 times vs. 20221), despite recent market challenges • Creating operational leverage by delivering $1.3bn of sustainable cost saves over 2022–2024: $0.4bn of cost saves in 2023, bringing 2022–2023 total to $0.9bn • Delivering sustainable shareholder distributions in excess of $5bn over 2022–2024: $2.7bn total distributions for 2023, bringing 2022–2023 total to $4.5bn; plus a new $1bn share buyback programme starting imminently in 2024. We have further optimised our businesses and footprint. In 2023, we completed the sale of our Aviation Finance leasing business. For the seven Africa and Middle East (AME) markets and two additional AME CPBB businesses we announced to exit in 2022, we have completed the sale of our Jordan business and closed our Lebanon representative office, and have signed binding agreements for the divestment of the remainder. The significant progress we have made on our strategic agenda has provided us with a strong platform to grow and drive sustainably higher returns. We target RoTE to increase steadily from 10%, targeting 12% in 2026 and to progress thereafter. Key actions for the next three years include: • Continue to deliver strong income growth targeting 5-7% income growth CAGR2 for the next three years • Improving operational leverage through the Fit for Growth programme, to simplify, standardise and digitise key elements of the Group, enabling the Group to keep annual operating expenses below $12bn in 2026 • Continuing active management of the Group’s capital position, with the target of a further capital return of at least $5bn over the next three years. 21 Standard Chartered – Annual Report 2023Strategic reportBusiness model continued The sources of value we rely on We aim to use our resources in a sustainable way to achieve the goals of our strategy. How we are enhancing our resources Human capital Diversity differentiates us. Delivering our Purpose rests on how we continue to invest in our people, the employee experience we further enhance, and the culture we strengthen. International network Our network is our unique competitive advantage and connects companies, institutions and individuals to, and in, some of the world’s fastest-growing and most dynamic regions. Local expertise We are deeply rooted in our markets with a strong understanding of key economic drivers, offering us insights that help our clients achieve their ambitions. Brand recognition We are a leading international banking group with 170 years of history. In many of our markets, we are a household name. Financial strength With $823bn in assets on our balance sheet, we are a strong and trusted partner for our clients. Technology Our strong digital foundations and leading technological capabilities continue to enable a data-driven digital bank that delivers world-class client service. Consumer client satisfaction metric1 56.6% 2022: 49.8% CET1 capital $34bn 1 Excludes CCIB and Business Banking clients. 1 Excludes CCIB, private bank and business banking clients Includes Private Banking. Restated for 2022 22 • Upskilling and reskilling our people continues to be a priority – more than 30,000 colleagues undertook learning in 2023 to build future-ready skills, including in sustainable finance, data and analytics, digital, cyber security, and leadership. • We continue to strengthen a work environment that supports inclusion, innovation, and high performance, with an ongoing focus on wellbeing. This includes further embedding flexible working across our markets, providing enhanced benefits, and building the capabilities of our people leaders. • Across our international network, we are investing in capabilities such as digital channels and client experiences to access new high-growth segments, grow our share of wallet with existing clients and create new business model opportunities. • We are strengthening our Transaction Banking, Financial Markets and Sustainable Finance solutions in CCIB and Wealth Management offerings in CPBB to meet the needs of our cross-border clients across our network. • We continue to enhance our product, advisory and digital capabilities to serve our individual clients. In 2023, we launched more than 20 new digital wealth capabilities, made our Signature Chief Investment Office (CIO) funds available in 12 markets and launched new digital loan partnerships. In Business Banking, we continued to support the growth of small and medium-sized enterprises by making digital loan origination available in five markets and expanding the SC Women’s International Network, our offering for women entrepreneurs, to five markets. • • In 2023, we continued to invest in our brand through our ‘Possibilities are Everywhere’ global advertising campaign, highlighting our distinctive brand promise to be here for good and showcasing how we help people, companies and communities grow and prosper across our international network. • We have been successful in leveraging our brand and insights to support business growth. Media sentiment towards the Group continued to exceed the average for the banking sector and ranked top three in most of our key markets over 2023. • Our capital position remains strong, with a CET1 ratio of 14.1% at the end of 2023, above the target range of 13–14 per cent. • We continue to maintain a strong and resilient funding profile, with a Liquidity Coverage Ratio (LCR) of 145% and a Net Stable Funding Ratio (NSFR) of 138% at the end of 2023. • We are maintaining momentum on simplification and harmonisation of our technology estate, integrating platforms using the cloud where appropriate, and investing in our engineering capabilities and best-in- class tools to provide secure and resilient technology. • We are accelerating automation to optimise our technology stack and enhancing the end-to-end delivery from requirements to deployment via a new, single platform that enables our colleagues to collaborate on technology projects in a consistent and efficient manner. • We have continued delivering value to our clients by improving speed to market, as enabled by more efficient and scalable technology development and delivery processes. Standard Chartered – Annual Report 2023Strategic reportBusiness modelThe value we create We aim to create long-term value for a broad range of stakeholders in a sustainable way. Read more on stakeholder engagement on pages 54 to 64 Clients We deliver banking solutions for our clients across our network, both digitally and in person. We help individuals grow their wealth while connecting corporates and financial institutions to opportunities across our network. Suppliers We engage diverse suppliers, locally and globally, to provide efficient and sustainable goods and services for our business. Total active individual clients1 Total CCIB and Business Banking clients1 Total spend in 2023 Active suppliers 11.8m 20222: 10.4m 226,000 20222: 232,000 $4.5bn 2022: $4.3bn 11,600 2022: 11,700 Employees We believe that great employee experience drives great client experience. We want all our people to pursue their ambitions, deliver with purpose and have a rewarding career enabled by great people leaders. Regulators and governments We play our part in supporting the effective functioning of the financial system and the broader economy by proactively engaging with public authorities and by paying our taxes. Senior appointments which are internal Employees committed to our success Corporate Taxes and Bank Levy paid in 2023 60% 2022: 67% 97% 2022: 96% $1,476m 20223: $926m Society We strive to operate as a sustainable and responsible company, working with local partners to promote social and economic development. Investors We aim to deliver robust returns and long-term sustainable value for our investors. Community investment Dividends declared in 2023 Share buy-backs in 2023 $68.6m 2022: $51.3m $728m 2022: $523m $2.0bn 2022: $1.3bn 1 Excluding customers served or supported by Ventures segment 2 2022 figures restated for the removal of (i) exit markets and businesses in AME and (ii) Aviation Finance 3 2022 restated to include bank levy 23 Standard Chartered – Annual Report 2023Strategic reportStrategic report Strategy Our strategy To become a leader in global finance Over the past year, we have executed strongly against our strategy, with a considerable uplift in our return on tangible equity (RoTE) delivered. We continue to focus on: • Four strategic priorities: Network business, Affluent client business, Mass Retail business, and Sustainability • Three critical enablers: People and Culture, Ways of Working, and Innovation. While the macroeconomic and industry environments continue to evolve, we believe the strategy remains fit for the Bank. Our strategic priorities and enablers will continue to be supported by our three Stands: Accelerating Zero, Lifting Participation and Resetting Globalisation (please find more details of our Stands on page 26). Critical enablers People and Culture We invest in our people by building future-ready skills, providing a differentiated employee experience, and strengthening our inclusive and innovative culture. We do this by: • Embedding our refreshed approach to performance, reward and recognition that puts greater focus on ambition, collaboration, and innovation • Increasing re-skilling and upskilling towards future roles and work, aligned with our business strategy and workforce’s aspirations • Strengthening leadership capability through modernised development programmes and measurement platforms • Focusing on wellbeing to enhance resilience, productivity and performance, as well as offering progressive, purpose-led benefits • Further embedding flexible working across our footprint, with over 52,000 employees in 44 markets now on agreed flexi-working arrangements. Ways of Working Innovation We drive client-centricity with a focus on speed to value for our clients. We are improving our operating rhythm and organisational agility while empowering our people to continuously improve the way we work. We continue strong progress on: • Simplifying and transforming the way we invest, operate and execute • Harnessing operational efficiencies to help us continue the drive of commerce and prosperity in our markets • Enhancing the way we deliver and manage change across the Bank, anchored around simplifying our processes end-to-end. We embed innovation through digitising our core, leveraging partnerships to drive scale and extended reach, and building new business models through ventures. We continue to focus on: • Modernising and strengthening our technology estate and data management • Exploring and experimenting to enhance client experience, develop new platforms and improve operational resilience • Leveraging partnerships to access new clients and strengthen our capabilities • Building, launching, and scaling innovative ventures while driving ventures’ collaboration with the broader Bank and its clients. Culture of inclusion score Speed to value1 Percentage of revenue from new businesses3 83.2% 2022: 83.1% 150days 2022: 160 days 36% 2022: 22% Women in senior roles Consumer client satisfaction metric2 32.5% 2022: 32.1% 56.6% 2022: 49.8% 1 Speed to value measures the time taken to deliver a change from ideation till customer go-live and is based on the weighted average of lead time across Corporate, Commercial and Institutional Banking (CCIB) and Consumer, Private and Business Banking (CPBB) businesses. 2 Excludes CCIB and Business Banking clients. Includes Private Banking. Restated for 2022. 3 Income from digital initiatives, innovation and transformation of the core, the majority of which will come from new and upgraded platforms and partnerships. Also includes Sustainable Finance income and 100 per cent of Ventures income. 24 Standard Chartered – Annual Report 2023 Strategic priorities Network business Affluent client business Through our unique network, we enable global trade and investment through financing, payments, asset origination and risk management, with an increasing focus on Sustainable Finance. Our on-the-ground presence and capabilities in more than 50 markets give us an advantage in advice and deal execution for corporates and financial institutions by: • Helping our clients seize opportunities in shifting supply chains, tapping into existing and emerging trade and investment corridors such as intra-Asia, and supporting our European and American clients’ access to emerging markets assets • Continuously improving client experience with market- leading digital platforms that allow seamless onboarding, client servicing and application programming interface (API) connectivity • Developing differentiated propositions in high-returning, high- growth sectors such as Technology, Media & Telecom (TMT), Healthcare, Cleantech and Electric Vehicles. CCIB network income Percentage of CCIB transactions digitally initiated We offer comprehensive solutions, personalised advice, and exceptional client experiences to help our Affluent clients manage and grow their wealth, at home and abroad. As a leading international wealth manager, we are strengthening our competitive advantage by: • Unlocking the value of our network, leveraging our wealth hubs in Hong Kong, Singapore, UAE and Jersey to deliver a seamless global proposition and client experience with wealth, advisory and digital capabilities • Maximising synergies across our client portfolios and the Bank by nurturing clients up the Affluent client continuum with our deep local expertise and differentiated propositions, and by partnering with CCIB to offer solutions such as real estate and acquisition financing to ultra-high-net-worth clients • Delivering expert advice and digital-first wealth solutions via an open architecture approach, supported by investments in innovation and scalable platforms. Affluent client income Active Affluent clients $6.9bn 20221: $5.2bn 65.7% 2022: 61.5% $4.6bn 20222: $3.7bn 2.3m 20222: 2.1m Mass Retail business Sustainability Mass Retail is strategically important to our client continuum. It demonstrates our deep local expertise, commitment to and relevance in the markets where we operate. Besides providing a continuous stream of clients who become more affluent over time, Mass Retail underscores our commitment to lifting participation in the communities we serve. Our focus is on: • Continuing the pivot towards a digital-first model to become more personalised, relevant and real-time • Sharpening our onboarding and engagement capabilities through digital sales and marketing, advanced analytics capabilities and straight-through self-service • Launching and developing new business models with leading global and regional partners to leverage synergies in distribution, digital capabilities and risk management to serve customers at scale. We aim to support the sustainable economic and social development of our markets, helping people to thrive long-term. In line with our Stands, we are committed to accelerating the transition to net zero, lifting participation in the economy and resetting globalisation. Our focus includes: • Continuing to scale our sustainable and transition finance business by integrating sustainability as a core component of our value proposition and enhancing our suite of Sustainable Finance products and solutions across CCIB and CPBB • Progressing on our pathway to achieve net zero financed emissions by 2050, including setting interim 2030 targets for additional high-emitting sectors and enhancing our existing climate risk governance and management processes • Contributing our skills, experience and networks to initiatives and coalitions that aim to further develop the global sustainability ecosystem • Seeking to partner with our clients and communities to mobilise social capital and drive economic inclusion and entrepreneurship through our Futuremakers global initiative. Active Mass retail clients Percentage of digital sales for Retail Products Cumulative Sustainable Finance mobilised since 20213 Sustainable Finance income in 20236 9.5m 20222: 8.3m 56% 2022: 48% $87bn4 2022: $57bn5 $720m 2022: $508m 1 2022 figures restated for removal of (i) exit markets and business in Africa and Middle East (AME) and (ii) Aviation Finance. 2 2022 figures restated for removal of exit markets and business in AME. 3 Defined as any investment or financial service provided to clients which supports: (i) the preservation and/or improvement of biodiversity, nature or the environment; (ii) the long-term avoidance/decrease of greenhouse gas (GHG) emissions, including alignment of a client’s business and operations with a 1.5 degrees Celsius trajectory (known as transition finance); (iii) a social purpose; or (iv) incentivises clients to meet their own sustainability objectives (known as sustainability-linked finance). 4 January 2021 to September 2023 cumulative progress towards $300 billion mobilisation target by 2030. 5 January 2021 to September 2022 cumulative progress towards $300 billion mobilisation target by 2030. 6 Defined as income generated from Sustainable Finance products as listed in the Green and Sustainable Product Framework. For further information, please refer to pages 99 to 101. 25 Standard Chartered – Annual Report 2023Strategic reportStrategic report Our Stands Our Stands Climate change, stark inequality and the unfair aspects of globalisation impact us all. We’re taking a stand by setting long-term ambitions on these issues where they matter most. This works in unison with our strategy, stretching our thinking, our action and our leadership to accelerate our growth. Accelerating Zero Lifting Participation Resetting Globalisation The world must reach net zero carbon emissions by 2050 to limit the worst effects of climate change. This will require efforts across stakeholder groups to accelerate the transition to a low-carbon, climate-resilient economy. Policymakers, corporates and financial institutions must play a substantial part in this to ensure that finance is an enabler of change. The need for a just transition that addresses environmental challenges, while ensuring inclusive economic and social development in the footprint markets where we operate, is a priority for the Group. Inequality, along with gaps in economic inclusion, mean that many young people, women, and small businesses struggle to gain access to the financial system to save for their futures and to grow their businesses. We want to increase access to financial services and make them available at low cost. We strive to expand the reach and scale of accessible banking and to connect clients and our wider communities to the skills and educational opportunities that promote and sustain access to finance and economic opportunity. Globalisation has lifted millions out of poverty but left many behind. We advocate for a new model of globalisation based on transparency to build trust, renew confidence and promote dialogue and innovation. We connect the capital, expertise and ideas needed to drive new standards and create innovative solutions for sustainable growth. We work across our markets to shape a new understanding of growth, one that is based on inclusivity, sustainability and our ambition to support people and communities for the long term. 26 Standard Chartered – Annual Report 2023S t r a t e g i c r e p o r t [[SC Ventures launches Tawi]] In May, SC Ventures, our innovation, fintech investments and ventures arms, launched Tawi – an Agritech B2B marketplace for smallholder farmers in Kenya. As part of the Tawi marketplace, farmers have access to an e-commerce platform helping them connect with commercial kitchens and reduce post- harvest losses. Tawi also helps improve price transparency and efficient supply chain management. By the end of 2023, Tawi had onboarded more than 1,000 farmers (65 per cent women), more than 700 commercial kitchens (34 per cent women-led businesses) and fulfilled more than 6,000 orders. Tawi is also working to launch financial services including agri-loans, savings and working capital to enhance financial inclusion. Read more at tawifresh.com Standard Chartered – Annual Report 2023 27 Strategic report We are also committed to promote sustainable finance in our markets and channeling capital to where the impact will be greatest. We are delivering on our ambition to support sustainable economic growth, increasing support and funding for financial offerings that have a positive impact on our communities and environment. Strategic priorities • Deliver sustainable growth for clients by leveraging our network to facilitate trade, capital and investment flows across our footprint markets • Generate high-quality returns by improving funding quality and income mix, growing capital-lite income and driving balance sheet velocity while maintaining disciplined risk management • Be a digital-first and data-driven bank, that delivers enhanced client experiences • Accelerate our sustainable finance offering to our clients through product innovation and enabling transition to a low-carbon future Progress • Our underlying income performance is driven by our diversified product suite and expanded client solutions supported by the higher interest rate environment. Our cross-border income currently contributes to 61 per cent of total CCIB income with growth across strategic corridors • Robust balance sheet quality with investment-grade net exposures representing 66 per cent of total corporate net exposures (2022: 70 per cent) and high-quality operating account balances broadly stable at 65 per cent of Transaction Banking and Securities Services customer balances (2022: 67 per cent) • We defended against liabilities attrition through active pricing management • Our client migration to the Straight to Bank NextGen platform is successfully completed. We achieved digital adoption of 65.7 per cent (2022: 61.5 per cent) across Cash, Trade and FX, by driving client awareness and adoption programs. Client experience remains at the centre of our digital transformation, with our Net Promoter Score at 78.6 per cent (2022: 68.4 per cent) • We are ~70% of the way towards delivering our $1 billion income from sustainable finance franchise by 2025, and have mobilised $87 billion in sustainable financing against our $300 billion commitment by 2030 Performance highlights • Underlying profit before tax of $5,436 million up 42 per cent at constant currency (“ccy”), primarily driven by higher income and lower credit impairment charges, partially offset by higher expenses • Underlying operating income of $11,218 million up 20 per cent at ccy primarily due to strong performance in Cash Management from pricing discipline in a rising interest rate environment. Financial Markets was down 2 per cent at ccy, mainly from lower revenue in FX and Commodities on the back of lower market volatility, subdued primary issuances and non-repeat of the gains on mark-to-market liabilities in 2022. Excluding the latter, Financial Markets was up 3 per cent • Underlying operating expenses were up by 10 per cent at ccy largely due to inflationary pressure, targeted investments and strategic hires to support business growth • Risk-weighted assets were down by $1.6 billion since 31 December 2022, mainly as a result of optimisation initiatives partly offset by business growth. We achieved $10.3 billion optimisation in risk-weighted assets in 2023 ($24.2 billion since January 2022) • Underlying RoTE increased from 13.4 per cent to 19.5 per cent Corporate, Commercial and Institutional Banking KPIs Profit before taxation $5,436m $5,747m 42% underlying basis 49% reported basis Return on tangible equity (RoTE) 19.5% 610bps underlying basis 20.6% 700bps reported basis Risk-weighted assets (RWA) $142bn $1.6bn 2023 Income Return on risk-weighted assets (Income RoRWA) 7.8% 6.2% 4.7% 2022 2021 Aim: Achieve RoRWA of 6.5% by 2024. Analysis: CCIB income RoRWA improved to 7.8% in 2023, up 160bps YoY and in line with our 2024 target, driven by higher income and disciplined risk management. Contribution of Financial Institutions segment to total income 2023 2022 2021 49% 47% 44% Aim: Drive growth in high-returning Financial Institutions segment. Analysis: Share of Financial Institutions income improved to 49 per cent in 2023 as we applied continued focus to this segment to drive income and returns. Segment overview Corporate, Commercial and Institutional Banking supports local and large corporations, governments, banks and investors with their transaction banking, financial markets and borrowing needs. We provide solutions to nearly 20,000 clients in some of the world’s fastest-growing economies and most active trade corridors. Our clients operate or invest across 45 markets across the globe. Our strong and deep local presence enables us to help co-create bespoke financing solutions and connect our clients multilaterally to investors, suppliers, buyers and sellers. Our products and services enable our clients 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 and Institutional Banking is at the heart of the Group’s shared Purpose to drive commerce and prosperity through our unique diversity. 28 Standard Chartered – Annual Report 2023Strategic reportClient segment reviewsWe are committed to realising greater synergies from our international network and the Group’s other client segments, from delivering holistic propositions to clients with cross- border investment needs to offering employee banking services to Corporate, Commercial and Institutional Banking clients. Consumer, Private and Business Banking also provides a source of high-quality liquidity for the Group. Strategic priorities • Maximise the value of our international network, with wealth hubs in Hong Kong, Singapore, UAE and Jersey, to provide Affluent clients with a global wealth proposition built on deep local expertise and seamless cross-border client experience • Unlock synergies from nurturing clients up our client continuum, by helping them grow and protect their wealth through expert advice and best-in-class wealth propositions • Grow Mass Retail profitably, via digital-first sales and service business models, partnerships, and data analytics • Continue to improve client experience and efficiency through digitalisation, process simplification and operational excellence Progress • Accelerated Affluent growth momentum in New to Bank clients, NNM and income across Priority Banking and Private Bank • Rolled out Standard Chartered-INSEAD Wealth Academy to more markets with over 900 senior frontline staff upskilled to be future-ready advisors • Enhanced cross border digital capabilities to improve client experience • Expanded myWealth suite of digital advisory tools to enable RMs to provide personalised portfolio construction and investment ideas for clients • Recognised as a leader in digital Wealth capabilities with 20 industry awards received in 2023 • Enhanced digital capabilities in key markets focusing on frictionless mobile experience, leading to an average rating of 4.6 on App Store and Play Store in Hong Kong, Singapore, India, China and Pakistan • Continued to transform our Mass Retail business by scaling sustainably through partnerships, digital client engagement, and automation • Eight Mass Retail partnerships live across our footprint in China, Indonesia, Vietnam and Singapore, reaching more than 2.6 million clients Performance highlights • Underlying profit before tax of $2,487 million was up 60 per cent at ccy driven by higher income, offsetting higher expenses and higher credit impairments • Underlying operating income of $7,106 million was up 19 per cent (up 22 percent at ccy). Asia was up 20 per cent at ccy and Africa and the Middle East was up 36 per cent at ccy • Strong income growth mainly from Deposits up 76 per cent at ccy with improved margins and balance sheet growth coupled with 10 per cent (ccy) growth from Wealth Management. This offsets lower income in Mortgages, and Unsecured Lending largely due to margin compression impacted by a rising interest rate environment • Underlying RoTE increased from 15.8 per cent to 25.3 per cent Consumer, Private and Business Banking KPIs Profit before taxation $2,487m $2,427m 60% underlying basis 63% reported basis Return on tangible equity (RoTE) 25.3% 950bps underlying basis 24.7% 950bps reported basis Risk-weighted assets (RWA) $51bn $0.6bn Affluent Net New Money (NNM) 2023 2022 2021 29.1bn 19.4bn 18.1bn Aim: Acquire NNM from new and existing Affluent clients, via innovation, advisory-led and digital-first Wealth propositions. Analysis: Affluent NNM increased by 50% YoY in 2023, supported by strong new-to-bank client acquisition momentum, cross-border referrals and digital-driven client engagement Digital Sales for Retail Products 2023 2022 2021 56% 48% 41% Aim: Sharpen our on-boarding and engagement capabilities through digital sales and marketing, advanced analytic capabilities and straight-through self-service to improve client experience and efficiency Analysis: Digital onboarding for Retail Products has seen significant growth increasing to 56% in 2023 vs. 41% in 2021. Segment overview Consumer, Private and Business Banking serves more than 11 million clients in many of the world’s fastest-growing markets. Our client continuum spans from Mass Retail to Affluent, including high-net worth clients served by our Private Bank. We leverage digital banking channels with a human touch to provide clients with differentiated products and services such as deposits, payments, financing, wealth management and personalised advice. We also support small business clients with their business banking needs. 29 Standard Chartered – Annual Report 2023Strategic reportStrategic priorities • SC Ventures’ focus is on building and scaling new business models – across the four themes of Online Economy & Lifestyle, SMEs & World Trade, Digital Assets and Sustainability & Inclusion. We do this by connecting ecosystems, partners and clients to create value and new sources of revenue, providing optionality for the Bank. Through its fund SC Ventures advances the Fintech agenda by identifying, partnering, and taking minority interests in companies, which can be integrated into the Bank and Ventures. Focus is on innovative, fast-growing, technology-focused companies which accelerate transformation in the financial industry. • Mox continues to grow the customer base and drive main bank relationships across mass and mass affluent segments in Hong Kong. Mox’s vision is to set the global benchmark for digital banking from Hong Kong. It aims to be the leading Hong Kong virtual bank for Cards, Digital Lending and continues to further expand services, including the recent launch of Digital Wealth Management services. • Trust Bank aims to become the fourth largest retail bank in Singapore by the end of 2024. To achieve this, it will scale through its partner ecosystem and deepen its customer relationships with the mass and mass affluent customer segments. Progress • Business performance in 2023 saw continued positive momentum for SC Ventures – five ventures were launched, funds were raised amidst a challenging environment, geographical reach was expanded, and the business exited two investments successfully. As a result, the SC Ventures customer base grew by 25 per cent to reach 587,000 with Gross Transactional Value (GTV) growing by 15 per cent to $18 bn. One significant milestone for SC Ventures in 2023 was the establishment of a partnership with SBI Holdings setting up a $100m digital asset joint venture in the UAE, a region fast becoming a hub for fintechs in the digital asset space. SC Ventures, through a number of innovative fintech ventures (such as Shoal, Tawi and myZoi), continues to drive sustainability, financial inclusion and financial literacy for the underbanked. • In 2023, Mox had a strong focus on expanding its card and digital lending services and recorded a strong performance and an engaged customer base. Mox has more than 523,000 customers, up 1.2 times YoY, with customers holding an average of 3.1x products. It delivered close to three times YOY growth in revenue with both deposits and lending expanding over 30 per cent YOY basis. Mox reached 36 per cent (ranked #1) and 30 per cent of (ranked #2) market share in lending and deposits respectively among all Hong Kong virtual banks in H1. The bank was recognised in Forbes’ World’s Best Banks 2023, and The Asian Banker Hong Kong Awards 2023 as the Best Digital-only Bank in Hong Kong, and was ranked fifth in the World’s Top 50 Digital Banks 2023 by The Digital Banker. The Mox app is the top-rated Hong Kong virtual banking app in Apple App Store. Mox consistently has the best Net Promoter Score (NPS) among all Hong Kong virtual banks. • Trust Bank continued to scale and, by reaching 12 per cent market share a year after launch, became one of the world’s fastest growing digital banks. Product development remained on track, with the launch of unsecured loans, supplementary credit cards, and broadening of the general insurance offering. By the end of 2023, its customer base had grown 1.7 times YoY to 700,000 customers and deposit balances had grown 3.0 times YoY to $1.4bn. Customer engagement remained strong with card activation of 85 per cent and more than 2m digital coupons redeemed by customers in the Trust ecosystem. In its first year of operation, Trust was recognised as the best digital retail bank in Singapore and Southeast Asia by The Digital Banker and was the number one rated banking app in the Singapore Apple App Store. Performance highlights • Underlying loss before tax of $408 million was up $45 million, driven mainly by higher expenses as we continue to invest in new and existing ventures. • Risk-weighted assets of $1.9 billion have increased $0.6 billion mainly due to continued investment in new and existing ventures and minority interests. Ventures KPIs Loss before taxation External Funds Raised $408m $64m 12% underlying basis 41% Risk-weighted assets (RWA) New Ventures launched $1.9bn $0.6bn 5 2 Gross Transaction Value Customers $18bn $2bn 2m Gross Transaction Value 2023 2022 2021 Customers 2023 2022 2021 $18bn $16bn $10bn 1.8m 1.3m 0.5m Customer numbers for 2021 and 2022 normalised for the exit of Cardspal in 2023 Segment overview Formed in 2022 the Ventures client segment is a consolidation of SC Ventures and its related entities as well as the Group’s two majority-owned digital banks Mox in Hong Kong and Trust in Singapore. • SC Ventures is the platform and catalyst for the Group to promote innovation, invest in disruptive financial technology and explore alternative business models. It represents a diverse portfolio of over 30 ventures and more than 20 investments. • Mox, a cloud-native, mobile only digital bank, was launched in Hong Kong as a joint venture with HKT, PCCW and Trip. com in September 2020. • Trust Bank is Singapore’s first cloud-native bank and was launched in a partnership with FairPrice Group in September 2022. 30 Standard Chartered – Annual Report 2023Strategic reportClient segment reviewsStrategic report Regional reviews Asia Loans and advances to customers (% of group) Profit before taxation Risk-weighted assets (RWA) $156bn $5bn $4,740m 32% underlying basis $3,812m 16% reported basis Income split by key markets Hong Kong Singapore India Others 74% 34% 20% 10% 36% Region overview The Asia region has a long-standing and deep franchise across some of the world’s fastest-growing economies. The region generates over two-thirds of the Group’s income from its extensive network of 21 markets. Of these, Hong Kong and Singapore contributed the highest income, underpinned by a diversified franchise and deeply rooted presence. The region is highly interconnected, with three distinct and potent sub-engines of Greater China, ASEAN and South Asia. Our global footprint and strong regional presence, distinctive proposition, and continued investment position us strongly to capture opportunities as they arise from the continuing opening up of China’s economy where we now earn two dollars offshore from Chinese clients for every dollar we earn onshore, the growing connectivity of ASEAN and the strong economic growth in India. The region is benefiting from rising trade flows, especially intra-Asia, continued strong investment, and a rising middle class which is driving consumption growth and improving digital connectivity. Progress • We continue to advance our China strategy both on- and off-shore, and have also made a material increase in both the number of, and the income contribution from New to Bank affluent Mainland China customers and adding new clients through digital partnerships. The China business delivered record income on-shore and has grown network income strongly along a number of key corridors in ASEAN, up 53 per cent and ME up 67 per cent YoY. We have also made progress with digital partnerships launching new partnerships JD.com and KCB. • Strong Asia cross border momentum including India Singapore corridor up 29 per cent YoY highlighting the role of Singapore as a financial hub for clients in ASEAN as well as India • Our two strong international financial hubs in Hong Kong and Singapore, delivered strong income growth driven by Wealth Management with Affluent clients, increased Financial Markets activity with Corporate and Institutional clients and a material improvement in the net interest margin. • Our digital agendas have progressed; and our virtual bank Mox has the largest loan book and the 2nd largest deposits base among virtual banks in Hong Kong, while our digital bank Trust, is becoming one of the world’s fasting growing digital banks; more than one in ten Singaporeans now bank with Trust. Strategic priorities • Leverage our network strength to serve the inbound and outbound cross-border trade and investment needs of our clients, particularly across high-growth corridors e.g., China–ASEAN, China–South Asia, China-AME and KR-ASEAN Performance highlights • Underlying profit before tax of $4,740 million was up 32 per cent at constant currency (ccy) on the back of higher income and lower credit impairment, partially offset by 8 per cent (ccy) increase in operating expenses • Capture and monetise opportunities arising from China’s opening and accelerate growth in Asia • Turbocharge our Affluent and Wealth Management businesses through differentiated propositions and service • Continue to invest and advance in technology, digital capabilities and partnerships to enhance client experience and build scale efficiently • Support clients’ sustainable finance and transition needs and continue to strengthen our thought leadership status • Underlying operating income of $12,429 million was up 15 per cent at ccy, mainly from strong double-digit increases across Cash Management and Retail Deposits, underpinned by expansion in margins and Wealth Management partly offset by lower Mortgage income and a loss in Treasury Markets • Credit Impairment improved 18 per cent year-on-year (YoY) • Loans and advances to customers were down 5 per cent (reported and ccy); Customer accounts were up 9 per cent (reported and ccy) YoY • Risk-weighted assets up $5 billion YoY • RoTE increased to 16.4 per cent from 11.9 per cent in FY22 31 Standard Chartered – Annual Report 2023Strategic reportAfrica and the Middle East Profit before taxation Risk-weighted assets (RWA) Loans and advances to customers (% of group) $1,311m 90% underlying basis $1,317m 87% reported basis $38.4bn $2.3bn Income split by key markets UAE Pakistan Kenya Others 7% 28% 13% 9% 50% Region overview We have a rich heritage in Africa and the Middle East (AME) with deep client relationships and historical contributions to the economy and the communities. Our unique footprint in the region, as well as across centres in Asia, Europe and the Americas, enable us to seamlessly support our clients. AME is becoming increasingly important for global trade and investment corridors, and we are well placed to facilitate these flows. Gulf Cooperation Council (GCC) markets are expected to outpace global growth on the back of macro-economic tailwinds, higher government spend in diversified areas, bilateral trade negotiations and evolving economic partnerships. The macro-economic risk remains elevated in some markets in the region due to a high level of sovereign debt and FX liquidity challenges, but they remain integral to the economic corridors for our global clients. Overall, AME’s medium and long-term attractiveness remains compelling and intact, and it is an important part of our global network proposition for our clients. Strategic priorities • Provide best-in-class structuring and financing solutions and drive creation through client initiatives • Accelerate growth in differentiated international network and Affluent client businesses • Invest in market-leading digitisation initiatives in CPBB to protect and grow market share in core markets, continue with our transformation agenda to recalibrate our network and streamline structures • Be an industry leader in the transition to net zero across the region • Simplify footprint and refocus on strategic growth areas • Further embedded our International Banking proposition, activating our diverse footprint across Africa and the Middle East. This has resulted in more than 150 per cent growth in Priority Banking client base across our International Banking corridors for the region • Enhanced our digital offering in Africa by becoming the first international bank with digital fixed income solutions in Kenya, Nigeria and Ghana, extending our micro-investment solution (SC Shillingi) to Uganda, and launching digital personal loans in Kenya • Our Saudi franchise saw strong growth following the branch set-up in 2021 while a new branch launched recently in Egypt provides additional growth opportunities in the region • The sale of the Jordan business has been completed and buyers have been announced for select sub-Saharan African businesses that were identified for exit as part of our strategic announcement in 2022 • Sustained productivity actions have resulted in an improved Cost to Income Ratio at 56 per cent (vs. 63 per cent in FY‘22) and an improvement in productivity with income per headcount (up 18 per cent year-on-year) Performance highlights • Underlying profit before tax of $1,311 million, the highest annual profit since 2015, was up 66 per cent (up 90 per cent at ccy), driven by higher income and a net release in credit provisions partially offset by an increase in expenses • Underlying operating income of $2,806 million was up 14 per cent (up 26 per cent at ccy) with strong growth in Cash Management, Retail Deposits and Financial Markets. Income was up 29 per cent (up 38 per cent at ccy) in Middle East, North Africa, Pakistan, up 1 per cent (up 14 per cent at ccy) in Africa • Credit Impairment net release of $91 million in FY23 compared to $119 million charge in FY22 reflecting a non-repeat of the prior year’s sovereign related impairments and releases relating to historic CCIB provisions Progress • Topped the regional DCM league tables for the tenth consecutive year and secured the first rank in GCC G3 Bond and Sukuk issuance • Loans and advances to customers were up 8 per cent YoY (up 15 per cent at ccy) and customer accounts were up 4 per cent (up 9 percent at ccy) since 31 December 2022 • Supported Sustainable Finance across our footprint through our comprehensive product offering. ESG DCM volumes across the Middle East grew by over 160 per cent year on year, on the back of some of the largest and most innovative ESG deals in the region • Strong cross-border income growth of 39 per cent with broad- based growth across all our key corridors • Risk-weighted assets were 6 per cent lower than 31 December 2022, despite the impact of sovereign downgrades, due to continuing RWA optimisation activities, de-risking in markets with elevated macro-economic risk and currency devaluation • RoTE increased to 16.6 per cent from 9.3 per cent in FY22 32 Standard Chartered – Annual Report 2023Strategic reportRegional reviewsEurope and the Americas Loss before taxation Risk-weighted assets (RWA) Loans and advances to customers (% of group) $330m 139% underlying basis $28m 103% reported basis $46.1bn $4bn Income split by key markets US UK Others 18% 62% 7% 31% Progress • Strong growth of 33 per cent in global cross-border network business with Europe and the Americas CCIB clients across key footprint markets • Financial Institutions segment growth of 32 per cent, now accounting for 60 per cent of the CCIB business for European and Americas clients. • Material growth in income from sustainable finance products and expansion of our sustainable product offering • In CPBB we see positive momentum on Net New Money in 2023 coupled with strong growth in mortgage balances for our high net worth clients Performance highlights • Underlying loss before tax of $330 million driven by lower income and increased expenses • Underlying operating income of $1,397 million was down 40 per cent reflecting the increased cost of hedges within Treasury whilst strong growth in Transaction Banking income was partly offset by lower Financial Markets income • Expenses increased by 12 per cent at ccy largely due to increased investment spend and the impact of inflation • Credit impairments for the region remain well controlled • FY23 RoTE negative 3.6 per cent down from 8.6% per cent in FY22 Region overview The Group supports clients in Europe and the 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 capabilities. The region generates significant income for the Group’s Corporate, Commercial and Institutional Banking business. Clients based in Europe and the Americas contribute over one-third of the Group’s CCIB client income. Over three- quarters of client income is booked in the network, generating above-average returns. In addition to being a key origination centre for CCIB, the region offers local, on-the-ground expertise and solutions to help internationally minded clients grow across Europe and the Americas. The region is home to the Group’s two biggest payment clearing centres and the largest trading floor. Our European CPBB business focuses on serving clients with links to our footprint markets. Strategic priorities • Leverage our network capabilities to connect new and existing Corporate and Financial Institutions clients in the West to the fastest-growing and highest-potential economies across our footprint • Supercharge our FI Franchise • Grow the business we capture from inbound trade flows from our East to West Corridors • Further develop our Sustainable Finance product offering and risk management capabilities • Enhance capital efficiency, maintain strong risk oversight and further improve the quality of our funding base • Expand assets under management in CPBB and continue to strengthen the franchise 33 Standard Chartered – Annual Report 2023Strategic reportStrategic report Group Chief Financial Officer’s review Group Chief Financial Group Chief Financial Officer’s review Officer’s review [[Back to growth and improving returns]] Diego De Giorgi Group Chief Financial Officer 34 Standard Chartered – Annual Report 2023 • Credit impairment was a $528 million charge, a reduction of $308 million representing an annualised loan loss rate of 17 basis points. The impairment charge includes $282 million in relation to the China commercial real estate sector, $354 million in the Consumer, Private and Business Banking (‘CPBB’) portfolio and $85 million from Ventures partly offset by a $45 million net release from sovereign-related exposures and a net release in other Corporate exposures • Other impairment increased by $91 million to $130 million primarily relating to write-off of software assets • Profit from associates and joint ventures decreased 44 per cent to $94 million reflecting a lower profit share from Bohai • Restructuring, other items and goodwill and other impairment totalled $585 million. This included an impairment charge of $850 million reflecting a reduction in the carrying value of the Group’s investment in Bohai following a refresh of the value-in-use calculation. Other items include the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans. Restructuring charges of $14 million include the impact of actions to transform the organisation to improve productivity, partly offset by profits from businesses classified as held-for-sale. Movements in the Debit Valuation Adjustment (‘DVA’) were a positive $17 million • Taxation was $1,631 million on a reported basis, with an underlying effective tax rate of 29.1 per cent down from 29.9 per cent in the prior year reflecting a favourable change in the geographic mix of profits partly offset by increased losses in the United Kingdom where the Group currently does not recognise a tax benefit • Underlying return on tangible equity (‘RoTE’) increased by 240 basis points to 10.1 per cent reflecting an increase in profits and lower average tangible equity benefitting from distributions to shareholders and movements in reserves primarily through the course of 2022 • Underlying basic earnings per share (‘EPS’) increased 32 per cent to 128.9 cents and reported EPS of 108.6 cents increased by 26 per cent • A final ordinary dividend per share of 21 cents has been proposed taking the full-year total to 27 cents, a 50 per cent increase. The Group also completed two share buyback programmes totalling $2 billion which along with a new share buyback programme of $1 billion to start imminently. Since 1 January 2022, total shareholder distributions announced total $5.5 billion Summary of financial performance The Group delivered on its key financial objective for 2023, achieving a 10 per cent underlying return on tangible equity, supported by significant progress on the five strategic actions set out in 2022. Underlying profit before tax increased 27 per cent at constant currency as the Group delivered 4 per cent positive income-to-cost jaws. Income grew 13 per cent on a constant currency basis as the Group took advantage of the favourable interest rate environment. Expenses increased 8 per cent at constant currency, while the Group incurred a loan loss rate of 17 basis points, well below its historical average. The Group reduced the carrying value of its investment in China Bohai Bank (‘Bohai’) by $850 million and booked a $262 million net gain from selling its Aviation Finance business. The Group remains well-capitalised and highly liquid with a liquidity coverage ratio of 145 per cent and a CET1 ratio of 14.1 per cent, above its target range, enabling the Board to announce a further $1 billion share buyback programme. The terms of the buyback will be published, and the programme will start shortly. All commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a reported currency basis, unless otherwise stated. • Operating income of $17.4 billion increased by 10 per cent year-on-year or 13 per cent on a constant currency basis as the Group benefitted from the positive impact of rising interest rates, and a partial recovery in Wealth Management partly offset by losses from hedges • Underlying net interest income increased 20 per cent or 23 per cent on a constant currency basis as the net interest margin increased 26 basis points or 18 per cent with the Group having increased its pricing on assets and the yield on its Treasury portfolio more quickly than it repriced its liability base, reflecting strong pricing discipline and passthrough rate management as interest rates increased in key footprint currencies. This was partly offset by an additional 15 basis points drag from short-term and structural hedges due to rising interest rates, 16 basis points headwind from migration into higher priced term deposits from lower rate paid current and savings accounts (‘CASA’) as well as adverse changes in the mix between Treasury and customer assets • Underlying non NII was stable, or 2 per cent higher on a constant currency basis. This was in part due to a strong Wealth Management performance, which was up 10 per cent on a constant currency basis as it benefitted from a steady flow of new to bank clients and net new money. An accounting asymmetry resulting from Treasury management of business as usual FX positions also contributed to an increase in non NII, with a partial offset from reduced net interest income • Operating expenses excluding the UK bank levy increased 7 per cent, or 8 per cent on a constant currency basis, reflecting the Group’s continued investment into business growth initiatives, strategic investments and higher inflation partly funded by cost efficiency actions. The Group generated 4 per cent positive income-to-cost jaws at constant currency and the cost-to-income ratio improved by 2 percentage points to 63 per cent 35 Standard Chartered – Annual Report 2023Strategic reportSummary of financial performance Underlying net interest income5 Underlying non NII5 Underlying operating income Other operating expenses UK bank levy Underlying operating expenses Underlying operating profit before impairment and taxation Credit impairment Other impairment Profit from associates and joint ventures Underlying profit before taxation Restructuring Goodwill and other impairment3 DVA Other items⁶ Reported profit before taxation Taxation Profit for the year Net interest margin (%)2 Underlying return on tangible equity (%)2 Underlying earnings per share (cents) 2023 $million 9,557 7,821 17,378 (11,025) (111) (11,136) 6,242 (528) (130) 94 5,678 (14) (850) 17 262 5,093 (1,631) 3,462 1.67 10.1 128.9 20224 $million 7,967 7,795 15,762 (10,307) (102) (10,409) 5,353 (836) (39) 167 4,645 (99) (322) 42 20 4,286 (1,384) 2,902 1.41 7.7 97.9 Change % Constant currency change¹ % 23 2 13 (8) (2) (8) 22 32 nm⁷ (43) 27 89 (164) (60) nm⁷ 24 (25) 24 20 – 10 (7) (9) (7) 17 37 nm⁷ (44) 22 86 (164) (60) nm⁷ 19 (18) 19 26 240 32 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Change is the basis points (‘bps’) difference between the two periods rather than the percentage change 3. Goodwill and other impairment include $850 million (2022: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (‘Bohai’) 4. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 5. To be consistent with how we the compute Net Interest Margin (‘NIM’), and to align with the way we manage our business, we have changed our definition of Underlying Net Interest Income (‘NII’) and Underlying non NII. The adjustments made to NIM, including interest expense relating to funding our trading book, will now be shown against Underlying non NII rather than Underlying NII. Prior periods have been restated. There is no impact on total income 6. Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans 7. Not meaningful Reported financial performance summary Net interest income Non NII Reported operating income Reported operating expenses Reported operating profit before impairment and taxation Credit impairment Goodwill and other impairment Profit from associates and joint ventures Reported profit before taxation Taxation Profit for the year Reported return on tangible equity (%)2 Reported earnings per share (cents) 2023 $million 7,769 10,250 18,019 (11,551) 6,468 (508) (1,008) 141 5,093 (1,631) 3,462 8.4 108.6 2022 $million 7,593 8,725 16,318 (10,913) 5,405 (836) (439) 156 4,286 (1,384) 2,902 6.8 85.9 Change % Constant currency change¹ % 5 20 13 (7) 25 34 (130) (10) 24 (25) 24 2 17 10 (6) 20 39 (130) (10) 19 (18) 19 160 26 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Change is the basis points (‘bps’) difference between the two periods rather than the percentage change 36 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Financial Officer’s reviewOperating income by product Transaction Banking Trade & Working capital Cash Management Financial Markets Macro Trading Credit Markets Credit Trading Financing Solutions & Issuance3 Financing & Securities Services3 Lending & Portfolio Management Wealth Management Retail Products CCPL & other unsecured lending Deposits Mortgage & Auto Other Retail Products Treasury Other Total underlying operating income 2023 $million 20222,3 $million Change % Constant currency change¹ % 5,837 1,294 4,543 5,099 2,827 1,803 554 1,249 469 498 1,944 4,969 1,161 3,437 236 135 (902) (67) 17,378 3,874 1,343 2,531 5,345 2,965 1,761 488 1,273 619 558 1,796 4,027 1,202 2,021 633 171 337 (175) 15,762 51 (4) 79 (5) (5) 2 14 (2) (24) (11) 8 23 (3) 70 (63) (21) nm⁴ 62 10 54 (1) 83 (2) (1) 5 17 – (22) (9) 10 26 (1) 74 (62) (19) nm⁴ 52 13 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 3. Shipping Finance is now reported under Financing Solutions & Issuance which was reported under Financing & Securities Services in 2022 4 Not meaningful The operating income by product commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a constant currency basis, unless otherwise stated. Lending and Portfolio Management income decreased 9 per cent reflecting the impact of risk-weighted assets optimisation actions which contributed to lower balances and an increase in portfolio management costs. Transaction Banking income increased 54 per cent with Cash Management income up 83 per cent reflecting strong pricing discipline and passthrough rate management to take advantage of a rising interest rate environment. Trade & Working Capital decreased 1 per cent, reflecting lower balance sheet and contingent volumes due to a reduction in economic activity and clients’ preference for local currency financing provided by local banks. This was partly offset by higher margins as the Group focused on higher-returning trade products. Financial Markets income decreased 2 per cent and was up 3 per cent excluding the non-repeat of $244 million gain on mark-to-market liabilities in 2022. Flow income grew by 7 per cent which was more than offset by the 15 per cent reduction in episodic income, driven by subdued market volatility, reduced issuances and the non-repeat of prior year fair value gains on mark-to-market liabilities. Macro Trading was down 1 per cent with declines in FX and Commodities partly offset by a double-digit increase in Rates from an expanded product offering. Credit Markets income was up 5 per cent primarily from higher Credit Trading income. Financing & Securities Services income was down 22 per cent as the benefit of higher interest rates on Securities Services balances was offset by negative movements in XVA and the non-repeat of mark-to-market gains. Wealth Management income grew 10 per cent with Bancassurance up 17 per cent and Treasury Products up 16 per cent partly offset by lower income from Wealth Management Lending which was down 15 per cent on the back of client deleveraging and margin compression. There was continued strong growth in net new sales, which totalled $14 billion and offset adverse market movements as Wealth Management assets under management remained broadly stable. Retail Products income increased 26 per cent. Deposits income was up 74 per cent due to active passthrough rate management in a rising interest rate environment partly offset by migration of Retail CASA balances into Time Deposits. Mortgage & Auto income decreased 62 per cent on the back of lower volumes and the impact of the Best Lending Rate cap in Hong Kong restricting the ability to reprice mortgages, despite an increase in funding costs from higher interest rates. CCPL income decreased 1 per cent reflecting reduced margins from increased funding costs partly offset by increased balances, driven by partnerships and the new digital banks. Treasury income was a $902 million loss primarily due to losses from structural and short-term hedges in a rising interest rate environment. The remaining short-term hedges mature in February 2024. 37 Standard Chartered – Annual Report 2023Strategic reportProfit before tax by client segment and geographic region Corporate, Commercial & Institutional Banking Consumer Private & Business Banking Ventures Central & other items (segment) Underlying profit before taxation Asia Africa & Middle East Europe & Americas Central & other items (region) Underlying profit before taxation 2023 $million 5,436 2,487 (408) (1,837) 5,678 4,740 1,311 (330) (43) 5,678 2022² $million 3,990 1,593 (363) (575) 4,645 3,616 792 834 (597) 4,645 Change % Constant currency change1 % 36 56 (12) nm³ 22 31 66 (140) 93 22 42 60 (12) nm³ 27 32 90 (139) 95 27 1. Comparisons presented on the basis of the current period’s transactional currency rate, ensuring like-for-like currency rates between the two periods 2. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 3. Not meaningful The client segment and geographic region commentary that follows is on an underlying basis and comparisons are made to the equivalent period in 2022 on a constant currency basis, unless otherwise stated. Corporate, Commercial & Institutional Banking (‘CCIB’) profit increased 42 per cent. Income grew 20 per cent with Cash Management benefitting from disciplined pricing initiatives in a rising interest rate environment partly offset by lower episodic income within Financial Markets and lower Lending income as CCIB delivered on its RWA optimisation initiatives. Expenses were 10 per cent higher while credit impairment decreased $302 million with lower charges in relation to the China commercial real estate sector and releases on historic provisions within the remaining portfolio. Consumer, Private & Business Banking (‘CPBB’) profit increased 60 per cent, with income up 22 per cent, benefitting from higher interest rates on Retail Deposits income and a recovery in Wealth Management. This was partly offset by lower Mortgage income negatively impacted by the Best Lending Rate cap in Hong Kong. Expenses increased 6 per cent while credit impairment was $92 million higher. Ventures loss increased 12 per cent to $408 million, reflecting the Group’s continued investment in transformational digital initiatives. Income increased five-fold to $156 million while expenses grew by 27 per cent. This resulted in a lower operating loss before impairment year-on-year. The impairment charge increased $69 million to $85 million reflecting increased bankruptcy related write-offs in Mox where credit criteria have now been adjusted to reduce the current elevated delinquency rate. Central & other items (segment) recorded a loss of $1.8 billion as income declined by $1.3 billion mostly reflecting the losses from structural and short-term hedges booked within Treasury. Expenses increased by $43 million while there was a net release in credit impairment primarily relating to sovereign-related exposures. Associate income reduced by $65 million reflecting lower profits at Bohai. Asia profits increased 32 per cent as income grew 15 per cent, expenses increased by 8 per cent and credit impairments reduced by $146 million. The income growth reflects strong double-digit increases across Cash Management, Retail Deposits and Wealth Management partly offset by lower Mortgage income and a loss in Treasury Markets. The profit share from Bohai reduced by $65 million. The lower credit impairment charge reflects in part a lower level of impairments booked in the year relating to the China commercial real estate sector. Africa & Middle East (‘AME’) profits increased 90 per cent as income increased 26 per cent with strong growth in Cash Management and Retail Deposits income partly offset by a loss in Treasury Markets following de-risking actions in certain markets. Expenses grew 6 per cent while credit impairment charges were a net release of $91 million, a $210 million reduction, reflecting a non-repeat of the prior year’s sovereign-related impairments and releases relating to historic Corporate provisions. Europe & Americas recorded a loss of $330 million as income reduced by 40 per cent, reflecting the increased cost of hedges within Treasury whilst strong growth in Transaction Banking income was partly offset by lower Financial Markets income. Expenses increased 12 per cent reflecting the impact of inflation and higher investment spend. There was a $59 million reduction in credit impairment releases. Central & other items (region) recorded a loss of $43 million compared to a $597 million loss in the prior year. This improvement is mainly due to higher returns paid to Treasury on the equity provided to the regions in a rising interest rate environment while expenses increased by 8 per cent. 38 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Financial Officer’s reviewAdjusted net interest income and margin Adjusted net interest income2 Average interest-earning assets Average interest-bearing liabilities Gross yield (%)3 Rate paid (%)3 Net yield (%)3 Net interest margin (%)3,4 2023 $million 9,547 572,520 540,350 4.76 3.27 1.49 1.67 2022 $million 7,976 565,370 525,351 2.70 1.38 1.32 1.41 Change¹ % 20 1 3 206 189 17 26 1 Variance is better/(worse) other than assets and liabilities which is increase/(decrease) 2 Adjusted net interest income is reported net interest income less financial markets trading book funding costs and financial guarantee fees on interest- earning assets 3 Change is the basis points (bps) difference between the two periods rather than the percentage change 4 Adjusted net interest income divided by average interest-earning assets, annualised Adjusted net interest income increased 20 per cent driven by an 18 per cent increase in the net interest margin, which averaged 167 basis points in the year, 26 basis points year-on-year uplift benefiting from a rapid increase in policy interest rates across many of our markets slightly offset by an adverse change in asset mix. The net interest margin was also depressed by loss making hedges within Treasury and an accounting asymmetry from Treasury’s business as usual management of FX positions within its portfolio. • Average interest-earning assets grew 1 per cent, or 2 per cent excluding the impact of currency translation and risk-weighted asset optimisation actions, reflecting an increase in cash and balances at central banks partly offset by lower customer loan balances. Gross yields increased 206 basis points compared with the average in the prior year • Average interest-bearing liabilities increased 3 per cent, or 4 per cent excluding the impact of currency translation, reflecting an increase in customer accounts while the rate paid on liabilities increased 189 basis points compared with the average in the prior year Credit risk summary Income Statement (Underlying view) Total credit impairment charge/(release)3 Of which stage 1 and 23 Of which stage 33 2023 $million 20222 $million Change1 % 528 138 390 836 407 429 (37) (66) (9) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting period 2 Underlying credit impairment has been restated for the removal of (i) exit markets and businesses in AME and (ii) Aviation Finance. No change to reported credit impairment 3 Reconciliation from underlying to reported can be found on page 46 39 Standard Chartered – Annual Report 2023Strategic reportBalance sheet Gross loans and advances to customers2 Of which stage 1 Of which stage 2 Of which stage 3 Expected credit loss provisions Of which stage 1 Of which stage 2 Of which stage 3 Net loans and advances to customers Of which stage 1 Of which stage 2 Of which stage 3 Cover ratio of stage 3 before/after collateral (%)3 Credit grade 12 accounts ($million) Early alerts ($million) Investment grade corporate exposures (%)3 2023 $million 292,145 273,692 11,225 7,228 (5,170) (430) (420) (4,320) 286,975 273,262 10,805 2,908 2022 $million 316,107 295,219 13,043 7,845 (5,460) (559) (444) (4,457) 310,647 294,660 12,599 3,388 Change1 % (8) (7) (14) (8) (5) (23) (5) (3) (8) (7) (14) (14) 60 / 76 57 / 76 3 / 0 2,155 5,512 73 1,574 4,967 76 37 11 (3) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting period 2 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $13,996 million at 31 December 2023, $10,267 million at 30 September 2023, $10,950 million at 30 June 2023 and $24,498 million at 31 December 2022 3 Change is the percentage points difference between the two points rather than the percentage change Credit quality remained resilient, reflected in lower year-on- year credit impairment charges and an improvement in a number of underlying credit metrics. The Group continues to actively manage the credit portfolio whilst remaining alert to a volatile and challenging external environment including increased geopolitical tensions which has led to idiosyncratic stress in a select number of markets and industry sectors. Credit impairment was a $528 million charge, down 37 per cent year-on-year, representing a loan loss rate of 17 basis points. There was a $282 million impairment charge relating to the China commercial real estate sector, including a $32 million decrease in the management overlay which now totals $141 million. The decrease in the management overlay reflects repayments and loans moving into stage 3. The Group has provided $1.2 billion in total, in relation to China commercial real estate sector primarily over the last three years. There was a net release of $45 million relating to sovereign downgrades. Excluding the China commercial real estate portfolio and sovereign-related exposures, there was a net release relating to Corporate exposures, primarily historical provisions. CPBB charge of $354 million reflects an uptick in delinquency trends across the year and the $85 million charge in Ventures is primarily from portfolio growth and increased bankruptcy related write-offs in Mox where credit criteria have now been adjusted to reduce the current elevated delinquency rate. Gross stage 3 loans and advances to customers of $7.2 billion were 8 per cent lower year-on-year as repayments, client upgrades and write-offs more than offset new inflows. Credit-impaired loans represented 2.5 per cent of gross loans and advances, flat on the prior year. The stage 3 cover ratio before collateral of 60 per cent increased by 3 percentage points, while the cover ratio post collateral at 76 per cent was flat on the prior year, with the cover ratio before collateral increasing due to an increase in stage 3 provisions in relation to the China commercial real estate sector and a reduction in gross stage 3 balances. Credit grade 12 balances have increased by 37 per cent to $2.2 billion substantially from a change in instrument on an existing sovereign exposure with no increase in risk. Excluding this temporary inflow, credit grade 12 balances declined 24 per cent reflecting both improvements into stronger credit grades and downgrades to stage 3. Early Alert accounts of $5.5 billion have increased by 11 per cent, reflecting new inflows relating to a select number of clients including sovereign-related exposures. The Group is continuing to carefully monitor its exposures in vulnerable sectors and select markets, given the unusual stresses caused by the currently challenging macro-economic environment. The proportion of investment grade corporate exposures fell by 3 percentage points to 73 per cent, mainly due to a reduction in repurchase agreement balances across various central clearing counterparties. 40 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Financial Officer’s reviewRestructuring, goodwill impairment and other items 2023 Goodwill and other impairment2 $million DVA $million Restructuring $million Operating income Operating expenses Credit impairment Other impairment Profit from associates and joint ventures Total 362 (415) 20 (28) 47 (14) – – – (850) – (850) 17 – – – – 17 20221 Goodwill and other impairment2 $million Restructuring $million 494 (504) – (78) (11) (99) – – – (322) – (322) Other items3 $million 262 – – – – 262 DVA $million 42 Other items $million 20 – – – – 42 – – – – 20 1. Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2. Goodwill and other impairment include $850 million (2022: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (‘Bohai’) 3. Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans The Group’s reported 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 significant or material in the context of the Group’s normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing underlying performance period-by period. In 2022 the Group announced the exit of seven markets in the AME region and will focus solely on the CCIB segment in two more markets. In 2023, the Group completed the sale of its Jordan business, closed its Lebanon representative office and signed agreements for sale of the remaining exit markets. Additionally, the Group sold its global Aviation Finance leasing business to Aircraft Leasing Company (‘AviLease’) for proceeds of approximately $3.6 billion including $0.7 billion consideration and $2.9 billion repayment of net-intra-group financing, giving rise to a gain on disposal of $309 million. The $1 billion Aviation loan businesses was sold separately, giving rise to a loss on disposal of $47 million. Both of these transactions are recorded in Other items. As a result of these disposals, effective 1 January 2023, the Group has not included the exit markets and the Aviation Finance business within the Group’s underlying operating profit before taxation but reported them within restructuring. The Group has also classified movements in the debit valuation adjustment (‘DVA’) out of its underlying operating profit before taxation and into Other items. To aid comparisons with prior periods the Group has removed the exit markets, Aviation Finance business and DVA from its underlying operating profit before taxation for 2022. Restructuring loss of $14 million reflects the impact of actions to transform the organisation to improve productivity, primarily additional redundancy charges, technology simplification and optimising the Group’s property footprint. This was partly offset by the profits from the AME exit markets and Aviation Finance business before the completion of their exit from the Group. Other impairment of $850 million is in relation to a further reduction in the carrying value of the Group’s investment in its associate Bohai, to align to a lower value-in-use computation following banking industry challenges and property market uncertainties in Mainland China, that may impact Bohai’s future profitability. The carrying value of the Group’s investment in Bohai has reduced to $0.7 billion from $1.5 billion. Movements in DVA were a positive $17 million driven by the widening of the Group’s asset swap spreads on derivative liability exposures. The portfolio subject to DVA did not change materially during the year. 41 Standard Chartered – Annual Report 2023Strategic reportBalance sheet and liquidity Assets Loans and advances to banks Loans and advances to customers Other assets Total assets Liabilities Deposits by banks Customer accounts Other liabilities Total liabilities Equity Total equity and liabilities Advances-to-deposits ratio (%)² Liquidity coverage ratio (%) 2023 $million 2022 $million Increase/ (Decrease)1 $million Increase/ (Decrease)1 % 44,977 286,975 490,892 822,844 28,030 469,418 275,043 772,491 50,353 822,844 53.3% 145% 39,519 310,647 469,756 819,922 28,789 461,677 279,440 769,906 50,016 819,922 57.4% 147% 5,458 (23,672) 21,136 2,922 (759) 7,741 (4,397) 2,585 337 2,922 14 (8) 4 – (3) 2 (2) – 1 – 1 Variance is increase/(decrease)comparing current reporting period to prior reporting periods 2 The Group now excludes $20,710 million held with central banks (30.09.23: $21,241 million, 30.06.23: $24,749 million, 31.12.22: $20,798 million) that has been confirmed as repayable at the point of stress. The Group’s balance sheet remains strong, liquid and well diversified. • Loans and advances to customers decreased 8 per cent, or $24 billion to $287 billion as at 31 December 2023 but declined 1 per cent on an underlying basis. The underlying reduction excludes the impact of $12 billion decrease in Treasury and securities backed loans held to collect, $7 billion reduction from risk-weighted asset optimisation actions undertaken by CCIB and a $1 billion reduction from currency translation • Customer accounts increased $8 billion to $469 billion and up 2 per cent excluding the $2 billion impact of currency translation. Retail Time Deposits increased $18 billion and Cash Management balances increased $11 billion partly offset by a $18 billion decrease in Corporate Term Deposits • Other assets increased 4 per cent, or $21 billion from 31 December 2022 with a $41 billion increase in financial assets held at fair value through profit or loss, primarily Risk-weighted assets By risk type Credit risk Operational risk Market risk Total RWAs reverse repurchase agreements and debt securities and other eligible bills. Cash and balances at central banks increased $12 billion. This was partly offset by a $13 billion reduction in derivative balances and a $8 billion reduction in investment securities fair valued through other comprehensive income • Other liabilities decreased 2 per cent, or $4 billion from 31 December 2022 with a $14 billion decrease in derivative balances partly offset by a $10 billion increase in repurchase agreements The advances-to-deposits ratio decreased to 53.3 per cent from 57.4 per cent at 31 December 2022 reflecting the reduction in loans and advances to customers. The liquidity coverage ratio decreased 2 percentage points to 145 per cent as at 31 December 2023 after increasing in the first half of the year as the banking industry as a whole navigated turbulent external market conditions and remains well above the minimum regulatory requirement of 100 per cent. 2023 $million 2022 $million Change1 $million Change1 % 191,423 27,861 24,867 244,151 196,855 27,177 20,679 244,711 (5,432) 684 4,188 (560) (3) 3 20 – 1 Variance is increase/(decrease) comparing current reporting period to prior reporting periods Total risk-weighted assets (‘RWA’) of $244.2 billion were broadly flat in comparison to 31 December 2022. • Credit risk RWA decreased by $5.4 billion to $191.4 billion. There was a $10.3 billion reduction from optimisation actions, relating to the CCIB low-returning portfolio, a $2.1 billion reduction from other RWA efficiency actions, $2.7 billion reduction from currency translation, and a $1.1 billion reduction from model and methodology changes. The impairment of Bohai further reduced RWAs by $2.1 billion and the sale of the Aviation Finance business by a further $1.6 billion. This was partly offset by a $11.8 billion increase from asset mix and $2.7 billion increase relating to adverse credit migration • Operational risk RWA increased $0.7 billion primarily due to an increase in average income as measured over a rolling three-year time horizon, with higher 2022 income replacing lower 2019 income • Market risk RWA increased by $4.2 billion to $24.9 billion reflecting an increase in traded risk positions and market volatility 42 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Financial Officer’s reviewCapital base and ratios CET1 capital Additional Tier 1 capital (AT1) Tier 1 capital Tier 2 capital Total capital CET1 capital ratio end point (%)2 Total capital ratio transitional (%)2 Leverage ratio (%)2 2023 $million 34,314 5,492 39,806 11,935 51,741 14.1 21.2 4.7 2022 $million 34,157 6,484 40,641 12,510 53,151 14.0 21.7 4.8 Change1 $million Change1 % – (15) (2) (5) (3) 157 (992) (835) (575) (1,410) 0.1 (0.5) (0.1) 1 Variance is increase/(decrease) comparing current reporting period to prior reporting periods 2 Change is percentage points difference between two points rather than percentage change The Group’s CET1 ratio of 14.1 per cent was 10 basis points higher than the ratio as at 31 December 2022. The Group was able to fund $2.7 billion of capital returns to ordinary shareholders from underlying profits. The CET1 ratio remains 3.5 percentage points above the Group’s latest regulatory minimum of 10.5 per cent and above the top of the 13-14 per cent target range. As well as the 169 basis points of CET1 accretion from underlying profits, the Group’s CET1 ratio decreased 34 basis points from a net $5.9 billion increase in risk-weighted assets as the Group exercised tight control over capital consumption. A further 22 basis points uplift was the result of an increase in Other Comprehensive Income from fair value gains on debt instruments as long-term interest rates began to fall in the latter half of the year. The sale of the Group’s Aviation Finance business increased the CET1 ratio by 20 basis points. Ordinary shareholder distributions reduced the CET1 ratio by approximately 111 basis points. The Group spent $2 billion purchasing 230 million ordinary shares of $0.50 each during the year, representing a volume-weighted average price per share of £7.06. These shares were subsequently cancelled, reducing the total issued share capital by 7.9 per cent and the CET1 ratio by 82 basis points. The Board has recommended a final dividend of 21 cents per share resulting in a total 2023 ordinary dividend of 27 cents per share or $728 million, reducing the CET1 ratio by approximately 30 basis points. Payments due to AT1 and preference shareholders cost approximately 17 basis points. The Board has announced a share buyback for up to a maximum consideration of $1 billion to further reduce the number of ordinary shares in issue by cancelling the repurchased shares. The terms of the buyback will be published, and the programme will start shortly and is expected to reduce the Group’s CET1 ratio in the first quarter of 2024 by approximately 40 basis points. The $850 million impairment of Bohai also resulted in a RWA reduction of $2.1 billion, the net effect of which resulted in a reduction of the CET1 ratio by 23 basis points. The Group’s leverage ratio of 4.7 per cent is 6 basis points lower than at 31 December 2022. This is primarily driven by a decrease in Tier 1 capital of $0.8 billion as CET1 capital increased by $0.2 billion and was more than offset by the redemption of $1.0 billion Additional Tier 1 securities. The reduction in Tier 1 capital was broadly offset by a $7.2 billion reduction in leverage exposures. The Group’s leverage ratio remains significantly above its minimum requirement of 3.7 per cent. Outlook We have updated our guidance for 2024 and have provided additional guidance for 2025 and 2026 as follows: • Income: – Operating income to increase 5-7 per cent for 2024 to 2026 and around the top of 5-7 per cent range in 2024 – Net interest income for 2024 of $10 billion to $10.25 billion, at constant currency • Expenses: – Operating expenses to be below $12 billion in 2026, at constant currency – Expense saves of around $1.5 billion and cost to achieve of no more than $1.5 billion from 2024 to 2026 – Positive income-to-cost jaws, excluding UK bank levy, at constant currency in each year from 2024 to 2026 • Assets and RWA: – Low single-digit percentage growth in loans and advances to customers and RWA each year from 2024 to 2026 (pre-Basel 3.1 day-1 impact) – Basel 3.1 day-1 impact, pending clarification of rules, expected to add no more than 5 per cent incremental RWA • Continue to expect the loan loss rate to normalise towards the historical through-the-cycle 30 to 35 basis points range • Capital: – Continue to operate dynamically within the full 13-14 per cent CET1 target range – Plan to return at least $5 billion to shareholders cumulative 2024 to 2026 – Continue to increase full-year dividend per share over time • RoTE increasing steadily from 10%, targeting 12% in 2026 and to progress thereafter Diego De Giorgi Group Chief Financial Officer 23 February 2024 43 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Risk Officer’s review ªProactively managing our risks whilst keeping our focus on the execution of the Group’s strategyº 44 Managing Risk 2023 presented challenges across many of our markets, with sustained high inflation levels from 2022 continuing to put pressure on the central banks to dampen rising prices through increases to interest rates. Increased levels of volatility were seen in early 2023 as several bank failures prompted fears of a global contagion. Despite having no material exposures to the failed banks, the Group took proactive steps to further strengthen our liquidity position and monitor for any signs of second order impacts. 2023 also saw a fundamental shift in global power dynamics, including with the BRICS expansion. Sovereign risks persisted across emerging markets in the Africa and Middle East region. In Asia, despite slower than expected economic growth in China, we saw positive signs of growth in the second half of the year. We continued to keep our focus on the challenges in the China real estate sector and any contagion risks. The Group has limited direct exposure in Ukraine and to the countries in the Middle East which are currently most impacted by conflict. However, we remained cognisant of the volatility and the potential second order market impacts, including those from elevated oil and commodity prices or supply chains disruption, which we continue to actively monitor through stress testing and portfolio reviews. As we enter 2024, we stay vigilant and continue to review our exposure and limits across our portfolios to identify vulnerable industries and clients for closer monitoring. Corporate, Commercial and Institutional Banking (CCIB) Our CCIB credit portfolio remained resilient with overall good asset quality, as evidenced by our largely investment grade corporate portfolio (31 December 2023: 73 per cent, 31 December 2022: 76 per cent). We actively tracked geopolitical risks to enable us to act should the need materialise. In consideration of the macroeconomic challenges, additional reviews were conducted throughout 2023 across US regional Banks, Non-Bank Financial Institutions (NBFI), Leveraged Lending books, Global Commercial Real Estate (CRE) portfolio and select geographies. We closely monitored vulnerable sectors and identified clients that may face difficulties on account of increased interest rates, foreign exchange movements, commodity volatility or increased prices of essential goods. In China, the property market recovery remained slower than expected amidst government support measures and we continued to monitor our developers and sponsors portfolios through dedicated reviews. Standard Chartered – Annual Report 2023Strategic reportGroup Chief Risk Officer’s reviewThe Risk function remains actively engaged in providing independent review and challenge to internal and regulatory stress tests and recovery and resolution capabilities. Further details on Risk Management for our Principal Risk Types can be found in page 314 Further details on Climate Risk can be found in page 298 Risk Performance Summary Asset quality is resilient. The percentage of investment- grade corporate net exposure remained high at 73 per cent (31 December 2022: 76 per cent). Exposure to our top 20 corporate clients as a percentage of Tier 1 capital decreased to 62 per cent (31 December 2022: 65 per cent), mainly driven by reduction in Transaction Banking exposures. However, the Group remained vigilant of persistent challenging conditions in some markets and sectors. In 2023, we saw a $0.5 billion increase in Early Alerts exposure (31 December 2023: $5.5 billion, 31 December 2022: $5.0 billion), driven by inflows relating to a select number of clients including sovereign- related exposures, partially offset by transfers to Purely Precautionary, regularisations, exposure reductions and outflows to Credit grades 12-14. Credit grade 12 balances increased to $2.2 billion (31 December 2022: $1.6 billion) due to sovereign and client downgrades, partially offset by outflows to non-performing loans. Consumer, Private and Business Banking (CPBB) The CPBB credit portfolio remained alert to the risks of the uncertain economic outlook but continued to demonstrate resilience. An increase in delinquency rates (Stage 2 provisions as at 31 December 2023: $139 million, 31 December 2022: $118 million) highlights the emerging pressure on customers’ debt servicing capacity, as our customers continue to adapt to the prolonged higher interest rate environment. We continued to monitor potential secondary impacts of local challenges arising from heightened country risks across Bangladesh, Ghana, Kenya, Nigeria, Pakistan, and Sri Lanka, amongst others. There was no material impact on the CPBB portfolio due to the war in Ukraine and the conflict in the Middle East. For both our secured and unsecured consumer credit portfolios, we continued to monitor customer affordability across our key markets and dynamically adjusted origination criteria, portfolio management and collections strategies, as appropriate. We were mindful of the higher credit risk associated with increased lending to the mass market segment through our digital partnerships and digital banks and have tailored our lending criteria and portfolio management approach to the unique risks and customer behaviours observed in these segments. Treasury Risk Our liquidity and capital risks are managed to ensure a strong and resilient balance sheet that supports sustainable growth. We continued to enhance our Treasury Risk framework to incorporate the lessons from recent market events as well as horizon risks. Liquidity remained resilient across the Group and major legal entities. Group liquidity coverage ratio (LCR) is 145.4 per cent as at December 2023 (31 December 2022: 147 per cent) with a surplus to both Risk Appetite and regulatory requirements. Common Equity Tier 1 (CET1) ratio was 14.1 per cent as at December 2023 (31 December 2022: 14.0 per cent) while Leverage ratio was 4.7 per cent (31 December 2022: 4.8 per cent). In March 2023, we saw sharp moves in funding markets and customer behaviours triggering several bank failures in the US and Switzerland. This resulted in a heightened focus on Treasury risks including capital, liquidity, and interest rate risk on the banking book, with problems most acute in the US market and reverberating globally. We maintained a resilient liquidity position throughout the period and continued to focus on managing risks even as those event risks receded. 45 Standard Chartered – Annual Report 2023Strategic reportKey indicators Group total business1 Stage 1 loans ($ billion) Stage 2 loans ($ billion) Stage 3 loans, credit-impaired ($ billion) Stage 3 cover ratio Stage 3 cover ratio (including collateral) Corporate, Commercial & Institutional Banking Investment grade corporate net exposures as a percentage of total corporate net exposures Loans and advances maturing in one year or less as a percentage of total loans and advances to customers3 Early Alert portfolio net exposures ($ billion) Credit grade 12 balances ($ billion) Aggregate top 20 corporate net exposures as a percentage of Tier 1 capital2 Collateralisation of sub-investment grade net exposures maturing in more than one year Consumer, Private & Business Banking 2023 292.1 273.7 11.2 7.2 60% 76% 73% 68% 5.5 2.2 62% 41% 2022 316.1 295.2 13.0 7.9 57% 76% 76% 68% 5.0 1.6 65% 53% Loan-to-value ratio of Consumer, Private & Business Banking mortgages 47.2% 44.7% 1 These numbers represent total gross loans and advances to customers 2 Excludes reverse repurchase agreements 3 The 2022 figure has been restated from 65 per cent to 68 per cent The Group’s credit impairment was a net charge of $508 million (31 December 2022: $836 million), a decrease of $328 million. 2022 included overlays for sovereign downgrades and China commercial real estate, which was partly offset by a full release of COVID-19 overlays. Stage 3 was a charge of $369 million (31 December 2022: $430 million), and the reduction was driven by CCIB releases and lower impairment charges for our China commercial real estate clients. This reduction was offset by higher bankruptcy related write-offs in CPBB across Singapore, Hong Kong and Korea, and portfolio growth in digital partners. Credit impairment Ongoing business portfolio Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items Credit impairment charge/(release) Restructuring business portfolio Others Credit impairment charge/(release) Total credit impairment charge/(release) 2023 20221 Stage 1 & 2 $million Stage 3 $million Total $million Stage 1 & 2 $million Stage 3 $million Total $million 11 129 42 (44) 138 - 1 1 139 112 225 43 10 390 - (21) (21) 369 123 354 85 (34) 528 - (20) (20) 508 148 151 13 95 407 - (1) (1) 406 277 111 3 38 429 - 1 1 425 262 16 133 836 - - - 430 836 1 Underlying credit impairment has been restated for the removal of (i) exit markets and businesses in AME and (ii) Aviation Finance. No change in reported credit impairment Further details of the risk performance for 2023 are set out in the full Risk review section (pages 232 to 343). 46 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Risk Officer’s reviewAn update on our risk management approach Our Enterprise Risk Management Framework (ERMF) outlines how we manage risk across the Group, as well as at branch and subsidiary level1. It gives us the structure to manage existing risks effectively in line with our Group Risk Appetite, as well as allowing for holistic risk identification. The ERMF also sets out the roles and responsibilities and the minimum governance requirements for the management of Principal Risks. In revisions made in the ERMF in 2023, effective 1 January 2024, the concepts of Integrated Risk Types (IRTs) and IRT Owner roles were discontinued. Oversight on existing IRTs, i.e. Climate Risk, Digital Asset and Third Party Risk, is achieved through the Risk Type Frameworks (RTFs) and dedicated policies. The subject matter experts, as the policy owners for these risks, provide overall governance and ensure a holistic view of how risks are monitored and managed across the Principal Risk Types (PRTs). Principal Risk Types PRTs are risks inherent in our strategy and business model. These are formally defined in our ERMF, which provides a structure for monitoring and controlling these risks through the Risk Appetite Statement. We will not compromise compliance with our Risk Appetite in order to pursue revenue growth or higher returns. The table below provides an overview of the Group’s PRTs and their corresponding risk appetite statements. Risk Types Credit Risk Traded Risk Treasury Risk Operational and Technology Risk Financial Crime Risk Compliance Risk Risk Appetite Statement The Group manages its credit exposures following the principle of diversification across products, geographies, client segments and industry sectors. The Group should control its financial markets and activities to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. The Group should maintain sufficient capital, liquidity and funding to support its operations, and an interest rate profile ensuring that the reductions in earnings or value from movements in interest rates impacting banking book items does not cause material damage to the Group’s franchise. In addition, the Group should ensure its Pension plans are adequately funded. The Group aims to control operational and technology risks to ensure that operational losses (financial or reputational), including any related to conduct of business matters, do not cause material damage to the Group’s franchise. The Group has no appetite for breaches in laws and regulations related to Financial Crime, recognising that whilst incidents are unwanted, they cannot be entirely avoided. The Group has no appetite for breaches in laws and regulations related to regulatory non- compliance; recognising that whilst incidents are unwanted, they cannot be entirely avoided. Information and Cyber Security Risk The Group aims to mitigate and control ICS risks to ensure that incidents do not cause the Bank material harm, business disruption, financial loss or reputational damage – recognising that whilst incidents are unwanted, they cannot be entirely avoided. Reputational and Sustainability Risk The Group aims to protect the franchise from material damage to its reputation by ensuring Model Risk that any business activity is satisfactorily assessed and managed with the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striving to do no significant environmental and social harm. The Group has no appetite for material adverse implications arising from misuse of models or errors in the development or implementation of models; whilst accepting some model uncertainty. In addition to the PRTs, the Group has defined the following Risk Appetite statement for Climate Risk: “The Group aims to measure and manage financial and non-financial risks arising from climate change, and reduce emissions related to our own activities and those related to the financing of clients in alignment with the Paris Agreement.” 1 The Group’s Enterprise Risk Management Framework and system of internal control applies only to wholly controlled subsidiaries of the Group, and not to Associates, Joint Ventures or Structured Entities of the Group. Further details on our Risk Management Approach can be found on page 314. 47 Standard Chartered – Annual Report 2023Strategic reportTopical and Emerging Risks (TERs) Emerging Risks refer to unpredictable and uncontrollable outcomes from certain events which may have the potential to adversely impact our business. Topical Risks refer to themes that may have emerged but are still evolving rapidly. As part of our continuous risk identification process, we have updated the Group’s TERs from those disclosed in the 2022 Annual Report and 2023 Half-Year Report; these remain applicable, with nuances in their evolution noted where pertinent. Below is a summary of the TERs, and the mitigating actions we are taking based on our current knowledge and assumptions. This reflects the latest internal assessment as performed by senior management. The TER list is not exhaustive and there may be additional risks which could have an adverse effect on the Group. There are some horizon risks that, although not highly likely at present, could evolve into a threat in the future and we are therefore monitoring them. These include future pandemics and the world’s preparedness for them, and other potential cross-border conflicts. Our mitigation approach for these risks may not eliminate them but demonstrates the Group’s awareness and attempt to reduce or manage the risks. As certain risks develop and materialise over time, management will take appropriate steps to mitigate them based on their materiality on the Group. Macroeconomic and geopolitical considerations There is interconnectedness between risks due to the importance of US Dollar financing conditions for global markets, the global or concentrated nature of key supply chains for energy, food, semi-conductors and rare metals, and the direct influence of geopolitics on geoeconomics. The Group is exposed to these risks directly through investments, infrastructure and staff, and also indirectly through its clients. Whilst the main impacts are financial, other ramifications may exist such as reputational, compliance or operational considerations. Expanding array of global tensions and new geopolitical order Global power dynamics have shifted, with different political and economic alliances beginning to create a multipolar power system. This has been accelerated by the war in Ukraine and conflicts in the Middle East. Whilst the Group has limited direct exposure to Russia, Ukraine or Israel, it may be impacted by second order effects on its clients and markets for agricultural commodities, oil or gas. The positioning of ‘middle powers’ is complex and evolving, and could tip the geopolitical scales. The negotiating power of exporters of energy and other natural resources has expanded and can shape global markets, as they can use global divisions to raise their own profile. One such example is the envisaged expansion of BRICS to seek a counterweight to Western power axes. 48 US-China tensions remain, with protectionist measures imposed by both sides. Tariffs, embargos, sanctions, new taxes such as that on carbon, and restrictions on technology exports and investments, are being used to achieve goals beyond just economic. Further economic or political actions could escalate distrust and accelerate the decoupling of trade links, leading to increasingly inefficient production and inflation pressures. Despite attempts to become more pragmatic, a number of potential flashpoints remain. A push by China to increase RMB trade and establish RMB as a secondary global reserve currency presents new business opportunities but also potential disruption to the balance of power. With many elections due across the world in the next twelve months, there is uncertainty over the political direction of domestic and foreign policy. There is a risk of short-term political expediency taking precedence over long-term strategic decision making. The malicious use of AI-enabled disinformation could also cause disruption and undermine trust in the political process. There is an ongoing threat of terrorism, with unpredictability exacerbated by the wider range of ideologies at play. Cyber warfare by state related actors could also be used to disrupt infrastructure or institutions in rival countries. A more complex and less integrated global political and economic landscape has the potential to challenge cross border business models, but also provides new business opportunities. Persistent high inflation and interest rates Although rate cuts have been signalled by the Federal Reserve, global rates could remain elevated for longer. Structurally higher spending and continued supply disruptions increase the probability of inflation remaining sticky. During 2023, the International Monetary Fund (IMF) and World Trade Organisation lowered their initial forecasts for trade growth and increased that of inflation in 2024, suggesting that several economies will walk a fine line between recession and stagflation. Concern for the credit environment spans both commercial and retail lending, with price inflation and the cliff effects of energy, mortgage and debt re-pricing ultimately leading to higher defaults. This is visible in bond markets with yields widening markedly and prone to high volatility. Drives to de-risk supply chains combined with no obvious resolution to ongoing conflicts continue to disrupt supply chains. This complicates efforts to combat inflation as supply constrained markets dent the effectiveness of monetary policy. Standard Chartered – Annual Report 2023Strategic reportGroup Chief Risk Officer’s reviewSome sectors are particularly sensitive to high rates, notably commercial real estate, non-bank financial institutions (NBFI) and leveraged finance due to their reliance on the availability of cheap financing. Bank failures in Q1 2023 highlighted challenges in managing liquidity, credit, refinancing and market risks. They also raised questions of competence and confidence in the finance industry. The growing need for minerals and rare earth metals to power green energy technologies could increase the geopolitical standing of the main refiners, such as China, Indonesia and some African nations. However, there are also environmental and social costs to rapidly increasing extraction. A desire to avoid dependence may slow down the move by some nations towards the transition. How these risks are mitigated/next steps • We remain vigilant in monitoring risk and assessing impacts from geopolitical and macroeconomic risks to portfolio concentrations. • We conduct thematic stress tests and portfolio reviews at the Group, country, and business level, with regular reviews on vulnerable sectors, and undertake any necessary mitigating actions. • We maintain a diversified portfolio across products and geographies, with specific risk appetite metrics to monitor concentrations. • Increased scrutiny is applied when onboarding clients and in ensuring compliance with sanctions. • Collateral and credit insurance are used to manage concentrations. • We track the participation of our footprint countries in the G20’s Common Framework Agreement and Debt Service Suspension Initiative for Debt Treatments and the associated exposure. • Our NBFI exposure is closely monitored in terms of both limits, products and counterparties. Regulatory considerations Changing regulatory environment Given notable bank failures in 2023 (and the response of resolution authorities to those failures), the regulatory framework for banks remains subject to continued change in addition to the implementation of Basel 3.1 in various jurisdictions. Additionally, the differing pace and scale of regulatory adoption between jurisdictions, along with increasing extraterritorial reach and prescriptiveness, can make it challenging for multinational groups to manage their business. Implementation timelines are a focus. The scale of upcoming regulatory change in 2024 and 2025 is significant with major regime changes in capital and operational resilience due to take effect. How these risks are mitigated/next steps • We actively monitor regulatory developments, including those related to sustainable finance and ESG, and respond to consultations either bilaterally or through well-established industry bodies. Economic slowdown in China Whilst China’s exit from COVID restrictions has had an overall positive impact, it has failed to deliver a sustained boost to the global economy as the country contends with strain in several sectors such as real estate. There has also been a change in the corporate operating environment, with reduced clarity on the economic outlook. Given China’s importance to global trade a slowdown would have wider implications across the supply chain, especially for its trading partners, as well as to countries which rely on it for investment, such as those in Africa. However, opportunities arise from the diversification of intra-Asia trade and other global trade routes, and growth acceleration in South Asia, especially India. Sovereign risk Credit fundamentals have been eroding across both emerging and advanced economies due to persistently high interest rates, food and energy prices. Emerging markets will also be affected by weakness in local currencies versus the US Dollar and the resultant cost of refinancing existing debt, or availability of hard currency liquidity. Issues and challenges have already been observed across several of the Group’s footprint markets, including the recent default of Ghana, political instability in Pakistan, high inflation in Turkey, economic turmoil in Sri Lanka, and coups in Africa. For some countries there is a heightened risk of failure to manage social demands, which might culminate in increased political vulnerability. Furthermore, food security exacerbated by the influences of armed conflict and climate change, and energy security challenges have the potential to drive social unrest. Debt moratoria and refinancing initiatives are complicated by larger number of financiers, with much financing done on a bilateral basis outside of the Paris Club. Whilst the Global Sovereign Debt Roundtable has made some progress on coordinating approaches between the Paris Club and other lenders their interests do not always match. This can lead to delays in negotiations on debt resolutions for developing nations. Supply chain issues and material shortages Demand and supply imbalances in global supply chains are increasingly becoming structural in nature and affect a wide range of commodities including food, energy, minerals and raw materials, plus targeted restrictions on certain industry sectors. There is growing political awareness around the need for key component and resource security at national level. Countries are enacting rules to “de-risk” by reducing reliance on rivals or concentrated suppliers (for example semiconductors) and look to either re-industrialise or make use of near-shoring and friend-shoring production. 49 Standard Chartered – Annual Report 2023Strategic reportESG considerations ESG stakeholder expectations Organisations across the corporate and financial sectors are setting ambitious sustainability goals and net zero targets with many embedding them in their business models. This has prompted increased attention from various stakeholders in ensuring that net zero targets are being met with credible action plans. Stakeholder scrutiny around greenwashing risk relating to ESG focused financial products, as well as companies’ commitments, transpires in the various regulatory developments and early enforcement actions taken by several key regulators. Fragmentation in the pace and scale of adoption of ESG regulations around the world remains, particularly around taxonomies and disclosure requirements, which may lead to unintended consequences including misallocation of capital, increased implementation costs and litigation risks. The Group’s net zero aspirations may be impacted by governments or corporates scaling back their sustainability targets, especially as economic conditions remain challenging, and budgets are constrained. There have been examples in developed nations, such as the UK revisiting its electric vehicle transition timeline. A slower transition from key clients may also weigh reputational pressure on the Group’s roadmap. Higher frequencies of extreme weather-related events such as wildfires, floods and famines may lead to physical climate risk and the cost of managing it becoming a heavier burden on global economies. This will be particularly impactful to developing markets. Alongside climate change, biodiversity loss, pollution, and depletion of key resources, such as water, pose incremental risks to food and health systems, energy security and contribute to the disruption of supply chains. Human rights concerns are increasingly in focus, with the scope expanding beyond direct abuses to cover other areas such as technological advancement and supply chains. How these risks are mitigated/next steps • We update our environmental and social standards for providing financial services to clients every two years, with a new version scheduled for 2024. • We focus on embedding our values through our Position Statements for sensitive sectors and a list of prohibited activities • We integrate the management of greenwashing risks into our Reputational and Sustainability Risk Framework and policies • ‘Green’, ‘sustainable’ and ‘transition’ labels for products and transactions reflect the criteria set out in the Group’s Sustainable Finance frameworks, which are regularly reviewed. We obtain external verification on the Group’s Sustainable Finance asset pool. • We assess our clients and suppliers against various international human rights principles, as well as through our social safeguards and supplier charter. Modern slavery statement: https://www.sc.com/modernslavery Human Rights Position Statement: https://www.sc.com/humanrights • Detailed portfolio reviews and stress tests are conducted to test resilience to climate-related risks and enhance modelling capabilities to understand the financial risks and opportunities from climate change. • Work is underway to embed Climate Risk considerations across all relevant PRTs. This includes client-level Climate Risk assessments, including setting adequate mitigants or controls as part of decision making and portfolio management activities. Technological considerations Data and digital The Group’s digital footprint will expand as more services and products are digitised and made more accessible. Scale in operations and interactions with digital systems will further reduce the tolerance for errors and outages. The risk of data breaches is amplified by highly organised actors, with threats such as ‘Ransomware as a Service’ and affordable, sophisticated AI systems helping to facilitate attacks on organisations and individuals. Data regulation continues to be fluid and fragmented. Geopolitical tensions have accelerated the implementation of data sovereignty laws, including data localisation requirements and cross-border access restrictions. These regulations often have an extraterritorial reach which could increase operating costs significantly, and also impact cross-border business models. Stakeholder expectations on data management have also increased, particularly relating to quality, integrity, record keeping, privacy, sovereignty, the ethical use of data and application of AI. The sophistication and adoption of AI solutions are growing exponentially and will increase exposure to existing risks such as model, fraud, financial crime, compliance and Information and Cyber Security (ICS) risks. In response, regulation is accelerating, particularly around the ethical application of AI in decision-making, necessitating robust governance measures. The Group needs to ensure that it develops sufficient in-house subject matter expertise. New business structures, channels and competition Failure to harness new technologies and new business models would place banks at a competitive disadvantage. The continued exploration of partnerships, alliances, digital assets, generative AI and nascent technologies, such as quantum computing, provides both opportunities and unique challenges. This is increasingly important as digital assets and distributed ledger technology become progressively prevalent and interconnected with the financial ecosystem. Supply chains are becoming more complex, interconnected and digital. Highly extended enterprises expand opportunities available for malicious actors, with risk cascading further down supply chains beyond just direct and third party risks. These innovations require specialist in-house expertise, new operating models and adapting risk frameworks to perform robust risk assessment and management of new threats. There is also growing regulatory attention in many of these areas. Balancing resilience and agility is essential given the global nature of new technologies alongside the maintenance of existing systems. It is imperative to establish clear ownership, frameworks, and oversight of the use of emerging technologies. 50 Standard Chartered – Annual Report 2023Strategic reportGroup Chief Risk Officer’s reviewDemographic trends Divergent demographic trends across developed and emerging markets create contrasting challenges. Developed markets’ state budgets could be strained by ageing and shrinking populations, whilst political stances reduce the ability to fill skills gaps through immigration. Conversely emerging markets are experiencing fast-growing, younger workforces. Whilst it is an opportunity to develop talent, population growth will put pressure on key resources such as food, water, education and health, as well as government budgets. Population displacement, whether as a result of climate events, lack of key resources, political issues or war, may increase the fragility of societal structures in vulnerable centres. Large scale movement could cause social unrest, as well as propagate disease transmission and accelerate the spread of future pandemics. How these risks are mitigated/next steps • Our culture and EVP work aims to address the emerging expectations of the diverse talent we seek. The Brand and Culture Dashboard monitors our diversity and inclusion, colleagues’ perceptions of our EVP, and whether we are living our Valued Behaviours. Management teams discuss many of these metrics (including employee survey responses) to identify actions. • We are undertaking a multi-year journey of developing future-skills amongst our colleagues by focusing on continuous learning, to balance appropriately between ‘building’ and ‘inducting’ skills into the Group. • Our internal Talent Marketplace provides colleagues with opportunities to learn through experience by signing up for cross-functional (or even cross-geography) projects. • Employees in 44 markets are on agreed flexible working arrangements. We continue to enhance support and resources to People Leaders and colleagues to help balance productivity, collaboration and wellbeing. • Our Stands continue to be operationalised through our strategy, and help address the talent pool’s increased expectations of us being purpose-led. Sadia Ricke Group Chief Risk Officer 23 February 2024 How these risks are mitigated/next steps • We monitor emerging trends, opportunities and developments in technology as well as emerging business models that may have implications for the banking sector. • We invest in our capabilities, to better prepare and protect ourselves against possible disruption and new risks. • We track the evolving regulatory landscape affecting key areas such as data management, digital assets and AI, including country-specific requirements, and actively collaborate with regulators to support important initiatives. • We have established enhanced governance for novel areas through the Digital Asset Risk Committee and Responsible AI Council, which considers emerging regulatory guidance. • We manage data risks through our Compliance Risk Type Framework and information security risks through our ICS Risk Type Framework. • We have developed a Group Data Strategy, to strengthen ownership of related data risks. • We maintain a dedicated Data Compliance Policy with globally applicable standards. These standards undergo regular review to ensure alignment with evolving regulations and industry best practice. • We maintain programmes to enhance our data risk management capabilities and controls, including compliance with BCBS239 requirements on effective risk data aggregation, with progress tracked at executive level risk governance committees • The Group has implemented a ‘defence-in-depth’ ICS control environment strategy to protect, detect and respond to known and emerging ICS threats. • New risks arising from partnerships, alliances, digital assets and generative technologies are identified through the New Initiatives Risk Assessment and Third Party Risk Management Policy and Standards. Demographic considerations Talent pools of the future The expectations of the workforce, especially skilled workers, continue to evolve. The COVID pandemic accelerated changes on how people work, connect and collaborate, with expectations on hybrid working now a given. The focus is increasingly on ‘what’ work people do and ‘how’ they get to deliver it, which are becoming differentiators in the war for future talents. There is greater desire to seek meaning and personal fulfilment at work that is aligned to individual purpose. These trends are even more distinct among Millennials and Generation Z who make up an increasing proportion of the global talent pool, and as digital natives possess the attributes and skills we seek to pursue our strategy. To sustainably attract, grow and retain talent, we must continue to invest in and further strengthen our Employee Value Proposition (EVP) and our brand promise, here for good, through both firm-wide interventions as well as targeted action. 51 Standard Chartered – Annual Report 2023Strategic reportStrategic report Stakeholders and Sustainability overview 54 Stakeholders 66 Our commitment to sustainability 68 Sustainability Aspirations 70 Sustainability Strategic Pillars 76 Managing Climate Risk [[The Women’s International Network continues to grow]] SC Women’s International Network (SC WIN) went from strength to strength in 2023, launching in Malaysia in June, Kenya in July, Singapore in September, and Hong Kong in October. SC WIN aims to provide female entrepreneurs with tailored financial solutions, business education and opportunities to connect with like- minded entrepreneurs so they can successfully grow their businesses. SC WIN launched in India in 2022 and is set to launch in further markets in 2024. Read more at sc.com/SCWin 52 Standard Chartered – Annual Report 2023 Strategic reportS t r a t e g i c r e p o r t Standard Chartered – Annual Report 2023 53 Stakeholders As an international bank operating in 52 markets, stakeholder engagement is crucial in ensuring we understand local, regional and global perspectives and trends which inform how we do business. Our stakeholders Clients Regulators and governments Investors Suppliers Society Employees 54 This section forms our Section 172 disclosure, describing 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. See the following pages for: • How we engage stakeholders to understand their interests. See pages 55 to 64 • How we engage employees and respond to their interests. See pages 60 to 64 • How we respond to stakeholder interests through sustainable and responsible business. See pages 54 to 64 Detailed information about how the Board engages directly with stakeholders and shareholders can be found in the Director’s report on pages 134 to 229. Examples of a selection of the Board’s principal decisions are included throughout this section. This section also forms our key non-financial disclosures in relation to sections 414CA and 414CB of the Companies Act 2006. Our Non-financial information statement can be found at the end of this section on page 79. Listening and responding to stakeholder priorities and concerns is critical to achieving our Purpose and delivering on our brand promise, here for good. We strive to maintain open and constructive relationships with a wide range of stakeholders including regulators, lawmakers, clients, investors, civil society, and community groups. In 2023, we made improvements to some of our feedback processes, so relationship managers could address client needs as they emerged. Our engagement took many forms, including 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 support us to operate as a responsible and sustainable business. Stakeholder feedback, where appropriate, is communicated internally to senior management through the relevant forums and governing committees such as the Sustainability Forum, and to the Board’s Culture and Sustainability Committee (CSC) which oversees the Group’s approach to its main relationships with stakeholders. We communicate progress regularly with external stakeholders through channels such as sc.com, established social media platforms and this report. More detailed information on material sustainability topics can be found in our Sustainability review on pages 90 to 133. Standard Chartered – Annual Report 2023Strategic reportStakeholdersClients How we create value We want to deliver easy, everyday banking solutions to our clients in a simple and cost-effective way with a great customer experience. We enable individuals to grow and protect their wealth; we help businesses trade, transact, invest and expand; and we help a variety of financial institutions, including banks, public sector and development organisations, with their banking needs. How we serve and engage Our presence in high-growth markets – and ongoing roll out of digital platforms – helps connect our clients to the global engines of trade and innovation. As part of our aim to reach net zero carbon emissions by 2050, our transition finance team have been working closely with our clients in hard-to- abate sectors on their own transitions. This is in addition to our plan to mobilise $300 billion of Sustainable Finance between 2021 and 2030. Across the bank, we have processes and controls to mitigate greenwashing risks, and to support transparency we publish the details of what constitutes our sustainable products and investments universe externally. We work closely with third-party Environmental, Social and Governance (ESG) data providers to support the development of product ideas, and due diligence is conducted by our in-house team on our high conviction suite of sustainable funds. Our push for a best-in-class client experience is underpinned by innovative products and digital straight-through services. This includes building capability to protect our clients against evolving risks in the ecosystem, like fraud and cyber security, and comes with education and increased client communication. To act in the best interests of our clients, we use our insights gathered from our data alongside robust policies, procedures and the Group’s risk appetite to design and offer products and services that meet client needs, regulatory requirements and Group performance targets, while contributing to a sustainable and resilient environment. 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, agreed interest rates, fees and other charges as billed to clients are monitored and assessed locally, with global oversight. Triggers for outlier fees and charges are defined and subject to annual review. Complaints are reviewed on an ongoing basis and are one of the factors that are taken into account prior to amendments to annual interest, fees and charges. We also assess our product portfolio for new risks to ensure they remain appropriate for client needs and aligned to emerging regulation. These quantitative and qualitative assessments, including Periodic Product Reviews, are intended to provide a complete view of whether to continue, enhance, grow or retire products. Training is provided to frontline staff across our branches, contact centres and digital channels to identify and support vulnerable clients, and we have also implemented an educational training programme for those clients who require assistance in navigating online and mobile channels. Throughout 2023, we maintained our sharp focus on improving the client experience across the Bank. We engaged with clients to show them the opportunities trade corridors could bring and how using our network could help them flourish. Consumer, Private & Business Banking In Consumer, Private & Business Banking (CPBB), 2023 saw significant enhancements in digital wealth with the delivery of around 20 new capabilities across our markets. This includes client DIY Wealth Lending for Funds in Hong Kong and the UAE and MyInsure in India where relationship managers can leverage a digital tool to perform comprehensive insurance needs analysis and portfolio reviews for clients. Our focus on partnerships continues to show results with the growth of our existing partnerships business in China, Vietnam, Indonesia, and Singapore, and we have expanded the partnership business to Malaysia. In 2023, the Bank launched partnerships with Ctrip in China, SeaMoney in Indonesia, and Atome in Singapore and Malaysia. These new and existing partnerships have incrementally added 2.6 million active clients, growth to 1.7 billion in balances, and a total of 7.5 billion of new disbursements with impressive revenue growth in 2023. Additionally, we made significant progress in our advisory business with the launch of SC Wealth Select in 14 markets. SC Wealth Select aims to bring a portfolio approach to client conversations and is supported by our digital advisory tool MyWealth Advisor. Across CPBB, 8,000 colleagues have completed the SC Wealth Select e-learning training and 930 frontline colleagues have completed or are undertaking the Standard Chartered INSEAD Wealth Academy Advisory programme. Importantly, we leverage our cross-border scale by using the same technology and open architecture product platform in different markets to offer competitive products and solutions globally. Examples of this include our series of Signature CIO Funds which is now available in 12 markets, with more to come in 2024, and Wealth Saver, an innovative savings product, now available in three markets. 55 Strategic reportStandard Chartered – Annual Report 2023Using artificial intelligence (AI) to serve CCIB clients In 2023, we deployed artificial intelligence (AI) and other cutting-edge technology to improve how we serve our Corporate, Commercial and Institutional Banking clients. This included: • client and frontline analytics that gave insights for better working capital decisions, FX hedging, more efficient liquidity deployment and cross-selling recommendations • data science in the use of in-house proprietary ESG models • the use of a cloud-based machine learning platform to automate manual processes and improve efficiency. We continued our work with open banking APIs to support sector solutions for fintechs, shipping, retail, insurance and healthcare. Their interests • Differentiated product and service offering • Digitally enabled and positive experience • Sustainable finance • Access to international markets. Stakeholders continued Clients continued Corporate, Commercial & Institutional Banking In 2023, Corporate, Commercial & Institutional Banking (CCIB) strengthened its annual feedback process by capturing how clients feel about what we offer – including advice, customer service and digital channels. CCIB also focused on building a consistent digital experience and accelerated delivery through Cash, Trade, Financial Markets and Data Solutions. Refining our processes through continuous improvement has enabled us to achieve benefits in revenue and cost savings by creating capacity and reducing client waiting times. We are transforming our bank-wide processes by taking a client- focused, data-driven digital bank approach that will enable us to serve the needs of our clients better and faster, and reduce the amount of friction and complexity in our network. We have set in place processes and guidelines specific to our client businesses for us to better understand and promptly address issues. We implemented self-serve digital tools and capabilities such as chatbot, our mobile banking app, application programming interface (API) connectivity and data analytics. These have reduced operational costs and enhanced the overall client experience. Agile ways of working accelerated our decision-making processes and change delivery to create great experiences and make it easier for our clients to bank with us. We continue to engage in partnerships that help us offer enhanced services to customers. Collaborations with Linklogis and Taulia, which is part of SAP, aid clients with supply chain financing through blockchain and dynamic discounting. Our work with the Partior platform allows us to deliver the speed, efficiency and visibility of domestic settlement systems to cross-border payments and settlements networks to absolve significant wholesale cross border payment frictions and deliver instant, 24/7 settlement of digital assets on the blockchain. Our work with digital trade transaction portal Trade Track-It integrates DHL’s tracking system and Lloyd’s List Intelligence vessel tracking system through API, to offer clients end-to-end visibility of their trade transaction status globally. Across both CCIB and CPBB, throughout 2024, we will continue to listen and respond to stakeholder priorities and concerns, addressing feedback as it emerges, strengthen our digital transformation and innovation capabilities, and support our clients as they transition to net zero. 56 Standard Chartered – Annual Report 2023Strategic reportStakeholdersRegulators and governments Investors How we create value We engage with public authorities to play our part in supporting the effective functioning of the financial system and the broader economy. How we create value We aim to deliver robust returns and long-term sustainable value for our investors. How we serve and engage We actively engage with governments, regulators and policymakers at a global, regional and national level to share insights and support the development of best practice, and adoption of consistent approaches, across our markets. In 2023, we engaged with regulators, government officials and trade associations on a broad range of topics that included international trade, sustainability, data, cyber security, digital adoption, and innovation. We also engaged with officials on the financial services regulatory environment, in particular on prudential, financial markets, conduct and financial crime frameworks. Our Group Public and Regulatory Affairs team supports most engagements while Conduct, Financial Crime & Compliance, Risk, Legal and Finance identify and analyse relevant policies, legislation and regulation. This work is overseen by various governance forums within the Bank, which comprise senior executives representing business and control functions to support alignment between advocacy and business strategies. For more details on our engagement with regulators and governments, as well as our industry and membership associations please see sc.com/politicalengagement Their interests • Strong capital base and liquidity position appropriate to a global systemically important bank (G-SIB) • Robust standards for conduct and financial crime • Healthy economies, trade flows and competitive markets • Sustainable Finance and net zero transition • Digital innovation in financial services • Operational resilience • Customer protection • Financial stability How we serve and engage We rely on capital from debt and equity investors to execute our business model. Whether they have short- or long-term investment horizons, we provide our investors with information about progress against our strategic and financial frameworks. Through our footprint and the execution of our sustainability agenda, we provide our investors with exposure to opportunities in emerging markets. We believe that our integrated approach to ESG issues, as well as a strong risk and compliance culture, are key differentiators. The Group delivered a strong set of results in 2023 and achieved its financial objective of a double-digit return on tangible equity (RoTE) for the year. We set out five actions in 2022 designed to accelerate delivery of this RoTE target. The strong execution of these actions over the last two years, where we either achieved our targets ahead of plan or they are well on-track, supported us to reach that milestone in 2023. We will now build on this success, taking action to deliver sustainably higher returns with a focus on driving income growth and improving operational leverage, to deliver a RoTE of 12 per cent in 2026 Regular and transparent engagement with our investors, and the wider market, helps us understand investors’ needs and tailor our public information accordingly. In addition to direct engagement from our Investor Relations team, we communicate through quarterly, half-year and full-year results, conferences, roadshows, investor days and media releases. We continued to expand our use of virtual meetings during the year 2023, coupled with a growing number of face-to-face interactions. We hosted two capital market days, focusing on our Asia region and the Sustainability opportunity in May and November respectively. Key investor feedback, recommendations and requests are considered by the Board, whose members keep abreast of current topics of interest. Standard Chartered PLC’s Annual General Meeting (AGM) in May was open to shareholders to attend either in person or electronically where they were provided a platform to view a live video feed of the meeting. All participants were provided with the opportunity to submit their votes and ask the Board questions. Similarly, the Group Chairman, alongside some members of the Board, hosted a hybrid stewardship event for institutional investors in November which provided a platform for shareholders to receive an update on a number of topics, including sustainability, net zero and governance matters. The event included an open question-and-answer session across a range of key issues. 57 Strategic reportStandard Chartered – Annual Report 2023Stakeholders continued Investors continued Suppliers We continue to respond to growing interest from a wide range of stakeholders on ESG matters, including investors. We sought shareholder endorsement for our net zero pathway at the 2022 AGM, intended as a means by which we will measure progress, engage and gather views. We also work with sustainability analysts and participate in sustainability indices that benchmark our performance, including the Carbon Disclosure Project (CDP) Climate Change survey and Workforce Disclosure Initiative. Regular engagement with different shareholder groups ensures that we act fairly between them. Our principal engagement event with our retail shareholders is our AGM and in order to hear from as wide a group as possible we encourage maximum participation by way of attendance in person and via a live web portal. Further details of our 2023 AGM are on page 159. In 2024, we will continue to engage with investors on progress against our strategic priorities and actions, as well as our financial framework as we progress towards delivering sustainably higher returns. Their interests • Safe, strong and sustainable financial performance • Facilitation of sustainable finance to meet the United Nations (UN) Sustainable Development Goals • Progress on ESG matters, including advancing our net zero agenda How we create value We are dedicated to engaging with suppliers who offer value-adding goods and services across our network, and we work closely with them to support global environmental and social standards. Our suppliers are expected to be ethical, respect human rights, diversity and inclusion, and the environment to support our colleagues, clients, and communities. How we serve and engage We must effectively manage, monitor, and mitigate risks in our supply chain. We do this through our Third-Party Risk Management Policy. This, in conjunction with the Principal Risk Type Policies and Standards, set out the Group’s minimum control requirements for the identification, mitigation and management of risks arising from the use of suppliers. Our Supplier Charter sets out our principles in relation to ethics, human rights, diversity and inclusion, and environmental performance. All newly onboarded suppliers are expected to agree with these principles. We seek to reinforce this through the terms of our standard contract templates, where possible, and we further encourage alignment by sending an annual letter to all active suppliers. This includes guidance regarding our stance on ethics and conduct, sustainability aspirations, payment processes and other relevant principles such as Anti-Bribery and Corruption. Our Charter covers all geographies and categories of suppliers, and we plan to refresh the Charter in 2024. Supporting our suppliers to achieve net zero Our supply chain is critical to achieving the Group’s sustainability aspirations, and we continue to make good progress. We encourage our suppliers to set science-based emissions reduction targets and by 2028 we plan to direct 70 per cent of our total expenditure to suppliers who have set or committed to setting science-based emission reduction targets. In 2023, we held group sessions with our suppliers to support them reduce their emissions, discuss progress and next steps. Supporting a diverse and inclusive supply chain We recognise the value of supply chain diversity to our business and society. In 2023, we continued to integrate supplier diversity into our business strategy and make efforts to include diverse suppliers in sourcing activities and improve spending levels with diverse suppliers as appropriate. To do this we have continued to collaborate with non-governmental organisations (NGOs), business incubators and others to help build and develop our diverse and talented supplier pool. In 2023, this included joining member-buyer events, local procurement networking activities and best practice sharing events with partners like WEConnect International – a global network supporting women-owned businesses to connect with larger companies. 58 Standard Chartered – Annual Report 2023Strategic reportStakeholdersWe have continued to build capacity with our own colleagues through online training on supplier diversity and inclusion. Highlighting our commitment, we have been awarded the Chartered Institute of Procurement and Supply Asia Excellence in Procurement Award for outstanding Diversity and Inclusion practices in procurement teams and Best Initiative to Build a Diverse Supplier Base. In 2023, approximately 40 per cent of our newly onboarded suppliers were diverse* including, for example, KASHow. KASHow is a micro-owned and predominately women-led business, which managed the logistics and planning of Standard Chartered Hong Kong’s 25th marathon in 2023. In addition, KASHow was supportive of our sustainability objectives by using recycled materials for the marathon event logistics and the building of the carnival event booth. *For Standard Chartered, diverse suppliers are defined as: • Small enterprise (10–49 employees + turnover 80% of income from thermal coal and those that remain have exit plans agreed/in progress based on contractual obligations. 200 Standard Chartered – Annual Report 2023Directors’ reportDirectors’ remuneration reportResponsible company Proof point Assessment • Reduction in property emissions of 10% annually. • Achieved. • Reduction of flight emissions of 25%. • Achieved with a 36% reduction in flight emissions against our 2019 baseline. • Offset 95% of all residual emissions from our operations. • Successfully completed our carbon credit purchases against our residual operating emissions since 2021. Clients Enablers Proof point Assessment • Improve client satisfaction rating evidenced in surveys and internal benchmarks. • Deliver growth in qualified clients across Private, Priority & Premium Banking, and Wealth Management. • Significantly improved performance in all three years, with consumer client satisfaction metric of 56.6%, increased from 29.5% in 2020. • Improved growth in qualified clients across our Affluent business, with strong performance achieved in 2023. • Deliver network income growth in CCIB. • Exceeded targets in 2023 ($6.9 billion) following strong performance in 2022 and improving on performance in 2021 (from $4.4 billion in 2020). • Add more than 2 million new customers via digital partnerships, platforms and technologies. • Added 1.8 million new customers by the end of 2023 following weaker performance in 2022 and 2021. Proof point Assessment • Drive culture of innovation to generate new revenues. • 36% of Group revenue coming from innovation, digital and • Adopt new ways of working that result in quicker decision-making and delivery. • Increase senior female representation to 33%. • Increase our culture of inclusion score from 81% to 84% (internal index). transformation revenue streams • Speed of decision-making and delivery have improved in each of the three years including ‘speed to value’, which measures time from ideation until customer go-live. • Increase in the number of females in senior roles by 3 ppt over the three years to 32.5%. • Increased by 1.5 ppt over the three years to 83.2%. Risk and controls Proof point Assessment • Maintain effective risk and control governance. • Improved performance of risk reduction across the Bank and good progress in embedding a healthier risk culture. • Successfully deliver milestones within the Cyber Risk • Continued reduction of Cyber Risk including the delivery of management plan. information and Cyber security strategic plan with all objectives achieved. [[Windfall gains]] When making LTIP awards the Committee reviews the proposed size of the award and considers the change in share price in the period leading up to the award compared with the share price when awards were made in the previous year. A significant fall in share price will increase the overall number of shares being awarded, and the Committee considers this, being mindful of the potential for a ‘windfall gain’. For awards made in 2021 the Committee reviewed the change in share price compared with the previous year and, being comfortable that the change was not significant, at -5.7 per cent, determined not to adjust the size of the awards. The Committee further reviews any increase in share price at the end of the performance period, when awards are due to vest, and considers potential outcomes to determine if any adjustment should be made where an increase in share price is not reflective of a corresponding improvement in underlying financial performance. To date no adjustments have been made. 201 Standard Chartered – Annual Report 2023Directors’ reportDirectors’ remuneration in 2023: LTIP awards continued LTIP awards for the executive directors to be granted in 2024 Based on Group and individual performance during 2023 awards for the performance year will be granted in March 2024 at the maximum amount under the 2022 directors’ remuneration policy. Performance measures are aligned to our strategic priorities. In line with his retirement arrangements, Andy Halford is not eligible for this LTIP award. Award as % of salary Award value on grant (£) Award value on vesting (£) Bill Winters Diego De Giorgi 132% 132% 3,322,440 To be determined based on the level of performance 2,178,000 achieved at the end of the three-year period against the performance measures and the future share price. The RoTE target range for the awards is increased to 10 to 13 per cent, versus 10 to 12.5 per cent for the 2023-25 awards, reflecting the progress in RoTE achieved in 2023 and our increased ambition of 12.5 per cent by 2026. Peer group for the relative TSR measure in the 2024-26 LTIP The peer group of companies selected for the relative TSR performance calculation are those with generally comparable business activities, size or geographic spread to Standard Chartered or with which we compete for investor funds and talent. The group is reviewed annually, prior to new LTIP awards being made and following the 2023 review the group for the 2024-26 LTIP awards has been updated. Bank of China, ICBC and State Bank of India are no longer considered to be comparable peers as they are state-owned banks which have significantly different purpose, strategies and performance profiles. In addition, Credit Suisse has been removed as it ceased public trading during 2023. TSR is measured in sterling for each company and the data is averaged over a month at the start and end of the three-year measurement period which starts from the date of grant. Banco Santander Bank of America Bank of East Asia Barclays BNP Paribas Citigroup DBS Group Deutsche Bank HSBC ICICI JPMorgan Chase KB Financial Group Oversea Chinese Banking Corporation Société Générale Standard Bank UBS United Overseas Bank Financial measures for 2024-26 LTIP awards Measure Weighting Minimum performance (25%) Between minimum and maximum performance Maximum performance (100%) RoTE1 in 2026 with a CET12 of the higher of 13% or the minimum regulatory requirement Relative TSR performance against peer group 30% 10% Straight-line assessment between minimum and maximum 13% 30% Median Straight-line assessment between peer companies positioned immediately above and below the Group Upper quartile 1 Underlying RoTE represents the ratio of the current year’s underlying operating profit attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intangibles for the reporting period. Underlying RoTE normally excludes regulatory fines and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 2 The CET1 underpin will be set at the higher of 13 per cent or the minimum regulatory level as of 31 December 2026. In addition, the Committee has the discretion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period, for example in relation to Basel IV Non-financial measures for 2024-26 LTIP awards Environmental, social and governance • Accelerating Zero: Progress towards our 2030 Sustainable Finance mobilisation target in each of the three performance years. • Actively contributing to the development of the sustainability ecosystem through global partnerships, initiatives and cross-sector collaborations. • Lifting participation: Year-on year growth in financing activity with female and/or small and medium enterprise (SME) clients and other underserved populations. • Resetting Globalisation: Maintaining our presence and supporting international/cross border trade in key developing markets that we serve. Improve eNPS target. Increase senior female representation and increase our ‘culture of inclusion’ (internal index). • • Weighting – 25% 202 Standard Chartered – Annual Report 2023Directors’ reportDirectors’ remuneration report Other strategic measures Clients Improve client satisfaction rating. • • Deliver growth across our markets including in cross-border income in CCIB, in Affluent wealth client activity and in Ventures. Productivity Improve Operating Profit less credit impairment per FTE. • • Percentage of transformation programmes on track. Risk and controls • Improve effectiveness of risk and control governance. Weighting – 15% Remuneration regulations for UK banks prohibit the award of dividend equivalent shares on vesting. The number of shares awarded in respect of the LTIP will take into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the overall market value of the award is maintained. These awards will vest in five annual tranches beginning after the third anniversary of the grant (i.e. March 2027 to March 2031) subject to meeting the performance measures set out at the end of 2026. All vested shares are subject to a 12-month retention period. Total variable remuneration awarded to directors in respect of 2023 (audited) Annual incentive (£000) Annual incentive as a percentage of salary LTIP award (value of shares subject to performance conditions) (£000)1 LTIP award as a percentage of salary Total variable remuneration (£000) Total variable remuneration as a percentage of salary Bill Winters Andy Halford 2023 1,462 58% 3,322 132% 4,784 190% 2022 1,499 62% 3,213 132% 4,712 194% 2023 920 57% N/A N/A 920 57% 2022 945 61% 2,054 132% 2,999 193% 1 LTIP awards for the 2023 performance year will be granted to executive directors in March 2024 and are based on 2023 salary 203 Standard Chartered – Annual Report 2023Directors’ reportDirectors’ remuneration in 2023 continued Service contracts for executive directors Copies of the executive directors’ service contracts are available for inspection at the Group’s registered office. These contracts have rolling 12-month notice periods and the dates of the executive directors’ current service contracts are shown below. The contracts were updated effective 1 January 2020 to reflect the changes made following the implementation of the 2019 remuneration policy and the change to pension contributions. Executive directors are permitted to hold non-executive directorship positions in other organisations. Where such appointments are agreed with the Board, the executive directors may retain any fees payable for their services. Bill and Andy served as non-executive directors elsewhere and received fees for the period covered by this report as set out below. Andy joined the Board of UK Government Investments Limited on 17 October 2023. Date of Standard Chartered employment contract Details of any non-executive directorship Fees retained for any non-executive directorship (local currency) Bill Winters Andy Halford 1 January 2020 1 January 2020 Novartis International AG CHF360,000 Board of UK Government Investments Limited GBP5,208 Diego De Giorgi 1 September 2023 – – Single figure of remuneration for the Chairman and INEDs (audited) The Chairman and INEDs were paid in monthly instalments during the year. The INEDs are required to hold shares with a nominal value of $1,000. The table below shows the fees and benefits received by the Chairman and INEDs in 2023 and 2022. The INEDs’ 2023 benefit figures are in respect of the 2022/23 tax year and the 2022 benefit figures are in respect of the 2021/22 tax year to provide consistency with the reporting of similar benefits in previous years and with those received by executive directors. Group Chairman José Viñals Current INEDs Shirish Apte David Conner3 Christine Hodgson, CBE4 Gay Huey Evans, CBE Jackie Hunt Robin Lawther, CBE Maria Ramos Phil Rivett David Tang Carlson Tong Jasmine Whitbread5 Linda Yueh, CBE6 Fees £000 Benefits £0001 Total £000 Shares beneficially held as at 31 December2 2023 2022 2023 2022 2023 2022 2023 1,293 1,250 69 45 1,362 1,295 45,000 287 250 17 150 185 225 332 247 185 190 82 219 128 233 289 155 43 93 239 234 170 183 210 – 0 1 0 0 3 0 0 0 1 0 0 0 0 1 0 1 0 0 0 0 1 0 0 – 287 251 17 150 188 225 332 247 186 190 82 219 128 234 289 156 43 93 239 234 171 183 210 – 2,000 10,000 – 2,615 2,000 2,000 2,000 2,128 2,000 2,000 – 2,000 1 The costs of benefits (and any associated tax costs) are paid by the Group 2 The beneficial interests of Chairman and INEDs, and connected persons in the shares of the Company are set out above. These directors do not have any non-beneficial interests in the Company’s shares. None of these directors used shares as collateral for any loans. No director had either: (i) an interest in the Company’s preference shares or loan stocks of any subsidiary or associated undertaking of the Group; or (ii) any corporate interests in the Company’s ordinary shares. All figures are as of 31 December 2023 or on the retirement of a director unless otherwise stated 3 David Conner’s fee includes his role on the Combined US Operations Risk Committee 4 Christine Hodgson stepped down from the Board on 31 January 2023 and we are no longer tracking her shareholding. Her reported fee for 2023 of £17,000 is in respect of the period of 1 January 2023 to 31 January 2023 5 Jasmine Whitbread stepped down from the Board on 3 May 2023 and we are no longer tracking her shareholding. Her reported fee for 2023 of £82,000 is in respect of the period of 1 January 2023 to 3 May 2023 6 Linda Yueh was appointed to the Board on 1 January 2023 INEDs’ letters of appointment The INEDs have letters of appointment, which are available for inspection at the Group’s registered office. INEDs are appointed for a period of one year, unless terminated by either party with three months’ notice. Details of the INEDs’ appointments are set out on pages 137 to 141 204 Standard Chartered – Annual Report 2023Directors’ reportDirectors’ remuneration report 2024 policy implementation for directors Remuneration for the executive directors in 2024 will be in line with our directors’ remuneration policy, approved at the AGM in May 2022. Key elements include salary, pension, benefits, an annual incentive and an LTIP award. Our policy is summarised on pages 188 and 189 of this report and set out in full on pages 159 to 164 of the 2021 Annual Report and on our website at sc.com The Committee annually reviews the executive directors’ salaries, considering changes to the scope or responsibility of the role, market alignment and Group-wide increases. Fixed pay for Bill and Diego will not be increased in 2024. £000 Salary of which cash of which shares Pension Total fixed pay Proportion of total fixed pay paid in cash Proportion of total fixed pay paid in shares Bill Winters Diego De Giorgi 2024 2,517 1,258 1,259 252 2,769 55% 45% 2023 % change 2,517 1,258 1,259 252 2,769 55% 45% 0 0 0 0 0 – – 2024 1,650 1,100 550 110 1,760 69% 31% 2023 % change – – – – – – – – – – – – – – Illustration of application of 2024 remuneration policy The charts below illustrate potential directors’ remuneration outcomes based on our policy (i.e. March 2024 awards based on 2023 performance and fixed remuneration with effect from 1 April 2024). These illustrate four performance scenarios and the percentages in each bar show the remuneration provided by each pay element. 2022 and 2023 single figures of remuneration for Bill are also shown. Executive director remuneration (£000) Fixed remuneration Annual incentive LTIP Bill Winters Minimum 100% 3,057 On-target Maximum Maximum + 50% share price increase 2022 single figure 2023 single figure Diego De Giorgi 52% 35% 30% 46% 39% 19% 29% 5,825 26% 22% 23% 19% 39% 8,594 48% 10,255 31% 6,408 42% 7,837 Minimum 100% 1,819 On-target Maximum Maximum + 50% share price increase 50% 33% 28% 20% 30% 3,634 27% 22% 40% 5,449 50% 6,538 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 Fixed remuneration Consists of salary and pension (as at 1 April 2024) and benefits (received in 2023, annualised for GCFO) Bill Winters Diego De Giorgi 2,517 1,650 288 59 252 110 £000 Salary Benefits Pension Total 3,057 1,819 Minimum £000 On-target Maximum % of target % of salary % of target % of salary Annual incentive No annual incentive is awarded LTIP award No LTIP award vests 50% 50% 44% 66% 100% 100% 88% 132% 205 Standard Chartered – Annual Report 2023Directors’ report2024 policy implementation for directors continued 2024 annual incentive scorecard Our annual incentive scorecard reflects our strategic priorities. Targets are set annually by the Committee based on the Group’s annual financial plans and strategic priorities. Targets and performance achieved will be disclosed retrospectively in the 2024 Annual Report due to commercial sensitivity. Financial measures make up 50 per cent of the scorecard. The Committee assesses strategic and personal measures using a quantitative and qualitative framework. 2024 scorecard – financial measures Measure Income1 CCIB Sustainable Finance Income Costs RoTE2 with a CET13 underpin of the higher of 13% or the minimum regulatory requirement Weighting Target 9% 3% 8% 30% • Targets to be disclosed retrospectively 1 The Group’s reported 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 significant or material in the context of the Group’s normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing underlying performance period by period 2 Underlying RoTE represents the ratio of the current year’s underlying operating profit attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intangibles for the reporting period. Underlying RoTE normally excludes regulatory fines and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 3 The CET1 underpin will be set at the higher of 13 per cent or the minimum regulatory level as at 31 December 2024. In addition, the Committee has the discretion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period 2024 scorecard – strategic measures Clients (Network, Affluent, Mass) Target Improve client satisfaction and client experience ratings. • • Deliver cross border income growth in CCIB. • Deliver network growth in qualified clients across Affluent activity. • Grow value of Ventures. • Mass market Retail growth through new to bank personal customers. Weighting – 12% Sustainability Target • Meeting key milestones through building infrastructure relating to client, transaction and central data for delivering on our net zero ambition. • Reducing our financed emissions for key sectors in line with our risk appetite and based on Weighting – 4% interim 2030 sectoral targets. • Reducing Scope 1 and 2 emissions in line with our operational net zero target by 2025. Productivity and transformation Target • Grow proportion of digitally initiated transactions and digital sales adoption. • Transformational Change: % of transformation change programmes on track. • Productivity: Increase Operating Profit less Credit Impairment per FTE. Weighting – 8% People and culture Target • • • Improve employee engagement as evidenced in our annual My Voice survey. Improve senior female representation to support reaching 35% by 2025. Improve our ‘culture of inclusion’ score (internal index). Weighting – 4% 206 Standard Chartered – Annual Report 2023Directors’ reportDirectors’ remuneration report Risk and controls Target • Non-financial risk reduction. • Self-identification of audit issues. 2024 scorecard – personal performance measures Bill – performance goals Target Weighting – 12% • Further progress towards an efficient and more profitable Bank while maintaining focus on risk and control. • Further promote our culture of innovation and maximise synergies between the main bank and Weighting – 10% our various Ventures. • Continue to build a high performance environment and embed the culture of excellence. Diego – performance goals Target • Financial performance: contribute to the delivery of Group financial performance and operating leverage. • Finance function performance: partner with and support business in the execution of the Group’s strategy. • Transformation and simplification: lead implementation of strategic change initiatives across • the Group. Process and controls: continue to progress on major multi-year programs and address regulatory requirements. Weighting – 10% INED fees The Board regularly reviews the fee levels, considering market data and the duties, time commitment and contribution expected for the PLC Board and, where appropriate, subsidiary boards. Considering the increasing demands made of our INEDs the Board determined an increase in INED basic fees of GBP5,000 to GBP115,000 to be appropriate. The revised fees are effective from 1 January 2024. The Chairman and the INEDs are eligible for benefits in line with the directors’ remuneration policy. Neither the Chairman or INEDs receive any performance-related remuneration. Our policy is summarised on pages 188 and 189 of this report and set out in full on pages 159 to 164 of the 2021 Annual Report and on our website at sc.com Role Group Chairman1 Senior Independent Director Independent Non-Executive Director Committee Audit, Board Risk, Remuneration Culture and Sustainability Governance and Nomination Member fee £40,000 £35,000 £17,000 1 The Group Chairman receives a stand-alone fee which is inclusive of all services (including Board and Committee responsibilities) 2 The Group does not currently utilise the role of Deputy Chairman and does not plan to do so Annual fee £1,293,000 £45,000 £115,000 Chair fee £80,000 £70,000 Nil 207 Standard Chartered – Annual Report 2023Directors’ reportAdditional remuneration disclosures The following disclosures provide further information and context on executive director and wider workforce remuneration as required by the Directors’ Remuneration Report Regulations and The Stock Exchange of Hong Kong Limited. The relationship between the remuneration of the Group CEO and all UK employees Ratio of the total remuneration of the CEO to that of the UK lower quartile, median and upper quartile employees Year 2023 2022 2021 2020 2019 2018 2017 Method A A A A A A A CEO UK employee – £000 Pay ratio £000 7,837 6,408 4,740 3,926 5,360 6,287 4,683 P25 110 95 92 84 83 78 76 P50 162 145 139 128 128 124 121 P75 247 228 215 199 212 208 203 P25 71:1 67:1 52:1 46:1 65:1 80:1 61:1 P50 48:1 44:1 34:1 31:1 42:1 51:1 39:1 P75 32:1 28:1 22:1 20:1 25:1 30:1 23:1 The ratio will depend materially on yearly LTIP outcomes for the CEO, and accordingly may fluctuate. Therefore, the Committee also discloses salary and salary plus annual incentive ratios, as most UK employees do not typically receive LTIP awards. Additional ratios of pay based on salary and salary plus annual incentive CEO UK employee – £000 Pay ratio Salary 2023 2022 2021 2020 2019 2018 2017 Salary plus annual incentive 2023 2022 2021 2020 2019 2018 2017 £000 2,496 2,418 2,370 2,370 2,353 2,300 2,300 P25 78 72 68 63 65 59 55 P50 103 87 100 93 90 86 81 CEO UK employee – £000 £000 3,958 3,917 3,559 2,756 3,604 3,691 3,978 P25 96 84 79 74 73 72 69 P50 138 123 122 104 109 105 103 P75 149 138 136 116 128 142 124 P75 220 202 186 175 187 183 182 P25 32:1 34:1 35:1 38:1 36:1 39:1 42:1 P25 41:1 47:1 45:1 37:1 49:1 52:1 58:1 P50 24:1 28:1 24:1 25:1 26:1 27:1 28:1 Pay ratio P50 29:1 32:1 29:1 26:1 33:1 35:1 39:1 P75 17:1 18:1 17:1 20:1 18:1 16:1 19:1 P75 18:1 19:1 19:1 16:1 19:1 20:1 22:1 CEO pay ratio methodology • Pay ratios are calculated using Option A methodology, aligned with investor guidance. • Employee pay data is based on full-time equivalent UK employees as of 31 December for the relevant year, excluding leavers, joiners, and transfers in/out of the UK during the year for like-for-like comparison. Total remuneration is calculated in line with the single figure methodology and insured benefits data is based on notional premiums. No other adjustments or assumptions have been made. • CEO pay is the single figure of remuneration for 2023 and restated for 2022 to reflect the final LTIP performance outcome assessed in March 2023. The 2023 ratio will be restated in the 2024 report to reflect the final LTIP performance outcome for eligible employees and the CEO. • The Committee considered the data for three individuals identified at the quartiles for 2023 and believes it fairly reflects UK employee pay. They were full-time employees and received remuneration in line with policy, without exceptional pay. • Our LTIP links remuneration to the achievement of long-term strategy and reinforces alignment with shareholder interests. Participation is typically senior employees who directly influence the award’s performance targets. The identified quartile employees are not LTIP participants. 208 Standard Chartered – Annual Report 2023Directors’ reportAdditional remuneration disclosures Group performance versus the CEO’s remuneration The graph below shows the Group’s TSR performance on a cumulative basis over the past 10 years alongside that of the FTSE 100 and peer banks. The graph also shows CEO remuneration based on the single figure over the 10 years ended 31 December 2023 for comparison. The FTSE 100 provides a broad comparison group against which shareholders may measure their relative returns. CEO single figure of remuneration (Bill Winters) Standard Chartered FTSE 100 Comparator median CEO single figure of remuneration (Peter Sands) 200 180 160 140 120 100 80 60 40 20 0 3 1 0 2 r e b m e c e D 1 3 n o d e t s e v n i 0 0 1 £ f o e u a V l 10 9 8 7 6 5 4 3 2 1 0 Jan 14 Jan 15 Jan 16 Jan 16 Jan 17 Jan 18 Jan 19 Jan 20 Jan 21 Jan 22 Jan 23 Jan 24 ) n o i l l i m £ ( n o i t a r e n u m e r l a t o t O E C The table below shows the single figure of total remuneration for the CEO since 2014 and the variable remuneration delivered as a percentage of maximum opportunity. Salary 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 2023 PS PS BW BW BW BW BW BW BW BW BW Single figure of total remuneration £000 Annual incentive as percentage of maximum opportunity Vesting of LTIP awards as a percentage of maximum1 3,093 1,290 8,399 3,392 4,683 6,287 5,360 3,926 4,740 6,408 7,837 0% 0% 0% 45% 76% 63% 55% 18.5% 57% 70% 66% 10% 0% – – – 27% 38% 26% 23% 36.8% 66% 1 TSR performance will be assessed three years from the date of award, in March 2024, making the projected 2023 LTIP outcome of 66 per cent subject to change • Bill’s single figure of total remuneration in 2015 includes his buyout award of £6.5 million to compensate for the forfeiture of share interests on joining from his previous employment. • The 2022 single figure for Bill has been restated based on the actual performance outcome and share price when the 2020-22 LTIP awards started vesting in March 2023. 209 Standard Chartered – Annual Report 2023Directors’ report Additional remuneration disclosures Additional remuneration disclosures continued Annual percentage change in remuneration of directors and UK employees In line with our Fair Pay Charter, we monitor CEO and wider workforce remuneration changes annually. Additionally, complying with the Shareholder Rights Directive, we compare PLC Board directors with an average FTE UK employee. As individuals are employed by subsidiary companies rather than Standard Chartered PLC we voluntarily disclose comparison against UK employees as we feel this is a suitable comparison. Salary % change Taxable benefits % change Annual incentive % change CEO Bill Winters GCFO Andy Halford Workforce average FTE UK employee Group Chairman José Viñals1 Shirish Apte David Conner Christine Hodgson, CBE2 2023 2022 3.2 3.2 10.4 3.4 – 7.5 – 2.0 2.0 3.3 0.0 – (8.8) (11.0) Gay Huey Evans, CBE (3.2) (22.5) Jackie Hunt Robin Lawther, CBE Maria Ramos3 Phil Rivett David Tang Carlson Tong Jasmine Whitbread2 Linda Yueh – – 38.8 5.7 8.8 4.1 – – – – 25.9 3.9 0.0 (11.0) 0.0 – 2021 0.0 0.7 3.1 0.0 – 2020 0.7 3.7 3.8 0.0 – (6.7) (0.6) 0.0 2023 (3.0) (17.0) 2022 79.8 23.9 2021 2020 (26.5) (2.9) (5.6) 30.2 2023 (2.5) (2.6) 2022 26.1 24.3 2021 2020 208.1 208.9 (69.2) (68.2) 2.2 (7.0) (2.0) 2.9 0.8 14.3 38.2 (22.1) 53.2 170.2 (61.5) (11.7) – 0.0 – – 0.0 – 5.9 – (57.5) 0.0 (100.0) 28.2 0.0 (100.0) 100.0 (100.0) 233.9 – – – – – – 0.0 – – – 0.0 0.0 0.0 0.0 – – – – 0.0 0.0 0.0 – – – – (82.3) 0.0 (100.0) – – – – – – 0.0 (100.0) (49.2) – – – 0.0 0.0 – – – – 18.3 0.0 0.0 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1 The increase in 2023 taxable benefits for José Viñals is primarily due to the continuing increase in business travel to pre-pandemic levels 2 In 2023, Christine Hodgson and Jasmine Whitbread stepped down from the Board on 31 January and 3 May respectively. Linda Yueh was appointed to the Board on 1 January 3 The increase in fees for Maria Ramos is due to changes in Board and Committee responsibilities in 2022 See pages 195 and 204 for the CEO, GCFO, Group Chairman and INEDs data the changes relates to Annual percentage change in remuneration of directors and UK employees methodology • Employee pay data is based on FTE UK employees as of 31 December for the relevant year, excluding leavers, joiners, and transfers in/out of the UK during the year for like-for-like comparison. Salary percentage change reflects increases decided at the end of 2022 and implemented in 2023. • Average FTE UK employee percentage change is calculated on a mean basis to allow for a more consistent year-on-year comparison. • Due to the low value taxable benefits received by INEDs, small value changes may lead to annual percentage change fluctuations. 210 Standard Chartered – Annual Report 2023Directors’ report Scheme interests awarded, exercised and lapsed during the year Employees, including executive directors, are not permitted to engage in any personal investment strategies with regards to their Company shares, including hedging against the share price of Company shares. The main features of the outstanding shares and awards are summarised below: Award Performance measures Performance outcome (100%) Accrues notional dividends?1 Delivery 2016-18 LTIP 2017-19 LTIP 2018-20 LTIP 2019-21 LTIP 2020-22 LTIP 2021-23 LTIP 2022-24 LTIP 2023-25 LTIP 33% RoE2 33% TSR 33% Strategic 33% RoTE 33% TSR 33% Strategic 30% RoTE 30% TSR 15% Sustainability 25% Strategic 27% 38% 26% 23% 36.8% 66% Yes Yes No No No No • Tranche 1: 50% • Tranches 2-5: 12.5% • 5 equal tranches • 5 equal tranches • 5 equal tranches • 5 equal tranches • 5 equal tranches To be assessed at the end of 2024 No • 5 equal tranches To be assessed at the end of 2025 No • 5 equal tranches 1 2016-18 and 2017-19 LTIP awards may receive dividend equivalent shares based on dividends declared between grant and vest. From 1 January 2017 remuneration regulations for European banks prohibited the award of dividend equivalent shares. Therefore, the number of shares awarded in respect of the LTIP awards granted after this date took into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the overall value of the award was maintained 2 Return on equity Change in interests during the period 1 January to 31 December 2023 (audited) Bill Winters1 Date of grant Share award price (£) As at 1 January Awarded2 Dividends awarded3 Vested/ exercised4 Lapsed As at 31 December Performance period end Vesting date 2016-18 LTIP 4 May 2016 2017-19 LTIP 13 Mar 2017 5.560 7.450 2018-20 LTIP 9 Mar 2018 7.782 2019-21 LTIP 11 Mar 2019 6.105 2020-22 LTIP 9 Mar 2020 5.196 2021-23 LTIP 15 Mar 2021 4.901 2022-24 LTIP 14 Mar 2022 4.876 2023-25 LTIP 13 Mar 2023 7.398 33,507 45,049 45,049 28,178 28,178 28,179 30,604 30,604 30,604 30,605 161,095 161,095 161,095 161,095 161,095 150,621 150,621 150,621 150,621 150,621 151,386 151,386 151,386 151,386 151,388 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 101,209 101,209 101,209 101,209 101,209 3,292 4,421 – – – – – – – – – – – – – – – – – – – – – – – – – – – – 36,799 49,470 – 28,178 – – 30,604 – – – 59,282 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 101,813 101,813 101,813 101,813 101,813 – – – – – – – – – – – – – – – – 11 Mar 2019 4 May 2023 – 13 Mar 2020 13 Mar 2023 45,049 13 Mar 2024 – 9 Mar 2021 9 Mar 2023 28,178 28,179 9 Mar 2024 9 Mar 2025 – 11 Mar 2022 11 Mar 2023 30,604 30,604 30,605 11 Mar 2024 11 Mar 2025 11 Mar 2026 – 9 Mar 2023 9 Mar 2023 59,282 59,282 59,282 59,282 9 Mar 2024 9 Mar 2025 9 Mar 2026 9 Mar 2027 150,621 15 Mar 2024 15 Mar 2024 150,621 150,621 150,621 150,621 15 Mar 2025 15 Mar 2026 15 Mar 2027 15 Mar 2028 151,386 14 Mar 2025 14 Mar 2025 151,386 151,386 151,386 151,388 14 Mar 2026 14 Mar 2027 14 Mar 2028 14 Mar 2029 101,209 13 Mar 2026 13 Mar 2026 101,209 101,209 101,209 101,209 13 Mar 2027 13 Mar 2028 13 Mar 2029 13 Mar 2030 211 Standard Chartered – Annual Report 2023Directors’ reportAdditional remuneration disclosures Additional remuneration disclosures continued Andy Halford1 Date of grant Share award price (£) As at 1 January Awarded2 Dividends awarded3 Vested/ exercised4 Lapsed As at 31 December Performance period end Vesting date 2016-18 LTIP 4 May 2016 2017-19 LTIP 13 Mar 2017 5.560 7.450 2018-20 LTIP 9 Mar 2018 7.782 2019-21 LTIP 11 Mar 2019 6.105 2020-22 LTIP 9 Mar 2020 5.196 2021-23 LTIP 15 Mar 2021 4.901 2022-24 LTIP 14 Mar 2022 4.876 2023-25 LTIP 13 Mar 2023 7.398 20,009 27,888 27,890 17,448 17,448 17,448 19,571 19,571 19,571 19,572 99,976 99,976 99,976 99,976 99,977 96,283 96,283 96,283 96,283 96,283 96,772 96,772 96,772 96,772 96,773 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 64,700 64,700 64,700 64,700 64,702 2022 Sharesave5,6 4.230 2,127 – 1,966 2,740 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 21,975 30,628 – 17,448 – – 19,571 – – – 36,791 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 63,185 63,185 63,185 63,185 63,186 – – – – – – – – – – – – – – – – – 11 Mar 2019 4 May 2023 – 13 Mar 2020 13 Mar 2023 27,890 13 Mar 2024 – 9 Mar 2021 9 Mar 2023 17,448 17,448 9 Mar 2024 9 Mar 2025 – 11 Mar 2022 11 Mar 2023 19,571 19,571 19,572 11 Mar 2024 11 Mar 2025 11 Mar 2026 – 9 Mar 2023 9 Mar 2023 36,791 36,791 36,791 36,791 9 Mar 2024 9 Mar 2025 9 Mar 2026 9 Mar 2027 96,283 15 Mar 2024 15 Mar 2024 96,283 96,283 96,283 96,283 15 Mar 2025 15 Mar 2026 15 Mar 2027 15 Mar 2028 96,772 14 Mar 2025 14 Mar 2025 96,772 96,772 96,772 96,773 14 Mar 2026 14 Mar 2027 14 Mar 2028 14 Mar 2029 64,700 13 Mar 2026 13 Mar 2026 64,700 64,700 64,700 64,702 13 Mar 2027 13 Mar 2028 13 Mar 2029 13 Mar 2030 2,127 – 1 Feb 2026 1 The unvested LTIP awards held by Bill and Andy are conditional rights. They do not have to pay towards these awards. Under these awards, shares are delivered on vesting or as soon as practicable thereafter 2 For the 2023-25 LTIP awards granted to Bill and Andy on 13 March 2023, the values granted were: Bill: £3.2 million; Andy £2.1 million. The number of shares awarded in respect of the LTIP took into account the lack of dividend equivalents (calculated by reference to market consensus dividend yield) such that the overall value of the award was maintained. Performance measures apply to 2023-25 LTIP awards. The closing price on the day before grant was £7.398 3 Dividend equivalent shares may be awarded on vesting for awards granted prior to 1 January 2018. On 31 March 2020, Standard Chartered announced that in response to the request from the PRA and as a consequence of the unprecedented challenges facing the world due to the COVID-19 pandemic, the Board decided to withdraw the recommendation to pay a final dividend for 2019. Dividend equivalent shares allocated to the 2016-18 and 2017-19 LTIP awards vesting in 2023 did not include any shares relating to the cancelled dividend 4 Shares (before tax) were delivered to Bill and Andy from the vesting element of LTIP awards. The closing share price on the day before the shares were delivered was as follows: • 4 May 2023: Shares in respect of the 2016-18 LTIP. Previous day closing share price: £6.114 • • 9 March 2023: Shares in respect of the 2018-20 LTIP. Previous day closing share price: £7.874 • 15 March 2023: Shares in respect of the 2020-22 LTIP. Previous day closing share price: £6.968 13 March 2023: Shares in respect of the 2017-19 LTIP and 2019-21 LTIP. Previous day closing share price: £7.398 5 Andy chose to participate in the 2022 Sharesave invitation. This unvested option was granted on 28 November 2022 under the 2013 Plan – to exercise this option, Andy has to pay an exercise price of £4.23 per share, which has been discounted by 20 per cent 6 The vesting date relates to the end of the savings contract and the start of the six month exercise window As at 31 December 2023, none of the directors had registered an interest or short position in the shares, underlying shares or debentures of the Company or any of its associated corporations that was required to be recorded pursuant to section 352 of the Securities and Futures Ordinance, or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers. See page 450 for details of share plan dilution limits 212 Standard Chartered – Annual Report 2023Directors’ reportExecutive directors’ shareholdings and share interests including share awards (audited) Shares that count towards the executive director shareholding requirements are beneficially owned shares, including shares subject to a retention period, and unvested share awards for which performance conditions have been satisfied (on a net of tax basis). As of 31 December 2023, both Bill and Andy significantly exceeded their shareholding requirement. Shares purchased voluntarily from their own funds are equivalent to 82 and 60 per cent of salary for Bill and Andy, respectively. No shares were purchased voluntarily in 2023. The following chart and table summarise the executive directors’ shareholdings and share interests. Shares held beneficially Unvested share awards not subject to performance measures (net of tax) Shareholding requirement Bill Winters Andy Halford 687% 60% 473% 59% 0% 100% 200% 300% 400% 500% 600% 700% 800% Bill Winters Andy Halford Shares held beneficially1,2,3 2,590,604 1,140,269 Unvested share awards not subject to performance measures (net of tax)4,5 228,083 142,389 Total shares counting towards shareholding requirement Shareholding requirement Salary3 Value of shares counting towards shareholding requirement as a percentage of salary1 Unvested share awards subject to performance measures (before tax) 2,818,687 250% salary £2,517,000 1,282,658 200% salary £1,609,000 747% 532% 2,016,082 1,288,778 1 All figures are as of 31 December 2023 unless stated otherwise. The closing share price on 29 December 2023 was £6.67. No director had either: (i) an interest in Standard Chartered PLC’s preference shares or loan stocks of any subsidiary or associated undertaking of the Group; or (ii) any corporate interests in Standard Chartered PLC’s ordinary shares 2 The beneficial interests of directors and connected persons in the ordinary shares of the Company are set out above. The executive directors do not have any non-beneficial interest in the Company’s shares. Neither of the executive directors used ordinary shares as collateral for any loans 3 The salary and shares held beneficially include shares awarded to deliver the executive directors’ salary shares 4 36.8 per cent of the 2020-22 LTIP award is no longer subject to performance measures due to achievement against 2020-22 TSR and strategic measures 5 As Bill and Andy are both UK taxpayers zero per cent tax is assumed to apply to Sharesave (as Sharesave is a UK tax qualified share plan) and 47 per cent tax is assumed to apply to other unvested share awards (marginal combined PAYE rate of income tax at 45 per cent and employee National Insurance contributions at 2 per cent) – rates may change Historical LTIP awards The current position on projected vesting for unvested LTIP awards from the 2021 and 2022 performance years based on current performance as at 31 December 2023 is set out in the tables below. Current position on the 2022-24 LTIP award: projected partial vesting Measure Weighting Minimum (25%) Maximum (100%) RoTE1 in 2024 with a CET12 underpin of the higher of 13% or the minimum regulatory requirement Relative TSR performance against peer group 30% 7% 11% 30% Median Upper quartile 2022-24 LTIP assessment as of 31 December 2023 RoTE between threshold and maximum: indicative partial vesting TSR positioned between median and upper quartile: indicative partial vesting Sustainability 15% Other strategic measures 25% Targets set for sustainability measures linked to the business strategy Tracking above target performance: indicative partial vesting Targets set for strategic measures linked to the business strategy Tracking above target performance: indicative partial vesting 1 Underlying RoTE represents the ratio of the current year’s underlying operating profit attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intangibles for the reporting period. Underlying RoTE normally excludes regulatory fines and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 2 The CET1 underpin will be set at the higher of 13 per cent or the minimum regulatory level as at 31 December 2024. In addition, the Committee has the discretion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period 213 Standard Chartered – Annual Report 2023Directors’ reportAdditional remuneration disclosures Additional remuneration disclosures continued Current position on the 2023-25 LTIP award: projected partial vesting Measure Weighting Minimum (25%) Maximum (100%) RoTE1 in 2025 with a CET12 underpin of the higher of 13% or the minimum regulatory requirement Relative TSR performance against peer group 30% 10% 12.5% 30% Median Upper quartile 2023-25 LTIP assessment as of 31 December 2023 RoTE between threshold and maximum: indicative partial vesting TSR positioned below the median: indicative 0% vesting Sustainability 15% Other strategic measures 25% Targets set for sustainability measures linked to the business strategy Tracking above target performance: indicative partial vesting Targets set for strategic measures linked to the business strategy Tracking above target performance: indicative partial vesting 1 Underlying RoTE represents the ratio of the current year’s underlying operating profit attributable to ordinary shareholders to the weighted average ordinary shareholders’ equity less the average goodwill and intangibles for the reporting period. Underlying RoTE normally excludes regulatory fines and certain other adjustments but, for remuneration purposes, such adjustments are subject to review by the Committee 2 The CET1 underpin will be set at the higher of 13 per cent or the minimum regulatory level as at 31 December 2025. In addition, the Committee has the discretion to take into account at the end of the performance period any changes in regulatory capital and risk-weighted asset requirements that might have been announced and implemented after the start of the performance period The Committee assesses the value of LTIP awards on vesting and has the flexibility to adjust if the formulaic outcome is not considered to be an appropriate reflection of the performance achieved and to avoid windfall gains. The approach used to determine Group-wide total discretionary incentives in 2023 is explained on pages 182 and 183 of this report. The following tables show the income statement charge for these incentives. Income statement charge for Group discretionary incentives Total discretionary incentives Less: discretionary incentives that will be charged in future years Plus: current year charge for discretionary incentives from prior years Total Year in which income statement is expected to reflect discretionary incentives Discretionary incentives awarded for 2021 and earlier Discretionary incentives awarded for 2022 Discretionary incentives awarded for 2023 Total 2023 $million 1,574 (242) 188 1,520 Actual Expected 2022 $million 2023 $million 2024 $million 150 77 – 227 82 106 81 269 37 60 116 213 2022 $million 1,589 (242) 150 1,497 2025 and beyond $million 27 60 126 213 214 Standard Chartered – Annual Report 2023Directors’ reportAllocation of the Group’s earnings between stakeholders When considering Group variable remuneration, the Committee takes account of shareholders’ concerns about relative expenditure on pay and determines the allocation of earnings to expenditure on remuneration carefully, and has approached this allocation in a disciplined way. The amount of corporate tax, including the bank levy, is included in the chart because it is a significant payment and illustrates the Group’s contribution through the tax system. Staff costs Corporate taxation including levy Paid to shareholders in dividends and buybacks 2023 2022 8,256 7,618 $million 1,742 2,568 1,486 1,651 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Approach to risk adjustment Risk adjustment What and how? When? Collective adjustments Individual adjustments • • At a collective level, the Group annual scorecard and LTIP performance criteria include risk and control measures. In addition, the Committee carries out a detailed review of all risk, control and conduct matters including ongoing investigations and any matters raised by regulators, and may use its discretion to adjust scorecard outcomes or remuneration to reflect matters not adequately captured by the scorecards. • Individual risk adjustments to variable remuneration are considered based on the materiality of the issue. • At an individual level, risk adjustments can be applied through the reduction or forfeiture of the value of current year variable remuneration or the application of malus or clawback to unpaid or paid variable remuneration as appropriate, at the Committee’s discretion. • Material restatement of the Group’s financials. • Significant failure in risk management. • Discovery of endemic problems in financial reporting. • Financial losses, due to a material breach of regulatory guidelines. • The exercise of regulatory or government action to recapitalise the Group following material financial losses. • Deemed to have: (i) caused in full or in part a material loss for the Group as a result of reckless, negligent or wilful actions, or (ii) exhibited inappropriate behaviours, or (iii) applied a lack of appropriate supervision and due diligence. • The individual failed to meet appropriate standards of fitness and propriety. Our Pillar 3 remuneration disclosures can be viewed in our 2023 Pillar 3 Report at sc.com Remuneration of the five highest paid individuals and the remuneration of senior management In line with the requirements of The Stock Exchange of Hong Kong Limited, the following table sets out, on an aggregate basis, the annual remuneration of: (i) the five highest paid employees; and (ii) senior management for the year ended 31 December 2023. Five highest paid1 $000 Senior management2 $000 Components of remuneration Salary, cash allowances and benefits in kind Pension contributions Variable remuneration awards paid or receivable Payments made on appointment Remuneration for loss of office (contractual or other) Other Total Total HKD equivalent 1 The five highest paid individuals include Bill Winters 2 Senior management comprises the executive directors and the members of the Group Management Team at any point during 2023 19,537 358 31,376 – – – 51,271 401,528 28,286 1,428 42,928 1,070 – – 73,712 577,275 215 Standard Chartered – Annual Report 2023Directors’ reportShare award movements for the five highest paid individuals for the year to 31 December 20231 LTIP2 Deferred shares2 Sharesave Weighted average Sharesave exercise price (£) Outstanding at 1 January 2023 Granted3,4,5 Lapsed Vested/Exercised Outstanding at 31 December 2023 Exercisable as at 31 December 2023 Range of exercise prices (£) 4,483,528 997,172 729,613 253,569 3,097,427 1,303,485 – 738,051 4,497,518 3,662,861 4,334 – – – – – – 4,246 4.23 88 – – – – – 4.26 – 4.23 – 5.88 1 The five highest paid individuals include Bill Winters 2 Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards 3 993,801 (LTIP) granted on 13 March 2023, 2,821 (LTIP) granted as a notional dividend on 1 March 2023, 550 (LTIP) granted as a notional dividend on 1 September 2023. 1,302,503 (Deferred shares) granted on 13 March 2023, 690 (Deferred shares) granted as a notional dividend on 1 March 2023, 292 (Deferred shares) granted as a notional dividend on 1 September 2023. 88 (Sharesave) granted on 18 Sep 2023 4 LTIP and Deferred shares were granted at a share price of £7.398, the closing price on the last trading day preceding the grant date. The vesting period for these awards ranges from 1 to 7 years 5 For Sharesave granted in 2023 the exercise price is £5.88 per share, a 20% discount from the average of the closing prices over the five days to the invitation date of 21 August 2023. The closing share price on 18 August 2023 was £7.214 See page 211 for details of awards and options for Bill Winters See page 451 for a view of share awards and options for all employees See page 447 for details on the accounting standard adopted for share awards is IFRS2 The table below shows the emoluments of: (i) the five highest paid employees; and (ii) senior management for the year ended 31 December 2023. Remuneration band HKD 20,000,001 – 20,500,000 22,000,001 – 22,500,000 23,500,001 – 24,000,000 24,000,001 – 24,500,000 26,500,001 – 27,000,000 27,000,001 – 27,500,000 32,000,001 – 32,500,000 32,500,001 – 33,000,000 34,500,001 – 35,000,000 41,000,001 – 41,500,000 44,500,001 – 45,000,000 52,000,001 – 52,500,000 75,500,001 – 76,000,000 78,000,001 – 78,500,000 84,500,001 – 85,000,000 110,500,001 – 111,000,000 Total Remuneration band USD equivalent Five highest paid Senior management1 Number of employees 2,553,789 – 2,617,634 2,809,168 – 2,873,013 3,000,702 – 3,064,547 3,064,547 – 3,128,392 3,383,771 – 3,447,615 3,447,616 – 3,511,460 4,086,063 – 4,149,907 4,149,908 – 4,213,752 4,405,286 – 4,469,131 5,235,268 – 5,299,113 5,682,181 – 5,746,026 6,639,852 – 6,703,697 9,640,554 – 9,704,399 9,959,778 – 10,023,623 10,789,759 – 10,853,604 14,109,685 – 14,173,530 – – – – – – – – – – – 1 1 1 1 1 5 1 1 1 1 1 1 1 1 1 1 1 – 1 1 1 – 14 1 Senior management comprises the executive directors and the members of the Group Management Team at any point during 2023 Shirish Apte Chair of the Remuneration Committee 23 February 2024 216 Standard Chartered – Annual Report 2023Directors’ reportAdditional remuneration disclosures Other disclosures The Directors’ report for the year ended 31 December 2023 comprises pages 134 to 229 of this report (together with the sections of the Annual Report incorporated by reference). The Company has chosen, in accordance with section 414C(11) of the Companies Act 2006, and as noted in this Directors’ report, to include certain matters in its Strategic report that would otherwise be disclosed in this Directors’ report. Both the Strategic report and the Directors’ report have been drawn up and presented in accordance with English company law, and the liabilities of the directors in connection with that report shall be subject to the limitations and restrictions provided by such law. Other information to be disclosed in the Directors’ report is given in this section. In addition to the requirements set out in the Disclosure Guidance and Transparency Rules relating to the Annual Report, information required by UK Listing Rule 9.8.4 to be included in the Annual Report, where applicable, is set out in the table below and cross-referenced. Information to be included in the Annual Report (UK Listing Rules 9.8.4) Relevant Listing Rule Pages LR 9.8.4 (1) (2) (4-11) (14) (A) (B) LR 9.8.4 (12-13) N/A 439 Principal activities We are a leading international banking group, with over 170 years of history. Our unique geographical footprint in Asia, Africa and the Middle East helps connect the world’s most dynamic markets. Our purpose is to drive commerce and prosperity through our unique diversity. The Group’s roots in trade finance and commercial banking have been at the core of its success throughout its history, but the Group is now more broadly based across Consumer, Private and Business Banking and Ventures. The Group operates in the UK and overseas through a number of subsidiaries, branches and offices. Further details on our business, including key performance indicators, can be found within the Strategic report on pages 2 to 89 Fair, balanced and understandable On behalf of the Board, the Audit Committee has reviewed the Annual Report and the process by which the Group believes that the Annual Report is fair, balanced and understandable and provides the information necessary for shareholders to assess the position and performance, strategy and business model of the Group. Following its review, the Audit Committee has advised the Board that such a statement can be made in the Annual Report. UK Corporate Governance Code compliance The table below contains examples of where the Company has applied the principles of the UK Corporate Governance Code in this Annual Report. A copy of the UK Corporate Governance Code can be found at frc.org.uk Board leadership and company purpose Principles A – Promoting long-term sustainable success and value Pages/reference 2 to 89, and 137 to 141 B – Purpose, value, strategy and alignment with culture 2 and 3, 24 and 25, 130 and 225 C – Performance measures, controls and risk management D – Shareholder and other stakeholder engagement E – Workforce policies and practices Division of responsibilities F – Chair role and responsibilities G – Board roles and responsibilities H – Non-executive directors’ role and capacity I – Board effectiveness and efficiency J – Board appointments and succession plans K – Board skills, experience, knowledge and tenure Composition, succession and evaluation Audit, risk and internal control M – Independence and effectiveness of internal and external audit functions, integrity of financial and narrative statements N – Fair, balanced and understandable assessment of the Company’s position and prospects O – Risk management and internal controls Remuneration P – Remuneration policies and practices Q – Procedure for developing remuneration policy R – Independent judgement and discretion when authorising remuneration outcomes The Remuneration Committee has written Terms of Reference that can be viewed at sc.com/termsofreference L – Board evaluation of composition, diversity and effectiveness 153, 155 and 156 14 and 15, and 314 to 319 54 to 64, and 157 to 161 60 to 64 151 to 153, and 155 to 156 151 151 155 to 156 179 137 to 141 166 164 314 to 319 182 to 216 Remuneration Committee Terms of Reference Remuneration Committee Terms of Reference 217 Standard Chartered – Annual Report 2023Directors’ reportEvents after the balance sheet date For details on post balance sheet events, see Note 35 to the financial statements. Code for Financial Reporting Disclosure The Group’s 2023 financial statements have been prepared in accordance with the principles of the UK Finance Disclosure Code for Financial Reporting Disclosure. Viability and going concern Having made appropriate enquiries, the Board is satisfied that the Company and the Group as a whole has adequate resources to continue in operation and meet its liabilities as they fall due for a period of at least 12 months from 23 February 2024 and therefore continues to adopt the going concern basis in preparing the financial statements. The directors’ viability statement in respect to the Group can be found in the Strategic report on pages 88 and 89, while the directors’ going concern considerations for the Group can be found on page 369. Sufficiency of public float As at the date of this report, the Company has maintained the prescribed public float under the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited (the Hong Kong Listing Rules), based on the information publicly available to the Company and within the knowledge of the directors. Research and development During the year, the Group invested $2.01 billion (2022: $1.98 billion) in research and development, of which $0.99 billion (2022: $0.94 billion) was recognised as an expense. The research and development investment primarily related to the planning, analysis, design, development, testing, integration, deployment and initial support of technology systems. Political donations The Group has a policy in place which prohibits donations being made that would: (i) improperly influence legislation or regulation, (ii) promote political views or ideologies, and (iii) fund political causes. In alignment to this, no political donations were made in the year ended 31 December 2023. Directors and their interests The membership of the Board, together with the Directors’ biographical details, are given on pages 137 to 141. Details of the directors’ beneficial and non-beneficial interests in the ordinary shares of the Company as at 31 December 2023 are shown in the Directors’ remuneration report on pages 204 and 213. As at 16 February 2024, there had been no changes to those interests in relation to directors remaining in office at that date. The Group operates a number of share-based arrangements for its directors and employees. Details of these arrangements are included in the Directors’ remuneration report and in Note 29 to the financial statements The Company has received from each of the INEDs an annual confirmation of independence pursuant to Rule 3.13 of the Hong Kong Listing Rules and still considers all of the non- executive directors to be independent. At no time during the year did any director hold a material interest in any contracts of significance with the Company or any of its subsidiary undertakings. In accordance with the Companies Act 2006, we have established a process requiring directors to disclose proposed outside business interests before any are entered into. This enables prior assessment of any conflict or potential conflict of interest and any impact on time commitment. On behalf of the Board, the GNC reviews existing conflicts of interest annually to consider if they continue to be conflicts of interest, and also to revisit the terms upon which they were authorised. The Board is satisfied that our processes in this respect continue to operate effectively. Subject to company law, the Articles of Association and the authority granted to directors in general meeting, the directors may exercise all the powers of the Company and may delegate authorities to committees. The Articles of Association contain provisions relating to the appointment, re-election and removal of directors. Newly appointed directors retire at the AGM following appointment and are eligible for election. All directors are nominated for annual re-election by shareholders subject to continued satisfactory performance based upon their annual assessment. Non-executive directors are appointed for an initial period of one year and subject to (re)election by shareholders at AGMs, in line with the UK Corporate Governance Code 2018. The Company has granted indemnities to all of its directors on terms consistent with the applicable statutory provisions. Qualifying third-party indemnity provisions for the purposes of section 234 of the Companies Act 2006 were accordingly in force during the course of the financial year ended 31 December 2023 and remain in force at the date of this report. 218 Standard Chartered – Annual Report 2023Directors’ reportOther disclosuresQualifying pension scheme indemnities Qualifying pension scheme indemnity provisions (as defined by section 235 of the Companies Act 2006) were in force during the course of the financial year ended 31 December 2023 for the benefit of the UK’s pension fund corporate trustee (Standard Chartered Trustees (UK) Limited), and remain in force at the date of this report. Significant agreements The Company is not party to any significant agreements that would take effect, alter or terminate following a change of control of the Company. The Company does not have agreements with any director or employee that would provide compensation for loss of office or employment resulting from a takeover, except that provisions of the Company’s share schemes and plans may cause awards granted to employees under such schemes and plans to vest on a takeover, subject to any regulatory or tax considerations that may prevent this. Future developments in the business of the Group An indication of likely future developments in the business of the Group is provided in the Strategic report. Results and dividends 2023: paid interim dividend of 6 cents per ordinary share (2022: paid interim dividend of 4 cents per ordinary share) 2023: proposed final dividend of 21 cents per ordinary share (2022: paid final dividend of 14 cents per ordinary share) 2023: total dividend of 27 cents per ordinary share (2022: total dividend, 18 cents per ordinary share) Share capital The issued ordinary share capital of the Company was reduced by a total of 229, 693, 294 over the course of 2023. This was due to the cancellation of ordinary shares as part of the Company’s two share buy-back programmes. No ordinary shares were issued during the year. The Company has one class of ordinary shares, which carries no rights to fixed income. On a show of hands, each member present has the right to one vote at our general meetings. On a poll, each member is entitled to one vote for every $2 nominal value of share capital held. The issued nominal value of the ordinary shares represents 84.3 per cent of the total issued nominal value of all share capital. The remaining 15.7 per cent comprises preference shares, which have preferential rights to income and capital but which, in general, do not confer a right to attend and vote at our general meetings. Further details of the Group’s share capital can be found in Note 28 to the financial statements There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. There are no specific restrictions on voting rights and the directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. Articles of Association The Articles of Association may be amended by special resolution of the shareholders. They were last amended at the 2023 AGM. The amendments primarily related to compliance with regulatory requirements in Hong Kong, but we also took the opportunity to amend them to reflect developments in market practice. A copy of the Company’s Articles of Association can be found on our website here sc.com/investors Authority to purchase own shares At the AGM held on 3 May 2023, our shareholders renewed the Company’s authority to make market purchases of up to 284,703,272 ordinary shares, equivalent to approximately 10 per cent of issued ordinary shares as at 20 March 2023, and up to all of the issued preference share capital. The authority to make market purchases up to 10 per cent of issued ordinary share capital was used during the year through two buy-back programmes announced in February and August 2023. These were utilised to reduce the number of ordinary shares in issue and as part of the Group’s approach to dividend growth and capital returns. The first share buy-back programme commenced on 20 February 2023 and ended on 29 September 2023. The second share buy-back programme commenced on 1 August 2023 and ended on 6 November 2023. A total of 229,693,294 ordinary shares with a nominal value of $0.50 were re-purchased for an approximate aggregate consideration paid of $2 billion. A monthly breakdown of the shares purchased during the period including the lowest and highest price paid per share is set out in Note 28 to the financial statements. All ordinary shares which were bought back were cancelled. In accordance with the terms of a waiver granted by The Stock Exchange of Hong Kong Limited (HKSE) as subsequently modified, the Company will comply with the applicable law and regulation in the UK in relation to holding of any shares in treasury and with the conditions of granting the waiver by the HKSE. No treasury shares were held during the year. Further details can be found in Note 28 to the financial statements 219 Standard Chartered – Annual Report 2023Directors’ reportAuthority to issue shares The Company is granted authority to issue shares by the shareholders at its AGM. The size of the authorities granted depends on the purposes for which shares are to be issued and is within applicable legal and regulatory requirements. Major interests in shares and voting rights As at 31 December 2023, Temasek Holdings (Private) Limited (Temasek) is the only shareholder that has an interest of more than 10 per cent in the Company’s issued ordinary share capital carrying a right to vote at any general meeting. Shareholder rights Under the Companies Act 2006, shareholders holding 5 per cent or more of the paid-up share capital of the Company carrying the right of voting at general meetings of the Company are able to require the directors to hold a general meeting. A request may be in hard copy or electronic form and must be authenticated by the shareholders making it. Where such a request has been duly lodged with the Company, the directors are obliged to call a general meeting within 21 days of becoming subject to the request and must set a date for the meeting not more than 28 days from the date of the issue of the notice convening the meeting. Under the Companies Act 2006, shareholders holding 5 per cent or more of the total voting rights at an AGM of the Company, or 100 shareholders entitled to vote at the AGM with an average of at least £100 paid-up share capital per shareholder, are entitled to require the Company to circulate a resolution intended to be moved at the Company’s next AGM. Such a request must be made not later than six weeks before the AGM to which the request relates or, if later, the time notice is given of the AGM. The request may be in hard copy or electronic form, must identify the resolution of which notice is to be given and must be authenticated by the shareholders making it. Shareholders are also able to put forward proposals to shareholder meetings and enquiries to the Board and/or the Senior Independent Director by using the ‘contact us’ information on the Company’s website sc.com or by emailing the Group Corporate Secretariat at group-corporate.secretariat@sc.com Notifiable interests Temasek Holdings (Private) Limited BlackRock Inc. Information provided to the Company pursuant to the FCA’s DTRs is published on a Regulatory Information Service and on the Company’s website. As at 16 February 2024, the Company has been notified of the following information, in accordance with DTR 5, from holders of notifiable interests in the Company’s issued share capital. The information provided in the table below was correct at the date of notification; however, the date received may not have been within 2023. It should be noted that these holdings are likely to have changed since the Company was notified. However, notification of any change is not required until the next notifiable threshold is crossed. Interest in ordinary shares (based on voting rights disclosed) 474,751,383 183,640,172 Percentage of capital disclosed 16.00 5.55 Nature of holding as per disclosure Indirect Indirect (5.01%) Securities Lending (0.39%) Contracts for Difference (0.14%) Dodge & Cox 150,620,884 5.08 Indirect Related party transactions Details of transactions with directors and officers and other related parties are set out in Note 36 to the financial statements. Connected/continuing connected transactions By virtue of its shareholding of over 10 per cent in the Company, Temasek and its associates are related parties and connected persons of the Company for the purposes of the UK Listing Rules and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“HKEx”) (“the HK Listing Rules”) respectively (together “the Rules”). 220 Standard Chartered – Annual Report 2023Directors’ reportOther disclosuresThe Rules are intended to ensure that there is no favourable treatment to Temasek or its associates to the detriment of other shareholders in the Company. Unless transactions between the Group and Temasek or its associates are specifically exempt under the Rules or are subject to a specific waiver, they may require a combination of announcements, reporting and independent shareholders’ approval. On 12 November 2021, the HKEx extended a waiver (the “Waiver”) it previously granted to the Company for the revenue banking transactions with Temasek which do not fall under the passive investor exemption (“the Passive Investor Exemption”) under Rules 14A.99 and 14A.100 of the HK Listing Rules. Under the Waiver, the HKEx agreed to waive the announcement requirement, the requirements to enter into written agreements and to set annual caps, and the annual report disclosure (including annual review) requirements under Chapter 14A of the HK Listing Rules for the three-year period ending 31 December 2024 on the conditions that: a) The Company will disclose details of the Waiver (including nature of the revenue banking transactions with Temasek and reasons for the Waiver) in subsequent annual reports; and b) The Company will continue to monitor the revenue banking transactions with Temasek during the three years ending 31 December 2024 to ensure that the 5 per cent threshold for the revenue ratio will not be exceeded. The main reasons for seeking the Waiver were: • The nature and terms of revenue banking transactions may vary and evolve over time; having fixed-term written agreements would not be suitable to accommodate the various banking needs of the Company’s customers (including Temasek) and would be impractical and unduly burdensome. • It would be impracticable to estimate and determine an annual cap on the revenue banking transactions with Temasek as the volume and aggregate value of each transaction are uncertain and unknown to the Company as a banking group due to multiple factors including market driven factors. • The revenues generated from revenue banking transactions were insignificant. Without a waiver from the HKEx or an applicable exemption, these transactions would be subject to various percentage ratio tests which cater for different types of connected transactions and as such may produce anomalous results. As a result of the Passive Investor Exemption and the Waiver, the vast majority of the Company’s transactions with Temasek and its associates fall outside of the connected transactions regime. However, non-revenue transactions with Temasek or any of its associates continue to be subject to monitoring for connected transaction issues. The Company confirms that: • The revenue banking transactions entered into with Temasek and its associates in 2023 were below the 5 per cent threshold for the revenue ratio test under the HK Listing Rules; and • It will continue to monitor revenue banking transactions with Temasek during the three years ending 31 December 2024 to ensure that the 5 per cent threshold for the revenue ratio will not be exceeded. The Company therefore satisfied the conditions of the Waiver. Fixed assets Details of additions to fixed assets are presented in Note 18 to the financial statements. Loan capital Details of the loan capital of the Company and its subsidiaries are set out in Notes 22 and 27 to the financial statements. Debenture issues and equity-linked agreements During the financial year ended 31 December 2023, the Company made no issuance of debentures. Further details of the equity-linked agreements the Group entered into can be found in Note 28 to financial statements. Risk management1 The Board is responsible for maintaining and reviewing the effectiveness of the risk management system. An ongoing process for identifying, evaluating and managing the significant risks that we face is in place. The Board is satisfied that this process constitutes a robust assessment of all of the principal risks, topical and emerging risks and integrated risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. 1 The Group’s Risk Management Framework and System of Internal Control applies only to wholly controlled subsidiaries of the Group, and not to Associates, Joint Ventures or Structured Entities of the Group. Key areas of risk on financial instruments for the directors included the impairment of loans and advances and valuation of financial instruments held at fair value. This risk assessment and management is explained further in the Audit Committee Key areas and Action taken on pages 163 and 164. The Risk review and Capital review on pages 44 to 51, and 314 to 337 sets out the principal risks, topical and emerging risks and integrated risks, our approach to risk management, including our risk management principles, an overview of our Enterprise Risk Management Framework and the risk management and governance practices for each principal risk type. The Board-approved Risk Appetite Statement can be found on pages 47, and 314 to 337 In accordance with Article 435(1)(e) of the Disclosure (CRR) Part of the PRA Rulebook, the Board Risk Committee, on behalf of the Board, has considered the adequacy of the risk management arrangements of the Group and has sought and received assurance that the risk management systems in place are adequate with regard to the Group’s profile and strategy. 221 Standard Chartered – Annual Report 2023Directors’ reportInternal control2 The Board is responsible for maintaining and reviewing the effectiveness of the internal control system. Its effectiveness is reviewed regularly by the Board, its committees, the Management Team and Group Internal Audit. For the year ended 31 December 2023, the Board Risk Committee has reviewed the effectiveness of the Group’s system of internal control and discussed a report on the 2024 annual risk and control self-assessment. Group Internal Audit represents the third line of defence and provides independent assurance of the effectiveness of management’s control of business activities (the first line) and of the control processes maintained by the Risk Framework Owners and Policy Owners (the second line). The audit programme includes obtaining an understanding of the processes and systems under audit review, evaluating the design of controls, and testing the operating effectiveness and outcomes of key controls. The work of Group Internal Audit is focused on the areas of greatest risk as determined by a risk-based assessment methodology. The Board considers the internal control systems of the Company to be effective and adequate. 2 The Group’s Risk Management Framework and System of Internal Control applies only to wholly controlled subsidiaries of the Group, and not to Associates, Joint Ventures or Structured Entities of the Group. Group Internal Audit reports regularly to the Audit Committee, the Group Chairman and the Group Chief Executive; and the Group Head, Internal Audit reports directly to the Chair of the Audit Committee and administratively to the Group Chief Executive. The findings of all adverse audits are reported to the Audit Committee, the Group Chairman and the Group Chief Executive where immediate corrective action is required. The Board Risk Committee is responsible for exercising oversight, on behalf of the Board, of the key risks of the Group. It reviews the Group’s Risk Appetite Statement and Enterprise Risk Management Framework and makes recommendations to the Board. The Audit Committee is responsible for oversight and advice to the Board on matters relating to financial, non-financial and narrative reporting. The Committee’s role is to review, on behalf of the Board, the Group’s internal controls including internal financial controls. The Audit Committee receives and discusses a paper on the internal controls for financial books and records. The risk management approach starting on page 314 describes the Group’s risk management oversight committee structure. Our business is conducted within a developed control framework, underpinned by policy statements and standards. There are written policies and standards designed to ensure the identification and management of risk, including Credit Risk, Traded Risk, Treasury Risk, Operational and Technology Risk, Information and Cyber Security Risk, Compliance Risk, Financial Crime Risk, Model Risk and Reputational and Sustainability Risk. This framework incorporates the Group’s internal controls on financial reporting. The Board has established a management structure that clearly defines roles, responsibilities and reporting lines. Delegated authorities are documented and communicated. Executive risk committees regularly review the Group’s risk profile. The performance of the Group’s businesses is reported regularly to senior management and the Board. Performance trends and forecasts, as well as actual performance against budgets and prior periods, are monitored closely. Group financial information is prepared in accordance with UK-adopted International Accounting Standards and International Financial Reporting Standards as adopted by the European Union, and financial reporting is subject to the Group’s control framework for reconciliation processes. Operational procedures and controls have been established to facilitate complete, accurate and timely processing of transactions and the safeguarding of assets. These controls include appropriate segregation of duties, the regular reconciliation of accounts and the valuation of assets and positions. In respect of handling inside information, we have applied controls to help ensure only those explicitly required receive inside information as well as controls regarding the onward dissemination of inside information. Controls are also in place to approve and review dealings in the Company’s shares. Such systems and controls are designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. Employee policies and engagement We work hard to ensure that our employees are kept informed about matters affecting or of interest to them, and more importantly that they have opportunities to provide feedback and engage in a dialogue. We strive to listen and act on feedback from colleagues to ensure internal communications are timely, informative, meaningful, and in support of the Group’s strategy and transformation. In November 2023, we launched our new employee communications platform – Pulse. Pulse will become our primary internal communications channel that will allow colleagues to receive key dynamic updates that are personalised by role and location, sign up for events, provide feedback, and navigate to other internal platforms. In addition to targeted digital communications, we also deploy audio and video calls, virtual and face-to-face townhalls, and other staff engagement and recognition events. To continue to improve the way we communicate and ensure our employee communications remain relevant, we also periodically analyse and measure the impact of our communications through a range of survey and feedback tools. Our senior leaders and people leaders play a critical 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. We offer additional support to our people leaders with specific calls and communications packs to help them provide context and guidance to their team members to better understand their role in executing and delivering the Group’s strategy. 222 Standard Chartered – Annual Report 2023Directors’ reportOther disclosuresAcross the organisation, regular team meetings with people leaders, one-to-one conversations and various management meetings provide an important platform for colleagues to discuss and clarify key issues. Regular performance conversations provide the opportunity to discuss how individuals, the team and the business area have contributed to our overall performance and how any recognition and reward relate to this. The Group’s senior leadership also regularly shares global, business, function, region and market updates on performance, strategy, structural changes, HR programmes, community involvement and other campaigns. The Board also engages with and listens to the views of the workforce through several sources, including through interactive engagement sessions. More information can be found on page 161 in the Directors’ report. Employees past, present and future can follow our progress through the Group’s LinkedIn network and Facebook page, as well as other social network channels including Instagram, which collectively have over 2.7 million followers. The diverse range of internal and external communication tools and channels we have put in place aim to ensure that all colleagues receive timely and relevant information to support their effectiveness. The wellbeing of our employees is central to our thinking about benefits and support, so that they can thrive at work and in their personal lives. Our Group minimum standards provide employees with a range of flexible working options, in relation to both location and working patterns. In terms of leave, employees are provided with at least 30 days’ leave (through annual leave and public holidays), and new parents are provided a minimum of 20 calendar weeks’ fully paid leave irrespective of gender, relationship status or how a child comes to permanently join a family. These are above the International Labour Organisation’s (ILO) minimum standards. We seek to build productive and enduring partnerships with various employee representative bodies (including unions and work councils). In our recognition and interactions, we are heavily influenced by the 1948 United Nations Universal Declaration of Human Rights (UDHR), and several ILO conventions including the Right to Organise and Collective Bargaining Convention, 1949 (No. 98) and the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87). 12.6 per cent of employees, across 20 markets, have collective representation through unions or employee representative bodies. The working conditions and terms of employment of other employees are based on our Group and country policies, and in accordance with individual employment contracts issued by the Group. The Group Grievance Standard provides a formal framework for dealing with concerns that employees have in relation to their employment or another colleague, which affect them directly, and cannot be resolved through informal mechanisms, such as counselling, coaching or mediation. This can include concerns related to bullying, harassment, discrimination and victimisation, as well as concerns regarding conditions of employment (for example, working practices or the working environment). Employees can raise grievances to their People Leader or a Human Resources (HR) Representative. The global process for addressing grievances involves an HR representative and a member of the business reviewing the grievance, conducting fact finding into the grievance and providing a written outcome to the aggrieved employee. Where employees raise concerns regarding alleged wrongdoing which does not pertain to those employees themselves, or in circumstances where the alleged wrongdoing does pertain to the employees themselves but they do not wish to raise a grievance, such concerns are investigated in accordance with the Group Investigations Standard. If a grievance or investigation is upheld, the next steps might include remedying a policy or process, or initiating a disciplinary review of the conduct of the colleague who is the subject of the concern. The Group Grievance Standard and accompanying process is reviewed on a periodic basis in consultation with stakeholders across HR, Legal, Compliance and Shared Investigative Services. Grievance trends are reviewed on a quarterly basis and action is taken to address any concerning trends. There is a distinct Group Speaking Up Policy and Standard which covers instances where an employee wishes to ‘blow the whistle’ on actual, planned or potential wrongdoing by another employee or the Group. The Group is committed to creating a fair, consistent and transparent approach to making decisions in a disciplinary context. This commitment is codified in our Fair Accountability Principles, which underpin our Group Disciplinary Standard. Dismissals due to misconduct issues and/or performance (where required by law to follow a disciplinary process) are governed by the Group Disciplinary Standard. Where local law or regulation requires a different process with regards to dismissals and other disciplinary outcomes, we have country variances in place. 223 Standard Chartered – Annual Report 2023Directors’ reportOur Group Diversity and Inclusion Standard has been developed to ensure a respectful workplace, with fair and equal treatment, diversity and inclusion, and the provision of opportunities for employees to participate fully and reach their full potential in an appropriate working environment. The Group aims to provide equality of opportunity for all, protect the dignity of employees and promote respect at work. All individuals are entitled to be treated with dignity and respect, and to be free from harassment, bullying, discrimination and victimisation. This helps to support productive working conditions, decreased staff attrition, positive employee morale and engagement, maintains employee wellbeing, and reduces people-related risk. All colleagues are responsible for fostering an inclusive culture where individuality and differing skills, capabilities and experience are understood, respected and valued. All colleagues, consultants, contractors, volunteers, interns, casual workers and agency workers are required to comply with the Standard, including conducting themselves in a manner that demonstrates appropriate, non-discriminatory behaviours. We do not accept unlawful discrimination in our recruitment or employment practices on any grounds including but not limited to: sex, race, colour, nationality, ethnicity, national or indigenous origin, disability, age, marital or civil partner status, pregnancy or maternity, sexual orientation, gender identity, expression or reassignment, HIV or AIDS status, parental status, military and veterans status, flexibility of working arrangements, religion or belief. We are committed to provide equal opportunities and fair treatment in recruitment, appraisals, pay and conditions, training, development, succession planning, promotion, grievance/disciplinary procedures and employment termination practices, that are inclusive and accessible; and that do not directly or indirectly discriminate. Recruitment, employment, training, development and promotion decisions are based on the skills, knowledge and behaviour required to perform the role to the Group’s standards. Implied in all employment terms is the commitment to equal pay for equal work. We also endeavour to make reasonable workplace adjustments (including during the hiring process) to ensure all individuals feel supported and are able to participate fully and reach their potential. If employees become disabled, we will aim to support them with appropriate training and workplace adjustments where possible and to support their continued employment. Health, Safety and Wellbeing Our Health, Safety and Wellbeing (HSW) vision is to support employee productivity through a healthy and resilient workforce, and our mission is for employees to deliver every day in a safe, secure and resilient way. Our corporate 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 minimum. Compliance rates are reported at least biannually to each country’s Management Team. We follow the International Labour Organisation (ILO) code of practice on recording and notification of occupational accidents and diseases, and guidance published by the UK Health and Safety Executive (HSE), and ensure that we meet all local Health and Safety (H&S) regulatory reporting requirements. We record and report all work- related illness and injuries, including from sub-contractors, visitors and clients. HSW performance and risks are reported annually to the Group Risk Committee and Board Risk Committee. We use an H&S management system and local regulatory compliance tracker across all countries to ensure a consistently high level of H&S reporting and compliance for all our colleagues and clients. The Group sponsors medical and healthcare services for all employees, except in markets where cover is provided through State-mandated healthcare, which represent less than 0.6 per cent of the Group’s employees. Across the Group, support for employee mental wellbeing is available. All employees have access to professional counselling via our Employee Assistance Programme, as well as to more proactive mental health support through our holistic wellbeing app and wellbeing platform. Our global Mental Health First Aid (MHFA) programme offers help to anyone developing a mental health problem, experiencing a worsening of an existing mental illness or a mental health crisis. The mental health support is given until appropriate professional help is received, or the crisis resolved. To date we have trained more than 600 mental health first aiders in 51 markets, covering over 99 per cent of colleagues. In 2023, we recorded two work-related fatalities. A contractor was tragically and fatally injured while crossing a road on her way to work in Nigeria. An employee was tragically and fatally injured in a road accident in India. Major injuries (per the UK HSE definition) decreased from 20 in 2022 to 16, with fractures the most common type of major injury (75 per cent). Overall, reported injuries increased by 28 per cent, with ‘slips/trips/falls’ and ‘transport/commuting’ remaining the most common causes of injury. The overall increase in reported injuries was a post COVID result, with all markets moving into the new normal in 2023. Our injury rates remain aligned to, or better than industry benchmarks. Hazards and near-miss reports decreased 4 per cent between 2022 and 2023. In 2023, we ran a back-to-basics programme to re-establish commitment and responsibility in safety and security at all levels, and address post pandemic and new normal practices. All premises are inspected at least annually to identify any hazards, risks and incidences of non-compliance. HSW communication is provided through mandatory training for all new joiners, along with annual refreshers. In 2023, we also created a pathway in the Group’s learning platform using engaging bite-sized video content to help educate colleagues on their responsibilities to keep the Group safe. The Group celebrated World Day for Safety and Health at Work in April with the theme ‘Safety is Everyone’s Responsibility’ in line with the back-to-basics intent. 224 Standard Chartered – Annual Report 2023Directors’ reportOther disclosuresOne hundred and fifty eight (158) buildings, which covers more than 90 per cent of our employees, were certified with the WELL Health & Safety Rating; an evidence-based, third-party certification that validates our efforts to address the hygiene and safety of our workspaces. Four major head office projects also obtained the broader WELL certification. Our regular Office and Home Working Experience survey, conducted across 49 markets, demonstrated continued high scores around wellbeing with 80 per cent of respondents agreeing that the workplace has a positive impact on their wellbeing and 87 per cent saying they are able to be physically active and maintain a healthy work–life balance. In 2023, all of the Group’s markets saw relaxation of COVID restrictions with business moving to new normal, and continued uptake of the Group’s Future Workplace Now (flexible working) programme. An ergonomic online assessment tool is available for employees to assess their home working area for hazards, with a virtual assessment of the individual’s work environment, and a workplace adjustment procedure available for employees who require support based on personal circumstances. Our work injury insurance covers all employees working from home. Business travel returned to pre-pandemic levels in 2023, and we put together a Travel Risk Management Framework aligned to ISO 31030:2021 Travel Risk Management Standards and supported by external travel risk and security advisers at International SOS to support travellers. Major customers Our five largest customers together accounted for 2.1 per cent of our total operating income in the year ended 31 December 2023. Major suppliers In 2023, USD $4.479 billion was spent with 11,563 suppliers. Of this, 74 per cent of the total spend was spent in the Asia region, with 18 per cent in Europe and the Americas, and 8 per cent in Africa and the Middle East. Furthermore, 80 per cent of total spend in 2023 was with 474 suppliers. In addition, 80 per cent of carbon emissions were with 481 suppliers (excluding air travel suppliers). In 2023, our five largest suppliers together accounted for 14.8 per cent of total spend, with the largest ten amounting to 23 per cent of total spend. Supply chain management To support the operation of our businesses we source a variety of goods and services governed through a third-party risk management framework through which we aim to follow the highest standards in terms of supplier selection, due diligence and contract management. For information about how the Group engages with suppliers on environmental and social matters, please see our Supplier Charter and Supplier Diversity and Inclusion Standard. Our Supplier Charter and Supplier Diversity and Inclusion standard can be viewed at sc.com/suppliercharter and sc.com/supplierdiversity Details of how we create value for our suppliers and other stakeholder groups can be found on pages 58 and 59 Product responsibility We aim to design and offer products based on client needs to ensure fair treatment and outcomes for clients. The Group has in place a risk framework, comprising policies, standards and controls to support these objectives in alignment with our Conduct Risk Framework. This framework covers sales practices, client communications, appropriateness and suitability, and post-sales practices. There are controls across all activities above and the controls are tested on a regular basis to provide assurance on the framework. As part of this, we ensure products sold are suitable for clients and comply with relevant laws and regulations. We also review our products on a periodic basis and refine them to keep them relevant to the changing needs of clients and to meet regulatory obligations. We have processes and guidelines specific to each of our client industries, to promptly resolve client complaints and understand and respond to client issues. Conduct considerations are given significant weighting in frontline incentive structures to drive the right behaviours. For more information on our approach to product design, product pricing, treating customers fairly and protecting customers, and incentivising our frontline employees, see pages 55 and 56. For more information on fraud identification see page 131. Safeguarding intellectual property rights The Group has processes in place to manage the Group’s trade mark rights and it respects third-party intellectual property rights. Group Code of Conduct The Board has adopted a Group Code of Conduct and Ethics (the Code) relating to the lawful and ethical conduct of business and this is supported by the Group’s valued behaviours. This has been communicated to all directors and employees, all of whom are expected to observe high standards of integrity and fair dealing in relation to customers, employees and regulators in the communities in which the Group operates. Directors and employees are asked to recommit to the Code annually, and 99.75 per cent have completed the 2023 recommitment. All Board members have recommitted to the Code. Community engagement We collaborate with local partners to support social and economic development in communities across our footprint. We aim to create more inclusive economies by sharing our skills and expertise and supporting community initiatives that transform lives. Established in 2019, Futuremakers by Standard Chartered is our global youth economic empowerment initiative, helping disadvantaged young people learn, earn and grow. We are committed to improving economic participation and equitable access to finance for young women and microbusinesses. For more information on Futuremakers, as well as our employee volunteering and community expenditure, please see pages 97 and 98. 225 Standard Chartered – Annual Report 2023Directors’ reportESG reporting guide Compliance with Listing Rules We comply with the requirements of the ESG Reporting Guide contained in Appendix C2 to The Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited. With respect to the key performance indicators (KPIs) noted in Part C: “Comply or explain” provisions, the Group does not report on KPI A1.3 and KPI A1.6 related to the production and handling of hazardous waste; KPI A2.5 related to packaging materials used for finished products; KPI B2.2 related lost days due to work injury; KPI B6.1 total products recalled due to safety and health reasons, and KPI B6.4 product recall procedures. As an office-based financial services provider these issues were not deemed material. For further information related to Aspect B4 Labour Standards and B5 Supply Chain Management, please also refer to the Group’s annual Modern Slavery Statement. Compliance with Task Force on Climate-related Financial Disclosures (TCFD) In line with our “comply or explain” obligation under the UK’s Financial Conduct Authority’s Listing Rules, we can confirm that we have made disclosures consistent with the TCFD recommendations and recommended disclosures in this Annual Report. Our TCFD disclosures also meet the new climate-related financial disclosure requirements contained in section 414CB of the Companies Act 2006. We have also taken into account the implementation guidance included in the TCFD 2021 Annex. Further information on net zero progress and financed emissions is available on pages 104 to 117. For a detailed TCFD summary and alignment index referencing relevant disclosures see page 511 to 516. Modern Slavery Act The Group publishes a Modern Slavery Statement annually. This document gives further detail on the actions the Group has taken as it seeks to prevent modern slavery and human trafficking in its operations (workforce), financing and supply chain. The Group publishes a Statement under the UK Modern Slavery Act 2015 for the financial year ending 31 December 2023. See more via sc.com/modernslavery Sustainable finance taxonomies Standard Chartered continues to assess the applicability of sustainable finance taxonomies across the Group’s footprint. Reporting has commenced in several markets in Asia in accordance with local sustainable finance taxonomy regulatory requirements. An assessment on the applicability and implementation timeline of the EU Corporate Sustainability Reporting Directive (CSRD) for Standard Chartered Bank AG and Standard Chartered PLC has also been undertaken. Preparatory work has commenced to embed EU Taxonomy classifications and metrics. We will continue to monitor expected policy developments from the UK and the European Commission concerning guidance on taxonomy alignment and technical screening criteria to incrementally enhance our assessment and support reporting as required. The Group is developing scalable digital capability to facilitate reporting against taxonomies being developed across the jurisdictions in which the Group operates. The solution adopts a rules-based approach to assess whether a client and any client activity with the Group is in-scope and eligible for taxonomy reporting and will facilitate broader implementation of taxonomy compliance by relevant Group entities as and when compliance implementation will be required. Taxonomy data availability and quality will continue to evolve via client engagement, data vendors and partnerships. The Group will consider applicable taxonomy alignment in our business decisions, including at a client and transaction level, as well as more broadly at a sector strategy level. Given our footprint across Europe and the UK, Asia, Africa and the Middle East, we need to continually assess taxonomy- alignment requirements based on information available from clients and through our due diligence processes. Environmental impact of our operations We aim to minimise the environmental impact of our operations as part of our commitment to be a responsible company. We report on the actions we take to reduce energy and water usage and non-hazardous waste generated in our operations in the Sustainability Review on page 106 and in the Supplementary sustainability information section on pages 505 and 506. Our reporting methodology is based on the ‘The Greenhouse Gas Protocol – A Corporate Accounting and Reporting Standard (Revised Edition)’. We have adopted the operational control approach to define our reporting boundary for GHG Scope 1 and 2 emissions. For Scope 3 financed emissions, boundaries are noted for each high-emitting sector in the ‘Our approach to measuring financed emissions’ table in the Sustainability Review. Information on the principles and methodologies used to calculate the GHG emissions of the Group can be found in our Environmental Reporting Criteria document at sc.com/environmentcriteria. Reporting period, boundary and scope We report on Sustainability and Environmental, Social and Governance (ESG) matters throughout this Annual Report, in particular in the following sections: (i) Strategic report, Sustainability overview on pages 66 to 79; (ii) Sustainability review on pages 92 to 133; (iii) Risk review on pages 298 to 313; and (iv) in the Supplementary sustainability information section on pages 504 to 516. The Sustainability and ESG information in this Annual report was compiled for the financial year 1 January to 31 December 2023, unless otherwise specified. The reporting period of operational environmental performance indicators is from 1 October 2022 to 30 September 2023. This allows sufficient time for independent third-party assurance to be completed prior to the publication of the Group’s Annual Report. Accordingly, the operating income used for associated environmental intensity metrics corresponds to the same time period, rather than the calendar year used in financial reporting. There was no significant change in the boundary and scope of this Annual Report from that of Standard Chartered PLC Annual Report 2022, published on 16 February 2023. 226 Standard Chartered – Annual Report 2023Directors’ reportOther disclosuresAssurance Our Scope 1 and 2 emissions are assured by an independent company, Global Documentation, against the requirements of ISO 14064. The Group as disclosed GHG emissions and energy consumption data as required by the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. Units 2023 2022 2021 Reporting coverage of data Annual operating income from 1 October to 30 September Net internal area of occupied property $ million m2 17,414 880,515 15,863 946,234 14,541 998,571 GHG emissions Scope 1 & 2: Scope 1 emissions Scope 2 emissions (location-based)² Scope 2 emissions (market-based)3 Scope 1 & 2 emissions (market-based)3 Scope 1 & 2 emissions (UK and offshore area only) GHG emissions – Intensity: tCO2e tCO2e tCO2e tCO2e tCO2e 8,488¹ 85,741 26,246 34,734 248 Total Scope 1 &2 emissions (market-based)/ intensity tCO2e/$ million 2 Environmental resource efficiency Energy Indirect non-renewable energy consumption Indirect renewable energy consumption Direct non-renewable energy consumption Direct renewable energy consumption Energy consumption Energy consumption (UK and offshore area only) GWh GWh GWh GWh GWh GWh 142 16 13 2 173 6 2,071 89,410 47,363 49,434 2,902 96,256 82,761 85,663 – 3 142 24 10 1 177 6 – 6 142 28 12 1 183 5 1 Scope 1 figure includes fugitive emissions for the first time in 2023 (2023: 5,266 tCO2e). Prior year data was not available for fugitive emissions. For more information on the methodology and assumptions used to calculate GHG emissions, please refer to the Environmental Reporting Criteria at sc.com/sustainabilityhub. 2 Location based emissions have been restated for prior comparative periods. Emissions erroneously included renewable energy certificates and power purchase agreements. Other scope 2 reductions outside clean power are attributed to footprint reduction and efficiency gains. 3 Market based emissions have decreased from 2022 to 2023 due to footprint reduction, efficiency gains and the purchase of additional energy attribution certificates by the Group. Further detail on our environment performance can be found on pages 104 to 117; associated assumptions and methodologies in our reporting criteria document at sc.com/environmentalcriteria Electronic communication The Board recognises the importance of good communications with all shareholders. Directors are in regular contact with our institutional shareholders and general presentations are made when we announce our financial results. The AGM presents an opportunity to communicate with all shareholders. Our shareholders are encouraged to receive our corporate documents electronically. The annual and interim financial statements, Notice of AGM and any dividend circulars are all available electronically. If you do not already receive your corporate documents electronically and would like to do so in future, please contact our registrars at the address on page 517. Shareholders are also able to vote electronically on the resolutions being put to the AGM through our registrars’ website at investorcentre.co.uk. Annual General Meeting Our 2024 AGM will be held at 11:00am (UK time) (6:00pm Hong Kong time) on 10 May 2024. Further details regarding the format, location and business to be transacted will be disclosed within the 2024 Notice of AGM. Our 2023 AGM was held on 3 May 2023 at 11:00am (UK time) (6:00pm Hong Kong time). Special business at the meeting included the approval of the power to allot ECAT1 Securities for cash without certain formalities. 227 Standard Chartered – Annual Report 2023Directors’ reportThe Policy is not a prescribed list of non-audit services that EY is permitted to provide. Rather, each request for EY to provide non-audit services will be assessed on its own merits. The Audit Committee believes that such a case-by-case approach best accommodates (i) the need for the appropriate rigour and challenge to be applied to each request for EY to provide non-audit services while (ii) preserving sufficient flexibility for the Group to engage EY to provide non-audit services where they are able to deliver particular value to the Group and where the proposed services can be provided without compromising EY’s objectivity and independence. To ensure that the Group will comply with a cap that limits fees on non-audit services provided by EY to under 70 per cent of the average Group audit fee from the previous three consecutive financial years (which will apply from EY’s fourth year of being the Group’s external auditor), the Policy requires that annual non-audit service fees are lower than 70 per cent of the average annual Group audit fee up to this time. The caps exclude audit related non-audit services and services carried out pursuant to law or regulation. For 2023, without deducting non-audit service fees which were required by law or regulation and performed by EY, the ratio was 0.3:1. Details relating to EY’s remuneration as the Group statutory auditor and a description of the broad categories of the types of non-audit services provided by EY are given in Note 38 to the financial statements. Auditor The Audit Committee reviews the appointment of the Group’s statutory auditor, its effectiveness and its relationship with the Group, which includes monitoring our use of the auditors for non-audit services and the balance of audit and non-audit fees paid. Following an annual performance and effectiveness review of EY, it was felt that EY is considered to be effective, objective and independent in its role as Group statutory auditor. Each director believes that there is no relevant information of which our Group statutory auditor is unaware. Each has taken all steps necessary as a director to be aware of any relevant audit information and to establish that the Group statutory auditor is made aware of any pertinent information. EY will be in attendance at the 2024 AGM. A resolution to re-appoint EY as auditor was proposed at the Company’s 2023 AGM and was successfully passed. EY is a Public Interest Entity Auditor recognised in accordance with the Hong Kong Financial Reporting Council Ordinance. By order of the Board Adrian de Souza Group Company Secretary 23 February 2024 Standard Chartered PLC Registered No. 966425 Non-audit services The Group’s non-audit services policy (the Policy) was reviewed and approved by the Audit Committee on 23 October 2023. The Policy is based on an overriding principle that, to avoid any actual or perceived conflicts of interest, the Group’s auditor should only be used when there is evidence that there is no alternative in terms of quality and when there is no conflict with their duties as auditor. EY can be used where the work is required by a regulator or competent authority. The Policy clearly sets out the criteria for when the Audit Committee’s prior written approval is required. The Policy requires a conservative approach to be taken to the assessment of requests for EY to provide non-audit services. Subject to the overriding principle, the Audit Committee’s view is that EY can be of value in a range of non-audit service activities and should be allowed to tender subject to the terms of the Policy. The Group is required to take a conservative approach to interpreting the potential threats to auditor independence and requires commensurately robust safeguards against them. UK legislation and guidance from the FRC sets out threats to audit independence, including self-interest, self-review, familiarity, taking of a management role or conducting advocacy. In particular, maintaining EY’s independence from the Group requires EY to avoid taking decisions on the Group’s behalf. It is also recognised as essential that management retains the decision-making capability as to whether to act on advice given by EY as part of a non-audit service. This means not just the ability to action the advice given, but to have sufficient knowledge of the subject matter to be able to make a reasoned and independent judgement as to its validity. All of this is contained within the Policy. By way of (non-exhaustive) illustration of the application of the principles set out in the Policy, the following types of non-audit services are likely to be permissible under the Policy: • Reviews of interim financial information and verification of interim profits – the Group would also extend this to work on investor circulars in most foreseeable circumstances • Extended audit or assurance work on financial information and/or financial or operational controls, where this work is closely linked to the audit engagement • Agreed-upon procedures on materials within or referenced in the Annual Report of the Group or an entity within the Group • Internal control review services Strictly prohibited under the Policy: • Bookkeeping, information technology and internal audit services • Corporate finance services, valuation services or litigation support • Tax or regulatory structuring proposals • Services where fees are paid on a contingent basis (in whole or in part) • Consulting services that actively assist in running the business in place of management as opposed to providing or validating information, which management then utilises in the operation of the business 228 Standard Chartered – Annual Report 2023Directors’ reportOther disclosuresStatement of directors’ responsibilities The directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group and Company financial statements for each financial year. Under that law: • The Group financial statements have been prepared in accordance with UK-adopted International Accounting Standards and International Financial Reporting Standards as adopted by the European Union; • The Company financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards as applied in accordance with section 408 of the Companies Act 2006; and • The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Under company law the directors must not approve the financial statements unless they are satisfied 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 financial statements, the directors are required to: • Select suitable accounting policies 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-adopted International Accounting Standards and International Financial Reporting Standards as adopted by the European Union; • Assess the Group and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements differ from legislation in other jurisdictions. Responsibility statement of the directors in respect of the annual financial report We confirm that to the best of our knowledge: • The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • The Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the emerging risks and uncertainties that they face We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. By order of the Board • Use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so Diego De Giorgi Group Chief Financial Officer 23 February 2024 The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control1 as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility 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 irregularities. 229 Standard Chartered – Annual Report 2023Directors’ reportRisk review Strategic report Section heading Risk review and Capital review 234 Risk profile 298 Climate risk 314 Enterprise Risk Management Framework 320 Principal risks 338 Capital review [[Thousands run our 2023 marathons]] In 2023, more than 160,000 elite runners, passionate amateurs and first-timers completed our sponsored marathons and races. We sponsor marathons in Singapore, Hong Kong, Taipei, Nairobi, Kuala Lumpur, Stanley (Falkland Islands) and Jersey, as well as a 10km run in Shanghai and a 5km run in London. These events champion a range of charitable causes, including underprivileged communities, healthcare, education, and the environment. We sponsored our first marathon in 1997 in Hong Kong and will introduce our first heritage marathon in Vietnam in 2024 – our 10th annual race. Read more at sc.com/marathons 230 Standard Chartered – Annual Report 2023 R i s k r e v i e w a n d C a p i t a l r e v i e w Standard Chartered – Annual Report 2023 231 Risk review and Capital review Risk Index Risk profile Credit risk Basis of preparation Credit risk overview Impairment model Staging of financial instruments IFRS 9 expected credit loss principles and approaches Summary of Performance in 2023 Maximum exposure to credit risk Analysis of financial instrument by stage Credit quality analysis • Credit quality by client segment • Credit quality by geographic region Movement in gross exposures and credit impairment for loans and advances, debt securities, undrawn commitments and financial guarantees Movement of debt securities, alternative tier one and other eligible bills Analysis of Stage 2 balances Credit impairment charge Problem credit management and provisioning • Forborne and other modified loans by client segment • Forborne and other modified loans by region • Credit-impaired (stage 3) loans and advances by geographic region Credit risk mitigation • Collateral • Collateral held on loans and advances • Collateral – Corporate, Commercial & Institutional Banking • Collateral – Consumer, Private & Business Banking • Mortgage loan-to-value ratios by geography • Collateral and other credit enhancements possessed or called upon • Other Credit risk mitigation Other portfolio analysis • Maturity analysis of loans and advances by client segment • Credit quality by industry • Industry and Retail Products analysis of loans and advances by geographic region • Vulnerable, cyclical and high carbon sectors • China commericial real estate • Debt securities and other eligible bills IFRS 9 expected credit loss methodology Traded risk Market risk movements Counterparty Credit risk Derivative financial instruments Credit risk mitigation Liquidity and Funding risk Liquidity & Funding risk metrics Liquidity analysis of the Group’s balance sheet Interest Rate risk in the Banking Book Operational and Technology risk Operational and Technology risk profile Other principal risks 232 Annual Report and Accounts 234 234 234 234 234 234 235 237 238 240 240 248 248 251 256 257 257 257 258 258 258 259 259 259 260 261 261 262 262 262 263 264 265 271 272 273 286 286 289 289 290 290 293 296 297 297 297 Standard Chartered – Annual Report 2023Risk reviewIndexRisk Index Climate risk Managing financial and non-financial risks from climate change Assessing the resilience of our strategy using scenario analysis Risk management approach Enterprise Risk Management Framework Capital Principal Risks Capital summary • Capital ratio • Capital base Movement in total capital Risk-weighted asset Leverage ratio Annual Report and Accounts 298 309 314 320 338 338 339 340 341 343 The following parts of the Risk review and Capital review form part of these financial statements and are audited by the external auditors: • a) Risk review: Disclosures marked as ‘audited’ from the start of Credit risk section (page 234) to the end of other principal risks in the same section (page 297); and • b) Capital review: Tables marked as ‘audited’ from the start of ‘Capital base’ to the end of ‘Movement in total capital’, excluding ‘Total risk-weighted assets’ (pages 339 and 340). 233 Standard Chartered – Annual Report 2023Risk review and Capital reviewRisk profile Credit Risk (audited) Basis of preparation Unless otherwise stated the balance sheet and income statement information presented within this section is based on the Group’s management view. This is principally the location from which a client relationship is managed, which may differ from where it is financially 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, per Note 16 Reverse repurchase and repurchase agreements including other similar secured lending and borrowing. Credit Risk overview Credit Risk is the potential for loss due to the failure of a counterparty to meet its contractual obligations to pay the Group. Credit exposures arise from both the banking and trading books. Impairment model IFRS 9 mandates an impairment model that requires the recognition of expected credit losses (ECL) on all financial debt instruments held at amortised cost, Fair Value through Other Comprehensive Income (FVOCI), undrawn loan commitments and financial guarantees. Staging of financial instruments Financial instruments that are not already credit-impaired are originated into stage 1 and a 12-month expected credit loss provision is recognised. Instruments will remain in stage 1 until they are repaid, unless they experience significant credit deterioration (stage 2) or they become credit-impaired (stage 3). Instruments will transfer to stage 2 and a lifetime expected credit loss provision is recognised when there has been a significant change in the Credit Risk compared to what was expected at origination. The framework used to determine a significant increase in credit risk is set out below. Stage 1 • 12-month ECL • Performing Stage 2 • Lifetime expected credit loss Stage 3 • Credit-impaired • Performing but has exhibited • Non-performing significant increase in Credit Risk (SICR) IFRS 9 expected credit loss principles and approaches The main methodology principles and approach adopted by the Group are set out in the following table. Title Supplementary Information Approach for determining expected credit losses Incorporation of forward-looking information IFRS 9 methodology Determining lifetime expected credit loss for revolving products Post model adjustments Incorporation of forward-looking information Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact of non-linearity Judgemental adjustments and sensitivity to macroeconomic variables Significant increase in credit risk (SICR) Quantitative and qualitative criteria Assessment of credit-impaired financial assets Consumer and Business Banking clients CCIB and Private Banking clients Write-offs Transfers between stages Modified financial assets Movement in loan exposures and expected credit losses Forbearance and other modified loans Governance and application of expert credit judgement in respect of expected credit losses Page 273 273 280 275 275 279 282 284 284 284 248 257 284 234 Standard Chartered – Annual Report 2023Risk reviewRisk profile Summary of performance in 2023 Loans and Advances 94 per cent (31 December 2022: 93 per cent) of the Group’s gross loans and advances to customers remain in stage 1 at $273.7 billion (31 December 2022: $295.2 billion), reflecting our continued focus on high-quality origination. Stage 1 loans decreased by $21.5 billion to $274 billion (31 December 2022: $295 billion). For Corporate, Commercial and Institutional Banking (CCIB), stage 1 balances increased to 90 per cent of the gross loans and advances to customers (31 December 2022: 88 per cent), while there was an overall decrease due to reductions in the financing, insurance and non-banking sectors. Stage 1 balances for Consumer, Private and Business Banking (CPBB) decreased by $5.6 billion, mainly driven by a slowdown in mortgages sales in Korea and Hong Kong, which was partly offset by new Credit Cards and Personal Loans businesses in Asia. Stage 1 balances for Central and other items decreased by $10.8 billion due to exposure reductions to a Central Bank in the Asia region. Stage 1 cover ratio remained stable at 0.2 per cent (31 December 2022: 0.2 per cent). Stage 2 gross loans and advances to customers decreased by $1.8 billion to $11.2 billion (31 December 2022: $13 billion). This was due to CCIB exposure reductions and transfers to stage 3 in the Commercial Real Estate (CRE) sector, and exposure reductions in the Transport sector. This was partially offset by an increase in CPBB Korea and Hong Kong Mortgage portfolio and Singapore Private Banking. Higher risk exposure net increase of $1 billion from Central and other items, was due to a short-term exposure to a Central Bank in the Africa and Middle East region, which was partly offset by exposure reductions and transfers to stage 3 in CCIB. Stage 2 cover ratio increased by 0.3 per cent to 3.7 per cent (31 December 2022: 3.4 per cent). The increase was driven by Ventures due to increased delinquencies and portfolio growth mainly in Mox Bank. The increase in CCIB cover ratio was due to a decrease in expected credit losses from exposure reductions and transfers to Stage 3. The decrease in CPBB stage 2 cover ratio was mainly due to an increase in secured portfolio exposures with relatively lower Loss Given Default. Stage 3 loans decreased by $0.6 billion to $7.2 billion (31 December 2022: $7.8 billion) as a result of repayments, debt sales and write-offs in CCIB. Although the portfolio reduced year on year, China CRE clients were the major inflows this year. The CCIB stage 3 cover ratio increased by 4.5 per cent to 64 per cent as a result of repayments and incremental provisions taken (31 December 2022: 60 per cent). The CPBB stage 3 cover ratio reduced by 2.2 per cent to 51 per cent (31 December 2022: 53 per cent), due to a small exposure increase mainly in Secured wealth products. Ventures stage 3 exposures increased by $11 million to $12 million (31 December 2022: $1 million). The cover ratio after collateral remained stable at 76 per cent (31 December 2022: 76 per cent) Further details can be found in the ‘Analysis of financial instruments by stage’ section in pages 238 and 239; ‘Credit quality by client segment’ section in pages 240 to 247; ‘Credit quality by industry’ section in pages 263 and 264. Stage 3 cover ratio is also disclosed in the ‘Stage 3 cover ratio’ and ‘Credit-impaired (stage 3) loans and advances by geographic region’ sections in page 258. Maximum exposure The Group’s on-balance sheet maximum exposure to Credit Risk increased by $8.6 billion to $798 billion (31 December 2022: $790 billion). Cash at Central bank increased by $11.6 billion to $70 billion (31 December 2022: $58 billion) due to deposits placed with the US Federal Reserve. Loans to banks also increased by $5 billion to $45 billion (31 December 2022: $40 billion). Fair Value through profit and loss increased by $42 billion to $144 billion (31 December 2022: $103 billion), largely due to an increase in Debt Securities and Reverse Repos. This was partly offset by a $13 billion decrease in Derivative financial instruments, and a $23.7 billion decrease in loans and advances to customers to $287 billion (31 December 2022: $311 billion). Out of the $23.7 billion decrease in loans and advances to customers, a $10.5 billion reduction relates to reverse repos, and a $11 billion reduction relates to Amortised Cost Debt Securities, as part of the Group’s liquidity management actions. Off-balance sheet instruments increased by $28 billion to $257 billion (31 December 2022: $229 billion), which was driven by new businesses. Further details can be found in the ‘Maximum exposure to Credit Risk’ section in page 237. Analysis of stage 2 The key SICR driver that caused exposures to be classified as stage 2 remains increase in probability of default. The proportion of exposures in CCIB in stage 2 due to increased PD has decreased partly due to an increase in clients placed on non-purely precautionary early alert that have not breached PD thresholds. In CPBB, the proportion of loans in stage 2 loans from 30 days past due trigger decreased by 2 per cent to 6 per cent (31 December 2022: 8 per cent). ‘Others’ category includes exposures where origination data is incomplete and the exposures are getting allocated into stage 2. Further details can be found in the ‘Analysis of stage 2 balances’ section in page 256. Credit impairment charges The Group’s ongoing credit impairment was a net charge of $508 million (31 December 2022: $836 million). For CCIB, stage 1 and 2 impairment charges decreased by $137 million to $11 million (31 December 2022: $148 million), as 2022 included Pakistan Sovereign downgrades and China CRE overlays, which was partly offset by a $102 million full release of COVID-19 overlay. In 2023, $11 million impairment charges were due to portfolio movements, including impairments on Pakistan Sovereign clients, and China CRE overlays, which was partly offset by a $13 million net release from model and methodology updates. CCIB stage 3 impairment charges decreased by $165 million to $112 million (31 December 2022: $277 million) largely due to higher releases and lower impairments on China CRE clients. In 2023, $112 million impairment charges were largely driven by impairments on China CRE clients, and releases across multiple clients. 235 Standard Chartered – Annual Report 2023Risk review and Capital reviewFor CPBB, stage 1 and 2 impairment charges decreased by $22 million to $129 million (31 December 2022: $151 million). In 2023, $129 million impairment charges were from normal flows, largely from unsecured portfolios in China, Hong Kong, India and Singapore. This was partially offset by $21 million of COVID-19 overlay releases, including the full release of $16 million remaining COVID-19 overlays in Bahrain. CPBB stage 3 impairment charges increased by $114 million to $225 million (31 December 2022: $111 million). The increase has been driven mainly by the unsecured business due to a mix of higher bankruptcies in Singapore, Hong Kong and Korea, and portfolio growth in digital partnerships. For Ventures, stage 1 and 2 impairment charges increased by $29 million to $42 million (31 December 2022: $13 million), mainly due to portfolio growth in Mox Bank. Ventures stage 3 impairment charges increased by $40 million to $43 million (31 December 2022: $3 million), mainly due to portfolio growth in Mox Bank, and higher bankruptcies. Mitigating actions have been taken to address these. For Central and other items, stage 1 and 2 impairment charges decreased by $139 million due to a net release of $44 million (31 December 2022: $95 million) as 2022 included Pakistan Sovereign CG12 downgrades. In 2023, $44 million net release of impairment charges were driven by exposure reductions and shortening tenors of balances to the Pakistan Government. This was partly offset by a $8 million charge due to Kenya Sovereign downgrade. Central and other items stage 3 impairment charges decreased by $28 million to $10 million (31 December 2022: $38 million) as Sri Lanka and Ghana exposures were downgraded to Stage 3 in 2022. Further details can be found in the ‘Credit impairment charge’ section in page 257. Vulnerable and Cyclical Sectors Total net on-balance sheet exposure to vulnerable and cyclical sectors decreased by $3 billion to $29 billion (31 December 2022: $32 billion) largely due to the exit of the Aviation business and lower drawn balances particularly in the CRE sector, where on-balance sheet exposure decreased by $1.8 billion to $14.5 billion (31 December 2022: $16.3 billion). Stage 2 vulnerable and cyclical sector loans decreased by $2.3 billion to $3.3 billion (31 December 2022: $5.6 billion), primarily driven by a $1.4 billion exposure reduction in the CRE sector and transfers to Stage 3. Stage 3 vulnerable and cyclical sector loans decreased by $0.5 billion to $3.6 billion (31 December 2022: $4 billion), mainly due to the Oil and Gas, and Commodity sectors, which was partly offset by new inflows into the CRE sector. The Group provides loans to CRE counterparties of which $9.6 billion is to counterparties in the CCIB segment where the source of repayment is substantially derived from rental or sale of real estate and is secured by real estate collateral. The remaining CRE loans comprise working capital loans to real estate corporates, loans with non-property collateral, unsecured loans and loans to real estate entities of diversified conglomerates. The average LTV ratio of the performing book CRE portfolio has increased to 52 per cent (31 December 2022: 49 per cent). The proportion of loans with an LTV greater than 80 per cent has increased to 3 per cent (31 December 2022: 1 per cent). Further details can be found in the ‘Vulnerable, cyclical and high carbon sectors’ section in pages 265 to 270. China commercial real estate Total exposure to China CRE decreased by $0.8 billion to $2.6 billion (31 December 2022: $3.4 billion) mainly from exposure reductions. The proportion of credit impaired exposures increased to 58 per cent (31 December 2022: 33 per cent) as market conditions continued to deteriorate during the period, and provision coverage increased to 72 per cent (31 December 2022: 56 per cent) reflecting increased provision charges during the period. The proportion of the loan book rated as Higher Risk decreased by 8 per cent to 0.3 per cent (31 December 2022: 8.4 per cent) primarily due to downgrades in the period. The Group continues to hold a judgemental management overlay, which decreased by $32 million to $141 million (31 December 2022: $173 million), reflecting changes in the portfolio and downgrades to Stage 3. The Group is further indirectly exposed to China CRE through its associate investment in China Bohai Bank. Further details can be found in the ‘China commercial real estate’ section in page 271. Management adjustments Given the evolving nature of the risks in the China CRE sector, a management overlay of $141 million (31 December 2022: $173 million) has been taken by estimating the impact of further deterioration to exposures in this sector. Overlays of $5 million (31 December 2022: $16 million) have been applied in CPBB to capture macroeconomic environment challenges caused by sovereign defaults or heightened sovereign risk and an overlay of $17 million (31 December 2022: nil) was applied in Central and other items, due to a temporary market dislocation in the Africa and Middle East. The remaining COVID-19 overlay in CPBB of $21 million that was held at 31 December 2022 has been fully released in 2023. The stage 3 overlay in CCIB of $9 million that was held at 31 December 2022, following the Sri Lanka Sovereign default was also fully released in 2023. Further details can be found in the ‘Judgemental management overlays’ section in page 280. Model performance and judgemental post model adjustments are also disclosed in the ‘Model performance post model adjustments’ section in page 275. 236 Standard Chartered – Annual Report 2023Risk reviewRisk profile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 financial instruments as at 31 December 2023, before and after taking into account any collateral held or other credit risk mitigation. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236. 2023 2022 Credit risk management Credit risk management Maximum exposure $million Collateral8 $million Master netting agreements $million Net Exposure $million Maximum exposure $million Collateral8 $million Master netting agreements $million Net exposure $million 58,263 38,541 – 175,453 – 171,640 38,084 976 6,546 – 30,562 4,378 2,706 1,388 39,295 On-balance sheet Cash and balances at central banks Loans and advances to banks1 69,905 44,977 1,738 69,905 43,239 58,263 39,519 978 of which – reverse repurchase agreements and other similar secured lending7 1,738 1,738 – 978 978 Loans and advances to customers1 286,975 118,492 168,483 310,647 135,194 of which – reverse repurchase agreements and other similar secured lending7 Investment securities – Debt securities and other eligible bills2 Fair value through profit or loss3, 7 Loans and advances to banks Loans and advances to customers Reverse repurchase agreements and other similar lending7 Investment securities – Debt securities and other eligible bills2 Derivative financial instruments4, 7 Accrued income Assets held for sale9 Other assets5 Total balance sheet Off-balance sheet6 Undrawn Commitments Financial Guarantees and other equivalents Total off-balance sheet 13,996 13,996 – 24,498 24,498 160,263 144,276 2,265 7,212 81,847 – 62,429 160,263 2,265 7,212 171,640 102,575 976 6,546 64,491 – 81,847 81,847 – 64,491 64,491 52,952 50,434 2,673 701 38,140 8,440 39,293 52,952 2,701 2,673 701 38,140 30,562 63,717 2,706 1,388 39,295 9,206 50,133 798,344 210,517 39,293 548,534 789,750 209,869 50,133 529,748 182,390 2,940 179,450 168,668 2,951 74,414 256,804 2,590 5,530 71,824 – 251,274 60,410 229,078 2,592 5,543 165,717 57,818 – 223,535 Total 1,055,148 216,047 39,293 799,808 1,018,828 215,412 50,133 753,283 1. An analysis of credit quality is set out in the credit quality analysis section (page 240). Further details of collateral held by client segment and stage are set out in the collateral analysis section (page 259) 2. Excludes equity and other investments of $992 million (31 December 2022: $808 million). Further details are set out in Note 13 financial instruments 3. Excludes equity and other investments of $2,940 million (31 December 2022: $3,230 million). Further details are set out in Note 13 financial 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 positive and negative mark-to-market values of applicable derivative transactions 5. Other assets include Hong Kong certificates of indebtedness, cash collateral, and acceptances, in addition to unsettled trades and other financial assets 6. Excludes ECL allowances which are reported under Provisions for liabilities and charges 7. Collateral capped at maximum exposure (over-collateralised) 8. Adjusted for over-collateralisation, which has been determined with reference to the drawn and undrawn component as this best reflects the effect on the amount arising from expected credit losses 9. The amount is after ECL. Further details are set out in Note 21 Assets held for sale and associated liabilities 237 Standard Chartered – Annual Report 2023Risk review and Capital reviewAnalysis of financial instruments by stage (audited) The table below presents the gross and credit impairment balances by stage for the Group’s amortised cost and FVOCI financial instruments as at 31 December 2023. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236. Stage 1 Total credit impair- ment $million Gross balance1 $million Net carrying value $million Gross balance1 $million Stage 2 Total credit impair- ment $million Net carrying value $million Gross balance1 $million Stage 3 Total credit impair- ment $million Net carrying value $million Gross balance1 $million Total Total credit impair- ment $million Net carrying value $million 2023 69,313 – 69,313 207 (7) 200 404 (12) 392 69,924 (19) 69,905 44,384 (8) 44,376 540 (10) 530 77 (6) 71 45,001 (24) 44,977 273,692 (430) 273,262 11,225 (420) 10,805 7,228 (4,320) 2,908 292,145 (5,170) 286,975 158,314 56,787 101,527 (26) (16) 56,771 (10) 1,860 103 1,757 2,673 – 2,673 661 (33) 628 38,139 – 38,139 – 76 – (34) (2) (32) – (4) – 101 – 72 – 176,654 (52) 5,733 (39) 164 120 44 – 1 4 3 (61) (57) (4) – – (3) – 160,338 (121) 63 57,010 (75) 56,935 103,328 (46) – – 1 1 2,673 – 2,673 738 (37) 701 38,143 (3) 38,140 182,390 (91) 70,832 834,662 (10) (559) 2,910 22,551 (14) (528) 672 (112) 8,553 (4,514) 74,414 (136) 865,766 (5,601) Cash and balances at central banks Loans and advances to banks (amortised cost) Loans and advances to customers (amortised cost) Debt securities and other eligible bills5 Amortised cost FVOCI2 Accrued income (amortised cost)4 Assets held for sale4 Other assets Undrawn commitments3 Financial guarantees, trade credits and irrevocable letter of credits3 Total 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 provision in respect of debt securities measured at FVOCI is held within the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financial liability and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liability provisions to the extent that the drawn and undrawn components of loan exposures can be separately identified. Otherwise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $80 million (31 December 2022: $28 million) originated credit-impaired debt securities with impairment of $14 million (31 December 2022: $13 million) 238 Standard Chartered – Annual Report 2023Risk reviewRisk profileStage 1 Total credit impair- ment $million Gross balance1 $million Net carrying value $million Gross balance1 $million Stage 2 Total credit impair- ment $million Net carrying value $million Gross balance1 $million Stage 3 Total credit impair- ment $million Net carrying value $million Gross balance1 $million Total Total credit impair- ment $million Net carrying value $million 2022 57,643 – 57,643 333 (8) 325 295 – 295 58,271 (8) 58,263 39,149 (9) 39,140 337 (3) 334 59 (14) 45 39,545 (26) 39,519 295,219 (559) 294,660 13,043 (444) 12,599 7,845 (4,457) 3,388 316,107 (5,460) 310,647 166,103 59,427 106,676 (25) (9) (16) 59,418 2,706 – 2,706 1,083 39,294 (6) – 1,077 39,294 5,455 271 5,184 – 262 – (90) (2) (88) – (4) – 269 – 258 – 162,958 (41) 5,582 (53) 144 78 66 – 120 4 128 (106) (51) (55) – (67) (3) – 171,702 59,776 111,926 (221) (62) 59,714 (159) 2,706 – 2,706 1,465 39,298 (77) 1,388 (3) 39,295 27 – 53 1 168,668 (94) 56,683 820,838 (11) (651) 3,062 28,074 (28) (630) 665 (147) 9,260 (4,794) 60,410 (186) 858,172 (6,075) Cash and balances at central banks Loans and advances to banks (amortised cost) Loans and advances to customers (amortised cost) Debt securities and other eligible bills5 Amortised cost FVOCI2 Accrued income (amortised cost)4 Assets held for sale4 Other assets Undrawn commitments3 Financial guarantees, trade credits and irrevocable letter of credits3 Total 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 provision in respect of debt securities measured at FVOCI is held within the OCI reserve 3 These are off-balance sheet instruments. Only the ECL is recorded on-balance sheet as a financial liability and therefore there is no “net carrying amount”. ECL allowances on off-balance sheet instruments are held as liability provisions to the extent that the drawn and undrawn components of loan exposures can be separately identified. Otherwise they will be reported against the drawn component 4 Stage 1 ECL is not material 5 Stage 3 gross includes $28 million originated credit-impaired debt securities with impairment of $13 million 239 Standard Chartered – Annual Report 2023Risk review and Capital reviewCredit quality analysis (audited) Credit quality by client segment For CCIB, exposures are analysed by credit grade (CG), which plays a central role in the quality assessment and monitoring of risk. All loans are assigned a CG, which is reviewed periodically 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 (credit-impaired) clients. Consumer and Business Banking portfolios are analysed by days past due and Private Banking by the type of collateral held. Mapping of credit quality The Group uses the following internal risk mapping to determine the credit quality for loans. Credit quality description Internal grade mapping S&P external ratings equivalent Regulatory PD range (%) Internal ratings Internal grade mapping Corporate, Commercial & Institutional Banking Private Banking1 Consumer & Business Banking5 Strong 1A to 5B AAA/AA+ to BBB-/ BB+² 0 to 0.425 Class I and Class IV Satisfactory 6A to 11C BB+/BB to B-/CCC+³ 0.426 to 15.75 Class II and Class III Higher risk Grade 12 CCC+ to C⁴ 15.751 to 99.999 Stressed Assets Group (SAG) managed Current loans (no past dues nor impaired) Loans past due till 29 days 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 facilities with liquid collateral, such as cash and marketable securities. Class II represents unsecured/partially secured facilities and those with illiquid collateral, such as equity in private enterprises. Class III represents facilities with residential or commercial real estate collateral. Class IV covers margin trading facilities 2 Banks’ rating: AAA/AA+ to BB+. Sovereigns’ rating: AAA to BB+ 3 Banks’ rating: BB to “CCC+ to C”. Sovereigns’ rating: BB+/BB to B-/CCC+ 4 Banks’ rating: CCC+ to C. Sovereigns’ rating: CCC+ to “CCC+ to C” 5 Medium enterprise clients within Business Banking are managed using the same internal credit grades as CCIB The table below sets out the gross loans and advances held at amortised cost, expected credit loss provisions 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. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236. 240 Standard Chartered – Annual Report 2023Risk reviewRisk profileLoans and advances by client segment (audited) 2023 Customers Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million 120,886 123,486 84,248 36,638 7,902 1,145 5,840 917 78 10 118,193 5,293 2,304 1,761 206 337 206 337 5,508 1,484 Banks $million 44,384 35,284 9,100 540 55 212 273 – – 77 Ventures $million 1,015 1,000 15 54 34 7 13 7 13 12 Central & other items $million Customer Total $million Undrawn commitments $million Financial Guarantees $million 28,305 273,692 27,967 231,408 176,654 162,643 338 965 – – 965 – – 42,284 11,225 2,940 6,053 2,232 291 360 224 7,228 14,011 5,733 1,090 4,169 474 – – 3 70,832 47,885 22,947 2,910 830 1,823 257 – – 672 45,001 134,296 127,274 1,081 29,494 292,145 182,390 74,414 (15) (14) (1) (21) (14) (3) (4) (3) (4) (12) (48) 1,033 1.5% 1.4% 6.7% 38.9% 41.2% 42.9% 30.8% (8) (3) (5) (10) (1) (2) (7) – – (6) (24) (101) (34) (67) (257) (18) (179) (60) (2) (1) (314) (234) (80) (141) (65) (22) (54) (22) (54) (3,533) (3,891) (760) (1,215) 44,977 130,405 126,059 0.0% 0.0% 0.1% 1.9% 1.8% 0.9% 2.6% 0.0% 0.0% 7.8% 0.1% 32,813 28,402 4,411 – – 32,813 77,790 0.1% 0.0% 0.2% 3.3% 1.6% 3.1% 6.5% 2.6% 10.0% 64.1% 2.9% 58,465 38,014 20,388 63 33 58,498 0.3% 0.2% 1.5% 6.1% 3.7% 10.7% 16.0% 10.7% 16.0% 42.9% 30.8% 51.2% 100.0% 1.0% 4.4% 13 13 – – – 13 – – – – – – – – – (1) – – (1) – – (430) (282) (148) (420) (97) (204) (119) (27) (59) (15) (16) (4,320) (5,170) 29,478 286,975 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.1% 0.0% 0.0% 6.7% 0.1% – – – – – – 0.2% 0.1% 0.4% 3.7% 3.3% 3.4% 5.3% 9.3% 16.4% 59.8% 1.8% 58,478 38,027 20,388 63 33 58,511 (52) (31) (21) (39) (5) (23) (11) – – – (91) 0.0% 0.0% 0.1% 0.7% 0.5% 0.6% 2.3% 0.0% 0.0% 0.0% 0.0% – – – – – – – (10) (2) (8) (14) – (7) (7) – – (112) (136) 0.0% 0.0% 0.0% 0.5% 0.0% 0.4% 2.7% 0.0% 0.0% 16.7% 0.2% – – – – – – – Amortised cost Stage 1 – Strong – Satisfactory Stage 2 – Strong – Satisfactory – Higher risk Of which (stage 2): – Less than 30 days past due – More than 30 days past due Stage 3, credit-impaired financial assets Gross balance¹ Stage 1 – Strong – Satisfactory Stage 2 – Strong – Satisfactory – Higher risk Of which (stage 2): – Less than 30 days past due – More than 30 days past due Stage 3, credit-impaired financial assets Total credit impairment Net carrying value Stage 1 – Strong – Satisfactory Stage 2 – Strong – Satisfactory – Higher risk Of which (stage 2): – Less than 30 days past due – More than 30 days past due Stage 3, credit-impaired financial assets (S3) Cover ratio Fair value through profit or loss Performing – Strong – Satisfactory – Higher risk Defaulted (CG13-14) Gross balance (FVTPL)2 Net carrying value (incl FVTPL) 188,903 126,072 1,033 29,478 345,486 1. Loans and advances includes reverse repurchase agreements and other similar secured lending of $13,996 million under Customers and of $1,738 million under Banks, held at amortised cost 2. Loans and advances includes reverse repurchase agreements and other similar secured lending of $51,299 million under Customers and of $30,548 million under Banks, held at fair value through profit or loss 241 Standard Chartered – Annual Report 2023Risk review and Capital review2022 Customers Ventures $million Central & other items $million Customer Total $million Undrawn commitments $million Financial Guarantees $million Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million 126,261 89,567 36,694 11,355 2,068 7,783 1,504 109 23 129,134 124,734 4,400 1,670 1,215 146 309 148 310 6,143 1,453 Banks $million 39,149 27,941 11,208 337 148 119 70 5 6 59 39,545 143,759 132,257 (9) (3) (6) (3) – (2) (1) – – (143) (43) (100) (323) (30) (159) (134) (2) (1) (406) (332) (74) (120) (62) (17) (41) (17) (41) 691 685 6 18 10 4 4 4 4 1 710 (10) (10) – (1) (1) – – – – (14) (26) (3,662) (4,128) (776) (1,302) (1) (12) 39,519 139,631 130,955 0.0% 0.0% 0.1% 0.9% 0.0% 1.7% 1.4% 0.0% 0.0% 23.7% 0.1% 24,930 21,451 3,479 – – 24,930 64,449 0.1% 0.0% 0.3% 2.8% 1.5% 2.0% 8.9% 1.8% 4.3% 0.3% 0.3% 1.7% 7.2% 5.1% 11.6% 13.3% 11.5% 13.2% 698 1.4% 1.5% 0.0% 5.6% 10.0% 0.0% 0.0% 0.0% 0.0% 59.6% 2.9% 53.4% 100.0% 1.0% 1.7% 44,461 36,454 8,007 – 37 44,498 184,129 28 27 1 – – 28 – – – – – – 130,983 698 39,133 39,133 – – – – – – – 295,219 254,119 41,100 13,043 3,293 7,933 1,817 261 337 162,958 148,303 14,655 5,582 1,449 3,454 679 56,683 39,612 17,071 3,062 522 2,134 406 – – – – 248 7,845 128 665 39,381 316,107 168,668 60,410 – – – – – – – – – (559) (385) (174) (444) (93) (176) (175) (19) (42) (18) (18) (4,457) (5,460) 39,363 310,647 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 7.3% 0.0% 2,557 2,409 148 – – 0.2% 0.2% 0.4% 3.4% 2.8% 2.2% 9.6% 7.3% 12.5% 56.8% 1.7% 47,046 38,890 8,156 – 37 2,557 41,920 47,083 357,730 (41) (28) (13) (53) (6) (42) (5) – – – (94) 0.0% 0.0% 0.1% 0.9% 0.4% 1.2% 0.7% 0.0% 0.0% 0.0% 0.1% – – – – – – – (11) (3) (8) (28) – (15) (13) – – (147) (186) 0.0% 0.0% 0.0% 0.9% 0.0% 0.7% 3.2% 0.0% 0.0% 22.1% 0.3% – – – – – – – Amortised cost Stage 1 – Strong – Satisfactory Stage 2 – Strong – Satisfactory – Higher risk Of which (stage 2): – Less than 30 days past due – More than 30 days past due Stage 3, credit-impaired financial assets Gross balance1 Stage 1 – Strong – Satisfactory Stage 2 – Strong – Satisfactory – Higher risk Of which (stage 2): – Less than 30 days past due – More than 30 days past due Stage 3, credit-impaired financial assets Total credit impairment Net carrying value Stage 1 – Strong – Satisfactory Stage 2 – Strong – Satisfactory – Higher risk Of which (stage 2): – Less than 30 days past due – More than 30 days past due Stage 3, credit-impaired financial assets (S3) Cover ratio Fair value through profit or loss Performing – Strong – Satisfactory – Higher risk Defaulted (CG13-14) Gross balance (FVTPL)2 Net carrying value (incl FVTPL) 1. Loans and advances includes reverse repurchase agreements and other similar secured lending of $24,498 million under Customers and of $978 million under Banks, held at amortised cost 2. Loans and advances includes reverse repurchase agreements and other similar secured lending of $40,537 million under Customers and of $23,954 million under Banks, held at fair value through profit or loss 242 Standard Chartered – Annual Report 2023Risk reviewRisk profileCredit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory 6A-7B 8A-9B Defaulted 13-14 Total Credit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory Loans and advances by client segment credit quality analysis Regulatory 1 year PD range (%) S&P external ratings equivalent Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Corporate, Commercial & Institutional Banking 2023 Gross Credit impairment 84,248 1,145 0 – 0.045 A+ and above 0.046 – 0.110 A/A- to BBB+/BBB 10,891 31,974 0.111 – 0.425 BBB to BBB-/BB+ 41,383 81 558 506 36,638 5,840 0.426 – 1.350 BB+/BB to BB- 24,296 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C 100 Defaulted 1,873 2,273 1,694 917 917 – – 8,196 4,146 – – – – – – – – – – – – – – 85,893 10,972 32,532 41,889 42,478 26,169 10,469 5,840 917 917 5,508 5,508 5,508 5,508 (34) (1) (3) (30) (67) (38) (13) (16) – – – – (18) – – (18) (179) (77) (90) (12) (60) (60) – – – – – – – – – – (52) (1) (3) (48) (246) (115) (103) (28) (60) (60) – – (3,533) (3,533) (3,533) (3,533) 120,886 7,902 5,508 134,296 (101) (257) (3,533) (3,891) Regulatory 1 year PD range (%) S&P external ratings equivalent Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Corporate, Commercial & Institutional Banking 2022 Gross Credit impairment 0 – 0.045 A+ and above 8,247 0.046 – 0.110 A/A- to BBB+/BBB 36,379 0.111 – 0.425 BBB to BBB-/BB+ 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted 89,567 2,068 117 321 1,630 7,783 2,684 3,116 1,983 1,504 1,504 – – 44,941 36,694 23,196 9,979 3,519 – – – – 126,261 11,355 – – – – – – – – – – 6,143 6,143 6,143 91,635 8,364 36,700 46,571 44,477 25,880 13,095 5,502 1,504 1,504 6,143 6,143 (43) (4) (5) (34) (100) (67) (20) (13) – – – – (30) – – (30) (159) (94) (35) (30) (134) (134) – – – – – – – – – – (73) (4) (5) (64) (259) (161) (55) (43) (134) (134) – – (3,662) (3,662) (3,662) (3,662) 143,759 (143) (323) (3,662) (4,128) Regulatory 1 year PD range (%) S&P external ratings equivalent Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Corporate lending¹ - Asia 2023 Gross Credit impairment Credit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory 0 – 0.045 A+ and above 36,959 3,550 0.046 – 0.110 A/A- to BBB+/BBB 12,634 0.111 – 0.425 BBB to BBB-/BB+ 20,775 802 24 400 378 22,581 2,534 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ 14,740 5,243 2,598 Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted – – – – – – – – – – 37,761 3,574 13,034 21,153 25,115 15,479 6,377 3,259 231 231 739 1,134 661 231 231 – – – – – – 2,870 2,870 2,870 2,870 (12) – (1) (11) (35) (28) (5) (2) – – – – (15) – – (15) (137) (68) (66) (3) (19) (19) – – – – – – – – – – (27) – (1) (26) (172) (96) (71) (5) (19) (19) – – (2,014) (2,014) (2,014) (2,014) 59,540 3,567 2,870 65,977 (47) (171) (2,014) (2,232) 1 Corporate loans and advances to customers excludes loans to “Financing, insurance and non-banking” and “Government” counterparties 243 Standard Chartered – Annual Report 2023Risk review and Capital reviewCorporate lending1 - Asia 2022 Gross Credit impairment Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Strong 1A-2B 3A-4A 4B-5B Satisfactory 0 – 0.045 A+ and above 0.046 – 0.110 A/A- to BBB+/BBB 0.111 – 0.425 BBB to BBB-/BB+ 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted 40,402 3,857 14,694 21,851 22,064 14,512 5,091 2,461 – – – – 1,361 52 250 1,059 3,859 1,285 1,451 1,123 463 463 – – 62,466 5,683 – – – – – – – – – – 3,063 3,063 3,063 41,763 3,909 14,944 22,910 25,923 15,797 6,542 3,584 463 463 3,063 3,063 71,212 (28) (3) (2) (23) (55) (47) (7) (1) – – – – (21) – (1) (20) (99) (81) (7) (11) (106) (106) – – – – – – – – – – (49) (3) (3) (43) (154) (128) (14) (12) (106) (106) – – (1,748) (1,748) (1,748) (1,748) (83) (226) (1,748) (2,057) 1 Corporate loans and advances to customers excludes loans to “Financing, insurance and non-banking” and “Government” counterparties Regulatory 1 year PD range (%) S&P external ratings equivalent Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Corporate lending1 - Africa & Middle East 2023 Gross Credit impairment Credit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory 0 – 0.045 A+ and above 0.046 – 0.110 A/A- to BBB+/BBB 0.111 – 0.425 BBB to BBB-/BB+ 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted 7,756 358 1,952 5,446 2,801 1,512 587 702 – – – – 43 – – 43 492 82 175 235 515 515 – – – – – – – – – – – – 7,799 358 1,952 5,489 3,293 1,594 762 937 515 515 1,435 1,435 1,435 1,435 (1) – – (1) (18) (2) (4) (12) – – – – (2) – – (2) (13) (3) (7) (3) (37) (37) – – – – – – – – – – (3) – – (3) (31) (5) (11) (15) (37) (37) – – (1,079) (1,079) (1,079) (1,079) 10,557 1,050 1,435 13,042 (19) (52) (1,079) (1,150) 1 Corporate loans and advances to customers excludes loans to “Financing, insurance and non-banking” and “Government” counterparties Regulatory 1 year PD range (%) S&P external ratings equivalent Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Corporate lending1 - Africa & Middle East 2022 Gross Credit impairment Credit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory 0 – 0.045 A+ and above 0.046 – 0.110 A/A- to BBB+/BBB 0.111 – 0.425 BBB to BBB-/BB+ 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted 6,268 338 2,049 3,881 4,389 1,454 2,361 574 – – – – 311 6 23 282 642 218 320 104 653 653 – – 10,657 1,606 – – – – – – – – – – 1,735 1,735 1,735 6,579 344 2,072 4,163 5,031 1,672 2,681 678 653 653 1,735 1,735 13,998 – – – – (32) (11) (11) (10) – – – – – – – – (41) (3) (24) (14) (26) (26) – – – – – – – – – – – – – – – – (73) (14) (35) (24) (26) (26) (1,344) (1,344) (1,344) (1,344) (32) (67) (1,344) (1,443) 1 Corporate loans and advances to customers excludes loans to “Financing, insurance and non-banking” and “Government” counterparties 244 Standard Chartered – Annual Report 2023Risk reviewRisk profileRegulatory 1 year PD range (%) S&P external ratings equivalent Stage 1 $million Stage 2 $million Stage 3 $million Total $million Stage 1 $million Stage 2 $million Stage 3 $million Total $million Corporate lending1 - Europe &Americas 2023 Gross Credit impairment Credit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory 0 – 0.045 A+ and above 0.046 – 0.110 A/A- to BBB+/BBB 0.111 – 0.425 BBB to BBB-/BB+ 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted 9,283 528 4,413 4,342 4,778 3,912 596 270 – – – – 198 – 124 74 1,621 768 821 32 77 77 – – 14,061 1,896 – – – – – – – – – – 980 980 980 9,481 528 4,537 4,416 6,399 4,680 1,417 302 77 77 980 980 (11) – (1) (10) (5) (4) (1) – – – – – – – – – (22) (2) (15) (5) (7) (7) – – 16,937 (16) (29) – – – – – – – – – – (11) – (1) (10) (27) (6) (16) (5) (7) (7) (345) (345) (345) (345) (345) (390) 1 Corporate loans and advances to customers excludes loans to “Financing, insurance and non-banking” and “Government” counterparties Corporate lending1 - Europe & Americas 2022 Gross Stage 2 $million Stage 3 $million Regulatory 1 year PD range (%) S&P external ratings equivalent 0 – 0.045 A+ and above 0.046 – 0.110 A/A- to BBB+/BBB 0.111 – 0.425 BBB to BBB-/BB+ Credit grade Strong 1A-2B 3A-4A 4B-5B Satisfactory 6A-7B 8A-9B 0.426 – 1.350 BB+/BB to BB- 1.351 – 4.000 BB-/B+ to B 10A-11C 4.001 – 15.75 B/B- to B-/CCC+ Higher risk 12 15.751 – 99.999 CCC+/C Defaulted 13-14 Total 100 Defaulted Stage 1 $million 10,033 575 4,065 5,393 4,498 3,867 537 94 – – – – 225 – 8 217 2,077 1,376 636 65 387 387 – – Total $million 10,258 575 4,073 5,610 6,575 5,243 1,173 159 387 387 – – – – – – – – – – Credit impairment Stage 1 $million Stage 2 $million Stage 3 $million Total $million (13) – (1) (12) (4) (4) – – – – – – – – – – (25) (25) – – (1) (1) – – (17) (26) – – – – – – – – – – (13) – (1) (12) (29) (29) – – (1) (1) (398) (398) (398) (398) (398) (441) 14,531 2,689 1,230 1,230 1,230 1,230 1,230 18,450 1 Corporate loans and advances to customers excludes loans to “Financing, insurance and non-banking” and “Government” counterparties 245 Standard Chartered – Annual Report 2023Risk review and Capital reviewConsumer, Private & Business Banking 2023 Asia Africa & Middle East Europe & Americas Mort- gages $million Credit Cards $million Others $million Total $million Mort- gages $million Credit Cards $million Others $million Total $million Mort- gages $million Credit Cards $million Others $million Total $million Total $million Stage 1 Gross Strong 77,270 6,234 30,027 113,531 Satisfactory 659 113 2,418 3,190 77,929 6,347 32,445 116,721 974 158 1,132 263 2,471 3,708 11 121 290 274 2,592 3,998 335 1,812 2,147 619 954 118,193 1 1,813 5,293 620 2,767 123,486 Total ECL Strong Satisfactory Total Coverage % 0% Stage 2 Gross Strong Satisfactory Higher risk Total ECL Strong Satisfactory Higher risk Total 1,014 122 161 1,297 (1) – (1) (2) (25) (57) (82) 1% 124 14 39 177 (12) (14) (17) (43) (5) – (5) (181) (19) (211) (76) (200) (287) (2) – (2) (7) – (7) 1% 0% 0% 3% 583 29 118 1,721 165 318 730 2,204 (43) (7) (34) (84) (56) (21) (52) (129) 6% 17 4 5 26 (1) – – (1) 8 1 3 12 (1) – (1) (2) – – – – – – (13) (2) (15) 1% 15 9 11 35 (7) (1) (1) (9) (22) (2) (24) 1% 40 14 19 73 (9) (1) (2) (12) – (2) (2) (1) – (1) (1) (2) (3) 0% 0% 0% 0% – 27 – 27 – – – – – – – – – – – – – – – – – – – – – 27 – 27 – – – – (234) (80) (314) 0% 1,761 206 337 2,304 (65) (22) (54) (141) 6% Coverage % 0% 24% 12% 4% 17% 26% 16% 0% 0% 0% 0% Stage 3 Gross credit impaired ECL 382 (84) 53 841 1,276 (36) (566) (686) 53 (25) 3 (2) 59 (33) 115 (60) 85 (14) – – 8 – 93 1,484 (14) (760) Coverage % 22% 68% 67% 54% 47% 67% 56% 52% 16% 0% 0% 15% 51% Total Gross Strong 78,284 6,358 30,610 115,252 Satisfactory Higher risk Credit-Impaired 781 161 382 127 2,447 3,355 39 53 118 841 318 1,276 991 162 5 53 271 2,486 3,748 12 3 3 130 11 59 304 19 115 335 1,839 – 85 Total ECL Strong Satisfactory Higher risk Credit-Impaired Total Coverage % 79,608 6,577 34,016 120,201 1,211 289 2,686 4,186 2,259 (6) – (1) (84) (91) 0% (37) (71) (17) (36) (224) (267) (26) (34) (97) (52) (566) (686) (161) (850) (1,102) 2% 2% 1% (3) – – (25) (28) 2% (8) – (1) (2) (11) 4% (20) (3) (1) (33) (57) 2% (31) (3) (2) (60) (96) 2% – (2) – (14) (16) 1% – – – – – – – – – – 0% 619 954 119,954 1 – 8 1,840 5,499 – 93 337 1,484 628 2,887 127,274 (1) – – – (1) 0% (1) (2) – (14) (17) 1% (299) (102) (54) (760) (1,215) 1% 246 Standard Chartered – Annual Report 2023Risk reviewRisk profileConsumer, Private & Business Banking 2022 Asia Africa & Middle East Europe & Americas Mort- gages $million Credit cards $million Others $million Total $million Mort- gages $million Credit cards $million Others $million Total $million Mort- gages $million Credit cards $million Others $million Total $million Total $million Total ECL Strong Satisfactory Total Coverage % 0% Stage 2 Gross Strong Satisfactory Higher risk Total ECL Strong Satisfactory Higher risk Total 576 75 150 801 (2) (1) (2) (5) (49) (37) (86) 1% 88 10 34 132 (26) (9) (6) (41) Stage 1 Gross Strong 81,738 5,781 32,297 119,816 1,004 281 2,590 3,875 Satisfactory 1,155 145 1,378 2,678 82,893 5,926 33,675 122,494 189 1,193 9 71 269 290 2,661 4,144 – (6) (6) (233) (282) (27) (260) 1% (70) (352) 0% (3) (1) (4) (6) – (6) 0% 2% 397 1,372 1,769 (2) (2) (4) – – – – – – 646 81 727 1,043 124,734 1,453 4,400 2,496 129,134 (2) – (2) (4) (2) (6) 0% 0% 0% 0% 1 – 34 35 – – – – – – – – – – – – 2 – – 2 – – – – 3 – 34 37 – – – – 0% 0% 0% 0% (332) (74) (406) 0% 1,215 146 309 1,670 (62) (17) (41) (120) 7% (37) (1) (38) 1% 46 3 13 62 (3) – (4) (7) (46) (2) (48) 1% 160 47 28 235 (7) – (5) (12) 5% 2 1 3 6 (1) – (1) (2) 10 (7) 56 (30) 177 (113) 68% 70% 54% 64% 77 (7) 9% – – – – 0% 0% 77 (7) 9% 1,453 (776) 53% 388 1,052 14 63 99 247 465 1,398 (27) (7) (28) (62) (55) (17) (36) (108) 8% 112 43 12 167 (3) – – (3) 2% 111 (76) Coverage % 1% 31% 13% 33% 11% Stage 3 Gross credit impaired ECL 368 (97) 48 (35) Coverage % 26% 73% 783 (524) 67% 1,199 (656) 55% Total Gross Strong 82,314 5,869 32,685 120,868 Satisfactory Higher risk Credit-Impaired 1,230 150 368 155 34 48 1,392 2,777 63 783 247 1,199 1,116 232 12 111 283 2,636 4,035 10 3 10 74 13 56 316 28 177 398 1,372 34 77 Total ECL Strong Satisfactory Higher risk Credit-Impaired Total Coverage % 84,062 6,106 34,923 125,091 1,471 306 2,779 4,556 1,881 (2) (7) (2) (97) (108) 0% (75) (46) (6) (35) (162) 3% (260) (337) (34) (28) (524) (846) 2% (87) (36) (656) (1,116) 1% (6) (1) – (76) (83) 6% (7) – (1) (7) (15) 5% (40) (53) (1) (4) (30) (75) 3% (2) (5) (113) (173) 4% (2) (2) – (7) (11) 1% – – – – – – – – – – 0% 648 1,046 125,949 81 – – 1,453 4,546 34 77 309 1,453 729 2,610 132,257 (2) – – – (2) 0% (4) (2) – (7) (394) (91) (41) (776) (13) (1,302) 0% 1% 247 Standard Chartered – Annual Report 2023Risk review and Capital reviewCredit quality by geographic region The following table sets out the credit quality for gross loans and advances to customers and banks, held at amortised cost, by geographic region and stage. Loans and advances to customers Amortised cost Gross (stage 1) Provision (stage 1) Gross (stage 2) Provision (stage 2) Gross (stage 3) Provision (stage 3) Net loans1 2023 2022 Asia $million Africa & Middle East $million Europe & Americas $million Total $million Asia $million Africa & Middle East $million Europe & Americas $million Total $million 229,289 17,536 26,867 273,692 248,625 17,553 29,041 295,219 (363) 6,660 (321) 4,604 (39) 3,276 (70) 2,273 (28) (430) 1,289 11,225 (29) 351 (420) 7,228 (454) 8,302 (337) 4,562 (2,734) (1,387) (199) (4,320) (2,483) (73) 3,122 (104) 2,725 (1,765) (32) 1,619 (3) 558 (209) (559) 13,043 (444) 7,845 (4,457) 237,135 21,589 28,251 286,975 258,215 21,458 30,974 310,647 1 Includes reverse repurchase agreements and other similar secured lending Loans and advances to banks Amortised cost Gross (stage 1) Provision (stage 1) Gross (stage 2) Provision (stage 2) Gross (stage 3) Provision (stage 3) Net loans1 2023 2022 Asia $million 35,338 Africa & Middle East $million Europe & Americas $million Total $million 2,803 6,243 44,384 Asia $million 21,806 Africa & Middle East $million Europe & Americas $million 3,818 13,525 (7) 17 (2) 73 (2) – 311 (8) – – (1) 212 – 4 (4) (8) 540 (10) 77 (6) (3) 212 (2) 59 (14) (4) 116 (1) – – (2) 9 – – – Total $million 39,149 (9) 337 (3) 59 (14) 35,417 3,106 6,454 44,977 22,058 3,929 13,532 39,519 1 Includes reverse repurchase agreements and other similar secured lending Movement in gross exposures and credit impairment for loans and advances, debt securities, undrawn commitments and financial guarantees (audited) The tables overleaf set out the movement in gross exposures and credit impairment by stage in respect of amortised cost loans to banks and customers, undrawn commitments, financial guarantees and debt securities classified at amortised cost and FVOCI. The tables are presented for the Group, debt securities and other eligible bills. Methodology The movement lines within 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 impairment charge in the income statement comprises the amounts within 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 financial instruments only. The approach for determining the key line items in the tables is set out below. • Transfers - transfers between stages are deemed to occur at the beginning of a month based on prior month closing balances. • Net remeasurement from stage changes - the remeasurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to. For example, assets transferred into stage 2 are remeasured from a 12-month to a lifetime expected credit loss, with the effect of remeasurement reported in stage 2. For stage 3, this represents the initial remeasurement from specific provisions recognised on individual assets transferred into stage 3 in the year. • Net changes in exposures - new business written less repayments in the year. Within stage 1, new business written will attract up to 12 months of expected credit loss charges. Repayments of non-amortising loans (primarily within CCIB) will have low amounts of expected credit loss provisions attributed to them, due to the release of provisions over the term to maturity. In stages 2 and 3, the net change in exposures reflect repayments although stage 2 may include new facilities where clients are on non-purely precautionary early alert, are CG 12, or when non-investment grade debt securities are acquired. 248 Standard Chartered – Annual Report 2023Risk reviewRisk profile• Changes in risk parameters - for stages 1 and 2, this reflects changes in the probability of default (PD), loss given default (LGD) and exposure at default (EAD) of assets during the year, which includes the impact of releasing provisions over the term to maturity. It also includes the effect of changes in forecasts of macroeconomic variables during the year. In stage 3, this line represents additional specific provisions recognised on exposures held within stage 3. • Interest due but not paid – change in contractual amount of interest due in stage 3 financial instruments but not paid, being the net of accruals, repayments and write-offs, together with the corresponding change in credit impairment. Changes to ECL models, which incorporate changes to model approaches and methodologies, are not reported as a separate line item as these have an impact over a number of lines and stages. Movements during the year Stage 1 gross exposures increased by $3.8 billion to $724 billion (31 December 2022: $720 billion). CCIB exposure increased by $21.8 billion to $337 billion (31 December 2022: $315 billion) due to off-balance sheet exposures, which was partly offset by a decrease in loans and advances to customers. CPBB decreased by $2.2 billion to $191 billion (31 December 2022: $193 billion) which was largely driven by the mortgage portfolio in Korea and Hong Kong. Stage 1 debt securities decreased by $7.8 billion to $158 billion (31 December 2022: $166 billion) due to liquidity management and maturities. Total stage 1 provisions decreased by $119 million to $526 million (31 December 2022: $645 million). CCIB provisions decreased by $43 million to $151 million (31 December 2022: $194 million), primarily due to new originations, which was partly offset by model updates. Debt securities provisions was stable at $26 million (31 December 2022: $25 million). CPBB decreased by $88 million to $325 million (31 December 2022: $413 million), mainly driven by the release of the judgemental non-linearity post model adjustment and overlay releases, both of which are reported in ‘Changes in risk parameters’. Stage 2 gross exposures decreased by $5.2 billion to $22 billion (31 December 2022: $27 billion), primarily driven by a net reduction in exposures in CCIB, particularly in the CRE and Transport sectors. CPBB exposures increased by $0.7 billion to $2.5 billion (31 December 2022: $1.8 billion), of which $0.4 billion was from the Secured portfolio. Debt securities decreased by $3.6 billion to $1.9 billion (31 December 2022: $5.5 billion). Stage 2 provisions decreased by $101 million to $517 million (31 December 2022: $618 million). CCIB provisions decreased by $93 million to $318 million (31 December 2022: $411 million) from releases due to exposure reductions, transfers to stage 3 for China CRE exposures and model updates. This was partly offset by a further downgrade of Pakistan sovereign clients within stage 2. CPBB provisions increased by $22 million to $140 million (31 December 2022: $118 million) due to higher delinquencies. This was partly offset by the release of judgemental non-linearity post model adjustment and overlay releases which are reported within ‘Changes in risk parameters’ due to underlying factors not being valid any more. Debt Securities decreased by $56 million to $34 million (31 December 2022: $90 million) largely due to exposure reductions and shortening of tenors, particularly in Pakistan. The impact of model and methodology updates in 2023 reduced stage 1 and 2 provisions by $15 million, of which $10 million was in CCIB and Central and other items, while $5 million was in CPBB. Stage 3 gross loans for CCIB decreased by $0.7 billion to $6.3 billion (31 December 2022: $7 billion) as repayments and write-offs were partly offset by the downgrade of China CRE clients. CCIB provisions decreased by $171 million to $3.7 billion (31 December 2022: $3.8 billion) as charges from new downgrades were offset by releases due to repayments and write-offs. CPBB stage 3 loans was stable at $1.5 billion (31 December 2022: $1.5 billion) but provisions decreased by $17 million to $0.8 billion (31 December 2022: $0.8 billion). Debt security gross assets increased by $20 million to $164 million (31 December 2022: $144 million). 249 Standard Chartered – Annual Report 2023Risk review and Capital reviewAll segments (audited) Stage 1 Total credit impair- ment $million Gross balance3 $million Stage 2 Total credit impair- ment $million Stage 35 Total credit impair- ment $million Net $million Gross balance3 $million Total Total credit impair- ment $million Net $million Net $million Gross balance3 $million Net $million Gross balance3 $million Amortised cost and FVOCI As at 1 January 2022 684,759 (609) 684,150 34,550 (652) 33,898 9,061 (4,941) 4,120 728,370 (6,202) 722,168 Transfers to stage 1 24,666 (555) 24,111 (24,633) 555 (24,078) Transfers to stage 2 (46,960) 228 (46,732) 47,479 (246) 47,233 (33) (519) – 18 (33) (501) Transfers to stage 3 (176) 74 (102) (3,630) 253 (3,377) 3,806 (327) 3,479 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements¹ As at 31 December 2022² Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/ release 83,204 (137) 83,067 (24,324) 93 (24,231) (1,710) 338 (1,372) 57,170 294 57,464 – – – – – 45 45 106 106 – – – – – – – – – – – (126) (126) (387) (387) – – – – – – – – (168) (168) (895) (895) (949) 949 (157) – 157 136 – – 136 – – (249) (249) (1,176) (1,176) (949) 949 (157) – 157 136 – – 136 (25,381) 203 (25,178) (1,963) (108) (2,071) (658) 9 (649) (28,002) 104 (27,898) 720,112 (645) 719,467 27,479 (618) 26,861 8,841 (4,724) 4,117 756,432 (5,987) 750,445 14 – 14 (420) – (420) (725) 293 (432) (1,131) 293 (838) As at 1 January 2023 720,112 (645) 719,467 27,479 (618) 26,861 8,841 (4,724) 4,117 756,432 (5,987)750,445 Transfers to stage 1 19,594 (661) 18,933 (19,583) 661 (18,922) Transfers to stage 2 (42,628) 174 (42,454) 42,793 (182) 42,611 (11) (165) – 8 (11) (157) Transfers to stage 3 (96) 6 (90) (2,329) 326 (2,003) 2,425 (332) 2,093 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements¹ As at 31 December 2023² Income statement ECL (charge)/release⁶ Recoveries of amounts previously written off Total credit impairment (charge)/release4 23,717 (185) 23,532 (22,727) 22 (22,705) (1,708) 624 (1,084) (718) 461 (257) – – – – – 52 52 202 202 – – – – – – – – – – – (199) (199) (32) (32) – – (163) (163) (1,100) (1,100) – – (310) (310) (930) (930) – – – – – – (1,027) 1,027 (83) – 83 180 – – 180 (1,027) 1,027 (83) – 83 180 – – 180 3,177 531 3,708 (3,365) (495) (3,860) (128) (102) (230) (316) (66) (382) 723,876 (526) 723,350 22,268 (517) 21,751 8,144 (4,499) 3,645 754,288 (5,542) 748,746 69 – 69 (209) – (209) (639) 271 (368) (779) 271 (508) Includes fair value adjustments and amortisation on debt securities 1 2 Excludes Cash and balances at central banks, Accrued income, Assets held for sale and Other assets gross balances of $111,478 million (31 December 2022: $101,740 million) and Total credit impairment of $59 million (31 December 2022: $88 million) 3 The gross balance includes the notional amount of off -balance sheet instruments 4 Reported basis 5 Stage 3 includes gross of $80 million (31 December 2022: $28 million) and ECL $14 million (31 December 2022: $13 million) originated credit-impaired debt securities 6 Does not include release relating to Other assets (31 December 2022: $2 million) 250 Standard Chartered – Annual Report 2023Risk reviewRisk profileTransfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Exchange translation differences and other movements1 As at 31 December 2022 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Exchange translation differences and other movements1 As at 31 December 2023 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release Of which – movement of debt securities, alternative tier one and other eligible bills (audited) Stage 1 Total credit impair- ment $million Gross balance $million Stage 2 Total credit impair- ment $million Stage 32 Total credit impair- ment $million Net $million Gross balance $million Total Total credit impair- ment $million Net3 $million Net $million Gross balance $million Net $million Gross balance $million Amortised cost and FVOCI As at 1 January 2022 157,352 (67) 157,285 5,315 (42) 5,273 2,296 (3,942) – (22) 2,274 (2,296) 22 (2,274) 38 – (3,904) 3,942 (38) 3,904 – (66) 42 (24) 21,613 (44) 21,569 (752) 9 (743) – – – – 10 38 – – 10 38 – – – – – – (2) (2) (98) (98) – – – – 113 – – 66 – – – (30) – (66) 47 162,780 (175) 162,605 – – (42) – – 24 – – – – – – – – – 1 1 20,861 (34) 20,827 (15) (15) – – (30) (73) 30 – – (73) – – (23) (23) (13) 30 – 7 (13) – – 2 (11,216) 22 (11,194) (688) 17 (671) (5) (11,909) 46 (11,863) 166,103 (25) 166,078 5,455 (90) 5,365 144 (106) 38 171,702 (221) 171,481 4 – 4 (91) – (91) (35) – (35) (122) – (122) As at 1 January 2023 166,103 (25) 166,078 5,455 (90) 5,365 144 (106) 38 171,702 (221) 171,481 Transfers to stage 1 371 (65) 306 Transfers to stage 2 (884) Transfers to stage 3 – 14 – (870) – (371) 884 (16) 65 (14) – (306) 870 (16) (11,583) (28) (11,611) (1,899) (44) (1,943) – – – – 7 32 – – 7 32 – – – – – – (18) (18) 105 105 – – – – – – 16 7 – – – – – – – – – – – 16 7 – (4) (4) – – – – – – – – – – – – – (13,475) (72) (13,547) – – – – (11) (11) 133 133 – – – – 4,307 39 4,346 (2,193) (38) (2,231) (3) 49 46 2,111 50 2,161 158,314 (26) 158,288 1,860 (34) 1,826 164 (61) 103 160,338 (121) 160,217 11 – 11 43 – 43 (4) – (4) 50 – 50 1 Includes fair value adjustments and amortisation on debt securities 2 Stage 3 includes gross of $80 million (31 December 2022: $28 million) and ECL $14 million (31 December 2022: $13 million) originated credit-impaired debt securities 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 to $160,263 million (31 December 2022: $171,640 million). Refer to the Analysis of financial instrument by stage table 251 Standard Chartered – Annual Report 2023Risk review and Capital reviewCorporate, Commercial & Institutional Banking (audited) Stage 1 Total credit impair- ment $million Gross balance1 $million Stage 2 Total credit impair- ment $million Net $million Gross balance1 $million Stage 3 Total credit impair- ment $million Net $million Gross balance1 $million Total Total credit impair- ment $million Net $million Net $million Gross balance1 $million Amortised cost and FVOCI As at 1 January 2022 313,132 (163) 312,969 25,437 (425) 25,012 7,372 (4,079) 3,293 345,941 (4,667) 341,274 Transfers to stage 1 17,565 (227) 17,338 (17,565) 227 (17,338) – Transfers to stage 2 (37,505) 48 (37,457) 37,944 (66) 37,878 (439) – 18 – (421) Transfers to stage 3 (42) – (42) (2,478) 134 (2,344) 2,520 (134) 2,386 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2022 Income statement ECL (charge)/release2 Recoveries of amounts previously written off Total credit impairment (charge)/ release 30,508 (44) 30,464 (21,915) 65 (21,850) (1,314) 340 (974) 7,279 361 7,640 – – – – – 2 21 – – – 2 21 – – – – – – – – (42) (42) (154) (154) – – – – – – – – (384) (130) – (104) (104) (551) 384 130 110 (551) – – 110 – – (144) (144) (684) (684) (384) 384 (130) – 130 110 – – 110 (8,221) 169 (8,052) (1,275) (150) (1,425) (631) 64 (567) (10,127) 83 (10,044) 315,437 (194) 315,243 20,148 (411) 19,737 6,994 (3,822) 3,172 342,579 (4,427) 338,152 (21) – (21) (131) – (131) (315) 49 (266) (467) 49 (418) As at 1 January 2023 315,437 (194) 315,243 20,148 (411) 19,737 6,994 (3,822) 3,172 342,579 (4,427) 338,152 Transfers to stage 1 14,948 (347) 14,601 (14,948) 347 (14,601) Transfers to stage 2 (34,133) 80 (34,053) 34,175 (88) 34,087 – (42) – 8 – (34) Transfers to stage 3 (17) – (17) (1,270) 141 (1,129) 1,287 (141) 1,146 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2023 Income statement ECL (charge)/release2 Recoveries of amounts previously written off Total credit impairment (charge)/release 41,314 (73) 41,241 (20,084) 89 (19,995) (1,335) 623 (712) 19,895 639 20,534 – – – – – 15 60 – – – 15 60 – – – – – – – – (45) (45) (68) (68) – – (82) (82) (668) (668) – – (112) (112) (676) (676) – – – – – – (340) 340 (120) – 120 155 – – 155 (340) 340 (120) – 120 155 – – 155 (360) 308 (52) (1,148) (283) (1,431) (188) (184) (372) (1,696) (159) (1,855) 337,189 (151) 337,038 16,873 (318) 16,555 6,256 (3,651) 2,605 360,318 (4,120) 356,198 2 – 2 (24) – (24) (127) 31 (96) (149) 31 (118) 1 The gross balance includes the notional amount of off balance sheet instruments 2 Does not include release relating to Other assets (31 December 2022: $2 million) 252 Standard Chartered – Annual Report 2023Risk reviewRisk profileConsumer, Private and Business Banking (audited) Stage 1 Total credit impair- ment $million Gross balance¹ $million Stage 2 Total credit impair- ment $million Net $million Gross balance¹ $million Stage 3 Total credit impair- ment $million Net $million Gross balance¹ $million Total Total credit impair- ment $million Net $million Net $million Gross balance¹ $million Amortised cost and FVOCI As at 1 January 2022 190,860 (377) 190,483 3,675 (185) 3,490 1,578 (797) Transfers to stage 1 4,798 (314) 4,484 (4,765) 314 (4,451) Transfers to stage 2 (5,498) Transfers to stage 3 (81) 92 – (5,406) (81) 5,578 (890) (92) 5,486 151 (739) (33) (80) 971 781 (33) (80) – – (151) 820 196,113 (1,359) 194,754 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2022 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release 9,072 (49) 9,023 (1,611) 19 (1,592) (396) – (396) 7,065 (30) 7,035 – – – – – 32 63 – – – 32 63 – – – – – – – – (82) (82) (132) (132) – – – – – – – – (535) (27) – (25) (25) (331) 535 27 26 (331) – – 26 – – (75) (75) (400) (400) (535) 535 (27) – 27 26 – – 26 (5,912) 140 (5,772) (166) (111) (277) (24) (60) (84) (6,102) (31) (6,133) 193,239 (413) 192,826 1,821 (118) 1,703 1,454 (776) 678 196,514 (1,307) 195,207 46 – 46 (195) – (195) (356) 245 (111) (505) 245 (260) As at 1 January 2023 193,239 (413) 192,826 1,821 (118) 1,703 1,454 (776) 678 196,514 (1,307) 195,207 Transfers to stage 1 4,265 (246) 4,019 (4,254) 246 (4,008) Transfers to stage 2 (7,544) Transfers to stage 3 (64) 73 1 (7,471) 7,667 (73) 7,594 (63) (1,049) 187 (862) (11) (123) 1,113 – – (188) (11) (123) 925 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2023 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release 1,965 (78) 1,887 (1,713) 14 (1,699) (395) – (395) (143) (64) (207) – – – – – 31 31 110 110 – – – – – – (862) 197 (665) – – – – – – (137) (137) (69) (69) – – – – – – – – (38) (38) (426) (426) (649) 649 37 – (37) 24 – – 24 – – (144) (144) (385) (385) (649) 649 37 – (37) 24 – – 24 (190) (190) 59 33 92 (803) 40 (763) 190,999 (325) 190,674 2,472 (140) 2,332 1,485 (759) 726 194,956 (1,224) 193,732 63 – 63 (192) – (192) (464) 239 (225) (593) 239 (354) 1 The gross balance includes the notional amount of off-balance sheet instruments 253 Standard Chartered – Annual Report 2023Risk review and Capital reviewConsumer, Private and Business Banking - Secured (audited) Stage 1 Total credit impair- ment $million Gross balance1 $million Stage 2 Total credit impair- ment $million Net $million Gross balance1 $million Stage 3 Total credit impair- ment $million Net $million Gross balance1 $million Total Total credit impair- ment $million Net $million Net $million Gross balance1 $million Amortised cost and FVOCI As at 1 January 2022 136,600 (96) 136,504 2,685 (32) 2,653 1,103 (517) 586 140,388 (645) 139,743 3,080 (3,254) (38) (28) 3,052 (3,054) 28 (3,026) 11 1 (3,243) (37) 3,319 (473) (11) 3,308 (472) (26) (65) 511 – – (26) (65) (2) 509 – – – – – – – – – Transfers to stage 1 Transfers to stage 2 Transfers to stage 3 Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2022 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release 1 1 3,093 (8) 3,085 (945) (944) (259) – (259) 1,889 (7) 1,882 – – – – – 1 (4) – – – 1 (4) – – – – – – – – (1) (1) 48 48 – – – – – – – – (78) – – (4) (4) (80) 78 – – (80) – – – – – (78) – – (4) (4) (36) 78 – – (36) – – – (4,119) 63 (4,056) (119) (51) (170) (158) (27) (185) (4,396) (15) (4,411) 135,362 (60) 135,302 1,413 (17) 1,396 1,028 (552) 476 137,803 (629) 137,174 (11) – (11) 48 – 48 (84) 55 (29) (47) 55 8 As at 1 January 2023 135,362 (60) 135,302 1,413 (17) 1,396 1,028 (552) 476 137,803 (629) 137,174 Transfers to stage 1 3,311 (20) 3,291 (3,302) 20 (3,282) Transfers to stage 2 (5,340) Transfers to stage 3 (28) 11 1 (5,329) 5,436 (9) 5,427 (27) (463) 1 (462) (9) (96) 491 – (2) (2) (9) (98) 489 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2023 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release (3,138) (16) (3,154) (1,250) 3 (1,247) (216) – (216) (4,604) (13) (4,617) – – – – – 4 22 – – – 4 22 – – – – – – – – (16) (16) 24 24 – – – – – – – – (109) (110) 109 (3) – 3 12 (110) – – 12 (3) (3) – – (109) (3) – (15) (15) (64) 109 3 12 (64) – – 12 (369) 25 (344) (7) (22) (29) (24) 20 (4) (400) 23 (377) 129,798 (33) 129,765 1,827 (16) 1,811 1,062 (525) 537 132,687 (574) 132,113 10 – 10 11 – 11 (113) 68 (45) (92) 68 (24) 1 The gross balance includes the notional amount of off-balance sheet instruments 254 Standard Chartered – Annual Report 2023Risk reviewRisk profileConsumer, Private and Business Banking - Unsecured (audited) Stage 1 Total credit impair- ment $million Gross balance1 $million Stage 2 Total credit impair- ment $million Net $million Gross balance1 $million Stage 3 Total credit impair- ment $million Net $million Gross balance1 $million Total Total credit impair- ment $million Net $million Net $million Gross balance1 $million Amortised cost and FVOCI As at 1 January 2022 54,260 (281) 53,979 990 (153) 837 475 (280) Transfers to stage 1 1,718 (286) 1,432 (1,711) 286 (1,425) Transfers to stage 2 (2,244) Transfers to stage 3 (43) 81 (1) (2,163) 2,259 (81) 2,178 (44) (417) 150 (267) 460 (149) (7) (15) – – 195 (7) (15) 311 55,725 (714) 55,011 – – – – – – – – – Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2022 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release 5,979 (41) 5,938 (666) 18 (648) (137) – (137) 5,176 (23) 5,153 – – – – – 31 67 – – – 31 67 – – – – – – – – (81) (81) (180) (180) – – – – – – – – (457) (27) – (21) (21) (251) 457 27 26 (251) – – 26 – – (71) (71) (364) (364) (457) 457 (27) – 27 26 – – 26 (1,793) 77 (1,716) (47) (60) (107) 134 (33) 101 (1,706) (16) (1,722) 57,877 (353) 57,524 408 (101) 307 426 (224) 202 58,711 (678) 58,033 57 – 57 (243) – (243) (101) (272) 190 (82) 307 426 (224) (458) 190 (268) 202 (2) (25) 436 58,711 (678) 58,033 – – – – – – – – – As at 1 January 2023 57,877 (353) 57,524 408 Transfers to stage 1 954 (226) 728 (952) 226 (726) Transfers to stage 2 (2,204) Transfers to stage 3 (36) 62 – (2,142) 2,231 (64) 2,167 (36) (586) 186 (400) (2) (27) 622 – 2 (186) Net change in exposures Net remeasurement from stage changes Changes in risk parameters Write-offs Interest due but unpaid Discount unwind Exchange translation differences and other movements As at 31 December 2023 Income statement ECL (charge)/release Recoveries of amounts previously written off Total credit impairment (charge)/release 5,103 (62) 5,041 (463) 11 (452) (179) – (179) 4,461 (51) 4,410 – – – – – 27 88 – – – 27 88 – – – – – – – – (121) (121) (93) (93) – – (35) (35) (316) (316) – – (129) (129) (321) (321) – – – – – – (540) 540 40 – (40) 12 – – 12 (540) 540 40 – (40) 12 – – 12 (493) 172 (321) 7 (168) (161) 83 13 96 (403) 17 (386) 61,201 (292) 60,909 645 (124) 521 423 (234) 189 62,269 (650) 61,619 53 – 53 (203) – (203) (351) 171 (180) (501) 171 (330) 1 The gross balance includes the notional amount of off-balance sheet instruments 255 Standard Chartered – Annual Report 2023Risk review and Capital reviewAnalysis of stage 2 balances The table below analyses total stage 2 gross on-and off-balance sheet exposures and associated expected credit provisions by the key significant increase in credit risk (SICR) driver that caused the exposures to be classified as stage 2 as at 31 December 2023 and 31 December 2022 for each segment. Where multiple drivers apply, the exposure is allocated based on the table order. For example, a loan may have breached the PD thresholds and could also be on non-purely precautionary early alert; in this instance, the exposure is reported under ‘Increase in PD’. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236. Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items1 Total Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % 2023 Increase in PD 8,262 75 0.9% 1,962 109 5.6% 96 23 24.0% 599 13 2.2% 10,919 220 2.0% Non-purely precautionary early alert 5,136 Higher risk (CG12) 1,008 Sub-investment grade Top up/Sell down (Private Banking) – – 26 56 0.5% 5.6% – 0.0% – 0.0% Others 2,467 37 1.5% 30 days past due Management overlay – – – 0.0% 124 0.0% 37 26 – 148 151 148 – – 0.0% 1 3.8% – 0.0% 2 1.4% 16 10.6% 12 8.1% – 0.0% – – – – – 2 – – 0.0% – – 0.0% 5,173 – 0.0% 2,020 17 0.8% 3,054 26 74 0.5% 2.4% – 0.0% – – 0.0% – 0.0% – 0.0% – – – 0.0% 148 – 0.0% 489 – 0.0% 3,107 – 0.0% – 0.0% – – – 0.0% 17 0.0% 150 – 2 53 12 1.4% 1.7% 8.0% 141 0.0% Total stage 2 16,873 318 1.9% 2,472 140 5.7% 98 23 23.5% 3,108 47 1.5% 22,551 528 2.3% Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items1 Total Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % Gross $million ECL $million Coverage % 2022 Increase in PD 13,620 192 1.4% 1,389 89 6.4% Non-purely precautionary early alert 3,272 Higher risk (CG12) 653 Sub-investment grade Top up/Sell down (Private Banking) Others 30 days past due Management overlay – – 2,603 – – Total stage 2 20,148 12 30 – – 41 – 136 411 0.4% 4.6% 0.0% 0.0% 1.6% 0.0% 0.0% 2.0% 35 18 – 111 122 146 – – 1 – – 4 12 12 0.0% 5.6% 0.0% 0.0% 3.3% 8.2% 0.0% 1,821 118 6.5% – – – – – – 47 – 47 – – – – – – 3 – 3 0.0% 2,973 11 0.4% 17,982 292 1.6% 0.0% 0.0% 0.0% 0.0% 0.0% 6.4% 0.0% 6.4% 5 2,534 95 – 451 – – – 69 11 – 7 – – 0.0% 2.7% 11.6% 0.0% 1.6% 0.0% 0.0% 3,312 3,205 95 111 3,176 193 – 6,058 98 1.6% 28,074 12 0.4% 100 3.1% 11 11.6% – 52 15 148 630 0.0% 1.6% 7.8% 0.0% 2.2% 1 Includes Gross and ECL for Cash and balances at central banks and Assets held for sale 256 Standard Chartered – Annual Report 2023Risk reviewRisk profileCredit impairment charge (audited) The table below analyses credit impairment charges or releases of the ongoing business portfolio and restructuring business portfolio for the year ended 31 December 2023. Further details can be found in the ‘Summary of performance in 2023’ in pages 235 and 236. Stage 1 & 2 $million 2023 Stage 3 $million Total $million Stage 1 & 2 $million 20221 Stage 3 $million Total $million Ongoing business portfolio Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items Credit impairment charge/(release) Restructuring business portfolio Others Credit impairment charge/(release) Total credit impairment charge/(release) 11 129 42 (44) 138 1 1 139 112 225 43 10 390 (21) (21) 369 123 354 85 (34) 528 (20) (20) 508 148 151 13 95 407 (1) (1) 277 111 3 38 429 1 1 425 262 16 133 836 – – 406 430 836 1 Underlying credit impairment has been restated for the removal of (i) exit markets and businesses in AME and (ii) Aviation Finance. No change to reported credit impairment Problem credit management and provisioning (audited) Forborne and other modified loans by client segment A forborne loan arises when a concession has been made to the contractual terms of a loan in response to a customer’s financial difficulties. Net forborne loans decreased by $120 million to $1,005 million (31 December 2022: $1,125 million) largely on performing forborne loans stock. The net performing forborne loans declined from $151 million to $38 million while net non-performing forborne loans remained stable at $967 million (31 December 2022: $974 million). 2023 2022 Amortised cost All loans with forbearance measures Credit impairment (stage 1 and 2) Credit impairment (stage 3) Net carrying value Included within the above table Gross performing forborne loans Modification of terms and conditions1 Refinancing2 Impairment provisions Modification of terms and conditions1 Refinancing2 Net performing forborne loans Collateral Gross non-performing forborne loans Modification of terms and conditions1 Refinancing2 Impairment provisions Modification of terms and conditions1 Refinancing2 Net non-performing forborne loans Collateral Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million 2,340 – (1,529) 811 – – – – – – – – 2,340 2,113 227 (1,529) (1,337) (192) 811 341 314 (2) (118) 194 40 40 – (2) (2) – 38 31 274 274 – (118) (118) – 156 49 – – – – – – – – – – – – – – – – – – – – Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million 2,129 (1) (1,253) 875 89 89 – (1) (1) – 88 7 2,040 1,997 43 (1,253) (1,210) (43) 787 243 377 – (127) 250 63 63 – – – – 63 60 314 314 – (127) (127) – 187 68 – – – – – – – – – – – – – – – – – – – – Total $million 2,654 (2) (1,647) 1,005 40 40 – (2) (2) – 38 31 2,614 2,387 227 (1,647) (1,454) (192) 967 390 Total $million 2,506 (1) (1,380) 1,125 152 152 – (1) (1) – 151 67 2,354 2,311 43 (1,380) (1,337) (43) 974 311 1 Modification of terms is any contractual change apart from refinancing, as a result of credit stress of the counterparty, i.e. interest reductions, loan covenant waivers 2 Refinancing is a new contract to a borrower in credit stress, such that they are refinanced and can pay other debt contracts that they were unable to honour 257 Standard Chartered – Annual Report 2023Risk review and Capital reviewForborne and other modified loans by region Net forborne loans decreased by $120 million to $1,005 million (31 December 2022: $1,125 million) mainly in the performing forborne loans, in particular the Asia and the Europe and Americas regions. Amortised cost Performing forborne loans Stage 3 forborne loans Net forborne loans 2023 2022 Asia $million Africa & Middle East $million Europe & Americas $million 34 661 695 4 75 79 – 231 231 Total $million 38 967 1,005 Asia $million Africa & Middle East $million Europe & Americas $million 129 568 697 9 144 153 13 262 275 Total $million 151 974 1,125 Stage 3 cover ratio (audited) The stage 3 cover ratio measures the proportion of stage 3 impairment provisions to gross stage 3 loans, and is a metric commonly used in considering impairment trends. This metric does not allow for variations in the composition of stage 3 loans and should be used in conjunction with other Credit Risk information provided, including the level of collateral cover. The balance of stage 3 loans not covered by stage 3 impairment provisions represents the adjusted value of collateral held and the net outcome of any workout or recovery strategies. Collateral provides risk mitigation to some degree in all client segments and supports the credit quality and cover ratio assessments post impairment provisions. Further information on collateral is provided in the ‘Credit Risk mitigation’ section in pages 258 to 260. Further details on stage 3 loans and advances and cover ratio can be found in the ‘Summary of performance in 2023’ in pages 235 and 236. 2023 2022 Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million Central & Others $million Total $million Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million Central & Others $million Total $million Amortised cost Gross credit-impaired 5,508 1,484 Credit impairment provisions (3,533) (760) Net credit-impaired Cover ratio Collateral ($ million) Cover ratio (after collateral) 1,975 64% 623 75% 724 51% 100% 554 – 89% 100% 12 (12) – 224 7,228 (15) (4,320) 209 7% – 7% 2,908 60% 1,177 76% 6,143 (3,662) 2,481 60% 956 75% 1,453 (776) 677 53% 543 91% 1 (1) – 100% – 100% 248 7,845 (18) (4,457) 230 7% – 7% 3,388 57% 1,499 76% Credit-impaired (stage 3) loans and advances by geographic region Stage 3 gross loans decreased by $0.6 billion to $7.2 billion (31 December 2022: $7.8 billion). The decrease was primarily driven by repayments and write-offs in the Africa and the Middle East, which was offset by new inflows in Asia. Further details can be found in the ‘Summary of performance in 2023’ in pages 235 and 236. Amortised cost Gross credit-impaired 2023 Asia $million 4,604 Africa & Middle East $million Europe & Americas $million 2,273 351 Total $million 7,228 Credit impairment provisions (2,734) (1,388) (198) (4,320) Net credit-impaired Cover ratio 1,870 59% 885 61% 153 56% 2,908 60% 2022 Africa & Middle East $million Europe & Americas $million 2,725 (1,765) 960 65% 558 (209) 349 37% Asia $million 4,562 (2,483) 2,079 54% Total $million 7,845 (4,457) 3,388 57% Credit Risk mitigation Potential credit losses from any given account, customer or portfolio are mitigated using a range of tools such as collateral, netting arrangements, credit insurance and credit derivatives, taking into account expected volatility and guarantees. The reliance that can be placed on these mitigants is carefully assessed in light of issues such as legal certainty and enforceability, market valuation correlation and counterparty risk of the guarantor. 258 Standard Chartered – Annual Report 2023Risk reviewRisk profileCollateral (audited) 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. The unadjusted market value of collateral across all asset types, in respect of CCIB, without adjusting for over-collateralisation, reduced to $290 billion (31 December 2022: $345 billion) predominantly due to a reduction in reverse repos. 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 mitigation policy and for the effect of over-collateralisation. The extent of over-collateralisation 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 arising from expected credit losses. The value of collateral reflects management’s best estimate and is 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. CCIB collateral decreased by $1.7 billion to $36.5 billion (31 December 2022: $38.2 billion) and CPBB collateral decreased by $5.5 billion to $86.8 billion (31 December 2022: $92.4 billion) due to exposure reductions from the mortgage portfolio. Total collateral for Central and other items decreased by $8.7 billion to $2.5 billion (31 December 2022: $11.2 billion) due to a decrease in stage 1 reverse repos. However, collateral for stage 2 Central and other items increased by $1 billion (31 December 2022: Nil) due to short-term reverse repo with a Central Bank in the Africa and Middle East region. Collateral held on loans and advances The table below details collateral held against exposures, separately disclosing stage 2 and stage 3 exposure and corresponding collateral. Net amount outstanding 2023 Collateral Stage 2 financial assets $million Credit- impaired financial assets (S3) $million Stage 2 financial assets $million Credit- impaired financial assets (S3) $million Total2 $million Total $million Net exposure Stage 2 financial assets $million Credit- impaired financial assets (S3) $million Total $million 175,382 8,175 2,046 36,458 2,972 623 138,924 5,203 1,423 126,059 1,033 29,478 331,952 2,163 33 964 11,335 724 – 209 2,979 86,827 – 2,475 125,760 Net amount outstanding Stage 2 financial assets $million Credit- impaired financial assets (S3) $million Total $million 1,136 – 964 5,072 2022 Collateral 554 – – 39,232 1,033 27,003 1,027 33 – 170 – 209 1,177 206,192 6,263 1,802 Net exposure Stage 2 financial assets $million Credit- impaired financial assets (S3) $million Stage 2 financial assets $million Credit- impaired financial assets (S3) $million Total $million Total2 $million 179,150 11,366 2,526 38,151 3,973 956 140,999 7393 1,570 130,955 1,550 698 39,363 350,166 17 – 12,933 677 – 230 3,433 92,350 1,019 543 38,605 – 11,214 141,715 – – – – 4,992 1,499 698 28,149 208,451 531 17 – 7,941 134 – 230 1,934 Amortised cost Corporate, Commercial & Institutional Banking1 Consumer, Private & Business Banking Ventures Central & other items Total Amortised cost Corporate, Commercial & Institutional Banking1 Consumer, Private & Business Banking Ventures Central & other items Total 1 Includes loans and advances to banks 2 Adjusted for over-collateralisation based on the drawn and undrawn components of exposures Collateral – Corporate, Commercial & Institutional Banking (audited) Collateral taken for longer-term and sub-investment grade corporate loans reduced to 41 per cent (31 December 2022: 53 per cent) primarily due to the exit of the Aviation business. Our underwriting standards encourage taking specific charges on assets and we consistently seek high-quality, investment- grade collateral. 83 per cent (31 December 2022: 85 per cent) of tangible collateral excluding reverse repurchase agreements and financial guarantees held comprises physical assets or is property based, with the remainder held in cash. Overall collateral decreased by $2 billion to $36 billion (31 December 2022: $38 billion) mainly due to a decrease in property collateral. Non-tangible collateral, such as guarantees and standby letters of credit, is also held against corporate exposures, although the financial effect of this type of collateral is less significant in terms of recoveries. However, this is considered when determining the probability of default and other credit-related factors. Collateral is also held against off balance sheet exposures, including undrawn commitments and trade-related instruments. 259 Standard Chartered – Annual Report 2023Risk review and Capital reviewCorporate, Commercial & Institutional Banking Amortised cost Maximum exposure Property Plant, machinery and other stock Cash Reverse repos AA– to AA+2 A– to A+2 BBB– to BBB+ Lower than BBB- Unrated Financial guarantees and insurance Commodities Ships and aircraft Total value of collateral1 Net exposure 2023 $million 175,382 9,339 933 2,985 13,826 1,036 10,606 855 169 1,160 5,057 5 4,313 36,458 138,924 2022 $million 179,150 10,152 1,168 2,797 14,305 92 10,459 1,485 – 2,269 5,096 37 4,596 38,151 140,999 1 Adjusted for over-collateralisation based on the drawn and undrawn components of exposures 2 Prior year has been represented to provide granular credit ratings Collateral – Consumer, Private & Business Banking (audited) In CPBB, fully secured products remain stable at 85 per cent of the total portfolio (31 December 2022: 86 per cent). The following table presents an analysis of loans to individuals by product; split between fully secured, partially secured and unsecured. Amortised cost Maximum exposure Loans to individuals Mortgages CCPL Auto Secured wealth products Other Total collateral1 Net exposure2 2023 2022 Fully secured $million Partially secured $million Unsecured $million Total $million 106,914 505 18,640 126,059 Fully secured $million 112,556 Partially secured $million Unsecured $million Total $million 449 17,950 130,955 82,943 375 312 20,303 2,981 – – – – – 17,395 – – 505 1,245 82,943 17,770 312 20,303 4,731 86,827 39,232 87,212 221 502 19,551 5,070 – – – – – 16,711 – – 449 1,239 87,212 16,932 502 19,551 6,758 92,350 38,605 Percentage of total loans 85% 0% 15% 86% 0% 14% 1 Collateral values are adjusted where appropriate in accordance with our risk mitigation policy and for the effect of over-collateralisation 2 Amounts net of ECL 260 Standard Chartered – Annual Report 2023Risk reviewRisk profileMortgage loan-to-value ratios by geography (audited) Loan-to-value (LTV) ratios measure the ratio of the current mortgage outstanding to the current fair value of the properties on which they are secured. In a majority of mortgages, the value of property held as security significantly exceeds principal outstanding of the mortgage loans. The average LTV of the overall mortgage portfolio increased to 47.1 per cent (31 December 2022: 44.7 per cent) driven by property prices decrease in a few key markets, including Hong Kong, Korea and China. Hong Kong, which represents 39.9 per cent of the residential mortgage portfolio, has an average LTV of 55.9 per cent (31 December 2022: 52.6 per cent). The increase of Hong Kong residential mortgage LTV is due to a decrease of the Property Price Index. All of our other key markets continue to have low portfolio LTVs (Korea, Singapore and Taiwan at 40.5 per cent, 43.0 per cent and 47.0 per cent respectively). Korea average LTV increase is due to government relaxations whereby highly regulated areas have eased up to accommodate customers with higher LTV. An analysis of LTV ratios by geography for the mortgage portfolio is presented in the table below. Amortised cost Less than 50 per cent 50 per cent to 59 per cent 60 per cent to 69 per cent 70 per cent to 79 per cent 80 per cent to 89 per cent 90 per cent to 99 per cent 100 per cent and greater Average portfolio loan-to-value Loans to individuals – mortgages ($million) Amortised cost Less than 50 per cent 50 per cent to 59 per cent 60 per cent to 69 per cent 70 per cent to 79 per cent 80 per cent to 89 per cent 90 per cent to 99 per cent 100 per cent and greater Average portfolio loan-to-value Loans to individuals – mortgages ($million) 2023 Africa & Middle East % Gross Europe & Americas % Gross 51.1 14.7 13.7 12.8 3.9 2.1 1.7 51.1 1,183 31.0 17.4 33.9 14.4 2.5 0.6 0.3 56.0 2,243 2022 Africa & Middle East % Gross Europe & Americas % Gross 43.0 18.2 16.8 12.8 5.1 2.0 2.2 54.3 1,388 32.2 19.2 31.3 14.8 1.1 – 1.3 56.6 1,870 Asia % Gross 55.5 17.1 11.4 7.7 3.3 2.6 2.5 46.9 79,517 Asia1 % Gross 60.9 15.5 9.8 6.5 3.6 2.5 1.4 44.4 83,954 Total % Gross 54.8 17.1 12.0 7.9 3.3 2.5 2.4 47.1 82,943 Total % Gross 60.1 15.6 10.2 6.7 3.6 2.4 1.4 44.7 87,212 Collateral and other credit enhancements possessed or called upon (audited) 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 securities acquired may be held by the Group for investment purposes and are classified as fair value through profit or loss, and the related loan written off. The carrying value of collateral possessed and held by the Group is $16.5 million (31 December 2022: $14.9 million). Property, plant and equipment Guarantees Total 2023 $million 2022 $million 10.5 6.0 16.5 9.6 5.3 14.9 261 Standard Chartered – Annual Report 2023Risk review and Capital reviewOther Credit risk mitigation (audited) Other forms of credit risk mitigation 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 $3.5 billion (31 December 2022: $5.1 billion). These credit default swaps are accounted for as financial 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 Risk and Foreign Exchange Rate Risk on these assets. Credit linked notes The Group has issued credit linked notes for portfolio management purposes, referencing loan assets with a notional value of $22.5 billion (31 December 2022: $13.5 billion). The Group continues to hold the underlying assets for which the credit linked notes provide mitigation. The credit linked notes are recognised as a financial liability at amortised cost on the balance sheet. Derivative financial 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 positive and negative mark-to-market values of applicable derivative transactions. Credit Risk mitigation for derivative financial instruments is set out below. 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 by credit quality by industry and industry and retail products analysis by region. Maturity analysis of loans and advances by client segment Loans and advances to the CCIB segment remain predominantly short-term, with $91 billion (31 December 2022: $98 billion) maturing in less than one year. 98 per cent (31 December 2022: 96 per cent) of loans to banks mature in less than one year, an increase compared with 2022 as net exposures increased by $5.5 billion to $45 billion (31 December 2022: $39.5 billion). Shorter maturities give us the flexibility to respond promptly to events and rebalance or reduce our exposure to clients or sectors that are facing increased pressure or uncertainty. The CPBB short-term book of one year or less and long-term book of over five years is stable at 26 per cent (31 December 2022: 25 per cent) and 63 per cent (31 December 2022: 64 per cent) of the total portfolio respectively. One year or less $million One to five years $million Over five years $million 2023 90,728 33,397 747 29,448 154,320 (4,872) 149,448 43,955 30,746 13,711 334 43 44,834 (185) 44,649 1,021 2022 12,822 80,166 – 3 92,991 (113) 92,878 1 One year or less $million One to five years $million Over five years $million 98,335 33,365 548 39,373 171,621 (4,767) 166,854 38,105 34,635 14,161 162 – 48,958 (574) 48,384 1,211 10,789 84,731 – 8 95,528 (119) 95,409 203 Total | $million 134,296 127,274 1,081 29,494 292,145 (5,170) 286,975 44,977 Total $million 143,759 132,257 710 39,381 316,107 (5,460) 310,647 39,519 Amortised cost Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items Gross loans and advances to customers Impairment provisions Net loans and advances to customers Net loans and advances to banks Amortised cost Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items Gross loans and advances to customers Impairment provisions Net loans and advances to customers Net loans and advances to banks 262 Standard Chartered – Annual Report 2023Risk reviewRisk profile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 impairment and net basis. Stage 1 Total credit impair- ment $million Gross balance $million Net carrying amount $million Gross balance $million Stage 2 Total credit impair- ment $million Net carrying amount $million Gross balance $million Stage 3 Total credit impair- ment $million Net carrying amount $million Gross balance $million Total Total credit impair- ment $million Net carrying amount $million 2023 9,397 21,239 (8) (8) 9,389 21,231 672 708 (22) (16) 650 692 949 656 (535) (436) 414 220 11,018 (565) 10,453 22,603 (460) 22,143 31,633 (13) 31,620 571 (1) 570 80 (77) 3 32,284 (91) 32,193 14,710 (8) 14,702 1,722 (36) 1,686 481 (178) 303 16,913 (222) 16,691 7,668 (15) 7,653 323 (7) 316 355 (262) 93 8,346 (284) 8,062 12,261 (30) 12,231 1,848 (129) 1,719 1,712 (1,191) 521 15,821 (1,350) 14,471 5,995 5,815 2,230 (4) (3) (2) 5,991 5,812 2,228 581 – 581 33,400 4,262 (6) 33,394 (4) 4,258 81,210 (8) 81,202 7,633 (104) 7,529 220 300 502 57 1,783 161 1,350 244 (10) (21) (8) – (5) (3) 210 279 494 57 1,778 158 (5) 1,345 (65) 179 151 329 358 107 367 187 519 69 (84) (298) (326) (58) (33) (70) (123) (50) 67 31 32 49 334 117 396 19 6,366 6,444 3,090 (98) 6,268 (322) 6,122 (336) 2,754 745 (58) 687 35,550 (44) 35,506 4,610 (77) 4,533 83,079 (136) 82,943 7,946 (219) 7,727 10,867 (188) 10,679 324 (77) 247 315 (165) 150 11,506 (430) 11,076 310 – 310 1 – 1 1 – 1 312 – 312 19,923 4,558 (22) 19,901 (7) 4,551 278 161 (10) (5) 268 156 474 118 (340) (94) 134 24 20,675 (372) 20,303 4,837 (106) 4,731 273,692 (430) 273,262 11,225 (420) 10,805 7,228 (4,320) 2,908 292,145 (5,170) 286,975 Amortised cost Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies & distributors Government Other Retail Products: Mortgage Credit Cards Personal loans and other unsecured lending Auto Secured wealth products Other Net carrying value (customers)¹ 1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $13,996 million 263 Standard Chartered – Annual Report 2023Risk review and Capital reviewStage 1 Total credit impair- ment $million Gross balance $million Net carrying amount $million Gross balance $million Stage 2 Total credit impair- ment $million Net carrying amount $million Gross balance $million Stage 3 Total credit impair- ment $million Net carrying amount $million Gross balance $million Total Total credit impair- ment $million Net carrying amount $million 2022 10,959 20,990 (8) 10,951 (23) 20,967 818 1,089 (7) (27) 811 1,062 1,324 777 (620) (518) 704 259 13,101 (635) 12,466 22,856 (568) 22,288 34,915 (9) 34,906 774 (3) 771 195 (175) 20 35,884 (187) 35,697 14,273 (22) 14,251 2,347 (36) 2,311 669 (224) 445 17,289 (282) 17,007 7,841 (21) 7,820 695 (20) 675 418 (259) 159 8,954 (300) 8,654 12,393 (43) 12,350 3,217 (195) 3,022 1,305 (761) 544 16,915 (999) 15,916 5,482 6,403 2,424 2,205 42,825 4,684 (4) (4) (2) 5,478 6,399 2,422 (1) 2,204 (2) 42,823 (4) 4,680 85,859 (12) 85,847 6,912 (103) 6,809 10,652 (253) 10,399 501 – 501 19,269 6,632 (45) 19,224 (3) 6,629 537 420 407 170 603 278 996 155 215 1 235 86 (5) (17) (5) (2) (1) (5) (7) (46) (57) – (10) (1) 532 403 402 168 602 273 989 109 158 1 225 85 248 358 495 122 168 312 556 59 296 – 407 136 (174) (307) (410) (80) (15) (137) (180) (44) (156) – (305) (92) 74 51 85 42 153 175 376 15 140 – 102 44 6,267 7,181 3,326 (183) 6,084 (328) (417) 6,853 2,909 2,497 43,596 (83) 2,414 (18) 43,578 5,274 (146) 5,128 87,411 7,126 (199) (193) 87,212 6,933 11,163 502 (466) 10,697 – 502 19,911 6,854 (360) (96) 19,551 6,758 295,219 (559) 294,660 13,043 (444) 12,599 7,845 (4,457) 3,388 316,107 (5,460) 310,647 Amortised cost Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies & distributors Government Other Retail Products: Mortgage Credit Cards Personal loans and other unsecured lending Auto Secured wealth products Other Net carrying value (customers)¹ 1 Includes reverse repurchase agreements and other similar secured lending held at amortised cost of $24,498 million Industry and Retail Products analysis of loans and advances by geographic region This section provides an analysis of the Group’s amortised cost loan portfolio, net of provisions, by industry and region. In the CCIB and Central and other items segment, our largest industry exposures are to Government, Financing, insurance and non-banking and Manufacturing with each constituting at least 8 per cent of CCIB and Central and other items loans and advances to customers. Financing, insurance and non-banking industry clients are mostly investment-grade institutions and this lending forms part of the liquidity management of the Group. The Manufacturing sector group is spread across a diverse range of industries, including automobiles and components, capital goods, pharmaceuticals, biotech and life sciences, technology hardware and equipment, chemicals, paper products and packaging, with lending spread over 3,255 clients. The Mortgage portfolio continues to be the largest portion of the CPBB portfolio at $83.1 billion (31 December 2022: $87.4 billion), of which 96 per cent continues to be in Asia. Credit cards, personal loans and other unsecured lending increased to 15 per cent (31 December 2022: 14 per cent) of the CPBB portfolio, mainly in Asia due to the growth from Mox Bank and digital partnerships. In Asia, the Financing, insurance and non-banking industry decreased by $1.9 billion to $22.8 billion (31 December 2022: $24.7 billion) while the CRE sector decreased by $2 billion to $11.2 billion (31 December 2022: $13.2 billion) due to exposure reductions. The Government sector decreased by $9.2 billion to $30.5 billion (31 December 2022: $39.7 billion) due to decreased lending to Korea. 264 Standard Chartered – Annual Report 2023Risk reviewRisk profileAmortisecd cost Industry: Energy Manufacturing Financing, insurance and non-banking Transport, telecom and utilities Food and household products Commercial real estate Mining and quarrying Consumer durables Construction Trading companies and distributors Government Other Retail Products: Mortgages Credit Cards Personal loans and other unsecured lending Auto Secured wealth products Other Net loans and advances to customers Net loans and advances to banks 2023 2022 Asia $million Africa & Middle East $million Europe & Americas $million Total $million Asia $million Africa & Middle East $million Europe & Americas $million Total $million 4,143 16,828 22,771 12,122 4,856 11,176 3,856 5,033 1,803 527 30,487 3,401 79,517 7,449 9,426 295 18,774 4,671 237,135 35,417 3,986 1,077 829 2,650 1,726 623 375 429 333 109 4,778 584 1,183 278 1,565 17 987 60 2,324 4,238 8,593 1,919 1,480 2,672 2,037 660 618 51 241 548 10,453 22,143 32,193 16,691 8,062 14,471 6,268 6,122 2,754 687 35,506 4,533 2,243 82,943 – 85 – 7,727 11,076 312 542 20,303 – 4,731 21,589 3,106 28,251 286,975 6,454 44,977 6,250 17,388 24,674 10,841 4,160 13,179 3,785 5,860 1,775 2,281 39,713 3,636 83,954 6,642 9,056 469 17,876 6,676 258,215 22,058 2,278 1,267 761 3,567 2,566 598 390 461 625 101 3,759 702 1,388 291 1,541 33 1,048 82 21,458 3,929 3,938 3,633 10,262 2,599 1,928 2,139 1,909 532 509 32 106 790 12,466 22,288 35,697 17,007 8,654 15,916 6,084 6,853 2,909 2,414 43,578 5,128 1,870 – 87,212 6,933 100 – 627 – 30,974 13,532 10,697 502 19,551 6,758 310,647 39,519 Vulnerable, cyclical and high carbon sectors Vulnerable and cyclical sectors are those that the Group considers to be most at risk from current economic stresses, including volatile energy and commodity prices, and we continue to monitor exposures to these sectors particularly carefully. Sectors are identified and grouped as per the International Standard Industrial Classification (ISIC) system and exposure numbers have been updated to include all in-scope ISIC codes used for target setting among the high carbon sectors. The maximum exposures shown in the table include Loans and Advances to Customers at Amortised cost, Fair Value through profit or loss, and committed facilities available as per IFRS 9 – Financial Instruments in $million. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236. 265 Standard Chartered – Annual Report 2023Risk review and Capital reviewMaximum exposure Industry: Automotive manufacturers¹ Aviation1,2 Of which : High Carbon Sector Commodity Traders2 Metals & Mining1.2 Of which: Steel1 Of which: Coal Mining1 Of which: Aluminium1 Of which: Other Metals & Mining1 Shipping1 Construction2 Commercial Real Estate2 Of which: High Carbon Sector Hotels & Tourism2 Oil & Gas1,2 Power1 Total3 Of which: Vulnerable and cyclical sectors Of which: High carbon sectors4 Total Corporate, Commercial & Institutional Banking Total Group 1 High carbon sectors 2 Vulnerable and cyclical sectors 2023 Maximum on Balance Sheet Exposure (net of credit impairment) $million Net On Balance Sheet Exposure $million Undrawn Commitments (net of credit impairment) $million Financial Guarantees (net of credit impairment) $million Net Off Balance Sheet Exposure $million Total On & Off Balance Sheet Net Exposure $million Collateral $million 3,564 1,775 1,330 7,406 4,589 1,596 29 526 2,438 5,964 2,853 14,533 7,498 1,680 6,278 5,411 54,053 38,880 34,634 65 974 974 303 307 193 9 9 96 3,557 448 6,363 3,383 715 894 1,231 14,857 9,983 10,411 3,499 801 356 7,103 4,282 1,403 20 517 2,342 2,407 2,405 8,170 4,115 965 5,384 4,180 39,196 28,897 24,223 3,791 1,794 944 2,591 3,373 601 51 338 2,383 2,261 2,753 4,658 1,587 1,339 7,845 3,982 34,387 24,842 23,783 538 668 615 6,281 1,218 358 99 188 573 291 5,927 311 112 227 6,944 732 23,137 21,511 10,450 4,329 2,462 1,559 8,872 4,591 959 150 526 2,956 2,552 8,680 4,969 1,699 1,566 14,789 4,714 57,524 46,353 34,233 7,828 3,263 1,915 15,975 8,873 2,362 170 1,043 5,298 4,959 11,085 13,139 5,814 2,531 20,173 8,894 96,720 75,250 58,456 130,405 32,744 97,661 331,952 125,760 206,192 104,437 182,299 63,183 167,620 265,281 74,278 256,577 462,769 3 Maximum On Balance sheet exposure include FVTPL portion of $955 million, of which Vulnerable sector is $821 million and High Carbon sector is $443 million 4 Excluded Cement to the value of $671 million net of ECL under Construction 266 Standard Chartered – Annual Report 2023Risk reviewRisk profile2022 Maximum On Balance Sheet Exposure (net of credit impairment) $million Net On Balance Sheet Exposure $million Undrawn Commitments (net of credit impairment) $million Financial Guarantees (net of credit impairment) $million Net Off Balance Sheet Exposure $million Total On & Off Balance Sheet Net Exposure $million Collateral $million 3,167 3,154 2,540 8,133 4,990 1,227 48 728 2,987 5,322 2,909 16,286 6,547 1,741 6,668 4,771 57,141 43,678 34,005 84 1,597 1,582 341 333 157 15 107 54 3,167 552 7,205 2,344 919 806 1,258 16,262 11,741 9,574 3,083 1,557 958 7,792 4,657 1,070 33 621 2,933 2,155 2,357 9,081 4,203 822 5,862 3,513 3,683 1,762 695 2,578 3,732 1,450 8 285 1,989 1,870 2,762 6,258 3,996 1,346 7,630 4,169 40,879 31,937 24,431 35,790 25,761 25,775 560 632 555 6,095 930 327 7 74 522 256 5,969 224 90 138 7,158 1,176 23,138 21,068 10,725 4,243 2,394 1,250 8,673 4,662 1,777 15 359 2,511 2,126 8,731 6,482 4,086 1,484 14,788 5,345 58,928 46,829 36,500 7,326 3,951 2,208 16,465 9,319 2,847 48 980 5,444 4,281 11,088 15,563 8,289 2,306 20,650 8,858 99,807 78,766 60,931 139,631 350,166 35,229 141,715 104,402 208,451 95,272 168,574 51,662 146,934 60,224 228,798 251,336 437,249 Industry: Automotive manufacturers1 Aviation1,2,3 Of which : High Carbon Sector Commodity Traders2 Metals & Mining1.2 Of which: Steel1 Of which: Coal Mining1 Of which: Aluminium1 Of which: Other Metals & Mining1 Shipping1 Construction2 Commercial Real Estate2 Of which: High Carbon Sector Hotels & Tourism2 Oil & Gas1,2 Power1 Total4 Of which: Vulnerable and cyclical sectors Of which: High carbon sectors5 Total Corporate, Commercial & Institutional Banking Total Group 1 High carbon sectors 2 Vulnerable and cyclical sectors 3 In addition to the aviation sector loan exposures, the Group owns $3.2 billion of aircraft under operating leases in 2022 4 Maximum On Balance sheet exposure include FVTPL portion of $1,251 million, of which Vulnerable sector is $1,072 million and High Carbon sector is $574 million 5 Excluded Cement to the value of $719 million net of ECL under Construction 267 Standard Chartered – Annual Report 2023Risk review and Capital reviewLoans and advances by stage Stage 1 Total Credit Impair- ment $million Net Carrying Amount $million Gross Balance $million 2023 Stage 2 Total Credit Impair- ment $million Net Carrying Amount $million Gross Balance $million Stage 3 Total Credit Impair- ment $million Net Carrying Amount $million Gross Balance $million Total Total Credit Impair- ment $million Net Carrying Amount $million – (2) (1) (2) 1,619 6,910 3,933 2,228 55 129 140 502 (1) (1) (8) (8) 54 128 132 494 74 555 154 358 (15) (504) (88) (326) (30) 12,231 1,848 (129) 1,719 1,712 (1,191) (2) (4) 1,466 5,230 61 615 – 61 (15) 600 126 571 (25) (147) 59 51 66 32 521 101 424 1,748 7,596 4,228 3,090 (16) 1,732 (507) 7,089 (97) 4,131 (336) 2,754 15,821 (1,350) 14,471 1,655 6,420 (27) 1,628 (166) 6,254 Gross Balance $million 1,619 6,912 3,934 2,230 12,261 1,468 5,234 33,658 (41) 33,617 3,350 (162) 3,188 3,550 (2,296) 1,254 40,558 (2,499) 38,059 Amortised Cost Industry: Aviation Commodity Traders Metals & Mining Construction Commercial Real Estate Hotels & Tourism Oil & Gas Total Total Corporate, Commercial & Institutional Banking 120,886 (101) 120,785 7,902 (257) 7,645 5,508 (3,533) 1,975 134,296 (3,891) 130,405 Total Group 318,076 (438) 317,638 11,765 (430) 11,335 7,305 (4,326) 2,979 337,146 (5,194) 331,952 Stage 1 Total Credit Impair- ment $million Net Carrying Amount $million Gross Balance $million 2022 Stage 2 Total Credit Impair- ment $million Net Carrying Amount $million Gross Balance $million (1) (6) (1) (2) 2,376 7,181 4,183 2,422 573 138 475 407 – (2) (4) (5) 573 136 471 402 155 689 257 497 (43) 12,350 3,217 (195) 3,022 1,305 (2) (4) 1,446 5,464 108 708 (1) (6) 107 702 206 919 Stage 3 Total Credit Impair- ment $million (32) (435) (157) (412) (761) (18) (442) Net Carrying Amount $million Gross Balance $million Total Total Credit Impair- ment $million Net Carrying Amount $million 123 254 100 85 544 188 477 3,105 8,014 4,916 3,328 (33) 3,072 (443) (162) (419) 7,571 4,754 2,909 16,915 (999) 15,916 1,762 7,095 (21) 1,741 (452) 6,643 (59) 35,422 5,626 (213) 5,413 4,028 (2,257) 1,771 45,135 (2,529) 42,606 Amortised Cost Industry: Aviation¹ Commodity Traders Metals & Mining Construction Commercial Real Estate Hotels & Tourism Oil & Gas Total Gross Balance $million 2,377 7,187 4,184 2,424 12,393 1,448 5,468 35,481 Total Corporate, Commercial & Institutional Banking 126,261 (143) 126,118 11,355 (323) 11,032 6,143 (3,662) Total Group 334,368 (568) 333,800 13,380 (447) 12,933 7,904 (4,471) 1 In addition to the aviation sector loan exposures, the Group owns $3.2 billion of aircraft under operating leases in 2022 Loans and advances by region (net of credit impairment) 2,481 3,433 143,759 (4,128) 139,631 355,652 (5,486) 350,166 Industry: Aviation Commodity Traders Metals & Mining Construction Commercial Real Estate Hotel & Tourism Oil & Gas Total 2023 2022¹ Asia $million Africa & Middle East $million Europe & Americas $million Total $million Asia $million Africa & Middle East $million Europe & Americas $million Total $million 1,077 3,778 1,628 1,803 11,176 998 2,639 23,099 7 675 1,522 333 623 178 1,815 5,153 648 2,636 981 618 2,672 452 1,800 9,807 1,732 7,089 4,131 2,754 14,471 1,628 6,254 1,105 3,497 2,966 1,776 13,180 880 3,574 38,059 26,978 1,259 978 347 624 598 465 1,445 5,716 708 3,096 1,441 509 2,138 396 1,624 9,912 3,072 7,571 4,754 2,909 15,916 1,741 6,643 42,606 1 In addition to the aviation sector loan exposures, the Group owns $3.2 billion of aircraft under operating leases in 2022 268 Standard Chartered – Annual Report 2023Risk reviewRisk profileCredit quality – loans and advances Amortised Cost Credit Grade Strong Satisfactory Higher risk Credit impaired (stage 3) Total Gross Balance Strong Satisfactory Higher risk Credit impaired (stage 3) Total Credit Impairment Strong Satisfactory Higher risk Aviation Gross $million Commodity Traders Gross $million Construction Gross $million Metals & Mining Gross $million Commercial Real Estate Gross $million 2023 1,452 222 – 74 4,444 2,592 5 555 1,012 1,702 18 358 3,213 788 73 154 1,748 7,596 3,090 4,228 – (1) – (15) (16) 0.0% 0.5% 0.0% (1) (2) – (504) (507) 0.0% 0.1% 0.0% (1) (6) (4) (325) (336) 0.1% 0.4% 22.2% 90.8% 10.9% – (1) (8) (88) (97) 0.0% 0.1% 11.0% 57.1% 2.3% 2022 Hotel & Tourism Gross $million 1,090 439 – 126 Oil & Gas Gross $million 4,024 1,726 101 569 Total Gross $million 22,561 14,220 229 3,548 1,655 6,420 40,558 (1) (1) – (25) (27) 0.1% 0.2% 0.0% 19.8% 1.6% (3) (12) (4) (147) (166) 0.1% 0.7% 4.0% (26) (162) (16) (2,295) (2,499) 0.1% 1.1% 7.0% 25.8% 64.7% 2.6% 6.2% 7,326 6,751 32 1,712 15,821 (20) (139) – (1,191) (1,350) 0.3% 2.1% 0.0% 69.6% 8.5% Credit impaired (stage 3) Cover Ratio 20.3% 90.8% 0.9% 6.7% Credit Grade Strong Satisfactory Higher risk Credit impaired (stage 3) Total Gross Balance Strong Satisfactory Higher risk Credit impaired (stage 3) Total Credit Impairment Strong Satisfactory Higher risk Credit impaired (stage 3) Cover Ratio Aviation¹ Gross $million Commodity Traders Gross $million Construction Gross $million Metals & Mining Gross $million Commercial Real Estate Gross $million Hotel & Tourism Gross $million Oil & Gas Gross $million 1,437 1,413 100 155 3,105 – (1) – (32) (33) 0.0% 0.1% 0.0% 20.6% 1.1% 4,419 2,894 12 689 8,014 (3) (4) (1) (435) (443) 0.1% 0.1% 8.3% 63.1% 5.5% 1,164 1,634 33 497 3,328 – (3) (4) (412) (419) 0.0% 0.2% 12.1% 82.9% 12.6% 3,425 1,208 26 257 4,916 – (5) – (157) (162) 0.0% 0.4% 0.0% 61.1% 3.3% 8,000 7,334 276 1,305 16,915 (25) (129) (84) (761) (999) 0.3% 1.8% 30.4% 58.3% 5.9% 1,047 494 15 206 1,762 (1) (1) (1) (18) (21) 0.1% 0.2% 6.7% 8.7% 1.2% 3,923 2,215 38 919 7,095 (1) (7) (2) (442) (452) 0.0% 0.3% 5.3% 48.1% 6.4% Total Gross $million 23,415 17,192 500 4,028 45,135 (30) (150) (92) (2,257) (2,529) 0.1% 0.9% 18.4% 56.0% 5.6% 1 In addition to the aviation sector loan exposures, the Group owns $3.2 billion of aircraft under operating leases in 2022 269 Standard Chartered – Annual Report 2023Risk review and Capital review2 9 48 13 53 34 11 166 105 7 166 614 2022 Expected Credit Loss $million – 55 43 12 41 44 16 238 132 52 51 684 Maturity and expected credit loss for high-carbon sectors 2023 Maturity Buckets¹ 2023 More than 1 to 5 years $million More than 5 years $million Expected Credit Loss $million Sector Automotive Manufacturers Aviation Cement Coal Mining Steel Other Metals & Mining Aluminium Oil & Gas Power Shipping Commercial Real Estate Total balance1 Loans and advances (Drawn funding) $million 3,566 1,339 719 42 1,649 2,151 537 6,444 5,516 5,971 7,664 35,598 Less than 1 year $million 3,106 149 512 9 1,258 1,886 442 2,980 1,933 1,051 3,722 17,048 460 145 189 33 185 240 63 1,576 1,533 2,568 3,935 10,927 – 1,045 18 – 206 25 32 1,888 2,050 2,352 7 7,623 1 Excluded fair value of Other Metals & Mining of $321 million 2022 Maturity Buckets¹ Sector Automotive Manufacturers Aviation Cement Coal Mining Steel Other Metals & Mining Aluminium Oil & Gas Power Shipping Commercial Real Estate Total balance2 1 Gross of credit impairment Loans and advances (Drawn funding) $million 3,167 2,595 762 60 1,268 1,964 744 6,550 4,903 5,374 6,598 33,985 Less than 1 year $million 2,450 118 661 2 1,080 1,660 528 3,100 1,615 918 2,568 14,700 More than 1 to 5 years $million More than 5 years $million 717 749 63 41 180 281 114 1,734 1,279 2,567 3,949 11,674 – 1,728 38 17 8 23 102 1,716 2,009 1,889 81 7,611 2 Excluded fair value of Other Metals & Mining and Oil & Gas of $58 million 270 Standard Chartered – Annual Report 2023Risk reviewRisk profileChina commercial real estate The table below represents the on and off-balance sheet items that are exposed to China CRE by credit quality. Further details can be found in the ‘Summary of Performance in 2023’ in pages 235 and 236. Loans to customers Off balance sheet Total as at 31 December 2023 Loans to customers – By Credit quality Gross Strong Satisfactory Higher risk Credit impaired (stage 3) Total as at 31 December 2023 Loans to customers – ECL Strong Satisfactory Higher risk Credit impaired (stage 3) Total as at 31 December 2023 1 Rest of Group mainly includes Singapore Loans to customers Off balance sheet Total as at 31 December 2022 Loans to customers – By Credit quality Gross Strong Satisfactory Higher risk Credit impaired (stage 3) Total as at 31 December 2022 Loans to customers – ECL Strong Satisfactory Higher risk Credit impaired (stage 3) Total as at 31 December 2022 1 Rest of Group mainly includes Singapore 2023 China $million Hong Kong $million Rest of Group1 $million 584 42 626 33 339 8 204 584 – (3) – (70) (73) 1,821 82 1,903 – 619 – 1,202 1,821 – (134) – (941) (1,075) 2022 39 – 39 – 39 – – 39 – (12) – – (12) China $million Hong Kong $million Rest of Group1 $million 953 74 1,027 256 459 – 238 953 – (9) – (37) (46) 2,248 85 2,333 221 921 271 835 2,248 (19) (110) (83) (559) (771) 39 8 47 – 39 – – 39 – – – – – Total $million 2,444 124 2,568 33 997 8 1,406 2,444 – (149) – (1,011) (1,160) Total $million 3,240 167 3,407 477 1,419 271 1,073 3,240 (19) (119) (83) (596) (817) 271 Standard Chartered – Annual Report 2023Risk review and Capital reviewDebt securities and other eligible bills (audited) This section provides further detail on gross debt securities and treasury bills. The standard credit ratings used by the Group are those used by Standard & Poor’s or its equivalent. Debt securities held that have a short-term rating are reported against the long-term rating of the issuer. For securities that are unrated, the Group applies an internal credit rating, as described under the credit rating and measurement section on page 321. Total gross debt securities and other eligible bills decreased by $11.4 billion to $160 billion (31 December 2022: $172 billion) due to action taken to manage liquidity, primarily in stage 1. Stage 1 gross balance decreased by $7.8 billion to $158 billion (31 December 2022: $166 billion) of which $3.4 billion of the decrease was from unrated. Stage 2 gross balance decreased by $3.6 billion to $2 billion (31 December 2022: $5 billion). Stage 3 gross balance was broadly stable at $0.2 billion (31 December 2022: $0.1 billion). Amortised cost and FVOCI Stage 1 AAA AA- to AA+ A- to A+ BBB- to BBB+ Lower than BBB- Unrated – Strong – Satisfactory Stage 2 AAA AA- to AA+ A- to A+ BBB- to BBB+ Lower than BBB- Unrated – Strong – Satisfactory – Higher risk Stage 3 Lower than BBB- Unrated Gross balance¹ Gross $million 158,314 61,920 34,244 38,891 13,098 1,611 8,550 7,415 1,135 1,860 98 22 81 499 893 267 217 50 – 164 72 92 160,338 2023 ECL $million Net2 $million (26) 158,288 (5) (2) (2) (7) (2) (8) (7) (1) (34) – – – (3) (30) (1) – (1) – (61) (4) (57) (121) 61,915 34,242 38,889 13,091 1,609 8,542 7,408 1,134 1,826 98 22 81 496 863 266 217 49 – 103 68 35 Gross $million 166,103 73,933 42,327 29,488 7,387 1,047 11,921 11,760 161 5,455 21 40 17 2,605 2,485 287 26 – 261 144 67 77 2022 ECL $million (25) (10) (4) (2) (1) (2) (6) (6) – (90) – – (1) (16) (71) (2) (2) – – (106) (55) (51) (221) Net2 $million 166,078 73,923 42,323 29,486 7,386 1,045 11,915 11,754 161 5,365 21 40 16 2,589 2,414 285 24 – 261 38 12 26 171,481 160,217 171,702 1 Stage 3 gross includes $80 million (31 December 2022: $28 million) originated credit-impaired debt securities with impairment of $14 million (31 December 2022: $13 million) 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 $160,263 million (31 December 2022: $171,640 million). Refer to the Analysis of financial instrument by stage table 272 Standard Chartered – Annual Report 2023Risk reviewRisk profileIFRS 9 expected credit loss methodology (audited) Approach for determining expected credit losses Credit loss terminology Component Definition Probability of default (PD) Loss given default (LGD) Exposure at default (EAD) The probability that a counterparty will default, over the next 12 months from the reporting date (stage 1) or over the lifetime 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 lifetime (or term structure) PDs are based on statistical models, calibrated using historical data and adjusted to incorporate forward-looking economic assumptions. 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 financial asset, taking into account forward-looking economic assumptions where relevant. The expected balance sheet exposure at the time of default, taking into account expected changes over the lifetime of the exposure. This incorporates the impact of drawdowns of facilities with limits, repayments of principal and interest, and amortisation. To determine the expected credit loss, these components are multiplied together: PD for the reference period (up to 12 months or lifetime) 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 and Institutional Banking (CCIB) businesses on a global basis, in line with their respective portfolios. However, for some of the key countries, country- specific models have also been developed. The calibration of forward-looking information is assessed at a country or region level to take into account local macroeconomic conditions. Retail expected credit loss models are country and product specific given the local nature of the CPBB business. For less material retail portfolios, the Group has adopted less sophisticated approaches based on historical 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 migration rate between delinquency states from period to period. A matrix multiplication 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 information, to the extent that there are significant changes in the macroeconomic forecasts an assessment will be completed on whether an adjustment to the modelled output is required. For a limited number of exposures, proxy parameters or approaches are used where the data is not available to calculate the origination PDs for the purpose of applying the SICR criteria; or for some retail portfolios where a full history of LGD data is not available, estimates based on the loss experience from similar 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 monitoring that uses recent data to compare the differences between model predictions and actual outcomes against approved thresholds. • Annual independent validations of the performance of material models by Group Model Valuation (GMV); an abridged validation is completed for non-material models. Application of lifetime Expected credit loss is estimated based on the period over which the Group is exposed to Credit Risk. For the majority of exposures this equates to the maximum contractual period. For retail credit cards and corporate overdraft facilities, 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. The behavioural life for corporate overdraft facilities is 24 months. 273 Standard Chartered – Annual Report 2023Risk review and Capital reviewComposition of credit impairment provisions (audited) The table below summarises the key components of the Group’s credit impairment provision balances at 31 December 2023 and 31 December 2022. 31 December 2023 Modelled ECL provisions (base forecast) Modelled impact of multiple economic scenarios Total ECL provisions before management judgements Includes: Model performance post model adjustments Judgemental post model adjustments Management overlays1 – China commercial real estate – Other Total modelled provisions Of which: Stage 1 Stage 2 Stage 3 Stage 3 non-modelled provisions Total credit impairment provisions 31 December 2022 Modelled ECL provisions (base forecast) Modelled impact of multiple economic scenarios Total ECL provisions before management judgements Includes: Model performance post model adjustments Judgemental post model adjustments Management overlays1 – China commercial real estate – Other Total modelled provisions Of which: Stage 1 Stage 2 Stage 3 Stage 3 non-modelled provisions Total credit impairment provisions Corporate, Commercial & Institutional Banking $ million Consumer, Private & Business Banking $ million Ventures $ million Central & other items $ million2 372 20 392 (3) – 141 – 533 151 318 64 3,587 4,120 553 18 571 (28) 2 – 5 578 325 140 113 646 1,224 48 – 48 – – – – 48 15 21 12 – 48 98 6 104 – – – 17 121 68 49 4 88 209 Corporate, Commercial & Institutional Banking $ million Consumer, Private & Business Banking $ million Ventures $ million Central & other items2 $ million 505 38 543 (22) – 173 9 725 194 411 120 3,702 4,427 556 6 562 (38) 44 – 37 643 413 118 112 664 1,307 12 – 12 – – – – 12 10 1 1 – 12 194 6 200 – – – – 200 34 100 66 129 329 Total $ million 1,071 44 1,115 (31) 2 141 22 1,280 559 528 193 4,321 5,601 Total $ million 1,267 50 1,317 (60) 44 173 46 1,580 651 630 299 4,495 6,075 1 $22 million (31 December 2022: $55 million) is in stage 1, $141 million (31 December 2022: $148 million) in stage 2 and $nil million (31 December 2022: $16 million) in stage 3 2 Includes ECL on cash and balances at central banks, accrued income, assets held for sale and other assets 274 Standard Chartered – Annual Report 2023Risk reviewRisk profile Model performance post model adjustments (PMA) As part of normal model monitoring and validation operational processes, where a model’s performance breaches the monitoring thresholds or validation standards, an assessment is completed to determine whether a model performance post model adjustment is required to correct for the identified model issue. Model performance post model adjustments are approved by the Group Credit Model Assessment Committee and will be removed when the models are updated to correct for the identified model issue or the estimates return to being within the monitoring thresholds. As at 31 December 2023, model performance post model adjustments have been applied for 5 models out of the total of 172 models. In aggregate, these post model adjustments reduce the Group’s impairment provisions by $31 million (2 per cent of modelled provisions) compared with a $60 million decrease at 31 December 2022. The most significant of these relates to an adjustment to decrease ECL for Korea Personal Loans as the IFRS 9 PD model is sensitive to the higher range of interest rates. In addition to these model performance post model adjustments, separate judgemental post model and management adjustments have also been applied as set out on pages 279 and 280. Model performance PMAs Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Total model performance PMAs Key assumptions and judgements in determining expected credit loss Incorporation of forward-looking information The evolving economic environment is a key determinant of the ability of a bank’s clients to meet their obligations as they fall due. It is a fundamental principle of IFRS 9 that the provisions 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 anticipate a sharp slowdown in the world economy over the coming year, it should hold more provisions 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 information in the form of forecasts of the values of economic variables and asset prices that are likely to have an effect on the repayment ability 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 projections from the Group’s in-house research team and outputs from a third-party model that project specific economic variables and asset prices. The research team takes consensus views into consideration, and senior management review projections for some core country variables against consensus when forming their view of the outlook. For the period beyond five years, management utilises the in-house research view and third-party model outputs, which allow for a reversion to long-term growth rates or norms. All projections are updated on a quarterly basis. 2023 $ million 2022 $ million (3) (28) (31) (22) (38) (60) Forecast of key macroeconomic variables underlying the expected credit loss calculation and the impact on non-linearity In the Base Forecast – management’s view of the most likely outcome –the pace of growth of the world economy is expected to slow marginally in the near term. Global GDP is forecast to grow by just below 3 per cent in 2024. World GDP growth averaged 3.7 per cent for the 10 years prior to COVID-19 (between 2010 and 2019). The world economy should be able to achieve a soft landing after the most aggressive monetary tightening cycle in years, although risks abound. The lagged impact of aggressive central bank tightening is likely to be felt most acutely in developed economies. Lingering inflation and geopolitical developments are risks to the global soft-landing scenario. The ongoing war in Ukraine, conflicts in the Middle East, ongoing US-China tensions, and the November 2024 US election are key sources of geopolitical and political risk; they come against a backdrop of increasing global fragmentation. On the inflation front, it is unclear whether it can slow on a sustained basis. Core inflation has remained sticky in some markets, signalling persistent underlying pressures. Structural factors – including higher fiscal deficits, the cost of the climate transition and recent under-investment in fossil fuels – could keep inflation higher than during the pre-COVID period. Oil prices and geopolitical conflict are also sources of upside inflation risk. While the quarterly Base Forecasts inform the Group’s strategic plan, one key requirement of IFRS 9 is that the assessment of provisions should consider multiple future economic environments. For example, the global economy may grow more quickly or more slowly than the Base Forecast, and these variations would have different implications for the provisions that the Group should hold today. As the negative impact of an economic downturn on credit losses tends to be greater than the positive impact of an economic upturn, if the Group sets provisions only on the ECL under the Base Forecast it might maintain a level of provisions that does not appropriately capture the range of potential outcomes. To address the inherent uncertainty in economic forecast, and the property of skewness (or non-linearity), IFRS 9 requires reported ECL to be a probability-weighted ECL, calculated over a range of possible outcomes. 275 Standard Chartered – Annual Report 2023Risk review and Capital review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 simulation, which addresses the challenges of crafting many realistic alternative scenarios in the many countries in which the Group operates by means of a model, which produces these alternative scenarios while considering the degree of historical uncertainty (or volatility) observed from Q1 1990 to Q3 2023 around economic outcomes, the trends in each macroeconomic variable modelled and the correlation in the unexplained movements around these trends. This naturally means that each of the 50 scenarios do not have a specific narrative, although collectively they explore a range of hypothetical alternative outcomes for the global economy, including scenarios that turn out better than expected and scenarios that amplify anticipated stresses. The GDP graphs below illustrate the shape of the Base Forecast for key footprint markets in relation to prior periods’ actuals. The long-term growth rates are based on the pace of economic expansion expected for 2030. The tables below provide a summary of the Group’s Base Forecast for these markets. The peak/trough amounts show the highest and lowest points within the Base Forecast. China’s GDP growth is expected to ease to 4.8 per cent in 2024 from over 5 per cent in 2023. This reflects a continued contraction in the property sector, a negative contribution from foreign trade, and low consumer and business confidence. Similarly, Hong Kong is also facing several headwinds with its GDP growth expected to ease to 2.9 per cent from 3.3 per cent in 2023. These headwinds include a weak property sector and elevated interest rates which will weigh on investment appetite for Hong Kong assets. Limited external demand from key markets will also weigh on exports. Growth in the US is expected to slow on the impact of tighter financial and credit conditions and as the impact of previous interest rate increases by the central bank feed through to the economy. For similar reasons, Eurozone growth is expected to remain weak in 2024. The uncertainty over the ongoing war in Ukraine, conflicts in the Middle East has hit global investor and business confidence. Growth in India is expected to ease to 6 per cent from 6.7 per cent in 2023 due to impact from pre-election uncertainties, tighter lending conditions and global recession concerns. In contrast, GDP growth for Singapore is expected to accelerate to just over 2.5 per cent in 2024 from 0.8 per cent last year. Favourable base effects may boost exports, despite the soft global growth outlook. The global electronics and semiconductor industry is showing signs of bottoming out. Although a strong rebound is not expected, inventory restocking may provide a small boost to Singapore’s electronics sector. Korea’s economic growth will also benefit from the turnaround in this key sector. GDP growth there is expected to reach 2.3 per cent in 2024 from 1.3 per cent last year. China GDP YoY% Hong Kong GDP YoY% Korea GDP YoY% 20 16 12 8 4 0 -4 -8 Actual Forecast Long-term growth 10 8 6 4 2 0 -2 -4 -6 -8 -10 Actual Forecast Long-term growth Actual Forecast Long-term growth 7 6 5 4 3 2 1 0 -1 -2 -3 -4 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 Singapore GDP YoY% India GDP YoY% 20 15 10 5 0 -5 -10 -15 Actual Forecast Long-term growth 30 20 10 0 -10 -20 -30 Actual Forecast Long-term growth 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 15 Q1 16 Q1 17 Q1 18 Q1 19 Q1 20 Q1 21 Q1 22 Q1 23 Q1 24 Q1 25 Q1 26 Q1 27 Q1 28 Q1 276 Standard Chartered – Annual Report 2023Risk reviewRisk profileBase forecast1 2023 2024 2025 2026 2027 5-year average2 Quarterly peak Quarterly trough Monte Carlo Low3 High4 Base forecast1 2023 2024 2025 2026 2027 5-year average2 Quarterly peak Quarterly trough Monte Carlo Low3 High4 Base forecast1 2023 2024 2025 2026 2027 5-year average2 Quarterly peak Quarterly trough Monte Carlo Low3 High4 China Hong Kong 2023 year-end forecasts GDP growth (YoY%) Unemployment % 3-month interest rates % House prices⁵ (YoY %) GDP growth (YoY %) Unemployment % 3-month interest rates % House prices (YoY %) 5.4 4.8 4.5 4.3 4.0 4.3 5.7 3.8 0.6 7.7 4.1 4.1 4.0 4.0 3.9 4.0 4.1 3.8 3.3 4.4 2.0 1.7 1.8 2.0 2.2 2.1 2.5 1.7 0.8 3.8 (0.8) 3.9 5.6 4.5 4.4 4.6 7.2 1.5 (1.5) 12.0 3.3 2.9 2.5 2.3 2.4 2.5 3.8 1.5 (3.8) 8.2 3.0 3.4 3.4 3.4 3.4 3.4 3.4 3.4 1.4 6.4 4.8 4.6 4.1 3.5 2.5 3.4 5.0 2.3 0.3 8.3 (6.8) 2.1 3.8 2.8 2.7 2.8 4.6 (1.1) (19.3) 25.5 Singapore Korea 2023 year-end forecasts GDP growth (YoY%) Unemployment⁶ % 3-month interest rates % House prices (YoY%) GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY %) 0.8 2.6 3.1 3.3 2.8 2.9 3.8 1.9 (2.4) 8.5 2.7 2.8 2.8 2.8 2.8 2.8 2.9 2.8 1.7 3.8 4.1 3.8 3.3 2.8 2.4 2.9 4.1 2.3 0.6 5.9 6.8 (0.2) 0.4 2.9 3.9 2.2 3.9 (0.7) (16.2) 19.2 1.3 2.3 2.5 2.4 2.2 2.3 2.6 2.0 (2.3) 7.0 2.7 3.3 3.3 3.1 3.0 3.1 3.5 3.0 1.4 5.8 3.8 3.5 3.1 3.1 3.1 3.1 3.7 3.1 0.7 6.3 (5.8) 3.3 5.0 3.5 2.4 3.3 5.3 (0.3) (6.1) 12.5 2023 year-end forecasts India GDP growth (YoY%) Unemployment % 3month interest rates % House prices (YoY%) Brent Crude $ pb 6.7 6.0 6.0 6.4 6.5 6.2 9.1 4.4 2.1 10.5 NA NA NA NA NA NA NA NA NA NA 6.4 5.9 6.3 6.3 6.2 6.2 6.3 5.8 2.7 9.9 5.3 5.3 6.3 6.5 6.4 6.1 6.5 4.7 (0.5) 13.8 84.2 89.5 90.3 92.8 84.9 88.2 93.8 82.8 46.0 137.8 277 Standard Chartered – Annual Report 2023Risk review and Capital reviewChina Hong Kong 2022 year-end forecasts GDP growth (YoY%) Unemployment % 3-month interest rates % House prices⁵ (YoY%) GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY%) 5.1 7.9 4.5 1.1 9.6 3.9 4.1 3.8 3.4 4.3 2.3 3.0 1.4 0.6 4.4 3.6 5.0 0.0 (3.4) 10.0 2.3 4.3 0.5 (3.8) 8.0 3.0 3.1 2.9 1.7 4.2 2.8 3.6 2.4 0.5 6.1 1.7 4.9 (8.4) (22.0) 26.8 Singapore Korea 2022 year-end forecasts GDP growth (YoY%) Unemployment⁶ % 3-month interest rates % House prices (YoY%) GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY%) 2.7 3.7 1.7 (3.4) 8.6 3.0 3.2 3.0 2.1 4.5 3.1 4.7 2.4 0.8 5.6 2.8 4.7 (2.4) (15.9) 20.4 2.2 2.5 1.8 (2.8) 7.0 3.1 3.3 3.0 1.1 4.9 2022 year-end forecasts India 3.1 3.9 2.7 1.1 5.9 2.1 2.8 (0.4) (5.4) 10.0 GDP growth (YoY%) Unemployment % 3-month interest rates % House prices (YoY%) Brent crude $ pb 6.4 7.7 3.2 1.5 12.1 NA NA NA NA NA 5.6 6.3 5.3 1.9 9.5 5.7 7.2 1.6 (1.1) 13.0 106.6 118.8 88.0 42.4 204.2 5-year average2 Quarterly peak Quarterly trough Monte Carlo Low3 High4 5-year average2 Quarterly peak Quarterly trough Monte Carlo Low3 High4 5-year average2 Quarterly peak Quarterly trough Monte Carlo Low3 High4 1 Data presented are those used in the calculation of ECL. These may differ slightly to forecasts presented elsewhere in the Annual Report as they are finalised before the period end. 2 5 year averages reported cover Q1 2024 to Q4 2028 for the 2023 annual report. They cover Q1 2023 to Q4 2027 for the numbers reported for the 2022 annual report. 3 Represents the 10th percentile in the range of economic scenarios used to determine non-linearity. 4 Represents the 90th percentile in the range of economic scenarios used to determine non-linearity. 5 A judgemental management adjustment is held in respect of the China commercial real estate sector as discussed on page 280. 6 Singapore unemployment rate covers the resident unemployment rate, which refers to citizens and permanent residents. 278 Standard Chartered – Annual Report 2023Risk reviewRisk profileImpact of multiple economic scenarios The final probability-weighted ECL reported by the Group is a simple average of the ECL for each of the 50 scenarios simulated using a Monte Carlo model. The Monte Carlo approach has the advantage that it generates many alternative scenarios that cover our global footprint. The total amount of non-linearity, calculated as the difference between the probability-weighted ECL calculated by the Monte Carlo model and the unweighted base forecast ECL, is $44 million (31 December 2022: $50 million). The CCIB and Central and other items portfolios accounted for $26 million (31 December 2022: $44 million) of the calculated non-linearity with the remaining $18 million (31 December 2022: $6 million) attributable to CPBB portfolios. As the non-linearity calculated for the CPBB portfolios at 31 December 2022 was relatively low, a judgemental post model adjustment of $34 million was applied. Subsequent stand-back analysis was completed during the first half of 2023 to benchmark the ECL non-linearity calculated using the Monte Carlo model, which confirmed that the calculated non-linearity for CPBB portfolios was appropriate and the judgemental post model adjustment was released. The impact of multiple economic scenarios on stage 1, stage 2 and stage 3 modelled ECL is set out in the table below, together with the management overlay and other judgemental adjustments. Total expected credit loss at 31 December 2023 Total expected credit loss at 31 December 2022 Management overlays and other judgemental adjustments $million 165 229 Multiple economic scenarios1 $million 44 84 Total modelled ECL2 $million 1.280 1,580 Base forecast $million 1,071 1,267 1 Includes judgemental post model adjustment of $nil million (31 December 2022: $34 million) relating to Consumer, Private and Business Banking 2 Total modelled ECL comprises stage 1 and stage 2 balances of $1,105 million (31 December 2022: $1,281 million) and $193 million (31 December 2022: $299 million) of modelled ECL on stage 3 loans 3 Includes ECL on Assets held for sale of $37 million (31 December 2022: $10 million) The average expected credit loss under multiple scenarios is 4 per cent (2022: 7 per cent) higher than the expected credit loss calculated using only the most likely scenario (the Base Forecast). Portfolios that are more sensitive to non-linearity include those with greater leverage and/or a longer tenor, such as Project and Shipping Finance portfolios. Other portfolios display minimal non-linearity owing to limited responsiveness to macroeconomic impacts for structural reasons, such as significant collateralisation as with the CPBB mortgage portfolios. Judgemental adjustments As at 31 December 2023, the Group held judgemental adjustments for ECL as set out in the table below. All of the judgemental adjustments have been determined after taking account of the model performance post model adjustments reported on page 275. They are reassessed quarterly and are reviewed and approved by the IFRS 9 Impairment Committee and will be released when no longer relevant. 31 December 2023 Judgemental post model adjustments Judgemental management overlays: – China CRE – Other Total judgemental adjustments Judgemental adjustments by stage: Stage 1 Stage 2 Stage 3 31 December 2022 Judgemental post model adjustments Judgemental management overlays: – China CRE – Other Total judgemental adjustments Judgemental adjustments by stage: Stage 1 Stage 2 Stage 3 Corporate, Commercial & Institutional Banking $ million Consumer, Private & Business Banking Mortgages $ million Credit Cards $ million Other $ million Total $ million Central & other $ million Total $ million – 141 – 141 17 124 – – – 1 1 1 – 1 – 2 3 3 – – 1 – 2 3 6 (3) – 2 – 5 7 10 (3) – – – 17 17 – 17 – 2 141 22 165 27 138 – Corporate, Commercial & Institutional Banking $ million Consumer, Private & Business Banking Mortgages $ million Credit Cards $ million Other $ million Total $million Central & other $million Total $million – 173 9 182 37 136 9 3 – 2 5 1 3 1 11 – 5 16 5 9 2 30 – 30 60 39 17 4 44 – 37 81 45 29 7 – – – – – – – 44 173 46 263 82 165 16 279 Standard Chartered – Annual Report 2023Risk review and Capital reviewJudgemental post model adjustments As at 31 December 2023, judgemental post model adjustments to increase ECL by a net $2 million (31 December 2022: $44 million increase) have been applied to certain CPBB models, primarily to adjust for temporary factors impacting modelled outputs. These will be released when these factors normalise. At 31 December 2022, $34 million of the increase in ECL related to multiple economic scenarios, which was fully released in the first half of 2023 (see ‘Impact of multiple economic scenarios’). Judgemental management overlays China CRE The real estate market in China has now been in a downturn since late 2021 as evidenced by continued decline in sales, and investments in the sector. Liquidity issues experienced by Chinese property developers continued into 2023 with more developers defaulting on their obligations both offshore and onshore. During 2023, authorities on the mainland have introduced a slew of policies to help revive the sector and restore buying sentiments. This has helped stabilise the market to an extent in some cities, but demand and home prices remain muted overall. Continued policy relaxations, including those related to house purchase restrictions, completion support for eligible projects from onshore financial institutions, relaxation in mortgage rates, and further support for affordable housing, are key for reversing the continued decline in sales and investments and ensuring a stable outlook for 2024. The Group’s loans and advances to China CRE clients was $2.4 billion at 31 December 2023 (31 December 2022: $3.2 billion). Client level analysis continues to be done, with clients being placed on purely precautionary or non-purely precautionary early alert, where appropriate, for closer monitoring. Given the evolving nature of the risks in the China CRE sector, a management overlay of $141 million (31 December 2022: $173 million) has been taken by estimating the impact of further deterioration to exposures in this sector. The decrease from 31 December 2022 was primarily driven by repayments and movement of some of the exposures to Stage 3. Other Overlays of $5 million (31 December 2022: $16 million) have also been applied in CPBB to capture macroeconomic environment challenges caused by sovereign defaults or heightened sovereign risk, the impact of which is not fully captured in the modelled outcomes. An overlay of $17 million (2022: nil) was applied in Central & Other due to a temporary market dislocation in the Africa and Middle East region. The remaining COVID-19 overlay in CPBB of $21 million that was held as at 31 December 2022 has been fully released in 2023. The stage 3 overlay in CCIB of $9 million that was held as at 31 December 2022 following the Sri Lanka Sovereign default was also fully released in 2023. Stage 3 assets Credit-impaired assets managed by Stressed Asset Group (SAG) incorporate forward-looking economic assumptions in respect of the recovery outcomes identified and are assigned individual probability weightings per IFRS 9. These assumptions are not based on a Monte Carlo simulation but are informed by the Base Forecast. Sensitivity of expected credit loss calculation to macroeconomic variables The ECL calculation relies on multiple variables and is inherently non-linear and portfolio-dependent, which implies that no single analysis can fully demonstrate the sensitivity of the ECL to changes in the macroeconomic variables. The Group has conducted a series of analyses with the aim of identifying the macroeconomic variables which might have the greatest impact on the overall ECL. These encompassed single variable and multi-variable exercises, using simple up/ down variation and extracts from actual calculation data, as well as bespoke scenario design assessments. The primary conclusion of these exercises is that no individual macroeconomic variable is materially influential. 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 uninfluential; rather, that the Group believes that consideration 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 uncertainties surrounding the macroeconomic outlook. To explore this, a sensitivity 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 particular to explore the current uncertainties over commodity prices. The first scenario, Global Stagflation, explores a temporary spike (relative to base) in commodity prices, inflation and interest rates in the near term from the ongoing war in Ukraine and conflicts in the Middle East. The second more severe scenario is based on the Bank of England’s most recent Annual Cyclical Scenario (ACS), which explores a persistent rise in commodity prices, inflation and interest rates. 280 Standard Chartered – Annual Report 2023Risk reviewRisk profileChina GDP China unemployment China property prices Hong Kong GDP Hong Kong unemployment Hong Kong property prices US GDP Singapore GDP India GDP Crude oil Baseline Global Stagflation Five year average Peak/Trough Five year average 4.3 4.0 4.6 2.5 3.4 2.8 1.7 2.9 6.2 5.7 / 3.8 4.1 / 3.8 7.2 / 1.5 3.8 / 1.5 3.4 / 3.4 4.6 / (1.1) 2.3 / 0.8 3.8 / 1.9 9.1 / 4.4 3.7 5.3 4.4 1.8 5.4 1.6 1.4 2.7 4.9 Peak/Trough 6.2 / (0.8) 6.4 / 3.8 15.9 / (17.5) 5.6 / (1.4) 7.4 / 3.4 9.4 / (3.8) 2.7 / (1.3) 5.0 / (1.6) 6.6 / 0.6 88.2 93.8 / 82.8 95.3 152.9 / 82.8 ACS Five year average 2.2 5.3 (5.5) (0.6) 6.3 Peak/Trough 3.9 / (3.4) 5.7 / 4.6 9.2 / (16.3) 2.9 / (9.4) 7.5 / 3.9 (9.7) 6.2 / (22.5) 0.1 1.2 4.2 118 1.5 / (4.8) 5.9 / (8.7) 7.3 / (0.7) 147.9 / 83.6 Period covered from Q1 2024 to Q4 2028 Base (GDP, YoY%) Global Stagflation Difference from Base 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 China Hong Kong US Singapore India 4.8 2.9 1.4 2.6 6.0 4.5 2.5 1.5 3.1 5.5 4.3 2.3 1.8 3.3 6.5 4.0 2.4 1.9 2.8 6.4 3.8 2.2 1.9 2.6 6.6 1.5 0.9 0.0 0.3 2.6 1.6 (1.0) 0.2 0.6 3.9 4.8 1.7 1.8 3.7 5.6 5.7 5.0 2.6 4.8 6.5 4.8 2.4 2.4 4.0 5.7 (3.3) (2.0) (1.5) (2.3) (3.4) (2.9) (3.5) (1.3) (2.4) 0.5 (0.6) 0.0 0.4 (1.6) (0.8) 1.7 2.5 0.7 2.0 0.1 1.0 0.2 0.5 1.3 (0.9) Each year is from Q1 to Q4. For example 2024 is from Q1 2024 to Q4 2024. Base (GDP, YoY%) ACS Difference from Base 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 2024 2025 2026 2027 2028 China Hong Kong US Singapore India 4.8 2.9 1.4 2.6 6.0 4.5 2.5 1.5 3.1 5.5 4.3 2.3 1.8 3.3 6.5 4.0 2.4 1.9 2.8 6.4 3.8 2.2 1.9 2.6 6.6 (0.9) (5.3) (1.7) (3.8) 2.8 1.3 (3.5) (1.5) 0.0 2.2 3.7 2.6 1.0 4.2 4.9 3.4 1.8 1.3 2.9 5.3 3.4 1.5 1.3 2.7 5.5 (5.6) (3.2) (0.5) (0.6) (0.4) (8.1) (6.0) 0.3 (0.6) (0.7) (3.2) (6.4) (3.2) (2.9) (0.8) (0.6) (0.6) (3.1) (3.3) 0.9 0.1 0.1 (1.6) (1.1) (1.2) Each year is from Q1 to Q4. For example 2024 is from Q1 2024 to Q4 2024 The total modelled stage 1 and 2 ECL provisions (including both on and off-balance sheet instruments) would be approximately $153 million higher under the Global Stagflation scenario, and $489 million higher under the ACS scenario than the baseline ECL provisions (which excluded the impact of multiple economic scenarios and management overlays which may already capture some of the risks in these scenarios). Stage 2 exposures as a proportion of stage 1 and 2 exposures would increase from 3.7 per cent in the base case to 4.1 per cent and 6.5 per cent respectively under the Global Stagflation and ACS 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 majority of the increase in ECL in CCIB came from the main corporate and CRE portfolios. For the main corporate portfolios, ECL would increase by $20 million and $79 million for the Global stagflation and ACS scenarios respectively and the proportion of stage 2 exposures would increase from 5.5 per cent in the base case to 5.9 per cent and 8.2 per cent respectively. For the CPBB portfolios, most of the increase in ECL came from the unsecured retail portfolios, with the Taiwan and Korea Personal Loans impacted. Under the Global Stagflation and ACS scenarios, Credit card ECL would increase by $28 million and $66 million respectively, largely in the Singapore and Hong Kong portfolios and the proportion of stage 2 credit card exposures would increase from 1.5 per cent in the base case to 2.1 per cent and 3.3 per cent for each scenario respectively, with the Singapore portfolio most impacted. Mortgages ECL would increase by $1 million and $45 million for each scenario respectively, with portfolios in Hong Kong and Korea most impacted and the proportion of stage 2 mortgages would increase from 1.2 per cent in the base case to 1.7 per cent and 14 per cent respectively, with the Hong Kong and Singapore portfolios most impacted. There was no material change in modelled stage 3 provisions as these primarily relate to unsecured CPBB exposures for which the LGD is not sensitive to changes in the macroeconomic forecasts. There is also no material change for non-modelled stage 3 exposures as these are more sensitive to client specific 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 mitigate potential increases in risk and changes in the underlying portfolio. 281 Standard Chartered – Annual Report 2023Risk review and Capital reviewGross as reported1 $ million ECL as reported2 $ million ECL Base case $ million ECL Global Stagflation $ million ECL ACS $ million Stage 1 modelled Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & Other items Total stage 1 excluding management judgements Stage 2 modelled Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & Other items Total stage 2 excluding management judgements Total Stage 1 & 2 modelled Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & Other items Total excluding management judgements Stage 3 exposures excluding other assets Other financial assets3 ECL from management judgements 337,189 190,999 1,015 194,673 723,876 16,873 2,472 54 2,869 22,268 354.062 193,471 1,069 197,542 746,144 8,144 111,478 Total financial assets reported at 31 December 2023 865,766 134 315 15 35 499 194 143 21 21 379 328 458 36 56 878 4,499 59 165 5,601 124 306 15 32 477 184 134 21 18 357 308 440 36 50 834 136 355 15 40 546 234 167 21 19 441 370 522 36 59 987 164 455 15 50 684 333 263 21 22 639 497 718 36 72 1,323 1 Gross balances includes both on- and off- balance sheet instruments; allocation between stage 1 and 2 will differ by scenario 2 Includes ECL for both on- and off- balance sheet instruments 3 Includes cash and balances at central banks, Accrued income, Other financial assets; and Assets held for sale Significant increase in credit risk (SICR) Quantitative criteria SICR is assessed by comparing the risk of default at the reporting date to the risk of default at origination. Whether a change in the risk of default is significant or not is assessed using quantitative and qualitative criteria. These criteria 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 IFRS 9 lifetime probability of default (IFRS 9 PD) over the residual term of the exposure. The absolute measure of increase in credit risk is used to capture instances where the IFRS 9 PDs on exposures are relatively low at initial recognition as these may increase by several multiples without representing a significant increase in credit risk. Where IFRS 9 PDs are relatively high at initial recognition, a relative measure is more appropriate in assessing whether there is a significant increase in credit risk, as the IFRS 9 PDs increase more quickly. The SICR thresholds have been calibrated based on the following principles: • Stability – The thresholds are set to achieve a stable stage 2 population at a portfolio level, trying to minimise 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 IFRS 9 PDs rather than relying on backward-looking backstops such as arrears • Relationship with business and product risk profiles – the thresholds reflect the relative risk differences between different products, and are aligned to business processes For CCIB clients the quantitative thresholds are a relative 100 per cent increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 50 and 100 bps. For Consumer and Business Banking clients, portfolio specific quantitative thresholds in Hong Kong, Singapore, Malaysia, UAE and Taiwan are applied for credit cards and one personal loan portfolio. The thresholds include relative and absolute increases in IFRS 9 PD with average lifetime IFRS 9 PD cut-offs for those exposures that are within a range of customer utilisation limits (for credit cards) and remaining tenor (for personal loans) and differentiate between exposures that are current and those that are 1 to 29 days past due. 282 Standard Chartered – Annual Report 2023Risk reviewRisk profileThe range of thresholds applied are: Portfolio Credit cards – Current Credit cards – 1-29 days past due Personal loans – Current Personal loan – 1-29 days past due Relative IFRS 9 PD increase (%) Absolute IFRS 9 PD increase (%) Customer utilisation (%) Remaining tenor (%) Average IFRS 9 PD (lifetime) 50% – 150% 3.4% – 9.3% 15% – 90% 100% – 210% 3.5% – 6.1% 25% – 67% – 25% 3.5% 3% – – – – 4.15% – 11.6% 1.5% – 18.5% 70% 75% 2.8% – For all other Consumer and Business Banking portfolios, the quantitative SICR thresholds applied are a relative threshold of 100 per cent increase in IFRS 9 PD and an absolute change in IFRS 9 PD of between 100 and 350 bps depending on the product. Certain countries have a higher absolute threshold reflecting the lower default rate within their personal loan portfolios compared with the Group’s other personal loan portfolios. Private Banking clients are assessed qualitatively, based on a delinquency measure relating to collateral top-ups or sell-downs. Qualitative criteria Qualitative factors that indicate that there has been a significant 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 principal and/or interest that have not been captured by the criteria above are considered to have experienced a significant increase in credit risk. Expert credit judgement may be applied in assessing SICR to the extent that certain risks may not have been captured by the models or through the above criteria. Such instances are expected to be rare, for example due to events and material uncertainties arising close to the reporting date. CCIB clients Quantitative criteria Exposures are assessed based on both the absolute and the relative movement in the IFRS 9 PD from origination to the reporting date as described above. To account for the fact that the mapping between internal credit grades (used in the origination process) and IFRS 9 PDs is non-linear (e.g. a one-notch downgrade in the investment grade universe results in a much smaller IFRS 9 PD increase than in the sub-investment grade universe), the absolute thresholds have been differentiated by credit quality at origination, as measured by internal credit grades being investment grade or sub-investment grade. Qualitative criteria All assets of clients that have been placed on early alert (for non-purely precautionary reasons) are deemed to have experienced a significant increase in credit risk. An account is placed on non-purely precautionary early alert if it exhibits risk or potential weaknesses of a material nature requiring closer monitoring, supervision or attention by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deterioration of repayment prospects and the likelihood of being downgraded. Indicators could include a rapid erosion of position within the industry, concerns over management’s ability to manage operations, weak/deteriorating operating results, liquidity 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 significant increase in credit risk. Accounts rated CG12 are primarily managed by relationship managers in the CCIB unit with support from SAG for certain accounts. All CCIB 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 Quantitative criteria Material portfolios (defined as a combination of country and product, for example Hong Kong mortgages, Singapore credit cards, Taiwan personal loans) for which a statistical model has been built, are assessed based on both the absolute and relative movement in the IFRS 9 PD from origination to the reporting date as described previously in page 273. For these portfolios, the original lifetime IFRS 9 PD term structure is determined based on the original Application Score or Risk Segment of the client. Qualitative and backstop criteria Accounts that are 30 DPD that have not been captured by the quantitative criteria are considered to have experienced a significant increase in credit risk. For less material portfolios, which are modelled based on a roll-rate or loss-rate approach, SICR is primarily assessed through the 30 DPD trigger. In addition, SICR is also assessed for where specific risk elevation events have occurred in a market that are not yet reflected in modelled outcomes or in other metrics. This is applied collectively either to impacted specific products/customer cohorts or across the overall consumer banking portfolio in the affected market. 283 Standard Chartered – Annual Report 2023Risk review and Capital review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’). Qualitative criteria For all Private Banking classes, in line with risk management practice, an increase in credit risk is deemed to have occurred where margining or loan-to-value covenants have been breached. For Class I assets (lending against diversified liquid collateral), if these margining requirements have not been met within 30 days of a trigger, a significant increase in credit risk is assumed to have occurred. For Class I and Class III assets (real-estate lending), a significant 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 within five days of a trigger. Class II assets are typically unsecured or partially secured, or secured against illiquid collateral such as shares in private companies. Significant credit deterioration of these assets is deemed to have occurred when any early alert trigger has been breached. Debt securities Quantitative criteria For debt securities originated before 1 January 2018, the bank is utilising the low Credit Risk simplified approach, where debt securities with an internal credit rating mapped to an investment grade equivalent are allocated to stage 1 and all other debt securities are allocated to stage 2. Debt securities originated after 1 January 2018 are assessed based on the absolute and relative movements in IFRS 9 PD from origination to the reporting date using the same thresholds as for Corporate, Commercial and Institutional Banking clients. Qualitative criteria Debt securities utilise the same qualitative criteria as the Corporate, Commercial and Institutional Banking client segments, including being placed on non-purely precautionary early alert or being classified as CG12. Assessment of credit-impaired financial assets Consumer and Business Banking clients The core components in determining credit-impaired expected credit loss provisions are the value of gross charge- off and recoveries. Gross charge-off and/or loss provisions are recognised when it is established that the account is unlikely to pay through the normal process. Recovery of unsecured debt post credit impairment is recognised based on actual cash collected, either directly from clients or through the sale of defaulted loans to third-party institutions. Release of credit impairment provisions for secured loans is recognised if the loan outstanding is paid in full (release of full provision), or the provision is higher than the loan outstanding (release of the excess provision). CCIB and Private Banking clients Credit-impaired accounts are managed by the Group’s specialist recovery unit, Stressed Asset Group (SAG), which is independent from its main businesses. Where a portion of exposure is considered not recoverable, a stage 3 credit impairment provision is raised. This stage 3 provision is the difference between the loan-carrying amount and the probability-weighted present value of estimated future cash flows, reflecting a range of scenarios (typically the Upside, Downside and Likely recovery outcomes). Where the exposure is secured by collateral, the values used will incorporate the impact of forward-looking economic information on the value recoverable collateral and time to realise the same. The individual circumstances of each client are considered when SAR estimates future cashflows and the timing of future recoveries which involves significant judgement. All available sources, such as cashflow arising from operations, selling assets or subsidiaries, realising collateral or payments under guarantees, are considered. In any decision relating to the raising of provisions, the Group attempts to balance economic conditions, local knowledge and experience, and the results of independent asset reviews. Write-offs Where it is considered that there is no realistic prospect of recovering a portion of an exposure against which an impairment provision has been raised, that amount will be written off. Governance and application of expert credit judgement in respect of expected credit losses The Group’s Credit Policy and Standards framework details the requirements for continuous monitoring to identify any changes in credit quality and resultant ratings, as well as ensuring a consistent approach to monitoring, managing and mitigating credit risks. The framework aligns with the governance of ECL estimation through the early recognition of significant deteriorations in ratings which drive stage 2 and 3 ECL. The models used in determining expected credit losses are reviewed and approved by the Group Credit Model Assessment Committee (CMAC), which is appointed by the Model Risk Committee. CMAC has the responsibility to assess and approve the use of models and to review all IFRS 9 interpretations related to models. CMAC also provides oversight on operational matters related to model development, performance monitoring and model validation activities, including standards and regulatory matters. Prior to submission to CMAC for approval, the models are validated by 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 validation, review of the model development and calibration process, out-of-sample performance testing, and assessment of compliance review against IFRS 9 rules and internal standards. 284 Standard Chartered – Annual Report 2023Risk reviewRisk profileA quarterly model monitoring process is in place that uses recent data to compare the differences between model predictions and actual outcomes against approved thresholds. Where a model’s performance breaches the monitoring thresholds, an assessment of whether a PMA is required to correct for the identified model issue is completed. Key inputs into the calculation and resulting expected credit loss provisions are subject to review and approval by the IFRS 9 Impairment Committee (IIC) which is appointed by the 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 provisions 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 Principal and Interest (SPPI) tests • Reviews and approves expected credit loss for financial assets classified as stages 1, 2 and 3 for each financial 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 financial assets • Reviews, challenges and approves base macroeconomic forecasts and the multiple macroeconomic scenarios approach that are utilised 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 projections 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 jurisdictions. PMAs may be applied to account for identified weaknesses in model estimates. The processes for identifying the need for, calculating the level of, and approving PMAs are prescribed in the Credit Risk IFRS 9 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 remediation plan to fix the identified model weakness, and these plans are reported to and tracked at CMAC. In addition, 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. 285 Standard Chartered – Annual Report 2023Risk review and Capital reviewTraded Risk Traded Risk is the potential for loss resulting from activities undertaken by the Group in financial markets. Under the Enterprise Risk Management Framework, the Traded Risk Framework brings together Market Risk, Counterparty Credit Risk and Algorithmic Trading. Traded Risk Management is the core risk management function supporting market- facing businesses, predominantly Financial Markets and Treasury Markets. Market Risk (audited) Market Risk is the potential for fair value loss due to adverse moves in financial markets. The Group’s exposure to Market Risk arises predominantly from the following sources: • Trading book: – The Group provides clients with access to financial markets, facilitation of which entails the Group taking moderate Market Risk positions. All trading teams support client activity. There are no proprietary trading teams. Hence, income earned from Market Risk-related activities is primarily driven by the volume of client activity rather than risk-taking • Non-trading book: – The Treasury Markets desk is required to hold a liquid assets buffer, much of which is held in high-quality marketable debt securities – The Group has capital invested and related income streams denominated in currencies other than US dollars. To the extent that these income streams are not hedged, the Group is subject to Structural Foreign Exchange Risk which is reflected in reserves A summary of our current policies and practices regarding Market Risk management is provided in the Principal Risks section (page 323). Daily value at risk (VaR at 97.5%, one day) (audited) The primary categories of Market Risk for the Group are: • Interest Rate Risk: arising from changes in yield curves and implied volatilities on interest rate options • Foreign Exchange Rate Risk: arising from changes in currency exchange rates and implied volatilities on foreign exchange options • Commodity Risk: arising from changes in commodity prices and implied volatilities on commodity options; covering energy, precious metals, base metals and agriculture • Credit Spread Risk: arising from changes in the price of debt instruments and credit-linked derivatives, driven by factors other than the level of risk-free interest rates • Equity Risk: arising from changes in the prices of equities, equity indices, equity baskets and implied volatilities on related options Market risk movements (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. The average level of total trading and non-trading VaR in 2023 was $53.3 million, 1.5 per cent higher than 2022 ($52.5 million). The year end level of total trading and non- trading VaR in 2023 was $44.5 million, 20.2 per cent lower than 2022 ($55.8 million), due to a reduction in non-trading positions. For the trading book, the average level of VaR in 2023 was $21.5 million, 19.4 per cent higher than 2022 ($18.0 million). Trading activities have remained relatively unchanged, and client driven. Trading1 and non-trading2 Average $million High $million Low $million Year End $million Average $million High $million Low $million Year End $million 2023 2022 39.5 33.8 7.0 5.8 0.1 (32.9) 53.3 54.1 48.0 12.2 9.7 0.4 N/A 65.5 23.2 25.0 4.2 3.7 – N/A 44.2 30.5 31.7 7.4 4.3 – (29.4) 44.5 27.8 34.2 6.5 7.0 0.1 (23.1) 52.5 42.1 47.1 10.3 11.9 0.2 N/A 64.1 21.0 20.3 4.8 3.5 – N/A 40.3 24.7 32.9 6.8 8.3 0.1 (17.0) 55.8 2023 2022 Average $million High $million Low $million Year End $million Average $million High $million Low $million Year End $million 13.1 9.4 7.0 5.8 – (13.8) 21.5 20.4 12.4 12.2 9.7 – N/A 30.6 7.7 7.4 4.2 3.7 – N/A 14.7 11.6 9.4 7.4 4.4 – (11.5) 21.3 8.1 9.5 6.5 7.0 – (13.1) 18.0 11.7 14.9 10.3 11.9 – N/A 24.4 5.3 5.0 4.8 3.5 – N/A 12.6 9.0 8.7 6.8 8.3 – (11.0) 21.8 Interest Rate Risk Credit Spread Risk Foreign Exchange Risk Commodity Risk Equity Risk Diversification effect Total Trading1 Interest Rate Risk Credit Spread Risk Foreign Exchange Risk Commodity Risk Equity Risk Diversification effect Total 286 Standard Chartered – Annual Report 2023Risk reviewRisk profileNon-trading2 Interest Rate Risk Credit Spread Risk Equity Risk Diversification effect Total 2023 2022 Average $million High $million Low $million Year End $million Average $million High $million Low $million Year End $million 34.2 28.3 0.1 (18.6) 44.0 43.6 40.1 0.4 N/A 53.4 19.7 21.5 – N/A 32.0 23.9 24.4 – (12.7) 35.6 26.3 28.8 0.1 (10.6) 44.6 44.5 37.8 0.2 N/A 52.5 18.1 18.7 – N/A 35.1 23.5 29.2 0.1 (11.5) 41.3 The following table sets out how trading and non-trading VaR is distributed across the Group’s businesses: Trading1 and non-trading2 Trading1 Macro Trading3 Global Credit XVA Diversification effect Total Non-trading2 Treasury4 Global Credit Listed Private Equity Diversification effect Total 2023 2022 Average $million High $million Low $million Year End $million 53.3 65.5 44.2 44.5 Average $million 52.5 High $million 64.1 Low $million 40.3 Year End $million 55.8 13.8 12.8 4.8 (9.9) 21.5 43.4 3.9 0.1 (3.4) 44.0 20.2 18.2 7.0 N/A 30.6 50.2 13.6 0.4 N/A 53.4 9.2 8.5 3.4 N/A 14.7 31.1 2.0 0.0 N/A 32.0 15.4 10.1 4.5 (8.7) 21.3 34.9 4.0 0.0 (3.3) 35.6 12.8 10.1 3.9 (8.8) 18 38.7 3.4 0.1 2.4 44.6 17.4 15.7 5.0 N/A 24.4 47.5 5.0 0.2 N/A 52.5 10.2 4.2 2.4 N/A 12.6 29.7 2.3 – N/A 35.1 16.9 8.4 4.6 (8.1) 21.8 40.3 3.5 0.1 (2.6) 41.3 1 The 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 positions permitted in the trading book 2 The non-trading book VaR does not include syndicated loans 3 Macro Trading comprises the Rates, FX and Commodities businesses 4 Treasury comprises Treasury Markets and Treasury Capital Management businesses Risks not in VaR In 2023, the main market risks not reflected in VaR were: • Basis risks for which the historical market price data is limited and is therefore proxied, giving rise to potential proxy basis risk that is not captured in VaR • Potential depeg risk from currencies currently pegged or managed, as the historical one-year VaR observation period does not reflect the possibility of a change in the currency regime, such as sudden depegging • Volatility skew risk due to movements in options volatilities at different strikes while VaR reflects only movements in at-the- money volatilities • Deal contingent risk where a client is granted the right to cancel a hedging trade contingent on conditions not being met within a time window Additional capital is set aside to cover such ‘risks not in VaR’. 287 Standard Chartered – Annual Report 2023Risk review and Capital review Backtesting In 2023, there were five regulatory backtesting negative exceptions at Group level (in 2022 there were eight regulatory backtesting negative exceptions at Group level). Group exceptions occurred on: • 16 March: After the US authorities put Silicon Valley Bank and Signature Bank into administration there were strong market reactions, including notable interest rate yield rises on 16 March • 1 June: After announcement of planned potential economic reforms in Nigeria, there were sharp movements in the offshore Naira FX market in anticipation of Naira devaluation • 12 June: After the governor of the Central Bank of Nigeria was removed there were further sharp movements in the offshore Naira FX market • 1 November and 3 November: After the Nigerian government announced on 30 October that it plans to target an exchange rate of 750 Naira per dollar, the onshore spot market became more volatile on low volumes. The VaR model is currently being enhanced to increase its responsiveness to abrupt upturns in market volatility. There have been five Group exceptions in the previous 250 business days. This is within the ‘amber zone’ applied internationally to internal models by bank supervisors (Basel Committee on Banking Supervision, Supervisory framework for the use of backtesting in conjunction with the internal models approach to market risk capital requirements, January 1996). The graph below illustrates the performance of the VaR model used in capital calculations. It compares the 99 percentile profit and loss confidence level given by the VaR model with the hypothetical profit and loss of each day given the actual market movement without taking into account any intra-day trading activity. 2023 Backtesting chart Internal model approach regulatory trading book at Group level Hypothetical profit and loss (P&L) versus VaR (99 per cent, one day) Hypothetical P&L Positive VaR at 99% Negative VaR at 99% Positive exceptions Negative exceptions 140 120 100 80 60 40 20 0 -20 -40 -60 Jan 2023 Feb 2023 Mar 2023 Apr 2023 May 2023 Jun 2023 Jul 2023 Aug 2023 Sep 2023 Oct 2023 Nov 2023 Dec 2023 Trading loss days Number of loss days reported for Financial Markets trading book total product income1 2023 16 2022 15 1 Includes credit valuation adjustment (CVA) and funding valuation adjustment (FVA), and excludes Treasury Markets business (non-trading), periodic valuation changes for Capital Markets, expected loss provisions, overnight indexed swap (OIS) discounting and accounting adjustments such as debit valuation adjustments Average daily income earned from Market Risk-related activities1 (audited) The average level of total trading daily income in 2023 was $12 million, 14 per cent lower than 2022 ($14 million). The decrease is largely attributable to lower income in Commodities in 2023 on the back of lower volatility and falling crude oil prices. Additionally, the decrease in FX business was on the back of lower cross-border flows and muted FX volatility. The average level of total non-trading daily income in 2023 was -$0.7 million, 217 per cent lower than 2022 ($0.6 million). The decrease is primarily attributable to lower income from the Credit Solutions business. Trading Interest Rate Risk Credit Spread Risk Foreign Exchange Risk Commodity Risk Equity Risk Total 288 2023 $million 2022 $million 4.5 1.2 5.5 0.8 – 12.0 5.0 1.4 6.3 1.3 – 14.0 Standard Chartered – Annual Report 2023Risk reviewRisk profileNon-trading Interest Rate Risk Credit Spread Risk Equity Risk Total $million $million (0.1) (0.7) 0.1 (0.7) – 0.6 – 0.6 1 Reflects total product income which is the sum of client income and own account income. Includes elements of trading income, interest income and non funded income which are generated from Market Risk-related activities. Rates, XVA and Treasury income are included under Interest Rate Risk whilst Credit Trading income is included under Credit Spread Risk Structural foreign exchange exposures The table below sets out the principal structural foreign exchange exposures (net of investment hedges) of the Group. Hong Kong dollar Renminbi Indian rupee Singapore dollar Korean won Malaysian ringgit Taiwanese dollar Euro Bangladeshi Taka Thai baht UAE dirham Pakistani rupee Indonesian rupiah Other 2023 $million 20221 $million 4,662 3,523 3,309 2,415 2,114 1,540 1,222 1,125 1,007 782 709 306 293 3,206 26,213 3,333 3,497 4,396 1,888 2,409 1,571 1,055 893 832 782 670 352 261 3,233 25,172 Derivative financial instruments Credit Risk mitigation 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 positive and negative mark-to-market values of applicable derivative transactions. In addition, the Group enters into credit support annexes (CSAs) with counterparties where collateral is deemed a necessary or desirable mitigant to the exposure. Cash collateral includes collateral called under a variation margin process from counterparties if total uncollateralised mark-to- market exposure exceeds the threshold and minimum transfer amount specified in the CSA. With certain counterparties, the CSA is reciprocal and requires us to post collateral if the overall mark-to-market values of positions are in the counterparty’s favour and exceed an agreed threshold. 1 Prior year has been represented to provide granular currency details As at 31 December 2023, the Group had taken net investment hedges using derivative financial instruments to partly cover its exposure to the Hong Kong dollar of $5,603 million (31 December 2022: $6,236 million), Korean won of $2,884 million (31 December 2022: $3,330 million), Indian rupee of $1,809 million (31 December 2022: $620 million), Renminbi of $1,516 million (31 December 2022: $1,608 million), UAE dirham of $1,470 million (31 December 2022: $1,334 million), Singapore dollar of $1,047 million (31 December 2022: $1,608 million), Taiwanese dollar of $1,025 million (31 December 2022: $1,075 million) and South African rand of $64 million (31 December 2022: $nil million). 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 positions above would be an increase of $260 million (31 December 2022: $421 million). Changes in the valuation of these positions are taken to reserves. For analysis of the Group’s capital position and requirements, refer to the Capital Review (page 338). Counterparty Credit Risk Counterparty Credit Risk is the potential for loss in the event of the default of a derivative counterparty, after taking into account the value of eligible collaterals and risk mitigation techniques. The Group’s counterparty credit exposures are included in the Credit Risk section. 289 Standard Chartered – Annual Report 2023Risk review and Capital reviewLiquidity and Funding Risk Liquidity and Funding Risk is the risk that the Group may not have sufficient stable or diverse sources of funding to meet its obligations as they fall due. The Group’s Liquidity and Funding Risk framework requires each country to ensure that it operates within predefined liquidity limits and remains in compliance with Group liquidity policies and practices, as well as local regulatory requirements. The Group achieves this through a combination of setting Risk Appetite and associated limits, policy formation, risk measurement and monitoring, prudential and internal stress testing, governance and review. Despite the challenging macroeconomic environment, the Group has maintained resilience and retained a robust liquidity position. The Group continues to focus on improving the quality and diversification of its funding mix and remains committed to supporting its clients. Group’s composition of liabilities and equity 31 December 2023 Primary sources of funding (audited) The Group’s funding strategy is largely driven by its policy to maintain adequate liquidity at all times, in all geographic locations and for all currencies. This is done to ensure the Group can meet all of its obligations as they fall due. The Group’s funding profile is therefore well diversified across different sources, maturities and currencies. The Group‘s assets are funded predominantly by customer deposits, supplemented with wholesale funding, which is diversified by type and maturity. The Group maintains access to wholesale funding markets in all major financial centres in which it operates. This seeks to ensure that the Group has market intelligence, maintains stable funding lines and can obtain optimal pricing when performing cashflow management activities. In 2023, the Group issued approximately $8.1 billion of securities, all in the form of senior debt, from its holding company (HoldCo) Standard Chartered PLC (2022 $5.2 billion of senior debt securities, $0.75 billion of subordinated debt securities and $1.25 billion of Additional Tier 1 securities). In the next 12 months, approximately $8.5 billion of the Group’s senior debt, subordinated debt and Additional Tier 1 securities in total are either falling due for repayment contractually or callable by the Group. a n ks D eriv a tiv e fi n a n cial e n ts m in stru D e b t s e c uritie s in iss u e D e p o sits b y b er a c c o u n ts m C u sto O th er lia bilitie s e d fu n d s S u b ordin a te d lia a n d o th er b orro E q uity bilitie s w 4.3 6.8 8.9 65.0 7.4 1.5 6.1 100% Geographic distribution of customer accounts 31 December 2023 A sia 69.5 6.0 A fric a & dle E a st M id eric a s m E uro p e & A 24.5 100% Liquidity and Funding Risk metrics The Group continually monitors key liquidity metrics, both on a country basis and consolidated across the Group. The following liquidity and funding Board Risk Appetite metrics define the maximum amount and type of risk that the Group is willing to assume in pursuit of its strategy: liquidity coverage ratio (LCR), liquidity stress survival horizons, recovery capacity and net stable funding ratio (NSFR). In addition to the Board Risk Appetite, there are further limits that apply at Group and country level such as, external wholesale borrowing (WBE) and cross currency limits. Liquidity buffer Total net cash outflows Liquidity coverage ratio 290 Liquidity coverage ratio (LCR) The LCR is a regulatory requirement set to ensure the Group has sufficient unencumbered high-quality liquid assets to meet its liquidity needs in a 30-calendar-day liquidity stress scenario. The Group monitors and reports its liquidity positions under the Liquidity Coverage Ratio per PRA rulebook and has maintained its LCR above the prudential requirement. The Group maintained strong liquidity ratios despite a challenging macroeconomic and geopolitical environment. At the reporting date, the Group LCR was 145 per cent (31 December 2022: 147 per cent), with a surplus to both Board-approved Risk Appetite and regulatory requirements. Adequate liquidity was held across our footprint to meet all local prudential LCR requirements where applicable. 2023 $million 185,643 128,111 145% 2022 $million 177,037 120,720 147% Standard Chartered – Annual Report 2023Risk reviewRisk profileStress coverage The Group intends to maintain a prudent and sustainable funding and liquidity position, in all countries and currencies, such that it can withstand a severe but plausible liquidity stress. Our approach to managing liquidity and funding is reflected in the Board-level Risk Appetite Statement which includes the following: “The Group should have sufficient stable and diverse sources of funding to meet its contractual and contingent obligations as they fall due.” The Group’s internal liquidity stress testing framework covers the following stress scenarios: • Standard Chartered-specific – Captures the liquidity impact from an idiosyncratic event affecting Standard Chartered only with the rest of the market assumed to be operating normally. • Market wide – Captures the liquidity impact from a market-wide crisis affecting all participants in a country, region or globally. • Combined – Assumes both Standard Chartered-specific and market-wide events affect the Group simultaneously and hence is the most severe scenario. All scenarios include, but are not limited 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 deterioration of a firm’s credit rating. Concentration risk approach has been enhanced to capture single name and industry concentration. Stress testing results show that a positive surplus was maintained under all scenarios at 31 December 2023, and respective countries were able to survive for a period of time as defined under each scenario. The results take into account currency convertibility and portability constraints while calculating the liquidity surplus at Group level. Standard Chartered Bank’s credit ratings as at 31 December 2023 were A+ with stable outlook (Fitch), A+ with stable outlook (S&P) and A1 with stable outlook (Moody’s). As of 31 December 2023, the estimated contractual outflow of a three-notch long-term ratings downgrade is $1.1 billion. External wholesale borrowing A risk limit is set to prevent excessive reliance on wholesale borrowing. Within the definition of wholesale borrowing, limits are applied to all branches and operating subsidiaries in the Group and as at the reporting date, the Group remained within the Risk Appetite. Advances-to-deposits ratio This is defined as the ratio of total loans and advances to customers relative to total customer deposits. An advances- to-deposits ratio 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. The Group’s advances-to-deposits ratio has decreased by 4.1 per cent to 53.3 per cent, driven by an increase in customer deposits of 3 per cent and with a reduction of 5 per cent in customer loans and advances. Deposits from customers as at 31 December 2023 are $486,666 million (31 December 2022: $473,383 million). Total loans and advances to customers1,2 Total customer accounts3 Advances-to-deposits ratio 2023 $million 259,481 486,666 53.3% 2022 $million 271,897 473,383 57.4% 1 Excludes reverse repurchase agreement and other similar secured lending of $13,996 million and includes loans and advances to customers held at fair value through profit and loss of $7,212 million 2 Loans and advances to customers for the purpose of the advances-to-deposits ratio excludes $20,710 million of approved balances held with central banks, confirmed as repayable at the point of stress (31 December 2022: $20,798 million) 3 Includes customer accounts held at fair value through profit or loss of $17,248 million (31 December 2022: $11,706 million) Net stable funding ratio (NSFR) The NSFR is a PRA regulatory requirement that stipulates institutions to maintain a stable funding profile in relation to an assumed duration of their assets and off-balance sheet activities 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 liabilities and capital, based on their perceived stability and the amount of stable funding they provide. Likewise, RSF factors are applied to assets and off-balance sheet exposures according to the amount of stable funding they require. The regulatory requirements for NSFR are to maintain a ratio of at least 100 per cent. The average ratio for the past four quarters is 136 per cent. 291 Standard Chartered – Annual Report 2023Risk review and Capital reviewLiquidity pool The liquidity value of the Group’s LCR eligible liquidity pool at the reporting date was $186 billion. The figures in the table below account for haircuts, currency convertibility and portability constraints per PRA rules for transfer restrictions, and therefore are not directly comparable with the consolidated balance sheet. A liquidity pool is held to offset stress outflows as defined in the LCR per PRA rulebook. Level 1 securities Cash and balances at central banks Central banks, governments/public sector entities Multilateral development banks and international organisations Other Total Level 1 securities Level 2A securities Level 2B securities Total LCR eligible assets Level 1 securities Cash and balances at central banks Central banks, governments/public sector entities Multilateral development banks and international organisations Other Total Level 1 securities Level 2A securities Level 2B securities Total LCR eligible assets 2023 Asia $million Africa & Middle East $million Europe & Americas $million 32,504 54,562 5,202 130 92,398 6,194 348 98,940 2,456 1,363 961 – 4,780 128 – 4,908 2022 46,715 15,843 10,754 1,161 74,473 6,946 376 81,795 Asia $million Africa & Middle East $million Europe & Americas $million 34,101 50,881 3,510 37 88,529 4,044 71 92,644 1,066 2,712 837 7 4,622 139 21 4,782 36,522 23,680 10,843 1,430 72,475 6,033 1,103 79,611 Total $million 81,675 71,768 16,917 1,291 171,651 13,268 724 185,643 Total $million 71,689 77,273 15,190 1,474 165,626 10,216 1,195 177,037 292 Standard Chartered – Annual Report 2023Risk reviewRisk profileLiquidity analysis of the Group’s balance sheet (audited) Contractual maturity of assets and liabilities The following table presents assets and liabilities by maturity groupings based on the remaining period to the contractual maturity date as at the balance sheet date on a discounted basis. Contractual maturities do not necessarily reflect actual repayments or cashflows. Within the tables below, cash and balances with central banks, interbank placements and investment securities that are fair valued through other comprehensive income are used by the Group principally for liquidity management purposes. As at the reporting date, assets remain predominantly short-dated, with 63 per cent maturing in less than one year. The less than six-month cumulative net funding gap improved by $35 billion as of 31 December 2023 compared to 31 December 2022. Between one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million One month or less $million Total $million 2023 Assets Cash and balances at central banks Derivative financial instruments Loans and advances to banks1,2 Loans and advances to customers1,2 Investment securities1 Other assets1 63,752 – – – – – – 6,153 69,905 12,269 10,632 6,910 3,611 2,921 4,650 6,038 3,403 50,434 28,814 23,384 10,086 4,929 5,504 1,583 2,392 1,098 77,790 86,695 12,187 17,611 55,009 28,999 31,729 25,492 17,131 1,286 15,392 18,993 409 14,537 25,987 20,590 24,244 587 67 26,545 44,835 93 95,829 345,486 50,168 10,300 217,147 62,082 Total assets 221,328 149,753 60,905 43,334 44,139 56,531 79,903 166,951 822,844 Liabilities Deposits by banks1,3 Customer accounts1,4 Derivative financial instruments Senior debt5 Other debt securities in issue1 13,111 130 3,123 12,472 1,111 5,822 Other liabilities 14,929 26,447 Subordinated liabilities and other borrowed funds Total liabilities Net liquidity gap 980 443,462 (222,134) 68 95,552 54,201 26,745 1,909 1,398 503 778 384,444 47,723 28,288 13,647 11,806 1,326 7,787 2,848 38,578 2 35,509 2,349 534,622 6,655 1,537 6,109 1,695 19 45,701 15,204 4,001 1,389 3,235 544 172 23,491 19,843 3,433 624 3,037 883 453 21,014 23,125 5,142 11,507 492 1,830 312 28,396 28,135 6,932 20,127 482 1,809 1,936 72,712 4,315 14,443 195 56,061 50,868 22,495 12,763 60,900 8,096 12,036 42,163 772,491 7,191 124,788 50,353 1 Loans and advances, investment securities, deposits by banks, customer accounts and debt securities in issue include financial instruments held at fair value through profit or loss, see Note 13 Financial instruments 2 Loans and advances include reverse repurchase agreements and other similar secured lending of $97.6 billion 3 Deposits by banks include repurchase agreements and other similar secured borrowing of $5.6 billion 4 Customer accounts include repurchase agreements and other similar secured borrowing of $48.0 billion 5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group 293 Standard Chartered – Annual Report 2023Risk review and Capital reviewBetween one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million One month or less $million Total $million 2022 49,097 – – – – – – 9,166 58,263 15,558 12,030 8,352 4,446 3,602 6,026 8,410 5,293 63,717 24,135 15,293 11,595 4,971 4,138 2,608 1,022 687 64,449 96,351 14,175 15,210 214,526 58,605 26,008 31,276 143,212 29,733 402,069 15,820 204 2,758 19,857 2,004 472,445 (257,919) 2,042 49,769 15,810 342 5,504 24,725 105 98,297 44,915 27,751 23,364 1,341 12,540 13,024 181 13,444 12,891 698 19,150 22,805 89 33,413 41,217 96,476 357,730 52,756 206,240 23 20,705 72,403 35,162 34,773 50,678 84,085 185,083 69,523 819,922 2,245 25,110 8,645 509 8,732 1,616 871 15,961 5,002 963 7,316 521 22 46,879 25,524 248 30,882 4,280 349 15,216 4,102 711 2,935 503 25 23,841 10,932 1,432 7,830 6,795 5,855 1,088 902 1,882 25,784 24,894 144 2,451 7,904 19,673 870 1,043 2,045 34,130 49,955 7 36,823 1,823 520,229 5,784 12,086 268 10,296 69,862 40,343 29,471 59,463 7,384 13,715 37,648 769,906 147,435 50,016 Assets Cash and balances at central banks Derivative financial instruments Loans and advances to banks1,2 Loans and advances to customers1,2 Investment securities1 Other assets1 Total assets Liabilities Deposits by banks1,3 Customer accounts1,4 Derivative financial instruments Senior debt5 Other debt securities in issue1 Other liabilities Subordinated liabilities and other borrowed funds Total liabilities Net liquidity gap 1 Loans and advances, investment securities, other assets, deposits by banks, customer accounts and debt securities in issue include financial instruments held at fair value through profit or loss, see Note 13 Financial instruments 2 Loans and advances include reverse repurchase agreements and other similar secured lending of $90 billion 3 Deposits by banks include repurchase agreements and other similar secured borrowing of $7.0 billion 4 Customer accounts include repurchase agreements and other similar secured borrowing of $46.8 billion 5 Senior debt maturity profiles are based upon contractual maturity, which may be later than call options over the debt held by the Group Behavioural maturity of financial assets and liabilities The cashflows presented in the previous section reflect the cashflows that will be contractually payable over the residual maturity of the instruments. However, contractual maturities do not necessarily reflect the timing of actual repayments or cashflow. In practice, certain assets and liabilities 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 qualitative and quantitative techniques, including analysis of observed customer behaviour over time. 294 Standard Chartered – Annual Report 2023Risk reviewRisk profileMaturity of financial liabilities on an undiscounted basis (audited) The following table analyses the contractual cashflows payable for the Group’s financial liabilities by remaining contractual maturities on an undiscounted basis. The financial liability balances in the table below will not agree with the balances reported in the consolidated balance sheet as the table incorporates all contractual cashflows, on an undiscounted basis, relating to both principal and interest payments. Derivatives not treated as hedging derivatives are included in the ‘On demand’ time bucket and not by contractual maturity. Within the ‘More than five years and undated’ maturity band are undated financial liabilities, the majority of which relate to subordinated debt, on which interest payments are not included as this information would not be meaningful, given the instruments are undated. Interest payments on these instruments are included within the relevant maturities up to five years. Deposits by banks Customer accounts Derivative financial instruments Debt securities in issue Subordinated liabilities and other borrowed funds Other liabilities Total liabilities 2023 Between one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million One month or less $million 26,759 1,921 1,417 513 790 385,361 48,140 28,763 14,049 12,190 Between one year and two years $million 1,328 8,118 Between two years and five years $million 2,848 39,000 More than five years and undated $million Total $million 4 35,580 3,036 538,657 53,054 3,507 517 6,995 1,043 12,200 481,924 134 26,291 83,998 46 8,015 46 1,560 44 103 202 887 5,070 4,002 13,663 23,413 208 515 570 884 395 1,832 2,389 1,810 1,208 16,396 14,367 11,513 39,847 20,399 18,539 25,538 70,347 46,524 Between one month and three months $million Between three months and six months $million Between six months and nine months $million 2022 Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million Deposits by banks Customer accounts Derivative financial instruments Debt securities in issue Subordinated liabilities and other borrowed funds Other liabilities Total liabilities One month or less $million 29,742 401,893 65,912 3,060 2,097 17,275 519,979 2,048 49,196 48 5,912 165 25,751 83,120 2,275 24,713 12 9,631 44 1,517 876 15,614 116 8,574 273 504 362 15,283 213 3,979 28 496 1,455 8,280 940 7,844 2,029 895 144 5,937 1,185 22,259 2,610 901 38,192 25,957 20,361 21,443 33,036 56,061 81,061 19,152 56,605 787,116 Total $million 36,910 8 2,591 523,507 1,436 18,465 14,004 9,669 46,173 69,862 79,724 21,250 57,008 788,261 295 Standard Chartered – Annual Report 2023Risk review and Capital reviewInterest Rate Risk in the Banking Book The following table provides the estimated impact to a hypothetical base case projection of the Group’s earnings under the following scenarios: • A 50 basis point parallel interest rate shock (up and down) to the current market-implied path of rates, across all yield curves • A 100 basis point parallel interest rate shock (up and down) to the current market-implied path of rates, across all yield curves These interest rate shock scenarios assume all other economic variables remain constant. The sensitivities shown represent the estimated change to a hypothetical base case projected net interest income (NII), plus the change in interest rate implied income and expense from FX swaps used to manage banking book currency positions, under the different interest rate shock scenarios. The base case projected NII is based on the current market- implied path of rates and forward rate expectations. The NII sensitivities below stress this base case by a further 50 or 100bps. Actual observed interest rate changes will lag behind market expectation. Accordingly, the shocked NII sensitivity does not represent a forecast of the Group’s net interest income. The interest rate sensitivities are indicative stress tests and based on simplified scenarios, estimating the aggregate impact of an unanticipated, instantaneous parallel shock across all yield curves over a one-year horizon, including the time taken to implement changes to pricing before becoming effective. The assessment assumes that the size and mix of the balance sheet remain constant and that there are no specific management actions in response to the change in rates. No assumptions are made in relation to the impact on credit spreads in a changing rate environment. Significant modelling and behavioural assumptions are made regarding scenario simplification, market competition, pass-through rates, asset and liability re-pricing tenors, and price flooring. In particular, the assumption that interest rates of all currencies and maturities shift by the same amount concurrently, and that no actions are taken to mitigate the impacts arising from this are considered unlikely. Reported sensitivities will vary over time due to a number of factors including changes in balance sheet composition, market conditions, customer behaviour and risk management strategy. Therefore, while the NII sensitivities are a relevant measure of the Group’s interest rate exposure, they should not be considered an income or profit forecast. Estimated one-year impact to earnings from a parallel shift in yield curves at the beginning of the period of: + 50 basis points - 50 basis points + 100 basis points - 100 basis points Estimated one-year impact to earnings from a parallel shift in yield curves at the beginning of the period of: + 50 basis points - 50 basis points + 100 basis points 2023 USD bloc $million HKD bloc $million SGD bloc $million KRW bloc $million CNY bloc $million 90 (150) 180 (280) 10 (30) 10 (40) 50 (50) 100 (100) 10 (20) 20 (40) 2022 30 (40) 60 (80) USD bloc $million HKD bloc $million SGD bloc $million KRW bloc $million CNY bloc $million 80 (80) 20 (20) 40 (40) 50 (60) 30 (30) Other currency bloc $million 160 (180) 320 (350) Other currency bloc $million 150 (140) Total $million 350 (470) 690 (890) Total $million 370 (370) 160 40 90 100 50 300 740 As at 31 December 2023, 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 $350 million. The equivalent impact from a parallel decrease of 50 basis points would result in a reduction in projected NII of $470 million. 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 $690 million. The equivalent impact from a parallel decrease of 100 basis points would result in a reduction in projected NII of $890 million. The benefit from rising interest rates is primarily from reinvesting at higher yields and from assets re-pricing faster and to a greater extent than deposits. NII sensitivity in falling rate scenarios has increased versus 31 December 2022, due to changes in modelling assumptions to reflect expected re-pricing activity on Retail and Transaction Banking current accounts and savings accounts in the current interest rate environment. Over the course of 2023 the size of the interest rate swaps and HTC-accounted bond portfolios used to programmatically hedge the behavioural lives of structural equity and CASA balances increased from $31 billion to $47 billion. The portfolios had a weighted average maturity of 2.9 years, which reflects the behaviouralised lives of the rate-insensitive deposit and equity balances that they hedge, and a yield of 3.1%, as at 31 December 2023. 296 Standard Chartered – Annual Report 2023Risk reviewRisk profilerisk and control management. Macro processes will provide a client-centric view and enable clearer accountability for delivery as well as management of risks in line with business objectives. Operational and Technology risk is elevated in areas such as Information and Cyber Security, Data Management and Transaction Processing. Other key areas of focus are Change, Systems Health/Technology risk, Third Party risk, Resilience and Regulatory Compliance. Management has focused on addressing these areas, improving the sustainable operating environment and has initiated a number of programmes to enhance the control environment. The Group continues to monitor and manage Operational and Technology risks associated with the external environment such as geopolitical factors and the increasing risk of cyber-attacks. Digitalisation and inappropriate use of Artificial Intelligence, various regulatory expectations across our footprint and the changing technology landscape remain key emerging areas to manage, allowing the Group to keep pace with new business developments, whilst ensuring that risk and control frameworks evolve accordingly. The Group continues to strengthen its risk management to understand the full spectrum of risks in the operating environment, enhance its defences and improve resilience. Operational and Technology risk events and losses Operational losses are one indicator of the effectiveness and robustness of the non-financial risk control environment. The Group’s profile of operational loss events in 2023 and 2022 is summarised in the table below, which shows the distribution of gross operational losses by Basel business line. Operational and Technology Risk The Group defines Operational and Technology risk as the potential for loss from inadequate or failed internal processes, technology events, human error, or from the impact of external events (including legal risks). Operational and Technology risk may occur anywhere in the Group, including third-party processes. Operational and Technology risk profile Risk management practices help the business grow safely and ensure governance and management of Operational and Technology risk through the delivery and embedding of effective frameworks and policies, together with continuous oversight and assurance. Managing Operational and Technology risk makes the Group more efficient and enables it to offer better, sustainable service to its customers. The Group’s Operational and Technology Risk Type Framework (‘O&T RTF’) is designed to enable the Group to govern, identify, measure, monitor and test, manage and report on its Operational and Technology risks. The Group continues to ensure the O&T RTF supports the business and the functions in effectively managing risk and controls within risk appetite to meet their strategic objectives. The Group has demonstrated progress on ensuring visibility of risks and risk management through implementation of a standardised risk taxonomy. Standardising the risk taxonomy enables improved risk aggregation and reporting as well as providing opportunities for simplifying the process of risk identification and assessment. A revised process universe along with taxonomies for causes and controls have been designed and will be implemented in 2024, with control categories supporting the streamlining and removal of duplicate controls, reducing complexity, and improving Distribution of Operational Losses by Basel business line Agency Services Asset Management Commercial Banking Corporate Finance Corporate Items Payment and Settlements Retail Banking Retail Brokerage Trading and Sales 1 Losses in 2022 have been restated to include incremental events recognised in 2023 The Group’s profile of operational loss events in 2023 and 2022 is also summarised by Basel event type in the table below. It shows the distribution of gross operational losses by Basel event type. Distribution of Operational Losses by Basel event type Business disruption and system failures Clients’ products and business practices Damage to physical assets Employment practices and workplace safety Execution delivery and process management External fraud Internal fraud % Loss 2023 6.0% 3.6% 0.0% 0.6% 75.0% 14.6% 0.2% 1 Losses in 2022 have been restated to include incremental events recognised in 2023 Other principal risks Losses arising from operational failures for other principal and integrated risks are reported as operational losses. Operational losses do not include operational risk-related credit impairments. 297 % Loss 2023 1.8% 0.1% 8.4% 7.6% 35.5% 17.6% 20.3% 0.0% 8.5% 2022¹ 3.0% 0.8% 8.9% 1.1% 2.5% 42.9% 25.5% 0.0% 15.2% 20221 3.5% 7.1% 0.0% 0.2% 79.6% 8.6% 0.9% Standard Chartered – Annual Report 2023Risk review and Capital reviewClimate Risk Managing the financial and non-financial risks from climate change Disclaimer For the avoidance of doubt, this ‘Climate Risk’ section is subject to the statements included in (i) the ‘Forward- Looking Statements’ section; and (ii) the ‘Basis of Preparation and Caution Regarding Data Limitations’ section provided under ‘Important Notices’ at page 519. Credit Risk We have developed a climate risk management framework, which provides a baseline level of effective risk mitigation. Consumer, Private and Business Banking (CPBB) Credit Risk As of September 2023, we have assessed the physical risk for 79 per cent and transition risk for 54 per cent of our CPBB portfolio. Physical Risk Measuring and Monitoring in CPBB (as of September 2023) Transition Risk Measuring and Monitoring in CPBB (as of September 2023) 2% 98% 21% 79% 46% 54% Overall CPBB Consumer Mortgage Business Banking 77% 23% Private Banking 20% 80% 46% 42% 54% 58% 78% 70% 100% 22% 30% CCPL Overall CPBB Consumer Mortgage Business Banking Private Banking CCPL Physical Risk Assessed Physical Risk Not assessed Transition Risk Assessed Transition Risk Not assessed For our secured portfolio, assessments are based on the underlying physical collateral for our residential and commercial portfolios where we continue to leverage Munich Re’s Risk Suite (Natural Hazards Edition) to measure acute and chronic physical risk impacting each asset. For our unsecured portfolios, such as credit cards and personal loans, we recognise that physical risk is likely to have a more pronounced second order impact that may indirectly affect our customers’ ability to repay. We have further expanded our scope of risk measurement and monitoring to cover these products in 2023, albeit using proxies based on the location of bank branches. We assess the exposure concentrations to high physical risk across acute and chronic hazards quarterly, and report these at risk management committees at Group, Region and Country, with a stronger focus on flood risk and rising sea levels. During 2023, the physical risk profile across products and markets has remained stable, apart from slight variations in exposure to high flood risk levels due to enhancements in Munich Re’s flood risk model. Assessment of Acute and Chronic Physical Risk for Top 10 Markets’ Exposures backed by Property Collateral, indicating Exposure Concentration Subjected to Very High Gross Risk (as of September 2023) Physical risk event Flood Risk Sea-level rise (Year 2100, RCP 8.5) Physical risk event Flood Risk Sea-level rise (Year 2100, RCP 8.5) Physical risk event Flood Risk Sea-level rise (Year 2100, RCP 8.5) Global Korea 23% Hong Kong 38% Taiwan 7% Q3-22 Q3-23 24.80% 24.20% Trend Q3-22 Q3-23 14.00% 12.30% Trend Q3-22 Q3-23 44.60% 44.90% Trend Q3-22 Q3-23 11.90% 11.00% Trend 2.10% 2.20% 0.01% 0.60% 3.40% 3.60% 0.04% 0.03% India 5% Singapore 18% Malaysia 4% UAE 1% Q3-22 Q3-23 30.20% 22.30% Trend Q3-22 Q3-23 3.50% 3.40% Trend Q3-22 Q3-23 6.50% 5.30% Trend Q3-22 Q3-23 29.50% 26.50% Trend 1.10% 0.90% 0.08% 0.06% 0.20% 0.30% 36.80% 36.10% Jersey 2% Vietham 1% China 2% Q3-22 Q3-23 1.90% 1.60% Trend Q3-22 Q3-23 63.90% 60.40% Trend Q3-22 Q3-23 67.70% 67.10% Trend – – – 1.80% 1.00% 8.30% 8.30% Note: Movements are called out for markets showing a change of >5 per cent year-on-year change in flood risk exposure concentration. 298 Standard Chartered – Annual Report 2023Risk reviewRisk profile Our key residential mortgage markets have not implemented minimum building energy efficiency standards. As such, in 2023 we took an alternative approach towards assessing the transition risk impact on our borrowers, by quantifying the robustness of their repayment capability, rather than accounting for valuation related risks of property collateral. We used a combination of internal and external data, including results from our net zero financed emissions calculations and our initial analysis shows that the transition risk levels appear to be low across key residential mortgage markets. These results will be refined along with revisions in exposure concentrations, as the data landscape matures over time and as we improve upon the initial approach. Approaches to Measure Transition Risk Impact on collateral valuation Impact on borrower repayment capability Energy price increase Minimum building enegy efficiency regulations Retrofitting cost Energy price increase Retrofitting cost Macroeconomic impacts Transition Risk Ratings using SCB CPBB Approach, by Exposure Concentration (as of December 2022) Very high High Medium Low Very Low 2% 2% 3% 2% 1% 4% 10% 13% 16% 9% 12% Singapore $9.4bn Hong Kong $32.3bn Taiwan $5.3bn 80% 77% 47% 23% For the Jersey residential mortgage portfolio, we used EPC (Energy Performance Certificate) data to assess the energy efficiency distribution, with results indicating that more than 80 per cent of the portfolio is rated at C or better. Transition Risk Ratings for Residential Mortgages in Jersey using EPC Ratings by Exposure EPC Ratings for Residential Mortgages in Jersey by Count (as of August 2023) 7% 0.3% 12% Jersey $0.3bn 17% A B C D E 60% 9% 64% 9% 8% 3% 0% 4% 0% 1% 2% 3% 0% 0% 0% 0% A B C D E A B C D E A B C D E Prior to 2000 2000 - 2021 2022 onwards We aim to continue to explore ways to enhance our assessment approaches across both secured and unsecured CPBB portfolios through improved methodologies and data. This will enable us to better assess the susceptibility to and readiness of our clients in managing climate-driven risks, whilst also enabling us to identify opportunities to assist them in their transition towards a low-carbon economy. Options we are considering include expanding the scope of our existing credit origination process to cover Climate-related considerations in segments such as Medium Enterprises. 299 Standard Chartered – Annual Report 2023Risk review and Capital review Corporate, Commercial and Institutional Banking (CCIB) Credit Risk This section covers details of how we assess climate risk for our corporate clients, including insights gained from our client level assessments and progress made to further strengthen our framework for climate and credit related portfolio and risk management. The figure below outlines our process in assessing climate risk. 5. Controls and Assurance Control Sample Testing Independant Assurance 5. 1. 4. Portfolio Management and Monitoring Credit Underwriting Principles Risk Appitite (%Black or Red) High Climate Risk Clients Monitoring 4. 3. 1. Identify Risks and Mitigation Plans Climate risk questionaire (CRQ) Data Gathering Client Outreach Scenario Analysis 2. 2. Analyzing the Risk Climate Risk Assesment (BRAG) Green Amber Red Black Time Horizon Impact Mitigating Factors 3. Evaluating the Risk Business Credit Application Review and Approval BCA Analysis Risk Trigers Financial Impacts Warning Signals 1. Identify risks and mitigation plans Our client-level Climate Risk Questionnaire (CRQ) aims to help assess the potential financial risks from climate change using quantitative and qualitative information. The assessment presents a consolidated view across five pillars of how exposed and ready for transition or adaptation our clients may be. Governance & Disclosures Gross Physical Risk Physical Risk Adaptation Gross Transition Risk Transition Risk Mitigation Intent, commitment and reporting • Reporting of Climate targets • Board responsibility and accountability • Management incentives to manage climate risk within the organisation Exposure to acute and chronic events • Asset locations Mitigations to acute and chronic events • Assessment of Relative emissions for sector and region • Reliance on fossil exposed to physical risk events (Floods, Storms, Droughts etc) client’s adaptation plans to its operating locations and supply chain • Model output to assess current and future risk to client’s operating location • Insurance coverage to protect against physical risk fuel/carbon products • Policy environmental/ impact due to sovereign decarbonisation policy in sector Decarbonisation plan and emission targets • Assess client’s plans and its credibility to transition its business and supply chain • Emissions reporting targets and plan to acheive them • Capex in low carbon • Potential financial impact from various climate scenarios technologies, internal carbon pricing scenarios 300 Standard Chartered – Annual Report 2023Risk reviewRisk profile The CRQ helps us to form a view of the overall climate risk profile of our clients and supports the underlying themes that feed into our broader scenario analysis and corporate planning exercises. In 2023, we completed an exhaustive review of the CRQ based on historical data, including rationalising questions, introducing a methodological differentiation in assessing corporates against projects, introducing sector-specific questions, and building stronger linkages to our net zero and credible transition plan workstreams. Coverage of our analysis In 2023 we completed CRAs for c.4,100 clients, which is c.85-90 per cent of our corporate client limits and is a significant improvement from c.2,200 clients assessed in the year before. How do different regions in our footprint compare? Overall, while the levels and consistency in the availability of climate information from public disclosures has increased, this is still a developing aspect in our markets, which highlights the importance of engaging our clients on this topic. Client-level Climate Risk assessment scores by region 2023 YTD Assessment* Asia Africa & Middle East Europe & Americas Total * Data assessed is as of September 2023 Number of clients Overall score across the five pillars 1. Governance & disclosures 2. Gross Physical Risk 3 Physical Risk adaptation 4. Gross Transition Risk 5. Transition RIsk Mitigation 2,709 409 1,018 4,136 46% 36% 64% 49% 44% 27% 75% 50% 69% 69% 78% 71% 27% 13% 53% 32% 48% 46% 50% 48% 41% 25% 65% 45% • We continue to see better transition risk mitigation and physical risk adaptation scores for corporates domiciled in Europe and Americas, where disclosure levels are highest and the plans to effectively manage climate risk are being put in place. • Physical risk adaptation levels remain an area of risk for most of our markets, with the lowest absolute scores in Africa and the Middle East. • Asia constitutes c.65 per cent of our total volume of clients assessed in 2023 (2022: c.63 per cent) followed by Europe and Americas, which represents c.25 per cent of the clients and the largest increase in share (2022: 18 per cent) Insights from these assessments for the pillars mentioned previously are provided below. Governance and disclosures We have seen a gradual increase in the number of clients reporting quantifiable climate change related commitments over 2022 and 2023 driven by an improvement in climate risk transition plans being put in place across our markets but this does not necessarily come via ‘Carbon Disclosures Project’, which remains more a developing market disclosure across our client footprint. Key risk remains on management incentives linked to climate change; an area where we are actively engaging with clients. Percentage of clients in scope Has a quantifiable climate policy or commitment Has board member with climage oversight 2023 2022 2021 2023 2022 2021 Have management incentives linked to climate 2023 2022 Has TCFD-aligned disclosures Discloses to CDP 2021 2023 2022 2021 2023 2022 2021 62% 58% 55% 55% 66% 49% 47% 29% 32% 37% 37% 24% 29% 29% 33% 301 Standard Chartered – Annual Report 2023Risk review and Capital review Transition risk mitigation levels Over the last two years, there has been a material increase in both the number of clients putting in place a transition plan and those planning investments to move to low carbon technologies, driven by increasing regulatory pressure and enhanced transition risk commitments in some of our key markets. While the number of clients reporting Scope 1, 2 and 3 emissions has not increased in the last two years, we have seen an increase in clients that report Scope 1, 2 and 3 emissions reduction targets. However, the ability to set quantifiable targets to achieve broader commitments is still lagging when looked at on an absolute basis and the scale of the transition needed. Percentage of clients in scope Reports Scope 1 & 2 emissions Reports Scope 3 emissions Has transition plan to meet current or future regulations Has made plans for investment in low carbon technologies Has scope 1 & 2 reduction targets Has scope 3 reduction targets Client performs financial transition scenario analysis 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 35% 31% 34% 17% 13% 21% 23% 71% 71% 68% 54% 52% 61% 61% 63% 43% 43% 54% 49% 50% 49% Physical risk readiness Physical risk adaptation remains an area of concern and we have seen downward trends across our portfolio of clients due to an increase in the number of assessments (from c.2,200 - 4,100) captured in our coverage, which now better reflects our overall corporate portfolio. This reflects the nature of many of our footprint markets, where physical risk adaptation and associated levels of disclosures are in nascent stages. Percentage of clients in scope 42% 54% 50% 35% 34% 39% 32% 40% 39% 18% 24% 22% Acknowledges physical risk Assessed physical risk Have taken adaptation measures to date or made future plans to Estimates a financial impact 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 302 Standard Chartered – Annual Report 2023Risk reviewRisk profile Transition risk – Gross Risk and Transition Plan levels for key sectors For four key sectors that have high transition risk i.e. Commercial Real Estate (CRE), O&G Producers, Metals and Mining Producers and Utilities, we have assessed the risk against the level of transition plans and how it varies across our key markets. CRE: Companies across our key markets are close together with respect to their transition scores, reflecting the policy environment in the building sector, which is broadly similar across major markets. Key factors which determine the transition risk grading for a building are its location, which helps ascertain the intensity of the power grid supplying electricity to the asset, the property type, and its energy efficiency. Power: Clients in the UAE are slightly behind some of their global peers, although this is driven in part by a lower level of disclosures and higher transition risk as a result of fossil fuel intensive business models. O&G: This sector has been gradually preparing for the transition to lower carbon intensive fuels over the last few years. While there is a lot more to do in terms of transitioning, the improved transition risk understanding and associated disclosures lead to on average better mitigation scores in this sector. Mining: Almost 50 per cent of the Metals and Mining clients in our portfolio, ranging from Steel to Cement to Aluminium producers are based in China and India. Effective decarbonisation in this sector is reliant on the power grid decarbonising, improved energy efficiency in overall operations, including heating, as well as managing process level emissions. CRE n o i t a g i t i M k s i R n o i t i s n a r T n o i t a g i t i m h g H i n o i t a g i t i m w o L Utilities n o i t a g i t i M k s i R n o i t i s n a r T n o i t a g i t i m h g H i n o i t a g i t i m w o L Gross Transition Risk Gross Transition Risk O&G Producer Metals & Mining Producers n o i t a g i t i M k s i R n o i t i s n a r T n o i t a g i t i m h g H i n o i t a g i t i m w o L n o i t a g i t i M k s i R n o i t i s n a r T n o i t a g i t i m h g H i n o i t a g i t i m w o L Gross Transition Risk Gross Transition Risk China Hong Kong India Singapore UK USA UAE South Africa Korea Rest of Middle East Europe 303 Standard Chartered – Annual Report 2023Risk review and Capital review 2. Analysing the climate risk grading Each client is assigned a climate risk grading (BRAG) computed based on the gross transition risk and transition risk mitigation. Owing to physical risk data being less robust, we have to date focused only on transition risk drivers to compute the climate risk grading. However, as highlighted in the section above, we have seen a steady improvement in the coverage of physical risk data in the last two years. During 2024, we plan to develop a methodology to incorporate both physical and transition risk drivers in the computation of BRAG which will holistically represent the extent of climate risk faced by a client. There are currently four types of BRAG ratings assigned to clients – black, red, amber, green. Black Red Amber Green Clients are deemed to have very high exposure to Transition Risk with little or no mitigation plans Clients are deemed to have very high exposure to Transition Risk but with acceptable or good mitigation plans Clients are deemed to have high exposure to Transition Risk but with acceptable or good mitigation plans. Clients are deemed to have low or limited exposure to Transition Risk 3. Evaluating the risk (linkage to credit process) Once a climate risk grading is assigned to a client, the impacts from climate-related risks are integrated into the existing credit approval process qualitatively and/or quantitatively through inclusion within the business risk analysis and financial modelling. If the risks are deemed material and not adequately represented via the existing credit rating of the client, subjective warning signals may be added to influence the credit rating. Additionally, risk triggers are added to monitor risks that are not adequately mitigated and to seek additional information from the client where applicable. 4. Portfolio management and monitoring Concentration of black and red graded clients remains within proposed Risk Appetite levels at 6 per cent within our key markets; some of the more developed markets have the highest proportion of green clients, which reflects the higher level of climate risk disclosures and governance established by companies in this region. Amongst our key markets, the UAE currently has the highest proportion of red and black clients, driven by a combination of clients that had fewer disclosures and high transition risk, particularly fossil fuel led utility providers. During 2023 we have embedded qualitative and quantitative climate considerations into the Group’s credit underwriting principles for O&G, Mining, Shipping and CRE sectors for which we have industry specific origination teams. This included introducing portfolio level caps for black and red rated clients and lower preference for emission intensive transactions. It is important to note that underlying principles vary depending on the sector, to help steer the portfolio in the desired direction over the medium term, and also consider the Group’s 2030 financed emission targets. We have also initiated work to assess risks to underlying collateral from physical and transition risk specifically for our CRE and Shipping portfolios. A key strategic focus area going forward is to embed climate risk and net zero targets into business and credit decisions. To enable this, we have established a Net Zero Climate Risk Working Forum where discussions on account plans on high climate risk and net zero divergent clients are held. Portfolio distribution across key markets 76.6% 81.73% 73.8% 56.1% 82.3% 74.4% 84.8% 74.49% 17.3% 5.4% Total 16.74% 0.7% 1.52% Singapore 21.1% 5.1% India 39.1% 4.8% UK 13.5% 4.2% US 8.0% 16.1% 1.5% UAE 11.9% 3.1% 0.2% 15.17% 6.45% 3.89% Hong Kong China 100% 80% 60% 40% 20% 0% 304 Standard Chartered – Annual Report 2023Risk reviewRisk profile 5. Controls and assurance Independent control checks by first line of defence and assurance reviews by second line of defence on integrating climate risk within the credit process are carried out quarterly to improve the quality and effectiveness of assessing climate risk. The results of the assurance testing and steps to address gaps are periodically shared with impacted stakeholders and as part of governance updates to risk committees. Credibility of transition plans We aim to actively manage our exposure by shifting to lower emissions-intensive clients and working closely with our existing clients to develop credible transition plans that are consistent with our net zero commitments. To help us identity such clients, we draw on our existing CRQ framework to finalise a methodology to assess the Credibility of Transition Plan (CTP) by analysing client commitments to transition their business to a low carbon economy. We leverage the data captured in the CRQ and assign a credibility rating to the clients’ transition plan based on an in-house scoring methodology that draws on the UK Transition Planning Taskforce and Glasgow Financial Alliance for Net Zero guidance on net zero transition plans. The current methodology will be periodically reviewed as the level of client climate-related disclosure steps up across our footprint, to ensure it remains fit for purpose and in line with industry best practices, stakeholder expectations and regulatory requirements. The CTP has been embedded into the Version 3 CRQ that was implemented in January 2024. Reputational and Sustainability Risk Climate risk is considered within the Reputational and Sustainability Risk framework, for our corporate clients, through an assessment of a client’s ability to meet their own climate-related commitments, as well as meet the Group’s aim to reach net zero GHG emissions by 2050. We have continued to perform additional client level due diligence for (i) clients covered by the Group’s net zero targets for high carbon sectors (O&G, Power, Steel, Aluminium, Cement, Automobiles, Shipping, Aviation and CRE), (ii) clients with a coal nexus2 as well as (iii) those that have been assessed at client level as high climate risk. The assessment focuses on three pillars at covering both client and transaction level aspects: Of the case reviews completed, an increase in Reputational and Sustainability Risk rating was suggested for c.24 per cent of transactions compared to c.17 per cent in 2022. These consisted of companies in Coal Production, O&G, Mining, Steel and Cement sectors, primarily from the South East Asia region, looking to procure coal or other high carbon emitting products for manufacturing, production, or wholesale purposes. In addition, some entities with high temperature alignment scores and no clear transition plan were raised as having additional risk and rating increases recommended. The above-mentioned due diligence is in addition to management of environmental and social risk arising from the Group’s client relationships and transactions. Further information is available in the Sustainability overview on pages 76 to 78 and Sustainability review on pages 125 to 129. Temperature alignment is one way to consider a company’s impact on climate change and an indicator of a client’s progress towards a net zero economy. It is calculated based on historic emission intensities and volume of hydrocarbons produced to produce a forward-looking temperature alignment score. We assessed the weighted average temperature alignment (WATA) projected to 2030 of 3,661 corporate client entities (covering c.62 per cent of corporate client portfolio on a net nominal basis) by high carbon sector. Client Level Transaction Level Temperature Alignment Temperature Alignment and Comparison to client peers Credibility of Transition Plan Readiness and Robustness of transition strategy from client risk assesments Net Zero Emissions Impact Influence on Net Zero alignment from both internal and regional context 2 As defined by the Group’s public Position Statement to only provide financial services to clients who by 2030, are less than 5 per cent dependent on thermal coal (based on percentage revenue). 305 Standard Chartered – Annual Report 2023Risk review and Capital reviewInsights • Portfolio average temperature alignment is 3.48⁰C. Compared to other sectors within our portfolio, O&G, CRE, Utilities and Construction have a higher temperature alignment given their dependence on high carbon emitting production. • Compared to 2022, there was an increase in sector temperature alignment scores across O&G and Construction sectors driven by improvements in both coverage of the corporate clients assessed and emission data coverage for our clients (due to reduced use of proxies). Weighted average temperature alignment (WATA) by client sectors (as of September 2023) 2021 2022 2023 % 8 6 4 . % 0 6 3 . ) C ° ( A T A W 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 % 4 6 3 . % 2 5 3 . % 0 5 3 . % 4 8 2 . % 9 7 2 . % 1 9 2 . % 4 5 3 . % 2 5 3 . % 9 3 3 . Utilities O&G Transportation and Storage CRE Building Products, Construction & Engineering Consumer Durables & Apparel Automobiles & Components Metals & Mining Technology Hardware & Equipment Commodity Traders Others Utilities O&G Transportation and Storage Building Products, Construction & Engineering CRE Consumer Durables & Apparel Automobiles & Components Metals & Mining Technology Hardware & Equipment Commodity Traders Asia 3.7°C 4.9°C 2.7°C 3.6°C 3.5°C 3.2°C 2.7°C 3.2°C 3.9°C 3.5°C Others 3.6°C Africa & Middle East Europe & Americas 3.9°C 4.6°C 2.8°C 3.3°C 3.6°C 3.4°C 3.5°C 2.8°C 3.3°C 4.6°C 3.2°C 3.0°C 4.6°C 3.1°C 3.9°C 3.2°C 4.0°C 3.0°C 2.6°C 1.8°C 3.2°C 3.1°C As part of our 2023 modelling roadmap, we initiated work on developing an in-house methodology to model temperature alignment for priority sectors (i.e. O&G, Steel and Automotive) as well as a sector-agnostic model to cover remaining corporate portfolios. This has helped to reduce reliance on third party modelling capabilities. Temperature alignment is an emerging concept, and industry-wide standards on methodology are still evolving. We fully expect our approach to evolve in line with best practice. Client-level emissions are only available for c.55 per cent of corporate clients and sector average proxies are being used for the remainder. Improving such data gaps remains a key priority. Country Risk The Group uses a set of physical and transition risk rankings to identify the markets most vulnerable and least ready to adapt and mitigate climate-related physical and transition risks. • The physical risk rankings are based on a set of publicly available scores such as ND-Gain Country Index and GermanWatch Climate Risk Index, as well as S&P Global Ratings and Moody’s Investors Service. • The transition risk rankings are based on an internally developed methodology which is a combination of climate and macroeconomic drivers. 306 Standard Chartered – Annual Report 2023Risk reviewRisk profile Physical and Transition Risk rankings methodological deep dives Assessing markets’ vulnerabilities to climate change and readiness to adapt Gauging markets’ historical losses as a result of extreme weather events Transition Risk ND-Gain Country Index German Watch Climate Risk Index Physical Risk S&P Global Rating Moody’s Investor Services Measuring markets’ exposure to extreme weather events Measuring markets’ exposure to extreme weather events n o i t i s n a r t o t d e c a f k s i R n o i t i s n a r t o t y t i l i b A n o i t i s n a r T s s o r G s r o t c a f k s i R k s i R n o i t i s n a r T s r o t c a f n o i t a g i t i M Reiliance on fossil fuel imports and exports Carbon footprint of imports and efforts Emission footprint per capita Energy efficiency levels Governments’ effectiveness in achieving targets Governments’ fiscal flexibility to support the transition Low-carbon energy production capacity Imports of low-carbon technology products Based on their aggregated physical and transition risk scores, sovereigns are split into decile-based buckets ranging from 1 (low risk) to 10 (high risk). These rankings are a qualitative input to our internal Country Risk management process spanning annual sovereign credit grades and limits reviews, inputs to climate-related scenario analysis, and Risk Appetite. Gross Country Risk (GCR) exposure distribution as of 30 September 2023 across Physical Risk categories Bucket Exposures % 1 (Best) 10.5 2 29.1 3 20.0 4 4.4 5 17.5 6 8.3 GCR exposure distribution as of 30 September 2023 across Transition Risk Categories Bucket Exposures % 1 (Best) 2.7 2 14.4 3 12.0 4 36.0 5 18.6 6 4.3 7 1.9 7 3.8 8 6.5 8 7.3 9 10 (Worst) 0.8 1.1 9 10 (Worst) 0.7 0.1 Physical and Transition Risk rankings distribution for key markets¹: Key markets’ climate risk bucket allocation (as of Sept 2023) k s i r h g H i k s i R l a c i s y h P Mainland China Hong Kong Pakistan India Nigeria UAE South Korea Singapore USA k s i r w o L Low risk Transition Risk High risk Bubble size represent markets’ GCR exposure 307 Standard Chartered – Annual Report 2023Risk review and Capital review Insights • For both physical and transition risk, our exposure to high-risk countries (buckets 9 and 10) remains well below Risk Appetite. Limitations • The computation inputs are based on latest available data which may be dated. Proxies have been used where data for the sovereign is not available. • The rankings are largely driven by the level of financial risk countries are exposed to and their ability to absorb these losses. As such, the rankings are largely dependent on countries’ development stage, economy-wide diversification, in-country inequalities and gross exposure to physical and transition risk shocks. • Additionally, we keep close track of transition risk events such as the establishment of the EU’s Carbon Border Adjustment Mechanism (EU CBAM) and its potential impact on our key portfolios. Other markets with internal carbon pricing mechanisms (such as Singapore, South Korea, South Africa, etc) are also being monitored as part of country risk annual reviews. From a physical risk standpoint, the rise of El Niño season (expected to peak at the beginning of 2024) is likely to exacerbate climate conditions throughout the Group’s footprint regions and we continue to monitor these as part of our annual reviews. • The ranking uses equally spaced decile scores and provides the results in an ordinal manner. While the simplicity helps in adoption and provides the relative position of the sovereigns, other systems may provide more information. Operational and Technology Risk Climate risk primarily impacts Operational and Technology risk as it manifests when physical risk disrupts our properties, data centres and third party arrangements. Thus far, our focus has been on physical risks, and we aim to explore transition risk elements in 2024. We continue exploring enhancements to our control framework across impacted areas. Whilst Continuity Plans for third party arrangements have been enhanced to include climate risk related considerations, we are targeting to gather our material vendors’ operating site location data to assess their specific physical risk exposures, such that enhanced continuity plans can be developed. We continue to assess the physical risk vulnerabilities of our own operating locations on a regular basis. Furthermore, we have expanded the assessment of physical risk exposure at onboarding to include data centres. Assessment of gross Physical Risk at our own operating locations (as of September 2023) Physical Risk event Flood (Acute) Wildfire (Acute) Storm (Acute) Sea-level rise (Chronic) Heat Stress (Chronic) Number of operating locations Time horizon Scenario 2023 N/A 2100 2050 RCP 8.5 RCP 8.5 Insights • From an acute risk perspective, 20 per cent of the Group’s locations globally are subjected to flood risk, 14 per cent with storm risk and none at risk from wildfire. Given our footprint, a higher proportion (24 per cent for flood, 18 per cent for storm) of the Group’s locations in Asia are subject to acute risks and 17 per cent of locations in Europe and Americas are subjected to flood risks. • In the locations where weather events such as storms or cyclones are frequent, the buildings are built in consideration of these risks in line with regional standards. • From a chronic risk perspective, under RCP 8.5 for heat stress is at 26 per cent (35 per cent for AME, 24 per cent for Asia). Exposure to sea level rise remains below 5 per cent. • A broad range of mitigation options are considered, such as property insurance, operating a diversified location strategy, splitting delivery and therefore reducing concentration risk. Asia 24% 0% 18% 1% 24% 714 AME 8% 0% 1% 5% 35% 239 E&A 17% 0% 6% 0% 0% 35 Global 20% 0% 14% 2% 26% 988 Traded Risk We manage the climate risk of traded risk exposures through the stress-testing framework. Climate risks are incorporated in the scenarios monitored against the traded risk stress Risk Appetite, covering all fair value exposures in the trading and banking books. Climate-related stress scenarios are designed to include transition risk effects from climate change policies and shocks to markets due to supply and demand disruption from physical climate events. Three scenarios are currently in place: two physical and one transitional. The assumptions and results are subject to internal governance. Our climate risk management for traded risk exposures is evolving and we are working closely with industry bodies and academics to better assess and monitor climate-related risks and opportunities. 308 Standard Chartered – Annual Report 2023Risk reviewRisk profileTreasury Risk From a capital perspective, climate risk considerations have been part of our Internal Capital Adequacy Assessment Process submissions since 2019. Our approach for assessing climate risk impact on capital adequacy has improved from qualitative judgements to quantitative simulations with the availability of tools and greater understanding of our portfolio. As understanding of climate risk management and potential forward-looking scenarios develop, our approach and assessment will evolve, including using a wide range of scenario outcomes to determine any potential capital-related impact in the future. From a liquidity risk perspective, we have started monitoring climate risk-related vulnerabilities and readiness of the top corporate client liquidity portfolios, leveraging the client outreach and data gathering exercise being undertaken on the asset side. The most recent exposure concentration in the ‘high transition risk and low readiness’ bucket is broadly comparable to what we see for our top corporate client exposures on the asset side. Liquidity providers with high transition risk and low readiness are from commodity traders and utilities sectors. The results of the analysis have been considered as part of our internal liquidity adequacy assessment process and we continue to monitor the profile. Model Risk Throughout 2023, we have been building our internal climate risk modelling capabilities to assess impacts from climate risk, through collaboration with various external vendors. These models have been independently validated by the second line of defence and approved by the Credit Model Assessment Committee, and were used to estimate climate impact on ECL for IFRS9. The amount of incremental ECL as a result of climate risk was below the Group’s materiality threshold and as such was not included as a quantitative post model adjustment. In future, the models will also be used for stress testing. The development of internal climate risk models has helped us to reduce reliance on external vendor models, and we will continue to enhance our internal capabilities by extending model coverage (e.g. to develop models to cover more portfolios, or to develop more granular sector- specific models) and incorporating model enhancements recommended by internal and external stakeholders. For the corporate portfolios, we developed transition risk models that adopt the microeconomic theory of demand and supply to determine price changes based on sustainability transition costs in different sectors of the economy. The model accounts for several key market dynamics, such as sensitivities with respect to price, revenue, cost, and profit due to changes in carbon prices. The model is calibrated at portfolio level, covering priority sectors that are carbon-intensive and a generic model that covers non-priority sectors. For retail mortgages, an asset haircut model was developed to assess physical climate risk impact by estimating the devaluation of property values along different climate pathways. The model takes input from the current and prospective risk profile of a property, which captures the evolution of various hazard types, including river floods and storms. For sovereigns, the climate adjusted Probability of Defaults is derived by considering benchmarks from the Cambridge Paper (Klusak et al., 2021) and incorporating the country risk rankings currently used by the Group, which covers both physical and transition risks. Apart from models that are used to estimate ECL, we have also developed temperature alignment models that assess implied temperature rise scores for corporate counterparties. The model methodology is forward-looking and compares the forecasted emissions of a counterparty to relevant benchmark scenarios. The cumulative difference in emissions between the counterparty’s forecast and the benchmark scenarios is converted into a temperature score. The output from temperature alignment models will support internal climate risk management processes. We have also partnered with external vendors for a scenario expansion model which has been used to for NGFS Version 3 scenarios. Assessing the resilience of our strategy using scenario analysis To assess climate-related risks and opportunities in the short, medium, and long-term we use scenario analysis to consider how risks and opportunities may evolve under different situations. Over two years, we have progressively strengthened our scenario analysis capabilities and developed our infrastructure and capabilities to incorporate climate risk into data, modelling, and analysis. We have expanded our portfolio coverage, built bespoke scenarios, and participated in several regulatory climate stress tests in 2023, including the Hong Kong Monetary Authority (HKMA) and the Central Bank United Arab Emirates stress tests. Scenarios used at Standard Chartered The table below summarises the climate risk scenarios used internally by the Group across risk types: Risk Types Scenario Family Credit Risk – Corporate, Commercial and Institutional Banking (CCIB) Network for Greening the Financial System (NGFS) Version 3 Credit Risk – CCIB Bespoke (Tail and Base) Credit Risk – Consumer, Private and Business Banking (CPBB) Intergovernmental Panel on Climate Change’s (IPCC) Representative concentration pathways (RCP) scenarios Operational and Technology Risk IPCC’s RCP 8.5 scenario Reputational and Sustainability Risk Traded Risk NGFS Version 3 Bespoke (two Physical scenarios and one Transition scenario) Number of Scenarios 3 3 3 1 2 3 Risk Measure ECL, RWA ECL, RWA Exposure Concentration to sea level rise risk Physical Risk Concentration for sea level rise risk and heat stress to our own operations Weighted Average Temperature Alignment Stressed Loss Refer Page no 311 311 298 308 305 308 309 Standard Chartered – Annual Report 2023Risk review and Capital reviewIn addition to the internal scenarios, Standard Chartered Bank (Hong Kong) Limited is responding to two HKMA mandated climate risk stress tests to (i) assess the impact on capital for short tenor scenarios across credit, traded and operational risks and (ii) a 30-year scenario based on NGFS Version 3 scenarios. The hybrid bespoke short-term five-year scenario has elements of a macro recession, transition, and physical risk events such as typhoons in Hong Kong, heatwave, and precipitation in China. We have used our existing stress testing models to model the credit risk impact with overlays provided for physical and transition risk using data on client transition mitigation readiness, climate adjusted asset level haircuts, assumptions on stranded assets for consumer mortgages and other available data. For Operational and Technology risk, we are assessing the impact of damage to our premises and business disruption. Transition (T) and Physical (P) Risk scenarios We adapted the following scenarios for our CCIB portfolio: Scenario Family Scenario Name Key Features NGFS v3 Net Zero 2050 (T) Delayed Transition (T) Current Policies (P+T) Bespoke In-house Base Case (P+T) ‘Green Trade War’ Tail (T) ‘Migration’ Tail (P) Global warming limited to 1.5°C through stringent climate policies and innovation Global net zero CO2 emissions around 2050 Strong policies will be needed to limit warming to below 2°C Annual emissions do not decrease until 2030 No additional policies beyond those currently implemented, along with slow technology change Global temperature rises over 3 degrees by 2100 Credibility assessment of countries’ current sector targets in the short-term (2030) and a durability assessment of reduction commitments in the long-term (2050) Delayed transition to a low-carbon economy and a lack of early climate action resulting in a 2.5°C temperature rise by 2100 Impact to global trade due to introduction of Carbon Border Adjustment Mechanism leading to trade war escalation Explores risks which are not addressed by NGFS scenarios and may emerge over a short-term horizon Increasing severe acute weather events globally impact global food prices and drive migration and displacement The scenarios used for CCIB clients are characterised by different levels of physical and transition risk, driven by various features in each scenario. Carbon price: increase in carbon price puts additional cost pressure on clients, squeezes the profit margin, and thus helps to determine level of potential credit losses. Oil price: increase (or lack thereof) in oil price impacts on clients’ revenues and profitability and thus helps to determine level of potential credit losses. Features of the NGFS and bespoke scenarios used in a Standard Chartered scenario analysis Feature Temperature rise Carbon price ($2015/tCO²) Oil price ($2015/boe) Gas price change (vs 2020, %) Power demand change (vs 2020, %) GDP baseline change (vs 2020, %) Net Zero 2050 1.4°C NGFS v3 Delayed Transition 1.6°C 124 487  84 107 56% 52% 27% 120% 34% 111% 6 416  94 118 43% 54% 35% 129% 36% 110% Current policices 3°C+ 6 7  94 125 43% 80% 35% 106% 36% 118% Bespoke Scenarios Tail Risk (Physical) Tail Risk (Transition) NA  61 70  50 41 15% -14% 20% 75% -4% -2% NA 66 90  50 41 15% -14% 20% 75% -5% -5% Year 2050 2030 2050 2030 2050 2030 2050 2030 2050 2030 2050 310 Standard Chartered – Annual Report 2023Risk reviewRisk profile Physical risk scenarios We adapted the following scenarios for our CPBB portfolio. The table below summarises acute and chronic hazards outputs we currently use in the Munich Re’s Location Risk Intelligence Platform tool. Scenario Family Scenario Name Key Features IPCC (2050, 2100) RCP 2.6 (P) RCP 4.5 (P) RCP 8.5 (P) Pathways of Greenhouse gas (GHG) emissions and atmospheric concentrations, air pollutant emissions and land use to project their consequences for the climate system Current and Projected Hazard scores from Munich Re model: • Tropical cyclone zones • River flood zones • Sea level rise zones • Heat stress index based on range of high-temperature indicators • Precipitation stress index based on heavy- precipitation indicators • Climatological index for wildfire hazard • Drought stress index based on Standardised Precipitation- Evapotranspiration Index Scenario analysis results for CCIB We assessed the impact of climate-related risks on our corporate, sovereign, and financial institutions clients under different climate scenarios. This assessment, across the NGFS and bespoke scenarios, covered approximately 95 per cent of our CCIB portfolio for these clients, primarily reflective of the gross transition risks. While client-level transition plans were not factored into the modelling, they were referenced to draw additional insights for priority sectors. Scenarios used in Standard Chartered Scenario Analysis¹: Loan impairment for corporate portfolio k s i r h g H i k s i R n o i t i s n a r T k s i r w o L Low risk Tail Transition Delayed Transition Tail Physical SCB In-house Net Zero 2050 Current Policies Physical Risk High risk 1 The size of the bubble is indicative of the gross expected losses assessed for 94% of our corporate portfolio The loan impairment (LI) intensity which measures the level of gross ECL against the exposure at default (EAD) enables us to assess the relative size of our exposure subject to potential losses from climate risks. As the graph below illustrates, LI intensities do not go beyond 3 per cent during the forecast horizon for the climate scenarios considered in our scenario analysis. We expect our LI intensity to rise the most in the NGFS Net Zero 2050 scenario. This is reflective of the high transition risks noted by higher carbon prices, coupled with the needs for greater investment to move to a low carbon economy. The NGFS Delayed Transition scenario also projects high LI intensity reflecting that such delayed transition will be equally disruptive due to lower levels of innovations that limits the ability to decarbonise effectively, and rising carbon prices that squeeze profit margins. Relatively lower LI intensity observed in the NGFS Current Policies scenario reflects the nascent modelling capabilities on assessing the physical risk impact to client asset locations and second-order impacts, such as that on the supply chain. 311 Standard Chartered – Annual Report 2023Risk review and Capital review Among the bespoke scenarios, we expect our LI intensity to rise the most in the tail transition risk scenario. This is reflective of the potential risks to the global economy and subsequent increase in credit losses that may manifest due to the climate subsidy competition and introduction of carbon border adjustment mechanism. Overall, we believe that the level of potential credit losses can be mitigated by continuing to take necessary actions which the Group is already doing across sectors, engaging with our clients on this topic and supporting them in enhancing their climate transition plans. Loan Impairment intensities for the NGFS and bespoke scenarios (December 2022 snapshot) Current policies Delayed transition Net Zero 2050 SCB in-house Tail Physical Tail Transition 2.7% to 0.7% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0% 2022 2026 2030 2035 2040 2045 2050 LI Intensity is calculated as gross ECL over EAD For corporate clients, we focused on the below sectors that have been identified as more vulnerable to potential climate impacts. As of December 2022, these sectors represented 55 per cent of our corporate portfolio. Loan Impairment intensities for key corporate sectors for the NGFS and bespoke scenarios Long Term - 2050 Automobiles & Components Construction Consumer Durables & Apparel CRE Metal & Mining O&G Telecomms Transportation Utilities Total portfolio EAD 4% 7% 6% 8% 5% 11% 2% 9% 3% 100% NGFS Net Zero 2050 NGFS Delayed Transition NGFS Current policices Bespoke Baseline Bespoke Tail Transition Risk Bespoke Tail Physical Risk Medium Medium Medium Low Medium Medium Medium Low Medium Medium High Medium High Medium Medium High Medium Medium Low Medium Low Low Low Low Low Low Low Low Medium Low Low Low Medium Low Medium Medium Medium Medium Medium Medium Medium High Low High Low Low Low Low Medium Medium Medium Medium Medium Low Low Medium Low Medium Low Medium As observed in the table above, O&G and transportation sectors are most impacted by a higher LI intensity level across the scenarios. Higher carbon prices, decrease in O&G demand characterised in the NGFS Net Zero 2050 and NGFS Delayed Transition scenario are the main drivers for higher LI levels for these sectors. The extreme phsycial and transition risk events occurring in the short term and their longer term second order impacts on the global economy result in the higher LI Intensity levels for these sectors in 2050. 312 Standard Chartered – Annual Report 2023Risk reviewRisk profileAs more solution providers become available and banks start extensively using them to build internal understanding and capabilities, the transparency and sophistication of modelling methodologies and assumptions will increase. Despite these limitations, our intention is to focus on how climate risk management can inform portfolio management and support opportunity identification with clients on their transition and adaptation pathways. Work is under way to build capability from a people, process, and technology perspective to support stress tests at country level, including in-house training and a plan to implement the in-house models in the Group infrastructure. The results are used to assess the impact of climate change on our portfolio and provide the management information to monitor stressed LI over the next five-year horizon under plausible and extreme climate scenarios. The results also form part of our Climate Risk Assessments (CRAs). Whilst further enhancements are required to improve our modelling capabilities, the results of scenario analysis have provided further validation to the actions we are taking as a Group in terms of our net zero ambitions and strategy and qualitative management actions in terms of improving the data quality and building in-house modelling expertise. The results have been subject to internal governance, including review and challenge by an expert panel and discussion at the Climate Risk Management Committee and Board Risk Committee. Scenario analysis results for CPBB As part of our internal climate scenario analysis for CPBB, we carried out physical risk assessments for rising sea levels for our top 10 retail mortgage markets. The concentration of the Group’s portfolio exposure exposed to extreme rising sea levels risk has been observed to remain stable at 2 per cent in the most extreme RCP 8.5 scenario. Further details on the metrics used in the climate scenario analysis for CPBB can be found in pages 298 and 299 We measured the impact of physical risk on ECL to the retail mortgage portfolio for four key markets (Hong Kong, China, Taiwan and Korea) as part of the HKMA stress test exercise. For our key residential mortgage markets, we have collaborated with our academic partner (Imperial College London) to develop an internal model for revaluating property valuations under different climate scenarios using the forward-looking risk indices from Munich Re. These revaluations are then used to inform haircuts on the property prices and arrive at climate adjusted ECL values for the mortgage book. Limitations and next steps Despite the efforts in gathering transition risk data relating to our CPBB credit portfolios, gaps still exist across our footprint markets, and we have not been able to run a forward-looking transition risk scenario for CPBB. We have a plan to address these data gaps by working with third parties, engaging clients to gather more information, and using appropriate proxies for remaining data gaps. Many of the assumptions and methodologies that underpin the scenario analysis continue to rely significantly on nascent methodologies as well as a dependence on first generation models and data challenges. Many of these limitations are shared across the industry. Given the complexities of climate modelling, it should also be noted that the results do not include the real-world aspects such as the non-linear shifts and complex feedback loops. However, they are intended to provide a strategic direction of the sense of portfolio concentrations subject to potential climate losses. 313 Standard Chartered – Annual Report 2023Risk review and Capital reviewEnterprise Risk Management Framework Risk management is at the heart of banking, it is what we do. Managing risk effectively is how we drive commerce and prosperity for our clients and our communities, and it is how we grow sustainably and profitably as an organisation. Strategic risk management The Group’s approach to strategic risk management includes the following: • Risk identification: impact analyses of risks that arise from the Group’s growth plans, strategic initiatives, and business model vulnerabilities are reviewed. This assesses how existing risks have evolved in terms of relative importance or whether new risks have emerged. • Risk Appetite: impact analysis is performed to assess if strategic initiatives can be achieved within RA and highlight areas where additional RA should be considered. • Stress testing: the risks highlighted during the strategy review and other risk identification processes are used to develop scenarios for enterprise stress tests. In order to ensure that the Group’s Strategy remains within the approved RA, the Group Chief Risk Officer (GCRO) and Group Chief Financial Officer (GCFO) recommend strategic actions based on the stress test results. Roles and responsibilities Senior Managers Regime2 Roles and responsibilities under the ERMF are aligned to the objectives of the Senior Managers Regime (SMR). The GCRO is responsible for the overall development and maintenance of the Group’s ERMF and for identifying material risks which the Group may be exposed to. The GCRO delegates effective implementation of the RTFs to Risk Framework Owners (RFO) who provide second line of defence oversight for their respective PRTs. In addition, the GCRO is the senior manager responsible for the development of the Group’s Digital Assets Risk Assessment Approach, and management of Climate Risk. Effective risk management is essential in delivering consistent and sustainable performance for all our stakeholders and is a central part of the financial and operational management of the Group. The Group adds value to clients and the communities in which they operate by balancing risk and reward to generate returns for shareholders. The Enterprise Risk Management Framework (ERMF) enables the Group to manage enterprise-wide risks, with the objective of maximising risk-adjusted returns while remaining within our Risk Appetite (RA). The ERMF is embedded across the Group, including its branches and subsidiaries1, and is reviewed annually. The latest version is effective from January 2024. Annual review In the 2023 review, the concepts of Integrated Risk Types (IRTs) and IRT Owner roles were discontinued. Oversight on IRTs, i.e. Climate Risk, Digital Assets and Third Party Risk, is provided through the Risk Type Frameworks (RTFs) and relevant dedicated policies. The subject matter experts as policy owners for these risks provide overall governance and a holistic view of how risks are monitored and managed across the Principal Risk Types (PRTs). Risk culture Risk culture encompasses our general awareness, attitudes, and behaviours towards risk, as well as how risk is managed at enterprise level. A healthy risk culture is one in which everyone takes personal responsibility to identify and assess, openly discuss, and take prompt action to address existing and emerging risks. We expect those in our control functions to provide oversight and challenge constructively, collaboratively, and in a timely manner. This effort is reflected in our valued behaviours, underpinned by our Code of Conduct and Ethics, and reinforced by how we hire, develop, reward our people, serve our clients, and contribute to communities around the world. The risks we face constantly evolve, and we must always look for ways to manage them as effectively as possible. While unfavourable outcomes will occur from time to time, a healthy risk culture means that we react quickly and transparently. We can then take the opportunity to learn from our experience and improve our framework and processes. 1 The Group’s ERMF and System of Internal Control applies only to wholly controlled subsidiaries of the Group, and not to Associates, Joint Ventures or Structured Entities of the Group. 2 Senior managers refers to individuals designated as senior management functions under the FCA and PRA Senior Managers Regime. 314 Standard Chartered — Annual Report 2023Risk reviewRisk management approachThe Risk function The Risk function provides oversight and challenge on the Group’s risk management, ensuring that business is conducted in line with regulatory expectations. The GCRO directly manages the Risk function, which is independent from the origination, trading, and sales functions of the businesses. The Risk function is responsible for: • Determining the RA for approval by Group’s Management Team (GMT) and the Board. • Maintaining the ERMF, ensuring that it remains relevant and appropriate to the Group’s business activities, and is effectively communicated and implemented across the Group. • Ensuring that risks are properly assessed, risk and return decisions are transparent and risks are controlled in accordance with the Group’s standards and RA. • Overseeing and challenging the management of PRTs under the ERMF. • Ensuring that the necessary balance in making risk and return decisions is not compromised by short-term pressures to generate revenues through the independence of the Risk function. In addition, the Risk function provides specialist capabilities relevant to risk management processes in the broader organisation. The Risk function supports the Group’s strategy by building a sustainable ERMF that places regulatory and compliance standards, together with culture of appropriate conduct, at the forefront of the Group’s agenda. Our Conduct, Financial Crime and Compliance (CFCC) function works alongside the Risk function within the ERMF to deliver a unified second line of defence. Three lines of defence model The Group applies a three line of defence model to its day-to-day activities for effective risk management, and to reinforce a strong governance and control environment. Typically: • The businesses and functions engaged in or supporting revenue generating activities that own and manage the risks constitute the first line of defence. • The control functions, independent of the first line of defence, that provide oversight and challenge of risk management activities act as the second line of defence. • Internal Audit acts as the third line of defence providing independent assurance on the effectiveness of controls supporting the activities of the first and second line of defence functions. Risk Appetite and profile The Group recognises the following constraints which determine the risks that we are willing 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 capabilities and resources, before breaching constraints determined by capital and liquidity requirements or the internal operational environment, or otherwise failing to meet the expectations of regulator and law enforcement agencies. • RA is defined by the Group and approved by the Board. It is the boundary for the risk that the Group is willing to undertake to achieve its strategic objectives and Corporate Plan. The Board is responsible for approving the RA Statements, which are underpinned by a set of financial and operational control parameters known as RA metrics and their associated thresholds. These directly constrain the aggregate risk exposures that can be taken across the Group. The Group RA is reviewed at least annually to ensure that it is fit for purpose and aligned with strategy, with focus given to new or emerging risks. Risk Appetite Framework The Group RA is defined in accordance with risk management principles that inform our overall approach to risk management and our risk culture. We set RA to enable us to grow sustainably whilst managing our risks, giving confidence to our stakeholders. The Group RA is supplemented by risk control tools such as granular-level limits, policies, standards, and other operational control parameters that are used to maintain the Group’s risk profile within approved RA. Risk Appetite Statement The Group will not compromise compliance with its Risk Appetite in order to pursue revenue growth or higher returns. See Table 1 for the set of RA statements. Risk identification and assessment Identification and assessment of potentially adverse risk events is an essential first step in managing the risks of any business or activity. To ensure consistency in communication, we use PRTs to classify our risk exposures. We also recognise the need to maintain a holistic perspective since: • a single transaction or activity 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. 315 Standard Chartered — Annual Report 2023Risk review and Capital reviewStress tests are performed at the Group, country, business, and portfolio level under a wide range of risks and at varying degrees of severity. Unless specifically set by the regulator, scenario design is a bespoke process that aims to explore risks that can adversely impact the Group. The Board delegates approval of the Bank of England (BoE) stress test submissions to the Board Risk Committee (BRC), which reviews the recommendations from the GRC. Based on the stress test results, the GCFO and GCRO can recommend strategic actions to the Board to ensure that the Group’s strategy remains within RA. In addition, analysis is run at PRT level to assess specific risks and concentrations that the Group may be exposed to. These include qualitative assessments such as stressing of credit sectors or portfolios, measures such as Value at Risk (VaR) and multi-factor scenarios in Traded Risk and internal stressed liquidity metrics. Non-financial risk types are also stressed to assess the necessary capital requirements under the Operational & Technology RTF. The Group has also undertaken a number of Climate Risk stress tests, both those mandated by regulators as well as management scenarios. There are also sources of risk that arise beyond our own operations, such as the Group’s dependency on suppliers for the provision of services and technology. As the Group remains accountable for risks arising from the actions of such third parties, failure to adequately monitor and manage these relationships could materially impact the Group’s ability to operate. The Group maintains a dynamic risk-scanning process with inputs on the internal and external risk environment, as well as potential threats and opportunities from the business and client perspectives. The Group maintains a taxonomy of the PRTs, and risk sub-types; as well as the Topical and Emerging Risks (TERs) inventory that includes near-term as well as longer-term uncertainties. Risk assessments of planned growth and strategic initiatives against the Group’s RA is undertaken annually. The GCRO and the Group Risk Committee (GRC) regularly review reports on the risk profile for the PRTs, adherence to Group RA and the Group risk inventory, including TERs. They use this information to escalate material developments and make recommendations to the Board annually on any potential changes to our Corporate Plan. Stress testing The objective of stress testing is to support the 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 sufficient financial resources to withstand severe but plausible scenarios; • has the financial flexibility to respond to extreme but plausible scenarios; • understands key business model risks and considers what kind of event might crystallise those risks – even if extreme and with a low likelihood of occurring; • Identify, as required, actions to mitigate the likelihood or impact of those events; • considers how the outcome of plausible stress events, including TERs, may impact availability of liquidity and regulatory capital; and • has set RA metrics at appropriate levels. Enterprise stress tests incorporate Capital and Liquidity Adequacy Stress Tests, including recovery and resolution, as well as reverse stress tests. 316 Standard Chartered — Annual Report 2023Risk reviewRisk management approachPrincipal Risk Types PRTs are those risks that are inherent in our strategy and business model and have been formally defined in the Group’s ERMF. These risks are managed through distinct RTFs which are approved by the GCRO. The PRTs and associated RA Statements are reviewed annually. The table below shows the Group’s current PRTs. Table 1: Principal Risk Types Definition and RA Statement Principal Risk Types Definition Risk Appetite Statement Credit Risk Traded Risk Treasury Risk Potential for loss due to failure of a counterparty to meet its agreed obligations to pay the Group. Potential for loss resulting from activities undertaken by the Group in financial markets. Potential for insufficient capital, liquidity, or funding to support our operations, the risk of reductions in earnings or value from movements in interest rates impacting banking book items and the potential for losses from a shortfall in the Group’s pension plans. 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 (including legal risks). Financial Crime Risk1 Potential for legal or regulatory penalties, material financial loss or reputational damage resulting from the failure to comply with applicable laws and regulations relating to international sanctions, anti-money laundering and anti-bribery and corruption, and fraud. The Group manages its credit exposures following the principle of diversification across products, geographies, client segments and industry sectors. The Group should control its financial markets and activities to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. The Group should maintain sufficient capital, liquidity and funding to support its operations, and an interest rate profile ensuring that the reductions in earnings or value from movements in interest rates impacting banking book items does not cause material damage to the Group’s franchise. In addition, the Group should ensure its pension plans are adequately funded. The Group aims to control operational and technology risks to ensure that operational losses (financial or reputational), including any related to conduct of business matters, do not cause material damage to the Group’s franchise. The Group has no appetite for breaches in laws and regulations related to Financial Crime, recognising that whilst incidents are unwanted, they cannot be entirely avoided. Compliance Risk Potential for penalties or loss to the Group or for an adverse impact to our clients, stakeholders or to the integrity of the markets we operate in through a failure on our part to comply with laws, or regulations. The Group has no appetite for breaches in laws and regulations related to regulatory non-compliance; recognising that whilst incidents are unwanted, they cannot be entirely avoided. Information and Cyber Security Risk Risk to the Group’s assets, operations, and individuals due to the potential for unauthorised access, use, disclosure, disruption, modification, or destruction of information assets and/or information systems. Reputational and Sustainability Risk Potential for damage to the franchise (such as loss of trust, earnings or market capitalisation), because of stakeholders taking a negative view of the Group through actual or perceived actions or inactions, including a failure to uphold responsible business conduct as we strive to do no significant environmental and social harm through our client, third party relationships, or our own operations. The Group aims to mitigate and control ICS risks to ensure that incidents do not cause the Bank material harm, business disruption, financial loss or reputational damage – recognising that whilst incidents are unwanted, they cannot be entirely avoided. The Group aims to protect the franchise from material damage to its reputation by ensuring that any business activity is satisfactorily assessed and managed with the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striving to do no significant environmental and social harm. Model Risk Potential loss that may occur because of decisions or the risk of mis-estimation that could be principally based on the output of models, due to errors in the development, implementation, or use of such models. The Group has no appetite for material adverse implications arising from misuse of models or errors in the development or implementation of models; whilst accepting some model uncertainty. 1 Fraud forms part of the Financial Crime RA Statement but in line with market practice does not apply a zero-tolerance approach In addition to the PRTs, there is a RA statement for Climate Risk: “The Group aims to measure and manage financial and non-financial risks arising from climate change, and reduce emissions related to our own activities and those related to the financing of clients in alignment with the Paris Agreement.” 317 Standard Chartered — Annual Report 2023Risk review and Capital reviewERMF effectiveness reviews The GCRO is responsible for annually affirming the effectiveness of the ERMF to the BRC via an effectiveness review. This review uses evidence-based self-assessments for all the RTFs and relevant policies. A top-down review and challenge of the results is conducted by the GCRO with all RFOs and an opinion on the internal control environment is provided by Group Internal Audit. The ERMF effectiveness review enables measurement of year-on-year progress. The key outcomes of the 2023 review are: • Continued focus on embedding the ERMF across the organisation. • Financial risks continue to be more effectively managed and the Group continues to make good progress in embedding non-financial risk management. • Other aspects of the ERMF, including the key risk committees and key supporting standards, are established. • Country-led self-assessments ensure adherence to the ERMF. Country and regional risk committees continue to play an active role in managing and overseeing material issues arising in countries. Ongoing ffectiveness reviews allow for a structured approach to identify improvement opportunities and build plans to address them. In 2024, the Group aims to further strengthen its risk management practices by improving the management of non-financial risks within its businesses, functions and across our footprint. Executive and Board risk oversight Overview The Board has ultimate responsibility for risk management and is supported by five core Board level committees. The Board approves the ERMF based on the recommendation from the BRC, which also recommends the Group RA Statement for all PRTs. In addition, the Culture and Sustainability Committee oversees the Group’s culture and key sustainability priorities. Board and Executive level risk committee governance structure The Committee governance structure below presents the view as of 2023. Board of Directors Board level committees Board Risk Committee Culture and Sustainability Committee Remuneration Committee Governance and Nomination Committee Audit Committee Group Risk Committee The GRC, which derives its authority from the GCRO, is responsible for ensuring the effective management of risk throughout the Group in support of the Group’s strategy. The GCRO chairs the GRC, whose members are drawn from the Group Management Team. The GRC oversees the effective implementation of the ERMF for the Group, including the delegation of any part of its authorities to appropriate individuals or sub-committees. Group Risk Committee sub-committees • The Group Non-Financial Risk Committee (GNFRC), chaired by the Global Head, Risk, Functions and Operational Risk, governs the non-financial risks throughout the Group, in support of the ERMF and the Group’s strategy. The GNFRC also reviews the adequacy of the internal control system across in-scope PRTs. • The Group Financial Crime Risk Committee (GFCRC), chaired by the Group Head, CFCC, governs the Financial Crime Risk Type (excluding Fraud Risk and Secondary Reputational Risk arising from Financial Crime Risk). The GFCRC ensures that the Financial Crime Risk profile is managed within RA and policies. 318 Standard Chartered — Annual Report 2023Risk reviewRisk management approach• The Regulatory Interpretation Committee, co-chaired by the Global Head ERM and Group Head, Central Finance, provides oversight of material regulatory interpretations for the Capital Requirements Regulation (as amended by UK legislation), the Prudential Regulatory Authority (PRA) rulebook and other relevant regulations impacting Group regulatory capital calculations and reporting. The areas and risk types in scope are credit risk, traded risk, operational risk, large exposures, leverage ratio and securitisation. • The Digital Assets Risk Committee, chaired by the Global Head, ERM, oversees effective risk management of the Digital Assets (DA) Risk profile of the Group. This includes providing oversight and subject matter expertise of DA Risk matters arising from DA-related activities across the PRTs. Group Asset and Liability Committee The Group Asset and Liability Committee (GALCO) is chaired by the GCFO. Its members are drawn principally from the Management Team. GALCO is responsible for determining the Group’s balance sheet strategy and for ensuring that, in executing the Group’s strategy, the Group operates within RA and regulatory requirements relating to capital, loss- absorbing capacity, liquidity, leverage, Interest Rate Risk in the Banking Book (IRRBB), Banking Book Basis Risk and Structural Foreign Exchange Risk. It also monitors the structural impact of decisions around sustainable finance, net zero and climate risk. GALCO is also responsible for ensuring that internal and external recovery planning requirements are met. • The Group Responsibility and Reputational Risk Committee (GRRRC), chaired by the Group Head, CFCC, ensures the effective management of Reputational and Sustainability Risk across the Group. This includes providing oversight of matters arising from clients, products, transactions and strategic coverage-related decisions and matters escalated by the respective RFOs. • The International Financial Reporting Standards (IFRS) 9 Impairment Committee, co-chaired by the Global Head Enterprise Risk Management (ERM) and Group Head, Central Finance, ensures the effective management of Expected Credit Loss (ECL) computations, as well as stage allocation of financial assets for quarterly financial reporting. • The Model Risk Committee, chaired by the Global Head, ERM, ensures the effective measurement and management of Model Risk in line with internal policies and RA. • The Corporate, Commercial and Institutional Banking (CCIB) Risk Committee, chaired by the Chief Risk Officer (CRO), CCIB and Europe and Americas, ensures the effective management of risk throughout CCIB in support of the Group’s strategy. • The Consumer, Private and Business Banking (CPBB) Risk Committee, chaired by the CRO, CPBB, ensures the effective management of risk throughout CPBB in support of the Group’s strategy. • The Asia Risk Committee and the Africa and Middle East Risk Committee are chaired by the CRO for the respective region. These committees ensure the effective management of risk in the regions in support of the Group’s strategy. • The Investment Committee, chaired by representatives from the Risk function (CRO, Stressed Asset Group (SAG), Chief Credit Officer), ensures the optimised wind-down of the Group’s existing direct investment activities in equities, quasi-equities (excluding mezzanine), funds and other alternative investments (excluding debt/debt-like instruments). This includes equity or quasi-equity stakes obtained as a result of restructuring of distressed debt, non-core equities and limited partner investments in funds linked to CCIB and managed by the Credit and Portfolio Management. • The SC Ventures (SCV) Risk Committee, chaired by the CRO, SCV, receives authority directly from the GCRO and oversees the effective management of risk throughout SCV and the portfolio of subsidiaries operating under SCV, in support of the Group’s strategy. • The Climate Risk Management Committee (CRMC), chaired by the Global Head, ERM, oversees the effective implementation of the Group’s Climate Risk Policy and workplan. This includes relevant regulatory requirements and covers Climate Risk related financial and non- financial risks. 319 Standard Chartered — Annual Report 2023Risk review and Capital reviewPrincipal risks We manage and control our PRTs through distinct RTFs, policies and RA. Credit Risk The Group defines Credit Risk as the potential for loss due to failure of a counterparty to meet its agreed obligations to pay the Group. Risk Appetite Statement The Group manages its credit exposures following the principle of diversification across products, geographies, client segments and industry sectors. Roles and responsibilities The Credit RTF for the Group are set and owned by the CROs for the respective business segments. The Credit Risk control function is the second line of defence responsible for independent challenge, monitoring and oversight of the Credit Risk management practices of the first line of defence. In addition, they ensure that credit risks are properly assessed and transparent; and that credit decisions are controlled in accordance with the Group’s RA, credit policies and standards. Mitigation Segment-specific policies for CCIB and CPBB are in place for the management of Credit Risk. The Credit Policy for CCIB Client Coverage sets the principles that must be followed for the end-to-end credit process, including credit initiation, credit grading, credit assessment, product structuring, credit risk mitigation, monitoring and control, and documentation. The CPBB Credit Risk Management Policy sets the principles for the management of CPBB segments, for end-to-end credit process including credit initiation, credit assessment, documentation and monitoring for lending to these segments. The Group also sets out standards for the eligibility, enforceability, and effectiveness of Credit Risk mitigation arrangements. Potential credit losses from a given account, client or portfolio are mitigated using a range of tools, such as collateral, netting agreements, credit insurance, credit derivatives and guarantees. Risk mitigants are also carefully assessed for their market value, legal enforceability, correlation, and counterparty risk of the protection provider. Collateral is valued prior to drawdown and regularly thereafter as required, to reflect current market conditions, the probability of recovery and the period of time to realise the collateral in the event of liquidation. The Group also seeks to diversify its collateral holdings across asset classes and markets. Where guarantees, credit insurance, standby letters of credit or credit derivatives are used as Credit Risk mitigation, the creditworthiness of the protection provider is assessed and monitored using the same credit approval process applied to the obligor. Governance committee oversight At Board level, the BRC oversees the effective management of Credit Risk. At the executive level, the GRC oversees and appoints sub-committees for the management of all risk types including Credit Risk – in particular the CCIB Risk Committee, CPBB Risk Committee, Asia Risk Committee, and Africa and Middle East Risk Committee. The GRC also receives reports from other key Group Committees such as the Standard Chartered Bank Executive Risk Committee (in relation to Credit Risk). These committees are responsible for overseeing all risk profiles including Credit Risk of the Group within the respective business areas and regions. Meetings are held regularly, and the committees monitor all material Credit Risk exposures, as well as key internal developments and external trends, ensuring that appropriate action is taken where necessary. Decision-making authorities and delegation The Credit RTF is the formal mechanism of delegating Credit Risk authorities cascading from the GCRO, as the Senior Manager of the Credit Risk PRT. The delegation is to individuals such as the business segments’ CROs. Further delegation of credit authorities to individual credit officers may be undertaken based on risk-adjusted scales by customer type or portfolio. Credit Risk authorities are reviewed at least annually to ensure that they remain appropriate. In CCIB Client Coverage, the individuals delegating the Credit Risk authorities perform oversight by reviewing a sample of the limit applications approved by the delegated credit officers periodically. In CPBB, where credit decision systems and tools (e.g. application scorecards) are used for credit decisioning, such risk models are subject to performance monitoring and periodic validation. Where manual or discretionary credit decisions are applied, the individuals delegating the Credit Risk authorities perform periodic quality control assessments and assurance checks. 320 Standard Chartered – Annual Report 2023Risk reviewRisk management approachMonitoring The Group regularly monitors credit exposures, portfolio performance, external trends and emerging risks that may impact risk management outcomes. Internal risk management reports that are presented to risk committees contain information on key political and economic trends across major portfolios and countries, portfolio delinquency and loan impairment performance. In CCIB Client Coverage, clients and portfolios are subject to additional review when they display signs of actual or potential weakness; for example, where there is a decline in the client’s position within the industry, financial deterioration, a breach of covenants, or non-performance of an obligation within the stipulated period. Such accounts are subject to a dedicated process overseen by the Credit Issues Committee in the relevant countries where client account strategies and credit grades are re-evaluated. In addition, remedial actions, including placing accounts on early alert for increased scrutiny, exposure reduction, security enhancement or exiting the account could be undertaken. Certain accounts could also be transferred into the control management of the SAG, which is our specialist recovery unit for CCIB Client Coverage that operates independently from our main business. On an annual basis, senior members from Business and Risk participate in a more extensive portfolio review for certain corporate industry groups. In addition to a review of the portfolio information, this enhanced review (known as the industry portfolio review) incorporates industry outlook, key elements of business strategy, RA, credit profile and emerging/horizon risks. A condensed version of these industry portfolio reviews will also be shared with the CCIB Risk Committee. Any material in-country developments that may impact sovereign ratings are monitored closely by the Country Risk Team. The Country Risk Early Warning system, a triage-based risk identification system, categorises countries based on a forward-looking view of possible downgrades and the potential incremental risk-weighted assets (RWA) impact. For CPBB, exposures and collateral monitoring are performed at the counterparty and/or portfolio level across different client segments to ensure transactions and portfolio exposures remain within RA. Portfolio delinquency trends are also monitored. Accounts that are past due (or perceived as high risk but not yet past due) are subject to collections or recovery processes managed by a specialist independent function. In some countries, aspects of collections and recovery activities are outsourced. For discretionary lending portfolios, similar processes to those of CCIB client coverage are followed. In addition, an independent Credit Risk Review team (part of ERM function), performs judgement-based assessments of the Credit Risk profiles at various portfolio levels. They 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 CCIB and CPBB are well managed within RA and policies, through forward-looking mitigating actions where necessary. 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, including willingness, ability, and capacity to repay. The primary lending consideration is based on the client’s credit quality and the repayment capacity from operating cashflows for counterparties, and personal income or wealth for individual borrowers. The risk assessment gives due consideration to the client’s liquidity and leverage position. Where applicable, the assessment includes a detailed analysis of the Credit Risk mitigation arrangements to determine the level of reliance on such arrangements as the secondary source of repayment in the event of a significant deterioration in a client’s credit quality leading to default. Client income, net worth, and the liquidity of asset by class are considered for overall risk assessment for wealth lending. The availability of Wealth Lending credit limits is subject to the availability of qualified collateral. Risk measurement plays a central role, along with judgement and experience, in informing risk-taking and portfolio management decisions. We adopt the Advanced Internal Ratings Based (AIRB) approach under the Basel regulatory framework to calculate Credit Risk capital requirements. The Group has also established a global programme to assess capital requirements necessary to be implemented to meet the latest revised Basel III finalisation (referred to as Basel 3.1 or Basel IV) regulations. A standard alphanumeric Credit Risk grade system is used for CCIB Client Coverage. The numeric grades run from 1 to 14 and some of the grades are further sub-classified. Lower numeric credit grades are indicative of a lower likelihood 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. CPBB internal ratings-based portfolios use application and behavioural credit scores that are calibrated to generate a probability of default. The Risk Decision Framework uses a credit rating system to define the portfolio/new booking segmentation, shape and decision criteria for the unsecured consumer business segment. AIRB models cover a substantial majority of our exposures and are used in assessing risks at a customer and portfolio level, setting strategy, and optimising our risk-return decisions. The Model Risk Committee approves material internal ratings-based risk measurement models. Prior to review and approval, all internal ratings based models are validated in detail by an independent model validation team. Reviews are also triggered if the performance of a model deteriorates materially against predetermined thresholds during the ongoing model performance monitoring process, which takes place between the annual validations. 321 Standard Chartered – Annual Report 2023Risk review and Capital review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 limits set for a counterparty or a group of connected counterparties based on control and economic dependence criteria. RA metrics are set at portfolio level and monitored to control concentrations, where appropriate, by industry, products, tenor, collateralisation 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 GRC and BRC. Credit impairment ECL is determined for all financial assets that are classified as amortised cost or fair value through other comprehensive income. ECL is computed as an unbiased, probability- weighted provision determined by evaluating a range of plausible outcomes, the time value of money, and forward- looking information such as critical global or country-specific macroeconomic variables. For more detailed information on macroeconomic data feeding into IFRS 9 ECL calculations, please refer to the Risk profile section (pages 273 to 285). At the time of origination or purchase of a non-credit impaired financial asset (Stage 1), ECL represents cash shortfalls arising from possible default events up to 12 months into the future from the balance sheet date. ECL continues to be determined on this basis until there is a significant increase in the Credit Risk of the asset (Stage 2), in which case ECL is recognised for default events that may occur over the lifetime of the asset. If there is observed objective evidence of credit impairment or default (Stage 3), ECL continues to be measured on a lifetime basis. To provide the Board with oversight and assurance that the quality of assets originated are aligned to the Group’s strategy, there is a RA metric to monitor Stage 1 and Stage 2 ECL from assets originated in the past 12 months. For CCIB, in line with the regulatory guidelines, Stage 3 ECL is considered when an obligor is more than 90 days past due on any amount payable to the Group, or the obligor(s) has symptoms of unlikeliness to pay its credit obligations in full as they fall due. These credit-impaired accounts are managed by SAG. In CPBB, loans to individuals and small businesses are considered credit-impaired as soon as any payment of interest or principal is 90 days overdue or they meet other objective evidence of impairment, such as bankruptcy, debt restructuring, fraud, or death. Financial assets are written off, in the amount that is determined to be irrecoverable, when they meet conditions set such that empirical evidence suggests the client is unlikely to meet their contractual obligations, or a loss of principal is reasonably expected. Estimating the amount and timing of future recoveries involves significant judgement and considers the assessment of matters such as future economic conditions and the value of collateral, for which there may not be a readily accessible market. The total amount of the Group’s impairment provision is inherently uncertain, being sensitive to changes in economic and credit conditions across the regions in which the Group operates. For further details on sensitivity analysis of ECL under IFRS 9, please refer to the Risk profile section (pages 273 to 285). 322 Standard Chartered – Annual Report 2023Risk reviewRisk management approachTraded Risk The Group defines Traded Risk as the potential for loss resulting from activities undertaken by the Group in financial markets. Risk Appetite Statement The Group should control its financial markets and activities to ensure that market and counterparty credit risk losses do not cause material damage to the Group’s franchise. Roles and responsibilities The Traded RTF, which sets the roles and responsibilities in respect of Traded Risk for the Group, is owned by the Global Head, Traded Risk Management (TRM). The business, acting as first line of defence, is responsible for the effective management of risks within the scope of its direct organisational responsibilities set by the Board. TRM is the second line control function that performs independent challenge, monitoring and oversight of the Traded Risk management practices of the first line of defence, predominantly Financial Markets and Treasury Markets. Mitigation The Traded RTF requires that Traded Risk limits be defined at a level appropriate to ensure that the Group remains within RA. All businesses incurring Traded Risk must comply with the Traded RTF. The Traded Risk Policy sets the principles that must be followed for the end-to-end traded risk management process, including limit setting, risk capture and measurement, limit monitoring and escalation, risk mitigation and stress testing. Policies and standards ensure that these Traded Risk limits are implemented. Policies are reviewed and approved by the Global Head, TRM periodically to ensure their ongoing effectiveness. Governance committee oversight At Board level, the BRC oversees the effective management of Traded Risk. At the executive level, the GRC delegates responsibilities to the CCIB Risk Committee to oversee the Traded Risk profile of the Group. For subsidiaries, the authority for setting Traded Risk limits is delegated from the local board to the local risk committee, Country CRO and Traded Risk managers. Meetings are held regularly, and the committees monitor all material Traded Risk exposures, as well as key internal developments and external trends, and ensure that appropriate action is taken. Decision-making authorities and delegation The Traded RTF is the formal mechanism which delegates Traded Risk authorities cascading from the GCRO, as the Senior Manager of the Traded Risk Type, to the Global Head, TRM who further delegates authorities to named individuals. Traded Risk authorities are reviewed at least annually to ensure that they remain appropriate and to assess the quality of decisions taken by the authorised person. Key risk-taking decisions are made only by certain individuals with the skills, judgement, and perspective to ensure that the Group’s control standards and risk-return objectives are met. Market Risk The Group uses a VaR model to measure the risk of losses arising from future potential adverse movements in market rates, prices, and volatilities. VaR is a quantitative measure of Market Risk that applies recent historical market conditions to estimate the potential future loss in market value that will not be exceeded in a set time period at a set statistical 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: • Historical simulation: this involves the revaluation of all existing positions to reflect the effect of historically observed changes in Market Risk factors on the valuation of the current portfolio. This approach is applied for general Market Risk factors and the majority of specific (credit spread) risk VaRs. • Monte Carlo simulation: this methodology is similar to historical simulation but with considerably more input risk factor observations. These are generated by random sampling techniques, but the results retain the essential variability and correlations of historically observed risk factor changes. This approach is applied for some of the specific (credit spread) risk VaRs in relation to idiosyncratic exposures in credit markets. A one-year historical 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 are subject to capital add-ons. An analysis of VaR results in 2023 is available in the Risk profile section (pages 286 to 289). 323 Standard Chartered – Annual Report 2023Risk review and Capital reviewCounterparty Credit Risk The Group uses a Potential Future Exposure (PFE) model to measure the credit exposure arising from the positive mark-to- market of traded products and future potential movements in market rates, prices, and volatilities. PFE is a quantitative measure of Counterparty Credit Risk that applies recent historical market conditions 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: simulation based, which is predominantly used, and an add-on based PFE methodology. Underwriting The underwriting of securities and loans is in scope of the RA set by the Group for Traded Risk. Additional limits approved by the GCRO are set on the sectoral concentration, and the maximum holding period. The Underwriting Committee, under the authority of the GCRO, approves individual proposals to underwrite new security issues and loans for our clients. Monitoring TRM monitors the overall portfolio risk and ensures that it is within specified limits and therefore RA. Limits are typically reviewed twice a year. Most of the Traded Risk exposures are monitored daily against approved limits. Traded Risk limits apply at all times unless separate intra-day limits have been set. Limit excess approval decisions are based on an assessment of the circumstances driving the excess and of the proposed remediation plan. Limits and excesses can only be approved by a Traded Risk manager with the appropriate delegated authority. 324 Standard Chartered – Annual Report 2023Risk reviewRisk management approachTreasury Risk The Group defines Treasury Risk as the potential for insufficient capital, liquidity, or funding to support our operations, the risk of reductions in earnings or value from movements in interest rates impacting banking book items and the potential for losses from a shortfall in the Group’s pension plans. Risk Appetite Statement The Group should maintain sufficient capital, liquidity and funding to support its operations, and an interest rate profile ensuring that the reductions in earnings or value from movements in interest rates impacting banking book items does not cause material damage to the Group’s franchise. In addition, the Group should ensure its pension plans are adequately funded. Roles and responsibilities The Global Head, ERM is responsible for the RTF for Treasury Risk under the ERMF. The Group Treasurer is supported by teams in Treasury and Finance to implement the Treasury RTF as the first line of defence and is responsible for managing Treasury Risk. At Regional and Country level, Chief Executive Officers (CEOs) supported by Regional and Country level Finance and Treasury teams are responsible for managing Treasury Risk as the first line of defence. Regional Treasury CROs and Country CROs for Treasury Risk (except Pension Risk) and Head of Pensions (for Pension Risk) are responsible for overseeing and challenging the first line of defence. Liquidity and Funding Risk At Group, regional and country level we implement various business-as-usual and stress risk metrics to monitor and manage liquidity and funding risk. This ensures that the Group maintains an adequate and well-diversified liquidity buffer, as well as a stable funding base, and that it meets its liquidity and funding regulatory requirements. The approach to managing risks and the RA is assessed annually through the Internal Liquidity Adequacy Assessment Process. A funding plan is also developed for efficient liquidity projections to ensure that the Group is adequately funded in the required currencies, to meet its obligations and client funding needs. The funding plan is part of the overall Corporate Plan process aligning to the capital requirements. Mitigation The Group develops policies to address material Treasury Risks and aims to maintain its risk profile within RA. In order to do this, metrics are set against Capital Risk, Liquidity and Funding Risk and IRRBB. Where appropriate, RA metrics are cascaded down to regions and countries in the form of Limits and Management Action Triggers. Capital Risk In order to manage Capital Risk, strategic business, and capital plans (Corporate Plan) are drawn up covering a five-year horizon which are approved by the Board annually. The plan ensures that adequate levels of capital, including loss absorbing capacity, and an efficient mix of the different components of capital are maintained 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. RA metrics including capital, leverage, Minimum Requirement for own funds and Eligible Liability (MREL) and double leverage are assessed within the Corporate Plan to ensure that the strategy can be achieved within risk tolerances. Structural Foreign Exchange (FX) Risk The Group’s structural FX position results from the Group’s non-US dollar investment in the share capital and reserves of subsidiaries and branches. The FX translation gains, or losses, are recorded in the Group’s translation reserves with a direct impact on the Group’s Common Equity Tier 1 ratio. The Group contracts hedges to manage its structural FX position in accordance with the RA, and as a result the Group has taken net investment hedges to partially cover its exposure to certain non-US dollar currencies to mitigate the FX impact of such positions on its capital ratios. Interest Rate Risk in the Banking Book This risk arises from differences in the repricing profile, interest rate basis, and optionality of banking book assets liabilities and off-balance sheet items. IRRBB represents an economic and commercial risk to the Group and its capital adequacy. The Group monitors IRRBB against the RA. Pension Risk Pension Risk is the potential for loss due to having to meet an actuarially assessed shortfall in the Group’s pension plans. Pension obligation risk to a firm arises from its contractual or other liabilities to or with respect to an occupational pension plan or other long-term benefit obligation. For a funded plan it represents the risk that additional contributions will need to be made because of a future shortfall in the funding of the plan. Or, for unfunded obligations, it represents the risk that the cost of meeting future benefit payments is greater than currently anticipated. The Pension Risk position against RA metric is reported to the GRC. This metric is calculated as the total capital requirement (including both Pillar 1 and Pillar 2A capital) in respect of Pension Risk, expressed as a number of basis points of RWA. Recovery and Resolution Planning In line with PRA requirements, the Group maintains a Recovery Plan which is a live document to be used by management in the event of stress in order to restore the Group to a stable and sustainable position. The Recovery Plan includes a set of recovery indicators, an escalation framework, and a set of management actions capable of being implemented during a stress. A Recovery Plan is also maintained within each major entity, and all recovery plans are subject to periodic fire-drill testing. 325 Standard Chartered – Annual Report 2023Risk review and Capital reviewAs the UK resolution authority, the BoE is required to set a preferred resolution strategy for the Group. The BoE’s preferred resolution strategy is whole Group single point of entry bail-in at the ultimate holding company level (Standard Chartered PLC) and would be led by the BoE. In support of this strategy, the Group has been developing a set of capabilities, arrangements, and resources to achieve the required outcomes. Following the BoE’s first resolvability assessment and public disclosure for major UK firms in 2022, the second Resolvability Assessment Framework (RAF) cycle is under way. The Group submitted its Resolvability Assessment Report to the BoE and PRA on 6 October 2023 and is due to publish its resolvability public disclosure in June 2024. Governance committee oversight At the Board level, the BRC oversees the effective management of Treasury Risk. At the executive level, the GALCO ensures the effective management of risk throughout the Group in support of the Group’s strategy, guides the Group’s strategy on balance sheet optimisation and ensures that the Group operates within the RA and other internal and external requirements relating to Treasury Risk (except Pension Risk). The GRC and Regional Risk Committees provide oversight for Pension Risk. Regional and country oversight resides with regional and country Asset and Liability Committees. Regions and countries must ensure that they remain in compliance with Group Treasury policies and practices, as well as local regulatory requirements. Decision-making authorities and delegation The GCFO has responsibility for capital, funding, and liquidity under the SMR. The GCRO has delegated the RFO responsibilities associated with Treasury Risk to the Global Head, ERM. The Global Head, ERM delegates second line of defence oversight and challenge responsibilities to the Treasury CRO and Country CROs for Capital Risk, Liquidity and Funding Risk and IRRBB, and to Head of Pensions for Pension Risk. Monitoring On a day-to-day basis, Treasury Risk is managed by Treasury, Finance and Country CEOs. The Group regularly reports and monitors Treasury Risk inherent in its business activities and those that arise from internal and external events. Internal risk management reports covering the balance sheet and the capital and liquidity position are presented to the relevant country Asset and Liability Committee. The reports contain key information on balance sheet trends, exposures against RA and supporting risk measures which enable members to make informed decisions around the overall management of the balance sheet. In addition, an independent Treasury CRO as part of ERM reviews the prudency and effectiveness of Treasury Risk management. Pension Risk is actively managed by the Head of Pensions and monitored by the Head of Country Risk, Scenario Analysis, Insurable and Pension Risk. The Head of Pensions ensures that accurate, complete, and timely updates on Pension Risk are shared with the Head of Country Risk, Scenario Analysis and Pension Risk, the Treasury CRO and the Global Head, ERM on a periodic basis. 326 Standard Chartered – Annual Report 2023Risk reviewRisk management approach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 (including legal risks). Risk Appetite Statement The Group aims to control operational and technology risks to ensure that operational losses (financial or reputational), including any related to conduct of business matters, do not cause material damage to the Group’s franchise. Changes to Third Party Risk With effect from January 2024, the Group has removed the IRT classification and formally included Third Party Risk as a sub risk under Operational and Technology Risk. Third Party Risk is defined as the potential for loss or adverse impact due to the failure to manage the onboarding, lifecycle and exit strategy of a third party. The Third Party Risk Management Policy and Standard, in conjunction with the respective PRT policies and standards, holistically set out the Group’s minimum controls requirements for the identification, mitigation and management of risks arising from the use of Third Parties. Roles and responsibilities The Operational and Technology RTF sets the roles and responsibilities in respect of Operational and Technology risk for the Group. The Operational and Technology RTF defines the Group’s Operational and Technology risk sub-types and sets standards for the identification, control, monitoring and treatment of risks. These standards are applicable across all PRTs and risk sub-types in the Operational and Technology RTF. The list of risk sub-types includes Execution Capability, Governance, Reporting and Obligations, Legal Enforceability, and Operational Resilience (including client service, change management, people management, safety and security, and technology risk). The Operational and Technology RTF reinforces clear accountability for managing risk throughout the Group and delegates second line of defence responsibilities to identified SMEs. For each risk sub-type, the subject matter expert sets policies and standards for the organisation to comply with, and provides guidance, oversight, and challenge over the activities of the Group. They ensure that key risk decisions are only taken by individuals with the requisite skills, judgement, and perspective to ensure that the Group’s risk-return objectives are met. Mitigation The Operational and Technology RTF sets out the Group’s overall approach to the management of Operational and Technology risk in line with the Group’s Operational and Technology RA. This is supported by the Risk and Control Self-Assessment (RCSA) which defines roles and responsibilities for the identification, control, and monitoring of risks (applicable to all PRTs, risk sub-types and IRTs). The RCSA is used to determine the design strength and reliability of each process, and requires: • the recording of processes run by client segments, products, and functions into a process universe; • the identification of potential failures in these processes and the related risks of such failures; • an assessment of the impact of the identified risks based on a consistent scale; • the design and monitoring of controls to mitigate prioritised risks; and • assessments of residual risk and timely actions for elevated risks. Risks that exceed the Group’s Operational and Technology RA require treatment plans to address underlying causes. Governance committee oversight At Board level, the BRC oversees the effective management of Operational and Technology risk. At the executive level, the GRC is responsible for the governance and oversight of Operational and Technology risk for the Group. The GRC, supported by the GNFRC, monitors the Group’s Operational and Technology RA and relies on other key committees for the management of Operational and Technology risk. Regional business segments and functional committees also provide governance oversight of their respective processes and related Operational and Technology risk. In addition, Country Non-Financial Risk Committees (CNFRCs) oversee the management of Operational and Technology Risk at the country (or entity) level. In smaller countries, the responsibilities of the CNFRC may be exercised directly by the Country Risk Committee (for branches) or Executive Risk Committee (for subsidiaries). Decision-making authorities and delegation The GCRO has delegated the RFO responsibilities associated with the Operational and Technology RTF to the Global Head of Risk, Functions and Operational Risk (GHRFOR). The Operational and Technology RTF is the formal mechanism through which the delegation of Operational and Technology Risk authorities is made. The GHRFOR places reliance on the respective SMEs for second line of defence oversight of the relevant Operational and Technology risk sub-types through the Operational and Technology RTF. 327 Standard Chartered – Annual Report 2023Risk review and Capital reviewMonitoring To deliver services to clients and to participate in the financial services sector, the Group runs processes which are exposed to Operational and Technology risks. The Group prioritises and manages risks which are significant to clients and to the financial services sectors. Control indicators are regularly monitored to determine the Group’s exposure to residual risk. The residual risk assessments and reporting of events form the Group’s Operational and Technology Risk profile. The completeness of the Operational and Technology Risk profile ensures appropriate prioritisation and timeliness of risk decisions, including risk acceptances with treatment plans for risks that exceed acceptable thresholds. The Board Risk Committee is informed on adherence to Operational and Technology RA through metrics reported for selected risks. These metrics are monitored, and escalation thresholds are devised based on the materiality and significance of the risk. These Operational and Technology RA metrics are consolidated on a regular basis and reported at relevant Group committees. This provides senior management with the relevant information to inform their risk decisions. 328 Standard Chartered – Annual Report 2023Risk reviewRisk management approachFinancial Crime Risk The Group defines Financial Crime Risk as the potential for legal or regulatory penalties, material financial loss or reputational damage resulting from the failure to comply with applicable laws and regulations relating to international sanctions, anti-money laundering and anti-bribery and corruption, and fraud. Risk Appetite Statement The Group has no appetite for breaches in laws and regulations related to financial crime, recognising that whilst incidents are unwanted, they cannot be entirely avoided. Governance committee oversight Financial Crime Risk within the Group is governed by the GFCRC and the GNFRC for Fraud Risk. The GFCRC is responsible for ensuring effective oversight for operational risk relating to Financial Crime Risk. Board Level oversight of Financial Crime risk is performed by the Audit Committee and the BRC. Decision-making authorities and delegation The Financial Crime RTF is the formal mechanism through which the delegation of Financial Crime Risk authorities is made. The Group Head, CFCC is the RFO for Financial Crime Risk under the Group’s ERMF. Certain aspects of Financial Crime Compliance, second line of defence oversight and challenge, are delegated within the CFCC function. Approval frameworks are in place to allow for risk-based decisions on client onboarding, potential breaches of sanctions regulation or policy, situations of potential money laundering (and terrorist financing), bribery and corruption or internal and external fraud. Monitoring The Group monitors Financial Crime Risk compliance against a set of RA metrics. These metrics are reviewed periodically and reported regularly to the GFCRC, GNFRC, BRC, GRC, and relevant Board committees. Roles and responsibilities The Group Head, CFCC has overall responsibility for Financial Crime Risk and is responsible for the establishment and maintenance of effective systems and controls to meet legal and regulatory obligations in respect of Financial Crime Risk. The Group Head, CFCC is the Group’s Compliance and Money-Laundering Reporting Officer and performs the Financial Conduct Authority (FCA) controlled function and senior management function in accordance with the requirements set out by the FCA, including those set out in their handbook on systems and controls. As the first line of defence, the business process owners have responsibility for the application of policy controls and the identification and measurement of risks relating to financial crime. The business must communicate risks and any policy non-compliance to the second line of defence for review and approval following the model for delegation of authority. Mitigation There are four Group policies in support of the Financial Crime RTF: • Group Anti-Bribery and Corruption Policy • Group Anti-Money Laundering and Counter Terrorist Financing Policy • Group Sanctions Policy • Group Fraud Risk Management Policy The Group operates risk-based assessments and controls in support of its Financial Crime Risk programme, including (but not limited to): • Group Risk Assessment: the Group monitors enterprise-wide Financial Crime Risks through the CFCC Risk Assessment process consisting of Financial Crime Risk and Compliance Risk assessments. The Financial Crime Risk assessment is a Group-wide risk assessment undertaken annually to assess the inherent Financial Crime Risk exposures and the associated processes and controls by which these exposures are mitigated. • Financial Crime Surveillance: risk-based systems and processes to prevent and detect financial crime. The strength of controls is tested and assessed through the Group’s Operational and Technology RTF, in addition to oversight by CFCC Assurance. 329 Standard Chartered – Annual Report 2023Risk review and Capital review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 integrity of the markets 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; recognising that whilst incidents are unwanted, they cannot be entirely avoided. Governance committee oversight Both Compliance Risk and the risk of non-compliance with laws and regulations resulting from failed processes and controls are reported at the respective country, business, product, function, Risk and CFCC Non-Financial Risk Committees. Relevant matters, as required, are further escalated to the GNFRC and GRC. At Board level, oversight of Compliance Risk is primarily provided by the Audit Committee, and by the BRC for relevant issues. Whilst not a formal governance committee, the CFCC Oversight Group provides oversight of CFCC risks including the effective implementation of the Compliance RTF. The Regulatory Change Oversight Forum provides visibility and oversight of material and/or complex large-scale regulatory change emanating from Financial Services regulators impacting Non-Financial Risks. The CFCC Policy Council provides oversight, challenge and direction to Compliance and FCC Policy Owners on material changes and positions taken in CFCC-owned policies, including issues relating to regulatory interpretation and Group’s CFCC RA. Decision-making authorities and delegation The Compliance RTF is the formal mechanism through which the delegation of Compliance Risk authorities is made. The Group Head, CFCC has the authority to delegate second line of defence responsibilities within the CFCC function to relevant and suitably qualified individuals. Monitoring The monitoring of controls designed to mitigate the risk of regulatory non-compliance in processes is governed in line with the Operational and Technology RTF. The Group has a monitoring and reporting process in place for Compliance Risk, which includes escalation and reporting to Risk and CFCC Non-Financial Risk Committee, GNFRC, GRC, BRC, and relevant Board committees. Roles and responsibilities The Group Head, CFCC as RFO for Compliance Risk provides support to senior management on regulatory and compliance matters by: • providing interpretation and advice on CFCC regulatory requirements and their impact on the Group; and • setting enterprise-wide standards for management of compliance risks through the establishment and maintenance of the Compliance RTF. The Group Head, CFCC also performs the FCA controlled function and senior management function of Compliance Risk oversight in accordance with the requirements set out by the FCA. All activities 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 provides second line of defence oversight and challenge of the first line of defence risk management activities that relate to Compliance Risk. Where Compliance Risk arises, or could arise, from failure to manage another PRT or sub-type, the Compliance RTF outlines that the responsibility rests with the respective RFO or control function to ensure that effective oversight and challenge of the first line of defence can be provided by the appropriate second line of defence function. Each of the assigned second line of defence functions have responsibilities, including monitoring relevant regulatory developments from Non-Financial Services regulators at both Group and country levels, policy development, implementation, and validation as well as oversight and challenge of first line of defence processes and controls. In addition, the remit of CFCC has been further clarified in 2023 in relation to Compliance risk and the boundary of responsibilities with other PRTs. Mitigation The CFCC function is responsible for the establishment and maintenance of policies, standards and controls to ensure continued legal and regulatory compliance, and the mitigation of Compliance Risk. In this, the requirements of the Operational and Technology RTF are followed to ensure a consistent approach to the management of processes and controls. The deployment of technological solutions to improve efficiencies and simplify processes has continued in 2023. These include launch of a new Regulatory Change Management System for Group regulatory obligations management, and further enhancement of the Ask Compliance platform. 330 Standard Chartered – Annual Report 2023Risk reviewRisk management approachInformation and Cyber Security (ICS) Risk The Group defines ICS Risk as the risk to the Group’s assets, operations, and individuals due to the potential for unauthorised access, use, disclosure, disruption, modification, or destruction of information assets and/or information systems. Risk Appetite Statement The Group aims to mitigate and control ICS risks to ensure that incidents do not cause the Bank material harm, business disruption, financial loss or reputational damage - recognising that whilst incidents are unwanted, they cannot be entirely avoided. Roles and responsibilities The Group’s ICS RTF defines the roles and responsibilities of the first and second lines of defence in managing and governing ICS Risk across the Group. It emphasises business ownership and individual accountability. Decision-making authorities and delegation The ICS RTF defines how the Group manages ICS Risk. The Group CISRO delegates authority to designated individuals through the ICS RTF, including at a business, function, region and country level. The Group CISO is responsible for implementing ICS Risk Management within the Group, and to cascade ICS risk management into the businesses, functions and countries to comply with the ICS RTF, policy, and standards. Monitoring Group CISO performs a threat-led risk assessment to identify key threats, in-scope applications and key controls required to ensure the Group remains within RA. The ICS Risk profiles of all businesses, functions and countries are consolidated to present a holistic Group-level ICS Risk profile for ongoing monitoring. Mandatory ICS learning, phishing exercises and role-specific training support colleagues to monitor and manage this risk. During these reviews, the status of each risk is assessed against the Group’s controls to identify any changes to impact and likelihood, which affects the overall risk rating. Group CISO and Group CISRO monitor the ICS Risk profile and ensure that breaches of RA are escalated to the appropriate governance committee or authority levels for remediation and tracking. A dedicated Group CISRO team supports this work by executing offensive security testing exercises, including vulnerability assessments and penetration tests, which show a wider picture of the Group’s risk profile, leading to better visibility on potential ‘in flight’ risks. The Group also tracks remediation of security matters identified by external reviews such as the BoE CBEST Threat Intelligence-Led Assessment and the Hong Kong Monetary Authority’s (HKMA) Intelligence-led Cyber Attack Simulation Testing (iCAST). The Group Chief Transformation, Technology & Operations Officer (CTTO) has the first line of defence responsibility for ICS Risk and is accountable for the Group’s ICS strategy. The Group Chief Information Security Officer (CISO) leads the development and execution of the ICS strategy. The first line of defence also manages all key ICS Risks, breaches and risk treatment plans. ICS Risk profile, RA breaches and remediation status are reported at Board and Executive committees, alongside business, function and country governance committees. The Group Chief Information Security Risk Officer (CISRO) function within Group Risk is the second line of defence and sets the framework, policy, standards, and methodology for assessing, scoring, and prioritising ICS Risks across the Group. The ICS Policy and standards are aligned to industry best practice models including the National Institute of Standards and Technology Cyber Security Framework and ISO 27001. This function has the responsibility for governance, oversight, and independent challenge of first line of defence’s pursuit of the ICS strategy. Group ICS Risk Framework Strategy remains the responsibility of the ICS RFO (RFO), delegated from the GCRO to the Group CISRO. Mitigation ICS Risk is managed through the ICS RTF, comprising a risk assessment methodology and supporting policy, standards, and methodologies. These are aligned to industry recommended practice. We undertake an annual ICS Effectiveness Review to evaluate ICS Risk management practices in alignment with the ERMF. Governance committee oversight The BRC oversees the effective management of ICS Risk. The GRC has delegated authority to the GNFRC to ensure effective implementation of the ICS RTF. The GRC and GNFRC are responsible for oversight of ICS Risk profile and RA breaches. Sub-committees of the GNFRC have oversight of ICS Risk management arising from the businesses, countries and functions. 331 Standard Chartered – Annual Report 2023Risk review and Capital reviewReputational and Sustainability Risk The Group defines Reputational and Sustainability Risk as the potential for damage to the franchise (such as loss of trust, earnings, or market capitalisation), because of stakeholders taking a negative view of the Group through actual or perceived actions or inactions, including a failure to uphold responsible business conduct as we strive to do no significant environmental and social harm through our client, third party relationships 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 activity is satisfactorily assessed and managed with the appropriate level of management and governance oversight. This includes a potential failure to uphold responsible business conduct in striving to do no significant environmental and social harm. Roles and responsibilities The Global Head, ERM is responsible as RFO for Reputational and Sustainability Risk under the Group’s ERMF. Our Reputational and Sustainability RTF allocates responsibilities in a manner consistent with the three lines of defence model. In the first line of defence, the Chief Sustainability Officer (CSO) manages the overall Group Sustainability strategy and engagements. A dedicated Sustainable Finance solutions team is responsible for sustainable finance products and frameworks to help identify green and sustainable finance, and transition finance opportunities to aid our clients on their sustainability journey. The CSO team works with businesses to launch various sustainable finance products. Furthermore, the Environmental and Social Risk Management (ESRM) team provides dedicated advisory and challenge to businesses on the management of environmental and social risks and impacts arising from the Group’s client relationships and transactions. In the second line of defence, the responsibility for Reputational and Sustainability Risk management is delegated to the Group Environmental, Social, and Corporate Governance (ESG) and Reputational Risk team, as well as CROs at region, country and client-business levels. They constitute the second line responsible to oversee and challenge the first line, which resides with the CEOs, business heads, product heads and function heads. The Group ESG and Reputational Risk team is responsible for establishing RA, framework and policies for managing Reputational and Sustainability risk, in line with emerging regulatory expectations across our markets. Mitigation In line with the principles of Responsible Business Conduct and Do No Significant Harm, the Group deems Reputational and Sustainability Risk to be driven by: • negative shifts in stakeholder perceptions, including shifts as a result of greenwashing claims, due to decisions related to clients, products, transactions, third parties and strategic coverage; • potential material harm or degradation to the natural environment (environmental) through actions/inactions of the Group; and • potential material harm to individuals or communities (social) risks through actions/inactions of the Group. The Group’s Reputational Risk policy sets out the principal sources of Reputational Risk driven by negative shifts in stakeholder perceptions as well as responsibilities, control and oversight standards for identifying, assessing, escalating and effectively managing Reputational Risk. The assessment of risks associated with how individual client, transaction, product and strategic coverage decisions may affect perceptions of the organisation and its activities is based on explicit principles including, but not limited to, human rights and climate change. The assessment of stakeholder perception risk considers a variety of factors. Whenever potential for stakeholder concerns is identified, issues are subject to review and decision by both first and second lines of defence. The Group’s Sustainability Risk policy sets out the requirements and responsibilities for managing environmental and social risks for the Group’s clients, third parties and in our own operations. This includes management of greenwashing risks through the ongoing monitoring of Sustainable Finance products and transactions and clients throughout their lifecycle, from labelling to disclosures in line with emerging local and international regulatory obligations. • Clients are expected to adhere to the minimum regulatory and compliance requirements, including criteria from the Group’s Position Statements to sensitive sectors where environmental and social risks are heightened. The Group also defines the approach to certain specialist sectors where there are conflicting stakeholder views. • Third parties such as suppliers must comply with the Group’s Supplier Charter, which sets out the Group’s expectations on ethics, anti-bribery and corruption, human rights, environmental, health and safety standards, labour and protection of the environment. The Group is committed to respecting universal human rights, and we assess our clients and suppliers against various international principles, as well as through our social safeguards. • Within our operations, the Group seeks to minimise its impact on the environment and have targets to reduce energy, water and waste. We are committed to becoming Net Zero in our own operations by 2025. • We rely on our frameworks to help the labelling of Sustainable Finance Use of Proceeds products and transactions as well as the classification of pureplay clients. Reputational and Sustainability Risk policies and standards are applicable to all Group entities. However, where local regulators impose additional requirements, these are complied with in addition to existing Group requirements. 332 Standard Chartered – Annual Report 2023Risk reviewRisk management approachDecision-making authorities and delegation The Global Head, ERM delegates risk acceptance authorities for stakeholder perception risks to designated individuals 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 team reviews and supports the risk assessments for clients and transactions and escalates to the Group ESG and Reputational Risk team as required. Monitoring Exposure to stakeholder perception risks arising from transactions, clients, products and strategic coverage is monitored through established triggers to prompt the right levels of appropriate risk-based consideration and assessment by the first line and escalations to the second line where necessary. Risk acceptance decisions and thematic trends are also reviewed on a periodic basis. Exposure to Sustainability Risk is monitored through triggers embedded within the first line of defence processes. The Environmental and Social Risks are considered for clients and transactions via the environmental and social risk assessments and for vendors in our supply chain through the Modern Slavery questionnaires. Furthermore, monitoring and reporting on the RA metrics ensures that there is appropriate oversight by the MT and Board over performance and breaches of thresholds across key metrics. Governance committee oversight At Board level, the Culture and Sustainability Committee provides oversight for our Sustainability strategy while the BRC oversees Reputational and Sustainability Risk as part of the ERMF. The GRC provides executive level committee oversight and delegates the authority to ensure effective management of Reputational and Sustainability Risk to the GRRRC. The GRRRC’s remit is to: • Challenge, constrain and, if required, stop business activities where Reputational and Sustainability risks are not aligned with the Group’s RA; • Make decisions on Reputational and Sustainability Risk matters assessed as high or very high based on the Group’s Reputational and Sustainability Risk Materiality Assessment Matrix, and matters escalated from the regions or client businesses; • Provide oversight of material Reputational and Sustainability Risk and/or thematic issues arising from the potential failure of other risk types; • Identify TERs, as part of a dynamic risk scanning process; • Monitor existing or new regulatory priorities. The Sustainable Finance Governance Committee, appointed by the GRRRC, provides leadership, governance, and oversight for delivering the Group’s sustainable finance offering. This includes: • Reviewing and supporting the Group’s frameworks for Green and Sustainable Products, and Transition Finance for approval of GRRRC. These frameworks set out the guidelines for approval of products and transactions which carry the sustainable finance and/or transition finance label; • Decision-making authority on the eligibility of a sustainable asset for any RWA relief; • Approving sustainable finance and transition finance labels for products in addition to regular product management and governance; • Reviewing the reputational risks arising from greenwashing claims related to Sustainable Finance products and services. The GNFRC has oversight of the control environment and effective management of Reputational Risk incurred when there are negative shifts in stakeholder perceptions of the Group due to failure of other PRTs. The regional and client-business risk committees provide oversight on the Reputational and Sustainability Risk profile within their remit. The CNFRC provides oversight of the Reputational and Sustainability Risk profile at a country level. 333 Standard Chartered – Annual Report 2023Risk review and Capital reviewModel Risk The Group defines Model Risk as potential loss that may occur because of decisions or the risk of mis- estimation that could be principally based on the output of models due to errors in the development, implementation, or use of such models. Risk Appetite Statement The Group has no appetite for material adverse implications arising from misuse of models or errors in the development or implementation of models; whilst accepting some model uncertainty. Roles and responsibilities The Global Head, ERM is the RFO for Model Risk under the Group’s ERMF. Responsibility for the oversight and implementation of the Model RTF is delegated to the Global Head, Model Risk Management. The Model RTF sets out clear accountability and roles for Model Risk management through the three lines of defence model. First line of defence ownership of Model Risk resides with Model Sponsors, who are business or function heads and assign a Model Owner and provide oversight of Model Owner activities. Model Owners are accountable for the model development process, represent model users, are responsible for the overall model design process, coordinate the submission of models for validation and approval, and ensure appropriate implementation and use. Model Developers are responsible for the development of models and are responsible for documenting and testing the model in accordance with Policy requirements, and for engaging with Model Users. Second line of defence oversight is provided by Model Risk Management, which comprises Group Model Validation (GMV) to independently review and grade models, and the Model Risk Policy and Governance team, which provides oversight of model risk activities and reports to senior management via respective committees. The Group adopts an industry standard model definition as specified in the Group Model Risk Policy, together with a scope of applicability represented by defined model family types as detailed within the Model Risk Framework. Model Owners are accountable for ensuring that all models under their purview have been independently validated by GMV. Models are validated before use and then on an ongoing basis, with schedule determined by the perceived level of model risk associated with the model, or more frequently if there are specific regulatory requirements. The Model Risk Framework is cascaded to in-scope countries by way of local addendum or local framework documentation, along with specific responsibilities of the Country Model RFO. In-scope countries are selected with reference to regulatory capital requirements with credit risk (AIRB), counterparty credit risk Internal Model Method (IMM), or market risk Internal Model Approach (IMA) permissions for use of models for regulatory capital calculations; and countries where regulators have stipulated specific model risk requirements. Additional criteria, including financial materiality, regulatory importance, presence of important business services or critical economic functions are also considered. The main responsibilities of Country Model RFO are to ensure model usage is correctly identified, a suitable local governance process is established, and fundamental model risk training is provided for respective country stakeholders. Based on respective levels of regulatory expectations regarding Model Risk, a tiering approach is adopted to provide appropriate risk-based levels of depth and rigour of the associated requirements. Mitigation The Model Risk policy and standards define requirements for model development and validation activities, including regular model performance monitoring. Any model issues or deficiencies identified through the validation process are mitigated through model monitoring, model overlays and/or a model redevelopment plan, which undergoes 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 RTF, with remediation plans implemented where necessary. Governance committee oversight At Board level, the BRC exercises oversight of Model Risk within the Group. At the executive level, the GRC has appointed the Model Risk Committee to ensure effective measurement and management of Model Risk. Sub-committees such as the Credit Model Assessment Committee, Traded Risk Model Assessment Committee and Financial Crime Compliance 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. Decision-making authorities and delegation The Model RTF is the formal mechanism through which the delegation of Model Risk authorities is made. The Global Head, ERM delegates authorities to designated individuals or Policy Owners through the Model RTF. The second line of defence ownership for Model Risk at country level is delegated to Country CROs at the applicable branches and subsidiaries. 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, Financial Crime Compliance Model Assessment Committee, and individual designated model approvers for less material models. 334 Standard Chartered – Annual Report 2023Risk reviewRisk management approachMonitoring The Group monitors Model Risk via a set of RA metrics. Adherence to Model RA and any threshold breaches are reported to the BRC, GRC and Model Risk Committee. These metrics and thresholds are reviewed twice per year to ensure that threshold calibration remains appropriate, and the themes adequately cover the current risks. Models undergo regular monitoring based on their level of perceived Model Risk, with monitoring 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, identified model issues and remediation plans. These are presented for discussion at the Model Risk governance committees on a regular basis. 335 Standard Chartered – Annual Report 2023Risk review and Capital reviewClimate Risk (Oversight has moved to Reputational and Sustainability Risk with effect from January 2024) With effect from January 2024, the Group has removed the IRT classification. Climate Risk is defined as the potential for financial loss and non-financial detriments arising from climate change and society’s response to it. We are developing methodologies to identify, measure and manage the physical and transition risks that we are exposed to through our own operations, our suppliers, our clients, and the markets we operate in. Risk Appetite Statement The Group aims to measure and manage financial and non-financial risks arising from climate change, and reduce emissions related to our own activities and those related to the financing of clients in alignment with the Paris Agreement. Decision-making authorities and delegation The Global Head, ERM is supported by a Climate Risk team within the ERM function. The Global Head, ESG and Reputational Risk is responsible for executing the delivery of the Climate Risk workplan which will define decision- making authorities and delegations across the Group. Monitoring The Climate RA Statement is approved and reviewed annually by the Board, following the recommendation of the BRC. The Group has developed its first-generation Climate Risk reporting and Board/MT Level RA metrics and these will continue to be enhanced in 2024. Management information and RA metrics are also being progressively rolled out at the regional and country level. Management information is reviewed at a quarterly frequency and any breaches in RA are reported to the GRC and BRC. Roles and responsibilities The GCRO has the ultimate second line of defence and responsibility for Climate Risk, with support by the Global Head, ERM who has day-today oversight and central responsibility for second line of defence Climate Risk activities. As Climate Risk is embedded into the relevant PRTs, second line of defence responsibilities lie with those RFOs (at Group, regional and country level), with SME support from the central Climate Risk team. Mitigation We have completed c.4,100 Climate Risk Assessments (CRAs) in 2023 (c.85 - 90 per cent of the CCIB corporate portfolio limits), which measures transition risk of our clients. Concentration of Black and Red rated clients remain within proposed RA levels at 6 per cent. Linkages to Credit Underwriting Principles have been finalised for four sectors (Oil and Gas (O&G), Shipping, Commercial Real Estate (CRE) and Mining), including improved climate-related analysis, portfolio-level caps and additional data gathering measures. A key focus area going forward is to embed Climate Risk and net zero targets into business and credit decisions. To enable this, we have established a Net Zero Climate Risk Working Forum to facilitate discussions on account plans for high Climate Risk and net zero divergent clients. As of September 2023, we have assessed physical risk for 79 per cent and transition risk for 54 per cent of our CPBB book. The focus for Operational and Technology Risk has been to assess physical risks for our properties and data centres, as well as third parties. Concentration of top corporate liquidity providers to high transition risk and low levels of mitigation is being monitored. Governance committee oversight Board level oversight is exercised through the BRC, with regular updates on Climate Risk. At an executive level, the GRC has appointed the Climate Risk Management Committee (CRMC), which meets at least six times a year to oversee the implementation of Climate Risk workplans and monitoring the Group’s Climate Risk profile. In 2023, we have strengthened country and regional governance oversight for the Climate Risk profile across our key markets by cascading identified RA metrics, and rolling out climate risk management information. 336 Standard Chartered – Annual Report 2023Risk reviewRisk management approachDigital Assets Risk With effect from January 2024, the Group has removed the IRT classification. The Group recognises Digital Assets (DA) as an asset class which is managed under the ERMF. DA Risk is defined as the potential for regulatory penalties, financial loss and/or reputational damage to the Group resulting from DA-related activities arising from the Group’s businesses across clients, products, investments and projects. Risk Appetite Statement As DA Risk manifests through the various PRTs, the individual RA statements for each PRT take account of the risks specific to DAs. Roles and responsibilities Senior managers within the first line of defence are responsible for the overall management of DA risks, initiatives and exposures that may arise within their business segments. The GCRO has the second line of defence responsibility for defining the Group’s framework for managing DA-related risks, through the Digital Assets Risk Management Approach (DARMA). The GCRO is supported by the Global Head, ERM and the Global Head, DA Risk Management, who have day-to-day responsibility for second line of defence oversight of the DARMA. As DA Risk management is embedded into the relevant PRTs, RFOs and dedicated SMEs across the PRTs have second line of defence responsibilities of DA Risks for their respective PRTs. Decision-making authorities and delegation The Global Head, ERM is supported by a centralised DA Risk team within the ERM Function and is responsible for the design and maintenance of the DARMA. Decision- making authorities and delegation are defined in the DA Policy, outlining the incremental responsibilities and the embedding of risk management within associated policies and risk artefacts. The businesses are responsible for implementation of the DARMA and respective business governance forums, PRT RFOs and DA SMEs utilise decision-making authorities granted to them by their respective businesses, PRTs or in individual capacities to assess and approve DA activities and exposures that may give rise to risk. Mitigation The Group deploys a DA Risk management policy (DA Policy) to define the incremental risk management requirements for DA-related activities under the DARMA. The respective PRTs then include specific risk mitigation requirements within the relevant processes, policies and standards for their PRTs. DA Risk Assessments are conducted on certain higher-risk DA-related projects and products. These risk assessments detail the specific inherent risks, residual risks, controls and mitigants across the PRTs, and are reviewed and supported by the respective businesses, RFOs and DA SMEs. Governance committee oversight Board level oversight is exercised through the BRC, and DA Risk updates are provided to the Board and BRC, as requested. At the executive level, the GRC oversees the risk management of DA. The GCRO has also appointed a dedicated DA Risk Committee (DRC) consisting of senior business representatives, RFOs and DA SMEs across the Group. The DRC meets a minimum of four times per year to review and assess the risk assessments related to DA Projects and Products, discuss development and implementation of the DARMA, and to provide structured governance around DA Risk. DA Risk follows prescribed robust risk management practices across the PRTs, with specific expertise applied from DA experts. Risk management practices are informed by the “Dear CEO” letters published by the PRA and the FCA in June 2018, with updated notices in June 2022. Further guidance from the recent publication of the BCBS d545 on the prudential treatment of crypto assets, which will be in effect from January 2025, has refined the risk management approach. DA is a developing area which will continue to mature and stabilise over time as the technology, together with its use in financial services and associated research, become more established. Monitoring DA Risks are monitored through the existing Group RA metrics across the PRTs. In addition, specific DA Risk Management Monitoring level metrics are reviewed and monitored by the relevant individual PRTs. DA risk decisions relating to other PRTs are taken within the authorities for the respective PRT. 337 Standard Chartered – Annual Report 2023Risk review and Capital reviewCapital review The Capital review provides an analysis of the Group’s capital and leverage position, and requirements. Capital summary The Group’s capital, leverage and minimum requirements for own funds and eligible liabilities (MREL) position is managed within the Board-approved risk appetite. The Group is well capitalised with low leverage and high levels of loss-absorbing capacity. CET1 capital Tier 1 capital Total capital Leverage ratio MREL ratio 2023 14.1% 16.3% 21.2% 4.7% 33.3% 2022 14.0% 16.6% 21.7% 4.8% 32.1% Risk-weighted assets (RWA) $million 244,151 244,711 The Group expects to manage CET1 capital dynamically within our 13-14 per cent target range, in support of our aim of delivering future sustainable shareholder distributions. The Group’s MREL requirement as at 31 December 2023 was 27.4 per cent of RWA. This is composed of a minimum requirement of 23.5 per cent of RWA and the Group’s combined buffer (comprising the capital conservation buffer, the G-SII buffer and the countercyclical buffer). The Group’s MREL ratio was 33.3 per cent of RWA and 9.6 per cent of leverage exposure at 31 December 2023. During 2023, the Group successfully raised $8.1 billion of MREL eligible securities from its holding company, Standard Chartered PLC. Issuance was entirely in callable senior debt. The Group is a G-SII, with a 1.0 per cent G-SII CET1 capital buffer. The Standard Chartered PLC G-SII disclosure is published at: sc.com/en/investors/financial-results. The Group‘s capital, leverage and MREL positions were all above current requirements and Board-approved risk appetite. For further detail see the Capital section in the Standard Chartered PLC Pillar 3 Disclosures for FY 2023. The Group’s CET1 capital increased 10 basis points to 14.1 percent of RWA since FY2022. Profits, gains from the aviation leasing sale, movements in FVOCI and RWA optimisations were partly offset by distributions (including ordinary share buybacks of $2.0 billion during the year), impairments of the Group’s investment in Bohai, lower FX translation reserves and an increase in regulatory deductions. The PRA updated the Group’s Pillar 2A requirement during Q4 2023. As at 31 December 2023 the Group’s Pillar 2A was 3.8 percent of RWA, of which at least 2.1 per cent must be held in CET1 capital. The Group’s minimum CET1 capital requirement was 10.5 per cent at 31 December 2023. The UK countercyclical buffer increased to 2.0 per cent which impacts Group CET1 minimum requirement by approximately 8 basis points from July 2023. The Group CET1 capital ratio at 31 December 2023 reflects the share buy-backs of $2 billion completed during the year. The CET1 capital ratio also includes an accrual for the FY 2023 dividend. The Board has recommended a final dividend for FY 2023 of $560 million or 21 cents per share resulting in a full year 2023 dividend of 27 cents per share, a 50 percent increase on the 2022 dividend. In addition, the Board has announced a further share buy-back of $1 billion, the impact of this will reduce the Group’s CET1 capital by around 40 basis points in the first quarter of 2024. 338 Standard Chartered – Annual Report 2023Capital reviewCapital base1 (audited) CET1 capital instruments and reserves Capital instruments and the related share premium accounts Of which: share premium accounts Retained earnings2 Accumulated other comprehensive income (and other reserves) Non-controlling interests (amount allowed in consolidated CET1) Independently audited year-end profits Foreseeable dividends CET1 capital before regulatory adjustments CET1 regulatory adjustments Additional value adjustments (prudential valuation adjustments) Intangible assets (net of related tax liability) Deferred tax assets that rely on future profitability (excludes those arising from temporary differences) Fair value reserves related to net losses on cash flow hedges Deduction of amounts resulting from the calculation of excess expected loss Net gains on liabilities at fair value resulting from changes in own credit risk Defined-benefit pension fund assets Fair value gains arising from the institution’s own credit risk related to derivative liabilities Exposure amounts which could qualify for risk weighting of 1,250% Other regulatory adjustments to CET1 capital3 Total regulatory adjustments to CET1 CET1 capital Additional Tier 1 capital (AT1) instruments AT1 regulatory adjustments Tier 1 capital Tier 2 capital instruments Tier 2 regulatory adjustments Tier 2 capital Total capital Total risk-weighted assets (unaudited) 1 Capital base is prepared on the regulatory scope of consolidation 2 Retained earnings includes IFRS9 capital relief (transitional) of nil (2022: $106 million) 3 Other regulatory adjustments to CET1 capital includes Insufficient coverage for non-performing exposures of nil (2022: $(29) million) 2023 $million 2022 $million 5,321 3,989 24,930 9,171 217 3,542 (768) 42,413 (730) (6,128) (41) (91) (754) (100) (95) (116) (44) – (8,099) 34,314 5,512 (20) 39,806 11,965 (30) 11,935 51,741 244,151 5,436 3,989 25,154 8,165 189 2,988 (648) 41,284 (854) (5,802) (76) 564 (684) 63 (116) (90) (103) (29) (7,127) 34,157 6,504 (20) 40,641 12,540 (30) 12,510 53,151 244,711 339 Standard Chartered – Annual Report 2023Risk review and Capital reviewMovement in total capital (audited) CET1 at 1 January Ordinary shares issued in the period and share premium Share buy-back Profit for the period Foreseeable dividends deducted from CET1 Difference between dividends paid and foreseeable dividends Movement in goodwill and other intangible assets Foreign currency translation differences Non-controlling interests Movement in eligible other comprehensive income Deferred tax assets that rely on future profitability Increase in excess expected loss Additional value adjustments (prudential valuation adjustment) IFRS 9 transitional impact on regulatory reserves including day one Exposure amounts which could qualify for risk weighting of 1,250% Fair value gains arising from the institution’s own credit risk related to derivative liabilities Others CET1 at 31 December AT1 at 1 January Net issuances (redemptions) Foreign currency translation difference and others Excess on AT1 grandfathered limit (ineligible) AT1 at 31 December Tier 2 capital at 1 January Regulatory amortisation Net issuances (redemptions) Foreign currency translation difference Tier 2 ineligible minority interest Recognition of ineligible AT1 Others Tier 2 capital at 31 December Total capital at 31 December 2023 $million 34,157 – (2,000) 3,542 (768) (372) (326) (477) 28 464 35 (70) 124 (106) 59 (26) 50 2022 $million 38,362 – (1,258) 2,988 (648) (301) (1,410) (1,892) (12) (1,224) 74 (104) (189) (146) (67) (30) 14 34,314 34,157 6,484 (1,000) 8 – 5,492 12,510 1,416 (2,160) 146 19 – 4 11,935 51,741 6,791 241 9 (557) 6,484 12,491 778 (1,098) (337) 102 557 17 12,510 53,151 The main movements in capital in the period were: • CET1 capital increased by $0.2 billion as retained profits of $3.5 billion, movement in FVOCI of $0.6bn were partly offset by share buy-backs of $2.0 billion, distributions paid and foreseeable of $1.1 billion, foreign currency translation impact of $0.5 billion and an increase in regulatory deductions and other movements of $0.3bn. • AT1 capital decreased by $1.0 billion following the redemption of $1.0 billion of 7.75 per cent securities. • Tier 2 capital decreased by $0.6 billion due to the redemption of $2.2 billion of Tier 2 during the year partly offset by the reversal of regulatory amortisation and foreign currency translation impact. 340 Standard Chartered – Annual Report 2023Capital reviewRisk-weighted assets by business Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & Other items Total risk-weighted assets Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & Other items Total risk-weighted assets Risk-weighted assets by geographic region Asia Africa & Middle East Europe & Americas Central & Other items Total risk-weighted assets Movement in risk-weighted assets 2023 Credit risk $million Operational risk $million Market risk $million 102,675 42,559 1,885 44,304 191,423 18,083 8,783 35 960 27,861 2022 Credit risk $million Operational risk $million 110,103 42,091 1,350 43,311 196,855 17,039 8,639 6 1,493 27,177 21,221 – 3 3,643 24,867 Market risk $million 16,440 – 2 4,237 20,679 2023 $million 155,995 38,393 46,106 3,657 244,151 Total risk $million 141,979 51,342 1,923 48,907 244,151 Total risk $million 143,582 50,730 1,358 49,041 244,711 2022 $million 150,816 40,716 50,174 3,005 244,711 At 31 December 2021 At 1 January 2022 Assets growth & mix Asset quality Risk-weighted assets efficiencies Model Updates Methodology and policy changes Acquisitions and disposals Foreign currency translation Other, Including non-credit risk movements At 31 December 2022 Assets growth & mix Asset quality Risk-weighted assets efficiencies Model Updates Methodology and policy changes Acquisitions and disposals Foreign currency translation Other, Including non-credit risk movements At 31 December 2023 Credit risk Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million Central & Other items $million 125,813 125,813 (13,213) (4,258) – 4,329 2,024 – 42,731 42,731 (985) 431 – 1,420 85 – (4,883) (1,591) 291 – 110,103 42,091 (4,424) (391) – (597) – (1,630) (386) 728 390 – (151) (196) – (303) – – 756 756 594 – – – – – – – 1,350 535 – – – – – – – Total $million 219,588 219,588 50,288 50,288 (10,033) (23,637) 7,344 – – 93 – 3,517 – 5,749 2,202 – (3,376) (9,850) Operational risk $million Market risk $million Total risk $million 27,116 27,116 24,529 24,529 – – – – – – – – – – (1,000) 1,500 – – 271,233 271,233 (23,637) 3,517 – 4,749 3,702 – (9,850) (1,005) (714) 61 (4,350) (5,003) 43,311 196,855 27,177 20,679 244,711 1,183 2,684 (688) (151) – – (1,978) 2,683 (688) (899) (196) (1,630) (2,035) (2,724) – – – – – – – – – – 500 (800) – – (1,978) 2,683 (688) (399) (996) (1,630) (2,724) – – 684 4,488 5,172 102,675 42,559 1,885 44,304 191,423 27,861 24,867 244,151 341 Standard Chartered – Annual Report 2023Risk review and Capital reviewMovements in risk-weighted assets RWA decreased by $0.6 billion, or 0.2 per cent from 31 December 2022 to $244.2 billion. This was due to a decrease in Credit Risk RWA of $5.4 billion, an increase in Market Risk RWA of $4.2 billion and an increase in Operational Risk RWA of $0.7 billion. Ventures Ventures is comprised of Mox Bank Limited, Trust Bank and SC Ventures. Credit Risk RWA increased by $0.5 billion, or 39.7 per cent from 31 December 2022 to $1.9 billion from asset balance growth, mainly from SC Ventures. Corporate, Commercial & Institutional Banking Credit Risk RWA decreased by $7.4 billion, or 6.7 per cent from 31 December 2022 to $102.7 billion mainly due to: • $4.4 billion decrease from changes in asset growth & mix of which: Central & Other items Central & Other items RWA mainly relate to the Treasury Markets liquidity portfolio, equity investments and current & deferred tax assets. Credit Risk RWA increased by $1 billion, or 2.3 per cent from 31 December 2022 to $44.3 billion mainly due to: – $10.3 billion decrease from optimisation actions including reduction in lower returning portfolios • $2.7 billion increase due to deterioration in asset quality mainly from sovereign downgrades in Africa & Middle East – $5.9 billion increase from asset balance growth across the • $1.2 billion increase from changes in asset growth & mix rest of the portfolio • $1.6 billion decrease from sale of Aviation business • $0.9 billion decrease from industry-wide regulatory changes to align IRB model performance • $2.0 billion decrease from foreign currency translation • $0.7 billion decrease from RWA efficiencies • $0.2 billion decrease from model changes in Treasury Markets • $0.4 billion decrease from foreign currency translation • $0.4 billion decrease from asset quality movements, reflecting client upgrades in Asia, Europe & Americas, partially offset by sovereign downgrades in Africa & Middle East • $0.3 billion increase from model changes in Financial Markets and Lending Consumer, Private & Business Banking Credit Risk RWA increased by $0.5 billion, or 1.1 per cent from 31 December 2022 to $42.6 billion mainly due to: • $0.7 billion increase from changes in asset growth and mix, mainly from Asia • $0.4 billion increase due to deterioration in asset quality mainly in Asia • $0.3 billion decrease from foreign currency translation • $0.2 billion decrease from methodology change relating to an unsecured lending portfolio in Africa & Middle East • $0.1 billion decrease from industry-wide regulatory changes to align IRB model performance Market Risk Total Market Risk RWA increased by $4.2 billion, or 20.3 per cent from 31 December 2022 to $24.9 billion due to: • $2.4 billion increase in Standardised Approach (SA) RWA driven by higher Specific Interest Rate Risk relating to the traded credit portfolio, offset by lower net Structural FX positions • $2.1 billion increase in Internal Models Approach (IMA) RWA due to increased positions and increased market volatility • $0.5 billion increase in IMA RWA due to introduction of a new VaR model to address the rise in VaR backtesting exceptions in 2022 • $0.8 billion decrease in IMA RWA due to reduction in the IMA multiplier with fewer VaR backtesting exceptions in 2023 than in 2022 Operational Risk Operational Risk RWA increased by $0.7 billion, or 2.5 per cent from 31 December 2022 to $27.9 billion, mainly due to a marginal increase in average income as measured over a rolling three-year time horizon for certain products. 342 Standard Chartered – Annual Report 2023Capital reviewLeverage ratio The Group’s UK leverage ratio, which excludes qualifying claims on central banks was 4.7 per cent, which is above the current minimum requirement of 3.7 per cent. The leverage ratio was 6 basis points lower than FY22. Tier 1 Capital decreased by $0.8 billion as CET1 capital increased by $0.2 billion and was more than offset by the redemption of $1 billion 7.75 per cent AT1 securities. Leverage exposure decreased by $7.2 billion benefiting from an increase in deduction for central bank claims of $19.6 billion, a decrease in securities financing transactions and add-on of $1.3 billion, partly offset by increase in Other Assets of $7.2 billion, Off-balance sheet items of $4.5 billion and Derivatives of $2 billion. Leverage ratio Tier 1 capital Derivative financial instruments Derivative cash collateral Securities financing transactions (SFTs) Loans and advances and other assets Total on-balance sheet assets Regulatory consolidation adjustments1 Derivatives adjustments Derivatives netting Adjustments to cash collateral Net written credit protection Potential future exposure on derivatives Total derivatives adjustments Counterparty risk leverage exposure measure for SFTs Off-balance sheet items Regulatory deductions from Tier 1 capital Total exposure measure excluding claims on central banks Leverage ratio excluding claims on central banks (%) Average leverage exposure measure excluding claims on central banks Average leverage ratio excluding claims on central banks (%) Countercyclical leverage ratio buffer G-SII additional leverage ratio buffer 1 Includes adjustment for qualifying central bank claims and unsettled regular way trades 2023 $million 39,806 50,434 10,337 97,581 664,492 822,844 (92,709) (39,031) (9,833) 1,359 42,184 (5,321) 6,639 123,572 (7,883) 847,142 4.7% 853,968 4.6% 0.1% 0.4% 2022 $million 40,641 63,717 12,515 89,967 653,723 819,922 (71,728) (47,118) (10,640) 548 35,824 (21,386) 15,553 119,049 (7,099) 854,311 4.8% 864,605 4.7% 0.1% 0.4% 343 Standard Chartered – Annual Report 2023Risk review and Capital reviewFinancial statements Financial statements 346 Independent Auditor’s report 359 Consolidated income statement 360 Consolidated statement of comprehensive income 361 Consolidated balance sheet 362 Consolidated statement of changes in equity 363 Cash flow statement 364 Company balance sheet 365 Company statement of changes in equity 366 Notes to the financial statements [[Bolstering the client experience for affluent clients in Asia]] To enrich client experiences with holistic wealth advice for affluent clients, we opened two new Private Banking Centres in India as well as two Priority Private Centres for high-net- worth (HNW) clients in Shanghai and Hong Kong. The hubs offer bespoke services to HNW and Ultra HNW clients and form part of our continuing growth in the affluent sector. We also introduced an enhanced Priority Private value proposition for HNW clients during the launch of the Shanghai centre. In addition to the new openings, we also renovated and rebranded 17 branches across Asia, the Middle East and Africa, creating additional Priority Centres. Read more on our new centres in India at sc.com/privatebankingcentres 344 Standard Chartered – Annual Report 2023 i F n a n c i a l s t a t e m e n t s Standard Chartered – Annual Report 2023 345 Independent Auditor’s Report to the members of Standard Chartered PLC Opinion In our opinion: • the financial statements of Standard Chartered PLC (the ‘Company’ or the ‘Parent Company’), its subsidiaries, interests in associates and jointly controlled entities (together with the Company, 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 2023 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union (EU IFRS); • the Company financial statements have been properly prepared in accordance with UK adopted IAS as applied in accordance with section 408 of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of the Group and the Company for the year ended 31 December 2023 which comprise: Group Company Consolidated income statement for the year ended 31 December 2023; Consolidated statement of comprehensive income for the year then ended; Balance sheet as at 31 December 2023; Cash flow statement for the year then ended; Consolidated balance sheet as at 31 December 2023; Statement of changes in equity for the year then ended; and Consolidated statement of changes in equity for the year then ended; Related notes 1 to 40, where relevant to the financial statements, including material accounting policy information. Consolidated cash flow statement for the year then ended; Related notes 1 to 40 to the financial statements, including material accounting policy information; Information marked as ‘audited’ within the Directors’ remuneration report from page 182 to 216; and Risk Review and Capital Review disclosures marked as ‘audited’ from page 232 to 343. The financial reporting framework that has been applied in their preparation is applicable law and UK adopted IAS and EU IFRS; and as regards the Parent Company financial statements, UK adopted IAS as applied in accordance with section 408 of the Companies Act 2006. 346 Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company and we remain independent of the Group and the Company in conducting the audit. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of accounting included: • Performing a risk assessment to identify factors that could impact the going concern basis of accounting, including the impact of external risks such as geopolitical risk. • Assessing the directors’ going concern assessment including the Group’s forecast capital, liquidity, and leverage ratios over the period of twelve months from 23 February 2024 to evaluate the headroom against the minimum regulatory requirements and the risk appetite set by the directors. • Engaging internal valuation and economic specialists to assess and challenge the reasonableness of assumptions used to develop the forecasts in the Corporate Plan and evaluating the accuracy of historical forecasting. • Assessing the Group’s funding plan and repayment plan for funding instruments maturing over the period of twelve months from 23 February 2024. • Understanding and evaluating credit rating agency ratings and actions. • Engaging internal prudential regulatory specialists to assess the results of management’s stress testing, including consideration of principal and emerging risks, on funding, liquidity, and regulatory capital. • Reviewing correspondence with prudential regulators and authorities for matters that may impact the going concern assessment; and • Evaluating the going concern disclosure included in note 1 to the financial statements in order to assess that the disclosures were appropriate and in conformity with the reporting standards. Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s reportBased on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Company’s ability to continue as a going concern for a period of twelve months from 23 February 2024. In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group and Company’s ability to continue as a going concern. Overview of our audit approach Audit scope • We performed an audit of the complete financial • information of 10 components in 8 countries and audit procedures on specific balances for a further 17 components in 14 countries. In addition to the above, the Primary Audit Team also performed full-scope audit procedures on components related to the Group consolidation process. • The components where we performed full or specific audit procedures accounted for 78% of the absolute profit before tax (PBT), 87% of absolute operating income and 94% of Total assets. Key audit matters • Credit impairment • Basis of accounting and impairment assessment of China Bohai Bank (interest in associate) • Privileged Access Management • Impairment of goodwill and investments in subsidiary undertakings • Valuation of financial instruments held at fair value with higher risk characteristics Materiality • Overall group materiality of $274m which represents 5% of Adjusted PBT. An overview of the scope of the parent company and group audits Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each component within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We took into account the size, risk profile, the organisation of the Group and effectiveness of control environment, changes in the business environment and other factors such as the level of issues and 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 Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, of the 346 reporting units of the Group, we selected 66 reporting units which represent 27 components in 21 countries: Bahrain, Bangladesh, Hong Kong, India, Indonesia, Japan, Jersey, Kenya, Mainland China, Malaysia, Nigeria, Pakistan, Republic of Ireland, Republic of Korea, Singapore, Sri Lanka, Taiwan, United Arab Emirates, United Kingdom, United States of America, and Zambia. The definition of a component is aligned with the structure of the Group’s consolidation system, typically these are either a branch, group of branches, group of subsidiaries (or associates), or a subsidiary. We took a centralised approach to auditing certain processes and controls, as well as the substantive testing of specific balances. This included audit work over Group’s Global Business Services shared services centre (SSC), Commercial, Corporate and Institutional Banking SSC, Credit Impairment SSC and Technology, as well as certain other matters audited centrally by the Primary Audit Team. Of the 27 components selected in 21 countries, we performed an audit of the complete financial information of 10 components (“full scope components”) which were selected based on their size or risk characteristics. For 14 components (“specific scope components”) we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the Group financial statements either because of the size of these accounts or their risk profile. We also instructed 3 locations to perform specified procedures over certain aspects of credit impairment risk. Full scope components Specific scope components Specified procedures Total Group`s Absoulute PBT Group’s Total assets Group’s Absolute Operating Income 2023 62% 15% 1% 78% 2022 72% 10% 0% 82% 2023 87% 7% 0.10% 94% 2022 87% 8% 0% 95% 2023 72% 14% 1% 87% 2022 79% 10% 0% 89% Of the remaining reporting units that together represent 22% of the Group’s absolute PBT, none are individually greater than 2.3% of the Group’s absolute PBT. For the components represented by these reporting units, we performed other procedures at the Group level which included: performing analytical reviews at the Group financial statement line item level, evaluating entity level controls, performing audit procedures on the centralised shared service centres, testing of consolidation journals and intercompany eliminations, inquiring with selected overseas EY teams on the outcome of prior year local statutory audits (where audited by EY) to identify any potential risks of material misstatement to the Group financial statements. 347 Standard Chartered – Annual Report 2023Financial statementsThe charts below illustrate the coverage obtained from the work performed by our audit teams. Absolute profit before tax 62% Full scope components (2022: 72%) 15% Specific scope components (2022: 10%) 1% Specified procedures (2022: 0%) 22% Other procedures (2022: 18%) Absolute operating income Total assets 72% Full scope components (2022: 79%) 14% Specific scope components (2022: 10%) 1% Specified procedures (2022: 0%) 13% Other procedures (2022: 11%) 87% Full scope components (2022: 87%) 7% Specific scope components (2022: 8%) 0.1% Specified procedures (2022: 0%) 6% Other procedures (2022: 5%) Changes from the prior year We assessed our 2023 audit scope with consideration of history or expectation of unusual or complex transactions and potential for material misstatements. We also kept our audit scope under review throughout the year. Three components in Cameroon, Republic of Ireland, and South Africa, which were included in prior year audit scope and assigned specific scope, were excluded from the Group audit scope in the current year based on our updated risk assessment. These components represent individually no more than 0.1% of Group absolute PBT, 0.4% of the Group’s absolute operating income and 0.3% of the Group’s Total assets respectively in the current year. No component which was full scope in the prior year, has been excluded from Group audit scope for the 2023 audit. For Germany, Australia, Ghana and Cameroon, the Primary Audit Team performed certain procedures centrally over the cash balances as at 31 December 2023. Taiwan, Malaysia, Indonesia, Pakistan and Kenya were full scope components in the prior year but were designated as specific scope components in the current year based on our updated risk assessment. In 2023, we assigned a specific scope to Bahrain and United Kingdom (Jersey) components that are significant based on risk, and specified procedures to Taiwan (Taipei Branch). These components were not in-scope in the prior year. Involvement with component teams In establishing 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 primary audit engagement team (the “Primary Audit Team”), or by component auditors from other firms operating under our instruction. All of the direct components of the Group (full, specific or specified procedures) were audited by EY global network firms. There were two non-EY component teams auditing a single component in a single location, which were instructed by a direct component of the Group. Of the 10 full scope components, audit procedures were performed on 3 of these (including the audit of the Company) directly by the Primary Audit Team (EY London) in the United Kingdom. For 1 specific scope component, the audit procedures were performed by the Primary Audit Team. Where components were audited by the Primary Audit Team, this was under the direction and supervision of the Senior Statutory Auditor. For the 23 remaining components, where the work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole. In addition to the above, the Primary Audit Team also performed full-scope audit procedures on components related to the Group consolidation process. In addition, the Group has centralised processes and controls over key areas in its shared service centres. Members of the Primary Audit Team undertook direct oversight, review and coordination of our shared service centre audits. The Primary Audit Team continued to follow a programme of planned visits to component teams and shared service centres. During the current year’s audit cycle, visits were undertaken by the Primary Audit Team to the component teams in the following locations: • Bangladesh • Hong Kong • India (including the shared services centre) • Indonesia • Mainland China • Malaysia (including the shared services centre) • Pakistan • Republic of Korea • Singapore (including the shared services centre) • United Arab Emirates • United States of America These visits typically involved oversight of work undertaken at those locations, discussion of the audit approach and any issues arising from their work, meeting with local management, and reviewing relevant audit working papers on key risk areas. 348 Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s reportOur audit effort in considering the impact of climate change on the financial statements was focused on evaluating whether management’s assessment of the impact of climate risk, physical and transition, their climate commitments, and the significant judgements and estimates disclosed in note 1 have been appropriately reflected in the valuation of assets and liabilities, where these can be reliably measured, following the currently effective requirements of UK adopted IAS and EU IFRS. This was in the context of the Group’s process being limited, given that this is an emerging area, as a result of limitations in the data available and the availability of sophisticated models, and as the Group considers how it further embeds its climate ambitions into the planning process. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal specialists, to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit. We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability, and the associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are covered by the procedures described above. Based on our work, we have considered the impact of climate change on the financial statements to impact certain key audit matters. Details of our procedures and findings are included in our explanation of key audit matters below. In addition to the site visits, the Primary Audit Team interacted regularly with the component and SSC audit teams where appropriate during various stages of the audit, reviewed relevant working papers and deliverables to the Primary Audit Team, and were responsible for the scope and direction of the audit process. The Primary Audit Team also undertook video conference meetings with component and SSC audit teams and management. These virtual meetings involved discussing the audit approach and any issues arising from their work, as well as performing remote reviews of key audit workpapers. This, together with the procedures performed at Group level, gave us appropriate evidence for our opinion on the Group and Company financial statements. Climate change Stakeholders are increasingly interested in how climate change will impact the economy, including the banking sector, and further how this may consequently impact the valuation of assets and liabilities held on bank balance sheets. The Group manages climate risk according to the characteristics of the impacted risk types and is embedding climate-risk considerations into relevant frameworks, including principal risk type frameworks, and processes. The assessment of the risk by the Group is explained on pages 336 and 298-313 in the “Risk review: Climate Risk” section, and on pages 90-133 in the “Sustainability review” section of the Annual Report, where the Group has also explained their climate commitments. All of these disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other information”. In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material impact on its financial statements. The Group has explained in the “Sustainability review” section of the Annual Report how they have reflected the impact of climate change in their financial statements, including how this aligns with their commitment to the aspirations of the Paris Agreement to achieve net zero emissions by 2050. Significant judgements and estimates relating to climate change are included in the section “Climate impact on the Group’s balance sheet” of note 1 to the financial statements. As stated in these disclosures, the Group has considered Climate to be an area of significant accounting estimate and judgement through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liabilities. The Group has concluded that whilst it is not currently quantitatively material, it considers climate to be qualitatively material. 349 Standard Chartered – Annual Report 2023Financial statementsKey audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. Risk Our response to the risk 1. Credit Impairment Refer to the Audit Committee Report (page 163); Accounting policies (page 380); Note 8 of the financial statements; and relevant credit risk disclosures (including pages 238 and 274) At 31 December 2023, the Group reported total credit impairment balance sheet provision of $5,601 million (2022: $6,075 million). Management’s judgements and estimates are highly subjective as a result of the significant uncertainty associated with the estimation of expected future credit losses that are dependent upon several hard to estimate factors. Assumptions with increased complexity in respect of the timing and measurement of expected credit losses (ECL) include: • Staging – the determination of what constitutes significant increase in credit risk and consequent timely allocation of qualifying assets to the appropriate stage in accordance with IFRS 9; • Model output and adjustments – Accounting interpretations, modelling assumptions and data used to build and run the models that calculate the ECL, including the appropriateness, completeness and valuation of post-model adjustments applied to model output to address identified model deficiencies or risks not fully captured by the models; • Economic scenarios – Significant judgements involved in the determination of the appropriateness of economic variables, the future forecasting of these variables and the parameters used in the Monte Carlo Simulation. The assessment of non-linearity produced by the Monte Carlo simulation, the benchmarking of the output and the evaluation of the need for any Post Model adjustments; • Management overlays – Appropriateness, completeness and valuation of risk event overlays to capture risks not identified by the credit impairment models, including the consideration of the risk of management override; and • Individually assessed ECL allowances – Measurement of individual provisions including the assessment of probability weighted recovery scenarios, exit strategies, collateral valuations, expected future cashflows and the timing of these cashflows. We evaluated the design of controls relevant to the Group’s systems and processes over material ECL balances, including the judgements and estimates noted, involving EY specialists to assist us in performing our procedures where relevant. Based on our evaluation we selected the controls upon which we intended to rely and tested those for operating effectiveness. We increased the extent of our reliance on controls over model governance and in certain locations of the stage 3 exposures. We performed an overall stand-back assessment of the ECL allowance in total and by stage to determine if the ECL was reasonable. We considered the overall credit quality of the Group’s portfolios, risk profile, the impact of sovereign downgrades and challenges facing the China Commercial Real Estate sector. We performed peer benchmarking to the extent that this was considered relevant and investigated and sought explanations for any areas noted as being outliers. Our assessment also included the evaluation of the macroeconomic environment by considering trends in the economies and countries to which the Group is exposed. Staging – We evaluated the criteria used to determine significant increase in credit risk including quantitative backstops with the resultant allocation of financial assets to stage 1, 2 or 3 in accordance with IFRS 9. We reperformed the staging distribution for a sample of financial assets and assessed the reasonableness of staging downgrades applied by management. To test the completeness of the identification of significant increase in credit risk, we challenged the risk ratings (including appropriate operation of quantitative backstops) for a sample of performing accounts and other accounts exhibiting risk characteristics such as financial difficulties, deferment of payment, late payment and watchlist. We also considered whether vulnerable and cyclical sectors (as defined on page 265 in the annual report) resulted in a significant increase in credit risk at a sector level. Key observations communicated to the Audit Committee We highlighted the following matters to the Audit Committee: • We increased the extent of our reliance of controls over model governance and stage 3 exposures in certain locations; • Our evaluation of the appropriateness of the significant increase in credit risk triggers, and the results of our sensitivity analysis and recalculation of the staging. • Our assessment of the assumptions used to determine the Stage 3 ECL with a focus on sponsor and developers exposed to China Commercial Real Estate and the appropriateness of the management overlay applied to the sector’s modelled ECL; • Our assessment of the completeness and measurement of post model adjustments and overlays. • Our assessment of the quantum of the non-linearity adjustment produced by the Monte Carlo model including the comparison to the non-linearity produced by running narrative discrete scenarios. • Our assessment of the appropriateness of the Group’s models to generate the ECL and staging outcomes including the appropriateness and validity of the data used in the models and to generate the staging and consequent ECL. • Our evaluation of management’s enhanced modelling approach to the assessment of the potential impact on ECL from climate change; We concluded that management’s methodology, judgements and assumptions used in calculating credit impairment are materially in accordance with the accounting standard. 350 Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s reportRisk Our response to the risk Key observations communicated to the Audit Committee 1. Credit Impairment continued In 2023, the most material factors impacting the ECL were in relation to the China Commercial Real Estate (CRE) portfolio, sovereign downgrades impacted by dollar availability, the continuing impact of higher interest rates and inflation and geopolitical uncertainty. In addition, where relevant we considered the impact of climate on the impairment provisions. Overall, these factors were prevalent in the prior year, and consequently the risk of a material misstatement to the ECL remained consistent with that of the prior year. Modelled output and adjustments – We performed a risk assessment on models involved in the ECL calculation using EY independently determined quantitative and qualitative criteria to select a sample of models to test. Based on this risk assessment, we engaged our modelling specialists to evaluate a sample of ECL models by assessing the reasonableness of underpinning assumptions, inputs and formulae used. This included a combination of assessing the appropriateness of model design, formulae and algorithms, alternative modelling techniques and recalculating the Probability of Default, Loss Given Default and Exposure at Default parameters. Together with our modelling specialists, we also assessed material post- model adjustments which were applied as a response to risks not fully captured by the models or for known model deficiencies. This included the completeness and appropriateness of these adjustments. In response to new or enhanced models implemented this year to address known weaknesses in previous models, we performed substantive testing procedures as defined by our model inherent risk assessment process, including code review and implementation testing. We did not rely on controls over model monitoring and therefore adopted a substantive approach comprising reperformance of model monitoring procedures for models classified as higher risk in accordance with our EY independent risk assessment. To evaluate data quality, we agreed a sample of ECL calculation data points to source systems, including, 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. Economic scenarios – In collaboration with our economists and modelling specialists, we challenged the completeness and appropriateness of the macroeconomic variables used as inputs to the ECL models. Additionally, we involved our economic specialists 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 global external sources. We reviewed and challenged the appropriateness of the underlying coding and assumptions used in the Monte Carlo simulation. 351 Standard Chartered – Annual Report 2023Financial statementsRisk Our response to the risk Key observations communicated to the Audit Committee 1. Credit Impairment continued We assessed the reasonableness of the non-linearity impact on ECL allowances. We engaged our economists and modelling specialists, to assess and challenge the Group’s choice of discrete scenarios to benchmark the output from the Monte Carlo model and determine the sensitivity analysis as set out on page 280 in the annual report. This challenge included the choice of narrative scenarios and we independently challenged the output from these scenarios using independently determined EY weights for each scenario. We also performed a stand-back assessment by benchmarking the resulting non-linearity up-lift and overall ECL charge and provision coverage to peers. Management overlays – We challenged the completeness and appropriateness of overlays used for risks not captured by the models. We focussed our challenge on China Commercial Real Estate, sovereign risks and the sustained impact of higher interest rates and inflation. Our procedures included assessing the need for management overlays, evaluating the assumptions and judgments used to determine each overlay taking current market conditions into account. We computed a range of EY independently determined outcomes for the China Commercial Real Estate overlay. Individually assessed ECL allowances – Our procedures included challenging management’s forward-looking economic assumptions of the recovery outcomes identified, cashflow profile and timing, individual probability weightings for each scenario, and recalculating a sample of individually assessed provisions. We also engaged our valuation specialists to test the value of the collateral used in management’s calculations. Our sample was based on quantitative thresholds and qualitative factors, including exposure to vulnerable sectors. We have independently assessed all material China CRE developers in Stage 3 including challenging the plausibility of the applied scenarios, the corresponding weights assigned to work out scenarios and engaging local EY Real Estate specialists to validate the collateral values. We also considered whether planned exit strategies were viable. 352 Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s reportKey observations communicated to the Audit Committee On the basis of the evidence, we concluded that the Group continues to maintain significant influence over China Bohai Bank as at 31 December 2023. We concluded that the Interest in Associate –China Bohai Bank balance was not materially misstated as at 31 December 2023. Management’s carrying value for the investment in Bohai of $700 million is within EY`s independent range. We concluded that the disclosures in the annual report appropriately reflect the sensitivity of the carrying value to reasonably possible changes in key assumptions in the valuation of the investment in China Bohai Bank. Risk Our response to the risk Basis of accounting We evaluated the facts and circumstances that the Group presented to demonstrate that it exercises significant influence over China Bohai Bank, through Board representation, membership of Board Committees and sharing of technical advice. Impairment testing The Group impaired the value of the investment in China Bohai Bank by $850 million in 2023 (2022: $308 million). This brings the cumulative impairment recorded in relation to the Group’s investment in China Bohai Bank to $1,458 million as at 31 December 2023. We assessed the appropriateness of the Group’s VIU methodology for testing the impairment of the investment in China Bohai Bank for compliance with the accounting standards. We tested the mathematical accuracy of the VIU model and engaged our valuation and modelling specialists to support the audit team in calculating an independent range for the VIU. We performed audit procedures to assess the reasonableness of the Group’s forecast of the future cashflows relating to Bohai, by evaluating management’s assessment, benchmarking the forecasts to broker reports published for comparable companies and challenging management with regard to the relevance and reliability of historical data, including an evaluation of the public disclosures by Bohai. We assessed the appropriateness of disclosures in the annual report in relation to the impact of reasonably possible changes in key assumptions on the carrying value of the investment in China Bohai Bank. 2. Basis of accounting and impairment assessment of China Bohai Bank (Interest in Associate) Refer to the Audit Committee Report (page 163); Accounting policies (page 452); and Note 32 of the financial statements Interest in Associate – China Bohai Bank $700 million (2022: $1,421million). Other impairment – China Bohai Bank – $850 million (2022: $308 million). At 31 December 2023, the Group’s share of China Bohai Bank’s market capitalisation was $282m lower than the carrying value of $700m. We focused on judgements and estimates, including the appropriateness of the equity accounting treatment under IAS 28 and the assessment of whether the investment was impaired. Basis of accounting The Group holds a 16.26% stake in China Bohai Bank and equity accounts for the investment as an associate, on the grounds that the Group is able to exercise significant influence over China Bohai Bank. IAS 28 states that if the entity holds, directly or indirectly, less than 20% of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated. There is a risk that the equity accounting treatment may not be appropriate, if the Group cannot demonstrate that it exerts significant influence over China Bohai Bank. Impairment testing At 31 December 2023, China Bohai Bank’s market capitalisation was significantly lower than the carrying value of the investment. In addition, the financial performance of China Bohai Bank deteriorated during 2023. These matters are indicators of impairment. Impairment of the investment in China Bohai Bank is determined by comparing the carrying value to the value-in-use (VIU). The VIU is modelled by reference to future cashflow forecasts (forecast profit, including a haircut for regulatory capital), discount rate and macroeconomic assumptions such as long-term growth rates. The assumptions underpinning management’s assessment of China Bohai Bank’s VIU are subject to estimation uncertainty and consequently, there is a risk that if the judgements and assumptions are inappropriate, the investment in China Bohai Bank may be misstated. The risk of the impairment has increased in the current year in the context of economic headwinds in Mainland China impacting the banking sector, as well as Bohai’s deteriorating financial performance. The risk in respect of significant influence has not changed compared to the prior year. 353 Standard Chartered – Annual Report 2023Financial statementsKey observations communicated to the Audit Committee We concluded that the goodwill balance as at 31 December 2023 and the related disclosures, are not materially misstated. We concluded that the disclosures in the annual report appropriately reflect the sensitivity of the carrying value of goodwill to reasonably possible changes in key assumptions, noting that these downside scenarios could necessitate an adjustment to the carrying amount of goodwill in future. We also concluded that the investments in subsidiary undertakings balance reported in the Parent Company financial statements and the associated disclosures, are not materially misstated as at 31 December 2023. Risk Our response to the risk We obtained an understanding of management’s process and evaluated the design of controls. Our audit strategy was fully substantive. We assessed the appropriateness of the Group’s methodology for testing the impairment of goodwill and investments in subsidiary undertakings for compliance with accounting standards. For goodwill, we assessed the appropriateness of the cash generating units identified by management. We agreed the inputs in the VIU model to their source and tested the mathematical accuracy of the VIU model. We engaged EY specialists to support the audit team in assessing reasonableness of the regulatory haircut adjustment to future profitability forecasts and calculating an independent range for assumptions underlying the VIU calculations, such as the discount rate and long-term growth rate for each cash generating unit. We also reconciled the future profitability forecasts of each CGU to the Group’s approved Corporate Plan (‘the Plan’). We engaged our specialist team to determine the reasonableness of the forward macroeconomic inputs used in the Plan. We performed audit procedures to assess the reasonableness of the forecasts by understanding the Group Strategy, challenging key assumptions underpinning the Plan, assessing the feasibility of management actions necessary to achieve the Plan and testing the reliability of the Group’s historical forecasting by comparing with the actual performance. We performed a stand back assessment to evaluate the appropriateness of the audit evidence obtained and our conclusion in relation to these estimates. We agreed the NAV of the subsidiaries to their carrying value to confirm impairment or reversal of impairment recognised in the Parent`s Company financial results. We assessed the appropriateness of disclosures for impairment of goodwill and investments in subsidiary undertakings in accordance with IAS 36. 3. Impairment assessment of goodwill and investments in subsidiary undertakings a) Impairment of Goodwill: Accounting policies (page 424); and Note 17 of the financial statements. Refer to the Audit Committee Report (page 164). b) Impairment of investments in subsidiary undertakings: Accounting policies (page 452); and Note 32 of the financial statements. Refer to the Audit Committee Report (page 164). At 31 December 2023, the Group reported a goodwill balance of $2,429 million (2022: $2,471 million). During the year no impairment was recognised for goodwill (2022: $14million). In the Parent Company financial statements, the investment in subsidiary undertakings balance was $60,791 million (2022: $60,975 million). On an annual basis, management is required to perform an impairment assessment for goodwill, and to assess for indicators of impairment in respect of investments in subsidiary undertakings. Where indicators of impairment are identified, the recoverable amount of the investment should be estimated. The impairment assessment of goodwill is performed by calculating a value in use (‘VIU’) as the recoverable amount of the related cash generating unit (‘CGU’). The Group identified indicators of impairment of investments in subsidiary undertakings, including macroeconomic and geopolitical factors which have an impact on the financial position and performance of the subsidiaries. In assessing for indicators of impairment, among other procedures, management compares the Net Asset Value (‘NAV’) of the subsidiary to the carrying value of each direct subsidiary of the Parent Company. Where the net assets do not support the carrying value, the recoverable amount is estimated by determining the higher of VIU or fair value less cost to sell. Where the recoverable amount is based on the VIU, this is modelled by reference to future cashflow forecasts (profit forecast including a regulatory capital haircut adjustment), discount rates and macroeconomic assumptions such as long-term growth rates. There is a risk that if the judgements and assumptions underpinning the impairment assessments are inappropriate, then the goodwill and investments in subsidiaries balances may be misstated. The level of risk remains consistent with the prior year. 354 Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s reportRisk Our response to the risk We evaluated the design and operating effectiveness of controls relating to the valuation of financial instruments, including independent price verification, model validation and approval, fair value adjustments, income statement analysis and reporting. Among other procedures, we engaged our valuation specialists to assist the audit team in performing the following testing on a risk-assessed sample basis: • Test complex model-dependent valuations by independently revaluing Level 3 and complex Level 2 derivative financial instruments and debt securities in issue, in order to assess the appropriateness of models and the adequacy of assumptions and inputs used by the Group; • Test valuations of other financial instruments with higher estimation uncertainty, such as unlisted equity investments, Level 3 loans at fair value, Level 3 debt and other financial instruments. We compared management’s valuation to our own independently developed range, where appropriate; • Assessed the appropriateness of pricing inputs as part of the Independent Price Verification 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 determining illiquid credit spreads. Where differences between our independent valuation and management’s valuation were outside our thresholds, we performed additional testing to assess the impact on the valuation of financial instruments. Throughout our audit procedures we considered the continuing uncertainty arising from the current macroeconomic environment. In addition, we assessed whether there were any indicators of aggregate bias in financial instrument marking and methodology assumptions. We evaluated the results of management’s remediation program and risk assessment for applications in our audit scope. We also tested IT controls (including IT compensating controls) where possible, and also performed additional IT substantive procedures to assess the impact of risks associated with the reported deficiencies, on the financial statements. We assessed the impact of the results of the above on our audit procedures over the financial statements for the year ended 31 December 2023. 4. Valuation of financial instruments held at fair value with higher risk characteristics Refer to the Audit Committee Report (page 163); Accounting policies (page 390); and Note 13 of the financial statements. At 31 December 2023, the Group reported financial assets measured at fair value of $301,976 million (2022: $282,263 million), and financial liabilities at fair value of $139,157 million (2022: $149,765 million), of which financial assets of $6,714 million (2022: $5,865 million) and financial liabilities of $2,960 million (2022: $1,878 million) are classified as Level 3 in the fair value hierarchy. The fair value of financial instruments with higher risk characteristics involves the use of management judgement in the selection of valuation models and techniques, pricing inputs and assumptions and fair value adjustments. A higher level of estimation uncertainty is involved for financial instruments valued using complex models, pricing inputs that have limited observability, and fair value adjustments, including the Credit Valuation Adjustment, Funding Valuation Adjustment, Debit Valuation Adjustment and Own Credit Adjustment. We considered the following portfolios presented a higher level of estimation uncertainty: Level 3 derivatives and debt securities in issue and a portfolio of Level 2 financial instruments whose valuation involves the use of complex models, and Unlisted equity investments, loans at fair value, debt and other financial instruments classified in Level 3 with unobservable pricing inputs. The level of risk remains consistent with the prior year. 5. Privileged Access Management IT General Controls (ITGCs) support the continuous operation of the automated and other IT dependent controls within the business processes related to financial reporting. Effective IT general controls are needed to ensure that IT applications process business data as expected and that changes are made in an appropriate manner. During the 2020, 2021 and 2022 audits, a number of significant infrastructure privileged access management control deficiencies were identified by us. Similar deficiencies were identified by Group Internal Audit (GIA) and the predecessor auditor in 2018 and 2019. The possibility of users gaining access privileges beyond those necessary to perform their assigned duties may result in breaches in segregation of duties, including inappropriate manual intervention, unauthorised changes to systems or programmes. The risk has decreased in comparison to prior year due to management’s remediation program. The key audit matters remain consistent from prior year. Key observations communicated to the Audit Committee We concluded that assumptions used by management to estimate the fair value of financial instruments with higher risk characteristics and the recognition of related income were reasonable. We highlighted the following matters to the Audit Committee: • We did not identify material differences arising from our independent testing of complex model-dependent valuations; • Fair values of derivative transactions, debt securities in issue, unlisted equity investments, Level 3 loans, Level 3 debt and other financial instruments valued using pricing information with limited observability were not materially misstated as at 31 December 2023, based on the output of our independent calculations; and • Valuation adjustments in respect of credit, funding, own credit and other risks applied to derivative portfolios and debt securities in issue were appropriate, based on our analysis of market data and benchmarking of pricing information. We communicated the results of our audit procedures to the Audit Committee throughout the audit, in respect of the effectiveness of privileged access management controls and explained the results of the additional audit procedures performed and noted an overall improvement in the control environment during the course of the year. As a result of the procedures performed, we have reduced the risk that our audit has not identified a material error in the financial statements, related to infrastructure privileged access management, to an appropriate level. 355 Standard Chartered – Annual Report 2023Financial statementsOur application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be $274 million (2022: $234 million), which is 5% (2022: 5%) of adjusted PBT. This reflects actual PBT adjusted for non-recurring items relating to restructuring and the impairment of China Bohai Bank. We believe that adjusted PBT provides us with most appropriate measure for the users of the financial statements, given the Group is profit making, it is consistent with the wider industry, it is the standard for listed and regulated entities and we believe it reflects the most relevant measure for users of the financial statements. We also believe that the adjustments are appropriate as they relate to material non-recurring items. During our audit, we performed a reassessment of our initial materiality. This assessment resulted in higher final materiality calculated based on the actual financial performance of the Group for the year. There were no changes to the basis for materiality calculation from the planning stage. Starting basis • Reported profit before tax – $5,093m Adjustments • Add China Bohai Bank Impairment – $850m • Deduct Other restructuring – $460m Materiality • Totals $5,483m Adjusted PBT • Materiality of $274m (5% of Adjusted PBT) We determined materiality for the Parent Company to be $247 million (2022: $210 million), which is 0.5% (2022: 0.4%) of the equity of the Parent Company. We believe that equity provides us with the most appropriate measure for the users of the Parent Company’s financial statements, given that the Parent Company is primarily a holding company. 356 Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessment, together with our evaluation of the Group’s overall control environment, our judgement was that performance materiality was 50% (2022: 50%) of our planning materiality, namely $137m (2022: $117m). We have set performance materiality at this percentage based on a variety of risk assessment factors such as the expectation of misstatements, internal control environment considerations and other factors such as the global complexity of the Group. Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a percentage of total performance materiality. The performance materiality 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 materiality allocated to components was $11.4 million to $26.2 million (2022: $8.8 million to $34.1 million). Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $14 million (2022: $11 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. Other information The other information comprises the information included in the Annual Report and Accounts, including: the Strategic Report, Sustainability Review, Directors’ Report (other than those sections of the Directors Remuneration Report marked as audited), Risk Review and Capital Review (other than those sections marked as audited) and Supplementary Information, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s report Opinions on other matters prescribed by the Companies Act 2006 In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities set out on page 89; • Directors’ statement on fair, balanced and understandable set out on page 217; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 221; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 230 to 343; and • the strategic report and the directors’ report have been • The section describing the work of the audit committee prepared in accordance with applicable legal requirements. set out on pages 162 to 167. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified 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 opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Corporate Governance Statement We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: • Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 218; • Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate set out on pages 88 and 89; Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 229, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial 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 opinion. 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, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including 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 intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. 357 Standard Chartered – Annual Report 2023Financial statementsHowever, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Company and management. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant are those that relate to the reporting framework (UK-adopted IAS and EU IFRS, the Companies Act 2006 and the UK Corporate Governance Code, the Financial Conduct Authority (FCA) Listing Rules, the Main Board Listing Rules of the Hong Kong Stock Exchange), regulations and supervisory requirements of the Prudential Regulation Authority (PRA), FRC, FCA and other overseas regulatory requirements, including but not limited to regulations in its major markets such as Mainland China, Hong Kong, India, Republic of Korea, Singapore, the United Arab Emirates, the United State of America, and the relevant tax compliance regulations in the jurisdictions in which the Group operates. In addition, we concluded that there are certain significant laws and regulations that may have an effect on the determination of the amounts and disclosures in the financial statements and those laws and regulations relating to regulatory capital and liquidity, conduct, financial crime including anti-money laundering, sanctions and market abuse recognising the financial and regulated nature of the Group’s activities. • We understood how the Group is complying with those frameworks by performing a combination of inquiries of senior management and those charged with governance as required by auditing standards, review of board and certain committee meeting minutes, gaining an understanding of the Group’s approach to governance, inspection of regulatory correspondence in the year and engaging with internal and external legal counsel. We also engaged EY financial crime and forensics specialists to perform procedures on areas relating to anti-money laundering, whistleblowing, and sanctions compliance. Through these procedures, we became aware of actual or suspected non-compliance. The identified actual or suspected non-compliance was not sufficiently significant to our audit that it would have resulted in it being identified as a key audit matter. • We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by considering the controls that the Group has established to address risks identified by the entity, or that otherwise seek to prevent, deter or detect fraud. Our procedures to address the risks identified also included incorporation of unpredictability into the nature, timing and/or extent of our testing, challenging assumptions and judgements made by management in their significant accounting estimates and journal entry testing. • Based on this understanding, we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved inquiries 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, including journal entry testing. We also performed inspection of key regulatory correspondence from the principal regulatory authorities 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 financial statements, these were communicated by management to the Group audit engagement team and component teams (where applicable) who performed audit procedures such as inquiries with management, sending confirmations to external legal counsel, substantive testing and meeting with regulators. Where appropriate, we involved specialists 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 activities. 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 capabilities, which included the use of specialists where appropriate. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/ auditorsresponsibilities. This description forms part of our auditor’s report. Other matters we are required to address • Following the recommendation from the Audit Committee, we were re-appointed by the Company at the Annual General Meeting on 3 May 2023 to audit the financial statements for the year ending 31 December 2023 and subsequent financial periods. • The period of total uninterrupted engagement is four years, covering the years ended 31 December 2020 to 31 December 2023. • The audit opinion is consistent with the additional 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 responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. David Canning-Jones (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 23 February 2024 358 Standard Chartered – Annual Report 2023Financial statementsIndependent auditor’s reportConsolidated income statement For the year ended 31 December 2023 Interest income Interest expense Net interest income Fees and commission income Fees and commission expense Net fee and commission income Net trading income Other operating income Operating income Staff costs Premises costs General administrative expenses Depreciation and amortisation Operating expenses Operating profit before impairment losses and taxation Credit impairment Goodwill, property, plant and equipment and other impairment Profit from associates and joint ventures Profit before taxation Taxation Profit for the year Profit attributable to: Non-controlling interests Parent company shareholders Profit for the year Earnings per share: Basic earnings per ordinary share Diluted earnings per ordinary share The notes on pages 367 to 487 form an integral part of these financial statements. Notes 3 4 5 6 7 8 9 32 10 29 12 12 2023 $million 27,227 (19,458) 7,769 4,067 (815) 3,252 6,292 706 18,019 (8,256) (422) (1,802) (1,071) (11,551) 6,468 (508) (1,008) 141 5,093 (1,631) 3,462 (7) 3,469 3,462 cents 108.6 106.2 2022 $million 15,252 (7,659) 7,593 3,972 (859) 3,113 5,310 302 16,318 (7,618) (401) (1,708) (1,186) (10,913) 5,405 (836) (439) 156 4,286 (1,384) 2,902 (46) 2,948 2,902 cents 85.9 84.3 359 Standard Chartered – Annual Report 2023Financial statementsConsolidated statement of comprehensive income For the year ended 31 December 2023 Profit for the year Other comprehensive income: Items that will not be reclassified to income statement: Own credit gains/(losses) on financial liabilities designated at fair value through profit or loss Equity instruments at fair value through other comprehensive income Actuarial (losses)/gains on retirement benefit obligations Taxation relating to components of other comprehensive income Items that may be reclassified subsequently to income statement: Exchange differences on translation of foreign operations: Net loss taken to equity Net gains on net investment hedges Share of other comprehensive loss from associates and joint ventures Debt instruments at fair value through other comprehensive income: Net valuation gain/(loss) taken to equity Reclassified to income statement Net impact of expected credit losses Cash flow hedges: Net movements in cash flow hedge reserve Taxation relating to components of other comprehensive income Other comprehensive income/(loss) for the year, net of taxation Total comprehensive income/(loss) for the year Total comprehensive income/(loss) attributable to: Non-controlling interests Parent company shareholders Total comprehensive income/(loss) for the year Notes 2023 $million 3,462 30 10 14 32 6 14 10 29 239 212 181 (47) (107) 562 (734) 215 (7) 383 115 (48) 767 (129) 801 4,263 (38) 4,301 4,263 2022 $million 2,902 (75) (56) (75) 41 15 (3,703) (2,466) 512 (79) (1,528) 207 118 (619) 152 (3,778) (876) (88) (788) (876) 360 Standard Chartered – Annual Report 2023Financial statementsFinancial statementsConsolidated balance sheet As at 31 December 2023 Assets Cash and balances at central banks Financial assets held at fair value through profit or loss Derivative financial instruments Loans and advances to banks Loans and advances to customers Investment securities Other assets Current tax assets Prepayments and accrued income Interests in associates and joint ventures Goodwill and intangible assets Property, plant and equipment Deferred tax assets Assets classified as held for sale Total assets Liabilities Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Financial liabilities held at fair value through profit or loss Derivative financial instruments Debt securities in issue Other liabilities Current tax liabilities Accruals and deferred income Subordinated liabilities and other borrowed funds Deferred tax liabilities Provisions for liabilities and charges Retirement benefit obligations Liabilities included in disposal groups held for sale Total liabilities Equity Share capital and share premium account Other reserves Retained earnings Total parent company shareholders’ equity Other equity instruments Total equity excluding non-controlling interests Non-controlling interests Total equity Total equity and liabilities Notes 13,35 13 13,14 13,15 13,15 13 20 10 32 17 18 10 21 13 13 13,16 13 13,14 13,22 23 10 13,27 10 24 30 21 28 28 29 2023 $million 2022 $million 69,905 147,222 50,434 44,977 286,975 161,255 47,594 484 3,033 966 6,214 2,274 702 809 822,844 28,030 469,418 12,258 83,096 56,061 62,546 39,221 811 6,975 12,036 770 299 183 787 772,491 6,815 9,171 28,459 44,445 5,512 49,957 396 50,353 822,844 58,263 105,812 63,717 39,519 310,647 172,448 50,383 503 3,149 1,631 5,869 5,522 834 1,625 819,922 28,789 461,677 2,108 79,903 69,862 61,242 43,527 583 5,895 13,715 769 383 146 1,307 769,906 6,930 8,165 28,067 43,162 6,504 49,666 350 50,016 819,922 The notes on pages 367 to 487 form an integral part of these financial statements. These financial statements were approved by the Board of directors and authorised for issue on 23 February 2024 and signed on its behalf by: José Viñals Group Chairman Bill Winters Group Chief Executive Diego De Giorgi Group Chief Financial Officer 361 Standard Chartered – Annual Report 2023Financial statements Consolidated statement of changes in equity For the year ended 31 December 2023 Ordinary share capital and share premium account $million Preference share capital and share premium account $million Capital and merger reserves1 $million Own credit adjust- ment reserve $million Fair value through other compre- hensive income reserve – debt $million Fair value through other compre- hensive income reserve – equity $million Cash- flow hedge reserve $million Trans- lation reserve $million Retained earnings $million Parent company share- holders’ equity $million Other equity instru- ments $million Non- controlling interests $million Total $million 5,528 1,494 17,246 (15) 103 249 (34) (5,744) 27,184 46,011 6,254 371 52,636 – – – – – 2,948 2,948 (48) (1,219) (43) (530) (1,904) 82 (3,736) As at 1 January 2022 Profit/(loss) for the year Other comprehensive (loss)/income¹¹ Distributions Other equity instruments issued, net of expenses Redemption of other equity instruments Treasury shares net movement Share option expenses Dividends on ordinary shares Dividends on preference shares and AT1 securities Share buyback3,4 Other movements As at 31 December 2022 Profit/(loss) for the year Other comprehensive income/(loss)¹¹ Distributions Redemption of other equity instruments Treasury shares net movement Share option expenses Dividends on ordinary shares Dividends on preference shares and AT1 securities Share buyback8,9 Other movements – – – – – – – – – (92) – – – – – – – – – – – – – – – – – – – – – 92 – – – – – – – – – (115) – – – – – – – – – – – – – – – – – – – 115 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (203) (203) 163 163 (393) (393) (401) (401) (1,258) (1,258) – – – (46) 2,902 (42) (3,778) (31) (31) 1,240 (999) – – – – – – – – – – – – 1,240 (999) (203) 163 (393) (401) (1,258) 125 195,6 31 9⁵ 987 138 – (1,000) – (1,000) – – – (7) 3,462 (31) (26) 801 (26) – – – – – – – – – (189) 173 (568) (452) – (2,000) – – – – – – – – – (189) (189) 173 173 (568) (568) (452) (452) – (2,000) (2,000) 125 65 18 8⁵ 11010 136 5,436 1,494 17,338 (63) (1,116) 206 (564) (7,636) 28,067 43,162 6,504 350 50,016 – – – – – 3,469 3,469 163 426 124 655 (489) (47)2 832 As at 31 December 2023 5,321 1,494 17,453 100 (690) 330 91 (8,113) 28,459 44,445 5,512 396 50,353 1 Includes capital reserve of $5 million, capital redemption reserve of $337 million and merger reserve of $17,111 million 2 Comprises actuarial gain on Group defined benefit schemes 3 On 18 February 2022, the Group announced the buyback programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $56 million, and the total consideration paid was $754 million, the buyback completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 4 On 1 August 2022, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $36 million, and the total consideration paid was $504 million. The total number of shares purchased was 73,073,837 representing 2.5 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 5 Movement related to Translation adjustment and AT1 Securities charges 6 Movement mainly related to $21 million NCI on Power2SME Pte. Ltd. and $8 million on CurrencyFair Limited & $(9)million related to AT1 securities charges 7 Movements primarily from non-controlling interest pertaining to Mox Bank Limited ($39 million), Trust Bank Singapore Limited ($47 million) , Zodia Markets Holdings Limited ($3 million) and Power2SME Pte. Ltd. ($9 million) 8 On 16 February 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $58 million, and the total consideration paid was $1,000 million and the buyback completed on 29 September 2023. The total number of shares purchased was 116,710,492, representing 4.03 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 9 On 28 July 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $57 million, and the total consideration paid was $1,000 million and the buyback completed on 6 November 2023. The total number of shares purchased was 112,982,802, representing 3.90 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 10 Movements primarily from non-controlling interest pertaining to Mox Bank Limited ($48 million), Trust Bank Singapore Limited ($34 million) and Zodia Custody Limited ($28 million) 11 All the amounts are net of tax Note 28 includes a description of each reserve. The notes on pages 367 to 487 form an integral part of these financial statements. 362 Standard Chartered – Annual Report 2023Financial statementsFinancial statementsCash flow statement For the year ended 31 December 2023 Group Company Notes 2023 $million 2022 (Restated) $million 2023 $million 2022 $million 5,093 4,286 4,269 Cash flows from operating activities: Profit before taxation Adjustments for non-cash items and other adjustments included within income statement Change in operating assets³ Change in operating liabilities Contributions to defined benefit schemes UK and overseas taxes paid Net cash (used in)/from operating activities Cash flows from investing activities: Internally generated capitalised software Purchase of property, plant and equipment Disposal of property, plant and equipment Disposal of held for sale property, plant and equipment Acquisition of investment associates, and joint ventures, net of cash acquired Dividends received from subsidiaries, associates and joint ventures Disposal of investment in subsidiaries, associates, and joint ventures, net of cash acquired² Purchase of investment securities Disposal and maturity of investment securities Net cash from/(used in) from investing activities Cash flows from financing activities: Exercise of share options Purchase of own shares Cancellation of shares including share buyback Premises and equipment lease liability principal payment Issue of additional Tier 1 Capital, net of expenses Redemption of Tier 1 Capital Gross proceeds from issue of subordinated liabilities Interest paid on subordinated liabilities Repayment of subordinated liabilities Proceeds from issue of senior debts Repayment of senior debts Interest paid on senior debts Net cash inflow from non-controlling interest Distributions and dividends paid to non-controlling interests, preference shareholders and AT1 Securities Dividends paid to ordinary shareholders Net cash from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year³ Effect of exchange rate movements on cash and cash equivalents 34 34 34 30 10 17 18 18 21 32 32 32 28 28 34 34 34 34 34 34 29 11,29 11 3,274 (14,458) 1,977 (81) (1,367) (5,562) (1,124) (159) 53 191 (47) 11 3,603 3,549 12,989 8,786 (80) (821) 28,709 (1,096) (835) 343 79 (26) 58 – (229,302) (280,952) 242,585 15,811 259,853 (22,576) 26 (215) (2,000) (234) – (1,000) 18 (563) (2,160) 15,261 (6,471) (1,145) 116 (478) (568) 587 10,836 97,595 (796) 12 (215) (1,258) (269) 1,240 (999) 750 (667) (1,848) 11,902 (7,838) (845) 88 (432) (393) (772) 5,361 94,947 (2,713) 97,595 402 565 (258) (966) – – (257) – – – – – (2,847) (3,819) 3,239 – – 842 – – – – – 4,738 1,047 – (423) 2,000 6,315 26 (215) (2,000) – – (1,000) – (545) (2,160) 5,105 (2,037) (434) – (452) (568) (4,280) 2,877 7,417 – 10,294 – – 960 2,007 12 (215) (1,258) – 1,240 (999) 750 (619) (1,800) 1,500 (2,980) (506) – (401) (393) (5,669) (3,919) 11,336 – 7,417 Cash and cash equivalents at end of the year1,3 35 107,635 1 Comprises cash and balances at central banks $69,905 million (31 December 2022: $58,263 million), treasury bills and other eligible bills $5,931 million (31 December 2022: $12,661 million), loans and advances to banks $11,879 million (31 December 2022: $10,144 million), loans and advances to customers $25,829 million (31 December 2022: $24,586 million) investments $244 million (31 December 2022: $1,114 million) less restricted balances $6,153 million (31 December 2022: $9,173 million) 2 Includes disposal of aviation finance leasing business ($3,570 million), sale of Metaco SA ($14 million), Cardspal Pte. Ltd. ($12 million) and Kozagi ($7 million) 3 Refer to note 34 and 35 for details of the restatement Interest received was $27,136 million (31 December 2022: $14,590 million), interest paid was $18,379 million (31 December 2022: $6,200 million). 363 Standard Chartered – Annual Report 2023Financial statementsCompany balance sheet For the year ended 31 December 2023 Non-current assets Investments in subsidiary undertakings Current assets Derivative financial instruments Financial assets held at fair value through profit or loss Investment securities Amounts owed by subsidiary undertakings Total current assets Current liabilities Derivative financial instruments Amounts owed to subsidiary undertakings Financial liabilities held at fair value through profit or loss Other creditors Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Debt securities in issue Subordinated liabilities and other borrowed funds Total non-current liabilities Total assets less liabilities Equity Share capital and share premium account Other reserves Retained earnings Total shareholders’ equity Other equity instruments Total equity Notes 2023 $million 2022 $million 32 39 39 39 39 39 39 39 39 28 28 60,791 60,975 80 19,425 6,944 10,294 36,743 1,104 – 16,704 650 18,458 18,285 79,076 17,142 9,248 26,390 52,686 6,815 17,409 22,952 47,176 5,510 52,686 61 15,358 8,423 7,417 31,259 1,343 2 12,842 423 14,610 16,649 77,624 13,891 11,239 25,130 52,494 6,930 17,271 21,791 45,992 6,502 52,494 The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its individual statement of comprehensive income and related notes that form a part of these financial statements. The Company profit for the period after tax is $4,205 million (31 December 2022: $471 million). The notes on pages 367 to 487 form an integral part of these financial statements. These financial statements were approved by the Board of directors and authorised for issue on 23 February 2024 and signed on its behalf by: José Viñals Group Chairman Bill Winters Group Chief Executive Diego De Giorgi Group Chief Financial Officer 364 Standard Chartered – Annual Report 2023Financial statementsFinancial statements Company statement of changes in equity For the year ended 31 December 2023 Share capital and share premium account $million Capital and merger reserve1 $million Own credit adjustment reserve $million Cash flow hedge reserve $million Retained earnings $million Other equity instruments $million As at 1 January 2022 Profit for the year2 Other comprehensive loss⁸ Other equity instruments issued, net of expenses Treasury shares net movement Share option expenses Dividends on ordinary shares Dividends on preference share and AT1 securities Redemption of other equity instruments Share buyback3,4 Other Movements5 As at 31 December 2022 Profit for the year2 Other comprehensive income⁸ Treasury shares net movement Share option expenses Dividends on ordinary shares Dividends on preference share and AT1 securities Redemption of other equity instruments Share buyback6,7 Other Movements5 7,022 17,246 – – – – – – – – (92) – – – – – – – – – 92 – (14) – (5) (12) – (36) – – – – – – – – – – – – – – – – 6,930 17,338 (19) (48) – – – – – – – – – – – – – – (115) – 115 – – 11 – – – – – – – – 12 – – – – – – – 23,418 471 – – (203) 163 (393) (401) 6,252 – – 1,240 – – – – – (999) Total $million 53,912 471 (41) 1,240 (203) 163 (393) (401) (999) (1,258) 3 (1,258) (6) 21,791 4,205 – (189) 170 (568) (452) 9 6,502 52,494 – – – – – – 4,205 23 (189) 170 (568) (452) – (1,000) (1,000) (2,000) (5) – 8 (2,000) 3 As at 31 December 2023 6,815 17,453 (8) (36) 22,952 5,510 52,686 1 Includes capital reserve of $5 million, capital redemption reserve of $337 million and merger reserve of $17,111 million 2 Includes dividend received of $2,789 million (2022: $550 million) from Standard Chartered Holding Limited 3 On 18 February 2022, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $56 million, and the total consideration paid was $754 million, the buyback completed on 19 May 2022. The total number of shares purchased was 111,295,408, representing 3.61 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 4 On 1 August 2022, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $37 million, and the total consideration paid was $504 million. The total number of shares purchased was 73,073,837 representing 2.5 per cent of the ordinary shares in issue. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 5 Movement mainly related to AT1 securities charges 6 On 16 February 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $58 million, and the total consideration paid was $1,000 million and the buyback completed on 29 September 2023. The total number of shares purchased was 116,710,492, representing 4.03 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 7 On 28 July 2023, the Group announced the buyback programme for a share buyback of its ordinary shares of $0.50 each. Nominal value of share purchases was $57 million, and the total consideration paid was $1,000 million and the buyback completed on 6 November 2023. The total number of shares purchased was 112,982,802, representing 3.90 per cent of the ordinary shares in issue as at the commencement of the buyback. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account 8 All the amounts are net of tax Note 28 includes a description of each reserve. The notes on pages 367 to 487 form an integral part of these financial statements. 365 Standard Chartered – Annual Report 2023Financial statementsContents – Notes to the financial statements Section Basis of preparation Performance/return Assets and liabilities held at fair value Financial instruments held at amortised cost Other assets and investments Funding, accruals, provisions, contingent liabilities and legal proceedings Capital instruments, equity and reserves Employee benefits Scope of consolidation Cash flow statement Other disclosure matters Note 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Accounting policies Segmental information Net interest income Net fees and commission Net trading income Other operating income Operating expenses Credit impairment Goodwill, property, plant and equipment and other impairment Taxation Dividends Earnings per ordinary share Financial instruments Derivative financial instruments Loans and advances to banks and customers Reverse repurchase and repurchase agreements including other similar lending and borrowing Goodwill and intangible assets Property, plant and equipment Leased assets Other assets Assets held for sale and associated liabilities Debt securities in issue Other liabilities Provisions for liabilities and charges Contingent liabilities and commitments Legal and regulatory matters Subordinated liabilities and other borrowed funds Share capital, other equity instruments and reserves Non-controlling interests Retirement benefit obligations Share-based payments Investments in subsidiary undertakings, joint ventures and associates Structured entities Cash flow statement Cash and cash equivalents Related party transactions Post balance sheet events Auditor’s remuneration Standard Chartered PLC (Company) 40 Related undertakings of the Group Page 367 370 375 375 378 378 379 380 384 384 388 389 390 414 422 422 424 427 429 430 430 431 432 432 433 434 435 436 441 442 447 452 457 458 460 460 461 462 462 465 366 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statementsNotes to the financial statements Significant accounting estimates and critical judgements Significant accounting estimates and judgements represent those items which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year. Significant accounting estimates and judgements are: • Expected credit loss calculations (Note 8) • Financial instruments measured at fair value (Note 13) • Investments in subsidiary undertakings, joint ventures and associates – China Bohai associate accounting and impairment analysis (Note 32) Other areas of accounting estimate and judgement Other areas of accounting estimate and judgement do not meet the definition under IAS 1 of significant accounting estimates or critical accounting judgements, but the recognition of certain material assets and liabilities are based on assumptions and/or are subject to long-term uncertainties. The other areas of accounting estimate and judgement are: • Taxation (Note 10) • Goodwill impairment (Note 17) • Retirement benefit obligations (Note 30) • Share-based payments (Note 31) Climate impact on the Group’s balance sheet Climate, and the impact of climate on the Group’s balance sheet is considered as an area of significant accounting estimate and judgment through the uncertainty of future events and the impact of that uncertainty on the Group’s assets and liabilities. It is noted that although not currently quantitatively material, the Group considers climate to be qualitatively material to the Group. The Group has assessed the impact of climate risk on the financial report. This is set out within the Sustainability Review chapter which incorporates the Group’s Climate- related Financial Disclosures which align with the recommendations from the Task Force for Climate related Financial Disclosures (TCFD). Further risk disclosure has been provided in the Principal Risks and Uncertainties section of the Annual Report where the Group has described how it manages climate risk as an Integrated Risk Type. 1. Accounting policies Statement of compliance The Group financial statements consolidate Standard Chartered PLC (the Company) and its subsidiaries (together referred to as the Group) and equity account the Group’s interests in associates and jointly controlled entities. The parent company financial statements present information about the Company as a separate entity. The Group financial statements have been prepared in accordance with UK-adopted international accounting standards and International Financial Reporting Standards (IFRS) as adopted by the European Union (EU IFRS). The Company financial statements have been prepared in accordance with UK-adopted international accounting standards as applied in conformity with section 408 of the Companies Act 2006. The financial statements have been prepared in accordance with the requirements of the Companies Act 2006. There are no significant differences between UK-adopted international accounting standards and EU IFRS. The following parts of the Risk review and Capital review form part of these financial statements: a) Risk review: Disclosures marked as ‘audited’ from the start of the Credit Risk section (page 234) to the end of Other principal risks in the same section (page 297). b) Capital review: Tables marked as ‘audited’ from the start of ‘CRD Capital base’ to the end of ‘Movement in total capital’, excluding ‘Total risk-weighted assets’ (page 339 to 340). Basis of preparation The consolidated and Company financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of cash-settled share-based payments, fair value through other comprehensive income, and financial assets and liabilities (including derivatives) at fair value through profit or loss. The consolidated financial 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 million dollars, except when otherwise indicated. Significant and other accounting estimates and judgement In determining the carrying amounts of certain assets and liabilities, the Group makes assumptions of the effects of uncertain future events on those assets and liabilities at the balance sheet date. The Group’s estimates and assumptions are based on historical experience and expectation of future events and are reviewed periodically. Further information about key assumptions concerning the future, and other key sources of estimation uncertainty and judgement, are set out in the relevant disclosure notes for the areas set out under the relevant headings below: 367 Standard Chartered – Annual Report 2023Financial statements1. Accounting policies continued The areas of impact where judgements and the use of estimates have been applied were credit risk and the impact on lending portfolios; ESG features within 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 recoverability of certain assets, including of goodwill, deferred tax assets and investments in subsidiary undertakings. This assessment on the corporate loan portfolio was undertaken by considering the maturity profile of the loan portfolio which is majority shorter term. Transition risk, as our clients move to lower carbon emitting revenues, (either by virtue of legislation or changing end customer preference) is considered with reference to client transition pathways and manifests over a longer term than the maturity of the loan book (up to 2050). The setting of net zero targets for our high carbon sectors, which as of this annual report covers 11 of the 12 high carbon sectors as mandated by the Net Zero Banking Alliance, manages transition risk. Net zero targets enable the portfolio managers to work with our clients on their transition, deploy capital to those clients which are engaged and have adequate transition pathways, and exit clients that refuse to work with the Group on moving from a high carbon present to a low carbon future. All of these actions manage the Group’s transition risk and engage clients before transition risk manifests itself into credit losses. Physical risk is already included within the majority of our mortgage lending decisions, and we have applied scenario analysis against the pathways of different temperature additions and country policy scenarios. We also assess the impact of climate risk on the classification of financial instruments under IFRS 9, when Environmental, Sustainability or Governance (ESG) triggers may affect the cash flows received by the Group under the contractual terms of the instrument. The Group Climate Risk team have performed a quantitative assessment of the impact of climate risk on the IFRS 9 ECL provision. This assessment has been performed across both the CCIB and CPBB portfolios. The Climate risk impact assessment on IFRS 9 business as usual ECL has been conducted based on newly developed internal climate risk models for four Corporate sectors (Oil and Gas, Power, Steel and Mining) and Sovereigns, whilst the top-down approach developed in 2022 was used for the remaining portfolios. The impact assessment resulted in a marginal ECL increase across CCIB and CPBB, which will not be recorded as an overlay for the 2023 year end. The Group’s corporate plan has a 5 year outlook and considers the high carbon sectors the Group finances. The majority of the Group high carbon sector targets are production/physical intensities which allow continued levels of lending as long as the products the client produce have a decreasing carbon cost. For Coal Mining and Oil and Gas, these sectors have absolute targets which represent a decreasing carbon budget. Coal Mining is an immaterial book, whilst for Oil and Gas lending is being actively monitored towards lower carbon counterparties and technologies. The corporate plan is shorter term than many of the climate scenario outlooks but seeks to capture the nearer term performance as required by recoverability models. The Group has for the second time in the 2024 corporate plan included anticipated ECL charges linked to climate for four sectors (Oil and Gas, Metals and Mining, Power and Transport excluding Aviation) over the 5 years. This addition of ECL has not in itself, impacted the recoverability of assets supported by discounted cash flow models (such as Value in Use) which utilise the Corporate plan. The Group has further progressively strengthened its scenario analysis capabilities with the modelling of Climate Risk impact over a 30-year period across multiple dimensions including scenario data and pathways. This has been limited by availability of client-specific data, and modelling limitations which have required judgements to be made around scenarios chosen, regression and proxies used. Notwithstanding these challenges, our work to date, using certain assumptions and proxies, indicates that our business is resilient to all Network of Central Banks and Supervisors for Greening the Financial System (NGFS) and bespoke scenarios that were explored. The Group, although acknowledging the limitations of current data available, increasing sophistication of models evolving and nascent nature of climate impacts on internal and client assets, considers Climate Risk to have limited quantitative impact in the immediate term and as a longer-term risk will be addressed through its business strategy and financial planning as the Group implements its net zero journey. IFRS and Hong Kong accounting requirements As required by the Hong Kong Listing Rules, an explanation of the differences in accounting practices between UK- adopted IFRS and Hong Kong Financial Reporting Standards is required to be disclosed. There would be no significant differences had these accounts been prepared in accordance with Hong Kong Financial Reporting Standards. 368 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements1. Accounting policies continued Comparatives Certain comparatives have been restated in line with current year disclosures. Details of these changes are set out in the relevant sections and notes below: • Cash flow statement • Note 2 Segmental information • Note 12 Earnings per ordinary share • Note 34 Cash flow statement • Note 35 Cash and cash equivalents New accounting standards adopted by the group There were no new accounting standards or interpretations that had a material effect on the Group’s Financial Statements in 2023. New accounting standards in issue but not yet effective IAS 21 Amendment - Lack of Exchangeability The IAS 21 amendment was issued in August 2023 and is effective for annual reporting periods beginning on or after January 1, 2025. This amendment is not yet endorsed for use in the United Kingdom. The amendment provides guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not. The amendment requires disclosure of information that enables users of financial statements to understand the impact of a currency not being exchangeable. The Group will apply the IAS 21 Amendment for annual reporting periods beginning on January 1, 2025 and is currently assessing the impact on the Group’s financial statements but do not expect this to be material. Going concern These financial statements were approved by the Board of directors on 23 February 2024. The directors have made an assessment of the Group’s ability to continue as a going concern. This assessment has been made having considered the current macroeconomic and geopolitical headwinds, including: • Review of the Group Strategy and Corporate Plan • An assessment of the actual performance to date, loan book quality, credit impairment, legal, regulatory and compliance matters, and the updated annual budget • Consideration of stress testing performed, including the Group Recovery Plan (RP) which include the application of stressed scenarios. Under the tests and through the range of scenarios, the results of these exercises and the RP demonstrate that the Group has sufficient capital and liquidity to continue as a going concern and meet minimum regulatory capital and liquidity requirements • Analysis of the capital, funding and liquidity position of the Group, including 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 liquidity was considered in the context of the risk appetite metrics, including the LCR ratio. • The Group’s Internal Liquidity Adequacy Assessment Process (ILAAP), which considers the Group’s liquidity position, its framework and whether sufficient liquidity resources are being maintained to meet liabilities as they fall due, was also reviewed • The level of debt in issue, including redemptions and issuances during the year, debt falling due for repayment in the next 12 months and further planned debt issuances, including the appetite in the market for the Group’s debt • A detailed review of all principal and emerging risks Based on the analysis performed, the directors confirm they are satisfied that the Group has adequate resources to continue in business for a period of at least 12 months from 23 February 2024. For this reason, the Group continues to adopt the going concern basis of accounting for preparing the financial statements. Changes in accounting policies The Group has changed its accounting policy regarding the determination of the cost of its portfolio of Investment Securities held at amortised cost and Debt securities and other eligible bills, other than those included within financial instruments held at fair value through profit or loss. Refer to Note 13 Financial Instruments. 369 Standard Chartered – Annual Report 2023Financial statements2. Segmental information 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 principally the location from which a client relationship is managed, which may differ from where it is financially booked and may be shared between businesses and/or regions. In certain instances this approach is not appropriate and a Financial View is disclosed, that is, the location in which the transaction or balance was booked. Typically, the Financial View is used in areas such as the Market and Liquidity Risk reviews where actual booking location is more important for an assessment. Segmental information is therefore on a Management View unless otherwise stated. Segments and regions 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. Restructuring items excluded from underlying results The Group’s reported IFRS performance is adjusted for certain items to arrive at alternative performance measures. These items include profits or losses of a capital nature, amounts consequent to investment transactions driven by strategic intent, other infrequent and/or exceptional transactions that are significant or material in the context of the Group’s normal business earnings for the period and items which management and investors would ordinarily identify separately when assessing consistent performance period by period. The alternative performance measures are not within the scope of IFRS and not a substitute for IFRS measures. These adjustments are set out below. Restructuring losses of $14 million primarily relates to exits in AME and the Aviation finance business performance until actual disposal. The Group is also reclassifying the movements in the Debit Valuation Adjustment (DVA) into restructuring and other items. Reconciliations between underlying and reported results are set out in the tables below: Underlying $million Restructuring $million 2023 Net gain on businesses disposed of³ $million Goodwill and other Impairment1 $million Operating income Operating expenses Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment Profit from associates and joint ventures Profit/(loss) before taxation 17,378 (11,136) 6,242 (528) (130) 94 5,678 362 (415) (53) 20 (28) 47 (14) 262 – 262 – – – 262 – – – – (850) – (850) Underlying $million Restructuring $million 2022² Net gain on businesses disposed of $million Goodwill and other Impairment1 $million Operating income Operating expenses Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment Profit/(loss) from associates and joint ventures Profit/(loss) before taxation 15,762 (10,409) 5,353 (836) (39) 167 4,645 494 (504) (10) – (78) (11) (99) 20 – 20 – – – 20 – – – – (322) – (322) DVA $million 17 – 17 – – – 17 DVA $million 42 – 42 – – – 42 Reported $million 18,019 (11,551) 6,468 (508) (1,008) 141 5,093 Reported $million 16,318 (10,913) 5,405 (836) (439) 156 4,286 1 Goodwill and other impairment include $850 million (31 December 2022: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai) 2 Restructuring, DVA and other items for relevant periods in 2022 have been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA from underlying operating performance 3 Net gain on businesses disposed of includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans 370 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements2. Segmental information continued Underlying performance by client segment Operating income External Inter-segment Operating expenses Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment (Loss)/profit from associates and joint ventures Underlying profit/(loss) before taxation Restructuring Goodwill and other impairment⁴ DVA Other items⁵ Reported profit/(loss) before taxation Total assets Of which: loans and advances to customers loans and advances to customers loans held at fair value through profit or loss (FVTPL)2 Total liabilities Of which: customer accounts3 Operating income External Inter-segment Operating expenses Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment (Loss)/profit from associates and joint ventures Underlying profit/(loss) before taxation Restructuring Goodwill and other impairment⁴ DVA Other items Reported profit/(loss) before taxation Total assets Of which: loans and advances to customers loans and advances to customers loans held at fair value through profit or loss (FVTPL)2 Total liabilities Of which: customer accounts3 Corporate, Commercial & Institutional Banking $million 11,218 8,543 2,675 (5,627) 5,591 (123) (32) – 5,436 32 – 17 262 5,747 403,058 189,395 130,897 58,498 464,968 328,211 Corporate, Commercial & Institutional Banking $million 9,608 8,462 1,146 (5,193) 4,415 (425) – – 3,990 14 – 42 – 4,046 401,567 184,254 139,756 44,498 479,981 332,176 Consumer, Private & Business Banking $million 7,106 3,902 3,204 (4,261) 2,845 (354) (4) – 2,487 (60) – – – 2,427 128,768 126,117 126,104 13 200,263 195,678 Consumer, Private & Business Banking $million 5,969 4,942 1,027 (4,104) 1,865 (262) (10) – 1,593 (56) – – – 1,537 133,956 130,985 130,957 28 185,396 180,659 2023 Ventures $million 156 157 (1) (429) (273) (85) (26) (24) (408) (4) – – – (412) 4,009 1,035 1,035 – 3,096 2,825 Central & other items (segment) $million (1,102) 4,776 (5,878) (819) (1,921) 34 (68) 118 (1,837) 18 (850) – – (2,669) 287,009 28,939 28,939 – 104,164 7,908 2022¹ Ventures $million Central & other items (segment) $million 29 29 – (336) (307) (16) (24) (16) (363) (1) – – – (364) 2,451 702 702 – 1,658 1,548 156 2,329 (2,173) (776) (620) (133) (5) 183 (575) (56) (322) – 20 (933) 281,948 41,789 39,232 2,557 102,871 5,846 Total $million 17,378 17,378 – (11,136) 6,242 (528) (130) 94 5,678 (14) (850) 17 262 5,093 822,844 345,486 286,975 58,511 772,491 534,622 Total $million 15,762 15,762 – (10,409) 5,353 (836) (39) 167 4,645 (99) (322) 42 20 4,286 819,922 357,730 310,647 47,083 769,906 520,229 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2 Loans held at FVTPL includes $51,299 million (2022: $40,537 million) of reverse repurchase agreements 3 Customer accounts includes $17,248 million (2022: $11,706 million) of FVTPL and $47,956 million (2022: $46,846 million) of reverse repurchase agreements 4 Goodwill and other impairment include $850 million (31 December 2023: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai) 5 Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans 371 Standard Chartered – Annual Report 2023Financial statements2. Segmental information continued Operating income by client segment Underlying operating income Restructuring DVA Other items² Reported operating income Underlying operating income Restructuring DVA Other items Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million 11,218 291 17 262 11,788 Corporate, Commercial & Institutional Banking $million 9,608 436 42 – 7,106 45 – – 7,151 Consumer, Private & Business Banking $million 5,969 47 – – Reported operating income 10,086 6,016 2023 Ventures $million 156 – – – Central & other items (segment) $million (1,102) 26 – – Total $million 17,378 362 17 262 156 (1,076) 18,019 2022¹ Ventures $million Central & other items (segment) $million 29 – – – 29 156 11 – 20 187 Total $million 15,762 494 42 20 16,318 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2 Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans Underlying performance by region Operating income Operating expenses Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment Profit/(loss) from associates and joint ventures Underlying profit/(loss) before taxation Restructuring Goodwill and other impairment1 DVA Other items⁴ Reported profit/(loss) before taxation Total assets Of which: loans and advances to customers loans and advances to customers loans held at fair value through profit or loss (FVTPL)2 Total liabilities Of which: customer accounts³ Africa & Middle East $million 2,806 (1,571) 2023 Europe & Americas $million 1,397 (1,733) Central & other items (region) $million 746 (736) 1,235 91 (15) – 1,311 (2) – 26 (18) 1,317 54,140 25,870 22,774 3,096 40,612 33,059 (336) 19 (13) – (330) 32 – 7 263 (28) 253,410 63,216 30,784 32,432 181,417 124,543 10 6 (39) (20) (43) 53 – – (18) (8) 9,389 – – – 88,894 – Asia $million 12,429 (7,096) 5,333 (644) (63) 114 4,740 (97) (850) (16) 35 3,812 505,905 256,400 233,417 22,983 461,568 377,020 Total $million 17,378 (11,136) 6,242 (528) (130) 94 5,678 (14) (850) 17 262 5,093 822,844 345,486 286,975 58,511 772,491 534,622 1 Goodwill and other impairment include $850 million (31 December 2023: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai) 2 Loans held at FVTPL includes $51,299 million (2022: $40,537 million) of reverse repurchase agreements 3 Customer accounts includes $17,248 million (2022: $11,706 million) of FVTPL and $47,956million (2022: $46,846 million) of reverse repurchase agreements 4 Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans 372 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements2. Segmental information continued Operating income Operating expenses Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment Profit/(loss) from associates and joint ventures Underlying profit/(loss) before taxation Restructuring Goodwill and other impairment2 DVA Other items Reported profit/(loss) before taxation Total assets Of which: loans and advances to customers loans and advances to customers loans held at fair value through profit or loss (FVTPL)3 Total liabilities Of which: customer accounts4 Asia $million 10,912 (6,675) 4,237 (790) (10) 179 3,616 (46) (308) 20 20 3,302 488,399 270,892 257,171 13,721 441,349 346,832 Africa & Middle East $million 2,460 (1,551) 909 (119) 2 – 792 21 – 8 – 821 53,086 23,857 21,570 2,287 40,902 31,860 2022¹ Europe & Americas $million 2,303 (1,548) 755 78 1 – 834 (13) – 14 – 835 268,960 62,981 31,906 31,075 219,701 141,537 Central & other items (region) $million 87 (635) (548) (5) (32) (12) (597) (61) (14) – – (672) 9,477 – – – 67,954 – Total $million 15,762 (10,409) 5,353 (836) (39) 167 4,645 (99) (322) 42 20 4,286 819,922 357,730 310,647 47,083 769,906 520,229 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2 Goodwill and other impairment include $850 million (31 December 2023: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai) 3 Loans held at FVTPL includes $51,299 million (2022: $40,537 million) of reverse repurchase agreements 4 Customer accounts includes $17,248 million (2022: $11,706 million) of FVTPL and $47,956million (2022: $46,846 million) of reverse repurchase agreements 5 Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans Operating income by region Underlying operating income Restructuring DVA Other items² Asia $million 12,429 203 (16) 35 Africa & Middle East $million 2,806 110 26 (18) Reported operating income 12,651 2,924 Underlying operating income Restructuring DVA Other items Asia $million 10,912 304 20 20 Africa & Middle East $million 2,460 140 8 – 2023 Europe & Americas $million 1,397 35 7 263 1,702 2022¹ Europe & Americas $million 2,303 35 14 – Reported operating income 11,256 2,608 2,352 Central & other items (region) $million 746 14 – (18) 742 Central & other items (region) $million 87 15 – – 102 Total $million 17,378 362 17 262 18,019 Total $million 15,762 494 42 20 16,318 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2 Other items includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans 373 Standard Chartered – Annual Report 2023Financial statements2. Segmental information continued Additional segmental information (reported) Corporate, Commercial & Institutional Banking $million 4,541 1,753 5,494 11,788 Corporate, Commercial & Institutional Banking $million 3,616 1,706 4,764 10,086 Asia $million 5,872 2,237 4,542 12,651 Asia $million 5,747 2,224 3,285 11,256 Consumer, Private & Business Banking $million 4,970 1,538 643 7,151 Consumer, Private & Business Banking $million 3,969 1,524 523 6,016 2023 Ventures $million 81 43 32 156 2022 Ventures $million 18 8 3 29 2023 Africa & Middle East $million Europe & Americas $million 1,584 509 831 2,924 (545) 553 1,694 1,702 2022 Africa & Middle East $million Europe & Americas $million 1,299 526 783 2,608 2023 260 526 1,566 2,352 Central & other items (segment) $million (1,823) (82) 829 (1,076) Central & other items (segment) $million (10) (125) 322 187 Central & other items (region) $million 858 (47) (69) 742 Central & other items (region) $million 287 (163) (22) 102 Total $million 7,769 3,252 6,998 18,019 Total $million 7,593 3,113 5,612 16,318 Total $million 7,769 3,252 6,998 18,019 Total $million 7,593 3,113 5,612 16,318 Hong Kong $million 1,946 615 2,052 4,613 Hong Kong $million 1,843 658 1,235 3,736 Korea $million China $million Taiwan $million Singapore $million India $million Indonesia $million UAE $million UK $million US $million 684 171 216 520 149 487 1,071 1,156 154 182 214 550 937 576 929 654 221 330 2,442 1,205 110 53 78 241 390 81 330 801 (930) 18 1,277 365 170 441 263 874 2022 Korea $million China $million Taiwan $million Singapore $million India $million Indonesia $million UAE $million UK $million US $million 751 157 237 1,145 561 143 450 1,154 171 162 141 474 982 553 380 1,915 611 239 377 1,227 89 52 73 214 281 81 268 630 (189) 44 1,167 1,022 330 393 306 1,029 Net interest income Net fees and commission income Net trading and other income Operating income Net interest income Net fees and commission income Net trading and other income Operating income Net interest income Net fees and commission income Net trading and other income Operating income Net interest income Net fees and commission income Net trading and other income Operating income Net interest income Net fees and commission income Net trading and other income Operating income Net interest income Net fees and commission income Net trading and other income Operating income 374 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements3. Net interest income Accounting policy Interest income for financial assets held at either fair value through other comprehensive income or amortised cost, and interest expense on all financial liabilities held at amortised cost is recognised in profit or loss using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial 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. For floating-rate financial instruments, periodic re-estimation of cash flows that reflect the movements in the market rates of interest alters the effective interest rate. Where the estimates of cash flows have been revised, the carrying amount of the financial asset or liability is adjusted to reflect the actual and revised cash flows, discounted at the instruments original effective interest rate. The adjustment is recognised as interest income or expense in the period in which the revision is made as long as the change in estimates is not due to credit issues. Interest income for financial assets that are either held at fair value through other comprehensive income or amortised cost that have become credit-impaired subsequent to initial recognition (stage 3) and have had amounts written off, is recognised using the credit adjusted effective interest rate. This rate is calculated in the same manner as the effective interest rate except that expected credit losses are included in the expected cash flows. Interest income is therefore recognised on the amortised cost of the financial asset including expected credit losses. Should the credit risk on a stage 3 financial asset improve such that the financial asset is no longer considered credit-impaired, interest income recognition reverts to a computation based on the rehabilitated gross carrying value of the financial asset. Balances at central banks Loans and advances to banks Loans and advances to customers Debt securities Other eligible bills Accrued on impaired assets (discount unwind) Interest income Of which: financial instruments held at fair value through other comprehensive income Deposits by banks Customer accounts Debt securities in issue Subordinated liabilities and other borrowed funds Interest expense on IFRS 16 lease liabilities Interest expense Net interest income 4. Net fees and commission 2023 $million 2,833 2,095 15,518 5,005 1,596 180 27,227 3,445 796 14,292 3,367 951 52 19,458 7,769 2022 $million 765 853 10,032 2,836 630 136 15,252 2,167 433 5,443 1,169 570 44 7,659 7,593 Accounting policy The Group can act as trustee or in other Fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. The assets and income arising thereon are excluded from these financial statements, as they are not assets and income of the Group. 375 Standard Chartered – Annual Report 2023Financial statements4. Net fees and commission continued The Group applies the following practical expedients: • information on amounts of transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations 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 consideration is not adjusted for the effects of a significant financing component as the period between the Group providing a service and the customer paying for it is expected to be less than one year • incremental costs of obtaining a fee-earning contract are recognised upfront in ‘Fees and commission expense’ rather than amortised, if the expected term of the contract is less than one year The determination 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 considerations on income recognition by product are as follows: 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. Financial Markets The Group recognises fee income at the point in time the service is provided. Fee income is recognised for a significant non- lending service when the transaction has been completed and the terms of the contract with the customer entitle the Group to the fee. This includes fees such as structuring and advisory fees. Fees are usually received shortly after the service is provided. Syndication fees are recognised when the syndication is complete defined as achieving the final approved hold position. Fees are generally received before completion of the syndication, or within 12 months of the transaction date. Securities services include custody services, fund accounting and administration, 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 consideration on bancassurance agreements is amortised straight-line over the contractual term. Commissions for bancassurance activities are recorded as they are earned through sales of third-party insurance products to customers. These commissions are received within a short time frame of the commission 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 specified date after achievement of a target has been confirmed. Upfront and trailing commissions for managed investment placements are recorded as they are confirmed. Income from these activities is relatively even throughout the period, and cash is usually received within a short time frame after the commission 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 over the service period. In most of our retail markets there are circumstances under which fees are waived, income recognition is adjusted to reflect customer’s intent to pay the annual fee. The Group defers the fair value of reward points on its credit card reward programmes, and recognises income and costs associated with fulfilling the reward at the time of redemption. Upfront bancassurance consideration amounts are amortised on a straight-line basis over the contractual period to which the consideration relates. 376 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements4. Net fees and commission continued Fees and commissions income Of which: Financial instruments that are not fair valued through profit or loss Trust and other fiduciary activities Fees and commissions expense Of which: Financial instruments that are not fair valued through profit or loss Trust and other fiduciary activities Net fees and commission 2023 $million 4,067 1,374 508 2022 $million 3,972 1,306 520 (815) (859) (169) (52) 3,252 (303) (49) 3,113 Transaction Banking Trade & Working capital Cash Management Financial Markets Lending & Portfolio Management Principal Finance Wealth Management Retail Products Treasury Others Fees and commission income Fees and commission expense Net fees and commission Transaction Banking Trade & Working capital Cash Management Financial Markets Lending & Portfolio Management Wealth Management Retail Products Treasury Others Fees and commission income Fees and commission expense Net fees and commission 2023 Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million Central & other Items (segment) $million 1,142 576 566 882 141 (1) – – – – 2,164 (411) 1,753 32 25 7 – 6 – 1,225 592 – 2 1,857 (319) 1,538 – – – – – – – 32 – 35 67 (24) 43 – – – – – – – – (15) (6) (21) (61) (82) 2022 Corporate, Commercial & Institutional Banking $million Consumer Private & Business Banking $million Ventures $million Central & other Items (segment) $million 1,143 594 549 958 124 – – – – 2,225 (519) 1,706 32 25 7 – 5 1,127 582 – (2) 1,744 (220) 1,524 – – – – – – 12 – 8 20 (12) 8 – – – – – – – (5) (12) (17) (108) (125) Total $million 1,174 601 573 882 147 (1) 1,225 624 (15) 31 4,067 (815) 3,252 Total $million 1,175 619 556 958 129 1,127 594 (5) (6) 3,972 (859) 3,113 Upfront bancassurance consideration amounts are amortised on a straight-line basis over the contractual period to which the consideration relates. Deferred income on the balance sheet in respect of these activities is $474 million (31 December 2022: $549 million). Following renegotiation of the contract in 2023, the life of the contract was extended for a further 3 years. Accordingly, the income will be earned evenly over a longer period for the next 8.5 years (31 December 2022: 6.5 years). For the twelve months ended 31 December 2023, $75 million of fee income was released from deferred income (31 December 2022: $84 million). 377 Standard Chartered – Annual Report 2023Financial statements5. Net trading income Accounting policy Gains and losses arising from changes in the fair value of financial 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. When the initial fair value of a financial instrument held at fair value through profit or loss relies on unobservable inputs, the difference between the initial 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. Income is recognised from the sale and purchase of trading positions, margins on market making and customer business and fair value changes. Net trading income Significant items within net trading income include: Gains on instruments held for trading¹ Gains on financial assets mandatorily at fair value through profit or loss Gains/(losses) on financial assets designated at fair value through profit or loss Losses on financial liabilities designated at fair value through profit or loss 1 Includes $299 million loss (31 December 2022: $365 million gain) from the translation of foreign currency monetary assets and liabilities 6. Other operating income Other operating income includes: Rental income from operating lease assets Net loss on disposal of fair value through other comprehensive income debt instruments Net (loss)/gain on disposal of amortised cost financial assets1 Net gain/(loss) on sale of businesses2 Dividend income Gain on sale of aircrafts Others³ Other operating income 2023 $million 6,292 4,625 4,270 10 (2,649) 2022 $million 5,310 4,942 1,087 (6) (677) 2023 $million 2022 $million 375 (115) (94) 351 15 - 174 706 421 (207) 17 (1) 14 21 37 302 1 Includes $47 million loss on sale of a portfolio of aviation loans 2 2023 includes $309 million gain from the sale of the aviation finance leasing business, $18 million from sale of associate (Metaco SA), $16 million gain from sale of subsidiary ($9 million from Cardspal and $7 million from Kozagi) and $8 million gain from the sale of Jordan one of the AME regions exit markets 3 2023 mainly includes $59 million tax credit against Research & Development Expenditure, $38 million gain on disposal of premises, $21 million income from VISA sponsorship in Hong Kong, $10 million from gain on lease modification in Hong Kong and $16 million interest income from tax refund in India 378 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements7. Operating expenses Staff costs: Wages and salaries Social security costs Other pension costs (Note 30) Share-based payment costs (Note 31) Other staff costs 2023 $million 2022 $million 6,459 233 431 226 907 8,256 6,014 210 390 199 805 7,618 Other staff costs include redundancy expenses of $106 million (31 December 2022: $79 million). Further costs in this category include training, travel costs and other staff-related costs. Details of directors’ pay, benefits, pensions and benefits and interests in shares are disclosed in the Directors’ remuneration report (page 195). Transactions with directors, officers and other related parties are disclosed in Note 36. Premises and equipment expenses: General administrative expenses: UK bank levy Provision for regulatory matters Other general administrative expenses Depreciation and amortisation: Property, plant and equipment: Premises Equipment Operating lease assets Intangibles: Software Acquired on business combinations Total operating expenses 2023 $million 422 2022 $million 401 111 – 1,691 1,802 315 103 27 445 625 1 1,071 11,551 102 14 1,592 1,708 326 123 202 651 531 4 1,186 10,913 Operating expenses include research expenditure of $996 million (31 December 2022: $946 million), which was recognized as an expense in the year The UK bank levy is applied to chargeable equity and liabilities on the balance sheet of UK operations. Key exclusions from chargeable equity and liabilities include Tier 1 capital, insured or guaranteed retail deposits, repos secured on certain sovereign debt and liabilities subject to netting. The rates are 0.10 per cent for short-term liabilities and 0.05 per cent for long-term liabilities. 379 Standard Chartered – Annual Report 2023Financial statements8. Credit impairment Accounting policy Significant accounting estimates and judgements The Group’s expected credit loss (ECL) calculations are outputs of complex models with a number of underlying assumptions. The significant judgements in determining expected credit loss include: • The Group’s criteria for assessing if there has been a significant increase in credit risk; • Development of expected credit loss models, including the choice of inputs relating to macroeconomic variables; • Determining estimates of forward looking macroeconomic forecasts; • Evaluation of management overlays and post-model adjustments; • Determination of probability weightings for Stage 3 individually assessed provisions The calculation of credit impairment provisions also involves expert credit judgement to be applied by the credit risk management team based upon counterparty information they receive from various sources including relationship managers and on external market information. Details on the approach for determining expected credit loss can be found in the credit risk section, under IFRS 9 Methodology (page 273). Estimates of forecasts of key macroeconomic variables underlying the expected credit loss calculation can be found within the Risk review, Key assumptions and judgements in determining expected credit loss (page 275). Expected credit losses An ECL represents the present value of expected cash shortfalls over the residual term of a financial asset, undrawn commitment or financial 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 ECL are computed as unbiased, probability-weighted amounts which are determined by evaluating a range of reasonably possible outcomes, the time value of money, and considering all reasonable and supportable information including that which is forward-looking. For material portfolios, the estimate of expected cash shortfalls is determined by multiplying the probability 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 lifetime 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 sophisticated approaches based on historical 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 indices 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 information, 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-linearity 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 determining the PD (and where relevant, the LGD and EAD) and in determining the overall ECL 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 limited to the maximum contractual period for which the Group is exposed to credit risk. However, for certain revolving credit facilities, which include credit cards or overdrafts, the Group’s exposure to credit risk is not limited 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 facilities. For credit-impaired financial instruments, the estimate of cash shortfalls may require the use of expert credit judgement. 380 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements8. Credit impairment continued The estimate of expected cash shortfalls on a collateralised financial instrument reflects the amount and timing of cash flows that are expected from foreclosure on the collateral less the costs of obtaining and selling the collateral, regardless of whether foreclosure is deemed probable. Cash flows from unfunded credit enhancements held are included within the measurement of expected credit losses if they are part of, or integral to, the contractual terms of the instrument (this includes financial guarantees, unfunded risk participations and other non-derivative 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 ECL recorded. Cash shortfalls are discounted using the effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired instruments (POCI)) on the financial instrument as calculated at initial recognition or if the instrument has a variable interest rate, the current effective interest rate determined under the contract. Instruments Location of expected credit loss provisions Financial assets held at amortised cost Financial assets held FVOCI – Debt instruments Loan commitments Financial guarantees Loss provisions: netted against gross carrying value1 Other comprehensive income (FVOCI expected credit loss reserve)2 Provisions for liabilities and charges3 Provisions for liabilities and charges3 1 Purchased or originated credit-impaired assets do not attract an expected credit loss provision on initial recognition. An expected credit loss provision will be recognised only if there is an increase in expected credit losses from that considered at initial recognition 2 Debt and treasury securities classified 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 within other comprehensive income (OCI) and is recycled to the profit and loss account along with any fair value measurement gains or losses held within FVOCI when the applicable instruments are derecognised 3 Expected credit loss on loan commitments and financial guarantees is recognised as a liability provision. Where a financial instrument includes both a loan (i.e. financial asset component) and an undrawn commitment (i.e. loan commitment component), and it is not possible to separately identify the expected credit loss on these components, expected credit loss amounts on the loan commitment are recognised together with expected credit loss amounts on the financial asset. To the extent the combined expected credit loss exceeds the gross carrying amount of the financial asset, the expected credit loss is recognised as a liability provision Recognition 12 months expected credit losses (stage 1) Expected credit losses are recognised at the time of initial recognition of a financial instrument and represent the lifetime cash shortfalls arising 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 significant increase in the credit risk of an instrument or the instrument becomes credit-impaired. If an instrument is no longer considered to exhibit a significant increase in credit risk, expected credit losses will revert to being determined on a 12-month basis. Significant increase in credit risk (Stage 2) Significant 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 origination (after taking into account the passage of time). Significant does not mean statistically significant nor is it assessed in the context of changes in expected credit loss. Whether a change in the risk of default is significant or not is assessed using a number of quantitative and qualitative factors, the weight of which depends on the type of product and counterparty. Financial assets that are 30 or more days past due and not credit-impaired will always be considered to have experienced a significant increase in credit risk. For less material portfolios where a loss rate or roll rate approach is applied to compute expected credit loss, significant increase in credit risk is primarily based on 30 days past due. Quantitative factors include an assessment of whether there has been significant increase in the forward-looking probability of default (PD) since origination. A forward-looking PD is one that is adjusted for future economic conditions to the extent these are correlated to changes in credit risk. We compare the residual lifetime PD at the balance sheet date to the residual lifetime PD that was expected at the time of origination 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 significant increase in credit risk (see page 282 to 284). Qualitative 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 monitoring). A non-purely precautionary early alert account is one which exhibits risk or potential weaknesses of a material nature requiring closer monitoring, supervision, or attention by management. Weaknesses in such a borrower’s account, if left uncorrected, could result in deterioration of repayment prospects and the likelihood of being downgraded. Indicators could include a rapid erosion of position within the industry, concerns over management’s ability to manage operations, weak/deteriorating operating results, liquidity strain and overdue balances among other factors. 381 Standard Chartered – Annual Report 2023Financial statements8. Credit impairment continued Credit-impaired (or defaulted) exposures (Stage 3) Financial assets that are credit-impaired (or in default) represent those that are at least 90 days past due in respect of principal and/or interest. Financial assets are also considered to be credit-impaired 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 financial asset. It may not be possible to identify a single discrete event but instead the combined effect of several events may cause financial assets to become credit-impaired. • Evidence that a financial asset is credit-impaired includes observable data about the following events: • Significant financial difficulty 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 financial difficulty, the lenders of the borrower have granted the borrower concession/s that lenders would not otherwise consider. This would include forbearance actions (page 257); • Pending or actual bankruptcy or other financial reorganisation to avoid or delay discharge of the borrower’s obligation/s; • The disappearance of an active market for the applicable financial asset due to financial difficulties of the borrower; • Purchase or origination of a financial asset at a deep discount that reflects incurred credit losses Lending commitments to a credit-impaired obligor that have not yet been drawn down are included to the extent that the commitment cannot be withdrawn. Loss provisions against credit-impaired financial assets are determined based on an assessment of the present value of expected cash shortfalls (discounted at the instrument’s original effective interest rate) under a range of scenarios, including the realisation of any collateral held where appropriate. The Group’s definition of default is aligned with the regulatory definition of default as set out in the UK’s onshored capital requirements regulations (Art 178). Expert credit judgement For Corporate & Institutional, Commercial and Private Banking, borrowers are graded by credit risk management on a credit grading (CG) scale from CG1 to CG14. Once a borrower starts to exhibit credit deterioration, it will move along the credit grading scale in the performing book and when it is classified as CG12 (which is a qualitative trigger for significant increase in credit risk (see page 283)the credit assessment and oversight of the loan will normally be performed by Stressed Assets Risk (SAR). Borrowers graded CG12 exhibit well-defined weaknesses in areas such as management and/or performance but there is no current expectation of a loss of principal or interest in the likely scenario. Where the impairment assessment indicates that there will be a loss of principal on a loan in the likely scenario, the borrower is graded a CG14 while borrowers of other credit-impaired loans are graded CG13. Instruments graded CG13 or CG14 are regarded as stage 3. For individually significant financial assets within stage 3, SAR 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 political climate of the customer, quality of realisable value of collateral, the Group’s legal position relative to other claimants and any renegotiation/ forbearance/ modification options. The future cash flow calculation involves significant judgements and estimates. As new information becomes available and further negotiations/ 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 financial assets which are not individually significant, such as the Retail Banking portfolio or small business loans, which comprise a large number of homogenous loans that share similar characteristics, statistical estimates and techniques are used, as well as credit scoring analysis. Consumer and Business Banking clients are considered credit-impaired where they are more 90 days past due, or 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 identified fraud on the account. Additionally, if the account is unsecured and the borrower has other credit accounts with the Group that are considered credit-impaired, the account may be also be credit-impaired. Techniques used to compute impairment amounts use models which analyse historical repayment and default rates over a time horizon. Where various models are used, judgement is required to analyse the available information provided and select the appropriate model or combination 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. Modified financial instruments Where the original contractual terms of a financial asset have been modified for credit reasons and the instrument has not been derecognised (an instrument is derecognised when a modification results in a change in cash flows that the Group would consider substantial), the resulting modification loss is recognised within credit impairment in the income statement with a corresponding decrease in the gross carrying value of the asset. If the modification involved a concession that the bank would not otherwise consider, the instrument is considered to be credit-impaired and is considered forborne. 382 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements8. Credit impairment continued Expected credit loss for modified financial assets that have not been derecognised and are not considered to be credit- impaired will be recognised on a 12-month basis, or a lifetime basis, if there is a significant increase in credit risk. These assets are assessed (by comparison to the origination date) to determine whether there has been a significant increase in credit risk subsequent to the modification. Although loans may be modified for non-credit reasons, a significant increase in credit risk may occur. In addition to the recognition of modification gains and losses, the revised carrying value of modified financial assets will impact the calculation of expected credit losses, with any increase or decrease in expected credit loss recognised within impairment. Forborne loans Forborne loans are those loans that have been modified in response to a customer’s financial difficulties. Forbearance strategies assist clients who are temporarily in financial distress and are unable to meet their original contractual repayment terms. Forbearance can be initiated by the client, the Group or a third-party including government sponsored programmes or a conglomerate of credit institutions. Forbearance may include debt restructuring such as new repayment schedules, payment deferrals, tenor extensions, interest only payments, lower interest rates, forgiveness of principal, interest or fees, or relaxation of loan covenants. Forborne loans that have been modified (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 original terms of the loans are considered credit-impaired if there is a detrimental impact on cash flows. The modification loss (see Classification and measurement – Modifications) is recognised in the profit or loss within credit impairment and the gross carrying value of the loan reduced by the same amount. The modified loan is disclosed as ‘Loans subject to forbearance – credit-impaired’. Loans that have been subject to a forbearance modification, but which are not considered credit-impaired (not classified as CG13 or CG14), are disclosed as ‘Forborne – not credit-impaired’. This may include amendments to covenants within the contractual terms. Write-offs of credit-impaired instruments and reversal of impairment To the extent a financial debt instrument is considered irrecoverable, the applicable portion of the gross carrying value is written off against the related loan provision. Such loans are written off after all the necessary procedures have been completed, it is decided that there is no realistic probability of recovery and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the provision for credit impairment in the income statement. Loss provisions on purchased or originated credit-impaired instruments (POCI) The Group measures expected credit loss on a lifetime basis for POCI instruments throughout the life of the instrument. However, expected credit loss is not recognised in a separate loss provision on initial recognition for POCI instruments as the lifetime expected credit loss is inherent within the gross carrying amount of the instruments. The Group recognises the change in lifetime expected credit losses arising subsequent to initial recognition in the income statement and the cumulative change as a loss provision. Where lifetime expected credit losses on POCI instruments are less than those at initial recognition, then the favourable differences are recognised as impairment gains in the income statement (and as impairment loss where the expected credit losses are greater). Improvement in credit risk/curing For financial assets that are credit-impaired (stage 3), a transfer to stage 2 or stage 1 is only permitted where the instrument is no longer considered to be credit-impaired. An instrument will no longer be considered credit-impaired when there is no shortfall of cash flows compared to the original contractual terms. For financial assets within stage 2, these can only be transferred to stage 1 when they are no longer considered to have experienced a significant increase in credit risk. Where significant increase in credit risk was determined using quantitative measures, the instruments will automatically transfer back to stage 1 when the original PD based transfer criteria are no longer met. Where instruments were transferred to stage 2 due to an assessment of qualitative factors, the issues that led to the reclassification must be cured before the instruments can be reclassified to stage 1. This includes instances where management actions led to instruments being classified as stage 2, requiring that action to be resolved before loans are reclassified 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 criteria have to be satisfied: • At least a year has passed with no default based upon the forborne contract terms • The customer is likely to repay its obligations in full without realising security • The customer has no accumulated impairment against amount outstanding (except for ECL) Subsequent to the criteria 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. 383 Standard Chartered – Annual Report 2023Financial statements8. Credit impairment continued Net credit impairment on loans and advances to banks and customers Net credit impairment on debt securities¹ Net credit impairment relating to financial guarantees and loan commitments Net credit impairment relating to other financial assets Credit impairment 1 Includes impairment of $1 million (2022: $13 million) on originated credit-impaired debt securities 9. Goodwill, property, plant and equipment and other impairment Accounting policy Refer to the below referenced notes for the relevant accounting policy. Impairment of goodwill (Note 17) Impairment of property, plant and equipment (Note 18) Impairment of other intangible assets (Note 17) Other¹ Property, plant and equipment and other impairment Goodwill, property, plant and equipment and other impairment 2023 $million 2022 $million 606 (50) (48) – 508 743 122 (27) (2) 836 2023 $million 2022 $million – 12 112 884 1,008 1,008 14 50 12 363 425 439 1 Other includes $850 million (2022: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai), reflecting Bohai’s lower reported net profit in 2023 (compared to 2022), as well as banking industry challenges and property market uncertainties in Mainland China, that may impact Bohai’s future profitability 10. Taxation Accounting policy Income tax payable on profits is based on the applicable tax law in each jurisdiction and is recognised as an expense in the period in which profits arise. Deferred tax is provided on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial 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 liability 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 utilised. Where permitted, deferred tax assets and liabilities 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. Other accounting estimates and judgements • Determining the Group’s tax charge for the year involves estimation and judgement, which includes an interpretation of local tax laws and an assessment of whether the tax authorities will accept the position taken. These judgements take account of external advice where appropriate, and the Group’s view on settling with the relevant tax authorities. • The Group provides for current tax liabilities at the best estimate of the amount that is expected to be paid to the tax authorities where an outflow is probable. In making its estimates the Group assumes that the tax authorities will examine all the amounts reported to them and have full knowledge of all relevant information. • The recoverability of the Group’s deferred tax assets is based on management’s judgement of the availability of future taxable profits against which the deferred tax assets will be utilised. In preparing management forecasts the effect of applicable laws and regulations relevant to the utilisation of future taxable profits have been considered. 384 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements10. Taxation continued The following table provides analysis of taxation charge in the year: The charge for taxation based upon the profit for the year comprises: Current tax: United Kingdom corporation tax at 23.5 per cent (2022: 19 per cent): Current tax charge on income for the year Adjustments in respect of prior years (including double tax relief) Foreign tax: Current tax charge on income for the year Adjustments in respect of prior years Deferred tax: Origination/reversal of temporary differences Adjustments in respect of prior years Tax on profits on ordinary activities Effective tax rate 2023 $million 2022 $million (48) 14 1,695 (11) 1,650 (22) 3 (19) 1,631 32.0% 48 – 1,216 5 1,269 144 (29) 115 1,384 32.3% The tax charge for the year of $1,631 million (31 December 2022: $1,384 million) on a profit before tax of $5,093 million (31 December 2022: $4,286 million) reflects the impact of tax losses for which no deferred tax assets are recognised, non-deductible expenses, and non-creditable withholding taxes and other taxes. These are partly offset by tax exempt income. Foreign tax includes current tax of $201 million (31 December 2022: $35 million) on the profits assessable in Hong Kong. Deferred tax includes origination or reversal of temporary differences of $nil million (31 December 2022: $51 million) provided at a rate of 16.5 per cent (31 December 2022: 16.5 per cent) on the profits assessable in Hong Kong. The Group will be in scope of the new Pillar Two global minimum tax rules which were substantively enacted in the UK on 20 June 2023 to apply for periods commencing 1 January 2024. The IAS 12 exception to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes has been applied. Based on an initial impact assessment undertaken in respect of historical financial data together with corporate plan data available, the Group’s exposure to Pillar Two income taxes are not expected to be material. The Group is closely monitoring developments to assess potential future implications and implementation efforts. Tax rate: The tax charge for the year is higher than the charge at the rate of corporation tax in the UK, 23.5 per cent. The differences are explained below: Profit on ordinary activities before tax Tax at 23.5 per cent (2022: 19 per cent) Lower tax rates on overseas earnings Higher tax rates on overseas earnings Tax at domestic rates applicable where profits earned Non-creditable withholding taxes and other taxes¹ Tax exempt income Share of associates and joint ventures Non-deductible expenses Bank levy Non-taxable losses on investments² Payments on financial instruments in reserves Goodwill impairment Deferred tax not recognised Deferred tax rate changes Adjustments to tax charge in respect of prior years Other items1 Tax on profit on ordinary activities 2023 $million 5,093 1,197 (330) 306 1,173 85 (131) (14) 219 26 64 (68) – 278 (1) 6 (6) 1,631 % 23.5 (6.5) 6.0 23.0 1.7 (2.6) (0.3) 4.3 0.5 1.3 (1.3) – 5.4 – 0.1 (0.1) 32.0 2022 $million 4,286 814 (122) 435 1,127 170 (69) (27) 115 19 51 (56) 3 77 (9) (24) 7 1,384 % 19.0 (2.8) 10.1 26.3 4.0 (1.6) (0.6) 2.7 0.4 1.2 (1.3) 0.1 1.8 (0.2) (0.6) 0.1 32.3 1 The comparatives have been reclassified by moving the effect of other taxes from Other items to Non-creditable withholding taxes and other taxes in order to provide more clarity to the reader. The 2022 comparatives have been reclassified as follows to align with the presentation in the current period: Non-creditable withholding taxes and other taxes from $90 million to $170 million, and Other items from $87 million to $7 million. 2 Non-taxable losses on investments includes $140 million (2022: $51 million) in respect of the tax impact of the impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai). 385 Standard Chartered – Annual Report 2023Financial statements10. Taxation continued 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 including acquisitions, disposals and restructuring of our businesses, the mix of profits across jurisdictions with different statutory tax rates, changes in tax legislation and tax rates and resolution of uncertain tax positions. The evaluation of uncertain tax positions involves an interpretation of local tax laws which could be subject to challenge by a tax authority, and an assessment of whether the tax authorities will accept the position taken. The Group does not currently consider that assumptions or judgements made in assessing tax liabilities have a significant risk of resulting in a material adjustment within the next financial year. Tax recognised in other comprehensive income Current tax $million Deferred tax $million Total $million Current tax $million Deferred tax $million 2023 2022 Items that will not be reclassified to income statement Own credit adjustment Equity instruments at fair value through other comprehensive income Retirement benefit obligations Items that may be reclassed subsequently to income statement Debt instruments at fair value through other comprehensive income Cashflow hedges Total tax credit/(charge) recognised in equity – – – – – – – – (107) (49) (69) 11 (129) (17) (112) (107) (49) (69) 11 (129) (17) (112) (236) (236) – – – – – – – – Current tax: The following are the movements in current tax during the year: Current tax comprises: Current tax assets Current tax liabilities Net current tax opening balance Movements in income statement Movements in other comprehensive income Taxes paid Other movements Net current tax balance as at 31 December Current tax assets Current tax liabilities Total 15 8 27 (20) 152 63 89 167 2023 $million 503 (583) (80) (1,650) – 1,367 36 (327) 484 (811) (327) Total 15 8 27 (20) 152 63 89 167 2022 $million 766 (348) 418 (1,269) – 821 (50) (80) 503 (583) (80) Deferred tax: The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the year: At 1 January 2023 $million Exchange & other adjustments $million (Charge)/credit to profit $million (Charge)/credit to equity $million At 31 December 2023 $million (589) 334 212 (74) 61 89 5 2 36 (11) 65 236 (20) (106) (1) (14) (2) (27) 2 – 16 84 (71) (28) (9) – (3) – – (11) 7 134 19 – – – (69) (17) (112) (49) 11 – – (236) (424) 286 97 (144) 27 (25) (71) 4 43 139 (68) Deferred tax comprises: Accelerated tax depreciation Impairment provisions on loans and advances Tax losses carried forward Equity instruments at fair value through other comprehensive income Debt instruments at fair value through other comprehensive income Cashflow hedges Own credit adjustment Retirement benefit obligations Share-based payments Other temporary differences Net deferred tax assets/(liabilities) 386 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements10. Taxation continued Deferred tax comprises: Accelerated tax depreciation Impairment provisions on loans and advances Tax losses carried forward Equity instruments at fair value through other comprehensive income1 Debt instruments at fair value through other comprehensive income1 Cashflow hedges Own credit adjustment Retirement benefit obligations Share-based payments Other temporary differences Net deferred tax assets/(liabilities) At 1 January 2022 $million Exchange & other adjustments $million (Charge)/credit to profit $million (Charge)/credit to equity $million At 31 December 2022 $million (515) 351 263 (96) (30) – (3) 27 32 30 59 (8) (41) 16 (6) 5 – – (5) – (7) (46) (66) 24 (67) 1 23 – – – 4 (34) (115) – – – 27 63 89 8 (20) – – 167 (589) 334 212 (74) 61 89 5 2 36 (11) 65 1 2022 has been reclassified to separately disclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance. Deferred tax comprises assets and liabilities as follows: Deferred tax comprises: Accelerated tax depreciation Impairment provisions on loans and advances Tax losses carried forward Equity instruments at fair value through other comprehensive income1 Debt instruments at fair value through other comprehensive income1 Cashflow hedges Own credit adjustment Retirement benefit obligations Share-based payments Other temporary differences Total $million 2023 Asset $million Liability $million Total $million 2022 Asset $million Liability $million (424) 286 97 (144) 27 (25) (71) 4 43 139 (68) 3 282 49 (1) 29 12 (1) 13 9 307 702 (427) (589) 4 48 (143) (2) (37) (70) (9) 34 (168) (770) 334 212 (74) 61 89 5 2 36 (11) 65 1 339 90 – 45 85 (1) 15 5 255 834 (590) (5) 122 (74) 16 4 6 (13) 31 (266) (769) 1 2022 has been reclassified to separately disclose Equity instruments at fair value through other comprehensive income and Debt instruments at fair value through other comprehensive income. No change in overall balance. The recoverability of the Group’s deferred tax assets is based on management’s judgement of the availability of future taxable profits against which the deferred tax assets will be utilised. The Group’s total deferred tax assets include $97 million relating to tax losses carried forward, of which $48 million arises in legal entities with offsetting deferred tax liabilities. The remaining deferred tax assets on losses of $49 million are forecast to be recovered before expiry and within five years. Sale of aircraft leasing business during the year, included within Other operating income, resulted in the disposal of $113 million of deferred tax assets relating to losses in Ireland held at 31 December 2022. Unrecognised deferred tax No account has been taken of the following potential deferred tax assets/(liabilities): Withholding tax on unremitted earnings from overseas subsidiaries and associates Tax losses Held over gains on incorporation of overseas branches Other temporary differences Net 2023 $million Gross 2023 $million Net 2022 $million Gross 2022 $million (653) 2,242 (366) 397 (7,685) 9,326 (1,389) 1,516 (507) 1,980 (346) 544 (6,434) 8,231 (1,313) 1,991 387 Standard Chartered – Annual Report 2023Financial statements11. Dividends Accounting policy The Board considers a number of factors prior to dividend declaration which includes the rate of recovery in the Group’s financial performance, the macroeconomic environment, and opportunities to further invest in our business and grow profitably in our markets. Ordinary equity shares 2023 2022 Cents per share $million Cents per share $million 2022/2021 final dividend declared and paid during the year 2023/2022 interim dividend declared and paid during the year 14 6 401 167 9 4 274 119 Dividends on ordinary equity shares are recorded in the period in which they are declared and, in respect of the final dividend, have been approved by the shareholders. Accordingly, the final ordinary equity share dividends set out above relate to the respective prior years. 2023 recommended final ordinary equity share dividend The 2023 ordinary equity share dividend recommended by the Board is 21 cents per share. The financial statements for the year ended 31 December 2023 do not reflect this dividend as this will be accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31 December 2024. The dividend will be paid in either pounds sterling, Hong Kong dollars or US dollars on 17 May 2024 to shareholders on the UK register of members at the close of business in the UK on 8 March 2024. Preference shares and Additional Tier 1 securities Dividends on these preference shares and securities classified as equity are recorded in the period in which they are declared. Non-cumulative redeemable preference shares: 7.014 per cent preference shares of $5 each Floating rate preference shares of $5 each¹ Additional Tier 1 securities: fixed rate resetting perpetual subordinated contingent convertible securities 2023 $million 2022 $million 53 50 103 349 452 53 20 73 328 401 1 Floating rate is based on Secured Overnight Financing Rate (SOFR), average rate paid for floating preference shares is 6.62% (2022: 2.71%) 388 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements12. Earnings per ordinary share Earnings per share on an underlying basis differs from earnings defined in IAS 33 Earnings per share. Underlying earnings is profit/(loss) attributable to ordinary shareholders adjusted for 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 significant or material in the context of the Group’s normal business earnings for the year. The table below provides the basis of underlying earnings. Profit for the period attributable to equity holders Non-controlling interest Dividend payable on preference shares and AT1 classified as equity Profit for the period attributable to ordinary shareholders Items normalised: Restructuring Goodwill and other impairment² DVA Net gains on sale of Businesses³ Tax on normalised items Underlying profit Basic – Weighted average number of shares (millions) Diluted – Weighted average number of shares (millions) Basic earnings per ordinary share (cents) Diluted earnings per ordinary share (cents) Underlying basic earnings per ordinary share (cents) Underlying diluted earnings per ordinary share (cents) 2023 $million 3,462 7 (452) 3,017 14 850 (17) (262) (21) 3,581 2,778 2,841 108.6 106.2 128.9 126.0 2022¹ $million 2,902 46 (401) 2,547 99 322 (42) (20) (3) 2,903 2,966 3,023 85.9 84.3 97.9 96.0 1 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2. Goodwill and other impairment include $850 million (2022: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai) 3. Includes the sale of the Aviation Finance business, of which there was a gain on sale of $309 million on the leasing business and a loss of $47 million in relation to a sale of a portfolio of Aviation loans The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and the basic weighted average number of shares excluding treasury shares held in employees benefit trust. When calculating diluted earnings per share, the weighted average number of shares in issue is adjusted for the effects of all expected dilutive potential ordinary shares held in respect of Standard Chartered PLC totalling 56 million (2022: 52 million). The total number of share options outstanding, under schemes considered to be potentially dilutive, was 7 million (2022: 5 million). These options have strike prices ranging from $3.99 to $7.49. Of the total number of employee share options and share awards at 31 December 2023 there were nil share options and awards which were anti dilutive. The 188 million decrease (2022: 142 million decrease) in the basic weighted average number of shares is primarily due to the impact of the share buy-back programmes completed in the year. 389 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments Classification and measurement Accounting policy Financial 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 principal and interest (SPPI) characteristics. In assessing whether the contractual cash flows have SPPI characteristics, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Group considers: • Contingent events that would change the amount and timing of cash flows • Leverage features • Prepayment and extension terms • Terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse asset arrangements) • Features that modify consideration of the time value of money – e.g. periodical reset of interest rates. Whether financial assets are held at amortised cost or at FVOCI depends on the objectives of the business models under which the assets are held. A business model refers to how the Group manages financial assets to generate cash flow. The Group makes an assessment of the objective of a business model in which an asset is held at the individual product business line, and where applicable within business lines depending on the way the business is managed and information 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, including 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 timing of sales in prior periods, the reasons for such sales and expectations about future sales activity. The Group’s business model assessment is as follows: Business model Business objective Characteristics Businesses Products Hold to collect Intent is to originate financial assets and hold them to maturity, collecting the contractual cash flows over the term of the instrument Hold to collect and sell Business objective met through both hold to collect and by selling financial assets Fair value through profit or loss All other business objectives, including trading and managing financial assets on a fair value basis • Providing financing and • Corporate Lending • Loans and advances • Financial Markets • Debt securities • Transaction Banking • Retail Lending • Treasury Markets (Loans and Borrowings) • Treasury Markets • Debt securities originating assets to earn interest income as primary income stream • Performing credit risk management activities • Costs include funding costs, transaction costs and impairment losses • Portfolios held for liquidity needs; or where a certain interest yield profile is maintained; or that are normally rebalanced to achieve matching of duration of assets and liabilities • Income streams come from interest income, fair value changes, and impairment losses • Assets held for trading • Financial Markets • Derivatives • Assets that are originated, • All other business lines • Equity shares purchased, and sold for profit taking or underwriting activity • Performance of the portfolio is evaluated on a fair value basis • Income streams are from fair value changes or trading gains or losses • Trading portfolios • Financial Markets reverse repos • Financial Markets (FM Bond and Loan Syndication) 390 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Financial assets which have SPPI characteristics and that are held within a business model whose objective is to hold financial assets to collect contractual cashflows (hold to collect) are recorded at amortised cost. Conversely, financial assets which have SPPI characteristics but are held within a business model whose objective is achieved by both collecting contractual cashflows and selling financial assets (Hold to collect and sell) are classified as held at FVOCI. Both hold to collect and hold to collect and sell business models involve holding financial assets to collect the contractual cashflows. However, the business models are distinct by reference to the frequency and significance that asset sales play in meeting the objective under which a particular group of financial assets is managed. Hold to collect business models are characterised by asset sales that are incidental to meeting the objectives 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 financial assets but sales for other reasons should be infrequent or insignificant. Cashflows from the sale of financial assets under a hold to collect and sell business model by contrast are integral to achieving the objectives under which a particular group of financial assets are managed. This may be the case where frequent sales of financial assets are required to manage the Group’s daily liquidity requirements or to meet regulatory requirements to demonstrate liquidity of financial instruments. Sales of assets under hold to collect and sell business models are therefore both more frequent and more significant 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 initial recognition as held at FVOCI on an instrument-by-instrument basis. Dividends received are recognised in profit or loss. Gains and losses arising from changes in the fair value of these instruments, including foreign exchange gains and losses, are recognised directly in equity and are never reclassified to profit or loss even on derecognition. Mandatorily classified at fair value through profit or loss Financial assets and liabilities which are mandatorily held at fair value through profit or loss are split between two subcategories as follows: Trading, including: • Financial assets and liabilities held for trading, which are those acquired principally for the purpose of selling in the short-term • Derivatives Non-trading mandatorily at fair value through profit or loss, including: • Instruments in a business which has a fair value business model (see the Group’s business model assessment) which are not trading or derivatives • Hybrid financial assets that contain one or more embedded derivatives • Financial assets that would otherwise be measured at amortised cost or FVOCI but which do not have SPPI characteristics • Equity instruments that have not been designated as held at FVOCI • Financial liabilities that constitute contingent consideration in a business combination Designated at fair value through profit or loss Financial assets and liabilities may be designated at fair value through profit or loss when the designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis (‘accounting mismatch’). Financial liabilities may also be designated at fair value through profit or loss where they are managed on a fair value basis or have an embedded derivative where the Group is not able to bifurcate and separately value the embedded derivative component. Financial liabilities held at amortised cost Financial liabilities that are not financial guarantees or loan commitments and that are not classified as financial liabilities held at fair value through profit or loss are classified as financial liabilities 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 specific date or at the option of the shareholder are classified as financial liabilities and are presented in other borrowed funds. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis using the effective interest method. 391 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Financial guarantee contracts and loan commitments The Group issues financial guarantee contracts and loan commitments in return for fees. Financial guarantee contracts and any loan commitments issued at below-market interest rates are initially recognised at their fair value as a financial liability, and subsequently measured at the higher of the initial value less the cumulative amount of income recognised in accordance with the principles of IFRS 15 Revenue from Contracts with Customers and their expected credit loss provision. 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 financial assets and liabilities The fair value of financial instruments is generally measured on the basis of the individual financial instrument. However, when a group of financial assets and financial liabilities is managed on the basis of its net exposure to either market risk or credit risk, the fair value of the group of financial instruments is measured on a net basis. The fair values of quoted financial assets and liabilities in active markets are based on current prices. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If the market for a financial instrument, and for unlisted securities, is not active, the Group establishes fair value by using valuation techniques. Initial recognition Regular way purchases and sales of financial assets held at fair value through profit or loss, and held at fair value through other comprehensive income are initially recognised on the trade date (the date on which the Group commits to purchase or sell the asset). Loans and advances and other financial assets held at amortised cost are recognised on the settlement date (the date on which cash is advanced to the borrowers). All financial instruments are initially recognised at fair value, which is normally the transaction price, plus directly attributable transaction costs for financial assets and liabilities which are not subsequently measured at fair value through profit or loss. In certain circumstances, the initial fair value may be based on a valuation technique which may lead to the recognition of profits or losses at the time of initial recognition. However, these profits or losses can only be recognised when the valuation technique used is based solely on observable market data. Where the initially 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 immediately in the income statement but following the passage of time, or as the inputs become observable, or the transaction matures or is terminated. Subsequent measurement Financial assets and financial liabilities held at amortised cost Financial assets and financial liabilities 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 financial instrument carried at amortised cost is the hedged item in a qualifying fair value hedge relationship, its carrying value is adjusted by the fair value gain or loss attributable to the hedged risk. Financial assets held at FVOCI Debt instruments held at FVOCI are subsequently carried at fair value, with all unrealised gains and losses arising from changes in fair value (including 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 the profit or loss and are accumulated in equity. On derecognition, 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 arising from changes in fair value (including any related foreign exchange gains or losses) recognised in other comprehensive income and accumulated in a separate component of equity. On derecognition, the cumulative reserve is transferred to retained earnings and is not recycled to profit or loss. Financial assets and liabilities held at fair value through profit or loss Gains and losses arising from changes in fair value, including 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 relationship. 392 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Derecognition of financial instruments Financial assets which are subject to commercial refinancing where the loan is priced to the market with no payment related concessions regardless of form of legal documentation or nature of lending will be derecognised. Where the Group’s rights to the cash flows under the original contract have expired, the old loan is derecognised and the new loan is recognised at fair value. For all other modifications for example forborne loans or restructuring, whether or not a change in the cash flows is ‘substantially different’ is judgemental and will be considered on a case-by-case basis, taking into account all the relevant facts and circumstances. On derecognition of a financial 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 consideration received (including any new asset obtained less any new liability 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 liability, that are held in other comprehensive income. Financial liabilities are derecognised when they are extinguished. A financial liability is extinguished when the obligation is discharged, cancelled or expires and this is evaluated both qualitatively and quantitatively. However, where a financial liability has been modified, it is derecognised if the difference between the modified cash flows and the original cash flows is more than 10 per cent, or if less than 10 per cent, the Group will perform a qualitative 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 liability and the consideration paid is included in ‘Other income’ except for the cumulative fair value adjustments attributable to the credit risk of a liability that are held in Other comprehensive income, which are never recycled to the profit or loss. Modified financial instruments Financial assets and financial liabilities whose original contractual terms have been modified, including those loans subject to forbearance strategies, are considered to be modified instruments. Modifications may include changes to the tenor, cash flows and or interest rates among other factors. Where derecognition of financial assets is appropriate (see Derecognition), the newly recognised residual loans are assessed to determine whether the assets should be classified as purchased or originated credit-impaired assets (POCI). Where derecognition is not appropriate, the gross carrying amount of the applicable instruments is recalculated as the present value of the renegotiated or modified contractual cash flows discounted at the original effective interest rate (or credit adjusted effective interest rate for POCI financial assets). The difference between the recalculated values and the pre-modified gross carrying values of the instruments are recorded as a modification gain or loss in the profit or loss. Gains and losses arising from modifications for credit reasons are recorded as part of ‘Credit Impairment’ (see Credit Impairment policy). Modification gains and losses arising from non-credit reasons are recognised either as part of ‘Credit Impairment’ or within income depending on whether there has been a change in the credit risk on the financial asset subsequent to the modification. Modification gains and losses arising on financial liabilities are recognised within income. The movements in the applicable expected credit loss loan positions are disclosed in further detail in Risk Review. 393 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued The Group’s classification of its financial assets and liabilities is summarised in the following tables. Assets at fair value Non-trading mandatorily at fair value through profit or loss $million Derivatives held for hedging $million Designated at fair value through profit or loss $million Fair value through other comprehensive income $million Total financial assets at fair value $million Assets held at amortised cost $million Total $million Notes Trading $million – 2,265 6,930 16 9,997 52,776 2,721 – 74,689 – – – – – – – – – – 282 71,850 98 219 6 72,455 14 15 16 15 16 20 21 48,333 2,101 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 78 – – 78 – – – – – – – – – – – – – – – – – – – – – – – – 69,905 69,905 2,265 7,212 81,847 52,952 2,940 6 147,222 50,434 – – – – – – – – 2,265 7,212 81,847 52,952 2,940 6 147,222 50,434 – 44,977 44,977 – – – 1,738 1,738 286,975 286,975 13,996 13,996 103,328 103,328 56,935 160,263 992 992 104,320 104,320 – – – – – 56,935 38,140 701 992 161,255 38,140 701 Assets Cash and balances at central banks¹ Financial assets held at fair value through profit or loss Loans and advances to banks² Loans and advances to customers² Reverse repurchase agreements and other similar secured lending Debt securities, alternative tier one and other eligible bills Equity shares Other assets Derivative financial instruments Loans and advances to banks² of which – reverse repurchase agreements and other similar secured lending Loans and advances to customers² of which – reverse repurchase agreements and other similar secured lending Investment securities Debt securities, alternative tier one and other eligible bills Equity shares Other assets Assets held for sale Total at 31 December 2023 123,022 2,101 72,455 78 104,320 301,976 497,633 799,609 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 230 to 343) 394 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Assets at fair value Non-trading mandatorily at fair value through profit or loss $million Derivatives held for hedging $million Designated at fair value through profit or loss $million Fair value through other comprehensive income $million Total financial assets at fair value $million Assets held at amortised cost $million Total $million Notes Trading $million – 976 5,765 16 1,175 30,162 2,997 – 41,075 – – – – – – – – – – 781 63,316 324 233 7 64,661 14 15 16 15 16 20 21 60,858 2,859 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 76 – – 76 – – – – – – – – – 3 – – – – – – – – – – – – – – 58,263 58,263 976 6,546 64,491 30,562 3,230 7 105,812 63,717 – – – – – – – – 976 6,546 64,491 30,562 3,230 7 105,812 63,717 – – – – 39,519 39,519 978 978 310,647 310,647 24,498 24,498 111,926 111,926 59,714 171,640 808 808 112,734 112,734 – – – 3 – 59,714 39,295 1,388 808 172,448 39,295 1,391 Assets Cash and balances at central banks¹ Financial assets held at fair value through profit or loss Loans and advances to banks² Loans and advances to customers² Reverse repurchase agreements and other similar secured lending Debt securities, alternative tier one and other eligible bills Equity shares Other assets Derivative financial instruments Loans and advances to banks² of which – reverse repurchase agreements and other similar secured lending Loans and advances to customers² of which – reverse repurchase agreements and other similar secured lending Investment securities Debt securities, alternative tier one and other eligible bills Equity shares Other assets Assets held for sale Total at 31 December 2022 101,933 2,859 64,661 79 112,734 282,266 508,826 791,092 1 Cash and balances at central banks includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of Loans and advances to customers 2 Further analysed in Risk review and Capital review (pages 230 to 343) 395 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Liabilities Deposits by banks Customer accounts Financial liabilities held at fair value through profit or loss Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Debt securities in issue Short positions Other liabilities Derivative financial instruments Repurchase agreements and other similar secured borrowing Debt securities in issue Other liabilities Subordinated liabilities and other borrowed funds Liabilities included in disposal groups held for sale Liabilities at fair value Derivatives held for hedging $million Designated at fair value through profit or loss $million Total financial liabilities at fair value $million Notes Trading $million Amortised cost $million Total $million – – – 39 1,660 – 11,846 – 13,545 52,747 – – – – – 16 22 14 16 22 23 27 21 – – – – – – – – – 3,314 – – – – – – – – – 28,030 28,030 469,418 469,418 1,894 17,209 39,623 10,817 – 8 69,551 – – – – – – 1,894 17,248 41,283 10,817 11,846 8 83,096 56,061 – – – – – – – – – – – – – 12,258 62,546 38,663 12,036 726 1,894 17,248 41,283 10,817 11,846 8 83,096 56,061 12,258 62,546 38,663 12,036 726 Total at 31 December 2023 66,292 3,314 69,551 139,157 623,677 762,834 Liabilities at fair value Derivatives held for hedging $million Designated at fair value through profit or loss $million Total financial liabilities at fair value $million Notes Trading $million Amortised cost $million 28,789 Total $million 28,789 461,677 461,677 – – – – Liabilities Deposits by banks Customer accounts Financial liabilities held at fair value through profit or loss Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Debt securities in issue Short positions Other liabilities Derivative financial instruments Repurchase agreements and other similar secured borrowing Debt securities in issue Other liabilities Subordinated liabilities and other borrowed funds Liabilities included in disposal groups held for sale – – – 29 – – 6,847 – 6,876 65,316 – – – – 5 – – – – – – – – – 4,546 – – – – – 16 22 14 16 22 23 27 21 1,066 11,677 51,706 8,572 – 6 73,027 – – – – – – 1,066 11,706 51,706 8,572 6,847 6 79,903 69,862 – – – – – – – – – – – – 5 2,108 61,242 42,915 13,715 1,230 1,066 11,706 51,706 8,572 6,847 6 79,903 69,862 2,108 61,242 42,915 13,715 1,235 Total at 31 December 2022 72,197 4,546 73,027 149,770 611,676 761,446 396 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Interest rate benchmark reform During 2023, significant progress was made in support of LIBOR transition. New LIBOR-referencing business had ceased and a full suite of Risk Free Rate-referencing derivative and cash products were standard offerings across the Group. Having completed the remediation of all non-USD LIBOR exposures at the end of 2021 with no reliance on synthetic rates, the Programme focused on remediating legacy USD LIBOR stock ahead of the USD LIBOR cessation date (30 June 2023). The Group made significant progress towards completing its remediation of legacy exposures over the course of 2023. Clients with legacy USD LIBOR loans were engaged to remediate their contracts via active conversion to alternative rates, or other suitable transition mechanisms such as the inclusion of robust fallbacks. For derivatives, the Group adhered to the International Swaps and Derivatives Association (ISDA) 2020 IBOR Fallbacks Protocol for all its trading entities and continued to engage clients to do the same or to negotiate remediation bilaterally. The Group also successfully participated in CCP conversion events, including both tranches of the London Clearing House (LCH) conversions for USD LIBOR and also the SGD/THB conversion, as well as the CME Eurodollar futures and the Hong Kong Exchanges and Clearing (HKEX) USD LIBOR events. This significantly reduced our overall notional exposure to USD LIBOR, as centrally cleared derivatives and bilateral derivatives with fallbacks represented a substantial portion of the Group’s overall USD LIBOR notional exposure. At 31 December 2023, a number of contracts remain subject to remediation but these are considered immaterial for the Group. The largest population of remaining exposures are syndicated loans, either on a standalone basis, or where the loans have been hedged with derivatives. These contracts currently operate under a synthetic USD LIBOR rate. Risks which the Group is exposed to due to LIBOR transition The Group has largely mitigated all material adverse outcomes associated with the cessation of IBOR benchmarks, and these have not required a change to the Group’s risk management strategy. However, the Group will continue to focus on the un-remediated contracts, and manage the risks of the transition until fully complete. Particular attention will continue to be paid to: legal risk of any contracts that may remain outstanding after the end of synthetic LIBOR (currently scheduled for end of September 2024); conduct risk arising from continued remediation; financial and accounting risk in terms of the financial impact of IBOR transition for the outstanding contracts, and also financial instruments that may be affected by accounting issues such as accounting for contractual changes due to IBOR reform, fair value measurement and hedge accounting, as well as other risks inherent in the reform. As at 31 December 2022 the Group had the following notional principal exposures to interest rate benchmarks that were subject to interest rate benchmark reform. IBOR exposures by benchmark at 31 December 2022 Assets Loans and advances to banks Loans and advances to customers Debt securities, AT1 and other eligible bills Liabilities Deposits by banks Customer accounts Repurchase agreements and other secured borrowing Debt securities in issue Subordinated liabilities and other borrowed funds Derivatives – Foreign exchange contracts Currency swaps and options Derivatives – Interest rate contracts Swaps Forward rate agreements and options Exchange traded futures and options Equity and stock index options Credit derivative contracts Total IBOR derivative exposure Total IBOR exposure Loan commitments off-balance sheet USD LIBOR $million GBP LIBOR $million SGD SOR $million THB FIX $million Other IBOR $million Total IBOR $million 145 21,395 2,843 24,383 332 3,066 671 1,211 – 5,280 135,145 671,534 22,067 31,922 49 3,974 864,691 894,354 2,798 – – – – – – – – – – – – – – – – – – – – 420 15 435 – – – – – – – – – – – 34 – – – 34 2,273 959 7,512 10,998 – – – 46 9,831 10,266 14 9 – – 129 12,095 12,129 – – – – – – – – – – – – – – – – – – – – 145 21,815 2,858 24,818 332 3,100 671 1,211 – 5,314 138,377 690,044 22,076 31,922 49 4,149 886,617 916,749 2,812 397 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Offsetting of financial instruments Financial assets and liabilities 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 intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. In practice, for credit mitigation, the Group is able to offset assets and liabilities which do not meet the IAS 32 netting criteria set out below. Such arrangements include master netting arrangements for derivatives 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 addition, the Group also receives and pledges readily realisable collateral for derivative 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 liquid 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 derivative transactions settled through an enforceable netting agreement where we have the intent and ability to settle net and which are offset on the balance sheet. Gross amounts of recognised financial instruments $million Impact of offset in the balance sheet $million 2023 Net amounts of financial instruments presented in the balance sheet $million Related amount not offset in the balance sheet Financial instruments $million Financial collateral $million Net amount $million Assets Derivative financial instruments 99,929 (49,495) 50,434 (39,293) (8,440) Reverse repurchase agreements and other similar secured lending At 31 December 2023 Liabilities 109,413 209,342 (11,832) (61,327) 97,581 148,015 – (97,581) (39,293) (106,021) Derivative financial instruments 105,556 (49,495) 56,061 (39,293) (10,337) Repurchase agreements and other similar secured borrowing At 31 December 2023 65,373 170,929 (11,832) (61,327) 53,541 109,602 – (39,293) (53,541) (63,878) 2,701 – 2,701 6,431 – 6,431 Gross amounts of recognised financial instruments $million Impact of offset in the balance sheet $million 2022 Net amounts of financial instruments presented in the balance sheet $million Related amount not offset in the balance sheet Financial instruments $million Financial collateral $million Net amount $million Assets Derivative financial instruments 120,799 (57,082) 63,717 (50,133) (9,206) Reverse repurchase agreements and other similar secured lending At 31 December 2022 Liabilities 105,891 226,690 (15,924) (73,006) 89,967 153,684 – (50,133) (89,967) (99,173) Derivative financial instruments 126,944 (57,082) 69,862 (50,133) (12,515) Repurchase agreements and other similar secured borrowing At 31 December 2022 69,738 196,682 (15,924) (73,006) 53,814 123,676 – (50,133) (53,814) (66,329) 4,378 – 4,378 7,214 – 7,214 Related amounts not offset in the balance sheet comprises: • Financial instruments not offset in the balance sheet but covered by an enforceable netting arrangement. This comprises master netting arrangements held against derivative financial instruments and excludes the effect of over-collateralisation • Financial instruments where a legal opinion evidencing enforceability of the right of offset may not have been sought, or may have been unable to obtain • Financial collateral comprises cash collateral pledged and received for derivative financial instruments and collateral bought and sold for reverse repurchase and repurchase agreements respectively and excludes the effect of over-collateralisation 398 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Financial liabilities designated at fair value through profit or loss Carrying balance aggregate fair value Amount contractually obliged to repay at maturity Difference between aggregate fair value and contractually obliged to repay at maturity Cumulative change in fair value accredited to credit risk difference 2023 $million 69,551 71,240 (1,689) 156 2022 $million 73,027 74,138 (1,111) (56) The net fair value loss on financial liabilities designated at fair value through profit or loss was $2,649 million for the year (31 December 2022: net loss of $677 million). Further details of the Group’s own credit adjustment (OCA) valuation technique is described later in this Note. Valuation of financial instruments The Valuation Methodology function is responsible for independent price verification, oversight of fair value and appropriate value adjustments and escalation of valuation issues. Independent price verification is the process of determining that the valuations incorporated into the financial 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 financial instruments are priced to exit. These are key controls in ensuring the material accuracy of the valuations incorporated in the financial statements. The market data used for price verification (PV) may include data sourced from recent trade data involving external counterparties or third parties such as Bloomberg, Reuters, brokers and consensus pricing providers. The Valuation Methodology function performs an ongoing review of the market data sources that are used as part of the PV and fair value processes which are formally documented on a semi-annual basis detailing the suitability of the market data used for price testing. Price verification 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, reliability, availability of multiple data sources and methodology employed by the pricing provider are taken into consideration. The Valuation and Benchmarks Committee (VBC) is the valuation governance forum consisting 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 Principal Finance, the Investment Committee meeting is held on a quarterly basis to review investments and valuations. Significant accounting estimates and judgements The Group evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgement and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date. • Fair value of financial 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 observability of significant valuation inputs can materially affect the fair values of financial instruments. • When establishing the exit price of a financial instrument using a valuation technique, the Group estimates valuation adjustments in determining the fair value (page 400). • In determining the valuation of financial 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 significant valuation judgements in respect of Level 3 instruments (page 407). • 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 significant degree of non-market-based unobservable inputs. 399 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Valuation techniques Refer to the fair value hierarchy explanation – Level 1, 2 and 3 (page 402) • Financial instruments held at fair value – Debt securities – asset-backed securities: Asset-backed securities are valued based on external prices obtained from consensus pricing providers, broker quotes, recent trades, arrangers’ quotes, etc. Where an observable price is available for a given security, it is classified as Level 2. In instances where third-party prices are not available or reliable, the security is classified as Level 3. The fair value of Level 3 securities is estimated using market standard cash flow models with input parameter assumptions which include prepayment speeds, default rates, discount margins derived from comparable securities with similar vintage, collateral type, and credit ratings. – Debt securities in issue: These debt securities relate to structured notes issued by the Group. Where independent market data is available through pricing vendors and broker sources these positions are classified as Level 2. Where such liquid external prices are not available, valuations of these debt securities are implied using input parameters such as bond spreads and credit spreads, and are classified as Level 3. These input parameters are determined with reference to the same issuer (if available) or proxies from comparable issuers or assets. – Derivatives: Derivative products are classified as Level 2 if the valuation of the product is based upon input parameters which are observable from independent and reliable market data sources. Derivative products are classified as Level 3 if there are significant 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 indices and interest rate products with quanto payouts. In most cases these unobservable correlation parameters cannot be implied from the market, and methods such as historical analysis and comparison with historical levels or other benchmark data must be employed. – Equity shares – private equity: The majority of private equity unlisted investments are valued based on earning multiples – Price-to-Earnings (P/E) or enterprise value to earnings before income tax, depreciation and amortisation (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 comparability between these unquoted investments and the comparable listed companies, appropriate adjustments are also applied (for example, liquidity 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 model or net asset value (‘NAV’) or option pricing model), 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 classified as Level 3 on the basis that the valuation methods involve judgements ranging from determining comparable companies to discount rates where the discounted cash flow method is applied. – Loans and advances: These primarily include loans in the FM Bond and Loan Syndication business which were not fully syndicated as of the balance sheet date and other financing transactions within Financial Markets, and loans and advances including reverse repurchase agreements that do not have SPPI cashflows 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 comparables with similar credit grade, sector and region, are used. Where observable transaction prices, credit spreads and market standard proxy methods are available, these loans are classified as Level 2. Where there are no recent transactions or comparables, these loans are classified as Level 3. – Other debt securities: These debt securities include convertible bonds, corporate bonds, credit and structured notes. Where quoted prices are available through pricing vendors, brokers or observable trading activities from liquid markets, these are classified as Level 2 and valued using such quotes. Where there are significant valuation inputs which are unobservable in the market, due to illiquid trading or the complexity of the product, these are classified as Level 3. The valuations of these debt securities are implied 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 or assets . • Financial instruments held at amortised cost The following sets out the Group’s basis for establishing fair values of amortised cost financial instruments and their classification between Levels 1, 2 and 3. As certain categories of financial instruments are not actively traded, there is a significant 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 securities in issue, subordinated liabilities 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 remaining 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 prices is based on discounted cash flows using the prevailing market rates for debts with a similar Credit Risk and remaining maturity 400 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued – Investment securities: For investment securities that do not have directly observable market values, the Group utilises a number of valuation techniques to determine fair value. Where available, securities 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 similar bond but using spreads for a particular sector and rating). Certain instruments cannot be proxies as set out above, and in such cases the positions are valued using non-market observable inputs. This includes those instruments held at amortised cost and predominantly relates to asset-backed securities. The fair value for such instruments is usually derived from proxy 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 prevailing money market rates for debts with a similar Credit Risk and remaining maturity. The Group’s loans and advances to customers’ portfolio is well diversified by geography and industry. Approximately a quarter of the portfolio re-prices within one month, and approximately half re-prices within 12 months. Loans and advances are presented net of provisions for impairment. 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, including 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 individual instruments within its loans and advances portfolio and as a result providing quantification of the key assumptions used to value such instruments is impractical – Other assets: Other assets comprise primarily cash collateral and trades pending settlement. The carrying amount of these financial instruments is considered to be a reasonable approximation of fair value as they are either short term in nature or re-price to current market rates frequently. Fair value adjustments When establishing the exit price of a financial instrument using a valuation technique, the Group considers adjustments to the modelled price which market participants would make when pricing that instrument. The main valuation adjustments (described further below) in determining fair value for financial assets and financial liabilities are as follows: Bid-offer valuation adjustment Credit valuation adjustment Debit valuation adjustment Model valuation adjustment Funding valuation adjustment Other fair value adjustments Total Income deferrals Day 1 and other deferrals Total 01.01.23 $million Movement during the year $million 31.12.23 $million 01.01.22 $million Movement during the year $million 31.12.22 $million 118 171 (112) 3 46 23 249 186 186 (3) (52) (17) 1 (13) 2 (82) (77) (77) 115 119 (129) 4 33 25 167 109 109 101 165 (70) 5 – 20 221 147 147 17 6 (42) (2) 46 3 28 39 39 118 171 (112) 3 46 23 249 186 186 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 neutralising the business’ positions through dealing away in the market, thereby bringing long positions to bid and short positions to offer. The methodology to calculate the bid-offer adjustment for a derivative portfolio involves netting between long and short positions and the grouping of risk by strike and tenor based on the hedging strategy where long positions are marked to bid and short positions marked to offer in the systems. • Credit valuation adjustment (CVA): The Group accounts for CVA against the fair value of derivative products. CVA is an adjustment to the fair value of the transactions to reflect the possibility 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 participant would include when deriving a purchase price to acquire our exposures. CVA is calculated for each subsidiary, and within 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 positive exposure, market-implied probability of default (PD) and recovery rates. Where market-implied 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 uncertainties associated with wrong-way risk in the Group’s Prudential Valuation Adjustments framework. 401 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued • Debit valuation adjustment (DVA): The Group calculates DVA adjustments on its derivative liabilities 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 derivative liabilities, a DVA adjustment is determined by applying the Group’s probability of default to the Group’s negative expected exposure against the counterparty. The Group’s probability 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 simulation of the underlying risk factors over the expected life of the deal. This simulation methodology incorporates the collateral posted by the Group and the effects of master netting agreements. • Model valuation adjustment: Valuation models may have pricing deficiencies or limitations that require a valuation adjustment. These pricing deficiencies or limitations arise due to the choice, implementation and calibration of the pricing model. • Funding valuation adjustment (FVA): The Group makes FVA adjustments against derivative products, including embedded derivatives. FVA reflects an estimate of the adjustment to its fair value that a market participant would make to incorporate funding costs or benefits that could arise in relation to the exposure. FVA is calculated by determining 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 (including partially collateralised) derivatives 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 calibrating to a set of market prices with differing maturity, expiry and strike of the trades. • Day one and other deferrals: In certain circumstances the initial fair value is based on a valuation technique which differs to the transaction price at the time of initial recognition. However, these gains can only be recognised when the valuation technique used is based primarily on observable market data. In those cases where the initially 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 immediately 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 primarily represent adjustments taken to reflect the specific terms and conditions of certain derivative contracts which affect the termination value at the measurement date. In addition, the Group calculates own credit adjustment (OCA) on its issued debt designated at fair value, including structured notes, in order to reflect changes in its own credit standing. Issued debt is discounted utilising the spread at which similar instruments would be issued or bought back at the measurement date as this reflects the value from the perspective of a market participant who holds the identical item as an asset. OCA measures the difference between the fair value of issued debt as of reporting date and theoretical fair values of issued debt adjusted up or down for changes in own credit spreads from inception date to the measurement date. Under IFRS 9 the change in the OCA component is reported under other comprehensive income. The Group’s OCA reserve will increase if its credit standing worsens in comparison with the inception of the trade and, conversely, decrease if its credit standing improves. The Group’s OCA reserve will reverse over time as its liabilities mature. Fair value hierarchy – financial instruments held at fair value The fair values of quoted financial assets and liabilities in active markets are based on current prices. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, 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 pricing models and, where appropriate, comparison with instruments that have characteristics similar to those of the instruments held by the Group. Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the observability of the significant inputs used to determine the fair values. Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Group recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level of observability 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 identical assets or liabilities. • Level 2: Fair value measurements are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable. • Level 3: Fair value measurements are those where inputs which could have a significant effect on the instrument’s valuation are not based on observable market data. 402 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued The following tables show the classification of financial instruments held at fair value into the valuation hierarchy: Assets Financial instruments held at fair value through profit or loss Loans and advances to banks Loans and advances to customers Reverse repurchase agreements and other similar secured lending Debt securities and other eligible bills Of which: Issued by central banks & governments Issued by corporates other than financial institutions1 Issued by financial institutions1 Equity shares Derivative financial instruments Of which: Foreign exchange Interest rate Credit Equity and stock index options Commodity Investment securities Debt securities and other eligible bills Of which: Issued by central banks & governments Issued by corporates other than financial institutions1 Issued by financial institutions1 Equity shares Other assets Level 1 $million Level 2 $million Level 3 $million Total $million – – – 27,055 23,465 4 3,586 2,386 954 129 37 – – 788 2,265 5,252 79,484 24,635 6,557 4,062 14,016 370 49,400 42,414 6,293 438 73 182 55,060 48,196 47,225 820 7,015 199 – 18,983 3,236 25,977 6 – – 1,960 2,363 1,262 – 346 916 184 80 25 6 47 2 – 72 51 – 21 787 6 2,265 7,212 81,847 52,952 30,022 4,412 18,518 2,940 50,434 42,568 6,336 485 75 970 103,328 66,259 4,056 33,013 992 6 Total financial assets at 31 December 2023 85,654 209,608 6,714 301,976 Liabilities Financial instruments held at fair value through profit or loss Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Debt securities in issue Short positions Derivative financial instruments Of which: Foreign exchange Interest rate Credit Equity and stock index options Commodity Other liabilities – – – – 7,152 1,560 15,970 41,283 9,776 4,591 749 55,116 122 46 – – 581 – 45,314 8,262 945 147 448 – 334 1,278 – 1,041 103 196 10 5 162 19 – 8 1,894 17,248 41,283 10,817 11,846 56,061 45,446 8,313 1,107 166 1,029 8 Total financial liabilities at 31 December 2023 7,901 128,296 2,960 139,157 1 Includes covered bonds of $7,509 million, securities issued by Multilateral Development Banks/International Organisations of $24,192 million and State-owned agencies and development banks of $7,564 million The fair value of financial assets and financial liabilities classified as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $940 million and $288 million respectively. There were no significant changes to valuation or levelling approaches during the year 31 December 2023. There were no significant transfers of financial assets and liabilities measured at fair value between Level 1 and Level 2 during the year 31 December 2023. 403 Standard Chartered – Annual Report 2023Financial statementsLevel 1 $million Level 2 $million Level 3 $million Total $million 13. Financial instruments continued Assets Financial instruments held at fair value through profit or loss Loans and advances to banks Loans and advances to customers Reverse repurchase agreements and other similar secured lending Debt securities and other eligible bills Of which: Issued by central banks & governments Issued by corporates other than financial institutions1 Issued by financial institutions1 Equity shares Derivative financial instruments Of which: Foreign exchange Interest rate Credit Equity and stock index options Commodity Investment securities – – 3 14,702 14,086 91 525 3,024 892 139 33 – – 720 955 4,741 62,490 14,707 4,734 3,452 6,521 24 62,781 54,020 7,351 410 98 902 Debt securities and other eligible bills 56,401 55,525 Of which: Issued by central banks & governments Issued by corporates other than financial institutions1 Issued by financial institutions1 Equity shares Other assets 45,151 1,775 9,475 146 – 22,171 4,045 29,309 7 – 21 1,805 1,998 1,153 – 517 636 182 44 13 28 1 2 – – – – – 655 7 976 6,546 64,491 30,562 18,820 4,060 7,682 3,230 63,717 54,172 7,412 411 100 1,622 111,926 67,322 5,820 38,784 808 7 Total financial assets at 31 December 2022² 75,168 201,230 5,865 282,263 Liabilities Financial instruments held at fair value through profit or loss Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Debt securities in issue Short positions – – – – 4,085 778 10,734 51,706 8,121 2,722 Derivative financial instruments 642 69,099 Of which: Foreign exchange Interest rate Credit Equity and stock index options Commodity Other liabilities 101 29 – – 512 – 56,710 10,020 899 191 1,279 – 288 972 – 451 40 121 12 12 42 55 – 6 1,066 11,706 51,706 8,572 6,847 69,862 56,823 10,061 941 246 1,791 6 Total financial liabilities at 31 December 2022² 4,727 143,160 1,878 149,765 1 Includes covered bonds of $8,455 million, securities issued by Multilateral Development Banks/International Organisations of $11,438 million , and State-owned agencies and development banks of $9,211 million 2 The above table does not include held for sale assets of $3 million and liabilities of $5 million. These are reported in Note 21 together with their fair value hierarchy The fair value of financial assets and financial liabilities classified as Level 2 in the fair value hierarchy that are subject to complex modelling techniques is $888 million and $209 million respectively. 404 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Fair value hierarchy – financial instruments measured at amortised cost The following table shows the carrying amounts and incorporates the Group’s estimate of fair values of those financial assets and liabilities 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 financial instrument. For certain instruments, the fair value may be determined using assumptions for which no observable prices are available. Carrying value $million Level 1 $million Level 2 $million Level 3 $million Total $million Fair value Assets Cash and balances at central banks¹ Loans and advances to banks of which – reverse repurchase agreements and other similar secured lending Loans and advances to customers of which – reverse repurchase agreements and other similar secured lending Investment securities² Other assets¹ Assets held for sale At 31 December 2023 Liabilities Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Debt securities in issue Subordinated liabilities and other borrowed funds Other liabilities¹ Liabilities held for sale At 31 December 2023 Assets Cash and balances at central banks¹ Loans and advances to banks of which – reverse repurchase agreements and other similar secured lending Loans and advances to customers of which – reverse repurchase agreements and other similar secured lending Investment securities² Other assets¹ Assets held for sale At 31 December 2022 Liabilities Deposits by banks Customer accounts Repurchase agreements and other similar secured borrowing Debt securities in issue Subordinated liabilities and other borrowed funds Other liabilities¹ Liabilities held for sale At 31 December 2022 69,905 44,977 1,738 286,975 13,996 56,935 38,140 701 497,633 28,030 469,418 12,258 62,546 12,036 38,663 726 – – – – – – – 101 101 – – – 31,255 11,119 – 54 69,905 44,921 1,738 53,472 13,827 54,419 38,140 541 – – – 226,211 169 33 – 59 69,905 44,921 1,738 279,683 13,996 54,452 38,140 701 261,398 226,303 487,802 28,086 460,224 12,258 30,859 336 38,663 672 – – – – – – – – 28,086 460,224 12,258 62,114 11,455 38,663 726 613,526 623,677 42,428 571,098 Fair value Carrying value $million Level 1 $million Level 2 $million Level 3 $million Total $million 58,263 39,519 978 310,647 24,498 59,714 39,295 1,388 508,826 28,789 461,677 2,108 61,242 13,715 42,915 1,230 611,676 – – – – – – – 344 344 – – – 24,624 12,445 – 398 58,263 39,488 924 58,663 15,727 56,444 39,295 946 – – – 251,560 8,911 25 – 98 253,099 251,683 28,813 461,665 2,108 36,148 385 42,914 832 37,467 572,865 – – – – – 1 – 1 58,263 39,488 924 310,223 24,638 56,469 39,295 1,388 505,126 28,813 461,665 2,108 60,772 12,830 42,915 1,230 610,333 1 The carrying amount of these financial instruments is considered to be a reasonable approximation 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 $19,422 million at 31 December 2023 and $17,943 million at 31 December 2022 405 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued The Group has changed its method of determining the cost of its portfolio of Investment Securities held at amortised cost and Debt securities and other eligible bills, other than those included within financial instruments held at fair value through profit or loss, from the weighted average cost method to the first-in-first-out method. This change in accounting policy will affect the calculation of gains or losses on derecognition of such instruments and the determination of the initial credit risk of these instruments, to better align with the IFRS 9 requirements for recognising and measuring impairment losses. The change was made prospectively for certain but not all securities and transactions. It is impracticable for the Group to determine the impact of this approach for each security and each transaction that was executed in previous periods. Loans and advances to customers by client segment¹ Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items At 31 December 2023 Corporate, Commercial & Institutional Banking Consumer, Private & Business Banking Ventures Central & other items At 31 December 2022 Carrying value Stage 1 and stage 2 $million Stage 3 $million 2023 Total $million Stage 3 $million 1,975 724 – 209 128,430 125,335 1,033 29,269 130,405 126,059 1,033 29,478 1,910 721 – 209 Fair value Stage 1 and stage 2 $million 125,841 120,701 1,032 29,269 Total $million 127,751 121,422 1,032 29,478 2,908 284,067 286,975 2,840 276,843 279,683 Carrying value Stage 1 and stage 2 $million 2022 Total $million Stage 3 $million 137,150 130,278 698 39,133 307,259 139,631 130,955 698 39,363 310,647 2,525 685 – 230 3,440 Stage 3 $million 2,481 677 – 230 3,388 Fair value Stage 1 and stage 2 $million 137,187 131,679 696 37,221 Total $million 139,712 132,364 696 37,451 306,783 310,223 1 Loans and advances includes reverse repurchase agreements and other similar secured lending: carrying value $13,996 million and fair value $13,996 million (31 December 2022: $24,498 million and $24,638 million respectively) 406 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Fair value of financial instruments Level 3 Summary and significant unobservable inputs The following table presents the Group’s primary Level 3 financial instruments which are held at fair value. The table also presents the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and the weighted average of those inputs: Instrument Loans and advances to customers Reverse repurchase agreements and other similar secured lending Debt securities, alternative tier one and other eligible securities Value as at 31 December 2023 Assets $million 1,960 Liabilities $million Principal valuation technique – Discounted cash flows 2,363 – Discounted cash flows 1,283 – Discounted cash flows Government bonds and treasury bills Equity shares (includes private equity investments) 51 971 Internal pricing model – Discounted cash flows – Comparable pricing/yield Discounted cash flows Option pricing model Other assets Derivative financial instruments of which: 6 – NAV Foreign exchange 25 10 Option pricing model Interest rate Credit Equity and stock index Deposits by banks Customer accounts Discounted cash flows 6 47 2 – – 5 Discounted cash flows 162 Discounted cash flows 19 Internal pricing model 334 Discounted cash flows 1,278 Discounted cash flows Internal pricing model Debt securities in issue – 1,041 Discounted cash flows Internal pricing model Short positions Other liabilities Total – – 103 Discounted cash flows 8 Comparable pricing/yield 6,714 2,960 Significant unobservable inputs Price/yield Credit spreads Repo curve Price/yield Price/yield Recovery rates Equity-Equity correlation Equity-FX correlation Price/yield Range1 1.7% – 100% 0.1% – 1.0% 5.1% – 7.6% (2.7)% – 10.3% (14.0)% – 25.8% 0.1% – 1.0% Weighted average2 12.0% 0.6% 6.3% 6.0% 10.1% 0.2% 44.1% – 100% 80.7% (35.9)% – 45.5% 14.2% 17.7% – 21.8% 20.6% EV/EBITDA multiples EV/Revenue multiples P/E multiples P/B multiples P/S multiples Liquidity discount Discount rates Equity value based on EV/Revenue multiples Equity value based on EV/EBITDA multiples Equity value based on volatility N/A Foreign exchange option implied volatility Interest rate curves Foreign exchange curves Interest rate curves Credit spreads Price/yield Equity-Equity correlation Equity-FX correlation Credit spreads Credit spreads Interest rate curves Price/yield Equity-Equity correlation Equity-FX correlation Credit spreads Price/yield Interest rate curves Equity-Equity correlation Equity-FX correlation Bond option implied volatility Price/yield EV/EBITDA multiples 13.8x – 15.6x 9.3x – 30.9x 10.6x – 51.8x 0.3x – 2.7x 0.2x – 1.6x 7.5% – 20.0% 9.2% – 35.6% 8.4x – 42.5x 14.9x 15.8x 45.7x 1.6x 0.3x 15.1% 17.0% 27.5x 3.1x – 3.1x 3.1x 21.0% – 65.0% 30.1% N/A N/A 0.5% – 51% 31.8% 3.6% – 5.8% 0.6% – 64.2% 3.8% 12.8% 3.6% – 8.6% 1.0% – 1.0% 1.7% – 16.3% 5.0% 1.0% 8.6% 44.1% – 100% 80.7% (35.9)% – 45.5% 14.2% 1.9% 0.1% – 3.4% 1.2% 1.0% – 2.0% 6.1% 2.9% – 8.6% 4.8% – 15.2% 9.9% 44.1% – 100% 80.7% (35.9)% – 45.5% 14.2% 1.1% 17.9% 4.4% 44.1% – 100% 80.7% (35.9)% – 45.5% 14.2% 4.4% 0.3% – 1.6% 6.6% – 20.9% 2.9% – 5.3% 2.9% – 5.3% 7.1% – 7.1% 5.8x – 11.2x 7.1% 8.5x 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 financial instruments as at 31 December 2023. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions 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 financial instruments 2 Weighted average for non-derivative financial instruments has been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator 407 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Value as at 31 December 2022 Instrument Assets $million Liabilities $million Principal valuation technique Significant unobservable inputs Range1 Weighted average2 Loans and advances to banks 21 – Discounted cash flows Price/yield Loans and advances to customers Reverse repurchase agreements and other similar secured lending Debt securities, alternative tier one and other eligible securities Government bonds and treasury bills Asset-backed securities Equity shares (includes private equity investments) 1,805 1,998 1,152 – 1 837 Other assets Derivative financial instruments of which: Foreign exchange Interest rate Credit Equity and stock index Deposits by banks Customer accounts Debt securities in issue Short position Other liabilities 7 13 28 1 2 – – – – – Credit spreads – Discounted cash flows Price/yield – Discounted cash flows Repo curve Recovery rates Price/yield – Discounted cash flows Price/yield – Discounted cash flows Price/yield Recovery rates – Discounted cash flows Price/yield – Comparable pricing/ yield EV/EBITDA multiples EV/Revenue multiples P/E multiples P/B multiples P/S multiples Liquidity discount Discounted cash flows Discount rates Option pricing model Equity value based on EV/Revenue multiples Equity value based on EV/EBITDA multiples Equity value based on volatility N/A – NAV N/A 2.9% 0.3% – 18.2% 5.0% – 100% 2.3% – 8.0% 1.9%-7.2% 3.1%–48.5% 0.0% – 1.0% N/A 6.8% 7.0x – 13.1x 8.2x – 23.2x 13.4x – 29.7x 0.3x – 3.3x 2.1x – 2.2x 10.0% – 29.7% 7.5% – 16.4% 4.8x – 76.1x N/A 2.9% 5.3% 90.5% 6.2% 6.0% 7.1% 0.2% N/A 6.8% 11.0x 12.9x 17.6x 1.3x 2.2x 17.5% 9.4% 32.9x 2.6x 2.6x 60.0% 60.0% N/A N/A (21.0)% – 21.0% (2.7)% (4.6)% – 81.8% 15.9% (2.1)% – 50.2% N/A 12 Option pricing model Discounted cash flows 12 Discounted cash flows Option pricing model Foreign exchange option implied volatility Foreign exchange curves Interest rate curves Bond option implied volatility 42 Discounted cash flows Credit spreads 55 Internal pricing model 288 Discounted cash flows Credit spreads 972 Discounted cash flows Credit spreads Internal pricing model Discounted cash flows 451 Discounted cash flows Credit spreads Price/yield 0.1% – 2.3% Price/yield 7.2% – 9.7% Equity-Equity correlation 30.0% – 96.0% (70.0)% – 85.0% Equity-FX correlation 0.9% – 3.4% 6.0% 0.9% – 19.1% Equity-Equity correlation 30.0% – 96.0% (70.0)% – 85.0% Equity-FX correlation Interest rate curves N/A 3.1% – 22.9% Price/yield 0.3% – 7.0% Price/yield 6.8% – 12.4% Equity-Equity correlation 30.0% – 96.0% (70.0)% – 85.0% Equity-FX correlation 6.8% 4.2x – 9.0x EV/EBITDA multiples Internal pricing model 40 Discounted cash flows Price/yield 6 Comparable pricing/ yield 10.6% N/A 1.4% 7.2% 67.0% 37.0% 1.8% 6.0% 10.3% 67.0% 37.0% N/A 17.8% 4.7% 9.1% 67.0% 37.0% 6.8% 6.1x Total 5,865 1,878 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 financial instruments as at 31 December 2022. The ranges of values used are reflective of the underlying characteristics of these Level 3 financial instruments based on the market conditions 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 financial instruments 2 Weighted average for non-derivative financial instruments has been calculated by weighting inputs by the relative fair value. Weighted average for derivatives has been provided by weighting inputs by the risk relevant to that variable. N/A has been entered for the cases where weighted average is not a meaningful indicator 408 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued The following section describes the significant unobservable inputs identified 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 implied yield (or spread over a liquid benchmark) from the price of a comparable instrument, then adjusting that yield (or spread) to derive a value for the instrument. The adjustment should account for relevant differences in the financial 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, deriving a fair value for a junior unsecured bond from the price of a senior secured bond). An increase in price, in isolation, would result in a favourable movement in the fair value of the asset. An increase in yield, in isolation, 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 additional yield that a market participant 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, Depreciation and Amortisation (EBITDA). EV is the aggregate market capitalisation and debt minus the cash and cash equivalents. An increase in EV/EBITDA multiple 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 in a favourable 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 a specified period • Net asset value (NAV) is the value of an entity’s assets after deducting any liabilities • Interest rate curves is the term structure of interest rates and measures of future interest rates at a particular point in time • Liquidity discounts in the valuation of unlisted investments are primarily applied to the valuation of unlisted firms’ investments to reflect the fact that these stocks are not actively traded. An increase in liquidity discount will result in an unfavourable movement in the fair value of the unlisted firm • Price-Earnings (P/E) multiple is the ratio of the market value of the 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 is the expectation of the rate of return resulting from the liquidation of a particular loan. As the probability of default increases for a given instrument, the valuation of that instrument will increasingly reflect its expected recovery level assuming default. An increase in the recovery rate, in isolation, 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 • Volatility represents an estimate of how much a particular instrument, parameter or index will change in value over time. Generally, the higher the volatility, the more expensive the option will be. 409 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Level 3 movement tables – financial assets The table below analyses movements in Level 3 financial assets carried at fair value. Held at fair value through profit or loss Investment securities 2023 Reverse repurchase agreements and other similar secured lending $million Debt securities, alternative tier one and other eligible bills $million Loans and advances to banks $million Loans and advances to customers $million Equity shares $million Other Assets $million Derivative financial instruments $million Debt securities, alternative tier one and other eligible bills $million 21 1,805 1,998 1,153 182 7 44 (35) – (35) (107) (292) – – (107) (304) – – – – – – – – 1,784 (1,133) (442) (225) 206 1,960 5,902 (3,942) (1,488) – – 2,363 12 – – – 1,082 (518) (305) (6) 148 1,262 4 – 5 (1) – – – 8 (10) – – – 184 (1) – – (1) – – – – – – – – 6 12 – 12 – – – – 189 (115) (25) (27) 2 80 Equity shares $million Total $million 655 5,865 – – – – (419) – (429) 10 101 100 108 (7) 61 108 (8) 9,069 (5) (5,768) – (2,260) (32) (327) 7 454 787 6,714 – – – – – (1) – (1) 21 (23) – (16) 91 72 Assets At 1 January 2023 Total (losses)/gains recognised in income statement Net interest income Net trading income Other operating income Total (losses)/gains recognised in other comprehensive income (OCI) Fair value through OCI reserve Exchange difference Purchases Sales Settlements Transfers out1 Transfers in2 At 31 December 2023 Total unrealised (losses)/ gains recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2023 – – – – – – – 22 (22) – (21) – – – (3) 3 (1) 4 – (12) – – (9) 1 Transfers out includes loans and advances, debt securities, alternative tier one and other eligible bills, equity shares and derivative financial instruments where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2 2 Transfers in primarily relates to loans and advances, debt securities, alternative tier one and other eligible bills, equity shares and derivative financial instruments where the valuation parameters became unobservable during the year 410 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued The table below analyses movements in Level 3 financial assets carried at fair value. Held at fair value through profit or loss Investment securities 2022 Reverse repurchase agreements and other similar secured lending $million Debt securities, alternative tier one and other eligible bills $million Loans and advances to banks $million Loans and advances to customers $million Equity shares $million Other Assets $million Derivative financial instruments $million 9 1,357 1,566 349 186 26 (16) – (16) – – – – 55 (30) (19) – 22 21 (132) – (132) – – – – 1,605 (237) (877) (160) 249 1,805 2 – 2 – – – – 7 – 7 – – – – 6,438 (5,484) (524) – – 1,063 (342) (1) – 77 4 – 4 – – – – 2 (10) – – – 1,998 1,153 182 – – – – – – – 8 (10) – (17) – 7 90 30 – 30 – – – – 118 (99) (80) (29) 14 44 Debt securities, alternative tier one and other eligible bills $million Equity shares $million Total $million 40 493 4,116 – – – – (1) (1) – – – (39) – – – – – – – (8) (1) (7) (105) – (105) – (9) (2) (7) 166 9,455 (6) (6,218) – – 10 655 (1,540) (206) 372 5,865 – – – – 3 – (2) – – 1 Assets At 1 January 2022 Total (losses)/gains recognised in income statement Net interest income Net trading income Other operating income Total losses recognised in other comprehensive income (OCI) Fair value through OCI reserve Exchange difference Purchases Sales Settlements Transfers out1 Transfers in2 At 31 December 2022 Total unrealised gains/ (losses) recognised in the income statement, within net trading income, relating to change in fair value of assets held at 31 December 2022 1 Transfers out includes loans and advances, other assets and derivative financial instruments where the valuation parameters became observable during the period and were transferred to Level 1 and Level 2 2 Transfers in primarily relates to loans and advances, debt securities, alternative tier one and other eligible bills and derivative financial instruments where the valuation parameters became unobservable during the year 411 Standard Chartered – Annual Report 2023Financial statements13. Financial instruments continued Level 3 movement tables – financial liabilities At 1 January 2023 Total losses/(gains) recognised in income statement – net trading income Issues Settlements Transfers out1 Transfers in2 At 31 December 2023 Total unrealised (gains)/losses recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 31 December 2023 Deposits by banks $million Customer accounts $million 2023 Debt securities in issue $million Derivative financial instruments $million Short positions $million Other liabilities $million 972 451 121 40 288 7 628 (6) 1,789 39 1,489 (585) (1,491) (1,218) (4) – (9) 23 (85) 365 334 1,278 1,041 (52) 447 (312) (11) 3 196 3 100 (40) – – 103 – (21) 6 (47) – – (62) Deposits by banks $million Customer accounts $million 2022 Debt securities in issue $million Derivative financial instruments $million Short positions $million Other liabilities $million Total $million 1,878 (6) 4,453 (3,646) (110) 391 2,960 Total $million 1,653 (120) 3,399 (3,120) (66) 132 1,878 (28) 6 3 – – (1) – 8 1 5 – – – – 6 – At 1 January 2022 283 454 821 Total (gains)/losses recognised in income statement – net trading income Issues Settlements Transfers out1 Transfers in2 At 31 December 2022 Total unrealised gains recognised in the income statement, within net trading income, relating to change in fair value of liabilities held at 31 December 2022 (37) 447 (82) 1,818 (158) 815 (400) (1,266) (1,066) (5) – 288 – 48 972 (38) 77 451 94 155 179 (291) (23) 7 121 – (3) 140 (97) – – 40 (1) (17) (7) (3) – 1 Transfers out during the year primarily relates to bank deposits, customer accounts debt securities in issue, other liabilities and derivative financial instruments where the valuation parameters became observable during the year and were transferred to Level 2 financial liabilities 2 Transfers in during the year primarily relates to derivative financial instruments, customer accounts and debt securities in issue where the valuation parameters become unobservable during the year 412 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements13. Financial instruments continued Sensitivities in respect of the fair values of Level 3 assets and liabilities Sensitivity analysis is performed on products with significant 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 statistical analysis performed on a set of reference prices based on the composition 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 sensitivity analysis assumes a one-way market move and does not consider offsets for hedges. Held at fair value through profit or loss Held at fair value through other comprehensive income Net exposure $million Favourable changes $million Unfavourable changes $million Net exposure $million Favourable changes $million Unfavourable changes $million Financial instruments held at fair value Loans and advances 1,960 1,985 1,918 Reverse repurchase agreements and other similar secured lending Debt securities, alternative tier one and other eligible bills Equity shares Other assets Derivative financial instruments Customers accounts Deposits by banks Short positions Debt securities in issue Other liabilities At 31 December 2023 Financial instruments held at fair value Loans and advances Reverse repurchase agreements and other similar secured lending Asset backed securities Debt securities, alternative tier one and other eligible bills Equity shares Other assets Derivative financial instruments Customers accounts Deposits by banks Short positions Debt securities in issue Other liabilities At 31 December 2022 2,363 2,390 2,336 1,262 184 6 (116) (1,278) (334) (103) (1,041) (8) 2,895 1,826 1,998 1 1,152 182 7 (77) (972) (288) (40) (451) (6) 3,332 1,309 202 7 (75) (1,191) (334) (101) (966) (7) 3,219 1,851 2,013 1 1,168 200 8 (44) (934) (283) (39) (419) (5) 3,517 1,193 166 5 (157) (1,365) (334) (105) (1,115) (9) 2,533 1,758 1,979 1 1,124 164 6 (109) (1,010) (293) (41) (482) (7) 3,090 – – 72 787 – – – – – – – – – 78 866 – – – – – – – – – 66 708 – – – – – – – 859 944 774 – – – – – – – – – – – – 655 715 595 – – – – – – – – – – – – – – – – – – – – – 655 715 595 The reasonably possible alternatives could have increased or decreased the fair values of financial instruments held at fair value through profit or loss and those classified as fair value through other comprehensive income by the amounts disclosed below. Financial instruments Held at fair value through profit or loss Fair value changes Possible increase Possible decrease Fair value through other comprehensive income Possible increase Possible decrease 2023 $million 2022 $million 324 (362) 85 (85) 185 (242) 60 (60) 413 Standard Chartered – Annual Report 2023Financial statements14. Derivative financial instruments Accounting policy Fair values may be obtained from quoted market prices in active markets, recent market transactions, and valuation techniques, including discounted cash flow models and option pricing models, as appropriate. Where the initially recognised fair value of a derivative contract is based on a valuation model that uses inputs which are not observable in the market, it follows the same initial recognition accounting policy as for other financial assets and liabilities. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Hedge accounting Under certain conditions, the Group may designate a recognised asset or liability, a firm commitment, highly probable forecast transaction or net investment of a foreign operation into a formal hedge accounting relationship with a derivative that has been entered to manage interest rate and/or foreign exchange risks present in the hedged item. The Group applied the ‘Phase 1’ hedge accounting requirements of IAS 39 Financial Instruments: Recognition and Measurement and the ‘Phase 2’ amendments to IFRS in respect of interest rate benchmark reform. There are three categories of hedge relationships: • Fair value hedge: to manage the fair value of interest rate and/or foreign currency risks of recognised assets or liabilities 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 liability, or a forecasted transaction • Net investment hedge: to manage the structural foreign exchange risk of an investment in a foreign operation. The Group assesses, both at hedge inception and on a quarterly basis, whether the derivatives designated in hedge relationships are highly effective in offsetting changes in fair values or cash flows of hedged items. Hedges are considered to be highly effective if all the following criteria are met: • At inception of the hedge and throughout its life, the hedge is prospectively expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk • Prospective and retrospective effectiveness of the hedge should be within a range of 80–125%. This is tested using regression analysis • The regression co-efficient (R squared), which measures the correlation between the variables in the regression, is at least 80%. In the case of the hedge of a forecast transaction, the transaction must have a high probability of occurring and must present an exposure to variations in cash flows that are expected to affect reported profit or loss. Fair value hedge Changes in the fair value of derivatives 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 liability that are attributable to the hedged risk. If the hedge no longer meets the criteria 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 remaining term to maturity of the hedged item. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immediately in the income statement. For financial assets classified 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 derivative. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedging instruments are initially recognised in other comprehensive income, accumulating in the cash flow hedge reserve within equity. These amounts are subsequently recycled to the income statement in the periods when the hedged item affects profit or loss. Both the derivative 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 derivative method, which creates a derivative instrument to serve as a proxy for the hedged transaction. The terms of the hypothetical derivative match the critical terms of the hedged item and it has a fair value of zero at inception. The hypothetical derivative and the actual derivative are regressed to establish the statistical significance of the hedge relationship. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the net trading income immediately. If a cash flow hedge is discontinued, 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. Should the Group consider the hedged future cash flows are no longer expected to occur due to reasons, the cumulative gain or loss will be immediately reclassified to profit or loss. Net investment hedge Hedges of net investments are accounted for in a similar manner to cash flow hedges, with gains and losses arising 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 within equity. These amounts remain in equity until the net investment is disposed of. The ineffective portion of the hedges is recognised in the net trading income immediately. 414 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements14. Derivative financial instruments continued The tables below analyse the notional principal amounts and the positive and negative fair values of derivative financial instruments. Notional principal amounts are the amounts of principal underlying the contract at the reporting date. 2023 2022 Derivatives Foreign exchange derivative contracts: Forward foreign exchange contracts Currency swaps and options Interest rate derivative contracts: Swaps Forward rate agreements and options Exchange traded futures and options Credit derivative contracts Equity and stock index options Commodity derivative contracts Gross total derivatives Offset Total derivatives Notional principal amounts $million 3,628,067 1,145,702 4,773,769 4,841,616 313,253 5,154,869 325,051 281,130 8,671 117,436 10,660,926 – 10,660,926 Assets $million Liabilities $million 30,897 11,671 42,568 53,735 2,057 55,792 39 485 75 970 99,929 (49,495) 50,434 32,601 12,845 45,446 55,241 2,520 57,761 47 1,107 166 1,029 105,556 (49,495) 56,061 Notional principal amounts $million 3,154,440 1,168,026 4,322,466 3,516,310 98,465 3,614,775 324,702 249,082 6,788 90,952 8,608,765 – 8,608,765 Assets $million Liabilities $million 38,162 16,010 54,172 62,001 2,214 64,215 279 411 100 1,622 120,799 (57,082) 63,717 39,376 17,447 56,823 64,005 2,880 66,885 258 941 246 1,791 126,944 (57,082) 69,862 The Group limits 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 enforceability of the right to offset (e.g. via legal opinion) and the ability and intention to settle on a net basis (e.g. via operational practice). The Group may enter into economic hedges that do not qualify for IAS 39 hedge accounting treatment, including derivatives such as interest rate swaps, interest rate futures and cross-currency swaps to manage interest rate and currency risks of the Group. These derivatives are measured at fair value, with fair value changes recognised in net trading income: refer to Market Risk (page 286). Derivatives held for hedging The Group enters into derivative contracts for the purpose of hedging interest rate, currency and structural foreign exchange risks inherent in assets, liabilities and forecast transactions. The table below summarises the notional principal amounts and carrying values of derivatives designated in hedge accounting relationships at the reporting date. Included in the table above are derivatives held for hedging purposes as follows: 2023 2022 Assets $million Liabilities $million Assets $million Liabilities $million Derivatives designated as fair value hedges: Interest rate swaps Currency swaps Derivatives designated as cash flow hedges: Interest rate swaps Forward foreign exchange contracts Currency swaps Derivatives designated as net investment hedges: Forward foreign exchange contracts Total derivatives held for hedging Notional principal amounts $million 69,347 115 69,462 41,834 12,071 14,321 68,226 15,436 153,124 2,397 6 2,403 537 183 150 870 1,264 10 1,274 184 420 191 795 32 2,101 Notional principal amounts $million 80,760 1,273 82,033 31,977 11,987 11,787 55,751 2,438 16 2,454 100 99 86 285 41 3,314 14,576 152,360 120 2,859 2,939 48 2,987 671 385 362 1,418 141 4,546 415 Standard Chartered – Annual Report 2023Financial statements14. Derivative financial instruments continued Fair value hedges The Group issues various long-term fixed-rate debt issuances that are measured at amortised cost, including 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 securities such as government and corporate bonds, including some denominated in foreign currency (see Note 13). These assets and liabilities 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 ineffectiveness from fair value hedges is driven by cross-currency basis risk and interest cashflows mismatch between the hedging instruments and underlying hedged items. The amortisation of fair value hedge adjustments for hedged items no longer designated is recognised in net interest income. At 31 December 2023 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 ineffectiveness Interest rate1 Interest rate swaps – debt securities/subordinated notes issued Interest rate swaps – loans and advances Interest rate swaps – debt securities and other eligible bills Interest and currency risk1 Cross-currency swaps – debt securities/subordinated notes issued Cross-currency swaps – debt securities and other eligible bills 2023 Carrying amount Notional $million Asset $million Liability $million Change in fair value used to calculate hedge ineffectiveness2 $million Ineffectiveness recognised in profit or loss $million 45,455 1,203 22,689 70 45 381 26 857 – 10 2,267 1 271 (20) 129 (459) 6 – (2) 11 (199) (4) – (17) – – (21) Total at 31 December 2023 69,462 1,274 2,403 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 derivatives, with changes in fair value including hedge ineffectiveness recorded within net trading income 2 This represents a (loss)/gains change in fair value used for calculating hedge ineffectiveness Interest rate1 Interest rate swaps – debt securities/subordinated notes issued Interest rate swaps – loans and advances Interest rate swaps – debt securities and other eligible bills Interest and currency risk1 Cross-currency swaps – debt securities/subordinated notes issued Cross-currency swaps – debt securities and other eligible bills Total at 31 December 2022 2022 Carrying amount Notional $million Asset $million 41,772 1,117 112 68 37,871 2,258 72 1,201 82,033 – 16 2,454 Change in fair value used to calculate hedge ineffectiveness2 $million Ineffectiveness recognised in profit or loss $million (3,020) 53 3,127 (260) (9) (109) (7) (1) 13 12 4 21 Liability $million 2,914 – 25 4 44 2,987 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 derivatives, with changes in fair value including hedge ineffectiveness recorded within net trading income 2 This represents a (loss)/gains change in fair value used for calculating hedge ineffectiveness 416 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements14. Derivative financial instruments continued Hedged items in fair value hedges 2023 Carrying amount Accumulated amount of fair value hedge adjustments included in the carrying amount Asset $million Liability $million Asset $million Liability $million Change in the value used for calculating hedge ineffectiveness1 $million Cumulative balance of fair value adjustments from de- designated hedge relationships2 $million Debt securities /subordinated notes issued Debt securities and other eligible bills Loans and advances to customers Total at 31 December 2023 – 46,156 21,473 1,183 22,656 – – 46,156 – (553) (20) (573) 2022 1,761 (273) – – 1,761 431 20 178 360 744 13 1,117 Carrying amount Asset $million Liability $million – 42,702 36,028 1,051 37,079 – – 42,702 Accumulated amount of fair value hedge adjustments included in the carrying amount Asset $million – (2,075) (65) (2,140) Liability $million 2,756 – – 2,756 Cumulative balance of fair value adjustments from de- designated hedge relationships2 $million Change in fair value used for calculating hedge ineffectiveness1 $million 3,285 (3,101) (54) 130 414 441 1 856 Debt securities /subordinated notes issued Debt securities and other eligible bills Loans and advances to customers Total at 31 December 2022 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffectiveness 2 This represents a credit/(debit) to the balance sheet value Income statement impact of fair value hedges Change in fair value of hedging instruments Change in fair value of hedged risks attributable to hedged items Net ineffectiveness (loss)/gain to net trading income Amortisation gain to net interest income 2023 Income/ (expense) $million 2022 Income/ (expense) $million (199) 178 (21) 232 (109) 130 21 141 Cash flow hedges The Group has exposure to market movements in future interest cash flows on portfolios of customer accounts, debt securities and loans and advances to customers. The amounts and timing of future cash flows, representing both principal and interest flows, are projected on the basis of contractual terms and other relevant factors, including estimates of prepayments and defaults. The hedging strategy of the Group involves using interest rate swaps to manage the variability in future cash flows on assets and liabilities 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 variability in future exchange rates on its assets and liabilities 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 relationship 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). Hedge ineffectiveness for cash flow hedges is mainly driven by payment frequency mismatch between the hedging instrument and the underlying hedged item. The hedged risk is determined as the variability of future cash flows arising from changes in the designated benchmark interest and/or foreign exchange rates. 417 Standard Chartered – Annual Report 2023Financial statements14. Derivative financial instruments continued Hedging instruments and ineffectiveness 2023 Carrying amount Notional $million Asset $million Liability $million Change in fair value used to calculate hedge ineffectiveness1 $million Ineffectiveness gain recognised in net trading income $million Amount reclassified from reserves to net trading income $million Gain recognised in OCI $million 41,834 184 537 612 609 12,071 14,321 68,226 420 191 795 183 150 870 104 185 901 103 183 895 3 1 2 6 – – – – Carrying amount Notional $million Asset $million Liability $million 2022 Change in fair value used to calculate hedge ineffectiveness1 $million Ineffectiveness (loss) recognised in net trading income $million Amount reclassified from reserves to net trading income $million (Loss)/gain recognised in OCI $million 31,977 100 671 (533) (531) 11,987 11,787 55,751 99 86 285 385 362 1,418 (141) 421 (253) (141) 426 (246) (2) – (5) (7) – – – – 2023 Change in fair value used for calculating hedge ineffectiveness1 $million Cash flow hedge reserve $million Cumulative balance in the cash flow hedge reserve from de-designated hedge relationships $million (421) (98) (312) (64) – (895) (114) (22) 134 – – (2) 2022 136 (15) – – – 121 Change in fair value used for calculating hedge ineffectiveness1 $million Cash flow hedge reserve $million Cumulative balance in the cash flow hedge reserve from de-designated hedge relationships $million 244 (165) 315 (135) (13) 246 (444) (72) (191) (6) – (713) 108 ((30) (18) – – 60 Interest rate risk Interest rate swaps Currency risk Forward foreign exchange contract Cross-currency swaps Total as at 31 December 2023 Interest rate risk Interest rate swaps Currency risk Forward foreign exchange contract Cross-currency swaps Total as at 31 December 2022 Hedged items in cash flow hedges Customer accounts Debt securities and other eligible bills Loans and advances to customers Intragroup lending currency hedge Intragroup borrowing currency hedge Total at 31 December 2023 Customer accounts Debt securities and other eligible bills Loans and advances to customers Intragroup lending currency hedge Intragroup borrowing currency hedge Total at 31 December 2022 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffectiveness 418 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements14. Derivative financial instruments continued Impact of cash flow hedges on profit and loss and other comprehensive income Cash flow hedge reserve balance as at 1 January Gain/(loss) recognised in other comprehensive income on effective portion of changes in fair value of hedging instruments Gain reclassified to income statement when hedged item affected net profit Taxation charge relating to cash flow hedges Cash flow hedge reserve balance as at 31 December 2023 Income/ (expense) $million (564) 895 (128) (112) 91 2022 Income/ (expense) $million (34) (246) (373) 89 (564) Net investment hedges Foreign currency exposures arise from investments in subsidiaries 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 subsidiaries 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 significant impact on the regulatory ratios of the Group and its banking subsidiaries. The Group uses foreign exchange forwards to manage the effect of exchange rates on its net investments in foreign subsidiaries. Hedging instruments and ineffectiveness Carrying amount Notional $million Asset $million Liability $million 2023 Change in fair value used to calculate hedge ineffectiveness1 $million Changes in the value of the hedging instrument recognised in OCI $million Ineffectiveness recognised in profit or loss $million Amount reclassified from reserves to income $million Derivative forward currency contracts2 15,436 32 41 215 215 – – Carrying amount Notional $million Asset $million Liability $million 2022 Change in fair value used to calculate hedge ineffectiveness1 $million Changes in the value of the hedging instrument recognised in OCI $million Ineffectiveness recognised in profit or loss $million Amount reclassified from reserves to income $million Derivative forward currency contracts2 14,576 120 141 512 512 – – 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffectiveness 2 These derivative forward currency contracts have a maturity of less than one year. The hedges are rolled on a periodic basis Hedged items in net investment hedges Net investments 2023 Change in the value used for calculating hedge ineffectiveness1 $million Translation reserve $million Balances remaining in the translation reserve from hedging relationships for which hedge accounting is no longer applied $million (215) (9) – 2022 Change in the value used for calculating hedge ineffectiveness1 $million Translation reserve $million Balances remaining in the translation reserve from hedging relationships for which hedge accounting is no longer applied $million Net investments (512) (21) – 1 This represents a gain/(loss) change in fair value used for calculating hedge ineffectiveness 419 Standard Chartered – Annual Report 2023Financial statements14. Derivative financial instruments continued Impact of net investment hedges on other comprehensive income Gains recognised in other comprehensive income Maturity of hedging instruments Fair value hedges Interest rate swap Notional Cross-currency swap Notional Average fixed interest rate (to USD) Average exchange rate Cash flow hedges Interest rate swap Notional Average fixed interest rate Cross-currency swap Notional Average fixed interest rate Average exchange rate 2023 Income/ (expense) $million 215 2022 Income/ (expense) $million 512 2023 More than one month and less than one year Less than one month One to five years More than five years $million 3,242 9,789 41,545 14,771 $million GBP CNH GBP/USD CNH/USD – – – – – 115 1.33% 3.17% 0.66 6.37 – – – – – – – – – – $million 2,129 27,634 11,664 407 5.10% 3.45% 4.70% 3.16% USD $million HKD KRO USD TWD JPY HKD/USD KRO/USD USD/HKD TWD/USD JPY/HKD 166 10,794 3,361 – 1.96% – (3.68)% – – 1,192.20 – 30.63 – 4.97% 3.58% 5.64% 0.77% (0.07)% 7.83 1,320.69 0.13 31.53 17.86 0.21% 0.62% – 0.81% (0.05)% 7.85 1,284.82 – 32.22 18.09 Forward foreign exchange contracts Notional $million 2,194 9,877 Average exchange rate Net investment hedges Foreign exchange derivatives Notional Average exchange rate 420 BRL/USD TWD/HKD JPY/USD – – 130.49 5.17 3.81 136.05 $million 15,436 CNY/USD KRW/USD AED/USD HKD/USD 7.12 1,283.25 3.67 7.80 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statementsFair value hedges Interest rate swap Notional Cross-currency swap Notional Cash flow hedges Interest rate swap Notional Average fixed interest rate Cross-currency swap Notional Average fixed interest rate Average exchange rate 14. Derivative financial instruments continued 2022 More than one month and less than one year Less than one month One to five years More than five years $million 2,462 8,888 53,225 16,185 $million Average fixed interest rate (to USD) JPY Average exchange rate JPY/USD – – – 1,109 164 (0.62)% 138.78 – – – – – $million HKD USD 195 – 3.80% 16,465 14,819 498 0.35% 1.82% 1.34% 1.60% – 1.29% $million 45 8,466 2,650 626 HKD KRO USD TWD HKD/USD KRO/USD USD/HKD TWD/USD – – – 3.93% 3.26% 4.15% (0.61)% (1.38)% – 3.83% – 0.32% 0.21% – – – – – – 27.74 7.84 – 7.85 1,342.85 1,278.62 1,300.90 7.84 30.77 – 29.73 Forward foreign exchange contracts Notional $million 1,246 10,741 Average exchange rate JPY/USD 135.18 133.26 Net investment hedges Foreign exchange derivatives Notional Average exchange rate $million 14,576 CNY/USD KRW/USD AED/USD HKD/USD 6.71 1,296.95 3.67 7.83 – – – – – – – – – – – – Interest rate benchmark reform As at 31 December 2023, there are no derivative instruments designated in fair value or cash flow hedge accounting relationships that were linked to IBOR reference rates (31 December 2022: $65,769 million). – – – – – – – – – 421 Standard Chartered – Annual Report 2023Financial statements15. Loans and advances to banks and customers Accounting policy Refer to Note 13 Financial instruments for the relevant accounting policy. Loans and advances to banks Expected credit loss Loans and advances to customers Expected credit loss Total loans and advances to banks and customers1 2023 $million 45,001 (24) 44,977 292,145 (5,170) 286,975 331,952 2022 $million 39,545 (26) 39,519 316,107 (5,460) 310,647 350,166 1 Includes $3.6 billion (31 December 2022: $4.8 billion) of assets pledged as collateral. For more information, please refer to page 127 of Pillar 3 disclosures The Group has outstanding residential mortgage loans to Korea residents of $17.2 billion (31 December 2022: $19.1 billion) and Hong Kong residents of $32.7 billion (31 December 2022: $35 billion). Analysis of loans and advances to customers by geographic region and client segment together with their related impairment provisions are set out within the Risk review and Capital review (pages 230 to 343). 16. Reverse repurchase and repurchase agreements including other similar lending and borrowing Accounting policy The Group purchases securities (a reverse repurchase agreement – ‘reverse repo’) typically with financial institutions subject to a commitment to resell or return the securities at a predetermined price. These securities 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. Consideration 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 majority 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 securities (a repurchase agreement – ‘repo’) subject to a commitment to repurchase or redeem the securities at a predetermined price. The securities are retained on the balance sheet as the Group retains substantially all the risks and rewards of ownership and these securities are disclosed as pledged collateral. Consideration received (or cash collateral received) is accounted for as a financial liability at amortised cost unless it is either mandatorily classified as fair value through profit or loss or irrevocably designated at fair value through profit or loss at initial recognition. Repo and reverse repo transactions typically entitle the Group and its counterparties to have recourse to assets similar to those provided as collateral in the event of a default. Securities sold subject to repos, either by way of a Global Master Repurchase Agreement (GMRA), or through a securities 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 securities (the TRS is not recognised). The counterparty liability 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. Reverse repurchase agreements and other similar secured lending Banks Customers Of which: Fair value through profit or loss Banks Customers Held at amortised cost Banks Customers 422 2023 $million 32,286 65,295 97,581 81,847 30,548 51,299 15,734 1,738 13,996 2022 $million 24,932 65,035 89,967 64,491 23,954 40,537 25,476 978 24,498 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements16. Reverse repurchase and repurchase agreements including other similar lending and borrowing continued Under reverse repurchase and securities borrowing arrangements, the Group obtains securities under usual and customary terms which permit it to repledge or resell the securities to others. Amounts on such terms are: Securities and collateral received (at fair value) Securities and collateral which can be repledged or sold (at fair value) Amounts repledged/transferred to others for financing activities, to satisfy liabilities under sale and repurchase agreements (at fair value) Repurchase agreements and other similar secured borrowing Banks Customers Of which: Fair value through profit or loss Banks Customers Held at amortised cost Banks Customers 2023 $million 101,935 101,845 2022 $million 124,989 123,759 34,154 44,628 2023 $million 5,585 47,956 53,541 41,283 4,658 36,625 12,258 927 11,331 2022 $million 6,968 46,846 53,814 51,706 5,737 45,969 2,108 1,231 877 The tables below set out the financial assets provided as collateral for repurchase and other secured borrowing transactions: Collateral pledged against repurchase agreements On-balance sheet 2023 Fair value through profit or loss $million Fair value through other comprehensive income $million Amortised cost $million Off-balance sheet $million Total $million Debt securities and other eligible bills 4,993 8,157 10,181 – 23,331 Off-balance sheet Repledged collateral received At 31 December 2023 Collateral pledged against repurchase agreements On-balance sheet – 4,993 – 8,157 – 10,181 34,154 34,154 34,154 57,485 2022 Fair value through profit or loss $million Fair value through other comprehensive income $million Amortised cost $million Off-balance sheet $million Total $million Debt securities and other eligible bills 2,956 3,630 Off-balance sheet Repledged collateral received At 31 December 2022 – 2,956 – 3,630 4,917 – 4,917 – 11,503 44,628 44,628 44,628 56,131 423 Standard Chartered – Annual Report 2023Financial statements17. Goodwill and intangible assets Accounting policy Goodwill Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in Investments in associates and joint ventures. Goodwill included in intangible assets is assessed at each balance sheet date for impairment and carried at cost less any accumulated impairment 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 forecasting expected cash flows of the relevant cash-generating units (CGUs) and discounting these at an appropriate discount rate, the determination of which requires the exercise of judgement. Goodwill is allocated to CGUs for the purpose of impairment testing. CGUs represent the lowest level within the Group which generates 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 425). Other accounting estimates and judgements The carrying amount of goodwill is based on the application of judgements including the basis of goodwill impairment calculation assumptions. Judgement is also applied in determination of CGUs. Estimates include forecasts used for determining cash flows for CGUs, the appropriate long-term growth rates to use and discount rates which factor in country risk-free rates and applicable risk premiums. The Group undertakes an annual assessment to evaluate whether the carrying value of goodwill is impaired. The estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement and is subject to potential change over time. Acquired intangibles At the date of acquisition of a subsidiary or associate, intangible assets which are deemed separable and that arise from contractual or other legal rights are capitalised and included within the net identifiable assets acquired. These intangible assets are initially measured at fair value, which reflects market expectations of the probability 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 indicators of impairment. In the event that an asset’s carrying amount is determined to be greater than its recoverable amount, the asset is written down immediately to the recoverable amount. Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Internally generated software represents substantially all of the total software capitalised. Direct costs of the development of separately identifiable internally generated software are capitalised where it is probable that future economic benefits attributable to the software will flow from its use. These costs include staff remuneration costs such as salaries, statutory payments and share-based payments, materials, service providers and contractors provided their time is directly attributable to the software build. Costs incurred in the ongoing maintenance of software are expensed immediately when incurred. Internally generated software is amortised over each asset’s useful life to a maximum of 10-years. On an annual basis software assets’ residual values and useful lives are reviewed, including assessing for indicators of impairment. Indicators of impairment include loss of business relevance, obsolescence, 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 capitalised software that is internally generated, judgement is required to determine which costs relate to research (expensed) and which costs relate to development (capitalised). Further judgement is required to determine the technical feasibility 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 functionality or improved asset safeguarding. Software as a Service (SaaS) is a contractual arrangement that conveys the right to receive access to the supplier’s software application over the contract term. As such, the Group does not have control and as a result recognises an operating expense for these costs over the contract term. Certain costs, including customisation costs related to implementation of the SaaS may meet the definition of an intangible asset in their own right if it is separately identifiable and control is established. These costs are capitalised if it is expected to provide the Group with future economic benefits flowing from the underlying resource and the Group can restrict others from accessing those benefits. 424 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements17. Goodwill and intangible assets continued 2023 2022 Goodwill $million Acquired intangibles $million Computer software $million Total $million Goodwill $million Acquired intangibles $million Computer software1 $million Total $million Cost At 1 January Exchange translation differences Additions Impairment charge² Disposals and amounts written off Classified as held for sale At 31 December Provision for amortisation At 1 January Exchange translation differences Amortisation Impairment charge2 Disposals and amounts written off Classified as held for sale At 31 December Net book value 2,471 (24) – – (18)¹ – 2,429 – – – – – – – 2,429 295 (12) – – (5)¹ – 278 276 (12) 1 – – – 5,178 21 1,124 (151) (4) – 7,944 (15) 1,124 (151) (27) – 2,595 (108) – (14) – (2) 6,168 8,875 2,471 1,799 2,075 11 625 (39) – – (1) 626 (39) – – 2,661 6,214 265 13 2,396 3,772 – – – – – – – 2,471 457 (26) – – (136) – 295 437 (29) 4 – (136) – 276 19 4,464 (22) 1,096 (7) (348) (5) 5,178 7,516 (156) 1,096 (21) (484) (7) 7,944 1,608 2,045 (11) 531 5 (331) (3) 1,799 3,379 (40) 535 5 (467) (3) 2,075 5,869 1 Includes disposal of goodwill and other intangibles relating to aviation finance leasing business. These were classified as held for sale during 2023 and sold during the year 2 Computer software impairment includes $82.8 million (2022: nil) charge relating to write off on SaaS (Software as a Service) applications capitalised in previous years At 31 December 2023, accumulated goodwill impairment losses incurred from 1 January 2005 amounted to $3,331 million (31 December 2022: $3,331 million), of which Nil million was recognised in 2023 (31 December 2022: $14 million). Outcome of impairment assessment An annual assessment is made as to whether the current carrying value of goodwill is impaired. For the purposes of impairment testing, goodwill is allocated at the date of acquisition to a CGU. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. Indicators of impairment include changes in the economic performance and outlook of the region, including geopolitical changes, changes in market value of regional investments, large credit defaults and strategic decisions 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 cashflow projections and an estimated terminal value based on a perpetuity value after year five. The cashflow projections are based on forecasts approved by management up to 2028. The perpetuity terminal value amount is calculated using year five cashflows using long-term GDP growth rates. All cashflows are discounted using discount rates which reflect market rates appropriate to the CGU. Post-tax discount rates are used to calculate the VIU using the post-tax cashflows. The post-tax discount rate is subsequently grossed up to pre-tax discount rate. The calculated VIU using post-tax and pre-tax discount rate is the same. The goodwill allocated to each CGU and key assumptions used in determining the recoverable amounts are set out below and are solely estimates for the purposes of assessing impairment of acquired goodwill. Cash-generating unit Country CGUs Asia Hong Kong Taiwan Singapore Africa & Middle East Pakistan Bahrain Global CGUs Global Private Banking Corporate, Commercial & Institutional Banking 2023 2022 Goodwill $million Pre-Tax Discount rates per cent Long-term forecast GDP growth rates per cent Goodwill $million Pre-Tax Discount rates per cent Long-term forecast GDP growth rates per cent 1,036 357 333 346 80 31 49 1,313 83 1,230 2,429 12.9 12.4 13.9 35.5 12.4 15.3 15.7 1.6 1.5 2.1 3.2 0.5 1.9 2.3 1,032 357 333 342 85 36 49 1,354 83 1,271 2,471 12.4 11.3 12.3 30.9 16.6 14.5 14.7 1.7 1.7 2.3 5.9 0.7 2.0 2.5 425 Standard Chartered – Annual Report 2023Financial statements17. Goodwill and intangible assets continued The Group has performed sensitivity analysis on the key assumptions for each CGU’s recoverable amount. Taiwan CGU is considered sensitive to the key variables and any individual movements on the estimates (cashflow, discount rate and GDP growth rate) up to the levels disclosed below would eliminate the current headroom. 2023 Sensitivities GDP Discount rate Cash flow Cash flow Cash- flow Downside scenario Extreme downside scenario GDP -1% GDP -1% DR +1% DR +1% Base Case +1% -1% +1% -1% +10% -10% +20% -20% -30% CF -10% CF -20% CGU Taiwan Goodwill $million Head- room $million Pre-Tax Discount Rate Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million Head- room $million GDP 333 217 12.4% 1.53% 351 112 73 400 375 60 532 (97) (254) (138) (267) The table above represents reasonably possible scenarios that could occur if either; economic factors (which drive GDP rates and discount rates); country-specific cash flows; or a combination of both are different from the assumptions used in the goodwill impairment assessment at 31 December 2023. For there to be no headroom, the pre-tax discount rate will need to increase by 2.02 per cent. Similarly, the GDP rates will need to decrease by 2.36 per cent and cashflows would need to decrease by 13.8 per cent. Acquired intangibles These primarily comprise those items recognised as part of the acquisitions of Union Bank (now amalgamated into Standard Chartered Bank (Pakistan) Limited), Hsinchu (now amalgamated into Standard Chartered Bank (Taiwan) Limited), Pembroke, American Express Bank and ABSA’s custody business in Africa. Maintenance intangible assets represent the value in the difference between the contractual right under acquired leases to receive aircraft in a specified maintenance condition at the end of the lease and the actual physical condition of the aircraft at the date of acquisition. The acquired intangibles are amortised over periods from four years to a maximum of 16 years. The constituents are as follows: Acquired intangibles comprise: Aircraft maintenance Brand names Customer relationships Licenses Net book value 2023 $million 2022 $million – – 1 12 13 5 1 1 12 19 426 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements 18. Property, plant and equipment Accounting policy All property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Land and buildings comprise mainly branches and offices. Freehold land is not depreciated although it is subject to impairment testing. Depreciation 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: • Owned premises • Leasehold premises • up to 50 years • up to 50 years • Leasehold improvements • shorter of remaining lease term and 10 years • Equipment and motor vehicles • three to 15 years • Aircraft • Ships • up to 18 years • up to 15 years Where the Group is a lessee of a right-of-use asset, the leased assets are capitalised and included in Property, plant and equipment with a corresponding liability to the lessor recognised in Other liabilities. The accounting policy for lease assets is set out in Note 19. Cost or valuation At 1 January Exchange translation differences Additions1 Disposals and fully depreciated assets written off Classified as held for sale As at 31 December Depreciation Accumulated at 1 January Exchange translation differences Charge for the year Impairment charge Attributable to assets sold, transferred or written off Classified as held for sale Accumulated at 31 December Net book amount at 31 December Premises $million Equipment $million 2023 Operating lease assets $million Leased premises assets $million Leased equipment assets $million 1,773 (27) 45 (68)² 18 1,741 678 (21) 77 3 (47)² 2 692 1,049 840 (22) 114 4,420 – – (122)² (4,420)³ – 810 575 (17) 99 – – – 1,185 1 27 – (122)² (1,213)³ – 535 275 – – – 1,652 (5) 286 (69) – 1,864 730 (25) 238 9 (38) – 914 950 29 (3) 1 (9) – 18 24 (1) 4 – (9) – 18 – Total $million 8,714 (57) 446 (4,688) 18 4,433 3,192 (63) 445 12 (1,429) 2 2,159 2,274 1. Refer to the cash flow statement under cash flows from investing activities section for the purchase of property, plant and equipment during the year of $159 million on page 363 2. Disposals for property, plant and equipment during the year of $53 million 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 3. Includes disposal of assets from aviation finance leasing business and sale of vessels (refer note 32). 427 Standard Chartered – Annual Report 2023Financial statements18. Property, plant and equipment continued Cost or valuation At 1 January Exchange translation differences Additions1 Disposals and fully depreciated assets written off2 Transfers to assets held for sale As at 31 December Depreciation Accumulated at 1 January Exchange translation differences Charge for the year Impairment charge Attributable to assets sold, transferred or written off2 Transfers to assets held for sale Accumulated at 31 December Net book amount at 31 December Premises $million Equipment $million 2022 Operating lease assets $million Leased premises assets $million Leased equipment assets $million 1,980 (90) 87 (142) (62) 1,773 795 (39) 76 1 (125) (30) 678 1,095 901 (65) 124 (102) (18) 840 611 (39) 116 – (101) (12) 575 265 4,248 – 624 (452) – 4,420 1,155 – 202 40 (212) – 1,185 3,235 1,854 (111) 339 (425) (5) 1,652 819 (33) 250 9 (313) (2) 730 922 33 (4) 1 (1) – 29 20 (3) 7 – – – 24 5 Total $million 9,016 (270) 1,175 (1,122) (85) 8,714 3,400 (114) 651 50 (751) (44) 3,192 5,522 1 Refer to the cash flow statement under cash flows from investing activities section for the purchase of property, plant and equipment during the year of $835 million on page 363 2 Disposals for property, plant and equipment during the year of $343 million 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 Operating lease assets The operating lease assets subsection of property, plant and equipment refers to the Group’s aircraft operating leasing business, all leases related to which were disposed on 2 November 2023. As at 31 December 2022, this consisted of 99 commercial aircraft of which 97 were narrow-bodies and 2 were wide-bodies. The leases were classified as operating leases as they did not transfer substantially all the risks and rewards incidental to the ownership of the assets. As at 31 December 2022, these assets had a net book value of $3,235 million. Refer note 6 Other operating income for the disposal gain and the associated rental income, up to the date of their disposal. Under these leases up to the date of disposal, the lessee was responsible for the maintenance and servicing of the aircraft during the lease term while the Group receives rental income and assumes the risks of the residual value of the aircraft at the end of the lease. 428 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements19. Leased assets Accounting policy Where the Group is a lessee and the lease is deemed in scope, it recognises a liability 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 liability is recognised in ‘Other liabilities’. A corresponding right-of-use asset equal to the liability, 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 liability using the effective interest method. Depreciation on the asset is recognised in ‘Depreciation and amortisation’, and interest on the lease liability is recognised in ‘Interest expense’. If a leased premise, or a physically distinct portion of a premise such as an individual 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 indicator of impairment. An impairment 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 ability and likelihood of obtaining a subtenant. The judgements in determining lease balances are the determination of whether the Group is reasonably certain that it will exercise extension options present in lease contracts. On initial recognition, the Group considers a range of characteristics such as premises function, regional trends and the term remaining 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 are the determination 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 pricing information 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 primarily enters lease contracts that grant it the right to use premises such as office buildings and retail branches. Existing lease liabilities may change in future periods due to changes in assumptions or decisions to exercise lease renewal or termination options, changes in payments due to renegotiations of market rental rates as permitted by those contracts and changes to payments due to rent being contractually linked to an inflation index. In general the re-measurement of a lease liability under these circumstances leads to an equal change to the right-of-use asset balance, with no immediate effect on the income statement. The total cash outflow during the year for premises and equipment leases was $283 million (2022: $310 million). The right-of-use asset balances and depreciation charges are disclosed in Note 18. The lease liability balances are disclosed in Note 23 and the interest expense on lease liabilities is disclosed in Note 3. Maturity analysis The maturity profile for lease liabilities associated with leased premises and equipment assets is as follows: Other liabilities – lease liabilities Other liabilities – lease liabilities 2023 One year or less $million 248 Between one year and two years $million Between two years and five years $million 203 373 2022 One year or less $million 272 Between one year and two years $million Between two years and five years $million 239 437 More than five years $million 410 More than five years $million 310 Total $million 1234 Total $million 1,258 429 Standard Chartered – Annual Report 2023Financial statements20. Other assets Other assets include: Financial assets held at amortised cost (Note 13): Hong Kong SAR Government certificates of indebtedness (Note 23)¹ Cash collateral2 Acceptances and endorsements Unsettled trades and other financial assets Non-financial assets: Commodities and emissions certificates3 Other assets 2023 $million 2022 $million 6,568 10,337 5,326 15,909 38,140 8,889 565 47,594 7,106 12,515 5,264 14,410 39,295 10,598 490 50,383 1 The Hong Kong SAR Government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued 2 Cash collateral are margins placed to collateralize net derivative mark-to-market (MTM) positions 3 Physically held commodities and emission certificates are inventory that is carried at fair value less costs to sell, $5.1 billion (31 December 2022: $6 billion) are classified as Level 1 and $3.7 billion are classified as Level 2 (31 December 2022: $4.6 billion). For commodities, the fair value is derived from observable spot or short-term futures prices from relevant exchanges. 21. Assets held for sale and associated liabilities Accounting Policy Upon reclassification property, plant and equipment are measured at the lower of their carrying amount and fair value less costs to sell. Financial instruments continue to be measured per the accounting policies in Note 13 Financial instruments. The assets below have been presented as held for sale following the approval of Group management and the transactions are expected to complete in 2024. Assets held for sale The financial assets reported below are classified under Level 1 $101 million (31 December 2022: $345 million), Level 2 $541 million (31 December 2022: $946 million) and Level 3 $59 million (31 December 2022: $100 million). Financial assets held at fair value through profit or loss Equity shares Derivative financial instruments – Assets Financial assets held at amortised cost Cash and balances at central banks Loans and advances to banks Loans and advances to customers Debt securities held at amortised cost Goodwill and intangible assets Property, plant and equipment Vessels Others Others 2023 $million 2022 $million – – – 701 246 24 251 180 – 59 43 16 49 3 2 1 1,388 423 81 508 376 4 174 133 41 56 809 1,625 During the year, the aviation finance leasing business, which held 99 commercial aircraft, was classified as held for sale. The business was sold to AviLease for a consideration of $3,570 million, and the Group recorded a gain on sale of $309 million. In addition, vessels with a carrying value of $83 million were sold (2022: nil) and the Group exited Jordan as part of the exit of AME regions ($108 million carrying value, with a $8 million gain on sale). 430 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements21. Assets held for sale and associated liabilities continued Liabilities held for sale The financial liabilities reported below are classified under Level 1 $54 million (2022: $402million) and Level 2 $672 million (2022: $833 million). Financial liabilities held at fair value through profit or loss Derivative financial instruments Financial liabilities held at amortised cost Deposits by banks Customer accounts Other liabilities Provisions for liabilities and charges 2023 $million 2022 $million – – 726 3 723 51 10 787 5 5 1,230 17 1,213 64 8 1,307 22. Debt securities in issue Accounting policy Refer to Note 13 Financial instruments for the relevant accounting policy. Certificates of deposit of $100,000 or more $million 2023 Other debt securities in issue $million Debt securities in issue 15,533 47,013 Certificates of deposit of $100,000 or more $million 2022 Other debt securities in issue $million 23,457 37,785 Total $million 62,546 Total $million 61,242 Debt securities in issue included within: Financial liabilities held at fair value through profit or loss (Note13) Total debt securities in issue – 15,533 10,817 57,830 10,817 73,363 – 23,457 8,572 46,357 8,572 69,814 In 2023, the Company issued a total of $8.1 billion senior notes for general business purposes of the Group as shown below: Securities $1,000 million fixed-rate senior notes due 2027 (callable 2026) EUR 1,000 million fixed-rate senior notes due 2031 (callable 2030) HKD 784 million fixed-rate senior notes due 2026 (callable 2025) $1,000 million fixed-rate senior notes due 2034 (callable 2033) $1,000 million fixed-rate senior notes due 2027 (callable 2026) $500 million floating-rate senior notes due 2027 (callable 2026) $400 million floating-rate senior notes due 2028 (callable 2027) $1,500 million fixed-rate senior notes due 2029 (callable 2028) $750 million fixed-rate senior notes due 2030 (callable 2029) $750 million fixed-rate senior notes due 2028 (callable 2027) Total senior notes issued $million 1,000 1,105 100 1,000 1,000 500 400 1,500 750 750 8,105 In 2022, the Company issued a total of $5.2 billion senior notes for general business purposes of the Group as shown below: Securities CNH 1,100 million fixed-rate senior notes due 2026 (callable 2025) $1,250 million fixed-rate senior notes due 2028 (callable 2027) $1,000 million fixed-rate senior notes due 2026 (callable 2025) $500 million floating-rate senior notes due 2026 (callable 2025) SGD 255 million fixed-rate senior notes due 2033 (callable 2032) HKD 800 million fixed-rate senior notes due 2025 (callable 2024) $1,000 million fixed-rate senior notes due 2025 (callable 2024) $1,000 million fixed-rate senior notes due 2028 (callable 2027) Total senior notes issued $million 158 1,250 1,000 500 190 102 1,000 1,000 5,200 431 Standard Chartered – Annual Report 2023Financial statements23. Other liabilities Accounting policy Refer to Note 13 Financial instruments for the relevant accounting policy for financial liabilities, Note 19 Leased assets for the accounting policy for leases, and Note 31 Share-based payments for the accounting policy for cash-settled share-based payments. Financial liabilities held at amortised cost (Note 13) Notes in circulation1 Acceptances and endorsements2 Cash collateral3 Property leases4 Equipment leases4 Unsettled trades and other financial liabilities Non-financial liabilities Cash-settled share-based payments Other liabilities 2023 $million 2022 $million 6,568 5,386 8,440 1,054 4 17,211 38,663 102 456 7,106 5,264 9,206 1,029 8 20,302 42,915 81 531 39,221 43,527 1 Hong Kong currency notes in circulation of $6,568 million (31 December 2022: $7,106 million) that are secured by the Government of Hong Kong SAR certificates of indebtedness of the same amount included in Other assets (Note 20) 2 Includes early receipts of funds ($60m) from customer, whereas corresponding liability is due in Jan’24 3 Cash collateral are margins received against collateralize net derivative mark-to-market (MTM) positions 4 Other financial liabilities include the present value of lease liabilities, as required by IFRS 16 from 1 January 2019; refer to Note 19 24. Provisions for liabilities and charges Accounting policy The recognition and measurement of provisions for liabilities and charges requires significant judgement and the use of estimates about uncertain future conditions or events. Estimates include the best estimate of the probability of outflow of economic resources, cost of settling a provision and timing of settlement. Judgements are required for inherently uncertain areas such as legal decisions (including external advice obtained), and outcome of regulator reviews. At 1 January Exchange translation differences (Release)/charge against profit Provisions utilized Transfer3 At 31 December Expected credit loss for credit commitments1 $million 2023 Other provisions2 $million Expected credit loss for credit commitments1 $million Total $million 280 (5) (48) – – 227 103 4 42 (71) (6) 72 383 (1) (6) (71) (6) 299 346 (39) (27) – – 280 2022 Other provisions2 $million 107 (2) 69 (71) – 103 Total $million 453 (41) 42 (71) – 383 1 Expected credit loss for credit commitment comprises those undrawn contractually committed facilities where there is doubt as to the borrowers’ ability to meet their repayment obligations. 2 Other provisions consist mainly of provisions for legal claims and regulatory and enforcement investigations and proceedings. 3 Includes the provisions transferred to held for sale. 432 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements25. Contingent liabilities and commitments Accounting policy Financial guarantee contracts and loan commitments Financial guarantee contracts and any loan commitments issued at below-market interest rates are initially recognised at their fair value as a financial liability, and subsequently measured at the higher of the initial value less the cumulative amount of income recognised and their expected credit loss provision. 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 financial guarantee contracts and loan commitments are disclosed in the table below. Financial 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 obligation 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 financial loss suffered. These contracts have various legal forms such as letters of credit, guarantee contracts and performance bonds. The contracts are issued to facilitate trade through export and import business, provide guarantees to financial institutions where the Group has a local presence, as well as guaranteeing project financing involving large construction projects undertaken by sovereigns and corporates. The contracts may contain performance clauses which require the counterparty performing services or providing goods to meet certain conditions 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 intention to provide funds to a customer or on behalf of a customer under prespecified terms and conditions 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 financial statements as commitments. Commitments and contingent liabilities are generally considered on demand as the Group may have to honour them, or the client may draw down at any time. Capital commitments are contractual commitments the Group has entered into to purchase non-financial assets. The table below shows the contract or underlying principal amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk. Financial guarantees and trade credits Financial guarantees, trade credits and irrevocable letters of credit Commitments Undrawn formal standby facilities, credit lines and other commitments to lend One year and over Less than one year Unconditionally cancellable Capital Commitments 2023 $million 2022 $million 74,414 74,414 60,410 60,410 78,356 33,092 70,942 69,597 31,688 67,383 182,390 168,668 Contracted capital expenditure approved by the directors but not provided for in these accounts 217 257 As set out in Note 26, the Group has contingent liabilities in respect of certain legal and regulatory matters for which it is not practicable to estimate the financial impact as there are many factors that may affect the range of possible outcomes. 433 Standard Chartered – Annual Report 2023Financial statements26. Legal and regulatory matters Accounting policy The Group receives legal claims against it in a number of jurisdictions and is subject to regulatory and enforcement investigations and proceedings from time to time. Apart from the matters described below, the Group currently considers none of the ongoing claims, investigations or proceedings to be individually material. However, in light of the uncertainties 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 District Courts for the Southern and Eastern Districts of New York against a number of banks on behalf of plaintiffs who are, or are relatives of, victims of attacks in Iraq and Afghanistan. The plaintiffs in each of these lawsuits have alleged that the defendant banks aided and abetted the unlawful conduct of parties with connections to terrorist organisations in breach of the United States Anti-Terrorism Act. None of these lawsuits specify the amount of damages claimed. The Group continues to defend these lawsuits. In January 2020, a shareholder derivative complaint was filed by the City of Philadelphia in New York State Court against 45 current and former directors and senior officers of the Group. It is alleged that the individuals breached their duties to the Group and caused a waste of corporate assets by permitting 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 Standard Chartered Bank and seven individuals were removed from the case. Standard Chartered PLC and Standard Chartered Holdings Limited remained as named “nominal defendants” in the complaint. In May 2021, Standard Chartered PLC filed a motion to dismiss the complaint. In February 2022, the New York State Court ruled in favour of Standard Chartered PLC’s motion to dismiss the complaint. The plaintiffs are pursuing an appeal against the February 2022 ruling. A hearing date for the plaintiffs’ appeal is awaited. Since October 2020, four lawsuits have been filed in the English High Court against Standard Chartered PLC on behalf of more than 200 shareholders in relation to alleged untrue and/or misleading statements and/or omissions in information published by Standard Chartered PLC in its rights issue prospectuses of 2008, 2010 and 2015 and/or public statements regarding the Group’s historic sanctions, money laundering and financial crime compliance issues. These lawsuits have been brought under sections 90 and 90A of the Financial Services and Markets Act 2000. These lawsuits are at an early procedural stage. Bernard Madoff’s 2008 confession to running a Ponzi scheme through Bernard L. Madoff Investment Securities LLC (BMIS) gave rise to a number of lawsuits against the Group. BMIS and the Fairfield funds (which invested in BMIS) are in bankruptcy and liquidation, respectively. Between 2010 and 2012, five lawsuits were brought against the Group by the BMIS bankruptcy trustee and the Fairfield funds’ liquidators, in each case seeking to recover funds paid to the Group’s clients pursuant to redemption requests made prior to BMIS’ bankruptcy filing. The total amount sought in these cases exceeds USD 300 million, excluding any pre-judgment interest that may be awarded. The four lawsuits commenced by the Fairfield funds’ liquidators have been dismissed and the appeals of those dismissals by the funds’ liquidators are ongoing. As has been reported in the press, a number of Korean banks, including Standard Chartered Bank Korea, have sold equity- linked securities (“ELS”) to customers, the redemption values of which are determined by the performance of various stock indices. Standard Chartered Bank Korea sold relevant ELS to its customers with a notional value of approximately USD900m. Due to the performance of the Hang Seng China Enterprise Index, it is anticipated that several thousand Standard Chartered Bank Korea customers may redeem their ELS at a loss. The value of Standard Chartered Bank Korea customers’ anticipated losses is subject to fluctuation as the ELS mature on various dates through 2026 and could total several hundred million USD. Standard Chartered Bank Korea may be faced with claims by customers and its regulator, the Financial Supervisory Service, to cover part or all of those anticipated losses and also may face regulatory penalties The Group has concluded that the threshold for recording provisions pursuant to IAS 37 Provisions, Contingent Liabilities and Contingent Assets is not met with respect to the above matters; however, the outcomes of these matters are inherently uncertain and difficult to predict. In 2023, three legal cases concluded in which allegations of corruption had been made against the Group or its employees, none of which resulted in liability being established. 434 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements27. Subordinated liabilities and other borrowed funds Subordinated loan capital – issued by subsidiary undertakings $700 million 8.0 per cent subordinated notes due 2031 (callable 2026)¹ NPR2.4 billion fixed sub debt rate 10.3 per cent2,3 Subordinated loan capital – issued by the Company4 Primary capital floating rate notes: $400 million floating rate undated subordinated notes5 $300 million floating rate undated subordinated notes (Series 2)5 $400 million floating rate undated subordinated notes (Series 3)5 $200 million floating rate undated subordinated notes (Series 4)5 £900 million 5.125 per cent subordinated notes due 2034 $2 billion 5.7 per cent subordinated notes due 2044 $2 billion 3.95 per cent subordinated notes due 2023 $1 billion 5.2 per cent subordinated notes due 2024 $750 million 5.3 per cent subordinated notes due 2043 €500 million 3.125 per cent subordinated notes due 2024 $1.25 billion 4.3 per cent subordinated notes due 2027 $1 billion 3.516 per cent subordinated notes due 2030 (callable 2025) $500 million 4.886 per cent subordinated notes due 2033 (callable 2028) £96.035 million 7.375 per cent Non-Cum Pref Shares (reclassed as Debt) – Other borrowings £99.250 million 8.25 per cent Non-Cum Pref Shares (reclassed as Debt) – Other borrowings $750 million 3.604 per cent fixed rate reset dated subordinated notes due 2033 € 1 billion 2.5 per cent subordinated debt 2030 $1.25 billion 3.265 per cent subordinated notes due 2036 €1 billion 1.200 per cent fixed rate reset dated subordinated notes due 2031 (callable 2026) Total for Group 1 Issued by Standard Chartered Bank 2 Issued by Standard Chartered Bank Nepal Limited 3 NPR refers to Nepalese Rupee 2023 $million 2022 $million 342 18 360 – – – – 644 2,197 – 1,001 697 536 1,154 964 481 122 126 648 1,044 1,040 1,022 11,676 12,036 345 – 345 16 69 50 26 587 2,172 1,999 1,017 679 502 1,119 938 473 116 119 630 967 1,002 891 13,370 13,715 4 In the balance sheet of the Company the amount recognised is $11,945 million (2022: 13,684 million), with the difference on accout of hedge accounting achieved on a Group basis 5 These notes were subject to remediation under interest rate benchmark reform. Please refer to Note 13 for further information on this Fixed rate subordinated debt Floating rate subordinated debt Total Fixed rate subordinated debt Floating rate subordinated debt Total USD $million 8,524 – 8,524 USD $million 10,372 161 10,533 EUR $million 2,602 – 2,602 EUR $million 2,360 – 2,360 2023 GBP $million 892 – 892 2022 GBP $million 822 – 822 NPR $million 18 – 18 NPR $million – – – Total $million 12,036 – 12,036 Total $million 13,554 161 13,715 Redemptions and repurchases during the year Standard Chartered PLC exercised its right to redeem USD 2 billion 3.95 per cent subordinated notes 2023. Further to that outstanding balances of floating rate undated subordinate notes were redeemed during the year. Issuance during the year On 1st March 2023, Standard Chartered Bank Nepal Limited issued NPR 2.4 billion 10.3 per cent fixed rate dated subordinated notes due 2028. 435 Standard Chartered – Annual Report 2023Financial statements28. Share capital, other equity instruments and reserves Accounting policy Securities which carry a discretionary coupon and have no fixed maturity or redemption date are classified as other equity instruments. Interest payments on these securities are recognised, net of tax, as distributions 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 consideration 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 consideration received is included in shareholders’ equity of the Group and/or the Company. At 1 January 2022 Cancellation of shares including share buy-back Additional Tier 1 equity issuance Additional Tier 1 equity redemption Number of ordinary shares millions 3,079 (184) – – Ordinary share capital1 $million 1,539 (92) – – Ordinary Share premium $million 3,989 Preference Share premium2 $million Total share capital and share premium $million Other equity instruments $million 1,494 7,022 6,254 – – – – – – (92) – – At 31 December 2022 2,895 1,447 3,989 1,494 6,930 Cancellation of shares including share buy-back Additional Tier 1 equity issuance Additional Tier 1 redemption At 31 December 2023 1 Issued and fully paid ordinary shares of 50 cents each 2 Includes preference share capital of $75,000 (230) (115) – – – – – – – – – – (115) – – 2,665 1,332 3,989 1,494 6,815 – 1,240 (990) 6,504 – – (992) 5,512 Share buy-back On 16 February 2023, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $58 million, and the total consideration paid was $1 billion. The buy-back completed on 29 September 2023. The total number of shares purchased was 116,710,492 representing 4.03 per cent of the ordinary shares in issue as at the commencement of the buy-back. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account. On 28 July 2023, the Group announced the buy-back programme for a share buy-back of its ordinary shares of $0.50 each. Nominal value of share purchases was $57 million, and the total consideration paid was $1 billion. The buy-back completed on 6 November 2023. The total number of shares purchased was 112,982,802 representing 3.90 per cent of the ordinary shares in issue as at the commencement of the buy-back. The nominal value of the shares was transferred from the share capital to the capital redemption reserve account. The shares were purchased by Standard Chartered PLC on various exchanges not including the Hong Kong Stock Exchange. February 2023 March 2023 April 2023 May 2023 June 2023 July 2023 August 2023 September 2023 October 2023 November 2023 Number of ordinary shares Highest price paid £ Lowest price paid £ 9,522,684 48,672,024 9,521,811 10,662,964 15,515,223 10,388,883 22,896,567 40,542,727 52,084,775 9,885,636 7.99400 7.94600 6.58200 6.66000 6.92200 7.53200 7.60800 7.64800 7.66600 6.38400 7.41600 5.79000 6.10600 5.92800 6.36000 6.56400 7.10000 6.93600 6.04800 6.12600 Average price paid per share £ Aggregate price paid £ Aggregate price paid $ 7.77508 74,039,628 89,017,672 7.07885 344,541,860 416,300,544 6.30837 6.28592 60,067,118 74,798,622 67,026,502 83,626,929 6.70601 104,045,286 131,601,470 6.81807 70,832,098 90,241,074 7.28931 166,900,079 211,996,912 7.35577 298,222,942 369,007,327 7.20829 375,442,209 457,218,216 6.23095 61,596,915 75,472,633 Ordinary share capital In accordance with the Companies Act 2006, the Company does not have authorised share capital. The nominal value of each ordinary share is 50 cents. During the period, nil shares were issued under employee share plans. 436 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements28. Share capital, other equity instruments and reserves continued Preference share capital At 31 December 2023, the Company has 15,000 $5 non-cumulative redeemable preference shares in issue, with 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 and are classified in equity. The available profits of the Company are distributed to the holders of the issued preference shares in priority to payments made to holders of the ordinary shares and in priority to, or pari passu with, any payments to the holders of any other class of shares in issue. On a winding up, the assets of the Company are applied to the holders of the preference shares in priority to any payment to the ordinary shareholders and in priority to, or pari passu with, the holders of any other shares in issue, for an amount equal to any dividends payable (on approval of the Board) and the nominal value of the shares together with any premium as determined by the Board. The redeemable preference shares are redeemable at the paid up amount (which includes premium) at the option of the Company in accordance with the terms of the shares. The holders of the preference shares are not entitled to attend or vote at any general meeting except where any relevant dividend due is not paid in full or where a resolution is proposed varying the rights of the preference shares. Other equity instruments The table provides details of outstanding Fixed Rate Resetting Perpetual Subordinated Contingent Convertible AT1 securities issued by Standard Chartered PLC. All issuances are made for general business purposes and to increase the regulatory capital base of the Group. Issuance date Nominal value Proceeds net of issue costs Interest rate1 Coupon payment dates2 First reset dates3 Conversion price per ordinary share 3 July 2019 SGD 750 million USD 552 million 5.375% 3 April, 3 October each year 3 October 2024 SGD 10.909 26 Jun 2020 USD 1,000 million USD 992 million 6% 26 January, 26 July each year 26 January 2026 USD 5.331 14 January 2021 USD 1,250 million USD 1,239 million 4.75% 14 January, 14 July each year 14 July 2031 USD 6.353 19 August 2021 USD 1,500 million USD 1,490 million 4.30% 19 February, 19 August each year 19 August 2028 USD 6.382 15 August 2022 USD 1,250 million USD 1,239 million 7.75% 15 February, 15 August each year 15 February 2028 USD 7.333 1 Interest rates for the period from (and including) the issue date to (but excluding) the first reset date 2 Interest payable semi-annually in arrears 3 Securities are resettable each date falling five years, or an integral multiple of five years, after the first reset date Standard Chartered PLC redeemed $1,000m Fixed Rate Resetting Perpetual Contingent Convertible Securities on its first optional redemption date of 2 April 2023. The AT1 issuances above are primarily purchased by institutional investors. The principal terms of the AT1 securities are described below: • The securities are perpetual and redeemable, at the option of Standard Chartered PLC in whole but not in part, on the first interest reset date and each date falling five years after the first reset date • The securities are also redeemable for certain regulatory or tax reasons on any date at 100 per cent of their principal amount together with any accrued but unpaid interest up to (but excluding) the date fixed for redemption. Any redemption is subject to Standard Chartered PLC giving notice to the relevant regulator and the regulator granting permission to redeem • Interest payments on these securities will be accounted for as a dividend. • Interest on the securities is due and payable only at the sole and absolute discretion of Standard Chartered PLC, subject to certain additional restrictions set out in the terms and conditions. Accordingly, Standard Chartered PLC may at any time elect to cancel any interest payment (or part thereof) which would otherwise be payable on any interest payment date. • The securities convert into ordinary shares of Standard Chartered PLC, at a pre-determined price detailed in the table above, should the fully loaded Common Equity Tier 1 ratio of the Group fall below 7.0 per cent. Approximately 859 million ordinary shares would be required to satisfy the conversion of all the securities mentioned above The securities rank behind the claims against Standard Chartered PLC of (a) unsubordinated creditors, (b) which are expressed to be subordinated to the claims of unsubordinated creditors of Standard Chartered PLC but not further or otherwise; or (c) which are, or are expressed to be, junior to the claims of other creditors of Standard Chartered PLC, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank, pari passu with, or junior to, the claims of holders of the AT1 securities in a winding–up occurring prior to the conversion trigger. 437 Standard Chartered – Annual Report 2023Financial statements28. 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 redenomination of share capital and share premium from sterling to US dollars in 2001. The capital redemption reserve represents the nominal value of share capital and preference shares redeemed • The amounts in the “Capital and Merger Reserve” represents the premium arising on shares issued using a cash box financing structure, which required the Company to create a merger reserve under section 612 of the Companies Act 2006. Shares were issued using this structure in 2005 and 2006 to assist in the funding of Korea ($1.9 billion) and Taiwan ($1.2 billion) acquisitions, in 2008, 2010 and 2015 for the shares issued by way of a rights issue, primarily for capital maintenance requirements and for the shares issued in 2009 by way of an accelerated book build, the proceeds of which were used in the ordinary course of business of the Group. The funding raised by the 2008, 2010 and 2015 rights issues and 2009 share issue was fully retained within the Company. Of the 2015 funding, $1.5 billion was used to subscribe to additional equity in Standard Chartered Bank, a wholly owned subsidiary of the Company. Apart from the Korea, Taiwan and Standard Chartered Bank funding, the merger reserve is considered realised and distributable. • Own credit adjustment reserve represents the cumulative gains and losses on financial liabilities designated at fair value through profit or loss relating to own credit. On derecognition of applicable instruments the balance of any OCA will not be recycled to the income statement, but will be transferred within equity to retained earnings • Fair value through other comprehensive income (FVOCI) debt reserve represents the unrealised fair value gains and losses in respect of financial assets classified as FVOCI, net of expected credit losses. Gains and losses are deferred in this reserve and are reclassified to the income statement when the underlying asset is sold, matures or becomes impaired. • FVOCI equity reserve represents unrealised fair value gains and losses in respect of financial assets classified as FVOCI. 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 derivatives that meet the criteria for these types of hedges. Gains and losses are deferred in this reserve and are reclassified 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 reclassified to the income statement when the underlying foreign operation is disposed. Gains and losses arising from derivatives 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 dividend distributions, own shares held (treasury shares) and share buy-backs A substantial part of the Group’s reserves is held in overseas subsidiary undertakings and branches, principally 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 addition, if these overseas reserves were to be remitted, further unprovided taxation liabilities might arise. As at 31 December 2023, the distributable reserves of Standard Chartered PLC (the Company) were $14.7 billion (31 December 2022: $13 billion). Distributable reserves of SC PLC were $14.7 billion, which are calculated from the Merger reserve and Retained Earnings with consideration for restricted items in line with sections 830 and 831 of the Companies Act 2006. 438 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements28. Share capital, other equity instruments and reserves continued Own shares Computershare Trustees (Jersey) Limited is the trustee of the 2004 Employee Benefit Trust (‘2004 Trust’) and Ocorian Trustees (Jersey) Limited has been the trustee of the 1995 Employees’ Share Ownership Plan Trust (‘1995 Trust’). The 1995 Trust was closed on 30 June 2023 as all historical awards under this trust have been satisfied, and the 2004 Trust will be used to satisfy existing and future awards. The 2004 Trust is used in conjunction with the Group’s employee share schemes and other employee share-based payments (such as upfront shares and fixed pay allowances). Group companies fund the 2004 Trust from time to time to enable the trustees to acquire shares in Standard Chartered PLC to satisfy these arrangements. Details of the shares purchased and held by the trusts are set out below. Shares purchased during the period Market price of shares purchased ($million) Shares held at the end of the period Maximum number of shares held during the period 1995 Trust 2004 Trust 2023 2022 2023 2022 Total 2023 2022 – – – – – – 29,069,539 30,203,531 29,069,539 30,203,531 237 218 237 218 28,095,542 27,525,624 28,095,542 27,525,624 28,893,930 27,976,046 Except as disclosed, neither the Company nor any of its subsidiaries has bought, sold or redeemed any Standard Chartered PLC securities listed on The Stock Exchange of Hong Kong Limited during the period. Dividend waivers The trustees of the 2004 Trust, which holds ordinary shares in Standard Chartered PLC in connection with the operation of its employee share plans, have lodged standing instructions in relation to shares held by them that have not been allocated to employees, whereby any dividend is waived on the balance of ordinary shares and recalculated and paid at the rate of 0.01p per share. Changes in share capital and other equity instruments of Standard Chartered PLC subsidiaries The table below details the transactions in equity instruments (including convertible and hybrid instruments) of the Group’s subsidiaries, including issuances, conversions, redemptions, purchase or cancellation. This is required under the Hong Kong Listing requirements, appendix 16 paragraph 10. Name and registered address The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Place of incorporation Description of shares Issued/(redeemed) capital Issued/(redeemed) Shares Proportion of shares held (%) Standard Chartered I H Limited United Kingdom $1.00 Ordinary shares Standard Chartered Holdings Limited United Kingdom $2.00 Ordinary shares $574,721,653 $574,721,653 574,721,653 287,360,826 Standard Chartered Strategic Investments Limited United Kingdom $1.00 Ordinary shares SC Ventures Holdings Limited United Kingdom $1.00 Ordinary shares Zodia Markets Holdings Limited United Kingdom $1.00 Ordinary shares $45,886,520 $217,712,622 $5,580 The following companies have the address of 5th Floor, Holland House 1-4 Bury Street, London, EC3A 5AW, United Kingdom 100 100 100 100 45,886,520 217,712,622 5,580 80.46 Zodia Holdings Limited United Kingdom $1.00 Ordinary-A shares $18,300,000 18,300,000 100 The following companies have the address of Suites 508,509,15th floor, Al Sarab Tower, Adgm Square, Al Maryah Island, Abu Dhabi, United Arab Emirates Financial Inclusion Technologies Ltd The following company has the address of 39/F, Oxford House,Taikoo Place,979 king’s road, Quarry Bay, Hong Kong United Arab Emirates $1.00 Ordinary shares $13,500,000 13,500,000 100 Mox Bank Limited Hong Kong HKD Ordinary shares HKD1,212,100,000 121,210,000 68.29 439 Standard Chartered – Annual Report 2023Financial statements 28. Share capital, other equity instruments and reserves continued Place of incorporation Description of shares Issued/(redeemed) capital Issued/(redeemed) Shares Proportion of shares held (%) Name and registered address 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-Division, Ward No. 150, Bengaluru, 560102, India. Standard Chartered Research and Technology India Private Limited India INR10.00 A Equity shares INR135,758,500 13,575,850 90.63 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 Limited India INR10.00 Equity shares INR730,222,220 73,022,222 100 The following company has the address of StandardChartered@Chiromo, Number 48, Westlands Road, P. O. Box 30003 – 00100, Nairobi, Kenya Solvezy Technology Kenya Limited Kenya Tawi Fresh Kenya Limited Kenya The following companies have the address of 27, Fitzwilliam Street, Dublin, D02 TP23, Ireland KES1,000.00 Ordinary shares KES1,000.00 Ordinary shares KES237,228,000 237,228 KES505,560,000 505,560 100 100 Zodia Custody (Ireland) Limited Ireland $1.00 Ordinary shares $1,230,000 1,230,000 72.83 The following company has the address of 77 Robinson Road, #25-00 Robinson 77, 068896, Singapore Trust Bank Singapore Limited Singapore SGD Ordinary shares SGD110,000,000 110,000,000 60 EX-26, Ground Floor, Bldg 16-Co Work, Dubai Internet City, Dubai, United Arab Emirates Appro Onboarding Solutions FZ-LLC The following company has the address of Part of Level 15, Standard Chartered Bank Building, Plot 8, Burj Downtown, Dubai, United Arab Emirates United Arab Emirates AED1,000.00 Ordinary shares AED25,691,000 25,691 100 myZoi Financial Inclusion Technologies LLC United Arab Emirates AED1.00 Ordinary shares AED25,000,000 25,000,000 100 The following company has the address of Standard Chartered Bank Building, 87 Independance Avenue, Ridge, ACCRA, Greater ACCRA, GA-016-4621, Ghana Solvezy Technology Ghana Ltd Ghana GHS Ordinary GHS4,301,000 4,301,000 100 The following company has the address of 8th Floor, Makati Sky Plaza Building 6788, Ayala Avenue San Lorenzo, City of Makati, Fourth District, National Capi, 1223, Philippines Standard Chartered Group Services, Manila Incorporated The following company has the address of 1201 1-2, 15-16, 12/F, Unit No.1, Building No.1, No. 1 Dongsanhuan Zhong Road, Chaoyang District, Beijing, China Standard Chartered Securities (China) Limited 440 Philippines PHP1.00 Ordinary PHP108,000,000 108,000,000 100 China CNY Ordinary CNY1,050,000,000 1,050,000,000 100 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements 28. Share capital, other equity instruments and reserves continued Place of incorporation Description of shares Issued/(redeemed) capital Issued/(redeemed) Shares Proportion of shares held (%) Name and registered address The following companies have the address of Raffles Place, #26-01 Republic Plaza, Singapore , 048619, Singapore Autumn Life Pte. Ltd. Audax Financial Technology Pte. Ltd CashEnable Pte. Ltd. Letsbloom Pte. Ltd The following companies have the address of 9 Raffles Place, #26-01 Republic Plaza, 048619 , Singapore Singapore Singapore Singapore Singapore $ Ordinary-A shares $2,650,000 2,650,000 96.62 $ Ordinary-A shares $94,300,000 94,300,000 $ Ordinary-A shares $ Ordinary shares $700,000 $4,599,999 700,000 4,599,999 100 100 100 100 100 SCV Research and Development Pte. Ltd. Singapore $ Ordinary shares SCV Master Holding Company Pte Ltd Singapore $ Ordinary shares $8,000,000 $25,700,000 8,000,000 25,700,000 The following companies have the address of 80 Robinson Road, #02-00, 068898, Singapore Solv-India Pte Ltd Singapore $ Ordinary shares $47,000,000 47,000,000 100 The following company has the address of 12th Floor, Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya , Selangor, Malaysia Solv Sdn. Bhd. Malaysia RM5.00 Ordinary shares RM10,911,120 2,182,224 90.6 Please see Note 22 Debt securities in issue for issuances and redemptions of senior notes. Please see Note 27 Subordinated liabilities and other borrowed funds for issuance and redemptions of subordinated liabilities and AT1 securities. Please see Note 40 Related undertakings of the Group for subsidiaries liquidated, dissolved or sold during the year. 29. Non-controlling interests At 1 January 2022 Comprehensive income for the year Income in equity attributable to non-controlling interests Other profits attributable to non-controlling interests Distributions Other increases1 At 31 December 2022 Comprehensive income for the year Income in equity attributable to non-controlling interests Other profits attributable to non-controlling interests Distributions Other increases2 At 31 December 2023 $million 371 (88) (42) (46) (31) 98 350 (38) (31) (7) (26) 110 396 1. Additional investment by non-controlling interests mainly in Mox Bank Limited ($39 million), Trust Bank Singapore Limited ($47 million), Zodia Markets Holdings Limited ($3 million), Power2SME Pte. Ltd. ($9 million) 2. Additional investment by non-controlling interests mainly in Mox Bank Limited ($48 million), Trust Bank Singapore Limited ($34 million) and Zodia Custody Limited ($28 million) 441 Standard Chartered – Annual Report 2023Financial statements 30. Retirement benefit obligations Accounting policy The Group operates pension and other post-retirement benefit plans around the world, which can be categorised into defined contribution plans and defined benefit plans. • For defined contribution plans, the Group pays contributions to publicly or privately administered pension plans on a statutory or contractual basis, and such amounts are charged to operating expenses. The Group has no further payment obligations once the contributions have been paid. • For defined benefit plans, which promise levels of payments where the future cost is not known with certainty: – the accounting obligation 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 Group determines the net interest expense on the net defined benefit liability for the year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability, taking into account any changes in the net defined benefit liability during the year as a result of contributions and benefit payments. Net interest expense, the cost of the accrual of new benefits, benefit enhancements (or reductions) and administration expenses met directly from plan assets are recognised in the income statement in the period in which they were incurred. Other accounting estimates and judgements There are many factors that affect the measurement of the retirement benefit obligations. This measurement requires the use of estimates, such as discount rates, inflation, pension increases, salary increases, and life expectancies which are inherently uncertain. The table below summarises how these assumptions are set: Assumption Discount rate Inflation Detail 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 obligations. This is the approach adopted across all our geographies. Where there are inflation-linked bonds available (e.g. United Kingdom and the eurozone), the Group derives inflation 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 liabilities are linked to Consumer Price Index inflation, whereas the reference bonds are linked to Retail Price Index inflation. Where no inflation- linked bonds exist, we determine inflation assumptions based on a combination of long-term forecasts and short-term inflation data. Salary growth Salary growth assumptions reflect the Group’s long-term expectations, taking into account future business plans and macroeconomic data (primarily expected future long-term inflation). Demographic assumptions Demographic assumptions, including 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 historic experience and/or future expectations. The sensitivity of the liabilities to changes in these assumptions is shown in the Note below. Retirement benefit obligations comprise: Defined benefit plans obligation Defined contribution plans obligation Net obligation Retirement benefit charge comprises: Defined benefit plans Defined contribution plans1 Charge against profit (Note 7) 2023 $million 2022 $million 166 17 183 128 18 146 2023 $million 2022 $million 66 365 431 58 332 390 1 The Group during the year utilised, against defined contribution payments, $4 million forfeited pension contributions in respect of employees who left before their interests vested fully. The residual balance of forfeited contributions is $16 million The Group operates over 60 defined benefit plans across its geographies, many of which are closed to new entrants who now join defined contribution arrangements. The aim of all these plans is, as part of the Group’s commitment to financial 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 conditions. The defined benefit plans expose the Group to currency risk, interest rate risk, investment risk and actuarial risks such as longevity risk. 442 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements30. Retirement benefit obligations continued The material holdings of government and corporate bonds shown partially hedge movements in the liabilities resulting from interest rate and inflation changes. Setting aside movements from other drivers such as currency fluctuation, the reduction in discount rates in most countries with material pension liabilities over 2023 has led to higher liabilities. This has been partly offset by increases in the value of bonds held as well as good performance of growth assets such as equities, leading to an increase in the pension deficit reported. These movements are shown as actuarial gains and losses in the tables below. Contributions into a number of plans in excess of the amounts required to fund benefits accruing have also partially offset the increase in the net deficit over the year. The disclosures required under IAS 19 have been calculated by independent qualified actuaries based on the most recent full actuarial valuations updated, where necessary, to 31 December 2023. UK Fund The Standard Chartered Pension Fund (the ‘UK Fund’) is the Group’s largest pension plan, representing 53 per cent (31 December 2022: 53 per cent) of total pension liabilities. The UK Fund is set up under a trust that is legally separate from the Bank (its formal sponsor) and, as required by UK legislation, at least one third of the trustee directors are nominated by members; the remainder are appointed by the Bank. The trustee directors have a fiduciary 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 UK employees are now offered membership of a defined contribution plan. The financial position of the UK Fund is regularly assessed by an independent qualified actuary. The funding valuation as at 31 December 2020 was completed in December 2021 by the Scheme Actuary, T Kripps of Willis Towers Watson, using assumptions different from those below, and agreed with the UK Fund trustee. It showed that the UK Fund was 92% funded at that date, revealing a past service deficit of $162 million (£127 million). To repair the deficit, three annual cash payments each of $42 million (£32.9 million) were agreed, with the first of these paid in December 2021, and two further instalments to be paid in December 2022 and December 2023. However, the agreement allowed that, if the funding position improves to being at or near a surplus in future years, the payments due in 2022 and 2023 will be reduced or eliminated. Based on the funding positions at the agreed measurement point of mid-year, no payment was made in December 2022, and a reduced payment of $8m (£6m) was made in December 2023. As part of the 2020 valuation, in order to provide security for future contributions an additional $64 million nominal gilts (£50 million) were purchased and transferred into the existing escrow account of $140 million gilts (£110 million), topping it up to $204 million. Under the terms of the 2020 valuation agreement, the USD8m payment made in December 2023 is deductible from the funds held in escrow. The Group has not recognised any additional liability under IFRIC 14, as the Bank has control of any pension surplus under the Trust Deed and Rules. Virgin Media vs NTL Pension Trustees II Ltd Following the June 2023 ruling in the case of Virgin Media vs NTL Pension Trustees II Limited, the Bank has considered the potential impact of this ruling on the UK Fund and is of the view that any potential impact is not expected to be material. Overseas plans The principal overseas defined benefit arrangements operated by the Group are in Hong Kong, India, Jersey, Korea, Taiwan, United Arab Emirates (UAE) and the United States of America (US). Plans in Hong Kong, India, Korea, Taiwan and UAE remain open for the accrual of future benefits. Key assumptions The principal financial assumptions used at 31 December 2023 were: Discount rate Price inflation Salary increases Pension increases Post-retirement medical rate 2023 2022 UK Funded % Overseas Plans1 % Unfunded Plans2 % UK Funded % Overseas Plans1 % Unfunded Plans2 % 4.6 2.5 n/a 2.3 1.2 – 4.9 2.0 – 2.9 3.5 – 4.5 2.9 3.1 – 7.4 2.0 – 5.0 4.0 – 8.5 0.0 – 2.3 8% in 2023 reducing by 0.5% per annum to 5% in 2029 4.8 2.6 n/a 2.4 1.2 – 5.4 1.0 – 3.1 3.5 – 4.5 3.1 3.7 – 7.6 2.0 – 4.0 4.0 – 7.8 0.0 – 2.4 7% in 2022 reducing by 0.5% per annum to 5% in 2026 1 The range of assumptions shown is for the funded defined benefit overseas plans in Hong Kong, Jersey, Korea, Taiwan, and the US. These comprise around 75 per cent of the total liabilities of overseas funded plans. 2 The range of assumptions shown is for the main unfunded defined benefit plans in India, Korea, Thailand, UAE, UK and the US. They comprise around 95 per cent of the total liabilities of unfunded plans The principal non-financial assumptions are those made for UK life expectancy. The UK mortality tables are S3PMA for males and S3PFA for females, projected by year of birth with the CMI 2019 improvement model with a 1.25% annual trend and initial addition parameter of 0.25%. Scaling factors of 92% for male pensioners, 92% for female pensioners, 92% for male dependants and 82% for female dependants have been applied. 443 Standard Chartered – Annual Report 2023Financial statements30. Retirement benefit obligations continued The resulting assumptions for life expectancy for the UK Fund are that a male member currently aged 60 will live for 27 years (2022: 27 years) and a female member for 30 years (2022: 30 years) and a male member currently aged 40 will live for 29 years (2022: 29 years) and a female member for 32 years (2022: 32 years) after their 60th birthdays. Both financial and non-financial assumptions can be expected to change in the future, which would affect the value placed on the liabilities. For example, changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below: • If the discount rate increased by 25 basis points the liability would reduce by approximately $35 million for the UK Fund |(2022: $30 million) and $20 million for the other plans (2022: $15 million) • If the rate of inflation increased by 25 basis points the liability, allowing for the consequent impact on pension and salary increases, would increase by approximately $20 million for the UK Fund (2022: $20 million) and $15 million for the other plans (2022: $15 million) • If the rate of salary growth relative to inflation increased by 25 basis points the liability would increase by nil for the UK Fund (2022: nil) and approximately $10 million for the other plans (2022: $10 million) • If longevity expectations increased by one year the liability would increase by approximately $35 million for the UK Fund (2022: $35 million) and $10 million for the other plans (2022: $10 million) Although this analysis does not take account of the full distribution of cash flows expected, it does provide an approximation of the sensitivity to the main assumptions. While changes in other assumptions would also have an impact, the effect would not be as significant. Profile of plan obligations Duration of the defined benefit obligation (in years) Duration of the defined benefit obligation – 2022 Benefits expected to be paid from plans Benefits expected to be paid during 2024 Benefits expected to be paid during 2025 Benefits expected to be paid during 2026 Benefits expected to be paid during 2027 Benefits expected to be paid during 2028 Benefits expected to be paid during 2029 to 2033 Funded plans UK Fund Overseas Unfunded plans 11 11 80 82 84 86 89 478 8 9 63 100 74 83 91 444 8 9 19 17 17 17 18 82 Fund values At 31 December 2022 Equities Government bonds Corporate bonds Hedge funds Infrastructure Property Derivatives Cash and equivalents Others Total fair value of assets1 At 31 December 2023 Equities Government bonds Corporate bonds Hedge funds Infrastructure Property Derivatives Cash and equivalents Others Total fair value of assets1 UK Fund Overseas plans Quoted assets $million Unquoted assets $million Total assets $million Quoted assets $million Unquoted assets $million Total assets $million 2 206 309 – – – 2 257 7 783 2 443 360 – – – 2 66 7 880 – – 82 14 177 126 – – 4 403 – – 113 9 166 84 5 – 2 379 2 206 391 14 177 126 2 257 11 1,186 2 443 473 9 166 84 7 66 9 1,259 223 160 116 – – – – 35 – 534 160 173 179 – – – – 37 – 549 – – – – – – – 221 63 284 – – – – – – – 166 145 311 223 160 116 – – – – 256 63 818 160 173 179 – – – – 203 145 860 1 Self-investment is monitored closely and is less than $1 million of Standard Chartered equities and bonds for 2023 (31 December 2022: <$1 million). Self-investment is only allowed where it is not practical to exclude it – for example through investment in index-tracking funds where the Group is a constituent of the relevant index 444 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements 30. Retirement benefit obligations continued At 31 December 2023 At 31 December 2022 Funded plans Funded plans UK Fund $million Overseas Plans $million Unfunded Plans $million UK Fund $million Overseas Plans $million Unfunded Plans $million Total fair value of assets Present value of liabilities Net pension plan asset/(obligation) 1,259 (1,219) 40 860 (877) (17) N/A (189) (189) 1,186 (1,138) 48 818 (817) 1 N/A (177) (177) The pension cost for defined benefit plans was: 2023 Current service cost1 Past service cost and curtailments2 Settlement cost3 Interest income on pension plan assets Interest on pension plan liabilities Total charge to profit before deduction of tax Net (gain)/losses on plan assets4 (Gains)/losses on liabilities Total (gains)/losses recognised directly in statement of comprehensive income before tax Deferred taxation Total (gains) /losses after tax Funded plans UK Fund $million Overseas plans $million Unfunded plans $million Total $million – 8 – (57) 56 7 (18) 30 12 (1) 11 39 – 2 (43) 41 39 (52) 79 27 (10) 17 11 1 – – 8 20 – 8 8 – 8 50 9 2 (100) 105 66 (70) 117 47 (11) 36 1 Includes administrative expenses paid out of plan assets of $1 million and actuarial losses of $2 million that are immediately recognised through P&L in line with the requirements of IAS 19. 2 Includes the cost of discretionary pension increases paid to UK pensioners as well as small past service costs in relation to Hong Kong 3 Termination benefits paid from the pension plan in Indonesia 4 The actual return on the UK Fund assets was a gain of $75 million and on overseas plan assets was a gain of $95 million Funded plans UK Fund $million Overseas plans $million Unfunded plans $million Total $million 2022 Current service cost1 Past service cost and curtailments2 Interest income on pension plan assets Interest on pension plan liabilities Total charge to profit before deduction of tax Net (gains)/losses on plan assets3 (Gains)/ losses on liabilities Total losses/(gains) recognised directly in statement of comprehensive income before tax Deferred taxation Total (gains)/losses after tax – – (34) 33 (1) 486 (453) 33 7 40 47 2 (32) 31 48 113 (143) (30) 13 (17) 6 – – 5 11 – (44) (44) – (44) 1 Includes administrative expenses paid out of plan assets of $ 1 million (2021: $ 1 million) 2 Includes various small costs and gains from plan amendments and settlements in India, Kenya, Mauritius, South Korea and Sri Lanka 3 The actual return on the UK Fund assets was a loss of $452 million and on overseas plan assets was a loss of $82 million 53 2 (66) 69 58 599 (640) (41) 20 (21) 445 Standard Chartered – Annual Report 2023Financial statements30. Retirement benefit obligations continued Movement in the defined benefit pension plans deficit during the year comprise: Surplus/(deficit) at January 2023 Contributions Current service cost1 Past service cost and curtailments Settlement costs and transfers impact Net interest on the net defined benefit asset/liability Actuarial gains/(losses) Assets held for sale3 Exchange rate adjustment Surplus/(deficit) at 31 December 2023² Funded plans UK Fund $million Overseas plans $million Unfunded plans $million Total $million 48 8 – (8) – 1 (12) – 3 40 1 59 (39) – (2) 2 (27) (7) (4) (17) (177) 14 (11) (1) – (8) (8) 6 (4) (189) (128) 81 (50) (9) (2) (5) (47) (1) (5) (166) 1 Includes administrative expenses paid out of plan assets of $1 million (31 December 2022: $1 million) 2 The deficit total of $166 million is made up of plans in deficit of $260 million (31 December 2022: $248 million) net of plans in surplus with assets totalling $94 million (31 December 2022: $120 million) 3 “Assets held for sale” is an adjustment relating to plans in Cameroon, Cote D’Ivoire and Zimbabwe which is required due to these countries being excluded in the opening and closing assets and liabilities, but included in the profit and other comprehensive income items shown. Funded plans UK Fund $million Overseas plans $million Unfunded plans $million Surplus/(deficit) at January 2022 Contributions Current service cost1 Past service cost and curtailments Settlement costs and transfers impact Net interest on the net defined benefit asset/liability Actuarial gains/(losses) Assets held for sale3 Exchange rate adjustment Surplus/(deficit) at 31 December 2022² 88 – – – – 1 (33) – (8) 48 (44) 67 (47) (2) – 1 30 (4) – 1 Total $million (192) 80 (53) (2) – (3) 41 (2) 3 (236) 13 (6) – – (5) 44 2 11 (177) (128) 1 Includes administrative expenses paid out of plan assets of $1 million (31 December 2021: $1 million) 2 The deficit total of $128 million is made up of plans in deficit of $248 million (31 December 2021: $355 million) net of plans in surplus with assets totalling $120 million (31 December 2021: $163 million) 3 Assets held for sale includes funded and unfunded plans in Cameroon, Cote D’Ivoire, Jordan and Zimbabwe The Group’s expected contribution to its defined benefit pension plans in 2024 is $53 million. At 1 January Contributions1 Current service cost2 Past service cost and curtailments Settlement costs Interest cost on pension plan liabilities Interest income on pension plan assets Benefits paid out2 Actuarial gains/(losses)3 Assets held for sale4 Exchange rate adjustment At 31 December Assets $million 2,004 82 – – – – 100 (161) 70 (7) 31 2023 Obligations $million (2,132) (1) (50) (9) (2) (105) – 161 (117) 6 (36) 2,119 (2,285) Total $million (128) 81 (50) (9) (2) (105) 100 – (47) (1) (5) (166) Assets $million 2,942 81 – – (5) – 66 (176) (599) (18) (287) 2022 Obligations $million (3,134) (1) (53) (2) 5 (69) – 176 640 16 290 Total $million (192) 80 (53) (2) – (69) 66 – 41 (2) 3 2,004 (2,132) (128) 1 Includes employee contributions of $1 million (31 December 2022: $1 million) 2 Includes administrative expenses paid out of plan assets of $1 million (31 December 2022: $1 million) 3 Actuarial gain on obligation comprises of $50 million loss (31 December 2022: $708 million gain) from financial assumption changes, $1 million loss (31 December 2022: $9 million gain) from demographic assumption changes and $66 million loss (31 December 2022: $77 million loss) from experience 4 “Assets held for sale” is an adjustment relating to plans in Cameroon, Cote D’Ivoire and Zimbabwe which is required due to these countries being excluded in the opening and closing assets and liabilities, but included in the profit and other comprehensive income items shown. 446 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements31. 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 2024 in respect of 2023 performance, which vest in 2025-2027, is recognised as an expense over the period from 1 January 2023 to the vesting dates in 2025-2027. 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 conditions (for example, profitability 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 binomial option pricing model. Non-market vesting conditions 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 revision of original estimates, if any, in the income statement and a corresponding adjustment to equity over the remaining vesting period. Forfeitures prior to vesting attributable to factors other than the failure to satisfy service conditions and non-market vesting conditions are treated as a cancellation and the remaining 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 liability 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 conditions or market-based performance conditions, the cumulative charge incurred up to the date of forfeiture is credited to the income statement. Other accounting estimates and judgements Share-based payments involve judgement and estimation uncertainty in determining the expenses and carrying values of share awards at the balance sheet date. • LTIP awards are determined using an estimation of the probability of meeting certain metrics over a three-year performance period using the Monte Carlo simulation model. • Deferred shares are determined using an estimation of expected dividends. • Sharesave Plan valuations are determined using a binomial option-pricing model. 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. Deferred share awards Other share awards Total share-based payments² 1 No forfeiture during the year 2023¹ 2022¹ Cash $million Equity $million Total $million Cash $million Equity $million Total $million 34 19 53 103 70 173 137 89 226 16 20 36 92 71 163 108 91 199 2 The total Share based payments charge during the year includes costs relating to Business ventures. Business ventures are established as separate legal entities with their own employee share ownership plans (ESOP) to attract and incentivise talent. ESOPs have been set up with share based payment charges recorded in 2023 with $14 million in Cash settled and $3 million equity settled deferred awards spread across 11 entities 447 Standard Chartered – Annual Report 2023Financial statements31. Share-based payments continued 2021 Standard Chartered Share Plan (the ‘2021 Plan’) and 2011 Standard Chartered Share Plan (the ‘2011 Plan’) The 2021 Plan was approved by shareholders in May 2021 and is the Group’s main share plan, replacing the 2011 Plan for new awards from June 2021. It may be used to deliver various types of share awards to employees and former employees of the Group, including directors and former executive directors: • Long Term Incentive Plan (LTIP) awards: granted with vesting subject to performance measures. Performance measures attached to awards granted previously include: relative total shareholder return (TSR); return on tangible equity (RoTE) (with a Common Equity Tier 1 (CET1) underpin); and strategic measures. Each measure is assessed independently over a three-year period. LTIP awards have an individual 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 anniversaries of the award date specified at the time of grant. Deferred awards are not subject to any plan limit. This enables the Group to meet regulatory requirements relating to deferral levels, and is in line with market practice. – replacement buy-out awards to new joiners who forfeit awards on leaving their previous employers. These vest in the quarter most closely following the date when the award would have vested at the previous employer. This enables the Group to meet regulatory requirements relating to buy-outs, and is in line with market practice. In line with similar plans operated by our competitors, these awards are not subject to an annual limit and do not have any performance measures. Under the 2021 Plan and 2011 Plan, no grant price is payable to receive an award. The remaining life of the 2021 Plan during which new awards can be made is eight years. The 2011 Plan has expired and no further awards will be granted under this plan. Valuation – LTIP awards The vesting of awards granted in 2023, 2022 and 2021 is subject to relative TSR performance measures, achievement of a strategic scorecard and satisfaction of RoTE (subject to a capital CET1 underpin). The vesting of awards also have additional conditions under strategic measures related to targets set for sustainability linked to business strategy. The fair value of the relative TSR component is calculated using the probability of meeting the measures over a three-year performance period, using a Monte Carlo simulation model. The value of the remaining components is based on the expected performance against the RoTE and strategic measures in the scorecard and the resulting estimated number of shares expected to vest at each reporting date. These combined values are used to determine the accounting charge. No dividend equivalents accrue for the LTIP awards made in 2023, 2022 or 2021 and the fair value takes this into account, calculated by reference to market consensus dividend yield. Grant date Share price at grant date (£) Vesting period (years) Expected divided yield (%) Fair value (RoTE) (£) Fair value (TSR) (£) Fair value (Strategic) (£) 2023 2022 13–March 14–March 7.40 3–7 3.1 4.88 3–7 3.4 1.91, 1.85 1.24, 1.20 1.08, 1.04 0.70, 0.68 2.54, 2.46 1.65, 1.60 Valuation – deferred 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 dividends. For awards granted to material risk takers in 2023, the fair value of awards takes into account the lack of dividend equivalents, calculated by reference to market consensus dividend yield. Deferred share awards – variable remuneration Grant date Share price at grant date (£) 18 September 7.43 2023 19 June 6.75 13 March 7.40 Vesting period (years) 1-3 years 1-5 years 3-7 years Expected dividend yield (%) N/A 3.0 – Fair value (£) 7.43 6.51 – Expected dividend yield (%) 3.3 Fair value (£) 6.75 Expected dividend yield (%) 3.1 Fair value (£) 7.4 3.3, 3.3 6.23, 5.83 3.1, 3.1 6.85, 6.65 – – 3.1, 3.1, 3.1, 3.1 6.65, 6.75, 6.35, 6.16 448 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements31. Share-based payments continued Grant date Share price at grant date (£) 09 November 5.62 2022 20 June 6.04 14 March 4.88 Vesting period (years) 1-3 years 1-5 years 3-7 years Deferred share awards – buy-outs Expected dividend yield (%) Fair value (£) Expected dividend yield (%) N/A 3.4 – 5.62 5.17 – N/A 3.4, 3.4 Fair value (£) 6.04 5.56, 5.56 Expected dividend yield (%) N/A N/A, 3.4, 3.4, 3.4 Fair value (£) 4.88 4.88, 4.48, 4.41, 4.34 – – 3.4,3.4,3.4 4.48, 4.13, 3.99 Grant date Share price at grant date (£) 20-Nov 6.60 18-Sep 7.43 19-Jun 6.75 13-Mar 7.40 2023 Vesting period (years) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) 3 months 4 months 6 months 7 months 9 months 10 months 1 year 2 years 3 years 4 years 5 years 3.0 3.0 3.0 6.54 6.49 6.44 3.0 6.25, 6.30, 6.35, 6.39 3.0 6.12, 6.16, 6.21 3.0 5.94, 5.98, 6.03 3.0 5.76 3.0 3.0 3.0 7.38 7.32 7.27 3.0 7.06, 7.11, 7.16, 7.22 3.0 6.85, 6.9, 6.95, 7.01 3.0 6.65, 6.7, 6.8 2022 3.3 3.3 6.7 3.1 7.34 6.64 3.3 6.48, 6.59 3.3 6.18, 6.38, 6.43, 6.54 3.3 5.98, 6.18, 6.33 3.3 5.98, 5.79, 6.13 3.1 7.12, 7.18 3.1 6.91, 6.96 3.1 6.70, 6.75 3.1 6.50, 6.55 3.1 6.35 Grant date 28 November 09 November Share price at grant date (£) 5.90 5.62 20 June 6.04 14 March 4.88 Vesting period (years) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) Expected dividend yield (%) Fair value (£) 4 months 1 year 1.4 years 2 years 2.4 years 3 years 4 years 5 years 6 years 3.4 3.4 3.4 3.4 3.4 5.71 5.52 5.34 5.16 4.99 3.4 3.4 3.4 3.4 3.4 3.4 3.4 5.56 5.44 5.38 5.26 5.2 5.08 4.92 3.4 3.4 3.4 3.4 3.4 3.4 3.4 5.84 5.65 5.46 5.28 5.11 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 4.72 4.56 4.41 4.27 4.13 3.99 449 Standard Chartered – Annual Report 2023Financial statements31. Share-based payments continued All Employee Sharesave Plans Sharesave Plans The 2013 Sharesave Plan expired in May 2023 and a new 2023 Sharesave Plan was approved by shareholders at the Annual General Meeting in May 2023. Under the 2023 Sharesave Plan, employees may open a savings contract. Employees can 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 invitation (the ‘option exercise price’), after which they have a period of six months to exercise the option. There are no performance measures attached to options granted under the Sharesave Plans 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 securities law and regulatory restrictions. In these countries, where possible, the Group offers an equivalent cash-based alternative to its employees. The remaining life of the 2023 Sharesave Plan during which new awards can be made is ten years. The 2013 Sharesave Plan has expired and no further awards will be granted under this plan. Valuation – Sharesave: Options under the Sharesave plans are valued using a binomial option-pricing model. The same fair value is applied to all employees including executive directors. The fair value per option granted and the assumptions used in the calculation are as follows: All Employee Sharesave Plan (Sharesave) Grant date Share price at grant date (£) Exercise price (£) Vesting period (years) Expected volatility (%) Expected option life (years) Risk-free rate (%) Expected dividend yield (%) Fair value (£) 2023 2022 18 September 28 November 7.35 5.88 3 36.7 3.5 4.48 3.0 3.05 5.80 4.23 3 39.3 3.33 3.21 3.4 2.08 The expected volatility is based on historical volatility 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 a term consistent with the assumed option life. The expected dividend yield is calculated by reference to market consensus dividend yield. Limits An award shall not be granted under the 2021 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 2021 Plan and under any other discretionary 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 2021 Plan or 2023 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 2021 Plan or 2023 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 2021 Plan or 2023 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 2021 Plan or 2023 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 2021 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 2023 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. Standard Chartered PLC has been granted waivers from strict compliance with Rules 17.03A, 17.03B(1), 17.03E and 17.03(18) of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong. Details are set out in the market announcements made on 30 March 2023. . In relation to the waiver of strict compliance with Note 1 to 17.03(18), in 2023 no changes to the Plan rules have been proposed and therefore the Board has not been required to exercise its discretion. 450 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements31. Share-based payments continued Reconciliation of share award movements for the year ending 31 December 2023 Outstanding at 1 January 2023 Granted2,3 Lapsed Exercised Outstanding at 31 December 2023 Discretionary¹ LTIP Deferred shares Sharesave 11,339,951 46,449,040 17,109,519 2,142,057 21,668,459 5,668,325 (1,911,931) (1,231,514) (1,407,502) (622,695) (19,817,781) (4,468,125) 10,947,382 47,068,204 16,902,217 Total number of securities available for issue under the plan 10,947,382 47,068,204 16,902,217 Percentage of the issued shares this represents as at 31 December 2023 0.41 1.76 0.63 Exercisable as at 31 December 2023 Range of exercise prices (£)³ Intrinsic value of vested but not exercised options ($ million) Weighted average contractual remaining life (years) Weighted average share price for awards exercised during the period (£) – – – 7.59 6.94 685,077 2,482,392 – 5.81 8.11 7.04 3.14 – 5.88 11.08 2.30 6.65 Weighted average Sharesave exercise price (£) 3.81 – 4.14 3.75 4.49 4.49 3.16 1. Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards. 2. 2,134,238 (LTIP) granted on 13 March 2023, 6,501 (LTIP) granted as a notional dividend on 1 March 2023, 1,318 (LTIP) granted as a notional dividend on 1 September 2023; 20,828,385 (Deferred shares) granted on 13 March 2023, 121,314 (Deferred shares) granted as a notional dividend on 1 March 2023, 338,583 (Deferred shares) granted on 19 June 2023, 235,186 (Deferred shares) granted on 18 September 2023, 52,082 (Deferred shares) granted as a notional dividend on 1 September 2023, 92,909 (Deferred shares) granted on 20 November 2023; 5,668,325 (Sharesave) granted on 18 September 2023 under the 2023 Sharesave Plan. 3. For Sharesave granted in 2023 the exercise price is £5.88 per share, a 20% discount from the average of the closing prices over the five days to the invitation date of 21 August 2023. The closing share price on 18 August 2023 was £7.214 Reconciliation of share award movements for the year ending 31 December 2022 Outstanding at 1 January 2022 Granted2,3 Lapsed Exercised Outstanding at 31 December 2022 Total number of securities available for issue under the plan Percentage of the issued shares this represents as at 31 December 2022 Exercisable as at 31 December 2022 Range of exercise prices (£)³ Intrinsic value of vested but not exercised options ($ million) Weighted average contractual remaining life (years) Weighted average share price for awards exercised during the period (£) Discretionary¹ LTIP Deferred shares Sharesave 11,627,751 39,718,654 16,897,075 3,066,288 25,037,706 5,777,197 (2,927,828) (1,121,849) (2,700,678) (426,260) (17,185,471) (2,864,075) 11,339,951 46,449,040 11,339,951 46,449,040 0.39 – – 0.02 7.88 5.09 1.60 1,191,693 – 8.93 8.25 4.93 17,109,519 17,109,519 0.59 1,699,772 3.14 – 5.13 2.59 2.27 5.94 Weighted average Sharesave exercise price (£) 3.95 – 4.29 5.03 3.81 3.81 4.96 – 1. Granted under the 2021 Plan and 2011 Plan. Employees do not contribute to the cost of these awards. 2. 3,048,826 (LTIP) granted on 14 March 2022, 14,989 (LTIP) granted as a notional dividend on 1 March 2022, 2,473 (LTIP) granted as a notional dividend on 8 August 2022, 23,434,127 (Deferred shares) granted on 14 March 2022, 77,479 (Deferred shares) granted as a notional dividend on 1 March 2022, 584,322 (Deferred shares) granted on 20 June 2022, 43,918 (Deferred shares) granted as a notional dividend on 8 August 2022, 771,103 (Deferred shares) granted on 9 November 2022, 126,757 (Deferred shares) granted on 28 November 2022 under the 2021 Plan. 5,777,197 (Sharesave) granted on 28 November 2022 under the 2013 Sharesave Plan. 3. For Sharesave granted in 2022 the exercise price is £4.23 per share, a 20% discount from the closing price on 1 November 2022. The closing price on 1 November 2022 was £5.282 451 Standard Chartered – Annual Report 2023Financial statements32. Investments in subsidiary undertakings, joint ventures and associates Accounting policy Associates and joint arrangements The Group did not have any contractual interest in joint operations. Investments in associates and joint ventures are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investment in associates and joint ventures includes goodwill identified on acquisition (net of any accumulated impairment loss). The Group’s share of its associates’ and joint ventures’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate or a joint venture equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the associates and joint ventures. At each balance sheet date, the Group assesses whether there is any objective evidence of impairment in the investment in associates and joint ventures. Such evidence includes a significant or prolonged decline in the fair value of the Group’s investment in an associate or joint venture below its cost, among other factors. Significant accounting estimates and judgements The Group applies judgement in determining if it has control, joint control or significant influence over subsidiaries, joint ventures and associates respectively. These judgements are based upon identifying the relevant activities of counterparties, being those activities that significantly affect the entities returns, and further making a decision of if the Group has control over those entities, joint control, or has significant influence (being the power to participate in the financial and operating policy decisions but not control them). These judgements are at times determined by equity holdings, and the voting rights associated with those holdings. However, further considerations including but not limited to board seats, advisory committee members and specialist knowledge of some decision-makers are also taken into account. Further judgement is required when determining 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 dispersion of other shareholders. Impairment testing of investments in associates and joint ventures, and on a Company level investments in subsidiaries is performed if there is a possible indicator of impairment. Judgement is used to determine if there is objective evidence of impairment. Objective 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 financial difficulty, or breaches of contracts/regulatory fines of the associate or joint venture. Further judgement is required when considering broader indicators of impairment such as losses of active markets or ratings downgrades across key markets in which the associate or joint venture operate in. Impairment testing is based on estimates including 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 estimation of future cash flows and the level to which they are discounted is inherently uncertain and requires significant judgement. Business combinations The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. In the Company’s financial statements, investment in subsidiaries, associates and joint ventures are held at cost less impairment and dividends from pre-acquisition profits received prior to 1 January 2009, if any. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated in the Group accounts. Investments in subsidiary undertakings As at 1 January Additions1 Disposal2 As at 31 December 2023 $million 60,975 1,566 (1,750) 60,791 2022 $million 60,429 1,545 (999) 60,975 1 Includes internal Additional Tier 1 Issuances of $992 million by Standard Chartered Bank and $575 million additional investment in Standard Chartered Holdings Limited (31 December 2022: Additional Tier 1 issuances of $1 billion by Standard Chartered Bank and $500 million by Standard Chartered Bank (Hong Kong) Ltd) 2 Includes redemption of Additional Tier1 capital of $1 billion by Standard Chartered Bank (31 December 2022: Additional Tier1 capital of $1 billion by Standard Chartered Bank) 452 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements32. Investments in subsidiary undertakings, joint ventures and associates continued At 31 December 2023, the principal subsidiary undertakings, all indirectly held except for Standard Chartered Bank (Hong Kong) Limited, and principally engaged in the business of banking and provision of other financial services, were as follows: Country and place of incorporation or registration Main areas of operation Standard Chartered Bank, England and Wales United Kingdom, Middle East, South Asia, Asia Pacific, Americas and, through Group companies, Africa Standard Chartered Bank (Hong Kong) Limited, Hong Kong Hong Kong Standard Chartered Bank (Singapore) Limited, Singapore Singapore Standard Chartered Bank Korea Limited, Korea Standard Chartered Bank (China) Limited, China¹ Standard Chartered Bank (Taiwan) Limited, Taiwan Standard Chartered Bank AG, Germany Standard Chartered Bank Malaysia Berhad, Malaysia Korea China Taiwan Germany Malaysia 1 Under PRC law, registered as Standard Chartered Bank (China) Limited Country and place of incorporation or registration Main areas of operation Standard Chartered Bank (Thai) Public Company Limited, Thailand Standard Chartered Bank (Pakistan) Limited, Pakistan Thailand Pakistan Standard Chartered Bank Botswana Limited, Botswana Botswana Standard Chartered Bank Kenya Limited, Kenya Standard Chartered Bank Nepal Limited, Nepal Standard Chartered Bank Ghana PLC, Ghana Mox Bank Limited, Hong Kong Kenya Nepal Ghana Hong Kong A complete list of subsidiary undertaking is included in Note 40. Group interest in ordinary share capital % 100 100 100 100 100 100 100 100 Group interest in ordinary share capital % 99.87 98.99 75.83 74.32 70.21 69.42 68.29 The Group does not have any material non-controlling interest except as listed above, which contribute $35 million (31 December 2022: $(6.2) million) of the (loss)/Profit attributable to non-controlling interest and $290 million (31 December 2022: $261 million) of the equity attributable to non-controlling interests. During 2023 the Group disposed of its investments in Pembroke Group Limited (Isle of Man), Pembroke Aircraft Leasing Holdings Limited and Pembroke Aircraft Leasing (Tianjin) Limited (China). The carrying amount was composed of Property, plant and equipment of $3,249 million, Goodwill and intangible assets of $23 million, Other assets of $124 million and Other liabilities of $292 million. The principal activity of these subsidiaries was the aviation finance leasing business. In Q1 2023, the aviation finance leasing business was classified as held for sale and was subsequently sold on 2nd November 2023 for a total consideration of $3,570 million. The gain on sale of the business was $309 million. In addition the Group disposed of its wholly owned subsidiaries Cardspal Pte. Ltd. and Kozagi during 2023. The gain on sale of Cardspal Pte. Ltd. and Kozagi comprised $12 million and $7 million, respectively. While the Group’s subsidiaries are subject to local statutory capital and liquidity requirements in relation to foreign exchange remittance, these restrictions arise in the normal course of business and do not significantly restrict the Group’s ability to access or use assets and settle liabilities of the Group. The Group does not have significant restrictions on its ability to access or use its assets and settle its liabilities other than those resulting from the regulatory framework within which the banking subsidiaries operate. These frameworks require banking operations to keep certain levels of regulatory capital, liquid assets, exposure limits and comply with other required ratios. These restrictions are summarised below: Regulatory and liquidity requirements The Group’s subsidiaries are required to maintain minimum capital, leverage ratios, liquidity and exposure ratios which therefore restrict the ability of these subsidiaries to distribute cash or other assets to the parent company. 453 Standard Chartered – Annual Report 2023Financial statements32. Investments in subsidiary undertakings, joint ventures and associates continued The subsidiaries are also required to maintain balances with central banks and other regulatory authorities in the countries in which they operate. At 31 December 2023, the total cash and balances with central banks was $70 billion (31 December 2022: $58 billion) of which $6 billion (31 December 2022: $9 billion) is restricted. Statutory requirements The Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits to the parent company, generally to maintain solvency. These requirements restrict the ability of subsidiaries to remit dividends to the Group. Certain subsidiaries are also subject to local exchange control regulations which provide for restrictions on exporting capital from the country other than through normal dividends. Contractual requirements The encumbered assets in the balance sheet of the Group’s subsidiaries are not available for transfer around the Group. Share of profit from investment in associates and joint ventures comprises: Loss from investment in joint ventures Profit from investment in associates Total Interests in associates and joint ventures As at 1 January Exchange translation difference Additions¹ Share of profits Dividend received⁴ Disposals Impairment2 Share of FVOCI and Other reserves Other movements3 As at 31 December 2023 $million 2022 $million (13) 154 141 2023 $million 1,631 16 64 141 (11) – (872) (7) 4 966 (7) 163 156 2022 $million 2,147 (232) 26 156 (58) (1) (336) (79) 8 1,631 1 Includes $17 million non-cash consideration (Intellectual Property – right to use) from SBI Zodia Custody Co. Ltd 2 Impairment mainly relates to the Group’s investment in its associate China Bohai Bank (Bohai) $850million and CurrencyFair Limited (Zai) $21 million 3 Movement related to CurrencyFair Limited 4 Include distribution ($7 million) in cash from Ascenta IV During 2023 the Group disposed of its 13.09% share of investment in associate Metaco SA for a total consideration of $18 million. The entire amount was recognised as gain on sale. A complete list of the Group’s interest in associates is included in Note 40. The Group’s principal associates are: Associate China Bohai Bank CurrencyFair Limited Exchange Ireland Nature of activities Main areas of operation Banking Banking China Ireland Group interest in ordinary share capital % 16.26 43.42 The Group’s ownership percentage in China Bohai Bank is 16.26%. Although the Group’s investment in China Bohai Bank is less than 20 per cent , it is considered to be an associate because of the significant influence the Group is able to exercise over its management and financial and operating policies. This influence is exercised through Board representation and the provision of technical expertise to Bohai. The Group applies the equity method of accounting for investments in associates. Bohai has a statutory year end of 31 December, but publishes its year-end financial statements after the Group. As it is impracticable for Bohai to prepare financial statements sooner, the Group recognises its share of Bohai’s earnings on a three- month lag basis. Therefore, the Group recognised its share of Bohai’s profits and movements in other comprehensive income for the 12 months ended 30 September 2023 in the Group’s consolidated statement of income and consolidated statement of comprehensive income for the year ended 31 December 2023, respectively. There have been significant developments since 2022, which have required an impairment to the Group’s carrying amount of the investment in Bohai. These events include Bohai’s lower reported net profit in 2023 (compared to 2022) as well as banking industry challenges and property market uncertainties in Mainland China, that may impact Bohai’s future profitability. If the Group did not have significant influence over Bohai, the investment would be measured at fair value rather than the current carrying value, which is based on the application of the equity method as described in the accounting policy note. 454 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements32. Investments in subsidiary undertakings, joint ventures and associates continued Impairment testing At 31 December 2023, the listed equity value of Bohai is below the carrying amount of the Group‘s investment in associate. As a result, the Group assessed the carrying value of its investment in Bohai for impairment and concluded that an impairment of $850 million was required in 2023 (2022: $308 million impairment). Total impairment is recorded in the ‘Goodwill, property, plant and equipment and other impairment’ line in the Consolidated Income Statement, under Central & other items segment. The carrying value of the Group’s investment in Bohai of $700 million (2022: $1,421 million) represents the higher of the value in use and fair value less costs to sell. The financial forecasts used in the VIU calculation reflects Group management’s best estimate of Bohai’s future earnings considering the significant developments explained above. Bohai VIU Carrying amount1 Market capitalisation2 2023 $million 2022 $million 700 700 418 1,421 1,421 685 1 The Group’s 16.26% share in the net assets less other equity instruments which the Group does not hold 2 Number of shares held by the Group multiplied by the quoted share price at 31 December Basis of recoverable amount The impairment test was performed by comparing the recoverable amount of Bohai, determined as the higher of VIU and fair value less costs to sell, with its carrying amount. The value in use (‘VIU’) is calculated using a dividend discount model (‘DDM’), which estimates the distributable future cashflows to the equity holders, after adjusting for regulatory capital requirements, for a 5-year period, after which a terminal value (‘TV’) is calculated based on the ‘Gordon Growth’ model. The key assumptions in the VIU are as follows: • Short to medium term projections are based on Group management’s best estimates of future profits available to ordinary shareholders and have been determined with reference to the latest published financial results and historical performance of Bohai • The projections use available information and include normalised performance over the forecast period, inclusive of: (i) asset growth assumptions based on the long-term GDP growth rate for Mainland China; (ii) ECL assumptions using Bohai’s historical reported ECL, based on the proportion of ECL from loans and advances to customers and financial investments measured at amortised cost and FVOCI. This was further adjusted for banking industry challenges and property market uncertainties; (iii) Net Interest Margin (NIM) increases from 2025 with reference to third party market interest rate forecasts in China; (iv) Net fee income estimated according to the latest available performance of Bohai and contribution of the constituent parts (trading and fee income) ; and (v) Effective Tax Rate (ETR) based on Bohai’s historical reported results for the short term projection, updated, for the medium and long term to a more conservative view • The discount rate applied to these cash flows was estimated with reference to transaction and broker data in the local Chinese market, cross-checked to the capital asset pricing model (CAPM), which includes a long term risk-free rate, beta and company risk premium assumptions for Bohai • A long-term GDP growth rate for Mainland China is used to extrapolate the expected short to medium term earnings to perpetuity to derive a terminal value; and • Capital maintenance ratio consists of a capital haircut taken in order to estimate Bohai’s target regulatory capital requirements over the forecast period. This haircut takes into account movements in risk weighted assets (RWA) projected based on the historical proportion of RWA to total assets and the total capital required (Core CET 1 and Minimum Core CET 1 ratios), including required retained earnings over time to meet the target capital ratios. RWA projection is adjusted to reflect management’s best estimates for the impact of implementing Basel 3.1, effective 1 January 2024 in China. The VIU model was refined during 2023 to include a projected summary balance sheet and more granular income statement assumptions for each period. While it is impracticable for the Group to estimate the impact on future periods, the key changes to the 2023 model are summarised as follows: • Asset growth rates, net interest income margin and ECL assumptions were applied to the relevant balance sheet lines to produce the profit and loss forecasts for each period • RWAs were modelled as a percentage of total assets, to reflect the potential capital impact(s) of regulatory changes (e.g., Basel 3.1) in each period. For the purposes of the VIU for 31 December 2023, it was assumed that the minimum CET 1 ratio is 8.0% (2022: 7.5%) over the forecast and terminal periods • Consistent with the model updates explained above, net fee income was modelled separately from net interest income. Prior to its use, the 2023 VIU model was calibrated using the 2022 modelled assumptions. 455 Standard Chartered – Annual Report 2023Financial statements32. Investments in subsidiary undertakings, joint ventures and associates continued The key assumptions used in the VIU calculation are as follows: Pre-tax discount rate Long term GDP growth rate Total assets growth rate RWA as percentage of total assets Net interest margin Net fee income growth rate Expected credit losses as a percentage of customer loans Expected credit losses as a percentage of financial investments measured at amortised cost and FVOCI Effective tax rate Capital maintenance ratio3 2023 per cent 13.68 4.00 4.00 63.87–67.06 1.21–1.48 4.00 0.80-1.24 0.35-0.67 12.02–16.00² 8.28 2022 per cent 13.03 4.00 N/A1 N/A1 1.50–1.84 N/A1 0.90-1.45 N/A1 16.00 8.06 1 These assumptions were not explicitly modelled in 2022, therefore no comparative figures are presented 2 Bohai’s latest available effective tax rate (12.02%) was only used for the first year of the cash flows. Thereafter, 16.00% was applied, consistent with previous periods 3 Core CET 1 reported by Bohai The table below discloses sensitivities to the key assumptions of Bohai, according to management judgement of reasonably possible changes. Changes were applied to every cash flow year on an individual basis. The percentage change to the assumptions reflects the level at which management assess the reasonableness of the assumptions used and their impact on the Value in Use. Sensitivities Discount Rate Long term GDP growth rate¹ Total assets growth rate RWA as percentage of total assets Net interest margin Net fee income Expected credit losses as a percentage of customer loans Expected credit losses as a percentage of financial investments measured at amortised cost and FVOCI Effective tax rate Capital maintenance ratio 1 Changes in long term GDP growth rate applied only to the calculation of the terminal value 2 Market capitalisation of Bohai at 31 December 2023 was used as impairment floor Key assumption change Increase Headroom/ (Impairment) $ million Decrease Headroom/ (Impairment) $ million basis points 100 100 100 100 10 100 10 10 100 50 (126) 135 41 (26) 452 53 (275) (131) (25) (199) 169 (100) (40) 26 (282)² (51) 275 131 25 199 The following table sets out the summarised financial statements of China Bohai Bank prior to the Group’s share of the associate’s profit being applied: Total assets Total liabilities Operating income1 Net profit1 Other comprehensive income1 1 This represents twelve months of earnings (1 October to 30 September) 30 Sep 2023 $million 30 Sep 2022 $million 246,212 230,101 236,396 220,662 3,640 811 (38) 3,958 1,186 (457) 456 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements33. Structured entities Accounting policy Structured entities are consolidated when the substance of the relationship between the Group and the structured entity indicates the Group has power over the contractual relevant activities of the structured entity, is exposed to variable returns, and can use that power to affect the variable return exposure. In determining whether to consolidate a structured entity to which assets have been transferred, the Group takes into account its ability to direct the relevant activities of the structured entity. These relevant activities are generally evidenced through a unilateral right to liquidate the structured entity, investment in a substantial proportion of the securities issued by the structured entity or where the Group holds specific subordinate securities that embody certain controlling rights. The Group may further consider relevant activities embedded within contractual arrangements such as call options which give the practical ability to direct the entity, special relationships 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 determining control over structured entities. The purpose and design of the entity is considered, along with a determination of what the relevant activities 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 principal in its own right or as an agent on behalf of others. Judgement is further required in the ongoing assessment of control over structured entities, specifically if market conditions have an effect on the variable return exposure of different investors. Interests in consolidated structured entities: A structured entity is consolidated into the Group’s financial statements where the Group controls the structured entity, as per the determination in the accounting policy above. The following table presents the Group’s interests in consolidated structured entities. Aircraft and ship leasing Principal and other structured finance Total 2023 $million 52 353 405 2022 $million 3,531 330 3,861 Interests in unconsolidated structured entities: Unconsolidated structured entities are all structured entities that are not controlled by the Group. The Group enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer transactions and for specific investment opportunities. This is predominantly within the CCIB business segment. An interest in a structured entity is contractual or non-contractual involvement which creates variability of the returns of the Group arising from the performance of the structured entity. The table below presents the carrying amount of the assets recognised in the financial statements relating to variable interests held in unconsolidated structured entities, the maximum exposure to loss relating to those interests and the total assets of the structured entities. Maximum exposure to loss is primarily limited to the carrying amount of the Group’s on-balance sheet exposure to the structured entity. For derivatives, 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. 2023 2022 Asset- backed securities $million Lending $million Structured finance $million Principal Finance funds $million Other activities $million Total $million Asset- backed securities $million Lending $million Structured finance $million Principal Finance funds $million Other activities $million Total $million Group’s interest – assets Financial assets held at fair value through profit or loss Loans and advances/ Investment securities at amortised cost Investment securities (fair value through other comprehensive income) Other assets Total assets Off-balance sheet Group’s maximum exposure to loss Total assets of structured entities 954 269 143 137 – 1,503 851 – – 136 – 987 17,795 15,105 13,353 2,443 – – – – 34 21,192 15,374 13,530 – 8,869 6,691 – – – 137 – 190 46,443 18,696 21,667 14,261 – 246 54,870 – – 2,443 2,248 34 – – – 190 50,423 21,795 21,667 20 15,580 – 9,675 – – 14,261 8,710 – 8 144 93 – – 2,248 8 246 58,113 – 18,478 21,192 24,243 20,221 137 210 66,003 21,795 31,342 22,971 237 246 76,591 191,627 15,374 31,806 250 1,688 240,745 177,194 17,925 35,732 291 1,828 232,970 457 Standard Chartered – Annual Report 2023Financial statements33. Structured entities continued The main types of activities for which the Group utilises unconsolidated structured entities cover synthetic credit default swaps for managed investment funds (including specialised Principal Finance funds), portfolio management purposes, structured finance and asset-backed securities. These are detailed as follows: • Asset-backed securities (ABS): The Group also has investments in asset-backed securities issued by third-party sponsored and managed structured entities. For the purpose of market making and at the discretion of ABS trading desk, the Group may hold an immaterial amount of debt securities from structured entities originated by credit portfolio management. This is disclosed in the ABS column above. • Portfolio management (Group sponsored entities): For the purposes of portfolio management, the Group purchased credit protection via synthetic credit default swaps from note-issuing structured entities. 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 entities. 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 securitisation only serves to protect the Group against losses upon the occurrence of eligible 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 entities, but may hold an insignificant 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 securities to collateralise the structured entities swap obligations to the Group, and to repay the principal to investors at maturity. The structured entities reimburse the Group on actual losses incurred, through the use of the cash collateral or realisation of the collateral security. Correspondingly, the structured entities write down the notes issued by an equal amount of the losses incurred, in reverse order of seniority. All funding is committed for the life of these vehicles and the Group has no indirect exposure in respect of the vehicles’ liquidity position. 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 entities have Standard Chartered branding. • Corporate Lending: Corporate Lending comprises secured lending in the normal course of business to third parties through structured entities. • Structured finance: Structured finance comprises interests in transactions that the Group or, more usually, a customer has structured, using one or more structured entities, which provide beneficial arrangements for customers. The Group’s exposure primarily represents the provision of funding to these structures as a financial intermediary, for which it receives a lender’s return. The transactions largely relate to real estate financing and the provision of aircraft leasing and ship finance. • Principal finance Fund: The Group’s exposure to Principal Finance Funds represents committed or invested capital in unleveraged investment funds, primarily investing in pan-Asian infrastructure, real estate and private equity. • Other activities: Other activities include structured entities created to support margin financing transactions, the refinancing of existing credit and debt facilities, as well as setting up of bankruptcy remote structured entities. In the above table, the Group determined the total assets of the structured entities using following bases: • Asset Backed Securities, Principal Finance, and Other activities are based on the published total assets of the structured entities. • Lending and Structured Finance are estimated based on the Group’s loan values to the structured entities 34. Cash flow statement Adjustment for non-cash items and other adjustments included within income statement Amortisation of discounts and premiums of investment securities Interest expense on subordinated liabilities Interest expense on senior debt securities in issue Other non-cash items Pension costs for defined benefit schemes Share-based payment costs Impairment losses on loans and advances and other credit risk provisions Dividend income from subsidiaries Other impairment Gain on disposal of property, plant and equipment Loss on disposal of FVOCI and AMCST financial assets Depreciation and amortisation Fair value changes taken to Income statement Foreign Currency revaluation Profit from associates and joint ventures Total 458 Group Company 2023 $million (704) 951 2,068 (578) 61 219 508 – 1,008 (31) 209 1,071 (1,666) 299 (141) 3,274 2022 $million 237 570 794 (12) 58 199 836 – 439 (62) 190 1,186 (365) (365) (156) 2023 $million – 632 1,434 8 – – – 2022 $million – 615 696 301 – – – (4,738) (1,047) – – – – (202) 19 – – – – – – – – 3,549 (2,847) 565 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements34. Cash flow statement continued Change in operating assets Decrease/(increase) in derivative financial instruments (Increase)/decrease in debt securities, treasury bills and equity shares held at fair value through profit or loss1 (Increase)/decrease in loans and advances to banks and customers1 Net decrease/(increase) in prepayments and accrued income Net decrease/(increase) in other assets Total Group Company 2023 $million 13,061 (29,477) (787) 82 2,663 (14,458) 2022 (Restated) $million (11,873) 9,067 14,381 (1,056) 2,470 12,989 2023 $million (19) (4,068) – – 268 (3,819) 2022 $million 259 289 – – (806) (258) 1 Decrease in debt securities, treasury bills and equity shares held at fair value through profit or loss for 2022 has been restated by $(821) million and the decrease in loans and advances to banks and customers for 2022 has been restated by $14,355 million (refer note 35) Change in operating liabilities (Decrease)/increase in derivative financial instruments Net increase/(decrease) in deposits from banks, customer accounts, debt securities in issue, Hong Kong notes in circulation and short positions Increase in accruals and deferred income Net decrease in other liabilities Total Disclosures Subordinated debt (including accrued interest): Opening balance Proceeds from the issue Interest paid Repayment Foreign exchange movements Fair value changes from hedge accounting Accrued interest and others Closing balance Senior debt (including accrued interest): Opening balance Proceeds from the issue Interest paid Repayment Foreign exchange movements Fair value changes from hedge accounting Accrued interest and others Closing balance Group 2023 $million (13,629) 17,877 1,106 (3,377) 1,977 2022 $million 17,145 (9,259) 1,381 (481) 8,786 Company 2023 $million (239) 4,479 153 (1,154) 3,239 2022 $million 1,004 106 4 (2,080) (966) Group 2023 $million Company 2022 $million 2023 $million 2022 $million 13,928 18 (563) (2,160) 146 311 536 12,216 32,288 15,261 (1,145) (6,471) (21) 119 1,319 41,350 16,885 750 (667) (1,848) (338) (1,502) 648 13,928 29,904 11,902 (845) (7,838) (729) (1,051) 945 32,288 13,895 – (545) (2,160) 146 271 516 12,123 14,080 5,105 (434) (2,037) (2) 188 618 17,518 16,395 750 (619) (1,800) (337) (1,098) 604 13,895 16,981 1,500 (506) (2,980) (431) (1,014) 530 14,080 459 Standard Chartered – Annual Report 2023Financial statements35. Cash and cash equivalents Accounting policy Cash and cash equivalents includes: • Cash and balances at central banks’, except for restricted balances; and • Other balances listed in the table below, when they have less than three months’ maturity from the date of acquisition, are not subject to contractual restrictions, are subject to insignificant changes in value, are highly liquid and are held for the purpose of meeting short-term cash commitments. This includes products such as treasury bills and other eligible bills, short-term government securities, loans and advances to banks (including reverse repos), and loans and advances to customers (placements at central banks), which are held for appropriate business purposes. Cash and balances at central banks’ includes both cash held in restricted accounts and on demand or placements which are contractually due to mature overnight only. Other placements with central banks are reported as part of ‘Loans and advances to customers’. Following a reassessment of the nature and purpose of balances held with central banks, customers and banks, the Group’s cash and cash equivalents balance for 31 December 2022 and 1 January 2022 has been restated. The following balances have been identified by the Group as being cash and cash equivalents based on the criteria described above. Cash and balances at central banks Less: restricted balances Treasury bills and other eligible bills Loans and advances to banks Loans and advances to customers Investments Amounts owed by and due to subsidiary undertakings Total Group Company 2023 $million 69,905 (6,153) 5,931 11,879 25,829 244 – 107,635 2022 (Restated) $million 58,263 (9,173) 12,661 10,144 24,586 1,114 – 97,595 2023 $million 2022 $million – – – – – – – – – – – – 10,294 10,294 7,417 7,417 The Group’s cash and cash equivalents balance for 31 December 2022 has been restated to increase the balance by $8,876 million as balances with central banks that met the cash and cash equivalents definition were originally included in loans and advances to customers ($24,586 million) but not included in cash and cash equivalents and there were balances included in cash and cash equivalents related to loans and advances to banks ($10,414 million), treasury bills and other eligible bills ($5,275 million) as well as Investments ($21 million) that did not meet the cash and cash equivalents definition. The cash and cash equivalents balance at the beginning of the year for 2022 has also been restated to decrease the balance by $4,659 million. On the 2022 cash flow statement for Group, the change in operating assets has also been restated by $13,534 million as a result of these changes. 36. Related party transactions Directors and officers Details of directors’ remuneration and interests in shares are disclosed in the Directors’ remuneration report. IAS 24 Related party disclosures requires the following additional information 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 discharging managerial responsibilities (PDMR) of Standard Chartered PLC. Salaries, allowances and benefits in kind Share-based payments Bonuses paid or receivable Termination benefits Total 2023 $million 2022 $million 42 26 5 - 73 39 26 4 1 70 Transactions with directors and others At 31 December 2023, the total amounts to be disclosed under the Companies Act 2006 (the Act) and the Listing Rules of the Hong Kong Stock Exchange Limited (Hong Kong Listing Rules) about loans to directors were as follows: 2023 2022 Number $million Number $million 4 – 3 – Directors1 1 Outstanding loan balances were below $50,000 460 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements36. Related party transactions continued The loan transactions provided to the directors of Standard Chartered PLC were a connected transaction under Chapter 14A of the Hong Kong Listing Rules. It was fully exempt as financial assistance under Rule 14A.87(1), as it was provided in our ordinary and usual course of business and on normal commercial terms. As at 31 December 2023, Standard Chartered Bank had in place a charge over $68 million (31 December 2022: $89 million) of cash assets in favour of the independent trustee of its employer financed retirement benefit scheme. Other than as disclosed in the Annual Report and Accounts, there were no other transactions, arrangements or agreements outstanding for any director, connected person or officer of the Company which have to be disclosed under the Act, the rules of the UK Listing Authority or the Hong Kong Listing Rules. Details of non-revenue transactions with Temasek Holdings (Private) Limited are set out on page 220. Company The Company has received $1,469 million (31 December 2022: $1,012 million) of net interest income from its subsidiaries. The Company issues debt externally and lends proceeds to Group companies. The Company has an agreement with Standard Chartered Bank that in the event of Standard Chartered Bank defaulting on its debt coupon interest payments, where the terms of such debt requires it, the Company shall issue shares as settlement for non-payment of the coupon interest. 2023 Standard Chartered Bank (Hong Kong) Limited $million Standard Chartered Bank $million Others1 $million Standard Chartered Bank $million 2022 Standard Chartered Bank (Hong Kong) Limited $million 10,208 62 20,524 30,794 – 1,104 1,104 60 12 4,775 4,847 – – – 25 – 1,070 1,095 – – – 6,860 47 18,787 25,694 2 1,283 1,285 141 – 4,469 4,610 – 61 61 Others1 $million 255 – 526 781 – – – Assets Due from subsidiaries Derivative financial instruments Debt securities Total assets Liabilities Due to subsidiaries Derivative financial instruments Total liabilities 1 Others include Standard Chartered Bank (Singapore) Limited, Standard Chartered Holdings Limited and Standard Chartered I H Limited Associate and joint ventures The following transactions with related parties are on an arm’s length basis: Assets Loans and advances Financial Assets held at FVTPL Derivative assets Total assets Liabilities Deposits Other Liabilities Total liabilities Loan commitments and other guarantees¹ 1 The maximum loan commitments and other guarantees during the period were $113 million (2022: $164 million) 2023 $million 2022 $million – 14 12 26 959 2 961 113 20 18 38 610 19 629 164 37. Post balance sheet events On 11 January 2024, Standard Chartered PLC issued $1.5 billion 6.097 per cent Fixed Rate Reset Notes due 2035. On 19 January 2024, Standard Chartered PLC issued SGD 335 million 4.00 per cent Fixed Rate Reset Notes due 2030 A share buy-back for up to a maximum consideration of $1 billion has been declared by the directors after 31 December 2023. This will reduce the number of ordinary shares in issue by cancelling the repurchased shares. A final dividend for 2023 of 21 cents per ordinary share was declared by the directors after 31 December 2023. 461 Standard Chartered – Annual Report 2023Financial statements38. Auditor’s remuneration Auditor’s remuneration is included within other general administration expenses. The amounts paid by the Group to their principal auditor, Ernst & Young LLP and its associates (together Ernst & Young 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 provision of other services. Audit fees for the Group statutory audit Of which fees for the audit of Standard Chartered Bank Group Fees payable to EY for other services provided to the SC PLC Group: Audit of Standard Chartered PLC subsidiaries Total audit fees Audit-related assurance services Other assurance services Other non-audit services Transaction related services Total non-audit fees Total fees payable 2023 $million 2022 $million 27.8 20.6 13.4 41.2 6.0 7.0 0.8 0.3 14.1 55.3 22.2 16.3 12.8 35.0 5.5 4.3 0.1 0.3 10.2 45.2 The following is a description of the type of services included within the categories listed above: • Audit fees for the Group statutory audit are in respect of fees payable to Ernst & Young LLP for the statutory audit of the consolidated financial statements of the Group and the separate financial 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 interim financial information, reporting on regulatory returns, reporting to a regulator on client assets and extended work performed over financial information and controls authorised by those charged with governance • Other assurance services include agreed-upon-procedures in relation to statutory and regulatory filings • Transaction related services are fees payable to Ernst & Young LLP for issuing comfort letters Expenses incurred in respect of their role as auditor, were reimbursed to EY LLP $0.9 million (2022: $0.6 million). 39. Standard Chartered PLC (Company) Classification and measurement of financial instruments 2023 2022 Financial assets Derivatives Investment securities Amounts owed by subsidiary undertakings Total Derivatives held for hedging $million Amortised cost $million Non-trading mandatorily at fair value through profit or loss $million – 6,944 – 19,4251 Total $million 80 26,369 10,294 17,238 – 19,425 10,294 36,743 80 – – 80 Derivatives held for hedging $million Amortised cost $million Non-trading mandatorily at fair value through profit or loss $million 61 – – 61 – 8,423 7,417 – 15,3581 – 15,840 15,358 Total $million 61 23,781 7,417 31,259 1 Standard Chartered Bank, Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank (China) Limited and Standard Chartered Bank (Singapore) Limited issued Loss Absorbing Capacity (LAC) eligible debt securities Instruments classified as amortised cost, which include investment securities and amounts owed by subsidary undertakings, are recorded in stage 1 for the recognition of expected credit losses. Derivatives held for hedging are held at fair value and are classified as Level 2 and Level 3 while the counterparty is Standard Chartered Bank, Standard Chartered Bank (Hong Kong) Limited and external counterparties. Debt securities comprise securities held at amortised cost issued by Standard Chartered Bank and SC Ventures Holdings Limited and have a fair value equal to carrying value of $6,944 million (31 December 2022: $8,423 million). 462 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements39. Standard Chartered PLC (Company) continued In 2023 and 2022, amounts owed by subsidiary undertakings have a fair value equal to carrying value. 2023 2022 Financial liabilities Derivatives Debt securities in issue Subordinated liabilities and other borrowed funds Amounts owed to subsidiary undertakings Derivatives held for hedging $million Amortised cost $million Designated at fair value through profit or loss $million 1,104 – – 17,142 14,007 Total $million 1,104 31,149 – – – 9,248 2,697 11,945 – – – Derivatives held for hedging $million Amortised cost $million Designated at fair value through profit or loss $million 1,343 – – Total $million 1,343 – – – 13,891 10,397 24,288 11,239 2,445 13,684 2 – 2 Total 1,104 26,390 16,704 44,198 1,343 25,132 12,842 39,317 Derivatives held for hedging are held at fair value and are classified as Level 2 while the counterparty is Standard Chartered Bank and Standard Chartered Bank (Hong Kong) Limited. The fair value of debt securities in issue held at amortised cost is $17,195 million (2022: $13,611 million). The fair value of subordinated liabilities and other borrowed funds held at amortised cost is $8,717 million (2022: $10,434 million). Derivative financial instruments Derivatives Foreign exchange derivative contracts: Forward foreign exchange Currency swaps Interest rate derivative contracts: Swaps Forward rate agreements and options Credit derivative contracts Total Credit risk Derivative financial instruments Debt securities Amounts owed by subsidiary undertakings Total 2023 2022 Notional principal amounts $million 8,968 563 14,819 – 4,030 28,380 Assets $million Liabilities $million 32 – 43 – 5 80 – 35 1,069 – – 1,104 Notional principal amounts $million 9,351 574 15,423 – 3,256 28,604 Assets $million Liabilities $million 47 – – – 14 61 2023 $million 80 26,369 10,294 36,743 61 71 1,211 – – 1,343 2022 $million 61 23,781 7,417 31,259 In 2023 and 2022, amounts owed by subsidiary undertakings were neither past due nor impaired; the Company had no individually impaired loans. In 2023 and 2022, the Company had no impaired debt securities. The debt securities held by the Company are issued by Standard Chartered Bank, Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Bank (China) Limited and Standard Chartered Bank (Singapore) Limited, subsidiary undertakings with credit ratings of A+. There is no material expected credit loss on these instruments as they are Stage 1 assets, and of a high quality. 463 Standard Chartered – Annual Report 2023Financial statements39. Standard Chartered PLC (Company) continued Liquidity risk The following table analyses the residual contractual maturity of the assets and liabilities of the Company on a discounted basis: Between one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million One month or less $million Total $million 2023 32 – – – – – 1,598 504 1,530 – – – – – – 1,630 504 1,530 11 – – 278 996 1,285 345 26 – – 202 51 279 225 17 – – 135 8 160 1,370 – – 12 – – 12 – – – 30 – – 10 3,853 27 11 80 5,581 16,935 26,369 1,073 1,082 3,254 1,241 10,294 – – – – – – 60,791 60,791 – – 1,073 4,945 8,862 78,978 97,534 – – – 5 93 171 7,242 14,020 786 9,887 1,104 31,149 – – – – – – – 650 172 202 (190) 440 445 628 2022 330 7,665 1,952 16,143 7,996 11,945 18,669 44,848 (2,720) (7,281) 60,309 52,686 Between one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million One month or less $million Total $million 45 2,000 – – 719 1,250 – – 2,764 1,250 77 – – – 175 2,004 2,256 508 3 – – – 134 88 225 1,025 – – 140 – 140 – – – – 95 13 108 32 – – – – – – – – – 14 248 262 (262) – – – – 16 – 61 5,351 16,430 23,781 840 1,523 2,081 864 7,417 – 840 – 1,523 – 7,448 60,975 78,269 60,975 92,234 – – – – 5 14 19 821 75 2,090 330 14,155 858 8,043 1,343 24,288 – – – – – – – 2 – – 2 423 1,900 4,065 2,078 16,563 (2,542) (9,115) 7,339 16,242 62,027 13,684 39,740 52,494 Assets Derivative financial instruments Investment securities Amount owed by subsidiary undertakings Investments in subsidiary undertakings Other assets Total assets Liabilities Derivative financial instruments Senior debt Amount owed to subsidiary undertakings Other liabilities Subordinated liabilities and other borrowed funds Total liabilities Net liquidity gap Assets Derivative financial instruments Investment securities Amount owed by subsidiary undertakings Investments in subsidiary undertakings Total assets Liabilities Derivative financial instruments Senior debt Other debt securities in issue Amount owed to subsidiary undertakings Other liabilities Subordinated liabilities and other borrowed funds Total liabilities Net liquidity gap 464 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements39. Standard Chartered PLC (Company) continued Financial liabilities on an undiscounted basis Between one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million One month or less $million 2023 Derivative financial instruments Debt securities in issue Subordinated liabilities and other borrowed funds Other liabilities Total liabilities 11 247 1,059 5 1,322 26 57 134 91 308 17 328 34 – 379 – 398 208 – 606 – 278 556 – 834 2022 Total $million 1,104 37,473 93 171 786 8,490 16,396 11,279 410 – 2,304 13,968 18,673 – – 96 8,993 18,871 26,033 57,346 Between one month and three months $million Between three months and six months $million Between six months and nine months $million Between nine months and one year $million Between one year and two years $million Between two years and five years $million More than five years and undated $million One month or less $million Total $million Derivative financial instruments Debt securities in issue Subordinated liabilities and other borrowed funds Other liabilities Total liabilities 77 88 2,097 9 2,271 3 66 174 15 258 – 262 33 – 295 – 145 273 – 418 – 271 17 – 75 2,896 330 15,676 858 9,057 1,343 28,461 2,035 2,552 14,668 21,849 – – – 24 288 5,006 18,558 24,583 51,677 40. Related undertakings of the Group As at 31 December 2023, the Group’s interests in related undertakings in accordance with Section 409 of the Companies Act 2006 are disclosed below. Unless otherwise stated, the share capital disclosed comprises ordinary or common shares which are held by subsidiaries of the Group. Standard Chartered Bank (Hong Kong) Limited, Standard Chartered Funding (Jersey) Limited, Stanchart Nominees Limited, Standard Chartered Holdings Limited and Standard Chartered Nominees Limited are directly held subsidiaries, all other related undertakings are held indirectly. Subsidiary Undertakings Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom FinVentures UK Limited SC (Secretaries) Limited SC Transport Leasing 1 LTD 7,8 SC Transport Leasing 2 Limited7,8 SC Ventures G.P. Limited SC Ventures Holdings Limited SC Ventures Innovation Investment L.P. SCMB Overseas Limited Shoal Limited Investment Holding Company Others Leasing Business Leasing Business Investment Holding Company Investment Holding Company Investment Holding Company Investment Holding Company Digital marketplace for sustainable and “green” products. United Kingdom US$1.00 Ordinary United Kingdom £1.00 Ordinary United Kingdom £1.00 Ordinary United Kingdom £1.00 Ordinary United Kingdom £1.00 Ordinary United Kingdom US$1.00 Ordinary US$1.00 Redeemable Preference United Kingdom Limited Partnership Interest United Kingdom £0.10 Ordinary United Kingdom US$1.00 Ordinary Stanchart Nominees Limited ⁹ Standard Chartered Africa Limited 7,8 Nominee Services United Kingdom £1.00 Ordinary Investment Holding Company United Kingdom £1.00 Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 465 Standard Chartered – Annual Report 2023Financial statements 40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) Standard Chartered Bank Banking & Financial Services United Kingdom US$0.01 Non-Cumulative Irredeemable Preference US$1.00 Ordinary US$5.00 Non-Cumulative Redeemable Preference Standard Chartered Foundation1 Charity projects United Kingdom Guarantor Standard Chartered Health Trustee (UK) Limited Standard Chartered Holdings Limited⁹ Standard Chartered I H Limited Standard Chartered Leasing (UK) Limited7,8 Standard Chartered NEA Limited Trustee Services United Kingdom £1.00 Ordinary Investment Holding Company Investment Holding Company United Kingdom US$2.00 Ordinary United Kingdom US$1.00 Ordinary Leasing Business United Kingdom US$1.00 Ordinary Investment Holding Company United Kingdom US$1.00 Ordinary Standard Chartered Nominees (Private Clients UK) Limited Nominee Services United Kingdom US$1.00 Ordinary Standard Chartered Nominees Limited⁹ Nominee Services United Kingdom £1.00 Ordinary Standard Chartered Securities (Africa) Holdings Limited7,8 Investment Holding Company Standard Chartered Strategic Investments Limited7,8 Standard Chartered Trustees (UK) Limited The BW Leasing Partnership 1 LP1 The BW Leasing Partnership 2 LP1 The BW Leasing Partnership 3 LP1 The BW Leasing Partnership 4 LP1 The BW Leasing Partnership 5 LP1 Investment Holding Company Trustee Services Leasing Business Leasing Business Leasing Business Leasing Business Leasing Business United Kingdom US$1.00 Ordinary United Kingdom £1.00 Ordinary US$1.00 Ordinary United Kingdom £1.00 Ordinary United Kingdom Limited Partnership Interest United Kingdom Limited Partnership Interest United Kingdom Limited Partnership Interest United Kingdom Limited Partnership Interest United Kingdom Limited Partnership Interest The SC Transport Leasing Partnership 1 Leasing Business United Kingdom Limited Partnership Interest The SC Transport Leasing Partnership 2 Leasing Business United Kingdom Limited Partnership Interest The SC Transport Leasing Partnership 3 Leasing Business United Kingdom Limited Partnership Interest The SC Transport Leasing Partnership 4 Leasing Business United Kingdom Limited Partnership Interest The following companies have the address of 1 Poultry, London, EC2R 8EJ, United Kingdom Assembly Payments UK Ltd¹ Payment Services Provider United Kingdom US$1.00 Ordinary CurrencyFair (UK) Limited¹ Banking & Financial Services United Kingdom £1.00 Ordinary Zai Technologies Limited1 Payment Services Provider United Kingdom £1.00 Ordinary The following companies have the address of 2 More London Riverside, London , SE1 2JT, United Kingdom Bricks (C&K) LP 1 Bricks (T) LP1 Bricks (C) LP1 The following companies have the address of 1 Bartholomew Lane, London, EC2N 2AX, United Kingdom Limited Partnership interest United Kingdom Limited Partnership Interest Limited Partnership interest United Kingdom Limited Partnership Interest Limited Partnership interest United Kingdom Limited Partnership Interest 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Corrasi Covered Bonds LLP Trustee Services United Kingdom Membership Interest 100 466 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares The following companies have the address of 5th Floor, Holland House 1-4 Bury Street, London, EC3A 5AW, United Kingdom Zodia Custody Limited Custody Services United Kingdom US$1.00 Voting Ordinary US$2.70 Series A Preferred Zodia Holdings Limited Investment Holding Company United Kingdom US$1.00 A Ordinary Proportion of shares held (%) 95.1 15.911 100 The following companies have the address of 6th Floor, 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Zodia Markets (UK) Limited Zodia Markets Holdings Limited The following company has the address of Edifício Kilamba, 8º Andar Avenida 4 de Fevereiro, Marginal, Luanda, Angola Standard Chartered Bank Angola S.A. The following companies have the address of Level 22, 120 Spencer Street, Melbourne VIC 3000 VIC 3000, Australia Assembly Payments Australia Pty Ltd ¹ Zai Australia Pty Ltd1 The following company has the address of Milsons Landing, Level 5, 6A Glen Street, Milsons Point NSW NSW 2061, Australia CurrencyFair Australia Pty Ltd ¹ The following company has the address of Level 5, 345 George St, Sydney NSW 2000, Australia Banking & Financial Services Digital Venture: Holding Company for The Zodia Markets Group United Kingdom US$1.00 Ordinary 100 United Kingdom US$1.00 Ordinary 80.461 Banking & Financial Services Angola AOK8,742.05 Ordinary 60 Holding Company Australia US$ Ordinary Payment Service Provider Australia AUD0.01 Ordinary Foreign Currency conversion services. Australia AUD Ordinary 100 100 100 100 Standard Chartered Grindlays Pty Limited Investment Holding Company Australia AUD Ordinary The following companies have the address of 5th Floor Standard House Bldg, The Mall, Queens Road, PO Box 496, Gaborone, Botswana Standard Chartered Bank Botswana Limited Banking & Financial Services Botswana BWP Ordinary 75.827 Standard Chartered Bank Insurance Agency (Proprietary) Limited Standard Chartered Botswana Education Trust2 Standard Chartered Botswana Nominees (Proprietary) Limited Standard Chartered Investment Services (Proprietary) Limited The following company has the address of Avenida Brigadeiro Faria Lima, no 3.477, 6 andar, conjunto 62 - Torre Norte, Condominio Patio Victor Malzoni, CEP 04538-133, Sao Paulo, Brazil Insurance Services Botswana BWP Ordinary CSR programme. Botswana Trust Interest Nominee Services Botswana BWP Ordinary Nominee Services Botswana BWP Ordinary 100 100 100 100 Standard Chartered Representação e Participações Ltda Banking & Financial Services Brazil BRL1.00 Ordinary 100 467 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of G01-02, Wisma Haji Mohd Taha Building, , Jalan Gadong, BE4119, Brunei Darussalam Standard Chartered Securities (B) Sdn Bhd The following company has the address of Standard Chartered Bank Cameroon S.A, 1155, Boulevard de la Liberté, Douala, B.P. 1784, Cameroon Investment Management Brunei Darussalam BND1.00 Ordinary 100 Standard Chartered Bank Cameroon S.A. Banking & Financial Services Cameroon XAF10,000.00 Ordinary 100 The following company has the address of 66 Wellington Street, West, Suite 4100, Toronto Dominion Centre, Toronto ON M5K 1B7, Canada CurrencyFair (Canada) Ltd ¹ Digital Payment platform Canada CAD Common 100 The following company has the address of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104 , Cayman Islands Cerulean Investments LP The following company has the address of c/o Maples Finance Limited, PO Box 1093 GT, Queensgate House, Georgetown, Grand Cayman, Cayman Islands Investment Holding Company Cayman Islands Limited Partnership Interest 100 SCB Investment Holding Company Limited Investment Holding Company Cayman Islands US$1,000.00 Ordinary-A 99.999 The following company has the address of Room 2619, No 9, Linhe West Road, Tianhe District, Guangzhou, China Guangzhou CurrencyFair Information Technology Limited 1,3 Foreign Currency conversion services. China CNY Ordinary 100 The following company has the address of 8A, Hony Tower, 1st Financial Street, Nanshan District, Shenzen, China SC Ventures Investment Management (Shenzhen) Limited Serve as a fund manager in China China US$1.00 Ordinary 100 Business consulting services China US$ Ordinary 100 Commercial banking China CNY Ordinary 100 The following company has the address of Units 1101B (Office use only), No. 235 Tianhebei Rd.,, Tianhe District, Guangzhou City, Guangdong Province, China Standard Chartered (Guangzhou) Business Management Co., Ltd. The following company has the address of Standard Chartered Tower, 201 Century Avenue, Pudong, Shanghai, 200120, China Standard Chartered Bank (China) Limited 3 468 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares The following company has the address of Unit 802B, 803, 1001A,100 2B,1003-1005,1101-1105,, 201- 1205,1302C,1303, No. 235 Tianhe North Road, Tianhe District,, Guangzhou City, Guangdong Province, China Standard Chartered Global Business Services (Guangzhou) Co., Ltd.3 Research, development, other services China US$ Ordinary The following company has the address of No. 35, Xinhuanbei Road, Teda, Tianjin, 300457, China Standard Chartered Global Business Services Co., Ltd 3 Research, development, other services China US$ Ordinary The following company has the address of 1201 1-2, 15-16, 12/F, Unit No.1, Building No.1, No. 1 Dongsanhuan Zhong Road, Chaoyang District, Beijing, China Proportion of shares held (%) 100 100 Standard Chartered Securities (China) Limited Banking & Financial Services China CNY Ordinary 100 The following company has the address of No. 188 Yeshen Rd, 11F, A-1161 RM, Pudong New District, Shanghai, 31, 201308, China Standard Chartered Trading (Shanghai) Limited 3 wholesale of base metal and its products China US$15,000,000.00 Ordinary 100 The following company has the address of Standard Chartered Bank Cote d’Ivoire, 23 Boulevard de la République, Abidjan 17, 17 B.P. 1141, Cote d’Ivoire Standard Chartered Bank Cote d’ Ivoire SA Banking & Financial Services The following company has the address of 8 Ecowas Avenue, Banjul, Gambia Standard Chartered Bank Gambia Limited Banking & Financial Services Cote d’Ivoire XOF100,000.00 Ordinary 100 Gambia GMD1.00 Ordinary 74.852 The following company has the address of Taunusanlage 16, 60325, Frankfurt am Main, Germany Standard Chartered Bank AG The following company has the address of Standard Chartered Bank Building, 87 Independance Avenue, Ridge, ACCRA, Greater ACCRA, GA-016-4621, Ghana Banking & Financial Services Germany € Ordinary Solvezy Technology Ghana Ltd Digital Venture Ghana GHS Ordinary The following companies have the address of Standard Chartered Bank Building, No. 87, Independence Avenue, P.O. Box 768, Accra, Ghana Standard Chartered Bank Ghana PLC Banking & Financial Services Ghana GHS Ordinary GHS0.52 Non-cumulative Irredeemable Preference Standard Chartered Ghana Nominees Limited Nominee Services Ghana GHS Ordinary 100 100 69.416 87.043 100 469 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of Standard Chartered Bank Ghana Limited, 87, Independence Avenue, Post Office Box 678, Accra, Ghana Standard Chartered Wealth Management Limited Company The following company has the address of 31/F, Tower 2 Times Square, 1 Matheson St, Causeway Bay, Hong Kong Investment Management Ghana GHS Ordinary Assembly Payments HK Limited ¹ Online payment platform Hong Kong HKD Ordinary The following company has the address of Suites 1103-4 AXA Tower, Landmark East, 100 How Ming Street, Kwun Tong, Hong Kong CurrencyFair Asia Limited ¹ The following company has the address of 18/F., Standard Chartered Tower, 388 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong Foreign Currency conversion services Hong Kong HKD Ordinary Horsford Nominees Limited Nominee Services Hong Kong HKD Ordinary The following companies have the address of 15/F., Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong Marina Acacia Shipping Limited Leasing Business Marina Amethyst Shipping Limited Leasing Business Marina Angelite Shipping Limited Leasing Business Marina Beryl Shipping Limited Leasing Business Marina Emerald Shipping Limited Leasing Business Marina Flax Shipping Limited Leasing Business Marina Gloxinia Shipping Limited Leasing Business Marina Hazel Shipping Limited Marina Ilex Shipping Limited Marina Iridot Shipping Limited Leasing Business Leasing Business Leasing Business Marina Mimosa Shipping Limited Leasing Business Marina Moonstone Shipping Limited Leasing Business Marina Peridot Shipping Limited Leasing Business Marina Sapphire Shipping Limited Leasing Business Marina Tourmaline Shipping Limited Leasing Business Standard Chartered Securities (Hong Kong) Limited Corporate Finance & Advisory Services Marina Leasing Limited Leasing Business Standard Chartered Leasing Group Limited Investment Holding Company Standard Chartered Trade Support (HK) Limited Corporate Finance & Advisory Services Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong Hong Kong US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary HKD Ordinary US$ Ordinary Hong Kong US$ Ordinary Hong Kong HKD Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 The following company has the address of 39/F., Oxford House, Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Mox Bank Limited Banking & Financial Services Hong Kong HKD Ordinary 68.291 470 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares The following company has the address of 13/F Standard Chartered Bank Building, 4-4A Des Voeux Road Central, Hong Kong, Standard Chartered Asia Limited The following company has the address of 32/F., 4-4A Des Voeux Road, Central , Hong Kong Investment Holding Company Hong Kong HKD Deferred HKD Ordinary Standard Chartered Bank (Hong Kong) Limited⁹ Banking & Financial Services Hong Kong HKD Ordinary-A HKD Ordinary-B US$ Ordinary-C US$ Ordinary-D The following company has the address of 14th Floor, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong Standard Chartered PF Real Estate (Hong Kong) Limited The following company has the address of 13/F Standard Chartered Bank Building, 4-4A Des Voeux Road Central, Hong Kong Ultimate Holding Company Hong Kong US$ Ordinary Proportion of shares held (%) 100 100 100 100 100 100 100 Standard Chartered Private Equity Limited Investment Holding Company Hong Kong HKD Ordinary 100 The following companies have the address of 14/F, Standard Chartered Bank Building, 4-4A Des Voeux Road , Central, Hong Kong Standard Chartered Trust (Hong Kong) Limited Standard Chartered Trustee (Hong Kong) Limited The following company has the address of 5/F, Manulife Place, 348 Kwun Tong Road, Kowloon, Hong Kong Investment Management Hong Kong HKD Ordinary Trustee Services Hong Kong HKD Ordinary Zodia Custody (Hong Kong) Limited Custody Services Hong Kong US$0.01 Ordinary The following company has the address of 2 Floor Sabari Complex 24 Field Marshal, Capriappa RD Shanthala Nagar, Ashok Nagar, Bangalore, Karnataka, 560025, India 100 100 100 Assembly Payments India Private Limited ¹ Activities auxiliary to financial intermediation India INR100.00 Ordinary 100 The following companies have the address of Ground Floor, Crescenzo Building, G Block, C 38/39 , Bandra Kurla Complex, Bandra (East) , Mumbai , Maharashtra , 400051, India St Helen’s Nominees India Private Limited Standard Chartered Private Equity Advisory (India) Private Limited The following company has the address of Vaishnavi Serenity, First Floor, No. 112, Koramangala Industrial Area, 5th Block, Koramangala, Bangalore, Karnataka, 560095, India Standard Chartered (India) Modeling and Analytics Centre Private Limited Nominee Services Support Services India India INR10.00 Equity INR1,000.00 Equity 100 100 Support Services India INR10.00 Equity 100 471 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) 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 Limited The following company has the address of 90 M.G.Road, II Floor, Fort, Mumbai, Maharashtra, 400001, India Standard Chartered Finance Private Limited The following company has the address of 1st Floor, Europe Building, No.1, Haddows Road, Nungambakkam, Chennai, 600 006, India Standard Chartered Global Business Services Private Limited 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-Division, Ward No. 150, Bengaluru, 560102, India Standard Chartered Research and Technology India Private Limited The following company has the address of 2nd Floor, 23-25 M.G. Road, Fort, Mumbai 400 001, India Banking & Financial Services India INR10.00 Equity 100 Support Services India INR10.00 Ordinary 98.683 Offshore Support Services India INR10.00 Equity 100 Support Services India INR10.00 Compulsory Convertible Cumulative Preference INR10.00 Equity Class - A 100 100 Standard Chartered Securities (India) Limited Banking & Financial Services India INR10.00 Equity 100 The following company has the address of B001, Metrotech Forest View, Sy.No, 67/5 BSK 6th Stage, Thalaghattapura Bengaluru 560062, Karnataka, India SCV Research and Development Pvt. Ltd. Others India INR 10.00 Ordinary 100 The following company has the address of The Icon Business Park Blok P Nomor 03, RT 03/RW 09Sampora, Kec, Cisauk, Kabupaten Tangerang, Banten, 15345, Indonesia PT Labamu Sejahtera Indonesia Others Indonesia IDR10,000.00 Ordinary 100 The following companies have the address of 91 Pembroke Road, Dublin 4, Ballsbridge, Dublin, DO4 EC42, Ireland CurrencyFair (Canada) Limited¹ CurrencyFair Limited1,10 Digital Payment platform Ireland FX transfer services Ireland CurrencyFair Nominees Limited ¹ Nominee company Ireland €1.00 Ordinary €0.001 A Ordinary €0.001 Ordinary €1.00 Ordinary 100 100 27.951 100 The following company has the address of 27 Fitzwilliam Street, Dublin, D02 TP23, Ireland Zodia Custody (Ireland) Limited Custody Services Ireland US$1.00 Ordinary 100 472 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of 32 Molesworth Street, Dublin 2, D02Y512, Ireland Zodia Markets (Ireland) Limited The following companies have the address of 1st Floor, Goldie House, 1-4 Goldie Terrace, Upper Church Street, Douglas, IM1 1EB, Isle of Man Banking & Financial Services Ireland US$1.00 Ordinary 100 Standard Chartered Assurance Limited Insurance Services Isle of Man US$1.00 Ordinary Standard Chartered Isle of Man Limited5 Insurance & Reinsurance Company Isle of Man US$1.00 Ordinary US$1.00 Redeemable Preference The following company has the address of 21/F, Sanno Park Tower, 2-11-1 Nagatacho, Chiyoda-ku, Tokyo, 100-6155, Japan Standard Chartered Securities (Japan) Limited Banking & Financial Services Japan JPY Ordinary The following company has the address of 15 Castle Street, St Helier, JE4 8PT, Jersey SCB Nominees (CI) Limited Nominee Services Jersey US$1.00 Ordinary The following company has the address of IFC 5, St Helier, JE1 1ST, Jersey Standard Chartered Funding (Jersey) Limited 5,⁹ Investment Holding Company Jersey £1.00 Ordinary The following companies have the address of Standard Chartered@ Chiromo, 48 Westlands Road, P. O. Box 30003 - 00100, Nairobi , Kenya Standard Chartered Bancassurance Intermediary Limited Insurance Services Standard Chartered Bank Kenya Limited Banking & Financial Services Kenya Kenya KES100.00 Ordinary KES5.00 Ordinary KES5.00 Preference Merchant Banking Kenya KES20.00 Ordinary Investment services Kenya KES20.00 Ordinary Standard Chartered Financial Services Limited Standard Chartered Investment Services Limited Standard Chartered Kenya Nominees Limited1 Nominee Services Standard Chartered Securities (Kenya) Limited Corporate Finance & Advisory Services Solvezy Technology Kenya Limited Digital Venture Tawi Fresh Kenya Limited Digital Marketplace, Ecommerce The following company has the address of 47, Jong-ro, Jongno-gu, Seoul, 110-702, Korea, Republic of Standard Chartered Bank Korea Limited Banking & Financial Kenya Kenya Kenya Kenya KES20.00 Ordinary KES10.00 Ordinary KES1,000.00 Ordinary KES1,000.00 Ordinary 100 100 100 100 100 100 100 74.318 100 100 100 100 100 100 100 Services Korea, Republic of KRW5,000.00 Ordinary 100 The following company has the address of 2F, 47, Jong-ro, Jongno-gu, Seoul, Korea, Republic of Standard Chartered Securities Korea Co., Ltd Asset Management Korea, Republic of KRW5,000.00 Ordinary 100 473 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of Atrium Building, Maarad Street, 3rd Floor, P.O. Box 11-4081 Raid El Solh, Beirut Central District, Lebanon Standard Chartered Metropolitan Holdings SAL Investment Holding Company Lebanon US$10.00 Ordinary A 100 The following company has the address of Level 13, Menara 1 Sentrum 201, Jalan Tun Sambanthan, Brickfields, 50470 Kuala Lumpur, Malaysia Assembly Payments Malaysia Sdn. Bhd. ¹ Other financial service activities Malaysia RM Ordinary 100 The following companies have the address of Level 25, Equatorial Plaza, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Cartaban (Malaya) Nominees Sdn Berhad Nominee Services Cartaban Nominees (Asing) Sdn Bhd Nominee Services Malaysia Malaysia RM Ordinary RM Ordinary Nominee Services Malaysia RM Ordinary Cartaban Nominees (Tempatan) Sdn Bhd Golden Maestro Sdn Bhd Price Solutions Sdn Bhd Investment Holding Company Direct Sales/Collection Services SCBMB Trustee Berhad Trustee Services Standard Chartered Bank Malaysia Berhad Banking & Financial Services Malaysia RM Ordinary Malaysia Malaysia Malaysia RM Ordinary RM Ordinary RM Irredeemable Convertible Preference RM Ordinary Standard Chartered Saadiq Berhad Banking & Financial Services Malaysia RM Ordinary The following companies have the address of TMF Trust Labuan Limited, Brumby Centre, Lot 42, Jalan Muhibbah, 87000 Labuan F.T., Malaysia Marina Morganite Shipping Limited6 Marina Moss Shipping Limited6 Marina Tanzanite Shipping Limited6 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 Kerinchi , 59200 Kuala Lumpur, Wilayah Persekutuan, Malaysia Resolution Alliance Sdn Bhd The following company has the address of 12th Floor, Menara Symphony , No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya , Selangor, Malaysia Solv Sdn. Bhd. The following company has the address of Level 1, Wisma Standard Chartered, Jalan Teknologi 8, , Taman Teknologi Malaysia, Bukit Jalil, , 57000 Kuala Lumpur, Wilayah Persekutuan, Malaysia Standard Chartered Global Business Services Sdn Bhd 474 Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Malaysia US$ Ordinary Malaysia US$ Ordinary Malaysia US$ Ordinary Investment Holding Company Malaysia Ordinary 91 B2B digital platform offering financial services Malaysia RM5.00 Ordinary 100 Offshore Support Services Malaysia RM Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following companies have the address of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands Marina Angelica Shipping Limited6 Marina Aventurine Shipping Limited6 Marina Citrine Shipping Limited6 Marina Dahlia Shipping Limited6 Marina Dittany Shipping Limited6 Marina Lilac Shipping Limited6 Marina Lolite Shipping Limited6 Marina Obsidian Shipping Limited6 Marina Quartz Shipping Limited6 Marina Remora Shipping Limited6 Marina Turquoise Shipping Limited6 Marina Zircon Shipping Limited6 The following company has the address of 6th Floor, Standard Chartered Tower , 19, Bank Street, Cybercity, Ebene, 72201, Mauritius Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary Marshall Islands USD1.00 Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 Standard Chartered Bank (Mauritius) Limited Banking & Financial Services Mauritius Ordinary No Par Value 100 The following companies have the address of c/o Ocorian Corporate Services (Mauritius) Ltd, 6th Floor, Tower A, 1 Cybercity, Ebene, 72201, Mauritius Standard Chartered Private Equity (Mauritius) II Limited Standard Chartered Private Equity (Mauritius) Limited Standard Chartered Private Equity (Mauritius) lll Limited The following company has the address of Mondial Management Services Ltd, Unit 2L, 2nd Floor Standard Chartered Tower, 19 Cybercity, Ebene, Mauritius Subcontinental Equities Limited The following company has the address of IQEQ Corporate Services (Mauritius) Ltd, 33, Edith Cavell Street, Port Louis, 11324, Mauritius Actis Treit Holdings (Mauritius) Limited1 Investment Management Mauritius US$1.00 Ordinary Investment Management Mauritius US$1.00 Ordinary Investment Management Mauritius US$1.00 Ordinary 100 100 100 Investment Holding Company Mauritius US$1.00 Ordinary 100 Investment Holding Company Mauritius Class A $1.00 Ordinary 62.001 475 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of Standard Chartered Bank Nepal Limited, Madan Bhandari Marg. Ward No.31, Kathmandu Metropolitan City, Kathmandu District, Bagmati Province, Kathmandu, 44600, Nepal Standard Chartered Bank Nepal Limited Banking & Financial Services Nepal NPR100.00 Ordinary 70.21 The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Standard Chartered Holdings (Africa) B.V.5 Standard Chartered Holdings (Asia Pacific) B.V.5 Standard Chartered Holdings (International) B.V.5 Standard Chartered MB Holdings B.V.5 The following company has the address of PromisePay, 4 All good Place, Rototuna North, Hamilton, 3210, New Zealand PromisePay Limited1 The following companies have the address of 142, Ahmadu Bello Way, Victoria Island, Lagos, 101241, Nigeria Holding Company Netherlands €4.50 Ordinary Holding Company Netherlands €4.50 Ordinary Holding Company Holding Company Netherlands Netherlands €4.50 Ordinary €4.50 Ordinary Payment Services Provider New Zealand NZD Ordinary Standard Chartered Bank Nigeria Limited Banking & Financial Services Nigeria NGN1.00 B Redeemable Preference NGN1.00 Irredeemable Non Cumulative Preference NGN1.00 Ordinary Standard Chartered Capital & Advisory Nigeria Limited Corporate Finance & Advisory Services Nigeria NGN1.00 Ordinary Custody Services Nigeria NGN1.00 Ordinary 100 100 100 100 100 100 100 100 100 100 Standard Chartered Nominees (Nigeria) Limited The following company has the address of 3rd Floor Main SCB Building, I.I Chundrigar Road, Karachi, Sindh, 74000, Pakistan Price Solution Pakistan (Private) Limited The following company has the address of P.O. Box No. 5556, I.I. Chundrigar Road , Karachi , 74000, Pakistan Banking & Financial Services Pakistan PKR10.00 Ordinary 100 Standard Chartered Bank (Pakistan) Limited Banking & Financial Services Pakistan PKR10.00 Ordinary 98.986 The following company has the address of 8th Floor, Makati Sky Plaza Building 6788, Ayala Avenue San Lorenzo, City of Makati, Fourth District, National Capi, 1223, Philippines Standard Chartered Group Services, Manila Incorporated The following company has the address of Rondo Ignacego Daszyńskiego 2B, 00-843, Warsaw, Poland Standard Chartered Global Business Services spółka z ograniczoną odpowiedzialnością 476 Offshore Support Services Philippines PHP1.00 Ordinary 100 Offshore Support Services Poland PLN50.00 Ordinary 100 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of Al Faisaliah Office Tower Floor No 7 (T07D) , King Fahad Highway, Olaya District, Riyadh P.O box 295522 , Riyadh, 11351 , Saudi Arabia Standard Chartered Capital (Saudi Arabia) The following company has the address of 9 & 11, Lightfoot Boston Street, Freetown, Sierra Leone Custody Services Saudi Arabia SAR10.00 Ordinary 100 Standard Chartered Bank Sierra Leone Limited Banking & Financial Services Sierra Leone SLL1.00 Ordinary 80.656 The following company has the address of 9 Raffles Place, #27-00 Republic Plaza, 048619, Singapore Actis Treit Holdings No.1 (Singapore) Private Limited1 Actis Treit Holdings No.2 (Singapore) Private Limited1 Investment Holding Company Investment Holding Company Singapore SGD Ordinary Singapore SGD Ordinary The following companies have the address of 38 Beach Road, #29-11 South Beach Tower, 189767, Singapore Assembly Payments Pte. Ltd. ¹ Assembly Payments SGP Pte. Ltd. ¹ The following companies have the address of Raffles Place, #26-01 Republic Plaza, Singapore , 048619, Singapore Investment Holding Company Transaction/Payment Processing Services Singapore US$ Ordinary US$ Preference Singapore SGD Ordinary Audax Financial Technology Pte. Ltd Support Services Autumn Life Pte. Ltd. CashEnable Pte. Ltd. Huma.Eco Pte. Ltd. Letsbloom Pte. Ltd. Libeara (Singapore) Pte. Ltd. Libeara Pte. Ltd. Pegasus Dealmaking Pte. Ltd. The following company has the address of 1 Robinson Road, #17-00, AIA Tower, 048542, Singapore CurrencyFair (Singapore) Pte.Ltd ¹ The following companies have the address of 9 Raffles Place, #26-01 Republic Plaza, 048619 , Singapore Support Services Digital Venture: Financial Services Support Services Others Digital Venture: Investment Services Digital Venture: Investment Services Mergers and Acquisitions (M&A) marketplace Singapore Singapore Singapore Singapore Singapore US$ Ordinary-A US$ Ordinary-A US$ Ordinary-A US$ Ordinary US$ Ordinary-A Singapore US$ Ordinary Singapore US$ Ordinary Singapore US$ Ordinary Foreign Currency conversion services. Singapore SGD Ordinary SCV Research and Development Pte. Ltd. Others Zodia Custody (Singapore) Limited Custody Services Singapore Singapore US$ Ordinary-A US$ Ordinary Inveco Pte. Ltd. Venture: Carbon Credit Marketplace Singapore US$1.00 Ordinary The following companies have the address of 8 Marina Boulevard, Level 26, Marina Bay Financial Centre, Tower 1, 018981, Singapore Marina Aquata Shipping Pte. Ltd. Leasing Business Singapore US$ Ordinary 100 100 100 100 100 100 96.623 100 100 100 100 100 100 100 100 100 100 100 477 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Marina Aruana Shipping Pte. Ltd. Leasing Business Singapore Marina Cobia Shipping Pte. Ltd. Leasing Business Singapore Marina Fatmarini Shipping Pte. Ltd. Leasing Business Marina Frabandari Shipping Pte. Ltd. Leasing Business Marina Gerbera Shipping Pte. Ltd. Leasing Business Marina Opah Shipping Pte. Ltd. Leasing Business Singapore Singapore Singapore Singapore Marina Partawati Shipping Pte. Ltd. Leasing Business Singapore SGD Ordinary US$ Ordinary SGD Ordinary US$ Ordinary US$ Ordinary US$ Ordinary US$ Ordinary SGD Ordinary US$ Ordinary US$ Ordinary The following company has the address of Tricor WP Corporate Services Pte Ltd, 80 Robinson Road #02-00, 068898, Singapore Solv-India Pte. Ltd. Investment Holding Entity Singapore US$ Ordinary The following companies have the address of 9 Raffles Place, #26-01 Republic Plaza , Singapore , 048619, Singapore Power2SME Pte. Ltd. Investment Holding Entity Singapore SCV Master Holding Company Pte. Ltd. Investment Holding Entity Singapore US$ Ordinary US$ Ordinary The following company has the address of 7 Changi Business Park Crescent, #03-00 Standard Chartered @ Changi, 486028, Singapore Raffles Nominees (Pte.) Limited Nominee Services Singapore SGD Ordinary The following companies have the address of 8 Marina Boulevard, #27-01 Marina Bay Financial Centre Tower 1, 018981, Singapore SCTS Capital Pte. Ltd SCTS Management Pte. Ltd. Nominee Services Nominee Services Standard Chartered Bank (Singapore) Limited Banking & Financial Services Singapore Singapore Singapore Standard Chartered Holdings (Singapore) Private Limited Investment Holding Company Singapore SGD Ordinary SGD Ordinary SGD Non-cumulative Class C Tier-1 preference SGD Non-cumulative Class D Tier-1 Preference SGD Ordinary-A US$ Non-cumulative Class B Tier-1 Preference US$ Ordinary-A US$ Ordinary-B US$ Ordinary-C SGD Ordinary US$ Ordinary Nominee Services Singapore SGD Ordinary Trustee Services Singapore SGD Ordinary Proportion of shares held (%) 100 100 100 100 100 100 100 100 100 100 100 90.6 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Investment Management Singapore USD Ordinary 50 Standard Chartered Nominees (Singapore) Pte Ltd Standard Chartered Trust (Singapore) Limited 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. Limited 478 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares The following companies have the address of 9 Raffles Place, #26-01 Republic Plaza, 048619, Singapore Standard Chartered Private Equity (Singapore) Pte. Ltd Investment Holding Company Singapore US$ Ordinary Standard Chartered Real Estate Investment Holdings (Singapore) Private Limited The following company has the address of 77 Robinson Road, #25-00 Robinson 77, 068896, Singapore Trust Bank Singapore Limited The following companies have the address of 2nd Floor, 115 West Street, Sandton, Johannesburg, 2196, South Africa Investment Holding Company Singapore US$ Ordinary Banking & Financial Services Singapore SGD Ordinary CMB Nominees (RF) PTY Limited Nominee Services South Africa ZAR1.00 Ordinary Standard Chartered Nominees South Africa Proprietary Limited (RF) The following company has the address of 6 Fort Street, PO 785848, , Birnam, Sandton, 2196 2146, South Africa Promisepay (PTY) Ltd1 The following company has the address of 1F, No.177 & 3F-6F, 17F-19F, No.179, Liaoning Street, Zhongshan Dist., Taipei, 104, Taiwan Nominee Services South Africa ZAR Ordinary Payment Services Provider South Africa ZAR1.00 Ordinary Proportion of shares held (%) 100 100 60 100 100 100 Standard Chartered Bank (Taiwan) Limited Banking & Financial Services Taiwan (Province of China) TWD10.00 Ordinary 100 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 Limited Banking & Financial Services Standard Chartered Tanzania Nominees Limited Nominee Services Tanzania, United Republic of Tanzania, United Republic of TZS1,000.00 Ordinary TZS1,000.00 Preference TZS1,000.00 Ordinary 100 100 100 The following company has the address of No. 140, 11th, 12th and 14th Floor, Wireless Road, Lumpini, Patumwan, Bangkok, 10330, Thailand Standard Chartered Bank (Thai) Public Company Limited Banking & Financial Services Thailand THB10.00 Ordinary 99.871 The following company has the address of Buyukdere Cad. Yapi Kredi Plaza C Blok, Kat 15, Levent, Istanbul, 34330, Turkey Standard Chartered Yatirim Bankasi Turk Anonim Sirketi Banking & Financial Services Turkey TRL0.10 Ordinary 100 The following company has the address of Standard Chartered Bank Bldg, 5 Speke Road, PO Box 7111, Kampala, Uganda Standard Chartered Bank Uganda Limited Banking & Financial Services Uganda UGS1,000.00 Ordinary 100 479 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of 14 Mackinnon Road, Nakasero, Kampala, 141769, Uganda Furaha Finserve Uganda Limited The following company has the address of EX-26, Ground Floor, Bldg 16-Co Work, Dubai Internet City, Dubai, United Arab Emirates Appro Onboarding Solutions FZ-LLC The following company has the address of Suites 508, 509, 15th Floor, Al Sarab Tower, Adgm Square, Al Maryah Island, Abu Dhabi, United Arab Emirates Financial Inclusion Technologies Ltd The following company has the address of Unit GV-00-10-07-OF-02, Level 7, Gate Village Building 10, Dubai International Financial Centre, Dubai, United Arab Emirates Banking & Financial Services Uganda US$1.00 Ordinary 20 IT solutions provider and support service provider. United Arab Emirates AED1,000.00 Ordinary 100 Digital wallet and technology payments platform United Arab Emirates US$ Ordinary-A 100 Furaha Holding Ltd Micro-lending Company United Arab Emirates US$1.00 Ordinary 100 The following company has the address of Standard Chartered Bank, 7th Floor, Building One, Gate Precinct, DIFC, PO Box 999, Dubai, United Arab Emirates Global Digital Asset Holdings Limited The following company has the address of Part of Level 15, Standard Chartered Bank Building, Plot 8, Burj Downtown, Dubai, United Arab Emirates myZoi Financial Inclusion Technologies LLC The following company has the address of 25 Taylor St, San Francisco CA 94102-3916, United States Assembly Escrow Inc1 The following company has the address of 251 Little Falls Drive, Wilmington DE 19808, United States Investment vehicle - Strategic investment United Arab Emirates US$ Ordinary 100 Digital Venture: Activity auxiliary to financial intermediation United Arab Emirates AED1.00 Ordinary 100 Payment Services Provider United States US$0.0001 Ordinary 100 CurrencyFair (USA) Inc¹ Digital Payment platform United States US$1.00 Uncertificated 100 The following company has the address of 1095 Avenue of Americas, New York City NY 10036, United States Standard Chartered Bank International (Americas) Limited Banking & Financial Services United States US$1,000.00 Ordinary 100 The following companies have the address of Corporation Trust Center, 1209 Orange Street, Wilmington DE 19801, United States Standard Chartered Holdings Inc. Investment Holding Company United States US$100.00 Common Standard Chartered Securities (North America) LLC Banking & Financial Services United States Membership Interest 100 100 480 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Subsidiary undertakings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of 50 Fremont Street, San Francisco CA 94105, United States Standard Chartered Overseas Investment, Inc. The following company has the address of C/O Corporation Service Company, 251 Little Falls Drive, Wilmington DE 19808, United States Standard Chartered Trade Services Corporation The following company has the address of Level 3, #CP1.L01 and #CP2.L01, Capital Place, 29 Lieu Giai Street, Ngoc Khanh Ward, Ba Dinh District, Ha Noi, 10000, Vietnam Ultimate Holding Company United States US$10.00 Ordinary 100 Trade Services United States US$0.01 Common 100 Standard Chartered Bank (Vietnam) Limited Banking & Financial Services Vietnam VND Charter Capital 100 The following company has the address of The Company’s Registered Office, Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, Virgin Islands, British Sky Harmony Holdings Limited6 The following companies have the address of Stand No. 4642, Corner of Mwaimwena Road and Addis Ababa Dri, Lusaka, 10101, Zambia Standard Chartered Bank Zambia Plc Standard Chartered Zambia Securities Services Nominees Limited The following companies have the address of Africa Unity Square Building, 68 Nelson Mandela Avenue, Harare, Zimbabwe Africa Enterprise Network Trust2 Investment Holding Company Virgin Islands, British USD1.00 Ordinary 100 Banking & Financial Services Zambia ZMW0.25 Ordinary Nominee Services Zambia ZMW0.0203 Ordinary Investment Holding Company Zimbabwe Trust Interest 90 100 100 100 100 Standard Chartered Bank Zimbabwe Limited Banking & Financial Services Zimbabwe US$1.00 Ordinary Standard Chartered Nominees Zimbabwe (Private) Limited Ultimate Holding Company Zimbabwe US$2.00 Ordinary 1. The Group has determined that these undertakings are excluded from being consolidated into the Groups accounts, and do not meet the definition of a Subsidiary under IFRS. See note 32 for the consolidation policy and disclosure of the undertaking. 2. No share capital by virtue of being a trust 3. Limited liability company 4. The Group has determined the prinicpal place of operation to be Ireland 5. The Group has determined the prinicpal place of operation to be United Kingdom 6. The Group has determined the prinicpal place of operation to be Hong Kong 7. Company is exempt from the requirements of the companies Act relating to the audit of individual accounts by virtue of S479A 8. Company numbers of the subsidiaries taking an audit exemption are SC Transport Leasing 1 LTD 06787116, SC Transport Leasing 2 Limited 06787090, Standard Chartered Leasing (UK) Limited 05513184, Standard Chartered Africa Limited 00002877, Standard Chartered Securities (Africa) Holdings Limited 05843604 and Standard Chartered Strategic Investments Limited 01388304 9 Directly held related undertaking 10 Group’s ultimate ownership for CurrencyFair entities is 43.422% 481 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Joint ventures Name and registered address Activity Place of incorporation Description of shares The following company has the address of Tricor WP Corporate Services Pte Ltd, 80 Robinson Road #02-00, 068898, Singapore Olea Global Pte. Ltd. Associates Provision of trade finance products and services. Singapore $ Ordinary $ Preference Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) 41 100 Proportion of shares held (%) The following company has the address of 41 Luke Street, London, EC2A 4DP, United Kingdom Fintech for International Development Ltd The following company has the address of Bohai Bank Building, No.218 Hai He Dong Lu, Hedong District, Tianjin, China, 300012, China China Bohai Bank Co., Ltd. The following company has the address of 17/F, 100, Gongpyeong-dong, Jongno-gu, Seoul, Korea, Republic of Financial intermediation United Kingdom $0.0001 Ordinary-A 58.9 General commercial banking businesses China CNY1.00 Ordinary 16.263 Ascenta IV Investment making Korea, Republic of Partnership Interest 39.100 The following company has the address of 1 Raffles Quay, #23-01, One Raffles Quay, 048583, Singapore Clifford Capital Holdings Pte. Ltd. The following company has the address of 10 Marina Boulevard #08-08, Marina Bay, Financial Centre, 018983, Singapore Investment Holding Company Singapore $1.00 Ordinary Verified Impact Exchange Holdings Pte. Ltd Exchange offering liquidity of trade Singapore SGD Ordinary The following company has the address of Victoria House, State House Avenue, Victoria, MAHE, Seychelles Seychelles International Mercantile Banking Corporation Limited. The following company has the address of Gervinusstrasse 17, 60322, Frankfurt am Main, Hesse, Germany SWIAT GmbH The following company has the address of Izumi Garden Tower 19F, 1-6-1 Roppongi, Minato-ku, Tokyo, Japan Commercial Bank Seychelles SCR1,000.00 Ordinary Digital Venture: Financial Services Germany €1.00 Ordinary 9.9 15 22 30 SBI Zodia Custody Co. Ltd Others Japan JPY50,000.00 Ordinary 100 The following company has the address of 60B, Orchard Road, #06-18, Tower 2, The Atrium @ Orchard, 238891, Singapore Partior Holdings Pte. Ltd. Financial Services Singapore SGD1.00 Ordinary SGD1.00 Series A Preferred 24.999 25.014 482 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements40. Related undertakings of the Group continued Significant investment holdings and other related undertakings Name and registered address Activity Place of incorporation Description 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) Limited The following company has the address of Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman , KY1- 9005, Cayman Islands Liquidation member (Bond holders) United Kingdom £1.00 Ordinary 20 ATSC Cayman Holdco Limited Investment holding Cayman Islands $0.01 Ordinary-A The following companies have the address of Unit 605-07, 6/F Wing On Centre, 111 Connaught Road, Central, Sheung Wan, Hong Kong Actis Temple Stay Holdings (HK) Limited Investment holding Hong Kong Actis Rivendell Holdings (HK) Limited Investment holding Hong Kong The following company has the address of 1221 A, Devika Tower, 12th Floor, , 6 Nehru Place, New Delhi 110019, New Delhi, 110019, India $0.01 Ordinary-B $ Class A Ordinary $ Class B Ordinary $ Class A Ordinary $ Class B Ordinary 5.272 100 39.689 39.689 39.671 39.671 Mikado Realtors Private Limited Other business activities India INR10.00 Ordinary 26 The following company has the address of 4thFloor, 274, Chitalia House, Dr. Cawasji Hormusji Road, Dhobi Talao, Mumbai City, Maharashtra, India 400 002, Mumbai, 400 002, India Industrial Minerals and Chemical Co. Pvt. Ltd The following company has the address of 17F, 47, Jong-ro, Jongno-gu, (17F, 100, Gongpyeong-dong, Jongno-gu), Seoul, Korea, Republic of Minerals and Chemical India INR100.00 Ordinary Ascenta III Investment making Korea KRW1.00 Class B Equity Interest 26 31 The following company has the address of 3 Jalan Pisang, c/o Watiga Trust Ltd, 199070 Singapore SCIAIGF Liquidating Trust1 The following company has the address of 251 Little Falls Drive, Wilmington, New Castle DE 19808, United States Investment Holding Company Singapore Trust Interest 43.96 Paxata, Inc. Data Analytics United States US$0.0001 Series C2 Preferred Stock US$0.0001 Series C3 Preferred Stock 40.74 8.908 1. The Group has determined the prinicpal place of operation to be Singapore 483 Standard Chartered – Annual Report 2023Financial statements 40. Related undertakings of the Group continued In liquidation Subsidiary Undertakings Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following companies have the address of C/O Teneo Financial Advisory Limited, The Colmore Building, 20 Colmore Circus, Queensway, Birmingham, B4 6AT, United Kingdom Standard Chartered Masterbrand Licensing Limited To manage intellectual property for Group 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 Limited Nominees One Limited Nominees Two Limited Songbird Limited Standard Chartered Secretaries (Guernsey) Limited Standard Chartered Trust (Guernsey) Limited The following company has the address of 30 Rue Schrobilgen, 2526, Luxembourg Fiduciary Services Fiduciary Services Fiduciary Services Fiduciary Services Guernsey Guernsey Guernsey Guernsey £1.00 Ordinary shares £1.00 Ordinary shares £1.00 Ordinary shares £1.00 Ordinary shares Fiduciary Services Guernsey £1.00 Ordinary shares Fiduciary Services Guernsey £1.00 Ordinary shares 100 100 100 100 100 100 Standard Chartered Financial Services (Luxembourg) S.A. Corporate Finance & Advisory Services Luxembourg €25.00 Ordinary shares 100 The following company has the address of Jiron Huascar 2055, Jesus Maria, Lima 15072, Peru Banco Standard Chartered en Liquidacion The following company has the address of Luis Alberto de Herrera 1248, Torre II, Piso 11, Esc. 1111, Uruguay Banking services Peru $75.133 Ordinary shares 100 Standard Chartered Uruguay Representacion S.A. Financial counselling services Uruguay UYU1.00 Ordinary shares 100 The following company has the address of 555 Washington Av, St Louis, MO, United States of America, 63101 Assembly Payments Inc1 The following companies have the address of C/O Teneo Financial Advisory Limited, The Colmore Building, 20 Colmore Circus, Queensway, Birmingham, B4 6AT, United Kingdom Standard Chartered Leasing (UK) 3 Limited Payment services provider United States $0.0001 Ordinary 100 Leasing Business United Kingdom $1.00 Ordinary shares 100 484 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements 40. Related undertakings of the Group continued Liquidated/dissolved/sold Subsidiary/Associate undertakings and Significant investment holdings Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following companies have the address of C/O Teneo Financial Advisory Limited, 156 Great Charles Street, Queensway, Birmingham, West Midlands, B3 3HN, United Kingdom Standard Chartered Leasing (UK) 2 Limited The following companies have the address of C/o WALKERS CORPORATE LIMITED, 190 Elgin Avenue George Town Grand Cayman KY1-9008 , Cayman Islands Leasing Business United Kingdom $1.00 Ordinary shares 100 Sirat Holdings Limited Investment Holding Entity Cayman Islands $0.01 Ordinary shares 100 The following companies have the address of TMF Trust Labuan Limited, Brumby Centre, Lot 42,, Jalan Muhibbah, 87000 Labuan F.T., Malaysia Pembroke Leasing (Labuan) 3 Berhad Leasing Business Malaysia $ Ordinary shares 100 The following companies have the address of c/o Ocorian Corporate Services (Mauritius) Ltd, 6th Floor, Tower A, 1 Cybercity, Ebene, 72201, Mauritius Standard Chartered Financial Holdings The following companies have the address of 142, Ahmadu Bello Way, Victoria Island, Lagos, 101241, Nigeria Cherroots Nigeria Limited The following companies have the address of 80 Robinson Road, #02-00, 068898, Singapore Investment Holding Company Investment Holding Company Mauritius $1.00 Ordinary shares 100 Nigeria NGN1.00 Ordinary Shares 100 Cardspal Pte. Ltd. Support Services Singapore $ Ordinary shares 100 The following companies have the address of Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, Virgin Islands, British Sky Favour Investments Limited The following companies have the address of 14th Floor, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong. Kozagi Limited The following company has the address of Hoogoorddreef 15, 1101 BA, Amsterdam, Netherlands Investment Holding Company Investment Holding Company Virgin Islands, British $1.00 Ordinary shares 100 Hong Kong HKD Ordinary shares 100 Pembroke Holland B.V. Leasing Business Netherlands €450.00 Ordinary shares 100 485 Standard Chartered – Annual Report 2023Financial statements40. Related undertakings of the Group continued Subsidiary/Associate undertakings and Significant investment holdings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following companies have the address of 32 Molesworth Street, Dublin 2, D02Y512, Ireland Inishbrophy Leasing Limited Inishcannon Leasing Limited Inishcrean Leasing Limited Inishdawson Leasing Limited Inisherkin Leasing Limited Inishoo Leasing Limited Nightjar Limited Leasing Business Leasing Business Leasing Business Leasing Business Leasing Business Leasing Business Leasing Business Pembroke Aircraft Leasing 1 Limited Leasing Business Pembroke Aircraft Leasing 2 Limited Leasing Business Pembroke Aircraft Leasing 3 Limited Leasing Business Pembroke Aircraft Leasing 4 Limited Leasing Business Pembroke Aircraft Leasing 5 Limited Leasing Business Pembroke Aircraft Leasing 6 Limited Leasing Business Pembroke Aircraft Leasing 7 Limited Leasing Business Pembroke Aircraft Leasing 8 Limited Leasing Business Pembroke Aircraft Leasing 9 Limited Leasing Business Pembroke Aircraft Leasing 10 Limited Leasing Business Pembroke Aircraft Leasing 11 Limited Leasing Business Pembroke Aircraft Leasing 12 Limited Leasing Business Pembroke Aircraft Leasing 13 Limited Leasing Business Pembroke Aircraft Leasing 14 Limited Leasing Business Pembroke Aircraft Leasing 15 Limited Leasing Business Pembroke Aircraft Leasing 16 Limited Leasing Business Pembroke Aircraft Leasing Holdings Limited Pembroke Capital Limited Leasing Business Leasing Business Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland Ireland €1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares €1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares €1.00 Ordinary shares €1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares $1.00 Ordinary shares €1.25 Ordinary shares US$1.00 Ordinary Skua Limited Leasing Business Ireland $1.00 Ordinary shares 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 The following company has the address of First Names House, Victoria Road, Douglas, IM2 4DF, Isle of Man Pembroke Group Limited The following company has the address of No. 1034, Managed by Tianjin Dongjiang Secretarial Services , Co., Ltd., Room 202, Office Area of Inspection Warehouse,, No.6262 Ao Zhou Road, Dongjiang Free Trade Port Zone,, Tianjin Pilot Free Trade Zone, China Pembroke Aircraft Leasing (Tianjin) Limited The following company has the address of No. 1035, Managed by Tianjin Dongjiang Secretarial Services , Co., Ltd., Room 202, Office Area of Inspection Warehouse,, No.6262 Ao Zhou Road, Dongjiang Free Trade Port Zone,, Tianjin Pilot Free Trade Zone, China Aircraft leasing, fleet advisory and technical services Isle of Man $0.01 Ordinary shares 100 Holding Company China $1.00 Ordinary shares 100 Pembroke Aircraft Leasing Tianjin 1 Limited SPV for Aircraft Operating Lease Business China CNY1.00 Ordinary shares 100 486 Standard Chartered – Annual Report 2023Financial statementsNotes to the financial statements 40. Related undertakings of the Group continued Subsidiary/Associate undertakings and Significant investment holdings continued Name and registered address Activity Place of incorporation Description of shares Proportion of shares held (%) The following company has the address of No. 1036, Managed by Tianjin Dongjiang Secretarial Services , Co., Ltd., Room 202, Office Area of Inspection Warehouse,, No.6262 Ao Zhou Road, Dongjiang Free Trade Port Zone,, Tianjin Pilot Free Trade Zone, China Pembroke Aircraft Leasing Tianjin 2 Limited SPV for Aircraft Operating Lease Business China CNY1.00 Ordinary shares 100 The following companies have the address of 1 Basinghall Avenue, London, EC2V 5DD, United Kingdom Pembroke Aircraft Leasing (UK) Limited Leasing Business United Kingdom £1.00 Ordinary shares 100 The following companies have the address of Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, Marshall Islands Marina Alysse Shipping Limited Marina Amandier Shipping Limited Marina Ambroisee Shipping Limited Marina Buxus Shipping Limited Marina Dorado Shipping Limited Marina Protea Shipping Limited The following company has the address of 3, Floor 1, No.1, Shiner Wuxingcaiyuan, West Er Huan Rd, , Xi Shan District, Kunming, Yunnan Province, PRC , China Yunnan Golden Shiner Property Development Co., Ltd. The following companies has the address of 49, Sungei Kadut Avenue, #03-01 S729673, Singapore Omni Centre Pte. Ltd. The following company has the address of 505 Howard St. #201, San Francisco, CA 94105, United States Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Ownership and Leasing of vessels Marshall Islands $1.00 Ordinary shares Marshall Islands $1.00 Ordinary shares Marshall Islands $1.00 Ordinary shares Marshall Islands $1.00 Ordinary shares Marshall Islands $1.00 Ordinary shares Marshall Islands $1.00 Ordinary shares 100 100 100 100 100 100 Real Estate Developers China CNY1.00 Ordinary shares 42.5 Real Estate Owners & Developers Singapore SGD Redeemable Convertible Preference shares 99.998 SC Studios, LLC Offshore Support Services United States US$1.00 Membership Interest 100 The following company has the address of Avenue de Tivoli 2, 1007, Lausanne, Switzerland Metaco SA Integrated infrastructure solutions Switzerland CHF 0.01 Preference A Shares 29.505 Save for those disclosed in this Annual Report , there were no other significant investments held, nor were there material acquisitions or disposals of subsidiaries during the year under review. Apart from those disclosed in this Annual Report, there were no material investments or additions of capital assets authorised by the Board at the date of this Annual Report. 487 Standard Chartered – Annual Report 2023Financial statementsSupplementary information Supplementary information 490 Supplementary financial information 498 Supplementary people information 504 Supplementary sustainability information 508 2023 Sustainability Aspirations 511 TCFD summary and alignment index 517 Shareholder information 522 Main awards and accolades 523 Glossary Zhangjiajie National Forest Park, China Photographer: Irene Yuan [[ Our weather photographers of the year]] We are showcasing three of the most striking weather and climate photographs captured by our colleagues, as voted for by over 4,000 employees. These pictures were originally submitted as part of the annual Standard Chartered Weather Photographer of the Year competition, organised by the UK’s Royal Meteorological Society. Climate change will hit hardest in many of the communities and markets where we operate. Its impact on the environment and human health significantly affects sustainable economic growth and the future of society. These pictures aim to draw attention to the beauty of the planet and the importance of its conservation. We’re committed to net zero carbon emissions in our own operations by 2025, and financing by 2050. Read more on sc.com/scwpy 488 Standard Chartered – Annual Report 2023 Amboseli, Kenya Photographer: Arvind Karthik Kolukkumalai Peak, Tamil Nadu, India Photographer: Akshat Tholia l S u p p e m e n t a r y i n f o r m a t i o n Standard Chartered – Annual Report 2023 489 Supplementary financial information Five-year summary Operating profit before impairment losses and taxation Impairment losses on loans and advances and other credit risk provisions Other impairment1 Profit before taxation Profit attributable to shareholders Loans and advances to banks2 Loans and advances to customers2 Total assets Deposits by banks2 Customer accounts2 Shareholders’ equity Total capital resources3 Information per ordinary share Basic earnings per share Underlying earnings per share Dividends per share4 Net asset value per share Net tangible asset value per share Return on assets5 Ratios Reported return on ordinary shareholders' equity Reported return on ordinary shareholders' tangible equity Underlying return on ordinary shareholders’ equity Underlying return on ordinary shareholders’ tangible equity Reported cost to income ratio (excluding UK Bank Levy) Reported cost to income ratio (including UK Bank Levy) Underlying cost to income ratio (excluding UK Bank levy) Underlying cost to income ratio (including UK Bank levy) Capital ratios: CET 16 Total capital6 2023 $million 6,468 (508) (1,008) 5,093 3,469 44,977 286,975 822,844 28,030 469,418 44,445 62,389 108.6c 128.9c 27.0c 1,629.0c 1,393.0c 0.4% 7.2% 8.4% 8.7% 10.1% 63.5% 64.1% 63.4% 64.1% 14.1% 21.2% 2022 $million 5,405 (836) (425) 4,286 2,948 39,519 310,647 819,922 28,789 461,677 43,162 63,731 85.9c 97.9c 18.0c 1,453.3c 1,249.0c 0.4% 6.0% 6.8% 6.9% 7.7% 66.3% 66.9% 65.5% 66.2% 14.0% 21.7% 2021 $million 3,777 (254) (372) 3,347 2,315 44,383 298,468 827,818 30,041 474,570 46,011 69,282 61.3c 85.8c 12.0c 1,456.4c 1,277.0c 0.3% 4.2% 4.8% 5.9% 6.8% 73.6% 74.3% 69.8% 70.5% 14.1% 21.3% 2020 $million 4,374 (2,325) (98) 1,613 724 44,347 281,699 789,050 30,255 439,339 45,886 67,383 10.4c 36.1c – 1,409.3c 1,249.0c 0.1% 0.8% 0.9% 2.6% 3.0% 68.1% 70.4% 66.4% 68.7% 14.4% 21.2% 2019 $million 4,484 (908) (136) 3,713 2,303 53,549 268,523 720,398 28,562 405,357 44,835 66,868 57.0c 75.7c 22.0c 1,358.3c 1,192.5c 0.3% 4.2% 4.8% 5.6% 6.4% 68.7% 70.9% 65.9% 68.2% 13.8% 21.2% 1 Other Impairment includes $850 million (2022: $308 million) impairment charge relating to the Group’s investment in its associate China Bohai Bank (Bohai) 2 Excludes amounts held at fair value through profit or loss 3 Shareholders’ funds, non-controlling interests and subordinated loan capital 4 Dividend paid during the year per share 5 Represents profit attributable to shareholders divided by the total assets of the Group 6 Unaudited 490 Standard Chartered – Annual Report 2023Supplementary informationSupplementary financial informationAnalysis of underlying performance by key market The following tables provide information for key markets in which the Group operates. The numbers are prepared on a management view. Refer to Note 2 for details. Hong Kong $million Korea $million China $million Taiwan $million Singapore $million India $million Indonesia $million UAE $million UK $million US $million 2023 Operating income Operating expenses 4,167 1,074 (1,927) (731) 1,158 (894) 558 2,455 1,206 (331) (1,214) (865) 241 (191) 794 102 870 (392) (870) (634) Operating profit/(loss) before impairment losses and taxation Credit impairment Other impairment Profit from associates and joint ventures Underlying profit/(loss) before taxation 2,240 (372) (17) – 343 (48) 1 – 264 (113) (5) 227 (42) (5) 1,241 (48) (14) 341 (31) (11) 114 – – – 50 (8) (2) – 402 (768) (236) 24 (5) – 14 (15) – 12 (5) – 1,851 296 260 180 1,179 299 40 421 (769) 243 Total assets employed 190,484 56,638 41,508 21,638 102,724 33,781 5,470 20,376 149,982 88,113 Of which: loans and advances to customers1 87,590 33,443 15,882 11,634 62,030 13,832 Total liabilities employed 183,112 46,666 38,252 20,365 109,825 26,532 Of which: customer accounts1 155,446 37,032 31,211 18,621 86,282 18,709 2,533 4,355 3,024 8,495 17,214 31,067 27,434 92,168 72,583 13,924 72,610 40,846 Hong Kong $million 3,441 (1,816) 1,625 (579) (1) – 1,140 (733) 407 (55) (1) 1,154 (844) 310 (200) (3) – 179 Operating income Operating expenses Operating profit before impairment losses and taxation Credit impairment Other impairment Profit from associates and joint ventures Underlying profit before taxation 2022² Korea $million China $million Taiwan $million Singapore $million India $million Indonesia $million UAE $million UK $million US $million 473 1,909 (336) (1,082) 1,222 (766) 214 (183) 621 (369) 1,013 (742) 827 84 (2) 456 (31) (1) – – 31 4 – – 252 81 – – 271 36 35 – 137 (15) (1) – 121 1,031 (603) 428 13 – – 1,045 351 286 909 424 35 333 342 441 Total assets employed 171,086 68,903 39,508 21,919 97,914 30,412 5,237 19,624 187,832 67,019 Of which: loans and advances to customers1 Total liabilities employed 85,359 165,499 49,264 58,992 15,652 33,124 11,283 59,872 20,216 104,318 Of which: customer accounts1 138,713 43,620 24,347 18,509 79,409 15,025 23,210 15,199 2,403 4,257 2,924 7,913 39,356 19,951 16,256 140,160 64,825 12,710 104,482 28,424 1. Loans and advances to customers includes FVTPL and customer accounts includes FVTPL and repurchase agreements 2 Underlying performance for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 491 Standard Chartered – Annual Report 2023Supplementary informationAnalysis of operating income by product and segment The following tables provide a breakdown of the Group’s underlying operating income by product and client segment. Transaction Banking Trade & Working capital Cash Management Financial Markets Macro Trading Credit Markets Credit Trading Financing Solutions & Issuance² Financing & Securities Services² Lending & Portfolio Management Wealth Management Retail Products CCPL and other unsecured lending Deposits Mortgage & Auto Other Retail Products Treasury Other Total underlying operating income Transaction Banking Trade & Working capital Cash Management Financial Markets Macro Trading Credit Markets Credit Trading Financing Solutions & Issuance² Financing & Securities Services² Lending & Portfolio Management Wealth Management Retail Products CCPL and other unsecured lending Deposits Mortgage & Auto Other Retail Products Treasury Other Total underlying operating income 2023 Corporate, Commercial & Institutional Banking $million Consumer, Private & Business Banking $million Ventures $million Central & other items (segment) $million 5,656 1,246 4,410 5,099 2,827 1,803 554 1,249 469 469 – 1 – 1 – – – (7) 11,218 181 48 133 – – – – – – 29 1,944 4,927 1,068 3,488 236 135 – 25 7,106 – – – – – – – – – – – 41 93 (52) – – 30 85 156 – – – – – – – – – – – – – – – – (932) (170) (1,102) Total $million 5,837 1,294 4,543 5,099 2,827 1,803 554 1,249 469 498 1,944 4,969 1,161 3,437 236 135 (902) (67) 17,378 2022 (Restated)¹ Corporate, Commercial & Institutional Banking1 $million Consumer, Private & Business Banking1 $million Ventures $million Central & other items (segment) $million Total $million 3,751 1,288 2,463 5,345 2,965 1,761 488 1,273 619 521 1 1 – 1 – – – (11) 9,608 123 55 68 – – – – – – 37 1,795 4,013 1,180 2,029 633 171 – 1 5,969 – – – – – – – – – – – 13 22 (9) – – 5 11 29 – – – – – – – – – – – – – – – – 332 (176) 156 3,874 1,343 2,531 5,345 2,965 1,761 488 1,273 619 558 1,796 4,027 1,202 2,021 633 171 337 (175) 15,762 1 Underlying income for relevant periods in 2022 has been restated for the removal of (i) exit markets and businesses in AME (ii) Aviation Finance and (iii) DVA. No change to reported performance 2 Shipping Finance is now reported under “Financing Solutions & Issuance” which was reported under “Financing & Securities Services” in Q1‘23 492 Standard Chartered – Annual Report 2023Supplementary informationSupplementary financial informationInsured and uninsured deposits SCB operates and provides services to customers across many countries and insured deposit is determined on the basis of limits enacted within local regulations. 2023 2022 Insured deposits Current accounts Savings deposits Time deposits Other deposits Uninsured deposits Current accounts Savings deposits Time deposits Other deposits Total Bank deposits $million 10 9 – 1 – 35,500 20,969 – 8,295 6,236 35,510 Customer accounts $million 66,753 15,767 27,376 23,517 93 467,868 150,559 91,425 176,977 48,907 534,621 Bankdeposits $million 28 8 – 20 – 36,795 22,425 – 6,870 7,500 36,823 Customer accounts $million 60,008 16,373 26,973 16,599 63 460,221 144,931 90,937 176,090 48,263 520,229 UK and non-UK deposits The following table summarises the split of Bank and Customer deposits into UK and Non-UK deposits for respective account lines based on the domicile or residence of the clients. UK deposits Current accounts Savings deposits Time deposits Other deposits Non-UK deposits Current accounts Savings deposits Time deposits Other deposits Total 2023 2022 Bank deposits $million 2,918 925 – 310 1,683 32,592 20,053 – 7,986 4,553 35,510 Customer accounts $million 29,318 7,062 330 5,412 16,514 505,303 159,264 118,471 195,082 32,486 534,621 Bank deposits $million 4,163 903 – 1,004 2,256 32,660 21,530 – 5,886 5,244 36,823 Customer accounts $million 38,557 8,955 420 6,760 22,422 481,672 152,349 117,490 185,929 25,904 520,229 493 Standard Chartered – Annual Report 2023Supplementary informationContractual maturity of Loans, Investment securities and Deposits One year or less Between one and five years Between five and ten years Between ten years and fifteen years More than fifteen years and undated Loans and advances to banks $million Loans and advances to customers $million 72,717 3,975 837 35 226 197,125 52,532 19,184 14,084 62,561 Investment securities – Treasury and other eligible Bills $million 38,877 4 1 – – Total 77,790 345,486 38,882 174,333 Total amortised cost and FVOCI exposures Fixed interest rate exposures Floating interest rate exposures 44,977 286,975 38,505 168,697 6,472 118,278 2023 Investment securities – Debt securities $million Investment securities – Equity shares $million 59,023 69,075 18,804 9,276 18,155 – – – – 3,932 3,932 Bank deposits $million Customer accounts $million 31,333 485,908 4,174 46,365 2 – – 567 1,341 441 35,509 534,622 One year or less Between one and five years Between five and ten years Between ten years and fifteen years More than fifteen years and undated Total Loans and advances to banks $million Loans and advances to customers $million 2022 Investment securities – Treasury and other eligible Bills $million Investment securities – Debt securities $million Investment securities – Equity shares $million 60,132 3,630 411 92 184 208,691 42,269 52,563 18,067 13,305 65,104 482 – – – 47,193 63,523 20,078 12,921 15,720 64,449 357,730 42,751 159,435 – – – – 4,037 4,037 Bank deposits $million Customer accounts $million 35,240 508,125 1,576 10,281 7 – – 694 598 531 36,823 520,229 Total amortised cost and FVOCI exposures Fixed interest rate exposures Floating interest rate exposures 39,519 36,218 310,647 170,609 3,301 140,038 Maturity and yield of Debt securities, alternative tier one and other eligible bills held at amortised cost One year or less Between one and five years Between five and ten years More than ten years Total $million Yield % $million Yield % $million Yield % $million Yield % $million Yield % Central and Central and other government agencies – US – UK – Other Other debt securities As at 31 December 2023 Central and other government agencies – US – UK – Other Other debt securities As at 31 December 2022 1,861 39 5,045 2,487 9,432 1.39 2.75 2.72 6.45 3.44 9,171 85 9,560 2,658 21,474 1.61 1.06 2.80 5.37 2.61 5,799 101 2,289 2,262 10,451 1.67 0.67 3.12 5.44 2.79 4,524 3.89 21,355 – 81 10,973 15,578 – 4.74 5.13 4.77 225 16,975 18,380 56,935 2.09 1.18 2.84 5.38 3.37 One year or less Between one and five years Between five and ten years More than ten years Total $million Yield % $million Yield % $million Yield % $million Yield % $million Yield % 2,208 – 3,599 4,752 10,559 1.58 – 2.71 4.53 3.29 5,437 85 9,659 2,869 18,050 1.41 1.98 1.98 5.07 2.30 6,317 60 3,541 1,454 11,372 1.32 0.50 2.24 4.09 1.96 4,498 47 44 15,144 19,733 3.47 0.90 4.00 3.55 3.53 18,460 192 16,843 24,219 59,714 1.90 1.26 2.19 3.96 2.82 The maturity distributions are presented in the above table on the basis of residual contractual maturity dates. The weighted average yield for each range of maturities is calculated by dividing the annualised interest income for the year by the book amount of debt securities at that date. 494 Standard Chartered – Annual Report 2023Supplementary informationSupplementary financial informationAverage balance sheets and yields and volume and price variances Average balance sheets and yields The following tables set out the average balances and yields for the Group’s assets and liabilities for the periods ended 31 December 2023 and 31 December 2022 under the revised definition of net interest margin. For the purpose of these tables, average balances have been determined on the basis of daily balances, except for certain categories, for which balances have been determined less frequently. The Group does not believe that the information presented in these tables would be significantly different had such balances been determined on a daily basis. Average assets Cash and balances at central banks Gross loans and advances to banks Gross loans and advances to customers Impairment provisions against loans and advances to banks and customers Investment securities – Treasury and Other Eligible Bills Investment securities – Debt Securities Investment securities – Equity Shares Property, plant and equipment and intangible assets Prepayments, accrued income and other assets Investment associates and joint ventures Total average assets Average assets Cash and balances at central banks Gross loans and advances to banks Gross loans and advances to customers Impairment provisions against loans and advances to banks and customers Investment securities – Treasury and Other Eligible Bills Investment securities – Debt Securities Investment securities – Equity Shares Property, plant and equipment and intangible assets Prepayments, accrued income and other assets Investment associates and joint ventures Total average assets Average non-interest earning balance $million 10,466 34,743 55,235 – 7,955 29,912 3,190 8,861 126,539 1,628 278,529 Average non-interest earning balance $million 19,700 29,576 61,480 – 5,564 23,618 4,152 8,821 142,599 2,152 297,662 Average interest earning balance $million 67,634 44,161 301,570 (5,894) 32,026 133,023 – – – – 2023 Interest income $million 2,833 2,095 15,698 – 1,596 5,005 – – – – Gross yield % Gross yield total balance % 4.19 4.74 5.20 – 4.98 3.76 – – – – 3.63 2.66 4.40 – 3.99 3.07 – – – – 572,520 27,227 4.76 3.20 Average interest earning balance $million 54,503 42,953 306,880 (5,867) 25,924 140,977 – – – – 2022 Interest income $million 765 853 10,168 – 630 2,836 – – – – Gross yield % Gross yield total balance % 1.40 1.99 3.31 – 2.43 2.01 – – – – 1.03 1.18 2.76 – 2.00 1.72 – – – – 565,370 15,252 2.70 1.77 495 Standard Chartered – Annual Report 2023Supplementary informationAverage liabilities Average liabilities Deposits by banks Customer accounts: Current accounts Savings deposits Time deposits Other deposits Debt securities in issue Accruals, deferred income and other liabilities Subordinated liabilities and other borrowed funds Non-controlling interests Shareholders’ funds Average non-interest bearing balance $million 14,238 41,911 – 15,345 44,211 12,259 132,442 – 373 49,920 310,699 Average interest bearing balance $million 24,066 132,537 112,046 186,287 6,527 65,579 1,009 12,299 – – 540,350 Adjustment for Financial Markets funding costs and financial guarantee fees on interest earning assets Total average liabilities and shareholders’ funds 310,699 540,350 Average liabilities Deposits by banks Customer accounts: Current accounts Savings deposits Time deposits Other deposits Debt securities in issue Accruals, deferred income and other liabilities Subordinated liabilities and other borrowed funds Non-controlling interests Shareholders’ funds Average non-interest bearing balance $million 17,039 51,375 – 11,586 52,962 6,720 147,814 – 312 49,873 337,681 Average interest bearing balance $million 27,241 132,709 131,571 152,118 5,094 60,559 1,065 14,994 – – 525,351 Adjustment for Financial Markets funding costs and financial guarantee fees on interest earning assets Total average liabilities and shareholders’ funds 337,681 525,351 2023 Interest expense $million 796 3,619 1,981 8,204 488 3,367 52 951 – – 19,458 (1,778) 17,680 2022 Interest expense $million 433 1,480 832 3,021 110 1,169 44 570 – – 7,659 (383) 7,276 Net interest margin Interest income (Reported) Average interest earning assets Gross yield (%) Interest expense (Reported) Adjustment for Financial Markets funding costs and financial guarantee fees on interest earning assets Interest expense adjusted for Financial Markets trading book funding costs and financial guarantee fees on interest-earning assets Average interest-bearing liabilities Rate paid (%) Net yield (%) Rate paid % 3.31 2.73 1.77 4.40 7.48 5.13 5.15 7.73 – – 3.60 Rate paid total balance % 2.08 2.07 1.77 4.07 0.96 4.33 0.04 7.73 – – 2.29 3.27 2.08 Rate paid % Rate paid total balance % 1.59 1.12 0.63 1.99 2.16 1.93 4.13 3.80 – – 1.46 0.98 0.80 0.63 1.85 0.19 1.74 0.03 3.80 – – 0.89 1.38 0.84 2023 $million 27,227 572,520 4.76 19,458 (1,778) 17,680 540,350 3.27 1.49 2022 $million 15,252 565,370 2.70 7,659 (383) 7,276 525,351 1.38 1.32 Net interest income adjusted for Financial Markets funding costs and Financial guarantee fees on interest earing assets Net interest margin (%) 9,547 1.67 7,976 1.41 496 Standard Chartered – Annual Report 2023Supplementary informationSupplementary financial informationVolume and price variances The following table analyses the estimated change in the Group’s net interest income attributable to changes in the average volume of interest-earning assets and interest-bearing liabilities, and changes in their respective interest rates for the years presented. Volume and rate variances have been determined based on movements in average balances and average exchange rates over the year and changes in interest rates on average interest-earning assets and average interest-bearing liabilities. Cash and unrestricted balances at central banks Loans and advances to banks Loans and advances to customers Investment securities Total interest earning assets Interest bearing liabilities Subordinated liabilities and other borrowed funds Deposits by banks Customer accounts: Current accounts and savings deposits Time and other deposits Debt securities in issue Total interest bearing liabilities Interest earning assets Cash and unrestricted balances at central banks Loans and advances to banks Loans and advances to customers Investment securities Total interest earning assets Interest bearing liabilities Subordinated liabilities and other borrowed funds Deposits by banks Customer accounts: Current accounts and savings deposits Time and other deposits Debt securities in issue Total interest bearing liabilities 2023 versus 2022 (Decrease)/increase in interest due to: Volume $million 550 57 (284) (74) 249 (208) (105) (458) 1,601 258 1,088 Rate $million 1,518 1,185 5,814 3,209 11,726 589 468 3,769 3,945 1,940 10,711 Net increase/ (decrease) in interest $million 2,068 1,242 5,530 3,135 11,975 381 363 3,311 5,546 2,198 11,799 2022 versus 2021 (Decrease)/increase in interest due to: Volume $million Rate $million Net increase/ (decrease) in interest $million (21) (60) (17) 228 130 (58) (3) 18 157 27 141 694 423 2,611 1,148 4,876 131 300 1,428 1,635 576 4,070 673 363 2,594 1,376 5,006 73 297 1,446 1,792 603 4,211 497 Standard Chartered – Annual Report 2023Supplementary informationSupplementary people information Global1 Full-time equivalent (FTE) Headcount (year end) Employed workers (permanent) of which female Fixed term workers (temporary) of which female Non-employed workers (NEW) Non-outsourced NEW2 Outsourced NEW3 Headcount (12-month average) Male FTE Headcount Full-time Part-time Female FTE Headcount Full-time Part-time Undisclosed4 FTE Headcount Full-time Part-time Nationalities Position type Management team of which female of which female (%) Management team and their direct reports5 of which female of which female (%) Senior leadership6 of which female of which female (%) Rest of Employees of which female of which female (%) of which who have supervisory responsibilities of which female of which female (%) Business FTE7 Business headcount of which female Support services FTE7 Support services headcount of which female 498 2023 84,958 85,007 84,073 37,598 934 453 12,537 4,925 7,612 85,353 45,993 46,004 45,975 29 38,014 38,051 37,926 125 950 952 944 8 129 2023 13 7 53.8% 133 48 36.1% 4,541 1,474 32.5% 80,466 36,577 45.5% 11,009 3,905 35.5% 29,909 29,929 15,335 55,049 55,078 22,716 2022 83,195 83,266 82,319 37,259 947 429 13,962 5,873 8,089 82,987 44,709 44,734 44,683 51 37,642 37,688 37,551 137 844 844 843 1 131 2022 13 6 46.2% 131 43 32.8% 4,422 1,420 32.1% 78,844 36,268 46.0% 11,067 3,995 36.1% 30,589 30,619 15,794 52,607 52,647 21,894 2021 % change 81,904 81,957 80,605 36,644 1,352 637 13,845 6,130 7,715 82,736 44,033 44,045 44,002 43 37,240 37,281 37,138 143 631 631 630 1 132 2021 15 5 33.3% 116 33 28.4% 4,227 1,299 30.7% 77,730 35,982 46.3% 11,109 4,009 36.1% 30,921 30,940 15,997 50,983 51,017 21,284 2.1 2.1 2.1 0.9 (1.4) 5.6 (10.2) (16.1) (5.9) 2.9 2.9 2.8 2.9 (43.1) 1.0 1.0 1.0 (8.8) 12.6 12.8 12.0 700.0 (1.5) % change – 16.7 16.7 1.5 11.6 9.9 2.7 3.8 1.1 2.1 0.9 (1.2) (0.5) (2.3) (1.7) (2.2) (2.3) (2.9) 4.6 4.6 3.8 Standard Chartered – Annual Report 2023Supplementary informationSupplementary people informationRegion Asia FTE Asia headcount Asia female headcount Asia employed workers headcount Asia fixed term workers headcount Asia full time headcount Asia part time headcount AME FTE AME headcount AME female headcount AME employed workers headcount AME fixed term workers headcount AME full time headcount AME part time headcount EA FTE EA headcount EA female headcount EA employed workers headcount EA fixed term workers headcount EA full time headcount EA part time headcount Age < 30 years FTE < 30 years headcount < 30 years female headcount 30-50 years FTE 30-50 years headcount 30-50 years female headcount > 50 years FTE > 50 years headcount > 50 years female headcount 2023 71,097 71,123 32,452 70,394 729 71,051 72 8,575 8,577 3,766 8,432 145 8,574 3 5,286 5,307 1,833 5,247 60 5,220 87 2023 13,168 13,176 6,848 63,309 63,334 27,432 8,480 8,497 3,771 2022 69,329 69,364 32,033 68,585 779 69,257 107 8,905 8,921 3,918 8,813 108 8,917 4 4,962 4,981 1,737 4,921 60 4,903 78 2022 13,826 13,836 7,397 61,651 61,691 26,870 7,718 7,739 3,421 2021 % change 67,840 67,870 31,470 66,968 902 67,774 96 9,372 9,373 4,100 8,999 374 9,369 4 4,691 4,714 1,711 4,638 76 4,627 87 2.6 2.5 1.3 2.6 (6.4) 2.6 (32.7) (3.7) (3.9) (3.9) (4.3) 34.3 (3.8) (25.0) 6.5 6.5 5.5 6.6 – 6.5 11.5 2021 % change 14,063 14,069 7,623 60,891 60,919 26,583 6,949 6,969 3,075 (4.8) (4.8) (7.4) 2.7 2.7 2.1 9.9 9.8 10.2 499 Standard Chartered – Annual Report 2023Supplementary informationTalent management ⁸ Global voluntary turnover – FTE Global turnover – FTE Global voluntary turnover rate (%) Global turnover rate (%) Male turnover FTE Male (%) Female turnover FTE Female (%) Female as a % of global turnover FTE Asia turnover FTE Asia (%) AME turnover FTE AME (%) EA turnover FTE EA (%) < 30 years turnover FTE < 30 years (%) 30-50 years turnover FTE 30-50 years (%) > 50 years turnover FTE > 50 years (%) Average tenure (years) – Male Average tenure (years) – Female Global new hires – FTE Global new hire rate (%) Male new hire FTE Male (%) Female new hire FTE Female (%) Female as a % of global new hires FTE Asia new hire FTE Asia (%) AME new hire FTE AME (%) EA new hire FTE EA (%) < 30 years new hire FTE < 30 years (%) 30-50 years new hire FTE 30-50 years (%) > 50 years new hire FTE > 50 years (%) Roles filled internally (%) of which filled by females (%) Absenteeism rate9 (%) Employee job satisfaction (%) 500 2023 8,200 9,712 9.7% 11.5% 5,214 11.4% 4,394 11.6% 45.2% 8,293 11.8% 858 9.9% 562 10.9% 2,593 19.2% 6,242 9.9% 878 11.0% 7.3 7.9 12,145 14.2% 6,875 14.9% 5,044 13.2% 41.5% 10,653 14.9% 615 7.0% 877 16.8% 4,963 35.5% 6,841 10.8% 341 4.2% 32.3% 41.6% 1.3% 83.0% 2022 12,645 14,388 15.5% 17.6% 8,021 18.2% 6,230 16.8% 43.3% 12,501 18.4% 1,046 11.7% 841 17.7% 4,137 30.5% 9,303 15.2% 947 13.1% 7.1 7.6 17,432 21.0% 9,683 21.7% 7,384 19.6% 42.4% 15,441 22.4% 934 10.2% 1,056 21.9% 7,673 54.7% 9,357 15.2% 401 5.4% 37.3% 41.0% 1.4% 80.0% 2021 % change 10,214 13,160 12.6% 16.2% 7,332 16.7% 5,736 15.6% 43.6% 11,004 16.4% 1,454 15.4% 703 15.5% 3,712 26.1% 8,144 13.5% 1,304 19.3% 7.2 7.7 12,660 15.3% 6,758 15.2% 5,580 14.9% 44.1% 11,387 16.7% 431 4.3% 842 18.2% 5,857 39.6% 6,514 10.7% 290 4.2% 40.8% 42.8% 1.6% 81.0% (35.1) (32.5) (37.1) (34.5) (35.0) (37.2) (29.5) (30.9) 4.5 (33.7) (35.9) (18.0) (15.1) (33.2) (38.5) (37.3) (37.3) (32.9) (34.8) (7.3) (16.5) 2.8 3.9 (30.3) (32.3) (29.0) (31.2) (31.7) (32.9) (1.9) (31.0) (33.2) (34.2) (31.7) (17.0) (23.4) (35.3) (35.1) (26.9) (28.8) (15.1) (23.3) (13.5) 1.5 (2.9) 3.7 Standard Chartered – Annual Report 2023Supplementary informationSupplementary people informationLearning10 Employees receiving training (%) Employees receiving training for personal development (%) Female (%) Senior leadership (%)6 Average number of training hours per employee Female Male Employed workers Fixed term workers Average cost of training per employee ($)11 Diversity % of women remained employed 12 months after their return from parental leave % of Information Technology (IT) and/or Engineering roles filled by women12 % of senior leadership and managerial roles filled by women6,13 % of middle management roles filled by women13 % of non-managerial positions filled by women13 % of women total promotions Executive and non-executive directors14 Men Women % of men % of women White British or other White (including minority-White groups) Asian/Asian British Black/African/Caribbean/Black British Mixed/Multiple Ethnic Groups White British or other White (including minority-White groups) (%) Asian/Asian British (%) Black/African/Caribbean/Black British (%) Mixed/Multiple Ethnic Groups (%) Number of senior positions (CEO, CFO, SID and Chair)15 Men Women White British or other White (including minority-White groups) Asian/Asian British Black/African/Caribbean/Black British Mixed/Multiple Ethnic Groups 2023 99.5% 96.2% 95.8% 93.4% 38.0 37.0 38.8 38.1 33.3 730 2023 2022 99.5% 91.6% 90.0% 94.9% 36.9 35.4 38.1 37.1 21.9 743 2022 2021 99.4% 91.7% 91.2% 96.2% 37.8 37.1 38.3 37.9 34.1 708 % change 0.0 5.0 6.4 (1.5) 3.1 4.5 1.8 2.7 52.3 (1.8) 2021 % change 75.2% 72.4% 78.9% 24.2% 34.6% 35.5% 47.0% 46.0% 8 5 61.5% 38.5% 9 4 0 0 69.2% 30.8% 0.0% 0.0% 3 1 4 0 0 0 24.0% 35.0% 36.1% 47.6% 46.1% 8 6 57.1% 42.9% 11 3 0 0 78.6% 21.4% 0.0% 0.0% 3 1 4 0 0 0 23.8% 34.6% 36.1% 48.0% 45.3% 9 4 69.2% 30.8% 10 3 0 0 76.9% 23.1% 0.0% 0.0% 3 1 4 0 0 0 3.9 0.7 (0.9) (1.6) (1.2) (0.2) – (16.7) 7.7 (10.3) (18.2) 33.3 – – (11.9) 43.6 – – – – – – – – 501 Standard Chartered – Annual Report 2023Supplementary informationDiversity 2023 2022 2021 % change % of Board members that have a cultural background different from the location of the corporate headquarters16 38.5% 35.7% 38.5% 7.7 Executive management17 Men Women % of men % of women White British or other White (including minority-White groups) Asian/Asian British Black/African/Caribbean/Black British Mixed/Multiple Ethnic Groups Not specified/prefer not to say White British or other White (including minority-White groups) (%) Asian/Asian British (%) Black/African/Caribbean/Black British (%) Mixed/Multiple Ethnic Groups (%) Not specified/prefer not to say (%) UK senior leadership6, 18 (% declared) UK Black Ethnicity UK Black, Asian and Minority Ethnicity US senior leadership6, 18 (% declared) US Black Ethnicity US Hispanic or Latinx Ethnicity Work-related Health & Safety Fatalities19 Fatalities (rate per million hours worked) Major injuries19,20, 21, 22 Major injuries (rate per million hours worked23) Recordable work-related injuries24 Recordable work-related injuries (rate per million hours worked23) Work-related ill-health (fatalities) 14 7 7 50.0% 50.0% 5 6 1 – 2 35.7% 42.9% 7.1% 0.0% 14.3% 2.5% 27.8% 4.0% 10.1% 2023 2 0.010 16 0.08 108 0.56 0 14 8 6 57.1% 42.9% 6 6 1 – 1 42.9% 42.9% 7.1% 0.0% 7.1% 2.5% 26.4% 4.7% 9.9% 2022 1 0.005 20 0.11 83 0.44 0 16 11 5 68.8% 31.3% 9 5 – 1 1 56.3% 31.3% 0.0% 6.3% 6.3% 2.7% 22.1% 3.8% 10.2% 2021 0 0.000 24 0.13 79 0.43 0 – (12.5) 16.7 (12.5) 16.7 (16.7) – – – 100.0 (16.7) – – – 100.0 (0.2) 5.2 (13.8) 2.1 % change 100.0 100.0 (20.0) (27.3) 30.1 27.6 – 502 Standard Chartered – Annual Report 2023Supplementary informationSupplementary people information1 Excludes 699 employees (headcount) from Digital Ventures entities (Appro, Audax, Autumn, Letsbloom, MyZoi, Solv Ghana, Solv India, Solv Kenya, Solv Malaysia, TASConnect, Tawi, Zodia Custody, Zodia Markets). Excludes 412 Person of Interest (headcount) following a recategorisation of worker types from 2022, i.e. independent non-executive directors, advisors, external auditors and regulators. Includes employees operating in discontinued/restructured businesses. Percentage change refers to the percentage change from 2022 to 2023. All figures above are presented to 1 decimal place and the corresponding percentage changes are derived from actual data without rounding to 1 decimal place to remain as accurate as possible. 2 Non-outsourced NEWs are resources engaged on a time and materials basis where task selection and supervision is the responsibility of the Bank, such as agency workers. 3 Outsourced NEWs are arrangements with a third party vendor where the delivery is based on a specific service or outcome at an agreed price, irrespective of the number of resources required to perform the service. These resources are not considered as the Group’s headcount. 4 The disclosure of gender information is not mandatory in some markets. 5 Management team (MT) and colleagues who report to them, excluding administrative or executive support roles (personal assistant, business planning managers). 6 Senior leadership is defined as Managing Directors and Bands 4 (including Management Team). 7 Business is defined as employees directly under the remit of the businesses. Support services include employees who support businesses’ operations or investments where costs are fully recharged to the businesses. Increase in support services in 2023 is mainly due to increase in business demand for investment support resources and transfer of approximately 670 employees from CCIB business. 8 Turnover metrics are based on permanent employed workers only. New hire metrics are based on external new hires. Turnover and new hire metrics are based on average 12 month FTE. These metrics are not shown for the undisclosed gender population due to a small population size. Turnover in 2023 declined. Voluntary turnover in 2022 was at a historical high as experienced by many other organisations in the aftermath of Covid-19 pandemic. As turnover declined, the need for hiring reduced accordingly compared to 2022, resulting in lower new hires. 9 Represents health and disability related absence. Excludes Korea 10 Learning metrics exclude non-employed workers (NEWs). Training for personal development is defined as all training excluding mandatory or role specific training. Average training hours (including mandatory training) has been updated to include self-declared external training hours and prior periods have been restated for comparison. 11 Average cost of training per employee includes cost of learning management system. 12 Represents the % of Information Technology (IT) and/or Engineering roles filled by women. IT and/or engineering roles is defined as employees who work in the IT job function, including engineering roles (excluding Innovation, Transformation & Ventures) and/or certain job families in the Data and Analytics job function. 13 Represents the percentage of women that are in the respective population groups. For the purpose of this metric, managerial/middle management roles are considered as roles which have people leader responsibilities excluding senior leadership. Non-managerial roles do not have people leader responsibilities 14 Executive and non-executive directors refer to the UK PLC Board. Data has been collected by way of the directors’ annual self-declarations. 15 For the purpose of this metric, senior positions in the Board include the Group Chairman, Group Chief Executive, Group Chief Financial Officer and Senior Independent Director 16 Percentage of Board Members whose cultural background (nationality) is different from the location of the corporate headquarters (UK) 17 For the purpose of this metric, executive management refers to Management team plus Group Company Secretary as defined by UK Listing Rules 18 Ethnicity % has been derived based on colleagues who have declared their ethnicity against the overall UK/US population respectively (including colleagues who have not made a declaration). 19 Includes commuting and contractors (2023 one fatality was a contractor commuting accident, one was a staff road accident) 20 Per UK HSE definition. 21 Most common types of major injury are fractures (75%) 22 2023 includes 5 contractor/visitor. 2022 includes 1 contractor/visitor. 2021 includes 4 contractors/visitors. 23 2023 hours worked = 192,870,120. 2022 hours worked = 188,758,285. 2021 hours worked = 184,997,097 24 2023 includes 31 contractor/visitors. 2022 includes 18 contractors/visitors. 2021 includes 23 contractors/visitors. 503 Standard Chartered – Annual Report 2023Supplementary informationSupplementary sustainability information Environmental and Social Risk Management (ESRM) Number of participants in ESRM training sessions1 Number of transactions reviewed Number of clients reviewed Client exits due to non-compliance with Position Statements Equator Principles reporting 2023 2,609² 708 1,341 41 2022 4,944³ 550 1,170 14 2021 1,280 547 786 – Project finance mandates Project-related corporate loans Project-related refinance7 Project advisory mandates Cat A4 Cat B5 Cat C6 Cat A Cat B Cat C Cat A Cat B Cat C Cat A Cat B Cat C Total 2021 Total 2022 Total 2023 2023 Sector Mining Infrastructure Oil and Gas Power Others8 Region Americas Asia-Pacific Europe, Middle East and Africa Designation9 Designated Country Non-Designated Country Independent Review Yes No 8 6 11 12 7 22 Project finance mandates A – – 2 9 – 1 6 4 3 8 10 1 B – 6 – 15 1 2 11 9 10 12 17 5 3 1 3 C – 3 – – – – 1 2 1 2 – 3 1 2 1 6 3 4 Project-related corporate loans A – 1 – – – – – 1 – 1 1 – B – – 1 1 2 – 2 2 1 3 2 2 – 4 1 C – 1 – – – – – 1 – 1 – 1 – – – 1 – – Project-related refinance A – – – – – – – – – – – – B – – – – – – – – – – – – – – 1 C – 1 – – – 1 – – 1 – – 1 – – – – – 1 Project advisory mandates A – – – – – – – – – – – – B – 1 – – – – – 1 – 1 1 – – – – C – – – – – – – – – – – – 1 Metric was updated in 2023 as all participants are counted for each live training or e-learning session. An employee may attend either or both types of training during the year. 2 Includes 1,338 participants in live training sessions and 1,271 participants who completed e-learning sessions. 3 Figure in 2022 was higher as the Group’s mandatory Sustainable Finance Foundation training was launched in this year, incorporating ESRM as part of the curriculum. Frontline colleagues were first required to complete the training in 2022, for other functions the timeline extended into 2023. 4 Cat A or Category A are projects with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented. 5 Cat B or Category B are projects with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. 6 Cat C or Category C are projects with minimal or no adverse environmental and social risks and/or impacts. 7 In line with Equator Principles (EP4), Standard Chartered now reports those transactions that trigger project-related refinance. 8 Sectors covered under “Others” include Agro-industries, Transport, Chemicals and Manufacturing. 9 Designation is split into Designated and Non-Designated Countries. Designated Countries are deemed by the Equator Principles to have robust environmental and social governance, legislation systems and institutional capacity designed to protect their people and the natural environment. Non-Designated Countries are countries that are not found on the list of Designated Countries. The list of countries can be found at www.equator-principles.com. 504 Standard Chartered – Annual Report 2023Supplementary informationSupplementary sustainability informationEnvironment Reporting coverage of data Offices reporting Net internal area of occupied property Annual operating income from 1 October to 30 September Scope 1 and 2 GHG emissions Scope 1 emissions Scope 2 emissions (location-based) Scope 2 emissions (market-based) Total Scope 1 and 2 emissions (market-based) Scope 1 and 2 emissions (UK and offshore area only) Scope 3 GHG emissions Category 1: Purchased goods and services (other) Category 1: Purchased goods and services (data centres) Category 2: Capital goods Category 3: Fuel- and energy-related activities Category 4: Upstream transportation and distribution Category 5: Waste generated in operations Category 6: Business travel (air travel) Category 6: Business travel (miscellaneous other than air travel) Category 7: Employee commuting Category 8: Upstream leased assets Category 9: Downstream transportation and distribution Category 10: Processing of sold products Category 11: Use of sold products Category 12: End-of-life treatment of sold products Category 13: Downstream leased assets (real estate) Category 14: Franchises Category 15: Investments (financed emissions) Total Scope 3 Total Scope 1, 2 and 3 1, 2, 4 12 3 13 1, 2 5 5 6 7, 8 8 6 6 6 6 6 8, 9 6 10, 14 tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e tCO2e Units Footnote Measured Scaled up Measured Scaled up Measured Scaled up 2023 2022 2021 No. of offices 762 875 838 m2 864,932 880,515 930,327 946,234 976,520 998,571 $million 1 17,414 15,863 14,541 2022–2023 % change (13) (7) 10 8,454 8,488 2,027 2,071 2,834 2,902 310 84,741 85,741 88,450 89,410 94,564 96,256 25,469 26,246 41,492 47,363 73,016 82,761 33,923 34,734 43,519 49,434 75,850 85,663 248 - - 286,304 380,732 330,244 4,431 42,707 nm 24,125 520 60,279 8,918 71,228 nm nm nm nm nm 7,898 nm 7,060 34,496 nm 20,300 747 39,107 2,654 61,917 nm nm nm nm nm 8,594 nm 41,944,000 42,450,410 42,485,144 49,512,000 50,067,607 50,117,041 45,200,000 45,650,190 45,735,853 3,654 54 4,994 236 43,132 47,217 nm 20,949 nm nm nm nm nm nm (4) (45) (30) 100 (25) (37) 24 nm 19 (30) 15 nm nm nm nm nm (8) nm (15) (15) (15) 505 Standard Chartered – Annual Report 2023Supplementary information Environment continued Scope 1 and 2 GHG emissions (market-based) intensity Environmental resource efficiency Energy Indirect non-renewable energy consumption Indirect renewable energy consumption Direct non-renewable energy consumption Direct renewable energy consumption Energy consumption Units tCO2e/ $ million GWh GWh GWh GWh GWh Energy consumption intensity kWh/m2 Energy consumption (UK and offshore area only) GWh Water Water consumption Water intensity Waste Waste generated Waste intensity Waste reused or recycled Million litres m3/m2 kg kg/m2 % Footnote Measured Scaled up Measured Scaled up Measured Scaled up 2023 2022 2021 2022–2023 % change 2 3 6 (36) 139 142 16 13 2 170 289 16 13 2 173 196 6 393 0.45 140 23 10 1 174 265 142 24 10 1 177 187 6 385 0.41 139 27 12 1 179 256 142 28 12 1 183 183 5 384 0.38 998,407 1.1 1,575,954 1.7 3,633,870 3.6 52 35 32 – (33) 30 100 (2) 5 – 2 10 (37) (32) 49 11 11 11 1 The reporting period for carbon emissions is 1 October to 30 September. This only differs for Category 1: Purchased Goods (other); Category 2: Capital Goods; Category 4: Upstream transportation and distribution; Category 6: Business travel (miscellaneous other than air travel) and Category 15: Investments where a period of 1 January to 31 December is used. Emissions data for these categories is also on a one-year lag with emissions reported in 2023 based on 2022 emissions data. 2 Scope 1 figure includes fugitive emissions for the first time in 2023. For more information on the methodology and assumptions used to calculate GHG emissions, please refer to the Environmental Reporting Criteria at sc.com/sustainabilityhub. 3 Location based emissions have been restated for prior comparative periods. Emissions erroneously included renewable energy certificates and power purchase agreements. Other scope 2 reductions outside clean power are attributed to footprint reduction and efficiency gains. 4 We use an independent third-party assurance provider to verify our Scope 1 and 2 GHG emissions. In 2023, limited assurance was completed by Global Documentation Ltd, excluding fugitive emissions in this first reporting year. 5 Scope 3 Category 1: Purchased goods and services is made up of third-party on-premise data centres (data centres) and all other purchased goods and services (other). Purchased goods and services (data centres) have been restated from 706tCO2e to 7,060tCO2e due to an error in converting the unit of emissions. 6 Scope 3 Category 3, Category 8, Category 9, Category 10, Category 11, Category 12 and Category 14 are not relevant for the Group due to the nature of our business, products and services and operations. GHG emissions associated with these categories are not deemed as relevant and/or material. 7 Scope 3 Category 5: Waste generated from operations emissions have been restated for the 2022 reporting period due to an out of date emissions factor being used in prior year. 8 Emissions for Scope 3 Category 5: Waste generated in operations, Category 7: Employee commuting and Category 13: Downstream leased assets were measured and reported for the first time in 2022. 9 Reporting of emissions associated with downstream leased aircrafts related to the Group’s aircraft leasing business has been paused following the sale of this business during 2023. 10 Scope 3 Category 15 emissions includes financed emissions associated with the Group’s transactions with clients. 2022 absolute emissions have been restated from 58.5MtCO2e to 49.5MtCO2e. This is due to (i) reduction in shipping absolute emissions as improved data has resulted in individual ship-level fair values being obtained, (ii) pausing of aviation emissions reporting due to the sale of the Group’s aviation leasing and lending business, (iii) decreases in Automotive Manufacturers’ emissions due to changes in the industry emissions reporting methodology referenced earlier, (iv) decreases in emissions from the ‘Others’ sector where improved data has been obtained to calculate emissions and (v) the sectoral baselining of emissions reporting for the Cement and Commercial Real Estate as separate high-emitting sectors. 11 Energy intensity metric updated to kWh per square meter in the current year from kWh per headcount in 2022. Water intensity metric updated to cubic litres of water per square meter in the current year from cubic litres of water per headcount in 2022. Waste intensity metric updated to cubic kilograms of waste per square meter in the current year from cubic metres of waste per headcount in 2022. 12 Scope 1 figure includes fugitive emissions for the first time in 2023 (2023: 5,266 tCO2e). Prior year data was not available for fugitive emissions. For more information on the methodology and assumptions used to calculate GHG emissions, please refer to the Environmental Reporting Criteria at sc.com/sustainabilityhub. 13 Market based emissions has decreased from 2022 to 2023 due to footprint reduction, efficiency gains and the purchase of additional energy attribution certificates by the Group. 14 Financed emissions are included on page 110. A facilitated emissions baseline was measured for the first time during the year. Refer to page 112 for more details. 506 Standard Chartered – Annual Report 2023Supplementary informationSupplementary sustainability information Supplier spend Top 10 sourcing locations by % overall spend Singapore United Kingdom India Hong Kong China³ Korea United Arab Emirates Malaysia United States Taiwan Regional spend Asia Europe and Americas Africa and the Middle East Category spend Technology Professional Services Property Marketing Human Resources Banking Operations Travel Office Supplies Others Portion of total third-party spend1,2 Number of supplier organisations with spend in 20231,2 Number of local suppliers by payment market1,2 Number of global4 suppliers (by payment market)1,2 36% 14% 11% 11% 5% 3% 3% 2% 2% 2% 74% 18% 8% 43% 16% 13% 13% 7% 3% 3% 1% 1% 1,447 881 2,256 761 936 497 408 565 294 492 8,936 1,704 3,409 1,578 2,066 2,490 1,913 1,503 362 485 786 380 966 563 2,080 483 813 472 241 427 161 416 7,225 1,041 2,507 1,346 1,870 2,431 1,823 1,395 338 443 753 374 481 318 176 278 123 25 167 138 133 76 1,711 663 902 232 196 59 90 108 24 42 33 6 1 Suppliers are counted by generic name (e.g. all DHL legal entities are counted as one DHL). 2 The same supplier may be used in more than one market. 3 ‘China’ refers to the People’s Republic of China and, for the purposes of this document only, excludes Hong Kong Special Administrative Region (Hong Kong), Macau Special Administrative Region (Macau) and Taiwan, ‘Korea’ or ‘South Korea’. 4 Suppliers with payments in more than one market. Charitable giving Cash contributions Employee time (non-cash item) Gifts in-kind (non-cash item)1 Management costs Total (direct contributions by Group) Leverage2 Total (including leverage) Percentage of prior year operating profit (PYOP) 1 Gifts in-kind comprises all non-monetary donations. 2 Leverage relates to the proceeds from staff and other fundraising. 2023 $million 2022 $million 2021 $million 31.2 28.7 0.4 5.4 65.7 2.9 68.6 1.6 23.7 17.5 0.3 5.0 46.5 4.8 51.3 1.5 28.2 11.4 2.6 4.7 46.9 1.9 48.8 3.0 507 Standard Chartered – Annual Report 2023Supplementary information Supplementary information Supplementary sustainability information 2023 Sustainability Aspirations 1. Mobilise Sustainable Finance Pillar Sustainable Finance Key performance indicators Mobilise $300 billion in Sustainable Finance (SF)¹ Period 2021–2030 Status 2023 progress update Mobilised $87.2bn between January 2021 and September 2023. Strong progress in 2023. We anticipate that mobilisation of SF will not be linear and will likely increase over time as the market matures and we help our clients transition. We remain on track for overall target in 2030. 2. Operationalise interim 2030 financed emissions targets to meet our 2050 net zero ambition Period Pillar Key performance indicators 2023 progress update Status Operations Net zero in our operations (Scope 1 and 2 2019–2025 GHG) Increase renewable energy sourcing to 100% by 2025 (RE100 compliant) 2022–2025 Achieve and maintain flight emissions 28% lower than our 2019 baseline of 94,000 tCO2e Divert 90% of waste from the landfill by 2030 2021–2023 2020–2030 2020/ 2021–2030 Financed Emissions Achieve 2030 interim financed emissions reduction in our most carbon-intensive sectors²: • -29% in Oil and Gas (absolute) • -45–67% in Power (production intensity) • -20–30% in Steel (production intensity) • -85% emissions reduction in Thermal Coal Mining (absolute) • Maintain production-intensity in Aluminium • Reduce our alignment delta in Shipping to 0% • -53–82% in Automotive Manufacturers (physical intensity) Set and disclose 2030 financed emission targets for high-emitting and carbon- intensive sectors in line with Net-Zero Banking Alliance (NZBA) guidelines: • 2023: Develop targets for Commercial Real Estate, Cement, Residential Mortgages, and Aluminium to be communicated in our 2023 Annual Report • 2024: Develop 2030 target for Agriculture to be communicated in our 2024 Annual Report We reduced our Scope 1 and 2 emissions by 30% to 34,734 tCO2e during 2023. Our measured real estate decreased by 7% during that time. The Group purchased and retired carbon credits for our residual operational Scope 1 and 2 emissions. We remain on track for overall target 2025. 66% of our electricity came from renewable sources across our portfolio after matching consumption with Renewable Energy Certificates (RECs). We remain on track for overall target 2025. Achieved 36% reduction in flight emissions compared to 2019 baseline. In 2023, we reduced our overall waste generated by 37% and achieved 52% avoidance of landfill (up from 31%). During the year, Oil and Gas sector's revenue-based target was changed to absolute target, effectively placing a carbon budget on the sector. Power and Steel sector targets changed from revenue-based to production-based intensity targets, which are considered best in class for these sectors. We remain on track for all interim 2030 sectoral science-based targets; however, transition alignment is needed for Shipping and Cement. For further information on the progress against each sector-specific 2030 target, refer to pages 109-117. 2021–2024 Targets have been set for Commercial Real Estate, Cement, Residential Mortgages and Aluminium and presented in this Annual Report, refer to pages 109-117. Target for Agriculture will be developed in 2024. We remain on track for overall target for 2024. 1 Mobilisation of Sustainable Finance is defined as any investment or financial service provided to clients that supports: (i) the preservation and/or improvement of biodiversity, nature or the environment; (ii) the long-term avoidance/decrease of GHG emissions, including the alignment of a client’s business and operations with a 1.5 degree Celsius trajectory (known as transition finance); (iii) a social purpose; or (iv) incentivises our clients to meet their own sustainability objectives (known as sustainability-linked finance). 2 Refer to the Group’s ‘Net zero methodological white paper – The journey continues’ via sc.com/sustainabilityhub and aligned with our Position Statements available at sc.com/sustainabilityhub. For Aviation, the Group completed the sale of its global aviation finance leasing business and the majority of its aviation lending book in August 2023. Noting the distortive effects that the sale of this business would create in our emissions profile for this sector, the progress against this target has been paused for year-end 2023. This will be re-assessed based on the size and materiality of the remaining portfolio in 2024. 508 Standard Chartered – Annual Report 2023 3. Enhance and deepen leadership within the sustainability ecosystem Pillar Key performance indicators Period Status 2023 progress update Ongoing Market Integrity, Trust, Conduct and Compliance Partnering to lead the fight against financial crimes: • Participating in public–private partnerships to contribute to understanding most recent developments, share intelligence and good practices • Contribute to developing typologies and red flags for financial flows Develop and deliver a targeted outreach programme, including through key international platforms, aimed at safely and transparently reducing barriers to capital mobilisation for sustainable development 2022–2024 4. Drive social impact with our clients and communities During 2023, the Group undertook a series of engagements across multiple jurisdictions in furtherance of this aspiration. The Group continued engagement with international and regional standard-setters, such as the Financial Action Task Force and Wolfsberg Group. In many jurisdictions, the Group contributed, either directly or via trade bodies, to reform of financial crime legislation and regulation, and to public–private partnerships to tackle financial crime. The Group has participated in a number of financial crime conferences across our footprint - chairing and leading many panel discussions, and contributing subject–matter expertise whenever possible. In addition, the Group has been engaged in planning discussions with countries and bodies seeking to establish new partnerships and information-sharing arrangements. The Group continued to proactively engage in policy discussions via a number of major international and regional platforms and conferences. Through these activities, the Group sought to promote robust policy and regulatory frameworks to ensure the credibility and integrity of sustainable investments and to support capital mobilisation for sustainable finance. Pillar People Key performance indicators Period Status 2023 progress update Increase gender representation to 35% women in senior roles³ 2016–2025 Create Supplier Diversity and Inclusion Plans for all in-scope markets with Supply Chain Management (SCM) team presence to support 40 per cent of our newly onboarded suppliers being diverse⁴ 2022–2025 Increase our Culture of Inclusion score to 84.5%⁵ 2020–2024 Grow our employee MyVoice score to the question “The way we operate day-to-day is aligned with our sustainability strategy” from 2021 baseline of 84% to 88% 2022–2024 Women leadership representation at the end of 2023 was 32.5%. We remain on track for our overall target in 2025. 100% of in-scope markets have Supplier Diversity and Inclusion Plans and 40% of our newly onboarded suppliers were diverse. 83.23% of employees reported positive sentiments around our culture of inclusion. We remain on track for our overall 2024 target. 86% of employees have said the way we operate day to day is aligned with our sustainability strategy. We remain on track for our overall 2024 target. 3 Senior roles refer to roles thatare at least at the level of Executive Director (Band 4) and Managing Directors (Band 3) as of 31 December of each reporting year. 4 For Standard Chartered diverse suppliers are defined as: • Small Enterprise (10-49 employees + turnover

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