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Final Terms dated: 20 January 2020
HSBC Bank plc
(A company incorporated with limited liability in England with registered number 14259)
Programme for the Issuance of Notes and Warrants
Issue of
150,000 Notes (USD 1,579,500) Market Access Notes linked to ordinary shares issued by YANBU
CEMENT ORD SHS SAR 10.00 (the "Underlying Security") due Feburary 2021(the "Notes")
PART A – CONTRACTUAL TERMS
This document constitutes the Final Terms relating to the issue of the Tranche of Notes described herein
Terms used herein shall be deemed to be defined as such for the purposes of the terms and conditions of
the Notes (the "Conditions") set forth in the Base Prospectus dated 31 May 2019 in relation to the above
Programme, together with each supplemental prospectus relating to the Programme published by the Issuer
after 31 May 2019 but before the issue date or listing date of the Notes, whichever is later, to which these
Final Terms relate which together constitute a base prospectus ("Prospectus") for the purposes of the
Prospectus Directive (Directive 2003/71/EC as amended or superseded, the "Prospectus Directive"). This
document constitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the
Prospectus Directive and must be read in conjunction with such Prospectus. However, a summary of the
issue of the Notes is annexed to these Final Terms.
PRIIPs REGULATION - PROHIBITION OF SALES TO EEA RETAIL INVESTORS - The Notes
are not intended to be offered, sold or otherwise made available to and should not be offered, sold or
otherwise made available to any retail investor in the European Economic Area ("EEA"). For these
purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11)
of Article 4(1) of Directive 2014/65/EU, as amended ("MiFID II"); (ii) a customer within the meaning of
Directive 2002/92/EC (as amended or superseded, the "Insurance Mediation Directive"), where that
customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or
(iii) not a qualified investor as defined in the Prospectus Directive. Consequently no key information
document required by Regulation (EU) No 1286/2014 (the "PRIIPs Regulation") for offering or selling
the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore
offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be
unlawful under the PRIIPs Regulation.
Singapore SFA Product Classification: In connection with Section 309B of the Securities and Futures
Act (Chapter 289) of Singapore (the "SFA") and the Securities and Futures (Capital Markets Products)
Regulations 2018 of Singapore (the "CMP Regulations 2018") the Issuer has determined, and hereby
notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are capital markets
products other than prescribed capital markets products (as defined in the CMP Regulations 2018) and
are Specified Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of
Investment Products and MAS Notice FAA-N16: Notice on Recommendation on Investment Products).
Full information on the Issuer and the offer of the Notes is only available on the basis of the combination
of these Final Terms and the Prospectus. The Prospectus is available for viewing during normal business
hours at HSBC Bank plc, 8 Canada Square, London E14 5HQ, United Kingdom and www.hsbc.com (please
follow links to 'Investors', 'Fixed income investors', 'Issuance programmes') and copies may be obtained
from HSBC Bank plc, 8 Canada Square, London E14 5HQ, United Kingdom.
1. Issuer: HSBC Bank plc
2. Tranche Number: 1
3. Settlement Currency: United States Dollar (“USD”)
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4. Aggregate Principal Amount of
Notes admitted to trading:
(i) Series: 150,000 Notes (USD 1,579,500)
(ii) Tranche: 150,000 Notes (USD 1,579,500)
5. Issue Price: USD 10.53
6. Denomination(s): USD 10.53
7. Issue Date: 21 January 2020
8. Maturity Date: 08 Feburary 2021
PROVISIONS RELATING TO ADDITIONAL PAYMENTS AND INTEREST (IF ANY)
PAYABLE
9. Default Rate: 1 week USD LIBOR plus 1 per cent., reset daily
10. Additional Payments for
Underlying Index-Linked Notes
Not Applicable
PROVISIONS RELATING TO REDEMPTION
11. Redemption Commission
Percentage:
1.00%
12. Early Redemption Amount: Fair Market Value
13. Buy-Back provisions: Not Applicable
14. (i) Administration Fee: Not Applicable
PROVISIONS APPLICABLE TO EQUITY-LINKED NOTES AND INDEX-LINKED NOTES
15. Provisions for Underlying Equity-
Linked Notes:
Applicable
(a) Underlying Security-Linked
Notes:
Applicable
Underlying
Securities
(including ISIN
or other security
identification
code)
Underlying
Companies
Number
of
Underlyi
ng
Securitie
s per
Note Exchange(s)
Related
Exchange(s)
Underlying
Currency(ies)
China Connect Underlying / PRC
Underlying / PRC Underlying that is
B-Shares
Ordinary shares issued
by the
Underlying Company:
SA00078795
19
YANBU CEMENT
ORD SHS
SAR 10.00 1
SAUDI
ARABIA
SAUDI
ARABIA SAR Not applicable
(i) Underlying Security(ies): As specified in the above table
(ii) Underlying
Company(ies):
As specified in the above table
(iii) Exchange(s): As specified in the above table
(iv) Related Exchange(s): As specified in the above table
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(v) Underlying Currencies: As specified in the above table
(vi) PRC Underlying: No
(vii) China Connect
Underlying:
No
(viii) PRC Underlying that is B-
shares:
No
(ix) Additional Disruption
Events:
Change in Law Insolvency Filing Hedging Disruption
Increased Costs of Hedging Currency Event
(b) Underlying Fund-Linked Notes: Not Applicable
16. Provisions for Underlying Index-
Linked Notes:
Not Applicable
17. Further provisions applicable to
Underlying Index-Linked Notes:
Not Applicable
VALUATION PROVISIONS
18. Valuation Date(s): 01 Feburary 2021
19. Valuation Time: The definition in the Conditions applies
GENERAL PROVISIONS APPLICABLE TO THE NOTES
20. Form of Notes: Registered Notes
21. If issued in bearer form: Not Applicable
22. Exchange Date for exchange of
Temporary Global Note:
Not Applicable
23. If issued in registered form: Applicable
- Initially represented by: Combined Global Registered Note
- Combined Global Registered
Note exchangeable at the option
of the Issuer in circumstances
where the Issuer would suffer a
material disadvantage following
a change of law or regulation:
Yes
24. Payments:
(i) Relevant Financial
Centre Day:
New York
(ii) Business Centre(s): New York and London
(iii) Payment of Alternative
Payment Currency
Equivalent:
Not Applicable
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25. Redenomination: Not Applicable
26. Supplementary Amount: Not applicable
CONFIRMED
HSBC BANK PLC
By: ......................................................................
Authorised Signatory
Date: ......................................................................
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PART B – OTHER INFORMATION
LISTING
1. (i) Listing: Application will be made to admit the Notes to listing on the
Official List of the United Kingdom Financial Conduct
Authority. No assurance can be given as to whether or not, or
when, such application will be granted.
(ii) Admission to
trading:
Application will be made for the Notes to be admitted to trading
on the regulated market of the London Stock Exchange plc. No
assurance can be given as to whether or not, or when, such
application will be granted.
2. REASONS FOR THE OFFER AND USE OF PROCEEDS, ESTIMATED NET
PROCEEDS AND TOTAL EXPENSES
(i) Reasons for the
offer and use of
proceeds:
Not applicable
(ii) Estimated net
proceeds:
Information not provided
(iii) Estimated total
expenses:
Information not provided
3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE
Save for any fees payable to the Dealer(s), so far as the Issuer is aware, no person involved in
the issue of the Notes has an interest material to the issue The Dealer(s) and their affiliates
have engaged, and may in the future engage, in investment banking and/or commercial
banking transactions with, and may perform other services for, the Issuer and its affiliates in
the ordinary course of business.
4. INFORMATION ABOUT THE UNDERLYING
Details of past and further performance and volatility of the Underlying Securities are
obtainable from the following display pages on Bloomberg and such information does not form
part of this document: (Source: Bloomberg Financial Markets Information Service) YANBU
CEMENT ORD SHS SAR 10.00. Additional details relating to the Underlying Securities and
the issuer of the Underlying Securitiesare available on the following websites of the issuers of
such Underlying Securitieswww.yamamacement.com. The Issuer confirms that the
information sourced from Bloomberg Financial Markets Information Service and the website
of the issuers of the Underlying Securities has been accurately reproduced. As far as the Issuer
is aware and is able to ascertain from information available from such source, no facts have
been omitted which would render the reproduced information inaccurate or misleading.
DISTRIBUTION
5. Method of distribution: Non-Syndicated
(i) If syndicated, names
and addresses and
underwriting
commitment of
Relevant Dealer/Lead
Manager:
Not Applicable
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(ii) If syndicated, names
and addresses and
underwriting
commitments of other
Dealers/ Lead
Managers (if any):
Not Applicable
(iii) Date of Subscription
Agreement:
Not Applicable
(iv) Stabilising
Manager(s) (if any):
Not Applicable
6. If non-syndicated, name
and address of Relevant
Dealer:
HSBC Bank Plc
7. Additional selling
restrictions:
Not Applicable/
OPERATIONAL INFORMATION
8. ISIN: XS2106574796
9. Common Code: 210657479
10. SEDOL: BL39721
11. CUSIP: Not Applicable
12. Valoren Number: Not Applicable
13. Other identifier / code: Not Applicable
14. Clearing System: Euroclear
15. Common Depositary: HSBC Bank plc
16. Settlement procedures: Medium Term Note
17. Delivery: Delivery against payment
18. TEFRA Rules applicable to
Bearer Notes:
TEFRA Not Applicable
19. Additional U.S. federal
income tax considerations:
Not applicable. The Notes are not Section 871(m) Notes for the
purpose of Section 871
20. Calculation Agent: HSBC Bank plc
21. Principal Paying
Agent/Registrar/Issue
Agent/Transfer Agent:
HSBC Bank plc
22. Additional Paying Agent(s)
(if any):
Not Applicable
BENCHMARKS
23. Details of benchmarks
administrators and
registration under
Not Applicable
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Benchmarks Regulation:
TRANSFER RESTRICTIONS
AUSTRALIA
(I) NO PROSPECTUS OR OTHER DISCLOSURE DOCUMENT (AS DEFINED IN THE
CORPORATIONS ACT) IN RELATION TO THE PROGRAMME OR THE NOTES HAS
BEEN, OR WILL BE, LODGED WITH ASIC OR THE ASX. THE PURCHASER IS A
"PROFESSIONAL INVESTOR" WITHIN THE MEANING OF SECTION 708(11) OF THE
CORPORATIONS ACT AND, UNLESS THE RELEVANT FINAL TERMS OTHERWISE
PROVIDES, IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, IT:
(A) SHALL NOT (DIRECTLY OR INDIRECTLY) OFFER OR INVITE APPLICATIONS
FOR THE ISSUE, SALE OR PURCHASE OF THE NOTES IN, TO OR FROM
AUSTRALIA (INCLUDING AN OFFER OR INVITATION WHICH IS RECEIVED BY
A PERSON IN AUSTRALIA); AND
(B) SHALL NOT DISTRIBUTE OR PUBLISH THIS BASE PROSPECTUS OR ANY
OTHER OFFERING MATERIAL OR ADVERTISEMENT RELATING TO THE
NOTES IN AUSTRALIA,
UNLESS:
I. EACH OFFEREE, AND ANY PERSON ON WHOSE ACCOUNT OR BEHALF
AN OFFEREE IS ACTING, IS A "PROFESSIONAL INVESTOR" WITHIN
THE MEANING OF SECTION 708(11) OF THE CORPORATIONS ACT;
AND
II. SUCH ACTION COMPLIES WITH ALL APPLICABLE LAWS,
REGULATIONS AND DIRECTIVES AND DOES NOT REQUIRE ANY
DOCUMENT TO BE LODGED WITH ASIC OR ASX.
(II) THE AGGREGATE CONSIDERATION PAYABLE BY EACH OFFEREE OR INVITEE IS AT
LEAST A$500,000 (OR EQUIVALENT IN OTHER CURRENCIES, BUT DISREGARDING
MONEYS LENT BY THE OFFEROR OR ITS ASSOCIATES) OR THE OFFER OR
INVITATION OTHERWISE DOES NOT REQUIRE DISCLOSURE TO INVESTORS IN
ACCORDANCE WITH PART 6D.2 AND PART 7.9 OF THE CORPORATIONS ACT AND
COMPLIES WITH THE TERMS OF ANY AUTHORITY GRANTED UNDER THE BANKING
ACT 1959 (CTH) OF AUSTRALIA.
KOREA
ANY TRANSFER OF NOTES TO A KOREAN RESIDENT AS THE TERM IS DEFINED IN THE
FOREIGN EXCHANGE TRANSACTION LAW OF THE REPUBLIC KOREA AND ITS
PRESIDENTIAL DECREE SHALL GIVE THE ISSUER THE RIGHT TO COMPEL THE
TRANSFEREE TO REDEEM ANY NOTES HELD BY SUCH TRANSFEREE.
MALAYSIA
ANY PLEDGE, SALE OR OTHER TRANSFER OF NOTES TO A PERSON THAT IS A MALAYSIAN
RESIDENT AS THE TERM IS DEFINED IN THE PROSPECTUS SHALL GIVE THE ISSUER THE
RIGHT TO COMPEL THE TRANSFEREE TO REDEEM ANY NOTES HELD BY SUCH
TRANSFEREE. THE FOREGOING SHALL NOT APPLY TO ANY PLEDGE, SALE OR OTHERWISE
TRANSFER OF NOTES WHERE:
(A) SUCH PLEDGE, SALE OR TRANSFER TO OR FOR THE BENEFIT OF A RESIDENT IS
WHOLLY CONDUCTED OUTSIDE MALAYSIA; AND
(B) THE INVESTMENT BY SUCH PERSON IN THE NOTES IS IN ACCORDANCE WITH THE
PROVISIONS OF THE MALAYSIAN FINANCIAL SERVICES ACT 2013 OR THE
MALAYSIAN ISLAMIC FINANCIAL SERVICES ACT 2013 AND THE FOREIGN
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EXCHANGE ADMINISTRATION NOTICES ISSUED THEREUNDER, OR IN
ACCORDANCE WITH RELEVANT APPROVALS OBTAINED FROM THE CENTRAL
BANK OF MALAYSIA THEREUNDER, AS THE CASE MAY BE.
SRI LANKA
THE SALE OR TRANSFER OF NOTES TO A SRI LANKAN NATIONAL RESIDENT IN SRI LANKA
(INCLUDING ENTITIES INCORPORATED IN SRI LANKA), CONTRARY TO THE SRI LANKAN
FOREIGN EXCHANGE LAW SHALL GIVE THE ISSUER THE RIGHT TO COMPEL THE
TRANSFEREE TO REDEEM ANY NOTES HELD BY SUCH TRANSFEREE.
TAIWAN
NO OFFERS OR DISTRIBUTIONS OF THE NOTES AND ANY DOCUMENTS RELATING TO THE
NOTES ARE PERMITTED IN TAIWAN.
ANY SALE OR OTHER TRANSFER OF NOTES TO (I) A RESIDENT(S) OF THE PRC (EXCLUDING
HONG KONG AND MACAU) FOR THE CURRENT PURPOSE) OR AN ENTITY(IES) DOMICILED
IN THE PRC ("PRC PERSON"), (II) AN ENTITY(IES) OTHER THAN A FUND ESTABLISHED
OUTSIDE THE PRC (INCLUDING SUCH ENTITY(IES) ESTABLISHED IN HONG KONG OR
MACAU) THAT IS CONTROLLED BY A PRC PERSON(S), (III) AN ENTITY(IES) ESTABLISHED
OUTSIDE THE PRC (INCLUDING SUCH ENTITY(IES) ESTABLISHED IN HONG KONG OR
MACAU) WHICH IS MORE THAN THIRTY PERCENT (30%) OWNED, DIRECTLY OR
INDIRECTLY, BY A PRC PERSON(S); OR (IV) A FUND ESTABLISHED OUTSIDE THE PRC
(INCLUDING A FUND ESTABLISHED IN HONG KONG OR MACAU) WHICH FUND IS: (A) A
PUBLICLY OFFERED FUND THE MANAGEMENT COMPANY OF WHICH IS CONTROLLED OR
MORE THAN 30% OWNED, DIRECTLY OR INDIRECTLY, BY PRC PERSONS AND THE
INVESTMENTS IN WHICH FROM PRC PERSONS EXCEEDS 30% OF ASSETS UNDER
MANAGEMENT; OR (B) A PRIVATELY PLACED FUND WHICH IS CONTROLLED OR MORE
THAN 30% OWNED, DIRECTLY OR INDIRECTLY, BY PRC PERSONS SHALL GIVE THE ISSUER
THE RIGHT TO COMPEL THE TRANSFEREE TO REDEEM ANY NOTES HELD BY SUCH
TRANSFEREE.
NOTES ARE NOT PERMITTED TO BE SOLD TO ANY HOLDER UTILISING FUNDS SOURCED
FROM TAIWAN OR THE PRC FOR THE PURPOSES OF PURCHASING THE NOTES.
UNITED STATES
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE STATE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. EACH PURCHASER OF THIS
NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE
ISSUER THAT THIS NOTE MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY (A) IN THE UNITED STATES ONLY TO "QUALIFIED
INSTITUTIONAL BUYERS" OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS
DEFINED IN REGULATION S) WHO ARE "QUALIFIED INSTITUTIONAL BUYERS" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) AND (B) TO NON-U.S.
PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT ("REGULATION
S")) IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S, (C) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 (IF AVAILABLE) OR (D) TO THE
ISSUER OR ITS AFFILIATES. NO REPRESENTATION CAN BE MADE AS TO THE
AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
FOR THE RESALE OF NOTES REPRESENTED HEREBY. THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT
OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
- 9 -
EACH BENEFICIAL OWNER OF THIS NOTE OR AN INTEREST HEREIN AND ANY PARTY
CAUSING THE BENEFICIAL OWNER TO PURCHASE OR HOLD ANY INTEREST IN THIS NOTE
(SUCH AS AN INVESTMENT MANAGER), WILL BE DEEMED TO REPRESENT AND WARRANT
(THE LATTER, IN ITS FIDUCIARY AND INDIVIDUAL CAPACITY) ON EACH DATE ON WHICH
THE BENEFICIAL OWNER (OR ANY PARTY ON WHOSE BEHALF IT IS ACTING) ACQUIRES
THIS NOTE THROUGH AND INCLUDING THE DATE ON WHICH THE BENEFICIAL OWNER (OR
ANY PARTY ON WHOSE BEHALF IT IS ACTING) DISPOSES OF ITS INTEREST IN THIS NOTE
THAT EITHER (A) SUCH BENEFICIAL OWNER IS NOT (AND FOR SO LONG AS IT HOLDS THIS
NOTE OR AN INTEREST THEREIN WILL NOT BE), AND IS NOT (AND FOR SO LONG AS IT
HOLDS THIS NOTE OR AN INTEREST THEREIN WILL NOT BE) ACTING ON BEHALF OF A
"BENEFIT PLAN INVESTOR" AS DEFINED IN SECTION 3(42) OF THE UNITED STATES
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1986, AS AMENDED ("ERISA") OR A
GOVERNMENTAL, CHURCH OR NON-U.S. PLAN WHICH IS SUBJECT TO ANY FEDERAL,
STATE, LOCAL OR NON-U.S. LAW OR REGULATION THAT IS SIMILAR TO THE PROHIBITED
TRANSACTION PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE UNITED
STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (ANY SUCH LAW
OR REGULATION, A "SIMILAR LAW"), INCLUDING ANY ENTITY WHOSE UNDERLYING
ASSETS INCLUDE THE ASSETS OF ANY BENEFIT PLAN INVESTOR OR SIMILAR LAW PLAN,
THE INCLUSION OF WHICH FOR PURPOSES OF ERISA OR ANY SIMILAR LAW, AS THE CASE
MAY BE, WOULD RESULT IN SUCH ENTITY BEING DEEMED A BENEFIT PLAN INVESTOR OR
SIMILAR LAW PLAN OR (B) SUCH BENEFICIAL OWNER'S ACQUISITION, HOLDING AND
DISPOSITION OF THIS NOTE OR AN INTEREST THEREIN DOES NOT AND WILL NOT
CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION IN VIOLATION OF SECTION 406
OF ERISA OR SECTION 4975 OF THE CODE AS A RESULT OF SATISFYING ALL OF THE
APPLICABLE CONDITIONS OF ONE OR MORE OF THE FOLLOWING PROHIBITED
TRANSACTION CLASS EXEMPTIONS ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60 OR
PTCE 96-23 ISSUED BY THE U.S. DEPARTMENT OF LABOR, OR SUCH OTHER PROHIBITED
TRANSACTION EXEMPTION FOR WHICH THE PURCHASER OR TRANSFEREE (AND, IF
APPLICABLE, ANY PERSON OR ENTITY ACTING ON BEHALF OF SUCH PURCHASER OR
TRANSFEREE) DEMONSTRATES TO THE SATISFACTION OF THE ISSUER THAT ALL
APPLICABLE CONDITIONS ARE SATISFIED (OR, IN THE CASE OF A GOVERNMENTAL,
CHURCH PLAN OR NON-U.S. PLAN, WILL NOT RESULT IN A VIOLATION OF ANY SIMILAR
LAW), IN ADDITION, EACH PURCHASER AND TRANSFEREE OF ANY SUCH OFFERED NOTE
OR INTEREST THEREIN THAT IS A BENEFIT PLAN INVESTOR SHALL BE REQUIRED OR
DEEMED TO REPRESENT AND WARRANT TO THE ISSUER, ON EACH DAY FROM THE DATE
ON WHICH SUCH BENEFICIAL OWNER ACQUIRES SUCH NOTE OR INTEREST THROUGH
AND INCLUDING THE DATE ON WHICH IT DISPOSES OF SUCH NOTE OR INTEREST, AND AT
ANY TIME WHEN REGULATION 29 C.F.R. SECTION 2510.3-21, AS MODIFIED IN 2016, IS
APPLICABLE, THAT (A) THE FIDUCIARY MAKING THE DECISION TO INVEST IN SUCH NOTE
ON ITS BEHALF (THE "INDEPENDENT FIDUCIARY") IS A BANK, INSURANCE COMPANY,
REGISTERED INVESTMENT ADVISER, BROKER-DEALER OR OTHER PERSON WITH
FINANCIAL EXPERTISE, IN EACH CASE AS DESCRIBED IN 29 C.F.R. SECTION 2510.3-
21(C)(1)(I); (B) THE INDEPENDENT FIDUCIARY IS AN INDEPENDENT PLAN FIDUCIARY
WITHIN THE MEANING OF 29 C.F.R. SECTION 2510.3-21(C); (C) THE INDEPENDENT
FIDUCIARY IS CAPABLE OF EVALUATING INVESTMENT RISKS INDEPENDENTLY, BOTH IN
GENERAL AND WITH REGARD TO PARTICULAR TRANSACTIONS AND INVESTMENT
STRATEGIES; (D) THE INDEPENDENT FIDUCIARY IS RESPONSIBLE FOR EXERCISING
INDEPENDENT JUDGEMENT IN EVALUATING THE ACQUISITION, HOLDING AND
DISPOSITION OF SUCH NOTE; AND (E) NEITHER THE BENEFIT PLAN INVESTOR NOR THE
INDEPENDENT FIDUCIARY IS PAYING OR HAS PAID ANY FEE OR OTHER COMPENSATION
TO ANY OF THE ISSUER AND ITS AFFILIATES (THE "TRANSACTION PARTIES") FOR
INVESTMENT ADVICE (AS OPPOSED TO OTHER SERVICES) IN CONNECTION WITH ITS
ACQUISITION OR HOLDING OF SUCH NOTE. IN ADDITION, EACH SUCH PURCHASER OR
TRANSFEREE WILL BE REQUIRED OR DEEMED TO ACKNOWLEDGE AND AGREE THAT THE
INDEPENDENT FIDUCIARY (X) UNDERSTANDS THAT NONE OF THE TRANSACTION
PARTIES OR OTHER PERSONS THAT PROVIDE MARKETING SERVICES, NOR ANY OF THEIR
AFFILIATES, HAS PROVIDED, AND NONE OF THEM WILL PROVIDE, IMPARTIAL
INVESTMENT ADVICE AND THEY ARE NOT GIVING ANY ADVICE IN A FIDUCIARY
CAPACITY, IN CONNECTION WITH THE PURCHASER’S OR TRANSFEREE’S ACQUISITION OR
HOLDING OF SUCH NOTES AND (Y) HAS RECEIVED AND UNDERSTANDS THE DISCLOSURE
- 10 -
OF THE EXISTENCE AND NATURE OF THE INTERESTS OF THE TRANSACTION PARTIES
DISCLOSED IN THE BASE PROSPECTUS AND ANY RELATED MATERIALS. "BENEFIT PLAN
INVESTORS" INCLUDE (1) ANY EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA), THAT IS SUBJECT TO PART 4 OF TITLE I OF ERISA, (2) ANY PLAN DESCRIBED IN
SECTION 4975(e)(1) OF THE CODE, INCLUDING, WITHOUT LIMITATION, INDIVIDUAL
RETIREMENT ACCOUNTS AND KEOGH PLANS, AND (3) ANY ENTITY WHOSE UNDERLYING
ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY
PURSUANT TO THE PLAN ASSET REGULATION ISSUED BY THE UNITED STATES
DEPARTMENT OF LABOR, 29 C.F.R. § 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA.
VIETNAM
ANY PLEDGE, SALE OR OTHER TRANSFER OF NOTES TO A PERSON THAT IS A VIETNAMESE
RESIDENT (OTHER THAN A QUALIFIED VIETNAMESE ENTITY) AS THE TERMS ARE
DEFINED IN THE PROSPECTUS AND/OR THE FINAL TERMS SHALL GIVE THE ISSUER THE
RIGHT TO COMPEL THE TRANSFEREE TO REDEEM ANY NOTES HELD BY SUCH
TRANSFEREE.
- 11 -
ANNEX
ADDITIONAL PROVISIONS NOT REQUIRED BY THE SECURITIES NOTE RELATING TO
THE UNDERLYING
INFORMATION ABOUT THE SECURITY
The information set out in this Annex relating to YANBU CEMENT ORD SHS SAR 10.00 (Bloomberg:
YNCCO AB ) provides a brief discussion of the business of the Underlying Company and the split-adjusted
high, low and end-of-period closing prices for each Security for each calendar quarter in the period from
30 June 2003 to 31 December 2019 and Daily form 01 Janaury 2020 to 14 Januay 2020. The Issuer confirms
that the information set out in this Annex relating to YANBU CEMENT ORD SHS SAR 10.00 of the
Underlying Company (the "Security") has been accurately reproduced from information available from the
website of the issuer of the underlying Security, www.yamamacement.com and Bloomberg Financial
Markets Information Service. As far as the Issuer is aware and is able to ascertain from information
available from such source, no facts have been omitted which would render the reproduced information
inaccurate or misleading.
1. Description of the Underlying Company (Source: Bloomberg Financial Markets
Information Service)
2. The Underlying Company is incorporated in SAUDI ARABIA .
The Underlying Company is YANBU CEMENT ORD SHS SAR 10.00
3. Listing
The Security is listed on the London Stock Exchange
4. Historical prices
The historical prices of a Security should not be taken as an indication of future performance,
and no assurance can be given that the price of a Security will perform sufficiently from year
to year to cause the holders of the Notes to receive any return on their investment.
Date Px High Px Low Px Last
6/30/2003 308.75 209.00 300.00
9/30/2003 335.00 270.00 311.00
12/31/2003 329.25 297.00 323.00
3/31/2004 360.75 318.00 335.00
6/30/2004 364.00 321.00 343.00
9/30/2004 364.50 340.00 356.25
12/30/2004 482.00 345.25 474.75
3/31/2005 543.75 410.00 460.50
6/30/2005 830.00 466.00 769.50
9/29/2005 748.75 530.00 675.00
12/29/2005 800.00 620.00 727.00
3/30/2006 810.00 483.00 596.00
6/29/2006 665.00 77.25 114.00
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9/28/2006 120 84 90
12/31/2006 92 66.25 72
3/29/2007 84 67 67.25
6/28/2007 72 62 68.25
9/30/2007 82.00 67.25 79.25
12/31/2007 100.25 77 94.25
3/31/2008 95.5 76.75 79.75
6/30/2008 84 76 77
9/30/2008 78.5 56 62
12/31/2008 64.75 34.2 39
3/31/2009 49.3 35.1 42.4
6/30/2009 52.75 41.8 48.1
9/30/2009 56.75 47 56.75
12/31/2009 56 47.5 48.5
3/31/2010 52.25 46.7 46.8
6/30/2010 46.8 40.5 43
9/30/2010 43.1 41.4 41.7
12/30/2010 43.6 39.6 42.8
3/31/2011 47 37.6 45.3
6/30/2011 58.25 43.5 55
9/29/2011 64.25 54.25 57.25
12/29/2011 69 55.25 69
3/29/2012 79.75 58.25 77.25
6/28/2012 83 71 78
9/30/2012 82.25 72.5 74.5
12/31/2012 81 70 78.5
3/31/2013 97 58.25 58.25
6/30/2013 71.25 58 67.25
9/30/2013 80.75 66.75 73.75
12/31/2013 75 65.25 66.75
3/31/2014 73.25 63.5 70.25
6/30/2014 76 68 73
- 13 -
9/30/2014 82.5 70.5 77.49
12/31/2014 79.5 54.5 61.64
3/31/2015 72.25 59.5 69.22
6/30/2015 69.75 62.75 63.41
9/30/2015 68.75 50.5 53.67
12/31/2015 54.25 42.7 43.63
3/31/2016 52.25 34.5 49.15
6/30/2016 49.7 41 43.32
9/29/2016 43.4 30 33.66
12/29/2016 40.7 25.8 40.5
3/30/2017 41.1 32.3 36.7
6/29/2017 36.8 31 31.92
9/28/2017 33 27.6 28.49
12/31/2017 34.8 23.5 33.82
3/29/2018 36.2 30.4 33.14
6/28/2018 33.2 26 27.05
9/30/2018 27.5 19.9 21.66
12/31/2018 25.95 18.9 24
3/31/2019 30.6 22.54 28.15
6/30/2019 32.05 26.9 30.9
9/30/2019 36.1 30.75 34.65
12/31/2019 40.2 30.55 38.15
Date Px High Px Low Px Last
1/14/2020 40.75 40.00 40.20
1/13/2020 40.95 39.50 40.40
1/12/2020 40 39.3 39.75
1/9/2020 39.45 37.9 39.3
1/8/2020 37.35 36.15 37.3
1/7/2020 37.9 36.5 36.7
1/6/2020 38 37.2 37.45
1/5/2020 39.2 37.75 38.1
- 14 -
1/2/2020 40 39.2 39.25
1/1/2020 39.7 38.2 39.65
- 15 -
For listed Notes only
ISSUE SPECIFIC SUMMARY
Section A – Introduction and Warnings
A.1 Introduction and
Warnings:
This summary must be read as an introduction to the prospectus and any
decision to invest in the Notes should be based on a consideration of the
prospectus as a whole by the investor, including any information
incorporated by reference and read together with the relevant final terms.
Where a claim relating to the information contained in the prospectus is
brought before a court in a Member State of the European Economic
Area, the claimant may, under the national legislation of the Member
States, be required to bear the costs of translating the prospectus before
the legal proceedings are initiated.
Civil liability attaches only to those persons who have tabled this
summary including any translation thereof, but only if this summary is
misleading, inaccurate or inconsistent when read together with the other
parts of the prospectus or it does not provide, when read together with
the other parts of the prospectus, key information in order to aid
investors when considering whether to invest in the Notes.
A.2 Consent by the
Issuer to the use of
the prospectus in
subsequent resale
or final placement
of the securities,
indication of offer
period and
conditions to
consent for
subsequent resale
or final placement
and warning:
Not Applicable. The prospectus has been prepared solely in connection
with the admission of Notes to trading on a regulated market pursuant to
Article 3(3) of the Prospectus Directive and there will be no public offer
of the Notes. The Issuer does not consent to the use of the prospectus
for subsequent resales.
Section B – Issuer
B.1 Legal and
commercial name
of the Issuer:
The legal name of the issuer is HSBC Bank plc (the "Issuer") and, for
the purposes of advertising, the Issuer uses an abbreviated version of its
name, HSBC.
B.2 Domicile and legal
form of the Issuer,
the legislation
under which the
Issuer operates
and its country of
incorporation:
The Issuer is a public limited company incorporated and registered in
England and Wales under registration number 14259 with limited
liability. The liability of its members is limited. The Issuer was
constituted by Deed of Settlement on 15 August 1836 and in 1873,
registered under the Companies Act 1862 as an unlimited company. It
was re-registered as a company limited by shares under the Companies
Acts 1862 to 1879 on 1 July 1880. On 1 February 1982 the Issuer
re-registered under the Companies Acts 1948 to 1980 as a public limited
company.
The Issuer is subject to primary and secondary legislation relating to
financial services and banking regulation in the United Kingdom,
including, inter alia, the UK Financial Services and Markets Act 2000
as amended, for the purposes of which the Issuer is an authorised person
carrying on the business of financial services provision. In addition, as
- 16 -
Section B – Issuer
a public limited company, the Issuer is subject to the UK Companies
Act 2006.
B.4b Known trends
affecting the
Issuer and the
industries in which
it operates:
UK
Real quarterly UK GDP growth accelerated in the first quarter of 2019
to 0.5% from 0.2% in the fourth quarter of 2018. A material portion of
that increase, however, appears to have reflected a surge in stockpiling
ahead of 29 March, when the UK had been scheduled to withdraw from
the European Union (EU). As this effect unwinds, GDP is expected to
contract slightly in the second quarter, by 0.1%. Looking through the
volatility, the underlying pace of UK economic growth remains
subdued, relative to historic averages. In part, that reflects uncertainty
relating to the UK's departure from the EU, alongside softer global
economic growth. The labour market remains firm, however. The
unemployment rate stood at an average of 3.8% in the three months to
May, the lowest rate since December 1974. The annual rate of inflation,
according to the Consumer Price Index (CPI), was 2.0% in June 2019.
The ‘core’ CPI rate, which strips out food and energy prices, stood at
1.8%.
Prospects for the UK economy are likely to depend on the nature of the
UK's future economic relationship with the EU. The UK is now
scheduled to leave the EU on 31 October 2019. Based on an assumption
that the UK withdraws from the EU with transition arrangements, HSBC
Research forecasts real GDP to grow by 1.2% in 2019 and 1.1% in 2020.
In such a scenario, given global growth headwinds and limited signs of
inflationary pressure, the Bank of England's policy rate, Bank Rate, is
expected to remain at 0.75% until at least the end of 2020. On the other
hand, ‘no deal Brexit’, and the possible economic disruption it might
entail, is a downside risk to that outlook. In that case, the Bank of
England might respond by loosening monetary policy.
Eurozone
Eurozone real quarterly economic growth slowed to 0.2% in the second
quarter of 2019, after 0.4% growth in the first quarter, 'flash' official
estimates showed. That brought growth back in line with the sluggish
rates seen through the second half of 2018. However, despite the
subdued pace of GDP growth, the labour market has continued to
improve - the eurozone unemployment rate has seen continued declines
and stood at a post-2008 low of 7.5% in June.
A softening in world trade growth appears to have weighed on activity,
particularly in those countries and sectors with significant export
exposures. Eurozone industrial production has been weak - in May 2019
the level of industrial output was 1.8% lower than the peak seen in
December 2017. Meanwhile, inflation remains soft. The annual rate of
core eurozone consumer price inflation – which strips out food and
energy prices - has trended close to the 1% mark over the past two years,
and stood at 0.9% in July.
Given the impact of global headwinds on the eurozone, which has been
accompanied by a weakening in leading indicators, HSBC Research
forecasts GDP growth to hold steady in the third quarter, at 0.2%. Trade-
related uncertainty is expected to weigh on net trade and investment
through this year and next. On the other hand, a relatively robust labour
market should underpin modest growth in consumer spending. Taken
- 17 -
Section B – Issuer
together, HSBC Research projections are for eurozone GDP growth of
1.0% in 2019 and 1.1% in 2020.
Against this subdued growth backdrop and low inflation, HSBC
Research forecasts the European Central Bank (ECB) to cut its deposit
rate by 20 basis points in September, taking the rate to -0.60%. It also
forecasts a re-start of net asset purchases under the ECB's Asset
Purchase Programme (APP), with purchases starting in January for 12
months, at EUR30bn a month.
B.5 The group and the
Issuer's position
within the group:
The whole of the issued ordinary and preference share capital of the
Issuer is beneficially owned by HSBC UK Holdings Limited. HSBC UK
Holdings Limited is a wholly and directly owned subsidiary of HSBC
Holdings plc ("HSBC Holdings", together with its subsidiaries, the
"HSBC Group"). The Issuer is the HSBC Group's principal operating
subsidiary undertaking in Europe.
The HSBC Group is one of the largest banking and financial services
organisations in the world with an international network which covers
66 countries and territories in Europe, Asia, the Middle East and Africa,
North America and Latin America. As at 31 December 2018 the total
assets of the HSBC Group were U.S.$2,558,124 million.
B.9 Profit forecast or
estimate:
Not Applicable. There are no profit forecasts or estimates made in the
prospectus.
B.10 Nature of any
qualifications in
the audit reports
on the historical
financial
information:
Not Applicable. There are no qualifications in the audit reports on the
audited, consolidated financial statements of the Issuer for the financial
years ended 31 December 2017 or 31 December 2018.
B.12 Selected key
financial
information, no
material adverse
change and no
significant change
statement:
The selected key financial information regarding the Issuer set out below
has been extracted without material adjustment from the audited
consolidated financial statements of the Issuer for the year ended 31
December 2018 (in respect of the table of year-end figures) and the
Unaudited Consolidated Interim Report of the Issuer for the six month
period ended 30 June 2019 (in respect of the table of half-year figures).
Year ended
31 December
2018
31 December
2017
£m £m
For the period (£m) Profit before tax (reported basis) .................................................................................... 315 2,370
Profit before tax (adjusted basis)2 ................................................................................... 335 3,832
Net operating income before change in expected credit losses and other credit impairment charges3 .......................................................................................................
3,029 13,305
Profit attributable to shareholders of the parent company .............................................. 303 1,809
At period end (£m) Total equity attributable to shareholders of the parent company .................................... 26,878 43,462
Total assets ..................................................................................................................... 604,958 818,868
Risk-weighted assets ...................................................................................................... 143,875 233,073 Loans and advances to customers (net of impairment allowances .................................. 111,964 280,402
Customer accounts ......................................................................................................... 180,836 381,546
Capital ratios (%)4 Common equity tier 1 ..................................................................................................... 13.8 11.8
Tier 1 .............................................................................................................................. 16.0 13.8
Total capital .................................................................................................................. 26.2 16.9
Performance, efficiency and other ratios (annualised %)
Return on average ordinary shareholders' equity5 ........................................................... 2.0 4.4
- 18 -
Section B – Issuer
Return on tangible equity6 .............................................................................................. 5.1 -
Adjusted return on average risk-weighted assets ............................................................ - 1.6
Cost efficiency ratio (reported basis)7 ............................................................................ 89.1 78.2 Cost efficiency ratio (adjusted basis)7 ............................................................................ 88.4 67.5
Jaws (adjusted basis)8 ..................................................................................................... (11.3) (5.8)
Ratio of customer advances to customer accounts .......................................................... 61.9 73.5 _____________________________
2 Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 10 to
12 of the Issuer's Annual Report and Accounts for the year ended 31 December 2017. 3 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as
revenue. 4 Capital ratios are detailed in the Capital section on pages 23 to 32 of the Unaudited Consolidated Interim Report of the Issuer
for the six month period ended 30 June 2019. 5 The return on average ordinary shareholders' equity is defined as profit attributable to shareholders of the parent company
divided by the average total shareholders' equity. 6 The Return on Tangible Equity ('RoTE') for 2018 includes those entities that formed part of HSBC Bank plc. The 31 December
comparative displays the RoTE for the full year of 2018. RoTE is calculated as reported profit attributable to ordinary shareholders less changes in goodwill and present value of in-force long-term insurance business divided by average tangible
shareholders' equity.
7 Reported cost efficiency ratio is defined as total operating expenses (reported) divided by net operating income before change in expected credit losses and other credit impairment charges (reported), while adjusted cost efficiency ratio is defined as
total operating expenses (adjusted) divided by net operating income before change in expected credit losses and other credit
impairment charges (adjusted). 8 Adjusted jaws measures the difference between adjusted revenue and adjusted cost growth rates.
Half-year to
30 June 2019 30 June 20181
£m £m
For the period (£m) Profit before tax (reported basis) .................................................................................... 151 1,659
Profit before tax (adjusted basis)2 ................................................................................... 290 1,765
Net operating income before change in expected credit losses and other credit impairment charges3 .......................................................................................................
3,137 6,439
Profit attributable to shareholders of the parent company .............................................. 23 1,203
At period end (£m) Total equity attributable to shareholders of the parent company .................................... 25,917 46,947
Total assets ..................................................................................................................... 673,008 865,870
Risk-weighted assets ...................................................................................................... 148,817 230,386 Loans and advances to customers (net of impairment allowances .................................. 114,906 278,682
Customer accounts ......................................................................................................... 183,084 385,913
Capital ratios (%)4 Common equity tier 1 ..................................................................................................... 13.3 13.3
Tier 1 .............................................................................................................................. 15.4 15.6
Total capital .................................................................................................................. 24.8 19.0
Performance, efficiency and other ratios (annualised %)
Return on average ordinary shareholders' equity5 ........................................................... (0.1) 5.6
Return on tangible equity6 .............................................................................................. (0.7) 7.1 Adjusted return on average risk-weighted assets ............................................................ - -
Cost efficiency ratio (reported basis)7 ............................................................................ 92.6 72.2 Cost efficiency ratio (adjusted basis)7 ............................................................................ 88.3 70.3
Jaws (adjusted basis)8 ..................................................................................................... (12.6) (9.3)
Ratio of customer advances to customer accounts .......................................................... 62.8 72.2 _____________________________
1 Comparatives for the half-year to 30 June 2018 include the discontinued operations (HSBC UK Bank plc). 2 Adjusted performance is computed by adjusting reported results for the effect of significant items as detailed on pages 10 to
12 of the Issuer's Annual Report and Accounts for the year ended 31 December 2017. 3 Net operating income before change in expected credit losses and other credit impairment charges is also referred to as
revenue. 4 Capital ratios are detailed in the Capital section on pages 23 to 32 of the Unaudited Consolidated Interim Report of the Issuer
for the six month period ended 30 June 2019. 5 The return on average ordinary shareholders' equity is defined as profit attributable to shareholders of the parent company
divided by the average total shareholders' equity. 6 The Return on Tangible Equity ('RoTE') for 2018 includes those entities that formed part of HSBC Bank plc. The 31 December
comparative displays the RoTE for the full year of 2018. RoTE is calculated as reported profit attributable to ordinary shareholders less changes in goodwill and present value of in-force long-term insurance business divided by average tangible
shareholders' equity.
7 Reported cost efficiency ratio is defined as total operating expenses (reported) divided by net operating income before change in expected credit losses and other credit impairment charges (reported), while adjusted cost efficiency ratio is defined as
- 19 -
Section B – Issuer
total operating expenses (adjusted) divided by net operating income before change in expected credit losses and other credit
impairment charges (adjusted). 8 Adjusted jaws measures the difference between adjusted revenue and adjusted cost growth rates.
There has been no material adverse change in the prospects of the Issuer
since 31 December 2018.
There has been no significant change in the financial position of the
Issuer and its subsidiary undertakings since 30 June 2019.
B.13 Recent events
particular to the
Issuer which are to
a material extent
relevant to the
evaluation of the
Issuer's solvency:
Not Applicable. There have been no recent events particular to the
Issuer which are to a material extent relevant to the evaluation of its
solvency.
B.14 Dependence upon
other entities
within the group:
The Issuer is an indirectly wholly owned subsidiary of HSBC Holdings.
The Issuer and its subsidiaries form a UK head-quartered group (the
"Group") with subsidiaries in continental Europe and the UK. The
Issuer conducts part of its business through its subsidiaries and is
accordingly dependent upon those members of the Group as well as
certain members of the wider HSBC Group, including HSBC Global
Services (UK) Limited, which provides support services to the Issuer
and to HSBC UK Bank plc.
B.15 The Issuer's
principal
activities:
The Group provides a comprehensive range of banking and related
financial services. The Group divides its activities into four business
segments: Retail Banking and Wealth Management; Commercial
Banking; Global Banking and Markets; and Global Private Banking.
B.16 Controlling
persons:
The whole of the issued ordinary and preference share capital of the
Issuer is beneficially owned by HSBC UK Holdings Limited. HSBC UK
Holdings Limited is a wholly and directly owned subsidiary of HSBC
Holdings.
Section C – Securities
C.1 Description of
type and class of
securities:
Issuance in series:
Notes will be issued in series which may comprise one or more tranches.
Each Tranche issued under a series will have identical terms, except that
different tranches of Notes may comprise Notes in bearer form ("Bearer
Notes") or registered form ("Registered Notes"). The issue dates and
issue prices under different tranches of Notes may also vary.
The Registered Notes being issued are series PALMS 1496 Notes (the
"Notes")
Form of Notes:
- 20 -
Section C – Securities
Registered Notes in global form:
Registered Notes will be issued in global form and a combined global
registered note will be deposited with and registered in the name of a
common depositary (or its nominee) for Euroclear Bank SA/NV
("Euroclear") and/or Clearstream Banking, S.A. ("Clearstream,
Luxembourg")
Security Identification Numbers:
The Registered Notes have been accepted for clearance through
Euroclear and/or Clearstream, Luxembourg and will be allocated the
following Security Identification Numbers:
ISIN Code: XS2106574796
Common Code: 210657479
Other identifier / code: Not applicable
CUSIP: Not applicable
SEDOL: BL39721
Valoren Number: Not applicable
C.2 Currency of the
securities issue:
The settlement currency of the Notes is USD (the "Settlement
Currency").
C.5 Description of any
restrictions on the
free
transferability of
the securities:
The Notes are freely transferable. However, there are restrictions on the
offer and sale of the Notes. The Issuer and HSBC bank plc (the
"Dealers") have agreed restrictions on the offer, sale and delivery of the
Notes and on distribution of offering materials in Australia, Brazil, the
Dubai International Financial Centre, the European Economic Area,
France, Hong Kong, India, Indonesia, Italy, Japan, the Kingdom of
Bahrain, Korea, Malaysia, Mexico, the People's Republic of China,
Pakistan, Philippines, Russia, Saudi Arabia, Singapore, Spain, Sri Lanka,
Switzerland, Taiwan, Thailand, The Netherlands, the United Arab
Emirates (excluding the Dubai International Financial Centre), the
United Kingdom, the United States of America and Vietnam.
In addition, investors of the Notes, by their purchase of the Notes, will
be deemed to have given certain representations, warranties,
undertakings, acknowledgements and agreements.
C.8 The rights
attaching to the
securities,
including ranking
and limitations to
those rights:
Status of the Notes:
The Notes will be direct, unsecured and unsubordinated obligations of
the Issuer and will rank equally and without preference among
themselves and, at their date of issue, with all other unsecured and
unsubordinated obligations of the Issuer (unless preferred by law).
Interest Payments:
- 21 -
Section C – Securities
The Notes do not bear interest.
Early redemption/termination for illegality:
If the Calculation Agent determines that the performance of the Issuer's
obligations has become unlawful or impracticable in whole or in part for
any reason, the Issuer will be entitled to redeem the Notes and pay the
relevant investor an amount per Note equal to the fair market value of
such Note or such other amount specified in the relevant final terms
("Final Terms").
Early redemption for taxation reasons:
If the Issuer were required under the terms and conditions of the Notes
(as applicable) (the "Conditions") to pay additional amounts in respect
of tax, the Issuer may subject to prior notice to the holders of such Notes,
redeem or terminate all, but not some only, of such Notes and pay the
relevant investor an amount per Note equal to the fair market value of
such Note or such other amount specified in the relevant Final Terms.
Modification and substitution:
Modifications to the Conditions may be made without the consent of any
holders of Notes to cure any ambiguity or manifest error or correct or
supplement any Conditions provided that: (i) the modification is not
materially prejudicial to the interest of holders of Notes; (ii) the
modification is of a formal, minor or technical nature or is to correct a
manifest error or is to comply with mandatory provisions of the law of
the Issuer's jurisdiction of incorporation; or (iii) the modification corrects
inconsistency between the Conditions and the relevant termsheet relating
to the Notes. The Notes permit the substitution of the Issuer with its
affiliates without the consent of any holders of Notes where the Issuer
provides an irrevocable guarantee of the affiliate's obligations.
Events of default of the Notes:
The following events constitute events of default (each, an "Event of
Default") under the Notes and would entitle the Noteholder to accelerate
the Notes: (i) a continuing default in the repayment of any principal due
on the Notes for more than 14 days, provided that the reason for non-
payment is not compliance with any fiscal or other law or regulation or
court order, or that there is doubt as to the validity of such law, regulation
or order in accordance with independent legal advice from advisers
which is acceptable to HSBC Bank plc, acting in its capacity as principal
paying agent (the "Principal Paying Agent"); or (ii) the passing of a
winding-up order in relation to the Issuer. On an Event of Default the
Notes will be redeemed against payment of an amount per Note equal to
the fair market value of such Note.
Meetings of Noteholders
The Conditions of the Notes contain provisions for calling meetings of
Noteholders to consider matters affecting their interests generally. These
provisions permit defined majorities to bind all Noteholders including
Noteholders who did not attend and vote at the relevant meeting and
Noteholders who voted in a manner contrary to the majority.
No guarantee or security:
- 22 -
Section C – Securities
The Notes are the obligations of the Issuer only and are unsecured.
Taxation:
All payments by the Issuer in respect of the Notes will be made without
deduction of any taxes, duties and other similar charges, including
United Kingdom taxes unless the Issuer is required by law to withhold
or deduct any such taxes. Therefore, Noteholders will be liable for
and/or subject to any taxes, duties and other similar charges, including
withholding tax, stamp duty, stamp duty reserve tax and/or similar
transfer taxes, payable in respect of the Notes.
Governing Law:
English law.
C.11 Listing and
trading:
Application will be made to admit the Notes to the Official List of the
United Kingdom Financial Conduct Authority and to trading on the
regulated market of the London Stock Exchange plc.
C.15 Description of how
the value of the
investment is
affected by the
value of the
underlying
instrument:
The Notes are designed to track the price of the Underlying converted
into the currency of the Note (if applicable). The Final Redemption
Amount payable on redemption of any Note is linked to a fixed amount
of the Underlying by way of a hedge in respect of such fixed amountof
the Underlying (whether directly or synthetically). In general, as the
price of the Underlying increases or decreases, so will the Final
Redemption Amount payable in respect of such Notes. Similarly,
changes in the value of the relevant currency rate will change the value
of the Notes.
The quoted price of the Underlying converted into the currency of the
Note (if applicable) may diverge from the Final Redemption Amount
payable under the Note owing to disparity between any hedge and the
Underlying, and to the deduction of costs, such as, amongst other things,
brokers fees, transaction processing fees and actual and potential taxes,
duties and other similar charges, including those costs that would be
incurred by the Issuer and/or its designated affiliates of hedging the
Underlying, whether directly or synthetically, and a fee to be retained by
the Issuer, the Dealer(s) and/or their affiliates.
C.16 Expiration or
maturity date of
securities:
The Notes will be cash-settled.
The maturity date of the Notes is 08 Feburary 2021 (the "Maturity
Date").
C.17 Settlement
procedure:
The Notes will be cash-settled.
All payments to Noteholders will be paid through Euroclear and/or
Clearstream, Luxembourg
C.18 Return on
securities:
The Notes are "Underlying Security-Linked Notes" and are linked to
a single underlying security (the "Underlying")
The Notes are market access products, which are designed for investors
who wish to be exposed to fluctuations in the price of the Underlying,
but who do not wish to or are not able to hold the relevant Underlying
itself. In addition, the Notes are designed to allow investors to get
- 23 -
Section C – Securities
exposure to the Underlying even though it may be priced locally in a less
accessible currency or currencies.
A Noteholder will receive one type of payment under the Notes: the Final
Redemption Amount
Payments at maturity or on exercise
The Notes will have a Final Redemption Amount which will be
calculated in a different manner depending on whether the Notes are
Underlying ETF-Linked Notes, Underlying Fund-Linked Notes,
Underlying Index-Linked Notes or Underlying Security-Linked Notes.
The Notes are Underlying Security-Linked Notes and accordingly the
Final Redemption Amount will be the greater of 0.03 per cent. of the
issue price per Note and the Net Realisable Sale Price. The Realisable
Sale Price per Note will be equal to:
if the Issuer or any of its affiliate(s) hold the underlying assets
and dispose of them, the amount per Note received from such
disposal, less any costs and converted into the currency of the
Note (if applicable);
if neither the Issuer nor any of its affiliate(s) hold the underlying
assets but is party to a hedge or other arrangement relating to the
Notes being redeemed, the effective price at which such hedge
or other arrangement was realised or unwound, less any costs
and converted into the currency of the Notes (if applicable); or
if neither the Issuer nor any of its affiliate(s) hold the underlying
assets nor are party to a hedge or other arrangement relating to
the Notes being redeemed, the amount per Note a notional,
direct holder of the underlying assets of the Notes would receive
from disposing of them on expiry, less any costs and converted
into the currency of the Note (if applicable).
If the actual or notional amounts received need to be converted into the
currency of the Note, the rate of exchange used will be either:
if the Issuer or its affiliate(s) has an exchange transaction
(whether implicit as part of a hedge or other arrangement for the
underlying assets or as part of a separate arrangement), the rate
of exchange obtained under that arrangement; or
if the Issuer or its affiliate(s) has not entered into an exchange
transaction the rate of exchange which a notional, direct holder
of the underlying assets of the Notes would be able to obtain.
Additional Payments
If the Notes are Underlying Security-Linked, Underlying ETF-Linked or
Underlying Index-Linked Notes, then holders of Notes will also
potentially be entitled to Additional Payments.
The Notes are Underlying Security-Linked Notes and the Additional
Payments payable to holders of Notes will be:
if the Issuer or its affiliate(s) hold the appropriate underlying
assets (that is, the shares or exchange-traded funds ), the
- 24 -
Section C – Securities
aggregate amount of the net cash dividend or distribution
received;
if the Issuer or its affiliate(s) hold a hedge or other arrangement
for the purposes of performing its obligations under the Notes,
the net cash dividend or distribution equivalent payment
received under the hedge or other arrangement;
if the Issuer or its affiliate(s) do not hold any of the underlying
assets or are not party to a hedge or other arrangement relating
to the Notes, the net amount a notional, direct holder of the
underlying assets relating to the Notes would receive by way of
cash dividend or distribution; or
if a non-cash dividend or distribution is made, the Issuer may in
its absolute discretion, pay to the Noteholders the net cash value
of such non-cash dividend or distribution or, if the Issuer or its
affiliate(s) holds a hedge or other arrangement relating to the
Notes, the net cash adjustment or settlement received in respect
of such non-cash dividend or distribution under such hedge or
other arrangement, in respect of the underlying securities, such
as an issue of warrants or preference shares,
in all cases, less any costs and converted into the currency of the Notes
(if applicable).
If the actual or notional amounts need to be converted into the currency
of the Note, the rate of exchange used is either:
if the Issuer or its affiliate(s) has an exchange transaction
(whether implicit as part of a hedge or other arrangement for the
underlying assets or as part of a separate arrangement), the rate
of exchange obtained under that arrangement; or
if the Issuer or its affiliate(s) has not entered into an exchange
transaction, that which a notional, direct holder of the
underlying assets of the Notes would be able to obtain.
Supplementary Amounts:
Supplementary Amounts do not apply to this series of Underlying
Security-Linked Notes.
Interest Payments:
The Notes do not bear interest.
C.19 Exercise price or
final reference
price of the
underlying:
The calculations which are required to be made to calculate the Final
Redemption Amount will be based on the value of the Underlying
determined by the Calculation Agent being HSBC Bank plc. The
Calculation Agent will determine the value of the Underlying by
reference to the actual or notional value upon disposal or realisation of
the Underlying or the value of realising or unwinding a hedge or other
arrangement in respect of such Underlying, in all cases deducting costs
and converting into the currency of the Note (if applicable).
- 25 -
Section C – Securities
C.20 Type of the
underlying:
Each series of Notes is linked to the performance of one of the following:
a security or basket of securities (together, the "Underlying Securities"
and each, an "Underlying Security") issued by a company or companies
(together, the "Underlying Companies" and each, an "Underlying
Company") which is/are listed and/or admitted to trading on one or more
stock exchanges (such Notes are referred to as, "Underlying Security-
Linked Notes"); or
a security or basket of securities (together, the "China Connect
Underlying Securities" and each, a "China Connect Underlying
Security") issued by a company or companies (together, the
"Underlying Companies" and each, an "Underlying Company") which
is, or is expected to be, listed and/or admitted to trading on any stock
exchange (each a "China Connect Market") in the People's Republic of
China ("PRC", which shall for the purposes of this document exclude
Hong Kong, Macau or Taiwan) under any securities trading and clearing
links developed or to be developed by The Stock Exchange of Hong
Kong Limited ("SEHK"), any such China Connect Market, the Hong
Kong Securities Clearing Company Limited and the China Securities
Depository and Clearing Corporation for the establishment of mutual
market access between SEHK and any such China Connect Market (such
Notes are referred to as "China Connect Underlying Security-Linked
Notes"); or
an index or basket of indices (together, the "Underlying Indices" and
each, an "Underlying Index") being composed of certain securities
(together, the "Component Securities" and each, a "Component
Security") (such Notes are referred to as, "Underlying Index-Linked
Notes"); or
a fund or basket of funds (together, the "Underlying Funds" and each,
an "Underlying Fund") (such Notes are referred to as, "Underlying
Fund-Linked Notes"); or
an exchange-traded fund or a basket of funds (together, the "Underlying
ETFs" and each, an "Underlying ETF") which is/are listed and/or
admitted to trading on one or more stock exchanges (such Notes are
referred to as, "Underlying ETF-Linked Notes").
The Notes are Underlying-Security Linked Notes, being Notes in
relation to which the Final Redemption Amount is linked to one security
namelyYANBU CEMENT ORD SHS SAR 10.00. Underlying Security
Linked Notes are also referred to in the prospectus as "Underlying
Equity-Linked Notes".
References to "Underlying", either in the singular or plural form, shall
refer to any Underlying applicable to a series of Notes.
Information on the Underlying can be found on
www.yamamacement.com
Section D – Risks
D.2 Key risks specific
to the Issuer:
A description of the key risk factors relating to the Issuer that may affect
the ability of the Issuer to fulfil its obligations to investors in relation to
any of its debt or derivative securities is set out below. The occurrence
of any of these events or circumstances could have a material adverse
- 26 -
Section D – Risks
effect on the Issuer's business, financial condition, results of operations
and prospects.
The UK's withdrawal from the EU may adversely affect the Issuer's
operating model and financial results:
The circumstances of the United Kingdom's ("UK") withdrawal from the
European Union ("EU") will likely have a significant impact on general
economic conditions in the UK and the EU. The UK's future relationship
with the EU and its trading relationships with the rest of the world will
likely take a number of years to resolve. This may result in a prolonged
period of uncertainty, unstable economic conditions and market
volatility, including currency fluctuations.
The Issuer also expects the UK's withdrawal to have implications for the
Issuer's London-based cross-border operations, to the extent they rely on
unrestricted access to the European financial services market. The extent
of these implications will depend on the outcome of negotiations. To
ensure continuity of service, independent of the outcome of negotiations,
the Issuer assumes a scenario whereby the UK withdraws from the EU
without the existing passporting or regulatory equivalence framework
that supports cross-border business. This scenario would impact (i) the
Group's legal entities in the UK and the EU, (ii) the Issuer's product
offering, (iii) the Issuer's clients and (iv) the Issuer's employees.
The Issuer is taking steps to prepare for the UK leaving the EU in 2019.
This process involves execution risks, many of them linked to the
uncertain outcome of negotiations and potentially tight timelines to
implement significant changes to the Issuer's UK and European
operating models. If these risks materialise, the Issuer's clients and
employees are likely to be affected. The exact impact on the Issuer's
clients will depend on their individual circumstances and, in a worst-case
scenario, could include disruption to the provision of products and
services.
The Issuer is likely to be affected by global geopolitical trends,
including the risk of government intervention:
While economic globalisation appears to remain deeply embedded in the
international system, it is increasingly challenged by nationalism and
protectionism, and international institutions may be less capable of
arresting this trend. In Europe, for example, there remains an uncertain
economic and political outlook, particularly in light of the UK's
anticipated withdrawal from the EU. A gradual shift in global power
from the United States of America ("U.S.") and Europe towards China
and emerging markets also appears to be occurring and may continue.
Furthermore, sanctions targeting the Russian government, institutions
and individuals have had (and are continuing to have) an adverse effect
on the Russian economy, and further sanctions may be possible. A rise
in nationalism and protectionism, including trade barriers, may be driven
by populist sentiment and structural challenges facing developed
economies. Similarly, if capital flows are disrupted, some emerging
markets may impose protectionist measures that could affect financial
institutions and their clients, and other emerging, as well as developed,
markets, may be tempted to follow suit. This rise could contribute to
weaker global trade, potentially affecting the Issuer's traditional lines of
business.
The Issuer's geographic coverage will make it and its customers
susceptible to protectionist measures taken by national governments and
authorities, including imposition of trade tariffs, restrictions on market
- 27 -
Section D – Risks
access, restrictions on the ability to transact on a cross-border basis,
expropriation, restrictions on international ownership, interest rate caps,
limits on dividend flows and increases in taxation. There may be
uncertainty as to the conflicting nature of such measures, their duration,
the potential for escalation, and their potential impact on global
economies. Whether these emerging trends are cyclical or permanent is
hard to determine, and their causes are likely to be difficult to address.
Unfavourable legislative or regulatory developments, or changes in the
policy of regulators or governments could materially adversely affect
the Issuer:
The Issuer's businesses are subject to on-going regulation and associated
regulatory risks, including the effects of changes in the laws, regulations,
policies, guidance, voluntary codes of practice and their interpretations
in the UK, the EU and the other markets in which the Issuer operates.
This is particularly so in the current environment, where the Issuer
expects government and regulatory intervention in the banking sector to
remain high for the foreseeable future.
More stringent regulatory requirements, including further capital,
liquidity and funding requirements, and adjustments in the use of models
for measuring risk, may adversely affect elements of the Issuer's
business, particularly if capital requirements are increased.
The delivery of the Issuer's strategic actions is subject to execution
risk:
Robust management of critical time-sensitive and resource-intensive
projects is required to effectively deliver the Issuer's strategic priorities.
The Issuer continues to implement a number of externally driven
regulatory programmes and the magnitude and complexity of the
projects required to meet these demands present heightened execution
risk. The failure to successfully deliver key strategic actions or other
regulatory programmes could have a significant impact on the Issuer's
business, financial condition, results of operations and prospects.
Third parties may use the Issuer as a conduit for illegal activities
without the Issuer's knowledge:
The Issuer is required to comply with applicable anti-money laundering
("AML") regulations and has adopted various policies and procedures,
including internal control and 'know-your-customer' procedures, aimed
at preventing use of the Issuer's products and services for the purposes
of committing or concealing a financial crime.
A number of remedial actions have been taken as a result of the matters
related to HSBC Holdings' expired U.S. deferred prosecution agreement
with the U.S. Department of Justice, which are intended to ensure that
the HSBC Group's businesses are better protected in respect of these
risks. However, there can be no assurance that these will be completely
effective. Moreover, in relevant situations and where permitted by
regulation, the Issuer may rely upon certain counterparties to maintain
and properly apply their own appropriate AML procedures. While
permitted by regulation, such reliance may not be effective in preventing
third parties from using the Issuer (and the Issuer's relevant
counterparties) as a conduit for money laundering, including illegal
cash operations, without the Issuer's (and its relevant counterparties')
knowledge. Becoming a party to money laundering, association with,
or even accusations of being associated with, money laundering will
- 28 -
Section D – Risks
damage the Issuer's reputation and could make it subject to fines,
sanctions and/or legal enforcement.
The Issuer may experience adverse changes in the credit quality of the
Issuer's borrowers:
Risks arising from changes in credit quality and the recoverability of
loans and amounts due from borrowers and counterparties (for example,
reinsurers and counterparties in derivative transactions) are inherent in
a wide range of the Issuer's businesses. Adverse changes in the credit
quality of the Issuer's borrowers and counterparties arising from a
general deterioration in economic conditions or systemic risks in the
financial systems could reduce the recoverability and value of the Issuer's
assets and require an increase in the Issuer's loan impairment charges.
The Issuer remains susceptible to a wide range of cyber risks that
impact and/or are facilitated by technology:
The threat from cyber-attacks remains a concern for the Issuer's
organisation, and failure to protect the Issuer's operations from internet
crime or cyber-attacks may result in financial loss, business disruption
and/or loss of customer services and data or other sensitive information
that could undermine its reputation and its ability to attract and keep
customers.
Destructive malware (including ransomware), distributed denial of
service attacks and organised cyber criminals targeting payments are
increasingly dominant threats across the industry. Although cyber-
attacks in 2018 had a negligible effect on the Issuer's customers, services
or firm, due to the increasing sophistication of cyber-attacks there is the
potential for future attacks to have a material adverse effect on the
Issuer's business, financial condition, results of operations, prospects and
reputation.
The Issuer could incur losses or be required to hold additional capital
as a result of model limitations or failure:
The Issuer uses models for a range of purposes in managing its business,
including regulatory capital calculations, stress testing, credit approvals,
calculation of ECLs on an IFRS 9 basis, financial crime and fraud risk
management and financial reporting.
Regulatory scrutiny and supervisory concerns over banks' use of models
is considerable, particularly the internal models and assumptions used by
banks in the calculation of regulatory capital. If regulatory approval for
key capital models is not achieved in a timely manner, the Issuer could
be required to hold additional capital.
Evolving regulatory requirements have resulted in changes to the Issuer's
approach to model risk management, which poses execution challenges.
The adoption of more sophisticated modelling approaches and
technology by both the Issuer and the financial services industry could
also lead to increased model risk.
The Issuer's operations are highly dependent on HSBC Group's
information technology systems:
The reliability and security of the HSBC Group's information and
technology infrastructure and customer databases are crucial to
maintaining the service availability of banking applications and
- 29 -
Section D – Risks
processes and to protecting the HSBC brand. The proper functioning of
the HSBC Group's payment systems, financial control, risk management,
credit analysis and reporting, accounting, customer service and other
information technology systems, as well as the communication networks
between the Issuer's branches and main data processing centres, are
critical to the Issuer's operations.
Critical system failure, any prolonged loss of service availability or any
material breach of data security, particularly involving confidential
customer data, could cause serious damage to the Issuer's ability to
service its clients, could breach regulations under which it operates and
could cause long-term damage to its business and brand that could have
a material adverse effect on the Issuer's business, financial condition,
results of operations, prospects and reputation.
Third parties may use the Issuer as a conduit for illegal activities
without the Issuer's knowledge:
The Issuer is required to comply with applicable anti-money laundering
("AML") laws and regulations and has adopted various policies and
procedures, including internal control and 'know-your-customer'
procedures, aimed at preventing use of its products and services for the
purposes of committing or concealing financial crime.
A number of remedial actions have been taken as a result of the matters
related to HSBC Holdings' expired U.S. deferred prosecution agreement
with the U.S. Department of Justice, which are intended to ensure that
the HSBC Group's businesses are better protected in respect of these
risks. However, there can be no assurance that these will be completely
effective. Moreover, in relevant situations and where permitted by
regulation, the Issuer may rely upon certain counterparties to maintain
and properly apply their own appropriate AML procedures. While
permitted by regulation, such reliance may not be effective in preventing
third parties from using the Issuer (and the Issuer's relevant
counterparties) as a conduit for money laundering, including illegal cash
operations, without the Issuer's knowledge (and that of the Issuer's
relevant counterparties). Becoming a party to money laundering,
association with, or even accusations of being associated with, money
laundering will damage the Issuer's reputation and could make it subject
to fines, sanctions and/or legal enforcement.
The Issuer may suffer losses due to employee misconduct:
The Issuer's businesses are exposed to risk from potential non-
compliance with HSBC Group policies, including the "HSBC Values"
(the HSBC Values describe how the Issuer's employees should interact
with each other and with customers, regulators and the wider
community) and related behaviours, and employee misconduct, such as
fraud or negligence, all of which could result in regulatory sanctions
and/or reputational or financial harm. In recent years, a number of
multinational financial institutions have suffered material losses due to
the actions of 'rogue traders' or other employees. It is not always possible
to deter employee misconduct and the precautions the Issuer takes to
prevent and detect this activity may not always be effective.
- 30 -
Section D – Risks
The Issuer's data management policies and processes may not be
sufficiently robust:
Critical business processes across the Group rely on large volumes of
data from a number of different systems and sources. If data governance
(including data retention and deletion, data quality and data architecture
policies and procedures) is not sufficiently robust, manual intervention,
adjustments and reconciliations may be required to reduce the risk of
error in the Group's external reports or in reporting to senior management
or regulators. Inadequate policies and processes may also affect the
Issuer's ability to use data within the Group to service customers more
effectively and/or improve the Issuer's product offering. Moreover,
financial institutions that fail to comply with in-country (local) and
global regulatory and compliance requirements may face supervisory
measures. In addition, failure to comply with emerging and recently
implemented laws and regulations concerning data privacy and
localisation in a number of jurisdictions across the globe may result in
regulatory sanctions which could be significant.
The Issuer relies on recruiting, retaining and developing appropriate
senior management and skilled personnel:
The demands being placed on the human capital of the Issuer are
unprecedented. The cumulative workload arising from a regulatory
reform programme that is often extra-territorial and regularly evolving
consumes significant human resources, placing increasingly complex
and conflicting demands on a workforce that operates in an employment
market where expertise in key markets is often in short supply and
mobile.
The Issuer's continued success depends in part on the retention of key
members of its management team and wider employee base. The ability
to continue to attract, train, motivate and retain highly qualified
professionals is a key element of the Issuer's strategy. The successful
implementation of the Issuer's growth strategy depends on the
availability of skilled management in each of its business units, which
may depend on factors beyond the Issuer's control, including economic,
market and regulatory conditions.
Liquidity, or ready access to funds, is essential to the Issuer's
businesses:
The Issuer's ability to borrow on a secured or unsecured basis, and the
cost of doing so, can be affected by increases in interest rates or credit
spreads, the availability of credit, regulatory requirements relating to
liquidity or the market perceptions of risk relating to the Issuer or the
banking sector, including the Issuer's perceived or actual
creditworthiness.
If the Issuer is unable to raise funds through deposits and/or in the capital
markets, the Issuer's liquidity position could be adversely affected, and
the Issuer might be unable to meet deposit withdrawals on demand or at
their contractual maturity, to repay borrowings as they mature, to meet
the Issuer's obligations under committed financing facilities and
insurance contracts or to fund new loans, investments and businesses.
The Issuer may need to liquidate unencumbered assets to meet the
Issuer's liabilities. In a time of reduced liquidity, the Issuer may be unable
to sell some of the Issuer's assets, or the Issuer may need to sell assets at
- 31 -
Section D – Risks
reduced prices, which in either case could materially adversely affect the
Issuer's business, financial condition, results of operations and prospects.
The Issuer may not manage risks associated with the replacement of
benchmark indices effectively:
The expected discontinuation of certain key inter-bank rates such as the
London Interbank Offered Rate ("Libor"), and the adoption of
alternative risk-free benchmark rates ("RFRs") by the market, introduces
a number of risks for the Issuer, its clients, and the financial services
industry more widely. These include, but are not limited to:
Legal risks, as changes to documentation for new and existing
transactions may be required;
Financial risks, arising from any changes in the valuation of
financial instruments linked to RFRs;
Pricing risks, as changes to RFRs could impact pricing
mechanisms on some instruments;
Operational risks, due to the potential need to adapt IT systems,
trade reporting infrastructure, operational processes and
controls to accommodate one or more RFRs; and
Conduct risks, through potentially material adverse impact on
customers or financial markets.
The benchmark specifications, together with the timetable and
mechanisms for discontinuation of existing inter-bank rates and
implementation of RFRs, have not yet been agreed across the industry
and regulatory authorities. Accordingly, it is not currently possible to
determine whether, or to what extent, any such changes would affect the
Issuer.
The delivery of the Issuer's strategic actions is subject to execution
risk:
Effective management of transformation projects is required to
effectively deliver the Issuer's strategic priorities, involving delivering
both on externally driven programmes (e.g. regulatory), as well as key
business initiatives to deliver revenue growth, product enhancement and
operational efficiency outcomes. Additionally, the cumulative impact of
the collective change initiatives underway within the HSBC Group is
significant and has direct implications on resourcing. The magnitude,
complexity and, at times, concurrent demands of the projects required to
meet these can result in heightened execution risk, which the Issuer
endeavours to manage through appropriate governance. The failure to
successfully deliver these key strategic initiatives may have material
adverse effect on the Issuer's business, financial condition, results of
operations, prospects and reputation.
The Issuer is subject to unfavourable legislative or regulatory
developments and changes in the policy of regulators or governments
and the Issuer may fail to comply with all applicable regulations,
particularly any changes thereto:
The Issuer's businesses are subject to on-going regulation and associated
regulatory risks, including the effects of changes in the laws, regulations,
policies, guidance, voluntary codes of practice and their interpretations
- 32 -
Section D – Risks
in the UK, the EU and the other markets in which the Issuer operates.
This is particularly so in the current environment, where the Issuer
expects government and regulatory intervention in the banking sector to
remain high for the foreseeable future.
In recent years, regulators and governments have focused on reforming
both the prudential regulation of the financial services industry and the
ways in which the business of financial services is conducted. Measures
include enhanced capital, liquidity and funding requirements, the
separation or prohibition of certain activities by banks, changes in the
operation of capital markets activities, the introduction of tax levies and
transaction taxes, changes in compensation practices and more detailed
requirements on how business is conducted. The governments and
regulators in the UK, the EU or elsewhere may intervene further in
relation to areas of industry risk already identified, or in new areas, which
could adversely affect the Issuer.
Any reduction in the credit rating assigned to the Issuer, any
subsidiaries of the Issuer or any of their respective debt securities could
increase the cost or decrease the availability of the Issuer's funding and
materially adversely affect the Issuer's liquidity position and net interest
margin:
Credit ratings affect the cost and other terms upon which the Issuer is
able to obtain market funding. Rating agencies regularly evaluate the
Issuer, as well as its debt securities. There can be no assurance that the
rating agencies will maintain the Issuer's current ratings or outlook. Any
reductions in these ratings and outlook could increase the cost of the
Issuer's funding, limit access to capital markets and require additional
collateral to be placed and, consequently, materially adversely affect the
Issuer's interest margins and/or its liquidity position.
The Issuer is subject to the risk of current and future legal, regulatory
or administrative actions and investigations, the outcomes of which are
inherently difficult to predict:
The Issuer faces significant legal, regulatory and administrative risks in
its business. The volume and amount of damages claimed in litigation,
regulatory proceedings, investigations, administrative actions and other
adversarial proceedings against financial institutions are increasing for
many reasons, including a substantial increase in the number of
regulatory changes taking place globally, increased media attention and
higher expectations from regulators and the public. In addition, criminal
prosecutions of financial institutions for, among other things, alleged
conduct breaches, breaches of anti-money laundering ("AML"), anti-
bribery/corruption, sanctions and counter-terrorist financing regulations,
antitrust violations, market manipulation, aiding and abetting tax
evasion, and providing unlicensed cross-border banking services, have
become more commonplace and may increase in frequency due to
increased media attention and higher expectations from prosecutors and
the public. Additionally, the Issuer's financial statements reflect
provisioning for legal proceedings and regulatory matters. Provisions for
legal proceedings and regulatory matters typically require a higher
degree of judgement than other types of provisions, and the actual costs
of any disciplinary action discussed above may exceed existing
provisioning.
In addition, the Issuer and its affiliates continue to be subject to a number
of material legal proceedings, regulatory actions and investigations. An
- 33 -
Section D – Risks
unfavourable result in one or more of these proceedings could have a
material adverse effect on the Issuer's business, financial condition,
results of operations, prospects and reputation.
D.6 Key risks specific
to the securities
and risk warning
to the investor:
Credit risk: The Notes are direct, unsubordinated and unsecured
obligations of the Issuer and not of any other person. If the Issuer's
financial position were to deteriorate, there could be a risk that the Issuer
would not be able to meet its obligations under the Notes (the Issuer's
credit risk). If the Issuer becomes insolvent or defaults on its obligations
under the Notes, in the worst case scenario, investors in the Notes could
lose all of their invested amounts.
The Notes are unsecured obligations: The Notes are not secured over
any asset. Therefore, the investor would not be able to enforce security
as a method of recouping payments due under the Notes if the Issuer
were to become insolvent and cease to be able to pay such amounts.
The Notes are not ordinary debt securities: The Notes do not pay
interest and, upon redemption, expiry or upon exercise (as applicable),
may return less than the amount invested or nothing. The Notes are
designed to track the price or level of the Underlying. If the performance
of such Underlying does not move in the anticipated direction or if the
issuer thereof becomes insolvent, the Notes will be adversely affected
and, in a worst case scenario, may become worthless.
Payments under the Notes may be delayed: Payments to holders of
Notes which are calculated by reference to hedging arrangements will
only be due if the proceeds would have been received by an investor
outside the jurisdiction where the Underlying is listed or quoted. There
is a risk that limitations on the importation and withdrawal of funds in
such jurisdiction could lead to potential delays in payments under the
Notes or, in the worst case, the Notes becoming worthless.
No ownership rights: The Notes do not confer any legal or beneficial
interest or any voting or dividend rights in the Underlying or the
Component Securities.
Suspension of Issuer's payment obligation: Payments to holders of
Notes may be suspended so long as dealings in the relevant Underlying
and related hedging transaction are or are wholly to be prevented,
delayed or restricted by the closure of a relevant exchange or the
suspension of trading or the occurrence of other circumstances, or if any
circumstances arise which adversely affect the ability to carry out foreign
exchange transactions or currency transfers. In the event of such
suspension, Noteholders will not be entitled to any interest or other
compensation in respect of the suspension.
There may be no active trading market or secondary market for
liquidity for the Notes: Any series of Notes may not be widely
distributed and there may not be an active trading market, nor is there
assurance as to the development of an active trading market. If there is
no liquid market, investors may not be able to realise their investment
until maturity of the Notes or may not realise a return that equals or
exceeds the purchase price of their Notes. Notwithstanding the
foregoing, the Issuer may issue Notes which provide for certain
circumstances where the Issuer and/or Dealer may buy-back such Notes
from the holders of such securities.
- 34 -
Section D – Risks
Certain factors affecting the value and trading price of Notes: The
Final Redemption Amount payable under the Notes may be affected by
fluctuations in value of the Underlying or the Component Securities,
changes in currency exchange rates, changes in interest rates, volatility
of the Underlying, time remaining to expiry, dividend rates on the
Underlying or the Component Securities or, where applicable, the
number and type of Underlyings included in a basket to which the
relevant Notes relate.
Conflicts of interest may arise between the interests of the Issuer or its
affiliates and those of the holders of the Notes: The Issuer or its
affiliates may enter into hedging or other transactions (i) relating to
Underlyings or the Component Securities or (ii) with issuers of
Underlyings or the Component Securities. The Issuer or its affiliates
may also publish research or other reports relating to Underlyings or the
Component Securities. Any such activities may have a negative effect
on the value of Notes relating to such Underlyings. In addition, the Issuer
may assume roles as hedging party, service providers or calculation
agent in respect of Underlyings which are funds, calculation agent under
the Notes or publisher of research reports. In respect of any of these roles
the Issuer may have interests that conflict with the interests of holders of
such securities.
Commission and cost of hedging: The issue price of the Notes may
include commissions charged by Issuer or its affiliates and the cost or
expected costs of hedging the Issuer's obligations under the Notes (if
any). Accordingly, there is a risk that, upon issue, the market price of
Notes may be lower than original issue price of the Notes. Also, fees,
commission and hedging costs may be deducted from the Final
Redemption Amount in the case of Notes.
Exchange rate risks and exchange control risk:
The Issuer will pay amounts in respect of the Notes in the Settlement
Currency. Since the Underlying is referenced in SAR (the "Underlying
Currency"), amounts payable under the Notes may be affected by
multiple currency conversion costs which may be passed on to investors.
Where the Settlement Currency is not the same as the investor's home
currency, the realisable value of the investment in the investor's home
currency may be at risk from fluctuations in the exchange rate.
Government and monetary authorities may impose or modify exchange
controls that could adversely affect an applicable exchange rate or
transfer of funds in and out of the country. As a result of such restrictions
and controls the Issuer may suspend its obligations to make any payment
under any Notes if and for as long as such exchange controls have
occurred and are continuing. Holders of the Notes shall not be entitled
to any interest or other compensation in respect of any such suspension.
- 35 -
Section D – Risks
Market Disruption Events and Additional Disruption Events: In the
case of early closure of the relevant exchange, disruption of such
exchange or suspension of trading on such exchange, including, in the
case of Notes linked to a China Connect Underlying, including the early
closure or disruption of the securities trading and clearing links
programme developed or to be developed by The Stock Exchange of
Hong Kong Limited (the "SEHK"), the China Connect Market, the Hong
Kong Securities Clearing Company Limited and the China Securities
Depository and Clearing Corporation for the establishment of mutual
market access with SEHK and the China Connect Market, where
applicable ("Market Disruption Events") or a hedging disruption, a
change in applicable laws, an increased cost of hedging, where
applicable, an insolvency filing of the issuer of the Underlying, a foreign
exchange disruption event, or, in the case of Notes linked to a China
Connect Underlying, a ceasing by the relevant exchange to accept
Securities as "China Connect" securities, or a permanent suspension or
termination of the "China Connect" service with respect to the Securities
("Additional Disruption Events"), postponement or adjustment of
valuations in case of a Market Disruption Event or adjustment of terms
agreed to by the holders of Notes or redemption or exercise of the Notes
in case of an Additional Disruption Event in respect of such Notes may
have an adverse effect on the value of and/or the Final Redemption
Amount in respect of such Notes.
Illegality or changes in tax law may cause the Issuer's obligations
under the Notes to be redeemed or terminated early: If the Calculation
Agent determines the performance of the Issuer's obligations under any
Notes shall have become unlawful or impracticable or if the Issuer
determines that it would be required to pay additional amounts in respect
of any withholding or deduction for taxes, duties or other similar charges
on payments under the Notes, the Issuer may redeem such Notes and pay
a sum representing the fair market value of such Notes. As a result
holders of Notes will forgo any future appreciation in the relevant
Underlying and may suffer a loss of some or all of their investments.
Considerations regarding hedging: The value of the Notes may not
exactly correlate with the value of the Underlying to which the Notes
relate.
Applicable Bank Resolution Powers: The Issuer is subject to the
Banking Act 2009 which implements the BRRD in the UK and gives
wide powers in respect of UK banks and their parent and other group
companies to HM Treasury, the Bank of England, the Prudential
Regulation Authority and the United Kingdom Financial Conduct
Authority (each, a "relevant UKRA") in circumstances where a UK
bank has encountered or is likely to encounter financial difficulties.
These powers include a "bail-in" power, which gives the relevant UKRA
the power to cancel all or a portion of the principal amount of, or interest
on, certain unsecured liabilities (which could include the Notes) of a
failing financial institution, to convert certain debt claims (which could
be amounts payable under the Notes) into another security (including
common shares), or alter the terms of such liabilities, including their
maturity or expiry or the date on which interest becomes payable,
including by suspending payments for a temporary period. The exercise
by the relevant UKRA of any of its powers under the Banking Act 2009
(including especially the bail-in power) could lead to the holders of the
Notes losing some or all of their investment or may adversely affect the
rights of holders of the Notes, the market value thereof or the Issuer's
ability to satisfy its obligations thereunder.
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Section D – Risks
Tax risks: The amount of a payment to the investor under the Notes may
be decreased to take into account the effect of taxes, duties or other
similar charges on an investment in the Underlying. There is a risk that
tax law or practice will change in the future resulting in the imposition
of or increase in tax on an investment in, or disposition of the Underlying.
This will result in a decrease of the amounts payable under the Notes.
Also, investors in the Notes will be obliged to pay all taxes, duties or
other similar charges payable in connection with the subscription,
purchase or holding of such Note and the payment of the Final
Redemption Amount and/or any Additional Payment.
Emerging market risks: Investors in Notes relating to Underlyings
which are issued in or located in or listed on an exchange in an emerging
market, namely SAUDI ARABIA, should be aware that investments in
emerging markets, and specifically SAUDI ARABIA, are subject to
greater risks than well-developed western markets. Institutions relied
upon for the efficient functioning of capital markets, such as stock
exchanges, economic, legal and regulatory institutions, systems for the
clearing, settlement and registration of securities, may be less developed.
Disclosure standards may be less onerous on issuers and accountancy
practices may differ from those which are internationally accepted.
Political conditions in certain geographic locations where the issuers of
Underlyings may operate may be volatile or unstable, and there could be
increased price volatility.
Specific risks relating to Underlying Equity-Linked Notes: If a
Potential Adjustment Event occurs and dilutes the theoretical value of
the Underlying or an Extraordinary Event occurs, the Calculation Agent
may make corresponding adjustments to the conditions of the Notes
which may adversely affect the Final Redemption Amount payable or (in
the case of Extraordinary Events) may redeem the Notes; as a result the
holder of Notes may lose some or all of its investment.
Alternative Payment Currency Risk: If "Payment of Alternative
Payment Currency Equivalent" is specified as applicable in the relevant
Final Terms, an investor is subject to the risk that payments in respect of
such Notes will be made in the Alternative Payment Currency specified
in the relevant Final Terms instead of the Settlement Currency. To the
extent the Issuer is not able, or it is impracticable for it, to satisfy its
obligation to pay the Final Redemption Amount, Additional Payments
and/or Supplementary Amounts (if applicable) as a result of
Inconvertibility, Non transferability or Illiquidity (each, as defined in the
Conditions), the Issuer shall be entitled to settle any such payment in the
Alternative Payment Currency specified in the relevant Final Terms on
the due date at the Alternative Payment Currency Equivalent of any such
Final Redemption Amount, Additional Payments and/or Supplementary
Amounts (if applicable). In this case, the subheading in this section
entitled "Exchange rate risks and exchange control risk" would apply
as if the relevant Alternative Payment Currency were the Settlement
Currency.
Investors may lose the value of their entire investment or part of it,
as the case may be.
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Section E – Offer
E.2b Reasons for the
offer and use of
proceeds when
different from
making profit
and/or hedging
certain risks:
Not Applicable. The prospectus has been prepared solely in connection
with the admission of Notes to trading on a regulated market pursuant to
Article 3(3) of the Prospectus Directive. There will be no public offer of
the Notes and thus reasons for the offer and use of proceeds are not
required.
E.3 Description of the
Terms and
conditions of the
offer:
Not Applicable. The prospectus has been prepared solely in connection
with the admission of Notes to trading on a regulated market pursuant to
Article 3(3) of the Prospectus Directive. There will be no public offer of
the Notes and thus a description of the terms and conditions of the offer
is not required.
E.4 Description of any
interests material
to the issue/offer,
including
conflicting
interests:
The Issuer or its affiliates may engage in hedging or other transactions
involving the relevant Underlying which may have a positive or negative
effect on the value of such Underlying and therefore on the value of any
Notes to which they relate. Certain affiliates of the Issuer may also be
the counterparty to the hedge of the Issuer's obligations under an issue of
Notes and the Calculation Agent is responsible for making
determinations and calculations in connection with the Notes in its sole
and absolute discretion acting in good faith and may be a service provider
in respect of Underlyings which are funds. The Issuer or its affiliates
may from time to time advise the issuer or obligors of, or publish
research reports relating to, an Underlying. The views or advice may
have a positive or negative effect on the value of an Underlying and may
be inconsistent with purchasing or holding the Notes relating to such an
Underlying.
Fees may be payable by the Issuer to the Deales acting as underwriter(s)
of issues of the Notes.
Save as disclosed above, no No person involved in the issue of the Notes
has, so far as the Issuer is aware, an interest material to the issue.
E.7 Estimated
expenses charged
to the investor by
the Issuer or the
offeror:
Not Applicable. The prospectus has been prepared solely in connection
with the admission of Notes to trading on a regulated market pursuant to
Article 3(3) of the Prospectus Directive. There will be no public offer of
the Notes and expenses in respect of the listing of Notes are not charged
directly by the Issuer or Dealer(s) to the investor.
