HSBC France € 20,000,000,000 Euro Medium Term Note Programme

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Loan loss provisions
At 30 June 2008, loan loss provisions represented 56.30 per cent of the HSBC France group’s total doubtful and
non-performing exposure.
Liquidity ratio
The group’s regulatory ratios reflect its good liquidity risk cover. The regulatory liquidity ratio, which measures
the potential one-month liquidity gap, averaged 111.45 per cent in the first half of 2008 on an individual basis.
Basel II international solvency ratio
The HSBC France group's Basel II international solvency ratio was 9.2 per cent at 30 June 2008, compared with
a minimum requirement of 8 per cent. The group’s Tier 1 capital ratio was 8.7 per cent compared with a
minimum requirement of 4 per cent.
Under the Basel II definitions, total HSBC France group capital amounted to EUR 5 billion at 30 June 2008, of
which EUR 4.67 billion was Tier 1 capital.
The corresponding risk-weighted assets totalled EUR 53.9 billion, broken down as follows:
(in billions of euros)
Credit risks, not including trading book 46.0
Trading book credit risks 3.2
Market risks 4.7
OPERATIONAL RISK MANAGEMENT
Operational risk is the risk that financial loss arises from fraud, non-authorised activities, errors, oversights,
inefficiency, failures in systems or external events.
In general, therefore, it includes the risk linked to the security of information systems, legal and regulatory risks
and environmental risks.
Identification and management of operational risks
An operational risk management system was established in 2003 as an extension of the loss-reporting system set
up for all HSBC France group business units in 2002. In addition to a small central operational risk management
team, each business unit has its own Operational Risk Business Co-ordinators ("ORBC") who, within their
entities, co-ordinate work to identify operational risks liable to affect their business. In conjunction with the
business head concerned, they analyse and quantify the risk of loss in terms of frequency, severity and exposure
(with exposure taking account of the effectiveness of existing procedures), using the grading system
recommended by the HSBC Group.
During 2004, action plans were drawn up for all risks identified by the system as significant, after review and
validation by an Operational Risk Management Committee. The ORBCs are responsible for monitoring these
action plans and more generally for measuring trends in their business unit’s exposure to risk.
In January 2005, the HSBC Group rounded out existing procedures by drawing up a summary of all methods for
identifying, reporting, managing, control ling and preventing risks. These rules include the following:
- responsibility for operational risk management falls primarily to managers, through transaction
processing;
- information systems are used to identify and report operational risks and to generate appropriate regular
reporting documents;