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

federal income tax return, which may entail significant administrative burden. A beneficial owner ofNotes that is a foreign financial institution will be able to obtain a refund only to the extent anapplicable income tax treaty with the United States entitles it to an exemption from, or reduced rate of,tax on the payment that was subject to FATCA Withholding.FATCA is particularly complex and its application is uncertain at this time. The above description isbased in part on proposed regulations, official guidance and the model IGA, all of which are subject tochange or may be implemented in a materially different form. Prospective investors should consulttheir own tax advisers on how these rules may apply to the Issuer and to payments they may receive inconnection with the Notes.EU Crisis Management DirectiveThe European Commission has published proposals for a crisis management directive which isintended to enable a range of actions to be taken by relevant regulatory authorities in relation to creditinstitutions and investment firms which are considered to be at risk of failing. The full scope of thedirective and its impact on the Issuer is currently unclear but the implementation of the directive or thetaking of any action under it could materially affect the value of any Notes.On 6 June 2012, the European Commission published a draft legislative proposal for a directiveproviding for the establishment of an EU-wide framework for the recovery and resolution of creditinstitutions and investment firms (the Crisis Management Directive or CMD). The stated aim of thedraft CMD is to provide resolution authorities with common tools and powers to address banking crisespre-emptively in order to safeguard financial stability and minimise taxpayers’ contributions to bankbail-outs and/or exposure to losses. The powers provided to authorities in the draft CMD are dividedinto three categories: (i) preparatory steps and plans to minimise the risks of potential problems(preparation and prevention); (ii) in the event of incipient problems, powers to arrest a firm'sdeteriorating situation at an early stage so as to avoid insolvency (early intervention); and (iii) ifinsolvency of a firm presents a concern as regards the general public interest, a clear means toreorganise or wind down the firm in an orderly fashion while preserving its critical functions andlimiting to the maximum extent any exposure of taxpayers to losses.The draft CMD currently contains four resolution tools and powers:(i) sale of business – enables resolution authorities to direct the sale of the firm or the whole orpart of its business on commercial terms without requiring the consent of the shareholders orcomplying with the procedural requirements that would otherwise apply;(ii) bridge institution - enables resolution authorities to transfer of all or part of the business of thefirm to a "bridge bank" (a public controlled entity);(iii) asset separation - enables resolution authorities to transfer impaired or problem assets to anasset management vehicle to allow them to be managed and worked out over time; and(iv) bail-in - gives resolution authorities the power to write-down the claims of unsecured creditorsof a failing institution and to convert debt claims to equity (subject to certain parameters as to whichliabilities would be eligible for the bail-in tool).The draft CMD currently contemplates that it will be implemented in Member States with effect from 1January 2015, except for the bail in tool, which is contemplated to be implemented by 1 January 2018.The powers currently set out in the draft CMD would impact how credit institutions and investmentfirms are managed as well as, in certain circumstances, the rights of creditors. However, the proposeddirective is not in final form and changes may be made to it in the course of the legislative process. In39