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HSBC Bank Malta p.l.c.

Annual Report and Accounts 2022

The HSBC Group HSBC Bank Malta p.l.c. is a member of the HSBC Group, whose ultimate parent company is HSBC Holdings plc. Headquartered in London, HSBC Holdings plc is one of the largest banking and financial services organisations in the world. The HSBC Group’s international network is spread across 64 countries and territories in Europe, Asia, North America, Latin America, and the Middle East and North Africa.

HSBC Bank Malta p.l.c. Registered in Malta: C3177 Registered Office and Head Office: 116 Archbishop Street Valletta VLT 1444 Malta  Telephone: 356 2380 2380 www.hsbc.com.mt HSBC Holdings plc Registered Office and Group Head Office: 8 Canada Square London E14 5HQ United Kingdom Telephone: 44 020 7991 8888 www.hsbc.com

Contents
	Page
Chairman’s Statement	2
Chief Executive Officer’s review	5
Board of Directors and Company Secretary	12
Executive Committee and Head of Internal Audit	14
Report of the Directors	17
Directors’ Responsibilities Statement	30
Statement of compliance with the Code of Principles of Good Corporate Governance	31
Remuneration Report	39
Income statements	46
Statements of comprehensive income	47
Statements of financial position	48
Statements of changes in equity	49
Statements of cash flows	51
Notes on the financial statements	52
Five-Year comparison: Income statements and statements of comprehensive Income	150
Five-Year comparison: Statements of financial position	151
Five-Year comparison: Statements of cash flows	151
Five-Year Comparison: Accounting ratios	152
Branches and offices	153

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	1

Chairman’s Statement

John Bonello, HSBC Bank Malta p.l.c. Chairman

2022 saw the beginning of a recovery in our economy, particularly in the tourism sector, despite the considerable economic headwinds

that persist internationally. The adverse effects of Covid-19 have largely been replaced by worsening geopolitical events, in particular the

war in Ukraine, energy costs, supply chain issues and inflation. Uncertainty continues to be the dominant sentiment.

Malta’s removal from the so-called FATF ‘Grey List’ in a short time is testament to the commitment by the authorities and the wider

financial community to address the shortcomings that had been identified. It is, of course, essential that our guard is not allowed to slip

and that the advances that have been made are retained and the commitment to fight financial crime continues to increase. There is no

room for complacency in this space. At HSBC we will continue to strive to be a safe and compliant bank working to the highest

international standards whilst pursuing safe growth.

Our results for the year were considerably better than the previous year, largely driven by the removal of the negative interest rate

environment and the recovery of a commercial debt for which we had fully provided in previous years. We also benefitted from the hard

work that was put in to re-structure our operations and costs.

We also remain at our clients’ disposal to assist in their efforts to reduce emissions and transition to net zero, as we work to reduce our

own, and to provide the market with sustainable and responsible investment opportunities.

Results

The reported profit before tax for the year ended 31 December 2022 was €57.3m. This represents an increase of €30.4m when compared

with the prior year. The bank’s improvement in performance was driven by rising interest rates and a significant recovery on a

commercial non-performing loan which was largely provided for in prior years. In 2022, the underlying results of the insurance company

were impacted positively by an improvement in the yield curve. We also maintained effective cost management resulting in cost savings.

The adjusted profit before tax increased to €58.8m, or 98% compared to 2021. The adjusted profit before tax for 2022 and 2021 excludes

a restructuring provision of €1.5m and €2.8m respectively. More details on the financial results can be found in the CEO’s review.

Profit attributable to shareholders amounted to €37.6m, resulting in earnings per share of 10.4 cent compared with 4.9 cent in 2021.

The bank’s capital ratios improved marginally with CET1 increasing from 18.4% to 18.5% and the total capital ratio increasing from

21.1% to 21.3%. This improvement was driven by the profits for the year partially offset by the reduction in revaluation reserves of

€23.2m as a result of the decrease in the market prices of financial instruments. The bank continues to maintain a strong capital base and

is fully compliant with the regulatory capital requirements.

Whilst we continue to strengthen our capital base, we recognise the importance of dividends to our shareholders. The Board has thus

recommended a dividend pay-out ratio of 35% on reported profits.

The final gross dividend will be 5.61 cent per share (3.64 cent per share net of tax).

Chairman’s Statement

2	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

From left: Charlotte Cilia, Chief Financial Officer, John Bonello, Chairman, Simon Vaughan Johnson, Chief Executive Officer

Our regulatory environment

During the course of 2022, the focus on prudential risk management by the regulatory and supervisory authorities continued, focusing

mainly on the bank’s governance and risk management activities as well as climate risk. The bank’s business model remained aligned to

the principle of safe growth, strict but safer prudential risk buffers, and robust compliance standards.

The regulatory engagement with the bank’s principal regulators has continued in a transparent manner, covering various risk themes and

assessments including climate risk and the bank’s Internal Capital Adequacy Assessment Process (ICAAP) which were undertaken as a

result of the European Central Bank’s direct supervision and its supervisory priorities. During this period regulatory engagement was

mainly focused on ensuring that governance and prudential risk management structures, procedures and internal controls are operating

effectively. This work continues to be pivotal to the regulators’ supervisory evaluation process.

The Regulatory Development Programme of the bank has progressed on a number of new and enhanced requirements relating to the

Payment Services Directive II (‘PSD II’) and the Sustainable Finance Disclosure Regulation (‘SFDR’). The new Central Bank of Malta

Directive on the Use of Cheques and Bank Drafts (‘CBM Directive 19’), was implemented within the required timeframes in 2022. This

Directive introduced a set of rules and regulations on the use of paper-based instruments in Malta to regulate the use of such instruments

due to their inefficient nature, high processing costs and Anti-Money Laundering (AML) risks.

Throughout 2022, the bank remained in close engagement with regulators and industry bodies during the consultation and ongoing

implementation processes of other regulatory changes. The bank will continue to observe and monitor all of the upcoming relevant

regulatory developments in order to fully adhere to its legal and regulatory obligations, and to contribute to the European and local

jurisdiction’s evolving regulatory agenda and consultation process.

Our responsibility towards the community

The bank plays an important role in supporting the community through the customers we serve and its very active and expansive

corporate social responsibility programs. Through the HSBC Malta Foundation, the bank seeks to work with numerous stakeholders in

the community with the aim of creating a sustainable future. Drawing from HSBC Group resources and a network of partners, we work to

tackle critical problems in key areas of sustainable finance, climate and future skills. We also remain committed to making a difference in

other areas, such as, but not limited to, youth education and the protection of our environment and heritage. We have pledged long-term

support to help people gain access to education and training, so they can acquire the skills they need to succeed in today’s rapidly

evolving workplace. In this context, we work closely with several stakeholders including government, policymakers, local businesses,

charities and non-profit organisations. We take pride in HSBC colleagues who contribute to the charities and causes that they feel

passionate about. In this regard, we grant all our employees a paid day to take leave and volunteer for work in the community. We also

encourage our people to take an active role in initiatives supported by the HSBC Malta Foundation. The Foundation is, furthermore,

immensely grateful for the support and guidance of our highly experienced HSBC Malta Foundation Board members.

During 2022, the bank focused on creating a more sustainable planet and society, both internationally and locally. The bank has set out a

series of commitments to contribute to the global transition to a low-carbon economy and to become a net-zero bank. We are committed

to reducing our footprint through our operations, supply chain and financing portfolio. Being net zero means reducing the emissions we

add to the atmosphere while increasing the amount we remove, in order to achieve a balance that protects the planet, whilst creating a

thriving and resilient global economy. Our aim is to achieve net zero in our own operations and supply chain by 2030 or sooner; using the

Paris Agreement Capital Transition Assessment (‘PACTA’) tool to develop clear and measurable ways to achieve net zero. We make

regular and transparent disclosures to communicate our progress in line with guidelines set out by the Taskforce on Climate-related

Financial Disclosures guidelines. We warmly encourage our customers and clients to do the same. HSBC Bank Malta is also one of the

founding members of the Malta ESG Alliance.

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	3

HSBC Malta Foundation supports the High 5 Mathematics challenge. Winners and awardees of the seventh High 5 Junior Mathematics Challenge 2022 receive their accolades at the

Malta National Aquarium in Qawra.

Currently the HSBC Malta Foundation is sponsoring two major transformative projects in line with its strategic priorities. The first project

is linked to Future Skills which is aimed at looking into the skills required in the future of work. This three-year research project aims to

identify the skills needed for the future of work in Malta and to embed these skills in the national curriculum. The second project is linked

with our climate ambition and net zero strategy. The objective of the project is to establish the requirements and guidelines for a net zero

carbon commercial building in the Maltese context.

Every year, the HSBC Malta Foundation earmarks part of its funding for causes that are important to our community. During 2022, the

Foundation supported a number of projects including the Prince’s Trust International Achieve Programme, the JAYE (Young Enterprise)

Malta Foundation, The Malta Chamber of Commerce, The Chamber of SME’s, the Malta Community Chest Fund Foundation and

Fondazzjoni Patrimonju Malti amongst others.

I take this opportunity to thank all our employees whose support and dedication towards these initiatives and projects for the benefit of

the community we serve.

Our People

Once again I have to congratulate and thank all the employees for the considerable effort they have put in to keeping themselves and our

customers safe in these difficult times. At the same time, I must congratulate management for their leadership in this regard.

Our bank is led by a highly professional, multi-skilled and committed management team. Throughout the organisation, we are fortunate

to have people who are equally professional and proud to be a part of HSBC and the brand it represents. I would therefore like to express

my gratitude, on your behalf, to all our people who work diligently every day to deliver HSBC’s services to our customers in compliance

with the highest standards.

Our Board of Directors

During 2022, there were three changes to the membership of the Board. On 26 October 2022, 5 December 2022 and 7 December 2022,

the bank announced the respective appointments of Henri Mizzi, Maria Micallef and Terecina Kwong as Non-Executive Directors of the

bank. These appointments were effective on the date of regulatory approval. The Board of Directors of the bank is composed of

colleagues whose varied areas of expertise and experiences contribute unparalleled insights into the varied agendas debated during

meetings through the year, thereby ensuring that all decisions taken are based on the highest ethical standards and knowledge of the

banking sector.

I feel privileged to serve as the Chairman of this outstanding group of people. On your behalf, I want to express to them my gratitude for

their focus and dedication to the work of the Board.

Looking ahead

In these difficult and uncertain times, our customers will undoubtedly be exercising caution, as will we, but I am confident they will

continue to seek investment opportunities to grow their business and we will continue to support the opportunities that are aligned to our

values. We will also continue to leverage our unique ability to connect Maltese companies to the global economy.

I will conclude by expressing my gratitude to you, our shareholders, for your continued support and commitment to this bank. I assure

you that all at HSBC Bank Malta p.l.c. will continue to strive for the best outcomes for your investment.

Signed by John Bonello (Chairman) on 21 February 2023

Chairman’s Statement

4	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

Chief Executive Officer’s review

As the Chairman stated, 2022 continued to be a challenging year for both the Maltese and global economy. Despite persistent shocks

from the pandemic and the unstable geopolitical environment, we succeeded in delivering innovative solutions to our customers and

have invested time and effort in identifying and realising opportunities to grow the business. We remain focused on the future, with a

very strong appetite to grow our bank safely. 

The bank achieved strong growth in profit in 2022. The bank’s fundamentals remain robust and underlying performance was resilient.

We remain committed to executing our Safe Growth strategy that is focused on three strategic pillars: Growth, our Customers and our

People. I am pleased that our Safe Growth strategy is delivering tangible results and I’m confident that our future-focused framework

positions HSBC Malta well for long term success.

In the area of growth, we strive to deliver safe growth from areas of strength where we have the right to win by accelerating growth from

Commercial Banking and Wealth and Personal Banking and by maximising sustainable finance opportunities, leveraging our international

advantage, maintaining proactive cost management and maintaining a robust risk management and Financial Crime Compliance culture. 

Financial crime undermines financial systems, hinders economic growth, and negatively affects legitimate businesses and innocent

people. Malta is part of the global financial system and therefore weak controls or complacency might have an impact not only on Malta

but worldwide.

Malta’s successful removal from the FATF ‘Grey List’ in a relatively short period of time is very positive and the result of a collective effort

at country level. Having said that, all relevant stakeholders including authorities, regulators, financial service operators and other subject

persons should continue to work together to ensure that Malta does not find itself in a similar position and to convert this decision into an

opportunity to re-position Malta as a financial services hub and utilise this as a competitive advantage internationally.

We believe that the steps which have been and continue to be taken on this front provide stability and security to the financial system at

large and to all those who make use of it. High compliance standards in the banking system continue to be a source of strength and

competitive advantage, as we work diligently to support growth in Malta’s economy by facilitating new business and cross-border trade.

Our customer strategy is focused on building a bank for the future that is centred around customers, connecting them to the highest

growth potential and delivering world-class transaction banking capabilities.

Our people strategy is centred around empowering our people by investing in opportunities for colleagues to develop skills, learn new

capabilities and adapt to the future, whilst reducing complexity and bureaucracy.

Our customers and people remain two key strategic focus areas. We were delighted to launch the largest capital expenditure project for

HSBC in Europe to transform and update our Operations Centre in Qormi. This exciting project will create a modern, fit for purpose

business environment for all who work in, or visit, our premises at 80 Mill Street Qormi. Furthermore, this landmark project will facilitate

a number of carbon net zero initiatives that are fully aligned with our published targets. I would like to express my sincere thanks and

gratitude to our Board and my colleagues for their dedication, hard work and support in 2022.

Chief Executive Officer’s review

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	5

Performance

The bank achieved strong growth in profit in 2022. The reported profit before tax for the year ended 31 December 2022 was €57.3m. This

represents an increase of €30.4m or 113% compared to prior year. The adjusted profit before tax of €58.8m increased by €29.2m, or 98%

versus 2021. The adjusted profit before tax excludes the impact of restructuring provisions of €1.5m.

Reported profit attributable to shareholders was €37.6m, resulting in earnings per share of 10.4 cent compared with 4.9 cent in the same

period in 2021.

Net interest income increased by 11% to €108.2m compared to prior year as the bank benefitted from rising interest rates. The European

Central Bank increased the interest rate on their overnight deposit facility from -0.50% on 26 July 2022 rising to 2% as from

21 December 2022 and therefore the bank’s surplus liquidity position was no longer being placed at negative rates.   

Net fee income decreased by €2.1m compared to 2021 to €22.1m. This was driven by the removal of the high balance fee in July 2022,

which was a customer-driven decision taken by the bank in view of the rising interest rate environment. We also saw a decrease in the

refund on card scheme fees. On an underlying basis, the bank has sustained good progress in generating fee income.

Net trading income increased by €2.2m as we continue to strengthen and deepen our relationships with our corporate customers. As the

leading international bank in the market, we have continued to offer a comprehensive range of award winning transaction banking

services, including foreign exchange and other hedging products.

Operating costs for the year reduced by 2% and amounted to €103.0m. Operating expenses include restructuring provisions of €1.5m in

2022 and €2.8m in 2021. Excluding the restructuring provisions, expenses decreased by €1.1m, or 1%, compared to prior year,

demonstrating continuously effective cost management actions.

A number of factors contributed to the net decrease in adjusted costs of €1.1m. The most material items were lower long term employee

benefit costs in view of the increase in interest rates, savings on our commercial real estate costs and lower regulatory fees. These cost

savings were partially offset by higher amortisation of intangible assets since we continue to invest in digitalisation, higher recharges

from Group entities in view of increased outsourced services and higher costs incurred by the insurance subsidiary for the

implementation of new accounting requirements. 

During the year, we reported a release of Expected Credit Losses (ECL) of €9.6m, compared to a release of €1.0m in 2021. In 2022, our

Commercial Banking business reported a net release of €12.3m which was mainly attributable to a significant recovery on a commercial

non-performing loan which was largely provided for in prior years. Wealth and Personal Banking incurred a net charge of €2.7m.

Provisions relating to a deterioration in the forward economic outlook from heightened levels of uncertainty and inflationary pressures

were partially offset by the release of Covid-19 provisions booked in prior years.

The effective tax rate was 34.4%. This translated into a tax expense of €19.7m, €10.6m higher than the €9.1m expense for 2021. The

increase in tax expense resulted mainly from increased profits.

HSBC Life Assurance (Malta) Ltd reported a profit before tax of €4.8m compared to a loss of €3.0m in 2021. The positive variance in

profitability of €7.8m is mainly attributable to rising interest rates and lower actuarial losses, partially offset by higher expenses arising

from increased costs associated with IFRS 17 implementation. The entity benefitted from the direct impact of increased interest rate

expectations, reflected in the revision of the yield curve impacts of €17.4m and positive actuarial adjustments in line with inflationary

expectations amounting to €0.9m, which were partially offset by the decrease in the fair value movement of investments of €12.8m,

resulting in a net gain in 2022 of €5.5m, with a year-on-year increase of €3.6m. Performance in comparison to previous year was also

positively impacted by lower adverse actuarial impacts.  The entity incurred increases in expenses of €1.0m mainly driven by the

implementation costs of new accounting requirements.

Net loans and advances to customers decreased marginally by €21.6m to €3,175m. Commercial balances decreased by 1.9%, while retail

balances decreased by 0.2%. The bank continued to improve asset quality by reducing commercial non-performing loans by 22%. Retail

non-performing loans decreased by 34% mainly driven by mortgage upgrades on which moratoria were extended during Covid-19. We

saw an increase in new loans and other facilities approved to commercial banking customers, which were up by over 30% on prior year.

We expect drawdown of these facilities in 2023.

Customer deposits grew by 6% to €5,971m driven by both retail and commercial deposits. The bank maintained a healthy advances to

deposits ratio of 53% and its liquidity ratios remained well in excess of regulatory requirements.

The financial investments portfolio increased by 19% to €1,005m. The increase was driven by higher liquidity as a result of the growth in

customer deposits. During the year, the fair value of the hold-to-collect-and-sell investments was impacted by adverse price movements

on financial instruments, as a result of the increase in term market yield curves, impacting negatively revaluation reserves by €23.2m. The

bank took action to address the negative impact by entering into fair value hedges to mitigate against further decreases in market prices,

as well as establishing a hold-to-collect portfolio. The risk appetite for investment quality remained unchanged. The portfolio consists

entirely of securities of sovereign and supranational issuers rated A- (S&P) or better.

The bank’s common equity tier 1 capital was 18.5% as at 31 December 2022, compared to 18.4% at the end of 2021. The total capital

ratio increased to 21.3% compared to 21.1% at 31 December 2021. The improvement in the capital ratios was driven by increased profits,

partially offset by adverse price movements on financial instruments. The bank maintained a strong capital base and is fully compliant

with the regulatory capital requirements.

The bank is determined to maintain a strong capital base, at the same time recognising the importance of dividends to our shareholders.

In view of the adverse price movements experienced this year, expected changes in capital regulations and the uncertain economic

outlook, the Board has recommended a dividend pay-out ratio of 35% on reported profits after tax amounting to €13.1m which is the

highest dividend paid in the last 4 years. The final dividend will be paid on 25 April 2023 to shareholders who are on the bank’s register of

shareholders on 21 March 2023, subject to approval at the Annual General Meeting scheduled for 20 April 2023.

Chief Executive Officer’s review

6	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

Wealth and Personal Banking (‘WPB’)

In early 2022, as the restrictions of Covid-19 started to ease, we resumed full operations through twelve Branches across Malta and

Gozo. 

Enabling our customers to bank with us continues to be a key focus. Our customers’ expectations are changing fast as digital channels

are becoming the primary payments tool. We have continued to grow digital channel usage, with over 95% of basic transactions now

carried out through our internet and mobile banking platforms. During 2022, customer adoption of HSBC Malta’s Mobile Banking App

increased by 12% and monthly mobile logins increased by 20%, as more transactions were completed online. We have also deployed a

number of mobile banking enhancements which will improve the user experience and align with new regulatory requirements. During the

process, protecting our customers remained a key priority as we enhanced our mobile application’s security features.

Helping our customers to buy their first home, or move to a new property, remains key to HSBC and we continue to provide best in class

expertise through our team of Mortgage Protection Managers, offering both mortgages and life assurance. Given the external

environment, a prudent credit policy was retained for both secured and unsecured lending to ensure the long-term sustainability of our

service proposition. 

We continued to increase the number of retail customers that trust us with their day-to-day banking relationship, evidenced through

growth in the number of customers who choose HSBC as their main Bank, thanks to process improvements and best-in-market

propositions, namely HSBC Premier and HSBC Advance.

This year we launched the Employee Banking Solutions initiative that is a collaboration with Commercial Banking with the aim of

engaging new customers in our retail propositions, including the Employee Pension Plan.

During 2022, the bank launched new products and initiatives, primarily in Wealth Management, including: the new sustainable Multi-

Asset Fund, providing customers with additional income generation options; returning to the market to act as a Financial Intermediary for

local corporate bond issuance; and launch of the Corporate Employee Pension Plan. In January 2023, we have also launched the Key Five

Critical Illness Cover, which is the first product to market of its kind that provides stand-alone insurance protection for customers.

We have successfully implemented a number of transformational regulatory projects following new legislation that came into force,

safeguarding the interests of our customers. We also deployed a new Cards system that provides enhanced features and protection to

our customers.

As we look ahead to 2023, we remain focused on creating accessible banking for our customers to meet their changing needs through a

multichannel banking experience, as we continue to embed our Environmental, Social and Governance strategy. We remain committed

to supporting the local economy to achieve the Paris Agreement goal of net zero by 2050.

HSBC Bank Malta p.l.c launched a new student campaign, pledging to plant a tree for every new student enrolled

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	7

Commercial Banking (‘CMB’)

The past year has, once again, brought about various challenges and uncertainties that businesses across the world have had to face,

with supply chain disruptions taking centre stage for most of the year. Despite this, many businesses are finding new ways to adapt and

seize opportunities, including navigating international markets. We have continued working closely with our customers to support them

as they face these challenges, not only by meeting their financing needs, but also by giving them access to the wealth of resources

provided by the HSBC Group, such as webinars, leading international market research and relevant articles and industry insights. Our

focus remains on building strong and mutually beneficial partnerships with our customers and adding value to them. We were pleased to

see another increase in new loans and other facilities approved to customers, which were up by 30% on prior year. We expect drawdown

of these facilities in 2023.

We have provided a number of Green and Sustainability Linked Trade Finance and other lending products to a number of our customers,

enabling them to invest in greener energy sources and reduce greenhouse gas emissions. This was made possible following the rollout of

a full suite of such products in 2021. We are also increasingly engaging with customers on their transition plans towards net zero and

providing them with relevant information and support. This is an area of ongoing focus, in alignment with the Group’s ESG commitments

and also with regulatory requirements. 

As the leading international bank in Malta, we have continued our efforts to grow revenues from our award winning Transaction Banking

products and solutions leveraging on our core strengths. We have seen a further increase in deposits, as more customers have trusted us

with their funds, with a related increase in payment volumes routed through our customers’ accounts. This was attributable both to

existing customers as well as newly on-boarded ones. Our Trade and Receivables Finance area has also performed very strongly in the

past 12 months, generating growth in volumes and revenue. This is another area where we can provide unique services and solutions to

our customers who trade internationally, drawing on the strengths of the Group which was named Global Best Bank for Trade Finance

2022 by Euromoney. We were delighted to be awarded Market Leader and best service provider for Trade Finance in Malta by

Euromoney in February 2023.

HSBC Bank Malta p.l.c. has supported Pet Nutrition House, a Maltese pet food manufacturer and distributor, to internationalise its portfolio of products under the Prince and Princess

brand names. Today, exports account for approximately 60 per cent of the company’s sales

In an effort to make it easier for our customers to bank with us, we have continued to invest in technology, acknowledging a clear

customer preference for digital services. We have introduced a number of enhancements to HSBCnet and its related processes that are

aimed at saving our customers time, giving them more control, simplifying key functionalities and making it easier to access timely

support when required. We have also standardised our Trade and Receivables Finance documentation and simplified our terms, making

them easily accessible online. Thanks to this investment, as well as to a continued focus on increasing digitisation, we have seen higher

penetration of HSBCnet across our customer base and higher utilization by customers. We have consequently seen lower usage of

branches by business customers. These initiatives allow customers to spend less time banking and more time growing their business. 

We were very pleased to see our efforts to improve customer satisfaction result in strong customer satisfaction scores in 2022. For the

second year in a row, we saw a material increase in the satisfaction scores given by customers who took part in an online survey at the

end of the year. Once again, customers scored the quality of their Relationship Manager highly, which is testament to the dedication and

professionalism of our people. We will, as we have done in previous years, review in depth the feedback given by our customers with a

view to finding areas where we can improve further and particularly to increase the ease with which customers do business with us.

In 2022, we announced the renewal of our long-standing Gold Partnership Agreement with The Malta Chamber, reinforcing our

commitment to support Maltese businesses. Through this partnership, we support the Malta Chamber’s ongoing operations while

creating unique joint events through which we make our international expertise and business connections available to members. Later in

Chief Executive Officer’s review

8	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

the year, we also reaffirmed our commitment to supporting Maltese businesses’ expansion into international markets through a three-

year agreement with TradeMalta, which supports the internationalisation of Maltese businesses.

We have continued investing in our greatest asset, our dedicated and professional team. The ever-changing business environment

requires our people to be updated on issues that impact our customers and we have therefore continued rolling out ongoing training

programs in ESG and regulatory issues, among others. This training enables colleagues to better understand the issues faced by our

customers and to be in a better position to provide expert support.

Our strategy remains unchanged. We aim to grow our lending book responsibly, including providing trade finance facilities to allow more

businesses to grow internationally. We will also leverage our strengths and capabilities to increase our transaction banking flows. In the

current economic environment which presents various challenges to businesses worldwide, we will additionally support customers by

providing hedging products which help them to mitigate market risks. 

Global Markets (‘GM’)

2022 has been another challenging year for Global Markets as the market continued to face demanding external factors. Notwithstanding

this, Global Markets has generated significantly higher profits in 2022, reaching levels not seen for a number of years. GM continues to

successfully deliver on its strategy to provide best in class services to local and international customers. Global Markets leverages on

HSBC’s competitive advantage as the leading international bank in Malta and on the expertise available across the HSBC Group’s

worldwide network. Collaboration with Commercial Banking and Wealth and Personal Banking businesses remains one of Global

Markets strategic priorities in our safe growth strategy. During the year GM, together with CMB, organised various events during which

leading industry specialists interacted with our clients.

Corporate Centre (‘CC’)

Markets Treasury (Corporate Centre), which manages cash, liquidity, funding and interest rate risk for the entity, generated satisfactory

revenues as a result of proactive management of excess liquidity. Both the Hold to Collect and Sell as well as the Hold to Collect

securities portfolio are mainly invested in high quality liquid assets, reflecting our conservative risk appetite. During the course of the

year, the bank took action to address the decrease in market prices of financial instruments by entering into fair value hedges to mitigate

against further decreases in market prices as well as setting up a hold-to-collect portfolio.

Digital Business Services (‘DBS’)

DBS supports and helps our business to grow safely by driving and providing digital solutions for the bank and delivering excellent

services for our customers and colleagues.

In 2022, various teams in DBS remained pivotal in maintaining customer service and business continuity during the ongoing Covid-19

pandemic. Technology solutions and more established remote working practices enabled over 90% of our colleagues to continue to work

as efficiently from home when necessary. Our Corporate Services team ensured that changes in Health Authority Guidelines continued to

be respected in all work places and customer facing locations, which involved a number of initiatives such as reinstalling sun shades to

protect our customers during the hot summer months and so safeguard social distancing measures. We take pride in the positive

feedback received from customers, employees and the Unions on the way that HSBC Malta continued to manage the Covid-19 challenge,

many positive changes for which have been adopted as permanent improvements as we reached a “new normal” phase of operation.

DBS continued to deliver on key strategic projects in 2022 and, with sustainability at the forefront of all that DBS stands for, these

included the launch of the largest capital expenditure project for HSBC in Europe to transform and update our Operations Centre in

Qormi. The project has successfully progressed in line with the ambitious plan to achieve a LEED accredited, modern, fit for purpose

business environment for all who work or visit there. In addition to facilitating a number of carbon net zero initiatives that are fully aligned

to our published targets, the interior design and supporting technological investment will provide more flexibility for employees, to

maximise the opportunity brought about by the modern approach of “hybrid” working. The project is also attracting growing external

interest, as we showcase it against the backdrop of Malta’s high profile sustainability agenda and boasts the highest safety practices in

terms of construction.

Our people

Our people and the community we serve remain at the heart of our business. Employee engagement and personal growth are key drivers

for the provision of excellent customer service. Our focus is on providing our people with opportunities to realise their career aspirations

and tools to safeguard their well-being.

Throughout the first half of 2022, we continued to adapt our ways of working as the Covid-19 situation persisted. Customer and

employee wellbeing remained at the forefront of our decisions and strategy. As the Covid-19 situation improved later in the year, we

reverted to a hybrid working model remaining vigilant despite a relaxation of restrictions across the country. We continued to capitalise

on our employee platforms and tools to facilitate employee personal development and further enhance skills and abilities. This was

achieved through various forms of virtual-led programs. These included career progression sessions, HSBC’s Degreed platform, and

future skills training launched during 2022. A number of middle managers also joined the Group’s “You Grow, Unlocking your Potential

and Accelerating into Leadership” programmes, as part of their personal development during the year.

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	9

Labour Market Forecast and Future Skills Project supported by the HSBC Malta Foundation and The Malta Chamber, focuses on identifying the future skills required to ensure Malta’s

continued competitiveness in the global economy and will examine sectors such as: banking and financial services; information technology and communication, professional and

technical services sectors.

L-R: Dr Clifton Grima, Minister for Education and Sport; Marisa Xuereb, President at The Malta Chamber; Simon Vaughan Johnson, CEO at HSBC Bank Malta p.l.c.

The attraction and retention of talent was high on our agenda throughout 2022. In July we successfully introduced a ‘Refer a Friend’

initiative to create a stronger resourcing pool in view of an increase in demand for resources across the financial services market. We

also expanded our Internship proposition by collaborating with the University of Malta, and continued our collaboration with all

educational institutions to recruit students and provide them a rich working experience. This year we welcomed back several students

who returned to HSBC as full time employees after completing their studies. We strongly believe in the importance of engaging with our

future talent, thereby providing future pipeline for the business. Flexible (including remote) working practices have been engrained in our

business thereby facilitating a healthy work/life balance for our people. Throughout the year we organised various sessions for our

employees focusing on topics of interest including mental, physical and financial well-being. In December we organised another

successful Mental First Aid Training course for line managers which reconfirmed our Gold Standard in this area, awarded by the

Richmond Foundation.

During 2022 we continued leading our HSBC HR roundtable sessions bringing together Heads of Human Resources from other leading

organisations in Malta to discuss best practices and share challenges to identify common solutions and drive a strong human capital

strategy.

In December, the Malta Council for the Voluntary Sector held the National Volunteer Awards for 2022. These awards are under the

patronage of H.E. the President of Malta, Dr. George Vella, and they recognize the work of people and entities who are making a positive

contribution to society and who are an inspiration to others. During the event, HSBC Bank Malta was honoured as winner of the National

Corporate Voluntary Organisations Award, reflecting the outstanding work that HSBC Malta colleagues do to support the community we

serve beyond banking.

Financial Crime Compliance (‘FCC’)

The Anti-Money Laundering program and agenda has continued to be a focal part of the bank’s safe growth strategy and HSBC has

continued to operate at the highest standards of financial crime risk management. Across the bank, colleagues have continued to receive

training on financial crime risk contributing in the creation of a safer community, providing stability and security to the financial system at

large and to all those who make use of it. High compliance standards in the banking system continue to be a source of strength and

competitive advantage, as we work diligently to support growth in Malta’s economy by facilitating new business and cross-border trade.

Chief Executive Officer’s review

10	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

Change of majority shareholder

On 30 November 2022, HSBC Europe B.V. transferred its direct shareholding in the Bank to HSBC Continental Europe (‘HBCE’). As a

result of this transaction, HBCE holds a direct shareholding of c70.03% in HSBC Bank Malta p.l.c. This transaction occurred to comply

with an EU Directive requiring non-EU headquartered banking groups like the HSBC Group to have an intermediate parent undertaking in

the EU by 31 December 2023. The transaction will not involve any material change in the day-to-day business of the Bank and its

subsidiaries. Ultimate control of the HSBC Malta Group will not change and remains vested in HSBC Holdings plc.

Outlook

While the interest rate outlook is now more positive, the outlook for 2023 remains uncertain in view of heightened levels of inflationary

pressures and continued geopolitical tensions.

HSBC remains strategically focused on growing our business in Malta through the Safe Growth program which is delivering tangible

benefits to our customers, shareholders and the wider community. As the leading international bank in Malta, HSBC remains fully

committed to pursuing the digitalisation journey and to offering local and global products and services to our customers, supporting

them to realise opportunities to grow both locally and internationally.

We continue to maintain high standards through applying our core values and doing the right thing by bringing the best that HSBC has to

offer to the Malta market. We remain firmly committed to this ethos. We will also continue to support the wider community through the

HSBC Malta Foundation, which, once again, has been very active throughout 2022.

We are determined to operate in a sustainable manner and will continue to give high importance to our net zero ambitions, aiming to be

net zero ourselves by 2030.

I am enormously grateful to our colleagues for their dedication and commitment and I would like to thank them sincerely for all they have

done – and are doing – for our customers, communities and each other.

We have our sights on the future and we remain confident that the ‘Safe Growth’ strategy will deliver increased returns to our

shareholders, as we strive to open up a world of opportunity.

Signed by Simon Vaughan Johnson (Chief Executive Officer) on 21 February 2023

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	11

Board of Directors and Company Secretary
		John Bonello, CHAIRMAN AND NON-EXECUTIVE DIRECTOR Appointed Director of the bank in July 2013 and Chairman in August 2019. Member of the bank’s Remuneration and Nomination Committee, former Chairman of the bank’s Audit Committee and former Member of the bank’s Risk Committee. Mr Bonello is a Chartered Accountant and a Certified Public Accountant. He was formerly the Chairman and Senior Partner of PricewaterhouseCoopers in Malta from where he retired in December 2009. He is a Fellow of the Malta Institute of Accountants, Chairman of the Disciplinary Committee of the Institute and a Member of the Joint Disciplinary Board of the Accountancy Board. He is also a fellow member of the Institute of Chartered Accountants in England and Wales.

Simon Vaughan Johnson, DIRECTOR AND CHIEF EXECUTIVE OFFICER Appointed Chief Executive Officer and Executive Director in July 2020. Chairman of HSBC Life Assurance (Malta) Ltd and of HSBC Global Asset Management (Malta) Limited. Joined HSBC Group in 1986. Mr Vaughan Johnson has broad and deep international banking experience as a Country Head, also working across Commercial Banking, Wealth and Personal Banking, and Global Markets. Additionally, he has worked in Financial Crime Risk, Trade Services, Payments and Cash Management, and e-Commerce. His postings span nine countries and four regions. Prior to taking up his appointment in Malta, Mr Vaughan Johnson was Head of the Remediation Management Office, HSBC France. He graduated with Honours from the University of Stirling, majoring in English and French. He is an Associate of the Chartered Institute of Bankers (‘ACIB’) and a Member of the Chartered Institute of Linguists. He is a Certified Anti-Money Laundering Specialist.

		Michel Cordina, EXECUTIVE DIRECTOR Appointed Executive Director in April 2019. Mr Cordina, formerly Head of Commercial Banking, is presently Head of Business Development and also heads the bank’s Corporate Sustainability arm and is the Deputy Chair of the HSBC Foundation. Mr Cordina is a seasoned banker and has a wealth of experience having started his banking career 41 years ago. He has worked in various areas of banking in both Personal Banking and Commercial Banking. He has also led a number of operational and support functions of the bank. He has occupied various executive roles within HSBC Bank Malta including Deputy Head of Operations and Head of Business Transformation. He was also the Programme Manager responsible for bringing the HSBC Contact Centre to Malta. In 2010, he was seconded to HSBC Commercial Banking in London where he performed the role of Head of Sales Performance. He is an Associate of the Chartered Institute of Bankers (‘ACIB’).

Henri Mizzi, NON-EXECUTIVE DIRECTOR Appointed Director of the bank in October 2022. Member of the bank’s Audit Committee and Remuneration and Nomination Committee. Dr Mizzi is an Independent Arbitrator and Mediator and a Member of the International Chambers for Arbitrators, Mediators, Adjudicators and Dispute Board Members. He was an Associate at Camilleri Preziosi Advocates between 1989 and 1994 and became Partner in 1995 till 2020. In 1988 he obtained his Doctor of Laws Degree from the University of Malta. He then obtained his Master Degree from the University of Cambridge (Trinity Hall) in 1988 and became a CEDR Accredited Member in 2021.

		Yiannos Michaelides, NON-EXECUTIVE DIRECTOR Appointed Director of the bank in May 2017. Presently Member of the bank’s Risk Committee. Mr Michaelides has over 28 years of international business experience involving telecoms and media as CEO and holder of other Executive positions. He is currently CEO of Cablenet Communication Systems Ltd. Till 31 March 2017, Mr Michaelides occupied the post of Group CEO of GO p.l.c. Before joining GO p.l.c. he was Senior Executive at EITL Dubai (a Dubai Holding subsidiary), with responsibilities including portfolio management and value creation at EITL portfolio companies. Prior to that, he worked as Vice- president of Strategic Marketing at du in Dubai, the new integrated telecoms operator in the UAE, Areeba, the second mobile operator in Cyprus and Nortel Networks in North America and EMEA. Mr Michaelides holds a B.Eng. (Honours), M.Eng. from McGill University (Montreal, Canada) and an M.B.A. with distinction from Warwick Business School (UK).

Board of Directors and Company Secretary

12	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

		Ingrid Azzopardi, NON-EXECUTIVE DIRECTOR Appointed Director of the bank in August 2019. She is a Chartered Director and is the Chairperson of the bank’s Audit Committee and Member of the bank’s Risk Committee. A former Director of HSBC Life Assurance (Malta) Ltd and former Chairperson of the Audit and Risk Committee of said company. Ms Azzopardi is presently the Group Internal Auditor of GO p.l.c., a position she has occupied since November 2000. She has chaired various committees at GO p.l.c., including the Group Fraud Forum and the Gender Equality Committee. She is a Certified Public Accountant and Auditor, a Fellow of the Malta Institute of Accountants, a Fellow of the UK Institute of Directors, and also a Member of the Institute of Internal Auditors.

Maria Micallef, NON-EXECUTIVE DIRECTOR Appointed as Director in December 2022. Currently, Ms Micallef is the Chairperson of the bank’s Remuneration and Nomination Committee, and Member of the bank’s Audit Committee. She was the Managing Partner at RSM Malta until her retirement in December 2020. Ms Micallef specialised in business advisory services including mergers and acquisitions, corporate finance, valuations and investment appraisals. She is a visiting lecturer at the University of Malta. Currently Ms Micallef is pursuing a Degree in Humanities at the same University. Ms Micallef has a B.A. Hons Accountancy degree and is a Certified Public Accountant. She is a fellow of the Malta Institute of Accountants, a member of the US Institute of Internal Auditors and a member of the Association of Certified Fraud Examiners. Ms Micallef served as President of the Malta Institute of Accountants during the period 2013 to 2015.

		Manfred Galdes, NON-EXECUTIVE DIRECTOR Appointed Director of the bank in January 2021. Dr Galdes is the Chairman of the bank’s Risk Committee. He is the managing partner of the ARQ Group, a multi-disciplinary advisory firm. After graduating as a lawyer (LL.D.) from the University of Malta, he obtained a Masters Degree (LL.M.) in European (Commercial) Law at the University of Leicester. Dr Galdes has spent the last 22 years practicing in the area of regulatory and financial crime compliance having held various leading roles both in the private and public sector. Between 2008 and 2016, Dr Galdes headed the FIAU, Malta’s financial intelligence unit and principal AML/CFT supervisory authority.

Terecina Kwong, NON-EXECUTIVE DIRECTOR Appointed as Director in December 2022. Ms Kwong started her career at the HSBC Group via the Hong Kong Management Associate Programme in 2000. She has held several senior positions within HSBC including Global Head of Channels Distribution, Global Commercial Banking Chief Risk and Administration Officer, Global Control Office Chief Operating Officer and Head of Centre of Excellence, Group Head of Operational Management and Chief Operating Office at HSBC China. She is currently Chief Operating Officer, HSBC Bank plc and HSBC Europe and a Non-Executive Director of HSBC Armenia. In 1997 she obtained a Bachelor of Arts Degree (Economics) from the University of British Columbia, Vancouver, Canada. In 1999 she graduated with Master of Business Administration from the Chinese University of Hong Kong. She also graduated in 2007 with a Bachelor of Law from the University of London and is a Fellow CPA, CPA Australia.

		Paula Mamo, COMPANY SECRETARY Company Secretary of HSBC Bank Malta p.l.c. since May 2022. Dr Mamo joined the bank in February 2018 as Deputy Company Secretary supporting the Company Secretary. She was appointed Company Secretary for the two subsidiary companies of the bank, HSBC Life Assurance (Malta) Ltd and HSBC Global Asset Management (Malta) Limited in May 2018. Prior to joining HSBC, Dr Mamo progressed through a number of roles primarily within legal, regulatory compliance and financial crime compliance, with other licensed financial institutions. She graduated as Doctor of Laws from the University of Malta in 2010.

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	13

Executive Committee and Head of Internal Audit
		Simon Vaughan Johnson, DIRECTOR AND CHIEF EXECUTIVE OFFICER Appointed Chief Executive Officer and Executive Director in July 2020. Chairman of HSBC Life Assurance (Malta) Ltd and of HSBC Global Asset Management (Malta) Limited. Joined HSBC Group in 1986. Mr Vaughan Johnson has broad and deep international banking experience as a Country Head, also working across Commercial Banking, Wealth and Personal Banking, and Global Markets. Additionally, he has worked in Financial Crime Risk, Trade Services, Payments and Cash Management, and e-Commerce. His postings span nine countries and four regions. Prior to taking up his appointment in Malta, Mr Vaughan Johnson was Head of the Remediation Management Office, HSBC France. He graduated with Honours from the University of Stirling, majoring in English and French. He is an Associate of the Chartered Institute of Bankers (‘ACIB’) and a Member of the Chartered Institute of Linguists. He is a Certified Anti-Money Laundering Specialist.

Elizabeth Hardy, CHIEF OPERATING OFFICER Appointed Chief Operating Officer in February 2021. In 2022, Mrs Hardy celebrated 40 years of international experience within the HSBC Group. She joined Midland Bank in the UK in 1982 and has held a variety of managerial roles in Personal Banking, Audit, Risk, Human Resources and Operations. Mrs Hardy held the position of Chief Operating Officer for Kazakhstan, Russia and Italy prior to taking up her role in Malta.

		Charlotte Cilia, CHIEF FINANCIAL OFFICER Appointed Chief Financial Officer in December 2020. Mrs Cilia is a certified public accountant and auditor with over 20 years of varied experience across audit and banking finance. She joined the HSBC Finance team as a senior manager in 2010 where she worked for four years and re-joined the bank in 2018 as Chief Accounting Officer and Deputy Chief Financial Officer. She served as Deputy Chief Financial Officer during her four years at MeDirect Group until 2018. Previously an auditor at KPMG in Malta and the UK where she performed key roles on various international engagements. She is a Director on the Board of HSBC Life Assurance (Malta) Ltd.

Alvaro Luis Teixeira, HEAD OF WEALTH AND PERSONAL BANKING Mr. Teixeira was appointed Head of Wealth and Personal Banking in June 2022, pending regulatory approvals, and has a career spanning 30 years, 7 countries and many different areas of both wholesale and retail banking and wealth management. He joined HSBC in 2010 and has had roles in Brazil, Hong Kong, Mexico, USA and UK, managing large business units, such as Wealth and Private Clients in Mexico as well as large global programs, such as Wealth Transformation. He also served in the boards of some of HSBC’s Insurance, Asset Management and Private Banking subsidiaries. Previously he spent nearly 20 years in trading desks in Brazil, USA and Canada. Mr Teixeira was trained as an economist in Brazil and then studied organisational behaviour in France and the UK.

		Michel Cordina, EXECUTIVE DIRECTOR AND HEAD OF BUSINESS DEVELOPMENT Appointed Executive Director in April 2019. Mr Cordina, formerly Head of Commercial Banking, is presently Head of Business Development and also heads the bank’s Corporate Sustainability arm and is the Deputy Chair of the HSBC Foundation. Mr Cordina is a seasoned banker and has a wealth of experience having started his banking career 41 years ago. He has worked in various areas of banking in both Personal Banking and Commercial Banking. He has also led a number of operational and support functions of the bank. He has occupied various executive roles within HSBC Bank Malta including Deputy Head of Operations and Head of Business Transformation. He was also the Programme Manager responsible for bringing the HSBC Contact Centre to Malta. In 2010, he was seconded to HSBC Commercial Banking in London where he performed the role of Head of Sales Performance. He is an Associate of the Chartered Institute of Bankers (‘ACIB’).

Executive Committee and Head of Internal Audit

14	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

		Jesmond Apap, HEAD OF GLOBAL MARKETS Appointed Head of Global Markets in April 2020. Joined the bank in 1989, then Mid-Med Bank. During his career Mr Apap has held a number of key roles that have seen him successfully drive transformation and performance. Mr Apap started his career in Operations before moving to Markets. Prior to his role as Head of Global Markets, Mr Apap headed Markets Treasury, managing cash, liquidity, funding and the structural interest rate risk for the bank.

Caroline Buhagiar Klass, HEAD OF HUMAN RESOURCES Appointed Head of Human Resources in April 2018. In 2022, in addition to her HR responsibilities in Malta, she took over regional HR responsibilities for Commercial Banking across HSBC Europe. Ms Buhagiar Klass began her HR career with ST Microelectronics in Malta in the 1990s before moving overseas in 2004 to work for ST in Italy and then France. In 2010 she moved to Singapore, initially with ST before becoming the Head of Talent and Leadership Development for AXA Insurance. Towards the end of 2015 she returned to Malta and established her own HR consultancy, working with a range of local businesses before joining HSBC Bank Malta p.l.c.

		Joyce Grech, HEAD OF COMMERCIAL BANKING Ms Grech has occupied a number of roles, primarily in Malta, during her 26 year career with HSBC. She has been heading Commercial Banking team for three years, during which she has implemented a number of changes, reshaping the team to ensure there is a focus on customer needs. Prior to her current role, she gained experience in various areas of Risk through a number of positions within the Risk department, and became the Bank’s Chief Risk Officer in 2013, a role she occupied for 6 years. In previous roles, she led Customer Value Management within the bank’s Personal Banking area for a number of years. She had also worked in the Trade Finance and Commercial Banking areas. A strong supporter of diversity and inclusion in its various forms, she is the chairperson of the bank’s Diversity and Inclusion Committee. She is particularly involved in gender diversity and aims to support female colleagues through mentoring and other initiatives and activities.

Steven Beddow, CHIEF RISK OFFICER Mr Beddow was appointed Chief Risk Officer in November 2022. Mr Beddow holds a Bachelor and Master’s Degree from the University of Oxford in Modern Languages. He has over 20 years of experience within the HSBC Group and has worked in a number of locations across Europe, Asia, the Middle East and the Americas. Mr Beddow has previously held a number of banking related Director positions, served on different country level executive committees, led transformation work, and co- sponsored a country level diversity and inclusion committee. He is passionate about staff development and mentoring.

		Joseph Sammut, GENERAL COUNSEL Appointed General Counsel in July 2016. Joined the bank in 1981, then Mid-Med Bank, and subsequently read law at the University of Malta, where he graduated in 1988. He obtained his postgraduate degree in European Law at the College of Europe in Bruges in 1989. At the bank’s Legal Office he worked for some years as a contracts lawyer and subsequently focused mainly on financial services. Since 1999, he was entrusted with leading the legal advice team and in 2010 worked at HSBC Head Office in London on a short-term legal assignment. He was appointed Deputy General Counsel in 2012.

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	15

Mandy Falzon, CHIEF COMPLIANCE OFFICER Appointed as Chief Compliance Officer in March 2021, leading the Regulatory Compliance and Financial Crime Compliance teams at HSBC Malta. She graduated as a Doctor of Laws from the University of Malta in 2005, and has 16 years’ experience in banking and financial services at HSBC. Dr Falzon held managerial positions within the HSBC Malta Legal Office prior to joining the Regulatory Compliance function in 2015 in a senior management position. She is a Director on the Board of HSBC Global Asset Management (Malta) Limited.

		Carine Arpa, HEAD OF COMMUNICATIONS Ms Arpa was appointed Head of Communications in January 2019, bringing over 15 years of experience in the fields of communications, marketing and media relations. Ms Arpa has undertaken a number of different roles in the course of her career, including leading communications and marketing campaigns for the National Euro Changeover Committee, the European Commission Representation in Malta, KPMG and EY. She holds a Bachelor of Arts in Psychology and Communication Studies (Honours), a Master's Degree in European Studies and an MBA (Henley).

Paula Mamo, COMPANY SECRETARY Company Secretary of HSBC Bank Malta p.l.c. since May 2022. Dr Mamo joined the bank in February 2018 as Deputy Company Secretary supporting the Company Secretary. She was appointed Company Secretary for the two subsidiary companies of the bank, HSBC Life Assurance (Malta) Ltd and HSBC Global Asset Management (Malta) Limited in May 2018. Prior to joining HSBC, Dr Mamo progressed through a number of roles primarily within legal, regulatory compliance and financial crime compliance, with other licensed financial institutions. She graduated as Doctor of Laws from the University of Malta in 2010.

		Morgan Carabott, HEAD OF INTERNAL AUDIT In September 2021, the Bank announced the appointment of Morgan Carabott as Head of Internal Audit. Ms Carabott joined the Bank as Deputy Head of Internal Audit in 2018. Prior to joining the Bank she spent seven years as a Senior Internal Auditor within the Insurance industry and was an external auditor with one of the big four audit firms. Ms Carabott is a warranted Accountant and Auditor and is also a Certified Information Systems Auditor and Certified Anti-Money Laundering Specialist. She is a Member of the Malta Bankers Association Executive Committee and a Fellow of the Malta Institute of Accountants. She has strong auditing skills and sound industry knowledge coupled with extensive experience in managing numerous audit assignments across different sectors.

Executive Committee

16	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

Report of the Directors

The bank provides a comprehensive range of banking and

financial related services. The bank is authorised to carry on the

business of banking, under the Banking Act, 1994 as a credit

institution. It is also a licensed financial intermediary in terms of

the Financial Markets Act, 1990. The bank also holds Category 3

and Category 4a Investment Services licences issued by the Malta

Financial Services Authority in terms of the Investment Services

Act, 1994. These licences authorise the bank to provide

investment services to third parties and custodian services for

collective investment schemes respectively. As at 31 December

2022 the bank had 12 branches in Malta, one of which is located

in Gozo.

The local group comprised the following subsidiaries at

31 December 2022: HSBC Life Assurance (Malta) Ltd and HSBC

Global Asset Management (Malta) Limited.

Principal activities of subsidiaries

HSBC Life Assurance (Malta) Ltd is authorised by the Malta

Financial Services Authority to carry on the business of insurance

in Malta under the Insurance Business Act (chapter 403, Laws of

Malta). It offers a range of protection and investment life

assurance products distributed through HSBC Bank Malta p.l.c.

which is enrolled as a tied insurance intermediary for HSBC Life

Assurance (Malta) Ltd under the Insurance Distribution Act

(chapter 487, Laws of Malta).

HSBC Global Asset Management (Malta) Limited is regulated by

the Malta Financial Services Authority. It has an Investment

Services Licence and is principally engaged in the asset

management of Collective Investment Schemes and Discretionary

Portfolio Mandates.

Business and strategy

HSBC Malta is part of HSBC Group, which has an unrivalled global

position which serves customers worldwide from offices in 63

countries and territories in its geographical regions: Europe, Asia,

North America, Latin America, and Middle East and North Africa.

With assets of US$2,967bn at 31 December 2022, HSBC is one of

the world’s largest banking and financial services organisations.

HSBC Malta is Malta’s leading international bank. No international

bank has our presence in Malta and no domestic bank has our

international reach.

HSBC Group launched its refreshed purpose, strategy and values

in 2021, HSBC Group’s purpose statement is: Opening up a world

of opportunity. HSBC is here to use our unique expertise,

capabilities, breadth and perspectives to open up new kinds of

opportunities for our customers. Our purpose is to bring together

the people, ideas and capital that nurture progress and growth,

helping to create a better world – for our customers, our people,

our investors, our communities and the planet we all share.

Our values define who we are as an organisation and make us

distinctive. We are dependable, by succeeding together, we make

the connections that allow us to realise the full potential of those

opportunities. We are open, we value difference and actively take

a broader perspective, and so are alert to more opportunities for

our customers. We are connected by taking personal responsibility

and ensuring we leverage those opportunities with integrity. We

get it done by committing to tenaciously follow through the

actions that make those opportunities a reality.

Our customers range from individual savers and investors to large

international companies. We aim to connect our customers to

opportunities and help them to achieve their ambitions. The

products and services we offer vary widely according to

customers’ needs. We provide individuals and families with

mortgages that help them buy their own home, as well as savings

accounts, insurance solutions and wealth management products

that help personal banking customers to plan and invest for the

future. For our commercial customers, we offer loans to invest in

growth, and transaction banking products such as foreign

exchange, trade financing and cash management services that

enable businesses to expand both locally and internationally. For

large companies and organisations operating across borders, we

also offer tailored advice on decisions such as financing major

projects or making acquisitions.

Our strategy is aimed at growing safely whilst sustaining a robust

risk management environment and maintaining a strong financial

crime compliance culture. We take a long term view in terms of

our customer relationships and we aim to build a bank that is fit

for the future which is centred around our customers. Our Safe

Growth strategy is aligned and consistent with the HSBC Group’s

strategy. We aim to generate stable returns for our shareholders,

increase operational efficiency and simplify processes making it

easier for our customers to do business with us and for our staff to

serve our customers.

In 2022, the bank launched new products and initiatives, such as

the sustainable Multi-Asset Fund, providing customers with

income generation options and returning to act as a financial

intermediary for local corporate bond issuance.

Throughout 2022, the Commercial Banking business continued to

focus on its commitment to increase Green and Sustainable

Financing to both public and private companies in Malta. Solutions

have been provided via various Trade Finance and core lending

products, with HSBC Malta acting as both sole lender and as part

of a syndicate in order to provide optimal financing packages to

customers of various sizes. The Sustainable facilities provided

have enabled our customers to transition to using greener fuel

sources, and have incentivised reducing greenhouse gas

emissions and focusing on social improvements (e.g. gender

diversity) within their organisations.

In the past year we introduced several enhancements to HSBCnet

and its related processes which have enhanced our customers’

digital cash management journey. These include the automation of

form processing which materially reduced the time for profile

setup and account loading; introduction of e-signature capability

on all HSBCnet related forms; enhanced beneficiary management

which saves clients time and effort when making payments; and

the introduction of LiveChat via HSBCnet Mobile, providing clients

with an alternative method for assistance.

Looking ahead to 2023, we seek to continue embedding our

Climate Strategy, actively supporting the local economy to achieve

the Paris Agreement goal of net zero by 2050, and launching new

stand-alone insurance protection products.

This banking model is designed to enable the local group to

effectively meet clients’ diverse financial needs, support a strong

capital and funding base and further reduce the risk profile and

volatility.

Research and development

Operating in the financial sector, the bank does not consider

Research and Development as a main area of activity.

Events occurring after the end of the accounting period

There were no significant events affecting the bank or any of its

subsidiary undertakings which have occurred after 31 December

2022.

Conduct

Our Conduct Approach ensures that we continue to do the right

thing and to focus on the impact we have on our customers and

the financial market in which we operate.

The HSBC Purpose-Led Conduct Approach programme recognises

cultural and behavioural drivers of good conduct outcomes, and it

applies across all risk disciplines, operational processes and

technologies.

HSBC has undertaken specific Conduct-related initiatives engaging

staff to consider the practical aspects of Conduct and

Report of the Directors

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	17

engagement. Oversight of conduct and related issues in

governance has also been enhanced.

Throughout this year, regulatory engagement has continued to be

conducted with high professional competence, representing trust,

respect and full transparency that facilitated an ongoing value-

adding constructive dialogue, which is a trademark of the local

group’s robust governance and oversight culture.

Results for 2022

HSBC Bank Malta p.l.c. (‘the bank’) and its subsidiaries

(collectively referred to as the local group), reported a profit before

tax of €57.3m for the year under review. The local group’s profit

attributable to shareholders was €37.6m.

The Directors have proposed a gross final dividend of 5.61 cent

per ordinary share. The final dividend will be payable to

shareholders on the bank’s register as at 21 March 2023.

Further information about the results of the local group is provided

in the Income Statements and the Statements of Comprehensive

Income on pages 46 and 47 respectively.

A detailed review of the financial performance including important

events affecting the local group’s results and an indication of

future developments are included in the Chief Executive Officer’s

Review.

Key performance indicators

The Board of Directors tracks the local group’s progress in

implementing its strategy with a range of financial measures or

Key Performance Indicators (‘KPIs’). Progress is assessed by

comparison with the local group strategic priorities, operating plan

targets and historical performance. The local group reviews its

KPIs regularly in light of its strategic objectives and may adopt

new or refined measures to better align the KPIs to HSBC’s

strategy and strategic priorities.

	2022	2021
Profit before tax (reported) (€m)	57.3	26.9
Profit before tax (adjusted) (€m)	58.8	29.7
Cost efficiency ratio (reported) (%)	68.4	80.3
Cost efficiency ratio (adjusted) (%)	67.4	78.2
Post-tax return on equity (reported) (%)	7.6	3.7
Post-tax return on equity (adjusted) (%)	7.8	4.0
Common Equity Tier 1 ratio (%)	18.5	18.4

Profit before tax (reported/adjusted): Reported profit before

tax is the profit as reported under IFRS. Adjusted profit before tax

excludes the impact of notable items as detailed in the Chief

Executive Officer’s Review.

Outcome (reported): Reported profit before tax was higher year-

on-year as a result of a significant recovery on a commercial non-

performing loan largely provided for in prior years, better

performance from the insurance business, continued robust cost

management and rising interest rates. Both 2021 and 2022

included a one-off restructuring provision to deliver future cost

savings.

Outcome (adjusted): The adjusted profit before tax is higher than

2021 due to factors mentioned in the Outcome (reported).

Adjusted costs which related to restructuring provisions were

lower in 2022.

Cost efficiency ratio (adjusted): is measured as total operating

expenses divided by net operating income before changes in

expected credit losses and provisions.

Outcome: The adjusted cost efficiency ratio decreased from 78%

in 2021 to 67% in 2022. Adjusted costs decreased by 1% year on

year. Staff costs decreased as the bank continued to achieve

sustainable savings from transformation programmes and also

long term benefit costs were lower in view of the increase in

interest rates. Non-staff costs also decreased due to savings on

commercial real estate costs and lower regulatory fees, partly

offset by higher intangible assets amortisation, higher group

recharges as a result of increased outsourced services and higher

costs incurred by the insurance subsidiary for the implementation

of new accounting requirements.

Post-tax return on equity (reported/adjusted): is measured as

post-tax profit divided by average equity.

Outcome (reported): The reported return on equity is

significantly higher than that reported last year in view of the

increase in profits.

Outcome (adjusted): The adjusted return on equity excludes the

notable items and is significantly better than 2021.

Common Equity Tier 1 capital ratio (‘CET1’): represents the

ratio of Common Equity Tier 1 capital comprising shareholders’

equity less regulatory deductions and adjustments, to total risk-

weighted assets. The group seeks to maintain a strong capital

base to support the development of its business and meet

regulatory capital requirements at all times.

Outcome: The Common Equity Tier 1 ratio improved compared to

2021 due to increased profits partially offset by adverse

movements on financial instruments.

From a non-financial perspective, Directors evaluate the outcomes

of surveys and reviews undertaken on a regular basis in respect of

customers, people, culture and values including customer service

satisfaction, employee involvement and engagement, and diversity

and sustainability.

Employees

Our people and the community we serve remain at the heart of our

business. Employee engagement and growth are key drivers for

the provision of excellent customer service. We therefore provide

our people with opportunities to realise their career aspirations

and the knowledge and tools to safeguard their well-being.

Diversity and Inclusion

We strive to value diversity and inclusion (‘D&I’) to reflect our

customers and community. Our values are the foundation of how

we operate by valuing differences, succeeding together, taking

responsibility and getting it done. We are committed to an

inclusive culture where our people can be confident that their

views matter, their workplace is an environment free from bias,

discrimination and harassment, and where they can see that

advancement is based on merit.

Our Diversity and Inclusion Committee continues to ensure that

we drive our Diversity and Inclusion policies and principles

through all activities including recruitment processes, learning

programmes and various initiatives across the bank and Malta. In

2022, 53% of our senior leadership roles were held by women and

83.5% of internal appointments were from our female population.

We delivered regular career sessions to support employee

development and career progression. During the year, we held a

session on celebrating cultures for all employees who had the

opportunity to share their traditions, values and ways of working.

This year HSBC Bank Malta p.l.c. was the proud ‘Gold’ sponsor of

Pride, where again we showed our commitment to promoting and

supporting the LGBTI+ community. We launched our Diversity and

Inclusion plan which focuses on Ethnicity, Disability and Gender

Diversity including LGBTI+.

Well-being

Throughout the first half of 2022, we continued to adapt our ways

of working as the Covid-19 situation persisted. Customer and

employee wellbeing remained at the forefront of our decisions and

strategy. As the Covid situation improved later in the year we

reverted to a hybrid working model remaining vigilant despite a

relaxation of restrictions across the country. Throughout the year

we organised various sessions for our employees focusing on

topics of interest including mental, physical and financial well-

being. In December we organised another successful Mental

Health First Aid Training course for line managers which

reconfirmed our high standard in this area, supported by the

Richmond Foundation.

Report of the Directors

18	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

Learning and Development

We continued to capitalise on our employee platforms and tools to

facilitate employee personal development and the enhancing of

skills and abilities. This was achieved through various virtual-led

programs including career progression sessions, HSBC’s Degreed

platform, and future skills training launched during 2022. Several

middle managers joined the Group’s “uGrow”, “Unlocking your

Potential” and “Accelerating into Leadership” programmes as part

of their personal development during the year.

Attraction and retention of quality employees

The attraction and retention of talent was high on our agenda

throughout 2022. In July we introduced a ‘Refer a Friend’ initiative

to create a stronger resourcing pool in view of an increase in

demand for resources across the financial services market. We

also expanded our internship proposition by collaborating with the

University of Malta and continued our collaboration with all

educational institutions to recruit students and provide them with

a rich working experience. This year, several students returned to

HSBC as full-time employees upon completion of their studies,

proof over the positive value of student placements. We strongly

believe in the importance of engaging with our future Talent,

thereby providing future pipeline for the business. Flexible

(including remote) working have been engrained in our work

practice thereby facilitating a healthy work/life balance for our

people.

Listening to our People

We continue to run a Snapshot Survey every year to have a better

understanding about our employees’ needs. During 2022 we had a

46% response rate which saw an improvement over the previous

semester. We will continue to encourage higher response rates

during 2023. In the first quarter of 2022, we cascaded the newly

revised purpose and values through an extensive range of virtual

sessions and discussions across the bank. 72% of employees

stated that they see colleagues demonstrate the values in their

day-to-day work.

We promote a speak up culture where employees have various

tools and channels they can use to speak up. In the 2022

employee survey, 68% of colleagues stated that they are confident

to speak up when they see behaviours which they consider are

wrong. Furthermore 86% of our employees stated having trust in

line management. Our conduct framework and policies ensure

that we deliver fair outcomes for our people to foster a healthy

working environment.

Guiding Principles

The bank is committed to respecting human rights, primarily as

they apply to our employees, our customers, and our suppliers.

Businesses do not exist in isolation: they exist to support the

communities they serve. We recognise the duty of States to

protect human rights and the role played by business in respecting

them, in line with the UN Guiding Principles’ (‘UNGPs’) Protect,

Respect and Remedy framework. HSBC Group has signed, or

expressed support for, a number of international codes, as set out

in our 2015 Statement on Human Rights.

Networking

Throughout 2022 we continued leading our HSBC HR roundtable

sessions bringing together Heads of Human Resources from other

leading organisations in Malta to discuss best practice and

experience.

Whistleblowing

HSBC encourages a speak up culture where individuals can raise

any concerns about wrongdoing or unethical conduct through the

normal reporting channels without fear of reprisal or retaliation.

HSBC provides a number of channels to speak up, however it is

recognised that in certain circumstances it may be necessary for

individuals to raise concerns through more targeted and

confidential channels. For this purpose, a local whistleblowing

reporting policy is in place, which provides an official and

confidential channel for whistleblowing. Our whistleblowing

channel, HSBC Confidential is open to all colleagues to raise

concerns in line with local laws. All whistleblowing reports

received are investigated in a detailed and independent manner

and remedial action is taken where appropriate. The prevalent

themes raised are in relation to allegations on staff behaviour.

The oversight of the policy falls within the responsibilities of one of

the Non-Executive Directors and within the remit of the bank’s

Audit Committee.

Health and safety

The maintenance of a safe place of work and business for our

employees, customers and visitors is a key responsibility for all

managers. The local group is committed to proactively manage

health and safety risk through the identification, assessment and

mitigation of hazards that may otherwise result in injury, fire

events and operational failure.

Group policies, standards and guidance for the management of

health and safety are set by the Global Corporate Services

function. Achieving these in the local group is the responsibility of

the Chief Operating Officer, with support and coordination

provided by the Health and Safety Coordinator, together with

Global and Regional Corporate Services.

Global Protective Security continuously monitors potential threats

from terrorism and violent crime and ensures that HSBC maintains

effective measures to protect its staff, customers, buildings, assets

and information.

The local group remains committed to maintaining its readiness

for emerging and foreseeable risks in ensuring health and safety

compliance.

Sustainability

HSBC Group’s climate strategy; our Plan for the Planet, has three

elements:     

•Help our portfolio of customers to make the transition

The Group plans to support customers with between USD750

billion and USD1 trillion of finance and investment by 2030.

•Unlock climate solutions and innovation

HSBC Group will develop ways to finance the management of

natural environments, and invest in activities that preserve, protect

and enhance nature over the long-term. We’ll also launch a

USD100 million philanthropic programme to help scale climate

innovation.

•Transform HSBC into a net zero bank.

HSBC is committed to reach net zero emissions for our own

operations and supply chain by 2030 or sooner. We’re focused on

helping to deliver a net zero global economy. It’s a pillar of our

strategy as a business.

We aim to achieve net zero in our operations and supply chain by

2030 and in our financing portfolio by 2050. Between now and

then, we’re working with our clients to help them reduce their

emissions and scale up low-carbon solutions, as we work to

reduce our own. This will be a change over time, as businesses

and economies progressively move away from high-carbon

activities.

We call this the transition to net zero. We can have the biggest

impact by working with our clients to help them achieve it.

Corporate sustainability is a high priority for businesses today and

at HSBC we have revised and renewed our strategy to ensure we

operate in a responsible manner and provide access to sustainable

finance that will help economies and societies prosper today and

in the future. Being sustainable means building strong

relationships with all our key stakeholders and taking into account

the issues that matter to them. We use our international expertise

to connect our customers to opportunities around the world. We

are powering new solutions to the climate crisis and supporting

the transition to a low-carbon future. We are building an inclusive

organisation that prioritizes well-being, invests in learning and

careers and prepares our customers, employees, suppliers and the

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	19

community to be fit for the future. We uphold high standards of

corporate governance and ensure we meet our responsibilities to

society. Through our Sustainability function we have two bodies

responsible for driving this agenda. Our HSBC Malta Foundation

and our Climate Business Council. These two bodies ensure that

all stakeholders are involved in the decision making and execution

of our sustainability strategy. In line with the Group’s strategy, the

Foundation is supporting a number of projects which focus on

Future Skills. The objective of Future Skills is on helping people

develop their employability and financial skills in order to thrive in

the modern world.

In 2022 we supported a number of Future Skills Projects. The

launch of the Human Capital Research Project together with the

Minister for Education and the Malta Chamber of Commerce will

assist to review the local curriculum. The HSBC Malta Foundation

is supporting the Human Capital Research Project through a

donation of €135K. The three-year long research project, will focus

on identifying current and future skills in financial services and

banking, information technology, communication, professional,

scientific and technical services. Once concluded, the project will

contribute to Malta’s ongoing competitiveness in the global

economy by delivering a series of evidence-based policy

recommendations. We continued to support the Prince’s Trust

International Achieve Programme which has surpassed our

targeted reach this year, supporting 383 newly enrolled students. 

This year, the HSBC Group provided funding of $350K to the JAYE

‘Future Skills Impact Fund’.

The HSBC Malta Foundation continues to support the Net Zero

Building Framework for Malta research project with a donation of

€120K. The aim of this project is to create a guideline for zero-

carbon commercial buildings in the Maltese context. This project

will help to achieve National Climate Goals. The framework may

be used as a tool for the government and businesses to drive the

transition to a net zero carbon-built environment and will raise

standards in energy efficiency and conservation. The intended

framework is inspired by models such as LEED certification, for

example.

Additionally HSBC Bank Malta is one of the 13 founding members

of the Malta ESG Alliance. The Alliance has the aim of acting as a

platform for Maltese businesses to collaborate and work together

in order to lead and drive national ESG goals and ultimately act as

catalysts while leading by example.

A number of information sessions on sustainability finance were

held with the Malta Chamber of SMEs. The Malta Chamber of

SMEs and HSBC Malta Foundation held a series of sustainability

seminars for small and medium-sized enterprises on corporate

sustainability practices across a variety of industries.

Our Climate Business Council (‘CBC’) has been set up in 2021 with

the aim of facilitating collaboration and knowledge sharing, and

supporting the Group’s Sustainable Finance and Climate related

initiatives. The CBC drives and monitors the implementation of the

bank’s sustainable finance strategy, it also ensures that the

strategy is fit for purpose and is updated as required. The CBC

provides guidance and resolves issues in developing the

sustainable finance business across the bank. It also determines

the objectives of agreed initiatives and appropriate ownership as

well as ensuring measurement and reporting of progress. The CBC

is chaired by the Chief Executive Officer of the bank and updates

on progress are provided to stakeholders including the local Board

and regional committees for oversight and endorsement of the

strategies and actions. Five CBC meetings were held in 2022.

During the year, the bank continued to support the Climate Action

Network (‘CAN’). This is a network led by employees of the bank

where different teams from across business lines and functions

drive sustainable projects inside and outside the bank. We had

two climate action network teams in 2022 thanks to the

commitment of our employees ranging from environmental to

future skills topics. The CAN teams drive various internal learning

initiatives to increase the capabilities of our own employees and

also within the community. All these initiatives were led ably by

our people who use a central platform where they share their

achievements and successes of their projects.

From a learning and development perspective, Sustainability

programs progressed throughout the year to further embed

sustainability across businesses and functions in order to translate

into growth opportunities. As in the preceding year, the programs

ranged from raising awareness, to developing technical skills for

front line and specialist roles within our control functions and

business lines. The programs also focused on building a network

for participants to promote intra-Group collaboration in

transforming HSBC into a net zero bank. Employees were also

encouraged to personally participate in any one sustainability

initiative to effectively connect theory with hands-on experience.

For the second year running, members of the CAN delivered a

number of webinars in relation to Sustainability as well as direct

engagement in HBCE led Sustainability initiatives.

Leadership and Soft Skills training was also delivered throughout

2022 in addition to technical training related to specific roles.

2022 has been instrumental in the bank’s drive to achieve the

Group’s published Net Zero Charter by 2030. The biggest impact

on our carbon footprint is maintaining our property portfolio and

during the year we have commenced major works on our

Operations Centre at Qormi, to redevelop and fully refurbish the

campus, replacing all the plant and equipment to achieve

operational efficiency levels to meet our targets. The

redevelopment includes energy saving measures and the creation

of a solar farm, which will potentially provide 75% of our electricity

needs in future years. The project is aiming for Gold status LEED

accreditation and is already well on track to meet these

requirements.

The introduction of hybrid working has reduced our office portfolio

by 30% and our new campus will allow us to maximise own usage

of our freehold property, reducing reliance on our leasehold estate.

Within the year, we also increased our electric car charging

facilities for both employees and customers at the Qormi location,

with the intention to introduce better facilities for cyclists,

including secure storage and shower facilities. Work continues on

our Green Travel Plan to explore more initiatives to reduce Carbon

Emissions.

We have accelerated our retail sustainable solutions by providing

attractive rates on Energy Efficiency Loans, and rolling out PVC

cards made up of 85% recycled material, issuing them to

customers needing new or replacement cards. The recycled PVC

plastic card action is expected to reduce CO2 emissions and save

tonnes of plastic waste per year as part of our net zero strategy.

We have implemented measures to further reduce water

consumption through the installation of flow restrictors, auto-taps

and low or zero flush sanitary fittings and continue to track our

water consumption.

We have also added a new sustainable investment fund to our

product shelf with the total subscriptions into the sustainable

funds offered exceeding €18 million. The bank launched several

educational webinars for our Retail and Small to Medium Entities

on how to transition to a greener business model, how to cut

costs and improve efficiency while being environmentally friendly.

We have reduced 318,000 paper statements by migrating

customers to digital banking. We have held training and

informative sessions for our employees on their pension plans and

the importance of sustainable investments.

Within Commercial Banking, we have continued to engage with

our customers with a view to identifying ways in which we can

support their transition to a more sustainable business. Our

approach remains multi-faceted, taking into consideration the

different sectors in which our customers operate and the

challenges and opportunities that they face. Our Green Loans and

Trade Finance solutions are designed to finance a range of

projects and activities, including renewable energy, waste

prevention/reduction, green buildings and retrofit of existing

commercial premises, energy efficiency, sustainable water and

wastewater management. We also offer a range of sustainability

linked products, where the customer’s overall performance is

measured against pre-agreed and meaningful environmental,

social or governance (‘ESG’) criteria. We have stepped up

Report of the Directors

20	HSBC Bank Malta p.l.c. Annual Report and Accounts 2022

engagement with our top customers whose activities expose them

to high ESG risks and are discussing and supporting their

transition plans. We have meanwhile continued to provide

extensive training to our Relationship Managers, using Group

resources where appropriate, and are supporting some colleagues

who are seeking to obtain external certification in this broad

subject.

EU Taxonomy economic performance indicators1

Climate change mitigation and climate change

adaptation objectives

In order to meet the European Union’s climate and energy targets

for 2030, the European Commission (‘EC’) has set out the EU

Taxonomy classification system, establishing a list of

environmentally sustainable economic activities. The EU

Taxonomy provides companies, investors and policymakers with

appropriate definitions for which economic activities can be

considered environmentally sustainable. In 2021, the EC adopted

the Delegated Act supplementing Article 8 of the Taxonomy

Regulation (‘the Disclosures Delegated Act’)2 followed by an

amendment to the Delegated Act in 2022 to include certain energy

sectors. Under these regulations, HSBC Bank Malta p.l.c. is

therefore required to provide information to investors about the

environmental performance of our assets and economic activities.

In the first two years of disclosure from 2021, information is

provided on our counterparty exposures toward Taxonomy

‘eligible’ economic activities. This helps to prepare for the second

phase of disclosures related to Taxonomy-alignment of economic

activities (i.e. disclosure of the key performance indicators) from

1 January 2024 when Taxonomy ‘eligible’ economic activities will

be assessed to determine whether they are environmentally

sustainable (i.e. Taxonomy ‘aligned’) against technical criteria.

The table presented below is based on the methodology and

content specified in the Disclosures Delegated Act as at the

reporting date.

1Taxonomy Regulation EU 2020/852.

2Commission Delegated Regulation (EU) 2021/2178.

	31 Dec 2022		31 Dec 2021
	Mandatory as proportion of total assets	Voluntary as proportion of total assets	Mandatory as proportion of total assets	Voluntary as proportion of total assets
	%	%	%	%
Exposures towards taxonomy relevant sectors (Taxonomy eligible)	33	33	35	35
Exposures towards taxonomy non-relevant sectors (Taxonomy non-eligible)	5	5	2	2
Exposures to Counterparties not subject to NFRD3 disclosure obligations	13	13	18	18
Exposures to central governments, central banks and supranational issuers and derivatives	19	19	20	20
Trading portfolio and On-demand interbank loans	5	5	4	4
Other assets	25	25	21	21
Total Assets	100	100	100	100

3Non-Financial Reporting Directive (NFRD) – Directive 2013/34/EU.

Scope of consolidation

The ratios in the above table represent exposures and balances as

a proportion of total assets for HSBC Bank Malta p.l.c. as at

31 December 2022. Subsidiaries engaged in insurance activities

are excluded from the prudential consolidation.

Assets in scope

The calculation of the ratios for Taxonomy-eligible economic

activities and Taxonomy non-eligible activities include on-balance

exposures covering loans and advances, debt securities and equity

instruments not held for trading. This includes exposures to

undertakings such as large EU banks, asset managers, insurance

companies and issuers that are subject to the Non-Financial

Reporting4 disclosure obligation.

Other assets, which principally include cash, tangible and

intangible assets, are excluded from the Taxonomy framework and

therefore cannot be assessed for Taxonomy eligibility. On this

basis, these assets are excluded from the eligibility assessment.

However, other assets are included in the total assets used in the

denominator for the calculation of the ratios.

4NFRD as per Article 19a or Article 29a of Directive 2013/34/EU.

Taxonomy-eligible economic activities

Taxonomy-eligible economic activities are those activities which

can be assessed in future disclosures as either environmentally

sustainable or not.

Eligibility related disclosures shall be based on actual information

provided by the financial or non-financial undertakings.

The classification of environmentally sustainable is based on

criteria laid out in the Taxonomy Regulation. An eligible economic

activity is defined in the Delegated Acts and in some instances

corresponds to one or more specific Nomenclature of Economic

Activities (‘NACE’) code. The assessment of Taxonomy eligibility

for mandatory disclosures is made using the specific description of

the activity provided in the Delegated Acts. This includes

exposures to undertakings subject to the NFRD where the use of

proceeds is known such as green lending, green bonds and

property-related lending.

In 2022, eligibility of general lending exposures has been assessed

using the turnover eligibility ratios published by our NFRD

counterparty’s in their most recently available annual reports.

Taxonomy non-eligible economic activities

Taxonomy non-eligible economic activities are those activities

which cannot be assessed as environmentally sustainable.

Included in Taxonomy non-eligible are those assets in scope that

cannot be assessed for Taxonomy eligibility, either due to activities

not covered by the Taxonomy framework, limited data availability

from our counterparties or lack of required information.

Until such time as financial institutions disclose KPIs in

accordance with the EU taxonomy regulation, exposures to these

financial institutions are treated as non-eligible.

Total exposures to undertakings not subject to NFRD

Exposures to undertakings that are not obliged to publish Non-

Financial Reporting(4) information have been excluded from the

assessment of Taxonomy-eligible economic activities. The total of

these exposures as a proportion of total assets has been disclosed

as a separate line item in the table.

Data limitations

HSBC Bank Malta p.l.c. relies on a number of data sources to

determine Taxonomy eligible and non-eligible exposures and

exposures not subject to NFRD. Availability of data and

improvements in data quality over time, as firms adopt the

HSBC Bank Malta p.l.c. Annual Report and Accounts 2022	21

Taxonomy requirements for their own disclosures, could lead to

differences in the data reported in future years as compared to the

current year.

HSBC Bank Malta p.l.c. will continue to engage with customers,

market data providers and standard setters to improve the quality

and completeness of our Taxonomy data as we develop our

capabilities to assess the Taxonomy alignment of our portfolios in

preparation for future Taxonomy reporting requirements from

1 January 2024.

In determining the methodology for identifying Taxonomy-eligible

and non-eligible exposures and exposures not subject to NFRD it

has been necessary to make some judgements, taking into

account data availability. Methodologies will develop over time to

align with changes in market practice and regulation. In particular,

detailed below are key judgments and assumptions made:

Counterparties which are subject to NFRD are large public interest

undertakings with more than an average of 500 employees during

the financial year and incorporated within the European Union.

Due to data limitations, it has not been possible to assess all the

criteria required to determine the NFRD status of an individual

counterparty. Instead, reliance has been placed upon a simplified

methodology using the available data, as well as a sample-based

review of the largest counterparties by exposure. The counterparty

data considered in making an assessment included, where

available: country of incorporation, customer group by global

business segment, NACE code, listing status, turnover, and

number of employees.

Eligibility ratios have been reported in a combined manner for the

two Taxonomy objectives adopted as of 1 January 2022: climate

change mitigation and climate change adaptation.

Additional voluntary disclosures

Estimates and proxies are not allowed to be used for the

mandatory reporting under Article 8 of the Taxonomy Regulation.

We have therefore included additional disclosures on a voluntary

basis. The basis of preparation, methodology and explanation

supporting our voluntary disclosures is set out below.

Taxonomy-eligible economic activities

The Disclosures Delegated Act entered into force from 1 January

2022 for both financial and non-financial undertakings.

In 2022, where we have continued to rely on the NACE code of the

principal activity to determine the counterparty’s taxonomy

eligibility, we consider this to be an estimate and included these

exposures in the additional voluntary disclosures. In addition,

exposures to undertakings not subject to NFRD including loans

collateralised by commercial property and green bonds have been

included on a voluntary basis as taxonomy eligible.

In July 2022, the European Commission amended the Delegated

Act to include technical screening criteria for economic activities

in the fossil gas and nuclear energy sectors. Where our

counterparties published estimated taxonomy eligibility ratios

inclusive of energy sector activities, we have used these ratios for

assessing our eligible exposures in the voluntary disclosure. 

Exposures to central governments, central banks, supranational

issuers and derivatives as well as Trading portfolio and On-

demand interbank loans have been included in voluntary

disclosures on the same basis and methodology as the mandatory

disclosures. Other retail exposures and other assets are included in

the same way as mandatory disclosures.

Financial Crime Compliance

In 2022 the bank continued to focus on embedding its financial

crime risk management control framework, and sustain its

capability through ongoing training, oversight and governance.

We believe that the enforcement of high compliance standards is

a competitive advantage, and is essential to our success and that

of the jurisdiction.

Anti-bribery and corruption

HSBC Malta and the wider HSBC Group remain committed to

maintaining high standards of ethical behaviour and have zero

tolerance towards bribery and corruption. HSBC complies with all

anti-bribery and corruption laws in all markets and jurisdictions

including the UK Bribery Act, US Foreign Corrupt Practices and

Hong Kong Prevention of Bribery Ordnance.

HSBC Malta adheres to the HSBC Group Anti-Bribery and

Corruption compliance programme and policies which are

overseen by the HSBC Holdings plc Board. HSBC requires all

employees, including the Board of Directors and Associated

Persons, to comply with the principles in the policy in the

performance of their services for or on behalf of HSBC.

All HSBC entities and individuals are required by Group Policy to

apply controls in order to protect against bribery and corruption

risks. All HSBC staff undergo mandatory anti-bribery and

corruption training annually. HSBC also maintains clear whistle

blowing policies and processes, to ensure that individuals can

confidentially report concerns with no fear of retribution, confident

that they will be investigated and remediated appropriately.

As part of its risk management, HSBC Malta performs an annual

assessment of the anti-bribery and corruption inherent and

residual risk to understand if any new risks have been identified

and ratings revisited accordingly. Risk evaluation takes into

consideration various pillars related to anti-bribery and corruption

including Employee, Third Party, Strategic and Customer Risks.

Risk management

Our Approach to Risk Management

We recognise the importance of a strong risk culture, which refers

to our shared attitudes, values and standards that shape

behaviours related to risk awareness, risk taking and risk

management. All our people are responsible for the management

of risk, with the ultimate accountability residing with the Board.

We seek to build our business for the long term by balancing

social, environmental and economic considerations in the

decisions we make. Our strategic priorities are underpinned by our

endeavour to operate in a sustainable way. This helps us to carry

out our social responsibility and manage the risk profile of the

business. We are committed to managing and mitigating climate-

related risks, both physical and transitional, and continue to

incorporate consideration of these into how we manage and

oversee risks internally and with our customers.

The following principles guide the local group’s overarching

appetite for risk and determine how our businesses and risks are

managed.

Financial position

We aim to maintain a strong capital position, defined by regulatory

and internal capital ratios. We carry out liquidity and funding

management on a stand-alone basis.

Operating model

We seek to generate returns in line with our risk appetite and

strong risk management capability. We aim to deliver sustainable 

and diversified earnings as well as consistent returns for

shareholders.

Business practice

We have zero tolerance for any of our people knowingly engaging

in any business, activity or association where foreseeable