So that gives us this flexibility on our capital. The second one is, yes, a part of the hedge considerations is indeed allowing us to extend higher yields for longer rather than kind of retain some of the lower yielding assets for longer than we wish for and give us additional protection. And the third is also risk management considerations. We will also look at how we use our RWAs and treasury portfolio and how we can optimize the utilization there often, how we use combination of bonds and swap hedges and in fair value accounting relationships, et cetera. So there are all sorts of number of other considerations which we’ll look at. But the outcome of which for the purposes of our bottom line is indeed giving us this runway. Now I need to point out.
We’ve done an exercise in Q3. We indicate that we intend to do another exercise to the tune of about $0.4 billion in Q4. But we do not look at this as a recurring activity, right? This is kind of by exception occasional when risk management and performance justify it, we will do it. This is not meant to be a recurrent “activity.” I just want to be clear about that. We’ve done it last quarter. We’ll do it next quarter. Anything beyond that, we will give you an indication, but it will be on a case by case and occasional basis. Noel, for the second question.
Noel Quinn: Yes, on China CRE, my comments this morning were really about the massive policy correction that has taken place over the last 18 months in commercial real estate in China. It has really impacted very heavily the real estate market. Do I think that big negative correction in the market has been delivered and do I expect further negative correction? No. I think what we’re now into is the workout phase of that policy correction. Equally, I think I said this morning, I don’t see a big swing back into positive policy territory for commercial real estate. I see it as fine tuning from this low base. So what I’m talking about is the market as a whole, the commercial real estate market in China, a massive correction down.
I think we’re at the bottom of that correction phase. And we know in a gradual replying back out with possible policy tweaks taking place. But as you quite rightly say, they’re not going to be big swings back up in policy correction. They’re going to be smaller policy correction taking place as we’ve seen in recent weeks. Now what does that mean for ECLs, for banks both domestically and internationally? Well, those ECLs have and could still emerge over time. But I think the market itself has bottomed and now we’re in a period of sort of readjustment for the new norm. And I don’t see a big readjustment back up. From our point of view on ECLs, I think we feel as Georges has said, we’ve got good coverage ratios on the unsecured book. 50% of our offshore book that is SOE related or POE related.
We do not see that same policy correction effect in the SOEs the way it’s affected the POEs. So we don’t see necessarily a downside on that at this stage. And then those POEs in 50% I talked about, those POEs are largely either secured or they’re not in the residential sector. They’re in CRE and other forms of the sector. So I think from our point of view, we feel well provisioned at this stage. It’s not to say that there aren’t potential problems on the horizon from an ECL point of view for the industry. But we feel as though we’re well positioned. I suppose my bottoming comment was on the market as a whole in that there’s been such a massive correction. I think we’re now in a gradual rebuild, but that gradual rebuild will take time and there will be the potential for the industry to bear some further losses.
And we are keeping a close eye on that and what it means for us. But we think we’re well provisioned at the Q3 level. We’re probably going to take some more of our plausible downside scenario in Q4. But as Georges said earlier, we think that we’ve got the capacity within our overall guidance on ECL of 40 basis points to absorb any further charges we may or may not take in Q4.
