Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 56

Exceptions to section 55

(1) Where a sovereign exposure of an authorized institution consists of a
domestic currency exposure to the Government (including an exposure to the
Exchange Fund), the institution shall allocate a risk-weight of 0% to the
exposure.

(2) Where—

   (a)  a sovereign exposure of an authorized institution consists of a
        domestic currency exposure to a sovereign (other than the Government
        or a restricted sovereign); and

   (b)  the relevant banking supervisory authority for the jurisdiction of the
        sovereign would permit banks carrying on banking business in the
        jurisdiction to allocate a risk-weight to the exposure which is lower
        than the risk-weight which would be allocated under section 55 to the
        exposure, the institution may allocate the lower risk-weight to the
        exposure.

(3) Where—

   (a)  a sovereign exposure of an authorized institution consists of a
        domestic currency exposure to a sovereign (other than the Government
        or a restricted sovereign); and

   (b)  subsection (2) is not applicable to the exposure, the institution may
        allocate to the exposure a risk-weight of—

   (c)  0% if the exposure arises from a loan by the institution to the
        sovereign;

   (d)  10% if the exposure arises from fixed rate debt securities with a
        residual maturity of less than one year or floating rate
        debt securities of any maturity; or

   (e)  20% if the exposure arises from fixed rate debt securities with a
        residual maturity of not less than one year.

(4) Where a sovereign exposure of an authorized institution consists of an
exposure to a relevant international organization, the institution shall
allocate a risk-weight of 0% to the exposure.