Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 64

Regulatory retail exposures

(1) Where—

   (a)  the maximum aggregate exposure of an authorized institution to a
        single obligor, or to a group of obligors considered by the
        institution as a group of obligors for risk management purposes
        (including, but not limited to, those grouped under section 81(1)(a),
        (b), (c) or (d) of the Ordinance), does not exceed $10 million; and

   (b)  that single obligor, or a particular obligor in the group of obligors,
        is an individual or small business, subject to subsections (3) and (4)
        and section 65(4)(a), the institution shall allocate a risk-weight of
        75% to any exposure of the institution to that single obligor or that
        particular obligor arising from a transaction, whether drawn down or
        not, which takes the form of an advance or extension of credit that
        is—

   (c)  an overdraft or other line of credit;

   (d)  an instalment loan, auto loan or lease or other personal term loan or
        advance by way of leasing facilities;

   (e)  a credit card or other revolving credit; or

   (f)  a credit facility or commitment to lend funds or advance a credit
        facility to a small business.

(2) For the purposes of subsection (1)(a)—

   (a)  the maximum aggregate exposure shall be calculated on the assumptions
        that—

        (i)    in the case of an on-balance sheet exposure, the amount of the
               exposure is the principal amount of the exposure;

        (ii)   in the case of an off-balance sheet exposure which is an OTC 
               derivative transaction or credit derivative contract, the
               amount of the exposure is the credit equivalent amount of the
               exposure; and

        (iii)  in the case of an off-balance sheet exposure which does not
               fall within subparagraph (ii), the amount of the exposure is
               the principal  amount multiplied by the applicable CCF; and

   (b)  the following exposures shall be excluded from the calculation of the
        maximum aggregate exposure—

        (i)    an exposure which is a residential mortgage loan falling within
               section 65(1) or (if applicable) section 65(9);

        (ii)   an exposure which is a holding of securities, whether listed or
               unlisted.

(3) An authorized institution shall not allocate a risk-weight of 75% to any
exposure of the institution under subsection (1) if the exposure—

   (a)  is a residential mortgage loan falling within section 65(1) or

(9);

   (b)  is a holding of securities, whether listed or unlisted; or

   (c)  is a past due exposure.

(4) Where a regulatory retail exposure of an authorized institution is an
exposure to a small business in respect of which consent under the
small business consent provisions is required, the institution shall comply
with those provisions as in force from time to time.