Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 79

Collateral which may be recognized for purposes of section 77(i)(i)

For the purposes of section 77(i)(i), only collateral of the following
description may be recognized in relation to an authorized institution which
uses the simple approach in its treatment of recognized collateral—

   (a)  cash on deposit with the institution or held at a third-party bank;

   (b)  certificates of deposit issued by the institution;

   (c)  instruments issued by the institution which are comparable to
        instruments referred to in paragraph (b);

   (d)  gold bullion;

   (e)  debt securities issued by a sovereign which have a long-term 
        ECAI issue specific rating which, if mapped to the scale of
        credit quality  grades in Table A in Schedule 6, would result in the
        debt securities being assigned a credit quality grade of 1, 2, 3 or 4;

   (f)  debt securities (other than restricted debt securities) issued by a
        sovereign foreign public sector entity which have an ECAI issue 
        specific rating which, if mapped to the scale of credit quality grades
        in Table A in Schedule 6 as if they were securities issued by a
        sovereign, would result in the debt securities being assigned a
        credit quality grade of 1, 2, 3 or 4;

   (g)  debt securities issued by a domestic public sector entity or
        foreign public sector entity (other than a
        sovereign foreign public sector  entity) which have an
        ECAI issue specific rating which, if mapped to the scale of
        credit quality grades in Table A in Schedule 6 as if they were
        securities issued by a sovereign, would result in the debt securities
        being assigned a credit quality grade of 1, 2 or 3;

   (h)  debt securities issued by a multilateral development bank;

   (i)  debt securities issued by a bank or securities firm which have a
        long-term ECAI issue specific rating which, if mapped to the scale of
        credit quality grades in Table B in Schedule 6, would result in the
        debt  securities being assigned a credit quality grade of 1, 2 or 3;

   (j)  debt securities issued by a corporate which have a long-term 
        ECAI issue specific rating which, if mapped to the scale of
        credit quality  grades in Table C in Schedule 6, would result in the
        debt securities being assigned a credit quality grade of 1, 2 or 3;

   (k)  debt securities issued by a sovereign, public sector entity or
        sovereign foreign public sector entity which have a
        short-term ECAI issue  specific rating which, if mapped to the scale
        of credit quality grades in Table E in Schedule 6 as if they were
        securities issued by a bank, securities firm or corporate, would
        result in the debt securities being assigned a credit quality grade of
        1, 2 or 3;

   (l)  debt securities issued by a bank, securities firm or corporate which
        have a short-term ECAI issue specific rating which, if mapped to the
        scale of credit quality grades in Table E in Schedule 6, would result
        in the debt securities being assigned a credit quality grade of 1, 2
        or 3;

   (m)  debt securities issued by a bank or securities firm which do not have
        an ECAI issue specific rating where—

        (i)    the debt securities are not subordinated to any other debt
               obligations of the issuer of the debt securities;

        (ii)   the debt securities are listed on a recognized exchange and the
               institution is of the reasonable opinion that, having regard to
               current market conditions, there is sufficient liquidity in the
               market for the debt securities to enable the institution to
               dispose of the debt  securities at an open market price;

        (iii)  other debt securities issued by the same issuer which have an
               ECAI issue specific rating and rank equally with the
               first-mentioned debt  securities, have an
               ECAI issue specific rating which, if mapped to the scale of
               credit quality grades in Table B in Schedule 6 (or, in the case
               of exposures with short-term ECAI issue specific ratings, in
               Table E in Schedule 6) would result in those other
               debt securities being assigned a credit quality grade of 1, 2
               or 3; and

        (iv)   the institution is not aware, and has no reason to be aware, of
               information suggesting that an assignment of a
               credit quality grade of 4 or 5 in Table B in Schedule 6 (or, in
               the case of short-term ECAI issue  specific ratings, a
               credit quality grade of 4 in Table E in Schedule 6) would be
               justified in respect of the debt securities;

   (n)  equities (including convertible bonds) which are included in any main
        indices;

   (o)  units or shares in a collective investment scheme where—

        (i)    the price of the units or shares in that scheme is quoted
               publicly on a daily basis; and

        (ii)   that scheme is restricted by its investment guidelines or
               objects to investing in those items listed in these Rules as
               being recognized collateral for the purposes of using the
               simple approach to the treatment of recognized collateral;or

   (p)  collateral in the form of real property (whether residential or
        otherwise) insofar as the collateral relates to a past due exposure.