Hong Kong Regulations

BANKING (CAPITAL) RULES - SECT 92

Adjustment of standard supervisory haircuts in certain circumstances

Where for the purposes of section 87, 88, 89, 90, 94, 95, 96 or 100—

   (a)  the assumed minimum holding period of a transaction giving rise to an
        exposure of an authorized institution is not 10 business days; or

   (b)  the exposure of an authorized institution and the recognized 
        collateral provided to the institution in respect of the exposure, are
        not subject to daily remargining or daily revaluation as assumed in
        the standard supervisory haircuts, the institution shall adjust the
        standard supervisory haircuts by the use of Formula 6.

FORMULA 6

ADJUSTMENT OF STANDARD SUPERVISORY HAIRCUTS FOR CIRCUMSTANCES SET OUT IN
SECTION 92

H = H10 × where— H = haircut after adjustment for differences in assumed
minimum holding period and remargining and revaluation frequency; H10 =
standard supervisory haircuts based on an assumed minimum holding period of 10
business days, daily remargining and daily revaluation; NR = actual number of
days between each remargining or each revaluation of the
recognized collateral; and TM = assumed minimum holding period for a
particular type of transaction as set out in Table 12.