Hong Kong Regulations

BANKING (DISCLOSURE) RULES - SECT 38

Provisions supplementary to section 36: derivative transactions

(1) An authorized institution shall disclose a description of its objectives,
policies and strategies for the use of derivative transactions

(including the types of derivative contracts which qualify as hedges for
accounting purposes, those which do not qualify as hedges for accounting
purposes but which are managed in conjunction with the financial instruments
designated at fair value through profit or loss, those entered into for other
purposes including trading, and whether they are exchange-traded or OTC
derivative transactions).

(2) An authorized institution shall disclose the total contractual or notional
amounts, total risk-weighted amount for credit risk and total fair value
(after taking into account the effect of a valid bilateral netting agreement)
of derivative transactions, broken down into—

   (a)  exchange rate-related derivative contracts (excluding forward foreign
        exchange contracts arising from swap deposit arrangements);

   (b)  interest rate derivative contracts; and

   (c)  others.

(3) An authorized institution shall disclose a breakdown of the total
contractual or notional amounts, total risk-weighted amount for credit risk
and total fair value (after taking into account the effect of a valid
bilateral netting agreement) of each material class of derivative transactions
into—

   (a)  exchange rate-related derivative contracts which are—

        (i)    forwards and futures contracts;

        (ii)   swap contracts;

        (iii)  option contracts purchased; and

        (iv)   option contracts written;

   (b)  interest rate derivative contracts which are—

        (i)    forwards and futures contracts;

        (ii)   swap contracts;

        (iii)  option contracts purchased; and

        (iv)   option contracts written; and

   (c)  others (broken down if material).

(4) For the purposes of subsection (3), an authorized institution shall
disclose—

   (a)  the amount of fair value which has taken into account the effect of a
        valid bilateral netting agreement; and

   (b)  a breakdown of the total contractual or notional amounts of each
        material class of derivative transactions into—

        (i)    those which qualify as hedges for accounting purposes;

        (ii)   those which do not qualify as hedges for accounting purposes
               but which are managed in conjunction with the financial
               instruments designated at fair value through profit or loss; or

        (iii)  those entered into for other purposes including trading.