Regulatory Alerts2024-02-20
Added · Updated
Q&As on IPO Financing and Swap Connect Capital Treatment
The Hong Kong Monetary Authority clarifies that IPO loans qualify for 0% risk-weight only if funds are legally owned and controlled by the lending institution through specific HKSCC nominee arrangements. It further specifies that pre-funding commitments for IPO loans attract 0% risk-weight from the time of commitment, with off-balance sheet exposures calculated using the applicable Credit Conversion Factor. For Swap Connect, participating margins posted by Authorized Institutions are treated as default fund contributions to the OTC Clearing Hong Kong Limited, requiring capital charges calculated via specific formulas and reported under the CAR return.
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