Interest Rate Risk Management

What is Interest Rate Risk?

Interest rate risk refers to the increase of loan interest or the decrease of investment income caused by adverse changes in the market interest rate, which results in reduction of the company's profits.

Purposes of Interest Rate Risk Management

By properly managing interest rate risk, you can:

  • Lock the interest rate level – you can convert debt interest rate exposure from floating to fixed to mitigate risks caused by the rise of interest rates.
  • Reduce the cost of borrowing under adverse market conditions – you can convert debt interest rate exposure from fixed to floating to mitigate risks of decline in interest rates.
  • Manage the asset and liability flexibly – To mitigate the risk of the adverse impact to your portfolio caused by changes in interest rate, you can use the interest rate hedging tools to adjust the portfolio without selling asset or repaying the debt sooner than planned. With these tools you can save costs and enhance management efficiency without changing the portfolio structure.

Based on our thorough understanding of your business needs and analysis of the global foreign exchange market, BOCHK will offer you suitable products and strategies for interest rate risk management. Our products include:

  • Interest Rate Swap
  • Interest Rate Cap
  • Interest Rate Floor
  • Interest Rate Collar
  • Swaption

You should read and understand the Bank's Conditions for Services and all of the offering documents including the relevant term sheet, Important Facts Statement, etc. before deciding whether to use the above product(s) for hedging purpose.

Your Company is Exposed to Interest Rate Risk? Hedge or Not?

For more information, please contact us now via the following channels:

  • Call +852 2537 2997
  • Email
  • Contact your account BOCHK manager

Important Notice

The following risk disclosure statements cannot disclose all the risks involved. Prior to trading or investment, you should collect and study the information required for your investment. You should carefully consider whether trading or investment is suitable in light of your own financial position and investment objectives. You should seek independent financial and professional advice before trading or investment. If you are uncertain of or have not understood any aspect of the following risk disclosure statements or the nature and risks involved in trading or investment, you should seek independent advice. The above information are for reference only and does not constitute any offer, solicitation or recommendation to buy, sell or provide any investment product or service.

Risk Disclosure Statement

  • Credit and insolvency risk: The above products are not backed by any collateral. The settlement of the contract is subject to the credit and insolvency risk of BOCHK. Should BOCHK becomes insolvent or go into liquidation or default on its obligations, you will be ranked as an unsecured creditor of BOCHK and may lose your entire investment, regardless of the movements in the underlying interest rate or the terms of the product.
  • Market risk: Returns on the above products are dependent on movements in the underlying interest rate. Movements in interest rates can be unpredictable, sudden, drastic and affected by financial, economic, political factors as well as intervention by central banks and other bodies. You will be subject to risk of loss due to fluctuations in interest rates.
  • Risks relating to RMB: RMB investments are subjects to exchange rate fluctuations which may provide both opportunities and risks. The fluctuation in the exchange rate of RMB may result in losses in the event that the customer converts RMB into HKD or other foreign currencies. RMB is currently not fully freely convertible. Corporate customers who intend to conduct conversion of RMB through banks may occasionally not be able to do so fully or immediately, for which it is subject to the RMB position of the banks and their commercial decisions at that moment. Customers should consider and understand the possible impact on their liquidity of RMB funds in advance.
  • No secondary market: The above products are not listed on any exchanges and there is no secondary market for you to sell the above products prior to their expirations.