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Structured Products
Capped & Floored Floater Deposit
- Structured Investment Deposit is a structured product involving derivatives. The investment decision is yours but you should not invest in Structured Investment Deposit unless the intermediary who sells it to you has explained to you that the product is suitable for you having regard to your financial situation, investment experience and investment objectives.
- Structured Investment Deposit is NOT equivalent to a time deposit. It is NOT protected under the Hong Kong Deposit Protection Scheme and the repayment of this Structured Investment Deposit is not guaranteed by the Hong Kong SAR Government's Exchange Fund.
- Simple and relatively less risky investment product
- 100% protection of your capital at maturity while you do not mind to lock up your structured investment deposit for a certain period (e.g. from 2 to 3 years)
- Periodic interest payment linked to an interest rate reference index e.g. HIBOR
Capital Protected Investment Deposit - Capped & Floored Floater Deposit may be your choice.
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Available in branches |
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Available online (For HSBC Premier Customers only) |
- Need help?
Call (852) 2233 3733
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| For each interest period, receive | |
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Periodic interest payment equivalent to the Interest Rate Reference Index, subject to a floor and cap |
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| At maturity, receive | |
| 100% of principal | |
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Example [Price quoted as of 23 May 2011]
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| Customer View | US Dollar 3-month LIBOR will stay within the range of 0.85% p.a.- 1.50% p.a. in the coming 3 years |
| Deposit currency | US Dollar (USD) |
| Deposit Period | 3 years |
| Deposit Amount | USD10,000 |
| Interest Rate Reference Index | USD Dollar 3-month LIBOR (3M LIBOR) |
| Interest Floor | 0.85% p.a. |
| Interest Cap | 1.50% p.a. |
| Interest rate | Equals to US dollar three-month LIBOR subject to a minimum of 0.85% p.a. and a maximum of 1.50% p.a. |
| Interest period | Quarterly |
| Interest payment for each period | (Principal x Interest rate / 4) for each interest period |
| Upon maturity, customer receives | 100% of principal |
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Scenario 1: Best case scenario
US dollar three-month LIBOR is at or above the Interest Cap throughout the interest tenor.
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| Year | Quarterly Interest period | USD 3-month LIBOR Valuation Date | USD 3-month LIBOR (p.a.) | Interest rate for the period (p.a.) | Interest earned for the period |
| 1 | 1 | 2 London Business Day prior to the Deposit Date | 1.50% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% |
| 2 | 2 London Business Day prior to the first date of the interest period | 1.60% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | |
| 3 | 1.70% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 4 | 1.80% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 2 | 5 | 1.90% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | |
| 6 | 1.95% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 7 | 2.00% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 8 | 2.05% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 3 | 9 | 2.05% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | |
| 10 | 2.05% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 11 | 2.10% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 12 | 2.15% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
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Total interest earned for the 3-year period is 4.50%. Effective interest rate is 1.50% p.a.. Investor receives 100% of principal at maturity.
Scenario 2: Middle-of-the-road scenario
US dollar three-month LIBOR stays below the Interest Floor in the first 6 quarters, then it moderately moves up starting the 7th quarter.
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| Year | Quarterly Interest period | USD 3-month LIBOR Valuation Date | USD 3-month LIBOR (p.a.) | Interest rate for the period (p.a.) | Interest earned for the period |
| 1 | 1 | 2 London Business Day prior to the Deposit Date | 0.30% | 0.85% (Interest Floor) | 0.85% / 4 = 0.2125% |
| 2 | 2 London Business Day prior to the first date of the interest period | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | |
| 3 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 4 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 2 | 5 | 0.80% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | |
| 6 | 0.80% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 7 | 1.20% | 1.20% | 1.20% ÷ 4 = 0.3000% | ||
| 8 | 1.25% | 1.25% | 1.25% ÷ 4 = 0.3125% | ||
| 3 | 9 | 1.30% | 1.30% | 1.30% ÷ 4 = 0.3250% | |
| 10 | 1.50% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 11 | 1.60% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
| 12 | 1.70% | 1.50% (Interest Cap) | 1.50% ÷ 4 = 0.375% | ||
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Total interest earned for the 3-year period is 3.3375%. Effective interest rate is 1.1125% p.a.. Investor receives 100% of principal at maturity.
Scenario 3: Middle-of-the-road scenario
US dollar three-month LIBOR stays below the Interest Floor throughout the deposit period.
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| Year | Quarterly Interest period | USD 3-month LIBOR Valuation Date | USD 3-month LIBOR (p.a.) | Interest rate for the period (p.a.) | Interest earned for the period |
| 1 | 1 | 2 London Business Day prior to the Deposit Date | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% |
| 2 | 2 London Business Day prior to the first date of the interest period | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | |
| 3 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 4 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 2 | 5 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | |
| 6 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 7 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 8 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 3 | 9 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | |
| 10 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 11 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
| 12 | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | ||
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Total interest earned for the 3-year period is 2.55%. Effective interest rate is 0.85% p.a.. Investor receives 100% of principal at maturity.
Scenario 4: Worst case scenario
US dollar three-month LIBOR stays below the Interest Floor in the first 6 months, Customer redeems the deposit after the 2nd quarter.
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| Year | Quarterly Interest period | USD 3-month LIBOR Valuation Date | USD 3-month LIBOR (p.a.) | Interest rate for the period (p.a.) | Interest earned for the period |
| 1 | 1 | 2 London Business Day prior to the Deposit Date | 0.30% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% |
| 2 | 2 London Business Day prior to the first date of the interest period | 0.50% | 0.85% (Interest Floor) | 0.85% ÷ 4 = 0.2125% | |
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Total interest earned for the 6-month period is 0.425%. Effective interest rate is 0.85% p.a.
Since investor redeems the deposit before its maturity, investor may receive less than 100% of his or her initial deposit amount. In the worst case scenario, investor may incur significant loss from the investment.
Scenario 5: The Bank becomes insolvent or defaults on its obligations
Assuming that the Bank becomes insolvent during the tenor of this product or defaults on its obligations under this product, you can only claim as its unsecured creditor. You may get nothing back and suffer a total loss of your deposit amount.
As a reference, if a sum of US$10,000 is placed in a conventional 3-year US dollar time deposit on 23 May 2011, the interest rate is 0.45% p.a.
If investor redeems the product before its maturity, investor may receive less than 100% of initial investment amount. In the worst case scenario, investor may incur significant loss.
Graphic presentation
The price volatility of the product is low, and the product is normally 100% capital protected upon maturity (for products with scheduled maturity). Customers may adopt a passive strategy on the investment.
This product may be suitable for investors who are happy to accept low level of investment risk.
The above scenarios are provided for illustrative purposes only, and do not reflect a complete analysis of all possible gain and loss scenarios that may arise during any actual investment. No representation or warranty is made by the Bank that any scenario described above can be duplicated under real investment conditions. Actual results may vary from the results shown above, and variations may be material.
Risk Disclosure
- Not a time deposit - Capped & Floored Floater Deposit is NOT equivalent to, nor should it be treated as a substitute for, time deposit. It is NOT a protected deposit and is NOT protected by the Deposit Protection Scheme in Hong Kong.
- Derivatives risk - Capped & Floored Floater Deposit is embedded with interest rate option(s). Option transactions involve risks. If the Interest Rate Reference Index increases above the cap, the Interest Cap will limit the upside potential of interest return.
- Limited potential gain - The maximum potential gain is limited to the interest on the deposit calculated based on the Interest Cap.
- Principal protection at maturity only - The principal protection feature is only applicable if this product is held to maturity. If you redeem the deposit before maturity, you may receive an amount significantly less than the initial investment, even if the level of the linked interest rate has moved in a favourable direction, as the Bank will incur cost in obtaining the funds in the money market for the remainder of the deposit period.
- Market risk - The interest return of a Capped & Floored Floater Deposit will depend upon the Interest Rate Reference Index on the relevant Valuation Dates during the relevant deposit period. Interest rate movements can be unexpected, sudden and drastic, and can be affected by complex political and economic factors. The Interest Cap may limit the upside potential of interest return, should the Interest Rate Reference Index increase to above the Interest Cap. You must be prepared to take the risk of earning a very low return on the money invested.
- Liquidity risk - Capped & Floored Floater Deposit is designed to be held until maturity. You should not use it as a short term investment vehicle. You will not be able to early redeem the deposit at any time. Early redemption is only offered twice a month after the initial 6 months.
- Reinvestment risk - If you redeem the deposit before maturity, you must be prepared to risk the interest that might otherwise have been earned if the deposit is not early redeemed. Also, you may not be able to enjoy the same rate of return if you re-invest in other investments with similar risk parameters.
- Currency risk - If the deposit currency is not your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.
- Credit risk of the Bank - Capped & Floored Floater Deposit is not secured by any collateral. When you invest in this product, you will be relying on the Bank's creditworthiness. If the Bank becomes insolvent or defaults on its obligations under this product, you can only claim as an unsecured creditor of the Bank. In the worst case, you could suffer a total loss of your deposit amount.
- Currency risk - If the deposit is not in your home currency, and you choose to convert it back to your home currency upon maturity, you may make a gain or loss due to exchange rate fluctuations.
- Risk of early termination by the Bank - The Bank shall have the discretion to uplift a Deposit or any part thereof prior to the Maturity Date (subject to the deduction of such break costs or the addition of such proportion of the return or redemption amount, which may result in a figure less than the original principal amount of the Deposit) if it determines, in its sole discretion, that this is necessary or appropriate to protect any right of the Bank to combine accounts or set-off, or any security interest, or to protect the Customer's interests.
