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Structured Products
Interest Rate Range Accrual
- Structured Investment Deposit is a structured investment 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.
- This is a structured investment product, which is NOT protected by the Deposit Protection Scheme in Hong Kong.
Additional risks are disclosed in the section of "Risk disclosure" below. Please refer to it for details.
- simpler and less risky investment
- 100% protection of your capital at maturity while you do not mind to lock up your deposit for a certain period (e.g. from 1 to 3 years)
- Potential to earn enhanced returns based on the performance of the Interest Rate Reference Index (e.g. HIBOR, LIBOR) only if held to maturity
- Higher accrual in rate for interest payment if Interest Rate Reference Index stays at or within the accrual range.
- Accrual out rate for interest payment if Interest Rate Reference Index fixes outside the accrual range.
Capital Protected Investment Deposit - Interest Rate Range Accrual 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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| Place a structured deposit using your preferred currency e.g. CNY |
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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 0.25 - 0.60% (inclusive) in the coming 1 year |
| Deposit currency | Renminbi (CNY) |
| Deposit Period | 1 year |
| Deposit Amount | CNY1,000,000 |
| Interest Rate Reference Index | US Dollar 3-month LIBOR (3M LIBOR) |
| Accrual in rate | 0.70% p.a. |
| Accrual out rate | 0.00% p.a. |
| Interest rate | Accrual in rate x (No of days 3M LIBOR stays at or within the Accrual Range) / Total number of days + Accrual out rate x (No of days 3M LIBOR stays outside the Accrual Range) / Total number of days |
| Accrual range | 0.25% - 0.60% 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 stays within the Accrual Range for the whole deposit period.
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| Quarterly interest period | Number of calendar days during the interest period | Number of days upon which LIBOR stays at or within the Accrual Range | Number of days upon which LIBOR stays outside the Accrual Range | Interest Payment |
| 1 | 93 | 93 | 0 | CNY1,000,000 × [(0.70%/4) × (93/93) + (0.00%/4) × (0/93)] = CNY1,750.00 |
| 2 | 91 | 91 | 0 | CNY1,000,000 × [(0.70%/4) × (91/91) + (0.00%/4) × (0/91)] = CNY1,750.00 |
| 3 | 91 | 91 | 0 | CNY1,000,000 × [(0.70%/4) × (91/91) + (0.00%/4) × (0/91)] = CNY1,750.00 |
| 4 | 90 | 90 | 0 | CNY1,000,000 × [(0.70%/4) × (90/90) + (0.00%/4) × (0/90)] = CNY1,750.00 |
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Total interest earned is CNY7,000 over 1 year. Effective interest rate is 0.70% p.a.
Scenario 2: Middle-of-the-road scenario
US dollar three-month LIBOR rises and stays outside the Accrual Range for some of the days during the deposit period.
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| Quarterly interest period | Number of calendar days during the interest period | Number of days upon which LIBOR stays at or within the Accrual Range | Number of days upon which LIBOR stays outside the Accrual Range | Interest Payment |
| 1 | 93 | 87 | 6 | CNY1,000,000 × [(0.70%/4) × (87/93) + (0.00%/4) × (6/93)] = CNY1,637.10 |
| 2 | 91 | 60 | 31 | CNY1,000,000 × [(0.70%/4) × (60/91) + (0.00%/4) × (31/91)] = CNY1,153.85 |
| 3 | 91 | 15 | 76 | CNY1,000,000 × [(0.70%/4) × (15/91) + (0.00%/4) × (76/91)] = CNY288.46 |
| 4 | 90 | 0 | 90 | CNY1,000,000 × [(0.70%/4) × (0/90) + (0.00%/4) × (90/90)] = CNY0.00 |
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Total interest earned is CNY3,079.41 over 1 year. Effective interest rate is 0.31% p.a.
Scenario 3: Worst case scenario
US dollar three-month LIBOR rises sharply and stays outside the Accrual Range for all days during the deposit period.
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| Quarterly interest period | Number of calendar days during the interest period | Number of days upon which LIBOR stays at or within the Accrual Range | Number of days upon which LIBOR stays outside the Accrual Range | Interest Payment |
| 1 | 93 | 0 | 93 | CNY1,000,000 × [(0.70%/4) × (0/93) + (0.00%/4) × (93/93)] = CNY0 |
| 2 | 91 | 0 | 91 | CNY1,000,000 × [(0.70%/4) × (0/91) + (0.00%/4) × (91/91)] = CNY0 |
| 3 | 91 | 0 | 91 | CNY1,000,000 × [(0.70%/4) × (0/91) + (0.00%/4) × (91/91)] = CNY0 |
| 4 | 90 | 0 | 90 | CNY1,000,000 × [(0.70%/4) × (0/90) + (0.00%/4) × (90/90)] = CNY0 |
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Total interest earned is CNY0 over 1 year. Effective interest rate is 0% p.a.
Scenario 4: 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.
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.
As a reference, if a sum of CNY$1,000,000 is placed in a conventional 1-year CNY time deposit on 23 May 201X, the interest rate is 0.60% p.a.
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 - Interest Rate Range Accrual 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 - Interest Rate Range Accrual is embedded with interest rate option(s). Option transactions involve risks. If the Interest Rate Reference Index stays outside of the Accrual Range throughout the whole deposit period, you could earn no interest return.
- Limited potential gain - The maximum potential gain is limited to the interest on the deposit calculated based on the Accrual In Rate.
- Market risk - The interest return of the Interest Rate Range Accrual will depend upon the Interest Rate Reference Index during the deposit period. Interest rate movements can be unexpected, sudden and drastic, and can be affected by complex political and economic factors. You could earn no interest return if the Interest Rate Reference Index stays outside the accrual range throughout the deposit period. You must be prepared to take the risk of earning a very low return or even no return on the money invested.
- Liquidity risk - Interest Rate Range Accrual is designed to be held until maturity. You should not use it as a short term investment vehicle. You do not have a right to request early termination of this product before aturity.
- Credit risk of the Bank - Interest Rate Range Accrual 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.
- Risks relating to RMB - You should note that the value of RMB against other foreign currencies fluctuates and will be affected by, amongst other things, the PRC government's control (for example, the PRC government regulates conversion between RMB and foreign currencies), which may adversely affect your return under this product when you convert RMB into your home currency. If you choose to convert your RMB deposit to other currencies at an exchange rate that is less favourable than that in which you made your original conversion to RMB, you may suffer loss in principal. RMB is currently not freely convertible and conversion of RMB in Hong Kong is subject to certain restrictions. In particular, the conversion of RMB by an individual customer through RMB deposit accounts with banks in Hong Kong is subject to a daily limit of RMB20,000 per person per day. If you intend to convert an amount of RMB from/to another currency exceeding such daily limit, you should allow sufficient period for the conversion.This product (if denominated in RMB) will be denominated and settled in RMB deliverable in Hong Kong, which is different from that of RMB deliverable in Mainland China.
