Market risks
Depending on market conditions, the value of your collateral may fall. You may then be called upon to “top up” your collateral by substantial amounts or to repay your outstanding credit facility at short notice. If you fail to do so, the Bank may have to liquidate your collateral at a loss to repay any amount outstanding and you would be liable for any amounts still owing subsequently.
Interest rate risks
The interest rate of your credit facility may increase, resulting in a higher interest payment amount for the facility. An increase in interest rate will in turn reduce the return on any investment.
Foreign exchange risks
Your credit facility may be subject to additional foreign exchange risks if it is taken in a different currency other than that of your collateral. If the exchange rate moves against you, the repayment amount of the facility may be affected and/or you may be required to “top up” your collateral.
Change in credit Loan-to-value (LTV) ratio
LTV ratios are subject to periodic review and may change within a short period of time. When the LTV of your collateral is reduced, you will need to have sufficient liquidity to reduce or repay your outstanding credit facility or pledge additional collateral as security for the credit facility.
Regulatory risks
A regulatory body may take action that has the effect of curtailing or placing restrictions on the Bank’s ability to trade with respect to open positions or lend against investments or life insurance policies. You may consequently be required to close, reduce or rebalance your pledged portfolio with the Bank.
Leverage Financing risks
While Wealth Lending with Leverage Financing can amplify potential investment earnings, it can also magnify potential losses. You could even sustain losses that exceed the value of your original investment amount and the value of your collateral. You should ensure that you do not commit yourself to investments beyond your means – and consider your appetite for losses before requesting for Leverage Financing.
