Leverage risks
Depending on market conditions, the value of your collateral may fall. You may then be called upon to “top up” your account by substantial or to pay your outstanding credit facilities at short notice. If you fail to do so, the Bank may have to liquidate your collateral at a loss to pay any amount outstanding and you would be liable for any amounts still owing subsequently.
Profit rate risks
The profit rate of your credit facility may increase, resulting in a higher profit payment amount for the facility. An increase in profit rate will in turn reduce the return of investment.
Foreign exchange risks
Your credit facilities may be subject to additional foreign exchange risks if they are taken in a different currency other than of your collateral. If the exchange rate moves against you, the payment amount of the facilities may be affected.
Change in credit Financing to Value (FTV) ratio
FTV ratio are subject to periodic review and may change within a short period of time. When the FTV of your collateral is reduced, you will need sufficient liquidity to pay your outstanding credit financing or pledge additional collateral as security for the credit facility.
