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Following is a question by the Hon Henry Wu and a written reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (May 21):

Question:

It has been reported that a member of the public has lodged a complaint against a bank which has, without obtaining his prior consent, transferred his deposit into a non-interest-bearing account on grounds that his account has been inactive for over six years. In this connection, will the Government inform this Council:

(a) whether it knows the circumstances under which each bank will transfer its customers' deposit accounts to non-interest-bearing accounts;

(b) of the rules set by the relevant authorities on banks' unauthorized transfer of customers' accounts into non-interest-bearing accounts, and the penalties for breaches;

(c) whether the relevant authorities will consider requiring banks to obtain their customers' consent prior to taking such action; if so, of the details; if not, the reasons for that; and

(d) whether the relevant authorities will consider fine-tuning banks' procedure for notifying their customers before they take such action, so as to plug any loopholes and prevent the recurrence of such incidents; if so, of the details; if not, the reasons for that?

Reply:

Madam President,

(a) The operation of banking services, including the handling of customer deposits, must be conducted in accordance with the terms and conditions of the contracts between banks and their customers. Under the Code of Banking Practice (the Code), banks are required to make available to customers detailed terms and conditions and general descriptive information about the operation of their accounts, which should cover the treatment of inactive or dormant accounts. The Hong Kong Monetary Authority (HKMA) will monitor banks' compliance with the requirements of the Code in its supervision of banks. We are not aware of any circumstances under which a bank may transfer its customers' deposits, which are interest bearing, to non-interest bearing accounts without a proper legal basis to do so.

(b) In case a bank, without a proper legal basis, transferred a customer's deposit to a non-interest bearing account, the customer would have a claim against the bank for any losses arising from such actions. The customer may make a complaint to the bank concerned. All banks are required by the HKMA to have proper complaint handling procedures in place. If the customer fails to resolve its complaint with the bank, he may make a complaint to the HKMA, which will investigate the complaint in accordance with its established complaint handling procedures and require the bank to take prompt remedial actions if the complaint is substantiated.

(c) & (d) Any changes in the interest rates of deposits must be made in accordance with the terms and conditions of the contract with the customer. If a bank seeks to make any variations to its contract with the customers regarding the setting of interest rates, it should, as required by the Code, give its customers reasonable notice before such variations take effect. The notice should show clearly the variations and the ways in which the customer may indicate refusal. The customer may, for example, choose to terminate his relationship with the bank.

The HKMA believes that the above procedures are sufficient. In fact, the HKMA has not received any complaint relating to the transfer of deposits in inactive or dormant accounts to non-interest bearing accounts since the HKMA complaints unit has been established in April 1999.

End/Wednesday, May 21, 2003

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