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The following is issued on behalf of the Hong Kong Monetary Authority:
The Hong Kong Deposit Protection Board (the Board) today (April 27) published a consultation paper on a review of the Deposit Protection Scheme (DPS) conducted by the Board. The consultation paper carries a number of recommendations to enhance the DPS for providing better protection to depositors.
In the light of the experience gained from operating the DPS since its inception and overseas reforms of deposit insurance regime after the outbreak of the US sub-prime crisis, the Board decided in mid-2008 to review the coverage of the DPS. The review commenced in the fourth quarter of 2008 and was completed in the first quarter of 2009 as scheduled. Significant developments in the overseas and local financial markets during the review period were also considered in the review. The review covered protection limit, compensation calculation basis, product coverage, membership and funding arrangements of the DPS.
The review concluded that the existing design features of the DPS in Hong Kong already comply substantially with international best practices. Nevertheless, enhancements that can improve protection to depositors and strengthen the operation of the DPS were identified. The key recommendations and conclusions of the review include:
* the protection limit of the DPS is recommended to be raised from the current HK$100,000 to HK$500,000;
* the product coverage of the DPS is recommended to be expanded to cover secured deposits referable to the provision of banking and financial services;
* the rates for charging contribution on banks are recommended to be halved to neutralise the cost impact of raising the protection limit; and
* no changes are recommended to be made to the basis for calculating deposit compensation, types of institutions covered by the DPS and the current arrangement of excluding structured deposits from protection.
Chairman of the Board, Professor Andrew Chan chi-fai said, "The coverage of a deposit protection scheme should be reviewed from time to time to ensure it will remain effective in meeting the objectives intended for it. Since the DPS commenced operation in 2006, the landscape of the global financial market has undergone significant changes. The proposed enhancements to the DPS are expected to be helpful in enhancing the robustness of the DPS in coping with the changing market conditions and public expectations."
Chief Executive Officer of the Board, Mr Raymond Li added, "The Board intends to introduce the enhancements as soon as possible, preferably upon the expiry of the full deposit guarantee offered by the Government, so that the public will benefit from an improved DPS as a part of the long term financial infrastructure of Hong Kong."
The full consultation paper can be found at the Board's website (www.dps.org.hk). The Board will take into consideration views received at the consultation in finalising the proposed enhancements to the DPS. Members of the public who have comments on the recommendations in the consultation paper may send them to the Board on or before June 26 via the following channels:
* by mail to the Board's office at 78/F, Two IFC, 8 Finance Street, Central, Hong Kong marked with reference to DPS Review;
* by fax to 2290 5168;
* by email to dps_review@dps.org.hk;
* by visiting the Board's website.
For further enquiries, please contact:
Senior Manager (Payout & Publicity), Raymond Tsai, at 2878 1060 or
Manager (Publicity), Teresa Lai, at 2878 1305
Ends/Monday, April 27, 2009
Issued at HKT 19:36
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