28 December 2004

Dear Sir / Madam,

Annual Self-Assessment on Compliance with the Code of Banking Practice 2003/04

The industry has completed the annual self-assessment on compliance with the Code of Banking Practice covering the period from 1 June 2003 to 31 May 2004. I write to inform you of the results of this exercise.

The self-assessment was completed by 184 AIs. Taking into account the results of the recent review of the terms and conditions for safe deposit box service, 99.5% of AIs achieved full or almost full compliance*. Only one AI reported over five instances of non-compliance. The results are very similar to those in the 2002/03 assessment. Please see Annex for details.

In terms of systems of control for monitoring compliance with the Code, all AIs reported that they had adequate internal procedures and management oversight to ensure compliance. New products were also subject to adequate review before they were launched to ensure compliance with the Code.

The results of this year’s self-assessment are satisfactory. AIs have generally maintained a high degree of compliance with the Code. Notwithstanding this, AIs should take any instances of non-compliance with the Code seriously. Where non-compliant areas are identified during the self-assessment process, AIs should develop a plan to promptly rectify the situation. A report should be submitted to the HKMA before 31 January 2005 to confirm that all non-compliant areas have been rectified, or if not, the reasons why extended time is required. The report should be sent to the attention of the institution’s usual contact in the Banking Supervision Department.

Should you have any questions, please contact Ms Carman Chiu at 2878 1474 or Miss Gillian Hui at 2878 1275.

Yours faithfully,

Arthur Yuen
Executive Director (Banking Development)

^* Almost full compliance refers to the reporting of five or less instances of non-compliance.