Our Ref: B1/1C
17 December 2004
The Chief Executive
All authorized institutions
Dear Sir / Madam,
Review of Terms and Conditions for Safe
Deposit Box Service
The HKMA has requested authorized institutions (AIs) to conduct
a comprehensive review of their terms and conditions for banking
service to ensure compliance with the Code of Banking Practice. I
am writing to inform you of the summary results of the review
covering the terms and conditions for safe deposit box (SDB)
service.
The HKMA has altogether received 27 reports from AIs. All of the
AIs concerned have included exemption of liability clauses (ELCs)
in their terms and conditions for safe deposit box service. Of
these 27 AIs, 24 of them attempt
to exclude their liability or limit their liability to a nominal
amount even if the loss or damage is caused by the negligence of
the AI or its staff. Only 3 AIs assume liability
for their own negligence without specifying an upper limit.
The HKMA considers that the exemption of liability clauses used
by the 24 AIs are inconsistent with the Code of Banking Practice
and therefore should be amended. We note that most of the AIs have
developed an action plan to rectify the situation. The HKMA is
following up with those AIs which have not yet come up with a
detailed rectification plan.
Having reviewed the action plans submitted to the HKMA so far,
we recommend AIs to take into account the following principles when
revising their terms and conditions for safe deposit box
service:-
(i) If an AI intends to include an ELC in its terms and
conditions, it must satisfy itself that the clause would unlikely
be made unenforceable by virtue of the Control of Exemption Clauses
Ordinance as well as other consumer protection legislation such as
Unconscionable Contracts Ordinance and the Supply of Services
(Implied Terms) Ordinance. In case of doubt, the AI should seek
legal advice accordingly.
(ii) An AI should not include in its terms and conditions an ELC
which excludes its liability for negligence unless it can justify
that the inclusion of the ELC is reasonable in the
circumstances.
(iii) If an AI includes in its terms and conditions an ELC which
seeks to restrict its liability for negligence to a specified
limit, any such limit must be reasonable in the circumstances. The
AI should advise the customer that its liability for negligence is
subject to the limit specified in the ELC.
(iv) Where an AI has included an ELC in its terms and
conditions, it should draw the ELC to the customer's attention.
(v) An AI should where appropriate advise the customer to take
out insurance on the contents of his or her SDB.
Where the outcome of the review has revealed that changes to an
AI's terms and conditions for safe deposit box service are
required, the AI concerned should submit a report to the HKMA
before 31 March 2005 to confirm that the necessary
changes have been completed or, if not, explain why extended time
is required. The report should be addressed to your usual contact
with the HKMA.
In connection with the use of exemption clauses by AIs, I would
also like to draw your attention to the fact that the Code of
Banking Practice Committee has recently revised the Code. First, in
drawing up terms and conditions for banking services, AIs should
give due regard specifically to the three main consumer protection
legislation, namely the Control of Exemption Clauses Ordinance, the
Unconscionable Contracts Ordinance and the Supply of Services
(Implied Terms) Ordinance. Secondly, AIs should keep their terms
and conditions under review to ensure they are consistent with the
Code (including the above legislation). AIs should take into
account these new provisions of the Code, which has already taken
effect, when they revise their terms and conditions under the
current review exercise.
In addition to the above, we would also like to remind AIs that
they should make readily available to customers and prospective
customers written terms and conditions of banking services,
including SDB service, in accordance with s5.1 of the Code. They
should also ensure that the fees and charges are highlighted in the
terms and conditions (re s5.4 of the Code) and thus made known to
customers in a transparent manner.
Finally, please be reminded that the review of the terms and
conditions for other banking services is due by 15 January 2005. If
you have any questions on the content of this letter, please
contact Ms Carman Chiu at 2878 1474 or Miss Gillian Hui at 2878
1275.
Yours faithfully,
Arthur Yuen
Executive Director (Banking Development)
- c.c.
- Secretary for Financial Services and the Treasury (Attn: Mrs
Millie Ng)
Code of Banking Practice Committee (Attn: Secretary)
Consumer Council (Attn: The Chief Executive)
