Deposit Protection Scheme Ordinance

The Deposit Protection Scheme Ordinance has today (Wednesday) been passed by the Legislative Council.

The Deposit Protection Scheme Ordinance provides for the establishment of a deposit protection scheme (DPS) in Hong Kong. A Hong Kong Monetary Authority (HKMA) spokesperson said that the establishment of a DPS will enhance deposit protection in Hong Kong and contribute to the stability of the financial system.

The DPS to be introduced in Hong Kong will contain the following main features:

• the DPS will be managed by an independent Deposit Protection Board (the Board) whose functions are confined to the assessment and collection of contributions, investment of funds and paying compensation to depositors in the event of a bank failure
• the Board will perform its functions through the HKMA (i.e. the HKMA will carry out the day to day administration of the scheme on behalf of the Board)
• participation by licensed banks in the scheme is mandatory but overseas-incorporated banks may apply for exemption from participation if the deposits taken by its Hong Kong offices are already covered by a comparable scheme in its home jurisdiction
• the coverage limit is HK$100,000 per depositor per bank
• a DPS Fund with a target fund size of 0.3% of the total amount of protected deposits will be built up through collection of contributions from banks
• a differential rate system based on the supervisory ratings of individual banks will be used to assess contributions.

Following the passage of the Ordinance, the Board will be established to oversee the progress of the whole project. A large volume of preparatory work will need to be completed before protection can be provided. It is expected that the scheme will start providing deposit protection in 2006.

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
5 May 2004