Comprehensive Review of Code of Banking Practice

The Hong Kong Monetary Authority (HKMA) welcomes the launch of the revised Code of Banking Practice ("Code") by the Hong Kong Association of Banks (HKAB) and the DTC Association (DTCA) today.  The Code is issued by HKAB and the DTCA and endorsed by the HKMA.

The Code is revised after a comprehensive review undertaken by the Code of Banking Practice Committee comprising representatives of HKAB, the DTCA and the HKMA.  The review aimed at providing a wider protection to customers, promoting good banking practices as well as enhancing the provisions of the Code to align with international standards on financial consumer protection.

Major enhancements to the Code, covering a wide range of banking products and services, include:

• extending the coverage of the Code to subsidiaries and affiliated companies controlled by authorized institutions (AIs).  In other words, AIs will be required to ensure that their subsidiaries and affiliated companies also observe all requirements and good practices as set out in the Code when providing banking services (e.g. lending) in Hong Kong;
• incorporating the G20 High-level Principles on Financial Consumer Protection¹ as general principles for AIs to observe when providing products and services to their customers, thereby helping to promote international good banking practices in Hong Kong, including important areas of disclosure and transparency, responsible business conduct, and financial education;
• enhancing the disclosure and transparency about terms and conditions by AIs, which include the provision of new standardized Key Facts Statements by AIs setting out major terms and conditions of loan products to allow customers to easily access and compare details of such products, as well as explaining any revisions of terms and conditions of banking services;
• enhancing credit card related practices of AIs, which includes (i) to obtain the consent of the customers for upgrade and replacement of credit cards; (ii) to terminate non-activated cards after reminders for activation have been sent to the cardholders, hence non-activated cards will not be auto-renewed; and (iii) not to levy annual fees on non-activated cards; and
• providing more explanation on the customer due diligence requirements in relation to the opening of accounts, which would help members of the public to have a better understanding of the requirements and the basic types of documents which may be required of them for such purposes.

Mr Norman Chan, Chief Executive of the HKMA, said, “In the wake of the global financial crisis, considerable international efforts have been directed to, amongst other things, the strengthening of financial consumer protection.  In this connection, the HKMA has also taken a proactive approach and seek to cultivate a culture of treating customers fairly in the banking industry.  The enhancement of the Code of Banking Practice is another milestone, further to the launch of the Treat Customers Fairly Charter in 2013, in strengthening banks’ corporate culture to take good care of the interests of customers in their day-to-day business dealings.”

“I am pleased that the Code is enhanced to provide better protection for financial consumers in line with the evolving customers’ needs, and to align with good international practices promulgated by the G20.”, Mr Chan added.  “The HKMA will continue to work with the industry and the relevant stakeholders to promote bank consumer protection and good business practices.”

The revised Code is effective from 6 February 2015.  AIs are expected to achieve full compliance with the new provisions as quickly as possible within 6 months of the effective date.  Another 6 months is allowed for compliance with those provisions that require system changes.  The HKMA will monitor compliance as part of its ongoing supervision of AIs.

A copy of the revised Code can be found at: http://www.hkma.gov.hk/media/eng/doc/code_eng.pdf.

Hong Kong Monetary Authority
6 February 2015