Various measures for improving protection for bank customers are currently in progress: the aim is to improve protection while avoiding too heavy a regulatory and cost burden on the banks.
Readers are perhaps aware of our initiative in drawing public attention to the matter of banking consumer protection. At around this time last year we conducted a comparative study of the extent and nature of banking consumer protection and competition arrangements in the UK, Australia and Hong Kong. We presented the outcome of the study to the Financial Affairs Panel of the Legislative Council in April 2001 and invited guidance on a number of matters raised in the study. This was followed up in June 2001 by a speech I gave to the banking industry urging that more attention be paid to the question of consumer protection in the area of banking services.
One reason for this initiative was a concern on our part in our becoming increasingly involved in a banking matter of importance to the community while not having an explicit mandate to deal with it. The comparative study highlighted two particular areas in which practices in Hong Kong differ from those in the other jurisdictions: first, the setting, monitoring, and enforcement of standards of business practice; and, second, the investigation, resolution, and arbitration of consumer complaints. We have since received comments on these and other issues from a number of parties. Separately, the Legislative Council has also conducted studies on this subject matter. We in the HKMA are very encouraged by the amount of interest generated. Indeed, next week on 26 February 2002 there will be a special meeting of the Financial Affairs Panel of the Legislative Council on this subject.
To facilitate discussion at the meeting, we have prepared a detailed paper on the role of the HKMA in relation to banking consumer protection and on the initiatives that the HKMA and the industry have undertaken in the past year on this issue. Specifically, the paper covers the following topics:
- the regulatory framework for prudential supervision and conduct regulation of the banking sector;
- the revised Code of Banking Practice;
- the mechanism for handling complaints from bank customers (including the need for a Banking Ombudsman);
- fees and charges for basic banking services;
- consumer consultation on banking-related legislation and policies;
- consumer education on banking-related matters; and
- access to credit reference agencies.
We look forward to a meaningful discussion at the Financial Affairs Panel and, we hope, to the emergence of a clear direction to take the subject matter further. There have already been a number of initiatives over the last year or so to improve protection for bank customers. The Code of Banking Practice has been revised with substantial improvements made to enhance customer protection. The HKMA has made use of its existing powers to formulate a guideline on banks' complaint handling procedures. Furthermore, there are further initiatives to enhance the consumer protection regime in the pipeline. The Deposit Insurance Scheme will be introduced after the implementation framework has been finalised. The Code of Banking Practice Committee has recently commenced operation, through which the industry Associations will perform an enhanced role in developing and administering the Code. Coupled with the self-assessment framework that will first be conducted in September this year, this is expected to enhance compliance with the Code. These measures all serve to enhance the protection to bank consumers, while avoiding too heavy a regulatory and cost burden on banks.
It should be noted again that, notwithstanding these efforts, the HKMA does not have an explicit statutory mandate for consumer protection. A specific statutory responsibility for consumer protection, with the enforcement powers to back it up, would no doubt make the HKMA's position more clear-cut; and if there were a consensus that the HKMA should be given this responsibility, we would be prepared to take it on. However, the present approach, whereby the HKMA relies on moral suasion, backed ultimately by the sanctions in the Banking Ordinance, seems to be working reasonably effectively, and thus the status quo seems adequate for the time being. A point to be borne in mind is that the resource implications for the HKMA and the increased cost burden for the industry, which is currently facing difficult conditions, of a more elaborate regulatory framework would need to be carefully considered.
Joseph Yam
21 February 2002
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