Apart from prudential supervision, the HKMA attaches great importance to supervision of banks’ business practices and conduct to protect the interests of bank customers. The key framework for the HKMA’s work on enhancing consumer protection is outlined below.
Consumer confidence and trust are the cornerstone for sustainable development of banks, which in turn promotes banking stability. To earn and keep customers’ confidence and trust, banks should treat customers fairly at all stages of their relationship with them. Over the past few years, the HKMA has been engaging the banking industry on various initiatives to promote a stronger corporate culture among banks of treating their consumers fairly.
The HKMA has worked with the industry in developing the Treat Customers Fairly (TCF) Charter which all the retail banks in Hong Kong have signed up on 28 October 2013, demonstrating the industry’s commitment not only to treating customers fairly but fostering a stronger culture towards upholding fair treatment of customers at all levels of banks and at all stages of their relationship with customers.
The promotion of a strong corporate culture to ensure fair treatment of customers has been extended to the private wealth management industry: On 8 June 2017, the HKMA and the Private Wealth Management Association (PWMA) jointly announced the commitment of all PWMA member institutions to implement the Treat Customers Fairly Charter for Private Wealth Management Industry.
Both Charters incorporate five high-level TCF principles, having drawn from good practices locally and overseas and from the G20 High-Level Principles on Financial Consumer Protection. To assist implementation of the two Charters, the HKMA has collaborated with the industry in providing practical examples of measures.
Banks should provide consumers with key information that informs the consumers of the fundamental benefits, risks and terms of the products. The Code of Banking Practice (CoBP) is intended to increase transparency in the provision of banking services so as to enhance customers’ understanding of the services provided by banks. Under the CoBP, banks should make readily available to customers written terms and conditions of a banking service, including fees and charges, penalties and relevant interest rates, and the customers’ liabilities and obligations in the use of the banking service. All financial promotional materials should be fair, reasonable and not misleading. All banks are required to fully comply with all the provisions of the Code.
Banks are required to engage an independent internal party to conduct regular self-assessments on their compliance with the CoBP and report the results to the HKMA. The HKMA also conducts on-site examinations of banks to monitor their compliance with the CoBP.
The HKMA puts great emphasis on financial consumer education. Through disseminating various smart and safety tips, the HKMA seeks to educate the public to be smart and responsible in the use of banking and other financial products and services.
From time to time, the HKMA also publishes inSight articles to enhance consumers’ awareness of their rights and obligations as well as their understanding of the key features and risks of certain financial products.
In addition, the HKMA works closely with other relevant stakeholders, such as Hong Kong Association of Banks, Consumer Council, Investor and Financial Education Council (IFEC) * and Education Bureau, to promote financial literacy in Hong Kong.
* Careful attention should be paid to the Liability Statement section on the homepage of the IFEC website when referring to information using this link.
The HKMA expects banks to comply with the Personal Data (Privacy) Ordinance (PDPO) in the collection, use and holding of customer personal data. They should also comply with any relevant codes of practice issued or approved by the Privacy Commissioner for Personal Data giving practical guidance on compliance with the PDPO.
In light of growing diversity of wealth management products with varying complexity and risks as well as the special trust in banks by their customers, there is an increasing need to enhance protection for bank customers, especially retail customers who may have limited knowledge in wealth management products. Coupled with the growing public expectation for better protection of bank customers, the HKMA has required banks to implement a number of enhanced measures on top of the measures introduced by other financial regulators (e.g. audio recording of sale process involving complex products or risk-mismatch, physical segregation between investment activities and deposit-taking activities, and pre-investment cooling-off period for certain investment products). These enhanced measures are mostly targeted at retail customers in order to accord protection to them. Taking into account the level of sophistication and investment needs of private banking customers and corporate banking customers, the HKMA adopts a more measured approach on conduct supervision while maintaining investor protection.
At the same time, the HKMA formulates policies and issues circulars or guidelines governing banks’ sale of investment, insurance, and Mandatory Provident Fund (MPF) products to customers.
The HKMA’s supervisory approach includes on-site examinations of banks (mainly focusing on regulatory compliance, internal controls and management supervision), off-site surveillance (including analysing banks’ regular and ad hoc returns and surveys), and conducting from time to time mystery shopping of banks’ sale of investment and insurance products. The HKMA monitors remedial actions taken by the banks on issues of supervisory concerns or non-compliance identified in the supervisory process.
Following the global financial crisis, international efforts have intensified to enhance financial consumer protection policies. The development of high-level principles on financial consumer protection was in response to a call from the G20 Finance Ministers and Central Bank Governors for the Organisation for Economic Co-operation and Development (OECD), the Financial Stability Board and other relevant international organisations to develop common principles to assist G20 countries and other interested economies to enhance financial consumer protection. The development of these principles is led by the OECD, which has formed a task force for this purpose. The HKMA is a member of this task force and has been participating actively in providing comments on the drawing up of these principles. The ten High-level Principles on Financial Consumer Protection have been published by the OECD.
The Deposit Protection Scheme (DPS) in Hong Kong was introduced in 2006 under the Deposit Protection Scheme Ordinance for protecting depositors in Hong Kong. It is administered by an independent statutory body - Hong Kong Deposit Protection Board (the Board). The day-to-day operation of the Board is undertaken by the HKMA. Both the Board and the HKMA are financial safety net players in Hong Kong. They share a common objective of promoting stability of Hong Kong’s banking system.
All licensed banks, unless exempted by the Board, are required to participate in the DPS and the current compensation limit is HK$500,000 per depositor per member bank. Deposits held by an individual or a company which are placed with Hong Kong offices of member banks, whether denominated in Hong Kong dollar, Renminbi or any other currency, are protected.
For further information about the DPS, please visit the website of the Board or call the Board’s hotline (852) 1831 831.