More attention needs to be paid to the question of consumer protection in the area of banking services, said Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority (HKMA), in an address at the half-yearly dinner of the Hong Kong Association of Banks (HKAB) today (Tuesday).
In a speech entitled "Consumer Protection and the Banking Industry", Mr Yam noted that greater competition among banks was bringing both benefits and disruption to consumers.
"The regulatory system is in the middle of a programme of intensive reform. The theme of the reform programme is facilitating greater competition in the banking sector while strengthening safety and soundness," said Mr Yam. "Perhaps the single most important measure to remove barriers to competition will be the abolition early next month of the last remaining Interest Rate Rules, which involves removing the interest rate cap on savings accounts and ending the prohibition on interest on current accounts," Mr Yam said.
"In the banking sector, greater competition strengthens both individual banks and the banking system as a whole. For the consumer, competition promotes choice, quality and efficiency in products and services, and more reasonable costs," Mr Yam noted. But, less positively, and partly as a result of increased competition, he added, "there has been disruption and anxiety, which has been reflected in the steadily growing number of complaints and protests, and in the greater political attention being paid to this subject."
Mr Yam said that, currently the HKMA had no formal powers to deal with consumer complaints, although, in conjunction with the industry associations, it promoted good business practices and transparency among banks through the Code of Banking Practice. He said that the HKMA had recently undertaken a comparative study on banking consumer protection in the UK, Australia and Hong Kong, with the intention of clarifying some of the issues surrounding the subject of consumer protection. The study had revealed that both the UK and Australia had gone somewhat further than Hong Kong in their measures to protect consumers of banking services. "However, the public concern about the effects of deregulation, coupled with the recognition of the importance of banking services to people's daily lives, suggest that we should be paying more attention than we have in the past to the question of consumer issues," Mr Yam said.
"The HKMA has an open mind on this issue, and we are hoping to receive views on the way forward, from the industry, from Legislative Councillors, and from the community at large," said Mr Yam. "But as the Hong Kong market becomes more sophisticated and more competitive, and as consumer issues are coming more to the fore, it may be useful to consider whether Hong Kong should follow the path of other jurisdictions." Mr Yam added that the HKMA had yet to take a view on what form of organisation should be responsible for banking consumer protection, should it be decided to take the matter further. "This is not necessarily one of the functions that the HKMA would wish to add to its already onerous responsibilities," he said.
Mr Yam said that HKAB, as the traditional vehicle for self-regulation, would have a part to play in shaping policies and practices in the area of consumer protection. He also noted that, in the light of the full deregulation of interest rates and of changing public expectations, HKAB was currently reviewing its role and aims as the main industry body. He said the recommendations in the recent HKAB consultancy report on the issue were sensible and realistic. These included:
- Taking a stronger and more unified approach as the voice of the banking industry.
- Taking greater ownership of the Code of Banking Practice, particularly in setting standards and in monitoring and enforcing compliance.
- Promoting consumer education in the field of banking services.
Mr Yam said that the HKMA supported these recommendations, although he stressed that it was ultimately a matter for HKAB to decide on how ultimately its role should be developed.
Mr Yam added that the HKMA also hoped to see HKAB taking active part in the development of Hong Kong's financial infrastructure, particularly in taking forward the establishment of a commercial credit reference agency.
Summarising the main points in his address, Mr Yam said "the transitional period in which we find ourselves will give rise to misunderstandings, disputes, and dissatisfaction among many consumers that will need to be resolved. To approach these problems and to find practical ways of resolving them, we need to develop a more sophisticated and better organised system of consumer protection. I hope that the community and its representatives, and the industry, through your organisation, will take up the debate and help shape an effective solution."
For further enquiries, please contact:
Thomas Chan, Senior Manager (Press) at 2878 1480, or
Caitlin Wong, Manager (Press) at 2878 1687
Hong Kong Monetary Authority
19 June 2001
