First Annual Self-Assessment on Compliance with the Code of Banking Practice

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) the results of the first annual self-assessment on authorized institutions' (AIs) compliance with the Code of Banking Practice. The assessment covered the first six months of the revised Code's operation since it was launched on 1 December 2001.

This is the first annual self-assessment conducted by all AIs on their compliance with the Code of Banking Practice. The new self-assessment framework has been introduced as part of the HKMA's role in monitoring AIs' compliance with the Code. The self-assessment requires the internal auditors of AIs or other equivalent units to independently review the AIs' compliance with the requirements under individual sections of the Code. Where non-compliant areas¹ are identified, AIs are required to provide details of the remedial actions they plan to take, or have already taken, to rectify the situation.

The self-assessment was completed by 190 AIs and covered 186 provisions of the Code. 63% of AIs reported full compliance, 27% of AIs reported 5 or fewer instances of non-compliance and 10% of AIs reported over 5 instances of non-compliance. The reported cases of non-compliance mainly relate to the requirements in Chapter 1 and 2 of the Code such as the need to highlight fees and charges in the terms and conditions, to provide sufficient notice to customers before variations in fees and charges take place and to provide customers general descriptive information about operation of accounts. "The progress of the industry towards full compliance seems to be generally satisfactory, with 90% of institutions reporting full, or almost full, compliance with the Code. Moreover, since submitting the self-assessment reports, most AIs have already remedied the non-compliant areas identified or have set a target date to do so," said Mr David Carse, Deputy Chief Executive of the HKMA.

Mr Carse added that "any remaining non-compliance with the Code should be taken seriously by institutions. The HKMA will continue to follow up with the institutions concerned to ensure that they rectify the areas of non-compliance as soon as possible."

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246 or
Sylvia Yip, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
28 November 2002

First Annual Self-Assessment on Compliance with
the Code of Banking Practice

Overall state of compliance by the banking industry

1. To achieve compliance, AIs should satisfy two requirements in respect of each section of the Code. AIs should have (i) documents/information which comply with the section; and (ii) effective procedures in place to ensure compliance with the section. An instance of non-compliance refers to an AI's failure to comply with either one or both requirements in respect of each section of the Code.