Hong Kong Deposit Protection Board consults on enhancements to the Deposit Protection Scheme

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Authored by: Simon Deane and Natalie Chan

On 13 July 2023, the Hong Kong Deposit Protection Board issued a consultation paper (“Consultation Paper”) on some proposed enhancements to the Deposit Protection Scheme (“DPS”). The Consultation Paper contains a number of policy recommendations on enhancing protection of depositors in Hong Kong, following a comprehensive review which was initiated in 2021. DPS protects the deposits of both personal and corporate depositors held with licensed banks in Hong Kong (not with the other types of AI), but does not protect the deposits of AIs, foreign banks or persons/companies related to a DPS scheme member.

One of the key enhancements is to increase the protection limit from the current HK$500,000 to HK$800,000 per depositor. This will expand the coverage of protected depositors from the current 89% to 92%, in line with an international standard with a reasonable buffer.  Under this proposal, the deposits in the banking system that are protected will also be increased by 26% to HK$3.3 trillion, making up 25% of the total deposits in the banking system.

Another key enhancement relates to the merger of licensed banks which are both scheme members of the DPS. In cases where the depositors have deposits with more than one scheme members which are in the process of merging, each affected depositor will be entitled to compensation in respect of his/her protected deposits up to HK$800,000 with each relevant scheme member during a grace period of six months upon the bank merger, as if the merger had not occurred.

For more information on the Consultation Paper, please see here.

Key Contacts

Simon Deane

Consultant | Banking and Finance

Email or call +852 2825 9209