On 8 May 2015, the Hong Kong Financial Services and the Treasury Bureau (FSTB) and Hong Kong Monetary Authority (HKMA) jointly published their Consultation Conclusions on Enhancements to the Deposit Protection Scheme (DPS) (the Consultation Conclusions).The Consultation Conclusions set out the FSTB’s and HKMA’s responses to the three-month public consultation (the Consultation) with the intention that these would form the basis of the proposed amendments to the Deposit Protection Scheme Ordinance.
The Consultation Conclusions focused mainly on the three proposals in the Consultation:
Adoption of “gross pay-out” method to determine DPS compensation
This proposal was welcomed by all respondents. It was generally agreed that the application of the gross pay-out approach would enable depositors to have quicker access to deposit compensation payments helping maintain depositor confidence and promoting banking stability.
The FSTB and HKMA acknowledged that the annual contributions of some DPS members might increase as a result of a higher level of protected deposits when calculated on a gross basis. However, they estimated that any potential increase would be moderate.
Enhancement of pay-out process by providing more certainty for the determination of the “Quantification Date” (QD)
All respondents supported the proposal to amend the definition of the QD to the earlier of the trigger date (TD) or the date of appointment of a provisional liquidator (PLD). This is to remove uncertainty for the Hong Kong Deposit Protection Board (HKDPB) in determining the reference date for DPS compensation calculation if there is a time gap between the appointment of a provisional liquidator and the triggering of the DPS.
To streamline the compensation determination process the FSTB and HKMA propose to define the QD as the DPS trigger date.
Enabling the use of electronic communication channels by the HKDPB to handle the pay-out process
All respondents supported this proposal. The FSTB and HKMA noted that one of key priorities will be to safeguard information security and data privacy when implementing this new information transmission channel.
As the responses to the Consultation Conclusions showed all respondents were supportive of the proposed changes, the FSTB and the HKMA will proceed in the legislation amendments on this basis.
The full text of the Consultation Conclusions is available here.
Please click here for the consultation paper.
 TD refers to the date of a specified event under section 22 of the Deposit Protection Scheme Ordinance, meaning the date on which a winding-up order has been made by the Court of First Instance in respect of a DPS member, or the date on which the HKMA has served a notice on the HKDPB to trigger the DPS, whichever is the earlier.