Legal Update: Deposit Protection Scheme (Amendment) Bill 2024 – improvements to enhance Hong Kong’s banking attractiveness
- Chloe Lau
- Sep 26, 2024
- 4 min read
Updated: Mar 30
Author: Chloe Lau, Associate Solicitor
Providing stability and reassurance, deposits in Hong Kong banks have been guaranteed for nearly 2 decades now under the Deposit Protection Scheme (“DPS”). One of the conclusions of a recent review of the scheme was among others to increase the limit of protection of deposits by HK$300,000. These and other improvements will be implemented from 1 October 2024 onwards, ensuring continued confidence in banking in Hong Kong. This article provides background and additional notes to this welcomed amendment to the scheme.
Background: Deposit Protection in Hong Kong
Deposit protection is considered fundamental and foundational to the stability of a banking system. Since 2006, the DPS was established in Hong Kong pursuant to the Deposit Protection Scheme Ordinance (Cap. 581) (“DPSO”), with the primary objective of protecting depositors from potential default of banks in Hong Kong.
The operation of the DPS is overseen by the Hong Kong Deposit Protection Board (“HKDPB”), an independent statutory body formed under the DPSO.
Key Characteristics of the DPS
The notable characteristics of DPS include:
all licensed banks are DPS members, unless exempted by the HKDPB.
most types of deposits, whether in Hong Kong Dollars or foreign currencies, are protected by the DPS alike.
the current limit of protection is HK$500,000 per depositor per bank.
the DPS is backed by the Deposit Protection Scheme Fund (“DPS Fund”) established under DPSO, to which DPS members contribute by way of levies.
The latest review called for improvements, which paved way for the subject amendment.
The HKDPB conducts regular reviews on the DPS to maintain its effectiveness and to ensure that it stays up to date with reference to international practice. The latest review called for improvements, which paved way for the subject amendment.
The Amendment: strengthening protection, reinforcing Hong Kong’s financial hub status
Following the recommendations by the HKDPB, the Deposit Protection Scheme (Amendment) Bill 2024 was first introduced to the Legislative Council (“LegCo”) on 8 May 2024.
The Deposit Protection Scheme (Amendment) Ordinance 2024 (“Amendment Ordinance”) was subsequently passed on 3 July 2024, which aims to enhance the abovementioned function of the DPS as the financial safety net, and strengthen the protection offered to depositors banking in Hong Kong.
Key Amendments Introduced
Some of the prominent amendments are:
raising the limit of protection under the DPS from HK$500,000 to HK$800,000.
providing additional recourses to depositors in the event of a bank merger or acquisition.
enhancing the levy mechanism such that the DPS Fund may reach the target level within a certain period.
requiring mandatorily the display of DPS membership sign on electronic banking platforms of the DPS members.
streamlining the negative disclosure requirement on non‑protected deposit transactions for private banking customers.
Implementation Timeline
The Amendment Ordinance was gazetted on July 12 and will be implemented in two phases.
The first phase, effective from 1 October 2024, covers measures requiring less preparatory work, including:
enhancement of the deposit protection limit to HK$800,000.
refinement of the levy mechanism; and
mandatory display of DPS membership sign.
The remaining amendments will be implemented in the second phase, effective from 1 January 2025.
Market Reception
The Amendment Ordinance appears to be generally well received and widely welcomed, in the hopes that the amendment’s advanced protection and enhanced confidence for depositors strengthens the stability of Hong Kong’s banking system and reinforces Hong Kong’s niche as an international financial hub.
How Ravenscroft & Schmierer Can Help?
The Deposit Protection Scheme Hong Kong amendment has practical implications for banks, financial institutions and depositors alike. Ravenscroft & Schmierer advises clients on banking regulation developments, compliance obligations, depositor protection frameworks and regulatory risk management arising from DPS reforms.
If you would like to understand how the Amendment Ordinance may affect your banking arrangements or regulatory responsibilities, contact us to discuss your circumstances and available options.
FAQ: Deposit Protection Scheme Hong Kong amendment
What is the Deposit Protection Scheme (DPS)?
The DPS is a statutory scheme protecting depositors against bank default in Hong Kong.
Who regulates the DPS?
The scheme is overseen by the Hong Kong Deposit Protection Board.
What is the new deposit protection limit?
The limit has increased to HK$800,000 from 1 October 2024.
When does the Amendment Ordinance take effect?
The amendment is implemented in two phases from 1 October 2024 and 1 January 2025.
How can Ravenscroft & Schmierer advise on deposit protection issues?
Ravenscroft & Schmierer advises on banking regulation, depositor protection frameworks, and compliance with DPS requirements.
Does Ravenscroft & Schmierer assist financial institutions with DPS compliance?
Yes. We advise banks and financial institutions on regulatory obligations under the Deposit Protection Scheme Ordinance.
Can Ravenscroft & Schmierer advise depositors affected by bank restructuring?
Yes. We advise depositors on depositor protection rights following bank mergers, acquisitions, or restructuring.
Disclaimer: Whilst every effort has been made to ensure the accuracy of this article it is general in nature and does not constitute legal advice of any kind. You should seek your own personal legal advice before taking legal action. We accept no liability whatsoever for loss arising out of the use or misuse of this article.
For specific advice about your situation, please contact:
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