Hong Kong plans to raise bank deposit protection from 2025

HONG Kong plans to raise the maximum protection on bank deposits in a move designed to better shield people during times of severe stress.

The Hong Kong Monetary Authority (HKMA) proposed to increase the amount of savings covered by the government guarantee in the event of bank failure to HK$800,000 (S$135,990) per depositor at each Hong Kong bank, up from HK$500,000, a consultation paper showed on Thursday (Jul 13). Changes to the scheme, which covers both individuals and corporate account holders, are expected to take effect from the start of 2025.

This review will “ensure the scheme remains effective in maintaining banking stability and to keep up with international best practice,” said Daryl Ho, Hong Kong Deposit Protection Board chief executive officer and the executive director at the HKMA.

Recent US bank failures reignited a debate around the world on savers’ protections, schemes where governments guarantee to pay depositors in the rare event of a bank collapsing. While the majority of large countries offer such a backstop, the demise of Silicon Valley Bank indicated a shortfall in the depositor protection programme for smaller institutions.

Hong Kong is attempting a revival from years-long Covid restrictions that saw talent and capital leave. The domestic economy and its stock market are showing scant signs of recovery six months after borders reopened, as data signalled the wider China economy is struggling. Last week the city relaxed some of its residential mortgage rules, allowing buyers a smaller down payment.

This review was initiated in 2021 and wasn’t prompted by recent banking events in the US and Europe, said Connie Lau, chairman of the Hong Kong Deposit Protection Board.

SEE ALSO

Hong Kong will ban seafood imports if Japan releases nuclear water

Hong Kong investment property transactions drop to 19-year low

After the change, some 92.2 per cent of depositors will be covered, up from 88.6 per cent at present, the HKMA said. That compares with international guidance of 90 per cent, it said.

The consultation period for comments on the policy recommendations will run until Oct 12. BLOOMBERG