HKMA Chief Calls For Better Protection Of Consumer Banking

by Mary Swire, Tax-news.com, Hong Kong

21 June 2001

More attention must be paid to the issue of consumer protection in Hong Kong's banking services, said Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority (HKMA) this week.

In an address at the half-yearly dinner of the Hong Kong Association of Banks (HKAB) on Tuesday, Mr Yam delivered a speech entitled 'Consumer Protection and the Banking Industry.' He noted that greater competition among banks was bringing not only benefits to consumers but disruption also.

Mr Yam said: 'The regulatory system is in the middle of a programme of intensive reform. The theme of the reform programme is facilitating greater competition in the banking sector while strengthening safety and soundness. Perhaps the single most important measure to remove barriers to competition will be the abolition early next month of the last remaining Interest Rate Rules, which involves removing the interest rate cap on savings accounts and ending the prohibition on interest on current accounts.'

He added: 'In the banking sector, greater competition strengthens both individual banks and the banking system as a whole. For the consumer, competition promotes choice, quality and efficiency in products and services, and more reasonable costs.' He said that, however, 'there has been disruption and anxiety, which has been reflected in the steadily growing number of complaints and protests, and in the greater political attention being paid to this subject.'

In conjunction with industry associations the HKMA has endeavoured to promote good business practices and transparency among banks through the Code of Banking Practice guidelines. Although at present the authority posseses no formal powers to deal with consumer complaints.

The HKMA has recently undertaken a comparative study on banking consumer protection in the UK, Australia and Hong Kong, with the intention of clarifying some of the issues surrounding the subject of consumer protection. The study revealed that both the UK and Australia had gone somewhat further than Hong Kong in their measures to protect consumers of banking services. 'However,' said Mr Yam, 'the public concern about the effects of deregulation, coupled with the recognition of the importance of banking services to people's daily lives, suggest that we should be paying more attention than we have in the past to the question of consumer issues.'

Mr Yam said that HKAB, as the traditional vehicle for self-regulation, would have a part to play in shaping policies and practices in the area of consumer protection. He noted that, in the light of the full deregulation of interest rates and of changing public expectations, HKAB was currently reviewing its role and aims as the main industry body. He said the recommendations in the recent HKAB consultancy report on the issue were sensible and realistic. These included:

• Taking a stronger and more unified approach as the voice of the banking industry
• Taking greater ownership of the Code of Banking Practice, particularly in setting standards and in monitoring and enforcing compliance
• Promoting consumer education in the field of banking services

Mr Yam said that the HKMA supported these recommendations, but he did stress that it was ultimately a matter for HKAB to decide on how its role should be developed.

Summarising the main points in his address, Mr Yam said: 'the transitional period in which we find ourselves will give rise to misunderstandings, disputes, and dissatisfaction among many consumers that will need to be resolved. To approach these problems and to find practical ways of resolving them, we need to develop a more sophisticated and better organised system of consumer protection. I hope that the community and its representatives, and the industry, through your organisation, will take up the debate and help shape an effective solution.'

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