Hong Kong plans to raise deposit protection limit

HONG KONG, Feb. 6 (Xinhua) -- The deposit protection board of the Hong Kong Special Administrative Region (HKSAR) on Tuesday proposed to raise the protection limit of deposits to provide a better buffer for depositors while adding to the stability of the banking system.

The cap would be raised to 800,000 Hong Kong dollars (about 102,257 U.S. dollars) from the previous 500,000 Hong Kong dollars, the board said, adding that the proposal was made after a three-month public consultation ending in October.

The board said that it has carefully considered all the comments received during the consultation and relevant factors, and decided that the 60 percent increase in the protection limit can compensate for the cumulative inflation over time while translating into around 20 percent increase in the real value of deposit protection.

The Hong Kong Monetary Authority said in a statement that the deposit protection scheme has been playing an important role as the "guardian of deposits" in Hong Kong since its inception in 2006.

"It gives small depositors peace of mind, making them less likely to be affected by rumors and lose confidence in individual banks or even in the banking system as a whole. This in turn can help reduce the likelihood of rumor-driven bank runs and hence ripple effects on the entire banking system. Deposit protection is indeed a core element of the overall financial safety net," it said.

The board said that it will work closely with the HKSAR government to introduce the amendment bill into the Legislative Council in the next few months and the target is to implement some of the policy proposals covering the enhanced protection limit in the fourth quarter of this year.