REVIEW OF THE CODE OF BANKING PRACTICE

1. REVIEW OF THE CODE OF BANKING PRACTICE 15 November 2001

2. Background of the Code • Jointly issued by HKAB & DTCA & endorsed by HKMA • First published in 1997 • Primary objective is to promote good banking practices by setting out the standards expected of institutions • It covers business with personal customers • Subject to periodic review

3. The Review • Informal Working Group (IWG) • convened by HKMA • comprised of representatives of HKAB & DTCA • Objective • strengthen the Code in the light of its operation since 1997 and keep it up to date with banking industry developments • Extensive consultation • with industry associations & Consumer Council

4. More transparent Terms & conditions should be provided at the request of customers Major terms & conditions should be highlighted in application forms, & in plain language! Major Improvements Card Services (effective since 15 January 2001) Greater protection for consumers • Maximum liability for card loss should not exceed HK$500 except for fraud and negligence • Subsidiary cardholders not liable for debts of primary cardholders • Customers should not be charged extortionate interest rates Fairer • APRs further standardised to facilitate price comparison by consumers • Cost of debt recovery should be of reasonable amount & reasonably incurred

5. Major Improvements • Notification of Changes to Fees and Charges • Effective since 1 June 2001 ahead of full deregulation of Interest Rate Rules in July 2001 • Institutions should give 30 days’ notice to affected customers before changes in fees & charges take effect • Effective means of notification should be adopted e.g. one or a combination of the following: • individual notification by mail • press advertisement • prominent display of notice in banking halls • display on ATM screens • phone-banking message • notice posted on institution’s website

6. Major Improvements • Debt Collection • Any collection expenses to be recovered from customers should be of reasonable amount and should have been reasonably incurred • Institutions should regularly evaluate whether charges of debt collection agencies are reasonable • Institutions should have proper systems & procedures for selecting debt collection agencies and monitoring their performance • Institutions should have established procedures to handle complaints from debtors • Institutions should require their debt collection agencies not to employ harassment or improper debt collection tactics

7. Major Improvements • New Chapter on e-banking Services • New guidelines to boost consumer confidence in using e-banking services • When customers contract an e-banking service, institutions should make clear & prominent disclosure of: • customers’ liability for unauthorised transactions • fees & charges applicable to the e-banking service • customers’ security obligations, etc. • Customers should be provided with a facility to confirm they have read such disclosures before they can sign up for e-banking services • Unless customers have acted fraudulently or with gross negligence, they should not be responsible for any direct loss suffered as a result of unauthorised transactions

8. Major Improvements • New Chapter on Stored Value Cards • Major terms & conditions of stored value cards should be drawn to the attention of customers or prospective customers • General descriptive information on use of stored value cards should be provided to customers, such as: • all fees & charges applicable to the card (e.g. annual fees) • any deposit payable by customers & the refund policy • potential loss to be suffered by customers in case of card loss, etc. • Deposit & any residual value in the card should be refunded to customers if they do not agree to significant variations of the terms & conditions

9. Going Forward Role of HKAB & DTCA • HKAB, in conjunction with DTCA, will take greater ownership of the Code. They will jointly handle: • Future review of the Code • Questions regarding general interpretation & application of the Code • A Code of Banking Practice Committee comprising representatives of HKAB, DTCA & HKMA has been established

10. Going Forward Role of HKMA • The HKMA is responsible for promoting & encouraging sound & prudent business practices amongst institutions • We will continue to be as involved - if not more involved - in the Code in terms of: • Monitoring compliance with the Code by • Requiring institutions to conduct annual self assessment; & • Carrying out on-site examinations • Ensuring institutions have effective complaint handling procedures (N.B. guideline on this to be issued) & assisting customers in filing complaints with individual institutions • Actively participating in the future development of the Code

11. Going Forward Role of Consumers • While institutions will endeavour to provide top quality service to consumers, consumers also have a role to play. They should: • Understand their rights & obligations • Read terms & conditions, compare APRs, etc.; a lot of helpful information is available, & increasingly in easily understandable language, but this is of little value unless consumers make use of it! • Seek help from institutions in case of need • Reflect their views on the Code to the industry associations

12. Conclusion • We believe that the issuance of the new Code of Banking Practice will help to promote the interests of bank customers • Institutions in Hong Kong are increasingly focusing on customer service, & the exercise clearly demonstrates the aspiration of the banking industry to bring our standards of banking services fully into line with international best practices • The HKMA will continue to play an active role in consumer issues

13. Q & A