The Government conducted a public consultation on whether to introduce a deposit protection scheme in Hong Kong.
Although a deposit protection scheme was not yet established, the Companies Ordinance was amended to grant a higher priority to depositors up to the first HK$100,000 of their aggregate deposits in the event of liquidation of a licensed bank.
The Asian financial crisis in 1997 triggered a temporary run on a local bank, which adversely affected confidence in the banking system.
The Hong Kong Monetary Authority (HKMA) commissioned a consultancy study on the Hong Kong banking sector in light of the trends in global financial markets. The study recommended the introduction of an enhanced form of explicit deposit protection in Hong Kong.
In response to the recommendation in the 1998 consultancy study, the HKMA commissioned a consultancy study on enhancing deposit protection in Hong Kong. The results of the public consultation indicated that there was broad support for establishing a deposit protection scheme in Hong Kong.
In April 2001, the Chief Executive in Council approved in principle the establishment of a deposit protection scheme in Hong Kong.
The HKMA undertook industry and public consultations on how the deposit protection scheme should be structured, including its funding approach, premium assessment, target fund size, and the use of netting to determine entitlement to compensation. The proposals were well received by the industry and other stakeholders.
The Deposit Protection Scheme (DPS) Ordinance was enacted in May 2004. The Hong Kong Deposit Protection Board (HKDPB) was formed in July 2004 to implement the DPS in Hong Kong.
With the enactment of the DPS (Amendment) Ordinance 2010 in June 2010, the deposit protection limit was raised to HK$500,000 and the DPS coverage was expanded to include secured deposits.
The DPS (Amendment) Ordinance 2024 was enacted in July 2024 and came into effect in two phases.
The first phase, covering the increase of deposit protection limit to HK$800,000, the refined levy system and the streamlined negative disclosure arrangements for private banking customers, took effect on 1 October 2024.
The second phase, including enhanced deposit protection in the event of a bank merger or acquisition and the new requirement for banks to display the simplified DPS Membership Sign on electronic banking platforms, took effect on 1 January 2025.
