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

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

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

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

5. 5 Major Improvements l 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. 6 Major Improvements l 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. 7 Major Improvements l 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. 8 Major Improvements l 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. 9 Going Forward Role of HKAB & DTCA l 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 l A Code of Banking Practice Committee comprising representatives of HKAB, DTCA & HKMA has been established

10. 10 Going Forward Role of HKMA l The HKMA is responsible for promoting & encouraging sound & prudent business practices amongst institutions l 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. 11 Going Forward Role of Consumers l 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. 12 Conclusion l We believe that the issuance of the new Code of Banking Practice will help to promote the interests of bank customers l 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 l The HKMA will continue to play an active role in consumer issues

13. 13 Q & A