| Part F - Financial products protected by the DPS |
| Q46. |
What financial products are protected by the DPS? |
| A46. |
Only deposits held with Scheme members are protected by the DPS. Other financial products such as bonds, stocks, warrants, mutual funds, unit trusts, insurance policies and virtual assets are not protected by the DPS. |
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| Q47. |
Is it possible that the protection status of similar products offered by different banks can be different? |
| A47. |
It is possible because the products offered by different banks may have different terms and conditions, and hence their protection status may be different. However, banks are required to disclose whether your deposits are protected or not. In case of doubt, you may consult your bank regarding the protection status of a particular product. |
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| Q48. |
Is it possible that a financial product which is not called or described as a deposit is protected by the DPS? |
| A48. |
It is not common but possible. A financial product which is not called or described as a deposit may fall within the definition of ‘deposit’ under the Banking Ordinance, and hence is protected by the DPS. In case of doubt, you may consult your bank regarding the protection status of a particular product. |
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| Q49. |
Does the DPS protect deposits which were placed with a Scheme member before the DPS commences operation? |
| A49. |
Yes. Whether a deposit is made before or after the DPS commences operation is not relevant to the Board’s determination of a depositor’s entitlement to compensation. |
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| Q50. |
Does the DPS protect the valuables kept in my safe deposit box opened with a Scheme member? |
| A50. |
No. They are not protected by the DPS. |
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| Q51. |
What is a secured deposit? Is it protected? |
| A51. |
A secured deposit means a deposit pledged to a bank, normally for the purpose of obtaining a credit facility from the bank. Yes, it is protected by the DPS. |
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| Q52 |
What is a structured deposit? |
| A52. |
Structured deposits can take many different forms. Typical examples of structured deposits are foreign currency linked deposits and equity linked deposits. The amounts of principal and / or interest to be repaid for such deposits are linked to the performance of the underlying financial assets. |
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| Q53. |
Why are structured deposits excluded from the protection of the DPS? |
| A53. |
In determining the scope of product coverage under the DPS, the most important factors of consideration are the nature of the financial product and its popularity amongst small depositors. The nature of structured products is more akin to an investment rather than a deposit. As such, a common practice in other jurisdictions (such as Canada and some European countries) is to exclude such products from the scope of deposit protection. Moreover, only an extremely small proportion of depositors in Hong Kong hold such products. Hence, all structured deposits are currently excluded from DPS protection. |
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| Q54. |
What is a bearer instrument? |
| A54. |
A bearer instrument, in simple terms, is a financial instrument where the holder of the instrument is entitled to the repayment of the money underlying the instrument. A typical example of a bearer instrument is a bearer certificate of deposit, where the holder of the certificate evidencing the deposit is entitled to the repayment of the principal from the issuing bank, whether or not he or she is the person who made the deposit at the beginning. |
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| Q55. |
Why are bearer instruments excluded from the protection of the DPS? |
| A55. |
As it is not possible to verify the beneficial owners of the bearer instruments within a short period of time, it is a common international practice to exclude such instruments from the scope of deposit protection. |
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| Q56. |
A term deposit with a maturity exceeding 5 years is not protected. How is the term to maturity determined? |
| A56. |
The DPS does not protect time deposits with a maturity exceeding 5 years. The term to maturity of a deposit refers to the current term agreed to by the depositor at the most recent time the deposit was negotiated. It does not refer to the remaining maturity of a deposit. For example, a 6-year term deposit placed with a Scheme member will not be protected by the DPS although the deposit will mature in 3 years. |
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| Q57. |
What is an off-shore deposit? |
| A57. |
Off-shore deposits refer to deposits placed with overseas branches of Scheme members. |
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| Q58. |
Why doesn’t the DPS protect offshore deposits? |
| A58. |
As the funds reside in the banking system of an overseas jurisdiction, it falls outside the scope of coverage of the DPS. |
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| Q59. |
What should I do if my bank tells me that a deposit product offered by it is not protected by the DPS? |
| A59. |
You have a choice not to proceed with the transaction. |
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| Q60. |
What should I do if I want to proceed with the transaction? |
| A60. |
Your bank will give you a notice that the deposit product is not protected by the DPS and require you to acknowledge that you have received and understand the notice. |
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| Q61. |
Can I refuse to give an acknowledgement to the bank? |
| A61. |
If you fail to give the acknowledgement, your bank will refuse to complete the transaction with you. |
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| Q62. |
How can I know whether a financial product is protected by the DPS? |
| A62. |
You can ask the bank offering the financial product to you whether it is protected by the DPS. |
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