Cap. 581 sub. leg. C

Deposit Protection Scheme (Asset Maintenance) Rules(Cap. 581, section 53)(Enacting provision omitted—E.R. 3 of 2023)[15 January 2007](Format changes—E.R. 3 of 2023) 1. (Omitted as spent—E.R. 3 of 2023) 2. Interpretation (1) In these Rules, unless the context otherwise requires—book value (帳面價值), in relation to an asset at a particular time, means the book value of the asset at that time after deducting the amount of any specific provision made at that time in the books against a reduction in its value;debt securities (債務證券) means any securities other than shares, stocks, import or export trade bills;Hong Kong office (香港辦事處), in relation to a Scheme member or an authorized institution, means—(a) the local office or the local branch, within the meaning of section 2(1) of the Banking Ordinance (Cap. 155), of the Scheme member or the authorized institution, as the case may be;(b) the Scheme member’s or the authorized institution’s, as the case may be, principal place of business in Hong Kong; or(c) any other place in Hong Kong at which the Scheme member or the authorized institution, as the case may be, carries on business;marketable debt securities (有市債務證券) means any debt securities which can be sold readily;relevant asset (有關資產) means an asset described in column 2 of the Schedule;residential mortgage loan (住宅按揭貸款) means a loan—(a) that is granted by an authorized institution to an individual on the security of a first legal charge on an immovable property—(i) located in Hong Kong; and(ii) used as a residence by the individual or his tenant; and(b) the amount of which does not exceed 90% of the purchase price of the immovable property or the market value of the immovable property as at the time when the loan was approved by the authorized institution concerned, whichever is the lower.(2) For the purposes of these Rules, a loan or residential mortgage loan granted to a person is a fully performing loan or residential mortgage loan if—(a) the condition set out in subsection (3)(a) or (b) is satisfied;(b) the condition set out in subsection (4)(a) or (b) is satisfied; and(c) the condition set out in subsection (5)(a) or (b) is satisfied.(3) The condition for the purposes of subsection (2)(a) is—(a) the loan or residential mortgage loan is not raised to repay another loan or residential mortgage loan granted by the lender to the person; or(b) in the case where the loan or residential mortgage loan is raised to repay another loan or residential mortgage loan granted by the lender to the person—(i) the raising of that loan or residential mortgage loan is not caused by a deterioration in the financial position of the person or by the person’s inability to repay on the original repayment date; and(ii) the terms of repayment of that loan or residential mortgage loan are not less favourable to the lender than those of other loans of similar nature granted by the lender to other customers and negotiated at arm’s length at the time when that loan or residential mortgage loan is granted.(4) The condition for the purposes of subsection (2)(b) is—(a) the repayment date of the loan or residential mortgage loan has not been postponed; or(b) in the case where the repayment date of the loan or residential mortgage loan has been postponed—(i) the postponement is not caused by a deterioration in the financial position of the person or by the person’s inability to repay on the original repayment date; and(ii) the terms of repayment of that loan or residential mortgage loan are not less favourable to the lender than those of other loans of similar nature granted by the lender to other customers and negotiated at arm’s length at the time when that loan or residential mortgage loan is granted.(5) The condition for the purposes of subsection (2)(c) is—(a) there are no arrears of principal or interest payment in respect of the loan or residential mortgage loan; or(b) in the case where the loan or residential mortgage loan is repayable by periodic instalments at intervals of not more than one month, there is no instalment that is in arrears for more than one month. 3. Assets in Hong Kong (1) For the purposes of these Rules, an asset is maintained in Hong Kong by a Scheme member if, subject to subsections (4), (5) and (6)—(a) the asset is a relevant asset;(b) the asset is recorded as an asset in the accounts of the Scheme member for all its Hong Kong offices;(c) the asset is not subject to any encumbrance, charge (other than floating charge) or outstanding incidental payment; and(d) the asset is not a claim on, or a share of, a related company of the Scheme member.(2) For the purposes of subsection (1)(d), a company is a related company of a Scheme member if, subject to subsection (3)—(a) the company is a subsidiary, or the holding company, of the Scheme member; or(b) the company is a subsidiary of that holding company.(3) On the written application by a Scheme member, the Monetary Authority may designate that a company is not a related company of the Scheme member for the purposes of subsection (1)(d).(4) If the asset is a relevant asset described in item 3, 4, 5 or 6 of the Schedule and comprising claims or securities that are in bearer form and transferable by delivery, the asset is not maintained in Hong Kong by a Scheme member by virtue of subsection (1) unless the documents of title of the claims or securities are also kept in Hong Kong.(5) If the asset is a relevant asset described in item 3, 4, 5 or 9 of the Schedule and comprising securities that are in registered form, the asset is not maintained in Hong Kong by a Scheme member by virtue of subsection (1) unless one of the following conditions is also satisfied—(a) the securities are transferable and registrable only at a register in Hong Kong; or(b) the securities are transferred and registered at a register in Hong Kong in the ordinary course of business and the certificates of the securities (if any) are kept in Hong Kong.(6) If the asset is a relevant asset described in item 3, 4, 5 or 9 of the Schedule and comprising securities held by an intermediary—(a) with whom a Scheme member maintains a securities account; and(b) on whose records the Scheme member’s rights or interests in the securities are recorded, the asset is not maintained in Hong Kong by the Scheme member by virtue of subsection (1) unless the conditions set out in subsection (7) are also satisfied.(7) The conditions for the purposes of subsection (6) are—(a) the intermediary is located in Hong Kong;(b) the intermediary’s records of the Scheme member’s rights or interests in the securities are kept in Hong Kong; and(c) the agreement for the securities account between the intermediary and the Scheme member is enforceable by legal proceedings in a court in Hong Kong. 4. Amount of relevant assets in Hong Kong (1) For the purposes of these Rules, the amount of a relevant asset maintained in Hong Kong by a Scheme member at a particular time is calculated by deducting from the relevant value of the asset at that time an amount equal to the relevant percentage of that relevant value.(2) For the purposes of this section—(a) the relevant value of a relevant asset at a particular time is, subject to paragraphs (b) and (c), the market value, or the book value, of the asset, as set out in column 3 of the Schedule opposite the description of the asset, at that time;(b) the relevant value of a relevant asset described in item 3 of the Schedule at a particular time is calculated by using the following formula—A + B − Cwhere— A represents the aggregate of the value, at that time, of each of the claims of the Scheme member on the Exchange Fund that are marketable debt securities; B represents the book value, at that time, of the claims of the Scheme member on the Exchange Fund that are not marketable debt securities; C represents the book value, at that time, of the liabilities (other than contingent liabilities), whether incurred in or outside Hong Kong, owed by the Scheme member to the Exchange Fund; (c) the relevant value of a relevant asset described in item 4 of the Schedule at a particular time is calculated by using the following formula—D + E − Fwhere— D represents the aggregate of the value, at that time, of each of the claims of the Scheme member on the authorized institution that are marketable debt securities; E represents the book value, at that time, of the claims of the Scheme member on the authorized institution that are not marketable debt securities; F represents the book value, at that time, of the liabilities (other than contingent liabilities), whether incurred in or outside Hong Kong, owed by the Scheme member to the authorized institution. (3) In this section, relevant percentage (有關百分率), in relation to the relevant value of a relevant asset, means the percentage set out in column 4 of the Schedule opposite the description of the asset.(4) In this section, a reference to the value of a claim of the Scheme member on the Exchange Fund, or an authorized institution, that is marketable debt securities is a reference to the market value or book value of the claim, whichever is the lower. 5. Issuance of asset maintenance requirement (1) Subject to subsection (4), if the Monetary Authority—(a) is of the opinion that a Scheme member—(i) is likely to become unable to meet its obligations;(ii) is likely to suspend payment to its depositors;(iii) is likely to become insolvent or cease to pay its debts in the ordinary course of business; or(iv) cannot pay its debts as they become due;(b) is of the opinion that a Scheme member is carrying on its business in a manner detrimental or likely to be detrimental to the interest of its depositors or potential depositors; or(c) has served on the Board a notice of the Monetary Authority’s decision in respect of a Scheme member under section 22(2) of the Ordinance, the Monetary Authority may, by notice in writing served on the Scheme member, require the Scheme member to maintain, during the period specified in the requirement, assets in Hong Kong of the amount specified in the requirement.(2) The period so specified may begin on a date specified in the requirement and continues to run whilst the requirement is in effect.(3) The amount of asset so specified is not to exceed 200% of the amount of relevant deposits maintained by the Scheme member as at a date specified in the requirement.(4) Before issuing a requirement under subsection (1), the Monetary Authority shall—(a) serve on the Scheme member a preliminary notice in writing—(i) stating that he intends to issue to the Scheme member such a requirement;(ii) stating what he intends to specify in the requirement; and(iii) stating the reasons for his intention;(b) afford the Scheme member an opportunity to submit to the Monetary Authority representations in writing on the preliminary notice within 7 days after the notice is served on the Scheme member; and(c) consider any representation so submitted by the Scheme member.(5) In this section, amount of relevant deposits (有關存款款額) has the meaning assigned to it by section 1 of Schedule 4 to the Ordinance. 6. Withdrawal of asset maintenance requirement (1) After a requirement has been issued under section 5(1) to a Scheme member, the Monetary Authority may withdraw the requirement on his own initiative or on an application by the Scheme member.(2) An application by a Scheme member for withdrawal of a requirement issued under section 5(1) is—(a) to be made in writing;(b) to state the grounds for the application; and(c) to be accompanied by such information and documents as the Monetary Authority may reasonably require for the purpose of deciding whether the requirement should be withdrawn.(3) The Monetary Authority shall not withdraw a requirement under subsection (1) unless—(a) he is satisfied that the reasons for issuing the requirement no longer exist; or(b) if the Monetary Authority has, before or after the issuance of the requirement, served on the Board a notice of his decision in respect of the Scheme member under section 22(2) of the Ordinance, the decision has been revoked under section 23(4) of the Ordinance or has been set aside by a court.(4) The Monetary Authority shall also withdraw a requirement issued under section 5(1) to a Scheme member if he issues another requirement under that section to the Scheme member to replace that requirement.(5) As soon as practicable after having withdrawn a requirement issued under section 5(1) to a Scheme member, the Monetary Authority shall serve on the Scheme member a notice in writing of the withdrawal.(6) As soon as practicable after having refused an application by a Scheme member for withdrawal of a requirement issued under section 5(1), the Monetary Authority shall serve on the Scheme member a notice in writing informing the Scheme member of the refusal and the reasons for the refusal. 7. Application for review: specification for the purposes of section 41 of the Ordinance (1) For the purposes of section 41(3) of the Ordinance, the Monetary Authority’s decision to issue a requirement under section 5(1), or to refuse an application by a Scheme member under section 6(2) for withdrawal of such a requirement, is a decision to which section 41 of the Ordinance applies.(2) For the purposes of section 41(5)(a) of the Ordinance—(a) if a person applies for a review of the Monetary Authority’s decision to issue a requirement under section 5(1), the application for review is to be made within 30 days after the date of service of the notice by which the requirement is issued; and(b) if a person applies for a review of the Monetary Authority’s decision to refuse an application by a Scheme member under section 6(2) for withdrawal of such a requirement, the application for review is to be made within 30 days after the date of service of the notice of the decision. 8. Offences If a Scheme member fails to comply with a requirement that is issued to it under section 5(1), every director and every chief executive of the Scheme member commits an offence and is liable—(a) on summary conviction to a fine at level 6 and to imprisonment for 6 months and, in the case of a continuing offence, to a further fine of $10,000 for each day during which the offence continues; or(b) on conviction on indictment to a fine of $400,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $20,000 for each day during which the offence continues. 9. Defences In any proceedings for an offence under section 8, it is a defence for the person charged to prove that he took reasonable precautions and exercised due diligence to avoid the commission of the offence by himself or any person under his control. 10. Service of notices In the absence of evidence to the contrary, a notice which is required to be, or may be, served on a Scheme member under section 5 or 6 is deemed to be so served if—(a) in the case of a Scheme member that is a company as defined by section 2(1) of the Companies Ordinance (Cap. 622)— (28 of 2012 ss. 912 & 920)(i) it is left at the Scheme member’s principal place of business in Hong Kong or registered office;(ii) it is sent by post to the Scheme member at its principal place of business in Hong Kong or registered office; or(iii) it is sent by telex, facsimile transmission or other similar method to the Scheme member at its principal place of business in Hong Kong or registered office;(b) in the case of any other Scheme member—(i) it is left at the Scheme member’s principal place of business in Hong Kong;(ii) it is sent by post to the Scheme member at its principal place of business in Hong Kong; or(iii) it is sent by telex, facsimile transmission or other similar method to the Scheme member at its principal place of business in Hong Kong. Schedule [ss. 2, 3 & 4]Assets in Hong Kong Item Description of assets Relevant value Relevant percentage 1. A currency note or coin held in Hong Kong Book value of the asset 0% 2. A piece of gold held in Hong Kong Market value or book value of the asset, whichever is the lower 0% 3. A net claim of the Scheme member (other than a contingent claim) on the Exchange Fund Note 1 — 10% 4. A net claim of the Scheme member (other than a contingent claim) on an authorized institution that Note 2 — — 20% (a) is payable in Hong Kong by a Hong Kong office of the authorized institution; and (b) is enforceable by legal proceedings in a court in Hong Kong 5. Marketable debt securities (other than those described in items 3 and 4) Market value or book value of the asset, whichever is the lower 20% 6. A negotiable bill of exchange, within the meaning of the Bills of Exchange Ordinance (Cap. 19), that is payable by a company (other than an authorized institution) Book value of the asset 50% 7. A fully performing loan granted to a person (other than an authorized institution) that is repayable in Hong Kong and enforceable by legal proceedings in a court in Hong Kong (other than that described in item 8) Book value of the asset 50% 8. A fully performing residential mortgage loan that is repayable in Hong Kong and enforceable by legal proceedings in a court in Hong Kong Book value of the asset 30% 9. A share issued by a company that is a constituent stock of Hang Seng Index Market value of the asset 20% 10. An immovable property located in Hong Kong Market value or book value of the asset, whichever is the lower 30% Note 1 For the relevant value of this item, please see section 4(2)(b) of these Rules. Note 2 For the relevant value of this item, please see section 4(2)(c) of these Rules.