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Tougher Race Sparks New Bank Charges in HK
Mr. Kwok Ho Fai, a 62-year-old retiree of Hong Kong, eliminated Wednesday his savings account at HSBC, which he has kept for 12 years, after he learned the new charges the biggest bank of Hong Kong will impose on small depositors like him.
The Hongkong and Shanghai Banking Corporation Limited (HSBC) Tuesday announced a plan which means customers whose savings account balances fall below 5,000 HK dollars will be charged a monthly fee of 40 HK dollars as from July 1 and those whose deposits fall below 1,000 HK dollars will enjoy no interest as from May 1.
Earlier this year, the Standard Chartered Bank, one of the three note-issuing banks of Hong Kong, announced a similar yet even higher rise of fees.
It is widely believed here that more banks, especially the big ones, will follow the steps of the two against the backdrop of fiercer competition in Hong Kong's financial market with the deregulation of interest rate due to go effective on July 1 when banks become free to decide interest rates on Hong Kong dollars savings and current accounts.
"The banking industry in Hong Kong is experiencing fundamental changes for a number of reasons, of which one is interest rate deregulation," said HSBC's General Manager Raymond Or.
"The removal of the maximum rate caps on deposits will increase competition and threaten to tighten margins further. Banks are obliged to recoup the cost of providing services to customers, some of which were previously subsidized," Or said.
Hong Kong Financial Secretary Donald Tsang said that the bank charges are inevitable with the deregulation of interest rates and customers can choose banks that suit them in a free market.
Small and medium banks are eager to accept the customers turned down by the new bank charges.
Several banks, including Dah Sing Bank, Chekiang First Bank and Citic Ka Wah Bank, have pledged not to introduce new charges, for the moment at least.
Although HSBC has set up a threshold for the small depositors, it offers choices for customers.
To encourage the use of electronic services and self-service facilities, HSBC has begun to offer free ATM cards and free automated phonebanking services and online banking services.
The youngest age qualifying for using the automated phonebanking and internet banking services has been lowered from 18 to 11.
The new Easy Savings account will require neither minimum balance nor account service fee unless customers withdraw cash or transfer at branch counters.
Local analysts believe that the competition will force banks to improve their management and make both banks and customers make their new choices.
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