Ask Melanie
PUBLISHED : Monday, 08 April, 2013, 12:00am
UPDATED : Monday, 08 April, 2013, 3:09am

Time to take a long, hard look at your bank's track record

Melanie Nutbeam, a certified financial planner based in Hong Kong, addresses common personal finance queries. Send your questions to


Melanie Nutbeam is an award-winning financial planning professional based in Hong Kong. She is a Certified Financial Planner TM (Australia) and has diplomas in finance, investment and law. She is also Vice-Chair of the Australian Chamber of Commerce in Hong Kong and Macau. She can be reached at

How safe is the money in my bank account?

Recent events in Cyprus remind all of us that you cannot always count on the cash in the bank. It is vulnerable to bank runs, financial crises, institutional failures and government edicts - of which recent Asian history provides many, many examples.

The first thing to remember is that deposits are an investment. They typically deliver paltry returns, but they're still an investment, and any investment involves risks, such as losses.

Banks don't just leave your money passively sitting there. They deploy it elsewhere to make profits partly returned to you as interest. That exposes the bank, and you, to risk.

All licensed banks in Hong Kong are members of the Deposit Protection Scheme, which is backed by the Monetary Authority. The scheme guarantees depositors a return of up to HK$500,000 per account, per bank. That includes savings accounts, term deposits of less than five years and foreign-currency accounts.

Structured deposits and offshore accounts are excluded. All members of the Deposit Protection Scheme are obliged to display a membership sign prominently in their premises.

Your money is safe up to HK$500,000. If you have more than that, you can spread your savings across several banks.

If that's inconvenient, your next line of defence is to consider the overall ratings and asset-backings of your banks. Global Finance magazine publishes a report entitled the "The World's 50 Safest Banks" every six months. It looks at banks' in terms of their credit ratings from Moody's, Standard & Poor's and Fitch, and looks at the assets backing each institution.

German and Swiss banks currently take the top five places. The safest banks in Hong Kong according to the list are Rabobank (in 10th place), DBS Bank (12th), and Royal Bank of Canada (15th).

National Australia Bank leads that country's banks in 16th place, overall, with Commonwealth Bank, Westpac and ANZ following right behind, making a quadrella for Australian banks offering retail services in Hong Kong.

HSBC is in 25th place and Standard Chartered closes the home field in 48th place. It doesn't offer its services in Hong Kong but it's interesting to note that plucky New Zealand lender Kiwibank clipped HSBC for the 24th spot.

While you're thinking about the safety of your bank deposits, you should review the agreement you signed when you opened your account.

The risk disclosure statement spells out the things the bank does not cover you for.

These typically include events beyond the bank's reasonable control, such as government measures, regulations, adverse markets, disruptions, financial, political or economic conditions, wars, sabotage and so on.



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