Ask MelanieTime 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 [email protected]
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.