Costs of introducing the Mandatory Provident Fund into sectors with high employee mobility will be 'quite exorbitant', according to confidential correspondence between the Bank of China and the Hong Kong Association of Banks. The Association is planning to pass on the Bank of China's concerns by writing to the MPF Office seeking guidance on the development of operational procedures. Banks and other financial services' institutions are focusing on practical problems of who should collect contributions in sectors with a high turnover, such as catering and construction, and who will be responsible for lapses. A draft copy of the letter asks: 'Would the Government prescribe operational procedures for the trustees and employers to follow in order to ensure that all contributions are properly received? The MPF regulation does not seem to provide for this.' The Government and industry are discussing issues ranging from the procedural through to technical, such as investment restrictions, as both parties attempt to finalise the fund's regulations. Banks have backed the concerns from other sectors of the industry, particularly the life insurance companies, about the proposed capital preservation fund. The Government is insisting that providers offer a deposit-style fund that preserves scheme members' contributions. Industry experts claim that the vast majority of members will use the fund, which they claim is unsuitable for long-term investments in a high-inflation economy. The providers also warn that the fund would not generate the fee-income providers need to justify their involvement. The letter states that under proposed regulations it is unclear whether investment managers would receive fees if the capital preservation fund's rate of return is less than the Hong Kong dollar savings interest rate. It adds that regulations also impose a duty on trustees to accept customers able to provide the required information and willing to accept terms. The letter states: 'In practice, there are customers who persistently fail to make contributions on time. 'If the trustee does not have the power to turn away such customers, additional time would be needed and extra costs incurred in administering the scheme. 'The bill should make it clear that an approved trustee can unilaterally terminate the relationship with a persistent defaulter in the interests of the remaining scheme members.'