The Hong Kong Association of Banks has expressed reservations about the increase in premiums needed to pay for the extension of the deposit protection scheme. The proposed lifting of the ceiling on Hong Kong's bank deposit protection to HK$500,000, from the previous cap of HK$100,000, could see banks pass premium costs on to depositors, association chairman Peter Wong Tung-shun said. 'We are in line with the government's proposal to increase the cap, but we have reservations on the suggestion to hike premiums,' Mr Wong said after an association meeting yesterday. 'A large increase [in premiums] may shift costs to customers.' It was the first time the association had expressed concern about the proposed overhaul of the deposit protection scheme, announced in late April by the Deposit Protection Board. The government agency said at the time the move would not add to banks' costs. But Mr Wong, HSBC's executive director, said that conclusion was based on government research figures, which appeared to be different from those generated by individual banks. 'There is a discrepancy on the research figures given by the Hong Kong Monetary Authority and the industry members,' he said. 'Individual banks have performed the cost analyses on their own, which is believed to be a more accurate estimate.' The association will submit a proposal to the Deposit Protection Board before Friday, when the public consultation on the revised cap ends. Castor Pang Wai-sun, a strategist at Sun Hung Kai Financial, said depositors would inevitably bear some of the costs associated with enhanced deposit protection. 'The strengthening of protection is not free and may need both sides [banks and depositors] to share the cost,' he said. 'But it will only constitute a small part of the bank's operating expense.'