The Deposit Protection Board has started drafting legislative amendments to enhance the Deposit Protection Scheme by the end of next year.

Releasing its public consultation report on the second phase of the scheme's review today, the board said its recommendations on streamlining payout processes have received general support.

Comments received mainly requested flexibilities to be added to the payout processes be executed in a prudent, fair and transparent manner, and be accompanied by proper checks and balances.

The spirit of keeping depositors well informed of their deposits' protection status, enshrined in the package of recommendations for enhancing the scheme's representation regime, also received wide recognition.

In response to the industry's comments banks might encounter genuine difficulty in implementing some of the recommendations, the board will provide flexibility which can address the industry's reasonable concerns while not compromising the intended policy objectives' achievement.

Contribution rates to be cut

The board also discussed with the banking industry the adjustments to the scheme's funding arrangements to offset the cost of raising the scheme protection limit.

The board found it inappropriate to cut contribution rates by as much as 75% as the industry proposed as it will risk significantly under-charging banks holding the bulk of protected deposits and causing a significant delay for the scheme fund to reach its target. However, to better eliminate the potential for cost transfer to depositors, the board agreed to cut the rates by 65%.

The board's chairman Prof Andrew Chan said the board will continue to seek support and comments to ensure the detailed requirements developed can meet their intended objectives without being too costly or burdensome to implement.