Hong Kong SAR – HKMA’s latest issue of Complaints Watch on dormant accounts and mental incapacity

The latest issue of Complaints Watch covers two tricky issues all too common in retail banking, which are not entirely unrelated.

Dormant accounts

In Complaints Issue number 14, the HKMA notes that it has received complaints in relation to long-standing/closed accounts. Typically complainants would present paper documents, such as time-deposit receipts or savings passbooks with the last account entry shown dating back many years ago (ranging from 20 to more than 30 years in these complaints). Some banks were not able to retrieve the relevant records where the relationship had been terminated.

The HKMA suggests that banks review their policies around the retention of certain basic information of closed accounts (such as account closure date and last account balance). The publication notes that while it is generally common practice for banks to draft their policies in line with the Personal Data (Privacy) Ordinance and many banks delete all details of closed accounts after a certain number of years, some banks have developed more sophisticated policies and procedures in retaining some necessary customer information including for closed accounts.

Joint accounts and mental incapacity

The HKMA writes that it has received complaints in relation to joint accounts where one of the account holders has a mental incapacity such as dementia.

As joint accounts are a common product in the Hong Kong SAR retail banking landscape, banks should ensure that they are clear in their explanation of how the product works to customers, including how the account will work if one of the account holders becomes incapacitated. The HKMA also highlights regular reminders to customers of relevant issues and/or terms which may affect the operation of the joint account as part of ongoing client communications.

Where an account can continue to be operated in the event one of the account holders does become mentally incapacitated, banks should make clear to the other account holders the terms around how the account may continue to be operated.

Banks should also conduct regular reviews of their policies and practices regarding the treatment of joint bank accounts, with a view to making sure that the arrangements are in accordance with the terms and conditions of the customer agreement and, as far as possible, able to fairly address the various interests of all the holders of a joint account on an ongoing basis.