Introduction to Deposits

Deposit products in Hong Kong are offered to customers under an umbrella structure wherein a virtual account known as the Primary account is at the top of the structure under which the individual deposit contracts are linked. A customer could open as many deposits as required under the Primary account. The individual deposit contract will have the primary account number with a sequence number added to it.

Prior to opening a deposit contract, a customer is required to open a deposit primary account. Subsequently, the customer could open term deposits with the bank. The closure of the primary account is allowed only when all the underlying deposits are closed.

Deposit Funding

Banks may require information on the source of funds when customers fund their term deposits. The accepted currencies in Hong Kong are HKD, USD and RMB/CNY. For example, the source of funds for TD (Term Deposits) can be account transfer (debit from accounts with FI), inward remittance or other inward payments and cheques (including customer cheques, in-house cashier's orders and gift cheques).

Deposits denominated in CNY are usually restricted for funding as well as redemption payouts to non-CNY denominated accounts.

Deposits denominated in other currencies could be funded from foreign currency accounts wherein deposit amount beyond a threshold would require a forward contract reference to be input during the deposit funding activities. Further, deposits could be funded through multiple sources including cash deposit, account transfers, etc.

Deposit Payout Instructions

Deposit payout including the scheduled interest payouts as well as the maturity payouts are processed based on the customer instructions received at the time of placing the deposits or during the life of the deposits.

Payout instruction could be to transfer the funds to other demand deposit accounts held by the customer or withdrawals through cash. Further, deposit payouts could be processed automatically based on an initial set payout instruction or manually by the bank users on the maturity date.

As part of the payout process, if the funds are to be transferred to an account denominated in other currencies and if the payout amount exceeds a specified threshold, then the treasury rates would be required to process the transaction.

Maturity Instructions for Deposits

While creating a deposit contract for a customer, banks allow customers to create deposits with different types of maturity instructions. The maturity instruction could be payout at maturity, rollover of deposits, rollover with incremental principal, partial redemption at maturity, and so on.

Customers could also place call deposits with the bank that do not have a specified term but gets rolled over or renewed at a specified period.

Depending on the customer’s preference, deposit maturity instructions are captured either during the creation of the deposit or during the life of the deposit.

Deposit Payout on Holiday

As part of holiday processing for deposits, it is expected that the deposit payout including the scheduled interest payouts or the maturity payouts are processed only on the next working day following the holiday rather than processing them on the previous working day. This is to ensure that the funds are not made available to the customers prior to the actual payout date.

Similarly, for all the cases including the rollover of deposits and change of deposit products are performed on the actual value date.

Pleasure Savings

These are deposit products that offer regular savings option to the customers with smaller contributions. These products are recurring in nature wherein a customer funds the deposit on a pre defined frequency for a specific period. The deposited sum along with the interest is repaid to the customer at the maturity.

These products allow customers to fund the deposits in advance in multiples of the principal amount. Further, the customers have the option to redeem the deposits for the current principal amount.

Privileged and Step-up Deposit

These are deposit products that are offered for specific periods with a subscription start and end dates. Customers willing to subscribe to these deposits can do so within the specified period.

This product has a specific quota upto which deposits can be accumulated and has a specified earliest date on which the deposit can be redeemed. The deposit product has a value date that would be considered as the effective date for the deposits.

Customers may choose to cancel the subscription to the deposit prior to the deposit value date and funds are returned to the customer’s account.

Bank may choose a termination date for the product on which all the deposits would be redeemed automatically.