The decision to move forward with the increase follows a three-month review and consultation period with the general public and the banking community.

“Given that the global landscape on deposit insurance is expected to remain uncertain in the coming years, the board will strive to put the new protection limit into effect within this year,” Lau said.

The board’s safety-net fund, which is used to bail out banks in the event they cannot back deposits, will also be bolstered by 30 per cent to HK$8.2 billion.

“This fund would provide more of a cushion should it be necessary to offer a pay out to customers if a bank [failure] happens,” said Donald Chen, CEO of the board.

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Lau added the next review will be in three years, sooner than the previous five year period.

“In the next review we will consider the further need to enhance the deposit protection, taking into regard the latest international and local developments,” she said.

The board will also work with the Legislative Council to put additional enhancements in place by early 2025. These include refining the levy system, enhancing the deposit protection arrangement in the case of a bank merger, streamlining the negative disclosure requirements on non-protected deposits for private banking customers and expanding to digital channels a requirement for member banks to display the DPS membership symbol.

The consultation, which ended in October, included feedback from the general public, consumer protection organisations, the banking industry and other professional bodies, as well as a commissioned public survey from the Hong Kong Institute of Asia-Pacific Studies of the Chinese University of Hong Kong.

The general public welcomed and supported the proposed enhancements to the DPS, with 80 per cent of the general public pleased with the proposed enhancements.

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Some banks supported the proposed protection limit, while others suggested further raising the limit to HK$1 million.

The DPS objective is to protect small depositors, and HK$800,000 of protection is sufficient “at this stage”, said Chen.

The Hong Kong Association of Banks (HKAB), which represents all 160 banks in the city, said the decision was in line with the latest guidance and will further increase protection to depositors.

“The HKAB also welcomes the introduction of a future road map to explore the possibility of rolling out other enhancements in the future,” said a spokesperson.

The confidence-building measures will allow the DPS to achieve “effectiveness and stability of Hong Kong’s banking system,” said Lau.

ZA Bank, the biggest of Hong Kong’s eight virtual banks, welcomed the proposals as an increase in the deposit protection scheme will improve confidence in the city’s banking system.

“ZA Bank welcomes the Hong Kong Deposit Protection Board’s proposal to raise the protection limit, and believes that the views from different parties have been carefully considered,” said a spokesperson. “Greater protection for all bank users in Hong Kong will help boost public confidence in the banking sector, including digital banking.”