Draft law
Discussions arising from the draft law
What lies ahead


When the 2008 global economic recession exploded and it was feared that its impact would reach the Macau Special Administrative Region, the government put in place a number of economic and financial measures to lessen the influence of the crisis in the region. This included the implementation, in October 2008, of a temporary Bank Deposit Guarantee Scheme which assured the reimbursement of deposits held in all banks authorised to operate in Macau, with the exception of those considered 'offshore'.(1)

While no financial institution operating in Macau was declared insolvent or liquidated due to or subsequent to the 2008 global crisis, and there was no actual need to resort to the scheme, the measure was deemed a success by both lawmakers and the financial community. It was thus considered convenient to establish a permanent scheme, with the objective of maintaining the confidence of depositors in Macau banks and in the Macau financial system.

However, it was only in October 2011 that the draft law was finalised and presented to the Legislative Assembly for analysis and discussion.

Draft law

The Draft Law for the Bank Deposit Guarantee Scheme was introduced by the president of the Legislative Assembly in the respective plenary session and subject to a general discussion and voting procedure. Under this procedure, the assembly generally approved the draft law on October 18 2011 by unanimous vote.

With a mere 23 articles, and subject to further detailing by means of administrative regulations, the draft law establishes that, within the limits determined therein, the reimbursement of bank deposits, regardless of their currency, made by depositors – both private and institutional – in participating Macau banks are guaranteed up to MOP500,000 ($62,280 / €46,878) per depositor and per bank. The guarantee itself will be assured by an independent and autonomous fund, the Deposit Guarantee Fund, to be created by a complementary administrative regulation. The fund will have legal personality and will be technically and administratively supported by the Monetary Authority of Macau.

Under the draft law, guaranteed or protected deposits encompass any monetary bank deposits constituted in participating Macau banks by individual or institutional depositors, in any currency, with the exception of:

  • structured deposits;
  • certificates of non-nominative bank deposits;
  • deposits constituted by banks or public entities; and
  • deposits held in participating banks constituted by related parties thereto, such as qualified shareholders and members of the administration and auditing bodies of such banks.

A list of the participating Macau banks is to be published annually in January by the Deposit Guarantee Fund, in the Macau Official Gazette and in at least two of the most circulated newspapers in Macau (one in Chinese and one in Portuguese).

As under the temporary measure established in 2008, deposits constituted with offshore banks – of which there are currently two operating in Macau – are expressly excluded from the Bank Deposit Guarantee Scheme. As such, neither the offshore banks will be bound to make contributions to the Deposit Guarantee Fund; nor will the deposits constituted therein be guaranteed under the Bank Deposit Guarantee Scheme.

The Deposit Guarantee Fund is to be construed with an initial contribution of MOP150 million ($18,684,172 / €14,066,798) from the Macau government, to which an annual contribution from each participating Macau bank will be added.

Participating Macau banks, as per the annually published list, are to pay the Deposit Guarantee Fund in January an annual contribution which shall correspond to a percentage of the total amount of protected deposits existing on October 31 of the preceding year.

The percentage of the contribution, as well as the minimum amount of such a contribution for each participating Macau bank, is to be determined by order of the chief executive, taking into account detailed information regarding existing protected deposits that must be mandatorily provided by the participating Macau banks to the Deposit Guarantee Fund each year.

Should the existing funds in the Deposit Guarantee Fund be insufficient to cover the reimbursements to be made to depositors, the draft law enables the Deposit Guarantee Fund to contract loans with the Monetary Authority of Macau for that purpose.

Discussions arising from the draft law

After its general approval by the plenary of the Legislative Assembly, the draft law was assigned to a working committee – the Third Permanent Committee of the Legislative Assembly – for a detailed study of the proposed law's particulars and the subsequent drafting of a memorandum or report.

Although the review of the draft law in the committee was expected to be swift and run smoothly, without major difficulties, several issues and discussions have arisen from the meetings held by the committee on November 10 2011 and December 12 2011 for that purpose, prompting clarification requests from lawmakers to the executive.

Lawmakers have pointed out that since the success of the scheme depends on the success of the fund itself, which entails a high level of complexity in its workings, the regulation of the functioning and operation of the Deposit Guarantee Fund should be established by means of a law issued by the Legislative Assembly and not through an administrative regulation, as proposed by the chief executive.

Furthermore, it is the lawmakers' understanding that it would not be fair for all participating Macau banks to contribute equal amounts to the Deposit Guarantee Fund, as the credit risk of each bank differs and, as such, so should the respective contributions. The lawmakers believe, and rightfully so, that contributions of participating Macau banks over the minimum amount established annually should reflect their actual standing in the market and their credit risk, and not just the results of a superficial evaluation by the executive.

At present, there are 28 banks authorised to operate in Macau, 12 of which are banks with registered offices in Macau and 16 of which are branches or subsidiaries of overseas banks authorised to operate in Macau, all with equal standing for the purposes of the draft law.

In order to strengthen the credibility of Macau's banking system, lawmakers added that international credit rating agencies or even the Monetary Authority of Macau should be allowed to rate Macau banks, and that the amounts of the contributions to the Deposit Guarantee Fund should be calculated taking into account those ratings.

This intention of the lawmakers is revolutionary in the banking context and history of Macau, and constitutes a major improvement of the financial system and a step forward on the path to the consolidation of Macau as a relevant financial offshore centre.

What lies ahead

There is no deadline for production of the Third Permanent Committee's memorandum or report on the Draft Law for the Bank Deposit Guarantee Scheme. In any case, no later than five days after such a memorandum or report is finalised and delivered to every lawmaker, the draft law – as amended (or not) by the working committee – shall be placed on the Legislative Assembly's plenary agenda so as to undergo a discussion of particularity by all lawmakers and be voted on in a plenary session.

The current course of the legislative procedure suggests that, regardless of the implementation of a credit rating system, the Bank Deposit Guarantee Scheme should become a permanent reality by the end of 2012, constituting a simplified scheme of protected deposits with an efficient payout and financing system.

For further information on this topic please contact Frederico Rato or Filipa Almeida Santos at Rato Ling Vong Lei & Cortés Advogados by telephone (+853 2856 2322), fax (+853 2858 0991) or email ([email protected] or [email protected]).


(1) An offshore bank, for the purposes of Macau law, is an institution with legal personality or without independent legal status, which engages in any economic activity dedicated to foreign markets, to be pursued exclusively with non-residents of Macau and by means of transactions in currencies other than the pataca.