Composite Interest Rate : End of February 2007

The Hong Kong Monetary Authority (HKMA) announced today (Monday) the composite interest rate at the end of February 2007.¹

The composite interest rate, which reflects the average cost of funds of banks, rose to 2.93% at the end of February 2007, from 2.86% at the end of January 2007 (see Chart 1 in the Annex). The composite interest rate was steady in January 2007 and December 2006. The 7 basis-point increase in the average cost of funds in February reflected the upward adjustment in interbank interest rates, while savings deposit rates were unchanged. During February 2007, the overnight HIBOR and HIBORs for funds with maturity of nine months and above declined by 2 to 10 basis points, while HIBORs for funds with maturity between one week and six months rose by 4 to 19 basis points. On a monthly average basis, HIBORs rose across-the-board by 18 to 29 basis points (see Chart 2 in the Annex).

Since US interest rates began increasing in the middle of 2004, the composite interest rate has increased by 269 basis points, compared with the upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks by the end of February 2007.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of February 2007 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 19 April 2007 and will provide the composite interest rate at the end of March 2007.

For further enquiries, please contact:
Hing-Fung Wong, Officer (Press), at 2878 1802 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
19 March 2007

¹ The composite interest rate is a weighted average interest rate of all Hong Kong dollar interest bearing liabilities, which include deposits from customers, amounts due to banks, negotiable certificates of deposit and other debt instruments, and Hong Kong dollar non-interest bearing demand deposits on the books of banks. Data from retail banks, which account for about 90% of the total customers' deposits in the banking sector, are used in the calculation. It should be noted that the composite interest rate represents only average interest expenses. There are various other costs involved in the making of a loan, such as operating costs (e.g. staff and rental expenses), credit cost and hedging cost, which are not covered by the composite interest rate.

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.