Composite Interest Rate : End of March 2007

Press Releases

19 Apr 2007

Composite Interest Rate : End of March 2007

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

The composite interest rate, which reflects the average cost of funds of banks, rose to 3.00% at the end of March 2007, from 2.93% at the end of February 2007 (see Chart 1 in the Annex). This followed a similar rise of 7 basis points in February 2007. The 7 basis-point increase in the average cost of funds in March mainly reflected the upward adjustment in short-term interbank rates, while savings deposit rates were unchanged (see Chart 2 in the Annex). The rise in short-term interbank rates was largely attributable to the initial public offering (IPO) activities near the end of the month2. Since US interest rates began increasing in the middle of 2004, the composite interest rate has increased by 276 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 March 2007.

"Short-term interbank rates have continued to rise in the early part of April 2007 due to another round of IPO activities. Until the temporary tight liquidity condition in the interbank market returns to normal following the completion of the current IPO activities, we may see the composite rate edging up further going forward," said Mr Peter Pang, Deputy Chief Executive of the HKMA.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of March 2007 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 17 May 2007 and will provide the composite interest rate at the end of April 2007.

For further enquiries, please contact:
Sara Yip, Manager (Press), at 2878 8246 or
Peggy Lo, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
19 April 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.

2 During March 2007, HIBORs for funds with maturity of less than three months rose by 0.4 to 40 basis points, while HIBORs for funds with maturity of three months or above declined by 5 to 10 basis points. The increase in short-term HIBORs reflected to a large extent the IPO activities in the stock market which tied up funds amounting to about HK$213 billion temporarily near the end of March.

Annex

Chart 1

Chart 1
*End-of-period figures.

Chart 2

Chart 2
*End-of-period figures.

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Last revision date : 19 April 2007