Composite Interest Rate : End of August 2007

Press Releases

19 Sep 2007

Composite Interest Rate : End of August 2007

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

The composite interest rate, which reflects the average cost of funds of banks, rose by 10 basis points to 3.08% at the end of August 2007, from 2.98% at the end of July 2007 (see Chart 1 in the Annex). This followed a decline of 11 basis points in July 2007. During August 2007, interbank rates increased across-the-board by 22 to 67 basis points, while savings deposit rates were unchanged (see Chart 2 in the Annex). Liquidity conditions in the interbank market tightened in August and the early part of September, due to the disruption in global credit markets and the new round of initial public offerings (IPOs) throughout September, with the latter tying up a substantial amount of short-term funds.2 Looking ahead, the composite interest rate will continue to be influenced by short-term changes in liquidity conditions.

Since US interest rates began increasing in the middle of 2004, the composite interest rate has increased by 284 basis points, compared with upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks by the end of August 2007.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of August 2007 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 18 October 2007 and will provide the composite interest rate at the end of September 2007.

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

Hong Kong Monetary Authority
19 September 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 For example, in recent IPOs, two companies that offered shares worth of HK$471 million tied up funds of HK$278 billion.

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 September 2007