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Press Releases

Deregulation of Interest Rate Rules

The Hong Kong Monetary Authority (HKMA) announced today (Monday) that the final phase of interest rate deregulation covering Hong Kong dollar savings and current accounts will proceed as scheduled on 3 July 2001.

"We have conducted an assessment of current economic and financial conditions and have concluded that the environment is not unfavourable to proceed with the final phase of deregulation on schedule, provided that there are no major adverse developments in the meantime. This view is shared by the Exchange Fund Advisory Committee, the Banking Advisory Committee and the Deposit-taking Companies Advisory Committee," said Mr David Carse, Deputy Chief Executive of the HKMA.

This is the final part of a two-phase plan to deregulate the remaining Interest Rate Rules (IRRs) in order to promote market liberalisation and enhance competition in the banking sector as part of the Banking Sector Reform Programme undertaken by the HKMA since 1999. Once this final phase of deregulation is implemented, interest rates on all types of deposits will be determined by competitive market forces.

"Our assessment indicates that the banking sector has largely, if not fully, recovered from the Asian financial crisis. While the external environment has recently become more uncertain, it is not considered that this justifies delay in the deregulation process. Indeed, the current plentiful liquidity in the banking system reinforces the case for going ahead. The Advisory Committees have therefore agreed that we should proceed as planned," said Mr Carse.

The HKMA has stated on a number of occasions that some banks may react to deregulation by increasing fees and charges and introducing tiered interest rates. This is a global trend related to intensified competition in the banking industry, which is driving banks to charge more explicitly for services.

"We note that some banks have already announced changes to their fees and charges, partly in anticipation of deregulation. While the HKMA does not regulate fees and charges, we have a strong interest in ensuring that the pricing structure of banks is transparent and that customers are given sufficient notice of any fee adjustments. The relevant provisions in the Code of Banking Practice will be strengthened to this effect," said Mr Carse. "Banks should also have regard to the disproportionate effect that such changes may have on certain members of the community," added Mr Carse.

The HKMA has written to the Hong Kong Association of Banks to ask them to consider the necessary amendments to the IRRs to effect the final phase of deregulation.

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246 or
Caitlin Wong, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
9 April 2001

Last revision date: 1 August 2011
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