Composite Interest Rate : End-September 2006

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) the composite interest rate at the end of September 2006.¹

The composite interest rate, which reflects the average cost of funds of banks, edged up slightly to 3.06% at the end of September 2006, from 3.05% at the end of August 2006 (see Chart 1 in the Annex). This followed a decline of six basis points in the composite interest rate in August 2006. The one basis-point increase in the average cost of funds in September was attributable to the mild rise of short-term interbank rates (see Chart 2 in the Annex).²

Since the commencement of the current up-cycle of US interest rates from the middle of 2004, the composite interest rate has increased by 282 basis points, compared with the upward adjustments of between 300 basis points and 325 basis points of the best lending rates of banks.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of September 2006 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 17 November 2006 and will provide the composite interest rate at the end of October 2006.

For further enquiries, please contact:
Sara Yip, Manager (Press), at 2878 8246 or
Ying-ying Cheng, Manager (Press), at 2878 1687

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 September 2006, HIBORs with maturity of less than 1 month rose by 2 to 14 basis points, while those for funds with maturity of over 1 month dropped by 7 to 16 basis points.

Hong Kong Monetary Authority
19 October 2006

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.