Composite Interest Rate : End of November 2006

Press Releases

19 Dec 2006

Composite Interest Rate : End of November 2006

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

The composite interest rate, which reflects the average cost of funds of banks, declined slightly to 3.02% at the end of November 2006, from 3.03% at the end of October 2006 (see Chart 1 in the Annex). This followed a decline of three basis points in October 2006. The one basis-point reduction in the average cost of funds in November reflected the decline in savings and time deposit rates, which offset the significant rise in short-term interbank rates due to the initial public offering (IPO) activities near the end of the month (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 278 basis points, compared with the upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks up to the end of November 2006.

"The average cost of funds has been steady over the past few months. Although short-term interbank rates were up significantly around the end of November due to IPO activities, they have eased back since early December, indicating that liquidity in the banking system remains ample," 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 November 2006 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 18 January 2007 and will provide the composite interest rate at the end of December 2006.

For further enquiries, please contact:
Ying-ying Cheng, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
19 December 2006

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 November 2006, HIBORs rose for funds with maturity of 3 months or less by 10 to 70 basis points, while that for funds with maturity over 3 months declined by 0.2 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 HK$292 billion temporarily near the end of November. Banks in Hong Kong lowered their best lending rates by 25 basis points on 8 November 2006. The savings and time deposit rates also decreased by 25 to 28 basis points.

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 December 2006