Composite Interest Rate : End of September 2008

The Hong Kong Monetary Authority (HKMA) announced today (Friday) the composite interest rate at the end of September 2008.¹

The composite interest rate, which reflects the average cost of funds of banks, rose by 27 basis points to 1.18% at the end of September 2008, from 0.91% at the end of August 2008 (see Chart 1 in the Annex). This followed an increase of 3 basis points in August 2008. The increase in the composite interest rate in September 2008 reflected upward adjustments of interbank and customers' time deposit rates, while savings rates were unchanged (see Chart 2 in the Annex).²

"Increased tightness in the money market amid heightened concerns about credit and liquidity conditions worldwide has resulted in the rise of the interbank rates, leading to the increase in banks' average cost of funds. Looking ahead, the composite interest rate is expected to continue to be influenced by global financial market conditions," 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 September 2008 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 19 November 2008 and will provide the composite interest rate at the end of October 2008.

For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Peggy Lo, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
17 October 2008

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, HIBORs rose across-the-board by 38.7 to 247.9 basis points.

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.