Composite Interest Rate : End of February 2009

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) the composite interest rate at the end of February 2009.¹

The composite interest rate, which reflects the average cost of funds of banks, declined by 9 basis points to 0.33% at the end of February 2009 from 0.42% at the end of January 2009 (see Chart 1 in the Annex). This followed a decrease of 26 basis points in January 2009. The decline in the composite interest rate in February 2009 reflected downward adjustments in time deposit and interbank rates (see Chart 2 in the Annex).²

"The lax monetary and interest-rate conditions since the fourth quarter of last year have been conducive to the continuous decline in banks' average funding cost. Looking ahead, the composite interest rate will continue to be influenced by domestic liquidity and 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 February 2009 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 21 April 2009 and will provide the composite interest rate at the end of March 2009.

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

Hong Kong Monetary Authority
19 March 2009

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 February, HIBORs dropped across-the-board by 5.6 to 25.8 basis points.

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.