The Hong Kong Monetary Authority (HKMA) announced today (Wednesday) the composite interest rate at the end of November 2007.1
The composite interest rate, which reflects the average cost of funds of banks, fell significantly by 103 basis points to 2.22% at the end of November 2007, from 3.25% at the end of October 2007 (see Chart 1 in the Annex). This followed a decrease of 9 basis points in October 2007. The fall in the composite interest rate in November 2007 was largely due to the downward adjustments in savings and time deposit rates, as well as interbank interest rates (see Chart 2 in the Annex).2
"The 103-basis-point reduction in the average cost of funds in November was attributed to the cuts in customers' deposit rates, following the market operations by the HKMA near the end of October 2007 which led to the substantial easing of the previously tight interbank liquidity conditions and the subsequent increase in the Aggregate Balance of the banking system.3 Given the rising volatilities in global financial markets, the composite interest rate will continue to be influenced by short-term changes in liquidity 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 November 2007 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 17 January 2008 and will provide the composite interest rate at the end of December 2007.
For further enquiries, please contact:
Thomas Chan, Senior Manager (Press), at 2878 1480 or
Hing-fung Wong, Officer (Press), at 2878 1802
Hong Kong Monetary Authority
19 December 2007
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 Local banks cut their best lending rates twice on 2 November and 12 November, each by 25 basis points, and cut their savings deposit rates as well. During November, HIBORs fell across-the-board by 56 to 211 basis points.
3 On 23, 26 and 31 October 2007, the HKMA undertook market operations and bought US dollars. As a result of these operations, the size of the Aggregate Balance increased from around HK$1.3 billion on 23 October to HK$10.6 billion on 2 November.