Composite Interest Rate : End of October 2008

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

The composite interest rate, which reflects the average cost of funds of banks, rose by 10 basis points to 1.28% at the end of October 2008, from 1.18% at the end of September 2008 (see Chart 1 in the Annex). This followed an increase of 27 basis points in September 2008. The increase in the composite interest rate in October 2008 reflected the carry-over effect from the upward adjustments of interbank rates in mid-September and early October that transmitted into the increases in customers' time deposit rates, which more than offset the fall in short-to-medium terms interbank rates during October, while savings rates were unchanged (see Chart 2 in the Annex).²

"In response to the market operations and various measures introduced by the HKMA to improve liquidity, local interbank rates have fallen further in recent weeks. That may help ease the upward pressure on banks' funding costs. Nevertheless, global financial markets remain volatile. 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 October 2008 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 18 December 2008 and will provide the composite interest rate at the end of November 2008.

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 November 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 October, HIBORs for funds with maturities up to six months fell by 0.8 to 275.7 basis points, while that for funds with maturities longer than six months rose by 4.9 to 17.7 basis points.

Annex

Chart 1

^*End-of-period figures.

Chart 2

^*End-of-period figures.