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The following is issued on behalf of the Hong Kong Monetary Authority:
The Hong Kong Monetary Authority (HKMA) announced today (January 19) the composite interest rate at the end of December 2011.*
The composite interest rate, which is a measure of the average cost of funds of banks, rose by 5 basis points to 0.53% at the end of December 2011, from 0.48% at the end of November 2011 (see Chart 1 in the Annex). The rise in the composite interest rate in December mainly reflected increases in the weighted funding cost for both deposits and interbank funds (see Chart 2 in the Annex). **
"The composite interest rate has been on a moderate uptrend since early 2011. In view of continued uncertainties in the external environment and the already high loan-to-deposit ratio of the banking sector, vigilance is required about interest rate risks which may arise from changes in local liquidity conditions," said Deputy Chief Executive of the HKMA, Mr Peter Pang.
The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of December 2011 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for February 17, 2012 and will provide the composite interest rate at the end of January 2012.
* 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.
**Liquidity conditions in the interbank market tightened during December 2011, with HIBORs rising across-the-board by about 6 to 34 basis points.
Ends/Thursday, January 19, 2012
Issued at HKT 16:40
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