HKMA Reports Decrease in Composite Interest Rate for May 2024

The
Hong
Kong
Monetary
Authority
(HKMA)
has
announced
a
decrease
in
the
composite
interest
rate
at
the
end
of
May
2024.
According
to
the
HKMA,
the
composite
interest
rate,
which
serves
as
a
measure
of
the
average
cost
of
funds
for
banks,
fell
by
4
basis
points
to
2.61%,
down
from
2.65%
at
the
end
of
April
2024.

Factors
Contributing
to
the
Decrease

The
primary
factor
behind
the
reduction
in
the
composite
interest
rate
was
a
decrease
in
the
weighted
funding
cost
for
deposits
during
the
month.
This
change
is
illustrated
in
the
HKMA’s
published
charts,
which
provide
a
detailed
breakdown
of
the
interest
rate
movements.

Historical
Data
and
Context

The
HKMA
has
made
historical
data
on
the
composite
interest
rate
available
from
the
end
of
the
fourth
quarter
of
2003
to
the
end
of
May
2024
in
its
Monthly
Statistical
Bulletin,
accessible
on
the
HKMA
website.
This
provides
context
for
analyzing
long-term
trends
in
the
cost
of
funding
for
banks
in
Hong
Kong.

Understanding
the
Composite
Interest
Rate

The
composite
interest
rate
is
a
weighted
average
interest
rate
of
all
Hong
Kong
dollar
interest-rate-sensitive
liabilities.
This
includes
deposits
from
customers,
amounts
due
to
banks,
negotiable
certificates
of
deposit,
and
other
debt
instruments.
Data
from
retail
banks,
which
account
for
about
90%
of
the
total
customer
deposits
in
the
banking
sector,
are
used
in
the
calculation.
It
is
important
to
note
that
the
composite
interest
rate
represents
only
average
interest
expenses
and
does
not
cover
other
costs
involved
in
making
loans,
such
as
operating
costs,
credit
costs,
and
hedging
costs.

Changes
in
Calculation
Methodology

Since
June
2019,
the
composite
interest
rate
and
the
weighted
deposit
rate
have
been
calculated
based
on
the
new
local
“Interest
Rate
Risk
in
the
Banking
Book”
(IRRBB)
framework.
As
a
result,
these
figures
are
not
strictly
comparable
with
those
from
previous
months.

For
more
detailed
information,
visit
the
official
announcement
on
the

HKMA
website.

Image
source:
Shutterstock