Hong Kong Monetary Authority Announces Decrease in Composite Interest Rate for July 2024

The
Hong
Kong
Monetary
Authority
(HKMA)
announced
a
decrease
in
the
composite
interest
rate
to
2.58%
at
the
end
of
July
2024,
down
from
2.62%
at
the
end
of
June
2024,
according
to
a
press
release
by
the
HKMA
on
August
19,
2024.

Details
of
the
Composite
Interest
Rate

The
composite
interest
rate
is
a
measure
of
the
average
cost
of
funds
for
banks
and
is
calculated
as
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.
Notably,
the
historical
data
of
the
composite
interest
rate,
dating
back
to
the
end
of
the
fourth
quarter
of
2003,
are
available
in
the
Monthly
Statistical
Bulletin
on
the
HKMA
website
(www.hkma.gov.hk).

Factors
Influencing
the
Decrease

The
primary
factor
contributing
to
the
4
basis
point
decrease
was
the
reduction
in
the
weighted
funding
cost
for
deposits
during
the
month.
The
HKMA’s
charts
provide
a
visual
representation
of
these
changes
(see

Chart
1
and

Chart
2
in
the
Annex).

Changes
in
Calculation
Methodology

Since
June
2019,
the
composite
interest
rate
and
weighted
deposit
rate
have
been
calculated
based
on
the
new
local
“Interest
rate
risk
in
the
banking
book”
(IRRBB)
framework.
Thus,
these
figures
are
not
directly
comparable
with
those
from
previous
months.
This
new
framework
aims
to
provide
a
more
holistic
view
of
interest
rate
risks
within
the
banking
sector.

Conclusion

The
HKMA’s
announcement
of
a
decrease
in
the
composite
interest
rate
for
July
2024
reflects
the
ongoing
adjustments
in
the
banking
sector’s
cost
of
funds.
As
the
financial
landscape
continues
to
evolve,
such
measures
provide
valuable
insights
into
the
monetary
environment
in
Hong
Kong.

Image
source:
Shutterstock