Hong Kong Monetary Authority Reports Slight Increase in Composite Interest Rate for June 2024

The Hong Kong Monetary Authority (HKMA) has reported a marginal increase in the composite interest rate at the end of June 2024. According to the HKMA, the rate rose by 1 basis point to 2.62%, up from 2.61% at the end of May 2024. This increase primarily reflects the higher weighted funding cost for deposits during the month.

Composite Interest Rate Overview

The composite interest rate is a measure of the average cost of funds for banks in Hong Kong. It is a weighted average interest rate of all Hong Kong dollar interest-rate-sensitive liabilities, including customer deposits, amounts due to banks, negotiable certificates of deposit, and other debt instruments. The rate also considers non-interest-bearing demand deposits sensitive to interest rate movements. Retail banks, accounting for approximately 90% of total customer deposits in the banking sector, contribute data for this calculation.

Factors Influencing the Rate

The HKMA noted that the latest increase in the composite interest rate was mainly driven by a rise in the weighted funding cost for deposits. This trend is depicted in Chart 1 and Chart 2 of the HKMA's official release, which illustrate the end-of-period figures for the composite interest rate and the weighted deposit rate, respectively.

Historical Data and Methodology

Historical data for the composite interest rate, dating back to the end of the fourth quarter of 2003, is available in the Monthly Statistical Bulletin on the HKMA's website. It is important to note that 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 directly comparable with those from earlier periods.

For more detailed information, the full announcement and charts can be accessed on the HKMA website.