HKMA Reports Decrease in Composite Interest Rate for November 2024

The Hong Kong Monetary Authority (HKMA) announced a significant decrease in the composite interest rate at the end of November 2024. According to the HKMA, the rate fell by 10 basis points to 2.20%, down from 2.30% at the end of October 2024. This decline is primarily attributed to a reduction in the weighted funding cost for deposits during the given period.

Understanding Composite Interest Rate

The composite interest rate offers a comprehensive measure of the average cost of funds for banks. It is calculated as a weighted average of all Hong Kong dollar interest-rate-sensitive liabilities, including customer deposits, amounts due to banks, negotiable certificates of deposit, and other debt instruments. This rate reflects only average interest expenses, excluding other costs like operating, credit, and hedging costs.

Recent Developments

Since June 2019, the composite interest rate and the weighted deposit rate have been computed based on the new local "Interest rate risk in the banking book" (IRRBB) framework. This shift implies that the current figures are not directly comparable to those of previous months, offering a modernized approach to understanding interest rate trends.

The HKMA's Monthly Statistical Bulletin provides historical data of the composite interest rate, spanning from the end of the fourth quarter of 2003 to the end of November 2024. This data is accessible via the HKMA website, offering valuable insights into the financial landscape over the years.

For more detailed information, the official announcement can be viewed on the Hong Kong Monetary Authority website.