Timothy Morano
January 17, 2025 09:42
The Hong Kong Monetary Authority announced an increase in the composite interest rate to 2.24% by December 2024, reflecting the increase in weighted funding costs for deposits.
The Hong Kong Monetary Authority (HKMA) said the composite interest rate rose slightly to reach 2.24% by the end of December 2024. This is an increase of 4 basis points from the 2.20% in November reported by the HKMA. .
Factors Affecting Rate Increases
The rise in comprehensive interest rates primarily reflects the increase in weighted funding costs for deposits throughout December. The composite interest rate is a key indicator of a bank’s average cost of funds, including various interest-sensitive liabilities such as customer deposits and certificates of deposit.
Historical context and calculation method
Data from retail banks, which account for approximately 90% of all customer deposits in the Hong Kong banking sector, are used to calculate composite interest rates. This interest rate is used as an average measure of interest expense even after excluding other costs associated with originating a loan, such as operating, credit, and hedging costs.
From June 2019, the HKMA adopted a new local ‘Risk in Bank Book Rate’ (IRRBB) framework to calculate composite interest rates and weighted deposit rates. As a result, these figures cannot be directly compared to figures from previous periods.
Access to historical data
Those interested can find historical data on composite interest rates from the end of the fourth quarter of 2003 to December 2024 in the HKMA’s monthly statistical bulletin. This comprehensive data set provides valuable insights into interest expense trends and changes in the banking sector over the years.
For more information, please visit the Hong Kong Monetary Authority’s official website.
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