Alvin Lang
Jun 20, 2025 11:08
The Hong Kong Financial Authority (HKMA) introduced a lower within the composite rate of interest, dropping by 41 foundation factors to 1.61% in Might 2025, reflecting decrease weighted funding prices.
The Hong Kong Financial Authority (HKMA) has introduced a notable lower within the composite rate of interest on the finish of Might 2025. The speed, which serves as a benchmark for the common price of funds for banks, fell by 41 foundation factors to 1.61%, down from 2.02% on the finish of April 2025, in keeping with the HKMA.
Evaluation of the Lower
The HKMA attributed this decline to a discount within the weighted funding price for deposits all through the month. The composite rate of interest is a central measure that features varied interest-rate-sensitive liabilities, equivalent to buyer deposits and negotiable certificates of deposit. These elements replicate the broader monetary atmosphere and the price implications for banks working inside Hong Kong.
Implications for the Banking Sector
This lower within the composite rate of interest suggests a shift in the price dynamics for banks, doubtlessly easing the monetary burden related to curiosity bills. Retail banks, which account for about 90% of buyer deposits in Hong Kong, are considerably impacted by these adjustments. Nonetheless, it is very important be aware that the composite rate of interest doesn’t embody all prices concerned in mortgage issuance, equivalent to operational and credit score prices.
Historic Context and Knowledge Availability
The HKMA has made historic knowledge on the composite rate of interest obtainable, stretching from the fourth quarter of 2003 to April 2025, which might be accessed by means of their Month-to-month Statistical Bulletin. This knowledge supplies a complete overview of the developments and fluctuations in rates of interest through the years.
Since June 2019, the calculation of the composite rate of interest has been aligned with the brand new native ‘Rate of interest danger within the banking e-book’ (IRRBB) framework, which can have an effect on comparability with earlier figures. This framework goals to offer a extra correct evaluation of rate of interest dangers impacting banks.
For extra detailed insights, the entire announcement is on the market on the Hong Kong Financial Authority web site.
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