Composite Interest Rate: End of November 2022
The composite interest rate, which is a measure of the average cost of funds of banks, increased by 48 basis points to 1.73% at the end of November 2022, from 1.25% at the end of October 2022 (see Chart 1 in the Annex). The increase in composite interest rate reflected increases in the weighted funding cost for deposits and interbank funds during the month (see Chart 2 in the Annex).2
The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of November 2022 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk).
1. The composite interest rate is a weighted average interest rate of all Hong Kong dollar interest-rate-sensitive liabilities, which include deposits from customers, amounts due to banks, negotiable certificates of deposit and other debt instruments, and all other liabilities that do not involve any formal payment of interest but the values of which are sensitive to interest rate movements (such as Hong Kong dollar non-interest bearing demand deposits) on the books of banks. Data from retail banks, which account for about 90% of the total customers’ deposits in the banking sector, are used in the calculation. It should be noted that the composite interest rate represents only average interest expenses. There are various other costs involved in the making of a loan, such as operating costs (e.g. staff and rental expenses), credit cost and hedging cost, which are not covered by the composite interest rate.
2. 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. As such, these figures are not strictly comparable with those of previous months.