HKMA Reports Slight Increase in Composite Interest Rate for December 2024

The Hong Kong Monetary Authority (HKMA) has revealed a modest increase in the composite interest rate, which reached 2.24% by the end of December 2024. This marks a rise of 4 basis points from November’s rate of 2.20%, as reported by the HKMA.

Factors Influencing the Rate Increase

The uptick in the composite interest rate primarily reflects an increase in the weighted funding cost for deposits throughout December. The composite interest rate is a key indicator of the average cost of funds for banks, encompassing various interest-rate-sensitive liabilities such as customer deposits and negotiable certificates of deposit.

Historical Context and Calculation Method

Data from retail banks, which represent approximately 90% of the total customer deposits in the Hong Kong banking sector, are utilized in calculating the composite interest rate. This rate serves as an average measure of interest expenses, although it excludes other costs associated with loan creation, such as operating, credit, and hedging costs.

Since June 2019, the HKMA has adopted a new local “Interest rate risk in the banking book” (IRRBB) framework for calculating the composite interest rate and weighted deposit rate. Consequently, these figures are not directly comparable with those from earlier periods.

Access to Historical Data

For those interested, historical data on the composite interest rate from the end of the fourth quarter of 2003 through December 2024 is accessible in the HKMA’s Monthly Statistical Bulletin. This comprehensive data set provides valuable insights into the trends and shifts in the banking sector’s interest costs over the years.

For more detailed information, please visit the official Hong Kong Monetary Authority website.

Image source: Shutterstock