Hong Kong’s three note-issuing banks – HSBC, Standard Chartered and Bank of China (Hong Kong) – have kept their prime lending and savings rates unchanged, even though the Hong Kong Monetary Authority (HKMA) lowered the base rate on Thursday.
Analysts said commercial banks found it difficult to reduce lending rates further because savings rates were already close to zero, meaning any cut in prime lending rates alone would erode profitability. Hong Kong banks set their own interest rates and are not obliged to follow HKMA decisions.
HSBC and Bank of China (Hong Kong) kept their prime lending rate at 5 per cent, while Standard Chartered maintained its lending rate at 5.25 per cent, according to separate statements from the lenders on Thursday.
They would also maintain their Hong Kong dollar savings rate at 0.001 per cent per annum, leaving no interest for deposits below HK$5,000, the banks said. HSBC said it would also cut its US dollar savings rate by 12.4 basis points to 0.001 per cent, aligning it with the Hong Kong dollar rate.
“Big banks did not follow the HKMA to cut their prime rate this time because they have to cut both the prime lending rate and the savings rate at the same time to maintain the margin between the two,” said Tommy Ong, managing director at T.O. & Associates Consultancy. “The current savings rate is close to zero, and they cannot move savings rates into negative territory.”