Savers in Hong Kong will continue to receive zero or near-zero interest rates on their deposits as banks in the city have chosen to leave both lending and deposit rates unchanged even as the city’s de facto central bank increased its base rate offered to banks by 25 basis points on Thursday.
HSBC, Bank of China (Hong Kong) and Hang Seng Bank confirmed they will continue to maintain their interest rates on Hong Kong dollar deposits at zero. Standard Chartered and Citi will continue to offer just 0.01 per cent. Among the smaller players, Chong Hing Bank and Dah Sing Bank will continue to pay 0.025 per cent and 0.03 per cent.
For homebuyers and businesses looking to borrow in the city, the prime rate that banks offer as their best deal to customer will also stay flat for now. It will be kept at 5 per cent by HSBC, BOCHK and Hang Seng. Citi, Standard Chartered and Chong Hing are offering 5.25 per cent.
Lending rates in Hong Kong have stayed unchanged since November 2008, when they were slashed to 5 per cent after the US Federal Reserve trimmed rates to near zero in the wake of the global financial crisis. Before the crisis, the prime rate offered by HSBC, in November 2007, was at 6.75 per cent.
“Banks in Hong Kong have the leverage not to follow the US Federal Reserve on its interest rate policy. Of course, there is still the chance that liquidity may leave the banking system. But banks have the flexibility to hike rates in their own pace when that happens. The rate hike cycle will be slow and limited in scale this time,” said Tristan Zhuo, senior economist at BOCHK.