The emergence in recent weeks of competitive savings deposit rates offered by some Hong Kong banks has been a long time coming.
In the days ahead, as lenders unveil their responses to the latest rise in US interest rates on Tuesday, depositors will discover whether they are able to continue enjoying the unaccustomed luxury of picking and choosing from a range of rates on offer.
Early signals were mixed. The sweetener available from some banks survived yesterday's adjustment, although Standard Chartered restricted its to only large deposits.
It was in July 2001 that an industry-wide cap on savings deposit rates was lifted, triggering concerns from some lenders that the restored freedom to set rates competitively might reignite the 'irrational competition' for funds that had contributed to a spate of bank collapses in the 1970s and the introduction of the interest-rate caps in the first place.
All credit, however, to the Hong Kong Monetary Authority that oversaw the unbundling process: the timing with which the last 'interest-rate rule' covering savings deposits was scrapped (caps on time deposits by then having already been phased out), was spot on. An abundance of deposits and poor loan demand actually led to savings rates heading down - all the way to zero in fact (negative, if penalties were incurred).
So. A rerun of the bad old days of the 1970s was avoided and the integrity of the banking system was served - if not the depositors providing the funds for that system.
