Bankers say interest rates in Hong Kong have room to fall but business leaders are not expecting any let-up in the credit crunch as global financial conditions worsen. HSBC Asia-Pacific chief executive Sandy Flockhart said at the Fourth Asia Economic Summit in Hong Kong yesterday that banks might have the ability to cut lending rates, but added that it would depend on the market. He declined to say whether HSBC would cut rates. HSBC Holdings is the first local lender to signal that interest rate cuts may be on the way, echoing recent comments from Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong. Stephen Cheung Yan-leung, a professor of finance at City University of Hong Kong, said rate cuts would help the stock and property markets because high lending costs had undermined sentiment. 'The US has cut its prime lending rate by one percentage point in the past year, but Hong Kong lenders have not yet followed suit,' Mr Cheung said. 'The high lending costs in Hong Kong have hurt the property market and the economy. 'The HKMA has done a lot to bring down interbank rates, which has created an environment for banks to cut lending rates.' Hong Kong Exchanges and Clearing chairman Ronald Arculli said at the summit the credit crunch might last for some time. 'We are sitting right at the heart of the crisis, with the US market still worrying about housing loans and credit card problems,' Mr Arculli said. 'This means the volatile market and credit crunch around the world may continue. 'The worst is not yet over.' Mr Arculli said the US government had introduced measures to calm the crisis but it was hard to predict when the financial crisis would be over. To ease some of the strain on the interbank lending market, the HKMA has pumped about HK$80 billion into the banking system since September to push down interbank rates and to encourage lenders to support lending. This has cut the one-month and three-month interbank rates to 1.05 per cent and 1.65 per cent respectively, compared with 2.25 per cent and 3.3 per cent in October. Other local bankers said some lenders might consider cutting prime rates if the US Federal Reserve trimmed rates at a meeting later this month. HSBC and Bank of China maintain their prime lending rate at 5 per cent while other lenders hold theirs at 5.25 per cent. 'Banks that narrowed the mortgage rate discount last month could have room to cut their best lending rate as the market expects the US will cut interest rates further,' said Frederick Chan Hoi-kit, a general manager at Chong Hing Bank. Stanley Wong Yuen-fai, ICBC (Asia)'s deputy general manager, said banks might only be able to reduce the lending rate but not the deposit rate. 'The local deposit rate has already reached a near-zero level.' Hong Kong Stockbrokers Association chairman Kenny Lee Yiu-sun said a rate cut would boost market sentiment but believed the financial crisis might mean banks were still reluctant to lend.