The three note-issuing banks in Hong Kong—HSBC, Standard Chartered, and Bank of China (Hong Kong)—have held their prime lending and savings rates steady even after the Hong Kong Monetary Authority (HKMA) lowered its base rate on Thursday.
Analysts note that banks face limited room to reduce lending rates further because savings rates are already nearly zero. Cutting prime lending rates alone would squeeze bank profitability. Unlike some regulators, Hong Kong banks set their own interest rates and are not required to mirror HKMA decisions.
According to statements from the lenders on Thursday, HSBC and Bank of China (Hong Kong) kept their prime lending rate at 5.0%, while Standard Chartered held its lending rate at 5.25%.
The banks also announced they would maintain their Hong Kong dollar savings rate at 0.001% per year, effectively yielding no interest on deposits below HK$5,000. HSBC said it would also lower its US dollar savings rate by 12.4 basis points to 0.001%, bringing it in line with the Hong Kong dollar rate.
"Big banks did not follow the HKMA’s move to cut their prime rate this time because they must reduce both the prime lending rate and the savings rate together to preserve the margin between the two," explained Tommy Ong, managing director at T.O. & Associates Consultancy. "With savings rates already near zero, there isn’t room to push them into negative territory."
