HKMA Unleashes Over $60 Billion of Liquidity
The Hong Kong Monetary Authority released around $HK500 billion in additional liquidity by cutting capital buffers to encourage support for small and medium-sized enterprises.
The HKMA’s countercyclical capital buffer was reduced from 2 percent to 1 percent yesterday hours after the city’s de facto central bank cut its base rate to 0.86, in line with the U.s Federal Reserve’s near-zero rates.
«Economic indicators and other relevant evidence have signaled that the economic environment in Hong Kong has deteriorated further since the novel coronavirus outbreak,» said the HKMA’s chief executive Eddie Yue in a statement.
«Lowering the countercyclical capital buffer at this juncture will allow banks to be more supportive to the domestic economy, in particular those sectors and individuals that are expected to experience additional short-term stress due to the impact arising from the outbreak.»
Prime Rate Unchanged
Whilst SMEs may welcome the much-needed cash flow support, retail banking customers are unlikely to benefit from recent loosening. Despite the HKMA’s base lending rate cut, the city's major lenders reportedly kept their prime lending rates unchanged including 5 percent at HSBC, its subsidiary Hang Seng Bank and Bank of China, as well as 5.25 percent at Standard Chartered and Bank of East Asia.
Meanwhile, Hong Kong’s one-month interbank offered interest rate (Hibor) is set to gain further popularity for mortgage payers. After representing just 8 percent of new mortgages in 2008, the benchmark rate is now linked to 80 percent of new mortgages as of January this year, according to HKMA data.
