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HK Deregulates Interest Rate Rules
The Hong Kong Monetary Authority (HKMA) announced Tuesday that the deregulation of Interest Rate Rules (IRRs) on time deposits with a maturity of less than 7 days and the prohibition on benefits for deposits other than Hong Kong dollar savings and current accounts will take effect on July 3, 2000.
This is the first of a two-phased plan to deregulate the remaining IRRs in order to promote market liberalization and enhance competition of the banking sector. It is also part of an overall program to reform and further develop the banking system.
Under the first phase of deregulation, the IRRs on time deposits with a maturity of less than 7 days and the prohibition on benefits for deposits other than Hong Kong dollar savings and current accounts will be lifted.
The second phase, which will remove the IRRs on savings and current accounts, is scheduled to take place 12 months after the phase 1 liberalization, subject to the prevailing economic and financial environment at the time.
"Although the first phase of the deregulation is relatively modest in itself, it brings the system one step closer to the complete liberalization of interest rates in Hong Kong," said David Carse, Deputy Chief Executive of the HKMA.
"The HKMA will continue to monitor closely the impact on the banks and developments in the market ahead of the final stage of deregulation due next year," he added.
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