The Money Supply and Interest Rates
50. There was a significant increase in interest rates in 1973, as shown in Table 16. This mainly reflected a worldwide tendency
towards higher interest rates in the face of more rapid inflation and the need, in these circum- stances, for Hong Kong rates to adjust in order to prevent the erosion of the Hong Kong dollar deposit base.
Interest Rates paid by Principal Banks, 1971–1973
Table 16
With effect from:
11 Oct 1971
1 Mar 1973
14 Jun 1973
1 Aug 1973
17 Aug 1973
10 Sep 1973
(% per annum)
Fixed deposits
7 days' call
3 months
6 months
12 months
Į
31/
41
4품
41
41
51
5
50
5
6
61
61
6
61
61
634
6/1/
7
7
71
8
8
8
Interest on savings deposits was raised from 34% to 4% on 1st September 1973, and on 10th September 1973, a 1 month fixed deposits scheme was introduced with interest at 74% per annum.
Bank Liquidity
51. As can be seen from Tables 14 and 17, the ratio of advances and loans to deposits increased substantially during the second half of 1972 and throughout 1973. This would seem to imply that bank liquidity against deposits came under pressure. However, all
banks complied fully with their obligations under the Banking Ordinance and the explana- tion lies in the fact that locally incorporated banks operate conservatively against their Hong Kong dollar deposit bases, while branches of foreign banks borrow funds from their head offices and associates overseas in order to maintain their lending commitments.
Banks' Deposits and Advances and Loans, 1973
Table 17
Deposits
Advances and loans
Ratio of advances and loans to deposits
(HK$ million)
(HK$ million)
(%)
As at end of month:
Jan
27,151
20,662
76.1
Feb
25,484
20,082
78.8
Mar
25,309
21,383
84.5
Apr
24,673
21,098
85.5
May
24,282
20,856
85.9
Jun
24,642
21,032
85.4
Jul
24,749
21,028
85.0
Aug
24,944
21,819
87.5
Sep
24,808
21,897
88.3
Oct
25,395
22,792
89.7
Nov
25,906
22,688
87.6
Dec
26,191
23,263
88.8
16
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