Nov. 6 (Bloomberg) -- Hong Kong's central bank will extend the tenor of collateralized loans to the city's lenders to three months from one month, tweaking measures it announced in September in a bid to further ease funding strains.

Banks can borrow from the Hong Kong Monetary Authority against ``acceptable'' collateral until the end of March, according to a statement on its Web site today. The change was made ``in anticipation of banks' greater demand for funding towards the year end,'' the release said.

HKMA Chief Executive Joseph Yam has injected cash into the banking system after the collapse of Lehman Brothers Holdings Inc. drove money-market rates higher. The rate banks say they charge each other for three-month loans fell 0.11 percentage point to 2.44 percent after the announcement. While down from an Oct. 13 high of 4.4 percent, it remains above levels before Lehman's Sept. 15 bankruptcy.

``This should help ease the interbank rates,'' Yam said in a local television broadcast today. ``We hope this will open up the lending market a bit and the impact can filter to other segments in the economy.''

The HKMA also said it may offer loans against collateral at a discount to market interest rates, ``in view of the secured nature of such lending and the current distortions and frictions in the term interbank market.''

Banks remain wary of extending loans beyond one month to each other as concerns over counterparty risk linger, the HKMA said. The one-month Hong Kong interbank offered rate has tumbled to 1.4 percent from 4.99 percent on Oct. 10, falling below the level before Lehman collapsed.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

Last Updated: November 5, 2008 22:26 EST