Capital G Bank announced yesterday it would drop its Bermuda dollar lending rate by 0.5 percent.

The announcement from Capital G follows cuts to local lending rates last week at both Butterfield Bank — which announced a 50 basis points cut on Wednesday — and Bank of Bermuda HSBC, which dropped its rate 0.25 percent. Both banks now have variable lending rates of 3.75 percent.

Capital G said yesterday its new rate was effective immediately.

"Given that financial markets have continued to exhibit unusual levels of volatility, and the likelihood of weaker global economic conditions affecting Bermuda, Capital G Bank is announcing a cut in its BMD lending rate of 50 basis points (one half of one per cent)," said president and CEO John Kephart.

"With effect from January 7, 2009 customers who borrow BMD at an adjustable rate will see their interest rate on loans drop by 0.5 percent p.a. The lower rate will apply immediately to new loans granted from October 14."

Central banks around the world dropped lending rates 0.5 percent last week in a concerted move to shore up banks and unfreeze credit markets.