The central bank responds!, Guiding Multiple Banks to Reduce Deposit Interest Rates | Banks | Interest Rates
The State Council Information Office held a press conference on July 14th to introduce the financial statistical data for the first half of 2023. Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, stated at the meeting that state-owned commercial banks and joint-stock commercial banks have proactively lowered some term deposit interest rates based on changes in market supply and demand and interest rate trends, taking into account their own operating conditions. This reflects the continuous role of the deposit interest rate marketization adjustment mechanism and also indicates that the degree of deposit interest rate marketization is further improving.
Zou Lan introduced that in April 2022, the People's Bank of China established a market-oriented adjustment mechanism for deposit interest rates, guiding banks to refer to changes in market interest rates and adjust deposit interest rate levels reasonably. Under the guidance of this mechanism, from September 2022 to April 2023, banks conducted the first round of self adjustment of deposit interest rates. In recent months, RMB deposits have increased rapidly, market interest rates continue to decrease, and the fixed and long-term nature of deposits has pushed up the cost of bank liabilities. The net interest rate spread of banks has narrowed to around 1.7%.
"After the bank voluntarily lowered the deposit interest rate, the deposit interest rate continued to decrease. In June 2023, the weighted average interest rate for current deposits was 0.23%, a year-on-year decrease of 0.09 percentage points, and the weighted average interest rate for fixed deposits was 2.22%, a year-on-year decrease of 0.12 percentage points. This is conducive to stabilizing the cost of bank liabilities, creating favorable conditions for reducing corporate loan interest rates, and enhancing the bank's ability and sustainability to support the real economy. At the same time, under the coordination of interest rate self-discipline mechanisms, various types of banks have orderly adjusted deposit interest rates, and bank deposits have continued to grow and their distribution has remained basically stable, effectively maintaining a good competitive order." said Zou Lan.
He stated that in the next step, the People's Bank of China will continue to deepen the market-oriented reform of interest rates, continue to play an important role in the market-oriented adjustment mechanism of deposit interest rates, guide the self-discipline mechanism of interest rates to maintain the competitive order of the deposit market, promote the stability of bank debt costs, and enhance the ability of finance to continuously support the real economy. At the same time, commercial banks are encouraged to sell and trade treasury bond and local government bonds over the counter, and provide bilateral quotations for customers to sell long-term bonds, so as to facilitate customers to sell and realize at any time, and increase the choice of financial products that give consideration to security, profitability and liquidity.