(Bloomberg) — Chinese banks are expected to sell 300 trillion yuan ($42.3 trillion) as soon as this week, according to people familiar with the matter, as a recent round of stimulus measures further pressures profitability. ) plans to lower interest rates on deposits.
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Big banks such as Industrial and Commercial Bank of China and China Construction Bank will cut interest rates on many deposit products based on the central bank’s interest rate self-discipline mechanism, the people said. It turned out that they were discussing private matters.
Interest rates on one-year term deposits may fall by at least 20 basis points (bp), while interest rates on long-term term deposits may fall by at least 25 basis points (bp), the people said. . Plans have not yet been finalized.
This is the second reduction this year, following the previous reduction in late July. The People’s Bank of China did not respond to requests for comment.
The move came after China announced its biggest package yet to shore up its struggling economy, lowering interest rates and lowering borrowing costs for $5.3 trillion in outstanding mortgages.
Last month, the central bank cut the interest rate charged on one-year insurance loans by the largest amount ever. Governor Ban Gong-seong also said that deposit interest rates would be lowered in line with this.
Since the People’s Bank of China abolished direct control in 2005, commercial banks in China have had some leeway in setting their own interest rates. However, the People’s Bank of China maintains significant influence by setting upper and lower limits on interest rates through its Interest Rate Voluntary Regulation Authority.
Chinese banks cut deposit rates sharply in the second half of 2022, the first such move since 2015, as authorities encouraged them to expand lending. They cut deposit rates three more times last year.
Despite the cuts, the industry’s net interest margin has declined, reaching an all-time low of 1.54% at the end of June, well below the 1.8% threshold required to maintain reasonable profitability. are.
Bloomberg earlier reported that China is considering injecting up to 1 trillion yuan in capital into state-run banks to boost their ability to support the world’s second-largest economy.
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