The client of China and Singapore Jingwei on March 13 (Dong Xiangyi) Following the State Council ’s proposal to “grasp the introduction of targeted measures for financial inclusion reduction for inclusive finance”, the central bank quickly cut the quota.
The central bank announced today that it decided to implement the inclusive financial targeted reduction on March 16, 2020, and targeted the banks that meet the assessment criteria to reduce the targeted reduction by 0.5 to 1 percentage point. In addition, the qualified joint-stock commercial banks will be further reduced by 1 percentage point to support the issuance of loans to the inclusive financial sector. The above-mentioned targeted RRR cuts totaled 550 billion yuan of long-term funds.
The People's Bank of China implements a prudent monetary policy, is more flexible and appropriate, and puts support for the recovery and development of the real economy in a more prominent position. It does not engage in flooding, considers internal and external balance, and maintains a reasonable and adequate liquidity. Adapt to economic development, and create a suitable monetary and financial environment for high-quality development and supply-side structural reform.
Data map. Photo by Zhongxin Jingwei
National regular meeting plans to reduce RRR, central bank frequently speaks
It is worth noting that on the eve of this reduction, the State Council just made a clear plan. At the executive meeting of the State Council held on March 10, it was required to step up the introduction of targeted inflow reduction measures for inclusive finance, and increase the reduction of shareholding banks, to promote commercial banks to increase loans to small and micro enterprises and individual industrial and commercial households. Help to resume work and production and promote reduction of financing costs.
At the same time, the central bank has also repeatedly stated that it will reduce the quasi-orientation, guide the interest rate of the overall market and the interest rate of loans down, and maintain reasonable and sufficient liquidity.
Deputy Governor of the Bank of China Liu Guoqiang said on February 27 that he will take the opportunity to implement the 2019 Inclusive Financial Targeted Dynamic Assessment to release long-term liquidity. In addition, in an exclusive interview published by the central bank's media "Financial Times" on February 22, Liu Guoqiang said, " The inclusive financial target reduction will also undergo annual dynamic adjustments in the near future. More qualified banks are expected to enjoy preferential policy support, which will further release the liquidity of the banking system. "
Chen Yulu, deputy governor of the central bank, said on February 24 that he continued to maintain reasonable and adequate liquidity; he must make greater use of structural monetary policy tools and make good use of inclusive monetary policy tools such as supporting agriculture, supporting small loans, and rediscounting. . In the near future, the inclusive financial directional reduction will be subject to annual dynamic adjustments, and more or more banks that meet the standards will receive preferential policy support in due course.
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Why is it lowered at this time?
"Reduction of the standard has the function of" three birds with one stone. "Firstly, it can release long-term liquidity; secondly, it can reduce the cost of bank liabilities; secondly, it can send a strong signal of expected stability to the market." Special Researcher, National Finance and Development Laboratory Dong Ximiao expressed to the client of Sino-Singapore Jingwei.
It is worth mentioning that after the outbreak, the central bank stepped up counter-cyclical control. After the Spring Festival holiday, it released 3 trillion yuan of liquidity through reverse market repurchase and MLF operations, and established 300 billion yuan of special reloans and 500 billion yuan. Yuan re-loan rediscounts special quotas, and reduces reverse repurchase and MLF interest rates to guide LPR downward, helping to alleviate the lack of corporate liquidity.
Although there are various support policies, many small and micro enterprises still face difficulties in survival and production, and need more vigorous and accurate financial rescue policies. The inclusive financial reduction is also an urgent need. Dong Ximiao said that a sound monetary policy will be more flexible and appropriate, and comprehensive and targeted reductions are both possible policy options. There is also a need to lower the benchmark deposit rate.
The first mention of additional efforts to reduce the number of joint-stock banks
This policy for the first time specifically mentions "additional efforts to reduce the number of joint-stock banks," which is undoubtedly also a highlight. From the perspective of many experts, joint-stock banks have relatively large debt sources and cost pressures. This will help small and medium-sized banks to better guard against risks and enhance their ability to serve the real economy. Rate policy framework continued to be optimized.
The reason why it is necessary to increase the reduction of shareholding banks in addition, Dong Ximiao believes that there are two reasons: First, the first batch of 300 billion yuan of special reloans did not cover the joint stock banks, and the second batch of 500 billion yuan of reloans and rediscounts. It mainly covers small and medium-sized banks (such as city commercial banks, rural commercial banks, etc.); second, joint-stock banks do not have large-scale banks with branches throughout the country, nor do they have the geographical and human advantages of urban commercial banks and rural commercial banks. .
In the opinion of Wen Bin, chief researcher of China Minsheng Bank, apart from large banks, joint-stock banks are the main force for inclusive financial services. The additional cuts will help increase loan support for small and micro enterprises and individual industrial and commercial households. "After the implementation of a series of relief measures such as temporary deferred repayment of principals and interest payments, and overdue penalties during epidemic conditions, it will inevitably have an impact on banks' profitability and asset quality. Compared with large banks, joint-stock banks will need additional reductions And other policy support. "
Data map. Photo by Zhongxin Jingwei
What is expected of subsequent interest rate cuts?
Analysts said that with the development of the epidemic, it is necessary for the central bank to further strengthen counter-cyclical adjustments and comprehensively use monetary policy tools such as open market operations, targeted RRR cuts, and reloans to maintain a reasonable and adequate overall market liquidity and Implement special support policies for the weak links in the economy to create a good financial environment for the development of the real economy.
Beyond the cut, the interest rate cut may not be far off. In fact, as the impact of the epidemic on the global economy has become more prominent, since the Fed ’s interest rate cuts, many central banks have joined the “rate cut”, including the UK, Australia, Malaysia, Saudi Arabia, the United Arab Emirates, and Canada. In addition, the Hong Kong Monetary Authority and the Macau Monetary Authority also followed up with interest rate cuts.
"Because LPR is linked to the MLF interest rate, lowering the MLF interest rate to guide LPR is the smoothest path to reduce costs under the condition of interest rate liberalization." CITIC Securities ’chief solid income analyst clearly predicts that there will be a regular MLF operation on March 16. It is expected that the MLF interest rate will be reduced by 5-10 basis points with a high probability to guide the LPR on the 20th to continue to fall, release a more "flexible and appropriate" monetary policy signal, and go further to the goal of reducing the financing cost of the entity.
Wen Bin also believes that the LPR will decrease further on March 20th, which will drive down corporate financing costs. In addition, banks are still facing greater pressure on the cost of liabilities, and a timely and moderate reduction in the benchmark interest rate on deposits will be an option for monetary policy in the next stage. (Zhongxin Jingwei APP)
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