The seven major banks announced a cut from today! about your savings

　　China News Service, September 15 (Zhongxin Finance and Economics Gong Hongyu) On September 15, the interest rate of personal bank deposits ushered in important changes.

Including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, Postal Savings Bank of China, and China Merchants Bank successively announced that the listed interest rate of RMB deposits will be adjusted from now on.

　　Among them, the interest rates of three-year time deposits and large-denomination certificates of deposit were reduced by 15 basis points, the interest rates of one-year and five-year time deposits were reduced by 10 basis points, and the interest rates of demand deposits were reduced by 0.5 basis points.

Announcement of the Industrial and Commercial Bank of China on Adjusting the Listing Rate of Renminbi Deposits.

Screenshot from the official website of Industrial and Commercial Bank of China

Why is the deposit rate lowered?

　　In fact, this round of cuts is not the first time the deposit rate has been adjusted this year.

According to the central bank's monetary policy implementation report for the first quarter of 2022, state-owned banks such as the Postal Savings Bank of China Industrial and Commercial Bank of China and most joint-stock banks have lowered their interest rates on time deposits with a maturity of more than one year and large-denomination certificates of deposit in late April. Adjusted accordingly.

　　The central bank said that the establishment of a market-oriented adjustment mechanism for deposit interest rates focuses on promoting further marketization of deposit interest rates, and the guidance to banks is flexible.

Banks may independently determine the actual adjustment range of their deposit interest rates according to their own circumstances and with reference to changes in market interest rates.

After the establishment of the new mechanism, the bank's deposit interest rate will be more market-oriented. Under the background that the current market interest rate has generally declined, it will help the bank to stabilize the cost of debt and promote the further decline of the actual loan interest rate.

　　In the context of the adjustment of the deposit interest rate mechanism, Wen Bin, chief economist of China Minsheng Bank, pointed out that

　　"After the mid-term lending facility (MLF) cut interest rates by 10 basis points unexpectedly in August, the yield on the 10-year Treasury bond fell sharply and rapidly, and the market quoted interest rate (LPR) for 1-year and more than 5-year loans was cut by 5 and 15 basis points, respectively. 1 basis points, the deposit interest rate has been lowered, and the reduction rate is generally consistent, indicating that the effect of the deposit interest rate reform is showing." Wen Bin said.

　　In addition, Dong Ximiao, chief researcher of China Merchants Union Finance, mentioned that the reduction of deposit interest rates is an active behavior of banks to strengthen asset-liability management and keep interest rate spreads basically stable.

　　This year, under the keynote of financial support for the real economy, the lending rates of banks and other financial institutions have continued to decline, which has continued to put pressure on the net interest margin.

According to data from the China Banking and Insurance Regulatory Commission, the net interest margin of commercial banks in the second quarter was 1.94%, which continued to narrow by 3 basis points from the first quarter.

A number of listed bank executives also mentioned this "pressure" at the performance meeting.

　　For example, Guo Mang, vice president of the Bank of Communications, said that in the low interest rate market environment, the interest margin level of commercial banks will still be under pressure in the second half of the year.

From the perspective of liabilities, affected by the decline in investment and consumption willingness of residents and enterprises, the trend of deposit regularization is obvious, and the cost of debt has become rigid to a certain extent.

　　"The net interest margin of commercial banks continues to narrow, and it is necessary to control the cost of bank liabilities." In response to the pressure on the narrowing of interest margins, Wen Bin pointed out that at present, the contradiction between credit supply and demand is still large. After the re-pricing in the first quarter of next year, it will greatly squeeze the bank's revenue. For this reason, it is imperative to further control the cost of bank liabilities.

　　In addition, Dong Ximiao also mentioned that since the beginning of this year, in order to better help stabilize growth and employment, the central bank has adopted a variety of monetary policy measures, including a comprehensive RRR cut, to increase market liquidity, and inter-bank liquidity is relatively abundant. So the bank is "not bad for money".

However, the lack of effective financing demand in the market reduces the incentive for banks to absorb medium and long-term deposits.

Data map: RMB.

Photo by Gong Hongyu

will drive the economy into a virtuous circle

　　What is the significance of this round of bank deposit interest rate cuts?

Wen Bin believes that the current market entities have a strong willingness to save, and reducing the cost of deposits will help stimulate the self-financing needs of market entities, facilitate the transfer of funds to the real sector, promote the formation of wide credit, and drive the economy into a virtuous circle.

　　Dong Ximiao pointed out that after large banks cut deposit interest rates, it is expected that more banks will follow suit, but different banks have different development strategies, debt capacity and business structure, and the extent and pace of deposit interest rate adjustments may be quite different.

In general, the

From abroad, some countries and regions have also experienced the phenomenon of "negative interest rate" on deposits.

　　"For the majority of residents, if there are more deposits and cash management wealth management products in asset allocation, the yield may decrease. The relationship between risk and return should be well balanced, and based on their own risk tolerance and investment and wealth management needs, do Good diversified asset allocation." Dong Ximiao said.

(Finish)

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