Why Several Small and Medium Banks Reduce Deposit Interest Rates
2023-05-04
Recently, multiple small and medium-sized financial institutions have collectively lowered the RMB deposit interest rate, with varying degrees of reduction across different maturities, which has attracted attention. In fact, in September 2022, the deposit interest rates of state-owned large banks were generally lowered, and many joint-stock banks followed suit. Some urban and rural commercial banks also made interest rate adjustments. Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, stated that this is a normal phenomenon in the market-oriented environment of deposit interest rates. The recent reduction in deposit interest rates is mainly due to the supplementary reduction by small and medium-sized banks that did not make any adjustments last time. In the context of a significant decline in market interest rates as a whole, commercial banks adjust deposit interest rates flexibly based on changes in market supply and demand, taking into account their own operating conditions. The magnitude, pace, and timing of adjustments by different banks may vary, "said Zou Lan. Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, believes that the main reason for some small and medium-sized banks to lower deposit rates is the continuous deepening of interest rate marketization reform in China, the significant increase in the initiative of banks to manage debt costs, and the rapid growth of domestic residents' savings in recent years, which is far above the trend level. The overall performance of the deposit market is oversupply. Industry insiders have stated that in recent years, the banking industry has continued to benefit the real economy, and the pressure on some banks' net interest margin has increased, which has to some extent driven down deposit interest rates. After large banks lowered interest rates, deposits shifted to small and medium-sized banks, expanding the source of deposits for small and medium-sized banks, which has a driving effect on reducing deposit rates for small and medium-sized banks, "said Lou Feipeng, a researcher at Postal Savings Bank. This time, some small and medium-sized banks experienced a pullback after the increase in deposit interest rates around the Spring Festival. For example, Henan Xincai Rural Commercial Bank and Henan Luoshan Rural Commercial Bank raised their deposit interest rates in early January this year. The recent announcement of lowering deposit interest rates shows that the reduction is the same as the increase in January. Zhou Yiqin, founder of Guantiao Consulting and financial regulatory policy expert, stated that currently, small and medium-sized banks maintain a relatively stable interest rate gap with large banks. Therefore, large banks take the lead in adjusting deposit rates according to market changes, and then small and medium-sized banks follow and supplement adjustments according to their own situation. The deposit rate gap between the two is still relatively stable, maintaining market competition order. Will there be a phenomenon of "deposit relocation" after the deposit interest rate is lowered? Zhou Maohua said that some small and medium-sized banks cut deposit interest rates by a small margin, and depositors should not have "deposit relocation" in the short term due to convenience needs and path dependence. Small and medium-sized banks should fully leverage their geographical and other advantages to accelerate the improvement of comprehensive competitiveness, enhance customer stickiness, promote high-quality development, improve internal governance, enhance risk control capabilities and operational levels, increase high-quality service supply, innovate and enrich financial products and services, and meet the diversified needs of the real economy. "Zhou Maohua suggested. Will bank deposit interest rates continue to be adjusted in the future? How much space is left for the descent? Lou Feipeng believes that the banking industry is currently facing significant pressure to reduce net interest margin. In the case where the asset side needs to yield benefits to the real economy, reducing the cost of the liability side is an important way to stabilize interest margin. Deposits are an important source of debt for commercial banks, and reducing deposit interest rates has become an effective way for banks to stabilize their net interest margin. Therefore, a comprehensive reduction in deposit interest rates
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：economic dairy
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