The loan prime rate (LPR) (贷款市场报价利率) in China is the lending rate provided by commercial banks to their highest quality customers, and serves as the benchmark for rates provided for other loans.
At present the LPR reporting group is comprised of 18 commercial banks in China, including an original core group of 10 national banks, plus two municipal commercial banks, two rural village commercial banks, two foreign invested banks and two privately operated banks.
The People’s Bank of China (PBOC) has authorised the National Interbank Funding Center (全国银行间同业拆借中心) to serve as the designated publisher of the LPR.
The Center publishes the LPR at 9:30 am on the 20th of each month, after first collecting quotes from the group of reporting banks and calculating the average of these quotes following exclusion of the lowest and highest quotes.
In August 2019 PBOC adopted measures to increase the influence of the LPR as part of broader market-based reforms of China’s interest rate regime.
PBOC said that in order to “raise the representativeness” of the LPR, it had increased the number of quoting banks from 10 to 18, to include municipal commercial banks, rural village commercial banks, foreign invested banks and private banks in addition to national banks.
The LPR will also be expanded from a single one-year rate to two rates- a one-year rate and a five-year rate.
PBOC said that “all banks should mainly make reference to the LPR for the issuance of new loans, as well as use the LPR as the pricing benchmark in floating rate loan contracts.”
As of 8 October the LPR will serve as the basis of Chinese personal mortgage loans.
On 28 December PBOC issued the “People’s Bank of China Public Announcement [2019] No. 30” (中国人民银行公告〔2019〕第30号), which called for financial institutions to shift towards use of the LPR for their outstanding floating-rate loan contracts during the period from 1 March to 31 August 2020.
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