Rates for Jumbo CD’s Lift as Chinese Banks Vie for Funds

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Chinese banks are raising rates for large-denomination certificates of deposit and structured deposits, as competition for funds intensifies following a crackdown on the use of principal-guaranteed wealth management products.

A report from Guangzhou Daily indicates that banks in the Guangdong province capital are already raising their rates in a bid to attract more retail funds.

One joint-stock bank in Guangzhou is offering 200,000 yuan three-year CD’s with a three year fixed-rate of 12.54%, equivalent to an annualised rate of 4.18%.

According to sources within the Cantonese banking sector many other lenders are following suite with the vigorous promotion of large-denomination CD’s for retail clients.

The latest data from Rong360 indicates that nearly 70% of Chinese banks raised the rates on jumbo CD’s in May, with the vast majority of them lifting them at least 40% above the benchmark rate.

A large number of banks have also lifted their jumbo CD rates at least 50% above the benchmark rate, especially for three year tenors, with the highest providing a 55% premium.

In addition to raising rates Chinese banks are also expanding denominations, with an increasing number of lenders providing 300,000 yuan, 500,000 yuan and 1 million yuan CD’s, and some also providing monthly or quarterly interest payments.

According to industry insiders the move comes as Chinese banks make changes during the transitional period for new asset management rules that forbid the sale of principal guaranteed wealth management products, which have previously served as a key channel of funds for smaller lenders.

Rong360 analysts forecast further increases in jumbo CD rates in June, as well as further expansion in issuance.

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