PBOC Issues New Interest Rates Directive to Chinese Banks, Structured Deposits Targeted

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The Chinese central bank has issued a new directive on interest rates to domestic lenders according to local media reports.

Chinese commercial banks recently received the “People’s Bank of China Notice Concerning the Strengthening of Deposit Interest Rate Regulation” (中国人民银行关于加强存款利率管理的通知) according to sources speaking to National Business Daily on 9 March.

The Chinese central bank subsequently announced on 10 March that it was concerned about the high guaranteed yields of the structured deposits offered by certain domestic lenders, prompting it to issue the Notice.

According to the source the Notice covers several key areas:

  • Further stressing rectification of non-standard deposit products such as time deposits that provide advance withdrawals with grade-calculated interest, in accordance with prior requirements;
  • PBOC will guide self-regulatory mechanisms for the market pricing of interest rates in strengthening self-regulatory management of deposit rates;
  • Inclusion of the guaranteed yields of structured deposits within the scope of self-regulation;
  • PBOC will include the execution of deposit interest rate management provisions and self-regulatory requirements of depository financial institutions in their macro-prudential assessments;
  • PBOC will guide market interest rate pricing mechanisms in including the above circumstances in prudential assessments of financial institutions.

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