China will deepen reforms of loan prime lending rate - central bank official
Reuters
Published Oct 07, 2021 11:45PM ET
Updated Oct 08, 2021 05:15AM ET
BEIJING (Reuters) -China will deepen its loan prime rate (LPR) reforms and gradually make deposit rates more market-driven, vice central bank governor Liu Guoqiang said in remarks published on Friday.
China will improve market-based interest rate formation and transmission mechanism and improve its interest rate corridor mechanism, Liu wrote in China Finance, a publication run by the People's Bank of China (PBOC).
The PBOC will improve its policy interest rate regime with the seven-day reverse repo rate in open market operations as the short-term policy rate and the medium-term lending facility (MLF) interest rate as the medium-term policy rate, Liu said.
The central bank will also improve its interest rate corridor mechanism, and guide market interest rates to fluctuate around the central bank's policy interest rate, Liu said.
The LPR is set monthly by 18 banks, who submit a monthly quotation by adding a premium over the MLF rate. The PBOC has kept the benchmark lending rate unchanged for 17 months, but speculation is growing it may cut one of its key rates soon to bolster slowing economic growth.
The weighted average corporate lending rate was at a record low of 4.62% in August, down 0.7 percentage points from July 2019 before the LPR reform, and the decline was greater than the fall in the one-year LPR during the same period, Liu said.
The central bank will improve LPR reforms, improve the quality of quotations from banks, and publish the historical quotation data in a timely way, Liu said.
In August 2019, PBOC overhauled the benchmark lending rate mechanism by using the market-driven LPR to replace the previous benchmark bank lending rate.
In June, China reformed the way banks calculate deposit rates, allowing banks to set ceilings on deposit rates by adding basis points to the benchmark rate, a shift from the previous practice of multiplying the benchmark rate.
Long-term deposit rates have fallen significantly since the reform, and the amount of deposits held by national banks and local banks has remained basically stable, Liu added.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.