MNI BRIEF: China Small Lenders To Cut Deposit Rates Further

Chinese small lenders will likely continue to cut deposit rates under the pressure of narrowed interest margin as authorities push for the reduction of financing costs across the economy, according to Financial News, a paper under the People’s Bank of China.

A large number of small- and medium-sized banks across the country have announced reductions in their fixed-term deposit rates since the beginning of April, covering various deposit products with terms ranging from three months to three years, with rate reductions ranging from 5-45 basis points, the paper reported, citing experts. Room exists for more cuts since current deposit rates are significantly higher than money market rates, the paper noted. (See MNI: PBOC Wary Of Rapid Long-dated CGB Yield Decline)

Commercial banks should also place greater focus on controlling high-cost liabilities alongside reducing costs from fixed-term deposits, the experts added. The deposit rate will restore stability as the economy steadily recovers and credit demand strengthens, leading to improvement of banks' net interest margins, they noted.