Finance Association, October 18 (Reporter Gao Ping) Today, a number of banks, including the Industrial and Commercial Bank, Agricultural Bank, Bank of China, China Construction Bank, Bank of Communications, and Postbank, announced lower interest rates on deposit listings. Overall, several banks have made the same adjustments this time. Among them, current and 1-day notice deposits were reduced by 0.05 percentage points, 7-day notice deposits were reduced by 0.25 percentage points, agreement deposits were reduced by 0.4 percentage points, and whole deposit and fixed deposit were reduced by 0.25 percentage points.

Authoritative experts told the Financial Federation reporter that on October 18, major state-owned banks such as Industrial and Commercial Bank, Agricultural Bank, Bank of China, and China Construction Bank took the initiative to lower deposit listing interest rates based on the current situation and their own business needs. This adjustment mainly shows several major features. First, the central bank's interest rate policy transmission mechanism is working effectively. Central Bank Governor Pan Gongsheng emphasized at the Lujiazui Forum that market-based interest rate control mechanisms should be further improved. On September 27, the People's Bank of China lowered the central bank's policy interest rate, that is, the interest rate for 7-day reverse repurchase operations in the open market from 1.7% to 1.5%, driving the medium-term loan facility interest rate down 0.3 percentage points.

“On October 18, major commercial banks lowered deposit listing interest rates. The LPR reported on October 21 will also reflect a corresponding decline in policy interest rate changes, indicating that market-based interest rate regulation mechanisms have been further improved and interest rate transmission channels have been effectively unblocked.” This is what the experts mentioned above said.

In addition, authoritative experts pointed out that lowering bank interest rates on deposit listings is beneficial to stabilizing bank debt costs, easing the pressure on commercial banks to narrow net interest spreads, and taking into account the balance of supporting the real economy and the steady operation of banks. In recent years, commercial banks have continued to step up efforts to make concessions to the real economy. The bank net interest spread for the second quarter of 2024 was 1.54%, falling to the lowest level in history. After the People's Bank of China adjusts the central bank's policy interest rate, it will drive the LPR reported this month to follow the decline. Combined with the batch adjustment of stock mortgage interest rates to be implemented in October, it is even more urgent for commercial banks to stabilize net interest spreads. The current adjustment of deposit interest rates by commercial banks is conducive to reducing bank debt costs, supporting stable net interest spreads, and improving the sustainability of financial support for the real economy.

According to the schedule for lowering interest rates on stock mortgages, commercial banks will have to make basic adjustments by the end of October. Wang Qing, chief macro analyst at Dongfang Jincheng, also told CFA reporters that this is also a catalytic factor for commercial banks to intensively lower deposit interest rates this month.

Wang Qing further said that the current round of stock mortgage interest rate cuts will drive banks to reduce interest income by about 150 billion per year; at the end of September, the size of various types of bank deposits is about 299 basis points, which can be covered by an average reduction of 5 basis points; if LPR quotes are lowered by 20 basis points in October and interest rates for various types of loans are lowered even more drastically, with a view to stabilizing net interest spreads, deposit interest rates will need to be lowered by an average of about 10-15 basis points.

“Looking at it this way, banks are currently starting a new round of deposit interest rate cuts, which is of great significance in stabilizing interest spreads, thereby ensuring the steady operation of commercial banks, and continuing to increase financing support for the real economy. “Wang Qing judged that the current round of bank deposit interest rate cuts can basically offset the impact of interest rate cuts on various types of loans on net interest spreads.

In the process of lowering deposit interest rates to reduce bank debt costs, Wang Qing pointed out that how to stabilize the deposit base is a problem banks need to face, and it is necessary to judge the scale and pace of “deposit moving” that may occur. Wang Qing believes that banks currently need better debt-side management. The core is to anticipate interest rate trends in a forward-looking manner and make policy adjustments. Among them, one very important aspect is to optimize the deposit structure, increase the proportion of current deposits, especially core deposits that are not sensitive to interest rates, moderately reduce the proportion of high-cost deposits, and reduce debt costs while stabilizing the debt side.