Stanley Li, an analyst at Mirae Asset Securities Co., comments on China’s decision to let banks offer deposit rates that are as much as 10 percent higher than the central bank’s benchmark.
The People’s Bank of China announced the move today, along with a decision to cut lending and deposit rates by 0.25 percentage points from tomorrow.
“Symmetric cut on the surface. In essence an asymmetric rate cut, narrowing banks’ net interest margin. It’s a small step toward interest rate liberalization.”
“Banks will likely compete for deposits by raising rates. One year deposit rate could go up to 3.58 percent from 3.5 percent before the rate cut. By narrowing banks’ margins, the move should help borrowers and savers.”