China Unveils New Method for Calculating Bank Deposit Rates
- Lenders will now add basis points to 1.5% benchmark rate
- Rule change drives up short-term deposit rates, cuts long term
The Lujiazui financial district in Shanghai.
Photographer: Qilai Shen/BloombergThis article is for subscribers only.
China adjusted how banks can set deposit rates in a move that could lower longer term funding costs and boost economic growth.
Under a new way of calculating the ceiling on deposits rates, banks will be allowed to add basis points on top of the existing benchmark rate instead of as before using a multiple. Under the new regime, ceilings for short-term time deposits and certificates with a term of six months or less will rise, while longer-term rates will fall, the self-discipline body backed by the People’s Bank of China said in a statement on Monday.