How will the “new” deposit interest rate pricing mechanism that has received much attention affect deposit interest rates? How will deposit pricing change between different banks?
On June 21, the market self-regulatory pricing self-regulatory mechanism announced that the market interest rate pricing self-regulatory mechanism optimized the method for determining the self-regulatory upper limit of deposit interest rates, which will be based on a certain multiple of the deposit benchmark interest rate. The self-discipline upper limit of the deposit interest rate formed is changed to a certain basis point to be determined on the basis of the deposit benchmark interest rate.
It can be seen that this adjustment is not a “rate cut” and the benchmark interest rate has not changed. The interest rate self-regulatory mechanism states that financial institutions can still negotiate with depositors to determine the actual interest rate for deposits within the upper limit of self-regulation, and the actual interest rate for deposits may not necessarily change significantly.
The new pricing model has less impact on big banks
Changing the deposit interest rate ceiling pricing method to the “base rate + basis point” model will help Eliminating the leverage effect can avoid vicious competition in long-term deposits by some banks.
“In practice, due to the advantages of dense branches, the four major banks are not motivated by high interest rates, and the percentage of their deposit rates reaching the upper limit is much lower than that of small and medium-sized banks. Banks, therefore, the new deposit interest rate ceiling pricing model will have less impact on major banks. For small and medium-sized banks, especially banks with a relatively high proportion of long-term deposits, it will help reduce a certain amount of pressure on the debt side.” Ping An Securities pointed out.
CICC pointed out that the adjusted upper limit of interest rates, among which, state-owned banks have lower interest rates than other banks. Institutional upward adjustments are relatively large. In the long run, state-owned banks have adjusted more downwards, while other banks’ downward adjustments are flat or lower than state-owned banks. After the implementation of the new interest rate ceiling, the long-term and short-term deposit spreads will be significantly narrowed. The slope of the structure is closer to the slope of the term structure of a bond.
Tianfeng Securities also believes that from the perspective of the main body, the upper limit of the deposit interest rate of the four state-owned banks has generally been reduced, and the decline is greater than that of other banks; other banks (4 With the exception of major banks), the upper limit of interest rates for deposits with maturities of one year and below and large-denomination certificates of deposits has generally risen, and the interest rates for deposits with maturities of one year and above have fallen. From the perspective of maturity, the upper limit of deposit interest rates for medium and long-term maturities (above 1 year) has been reduced, and the longer the maturity, the more obvious the decline.
How much can the bank’s debt cost be reduced
The interest rate self-regulatory mechanism stated that after the implementation of the new deposit interest rate self-regulatory ceiling, the deposit interest rate self-regulatory ceiling will rise and fall. Short-term time deposits and large amounts within six months The self-regulatory ceiling of the interest rate of certificates of deposit has increased, and the self-regulatory ceiling of long-term interest rates over one year has decreased.
Zheshang Securities pointed out that, in fact, this reform and related policies since last year, such as reducing structured deposits, calling docking file interest-bearing deposit products, and absorbing local corporate banks The integration of deposits in other places into the MPA assessment, etc., promotes orderly competition in the deposit market and helps banks reduce cost pressures on the liability side, thereby alleviating the upward pressure on loan interest rates on the asset side and strengthening financial support for the real economy.
Tianfeng Securities pointed out that this change will reduce and stabilize the debt-side costs of the banking system. First, after the optimization of the method for determining the self-discipline upper limit of deposit interest rates, the upper limit of short-end deposit interest rates increased and the upper limit of long-end deposit interest rates decreased. As of the end of May, the proportion of demand deposits of households + non-financial enterprises was only 34.3%, and the proportion of time deposits and other deposits reached 65.7%; second, because the long-term deposit benchmark interest rate was higher, the interest rate limit determined by the multiple was higher than the benchmark interest rate. For short-term deposits (with a leverage effect), the actual implemented interest rate is also significantly higher. Some financial institutions take this to absorb long-term deposits through irregular products, passively raising the deposit interest rates of other banks.
“According to our calculations, before and after the interest rate adjustment, since most deposits have a maturity of less than one year, it is assumed that the banks will absorb all deposits in accordance with the upper limit. The comprehensive cost of deposits will go down by 7bp, and the comprehensive cost of deposits for city commercial banks will go down by 2bp. The overall change is not big. However, considering that banks did not deposit all of them in accordance with the upper limit, in particular, demand deposits are often deposited on a benchmark rather than an upper limit. In addition, the reduction in long-term deposit interest rates will guide more deposits to short-term deposits. We expect that it will actually push the bank’s comprehensive deposit costs to fall higher than the above-mentioned estimated value.” CICC pointed out.