On July 8, the People’s Bank of China released the “China Regional Financial Operation Report (2022)” in the form of special topics to explain the effect of the LPR reform and the next direction.
According to the “Report”, the transmission channel of “market interest rate + central bank guidance → LPR → loan interest rate” has been continuously strengthened, and the transmission efficiency of monetary policy has been further improved.
The survey shows that in December 2021, the weighted average interest rates of general loans in the eastern, central, western, and northeastern regions were 5.05%, 5.40%, 5.40%, and 5.44%, down 0.11, 0.13, 0.21, and 0.22 percentage points year-on-year, respectively. ; The weighted average interest rates of corporate loans were 4.46%, 4.82%, 4.78%, and 4.67%, down 0.09, 0.11, 0.04, and 0.44 percentage points year-on-year, respectively.
The “Report” also stated that the LPR reform has continuously enhanced the independent pricing ability of financial institutions and improved the competitiveness of the loan market. In the past, the phenomenon of individual banks setting an implicit lower limit of loan interest rates through coordinated behavior no longer exists.
In addition, the optimization of the self-disciplined upper limit of deposit interest rates in 2021 not only guarantees the independent pricing space of banks, but also effectively restrains the irrational competitive behavior of individual banks. Since its implementation, it has achieved remarkable results. The interest rate of medium and long-term time deposits has dropped significantly, and the competition in the deposit market has become more orderly.
According to the “Report”, according to the survey, in December 2021, the weighted average interest rates of 3-year time deposits in the eastern, central, western, and northeastern regions were 3.27%, 3.32%, 3.27%, and 3.35%, respectively, down 0.41 and 0.35 percent year-on-year, respectively. 1, 0.42, 0.35 percentage points. A survey of 159 banks of various types across the country shows that in 2021, the median real interest rate for 3-year large-denomination certificates of deposit will be 3.88%, a year-on-year decrease of 0.29 percentage points.
The data shows that by the end of 2021, the proportion of newly issued corporate loans in the eastern, central, western and northeastern regions with LPR reduction points will reach 33.92%, 24.40%, 30.06% and 28.79%, respectively, which is significantly higher than that before the LPR reform. The entire range moves down.
The “Report” stated that the next step is to continue to deepen the LPR reform, improve the LPR quotation mechanism, and continuously improve the quality of LPR quotations, so that the central bank’s policy interest rate can be transmitted more smoothly to loan interest rates and deposit interest rates through market interest rates.
The second is to continue to increase the guidance on the construction of the interest rate pricing mechanism for small and medium-sized banks, especially the training on the construction of the FTP system for small and medium-sized banks and the embedding of LPR into the FTP system, so as to promote the small and medium-sized banks to further improve the internal and external interest rate pricing mechanism.
The third is to give full play to the important role of the market-oriented adjustment mechanism of deposit interest rates, focus on stabilizing the cost of bank liabilities, and promote the reduction of comprehensive financing costs for enterprises.
The fourth is to guide the differentiated operation of financial institutions. Small and medium-sized banks must be based on their origins, have a clear positioning, give full play to the advantages of serving the local economy, market penetration depth and inclusive risk management for small and micro customers, continuously improve the availability of loans for small and micro customers, and promote financial More resources flow to small and micro enterprises and private enterprises.
[Editor in charge: Xu Dan]