What’s new: Some of China’s biggest banks are lowering the interest they offer on deposits, Caixin has learned, as authorities have encouraged lenders to do so to ease their cost burden amid the ongoing Covid-19 pandemic.
Several Beijing branches of the major banks have released notices that they will reduce the upper limit of the interest rates on two-year and three-year fixed deposits by around 10 basis points on Monday, sources familiar with the matter said.
The background: A banking industry body overseen by the central bank had earlier this month suggested small and midsized banks lower their upper limit for deposit rates by 10 basis points, Caixin reported.
The reduction aimed to ease pressure on banks’ finances, as Beijing has long required banks to lower borrowing costs for businesses amid the pandemic.
Last year, multiple banks reported a decline in their net interest margin (NIM) — a key profitability metric that measures the difference between interest earnings and interest expenses. Many lenders expect their NIM to continue to fall this year, further squeezing their profitability.
Related: Exclusive: China Banking Industry Group Encourages Lenders to Cut Deposit Rates
Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)
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