Some Chinese state banks to cut deposit rates on Monday

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FILE PHOTO – A man stands on a bank of the Huangpu River in Pudong amid the lockdown in the Pudong region to contain the spread of the coronavirus disease (COVID-19) in Shanghai, China March 28, 2022 REUTERS/Aly Song

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SHANGHAI, April 24 (Reuters) – Some Chinese state-owned banks, such as the Bank of China and Bank of Communications, will lower deposit rate caps on Monday, joining smaller lenders, sources told Reuters.

The planned cuts come a week after regulators encouraged smaller banks to lower the cap on their deposit rates. The moves will also coincide with China’s reduction in bank reserve requirements, starting Monday.

Bank of China (601988.SS), will cut 2-3 year term deposit rates by about 10 basis points, according to two banking sources. Bank of Communications (601328.SS), will make similar moves, another source said.

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Bank of China and Bank of Communications were not immediately available for comment outside working hours.

It was not immediately clear whether other state-owned banks, including the Industrial and Commercial Bank of China (ICBC), the China Construction Bank (CCB) and the Agricultural Bank of China would also cut deposit rates. , but sources say state lenders typically move in tandem on the rate. moves.

Beijing has repeatedly urged banks to reduce borrowing costs for small businesses in an economy hit by COVID-19 outbreaks, fallout from the Ukraine crisis and capital outflows triggered by U.S. monetary tightening.

To incentivize banks to lend more, the PBOC announced that it would cut the reserve requirement ratio (RRR) for all banks by 25 basis points, effective April 25.

Rocky Fan, an economist at Guolian Securities, said cutting deposit rates could prompt banks to cut lending rates, lowering their own borrowing costs.

“One of the main reasons banks are reluctant to cut lending rates now is that it would hurt their margins.”

Lower deposit rates are also conducive to more efficient use of money and will benefit consumption and investment, Fan added.

In mid-April, the Interest Rate Self-Regulatory Mechanism, a top regulator overseen by the People’s Bank of China, urged small lenders to lower deposit limits on fixed-term deposits from around 10 basis points, sources told Reuters.

Banks including Industrial Bank and China Zheshang Bank have already made the adjustment, according to direct sources.

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Reporting by Samuel Shen, Kevin Huang and Ryan Woo Editing by Raissa Kasolowsky and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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