22 Jul 2013
Flash: PBoC eliminates lending rate floors – NAB
FXstreet.com (New York) - The NAB Research Team recently undertook an examination of the PBoC and the general lending policies, following recent fears of liquidity tightening in China.
Key quotes
“China’s PBoC announced that it would scrap the lower limit on lending rates that banks could charge – this was previously set at a maximum of 30% below the PBoC official 1-year lending rate (currently 6%, so a lower limit of 4.2%).”
Moreover, “In practice, less than 11% of lending occurs at anything less than the 6% official rate and virtually none at the 30% discount, so while the floor has been abolished, it should not have a significant impact on the volume or price of credit extended by the major banks. Perhaps more significant was that there was no change to the deposit rate ceiling.”
Key quotes
“China’s PBoC announced that it would scrap the lower limit on lending rates that banks could charge – this was previously set at a maximum of 30% below the PBoC official 1-year lending rate (currently 6%, so a lower limit of 4.2%).”
Moreover, “In practice, less than 11% of lending occurs at anything less than the 6% official rate and virtually none at the 30% discount, so while the floor has been abolished, it should not have a significant impact on the volume or price of credit extended by the major banks. Perhaps more significant was that there was no change to the deposit rate ceiling.”