Instant View: China liberalizes bank lending rates

BEIJING Fri Jul 19, 2013 7:49am EDT

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BEIJING (Reuters) - China's central bank announced long-awaited interest rate reforms on Friday, scrapping the floor on rates that banks charge clients for loans.

The People's Bank of China (PBOC) said in a statement on its website that rate reform will help lower financial costs for companies.

** Says to remove controls over bill discount rates.

** It did not remove a cap on deposit rates.

** The new rules come into effect on Saturday.

** Continues differentiated lending policies for housing.

** Australian dollar rises on news.

COMMENTARY

JOE NEIGHBOUR, SENIOR BROKER, CENTRAL MARKETS, LONDON:

"It's another method of easing and a form of looser monetary policy."

MARK WILLIAMS, CHIEF ASIA ECONOMIST, CAPITAL ECONOMICS:

"It's a very big deal, probably more in terms of what it symbolizes than the effect on the economy. China has been talking about interest rate liberalization for a long time, this is one of the biggest steps they could have taken.

"It does not necessarily change very much today, but it tells you something about the trajectory. Only a very small proportion of loans will be affected by this decision.

"Before today, banks were allowed to lend at no more than a 30 percent discount to the benchmark rate, but only 11 percent of loans were offered at any discount."

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