Bonds News

EXCLUSIVE-China's big four state banks to lower deposit rate ceilings - sources

(Adds details, background)

BEIJING, May 10 (Reuters) - China has told its “big four” state-owned banks to reduce the ceiling on interest rates they pay on some deposits, three sources with knowledge of the matter said.

The guidance comes as banks face squeezed margins under the weight of huge inflows of savings and deposits amid rising economic risks, while credit demand remained subdued.

The interest rate self-disciplinary mechanism, a top regulatory body overseen by the People’s Bank of China, urged lenders to lower ceilings on some personal and corporate deposits by 30 basis points (bps), effective on May 15, the sources said.

The regulatory body could not immediately be reached for comment after working hours.

China’s central bank does not set bank rates directly but guides them through the market-based mechanism, which comprises banks big and small.

According to the sources, products to be affected by the guidance include “call deposits” and “agreement deposits” with higher yields.

In addition to the big four state lenders, some other financial institutions have also been asked to lower deposit rate ceilings by 50 bps, the sources said.

China last month nudged banks to cut deposit interest rates further, sources with knowledge of the matter told Reuters.

Following that, three midsized lenders last week reduced interest rates on some deposits by between 10 bps and 30 bps, following smaller peers. (Reporting by Xiangming Hou, Rong Ma and Ryan Woo; Writing by Ziyi Tang and Beijing Newsroom; Editing by Andrew Heavens and Jan Harvey)