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PBC to Accelerate Marketization of Interest Rate
Ma Delun, Chief of Accounting and Fiscal Department of People's Bank of China (PBC), denoted on the 4th Sino-Britain International Seminar on Oct. 19 that PBC would accelerate the marketization of interest rate, and take measures to solve the problem of capital shortage in China's banking industry.
First of all, the interest rate of foreign currency should be liberalized to allow Chinese banks and foreign-owned banks to decide their own interest rate according to the capital demand and supply, said Ma Delun.
PBC announced in September that interest rate of foreign currency deposit would be liberalized. Interest rate of foreign currency deposit over US$3 million (including US$3 million) would be negotiable by the financial institutions and the depositor.
Ma Delun denoted that PBC would take ˇ°liberalizing long-term deposit interest rates after short-term deposit interest ratesˇ± and ˇ°Liberalizing interest rates in customer market after interest rates of open marketˇ± as its principal. The discount rate and enterprise bond rate would be liberalized immediately. Rural credit cooperatives under county level, would carry out flexible interest rate policy. Most interest rates of deposit and loan in rural area would be liberalized, and some specific kind of deposit interest rate would have upper limit. Then, interest rate of loan and large deposit in urban area would be liberalized gradually in the following order: range of interest rate float, loan rate, large deposit interest rate, and then general deposit interest rate.
Ma Delun deemed that the problem of capital shortage still existed in China's banking Industry. At present since the source of covering capital was singular, even though all the profit of the commercial banks were used, it was not enough to cover the lack of capital fund.
He also said, PBC would seek other methods such as IPO to cover the capital of state-own commercial banks besides financial allotment.
Besides, PBC will also take measures to help middle and small-sized banks to raise their capital. Besides directional fund raising, some qualified commercial banks would be allowed to issue long-term financial bond.
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