The People’s Bank of China has relaxed the upper limit to interest rates for some commercial bank deposits, sources told Reuters during the weekend, but will not follow through on suggestions made previously that it will lift the cap on all deposit types.
Instead, commercial banks will have greater freedom to adjust their certificate of deposit (CD) – financial products available to private and institutional investors that offer higher return rates than the normal high-street savings account – interest rates depending on their size and assets.
For China’s largest banks, such as China Construction Bank or Industrial and Commercial Bank of China, CD interest rates can be raised as high as 50% above the central bank’s benchmark, up from 40% under the previous system. For smaller banks the ceiling now stands at 55%, up from 45%.
Officially, the PBOC had already removed the deposit interest rate ceiling back in October of 2015, however influence from government watchdogs and the market interest rate pricing self-regulating mechanism had imposed implicit limits.