Large-denomination certificates of deposit rely on file interest calculation "benefits" are getting farther and farther away. A Beijing Business Daily reporter recently visited more than ten bank outlets in Beijing to investigate and found that some banks have adjusted their fixed deposit-related businesses based on file interest calculation. After the adjustment, the new products no longer support the interest calculation based on file, and large-denomination certificates of deposit are also under adjustment. It is understood that this move is related to the regulatory authorities' previous guidance on the window for fixed deposit interest calculation based on the file.
Large-denomination certificates of deposit are no longer based on file interest calculation
Beijing Business Daily reporters visited and investigated on January 2, 2020 and found that many banks, including some state-owned banks and joint-stock banks, no longer support the interest calculation of deposits based on file, and if withdrawn in advance, they will be calculated based on the current deposit interest rate. Similarly, as a category of fixed deposits, the rules for early withdrawal of large-denomination certificates of deposit will also apply to this provision.
The so-called fixed deposit product based on the file interest rate is that when the specified deposit is withdrawn in advance, the interest rate is not calculated according to the current interest rate, but is calculated according to the latest deposit rate of the actual deposit time, and the remaining part is calculated according to the current interest rate. This way, customers can get more deposit benefits when withdrawing in advance. For example, a customer has a large deposit certificate of deposit period of 2 years. When deposited for 1 year and 4 months, the interest withdrawal will be calculated based on the 1-year period and 3-month period interest rate, and the 1-month current interest rate.
is in a small and medium-sized bank branch. Beijing Business Daily reporters saw that the bank's recently issued large-denomination certificates of deposit no longer support interest calculation based on file. On the promotional picture, the bank stated that "From December 24, 2019, the early withdrawal of newly issued large-value personal deposit and loan products of our bank will be calculated based on current savings interest." The bank staff introduced that the large-denomination certificates of deposit issued in the past also support interest calculation based on files, but products issued after December 24, 2019 are no longer supported.
"This adjustment has only started recently, mainly in response to regulatory policy requirements." The account manager of a large state-owned bank said, "The regulator recently issued a document requiring banks to adjust fixed deposit products based on file interest calculations, and in the future, interest can only be calculated based on current withdrawals." He also pointed out that "this notice is for all banks, and some banks may lag behind, and it is expected that all of them may be implemented from January to February."
It is worth mentioning that the adjustment of the above rules is mainly for new fixed deposits, which has no effect on deposits that have been deposited and agreed to be calculated based on the file. When such deposits are withdrawn in advance, interest can still be calculated based on the file method.
Regarding the specific reasons and implementation of the above-mentioned rules adjustments, a relevant person in charge of a Beijing branch of a joint-stock bank confirmed to the Beijing Business Daily reporter that "it was recently adjusted, mainly for cost considerations." A person from a Beijing branch of a large state-owned bank also said, "The new large-denomination certificates of deposit are no longer based on file interest calculations. This has been adjusted since December 2019 and will be implemented in accordance with regulatory regulations."
"One float to the top" pushes up the cost of deposit acquisition
In order to make up for the interest losses caused by customers' early withdrawal of fixed deposits, fixed deposit products based on file interest calculation have become a popular product of various banks in recent years. Large-denomination certificates of deposit with high thresholds are also a powerful tool for many banks to acquire deposits. The "China Monetary Policy Implementation Report for the Third Quarter of 2019" recently released by the People's Bank of China shows that in the third quarter of 2019, financial institutions issued 12,476 large-denomination certificates of deposit, with a total issuance of 2.59 trillion yuan, an increase of 202 billion yuan year-on-year.
However, this type of product has also increased the cost of banks to attract deposits. It is understood that according to the agreement of the self-registration organization for market interest rate pricing in mid-April 2018, the upper limit of interest rates for large-denomination certificates of deposit in three major types of banking institutions, large banks, joint-stock banks, listed urban commercial banks, rural commercial banks, and non-listed urban commercial banks is 50%, 52%, and 55%. In the past, every mid-year and end of the year, many banks would launch a "price war" of large-denomination certificates of deposit, and small and medium-sized banks would repeatedly experience the situation when they reached the peak. When the interest rate of large-denomination certificates of deposit is large, if interest calculation is implemented based on the file, the bank's interest payment pressure will increase. A banking industry insider pointed out that commercial banks love and hate large-denomination certificates of deposit and rely on file interest calculation. For some banks with few branches and weak deposit absorption capabilities, interest calculation can attract depositors' funds through relying on file interest calculation, but in fact it also pushes up the bank's capital costs.
In fact, there is also compliance dispute over the method of calculating interest based on files. Article 24 of the " Savings Management Regulations " stipulates that if all fixed-term savings deposits that have not expired are withdrawn in advance, the interest shall be calculated at the current savings deposit interest rate announced on the day of withdrawal; if some are withdrawn in advance, the interest shall be calculated at the interest rate announced on the day of withdrawal. When the rest expires, the interest shall be calculated at the interest rate announced on the day of withdrawal.
A banking industry insider revealed that the regulatory authorities recently introduced restrictions on fixed deposits that are based on interest rates through window guidance. In this regard, Liu Yinping, an analyst at Rong360 Big Data Research Institute, said that the main purpose of regulators to regulate deposit-based deposit products this time is to reduce the cost of banks to attract deposits, thereby reducing loan interest rates and solving the problems of difficulty and high financing for small and micro enterprises. Su Xiaorui, a senior researcher at the
Mababa Research Institute, pointed out that the adjustment is mainly to prevent the liquidity risks of deposit products based on interest-bearing. In addition, the interest rates of such products are also relatively high, and their competitive advantages in the financial management market are obvious, which will have a certain impact on the implementation of non-guaranteed bank wealth management. In the future, after adjustments to fixed deposit products such as large-denomination certificates of deposit and other fixed deposits based on the interest calculation, small banks' deposit absorption capacity will decline.
Smart deposits may be affected
Large-denomination certificates of deposit interest calculation rules have been adjusted. Will the "smart deposit" products of small and medium-sized banks be affected? Beijing Business Daily reporters noticed that as of press time, on third-party Internet platforms, some small and medium-sized banks' "smart deposits" are still being sold, and some products still support early withdrawal and interest calculation based on the file.
Su Xiaorui believes that the specific implementation needs to be based on the instructions issued by the regulator, but it is highly likely that such products will be affected. However, considering that the requirements issued by the regulator generally have a transition period, it is not ruled out that they are currently in the stage of compression and addition.
Liu Yinping said that the issuing entities of interest-bearing deposits currently are private banks, small urban commercial banks, and rural commercial banks, and these banks are under great pressure to attract deposits. Especially private banks have been established for a short time and have no physical outlets. If high-interest "smart deposits" are stopped, it will have a major impact on these small banks. He pointed out that "whether the regulators will be one-size-fits-all, and it is still uncertain whether they will stop all such products, and it remains to be discussed."
After structured deposits are regulated and large-denomination certificates of deposit are restricted from interest calculation, the pressure of banks, especially small and medium-sized banks to attract deposits will be significantly increased. How to optimize and strengthen innovation in the future has become a problem that needs to be considered. Su Xiaorui suggested that banks should grasp the regulatory trends, gradually reduce their reliance on interest-bearing products based on deposits, and strive to strengthen product design to replace or even surpass the status of interest-bearing products based on deposits.
Beijing Business Daily reporter Meng Fanxia Wu Xian
