2014-09-15

China Seeks End to Deposit Wars

At the end of every quarter, especially since the cash crunch in June 2013, Chinese banks engage in a quarter end war for deposits to hit regulatory targets. From September of last year: Why Not Spend ¥8 million to Avoid a ¥10 million Fine?
One bank branch president explained that the penalty for inadequate reserves is a ¥10 million fine. He said, why wouldn't I spend ¥8 million to buy deposits and save ¥2 million?

December 2013: Chinese Deposit Wars Back On; Banks Refuse To Move Deposits and Poach Depositors With Enticing Rates

This is coming to an end.

China caps end-month bank deposits to limit window-dressing
Deposits at banks at the end of any given month must not exceed 3 percent of the average daily level during that month, the China Banking Regulatory Commission (CBRC) said in a notice published in its website, www.cbrc.gov.cn, at the weekend.

The notice was jointly issued with the central bank and the finance ministry.

It also banned banks from using interest rates exceeding regulatory limits to attract deposits or using wealth management products to indirectly boost their savings as the end of month approaches.

Lenders that violate these and other new requirements will have part of their business suspended while serious violators will have their ratings downgraded, the regulators said.

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