PBoC Changes CD Rules

DM: China c.bank eases individual investor curbs on certificates of deposit

China's central bank on Monday cut its threshold for individual investors subscribing to large-scale certificates of deposit (CDs).

In an online statement, the People's Bank of China (PBOC) said individual investors now need a minimum of 200,000 yuan ($30,467.83), down from 300,000 yuan earlier.

The measure takes effect on June 6, it added.k

PBOC statement is here: 中国人民银行公告〔2016〕第13号

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First, what is certificates of deposit

1, certificates of deposit, deposits by financial institutions to individuals, enterprises and other large issue a certificate of deposit. Our certificates of deposit on June 15, 2015 officially launched in RMB -denominated.

2, compared with the same period of time deposit certificates of deposit have higher interest rates go up 40% in most of the benchmark interest rate basis, while time deposits generally up floating around 30%.

3. Previously, individual subscription certificates of deposit starting amount not less than 300,000 yuan institutional investors to subscribe for certificates of deposit starting amount of not less than 10 million yuan. Including certificates of deposit period 1 month, 3 months, 6 months, 9 months, 1 year, 18 months, 2 years, 3 years and 5 years a total of nine varieties.

4, with the general difference is that certificates of deposit, certificates of deposit before maturity can be transferred, may be mortgaged. In other words, it is not only higher than deposit rates, as well as liquidity, liquidity is strong.

Well-known financial commentator Liu Xiaobo said in a column:

In US dollar rate hike of the year, the state learned last year and early this year the stock market crash "stock exchange double play," the lesson began curb asset bubbles, there are two primary means: first, smashing all kinds of "casino", such as crazy debt etc; second, to prevent the accumulation of hot money, the alliance, such as straighten P2P and private funds. The ultimate goal is to make money into the real economy, reducing real interest rates in the market. In this context, the hot money to give way. Tepid stock market, bond market, futures market cooling, certificates of deposit on debut.

Certificates of deposit can attract a variety of hot money, including the financial capital of the bank, jumped to solve the financial capital and the resulting risks.

Certificates of deposit if hot up, hot money can not only give a destination, you can also reduce the level of market interest rates, the market has become more orderly.

Overall, the current certificates of deposit business relatively light, the central bank has lowered the threshold to activate the business intent. In the long run, in addition to lower the threshold should also be transferred, mortgaged and other aspects of the introduction of measures to facilitate the investors. If listed on the Stock Exchange, the effect will be much better.

Fixed income analyst at Minsheng Li Qilin reviews that:

Certificates of deposit expansion means that the interest rate market ready to further improve the system, deposit interest rate ceiling interest rate market liberalization is the last step.

Since last June 15, including in agriculture, industry, construction, delivery, Merchants Bank, including nine bank certificates of deposit for the first time since the first issue, more and more banks to join this year's camp issued certificates of deposit products Term more and more rich. However, due to the high starting point purchase certificates of deposit, bonds and earnings still lower than bank financing, so the situation is slightly awkward.

According to Beijing Daily, although a number of banks have introduced certificates of deposit products, but sales were relatively deserted, savers do not buy it. A joint-stock bank account manager, higher certificates of deposit from the purchase of points, which cut a large number of customer enthusiasm, and from interest rates, although the 3-year bonds a coupon rate to 3.9%, but still higher than the Great 3.85% three-year certificates of deposit amount, while bank deposits and contrast, although the current earnings ratio of banks, regular income to be higher, but the threshold limit, and the early withdrawal will interest a lot of wear and tear, and negotiable feature and no promotion.