Related News
Forum: Interest rate reform to make competition fiercer
By Hu Xiaocen |
August 31, 2012, Friday
|
Online Edition
Online Edition
CHINA'S gradual relaxation in interest rate control will continue to erode banks profit in the next few years, bankers and regulators said at a forum in Shanghai today.
"Market-oriented interest rates will further weaken lenders profit growth, especially those heavily rely on interest income and it is inevitable that some lenders will be driven out of the market by competition," Fan Yifei, chairman of Bank of Shanghai, said today.
Borrowers rely less on banks for credit over the past decade -- the contribution of loans to overall social financing declined to 42 percent in the first half year from 96 percent in 2002.
In June, China loosed the control on the interest rate by allowing banks to offer a premium of up to 10 percent of the benchmark deposit rate, a long-awaited move by the industry amid China's interest rate reforms. Before that, banks are banned to offer premium on savings rates. The central bank also put a limit for banks to offer discount on the lending rate, making lenders sitting on interest income as the main source of income. The latest reform makes banks face more market competition to grow profits as their profits margin is squeezed.
Director of Financial Survey and Statistics Development of the People's Bank of China Sheng Songcheng said the current pricing strategy of banks show market competition is not thorough, as big lenders didn't float deposit rates to the ceiling.
Liao Min, head of the Shanghai Bureau of the China Banking Regulatory Commission echoed the view.
Fan said that the number of banks will not only drop in a more competitive domestic market, but also in a global context, citing a latest report by Ernst and Young.
"Market-oriented interest rates will further weaken lenders profit growth, especially those heavily rely on interest income and it is inevitable that some lenders will be driven out of the market by competition," Fan Yifei, chairman of Bank of Shanghai, said today.
Borrowers rely less on banks for credit over the past decade -- the contribution of loans to overall social financing declined to 42 percent in the first half year from 96 percent in 2002.
In June, China loosed the control on the interest rate by allowing banks to offer a premium of up to 10 percent of the benchmark deposit rate, a long-awaited move by the industry amid China's interest rate reforms. Before that, banks are banned to offer premium on savings rates. The central bank also put a limit for banks to offer discount on the lending rate, making lenders sitting on interest income as the main source of income. The latest reform makes banks face more market competition to grow profits as their profits margin is squeezed.
Director of Financial Survey and Statistics Development of the People's Bank of China Sheng Songcheng said the current pricing strategy of banks show market competition is not thorough, as big lenders didn't float deposit rates to the ceiling.
Liao Min, head of the Shanghai Bureau of the China Banking Regulatory Commission echoed the view.
Fan said that the number of banks will not only drop in a more competitive domestic market, but also in a global context, citing a latest report by Ernst and Young.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
