LPR reform plan unveiled to cut financing costs
Print Edition
CHINA’S central bank on Saturday unveiled a plan to improve and reform the country’s loan prime rate mechanism in its latest efforts to cut financing costs for the real economy.
Introduced in 2013 and disclosed every trading day, the LPR functions as a market-based reference for lenders to set their loan interest rates.
The new LPR’s quotations will be based on the central bank’s open market operations to better reflect market changes, while the LPR will be disclosed on the 20th day of each month to improve quotation quality starting from August 20, according to People’s Bank of China.
The number of quotation banks will be expanded from 10 to 18, including not only national banks but also urban commercial banks, rural commercial banks, foreign-invested banks and private banks, to improve the representativeness of the LPR. An above-five-year LPR will be available in addition to the current one-year LPR to serve as pricing references for new bank lending, according to the PBOC.
More and more of China’s enterprises, especially private, micro and small players, are expected to enjoy lower interest rates when borrowing money from banks as the country stepped up policy push.
Banks should take the LPR as the major lending rate reference when issuing loans, the statement said.
The PBOC plan came after the country’s State Council decided on Friday to take market-oriented reform measures to reduce real interest rates and ease financing difficulties.
The current LPR scheme has reduced the support effectiveness for the real economy by the lowering of market interest rate, and the above steps are expected to help improve the transmission efficiency of market interest rates, the PBOC said in another statement.
To ensure that the new plan is well implemented, enterprises can report banks’ practices of setting an implicit interest rate floor to market regulators and self-disciplinary industrial bodies.
The central bank also included the implementation of the new LPR scheme and loan interest rate competition behaviors in the macro-prudential assessment of banks to urge market players to follow the new LPR rules.
Efforts will be made to make lending rates and fees more open and transparent. Charges by financial institutions will be strictly regulated and intermediate agencies will be urged to cut fees, according to the PBOC.
The new scheme will help boost the country’s monetary policy efficiency, said Wen Bin, chief analyst at China Minsheng Bank.
“Banks might face shrinking loan interest rate margins, but they can still achieve stable business performance thanks to the expansion of loan businesses,” said Wen.
The PBOC plan came after the country’s State Council’s executive meeting decided on Friday to take market-oriented reform measures to reduce real interest rates and ease financing difficulties.
Efforts will be made to make lending rates and fees more open and transparent. Charges by financial institutions will be strictly regulated and intermediate agencies will be urged to cut fees.
- 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.
