BEIJING, March 11 (Reuters) - China’s central bank has placed caps on some interest rates financial institutions offer on high-yield structured deposits, according to a statement seen by Reuters on Wednesday, as Beijing guides lending rates lower to support economic growth.
The People’s Bank of China (PBOC) said in the statement, which was sent to banks on Monday, that it would regulate the lower end of rates issues on structured deposits, as rates on some products in the market breached upper limits.
“Some banks set guaranteed rates on structured deposits significantly higher than term deposit rates,” the PBOC said. “It is not conducive to...market competition on deposits and should be rectified.”
The statement didn’t elaborate on the rates cap but Reuters reported in January that banks were ordered by the PBOC not to set guaranteed rates on structured deposits at more than 150% of their term deposit rates of the same maturity. Those rules may vary between regions.
The central bank is widely expected to cut its benchmark deposit rates in future to create room for lowering lending rates.
Banks in China have been aggressively marketing structured deposits, which combine traditional deposits with higher-return investment products, to lure in more funds.
The market has grown to a 10 trillion yuan ($1.44 trillion) business over the past two years but the high rates they offer have hurt profit margins and threaten asset quality.
Previously, some structured deposits were marketing returns as high as 4%, while a one-year benchmark term deposit rate with the same maturity was only at 1.5%.
$1 = 6.9527 Chinese yuan Reporting by Cheng Leng, Kevin Yao and Samuel Shen; Editing by Sam Holmes