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China Further Eases Control Over Interest Rates
The People's Bank of China is now allowing the country's banks to trade deposits with each other, using certificates of deposit whose interest rates are determined by the market, BBC News reports.
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The People's Bank of China is now allowing the country's banks to trade deposits with each other, using certificates of deposit whose interest rates are determined by the market, BBC News reports. The central bank's policy took effect on Dec. 9.
BBC notes that overnight lending rates among banks briefly surged to 25% during a cash crunch in June. China's state-controlled Xinhua news service says the new policy will enable banks to "borrow at more stable costs" in the interbank market.
Institutions must notify the People's Bank of China in advance about their annual trade plans. The individual certificates of deposit they issue also must be for at least 50 million yuan ($8.2 million).
The new policy follows a decision by the central bank in July to eliminate its lower limit on lending rates by financial institutions. BBC says that step was intended to generate more domestic consumption.
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