PBOC Encourages Banks to Set Deposit Rates Based on Market Signals

China’s central bank established a deposit interest rate marketization mechanism in April to encouraging banks to adjust rates based on market signals as part of an overhaul aiming to maintain healthy competition in the deposit market.

This is the first time the People’s Bank of China (PBOC) disclosed such a mechanism. Banks are to set and adjust deposit rates based on 10-year government bond yield and the one-year loan prime rate, the central bank said Monday in its first-quarter monetary policy report.