Interest rate liberalization "breakthrough": how to meet the "Silver Era"?

According to the latest report of Caijing magazine, the central bank has formulated an overall reform plan to promote the process of interest rate liberalization, which was approved at the recent executive meeting of the State Council. Those who participated in the discussion of this plan revealed that the central bank has set short-term, near- and medium-term and medium-term goals for the process of interest rate marketization: the short-term goal is to establish and improve an independent pricing mechanism and abolish the lower limit of loan interest rates; the short-term and medium-term goal is to form a relatively complete market interest rate System and improve the central bank's ability to control interest rates; the medium-term goal is to fully realize the marketization of interest rates, so that the central bank can form the ability to carry out macro-control through policy interest rates.

It is reported that China's interest rate liberalization has been 27 years since the State Council promulgated the "Interim Regulations on Bank Management" in 1986 and liberalized the interest rate of the inter-bank lending market. Xiang Songzuo, Chief Economist of the Agricultural Bank of China, clearly pointed out that "the interest rate liberalization has generally completed nearly 90%, and the remaining 10% is the most troublesome and critical." It can be seen that China's interest rate liberalization has entered "" pass" stage.

According to this, the CBRC's internal quantitative calculation shows that if full interest rate marketization is realized in the next 10 years, the situation of "increasing deposit interest rates and falling loan interest rates" is inevitable in order to "take deposits and compete for loans". At that time, bank interest rates may increase. A drop of 60 to 80 points will cut bank profits in half and financial industry profits will be greatly compressed. Banks' ability to withstand risks will decline, capital replenishment pressure will increase, and competition among banks will become increasingly fierce. Industry insiders pointed out that domestic banks are moving from a "golden age" of high profits, high growth and low NPLs to a "silver age" of slowing growth, increasingly complex operating environments and gradual exposure of risks.

What does the arrival of the "Silver Age" mean? How should China's financial industry respond?

Actually, foreign countries that "moved ahead of China" have long had "learning lessons" in terms of interest rate liberalization reforms. It is reported that the interest rate liberalization reforms in the United States and Japan, which began in the 1960s and 1970s, both lasted 16 years and were successful. , and the interest rate liberalization reform in Latin American countries represented by Argentina was almost wiped out due to its inherent inadequacy and too aggressiveness.

"The past life is the teacher of the future". Whether the above-mentioned reforms are successful or not, they have practical guiding significance for the process of interest rate marketization in China today. The marketization of China's interest rate in the "Silver Age" requires a steady and firm pace. It is necessary to start the establishment of explicit deposits that protect the interests of depositors and reflect risk pricing and risk compensation as soon as possible in the "wind and rain" financial industry competition. In the insurance system, it is also necessary to "willing children to trap wolves" to establish a bankruptcy system with "in and out", enhance the risk management awareness of the banking industry, and stimulate its reform vitality.

Accelerate the launch of the "Deposit Insurance System"

On July 16 last year, the People's Bank of China said in its "2012 Financial Stability Report" that China's time to launch a deposit insurance system is basically ripe. However, the government is still implementing an implicit deposit insurance system, and the central bank and local governments are responsible for the repayment of personal debts. However, in the increasingly fierce financial competition environment, the financial risk is obviously rising. Therefore, it is imperative to establish a financial security mechanism, the deposit insurance system, which helps to protect the interests of depositors. The interest rate liberalization process in the United States, Japan and other countries has established a deposit insurance system, thereby avoiding the losses caused by bank failures to depositors and maintaining social stability. On the other hand, the United Kingdom, which has not implemented a deposit insurance system, encountered a banking system crisis in the interest rate liberalization, and then the government had to spend extremely high costs to save it.

In addition, the deposit insurance system also helps to protect the healthy development of small and medium-sized banks to some extent, thereby promoting fair competition. It can enable depositors to form a consensus that deposits in large or small banks will be protected from risks, so the quality of services provided will become the main factor for customers to choose a deposit bank. In this sense, the The system has increased the weight for small and medium-sized banks to participate in the competition in the financial industry.

Establish a bankruptcy system with "in and out"

Xiang Songzuo pointed out that a mechanism without a bankruptcy mechanism and without market cooperation cannot be a true market economy, nor a truly effective financial system," If there is a risk, it should be exposed.” In his view, the bankruptcy system of "in and out" is an effective weapon to stimulate the vitality of China's financial industry.

The reform of interest rate liberalization will eventually face a process of rising deposit interest rates, falling loan interest rates, and a serious narrowing of interest margins. During this process, small banks will undoubtedly suffer the most. Interest rate liberalization has a certain law of increasing returns. Compared with big banks, the weak foundation and weak foundation make many small banks face the outcome of being swallowed up by big banks, or going bankrupt. This has also occurred in the process of interest rate liberalization in the United States and Japan. However, with the development of reform and opening up today, it should be seen that the market is the touchstone of competition, and small and medium-sized banks should take precautions here.