Profit Is Squeezed By &Nbsp; The Upper Limit Of Deposit Rate For Small And Medium-Sized Banks Is Adjusted.

on deposit Whether the reserve ratio can be adjusted indefinitely has not stopped with the central bank's repeated statements.

Tang Shuangning, chairman of China Everbright Group, recently wrote that the adjustment of the deposit reserve ratio should take into account the liquidity bearing capacity of some small and medium-sized banks. This is not the first time that bankers have expressed their views on the upper limit of the reserve requirement rate. Earlier, there were also small and medium-sized. Bank People believe that the unlimited adjustment of the deposit reserve ratio will have a greater impact on the liquidity of small and medium-sized banks.

However, some market participants believe that for the banking sector, the dispute over the deposit reserve ceiling is more of a matter of interest, and its frequent adjustment will make the whole industry, especially small and medium-sized banks. profit The space was badly squeezed.

There is no theoretical upper limit.

As one of the most heavily relied tools in the central bank's monetary policy, although it has been in the 20.5% highest position, it will still be the main tool to recover liquidity in the future from the perspective of the current policy. From the analysis of the current situation, because of its impact on the monetary multiplier, there is still a large increase in the space of other factors.

Generally speaking, the impact of the statutory reserve requirement on money supply mainly comes from two aspects. First, it will directly lead to the increase or decrease of the basic money; the two is to decide the multiplier of the expansion or reduction of the basic money by multiplier effect, and the latter's role in the money supply is undoubtedly far greater than the former.

Since 2010, the central bank has raised the statutory reserve requirement rate for 10 times in a row, but from the relevant data, its role can only be described in limited terms. The most obvious evidence is that at the end of 3 this year, the monetary multiplier was as high as 3.94, and the ability to expand money was still strong. By contrast, it is 0.02 higher than the end of last year.

Through further analysis, it is found that this situation is also reasonable. Although the statutory reserve requirement rate has been raised, it has also been accompanied by a decline in excess reserve requirements. Because the two principles of money multiplier function are the same, the consequence of a rise or fall is naturally the currency multiplier unchanged or the change is smaller.

In addition, with the continuous increase in interest rates of the central bank and the determination of the policy-making layer to show the determination to curb price increases and seasonal factors, the other index of money multiplier - the ratio of cash to demand deposits has also decreased slightly, which has also played a certain role in the improvement of the monetary multiplier.

It is because of other factors' restraining effect on the reserve requirement ratio that the effect of the tool has been greatly reduced. If we follow this logic, the future monetary multiplier will remain high.

From the perspective of excess deposit reserve, although the end of 3 has dropped to a low level of 1.5%, the liquidity of the banking system is still abundant, especially with the increase in foreign exchange due to the appreciation of the renminbi and the new liquidity added, which means that its containment effect on the statutory reserve requirement still exists.

Under the recent acceleration of the RMB appreciation trend, "hot money" is accelerating to flow into China. Data show that in March, China's foreign exchange accounted for 400 billion yuan, but in March China's trade surplus was only $140 million. Analysts believe that due to the enhanced expectations of RMB appreciation, the recent rise in the volume of foreign exchange settlement eventually pushed up the increase in foreign exchange holdings, and also pushed up the issuing scale of the basic currency.

In addition, from the ratio of cash to demand deposits, it is mainly affected by the proportion of cash transactions and non cash transactions planned by the economic subjects, the relative opportunity cost of holding cash and deposits (generally measured by the difference in the yield of the two parties), the expected inflation rate and customs and habits. Generally speaking, in the country, the second quarter of the year is basically Cash - the lowest deposit ratio, and gradually increased from the third quarter to the fourth quarter. This means that at least for a certain period of time, the ratio will show a downward trend and increase the monetary multiplier.

A comprehensive analysis shows that, due to the reverse effect of other factors, even if the deposit reserve rate continues to rise in the future, the possibility of currency multipliers will decrease. This also means that the frequent adjustment of the policy will not have an expanded influence on the money supply, and there will still be much room for adjustment in the future.

The dispute between liquidity shock and profit

However, some people believe that although the impact on overall liquidity may be limited, the liquidity impact of frequent increase in deposit reserve ratio on individual banks, especially small and medium-sized banks, deserves attention. Tang Shuangning, chairman of China Everbright Group, recently wrote that the adjustment of deposit reserve ratio should take into account the liquidity bearing capacity of some small and medium-sized banks.

In its 2010 annual report, the CBRC said that the central bank raised the deposit reserve rate for the 6 time last year, raised the benchmark interest rate on deposit and loan for the 2 time, gradually reduced the liquidity level of the banking system, and increased the interest rate volatility in the inter-bank market, and increased the liquidity of some small and medium-sized commercial banks. Irregularities such as high interest collection, high price transactions and deposits may arise.

The liquidity risk of small and medium banks is also attracting the attention of the CBRC. At the second financial and economic briefing meeting of the CBRC in 2011, Liu Mingkang, chairman of the CBRC, proposed that we should guard against liquidity risks, carry out continuous and dynamic monitoring of liquidity risks, monitor the daily average loan and liquidity level by monthly monitoring, and request banks to standardize the operation and assessment of deposit business.

According to the reporter's understanding, in order to deal with the indicators such as the end of year loan to deposit ratio, some commercial banks are alleviating the financial products' expiry date at the end of the month, which also leads to a marked increase in the end of the deposit season.

According to data released by Puyi fortune, in the first quarter of this year, compared with 2010, the proportion of financial products under six months has exceeded 80% of all products. Among them, the issuance of ultra short term products under one month has increased by 5 percentage points, becoming one of the largest circulation products in each period.

However, some market participants believe that the upper limit of the deposit reserve ratio adjustment proposed by some small and medium-sized banks on the grounds of affecting liquidity is not a justification.

"With the liquidity of the banking system still relatively abundant, the liquidity tensions of some small and medium-sized banks can be solved through the interbank market, but it is only necessary to face higher lending rates. Even if the whole banking system is short of liquidity, it can also be solved by reverse repurchase in the open market, "the person said. In fact, for banks, there is more interest behind the dispute over the deposit reserve ceiling. Frequent adjustment of the reserve ratio will seriously squeeze their profit margins.

For the banking sector, the real issue behind the deposit reserve ceiling is more interest. Its frequent adjustment will severely squeeze the profit margins of the whole industry, especially small and medium-sized banks.

The frequent adjustment of the deposit rate will not have an expanded influence on the money supply. There will still be much room for adjustment in the future.