Mo Kaiwei: Why do commercial banks like to issue interbank certificates of deposit?


According to media disclosure, the enthusiasm of banks to issue interbank certificates of deposit (CDS) in 2022 is not reduced, and the planned issuance quota of most banks has increased by different degrees compared with 2021.In addition, incomplete statistical data from DataYes shows that as of January 23, more than 200 banks have issued plans and announcements for the issuance of interbank certificates of deposit in 2022, among which urban commercial banks, rural commercial banks and other small and medium-sized banks are the main force for issuing interbank certificates of deposit.In addition, nearly 140 banks have issued interbank certificates of deposit totaling more than 920 billion yuan so far this year.More commercial banks are expected to follow in the future.Seeing this news, many financial industry insiders and external readers wonder why commercial banks are so eager to issue interbank certificates of deposit, and the momentum is even greater than in previous years. What makes commercial banks so eager to issue interbank certificates of deposit?Why don’t commercial banks actively raise deposits and improve their ability to absorb deposits from the public? Can’t expanding the scale of deposits replace inter-bank certificates of deposit?What is particularly puzzling is that the interest rate of issuing inter-bank certificates of deposit is often higher than that of absorbing deposits from the public. Isn’t issuing inter-bank certificates of deposit making the operating cost of commercial banks higher and eroding the operating profits of commercial banks?According to the disclosure of relevant institutions, the interest rate of interbank deposit certificates issued by banks in recent years is generally maintained at 2.2%, which is about the same as the central bank’s policy rate and much higher than the interest rate of demand deposits and one-year time deposits that commercial banks attract to the public.At present, interbank liabilities account for 20%-30% of bank liabilities, and the rising interest rate of interbank certificates of deposit will drive up the cost of bank liabilities substantially.Let’s first understand what is the interbank certificate of deposit: The interbank certificate of deposit appears as a substitute for interbank deposit and improves the short, medium and long-term interest rate curve quoted by Shibor in the interbank lending market.The inter-bank deposit certificate is a bookkeeping certificate of time deposit issued by deposit-type financial institutions in the national inter-bank market, whose investment and transaction subjects are members of the national inter-bank lending market, fund management companies and fund products.Deposit-type financial institutions can determine the amount and maturity of each issue of inter-bank deposit by themselves within the quota of issuance for archival filing in the current year, provided that the amount of issuance of a single issue shall not be less than RMB 50 million yuan. The maturity of issuance is generally divided into five types: 1 month, 3 months, 6 months, 9 months and 1 year, and the longest maturity shall not exceed 1 year.Issuance of trade certificates of deposit is the commercial bank, in other words, broaden the financing channels, to solve the financing difficulties of a kind of temporary and commonly used means of financing, also one of the important tools of active liability management, bank issuing trade certificates of deposit helps to expand the scale of the commercial bank debt, better promote commercial Banks active liability management ability, and create favorable conditions for do work do big asset size.Understand the connotation and essence of interbank deposit certificate, we would not be difficult to understand why commercial Banks keen to release trade certificates of deposit, in a word, also forced to commercial Banks, “is there a way to raise more deposits, the development of effective source of debt and expand the scale of debt, estimates that the commercial bank is not for issuing trade certificates of deposit.Obviously, there are three factors that drive commercial banks’ enthusiasm for issuing inter-bank certificates of deposit. First, although the interest rate is higher, issuing inter-bank certificates of deposit has a large and relatively stable capital scale, which is conducive to commercial banks’ scientific and reasonable arrangement of fund utilization and management and to the financing of real enterprises.As we all know, commercial banks have three main sources of funds: first, central bank re-lending, medium – and long-term lending facilities, RRR reduction and other ways to release;The second is inter-bank mutual adjustment, that is, commercial banks make mutual funds adjustment through inter-bank lending market, including issuing inter-bank certificates of deposit;The third is savings deposits, namely time and demand deposits absorbed from the public through various means.At present, the interest rate of funds released by the central bank, re-lending and other monetary policy tools is relatively low, and the interest rate of deposit-taking from the public is relatively high, but the interest rate of deposit-taking from the public is lower than that of inter-bank certificates of deposit.Even so, at present, the “financial disintermediation” of commercial banks is intensified, and social funds are constantly diverting to the stock market, bond market, property market and other fields, which makes it more difficult for banks to attract public deposits.Due to the brand effect of large commercial banks, the public is willing to deposit, while small and medium-sized commercial banks, especially local small and medium-sized legal person banks, are affected by many factors such as operation scale and social reputation, making it more difficult to absorb deposits.In view of this situation, although many commercial banks have increased their efforts to attract deposits from the public, due to the limited total cake of the deposit market, the competition is intensified, and the effect is often not satisfactory, so they can only focus on the expansion of debt scale on interbank certificates of deposit.Although issuing inter-bank deposit certificates pays a little more interest, the effect is naturally incomparable to that of absorbing deposits from the public. It can receive immediate effect, expand the source of liabilities in a timely manner, and create favorable conditions for large commercial banks with rich funds to improve the efficiency of fund use.All inter-bank funds are activated and the effective allocation of financial resources is realized, which plays a positive role in improving the efficiency of the use of funds in the whole bank.The most important is small and medium-sized commercial Banks by issuing trade certificates of deposit, and effectively expand the sources of resources, and trade certificates of deposit time is relatively fixed, can keep the capital stability, favorable reasonable arrangement of funds use and management of small and medium-sized commercial Banks, more conducive to effective credit support for micro entities, small and medium enterprises, to crack the entity enterprise financing difficulties will play an important role.In addition, after the implementation of the new rules on capital management, banks are faced with the pressure from the liability side and the pressure of collecting deposits. In order to make up for their lack of funds, they have to issue inter-bank certificates of deposit to solve the problem.A few years ago, the financial market order confusion, bank regulatory arbitrage, idle funds, and so on chaos is outstanding, resulted in the swelling of shadow banking, buried the potential financial risks, this was the establishment of the China banking regulatory commission regulatory storm caused a rounds, together with the central bank to bank financial market turmoil has carried on the effective regulation, introducing information technology new rules, under such a strict regulatory situation,All current commercial Banks, especially small and medium-sized Banks in terms of deposits encountered greater difficulties and pressure, high interest rate deposits after termination, structured deposits contraction, small and medium-sized bank savings deposits of source reduction, many small and medium commercial bank deposits of negative growth, raising the small and medium-sized Banks need to use the interbank market to supplement their own funding gap of crisis and urgency.At the same time, for commercial banks, “misfortunes never come singly”, the stock market recovered in the early stage, part of the deposit into the stock market, bank deposit loss is more serious, the bank debt pressure increased.Especially after the central bank to regulate the structural deposit regulatory authorities, the structural deposit showed a continuous decline.As of the end of November 2021, the balance of structured deposits in China’s national banks was 5.46 trillion yuan, down 2.39 percent month-on-month and 26.81 percent year-on-year, hitting the lowest level since December 2016, according to data disclosed by the Central bank.And it shows two characteristics: the pressure drop pressure of large commercial banks is larger;Second, the continuous pressure drop in the size of structured deposits and the decline in yields are also weakening their appeal to savers.Interbank certificates of deposit are increasingly difficult to maintain stability on the debtor side;In particular, the continued decline in the scale of structured deposits will reduce the scale of liabilities of banks, so banks need to develop new products to adapt to future development.At the same time, because the interest rate of structured deposits is higher than that of other time deposits, it is difficult for banks to expand the capital source of the liability side through structured deposits on a large scale.The pressure of insufficient fund source can only be solved by issuing interbank certificates of deposit.Thirdly, in recent years, the asset scale of commercial banks has expanded rapidly, especially the substantial growth of credit business has consumed the liquidity and capital of commercial banks, making them short of funds. In order to make up for the shortage of liquidity and capital, commercial banks sometimes have to issue inter-bank certificates of deposit temporarily.As you know, commercial banks have been riding high on the real estate boom, and their balance sheets have expanded rapidly over the past two decades.According to the data disclosed by the Central Bank, by the end of June 2021, the total assets of banking financial institutions were 336 trillion yuan, with a year-on-year growth of 8.6%;Sixteen years ago, in 2005, the total assets of China’s commercial banks were rmb30tn, an 11-fold increase with an average annual growth rate of more than double digits.At that time, deposits also maintained high integration growth, which strongly supported the rapid expansion of commercial bank credit scale.However, in the past two years, the situation has reversed, and the competition of commercial banks to attract deposits has become increasingly fierce. For example, since 2021, the real estate loans of commercial banks and the loans related to urban investment enterprises have decreased due to the influence of stricter regulation and the increase of defaults in the open market, and the pressure of collecting deposits has increased.Especially in recent years, deposits have almost negative growth, which makes the liabilities of commercial banks unable to support the expansion of their assets, especially aggravating the liquidity shortage, triggering the rapid consumption of capital, and reducing the ability of capital replenishment.All these make the management of commercial banks into an unprecedented crisis.Therefore, commercial banks have to focus on issuing interbank certificates of deposit to expand the source of resources.The issuance of inter-bank certificates of deposit has several advantages, which plays a particular role in solving the shortage of temporary funds of commercial banks. First, the interest rate is relatively high, which is highly attractive to commercial banks that “subscribe” for inter-bank certificates of deposit, and most of them are willing to “sell” their rich funds through inter-bank certificates of deposit.2 it is to face the issue of object is a member of the national inter-bank lending market, fund managers and fund products, fund of profit-driven by other financial institutions, making it easier for the issue of trade certificates of deposit “subscribe”, is far more good than deposits to the public, can raise large sums of money, it is easier to solve temporary insufficient funds.In addition, financial institutions that “subscribe” for inter-bank CDS are also willing to effectively “adjust” their excess and temporarily unused funds due to the high interest rate, so as to obtain higher returns on inter-bank funds.In a word, commercial banks issue INTERBANK deposit certificates mainly to relieve the pressure on the bank’s liability side and solve the problem of insufficient development resources.At the same time, this is also related to the regulatory authorities last year on commercial banks deposit rate pricing self-regulation mechanism adjustment.By issuing interbank certificates of deposit, small and medium-sized banks and foreign banks can obtain more inter-bank resources from large banks and promote their own development.Moreover, in the future, for some commercial banks with low customer stickability, the pressure from the debt end will increase. Considering the rising pressure of collecting deposits and the structural adjustment of the debt end, it is expected that the issuance scale of inter-bank CDS will remain high in 2022, which should be a financial historical trend that cannot be reversed.

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