Central Bank: What does interest rate control regulate? 1. What does interest rate control in developed countries control?
Historically, the goal of interest rate control was demand savings. Europe and America mainly control deposit interest rates, especially deposit interest rates. Even Islamic banks now. Therefore, the core of interest rate marketization is the marketization of deposit interest rate.
In China, we should not regard the control of deposit interest rate as the control of residents' savings, but the deposit interest rate should broadly cover the interest rate of bank deposits or financial assets similar to deposits. In China, the interest rates of savings, wealth management products and national debt are closely related. Judging from the proportion of bank savings balance in all risk-free (or close to risk-free) and fixed-income assets, the marketization degree of deposit interest rate in China is higher than customary cognition; Similarly, this also means that whether the savings interest rate can go down is seriously limited by the yield of other savings alternative assets.
2. What is the main motivation of the wave of global interest rate marketization?
Historically, the motivation was runaway inflation. Few countries take the initiative to market interest rates. The wave of global interest rate liberalization may be mainly due to the impact of the energy crisis, especially Paul? The serious inflation in Volcker's period led to the balance between anti-inflation and interest rate control. Therefore, higher real interest rates have indeed successfully curbed inflation and significantly slowed down the central bank's currency issuance.
In China, interest rate marketization is actively carried out under the background that interest rate control is still effective and domestic inflation is stable. This situation is rare, and few central banks are willing to take the initiative to reduce their effective policy tools. It can be predicted that after the interest rate marketization is basically completed, the inflation level and money supply of all calibers in China will be significantly lower than before.
3. Is interest rate liberalization conducive to promoting economic growth?
Historically, in the process of interest rate marketization and the initial stage of completion, a country's economic growth is often slow, not fast. It will take about five years after the interest rate marketization is completed, before the economic system can absorb this impact and re-establish the track of economic growth. Financial economists, on the other hand, are accustomed to a general and difficult-to-prove statement: interest rate liberalization may not be beneficial to short-term economic growth, but it is beneficial to sustainable economic growth.
In China, the deposit interest rate is compared with the inflation level, and the loan interest rate is compared with the risk premium, which shows that interest rate control is a lower interest rate deviating from the market at both ends of deposit and loan. Therefore, the interest rate control in China is typical. Financial accelerator? Role, that is, promote faster economic growth. Therefore, the marketization of interest rate will slow down the economic growth of China.
4. Is interest rate liberalization conducive to curbing inflation?
Historically, yes, it is very effective. Moreover, the M2 growth rate of the central bank is usually closely related to the inflation rate. Therefore, the marketization of interest rate means that monetary policy pays more attention to the real price of money than the quantity of money.
In China, the background of interest rate liberalization is equally peculiar. The Bank of China showed no signs of trying to weaken its control over the money supply, nor did it take obvious measures to strengthen the real price of money. This implies that the central bank has actually weakened the concern between the overall credit and output gap of society.
5. Is interest rate liberalization conducive to improving income distribution?
Historically, the relationship between interest rate marketization and income distribution is not clear. In the past 30 years, the income distribution in Europe and America has been deteriorating, but there is no strong evidence of interest rate marketization and long-term income distribution.
In China, in the process of interest rate marketization reform, income distribution is likely to deteriorate rapidly. The marketization of interest rates is beneficial to depositors and unfavorable to debtors. In China, the central government and the wealthy class in China are the main savers, and they are also the main beneficiaries; Local governments and enterprises with high debt ratio (such as science and technology enterprises and small and medium-sized enterprises) are the main debtors and will also suffer mainly.
6. Will interest rate liberalization bring about changes in exchange rates and capital flows?
Historically, yes. In particular, the marketization of interest rates in big countries may even lead to crisis adjustment in peripheral countries. It is generally speculated that there is a causal relationship between the marketization of interest rates in the United States and the debt crisis in Latin America, the financial explosion in Japan and the East Asian crisis. But more credible research is that the culprit may be the welfare system in democratic countries.
In China, although the openness of China's financial system still needs to be improved, the marketization of interest rates has brought about significant changes in exchange rates and capital flows. 20 14 is probably the turning point of China's exchange rate and capital flow. People began to worry about the trend depreciation of RMB and the continuous net outflow of capital.
7. Can interest rate liberalization significantly reduce deposit and loan interest rates?
Historically, the interest rate depends on the growth and quality of the rich economy, the risk and return of the real economy, the total amount of money and credit and the efficiency of the financial system, which is not controversial in theory and demonstration. Therefore, in the long run, it is difficult to determine the relationship between interest rate marketization and deposit and loan interest rates. Interest rate control is usually a low interest rate under control, so in the process of interest rate marketization, the nominal interest rate level of both depositors and lenders usually rises.
In China, if the banking system does not try its best to strengthen leverage, avoid supervision and obtain spreads through the shadow banking system, the impact of the sharp rise in nominal interest rates will be more obvious in the initial stage of interest rate marketization. At present, the downward trend of interest rate level is mainly the result of economic recession and deflation, not that interest rate marketization has brought lower deposit and loan interest rates.
8. Has interest rate liberalization narrowed the deposit and loan spreads?
Historically, this is roughly the case. But the danger is that in the process of interest rate marketization, the deposit-loan spread becomes extremely unstable, and may even be temporarily upside down, making the banking industry bear huge risks. Bank valuation is quite low, and PB usually does not exceed 1 times. At present, the deposit and loan spreads in Taiwan Province Province, Hongkong and Japan are relatively low, which may be caused by the persistent local economic downturn and fierce financial competition.
In China, although the gross profit margin is large, there are many factors that affect the net profit margin, and interest rate marketization is only one of them. We believe that the ratio of income to cost, loan-to-deposit ratio requirements, reserve requirement ratio, competition intensity of banks, non-performing loan ratio and other factors have no less influence on the net profit rate than the interest rate marketization itself.
9. Has interest rate liberalization improved the financial performance of banks?
Historically, the marketization of interest rates has worsened the return on capital and assets of banks, increased the rate of non-performing assets and made the performance fluctuate more.
In China, the marketization of interest rates has obviously widened the differences in financial performance of banks. Generally speaking, in the past 10 years, city commercial banks expanded faster than joint-stock banks, rural credit cooperatives, five state-owned banks and foreign banks. After China's entry into WTO, the banking performance of foreign banks in China has not improved significantly.
10. Does interest rate marketization reduce the concentration of banks?
Historically, the marketization of interest rates made small and medium-sized commercial banks with no branches or few branches go bankrupt or be forced to merge. Although the financial performance of large banks is not good, they continue to expand their scale and transform into bank holding groups. The marketization of interest rates has reduced the number of American bankers by nearly 1/3, while almost all large and medium-sized banks in Japan have experienced repeated mergers and acquisitions. Generally speaking, the marketization of interest rates has significantly improved the concentration of banks.
In China, the concentration of banks has declined since the marketization of interest rates, but in the future, there will still be a large number of small and medium-sized banks in China facing merger or withdrawal.
What is the impact of interest rate liberalization on deposit and loan business?
Historically, this influence is concentrated in the following aspects: loan-to-deposit ratio keeps increasing even higher than 100%, and the bank loan business keeps tilting towards the housing-related business, and finally the proportion of housing-related loans reaches 25%-40%; Bank deposit business quickly concentrated in wealth management and private banks. Considering the account management fees of small and medium depositors and other factors, the real interest rate of most small savings accounts is negative. At the same time, asset charging services based on deposits and loans are pouring in.
In China, under the impact of interest rate liberalization, the central bank has not relaxed its control over the money supply, and the regulatory framework has not been significantly reformed, resulting in the banking industry increasing leverage through the shadow banking system and evading supervision, and the off-balance-sheet deposit business and loan business have been expanding. After the off-balance sheet was suppressed, the deposit and loan business began to bear the real pressure.
12. Does interest rate marketization promote the development of financial mixed industry?
Historically, yes, most central banks that refused to adopt the framework of financial mixed operation and supervision were forced to adopt the financial explosion in the late 1990s to re-determine the necessity of financial mixed operation. At present, it is not clear whether the advantages of financial mixed operation are the reduction of marginal cost and the improvement of financial service innovation ability brought by business collaboration and channel customers, or whether financial mixed operation makes banks evade supervision by increasing leverage through non-banks At the same time, the relationship between financial mixed operation and financial systemic risk is not clear, that is to say, whether a country adopts separate operation or mixed operation supervision seems to have nothing to do with the effectiveness of systemic risk supervision.
In China, the marketization of interest rate has obviously promoted the development of financial mixed operation, which may be the extensive deepening of cooperation between banks and non-banks within the group, because the barriers between subsidiaries within the group are not significantly smaller than those outside the group.
13. Has interest rate marketization promoted the development of intermediary business?
Historically, yes, banks have made up for the narrow spread through complex charging services. Usually, the proportion of intermediary business income may reach more than 25%. The marketization of interest rates forces banks to change from simple deposit and loan pricing to more complex and hidden charging services. The improvement of financial services perceived by consumers is not significant. Instead of promoting the development of intermediary business, interest rate marketization has promoted the development of self-operated and derivative business of banks, especially the development of derivative business. The main reason is to accelerate the quick ratio at both ends of the bank's assets and liabilities and turn credit risk into market risk. The continuous decline in the proportion of bank accounts has brought the Volcker rule after the crisis.
In China, the strong administrative power makes the intermediary business of banks shrink in the process of interest rate marketization, which is conducive to speeding up the derivative business of debt turnover and asset turnover, and the securitization business also develops slowly, so that the profit model of banks is still highly dependent on spreads.
14. Does interest rate liberalization make the financial system more stable?
Historically, the marketization of interest rates has made the financial system more fragile, which has nothing to do with the existence of deposit insurance system. In other words, the deposit insurance system can play its early intervention and payment box functions, but it cannot systematically reduce the bank mortality rate. For regulators, the key challenge is not small and medium-sized financial institutions, but how to maintain the stability of systemically important financial institutions.
In China, the relationship between interest rate liberalization and the soundness of the financial system needs to be verified.
15, is there an optimal order for financial reforms such as interest rate liberalization?
Historically, interest rate liberalization has little to do with exchange rate reform and the process of capital and financial transaction account convertibility. Although some studies discussed this topic in 1980s and 1990s, there was never enough empirical support.
In China, many scholars believe that interest rate liberalization is to raise the domestic price of RMB, while exchange rate is to raise the international price of RMB. Therefore, the interest rate reform comes first (capital control should be strengthened at this time) and the exchange rate reform comes later, which is the basic result of the capital account convertibility process. This optimal order arrangement is becoming more and more popular, but it has no practical basis. In China, any real reform, starting at any time, is the right choice, because we can't design or judge when the preconditions for a reform are ripe.