China allows negotiable interbank CDs as next step in market liberalisation

BEIJING - The People’s Bank of China (PBoC) has announced the introduction of Negotiable Interbank Certificate of Deposits, effective December 9. Issuance of the new CDs (ranging from one-month to three years) is open to commercial and policy banks, while purchase is open to both banks and non-bank financial institutions. Interest rates on the CDs are to be market-determined, with the Shanghai interbank offer rate (Shibor) to serve as a benchmark.

BBVA Bank says it views the step as part of a market development process in the ongoing transition to fully flexible interest rates (removal of the deposit rate cap is the key remaining step toward full interest rate liberalszation). “Separately, PBoC officials hinted today that a long-awaited deposit insurance scheme – widely viewed as a prerequisite for removal of the deposit rate cap – may be introduced early next year,” BBVA says. www.bbvaresearch.com (ATI).