LPR announced for the first time： the one-year mortgage interest rate will drop to 4.25%.

　　Text/Guangzhou Daily All-Media Reporter Lin Xiaoli

　　Yesterday, the first quotation after the reform of LPR formation mechanism was announced, and the one-year LPR was 4.25%, which was lower than the current benchmark interest rate of 4.35%, in line with expectations.

　　On the same day, Liu Guoqiang, deputy governor of the central bank, said that the new LPR mechanism will help reduce the financing costs of enterprises, especially private and small and micro enterprises, but the personal mortgage interest rate will not fall. It is revealed that the People’s Bank of China will issue an announcement on the interest rate policy of individual housing loans in a few days.

　　On August 20th, the first quotation was announced after the reform of the loan market quotation rate (LPR) formation mechanism. According to the data of the National Interbank Funding Center at 9: 30, the one-year LPR is 4.25%, which is lower than the current benchmark interest rate of 4.35%, in line with market expectations. The new LPR over five years is 4.85%, which is also lower than the current benchmark interest rate of 4.9%.

　　On the same day, the State Council held a regular briefing on relevant policies. At the meeting, Liu Guoqiang, deputy governor of the central bank, said that the new LPR mechanism will help reduce the financing costs of enterprises, especially private and small and micro enterprises, but the interest rate of personal mortgage will not drop. It is revealed that the People’s Bank of China will issue an announcement on the interest rate policy of individual housing loans in a few days.

　　All kinds of bank loans should be priced with reference to LPR.

　　On August 17th, the central bank issued "Announcement No.15", saying that it decided to reform and improve the LPR formation mechanism, and authorized the National Interbank Funding Center to announce the loan market quotation rate at 9: 30 on the 20th of each month (postponed in case of holidays).

　　18 quotation banks shall make quotations to the National Interbank Funding Center before 9: 00 on the 20th of each month (postponed in case of holidays) by adding the open market operating interest rate (mainly referred to as the medium-term lending convenience interest rate MLF). The National Interbank Funding Center calculates the quoted interest rate of the loan market by arithmetic average after removing the highest and lowest quotations.

　　For the first quotation of the new LPR yesterday, E Yongjian, chief financial analyst of the Bank of Communications Financial Research Center, pointed out that the new pricing benchmark decreased slightly by 10bp and 5bp respectively compared with the previous loan benchmark interest rate, which should belong to a slight decline, reflecting that the supervision, while guiding the decline of the loan interest rate, also paid attention to avoiding a one-time drop that would impact the market, thus giving the market time for adaptation and transition.

　　According to the requirements of the central bank, from now on, banks should mainly refer to the quoted interest rate in the loan market for pricing new loans, and adopt the quoted interest rate in the loan contract with floating interest rate as the pricing benchmark.

　　"All kinds of loans should refer to LPR." Liu Guoqiang stressed that at the same time, banks are required to improve the information system and contract text related to loan interest rate pricing. According to reports, since the third quarter of 2019, the central bank will include the use of LPR and the competition behavior of loan interest rates into the macro-prudential assessment (MPA). At the same time, improve the statistical method of loan interest rate. From August 20th, instead of counting the fluctuation of loan interest rate with reference to benchmark interest rate, we will count the increase and decrease points on the basis of LPR.

　　Liu Guoqiang said that the focus of this reform to improve the LPR formation mechanism is to deepen the interest rate marketization reform, and to use reform methods to promote the reduction of the financing cost of the real economy.

　　The new LPR formation mechanism will not reduce the mortgage interest rate.

　　"In the current situation, the implementation of LPR is conducive to reducing the financing costs of enterprises, especially private and small and micro enterprises." Liu Guoqiang prejudges.

　　According to the data of China Banking and Insurance Regulatory Commission, in the first half of the year, the interest rate of new loans for inclusive small and micro enterprises was 6.82%, which was 0.58 percentage points lower than the annual average interest rate in 2017. In addition, by reducing some credit-related expenses, the comprehensive financing cost of small and micro enterprises has dropped by more than 1 percentage point.

　　However, regarding the personal mortgage interest rate, Liu Guoqiang emphasized that the mortgage interest rate changed from the reference benchmark interest rate to the reference LPR, but the final loan interest rate level should remain basically stable. "How to operate specifically? In a few days, the People’s Bank of China will issue an announcement on the interest rate policy of individual housing loans. We are still investigating some details, and we will clarify them later. But one thing is certain, the interest rate of mortgage will not fall. " Liu Guoqiang said.

　　Liu Guoqiang pointed out that it is necessary to resolutely implement the requirements of Politburo meeting of the Chinese Communist Party on July 30th, adhere to the positioning of "houses are for living, not for speculation", implement the long-term management mechanism of real estate, and not use real estate as a short-term means to stimulate the economy, ensure the effective implementation of differentiated housing credit policies, and keep the interest rate of individual housing loans basically stable.

　　Focus on the impact of the new LPR mechanism

　　1. Does it affect the RRR cut and exchange rate?

　　Will the improvement of LPR reform affect the adjustment of deposit reserve ratio?

　　Liu Guoqiang said that the interest rate marketization reform is like "building a canal", which aims to make the water flow smoother and make the water flow to the fields more efficiently and accurately, but the size of the water still depends on the gate. Therefore, the interest rate marketization reform is conducive to enhancing the effect of monetary policy, but it cannot replace monetary policy or other policies.

　　Sun Guofeng, director of the monetary policy department of the central bank, also said at the policy briefing that on May 6 this year, the central bank announced the implementation of a new framework of "three grades and two excellent" reserve ratio, which was implemented three times on May 15, June 17 and July 15, initially establishing a framework for low deposit reserve ratio for small and medium-sized banks.

　　"At present, the average reserve ratio in China is about 11%, which is relatively low among developing countries. If excess reserves are added, the overall reserve ratio in China is also low compared with that in developed countries. From the perspective of the statutory reserve ratio, there is some room for adjustment in the future, but in general, this space is not as big as everyone thinks. " Sun Guofeng said that from the perspective of reserve ratio, the key point is to improve the statutory reserve ratio framework of "three gears and two excellent".

　　Regarding the exchange rate, Sun Guofeng also said that we usually say that the exchange rate is directly related to the market interest rate. This reform does not involve the change of market interest rate. The key word of this reform is the marketization of loan interest rate, which has no direct impact on the RMB exchange rate.

　　2. Short-term or impact on bank profits

　　Regarding the impact on banking institutions, Liu Guoqiang said that in the short term, the bank interest margin may decrease, which will affect the profits of banks. However, in the long run, the financing cost of the real economy has decreased and the development has improved, the non-performing rate of bank credit will come down, the credit quality will be improved, and the financial and real economy will achieve a virtuous cycle of healthy development.

　　Sun Guofeng also said that the short-term decline in loan interest rate may also have a certain impact on the bank’s interest margin and profit, but on the other hand, as far as deposit interest rate is concerned, the benchmark deposit interest rate is retained and will be retained for a long time to come. The People’s Bank of China will also guide the self-discipline mechanism of market interest rate pricing, strengthen the self-discipline management of deposit interest rate, maintain the market competition order, stabilize the cost of the bank’s debt side, and create favorable conditions for the bank’s sustainable development.

　　"In the short term, the impact is uncertain, and it is hard to say that there is a calculation. In the medium and long term, the improvement of the independent pricing ability of bank loans is conducive to the sustainable and healthy development of banks and is beneficial to banks. " Sun Guofeng believes.