PBOC Caps Maturity Period of Interbank Negotiable Certificates of Deposit at One Year

PBOC Caps Maturity Period of Interbank Negotiable Certificates of Deposit at One Year

Xu Wei

Date: Fri, 09/01/2017 - 14:20 / source:Yicai
PBOC Caps Maturity Period of Interbank Negotiable Certificates of Deposit at One Year
PBOC Caps Maturity Period of Interbank Negotiable Certificates of Deposit at One Year

(Yicai Global) Sept. 1 -- To guide the standardized and orderly development of the interbank deposit market, the People’s Bank of China decided that financial institutions shall be prohibited from issuing interbank negotiable certificates of deposit (IBNCD) with a maturity period of more than one year starting today.

Previously issued IBNCDs with a term of more than one year are not affected, the PBOC said on its official website yesterday.

IBNCDs with a maturity of at most one year can have terms of one month, three months, six months, nine months and one year, and can have fixed or floating rates, using the Shanghai interbank offered rate for the period as a reference.

The new IBNCD maturity policy is good for the product’s lifecycle, Sun Guofeng, head of the PBOC Financial Research Institute, told Financial News. The financial system lacks funds and with the new rule, IBNCDs can improve liquidity and boost support for the real economy, Sun said.

Simulations show that the rule change will have a minimal effect on IBNCDs with a term of less than one year.

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Keywords: Interbank Deposit, pboc