Editor's note

Zheng Lei, Deputy Dean of INERI, said in an interview with a reporter from Securities Daily: “The large-denomination certificate of deposit is more stable and safer than other financial products of banks, and the income is slightly higher than that of most financial products. Therefore, it is not difficult to understand that customers who originally liked to buy stable and high-yield wealth management products are now turning to grab large deposit certificates. In addition, due to the release of new asset management regulations and the downward impact of market interest rates, many bank wealth management products are expected to have declining yields, and even floating losses may occur due to market fluctuations. Under this circumstance, large deposit certificates are not only safe, but also profitable, which is naturally popular."

Large-denomination certificates of deposit, as a safe, stable and high-yielding deposit product of banks, have always been favored by customers. Since the beginning of this year, the supply has exceeded demand, and some products can only be bought by grabbing.

"Recently, a reporter from "Securities Daily" visited a number of bank outlets and found that the popularity of large-denomination certificates of deposit by investors is increasing. To purchase large deposit certificates, you need to queue up for appointment in advance. There are even phenomena that "you may not be able to buy by appointment" and "sold out within 2 minutes of release".

Zheng Lei, Deputy Dean of INERI, said in an interview with a reporter from Securities Daily: “The large-denomination certificate of deposit is more stable and safer than other financial products of banks, and the income is slightly higher than that of most financial products. Therefore, it is not difficult to understand that customers who originally liked to buy stable and high-yield wealth management products are now turning to grab large deposit certificates."

Large deposit receipts into "fragrant pastry"

Some products sold out in 2 minutes

Recently, some citizens complained to a reporter from Securities Daily, saying, "Recently, the yield of bank wealth management products is not as good as before. I don’t know much about wealth management products such as stocks and funds, so I might as well buy a large deposit certificate, which not only has a high rate of return, but is also safe, and it will surely protect the capital. But I didn't expect that the large deposit receipt was so popular that I couldn't get it even after an appointment."

Large-denomination certificates of deposit are special deposits launched by banks for depositors with large amounts of funds. There is a certain funding threshold, with a minimum deposit of 200,000 yuan. Large-denomination certificates of deposit are bank deposit assets and are protected by the deposit insurance system. Full coverage can be obtained within 500,000 yuan.

In order to investigate the current real sales of large deposit certificates of banks, a reporter from Securities Daily recently visited major bank outlets in Beijing and found that the sales of large deposit certificates are indeed quite hot. Due to the large number of citizens coming to buy, some products even can be bought only by grabbing.

A wealth management manager of a major state-owned bank's Beijing branch visited by a "Securities Daily" reporter told a "Securities Daily" reporter: "Affected by the new regulations on asset management, the expected yield of wealth management products continues to decline. Large-denomination certificates of deposit are deposit products, and the expected return rate is similar to that of non-guaranteed financial products. Therefore, more people have recently purchased large deposit certificates. Usually, large deposit certificates are sold out within a few minutes, and people need to queue up in advance to buy them."

The manager of a Beijing branch of a city commercial bank said in an interview with a reporter from Securities Daily that the most popular wealth management product in the past was structured deposits with higher interest rates. However, as the rate of return on structured deposits fell and floated according to marketization, large deposit certificates began to become popular.

"Securities Daily" reporters visited many bank outlets in Beijing and found that the structured deposit market did show signs of cooling down, and some banks even suspended the sale of structured deposits for a time. According to statistics from Puyi Standards, in July 2020, the issuance of structured deposit products was 1,020, with a decrease of 715 from the previous month. Among them, the average expected rate of return on RMB structured deposits was 2.61%, with a decrease of 0.08 percentage points from the previous month. With the continuous reduction in the scale of structured deposit issuance and the expected return rate no longer "attractive", large deposit certificates have begun to become "sweet pastry" in the eyes of the public.

"Our bank has a small amount of certificates of deposit issued. The amount of each issue is about 50 million to 100 million yuan. It starts to sell at 8:30 and it will be robbed in about 2 minutes. Many of my customers have not bought a large deposit certificate." The manager told reporters.

In the past two years, asset management regulations have continued to tighten, gradually breaking people's inherent impression of bank wealth management products. Especially since the beginning of this year, the average yield of wealth management products has begun to "break 4", and the transition to net-value wealth management products has begun. In this process, the net value of many wealth management products "break 4". In this context, the inherent image of "guaranteed capital, stability, strong redemption, and high yield" in bank financial management has basically been overturned.

According to the monitoring data of Puyi Standard, a total of 276 banks issued 1,403 bank wealth management products (including closed-end expected return, open-end expected return, and net value products) in June. The number of issuing banks increased by 10 and the number of products issued decreased by 56 models. Among them, the average return rate of closed-end expected return RMB products was 3.78%, with a decrease of 0.01 percentage point from the previous period. It hit a 43-month low.

Zheng Lei told "Securities Daily" reporter that due to the release of new asset management regulations and the decline in market interest rates, many bank wealth management products are expected to continue to decline in yields, and may even appear to suffer losses due to market fluctuations. Under this circumstance, large deposit certificates are not only safe, but also profitable, which is naturally popular."

"Volume and price" of large deposit certificates dropped

The common choice of regulators and banks

During the visit, the manager of a joint-stock bank revealed to "Securities Daily" reporter that "banks need to report to THE PEOPLE'S BANK OF CHINA for issuing large-value certificates of deposit, and then issue them as planned. Many customers have inquired about large deposit certificate products. However, our bank has not had a quota for a long time, so it is unable to meet customer needs in this regard."

According to statistics from China Currency Network, a reporter from Securities Daily found that as of 29 July, the number of new large-value certificates of deposit issued since July this year was 233, and the actual subscription amount totaled 2.663 billion yuan. In contrast, as of 30 June, the number of new large-value certificates of deposit issued in June this year was 134, and the actual subscription amount totaled 4.202 billion yuan. The month-on-month data showed that the amount of new large-value certificates of deposit issued in July was significantly smaller than that in June. The number of large-value certificates of deposit issued in July last year was 300, and the actual subscription amount was 9.039 billion yuan. In July of this year, the issuance of large-value certificates of deposit was reduced by more than half.

Deng Yu, a researcher at the Bank of Communications and a senior researcher at the Nishizawa Research Institute, said in an interview with a reporter from Securities Daily that large deposit certificates are different from regular fixed deposits and require special approval and filing, and each phase of the product needs to be specifically designed. The large-denomination certificate of deposit requires complicated procedures in the issuance, approval, filing, product design, etc., and the issuance is very difficult, so it will affect the issuance volume. At the same time, since the beginning of this year, the supervisory authorities have severely cracked down on the phenomenon of bank capital arbitrage and "idling", and the issuance of large deposit certificates will also be affected to a certain extent.

It is worth noting that only 2 of the large-value certificates of deposit issued in July this year are 5-years, and 75 are 3-years. 7 of the large-value certificates of deposit issued in the same period last year had a five-year period and 107 had a three-year period. From this point of view, the issuance of large-denomination certificates of deposit with longer maturities of 5 years and 3 years is becoming less and less.

"Securities Daily" reporter also found that the issuance rate of large-value certificates of deposit is also declining. "Securities Daily" reporter also found that the issuance rate of large-value certificates of deposit is also declining. Among the large deposit certificates issued in the past two months, there is no longer a certificate with an interest rate of more than 5%. In the previous May, some of the large deposit certificates issued by some rural commercial banks included certificates of deposit with interest rates exceeding 5%.

The branch manager of another joint-stock bank visited by "Securities Daily" reporter stated that the bank’s large-denomination certificate of deposit interest rate has generally been lowered, and last year there were products with an interest rate of 4%. At present, the highest interest rate for similar products is only about 3.48%, and large deposit certificates with a maturity of more than 3 years have become rare products.

An industry insider told "Securities Daily" reporter that deposits currently account for a relatively high proportion of the overall liabilities of commercial banks. Adjusting deposit pricing and structure may become a breakthrough for banks to manage the cost of liabilities. For example, the Board of Supervisors of Agricultural Bank of China recently reviewed and approved the "Recommendations on Further Strengthening the Management of Deposit Pricing". From this point of view, the reduction in the issuance of large-value certificates of deposit and the reduction in interest rates are also in line with the current market conditions.

"Securities Daily" reporter also noticed that in June, the four major state-owned banks voluntarily lowered the issuance rates of 3-year and 5-year certificates of deposit, and commercial banks’ deposit rates of various maturities also declined.

Dong Ximiao, a distinguished researcher of National Institution for Finance & Development, said in an interview with a reporter from Securities Daily: "Recently, banks have taken the initiative to lower deposit interest rates on the debt side, mainly to ease the pressure brought by the narrowing of interest margins and promote the financing cost of the real economy. Down. After the loan interest rate drops, banks will weaken their motivation to raise deposit interest rates, which will further promote the stability of deposit interest rates."

Deng Yu analyzed that, “On the one hand, the issuance cost of large-value certificates of deposit is relatively high, and high interest rates will raise the cost of liabilities of commercial banks. On the other hand, the contraction of deposit and loan interest rates will restrict interest rate market reform. Competing in the same industry will cause violations of the principle of self-discipline in deposit pricing. Therefore, the shrinking of the issuance of large-value certificates of deposit and the reduction of interest rates are the common choice of the regulatory authorities and commercial banks."

This article is reproduced from "Securities Daily Net"