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<Research>M Stanley Foresees Structural Monetary Policy Tool Rates to Fall, Saving CN Banks RMB15B Annually
The People's Bank of China (PBOC) announced yesterday (15th) a reduction in the rates of various structural monetary policy tools by 0.25 ppts, Morgan Stanley said in its resea...
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<Research>M Stanley Foresees Structural Monetary Policy Tool Rates to Fall, Saving CN Banks RMB15B Annually
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The People's Bank of China (PBOC) announced yesterday (15th) a reduction in the rates of various structural monetary policy tools by 0.25 ppts, Morgan Stanley said in its research report. Among these, the one-year rate for various relending facilities was trimmed to 1.25%, and the rate for pledged supplementary lending (PSL) was reduced to 1.75%. Rates for other terms were also adjusted accordingly. The PBOC Deputy Governor, Zou Lan, also indicated that there is still room for further reserve requirement ratio (RRR) and interest rate cuts this year.

Lowering the relending rates and expanding the relending program scale are more favorable support measures for Chinese banks. Morgan Stanley estimated that a 25-bp rate cut will save banks approximately RMB15 billion annually in funding costs. The relatively attractive cost may also encourage banks to use more relending tools. More reasonable loan pricing and lower funding costs will help support loan and financial asset yields. Therefore, even if the loan prime rate (LPR) is mildly reduced, the net interest margin (NIM) of Chinese banks is expected to remain underpinned, said Morgan Stanley.

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