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Image source: Visual China

Author: Xiao Wang

Editor: Wang Weikai

Produced by Prism Tencent Xiaoman Studio

"This large-denomination certificate of deposit is the best financial decision I have made in the past five years." Li Ya (pseudonym), an employee of a large Internet company, said to the author with emotion.

In February 2020, she bought a five-year large-denomination certificate of deposit of 200,000 yuan at a private bank with an annual interest rate of 4.2%. "The estimated interest is 23.01 yuan per day, and the interest has accumulated to more than 37,000 yuan so far. It is expected to receive 42,000 yuan in interest when it matures," Li Ya told the author.

In seven months, this large-denomination certificate of deposit will mature. Li Ya suddenly discovered that there were no large-denomination certificates of deposit in the market.

"We have not issued three-year and five-year large-denomination certificates of deposit for a long time. When customers come to us for consultation, we recommend that they just deposit directly in fixed-term deposits." A customer manager of a city commercial bank in South China told the author.

Since the launch of large-denomination certificates of deposit in June 2015, bankers believe that for a long time, it has only been popular among a small number of customers, while most customers have ignored it. As the market's risk-free return level continues to decline,Commercial BanksWith the start of a series of interest rate cuts, residents are more willing to deposit money, and large-denomination certificates of deposit have become increasingly unaffordable in the past three years. It is not uncommon to see people "setting alarms to grab large-denomination certificates of deposit" and "waiting in line for half a year for large-denomination certificates of deposit".

Nowadays, more and more banks are no longer short of deposits, and large-denomination certificates of deposit have been "banished" from their former "deposit-attracting magic weapon" by banks.

“The rush to buy large-denomination certificates of deposit has caused me to suffer from mental breakdown”

After looking through all the apps of large state-owned banks, joint-stock banks and familiar private banks, Li Ya finally accepted a reality: there are almost no large-denomination certificates of deposit with interest rates exceeding 2%.

What Li Ya regrets most is that she bought a five-year large-denomination certificate of deposit of 200,000 yuan with an annual interest rate of 4.0% in 2020. Later, because a friend borrowed money, she withdrew the large-denomination certificate of deposit in advance. "My friend only borrowed 50,000 yuan, but after I took it out, I never saw such a high-interest certificate of deposit again."

At the end of July, state-owned banks lowered their deposit rates for the fifth time since 2022, with the five-year time deposit rate being only 1.8%. An investor with 1 million yuan in deposits would lose 100,000 yuan in interest income if he bought a five-year large-denomination certificate of deposit (at an interest rate of 3.8%) three years ago and deposited it now for five years.

The interest rates on large-denomination certificates of deposit are getting lower and lower, and they are becoming increasingly difficult to buy. "I've been scrambling to get large-denomination certificates of deposit until I've had a nervous breakdown. I've set an alarm every day to grab them," one netizen said when sharing his experience of scrambling for large-denomination certificates of deposit.

Customers who are able to grab large-denomination certificates of deposit always attract the envy of others. "How did you get it? It seems that it is gone after you enter the password."

"There is no skill, only hand speed." The netizen replied.

In April this year,China Merchants BankIt was discovered that 3-year and 5-year large-denomination certificates of deposit have been removed from mobile banking.

In response to inquiries, a CMB account manager said that currently customers have a strong willingness to deposit, bank liquidity is relatively abundant, but asset investment is relatively weak. Reducing the cost of medium- and long-term deposits or certificates of deposit with higher costs can better manage net interest margins.

"It was basically out of stock last year." Zhang Nan (pseudonym), a customer of China Merchants Bank, complained to the author that the removal of the products from the shelves simply completely cut off the desire to buy large-denomination certificates of deposit.

She also set an alarm to wait for large-denomination certificates of deposit, but never got one.

"I forgot to set the alarm, and when I entered a little late, all the money was gone. I used to look down on the 3.5% rate, but now I'm scared of being cheated by financial management, and as a result, I can't buy it even though I want to." A netizen complained when sharing his experience of scrambling for large-denomination certificates of deposit at the beginning of last year.

Some time ago, Zhang Nan discovered that ICBC had put up a three-year large-denomination certificate of deposit with a minimum deposit of 1 million yuan. "It's a pity that I don't have that much money now." The account manager told her that this large-denomination certificate of deposit had already been sold out, and if she needed to deposit money, she could just go for a fixed-term deposit.

A senior account manager of a large bank told the author that after the interest rate liberalization, the interest rate of large-denomination certificates of deposit can be further increased on the basis of the interest rate self-discipline mechanism. At the beginning, the interest rate difference between large-denomination certificates of deposit and ordinary time deposits was very large. "The interest rate of a three-year large-denomination certificate of deposit can be 3.25%, while the interest rate of time deposits is 2.75%, so people will definitely wait to grab large-denomination certificates of deposit."

She said that banks are no longer short of deposits, and the interest rate difference between large-denomination certificates of deposit and ordinary time deposits has been narrowing. It is now only about 0.1%, and the amount is not large.

The shortage of three-year and five-year large-denomination certificates of deposit has spread from large banks and joint-stock banks to urban and rural commercial banks and private banks.

During 2022, many small and medium-sized banks lost tens of millions or even hundreds of millions of deposits every day. Nowadays, attracted by the relatively higher large-denomination certificates of deposit, large-denomination certificates of deposit of small and medium-sized banks have also become out of stock.

Wuhan Zhongbang Bank's APP shows that its three-year large-denomination certificates of deposit have an annual interest rate of 3.15%, and its five-year large-denomination certificates of deposit have an annual interest rate of 3.65%, but both are shown to be sold out. Large-denomination certificates of deposit with a term of less than one year can still be purchased directly, with an annual interest rate of only 2.0%.

Shandong Weihai Blue Ocean Bank's APP shows that its 1-year, 2-year and 3-year large-denomination certificates of deposit are all sold out. Its 3-year annual interest rate is 2.50%, and the 1-year annual interest rate is 2.10%.

Investors began to haggle over the 0.1% interest rate difference. The interest on a 200,000 yuan one-year large-denomination certificate of deposit at Blue Ocean Bank was 4,200 yuan, 200 yuan more than Zhongbang Bank, and Blue Ocean Bank's one-year large-denomination certificates of deposit were already sold out.

Faced with the ever-decreasing interest rates, more and more investors choose to hold large-denomination certificates of deposit until maturity. The transfer area of ​​large-denomination certificates of deposit has become one of the few areas where investors can buy existing large-denomination certificates of deposit.

"I received a large certificate of deposit transferred by someone else, with an interest rate of 2.85%. Hesitating for even a second would be disrespectful to it." A netizen shared.

From being indifferent to being out of reach

"The cost is too high and it's not cost-effective anymore." The president of a city commercial bank explained to the author why they no longer issue new three-year and five-year large-denomination certificates of deposit.

According to statistics from the central bank's monetary policy implementation report, the issuance scale of large-denomination certificates of deposit is not small. In the first half of this year, banking institutions have issued 46,000 issues, totaling 10.8 trillion yuan in large-denomination deposits, an increase of 2.2 trillion yuan compared with the same period last year. The reason why investors feel that it is more difficult to buy large-denomination certificates of deposit is that more people are buying large-denomination certificates of deposit, and supply is insufficient to meet demand.

The central bank's financial statistics report shows that since 2022, the scale of household deposits has increased significantly, with an increase of 17.84 trillion yuan in 2022 and 16.67 trillion yuan in 2023. In the first half of this year, the scale of household deposits increased by 9.27 trillion yuan.

At the 2022 mid-term performance meeting, Wang Liang, President of China Merchants Bank, pointed out that deposit growth in the first half of the year achieved the full-year target ahead of schedule, while retail loans only completed a little more than 30% of the plan.

Wang Liang introduced that the capital market was particularly bad in the first half of (2022), and customers' investment in stocks and funds decreased; secondly, the volatility of wealth management products increased after the net value transformation, and customers' willingness to buy bank wealth management products weakened. Many customers like to deposit fixed deposits in banks, and three-year fixed deposits are the most popular. China Merchants Bank has also moderately launched some large-amount fixed deposit products to meet customer needs.

The large-denomination certificates of deposit that are being snapped up now were not born to be so popular. In fact, this type of product has only been around for nine years.

On June 3, 2015, the central bank issued the Interim Measures for the Administration of Large Deposit Certificates. Subsequently, nine banks including ICBC, ABC, CCB, CCB, CMB, SPDB, CITIC, and CIB were approved to issue the first batch of large deposit certificates. The starting amount for individuals is 300,000 yuan, and the starting amount for institutional investors is 10 million yuan. The highest interest rate is 1.4 times the benchmark interest rate.

The central bank pointed out that the introduction of large-denomination certificates of deposit will help to orderly expand the scope of market-based pricing of liability products and improve the market-based interest rate formation mechanism. The central bank also pointed out that gradually replacing high-interest liability products such as wealth management through standardized and market-based large-denomination certificates of deposit will also have positive significance for promoting the reduction of social financing costs. In the second year, the starting point for individual subscription of large-denomination certificates of deposit was reduced to "not less than 200,000 yuan."

Li Min (pseudonym), president of a city commercial bank in North China, told the author that large-denomination certificates of deposit can be further increased based on the interest rate set by the self-regulatory mechanism. Large-denomination certificates of deposit were indeed popular for a while when they were first launched. The initial interest rate increase of 40% provided investors with a better investment channel. But at that time, it was more popular among a small number of customers.

For banks, large-denomination certificates of deposit provide them with a long-term, stable source of deposit liabilities. Banks are also willing to offer higher interest rates to high-net-worth customers.

But at that time, the financial management market was full of different kinds of people.P2PProducts, trust products with a yield of no less than 8% and implicit guarantee of redemption, and the returns on bank wealth management products are generally above 5%.

In addition, small and medium-sized banks have launched Internet deposit products since 2018, and some banks even offer a one-year deposit rate of 4.6%. However, the interest rate of large-denomination certificates of deposit of three-year banks is around 3.85%, which is not attractive enough for most investors.

As risks such as P2P and third-party financial management are exposed, trust products are no longer guaranteed to be redeemed, and Internet deposit products and irregular high-interest deposit-raising methods are being continuously regulated. Combined with fluctuations in the stock market and funds, the risk-free rate of return on market investments continues to decline. Large deposits that are risk-free and transferable and have interest rates significantly higher than those of time deposits have attracted the attention of investors.

For small and medium-sized banks, large-denomination certificates of deposit have become the only tool to attract customers and raise deposits after Internet deposits are regulated, and are beginning to be valued by more and more small and medium-sized banks.

An account manager of a city commercial bank in South China told the author that in her impression, large-denomination certificates of deposit became popular in the second half of 2022. Because the big banks began to cut interest rates, the bank issued large-denomination certificates of deposit once or twice a month at that time, but the quota was very small after 2023. The account manager began to guide customers to buy structured deposits. By the second half of 2023, the bank had almost no new 3-year and 5-year large-denomination certificates of deposit.

 The top priority for bank presidents: reducing deposit costs

Faced with the downward trend in deposit interest rates, in order to lock in higher interest rates, investors have increasingly adopted the trend of regular deposits in the past two years. The decline in deposit costs paid by banks is smaller than the decline in loan interest rates.

Take ICBC as an example. Its deposit interest expenses in 2023 will be 589.688 billion yuan, an increase of 22.8% year-on-year. Among them, the average balance of customer deposits increased by 13.8%, while the average interest rate increased by 14 basis points. Deposit regularization is an important factor. In terms of structure, ICBC's time deposits increased by 4176.147 billion yuan, an increase of 27.6%, while demand deposits decreased by 617.11 billion yuan.

Faced with the ever-shrinking net interest margin, many listed banks will experience negative growth in operating income and even net profit in 2023. Controlling deposit costs has become a top priority for bank presidents.

As early as when planning its work for 2022, China Merchants Bank proposed to adhere to the dominant position of core deposit growth, continue to strengthen the quantity and price control of high-cost deposits such as structured deposits and large-denomination certificates of deposit, maintain a high proportion of demand deposits, and maintain the advantage of relatively low deposit costs.

This also laid the groundwork for the removal of large-denomination certificates of deposit. When looking ahead to 2024, China Merchants Bank once again emphasized that it would focus on the growth of low-cost core deposits, strengthen the limit control of high-cost deposits, and flexibly arrange market-oriented capital integration according to market interest rate trends to reduce overall liability costs.

Held at the end of JuneChina Minsheng BankAt the shareholders' meeting, Li Bin, Vice President and Secretary of the Board of Minsheng Bank, responded to the author's question "How to deal with the narrowing net interest margin" and mentioned that there has been a clear trend of regular and long-term deposits in the past two years. Although the bank has been increasing its control over liability costs, the decline in liability costs is still lower than the decline in asset returns.

Li Bin said that it is difficult to increase the return on assets at present, and the control of deposit costs is the key to net interest margin management. This year, the self-discipline management of deposits has been further strengthened, which has played a good role in curbing disorderly competition in the market, and the downward trend of deposit costs is very obvious.

The author saw on the Minsheng Bank APP that since May, the bank has stopped issuing new 3-year and 5-year large-denomination certificates of deposit. Currently, it only issues 1-month, 6-month and 1-year large-denomination certificates of deposit, with the highest annual interest rate of 1.85%, but they have all been sold out. During the same period, the bank's 1-year fixed deposit rate was 1.55%.

Li Min told the author that as a bank manager, he prefers 6-month and 1-year deposits at present, as the deposit cost is low and the liquidity is controllable. However, the interest payment cost of three-year and five-year large-denomination certificates of deposit is high under the trend of interest rate cuts, and investors are increasingly inclined to hold them until maturity, which makes it difficult to reduce the interest rate when the interest rate is adjusted.

Li Min introduced that since the second half of last year, most banks have begun to take active control, reducing the issuance scale of three-year and five-year certificates and lowering the issuance interest rates of large-denomination certificates of deposit.

Li Min said that on the one hand, the regulatory authorities guided the large state-owned banks to lower deposit interest rates; on the other hand, the net interest margins of many banks narrowed, loan demand slowed, and continuing to issue high-cost large-denomination certificates of deposit would erode their profits; in addition, there are a small number of banks that, despite their good net interest margins, do not need to pay higher costs for deposits in an environment of overall decline in market interest rates, and will also reduce the issuance of large-denomination certificates of deposit or lower interest rates.

Li Ya found that the bank told her that she could purchase three-year large-denomination certificates of deposit at an interest rate of 2.5%. This is an exclusive service for customers who previously purchased five-year large-denomination certificates of deposit at 4.2% and 4%.

The term is shorter and the interest rate is lower. Compared with the previous deposit certificate, the interest earned by depositing 200,000 yuan for three years is 10,200 yuan less. Li Ya said that she would most likely choose the plan recommended by the bank after the maturity. "Is there any other better choice?"