HSBC left off list of rate-setting banks in China's interest rate mechanism reform

Source:Global Times Published: 2019/8/20 20:48:40

HSBC left off list of rate-setting banks in rate reform

Headquarters of the People's Bank of China, China's central bank, in Beijing in October 2018 Photo: IC

HSBC, which has the largest assets among foreign banks in the Chinese mainland, was not selected by the People's Bank of China (PBC), China's central bank, as one of the 18 rate-setting banks including two overseas banks in its recent interest rate mechanism reform. 

The PBC chose Standard Chartered and Citigroup. 

This led to market speculation as to whether HSBC failed the selection partly because of the controversy surrounding its alleged involvement in the US' investigation into Chinese telecommunications giant Huawei. 

HSBC didn't respond to an interview request from the Global Times as of press time. 

At a press conference on Tuesday, a reporter raised the question of why HSBC was not included in the list of quoting banks for the loan prime rate (LPR). 

Sun Guofeng, head of the monetary policy department of the PBC, said at the news conference that the newly added banks "have a relatively big influence in the credit market among similar banks, relatively strong loan pricing capabilities and relatively good effects in serving small and micro-sized enterprises." 

"All the eight new quoting banks have those characteristics and they were selected by the market rates pricing self-discipline mechanism," Sun said. 

The eight new banks, including two overseas banks and some domestic commercial banks, joined the club of rate-setting banks, composed of 10 major banks in the past, that report their one-year and five-year LPR to the PBC on a monthly basis. 

The PBC will announce a LPR based on the average of those rates for the banking industry to use as a benchmark. 

Under the new mechanism, domestic banks will refer to the LPR when setting rates on new loans, instead of referring to the rarely fluctuating benchmark interest rate as they did before, the PBC said in an earlier statement. 

Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times that it's hard to say why HSBC was not chosen as one of the new quoting banks "but the stumbling reputation of HSBC in China is likely to be one of the reasons." 

Two high-level HSBC executives resigned recently and market speculation linked the issue with HSBC's alleged assistance with the US prosecutors' charge against Huawei.  

Sun said that the quoting banks will be "adjusted" in the future according to regular appraisals of their quotations. 

"Joining the ranks of the new quoting banks will increase the representative nature of the prime lending rate quotations and will help different types of banks to price their loans," Sun said. 

Newspaper headline: HSBC left off list of rate-setting banks in rate reform


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