Structural Monetary Policy Tool "Pick The Big Beam" Detailed Explanation Of "Further Reduction Of Real Loan Interest Rate"

On March 5, the fourth session of the 13th National People's Congress opened in Beijing. According to the 2021 government work report, a stable monetary policy should be flexible, accurate, reasonable and moderate. The growth rate of money supply and social financing scale basically matches the growth rate of nominal economy, and the liquidity is reasonable and sufficient, and the macro leverage ratio is basically stable.

The government work report also put monetary policy support to the real economy and small and micro enterprises in a more prominent position. In terms of monetary and financial affairs, this year's government work report has spent a lot of ink to state that monetary policy should be moderately inclined to the real economy, small and micro enterprises, individual businesses and new agricultural business entities.

"The structural monetary policy will be the main driving force of this year. The focus of" insurance "is technological innovation, green development and small and micro enterprises. The" pressure "will point to real estate finance, and the financing environment of urban investment platform will also be tightened." Wang Qing, chief Macro Analyst of Dongfang Jincheng, said.

Before the two sessions of the National People's Congress, the market also paid close attention to the trend of loan interest rate. The government work report proposes to optimize the supervision of deposit interest rate, promote the further reduction of actual loan interest rate, and continue to guide the financial system to yield interest to the real economy.

"Recently, regulatory authorities have cleaned up illegal products such as Internet deposits and competitive behaviors, reflecting the trend of" optimizing deposit interest rate regulation. ". In the future, with the strengthening of the supervision of deposit interest rate and the further standardization of deposit competition order, the deposit cost of commercial banks is likely to decrease, thus creating space for the downward trend of loan interest rate at the asset side of banks. " Zeng Gang, deputy director of the national finance and development laboratory, said.

According to the reporter's interview with market participants, there may be two other understandings: one is that the decline of loan interest rate is a structural decline, mainly due to the decrease of loan interest rate of small and micro enterprises; the other is that the nominal interest rate remains unchanged, but inflation rises, leading to the decrease of real loan interest rate.

How to understand "real loan interest rate reduction"?

In terms of money and finance, the market is concerned about "further reducing the real loan interest rate". At present, LPR has become the pricing benchmark of bank loan interest rate. Most of the new loans issued by financial institutions have used LPR as the benchmark pricing, that is, "loan interest rate = LPR quotation + spread". In 2020, the central bank will lead the loan interest rate downward by reducing LPR and reducing the spread.

In August 2019, the central bank will promote the market-oriented reform of loan interest rate. After the reform, LPR refers to MLF, while loan interest rate anchors LPR. In other words, the central bank can affect the loan interest rate by adjusting MLF interest rate. However, the current proportion of MLF in bank liabilities is still low. More than 60% of bank liabilities are deposits, and the impact of MLF interest rate on deposit interest rate is limited.

"Loan interest rates are actually constrained by deposit rates on the liability side. If deposit interest rates do not fall, there is limited room for banks to lower lending rates. For quite a long time in the past, the competition in the deposit market was relatively fierce. There were innovations in capital guaranteed financial management, structured deposits, interest bearing deposits by file, and Internet deposits. To some extent, all of these have circumvented the current regulatory requirements on deposit interest rates, which makes it difficult for deposit interest rates to go down with market interest rates. " Zeng Gang said.

In contrast, the monetary policy tools mentioned in the 2020 government work report include RRR reduction, interest rate reduction and re lending. In this year's government work report, the re lending policy has been extended, but there is no further improvement of the two tools. Some analysis points out that this year's approximate rate will not lead to the decline of loan interest rate by reducing interest rate, but will reduce the cost of bank debt through "optimizing deposit interest rate supervision", so as to guide banks to reduce the actual loan interest rate.

"In the next step, monetary policy will pay more attention to accuracy, continue to increase credit support for small and micro enterprises through structural monetary policy tools, and keep the comprehensive financing cost of small and micro enterprises at an acceptable level. But like the real estate sector, which is already showing signs of overheating, their financing costs may rise. " Zeng Gang said.

Another explanation is that nominal interest rates remain unchanged, but inflation rises, leading to a decline in real lending rates. According to economic principles, the real interest rate is equal to the nominal interest rate minus the inflation rate.

Wu chaoming, chief economist of Caixin securities, said: on the one hand, with the rise of market interest rate, the nominal loan interest rate will also increase, but the inflation level is expected to rise quickly from the low level, and the actual loan interest rate of enterprises may fall; on the other hand, the government work report emphasizes that continuing to guide the financial system to yield profits to the real economy is also conducive to the downward trend of the real loan interest rate.

Monetary policy emphasizes precision

This year's government work report proposes that a prudent monetary policy should be flexible, accurate, reasonable and appropriate. Reasonably and moderately point to the level of market liquidity, and accurately solve the problem of financing difficulty and high financing of small and medium-sized enterprises.

In this year's government work report, it is proposed to continue the policy of extending the loan repayment to small and micro enterprises, and increase the re discount of re loans to support Inclusive Finance. The State Council has previously said that the implementation period of the inclusive credit loan support plan for small and micro enterprises will be appropriately extended by the end of 2020.

"The structural monetary policy will be the main driving force of this year, and the focus of 'safeguard' is technological innovation, green development and small and micro enterprises." Wang Qing said.

All of the above structural tools can reduce the burden of small and micro enterprises, and in essence, they also make profits to small and micro enterprises. For example, the capital cost of small and medium-sized banks is high. The central bank's refinancing to support inclusive finance can help reduce the capital cost of small and medium-sized banks, and guide them to reduce the financing cost of small and micro enterprises, and better solve the problems of financing difficulty and high financing cost of small and micro enterprises.

Last year, the two direct monetary policy instruments were mainly to support small and micro businesses, and the scope of support may be widened in the future. Liu Guoqiang, vice president of the central bank, once wrote that the next step is to design and innovate direct tools with leverage effect, such as improving the rural financial service system, developing green finance, and guiding financial institutions to increase credit support for small and micro enterprises, private enterprises, agriculture, rural areas and farmers, and manufacturing industry.

Wu chaoming said that it is expected to broaden the support areas of monetary policy tools directly to the real economy as a long-term trend. In order to realize the "14th five year plan" and the long-term goals and tasks in 2035, we need to take the supply side structural reform as the main line, strengthen innovation and enhance the potential economic growth rate. Therefore, the key areas and weak links of the national economy that need long-term support, such as private enterprises and manufacturing industry, are key support objects, which need direct support from the entity policy tools.

This year's government work report also proposed that banks should be guided to expand credit loans, continue to increase the number of first loan holders, and popularize loans with loan repayment, so as to make more funds flow to scientific and technological innovation and green development, and more to small and micro enterprises, individual businesses and new agricultural business entities, so as to provide targeted support to enterprises in industries continuously affected by the epidemic. Loans from large commercial banks to small and micro enterprises increased by more than 30%. Yang Zhijin reports from Shanghai

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