Non-bank deposits increased by 2.8 trillion in the first two months, drawing attention to how to regulate interbank rates.

The expectations of reserve requirement cuts and interest rate reductions coexist with pressure on bank interest margins. The structural reduction in banks’ liability costs remains a market focus.

Currently, the room for general deposit interest rates to decline has significantly narrowed. Against the backdrop of the central bank emphasizing smooth transmission of interest rates, discussions on further regulation of interbank deposit rates are heating up. Industry insiders believe this is partly because bank interbank deposit pricing is relatively high, increasing liability costs and hindering interest rate transmission; it is also related to the rapid growth of interbank deposits. Recent data from the central bank show that in the first two months of this year, deposits from non-bank financial institutions increased by 2.84 trillion yuan, exceeding a trillion yuan more than the same period last year.

Recently, attention has been drawn to the potential upgrade of self-regulation of the interest rates on interbank demand deposits. Market speculation suggests that interbank deposit pricing may be linked to the bank’s macroprudential assessment (MPA) system. Bank practitioners and securities analysts generally agree that a key way to eliminate the hidden costs and institutional arbitrage caused by opaque interbank deposit pricing is through such regulation.

Self-Regulation of Interbank Demand Deposit Rates Reignites Discussion

Recently, there have been reports that the market interest rate pricing self-regulation mechanism intends to strengthen management of interbank deposits. One approach is to impose quantitative constraints on the proportion of demand deposits exceeding the policy rate for 7-day reverse repurchase operations (currently 1.4%) at quarter-end.

This suggests that self-regulation of interbank demand deposit rates may be upgraded. Previously, at the end of 2024, the market interest rate self-regulation mechanism issued the “Self-Regulatory Initiative on Optimizing Non-bank Interbank Deposit Rate Management” (the “Initiative”), which brought previously unregulated interbank demand deposit rates into self-regulation and officially incorporated them into the first-quarter 2025 MPA assessment.

According to the Initiative, the interest rates for interbank demand deposits at financial infrastructure institutions should be reasonably determined based on excess reserve deposit rates; for other non-bank institutions, rates should reference the 7-day open market reverse repurchase rate.

Sources indicate that compared to general deposits, the marketization and transparency of interbank deposit pricing are lower, creating larger arbitrage opportunities. Some banks, driven by scale considerations, are willing to “pay for deposits,” raising their liability costs.

Industrial Securities research shows that, based on the 2025 semi-annual report, the previous self-regulation rules led to a decline of about 30–40 basis points in the liability costs of nationwide listed banks’ interbank liabilities, with total liability costs decreasing by about 3–4 basis points. Meanwhile, the average proportion of interbank deposits among these banks fell from 10% to around 9%.

Guosheng Securities reports that, influenced by the new regulations at the time, the year-on-year growth rate of large banks’ interbank deposits sharply dropped from 44% in November 2024 to 5.3% in January 2025, but then gradually recovered. By January this year, the growth rate had risen again to 48.9%.

A senior securities analyst told First Financial that the implementation of new regulations in 2024 had a clear impact on the volume and price of bank interbank deposits, but mostly as a “one-time” effect. The reason for the renewed focus on the self-regulation of demand deposit rates is twofold: banks still have room to attract deposits with high interest rates under current constraints, and demand for non-bank deposits has grown rapidly over the past year.

The analyst believes that for long-term constraints, besides upgrading the self-regulation of interbank deposit rates, further optimization of the MPA assessment system is necessary to include interbank deposit pricing behavior.

The MPA assessment is a tool used by the central bank to evaluate the stability of financial institutions. It covers 16 indicators across seven categories, including capital and leverage, asset-liability management, liquidity, pricing behavior, asset quality, external debt risk, and credit policy implementation. The results are graded A, B, or C, affecting reserve requirement ratios, cross-border financing, and access to re-lending policies. Pricing behavior—mainly whether deposit and loan rates meet self-regulation standards—is a “veto” indicator: failure in any of the categories results in a C grade.

“Currently, the assessment of non-bank interbank demand deposit pricing in the MPA is expected to be based on a weighted average,” said Liu Jie, chief banking analyst at Tianfeng Securities. “This could lead banks to offer higher single-transaction rates to attract funds from some non-bank institutions with strong bargaining power, especially at quarter-end, potentially raising bank liability costs if some demand deposits exceed the 1.4% threshold.”

A local official at a joint-stock bank told reporters that some banks already use a practice of offering lower interest rates on part of their interbank deposits and higher rates on others, to attract large depositors and meet internal KPIs while satisfying assessment requirements through weighted averages.

However, promoting smooth interest rate transmission and strengthening interest rate regulation have been key directions of the central bank’s monetary policy in recent years. During the Two Sessions, Governor Pan Gongsheng emphasized “unblocking the transmission from policy rates to market benchmark rates and various financial market rates,” and strengthening the implementation and supervision of interest rate policies, including regulating market behaviors that undermine monetary policy effectiveness.

In the context of the central bank’s earlier statement that “there is still room for reserve requirement and interest rate cuts this year,” further cost reduction by banks remains a market consensus to support easing monetary policy. Liu Jie suggests that after the maturity of high-yield fixed deposits, one of the main ways to further improve banks’ liability costs is through interbank deposits.

Many industry insiders believe that in the future, the assessment method for interbank demand deposits may shift from a weighted average to a single-transaction basis, addressing the issue of excessive deviation of interbank demand deposit rates from policy rates.

Impact on Bank Liability Volume and Pricing

Another important reason for renewed attention to interbank deposit rates is the rapid growth of non-bank deposits over the past year. Despite continuous declines in general deposit rates, the banking sector has not experienced significant liquidity shortages due to “deposit migration,” and net financing of interbank certificates of deposit has decreased substantially.

Latest data from the central bank show that in the first two months of this year, RMB deposits increased by 9.26 trillion yuan. Household deposits rose by 5.24 trillion yuan, non-financial enterprise deposits decreased by 445 million yuan, fiscal deposits increased by 1.2 trillion yuan, and non-bank financial institution deposits increased by 2.84 trillion yuan. Compared to the same period last year, household deposits grew less by 890 billion yuan, while non-bank deposits increased by 1.12 trillion yuan.

[Source: WIND]

Many believe that the rapid growth of non-bank deposits is related to “deposit migration.” However, Guolian Minsheng Securities’ chief banking analyst Wang Xianshuang analyzed data from December 2025 to January 2026, noting that with almost no decrease in household and corporate deposits, the high growth in non-bank deposits cannot be simply explained by “deposit migration.”

He explained, “The excess growth in deposits this round partly stems from the low base created by the interbank deposit self-regulation at the end of 2024, and partly because the low rates on interbank certificates of deposit make interbank deposits attractive. On a macro level, the chain of ‘non-bank borrowing via repos and depositing back into banks’ is expanding again.”

So, what is the current scale of bank interbank deposits? If self-regulation is upgraded, which banks will be most affected?

According to Huatai Securities estimates, by the end of Q3 2025, the total interbank deposit scale of listed banks was about 29 trillion yuan. Considering that listed banks account for roughly 60–70% of the entire banking sector, the total market scale of interbank deposits is estimated at about 40–50 trillion yuan, with interbank demand deposits around 25–30 trillion yuan.

“Based on the rule that the proportion of demand deposits exceeding 7-day reverse repurchase policy rates at quarter-end should not exceed 10–20%, and considering that some interbank demand deposits already meet the requirements, if we assume a ‘rectification rate’ of 40–50%, about 10 trillion yuan of interbank demand deposits could see rate reductions,” Huatai Securities estimates. “If the rates on these deposits decrease from 1.5–1.6% to 1.4%, the savings in liability interest costs would be less than 1 basis point, with limited overall impact.”

From the perspective of different institutions, state-owned large banks and joint-stock banks will be most affected. For example, according to Guolian Minsheng Securities, as of June 2024, the interbank demand deposit scales of state-owned large banks and joint-stock banks were 9.47 trillion yuan and 4.13 trillion yuan, respectively, accounting for over 96% of the total listed bank interbank demand deposits (~14 trillion yuan).

In terms of interest rates, Tianfeng Securities data shows that by the end of the first half of 2024, the interbank liability costs for state-owned and joint-stock banks had decreased by 49 and 44 basis points respectively, to around 2% and 1.89%, but still above their overall liability costs.

This cost level is generally higher than that of general deposits. For example, ICBC and China Construction Bank’s average interest paid on deposits last year was 1.45% and 1.4%, respectively, down 39 and 32 basis points from the previous year. The average interest paid on interbank placements and borrowings was higher at 2%, down 73 and 56 basis points year-on-year. After several rounds of rate cuts, the one-year fixed deposit rates for large state-owned banks have fallen below 1%, with actual rates mostly under 1.1%, and demand deposit rates as low as 0.05%.

Beyond cost considerations, markets are also closely watching whether further self-regulation might lead to deposit outflows, potentially causing a “liability shortage.” A securities analyst stated, “Banks are not short of liabilities now, and with moderate credit growth, the short-term impact should be limited.”

CITIC Securities fixed-income analyst Liang Weichao also believes that the current impact will be weaker than at the end of 2024, mainly reducing liability costs rather than significantly shrinking liabilities. “This is because current interbank certificates of deposit and short-term rates have already declined significantly and are close to the 1.4% constraint line. Non-bank funds are less motivated to reallocate to other assets; large banks can still access low-cost funds through buyout repos, MLF (Medium-term Lending Facility), and some demand liabilities have already shifted to short-term fixed deposits,” he said in a recent report.

However, Wang Xianshuang believes that as the low-base effect diminishes and policy attention shifts to the expansion of interbank liabilities, if self-regulation of interbank deposit rates tightens, the current excess deposit growth will also come to an end.

Besides interbank demand deposits, higher-priced interbank fixed deposit rates are also expected to be regulated. Industrial Securities suggests that the regulation could involve adding a spread over the 7-day reverse repurchase rate or referencing the same-term interbank certificate of deposit rate. Estimates show that a 40 basis point reduction in the cost of interbank fixed deposits would impact liability costs by about 2 basis points; if all interbank deposits are priced based on the 7-day reverse repurchase rate, the maximum impact would be around 5 basis points, which is less than the previous round.