Large-amount certificates of deposit are a new type of deposits that only appeared after 2015, with some characteristics such as high interest rates, good flexibility, and good security, large-amount certificates of deposit have been welcomed by many people after their launch, although their threshold requires more than 200,000 deposits, but it is still very popular.
Especially in the past two years, in the context of the continuous decline in interest rates, large-amount certificates of deposit are even more difficult to find.
But now large certificates of deposit are quietly changing, and may even be withdrawn from the market.
On the one hand, the interest rate on large certificates of deposit has continued to fall.
When the large-denomination certificates of deposit were first introduced, the interest rate was very high, especially during the period from 2015 to 2019, when the interest rate on the three-year large-denomination certificates of deposit of many banks could be given more than 4%, and some banks could even give more than 5.4%, and the interest rate on large-denomination certificates of deposit at that time ranged from 10 basis points to 50 basis points higher than the ordinary regular increase.
However, in recent years, in the context of continued loose market liquidity, the interest rate on large certificates of deposit has also continued to decline. After several rounds of interest rate cuts, the interest rate on large certificates of deposit of many banks has fallen below 2.5%.
Judging from the large-amount certificates of deposit issued by major banks, the interest rate on three-year certificates of deposit issued by the six major state-owned banks and 12 joint-stock banks basically does not exceed 2.5%, and most of them are between 2%~2.35%, and only a few banks can give about 2.5%.
Although the interest rate on large certificates of deposit of small banks is relatively high, it basically falls below 4%, most banks are between 3% ~ 4%, and only a few banks can still give about 4.05% for 5-year large certificates of deposit.
On the other hand, long-term certificates of deposit are gradually disappearing.
According to different tenors, large-denomination certificates of deposit are generally divided into 6 months, 1 year, 2 years, 3 years, and 5 years.
In the past, when deposits were in short supply, major banks mainly promoted three-year and five-year large-value certificates of deposit, which could lock in long-term deposit customers.
At present, the six major state-owned banks, 12 joint-stock banks, and some large urban commercial banks have basically lost their five-year certificates of deposit, and most of them are large-amount certificates of deposit of less than three years.
Moreover, in recent times, some banks have even begun to remove large certificates of deposit with a maturity of less than three years.
For example, the 3-year and 5-year large-value certificate of deposit products on the SPD Bank APP page can no longer be found; China Merchants Bank decided not to issue 3-year and 5-year certificates of deposit from April.
Minsheng Bank has even decided to stop selling large-denomination certificate of deposit products with a maturity of six months or more nationwide from May 7. At present, in the APP of Minsheng Bank, large-value certificate of deposit products are mainly concentrated in 1-month and 3-month maturities, and the annualized interest rate is 1.7%.
I believe that Minsheng Bank is not the first bank to cancel large-denomination certificates of deposit for more than half a year, and more and more banks will cancel long-term large-denomination certificates of deposit in the future.
Moreover, judging from the current situation in the deposit market and the situation of banks themselves, it cannot be ruled out that large-denomination certificates of deposit may disappear directly in the future.
The reason is very simple, because at present, there is no competitive advantage in large-denomination certificates of deposit, and there is no need for them to exist.
In the past, when bank funds were relatively scarce, large-amount certificates of deposit were a powerful tool for banks to absorb deposits, and they were welcomed by deposit customers by virtue of their high interest rates and the fact that early withdrawals could be linked to interest.
However, the market environment facing banks has changed a lot.
First, banks are no longer short of money.
In the past two years, the liquidity of the market has continued to increase, and the demand for social financing, especially some long-term loans such as housing loans, has slowed down.
In this context, banks no longer need to absorb deposits through large certificates of deposit, but instead continue to cut interest rates to slow down the growth of deposits.
Second, bank interest rate spreads have narrowed.
In the past two years, the biggest pressure on banks has been the narrowing of interest rate spreads, which used to reach more than 2% for many banks, and even more than 2.5% for some banks.
However, in the past two years, in the context of the continuous increase in deposits and the slowdown in loan demand, the interest margin of banks has been compressed, according to the 2023 financial report data released by 42 A-share listed banks, the average net interest margin of these listed banks in 2023 has fallen to a record low of 1.69%.
In the face of persistently low interest rate spreads, banks can only maintain a reasonable level of profit by constantly lowering deposit rates.
Against this backdrop, the large certificates of deposit, which are known for their high interest rates, are not only an advantage but a disadvantage for banks, so major banks have no choice but to cancel long-term certificates of deposit.
In addition, for depositors, the current interest rate on large-amount deposits is not very attractive, although the interest rate of large-amount certificates of deposit is higher than that of ordinary time deposits, there is no great advantage, and it is even disliked by some depositors.
In the case that banks and customers are not optimistic, large-denomination certificates of deposit may slowly cool down in the future, and may even disappear from the market.