The People’s Bank of China has given banks more freedom to fix foreign currency deposit rates in the financial capital of Shanghai as it moves to loosen interest-rate controls in the country.
China’s central bank said that starting Friday, it will do away with the limit on foreign currency deposit rates in the city for “small accounts”. The program will begin with institutional accounts, with individual accounts being incorporated later depending on what it termed as market conditions.
However, the central bank didn’t give further details regarding the size that constitutes the small accounts, reported Bloomberg
On March 1, the PBOC removed ceilings on foreign currency interest rates on deposits under $3 million within the Shanghai free-trade zone in order to give markets more freedom to determine prices. PBOC expects to loosen state-fixed deposit rates in 1-2 years, said the central bank Governor Zhou Xiaochuan in March.
PBOC’s website shows that on May 2005, it set an upper limit of 3 percent on 1-year U.S. dollar deposit rates. Local lenders are paying way far below, with the Industrial & Commercial Bank of China offering 0.8 percent while China Merchants Bank pays 0.7 percent.
China held $565.8 billion worth of foreign currency deposit by May, which is roughly 3 percent of the $17.6 trillion in local currency savings. Shanghai held one-seventh of the total foreign currency deposits at $76.7 billion as of May.
Phillip Futures Now Forex Dealer Member
In a separate report, Chicago-headquartered futures commission merchant Phillip Futures Inc said that it had been given the go-ahead to operate as a forex firm and forex dealer member (FDM) by the National Futures Association.
Being designated as an FDM means that Phillip Futures will now provide OTC foreign exchange products to clients in U.S. and international locations. This makes it the first FDM to enter the U.S. market in two years as more retail forex dealers exit this market. The company will roll out its first OTC forex product to clients starting this fall.
Phillip Futures joined the U.S. market in 2010 when it was licensed as a futures commission merchant, trading in NYMEX, CME, CFE, NYSE LIFFE, COMEX, CBOT and DME. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Yashu Gola at firstname.lastname@example.org