Chinese banks fight for deposits
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Shanghai Daily, July 4, 2011
Chinese banks are now in an increasingly heated battle for deposits after repeated lifts of the bank reserve requirement this year while the country's unrelenting loan-to-deposit cap also send lenders into a wild scramble for more money.
A bank president in Wenzhou, Zhejiang Province, obviously has become a casualty in this money hunting game, according to 21st Business Herald newspaper.
The president was sacked one day after he sent out short messages to all of his depositors last Thursday, which promised that starting Friday, his bank would offer anyone cash bonus of up to 5,000 yuan (US$773) as long as they were willing to put more money at the bank, the newspaper said.
"The more you deposit, the more bonus you will get," the newspaper cited the message as saying, without revealing the name of the president or which bank he was serving.
The unconventional incentive, coupled with rising daily deposit rate by lenders, were in fact a desperate move by banks which are now in urgent need of money to ease their liquidity pressure amid record high bank reserve requirement ratio.
China's bank reserve requirements ratio, the amount of money that lenders must keep in reserve, is now at a record of 21.5 percent after six hikes alone this year, which frozen 370 billion yuan in the latest raise on June 20.
China also raised interest rates two times this year, which means higher costs for banks.
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