THE China Banking and Insurance Regulatory Commission (CBIRC) is telling banks to scale back on high-yield structured deposits marketed to companies, Reuters quoted sources as saying yesterday, seeking to redivert funds to real economic activity.

Outstanding structured deposits jumped 26 percent to 12.14 trillion yuan (US$1.72 trillion) in the first four months of 2020, partly driven by firms who borrowed cheaply from banks and used the proceeds to invest in high-yield deposits.

Some banks received verbal guidance from the regulator this week to downsize their structured deposits by the end of 2020, said the sources.

At least one mid-sized bank had been told to cut the size of its structured deposits by one-third by the end of this year, the report said.

Chinese banks have aggressively marketing structured deposits – a hybrid that combines traditional deposits with higher-return investment products – to attract more funds.

But the yields they promise hurt their profitability, making the banks reluctant to reduce lending rates, which the government wants them to do in order to boost a virus-hit economy.

The curb on the structured deposits business is nationwide, although the rules vary according to the size of the bank, the sources said.

Some joint-stock banks and smaller privately owned lenders have already stopped selling structured deposits per previous guidance from the regulator, the sources said.

Bloomberg News also reported Tuesday that the CBIRC was acting to scale down structured deposits at banks.(SD-Agencies)