The People’s Bank of China (PBoC) said on Thursday that it will expand the liberalization of foreign-currency deposit rates in Shanghai, part of efforts to eventually free up interest rates nationwide.
The central bank said it will take to all of Shanghai a trial program that gives banks the freedom to set the own rates on small-account foreign-currency deposits, , the Wall Street Journal reported.
The trial was previously confined to the Shanghai free-trade zone.
The move goes into effect Friday and will apply solely to accounts holding less than US$3 million, the PBoC’s Shanghai branch was quoted as saying in a statement. It will initially apply only to companies but could be extended to individuals later, according to the report.
In March, the central bank removed the upper limit on foreign-currency deposit rates offered by banks in the Shanghai free-trade zone.
The PBoC said the move is expected to lay a foundation for an expansion of the pilot program nationwide.
The central bank said in the latest statement that foreign-currency deposit rates stabilized during the trial in the Shanghai free-trade zone and that there were no major deposit moves in or out of zone. But it added that it will closely monitor the market to prevent arbitrage after the trial’s expansion.
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