In order to deepen the reform of interest rate marketization and further promote the use of quoted interest rate (LPR) in the loan market, the Central Bank issued (2019) No. 30 Announcement on December 28, explaining the conversion of existing floating rate loan pricing benchmarks into LPR-related matters. The announcement of the announcement means that following the new loans mainly referenced to LPR pricing, the stock floating rate loans will also be referenced to LPR pricing. Industry insiders said that LPR has become a benchmark for loan pricing in an all-round way, which will enable the loan interest rate to reflect changes in market interest rates in a timely manner, improve the transmission effect of monetary policy, and at the same time help reduce the financing cost of the real economy.
The relevant person in charge of the central bank said that on August 17, 2019, the People's Bank of China announced the reform and improvement of the loan market quotation rate (LPR) formation mechanism announcement. At present, nearly 90% of newly issued loans have been priced with reference to LPR. However, the stock floating rate loans are still priced based on the benchmark interest rate of the loan. In order to further deepen the LPR reform, the People's Bank of China issued  No. 30 Announcement to promote the stable conversion of the floating floating rate loan pricing benchmark.
The principle for the conversion of the stock floating rate loan pricing benchmark is as follows: First, the borrower can negotiate with the bank to determine whether to convert the pricing benchmark to LPR or to a fixed interest rate. The borrower has only one option and cannot be converted again after the conversion. Existing floating rate loans that have been in the last repricing cycle may not be converted. The second is that the conversion will begin on March 1, 2020, and in principle should be completed before August 31, 2020. Third, the converted loan interest rate was determined through negotiation between the two parties. Among them, in order to implement the real estate market regulation and control requirements, the interest rate of existing commercial personal housing loans at the time of conversion should remain unchanged.
Wang Yifeng, chief banking analyst of China Everbright Securities Research Institute, said in an interview with the "Economic Reference News" reporter that this time the promotion of stock floating interest rate loans "anchor swap" is an inevitable move to accelerate the downward guidance of the real economy's financing costs. At present, the credit scale of financial institutions has exceeded 150 trillion, of which medium- and long-term loans to enterprises exceed 56 trillion, and residents' medium-to-long-term loans are close to 39 trillion. If the loan pricing anchor LPR adopts only the "new and old cut off" principle, for the real economy The improvement of financing cost is relatively limited, and driving the stock “anchor change” can reduce the financing cost of the real economy faster.
Dong Ximiao, chief researcher of Xinwang Bank, said that the central bank made it clear that both borrowers and lenders negotiated specific conversion terms in accordance with the principles of marketization. It is expected that after the initial conversion, the interest rate execution level of the existing loans will remain basically the same as before the conversion. This will help promote the smooth transition and protect the interests of both borrowers and lenders. In order to better serve the real economy, monetary policy has maintained a stable tone and increased counter-cyclical adjustments. There will still be a certain amount of downside for LPR in the future.