Reform prime rate system --view from the implementation of monetary policy
Date Issued
2005
Date
2005
Author(s)
Yue, Jiin-Tarang
DOI
zh-TW
Abstract
Central Bank of China (hereinafter is referred to as CBC ) conducts monetary policy, implementing various policy instruments. Among them, the discount rate adjustment has been the key role player. To revitalize the nation’s economy and to alleviate economic depression, CBC consecutively lowered the discount rate by 15 times during the period from the end of 1990 to the end of June 2003, bringing the discount rate from 4.75% p.a. down to 1.375% p.a.,i.e, declining by as much as 3.375% p.a..
During the same period, despite domestic banks adopted the prime rate pricing system in 1985, their average prime rate declined only by as little as 0.782% p.a. The medium and small businesses as well as the housing loan consumers became major victims, thus significantly weakening the effectiveness of the transmission mechanism of the CBC’s monetary policy.
To readdress the problem, CBC, in consultation with the Banks Association pushes forward the “ Base Rate “ and “ housing loan indicator rate “ pricing system and urges banks to accelerately transfer the existing over charged loans to the newly established rate-based loans. As shown by the related statistics, the reform works out well, which certainly enhances the effectiveness of transmission mechanism of CBC’s monetary policy.
Subjects
基本放款利率
基準利率
房貸指標利率
prime rate
base rate
housing laon indication rate
Type
other
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