The choice of maturity affects the cost of liabilities; several small and medium-sized banks adjusted deposit rates in September.

Recently, several small and medium-sized banks have begun adjusting their deposit interest rates, with varying directions of change.

For example, according to an announcement from Shanghai Songjiang Fuming Rural Bank, starting from September 21, the bank's one-year, two-year, and three-year fixed deposit interest rates are 1.65%, 1.50%, and 1.30%, respectively. The interest rate is 35 basis points lower than the deposit term of one year, which was extended to three years.

A month ago, the bank's one-year, two-year, and three-year interest rates were all 1.65%.

Compared to the interest rates implemented on August 21, the two-year and three-year interest rates were lowered by 15 and 35 basis points respectively, while the one-year interest rate remained unchanged, thus creating a maturity inversion.

Some small and medium-sized banks are raising interest rates for specific terms.

The hub noted that WeBank raised its three-year fixed deposit rate from 1.60% to 1.75% in September, while Blue Ocean Bank raised its one-year fixed deposit rate from 1.65% to 1.70%.

Currently, WeBank's three-year fixed deposit rate is higher than its five-year rate; Suzhou Commercial Bank's recently issued three-year and five-year large-denomination certificates of deposit have interest rates of 1.95% and 1.85% respectively, with the highest interest rate not falling on the longest term.

The September adjustment had two characteristics: interest rates rose and fell among different banks, and the term spreads among some banks also became inverted.

This also means that different institutions are diverging in their arrangements regarding deposit terms, liability costs, and periodic funding needs.

Long-end costs are being compressed

The reason some banks are lowering interest rates on medium- and long-term deposits is mainly related to the pressure of liability costs.

Data from the State Financial Regulatory Commission shows that the net interest margin of commercial banks was 1.40% in the first quarter of 2026, and rose slightly to 1.41% in the second quarter; the net interest margin of large commercial banks was 1.31% in the second quarter. The net interest margin remains low, and the pressure on bank profitability from long-term high-interest deposits is becoming more pronounced.

Some small and medium-sized banks have even narrower interest rate spreads.

In the first half of 2026, Harbin Bank's net interest margin fell to 0.98%, Guangzhou Rural Commercial Bank's was 1.07%, and Gansu Bank and Zijin Bank's were both 1.09%.

When asset yields are under pressure, the higher the deposit rate and the longer the term, the higher the interest cost locked in by the bank. Lowering the three-year and five-year deposit rates can reduce long-term high-cost funds and retain room for future adjustments to liability prices.

Zeng Gang, Dean of the Tianfu Liyan Financial Research Institute, said that the inverted deposit interest rate in some banks is a temporary business strategy.

Zeng Gang stated that banks are guiding some funds to short-term deposits by lowering interest rates on medium- and long-term deposits; if deposit rates continue to decline, short-term liabilities can be repriced more quickly, thereby alleviating cost pressures.

The adjustments made by Shanghai Songjiang Fuming Rural Bank mainly focus on the two-year and three-year terms, while the one-year term interest rate remains unchanged, consistent with the above logic.

The concentrated maturity of existing high-interest time deposits also provides banks with a window to adjust renewal rates.

According to calculations by Huatai Securities, Guoxin Securities, and CICC using different methods, the scale of time deposits maturing in 2026 is approximately RMB 50 trillion to RMB 75 trillion.

When a deposit matures, the bank can arrange the renewal period and price according to the current interest rate, thereby reducing the cost of existing high-interest liabilities.

Shorter maturities also increase pressure on deposit renewals and liquidity management. With increased deposit maturity frequency, whether customers renew their deposits and what interest rates banks need to pay to retain funds will all affect the final cost reduction effect.

Partial interest rate hikes to supplement funds

The recent interest rate hikes by small and medium-sized banks have mainly focused on specific timeframes, reflecting that some institutions still have a need to replenish deposits.

Wang Pengbo, a senior financial analyst at Broadcom Consulting, said that most private banks have relatively limited customer acquisition channels and rely heavily on online sources for deposits. In order to stabilize deposit size and supplement stable liabilities, some private banks will attract funds by moderately increasing interest rates.

For example, WeBank raised its three-year deposit rate this time. After the adjustment, its one-year, two-year, three-year and five-year fixed deposit rates are 1.50%, 1.60%, 1.75% and 1.60% respectively. The three-year rate is the highest, while the five-year rate is still lower than the three-year rate.

This indicates that some banks are willing to pay higher costs for the terms they currently need, but remain cautious about longer-term deposits.

Different types of banks also have different arrangements for long-term funds.

The hub noted that since July, the Bank of China, Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank of China have successively restarted five-year large-denomination certificates of deposit, with the highest interest rate of 1.60% and a minimum deposit of 200,000 yuan.

Among joint-stock banks, Huaxia Bank launched a five-year large-denomination certificate of deposit on July 15 with an annual interest rate of 1.75% to 1.80%, while China Merchants Bank, Shanghai Pudong Development Bank, and others did not offer five-year products at that time.

These differences suggest that a bank’s willingness to accept long-term funds and the interest rates it is willing to pay are related to its existing customer base, the size of maturing funds, and its asset allocation.

Institutions offering higher interest rates need to find a balance between retaining deposits and controlling costs.

It is worth noting that regulators are also restricting high-interest deposit-taking.

On June 5, the People's Bank of China publicly solicited opinions on the "Regulations on the Management of RMB Deposit and Loan Interest Rates," which will include behaviors such as illegal manual interest supplementation and exceeding the self-discipline ceiling on interest rates in the scope of high-interest deposit-taking.

Next, we can pay attention to the renewal rate of high-interest deposits after they mature, changes in the net interest margin of small and medium-sized banks, and the renewal and liquidity costs after the increase in the proportion of short-term liabilities.

These indicators will further reflect the actual impact of this round of interest rate adjustments on banks' cost of liabilities.

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