What are the impacts if peer-to-peer self-regulation upgrades/strengthens?

Recently, the market has been discussing the possible pathways for upgrading the self-regulatory mechanism for interbank deposit pricing. Since April 2022, when China established a market-oriented deposit interest rate adjustment mechanism, interbank deposit rates have undergone a series of regulations, gradually improving the market-based deposit rate mechanism, and the convex points on the interest rate curve have been gradually eliminated. In April 2022, member banks of the self-regulatory mechanism referenced bond market interest rates, represented by the 10-year government bond yield, and loan market interest rates, represented by the 1-year LPR, to promote market-based deposit pricing. In September 2022, major financial institutions began proactively lowering their listed deposit rates. In 2024, China’s deposit rate marketization reform accelerated: on April 8, 2024, the market interest rate pricing self-regulatory mechanism issued the “Proposal on Prohibiting Manual Interest Compensation to Maintain Deposit Market Competition,” clarifying that banks should include manual interest compensation within regulatory scope and strictly prohibit practices such as pre-commitments or manual interest payments at maturity to circumvent deposit rate authorization requirements or self-regulatory caps. On November 29, 2024, the self-regulatory mechanism issued two new initiatives: first, the “Proposal on Optimizing the Self-Regulatory Management of Non-Bank Interbank Deposit Rates,” which brought non-bank interbank demand deposit rates under self-regulation; second, banks are required to include a “rate adjustment guarantee clause” in deposit agreements with corporate clients to ensure that interest rate adjustments are promptly reflected in deposit services.