Core Viewpoint - The financial industry is experiencing a "de-involution" movement as banks face challenges from intense competition and declining net interest margins, necessitating a shift towards high-quality and healthy development [1][2][9]. Group 1: Current State of the Banking Sector - Recent half-year reports from listed banks indicate that the "involution" phenomenon persists, with deposit interest rate declines lagging behind loan interest rate declines [2][3]. - Average deposit costs for banks like Changshu Bank, Jiangyin Bank, and Jiangsu Bank fell below 2%, while their loan yields decreased more significantly, leading to further narrowing of net interest margins [3][4]. - The central bank has highlighted the "involution" issue, noting significant discrepancies between deposit and loan rate adjustments compared to policy rates [4]. Group 2: Causes of Involution - The central bank attributes the "involution" to fierce market competition, where banks engage in high-interest deposit strategies and aggressive loan pricing, leading to unsustainable practices [4][5]. - The decline in loan growth rates over the years indicates a shift from expanding new business to competing for existing market share, exacerbating the "involution" [7][8]. Group 3: Implications of Involution - The "involution" is compressing banks' profit margins and increasing operational risks, which could hinder the healthy development of the banking sector [8][9]. - The competitive landscape is characterized by price wars, relaxed credit standards, and high-interest deposit strategies, which ultimately threaten long-term profitability and stability [8][9]. Group 4: Responses to Involution - Recent initiatives from regulatory bodies and financial institutions aim to combat "involution" through measures that promote compliance and sustainable competition [9][10]. - Experts suggest that banks need to transform their customer base and business models to align with economic transitions, focusing on value rather than scale [11][12].

Core Viewpoint - The banking industry is facing a "反内卷" (anti-involution) movement aimed at shifting from a focus on scale and price competition to value creation and service differentiation, driven by regulatory actions and the need for sustainable development [1][2][16]. Group 1: Current Challenges in the Banking Industry - The banking sector is experiencing a "trilemma" where it struggles to balance lowering interest rates, expanding scale, and controlling risks due to a lack of quality business resources and market demand [1][4]. - The term "内卷" (involution) was first used by the People's Bank of China in 2024 to describe the severe competition in the banking sector, leading to rapid declines in loan rates while deposit rates remain stagnant [4][10]. - The average net interest margin for listed banks fell to 1.52% in 2024, a decrease of 17 basis points from the previous year, indicating a continuous decline in profitability [11][12]. Group 2: Key Areas of Focus for "反内卷" - The regulatory focus is on curbing irrational price competition, which includes practices like excessive discounting and high returns to attract customers, aiming to restore reasonable pricing based on costs and risks [5][6][16]. - There is a crackdown on non-compliant deposit solicitation practices, such as offering gifts or using third-party platforms to attract deposits, which disrupts market order [7][8]. - Over-lending and relaxed risk control standards are prevalent, with banks lowering credit standards to compete for clients, leading to potential resource waste and increased risks [8][9]. Group 3: Root Causes of Involution - The core issue of involution stems from structural contradictions, including narrowing net interest margins and insufficient effective credit demand, forcing banks into low-price competition for quality clients [10][11]. - The banking industry's obsession with scale growth and short-term performance metrics exacerbates the problem, leading to a "prisoner's dilemma" where banks feel compelled to engage in price wars [12][13]. - The lack of differentiated services and a modern financial service framework contributes to shallow price competition among banks [14][15]. Group 4: Strategies for Breaking the Cycle - Strengthening regulatory oversight and enhancing service quality are seen as essential strategies to reshape the competitive landscape and achieve high-quality development [16][17]. - Banks are encouraged to adopt self-regulatory measures and focus on value creation rather than price competition, with initiatives like the "反内卷" self-regulatory agreements being implemented across various regions [17][18]. - Upgrading service capabilities through technology and personalized financial solutions is crucial for banks to differentiate themselves and escape the price war trap [18][20].

Core Viewpoint - The banking industry is undergoing a "de-involution" movement, with various regional banking associations implementing self-regulatory agreements to curb "involution-style" competition, which has led to irrational practices like commission payments to real estate companies and intermediaries [3][5][12]. Summary by Sections Involution in Banking - "Involution-style" competition refers to low-level homogenized competition in the banking sector, characterized by blind expansion, price wars, and excessive marketing [6][8]. - Practices such as "commission grabbing" and "dark box operations" have emerged, where banks pay commissions to intermediaries or developers to attract customers, often bypassing regulatory scrutiny [6][10]. Causes of Involution - The prolonged "involution" phenomenon is attributed to multiple factors, including a significant decline in net interest margins, leading banks to resort to price competition due to severe service homogenization [9][10]. - Performance evaluation mechanisms in some banks focus on business scale and growth rates, pushing employees to adopt low-price and high-commission strategies to attract clients [10][11]. Risks and Consequences - "Involution-style" competition distorts market dynamics, leading to adverse effects such as "bad money driving out good" and resource misallocation, ultimately suppressing economic vitality [9][11]. - High commission payments can trigger vicious competition, increasing operational costs for banks and ultimately being passed on to consumers, which can harm both parties involved [10][11]. Moving Towards Value Creation - To address the "involution" issue, experts suggest establishing a three-dimensional governance framework that includes regulatory guidance, industry collaboration, and institutional transformation, shifting the competitive logic from "scale competition" to "value creation" [12][14]. - The transition will likely involve short-term pain, with banks relying on price wars facing customer attrition and potential performance declines, but it is expected to reshape a healthier banking ecosystem in the long run [12][14].