Core Viewpoint - The financial industry is experiencing intensified "involution" competition, prompting regulatory bodies to implement "anti-involution" policies to address unhealthy competitive practices [1][4]. Group 1: Industry Overview - Financial institutions are shifting from expanding new business to competing for existing market share, leading to severe "involution" competition [2]. - The net interest margin for commercial banks has decreased to 1.43% as of the end of Q1 this year, down from 1.52% at the end of 2024, moving further away from the market "red line" of 1.8% [1]. Group 2: Competitive Practices - The most common manifestation of "involution" competition is the "price war" in loans, with consumer loan rates dropping to the "2" range from Q4 2024 to Q1 2025, as banks engage in aggressive marketing strategies [2]. - Regulatory scrutiny has increased, leading to a rise in annualized rates for consumer loan products above 3% since April [2]. Group 3: Risks and Consequences - The short-term strategy of expanding asset scale through "involution" may be seen as necessary for survival, but it risks compressing profit margins and increasing operational risks for banks [3]. - The practice of "data manipulation" among employees to meet performance metrics has become a known issue, with some resorting to unethical methods to achieve targets [3]. Group 4: Regulatory Response - Regulatory bodies are advocating for "anti-involution" measures to correct unhealthy development trends, with initiatives like the "Guangdong Banking Industry Anti-Unfair Competition Self-Regulation Convention (2025 Edition)" aimed at standardizing evaluation metrics and promoting rational pricing [4]. - To achieve sustainable development, banks, especially smaller ones, are encouraged to dynamically adjust their scale and pricing, enhance risk and capital management, and pursue differentiated growth strategies [4].

Core Viewpoint - The banking industry is undergoing significant changes due to the consensus against "involution" competition, which has been emphasized since the Central Economic Work Conference at the end of last year [1] Group 1: Regulatory Actions - The Guangdong Banking Association has initiated a comprehensive rectification of "involution" competition based on a "1+3+N" system, which includes a negative list from regulatory authorities, self-regulatory agreements, and various industry self-discipline measures [1] - The Ningxia Banking Association has also held discussions regarding the situation of "involution" competition in the banking sector [1] Group 2: Market Dynamics - On the deposit side, banks are experiencing a "cannot lower" interest rate trend, leading to practices such as "high-interest deposits" and "buying indicators" at the end of performance assessment periods [2] - Some banks are engaging in practices like manual interest compensation, resulting in actual interest rates that are "lower in name but higher in reality" [2] - On the loan side, there is significant downward pressure on interest rates, with some banks offering loans at rates below the yield of government bonds, particularly for large enterprises [2] - The consumer loan market has seen intense price competition, with rates dropping below 2.5%, leading to market disorder and potential misuse of funds [2] Group 3: Implications of Involution - The practices associated with "involution" are squeezing banks' profit margins and threatening the healthy development of the industry [3] - There is a risk of increased bad debts and adverse selection due to relaxed risk assessments by some banks trying to capture market share [3] - The distortion of market signals caused by "involution" can hinder macroeconomic regulation [3] Group 4: Strategic Recommendations - Banks should shift from "losing money to gain market share" to focusing on quality and sustainable development [3] - It is recommended that banks adjust their business structures based on their resources and explore differentiated development strategies [3] - Banks should enhance their service capabilities instead of competing solely on interest rates, which can lead to a more diverse and stable financial institution system [3] - Expanding non-interest income and understanding customer needs are crucial for diversifying and strengthening risk resilience [3] Group 5: Internal Management - Banks should establish reasonable incentive mechanisms and performance evaluation systems to avoid short-term behaviors driven by deposit and loan scales [4] - Increasing the diversity of performance indicators can stimulate employee motivation and innovation [4]