Core Viewpoint - The recent reform of the deposit interest rate self-discipline pricing mechanism aims to promote the alignment of asset and liability pricing in banks, facilitating a more market-oriented approach to interest rates [1][2][3] Group 1: Market Rate Reform - The People's Bank of China (PBOC) has established a deposit interest rate marketization adjustment mechanism, allowing banks to adjust deposit rates based on the 10-year government bond yield and the 1-year Loan Prime Rate (LPR) [1] - This reform follows the previous adjustment in June, where the self-discipline upper limit for deposit rates was modified to include a certain basis point above the benchmark deposit rate [1][2] Group 2: Impact on Loan and Deposit Rates - The new mechanism encourages banks to reference market rates, which can more accurately reflect the supply and demand for funds, thereby enhancing the efficiency of monetary policy transmission [1][2] - By linking deposit rates to the LPR, which is influenced by the central bank's policy rates, the reform aims to create a dual influence between deposit rates and LPR, potentially leading to lower deposit rates and increased likelihood of LPR reductions [2][3] Group 3: Benefits for Banks and the Economy - The adjustment of the deposit interest rate mechanism is expected to lower banks' funding costs, which in turn can support a decrease in loan rates while maintaining banks' interest margins [3] - This approach is seen as a flexible and market-oriented alternative to direct interest rate cuts, allowing banks to enhance their lending capacity to the real economy amidst tightening monetary policies in developed economies [3]