Retail Deposit Interest Rate Regulation: Long-Term Characteristics and Regional Trends

Abstract

The main causal relationship between deposit interest rates fluctuations, the stability of individual banks and the financial system are structured in the paper. Based on the review of international experience, common regularities are identified in maximum deposit rates regulation, and main features of each of the regulatory stages are described. The author describes that currently in most developed countries there are no restrictions on the deposit pricing, while regulation is actively applied in developing countries in Africa and South-East Asia. Most of countries practice the direct regulation carried out by central banks by using the publicly open methodology of limit rate calculation. Based on the example of different countries banking systems (Russia, Iran, Kenya, Laos and Vietnam) the author reveals the prerequisites for introducing regulation that include increasing the stability of the banking industry and weakening price competition, as well as the features of its subsequent transformation such as the methodology for maximum rate calculation, rate benchmarking, rate differentiation on the deposit duration and sum.