What does idle arbitrage between banks mean?

Idle arbitrage refers to the arbitrage way that banking financial institutions make funds flow in the financial system instead of the real economy through various businesses, or obtain income by extending the financing chain and then flowing to the real economy.

In order to obtain the benefit of financing, enterprises cooperate with banks to complete the task, and the discount interest rate and deposit interest rate are upside down, which arouses the enthusiasm of enterprises to idle bills. From the perspective of enterprise interests, the income from participating in idling bills is the deposit interest of six-month deposits, and the expenditure is the handling fee and discount interest of bank acceptance bills.

As a kind of financing behavior of enterprises, the interest rate of bill discount should be higher than the deposit interest rate, and the discount expenditure of enterprises should be greater than the interest income of their deposits. Therefore, under normal circumstances, enterprises will lose part of the spread because of the idling of bills. However, some enterprises are not in good operating and financial conditions, with high risks and low comprehensive income, which are not attractive to banks. When banks provide financing for these enterprises, they tend to be cautious and even negative.

Therefore, these enterprises must actively cooperate with banks, meet their various requirements, help them complete various indicators, and have good relations with banks, so that banks can give corresponding preferential treatment in financing and other aspects.

Extended data

The traditional banking system is constrained by capital adequacy ratio, deposit reserve and loan-to-deposit ratio, and its leverage is controllable, but it is not constrained by shadow banking with credit-like characteristics. Theoretically, the lever can be infinite. As the "behind-the-scenes promoter" of leverage, China shadow banking has a "special" evolution path in recent years, and its manifestations are becoming more and more complicated.

According to the latest report issued by the Bank for International Settlements (BIS), China's shadow banking system is essentially the "shadow of banks", and its core is still commercial banks, while securitization and financial market instruments have only played a limited role.

The Bank for International Settlements also points out that shadow banking in China is not as complicated as that in the United States, because it involves fewer types of institutions and credit intermediaries. However, at present, shadow savings instruments are closely related to the bond market, and new forms such as "structured" shadow credit intermediaries have emerged, which indicate that the shadow banking in China is becoming more and more complicated.

Oriental News Network-How to operate the idle arbitrage of bills re-examined by CBRC?

People's Daily Online-Many banks reduce the arbitrage space of non-standard incremental interbank idling.