To deepen the market-oriented interest rate reform and further promote the application of the loan prime rate (LPR), the People’s Bank of China (PBC) hereby makes the following announcement on matters concerning the shift of the pricing benchmark for existing floating rate loans to the LPR.

1. Existing floating rate loans as mentioned in the Announcement refer to the floating rate loans priced on the benchmark lending rate (excluding personal housing provident fund loans), which have either been issued or not issued yet with the contracts signed before January 1, 2020. Starting from January 1, 2020, financial institutions shall not be allowed to sign floating rate loan contracts based on the benchmark lending rate.

2. Starting from March 1, 2020, financial institutions shall negotiate terms with the clients concerned on the pricing benchmark shift for existing floating rate loans, changing the way of interest rate setting previously agreed upon in the contract to a method based on the LPR plus some basis points. The basis points added can be negative and shall be fixed during the remaining period of the contract. Alternatively, the pricing benchmark can be shifted to a fixed rate. The choice shall be allowed only once, with no chance to change the pricing benchmark again. For those  floating rate loans that have entered their final repricing period, the pricing benchmark may not be changed. In principle, the pricing benchmark shift for existing floating rate loans shall be completed before August 31, 2020.

3. When the pricing benchmark for existing floating rate loans is shifted to the LPR, the basis points added shall be determined through negotiations between the lender and the borrower, except in the case of commercial personal housing loans, where the basis points added shall equal the difference between the latest interest rate implemented according to the original terms of the contract and the LPR released in December 2019 for loans in the corresponding maturity. In between the date of the shift and the first ensuing repricing day (excluded), the interest rate to be implemented shall equal the latest interest rate implemented according to the original terms of the contract, which is the LPR offered  in December 2019 for loans in the corresponding maturity plus the basis points added. As of the first ensuing repricing day, the interest rate shall be reset on each pricing day based on the LPR offered in the recent month for loans in the corresponding maturity plus the basis points added.

4. When financial institutions negotiate terms with their clients on the pricing benchmark shift, the repricing period and date can be reset, with the repricing period applied to commercial personal housing loans no shorter than a year.

5. In case the floating rates on existing loans are shifted to a fixed rate, the new interest rate shall be determined through negotiations between the lender and the borrower. For commercial personal housing loans, the interest rate determined as a result of the shift shall equal the latest interest rate implemented according to the original terms of the contract.

6. Financial institutions shall inform the clients concerned of the pricing benchmark shift for existing floating rate loans through official website and outlet announcements, phone calls, text messages, emails, mobile banking services, and other channels, and negotiate with them to reach agreement on specific issues, so that the contractual rights as well as the consumer rights and interests of the borrowers are protected according to laws and regulations.

7. PBC branches shall enhance guidance for locally incorporated financial institutions so as to ensure that the pricing benchmark shift for existing floating rate loans is carried out prudently in line with the overall arrangements.