For the first time, a bank has canceled its five-year fixed deposit product and also lowered interest rates for other terms. What is the situation?

Recently, an announcement from Inner Mongolia's Tuyang Mengyin Village Bank has attracted market attention.

The bank announced that starting from November 5, 2025, it will cancel its five-year fixed deposit product, becoming the first commercial bank in the industry to explicitly announce the removal of this term product. According to reports from Securities Times and Caixin, Tuyang Mengyin Village Bank is the first commercial bank to cancel the five-year fixed deposit product.

At the same time, many small and medium-sized banks have lowered deposit interest rates for various terms, and some private banks have also seen their medium- and long-term deposit products "sold out" or removed from the shelves. Behind this series of actions is the continued pressure on net interest margins as shown in the third-quarter reports of listed banks.

Screenshot source: Inner Mongolia Tuyang Mengyin Village Bank official WeChat

A senior banking analyst pointed out in an interview with the Daily Economic News that this is a clear signal of the transmission of pressure on bank interest margins to the liability-side product strategy. Its impact not only concerns the bank's own cost control but may also open up space for subsequent adjustments in loan interest rates and guide funds toward the capital market.

Initial Wave of Deposit Product Structure Adjustment

The competitive landscape of the deposit market at the end of the year is quietly changing.

The announcement from Tuyang Mengyin Village Bank shows that this adjustment not only cancels the five-year fixed deposit product, which is the longest term, but also synchronously lowers the interest rates for other terms: the one-year and two-year fixed deposit rates have both been reduced by 5 basis points, to 1.45% and 1.55%, respectively, while the three-year fixed deposit rate has seen the largest reduction of 10 basis points, down to 1.85%.

The bank clearly stated that this decision was made "after comprehensively considering the interest rate levels of peer institutions." This adjustment directly changes the bank's deposit product system, removing long-term, high-cost liabilities from the shelves.

Coincidentally, Inner Mongolia's Kundu Mengyin Village Bank has also experienced a similar situation. The latest deposit rate announcement from the bank shows that the five-year fixed deposit product rate column is also blank.

Screenshot source: Inner Mongolia Kundu Mengyin Village Bank official WeChat

According to media reports, several banks have taken similar actions around the same time. Additionally, two private banks have removed their three-year fixed deposit products, and one private bank's two-year fixed deposit product is also marked as "sold out."

Since entering the fourth quarter, a wave of deposit rate reductions initiated mainly by small and medium-sized banks has already begun. Institutions such as Zhejiang Pingyang Pudong Development Village Bank, Kunming Guandu Hu Nongshan Village Bank, Song County Xingfu Village Bank, Huixian Zhujiang Village Bank, and Shanghai Huari Bank have successively announced reductions in RMB deposit rates.

"These trends indicate that, compared to large banks, small and medium-sized banks, which are more sensitive to funding costs, are actively adjusting their liability structures by reducing the scale and cost of medium- and long-term deposits to alleviate operational pressure," analysts told reporters. From the net interest margins of listed banks in the first three quarters, although some banks have achieved initial results by optimizing asset allocation and strengthening liability cost management, However, the pressure of narrowing net interest margins faced by the entire banking industry still exists universally, forming the macro background for this adjustment of deposit products.

Transmission of Interest Margin Pressure to Product Side

Banks are canceling long-term deposit products and generally lowering interest rates, with the core logic being to respond to the continuously narrowing net interest margin.

Net interest margin is the ratio of a bank's interest income to the average balance of interest-earning assets, and it is a key indicator of the profitability of a bank's traditional lending and deposit business. When the yield on the asset side (such as loan interest rates) faces downward pressure while the cost on the liability side (such as deposit interest rates) remains relatively rigid, the net interest margin will be squeezed.

According to Choice data statistics, in the first three quarters of 2025, with the exception of a few banks like MINSHENG BANK, listed banks generally showed a downward trend in net interest margins, mainly influenced by multiple factors such as the decline in the Loan Prime Rate (LPR) and adjustments to existing mortgage rates.

Among them, the net interest margin of state-owned large banks generally decreased by about 15 basis points. The net interest margins of China Merchants Bank, Industrial Bank, CITIC Bank, PAB, Huaxia Bank, and CZBANK all experienced year-on-year declines. In the overall downward trend, there are also highlights. MINSHENG BANK's net interest margin rose slightly by 2 basis points against the trend, indicating that its business structure has certain resilience in responding to interest rate fluctuations.

Some high-quality regional banks, such as Ningbo Bank, saw a smaller narrowing of their interest margins compared to the industry average. Changshu Bank's interest margin fell back by 18 basis points from a high level but still leads at 2.57%.

As deposits are the main source of liabilities for banks, the cost directly determines the space for net interest margins.

"For a long time, time deposits, especially medium- to long-term deposits of three years and five years, have been a relatively high part of banks' funding costs. In the current environment where asset-side yields are under continuous pressure, these high-cost deposits increasingly highlight their erosion effect on bank profits," said the aforementioned analyst. The removal of five-year time deposits, the reduction of interest rates for three-year terms, and even prompting some deposits to "move" are essentially banks proactively optimizing their balance sheets under interest margin pressure.

He stated that this directly reduces the cost of interest-bearing liabilities for banks, providing a "buffer" to stabilize net interest margins.

This transmission from interest margin pressure to the product side also reveals subtle changes in banking operational strategies.

"In the past, banks may have been more inclined to pursue scale effects by expanding the size of liabilities, but now, under the dual influence of regulatory guidance and market competition, banks are beginning to pay more attention to the quality and cost structure of liabilities," the individual believes.

The "Deposit Migration" Effect May Have a Positive Impact on the Direct Financing Market

In addition, the impact of this round of adjustments may be reflected in its potential effects on monetary policy and capital markets.

The aforementioned analyst believes that the reduction in deposit interest rates will weaken their attractiveness, potentially prompting some funds seeking higher returns to flow out of the banking system and into capital markets such as stocks, bonds, and funds, bringing incremental funds to the market. If this "deposit migration" effect forms a trend, it will have a positive impact on the development of the direct financing market.

Securities research institutions generally believe that the market-oriented adjustment mechanism for deposit interest rates is beginning to take effect CITIC Securities research report believes that the net interest margin is further showing signs of stabilization. In the third quarter of 2025, the net interest margin of listed banks was 1.36% for the quarter, a decrease of 1 basis point compared to the second quarter. The yield on interest-earning assets continued to decline by about 10 basis points in the quarter, mainly affected by insufficient real demand and continued downward market pricing. The cost rate of interest-bearing liabilities also declined by about 10 basis points in the quarter, benefiting from the gradual effect of deposit rate cuts and banks' cost control on liabilities. Among the 26 listed banks that disclosed net interest margin data in their third quarter reports, these banks saw an arithmetic average decline of 1 basis point in net interest margin in the first three quarters of 2025 compared to the first half of 2025, further indicating a stabilization trend.

CICC expects that the net interest margin of commercial banks will narrow by 12 basis points year-on-year in 2025, and remain within 10 basis points in 2026. Additionally, the revenue and profit of listed banks are expected to remain stable year-on-year in 2026, mainly due to the further reduction of net interest margin pressure, including reserve requirement ratio cuts and limited symmetric interest rate cuts, with policies placing more emphasis on reducing liability costs and protecting interest margins.

Author of this article: Liu Jiaqing, Source: Daily Economic News, Original Title: "For the first time, a bank has canceled its five-year fixed deposit product and also lowered rates for other terms. What’s going on?"

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