4  BIS Review 32/2004  Commercial banks with low capital adequacy ratio can reduce deposit by lowering deposit rates so as to mitigate the pressure of excessively expanding loans to avoid loss due to large liability.
Therefore, deposit rate ceiling policy not only helps rein in excessive credit growth and mitigate inflation pressure and non-performing loan risks, but also guide funds into capital market to promote capital market development. v.  Actively push forward financial derivatives transaction with a purpose of providing commercial banks and customers with hedging instruments during interest liberalization.