State-owned banks still dominate the financial sector and are kept profitable by a positive spread between loananddepositrates dictated by government policy.
Borrowers can lower their interest rate by asking lenders to purchase certificates of deposit against their loan for rates of 4.25% or below, and credit unions guarantee the CDs.
First Manhattan, a consultancy, reckons that one-third of the improvement in big American banks' earnings since 1993 comes from three non-recurring factors: lower deposit-insurance premiums, smaller provisions for loan losses and a wider gap between market interest ratesand the rates banks pay depositors.