Vietnam Banks quietly raise deposit interest rates

Last update 11/11/2010 05:44:11 PM (GMT+7)


Banks quietly raise deposit interest rates

VietNamNet Bridge – Though members of the Vietnam Banking Association have agreed to keep the ceiling deposit interest rate at 12 percent per annum, many banks have quietly raised the deposit interest rates to 14-15 percent, and the lending interest rates to 18-19 percent.

On November 10, the interbank interest rate exceeded the 20 percent per annum threshold.

Banks thirsty for deposits

Deputy General Director of a HCM City-based bank said that though the bank has raised the deposit interest rate to 12 percent per annum from 11 percent, it still has to struggle hard to retain deposits, because people are trying to withdraw money from the bank.

“We have never met such big difficulties in mobilizing capital before. Though the deposit interest rates have become sky high, depositors still do not want to put money into banks, because the dollar and gold prices both have been increasing sharply,” he said.

General Director of another bank said that though the deposit interest rates have been increasing sharply, this still cannot attract capital into banks.

Some depositors told bank officers that they will only deposit money if the interest rates are raised to 13.5-14 percent per annum.

The highest deposit interest rate is being offered by Phuong Tay Bank, at 15 percent per annum.

Small banks stop lending

Pham Quoc Thanh, Deputy General Director of An Binh Bank, said that the bank now only disburses money for the signed credit contracts, while it does not consider providing new loans at this moment.

General Director of another bank said the bank’s board of director had a meeting yestserday to discuss the solutions to the sharp falls in mobilized capital. The prompt measure put forward is that the bank will stop providing new loans until the situation can be improved.

Currently, the bank still can meet the requirements on capital adequacy ratio. However, in the next week, when other banks withdraw money as the deposits become matured, the bank will face difficulties.

Urgent intervention called

According to Dr Tran Hoang Ngan, Deputy President of the HCM City Economics University, the task of the State Bank is to ensure liquidity for banks and keep the interest rates at the reasonable levels to ensure the implementation of socio-economic plans. Therefore, Ngan said, the State Bank needs to make urgent intervention to the market by pumping money through the open market to stabilize the interbank interest rates. If the central bank does not take actions immediately, a new interest rate war among commercial banks may occur.

Ngan also said that the central bank should consider allowing commercial banks to mortgage their gold at the central bank to borrow Vietnam dong.

Cao Sy Kiem, former Governor of the State Bank also thinks that the State Bank needs to take urgent action in order to obtain the macroeconomic stability.

Source: Tuoi tre