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Commercial banks request interest rate ceiling removal   2010-01-27 - VietNamNet/NLD

Commercial banks are proposing the ceiling interest rate scheme is removed, saying it has caused major difficulties in capital mobilization and lending.


According to the governor of the State Bank of Vietnam Nguyen Van Giau, five out of 16 banks in HCM City have been found to have outstanding loans double the mobilized capital of the interbank market.  They says that this shows the problems in the liquidity of the banks.

Currently, most commercial banks are offering the highest possible interest rate of 10.49 percent to all kinds of deposits. The actual interest rates depositors can enjoy are higher than 10.49 percent, because banks offer gifts and bonus money.


One director of a bank said that with the current interest rate policy, under which the same interest rate is applied to deposits of differing terms, it may happen that money will run from one bank to another, thus making the banks’ liquidity risks even higher.


General director of Orient Bank Tran Van Vinh said that banks now have to mobilize capital at high interest rates, but cannot lend money at high interest rates because the lending rates must not exceed the ceiling level. Vinh has urged the State Bank of Vietnam to remove the ceiling interest rate scheme soon to help banks boost capital mobilization and lending.


Giau also thinks that it would be better to remove the ceiling interest rate scheme. However, the problem is that in order to remove the scheme, it is compulsory to amend the provisions of the Civil Code. Giau said that the State Bank of Vietnam has reported the problem to the Government and the National Assembly’s Steering Committee.


Professor Tran Hoang Ngan, a Member of the National Advisory Council for the Monetary Policy also said at yesterday’s conference on discussing the measures to implement tasks of the banking sector in 2010 that the ceiling interest rate scheme needs to be removed, or it will mean major difficulties for banks. Ngan stressed that the ceiling interest rate scheme removal would not mean the interest rate increases -  just aims to give more autonomy to banks in their operation.


In the latest news, the State Bank has released a decision to keep the basic interest rate at eight percent per annum, which means that the ceiling lending interest rate is 12 percent per annum. This is the third consecutive month the State Bank has kept the basic interest rate unchanged, a move that gives out a message of striving to stabilize monetary policy.


Commercial banks who attended yesterday’s conference also talked about the problems in gold prices and the dong/dollar exchange rate.  They stressed that the dollar and gold speculation had over heated them market. The banks applauded the decision by the Government to request state-owned groups and general corporations to sell dollars to banks.


General Director of Sacombank Tran Xuan Huy suggested that in order to ease the pressure on the foreign currency supply and demand, SBV should set regulations to allow commercial banks to offer preference to attract kieu hoi (overseas remittance). Currently, people, who get kieu hoi from overseas relatives, do not want to sell dollars to banks.


The bank reported that some 850 million dollar worth of kieu hoi went through Sacombank in 2009, but Sacombank could purchase 10 percent of the sum only.

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