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Interbank market borrowing intensifies   2010-07-22 - VietNamNet/Viet Nam News

More banks have sought capital on the interbank market throughout the last week, pushing total dong-denominated borrowing on the market up 7.73 per cent to VND100.79 trillion (US$5.3 billion), according to the State Bank’s latest report

About 38 per cent of the trading volume or VND37.92 trillion ($1.9 billion) was overnight borrowing. Lending interest rates for overnight, and 1-6 week loans increased by 0.01-0.35 percentage points, reaching 6.6 per cent, 7.01-11.73 per cent respectively.

Given the cost of borrowing on the interbank market, banks were still in the process of retaining commercial deposit interest at about 11-11.2 per cent for almost all deposit terms. The lowest interest was 10.6 per cent per year.

However, across the interest rate board, there was a noticeable flatness in rates, rather than the variations normally associated with short and long-term deposits.

The fact reminded people of the poor capital liquidity in banks in 2008 when strict measures were applied to tighten monetary supply, fanning rampant inflation that topped 20 per cent. Responding to concerns, a capital management official at the Bank for Investment and Development of Viet Nam (BIDV) said that: "The nearly straight line is just normal and it’s nonsense to worry about bank liquidity".

He explained that many banks had offered the same interest rates for both short and long term deposits because there was a shortage of available capital in the long term, and they offered such high interest rates to attract more capital and balance risks.

Phan Dao Vu, general director of Bao Viet Bank shared a similar view and added that the mid-to long-term deposit interest rates depended on consumer price index expectations and Government bond coupons.

Banks are trying to lower deposit rates to 10 per cent over the next three months.

Some other bankers from Asia Commercial Bank, An Binh Bank and Vietcombank agreed that any reduction must be thoroughly considered, taking into account long-term risks and market movements.

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