Interbank rates in dramatic drop

HA NOI — Interbank interest rates have recently dropped by up to 3.3.4 percentage points since the end of last week in another clear signal of improved commercial bank liquidity, according to the lastest report from the State Bank of Viet Nam.

Overnight rates are now ranging from 6.16-8.47 per cent, while rates for one- to four-month loans are seeing an interest of 9.07-10.98 per cent.

Total trading volume last week on the interbank market reached VND86.59 trillion (US$4.56 billion) in Viet Nam dong and $2.05 billion in US dollars.

State Bank governor Nguyen Van Giau also announced last week that commercial banks had repaid VND34 trillion ($1.78 billion) in bailout funds injected into the banking system late last year and now had usable capital on hand of around VND30 trillion ($1.58 billion).

With more usable capital on hand, many commercial banks are contemplating a restructuring of their deposit interest rate structure, including Vietcombank, Bank for Investment and Development of Viet Nam (BIDV), DongA Bank, Eximbank, Sacombank, and Asia Commercial Bank.

"If the deposit interest cap is removed, deposit interest rates will increase and the interest curve will return to a normal shape, indicating that the longer deposits are, the more interest the deposits gain," said Nguyen Quoc Quynh, a senior economist and former general director of Vietcombank.

Commercial banks are currently capped at offering interest rates on deposits of no more than 10.49 per cent, under a voluntary agreement between the central bank and members of the Viet Nam Banking Association executed last December.

The cap is aimed at ending a deposit interest rate war but has had the effect of causing most banks to offer rates at or near the 10.49-per-cent limit for all deposit terms.

A reliable source that asked to remain anonymous told Viet Nam News that, in a closed meeting of the Banking Association late last week, most banks agreed that the deposit interest rate cap should be lifted now that lending interest rates could be negotiated.

A reliable source that asked to remain anonymous told Viet Nam News that, in a closed meeting of the Banking Association late last week, most banks agreed that the deposit interest rate cap should be lifted now that lending interest rates could be negotiated.

The central bank last week also partially lifted the cap on commercial lending rates, suggesting that banks would be able to operate with higher profit margins.

"Removing the deposit interest rate cap would help us be more active in managing capital resources," said the chairman of a Ha Noi-based bank who asked to stay unnamed. — VNS