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New interest rate mechanism not to hold back market
As of May 19, the State Bank of Vietnam starts applying the new rate mechanism. The benchmark interest rate rises to 12% per annum. SBV Governor Nguyen Van Giau talks about the new mechanism.
What could you say about the new rate mechanism and why the basic rate has risen to 12% per annum?
The new rate mechanism is appropriate to the two laws: the State Bank of Vietnam Law and some articles of the Civil Code.
In the past, the basic interest rate was for reference and orientation. At present, under the new mechanism, the benchmark interest rate is the foundation for credit institutions to fix their business rates under the laws.
The basic rate is calculated based on the inter-bank interest rate, open-market interest rate, and capital raising average of credit institutions, or market development. The state’s involvement will depend on each point of time but it won’t hinder the freedom of the market economy.
When SBV defined the basic rate, did it consider the positive real interest rate principle?
In this issue, the idea is based on the market and that idea aims at a positive real interest rate. This will be a process.
There is an interaction between the consumer price index and interest rate. We have to make forecasts and calculations to have suitable policies for market conditions and the people’s expectations.
The National Assembly will adjust economic goals and the government will have macro economic policies to realise the goals. This will be the basis for us to calculate the interest rate most reasonably.
Do you think that under the new mechanism, commercial banks’ interest rates will strongly fluctuate?
During this morning’s meeting (May 17), I told bank leaders that they have to help each other because banking operations are highly systematic.
In the coming time, if a bank highly increases deposit interest rates, which can threaten its safety, the SBV will take appropriate action.
But I think credit institutions will not do that because it is easy for clients to see it and it will not be good for banks.
As of May 19, all credit contracts that have interest rates on loans of over 18% are illegal. There will not be an interest rate race, never.
Could you talk about the liquidity of the system?
The State Bank of Vietnam always knows the liquidity of the credit system. For example, yesterday (May 16) the system had VND22 trillion in surplus.
The Vietnam Association of Financial Investors (VAFI) suggested that foreign investors not have to ask for permission to buy stocks of Vietnamese banks which are worth less than 5% of chartered capital. What is the SBV’s opinion?
That proposal must be researched, not only by the SBV but also other agencies. We have to consider it carefully to report to the government.
VNN
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