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SBV targets credit growth, liquidity
The State Bank of Vietnam, SBV, will refinance commercial banks to ensure their liquidity as it tightens monetary policy.
The money will be provided at the yearly 7.5 percent that has prevailed since February 1.
The central bank has not publicly identified any of the candidates for refinancing; nor have the commercial banks which need more funds identified themselves.
Banks in Ho Chi Minh City and Hanoi have reported only modest deposit growth during the past few weeks while lenders have put small banks at risk with the withdrawal of trillions of dong.
The central bank has warned that it will not issue administrative instructions that would allow inter-bank lending.
As a result, it will have to open its pockets to save its children because some are unlikely to survive any ensuing bank crisis that would both threaten the economy and force an expensive Government bailout.
But large amounts of money pumped into circulation carry the risk of seriously hampering the attempt to control inflation – the Government’s foremost priority.
The National Assembly’s Economic Committee deputy chairman and former Vietcombank general director Vu Viet Ngoan told Vietnam News daily that the refinancing would not put more pressure on inflation.
Refinancing was short term and would settle only demand for payment, while the battle against inflation would be for one, two or three years, he said.
SBV Governor Nguyen Van Giau has reiterated the tightening of monetary policy against inflation despite the refinancing of the commercial banks.
“The twin targets of controlling credit growth and the balancing of capital liquidity must be noted,” he said.
The two targets are not “contradictory long term run.”
Total payment instruments increased only 5.53 percent against late last year and was much lower than the 14.62 percent of the same four months of 2007.
Total outstanding bank loans have also gradually fallen since the beginning of the year. In April, outstanding loans increased at a modest 1.66 percent month on month and were much lower than January’s 6.3 percent.
VNA
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