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Local banks look to strengthen home base
Amid the global financial turmoil, local banks have en masse withdrawn their overseas deposits to fortify the domestic financial system.
According to a source from Bank for Investment and Development of Vietnam (BIDV), the country’s second largest lender, the bank’s total amount of greenbacks deposited overseas was around $1 billion. “With the collapse of international banks and financial institutions, we have withdrawn almost all [of it], reserving more or less than $100 million for cross-border transaction payments,” said the official.
A State Bank source said that BIDV and Bank for Foreign Trade of Vietnam (Vietcombank) were the market’s two largest greenback holders and “their overseas deposits together should make up around 50 per cent of the total amount that Vietnamese banks deposit overseas.”
Though there is no specific figure for Vietcombank’s overseas deposits, a reliable source told VIR the figure was more than $1.5 billion. Over the past years, in normal conditions Vietnamese banks’ total overseas deposits stood at around $4-5 billion.
Vietcombank general director Nguyen Phuoc Thanh said the bank had withdrawn 40 per cent of its deposits overseas.
Financial experts said that the withdrawals started from mid-September as local banks were afraid that banking collapses would wipe out their money. “Thus, though sometimes banks in other countries had increased their interest rates to 12 per cent, per year, more than triple the levels at the beginning of 2008,Vietnam still rejected,” said a financial expert.
According to the State Bank source, the withdrawals would strengthen the domestic financial system by providing a considerable source of foreign currency. Two weeks ago, in a meeting organised by the Vietnam Banking Association (VNBA), almost all large-scale state-owned and joint stock banks such as Asia Commercial Bank (ACB), Sacombank, Techcombank, VP Bank agreed to lower greenback deposit terms by 1 per cent.
“This was easily understood to mean that large-scale banks have withdrawn their overseas greenback deposits and thus, their demand for greenback mobilisation is not high now,” said the financial expert. At the moment, state-owned banks are offering interest rates of 3-4.5 per cent for greenback deposits with terms from three to 12 months. Meanwhile, joint stock banks are offering 4.5-5.5 per cent, per year.
On the foreign exchange market, the exchange rate has surprisingly gone up by VND400 per dollar. The exchange rate on the unofficial market is now around VND17,000 per dollar. Financial experts said that foreign investors selling government bonds over the last four weeks were converting dong into dollars.
VIR
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