Weekly Information on Banking Activities (December 18 – 24, 2008)

The Weekly Information on Banking Activities (December 18 – 24, 2008) is as follows:

1. The State Bank of Vietnam (SBV) decided to further lower the base interest rate to 8.5% p.a. from 10% p.a., starting on December 22 together with other decisions in relation to other interest rates and reserve requirement in order to implement Resolution No 30/2008/NQ-CP of the Government dated December 11, 2008 on urgent measures to actively prevent the economic downturn, to stabilize economic growth, and to secure social protection.

Following are the specific decisions singed by the SBV Governor:

- Decision No. 3161/QD-NHNN on cutting the base interest rate from 10% p.a. down to 8.5% p.a. The decision took effect on December 22, 2008.

- Decision No. 3162/QD-NHNN on lowering interest rate of VND-denominated reserve requirement of credit institutions to 8.5 % p.a from 9% p.a.

- Decision No.3160/QD-NHNN on reducing the interest rate applicable to compulsory SBV bills in VND issued on March 17, 2008 to 4.5% p.a. from 13% p.a.

- Decision No.3159/QD-NHNN on reducing the refinancing rate to 9.5% from 11% p.a., the rediscount rate to 7.5% p.a from 9% p.a, and the overnight rate in the inter-bank electronic payment and the rate of loans to finance short balances in clearing transactions between SBV and commercial banks to 9.5% p.a from 11% p.a.

- Decision No. 3158/QD-NHNN on reserve requirement ratios in VND applicable to credit institutions. The decision will take effect on January 1, 2009 as follows:

(i) For the reserve requirement ratios in VND and foreign currencies for demand deposits and time deposits with term below 12 months as below:

+ The reserve requirement ratios in VND applicable to the state-owned commercial banks (excluding the Vietnam Bank for Agriculture & Rural Development-VBARD), the Joint-Stock Bank for Foreign Trade of Vietnam (Vietcombank), urban joint-stock commercial banks, joint-venture banks, foreign bank branches and finance companies are down to 5% from 6%; and for VBARD, the reserve requirement ratio is reduced to 2% from 3%.

+ The reserve requirement ratios in VND for rural joint-stock commercial banks, the Central People’s Credit Fund and cooperative banks remain unchanged at 1%.

(iii) The reserve requirement ratios in VND and foreign currencies for time deposits with term over 12 months remain unchanged as below:

+ The reserve requirement ratio in VND is 1% applicable to the state- owned commercial banks, Vietcombank, urban joint-stock commercial banks, joint-venture banks, foreign bank branches, finance companies, rural joint-stock commercial banks, cooperative banks, and the Central People’s Credit Fund.

2. Following the aforesaid announcement of SBV, all the credit institutions started without delay to decrease both their mobilizing and lending rates in accordance with SBV’s regulations and the supply and demand of the money market.

- Lending rates: Most commercial banks cut their maximum lending rate down to 12.75% p.a. from 15% p.a.. Particularly, state-owned commercial banks (SOCBs) reduced their lending rates by 0.12% - 1 % p.a. to 10% p.a. for priority customers in export, rural development, small and medium enterprises (SMEs) and other sectors, with an exception that Vietcombank significantly reduced the lending rate by 2% to 8.5% p.a.. The rates are commonly listed as below:

- Mobilizing rates: The mobilizing rates in VND reduced by 1%-2% p.a. in most term deposits while the rates in USD were stable. The rates are commonly listed as below (% p.a.):

3. According to the express report of credit institutions by December 23, 2008, the average term interest rates in VND in the inter-bank market were on downward trend, excluding the overnight rate and 12-month term rate which slightly increased as compared to the previous week. Specifically, the average overnight rate is 7.12% p.a, the rates of 1 week, 2 weeks, 1 month, 3 months, 6 months and 1 year are 8.03% p.a, 8.74% p.a, 9.15% p.a, 10.67% p.a, 12% p.a and 10.56% p.a respectively.

The average term interest rates in USD decreased slightly in general. The common rates are below 2.5% p.a, the overnight rate is 0.82% p.a while the rates for terms over 1 week ranged from 1.49% p.a to 2.3% p.a.

4. The SBV Governor, on December 24, 2008, decided to depreciate the US$/VND average exchange rate in the inter-bank market to 16,989 VND, starting on December 25, 2008. This move contributes to facilitating export, controlling trade deficit, and ensuring a sustainable international balance of payments. Additionally, it helps limit the expectation of exchange rate hike, hence assisting enterprises to actively develop their stable business plans.

5. Activities of SBV leaders

- Governor Nguyen Van Giau attended the Government Office press conference in Ho Chi Minh City on December 24 to provide information related to monetary policy and banking operations.

- Deputy Governor Nguyen Dong Tien of the State Bank of Vietnam (SBV) paid working visits to the Bank of France (BoF) and the Bank of Italy (BoI) from December 13 to 21 with the company of senior representatives from SBV and the State Treasury. The visits aimed at learning from the experiences in conducting auctions of the Government’s bills and bonds and other issues related to the banking activities of these two countries.

- On December 18, Deputy Governor Nguyen Toan Thang chaired the seminar on current situation and development orientation of Vietnamese rural credit after accession to the WTO, which was jointly organized by the SBV and the Ford Foundation.

                                                                                                                                sbv

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