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Major banks to cut dollar deposit rates to inhibit hoarding
Vietnam’s largest banks will lower their interest rates on dollar deposits to 1.5 percent in June from around 2 percent now in a move to help avoid dollar hoarding in domestic markets, the central bank said.
All state-run banks plus Vietcombank, Vietnam’s largest partly private lender, have also agreed to set the ceiling for dollar lending rates at 3 percent, the State Bank of Vietnam said in a statement seen on Saturday.
“The governor of the SBV is asking Vietnam Banks Association to seek consensus with other commercial banks to lower interest rates and (help) stabilize the forex market,” it said.
The new rates come into effect tomorrow.
The interbank 12-month dollar lending rates rose to 2.29 percent on Friday from 2.20 percent a week ago. This is still below the rate of 2.45 percent on April 29, according to Reuters data.
The central bank said its inspectors will also step up large-scale checks from next month to deal with corporate dollar hoarding, which has pushed the exchange rate beyond regulated levels and led to a dollar shortage for the past several months.
The Dow Jones newswire quoted Hanoi-based bankers as saying the SVB is implementing measures to make dollar holders sell greenbacks to banks, and encourage enterprises to borrow dollars instead of buying them.
Earlier this month the government asked authorities, including the police, to help regulate foreign exchange transactions as part of efforts to reduce dollarization in the economy and control dollar rates on the black market.
The central bank will accept the country’s recently issued dollar-denominated bonds as collateral in its dollar lending operations to help ease the tightness in dollar supply, bankers said on Friday.
The central bank said it would accept foreign currency denominated “valuable papers” as collateral for the first time, without elaborating.
Bankers said these papers would primarily include Vietnam’s US$230 million dollar bonds issued in March and they would be accepted in the central bank’s dollar lending operations.
“This will accommodate the supply of short-term funds to banks which suffer from liquidity shortfall,” the bank said in a statement seen on Friday.
Importers have been complaining they were unable to buy dollars at the official exchange rate due to dollar shortage at the banks.
“The new rule would create a new mechanism for the central bank to intervene to solve the dollar shortage issue but given the amount of domestic dollar bonds, it will not be much,” a banker in Ho Chi Minh City said.
The central bank said earlier this month that banks had plenty of dollars that they can lend but a shortage of dollars to sell as exporters preferred to keep their export earnings in the greenback on fear of a faster depreciation of the dong.
Vietnam devalued its dong currency twice last year and the currency remains under pressure because of general economic uncertainty, an expected turnaround in the trade balance to a deficit and the fact that the dong has weakened less than many of its peers recently.
The government estimated earlier this week that the trade deficit in May would widen to $1.5 billion from $1.18 billion in April.
But State Bank Governor Nguyen Van Giau said last week he saw no need to adjust the dong’s exchange rate against the dollar on the grounds that the dollar was depreciating against other major currencies.
The central bank allows interbank dollar/dong transactions to trade up to 5 percent on either side of the official reference rate. It set the rate at VND16,938 per dollar on Saturday.
thanhnien, reuters
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