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Dollar interest rate 10 times higher than world’s
While the 3-month term dollar deposit interest rate on the international market stays at 0.25-0.35 percent per annum, many commercial banks in Vietnam have continued raising rates, standing now at 4.5-4.6 percent.
Eximbank, a large joint-stock bank powerful in dollar capital, announced in early September increases in dollar deposit interest rates. The bank now offers rates of 4.35 percent for three month term deposits and 4.45 percent for 12 month term deposits.
On September 8, ACB also officially announced new dollar deposit interest rates equal to those of Eximbank. Other banks have also raised their rates.
Vietnam-Russia Joint-Venture Bank and An Binh Bank have raised interest rates to 4.5 and 4.6 percent per annum for three month term deposits and to 5.2 percent for 12 month term deposits. Vietcombank, a big lender in dollars, is now preparing for dollar deposit interest rates at 4.5 percent.
Explaining the increases, Ly Xuan Hai, General Director of Asia Commercial Bank (ACB), remarked that, since other banks have raised interest rates, ACB must follow. ACB does not want to join the “interest rate war,” he asserted. Hai believes that the rates have climbed to very high levels and banks should not raise them further.
A senior executive of the Vietnam Industrial and Commercial Bank (Vietinbank) commented that all commercial banks know that the rates are now overly high, but they do not intend to ease them, because they want to hold their market share firmly and retain depositors.
Meanwhile, a Eximbank source proposed that banks must raise deposit interest rates to offset decreased capital in previous months. Since the dong/dollar exchange rate has become more stable and businesses now need dong, they tend to sell dollars to banks. As a result, dollar deposits have decreased so hiking interest rates is meant to lure more dollar capital.
Explaining the big gap between dollar interest rates in Vietnam and the world, Phan Dao Vu, General Director of Bao Viet Bank, point out that dollar interest rates in Vietnam have always been higher for many years. In the last two years, international interest rates have been decreasing dramatically due to the global financial crisis. In the US, the Federal Reserve has set up the prime interest rate at zero percent, while in the UK, the rate is just 0.5 percent. Meanwhile, dollar interest rates have been staying firmly high.
When asked why Vietnamese banks do not try to mobilize capital from the international market, which can provide capital at lower interest rates, Vu explained: “Individuals can deposit money at Vietnamese banks to enjoy high interest rates, while it is impossible to borrow big sums from foreign institutions at low rates. Therefore, Vietnamese banks must rely on the domestic market.”
He added that it is not really absurd that dollar interest rates in Vietnam continue rising, citing the dong interest rate. According to Vu, with dong interest rates now high at 13-15 percent per annum, businesses are open to loans in dollars at 6-7 percent. Therefore, deposit interest rates can hover around 4-5 percent and explains why banks do not intend to ease dollar interest rates.
The Deputy General Director of a garment company in HCM City, observed that current dollar interest rates on loans for businesses to import input materials are acceptable.
In fact, many businesses, especially export companies, prefer borrowing in dollars. Since most loans are short term, businesses do not fear exchange rate risks. Plus, dong interest rates remain unaffordable for many businesses.
vietnamnet, VnExpress
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