Rates stabilize, but maybe not for long: Bankers

Deposit and interbank rates in Vietnam have fallen over the past week after intervention by the authorities but bankers said there were signs this might not last very long.

Most lenders brought deposit rates down to 14 percent after the State Bank of Vietnam imposed this as the ceiling rate last Wednesday and threatened to punish those that ignored the cap.

Dong interbank rates also eased, with the overnight rate down at 10.14 percent on Monday, the lowest in two weeks, Reuters data showed.

However, state media reported on Monday that some banks were trying to circumvent the central bank's regulation by giving depositors bonuses or signing "investment cooperation" contracts with them, which pushed the actual rates up to 15-16 percent.

Several banks still need liquidity and some businesses are eager to get loans even at high rates despite lower profits, the Vietnam Economic Times quoted a bank executive as saying.

In the interbank market, banks had almost exclusively tapped overnight loans over the past week to manage short-term liquidity, said a currency trader who declined to be named. There was very little trading in longer terms and rates were stable.

"The fact that there were only short-term transactions may be a sign that the stability of the market could be vulnerable," he said.

Bankers said there was a difference in liquidity conditions between large and small banks, with the smaller ones trying to raise deposits while some larger players had extra cash.

Unusually, not all of the cash on offer from the central bank last week in open market operations was taken up because large institutions that have access to it were flush, while smaller banks in need of money were not eligible for the loans, the manager of a large bank in Hanoi said.

"Large banks have ample funds," she said. Several lenders were restricting their interbank loans to short terms and cutting longer-term lending in a defensive move at the end of the year, she added.

Smaller banks cannot access central bank loans via open market operations because they generally do not hold treasury notes to offer as collateral.

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