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Foreign exchange shops shut down, banks close doors to buyers
People are complaining that they have not been able to purchase foreign currencies over the last week because the free market unexpectedly shut down and banks refuse to sell dollars.
Since early last week, foreign exchange shops have unexpectedly closed the doors and stopped foreign exchange transactions. Though the exchange shops have refused to explain why they have stopped transactions, people well understand that this is the result of the “iron hand campaign” carried out by management agencies that aim to eliminate the black market.
The information has made people worried stiff, because they do not know where to purchase dollars.
In an effort to reassure the public, on March 12, Nguyen Quang Huy, Director of the Foreign Currency Management Department under the State Bank of Vietnam stated that everyone, who need foreign currencies for legitimate demands (For studying, for healthcare services or for business abroad) can come directly to banks to purchase foreign currencies. Commercial banks will sell foreign currencies depending on their capabilities and the legitimate demands from individuals.
However, in fact, people, who had legitimate demands for foreign currencies and can show legal documents, still could not purchase foreign currencies from banks. The reason that banks cited to refuse to sell foreign currencies is very simple: banks do not have enough foreign currencies to satisfy all the demand.
Dan Viet newspaper quoted Lan Anh, an accountant of a media company, as saying that she needs 18,000 dollars to remit to a partner in Hong Kong. Lan Anh came to Vietcombank to ask for purchasing the sum of money in early February. However, until now, the bank still cannot satisfy the demand, because Anh is not a “priority” client.
Fearing that the company would be fined for breaking the contract, Anh tried to contact another bank. Luckily, the bank agreed to sell dollars to her, but “at the price to be set up by the bank”. Of course, the dollar price will be much higher than the price quoted by commercial banks. This also means that the company will have to seek to “legalize” the additional expenses the company has to pay for purchasing dollars.
Explaining why commercial banks still hesitate to sell dollars, Huy from the State Bank said making transactions in cash will increase banks’ expenses, including the expenses on preservation, counting cash and security measures. He also said that the State Bank is considering applying some measures to facilitate people to purchase foreign currencies.
Huy also advised people to use international payment cards when they go abroad. However, people say that payment cards are not the ideal solution even in developed countries. People cannot pay for meals on pavement shops in South Korea with a Visa card.
Meanwhile, General Director of Vietcombank Nguyen Phuoc Thanh said that though the dollar price has been decreasing, the dollar supply still has not been profuse enough.
Pham Duy Hung, General Director of Viet A Bank, said that the dollar supply has not considerably improved, only a part of the demand for dollars can be satisfied. Therefore, Viet A only has enough dollars to sell to some loyal clients.
Cao Sy Kiem, former Governor of the State Bank of Vietnam, commented that it is necessary to apply comprehensive measures to deal with the foreign currency market. It is clear that eliminating a market which has been existing for many years will lead to many problems..
Analysts also comment that when shutting down the illegal market, the State needs to open the legal market widely, so that people can seek to purchase dollars there, or transactions will get stuck and the market will become distorted.
In related news, since foreign exchange shops stopped transactions, people tend to deposit dollars at banks.
The transaction office in Tay Ho District of a joint stock bank said that the deposited volume has increased sharply since the black market halted operations. Depositors mainly make 3-6 month term deposits. The highest deposit interest rate offered by the bank is 5.7 percent per annum.
Eximbank has slashed the dollar deposit interest rate from 5.5 percent to 5.3 percent for 12 month term deposits. The interest rates are now just 5.1-5.2 percent for short term deposits of 3-6 months. The bank said that in recent days, the deposited volume has increased sharply, which has forced the bank to slash interest rates in order to reduce the deposits.
Lan Huong
vietnamnet
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