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Interest rates down, deposits leaving banks
Commercial banks have no other choice than slashing the deposit interest rates to 14 percent per annum, after the State Bank of Vietnam threatened to dismiss the bank managers who offer overly high interest rates for deposits. However, banks are trembling with the fear that depositors may withdraw money from banks.
Commercial banks have unanimously been quoting the same interest rate of 14 percent per annum for deposits since September 7, after the State Bank stated that it will apply drastic measures to ensure that the deposit interest rates are not higher than 14 percent.
When asking banks to slash deposit interest rates, the State Bank assured banks that money will keep flowing to banks, because depositors will have no other better choice for their idle money now.
However, at the conference held by the Hanoi Branch of the State Bank of Vietnam held on September 15, Chair of VIB Bank, Han Ngoc Vu, said that since September 7, depositors have withdrawn 1 trillion dong in deposits from the bank, and that if the withdrawal continues, it would be unbearable for the banking system.
Deputy General Director of Phuong Nam Bank, Phan Cong Khoa, has also reported that 200 billion dong has “run away”. Khoa said that the single interest rate of 14 percent has been putting a hard pressure on small banks. Since the deposit interest rate is the same at all banks, people would rather deposit money at big banks than small banks.
However, in fact, not only small banks are seeing the deposits decreasing as depositors withdraw their money from the banks, big banks also are also crying about the decreases in deposits. Agribank, the bank with the biggest network and the biggest total assets in Vietnam, has also reported that hundreds of billions of dong left the bank last week.
“This thing has never been seen at the bank before,” the representative of the bank said.
General Director of Dong A Bank, Tran Phuong Binh, has disciplined a branch director who offers the deposit interest rates higher than 14 percent. However, Binh fears that if the bank continues applying the ceiling interest rate policy, it would not be able to mobilize capital.
“A lot of people have withdrawn money from banks to purchase stocks, gold or inject money in the real estate, because they do not find the deposit interest rate of 14 percent per annum attractive,” Binh said.
Binh went on to say that the volume of capital mobilized by Dong A Bank by the end of August still increased in comparison with July and 2010. However, since September 7, the capital mobilized by the bank decreased by 20 billion dong a day.
A representative of a small joint stock bank in HCM City also complained that just after one week of applying the ceiling interest rate of 14 percent, 150 billion dong has been withdrawn from the bank. “It is unclear where the sum of money will go,” he said.
Nguyen Anh Tuan, General Director of Vietinbank Capital, has warned that weak liquidity would be one of the three biggest risks for the banking system in the last months of the year.
Tuan said that what is happening now seems to be similar to what happened in 2008, when the sky high interest rate of 18 percent per annum was forced to 10-12 percent.
“When the high interest rate of 18 percent per annum goes down to 14 percent per annum, the mobilized capital reduction is inevitable,” Tuan said.
The thing that most worries commercial banks is that some banks are still offering the interest rates higher than 14 percent to compete with other banks and scramble for deposits. Vu from VIB Bank said that in big cities like Hanoi and HCM City, banks have to obey the instruction by the State Bank. However, in the localities far from the central agencies, bank branches may “break the laws”.
vietnamnet, VnExpress
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