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SBV adjusts compulsory reserves, a sign of 2016 monetary policy
The new policy on compulsory reserves, in the eyes of analysts, indicates the SBV's determination to curb interest rates and prepare for interest rate regulation policy in 2016, experts say.
The State Bank of Vietnam (SBV) late last week released Circular No 23 on adjusting the compulsory reserves that credit institutions have to pay, which takes effect in January 2016.
The credit institutions put under the SBV’s special control will pay the compulsory reserves at minimum level of zero percent, commencing from the first quarter of 2016. As for the banks which are undergoing restructuring and the banks assigned by SBV to help weak banks restructure, SBV will make decisions on specific cases.
According to Rong Viet Securities Research, Vietcombank, BIDV and VietinBank are likely to be covered by the new regulation, because they have joined the SBV’s campaign on restructuring weak banks.
Vietcombank, for example, has been assigned to help Saigonbank in its restructuring, while Vietinbank helps PG Bank and BIDV helps MHB.
The three account for 30% of the banking system’s capital mobilization and lending market and the growth rate of 16-17% in the first nine months of 2015.
The new circular was released as confirmation of the central bank’s commitment that big commercial banks will not be at a disadvantage when helping SBV restructure weak banks.
Lowering the compulsory reserves to be applied by these banks will bring big benefits to them because this will make the capital cost lower.
Vietcombank VietinBank and BIDV now have to pay high compulsory reserves of 3-8% for demand deposits and short-term deposits, for dong and dollar, respectively. Meanwhile, the rates are 1% and 6% for long term deposits.
An analyst commented that though the new compulsory reserves policy will only be applied to some banks, it will have great impact on monetary policies.
He said the lowering of compulsory reserves means the implementation of a loosened monetary policy in the context of high interest rates. Analysts all said current conditions do not allow to slash interest rates further.
Vietcombank, VietinBank and BIDV are the three pillars of the national economy which have the power of determining market interest rates.
While small and medium banks have begun raising their deposit interest rates so as to mobilize more capital to satisfy the year-end demand, the three big players still are silent.
Rong Viet Research estimates that once the required compulsory reserves are lowered by one percent, the volume of money to be put into circulation may increase by 0.2-0.3%. This means that the watchdog agency plans to boost lending in 2016.
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