Banks join forces to force dollar price down

The dollar price on the interbank market has decreased sharply to 18,600 dong from 19,100, following a commitment by Vietnam’s eight biggest commercial banks to provide enough dollars to the market at the ‘official’ price.

The banks have committed to meet the legitimate demand for foreign currencies from individuals (such as persons needing foreign currencies to use when going abroad to study or get healthcare), and from businesses which need foreign currencies to import materials for local production.

The agreement to increase the supply of dollars to the market was reached after a meeting between the State Bank of Vietnam and representatives of commercial banks on December 2.

Phan Thi Chinh, Deputy General Director of BIDV, said that the central bank and commercial banks must join forces to stabilize the market and narrow a gap of 1,000 dong per dollar between the exchange rate quoted by banks and the black market’s exchange rate.

The State Bank of Vietnam has stated that it will back commercial banks to ensure that commercial banks have the foreign currencies to sell to businesses.

The eight banks are Vietcombank, Vietinbank, the Bank for Investment and Development  (BIDV), Agribank, Asia Commercial Bank (ACB), Techcombank, Eximbank and Sacombank.

Right after the banks’ joint commitment was announced, the General Director of Techcombank, Nguyen Duc Vinh, said that he has instructed the bank’s branches to provide foreign currencies sufficiently and promptly to clients. General Director of Eximbank Truong Van Phuoc said the same.

Prior to that, on November 30, State Bank Governor Nguyen Van Giau sent a dispatch to commercial banks, reminding them to strictly follow the regulations on the new trading band of +/-3 percent.  The central bank chief threatened heavy fines on the banks which sell foreign currencies at prices above the allowed ceiling.

Commercial banks seem confident that the drastic measures taken by the State Bank of Vietnam will help cool down the foreign currency market.

The decision a week ago to raise the basic interest rate will discourage those who have been borrowing dong in order to buy dollars, reducing the artificial demand for foreign currencies.

According to BIDV and Techcombank, the State Bank is considering allowing exporting companies to obtain loans denominated in foreign currencies. This step is expected to induce export companies to sell banks the dollars they earn from exports.  Currently, the companies hold on to their dollar earnings because they fear they will not be able to purchase or borrow dollars from banks.  If they can borrow dollars, their fear of being caught short will be relieved.

As signalled by Governor Giau a week ago, the Government has now officially requested state-owned economic groups and general corporations to sell dollars to the State Bank.  These enterprises are said to be collectively holding several billions of dollars in their accounts.

VietNamNet/VNE

Tags: Vietnam currency market, vietnam dollar price, Vietnam finance news