Banks use raised gold as collateral to borrow interbank capital

As the interbank interest rate went up to 22% per annum (p.a.), many banks are using raised gold as collateral to borrow capital from other banks with the interest rate of only 14-15%, the local newspaper Nguoi Lao Dong (The Labourer) reported on Friday October 14.
On October 13, some banks said that they have to borrow capital on interbank market with the interest rate of 18-19% p.a. for 1-week term and it is up to 22% p.a. for 1-month term.

High interest rates were attributable to some ailing banks that are in need of capital to compensate for its weak liquidity via borrowing capital on interbank market. Meanwhile, big banks take this advantage to push up the interest rates.

The interest rate for certificate of deposit (C/Ds) in gold has been also pushed up after some banks were allowed to sell raised gold and trade account gold. However, at banks disallowable to sell raised gold and trade account gold, the interest rate of C/Ds in gold was raised to 2.7% p.a. while the common benchmark is only 1.7% p.a.

According to banks, the raised gold volume may be used as collateral to borrow capital at the other banks with the interest rate of only 14-15% p.a. instead of accessing interbank loans with higher interest rate amidst strong decline of deposits from people. – Source: Vietbiz24.com

Tags: vietnam gold, Vietnam gold market, Vietnam gold prices

Posted by VBN on Oct 15 2011. Filed under Banking-Finance, Gold. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry