Is bank’s liquidity worrying?

Worries about the low liquidity have been raised after local newspapers reported that banks are still restricting loans, while the State Bank of Vietnam (SBV) has had to offer 15 trillion dong to support banks’ liquidity.

Borrowers still hear “no”

Trinh Hoang Duy, a member of the Management Board of Vinaconex, observed that the corporation has good relations with many big banks, but they cannot borrow money because banks are having difficulties in mobilizing capital.

A VP Bank official, on the one hand, affirmed that the bank hopes to obtain a 25-30 percent credit growth rate in 2010, but , on the other hand, also noted that VP only provides loans to loyal clients because the gap between deposits and lending interest rates is too narrow.

In fact, many commercial banks collect additional fees of 3-4 percent, making real interest rates of loans much higher than the ceiling of 12 percent. The fees help banks mobilize costly capital.

Some sources reported that, in the interbank market, interest rates once reached 17 and even 20 percent.

Bankers say liquidity not a concern

Since SBV had to pump 15 trillion dong in support of bank liquidity, worries have blossomed about the state of banks. Economists have assured the public that the central bank takes such steps regularly.

Cao Sy Kiem, former Governor of SBV, believes that the injection of 15 trillion dong is a good move and can help improve bank liquidity, plus provide capital for the national economy.

Kiem believes that now is not the right time to raise the basic interest rate.

Le Xuan Nghia, Deputy Chairman of the National Finance Supervision Committee, confirmed that the move by SBV is a normal operation.

He added that SBV only supplies capital when they know that they can control the sums of money in circulation. Moreover, he continued, 15 trillion dong is really a small sum of money if compared with the total money supply and therefore is not inflationary.

Phan Thanh Son, Deputy General Director of Tien Phong Bank, also affirmed that bank liquidity should not be troubling. Maritime Bank, in a press release late last week, additionally stated that it is maintaining high liquidity.

VietNamNet/TBKTVN

Tags: vietnam bank, Vietnam finance news