Vietnam banks association suggests raising omo winning rates

Vietnam Banks Association (VNBA) has suggested the State Bank of Vietnam, the country’s central bank, to raise the winning bids on OMO to support liquidity to local small banks.

Vietnam Banks Association (VNBA) has suggested the State Bank of Vietnam, the country’s central bank, to raise the winning bids on OMO to support liquidity to local small banks, the local online newspaper Saigon Tiep Thi quoted Duong Thu Huong, Secretary General of the association, as saying.

Small banks are confronted with severe funds shortage after the central bank took measures to strictly reinforce the interest rate cap at 14%, raised the refinancing rate to 15% from 14% and lifted the overnight interest rates on electronic transactions to 16% from 14%.

Some expected the central bank to place a cap on the interbank interest rates as the 1-month interbank rate was as high as 20% per annum, encouraging banks to illegally increase deposits interest rates to attract cheaper source of funds, the newspaper reported.

Le Quang Trung, Deputy CEO of VIB disagreed on the idea, saying that the interbank market is supply and demand driven. Besides, small banks may not be able to borrow in the interbank market as state-owned banks, representing 60% market shares, are cutting credit lines for unsecured loans. Trung expected the SBV to increase the tender winning rates on OMO, explaining that the move will not increase the money supply as funds are pumped and withdrawn easily via OMO.

Source Sophie/ News Writer/ StoxPlus

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates

Posted by VBN on Oct 13 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry