Vietnam banks may use gold deposit to back interbank loans

Gold deposits can be used as a pledge for loans in the interbank market at only 14-15% p.a., the local newspaper Nguoi Lao Dong cited some unnamed local banks, as saying.

Small banks have recently been confronted with liquidity shortage resulting from the massive withdrawal of depositors and have to apply for interbank loans to meet the funds thirst. Big banks took advantage of the opportunity, raising the rates to enjoy more profits.

Banks are reported to currently borrow in the interbank market at sky-high rates, 18-19% for 1-week and up to 22% for 1-month terms.

Banks now can borrow funds from other banks at much lower rates, providing that they pledge their gold deposits to back the loans, the newspaper reported.

Banks also raced to raise their gold deposit interest rates after the Saigon Jewelry Company Limited (SJC) and 5 selected banks (Eximbank, ACB, Techcombank, Dong A Bank and Sacombank) were allowed to sell gold deposits to help stabilize the domestic gold market. The gold deposit rates at some banks were recorded to be as high as 2.7% per annum while the average rates of the whole banking sector stayed at around 1.7%.

Source Sophie/ News Writer/ StoxPlus

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial

Posted by VBN on Oct 14 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