Vietnam c.bank has no policy to issue compulsory bonds

Vietnam’s central bank does not have any policy to issue compulsory bonds, Governor Nguyen Van Giau was quoted as saying on Friday.

The State Bank of Vietnam, the country’s central bank, does not have any policy to issue compulsory bonds, Governor Nguyen Van Giau was quoted as saying on Friday, responding to talk that the authorities were considering such a move to withdraw dong liquidity after the body bought $1 billion dollars.

Giau did not confirm the news that the SBV has bought $1 billion but he said the forex policy is on the right track reflecting in the forex market movements.

Regarding banks’ deposit raising activities, the governor said as of May 23, total deposits rose 1.48% from last December in which dong deposits fell 2.75% but dollar ones rose 18.84%.

Giau pointed out that dong deposits fell because of lower deposits by institutions with absolute number of VND156.7 trillion ($7.64 billion).

Giau explained that “when loans rates are high, corporate will withdraw money to finance business and production and this is healthy move because it helps reduce production cost, increase liquidity in the economy and reduce money multiples in the economy”.

Meanwhile, individuals deposited (VND107.3 trillion) into banks in the same period, increasing 11.84% from the end of 2010, including 11.39% rise in dong deposit and 8.63% in foreign currencies. Idle money from the public is running strongly into the banking system, reducing inflation pressure, Giau concluded.

Vietnam posted credit growth of 6.2% as of May 23 against the end of 2010. Lending for agricultural production and the export sector rose 22.2%, the governor said. He gave no value for Vietnam’s total outstanding loans.

The central bank is doing a difficult job now as it wants to ensure adequate liquidity for the economy while it has to struggle to curb inflation which stood at 19.8% in May, the highest since December 2008

The SBV has been consistently applying tightening policy this year, including raising key several times and trying to keep banks’ credit growth below 20% this year.

However, the Governor also said SBV does not have any policy to cap loan rates saying “If there is a surplus in credit supply, it could be done, but now the supply is short so it cannot be imposed,” – Stoxplus.com

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial