Week Ending Oct. 1: Finance and Banking Review

The State Bank of Vietnam, the country’s central bank, capped mobilizing interest rates for non-term and less than 1 month deposits at 6% p.a.
The Central Bank’s policies
· On funds mobilization
The SBV issued Circular No. 30/2011/TT-NHNN on Sept. 28, placing a cap of 6% on dong denominated interest rates for non-term deposits and under 1 month terms, effective from Oct. 1, to consolidate banking system and prevent liquidity risks. While the SVB held other term deposit cap at 14%.
Banks are reported to seriously follow the new regulation, cutting the rates to 6% en mass.
However, deposits are seen to flow to big banks, considered as safer cash parks.
Total deposits in the whole banking system increased, but at a lower level than in previous years.
· On Liquidity Injection
The SBV net injected VND6 trillion into commercial banks through the open market operations from Sept 26 to Oct. 1 to support liquidity in the banking system. In September, the SBV net pumped VND28 trillion on OMO.
· On credit growth
The government will firmly pursue its tight monetary and fiscal policies until the end of the year, Vu Duc Dam, Chairman of the Government Office, said in a briefing on Sept. 26.
Vietnam adjusted credit and money supply growth caps to 17% and 13% this year, respectively, down 3% from previous targets. The government aimed the same targets for 2012.
The Prime Minister asked credit institutions to closely monitor bad debts, especially those arising from real estate loans.
· On gold and exchange rate stabilization.
The SBV sold USD150 million (or VND3,000 billion) from Sept 26-29, after selling USD1.5 billion in three weeks from mid August to stabilize the USD/VND exchange rate.
The central bank also granted more gold quota for more than 10 local importers on Sept 28 to tame local gold frenzy. The SBV has licensed to import about 20 tons of gold YTD.
The central bank may allow selective commercial banks to sell gold deposits and re-open their international gold trading accounts in an effort to pull down local gold premium.
Finance and banking highlights
Banks boosted up lending to exporters, manufacturers, agriculture producers at preferable rates from 17.5-18% p.a. Eximbank, VIB , Agribank and ANZ are some names. Agribank spared VND3 trillion for loans to Vinafood II while ANZ set aside USD160 million to lend exporting firms.
Many banks raised their interest rates on gold deposits to avoid customers’ withdrawal and sold gold at a lower price than in the market.
· Bad Debts
As of July, 2011, bad debts in Vietnam’s banking sector rose to 3.04% of the total outstanding loans versus 2.16% at end-2010. Bad debts on foreign currency loans accounted for 2.9% of total outstanding loans in foreign currencies. Bad debts of FDI firms reached USD80 million.
· Bond auctions
Vietnam could only sell VND850 billion or 40% of VND2 trillion worth of bonds offered in the week, down 20% from the previous session. The bond yield increased by 0.05% to 12.1-12.15% p.a. for 3 year tenor and 5 year tenor respectively. – Source:StoxPlus.com

Tags: Finance and Banking Review, interest rates, Vietnam banking industry, Vietnam finance, Vietnam financial, Vietnam interest rates

Posted by quynhdn on Oct 3 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