Interest rate on interbank market hots up

High capital needs of some small banks to meet immediate liquidity may be the main cause leading to the significant heating up of interest rates on the inter‐bank market, the state‐run newspaper Lao Dong reported on March 29.

By the end of last week, according to the latest data announced by the State Bank of Vietnam (SBV), total trading value on the interbank market reached at approximately 91 trillion dong and $ 3.397 billion. As many previous weeks, the dong transactions mainly incurred in the short terms (overnight and 1 week) with total trading value of these two terms accounting for 69 percent of total transactions.

A notable change is compared with the average interest rate last week, the average exchange rate on the inter‐bank market saw a slight increase in dong in most of the terms, with an increase from 0.02 percent to 0.44 percent per year.

The average interest rate of overnight loans and one‐week loans still continued to rise and remained high. Specifically, the average overnight interest rate currently stands at 13.47 percent per year, up 0.08 percent from the previous week while the average one-week interest rate is also at 13.29 percent per year, increasing 0.01 percent from the previous week.

According to analysis of some securities companies, because the CPI in March is still high (2.17 percent according to the general Statistical Office of Vietnam), so the continued monetary tightening will cause inter‐bank interest rates to remain at very high in the near future.

The central bank’s recently increasing a series of interest rates (rediscount rate, the refinancing rate, interest rates through the open market operations (OMO)) may have an indirect effect of interest rates offered for loans by large banks on the inter‐bank market.

Capital needs of small banks to meet immediate liquidity may also cause direct effects to the interest rate on the market. Experts said that with these changes, the initiative on interest rates on inter‐bank market will still belong to big banks.

Meanwhile, in the open market channel, Thang Long Securities (TLS) and Bao Viet Securities (BVSC) quoted the date last week as saying the SBV continued to make OMO net withdrawal at 11 trillion dong on the open market.

According to TLS, so from early 2011 until now, banks have made a net withdrawal of about 24 trillion dong through open market operations. Meanwhile, demand for loans in this market continues to rise, reflected in the rate of bidding registration last week increasing to 362 percent, compared to 250 percent of the previous week. – Vietbiz24

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