Large banks increase US dollar saving rate

Large banks are afraid that customers will make US dollar savings at other banks with higher deposit rate, so they are racing to raise the US dollar saving rate.

While the dong deposit rate is being stabilised the US dollar saving rate is increasing to the peak of up to 6.2 percent per annum.

After the State Bank of Vietnam (SBV) required the director board’s chair of two banks to strictly deal with the leaders who violated the regulation on interest rate, at commercial banks, the dong saving rate has been controlled at no more than 14 percent per year.

Meanwhile, the dong lending rate climbed to 19.5-21 percent per year. Leaders of banks explained due to the credit growth target of the banking system at less than 20 percent in 2011, banks have to urgently reduce the lending operations for non-production sector to 22 percent on the total outstanding loans (the deadline is on June 30), so they have to increase the lending rate to limit the credit growth.

In February 2011, after Vietcombank, VietinBank, Agribank adjusted up the US dollar saving rate from 5 percent per annum to 5.5-5.6 percent pa, immediately, Vietnam Export Import Commercial Joint Stock Bank (Eximbank-EIB) also increased the US dollar deposit rate to 5.6 percent per annum.

By early March, 2011, Asia Commercial Joint Stock Bank (ACB) also adjusted up the US dollar saving rate to 5.58 percent per annum meanwhile the US dollar deposit rate at small banks was up to 6-6.2 percent pa.

Leaders of many banks said that when the dong saving rate is controlled at 14 percent per year, some small banks suffered many hardships in mobilising the dong, so they switched to raise US dollar and then use US dollar as mortgage asset to borrow the dong from other banks to compensate for the temporary shortage of capital.

Big banks are afraid that customers will choose banks with higher US dollar saving rate, so they also increased the US dollar saving rate to keep customers. Thus, the US dollar deposit rate is now up to 5.6-6.2 percent per year, pushing the US dollar lending rate up to 8-9 percent per annum.

According to Ly Xuan Hai, ACB’s general director, the high US dollar saving rate will cause difficulties for the process of lowering the dong interest rate because the people will hold US dollar to make savings.

The authorities need to timely offer solutions to lower the US dollar interest rates, contributing to stabilise the forex rate, tame inflation and gradually reduce the dong interest rate.

Tags: US dollar saving rates