The Vietnamese central bank has issued a new regulation to allow resident and non-resident foreigners in the country to make term deposits at local banks from this month in a move to attract idle funds from the expat community.
Vietnam ranks first in the world for helping foreign workers save money
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The term deposits made by resident and non-resident foreigners shall have a maturity date not later than the expiry date of their visa or other valid papers determining the stay duration of the foreigners in Vietnam issued by the competent authority.
Besides this, the extension of the savings term will be negotiated between credit institutions and clients, according to the circular. The deposits will be used as collateral, per the current laws.
Currently, interest rates of deposits at banks in Vietnam are higher than that of other countries. The rates in Vietnam range between 5 percent and 8.5 percent per year, compared with some 2.5 percent in the US.
Meanwhile, Vietnam is considered an ideal destination for expatriate workers, with the country being named in the top 10 countries, according to HSBC’s Expat 2019 Global Report released last week.
HSBC’s annual survey gathered data from 18,059 overseas workers in 163 locations. Switzerland ranked high in quality of life, with 70 percent of expats based there saying it had a better natural environment than their home nations, compared to a global average of 40 percent for all expats. Respondents also highlighted the country’s low crime rate and its economic and political stability, factors which helped push the country’s ranking from the number eight to number one spot this year.
Late last year’s HSBC survey also showed that foreign experts in Vietnam could earn an average income of some US$90,408 per year. Some 31 percent of expat workers surveyed claimed their income increases by some 25 percent each year.
Further, Vietnam ranked first in the world for helping foreign workers save money, with 72 percent saying that moving to Vietnam helped them save more and another 72 percent stating that they have more disposable income in Vietnam than they did in their home country. Both were higher than the global average: 52 percent for savings and 56 percent for disposable income.
Benefits to both sides
Meanwhile, currently, Vietnamese banks are in dire need of capital to meet the central bank’s new regulations on minimum capital requirements and Basel II standards by early next year. Many banks therefore have to raise interest rates to attract depositors.
Besides, banks also have to seek the capital from international bond markets, experts said, adding it is also one way through which banks are connecting with potential strategic investors.
However, according to financial expert Nguyen Tri Hieu, banks may benefit from lower interest rates in the international market, but they had to bear the risk of exchange rate fluctuations.
According to Hieu, when issuing bonds, the exchange rate is relatively low, but when it comes to maturity, the exchange rate may increase and banks may have to buy US dollars at a higher price to repay the debt. In the context of forex volatility which tends to increase, international bond issuances will face significant risks.
In addition, only strong banks with good reputation and credit rating assessed by international rating agencies could sell bonds overseas, Hieu added.
