Business
Vietnam c.bank warns of banks’ deposit mobilization race
Banks must maintain an appropriate deposit rates that would not cause instability and affect the average interest rate in the market, requested the Vietnamese central bank.
Governor of the State Bank of Vietnam (SBV) Le Minh Hung has instructed banks to tighten deposit mobilization activities after some credit institutions have increased their deposit interest rates or issued certificate of deposits (CDs) at high rates.
“The SBV would follow closely the situation and strictly punish banks violating regulations, including lowering the credit growth limit of those in subject,” stated the Governor’s instruction.
According to the SBV, banks must maintain an appropriate deposit rates that would not cause instability and affect the average interest rate in the market.
Since the beginning of the year, Vietnamese banks have been actively promoting deposit mobilization programs and issuing CDs with high rates, with the latest case being Viet Capital Bank offering CDs at rate of 10.2% per annum, higher than the rates of 8 – 9% in early 2019.
Meanwhile, the average mobilization rate is on the growing trend at 8.2 – 8.4% per annum, even exceeding 9% in case of depositing large amount of cash for long-term.
The SBV stated higher deposit rate in the market could lead to unhealthy development of the banking sector, causing negative sentiment and instability of the financial market through a capital mobilization race among banks.
Experts said such trend was due to high demand for mid- and long-term capital of banks, while the authority’s decision to restrict the rate of short-term capital for mid- and long-term lending has been one of the reasons forcing banks to change the structure of capital mobilization sources towards greater focus on long-term lending capital.
Additionally, a growing number of realty firms issuing corporate bonds and cases of bank investing in corporate bonds issued for debt rollover have also contributed to a higher interest rates.
Previously, the SBV has also requested banks to control risks related to corporate bonds investments.
In the first six months of 2019, total corporate bond issuance reached VND116 trillion (US$5 billion), up 7.4% year-on-year, including VND36.7 trillion (US$1.58 billion) or 36% of the total from commercial banks, and VND22.12 trillion (US$953.53 million) or 19% from realty firms, among others.
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According to the SBV, banks must maintain an appropriate deposit rates that would not cause instability and affect the average interest rate in the market.
Since the beginning of the year, Vietnamese banks have been actively promoting deposit mobilization programs and issuing CDs with high rates, with the latest case being Viet Capital Bank offering CDs at rate of 10.2% per annum, higher than the rates of 8 – 9% in early 2019.
Meanwhile, the average mobilization rate is on the growing trend at 8.2 – 8.4% per annum, even exceeding 9% in case of depositing large amount of cash for long-term.
The SBV stated higher deposit rate in the market could lead to unhealthy development of the banking sector, causing negative sentiment and instability of the financial market through a capital mobilization race among banks.
Experts said such trend was due to high demand for mid- and long-term capital of banks, while the authority’s decision to restrict the rate of short-term capital for mid- and long-term lending has been one of the reasons forcing banks to change the structure of capital mobilization sources towards greater focus on long-term lending capital.
Additionally, a growing number of realty firms issuing corporate bonds and cases of bank investing in corporate bonds issued for debt rollover have also contributed to a higher interest rates.
Previously, the SBV has also requested banks to control risks related to corporate bonds investments.
In the first six months of 2019, total corporate bond issuance reached VND116 trillion (US$5 billion), up 7.4% year-on-year, including VND36.7 trillion (US$1.58 billion) or 36% of the total from commercial banks, and VND22.12 trillion (US$953.53 million) or 19% from realty firms, among others.
