Dong flow to banks slows down, putting pressure on liquidity
VietNamNet Bridge – Commercial banks all have reported the sharp decreases inthe volume of capital mobilized since September, when banks began applying the14 percent ceiling interest rate mechanism. Experts have warned that thedecrease in mobilized capital means higher liquidity risk, while the pressure onthe foreign currency market has also appeared, sooner than expected, partiallybecause of the gold price increases.
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General Director of Eximbank Truong Van Phuoc said that the capital mobilized bythe bank has decreased by two percent in comparison with the previous month,while the lent volume has also decreased equivalently. From July to September,the deposits at Eximbank dropped dramatically by 4 trillion dong. The banksometimes saw 400-500 billion dong withdrawn from the bank just within the day.
Other bankers declined to give concrete figures, but all have confirmed thatthey are facing the same problem.
Depositing money at banks has become no longer the biggest choice for people whohave idle money. The deposit interest rates have been lowered to 14 percent perannum at the highest as instructed by the State Bank of Vietnam, which meansthat depositors cannot obtain the expected profit if they deposit money atbanks.
People nowadays tend to use their idle money to buy gold. The gold price hasbeen decreasing since mid September, and people believe that the gold priceshave become low enough to buy in. Bankers believe that people have withdrawnmoney from banks to inject in gold, as they believe that the gold price keepsrising.
They also think that a big volume of money has been withdrawn from banks to bepoured into the foreign currency market. Analysts all have warned that thedemand for dollars would increase towards the end of the year, when businesseshave to buy dollars to pay due debts. Therefore, people believe that it is nowthe right time to buy dollars.
As such, banks now have to compete with other investment channels, includinggold and dollar, to attract capital.
Explaining the outstanding loans increases, Phuoc of Eximbank said that a lot ofenterprises are facing too big difficulties which have forced them to scale downthe production. Especially, many of them have to halt business or have gonebankrupted. The current lending interest rates prove to be unaffordable tobusinesses, even though the interest rates have been eased by a little.
The decrease in the capital flow to banks has immediately raised the worry aboutthe liquidity of banks. This explains why the interbank market has heated upsince mid September. In the first week of October, the overnight interbankinterest rate increased sharply to 14.5-15 percent, while the rate for one weekloans increased to 15-15.5 percent. The rates have been surged to 16 percent fortwo week loans and 16-17.5 percent for one month loan, higher than the ceilinginterest rates applied to the deposits from the public.
Meanwhile, the overnight interest rate was only 12.7 percent per annum in thelast week of September, while the rates for other terms of loans hovered around13.36-13.93 percent per annum.
Pressure on exchange rate appears soon
The pressure on the exchange rate has appeared, sooner than previously expected.The interbank exchange rate was raised to 20,678 dong per dollar on October 13after five times of consecutive adjustments.
Commercial banks have also adjusted their quoted prices. Vietcombank, forexample, quoted the dollar prices at 20,880 (purchase) and 20,885 dong perdollar. Banks all tend to raise the purchase prices, thus narrowing the gapbetween the purchase and the sale prices.
The dollar trading volume on the interbank market increased sharply to 3014million dollars (602 million dollars a day) in the last week of September, whilethe figure was 2641 million dollars only in the week before.
This does not surprise anyone at all, because everyone understands well that thedemand for foreign currencies always increases in the last months of the year,in accordance with the increases of the trade deficit.
Director of an agricultural machine import company said that his bank debt willbecome due later this month. However, he has decided to buy dollars right nowfor fear that the dollar price would be increasing. The director bought dollarson October 13 at 21,450 dong per dollar, though the official quoted price was20,885 dong per dollar.
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