Liquidity problems behind high bank interest rates: experts

By Nguyen Thoan, Nguyen Tuong
Sat, November 26, 2022 | 3:57 pm GMT+7

Commercial banks in Vietnam have increased deposit interest rates to 9-10% per annum amid inflationary pressure due to market liquidity problems, experts said.

The country's central bank - the State Bank of Vietnam (SBV) - raised its interest rates twice in September and October to curb inflation, support economic recovery, and adapt to domestic and foreign market movements.

 Vietnamese banknotes. Photo by The Investor/Trong Hieu.

Vietnamese banknotes. Photo by The Investor/Trong Hieu.

Almost all commercial joint stock banks in the country have so far placed their deposit rates higher than 9% per annum, while the Big-4 group, including wholly state-owned Agribank, and the trio BIDV, Vietcombank and Vietinbank with the state as majority shareholder, offer lower rates.

The SBV will keep its 14% cap on the banking system's credit growth for this year, according to an announcement on Tuesday, while businesses are facing a credit crunch. As of the time of the announcement, credit growth is at 11.5%, the central bank said.

Therefore, commercial banks’ interest rate race indicates that lenders, which are limiting lending, may face some liquidity problems and non-performing loan (NPL) issues, according to banking expert Nguyen Tri Hieu.

According to the SBV, the NPL ratio in Vietnam’s banking system as of July this year was 5.41%, which means banks need to promote deposits to ease old debts.

In terms of liquidity in Vietnam’s financial markets, Hieu said both the stock and corporate bond markets have been experiencing low liquidity, resulting in some liquidity difficulties in the banking system.

On October 8, the Ministry of Public Security announced Truong My Lan, chairwoman of Ho Chi Minh City-based property developer Van Thinh Phat was arrested on charges of illegally issuing bonds to raise trillions of Vietnamese dong (tens of millions of U.S. dollars) from investors during the 2018-2019 period. Then, Saigon Commercial Bank, or SCB, in which the property group has some stakes, started to see depositors rush to withdraw their savings.

According to Hieu, banks often utilize inter-bank loans but after the incident, they may not trust each other in using the loans. Therefore, they must rely on savings from depositors or SBV loans, while the central bank seeks to curb inflation. “Therefore, banks have to increase their deposit rates,” Hieu noted.

“The race may last until the end of this year or early next year. The situation is expected to become better after the Lunar New Year holidays in late January, depending on government measures,” he added.

Economist Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said the Vietnamese economy is facing a major problem - low liquidity.

So far this year, the central bank has sold about $26 billion to reclaim about VND600 trillion (the amount of dong pumped into the economy by the SBV is limited). Additionally, about VND900 trillion ($36.33 billion) in government public funding lies idle, according to the SBV’s balance sheet.

The central bank holds a great deal of money, which needs to be put it into circulation, said the economist.

He added that the government has sufficient tools to put that sum back into circulation to help drag down current high deposit rates in order to cut capital costs for both enterprises and residents, but the task requires smooth coordination between policymakers and regulators.

Comments (0)
  • Read More
Former Government Office chairman receives $7,900 bribe from property project

Former Government Office chairman receives $7,900 bribe from property project

Mai Tien Dung, former Minister-Government Office Chairman, received a bribe worth VND200 million ($7,900) from Nguyen Cao Tri, owner of the Dai Ninh eco-resort and urban area project in Lam Dong province.

Society - Sat, November 2, 2024 | 9:13 pm GMT+7

Thai food giant CP enters public-private partnership to promote food system transformation

Thai food giant CP enters public-private partnership to promote food system transformation

Thai-invested C.P. Vietnam Livestock JSC and the Partnership for Sustainable Agriculture Vietnam (PSAV) signed a memorandum of understanding Friday on working together to advance sustainable agriculture in the country.

Companies - Sat, November 2, 2024 | 7:16 pm GMT+7

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Vietnam’s central province of Quang Ngai will work with the investor to have construction of VSIP II Quang Ngai, a facility based on the Vietnam-Singapore Industrial Park (VSIP) model, begin in August 2025.

Industrial real estate - Sat, November 2, 2024 | 3:47 pm GMT+7

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.

Economy - Sat, November 2, 2024 | 2:00 pm GMT+7

Major Vietnamese developer Novaland appoints new CEO

Major Vietnamese developer Novaland appoints new CEO

Duong Van Bac, who joined Novaland as chief financial officer in August 2023, has been appointed general director, starting Friday.

Companies - Sat, November 2, 2024 | 10:24 am GMT+7

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Ho Chi Minh City-based Bamboo Capital Group recorded an after-tax profit of VND331.2 billion ($13.1 million) in the third quarter of 2024, an astounding 36-fold expansion year-on-year.

Southeast Asia - Sat, November 2, 2024 | 9:41 am GMT+7

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

Vietnam Beverage, wholly owned by Thai Beverage (ThaiBev) will rake in VND1,374 billion ($54.26 million) worth of dividend from Ho Chi Minh City-based top brewer Sabeco.

Companies - Sat, November 2, 2024 | 9:13 am GMT+7

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.

Industries - Sat, November 2, 2024 | 8:00 am GMT+7

Vietnam becomes Australia’s fastest-growing inbound market

Vietnam becomes Australia’s fastest-growing inbound market

The number of Vietnamese tourists to Australia has grown significantly after the Covid-19 pandemic, with nearly 178,000 reported in the 12 months to August 2024, according to a Friday press release by the Australian Minister for Trade and Tourism’s Office.

Southeast Asia - Fri, November 1, 2024 | 10:02 pm GMT+7

Study finds shift in Thai consumers’ spending patterns

Study finds shift in Thai consumers’ spending patterns

Consumers in Thailand are shifting their spending focus to experiences and investments, according to the latest ASEAN Consumer Sentiment Study (ACSS) by United Overseas Bank (UOB).

Southeast Asia - Fri, November 1, 2024 | 10:00 pm GMT+7

Energy security, digitalization key to Indonesia's economic growth

Energy security, digitalization key to Indonesia's economic growth

The Indonesian government is prioritizing long-term economic growth through energy security, digitalization, and natural resource industrialization, according to Deputy Minister of Finance Thomas Djiwandono.

Southeast Asia - Fri, November 1, 2024 | 9:58 pm GMT+7

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Prime Minister Pham Minh Chinh’s freshly ended six-day trip to the UAE, Saudi Arabia and Qatar has produced important outcomes, demonstrating the growing relations between Vietnam and the three Middle-East countries, Deputy Prime Minister and Foreign Minister Bui Thanh Son told the Vietnam News Agency.

Politics - Fri, November 1, 2024 | 9:25 pm GMT+7

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam and Qatar have recognized the significant potential for further collaboration in multiple sectors such as energy, oil and gas, especially LNG, agriculture, Halal industry, and banking.

Politics - Fri, November 1, 2024 | 9:02 pm GMT+7

Thailand bans export of raw palm oil until December

Thailand bans export of raw palm oil until December

Thailand's Department of Internal Trade has temporarily banned the export of raw palm oil due to reduced production caused by drought and plant diseases.

Southeast Asia - Fri, November 1, 2024 | 8:31 pm GMT+7

Envision Energy to build $420 mln wind power plant in Vietnam from June 2025

Envision Energy to build $420 mln wind power plant in Vietnam from June 2025

Envision Energy Singapore Pte Ltd, under China-based Envision Energy, aims to kick off construction of the 300-MW Envision Nam Po wind power plant in Vietnam’s northern mountainous province of Dien Bien in June 2025.

Energy - Fri, November 1, 2024 | 8:30 pm GMT+7

Indonesia to ban plastic waste imports from 2025

Indonesia to ban plastic waste imports from 2025

The Indonesian government will start imposing a ban on the import of plastic waste from the beginning of next year, according to Minister of Environment Hanif Faisol Nurrofiq.

Southeast Asia - Fri, November 1, 2024 | 8:29 pm GMT+7