Banks north and south agree to cap deposit interest

(25-03-2008)

HA NOI — Viet Nam’s bankers want the State Bank of Viet Nam to approve a ceiling for the interest paid for both dong and US dollar deposits.

The suggested yearly rate for US dollar deposits is no more than 6 per cent – against as much as 6.9 per cent now.

The suggested yearly rate for dong is no more than 11 per cent against the current 12 per cent.

The proposed ceilings, sought from Wednesday, April 2, were announced after a meeting of Viet Nam Banks Association (VNBA) members in HCM-City yesterday.

The association’s northern members had agreed to the 11 per cent ceiling for dong deposits on Friday and accepted the ceiling for the dollar yesterday.

The bankers expect the proposed ceilings to cool their deposit war and support hard-pressed businesses.

The proposal is likely to get the ‘green light’ from the central bank.

"We are going to ratify it soon," a senior regulator, who asked to remain anonymous, told Viet Nam News.

"It’s an active move from the local commercial banks."

The regulator said the proposal was similar to the action taken by banks in a developed financial market.

"The ceiling rate for dollar deposits is not to be set at our command and so can’t be called an ‘administrative command’ which is something we are trying to avoid," he said.

Those banks which do not honour the new rates would be punished in accordance with law of competition, not the law of the central bank.

Viet Nam Financial Investors Association secretary Nguyen Hoang Hai agreed with the regulator’s view saying: "The ceiling rates will limit unfair competition."

But economists seemed confused.

"I can’t understand what they are trying to do," Central Economic Management Institute senior economist Vo Tri Thanh told Viet Nam News.

"A simultaneous ceiling for dong and dollar deposits and plus or minus one per cent trading band for currency exchange all seem to violate the rules of the market."

"It’s not good for the banking business," said Asia Commercial Bank deputy general director Nguyen Thanh Toai.

"It leaves no room to raise interest a little to attract dollar savings."— VNS