Banks not allowed to offer promotion programmes?

Monday, April 28, 2008
The Ministry of Industry and Trade and the State Bank of Viet Nam have agreed not to grant more licences to commercial banks to carry out promotion programmes at this moment, in order to protect the current ceiling interest rate, according to Secretary General of the Viet Nam Banking Association Duong Thu Huong.
Stopping promotion programmes to maintain ceiling interest rate
Huong said that banks can continue the promotion programmes for which they got licences before. However, they will not be able to launch other promotion programmes in order to attract capital.

Promotion programmes have been used by banks as an effective tool to call for more capital from the public, especially as they are ordered not to offer deposit interest rates higher than 11% per annum. Banks have been trying to dodge the regulations by offering attractive gifts or bonus interest rates to clients, which have made actual deposit interest rates higher than 11% per annum.

However, the State Bank of Viet Nam and VNBA, who believe that high deposit interest rates will harm the national economy at this moment, have decided that promotion programmes should not continue.

Depositors want promotion programmes

Nguyen Thi Minh, a retired woman in district 3 in HCM City, said that with the interest rates offered by commercial banks all the same, the thing that helps her make a decision about which bank to deposit money in are promotion programmes, which means that promotion programme show the competitiveness of banks at this moment.

A recent survey made by a big joint stock bank shows that attractive promotion programmes can sway up to 50% of depositors, especially clients between the ages of 35-60.

That explains why the decision to stop licencing promotion programmes has been facing strong opposition from banks.

Stopping licencing promotion programmes? It’s illegal!

According to experts, VNBA setting the 11% ceiling interest rate proves to come contrary to the Competition Law, and may cause depositors losses.

If VNBA and the Ministry of Industry and Trade plan to stop licencing promotion programmes, they will, once again, be violating the rules of market liberalisation. The experts say that the two organs should think through the legal considerations before stopping licencing promotion programmes.

Lawyer Nguyen Van Hau, Head of the Information and Propaganda Division under the HCM City Bar Association, said that the State Bank of Viet Nam and the Vietnam Trade Promotion Agency would violate laws if they stopped licencing promotion programmes.

Promotion activities are considered legal activities under the Commercial Law. Competent agencies only have the right to prohibit promotion programmes if promotion programmes runners violate current regulations. If the prohibition by state management agencies can cause losses to enterprises, they can initiate legal proceedings against the agencies. (Tuoi tre)