Banks get ultimatum

Tuesday, May 27, 2008
The State Bank has warned commercial banks which set mobilisation interest rates “too high” could be punished. Early last week, after the State Bank released new regulations on interest rate management which allowed commercial banks to set mobilisation and lending interest rates not exceeding 150% of the State Bank’s 12% base rate, some banks raised interest rates to the 18% limit. In response, the State Bank sent warning documents to the Bank for Agriculture and Rural Development (Agribank) and Nam Viet Joint Stock bank (Navibank) asking the banks to lower their rates.

According to a State Bank official, if the mobilisation interest rate is set at 18% per year the lending rate should be around 22% to be profitable to a lender. “Thus, setting rates at 18% per year could imply that the bank is in a serious capital shortage or it would have to lend at rates higher than 18% limit,” said the official.

So far, Agribank and Navibank have reduced mobilisation rates to common levels with other peers. At the same time, almost all banks are setting mobilisation rates at around 14-15 per cent. The Southeast Asia Joint Stock Bank (SEA Bank) has offered the highest rate so far at 15.6% per year for 14-month deposits.

Last week, the State Bank also released Official Letters 4426 and 4428/NHNN-VP requesting the State Bank’s branches to strengthen its supervision of commercial banks’ mobilisation and lending services. “Any violation regarding mobilisation and lending at interest rates over 150% of the base rate should be punished and reported to the State Bank. The credit institution that violated the regulation should be investigated accordingly,” the documents stated. (Dau Tu)