Vietnam central bank offers lenders funds to support liquidity

Thursday, May 15, 2008
The State Bank of Viet Nam (SBV) will provide funds to ensure commercial banks maintain adequate liquidity as it tightens monetary policy, it said in a statement posted on its Web site late Tuesday.

The central bank will help commercial banks obtain funds by mortgaging their securities with it and through credit contracts, the statement said.

There are currently 90 commercial banks licensed to operate in Vietnam.

“Most of the banks are fully stretched with ensuring liquidity,’’ said Le Ba Hoang Quang the Hanoi-based head of research at the securities unit of Saigon Thuong Tin Commercial Bank Joint-Stock Co.

“Despite an increase in deposit rates, the capital of commercial banks is not abundant enough at the moment as a result of tightening monetary policy.’’

The SBV has raised interest rates, increased the amount of funds banks must set aside as reserves, and allowed the dong to strengthen to cut money supply and slow the pace of inflation.

Consumer prices in the Southeast Asian nation increased 21.4% last month, the fastest pace since at least 1992.

Vietnamese commercial banks on April 29 agreed to raise dong deposit rates by 1 percentage point to 12%.

In a separate statement earlier this week, the central bank said total outstanding loans of local banks rose 1.66% in April.

Loans denominated in foreign currencies increased 1.64% from the end of March, while those in dong rose 1.66%, according to the statement.

It did not provide figures of the absolute amount.

Total deposits in the month rose 1.2%.