Banks enjoy looser deposit interest cap

Under the previous voluntary agreement in effect, rates were capped at 11 per cent.

Maritime Bank, DongA Bank, Western Bank, Ocean Bank and the Bank for Investment and Development of Vietnam (BIDV) were the first banks to hike rates. Western Bank also gives depositors bonus interest of 0.7-3 per cent against total deposits, pushing real interest to over 12 per cent per year.

Small banks have expressed concerns that major state-owned banks and large commercial banks are in a better position to absorb the higher interest costs, and that the new, higher cap places them at a competitive disadvantage – particularly if banks rush to hike rates for all term deposits across-the-board.

But a BIDV official who asked to remain anonymous averred. "We see the 12 per cent deposit interest cap as a reference," he said. "Our branches will consider real market rates and particular areas in which to increase interest rates."

Late last week, State Bank of Viet Nam governor Nguyen Van Giau warned credit institutions not to increase deposit interest rates in order to attain unfair market advantage.

To ensure payment capacity during the rest of the year and into the next year, commercial banks were also ordered to more strictly control consumer and real estate lending as well as lending against securities collateral.

National Financial Supervisory Council chairman Le Duc Thuy said last Thursday that, in the first two weeks of October, total deposits in the banking system were down to VND45 trillion (US$2.19 billion).

But Giau yesterday contradicted that estimate, saying: "In the first 15 days of October, deposits in the system were up VND5.4 trillion ($263.41 million) against September 30."