Banks urged to quite race to put stability first

SeABank recently lifted its non-term [deposit interest] rate to 12 per cent per annum, while VP Bank offered customers embracing its VP Super services package with a non-term rate of 9 per cent per annum.

Normally, non-term deposit interest rates range from 1 to 4 per cent, per year.

“The practice of Vietnamese banks racing to drive up their non-term rates to levels nearly similar to those of term deposits is unacceptable,” said banking expert Dr. Nguyen Tri Hieu.

Hieu said in foreign countries, non-term deposits were usually subject to very low interest rates as banks often used that money for short-term loans.

A member of the National Advisory Council for Financial and Monetary Policies Dr. Tran Du Lich said pushing non-term rates to such high levels was abnormal and it would reflect liquidity tension at banks, particularly  small ones.

“The State Bank needs to take care of particular banks and lend them timely support to avoid putting the whole banking system at risk,” Lich warned.

Supportive of the idea, Dr. Vo Tri Thanh, deputy head of the Central Institute for Economic Management, said driving non-term rates to such high levels reflected unfair competition among local banks and it could threaten banks’ liquidity.

Thanh said that the move could worsen banks’ liquidity in the short term unless the State Bank launched immediate remedy measures. 

Thanh viewed reshuffling banking system particularly small banks as an essential task in the long haul.

Some industry insiders recommend the State Bank introduce a ‘ceiling non-term deposit interest rate’ to restore order in local monetary market and lend a hand to help small banks ease liquidity tension.

An executive at the National Financial Supervisory Commission said it was crucial for the central bank to amend a number of current banking regulations. He said policy reforms must be based on market practices, but not simply being of administrative nature to circumvent monetary system distortions.