Rising dollar lending not a concern

July 03, 2014 | 16:43

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Industry experts are weighing whether a jump in dollar lending is a cause for concern.

By mid-June 2014, lending in US dollars reportedly rose 10 per cent while deposits shrank considerably.

This is significant when compared to a 16.5 per cent contraction of dollar lending last year.

One of the main reasons many believe dollar lending is on the rise is that it is 4-5 per cent cheaper than taking out dong-denominated loans.

Banking expert Can Van Luc said the increase in dollar lending is attributable to upbeat export figures leading to resumed and/or expanded production.

Many economists, however, have expressed concern that if the trend continues, banks might lend more dollars than they can mobilise, thus posing a risk to their liquidity, particularly toward the year end when the loans come to maturity.

Also, increased lending in greenbacks could threaten to dolarise the local economy.

Member of the National Financial-Monetary Policy Advisory Council Le Xuan Nghia on the other hand said the rise in dollar lending was not a concern.

“While dong lending stayed stable, dollar lending suggests the economy is reviving,” Nghia said.

He added that many banks have kept their dollar stockpiles below the level set by the central bank as they were not worried about supply.

Similar to Nghia, Luc said increased dollar lending was of no worry, since the disbursed total only accounts for a modest 12-13 per cent of total outstanding loans.

Luc also said the possibility of banks racing to lend in dollars and thereby causing risk to their liquidity was unlikely, as banks are aware of the risk such an action would pose.

A central bank executive said the growth in dollar lending was under control and there was no cause for concern.

By By Thuy Lien

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