SBV Governor admits shortcomings over interest rate cap

SBV Governor Nguyen Van Binh answering NA inquiries

Deputy Huynh The Ky, from the central province of Ninh Thuan, questioned SBV Governor Nguyen Van Binh about the bank’s lack of action in the first six months of this year when it failed to detect any violations of the deposit interest rate cap. Ky noted that lax management had resulted in serious consequences and harmed depositors, many of whom were farmers and workers.

Deputy Nguyen Thai Hoc from Phu Yen province emphasised that violations of the interest rate cap had been obviously in past months. He wondered if the governor would admit personal responsibility for the misconduct and if he had taken any measures to deal with the situation.

In response, Binh admitted, “I’d like to apologise to the NA and the people for lax management that caused the ceiling deposit interest rate to be surpassed. I admit to the weak competence of the investigative agency that failed to find any violations to the interest rate caps in the first half of this year.”

According to Binh, leaders of the central bank have reviewed the problems. He promised to heighten the quality of supervision and investigations in the time to come. Banks have strictly complied with the required ceiling interest rate since August this year, he noted.

Concerning a proposal to remove the deposit interest rate cap and clearly stipulate lending interest rates to bring more benefits to depositors instead of banks, the governor said, “The Law on the State Bank of Vietnam 2010 allows the bank to stipulate levels of interest rates as well as ceiling deposit and lending interest rates, regardless of prioritising benefits for certain banks.”

He underlined the necessity of applying a ceiling interest rate in the country’s current economic circumstances.

Binh attributed the wide disparity between the 2 per cent USD deposit interest rate and 8 per cent USD lending interest rate to the country’s struggle to prevent the dollarisation of the economy. The SBV did not encourage people to borrow or keep USD.

In response to deputy Dang Xuan Huy’s question about the recent regulations on gold production and trading, Binh emphasised that the government would hold a monopoly in gold bullion production and trading.

“Saigon Jewellery Limited Company (SJC) has held 90 per cent of gold market share in Vietnam and we have decided that the company will operate under the direct management of the SBV in order to foster the government’s monopoly in gold bullion,” he added.