Business performance at banks is expected to improve significantly during the second quarter, against the same period last year, a State Bank of Vietnam (SBV) survey said.

The bank's business sentiment survey covered domestic and foreign banks in Vietnam and was released on April 20. Banks also expect better results for the whole of 2015, according to the survey.

Previously, some were concerned about the application of a Circular 36 to capital adequacy and liquidity requirements for credit institutions, including the branches of foreign banks in February 2015, which was expected to hurt banks' businesses.

The Circular 36 exhibited SBV's efforts to bring Vietnam's regulatory framework closer to Basel II, strengthening the transparency of institutions' operations, and promoting the development of and mitigating the risks in the local capital market.

"The latest survey showed banks making a positive assessment of the central bank's latest policy adjustment, including the new regulations on managing the banking system's safety," the central bank said in a statement.

Under the survey, banks forecast that the banking system's average credit growth would increase to 16.93 percent this year from 14.57 percent forecast in an earlier survey last December.

The respondents also anticipated a slight decrease in both deposit and lending interest rates. More than half of the banks expected interest rates to ease by 0.6 to 0.7 percent in the three-month period ending June and slip by 0.87 to 1.1 percent for the whole year.

Banks reported a rise in demand for loans since the beginning of March and they anticipated that demand would increase sharply for the whole of 2015.

Deposits are also forecast to increase by nearly 15 percent from the previous forecast of 14.35 percent, with capital mobilisation in Vietnamese dong to grow faster than foreign currencies.

Most of the banks involved believe long-term deposits, particularly those for six-month and longer terms, will increase in the second quarter towards the end of the year.

Under the survey, most banks also expected their bad debt ratio to further decline and remain below 3 percent by the end of 2015 from 3.25 percent in December 2014.-VNA