The deposit interest rate cap of 14 percent imposed last month is causing small banks to lose customers, who are moving to the security of the bigger banks.

Small banks used to offer higher interest rates to compete with their larger cousins but the cap has removed their advantage.

Small banks are now having difficulty holding on to their existing customers, let alone attracting new depositors. Some, including ABBank and Western Bank, offered a higher daily rate on savings account instead of term deposits.

Vietnam Investment Bank chairman Han Ngoc Vu said depositors had withdrawn 1 trillion VND (48 million USD) from the bank and that if the withdrawal continued, it would be unbearable for the banking system.

Phuong Nam Bank deputy general director Phan Cong Khoa reported 200 billion VND (9.6 million USD) had been withdrawn from the bank for the past few days.

Khoa said the rate cap had put a lot of pressure on small banks.

Meanwhile, for the 12 big banks, accounting for 80 percent of the country's market share, it is business as usual.

A Maritime Bank staff member said its capital level remained unchanged.

Many people are waiting to see what happens and are fixing their deposits for a week while big investors are pouring capital into stocks, gold, foreign currency and real estate.

Gold sales at the likes of Sai Gon Jewellery Holding Company (SJC), Phu Nhuan Jewellery (PNJ) and Sacombank Jewellery Company Ltd (SBJ) increased last week as the gold price climbed to 47 million VND (2,300 USD) per ounce.

PNJ deputy general director Nguyen Thi Cuc said the amount of gold purchased in the last three days had increased sharply because the price was seen as suitable.

Cuc said a part of people's saving accounts had been moved to gold investment after the loan interest rate was cut.

Sharing the ideas, general director of Southeast Bank Tran Phuong Binh said deposits in banks had decreased by several billion Vietnamese dong a day as customers moved to gold.

Vice Chairman of the National Financial Supervisory Commission Le Xuan Nghia said the move was unavoidable, adding that several people withdrawn their money to buy gold and US dollars.

"Small banks should borrow capital from others and report their business situation to the SBV to be refinanced," Nghia said.

The interest rate cap was expected to lower lending rates and thus ease pressure on businesses.

However, experts said financial institutions had to prepare for a mass withdrawal of deposits into other investment channels.

Meanwhile, the central bank last week announced a list of seven banks offering interest rates above the cap and called on leaders of these banks to resolve the violations./.