The State Bank of Vietnam has announced it would inject additional capital with longer terms into the interbank open market system, in a measure aimed at easing upward pressures on interbank interest rates.
The central bank said on Nov 12 it would add capital at two-week terms to open market operations while retaining current daily and weekly terms.
It also instructed major banks to increase lending to smaller banks and to maintain refinancing and swapping interest rates.
The pronouncement immediately helped lower interbank rates from highs of 21-22 percent to a range of 15-19 percent per year.
"Intervening promptly will have a good impact on the market, stabilising the market and preventing negative impacts on enterprises," said National Monetary Policy Consulting Council member Tran Hoang Ngan.
The State Bank blamed the current overheating of interbank rates on psychology, as commercial banks needed some time to stabilise liquidity while adjusting to higher deposit interest rates.
On Nov. 11, commercial banks began offering interest of up to 14 percent for Vietnamese dong deposits, up from 12 percent earlier in the week. Some banks are also paying an additional 0.5-3 percent as bonus interest on deposits, as well as offering vouchers or gifts. The higher interest contravenes a voluntary agreement entered into banks with the Vietnam Banking Association on Nov. 5 to cap deposit interest rates at no more than 12 percent./.
The central bank said on Nov 12 it would add capital at two-week terms to open market operations while retaining current daily and weekly terms.
It also instructed major banks to increase lending to smaller banks and to maintain refinancing and swapping interest rates.
The pronouncement immediately helped lower interbank rates from highs of 21-22 percent to a range of 15-19 percent per year.
"Intervening promptly will have a good impact on the market, stabilising the market and preventing negative impacts on enterprises," said National Monetary Policy Consulting Council member Tran Hoang Ngan.
The State Bank blamed the current overheating of interbank rates on psychology, as commercial banks needed some time to stabilise liquidity while adjusting to higher deposit interest rates.
On Nov. 11, commercial banks began offering interest of up to 14 percent for Vietnamese dong deposits, up from 12 percent earlier in the week. Some banks are also paying an additional 0.5-3 percent as bonus interest on deposits, as well as offering vouchers or gifts. The higher interest contravenes a voluntary agreement entered into banks with the Vietnam Banking Association on Nov. 5 to cap deposit interest rates at no more than 12 percent./.
