Banks struggle for capital in wake of new law
Banks struggle for capital in wake of new law
A crackdown on inter-bank trading has reduced their access to capital, prompting banks to raise deposit interest rates, often above the Government's cap, said Le Tham Duong of the HCM Banking University.
Since September 1, lending institutions have not been able to deposit money with each other. Sacombank deputy director Dang Minh Tam said it was necessary for banks to have plenty of money in hand in case business enterprises needed it.
Orient Commercial Joint Stock Bank chairman Trinh Van Tuan said improving liquidity was important, especially in view of the risk of bad debts and profit contraction.
To attract more deposits, commercial banks had raised rates for long-term dong deposits to 12-12.5 per cent. Asia Commercial Bank, Western Bank and Eximbank had gone to 13 per cent.
In fact, deposit rates for terms of 12 months or less were higher than the 9 per cent cap stipulated by the State Bank in June.
Dau tu (Viet Nam Investment Review) reported that several banks had even allowed their clients to withdraw money monthly or quarterly on term deposits and some permitted them to draw out money at any time on term deposits.
The State Bank recently flagged new penalties for violations of banking regulations. It proposed banks offering interest rates higher than that regulated would be fined between VND500 million (US$23,800) and VND1 billion ($47,600).
Duong said the penalty was sufficient but other strict punishment measures should also be used to ensure compliance.
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