Hanoi (VNS/VNA) - Banks have to mobilise long-termcapital at high costs by issuing certificates of deposit (CD) in Vietnamese dong with high interest rates to lure depositors, causing concerns about a dominoeffect on lending rates.

At the Southeast Asia Bank (SeABank), when customers apply for a 24-month CDvalued at a minimum of 100 million VND (4,290 USD), they can enjoy a fixedinterest rate of 8.4 percent per year, while a 36-month CD can bring them afixed interest rate of 8.6 percent.

The State-owned Bank for Investment and Development of Vietnam (BIDV) has alsointroduced high interest rates for long-term CD. Specifically, an interest rateof 7.6 percent is applied for an 18-month CD valued at a minimum of 10 million VNDfor individual customers and 50 million VND for corporate customers.

One leader of a bank, who declined to be named, said banks had to issue CD athigh interest rates as they faced difficulties in luring long-term capital. Therate of CD is currently some 1 percent higher than normal deposits.

Besides the issue of CD, banks have also adjusted up rates of long-termdeposits to attract depositors.

The Nam A Joint Stock Commercial Bank (Nam A Bank) has recently raised interestrates on 12-month deposits to 7.7 percent per year, up 0.3 percentage pointsfrom late last year. Notably, with the form of online savings deposit,customers will be offered an interest rate of 8 percent per year.

Early this month, the Saigon Joint Stock Commercial Bank (SCB) also applied thehighest interest rate of 8.65 percent per year on 13 to 36 month onlinedeposits for individual customers.

The Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) has recentlyalso introduced a new interest rate schedule, with an interest rate of 8 percentapplied for 13-month deposits, up 0.2 percentage points against the end of lastyear.

Currently, many banks are in a dire need of long-term capital as their ratio ofmedium- and long-term capital in the total remains limited. Meanwhile,according to State Bank of Vietnam (SBV) regulations, banks must reduce theirshort-term funds for medium- and long-term loans to 40 percent from early thisyear against last year’s rate of 45 percent.

In addition, banks also need more capital to meet a capital adequacy ratio(CAR) of 8 percent in 2020 as per the SBV’s Basel II norms. Fitch Ratingsestimated the Vietnamese banking system could face a capital shortfall ofalmost 20 billion USD to meet Basel II implementation.

According to experts, in the current context, the most effective and rapidmeasure to help banks meet the central bank’s regulations is to increaselong-term deposits by raising interest rates to attract depositors.

However, experts are also concerned that the rate hike of deposits would causea domino effect on interest rates of long-term loans.-VNS/VNA