The fluctuations in deposit rates at the beginning of March were an anomaly and things have returned to normal now, says Deputy Prime Minister Vuong Dinh Hue.
Hanoi (VNA) - The fluctuations in deposit rates at thebeginning of March were an anomaly and things have returned to normal now, saysDeputy Prime Minister Vuong Dinh Hue. However, he said, there must bestricter regulations and controls to ensure that the situation does not recur. During the “turbulent” period,several commercial banks issued deposit certificates with annual interest ratesfrom 8.2 to 9.2 percent for long term deposits and 5.4 to 6.9 percent forshort-term ones in order to attract more capital. This was a significant increasefrom the previous average rates of 6.5 to 6.8 percent in late 2016. Banks started offering highrates for long-term deposits (for more than a year) because the central bankwas looking askance at the use of short-term deposit funds to grant medium tolong term loans. This triggered some anxietyabout a shortage of cash and ensuing high borrowing costs. The central bank allayed suchconcerns. “This phenomenon waslocalised and has been quickly stabilised,” said Le Minh Hung, Governor of theSBV.
The governor also asserted thatduring the first quarter of 2017, especially during the period that depositrates spiked, there were domestic and international pressures. One was the Federal Resꦿerve’ssecond increase of𝓰 prime rate on the US dollar in the past three years.
In the first three months of2017, the SBV was following world market trends and actively adjusting thebanking system’s liquidity to ease pressure on interest and exchange rates. These timely actions helped keepthe exchange rate between the US dollar and domestic currency stable. Hung said that on the whole,commercial interest rates and SBV’s rates would not undergo any significantchange and in the coming time, the central bank would keep a close watch on themarket situation to ensure interest rate stability and help businesses accessthe credit they need to develop. In the first quarter of 2017,money supply into the economy has increased to satisfy the market demand forcapital at a reasonable rate and volume, according to the state bank governor.
At the same time, credit flowshave increased since January 2017, and core inflation has been stable, showingthat current fiscal policies were headed in the right direction. However, Deputy PM Hue alsore🙈minded the SBV to push public investment and increase the efficiency ofpolicy implementation.
The bank must find a solution tokeep the impact of global developments on domestic rates to a minimum, he said. A legal framework to controlinflation and other economic tools should also be deployed to ensure a safe andefficient banking system, Hue said. - VNA
Many commercial banks have recently raised their deposit interest rates in an attempt to satisfy new State Bank of Vietnam’s regulations that are due to take effect in 2017.
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The SBV’s headquarters in Hanoi (Photo: VNA)
