The high cash demand before the Lunar New Year has made the liquidity of the banking system tense, forcing the State Bank of Vietnam (SBV) to intervene.
The mobilisation interest rates of commercial banks continue to increase but there is a strong differentiation. In general, the mobilisation rates at state-owned commercial banks are much lower than that of private commercial banks, but all higher than the rates in the end of November 2018.
The mobilisation rates on terms from one to less than six months have been raised to the ceiling limit of 5.5 percent per annum. It means that if not limited by the ceiling level of the SBV, the mobilisation rates of those terms may even be increased higher.
The fact also shows that the interest rate race of banks are mainly recorded on terms of more than six months as there is no ceiling limit. Accordingly, the six-month deposit rate at Saigon Commercial Joint Stock Bank (SCB) was increased to the highest level of 8.1 percent per annum. The record high deposit rates on terms of nine and 12 months are maintained at 8.25 percent per annum.
However, on 18-month term, SCB is sharing the leading position with Viet Capital Commercial Joint Stock Bank (VietCapitalBank) when both banks are offering deposit rates of up to 8.5 percent per annum. The record high deposit rate for terms from 24 months and more still belongs to VietCapitalBank with 8.6 percent per annum. Online depositors of VietCapitalBank are even given an extra interest rate of 0.1 percent per annum.
Customers depositing money this time of year are also sought by banks by numerous promotions such as cash, gifts, and even additional interest rate.
Meanwhile, the credit growth limit in 2019 is controlled by the SBV at 14 percentthe lowest level at least in the past five years. However, according to the management agency, the credit growth room will be allocated depending on the health of each bank and prioritised for banks which have met the Basel II standards. By the end of 2018, only three banks have satisfied the Basel II requirements, which means that the remaining banks can hardly expect high credit growth room this year.
Is liquidity showing signs of tension?
Not only were interest rates pushed up on market 1 but also on the interbank market at the end of last week. On January 18th, the overnight, one-week and one-month rates were respectively 4.5 percent, 4.7 percent and 5.2 percent per annum, up by 0.1-0.3 percentage point compared to the beginning of the year.
The statistics also pointed that the SBV continued to net inject 4.962 trillion dong via Open Market Operation (OMO) after net injecting 17.213 trillion dong into the market. All of these signs showed that banks’ liquidity is getting stressful.
Indeed, according to banking experts, this time of year is often the peak season for liquidity when the capital demand increases and businesses tend to withdraw money to pay salaries and bonuses to employees and people also withdraw money to spend on Tet.
In addition, banks are currently under considerable capital mobilisation pressure to meet the maximum ratio of using short-term capital for medium and long-term lending which was reduced to 40 percent from the beginning of the year. “In the previous time, most banks often focused on calling for medium and long-term capital to meet this requirement. However, as this source of capital is fairly scarce, banks now have to boost mobilisation of all terms in order to speed up the increase of total capital,” said an expert.
The weekly Bond Newsletter No.2 (week from January 7th to 11th 2019) by Bao Viet Securities Company (BVSC) also stated that during the period from now until the end of the Lunar New Year, the liquidity of the system will still be under pressure and need support from the operator at some points.
Despite admitting that deposit rates are rising in the last months of the Lunar Year, according to an SBV official, it is more a seasonal problem than a liquidity one.