In October, the State Bank of Vietnam (SBV) net injected 18 trillion dong via the Open Market Operation (OMO), after net withdrawing 85 trillion dong in the previous month.
The net injecting move of the SBV was maintained in the first week of November. In the week of November 4th to 8th, the SBV only newly issued 46 trillion dong of seven-day bills, but the matured bills reached 52 trillion dong. On OMO channel, the SBV did not make any new issuance and no maturity was recorded. On both OMO and bill channels, the SBV net injected an addition of six trillion dong to the market.
Although the SBV continuously pumped capital to the market, the interbank interest rates have still been increasing sharply. The rates are currently 1.9 percent per annum on overnight term, 2.15 percent per annum on one-week term, and 2.45 percent per annum on two-week term, up by respectively 0.25%, 0.3 percent and 0.4 percent compared to early October 2019.
This has raised concern that commercial banks are having liquidity problems when entering the peak season at the end of the year. The concern is even greater when the interest rate level in market 1 continue to be high.
Except for two out of four state-owned banks reducing deposit interest rates by 20 to 30 basis points, most mobilisation interest rates of banks have moved sideways. Some banks with small market shares are mobilising 13-month deposits at up to 8.2 percent to 8.5 percent per annum or boosting mobilisation via issuance of certificates of deposits on terms from 24 months and more at interest rates from nine to 10 percent per annum. the deposit rates are currently popular at about 4.1-5.5 percent per annum on terms of less than six months, 5.3-7.8 percent per annum on terms from six to less than 12 months, and 6.4-8.1 percent per annum on terms of 12 and 13 months.
A banking expert said that banks’ liquidity is often getting tense in the last months of the year, because the capital demand in this period usually rises high, while the mobilisation of capital faces difficulties. The mobilisation fund of many banks even may experience decline when people withdraw money to spend on holidays and New Year’s occasion and business also withdraw money to pay salaries and bonuses for employees, etc.”
However, this expert also thought that the above signs are not enough to conclude that the liquidity of banks is having difficulties like the previous years. Because despite increasing compared to the beginning of October, the current interbank interest rate level is still low compared to the same period of the previous years.
Meanwhile, according to securities companies, although the SBV injected 18 trillion dong in October, the liquidity of the system remains stable. “The stable liquidity in October is due to two main reasons, including the foreign currency purchase to supplement foreign exchange reserves (increase in dong supply) and the slow public investment disbursement (leading to the large amount of the State Treasury’s capital deposited at banks),” according to KB Securities company.
Bao Viet Securities Company (BVSC) also shared similar view when saying that the system liquidity was stable in October as Vietnam had a high balance of payments (trade surplus, increase in disbursed Foreign Direct Investment (FDI) and in capital contribution.
According to Saigon Securities Incorporation (SSI), the SBV has somewhat loosened when shifting from net withdrawal in September to net injection in October. The SBV’s net injection in November is due to the need to increase foreign exchange reserves in the early month, which made liquidity to be less abundant.
However, according to the above banking expert, caution is still needed, because it is obvious that the liquidity of the banking system is not as abundant as in the previous months, after the SBV has continuously withdrawn money. Moreover, there may be some banks facing local difficulties in liquidity because credit grew very fast in the first months of the year.
Indeed, the nine-month financial statements of many banks recorded very high credit growth, much higher than the growth of mobilisation fund. Typically, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) by the end of September posted an outstanding loan growth of up to 28.4 percent compared to the end of 2018. Vietnam International Commercial Joint Stock Bank (VIB) also recorded an outstanding loan growth of 28.17%, etc.
In addition, from November 1st, Circular no.58/2019/TT-BTC (which regulates the management and use of the State Treasury’s account opened at the SBV and commercial banks) officially took effect. Accordingly, the payment deposits of the State Treasury will have to be transferred to the total account that the SBV’s Operation centre instead of being located at commercial banks as before. This will also make banks’ liquidity to not be as abundant as before.
