Relating to the fact that more than a dozen banks have recently reduced deposit rates, experts say that is just superficial phenomenon. In fact, interest rates do not decrease and banks are showing signs of boosting medium and long term loans.
*Reducing interest rates to attract long-term deposits
At bank’s transaction point on Lac Long Quan Street that has just announced to lower deposit rates, a staff said deposit rates only decrease for short terms. For long-term deposits, the interest rates are even rising.
Survey of the local Newswire Bao Dau Tu shows that long-term deposit rates almost remain unchanged, even increase, along with many attractive promotions. Many banks have raised deposit rates for long terms to 8.5-8.7%/annum.
Analysing the aforementioned situation, many economic experts say that the system’s liquidity is more abundant but in fact, banks lower deposit rates not due to excessive money but mainly because banks are restructuring terms.
“Since the beginning of 2018, according to the State Bank’s regulations in Circular No.19/2017/TT-NHNN on amendment of Circular No.36/2014/TT-NHHH, only 45 percent of short-term capital is used for medium and long-term loans instead of 50 percent like before. In 2019, this ratio is just 40%. Therefore, banks are focusing on restructuring terms, strengthening the mobilisation of long-term deposits”, said Dr Nguyen Tri Hieu, economic expert.
Another reason why banks boost the restructuring of terms is that short-term credit increases slowly, while medium and long-term credit accelerates. This is the reason why the bank wants to reduce the mobilisation of short-term capital, while stimulating long-term deposits.
*Concerns about money flowing into “hot” sectors
Increased proportion of medium and long term deposits has always been the dream of banks. Previously, more than 90 percent of deposits of banks were short term while 60-70 percent of loans were long term. This implies huge risks, especially for banks with large oustanding loans in traffic and real estate sectors.
In several recent years, with the direction of the State Bank, banks have gradually reduced the proportion of short term capital for medium and long term loans while issuing many promotional policies to attract medium and long term capital source. However, according to the statistics of the State Bank, currently, medium and long term loans still account for more than 53 percent while the mobilisation of medium and long term capital is just about 15%. Therefore, it is necessary for banks to change capital mobilisation structure.
However, discussing with reporters of the local Newswire Bao Dau Tu, an economic expert warns that there is the risk that banks increase pouring capital into stocks and real estate. The massive reduction of short term deposit rates, the strengthening of medium and long term capital mobilisation is also to serve this purpose.
Statistics of the State Bank show that credit for construction sector at the beginning of 2018 has increased nearly half compared to other sectors. With the suspicion that credit is hidden in construction and consumer sectors, the possibility of money flowing into risky areas such as real estate, securities is real.
Although earlier this year, the State Bank warned about real estate credit, representative of the State Bank admitted that this is a regular warning. However, the State Bank has not issued any specific regulation about the tightening of real estate credit.
In another perspective, the fact that nearly 3,600 trillion dong was poured into the economy via medium and long term credit channel shows that banks are encroaching into capital market.
In the context that securities market has strongly recovered, many experts suppose that banks should reduce medium and long term loans, and return this task to the capital market. Overly medium and long term loans not only cause banks to face future risks but also make them increasingly depend on bank capital, lack of willingness to grow and to seek for mobilisation channels in the capital market.
