Although liquidity had improved, many banks found it challenging to answer the current demand for mid and long-term capital.
Liquidity improved
The debt market report of the first half of December of MB Securities Joint Stock Company (MBS) recently released said that, although the amount of net injection into the market of the State Bank of Vietnam (SBV) in the first two weeks of December decreased significantly, bank accounts were still stabilising.
Indeed, the amount of net money injected into the market continued to sharply decrease in the first two weeks of December. Accordingly, in the first week of the month, the amount of net injection fell to 3.307 trillion dong, much lower than the figure. 66.13 trillion dong was injected into the market by SBV in the last week of November. The amount of net injection continued to decline to 1.627 trillion dong in the second week of December (from December 9 to 13).
Thus, in the first half of December, the amount of net injecting into the market of SBV was only 4.9 trillion dong, declined by 94 percent compared to the net injection amount in the last two weeks of November. SBV temporarily halted the buying term and shifted to net withdrawing in the previous trading session and continued to net withdraw in the first sessions of this week. The amount matured in the last sessions of the last week and the first three sessions this week reached 30.6045 trillion dong. In turn, the liquidity of banks tended to stabilise.
The improvement of liquidity was also shown by the sharp decrease of interbank offered rates compared to the beginning of the month. In the first week of December, the interbank offered rates for overnight, one-week and two-week terms increased by 0.1%, 0.2 percent and 0.35 percent to four percent per year, 4.2 percent per year and 4.3 percent per year, respectively. However, in the first sessions of this week, interbank offered rates decreased gradually. The overnight lending interest rate in the interbank market had reduced to 3.38 percent per year; the one-week term was 3.68 percent per year and the two-week term was 3.90 percent per year.
A banking expert said that the liquidity of the banking system was partially strained in the last weeks of November due to the following reasons. The first was the decision to lower the ceiling deposit interest rate for less than six months period of SBV. The second was due to the end of the year seasonal factors. The third was the improving disbursement of public investment. Especially, the fourth reason was the policy of withdrawing State Treasury deposits deposited at the previous commercial banking system to the SBV’s total account according to Circular 58/2019/TT-BTC taking effect from November 1, 2019. However, the timely assistance of SBV had helped stabilise the liquidity of the system, the expert said.
Little impact on the market one
However, movements in the interbank market do not have much effect on market one, which was the transaction market between banks, residents and other economic organisations.
According to SSI Securities Corporation, the market one did not notice any significant adjustment. Deposit interest rates still fluctuated in the range of 4.1 percent to five percent per year with terms of less than six months, 5.5 percent to 7.5 percent per year with a duration of six to less than 12 months and 6.4 percent to 7.9 percent per year with terms of 12, 13 months. Remarkably, interest rates for terms of six months and above were still high so deposits at commercial banks had grown well in the last four months and increased the proportion of medium and long-term deposits in the deposit structure.
In fact, many banks still maintained very high dynamic interest rates for terms of 18 months or more. Specifically, the interest rate for 18-month term deposits at Viet Capital Commercial Joint Stock Bank (Viet Capital Bank) was eight percent per year, while the term of 24 months and above was 8.1 percent per year. Notably, customers save online with an additional 0.1 percent compared to savings at the counter. Meanwhile, customers who deposited at Bac A Commercial Joint Stock Bank (Bac A Bank) would enjoy the interest rate of eight percent per year when storing with a term of 12 months or more.
According to the bank expert, the interconnection between the interbank market and market one was quite weak, partly due to the regulation of tightening short-term capital ratio for medium and long-term loans of SBV. The interbank market was where banks borrowed from each other and mainly served the short-term liquidity needs of banks. The most considerable trading turnover was the one-night and one-week terms, meaning that the capital in this market was only a concise term, the expert said.
Therefore, even if the capital in this market was abundant, it could not solve the current thirst for medium and long-term capital of many banks according to Circular 22/2019/TT-NHNN. The ratio of short-term capital used for medium and long-term loans would reduce to 30 percent from October 1, 2022. While according to the statistics of SBV, the current ratio of short-term capital for medium and long-term loans of commercial banks was 30.89%.
Many banks had a very high proportion of medium and long-term loans, including many real estate loans with terms of five to seven years. Thus, it would be difficult to reduce this proportion if the medium and long term capital did not increase, according to the expert. That was why many banks were still racing to attract this source of capital by interest rates, forcing other banks to raise interest rates to retain this precious capital.
Therefore, the interest rate for medium and long-term loans would continue to be at a high level for a while, even when the mobilising and short-term lending interest rates had been pulled down.
