Half of the second quarter of 2019 has passed but the interest rates of deposits in dong at banks have not decreased, after rising from the end of 2018.
In the interbank market, there have been some questions: why does the abundant cash flow not cool down interest rates?
With this point of view, visually comparing: interest rate in dong on interbank market is stable at three to four percent per year, even overnight rate is sometimes over two percent per year; while the rates of commercial banks are still quite high, from five to nine percent per year.
That comparison is also clearer this week, when interest rates of dong on the interbank tend to decrease but the State Bank of Vietnam (SBV) has boosted the regulation by increasing the issuance of treasury bills to recall the money in the market, but the deposit interest rates in dong have been no sign of reduction.
BizLIVE consulted a commercial bank’s leader about his views and techniques of the above flow.
“For some people, they consider the capital and interest rates on the interbank market upstream. However, in my point of view, these two channels are quite independent due to their separate role and purpose. Even in the above scenario, the capital mobilised from the population and interest rates in the market with new residents and economic organisations are upstream, “said the leader.
Specifically, the interbank market has the function of regulating short-term capital in the system, supporting liquidity with short-term deposits. Meanwhile, the market traded between banks and a wider population and economic organisation, is also associated with a relatively large credit of medium and long-term structure (the proportion of over 50%).
Therefore, it is impossible to abuse short-term sources to regulate and cool down the market with a large proportion of medium and long-term capital needs.
Secondly, the source through the transaction size on the interbank market is smaller, only a few hundred trillions of dong in short period, which, hence, has a vague impact on the scale of about 7.4 quadrillion dong of credit used in the market between banks and residents and organisations, or with more than eight quadrillion dong of mobilised capital.
Through the above analysis, the bank’s leader said that for the more reasonable viewpoint, it was necessary to regard the market between banks and residents and new economic organisations as the upstream, capable of regulating interest rates on the interbank.
Accordingly, if banks mobilised large deposits of population and organisation with good liquidity and capital, interest rates on the interbank are hard to rise, due to the decreasing need to offset systematic liquidity.
The common problem here is that: are banks well mobilised and favourable from population and organisation?
About a year ago, the capital mobilisation rate of the system has shown slower signs than credit growth. Deposits into the banking system have not grown as strongly as in the previous period.
The leader said this was a difficult question, depending on the market components.
That was, if the economy recovered and grew well, other markets or channels such as securities, real estate and self-trade increased motivation and attracted capital; deposit channel was diverted. If so, this balance became positive as it could reduce intermediate factors and costs, which spreads more directly than credit.
But if looking at another component, the source of capital into banks has not grown as high as before because other attractive channels such as peer lending, corporate bonds and shadow banking has been increasingly popular thanks to the levels of risk compared to banking deposits.
“In short, in the economy, most of the capital and cash flow are still outside the banking system. To attract, when there is more competition from other channels, banks often use interest rates. The bigger the competition and the sharing, the more difficult it is to reduce deposit interest rates, “said the bank’s leader.
On the other hand, with the specific nature of internal banking system in Vietnam, in which the demand for medium and long-term capital is quite large (the proportion accounts for over 50 percent of total outstanding loans) while mobilised capital is still mainly short-term, the liquidity pressure in balancing the source contributes to the fact that interest rate is continuously maintained high.
