Dwindling capital inflow rattles banks

A joint stock banker in HCMC said that the situation got strained as his bank’s public mobilization had dropped sharply over the past days since the ceiling deposit rate was vigorously enforced on September 8. No banks dare breach the rate cap after the State Bank of Vietnam had lately announced harsh penalties against violators.

The director general of a small bank in District 1 felt tremendously worried as the mobilization faced a day-on-day decrease of VND20 billion, saying that though the liquidity remained unaffected, the bank’s activity would be greatly influenced and the bank could made no credit increase if the trend kept on.

Earlier, DongA Bank’s director general Tran Phuong Binh had said his bank had seen its mobilization contracted by VND20 billion each day, explaining that people withdrew money to invest in other assets such as gold and securities as they found the new interest rate unattractive. DongA Bank was banned from expanding network for one year after an executive had allegedly raised money at over 14%.

To cope with the situation, banks are struggling to map out ways to retain customers’ deposits.

Lately, Western Bank has launched a daily savings product with an interest rate of 14% a year, which can be accrued up to 15% a year, while Asia Commercial Bank (ACB) adjusted its one-, two-, and three-week interest rates to 14%. Normally, short-term deposits are subject to lower interest rates, but banks now offered clients the ceiling rate to attract more funds.

ACB also revised the coupon up 0.2% a year for certificates of gold deposits at all terms with the highest level being 1.3% a year for 11-month term.

Housing Development Bank, or HDBank, also raised its three-month certificates of gold deposit rate for economic organizations to 1.2% per annum on September 13 as well as driving up other term interest rates.

The increase in gold deposit rates, as explained, is aimed at partly luring deposits in gold so as to keep banks’ total assets from sharp decline due to the plunge of deposits in Vietnam dong. If the total assets plummet substantially, the capital adequacy ratios (CAR) and banks’ ability to pull up credits will all be affected.

The director general of VietinBank fund management company Nguyen Anh Tuan said that the biggest risks facing Vietnam banks, especially small ones, were liquidity and interest rate.