The paradoxes in the foreign currency market
Capital profuse, but deposit interest rates remain high
Unofficial statistics about the dollar deposit interest rates of 20 commercial banks in HCM City showed that the highest demand deposit interest rate is 1.8% per annum. The highest rate is 6% for a 1-month term deposit, 6.2% for 2-months, 6.5% for 3-months, 6.8% for 6-9-month term deposits, and 7.5% for 12-month term deposits.
The gaps between banks’ interest rates prove to be very large. The interest rates offered by small joint-stock banks prove to be 2-3 times higher than the rates offered by bigger banks, like Vietcombank, BIDV or Vietinbank. The deposit interest rate for 1-month term deposit, for example, sees a big difference when BIDV offers 1.8% per annum, while Pacific Bank offers 6%. The lending interest rates set by joint-stock banks, therefore, are also high, between 7-9% per annum.
Le Quang Tri, General Director of Nam Viet Bank, admitted that it is really unreasonable to maintain high deposit interest rates for now. However, no bank dares cut down the interest rates as they fear losing clients.
Bankers said that capital in US$ is now in excess, with the loaning just equal to 50-60% of the mobilized capital. The demand for loans in dollars is not high due to the difficulties of the national economy and lower imports. Besides, businesses prefer the loans in VND to US$ due to the greenback revaluation.
Currently, as for idle capital, banks can receive the interest rate of 2% only if they deposit US$ capital at domestic banks, while the interest rate is nearly 0% if they deposit at foreign banks.
However, a banker said that the latest move by FED to slash the interest rate to 0.25% will prompt local banks to cut interest rates in upcoming days. SIBOR overnight interest rate on December 1 was 1% per annum, which reduced to 0.1325% per annum on December 17, while local banks are still lending at 7-9% per annum.
Not enough dollars to sell
While the dollar capital is now in excess at banks, there are not enough dollars to be sold.
Over the last few days, the VND/US$ exchange rates quoted by commercial banks have always been at ceiling levels, while the purchase and sale prices are the same.
Bankers said that the dollar has become scare due to a rumor that the State Bank will devaluate the VND in the first quarter of 2009, which has prompted businesses and people to collect dollars. There have been very few transactions on the interbank market as there has been no seller.
