Giau, in a recent meeting with commercial banks’ directors, said that he knew a joint stock bank, which mostly had short one-year term mobilized capital, which still provided long term loans of up to 20 years.

Giau also points out there is a big gap between the mobilized capital and outstanding loans. While the outstanding loans growth rate had reached 29.3 percent by the end of September, the capital mobilization growth rate had been 22.9 percent only.

The head of the central bank has sent an urgent message, requesting commercial banks to check operation scales and credit structures in order to prevent a new interest rate race and ensure safe operation of the banking system. He stressed checks must be carried out with deposits and loans in both VND and foreign currencies.

By the end of September, no commercial bank had been found to be violating the current regulations on the ratio of medium and long term loans and the ratio of short term capital used for long term loans. Under the current regulations, the ratio of medium and long term loans must not be higher than 42 percent of total outstanding loans. Meanwhile, banks must not use more than 30 percent of short term capital for long term loans.

However, some commercial banks have been found having borrowed money on the interbank market to serve their investment and credit development plan. Meanwhile, under the current regulations, they can only do that to improve temporary liquidity problems.

Economists have warned that the interest rate race commercial banks have triggered will a have bad impact on capital mobilization. They have warned that the slow capital mobilization may lead to the low credit growth rate in the last months of 2009 which is forecast at 1.2 percent per month only.

The gap between the deposit and lending interest rates has been narrowing because banks have raised deposit interest rates continuously to attract more capital. The gap is now 2.5 percent, while it should be 3-4 percent per annum to be big enough for banks to make profit.

To date, many joint stock banks have reportedly nearly fulfilled their credit growth plan. Sacombank, for example, has had total outstanding loans of 51 trillion dong, while it previously planned to have the outstanding loans of 55 trillion dong. Asia Commercial Bank has lent 61 trillion dong, nearly hitting the planned level of 65 trillion dong.

The State Bank of Vietnam will take inspection tours to banks which offer deposit interest rates of over 10 percent.

After hearing the news, some commercial banks have lowered deposit interest rates. HD Bank, for example, has adjusted its interest rates, now offering the highest rate at 9.99 percent per annum. Saigon Bank has also slashed its highest interest rate from 10.05 percent applied for six month term deposits to 9.99 percent per annum.
 

 Source: Vietnam Net