HA NOI — Banks will be required to improve liquidity under a restructuring plan being considered by the State Bank of Viet Nam.
The State Bank pumped about VND71 trillion (US$3.38 billion) into the banking system via open market operations to shore up liquidity prior to the Tet (lunar new year) holiday, but banks remain under high compulsory reserve requirements and tight restrictions on granting credit.
National Financial Advisory Council vice chairman Le Xuan Nghia said that to improve bank liquidity in the long term, new tools were needed, included re-financing from the State Bank; higher compulsory reserves requirements to help regulate supplies of capital maintained by banks; and allowing banks holding gold on account to use funds raised against these holdings.
Last week, the central bank granted permission to five credit institutions to maintain their compulsory reserves in Vietnamese dong at below regulated levels for a five-month period starting this month.
The Mekong Development Commercial Bank, Mekong Housing Bank, Agribank, LienViet Post Bank and Central People's Credit Fund will be allowed to maintain compulsory reserves 20 per cent below the levels required under current regulations.
The lower compulsory reserves requirements were tied, however, to requirements that would require them to loan the additional funds to agricultural producers, rural development projects and exporters.
At the monthly Government meeting last Saturday, Nguyen Thi Hong, director of the State Bank's monetary policy department, said that the liquidity of credit institutions had improved since Tet, with banks and credit institutions attracting a significant volume of deposits.
When the nation's ongoing problem with inflation is brought under control, deposit interest rates should be deregulated and lending interest rates lowered, giving banks a higher margin on capital, Nghia said, forecasting that this would likely take place early in the second quarter of this year.
At the same time, monetary and fiscal policies should be implemented flexibly and prudently with an aim at giving top priority to key industries, he said, adding that measures also needed to be taken to promote the development of the nation's real estate and capital markets. — VNS