The Vietnam Banks Association (VNBA) has proposed the State Bank of Vietnam (SBV) to cut credit risk provision ratio of commercial banks to 0.5% from current 0.75%, in a move to facilitate local lenders to cut interest rates.
Credit risk provision measures set by the SBV are putting more pressures on these banks which have been struggling to reduce deposit and lending interest rates to boost domestic production.
Banks will not be ready for further interest rate decreases as profit margin from lending activities, a major income source of almost all Vietnamese banks, has been narrowed, it said.
Common interest rates on loans at local banks are now just 2%, or even 1.5%-1.8%, higher than rates on deposits. Together with a required risk provision ratio of 0.75%, banks are likely to get smaller incomes from lending activities.
The SBV, meanwhile, currently sets a 250% risk coefficient for all loans secured by securities or real estate. The VNBA, in response, asked the central bank to clarify the types of loans in question rather than set a common, across-the-board standard.
Real estate with existing structures is a far different risk than property yet to be developed, so the coefficient should not be the same, the VNBA argued.
Statistics from the SBV showed that lending interest rates fell 0.5% and 1.5% in July while deposit rates were between 11% and 11.2% per annum, down 0.2%-0.4%.
Mekong Development Commercial JS Bank current offers deposit interest rates of up to 11.5% for terms of below 12 months, the highest level among local banks. The lowest is 10.6% per annum by Trust Bank.
Medium- and long-term loan interest rates ranged from 12% to 14.5% per annum at state-owned banks and 12% to 15.5% at joint stock ones. (Youth)
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