The interest rate race was whistle-blown by State Bank of Vietnam (SBV) after Techcombank suddenly offered incredible interest rates for Vietnamese dong-denominated deposits. Following the whip from the central bank, lenders agreed to cap deposit rates at 14% per annum, inclusive of promotions.
The intervention came after the central bank met with leaders of 42 banks, 11 financial companies and the Deposit Insurance of Vietnam (DIV) on December 14. Lenders agreed to bring down interest rates to match the Prime Minister’s guidance on monetary market stabilisation and banking system safety. Leaders of credit institutions stressed the immediate prevention of unhealthy interest rate competition and implicit rate depositors and banks.
One day before this meeting, commercial banks revised down deposit rates to the level reached a week earlier. Official deposit rate were capped at 14 % per annum and if extra bonuses are included, the rates would not exceed 15 % per annum. Most lenders are applying the maximum rate of 15 %.
Vietnam Technological and Commercial Joint Stock Bank (Techcombank) is one of the first banks to reduce the peak deposit rate to 13.95 % per annum. This rate is applied to 1-month, 2-month and 3-month terms and other terms are subjected to 13.45 - 13.5 % per annum. Earlier, Asia Commercial Bank (ACB) offered the highest rate of 15.2 % for one-month deposits in a promotion programme. But just two days later, on December 13, the Ho Chi Minh City-based lender applied the highest rate of 15 % as joint commitments reached with other banks. Saigon Commercial Bank (SCB), the highest rate of 14 % per annum is mainly applied to deposits with a maturity of 2-6 months while other terms are mainly subjected to only 13.5 % or lower.
State-owned commercial banks, with their stronger financial capacity and better prestige than other lenders, do not meet difficulties in decreasing interest rates. Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) applies the highest rate of 14 % per annum to deposits with a maturity of 1, 2 and 3 months and only 12 % to other terms. Bank for Investment and Development of Vietnam (BIDV) now has the highest deposit rate of 13.5 %.
Just a few days later, on December 14, banks agreed to pull down deposit rates to 14 % per annum, including bonuses and promotions.
Banks often broke agreement on interest rate reductions because of insufficient resolutions of all stakeholders. This time, the State Bank of Vietnam showed their strong determinations to keep the rate low. To put an end to the bleach of commitments, banks suggested the central bank supervise the implementation of the agreement at registered banks. Governor of the State Bank Nguyen Van Giau hailed the consensus on interest rates and directed State Bank units to oversee the implementation and strictly treat violators. At the same time, the Governor requested banks to make public and transparently rate tables to ensure rights and interests of depositors.
The attitude of the State Bank is reflected at the treatment to Techcombank as the lender broke the commitment, causing an adverse impact on monetary stability. Director of the State Bank - HCM City Branch has sent a written request to the President of the Board of Directors and the General Director of Techcombank to dismiss the Director of Techcombank - Phu My Hung Branch for holding the deposit rate at 16.8 % per annum and expressing uncooperative attitude towards the investigating team after leaders of Techcombank pledged with the State Bank, the Vietnam Banks Association and other commercial lenders to cap the rate at 14 % per annum.
The State Bank of Vietnam also sent a warning message to leaders of Techcombank for breaching the commitment and causing bad effects on efforts to stabilising interest rates, financial and monetary markets.
Kim Nhung
Vietnamese
