Deposit rates inch down to reluctant 11%

A customer scrutinizes deposit rates offered by Vietnam Asia Commercial Bank. Deposit rates are now at the same level of 11% for terms from one to 36 months - Photo: Thuy Trieu

HCMC – Almost all commercial banks have complied with a pledge made earlier to reduce their deposit rates, but signs of reluctance are seen in the new move when lenders quote the same rate of 11% for deposits of all terms.

Since late last week, banks have cut their rates for Vietnam dong deposits to a maximum of 11% per year for terms starting from one month instead of the previous level of 11.2% under their commitments with the Vietnam Banks Association.

Some big banks such as Asia Commercial Bank, Vietnam Export Import Commercial Bank and Vietcombank have revised their deposit rates for Vietnam dong with the highest rate standing at 11% per year.

On Monday, many other banks also followed suit.

The new common rate is believed to put smaller banks at a disadvantage in competition with larger institutions. Furthermore, operating costs will also be higher as banks may attract short-term funds only when offering the same interest rate.

That means banks will have to rely on promotions to lure depositors.

At Vietnam Asia Commercial Bank, those who deposit at least VND20 million for six, nine, or 12 months can enjoy a lot of incentives such as added rate for depositors older than 50 years, bonus cash depending on the deposit value, and vouchers to buy goods.

Therefore, depositors now do not need to compare interest rates offered by different banks but will look at available promotion programs.

However, lower borrowing rates will make it possible for banks to cut lending rates as well, a move sought by the Government and the central bank.

Dam The Thai, deputy general director of HDBank, said that if all banks agree to lower deposit rates, the capital cost will fall, offering lenders a chance to cut their lending rates.

Related Articles

• Weightlifter grabs Vietnam’s first Olympic gold at Youth Games
• TNK-BP to acquire BP's Vietnam, Venezuela assets
• Bank denies new rumours of devaluation
• Real win aristocratic duel, slick Arsenal cruise
• New decree hopes to protect holders of convertible bonds

Importers hit as banks slap fees on dollar sales

Banks are demanding additional fees to sell dollars that take official rates almost to black-market levels, causing importers anguish.

Many complain that they are forced to pay VND19,850 - VND19,900 for a dollar while the official rate is only VND19,500.

A Ho Chi Minh City-based fashion firm owner told Tuoi Tre she plans to buy $1 million to pay for imports during the year-end peak season, but would have to pay service fees of VND400 million (US$20,500), meaning the actual dollar rate will be VND19,900 and not VND19,500.

A paper importer said he will lose some VND2.8 billion on a consignment worth $7 million this month.

Asked about the fees, several banks explained they buy dollars from exporters at negotiated prices that are quite close to black-market rates due to the dollar shortage. They earn just VND5-VND10 per dollar, they claimed.

In what is a double whammy for buyers, banks do not issue invoices for the fee. “If there are no invoices, the fees will be treated as profits and taxed,” a director of a paper import company said.

It is unclear where Vietnam will get its dollars in the remaining months this year, Lao Dong (Labor) newspaper said.

It ruled out gold exports as a source saying the country recently began to import three tons of the precious metal to meet surging demand.

Around 56 tons were exported in the first eight months for $2 billion.

Mounting demand for the greenback to repay loans that will fall due at the peak year-end season is also expected to put pressure on the dollar rate.

The Ministry of Planning and Investment forecasts the trade deficit to reach $10.1billion this year.

The Asian Development Bank revealed last Friday that Vietnam’s forex reserves are enough for eight weeks’ imports, adding that they may not rise by much in the last quarter.

The country’s traditional sources like foreign direct investment, portfolio investment, and overseas remittances have not seen robust growth, the newspaper added.

Related Articles

• SE Asia should 'de-dollarize', but slowly: experts
• ADB finds dollars dull SE Asian financial controls
• Greenback firmer on signs of rising demand
• Banks scramble for mid-level managers
• Deposit rates inch down to reluctant 11%

Regulation Key To Sustainable Development

Before Dcree 101 took effect on december 20, 2009, State-run commercial banks such as VCB, Incombank and BIDV have resolved to turn into regional or even global finance-banking giants since 2006.

Vietnam must hammer out specific regulations on the establishment and operation of conglomerates in finance and banking to ensure these sectors achieve sustainable development

Although the State Bank Law and the Credit Institution Law have been revised twice, they have yet to mention finance-banking groups. Most sub-law documents have not dealt with these institutions, either. The only exception is Decree 101/2009/ND-CP, dated November 5, 2009, on the “pilot establishment, organization, operation and management of State-owned groups.” Article 3, Item 11 of this decree lists “finance, banking and insurance” among sectors where such pilot establishment takes place.

However, in reality, before Decree 101 took effect on December 20, 2009, commercial banks, especially State-run ones such as VCB, Incombank and BIDV, have resolved to turn into regional or even global finance-banking giants since 2006. If the global financial crisis had not erupted, some local finance-banking groups would be in operation now, at least on a trial basis.

As part of their efforts to realize this vision, some State-run commercial banks have ventured into non-core sectors and given birth to insurance, securities, asset management, realty and construction firms, as well as affiliates in such industries as health care or sports. This approach is somewhat questionable as the main pillars of a finance-banking group are finance, insurance, securities and investment.

Article 32 of the Credit Institution Law holds that credit institutions are allowed to set up, with their own equity, legal entities which have independent accounting records and operate in finance, banking, insurance, asset management and so on. In other words, it is through the pillars of banking, finance, securities and investment that commercial banks use their own capital to set up subsidiaries.

Several commercial joint-stock banks have transformed themselves into groups such as ACB Group or Sacombank Group. State-run commercial banks are capable of doing so, too, but must await official recognition by the Government first. For a start, these State-run financial intermediaries may want to capitalize on the provisions of Decree 101.

The lack of specific regulations on finance-banking groups may hamper the sustainable development of banks once these financial intermediaries turn into groups. In particular, restrictions on the extent to which banks can enter non-core fields of endeavor are vital for sheltering these credit institutions from the problems currently gripping Vinashin.

Currently, risk-taking behavior is widespread among commercial banks. Meanwhile, laws and sub-law documents have yet to offer provisions on the establishment, organization, operation and management of finance-banking groups, private or otherwise.

It is time for the State Bank of Vietnam to take the initiative to fill this gap and, in so doing, foster sustainable development in Vietnam’s finance-banking sector in the post-crisis period. Only then can Vietnam brace itself for the proliferation of finance-banking groups in the future. It is also important to avoid blanket bans on multi-sector and giant entities such as conglomerates, which, like gold trading floors and the likes, are rather difficult to manage.

Related Articles

• Competition serves sustainable agenda
• Regulation Key To Sustainable Development
• Vietnam pays attention to social equality, says PM
• Party reports come in from provinces
• Partnerships with India, S Korea to be practical, effective

Banks say cutting rates still a challenge

HCMC – Several bankers say it still proves difficult to cut interest rates in the rest of the year, borrowing and lending alike, as instructed by the Government although their current capital has got a spur following amendments to Circular 13.

The general director of a bank in HCMC’s District 1 said that his bank would not lower the lending rate any more between now and the end of the year as its profit up to date was so low compared to the year’s target. In addition, given current deposit rates, mobilization in Vietnam dong at the bank cannot increase much so the possibility of trimming the rate would be low, he added.

Another banker in HCMC said the rate cut would be minimal if any.

After Circular 13 was amended, which effectively means quantitative easing, the amount of current capital has increased as banks can use part of corporate deposits under call terms for lending, a practice banned under the circular.

However, “although there is the possibility of lower lending rates, the reduction will not be substantial,” explained the banker, who serves as deputy director of the HCMC branch of a big bank.

In September, Vietnam Banks Association had meetings with banks in Hanoi and HCMC to encourage them to reduce interest rates under the Government’s requirement. The association encouraged banks to cut mobilization rates to 11% from October 15 from the current 11.2% per year.

Early this month, the association has sent a document asking banks to comply with the requirement, but Duong Thu Huong, the association’s general secretary, told the Daily that banks would look at each other before making any rate cut decision due to fear of losing depositors.

“Banks are very much hesitant over the rate cut as demanded by the association,” Huong said.

In fact, commercial banks have launched a lot of promotion programs to lure depositors. Besides, according to the leader of a joint-stock bank, several lenders even negotiate deposit rates with clients at this time.

However, Huong also said that besides amending the Circular 13, the interest rates are also determined by the country’s inflation rate this year, which usually gains a faster pace towards the year’s end, as seen in the September CPI at 1.31%.

In addition, deposit rates for the U.S. dollar and gold are increasing, making it harder to cut the rate in Vietnam dong. Therefore, Vietnam Bank Association has asked banks to lower their dollar and gold rates also.

Many banks said that their deposits in gold have strongly increased after the interest rates have increased to 1%-2% per year.

According to the third quarter report of the State Bank of Vietnam, lending rates in Vietnam dong for agricultural sector, exporters, small and medium enterprises are around 12%-12.5% at State-owned banks and 12.5%-13.5% at joint-stock banks while rates for other loans are from 13% to 15% per year. However, only banks’ close corporate clients can enjoy those rates while others are charged at least one percentage point higher.

The report also said that mobilization and lending rates could not decrease to the levels asked by the Government (deposit rate at 10% and lending rate at 12%) due to high pressure on inflation and banks’ difficulties in mobilizing fund.

The new report of the National Financial Supervisory Commission said that after changes to Circular 13, the capital flow has got bigger but basically it is still restricted by the loans-to-deposit ratio at 80% for banks.

In 2009, banks’ outstanding loans accounted for 96.93% of total mobilization, and the ratio was 92.96% in the first half this year. Reducing the ratio further to 80% from October 1 has also proved a hard nut to crack for many banks.

Related Articles

• Banks say cutting rates still a challenge
• Sheraton Nha Trang celebrates grand opening
• Grand parade celebrates Hanoi anniversary
• Chambers of commerce join hands for cutting red tape
• Sinus infections nothing to sniff at, say medical experts

Banks say cutting rates still a challenge

HCMC – Several bankers say it still proves difficult to cut interest rates in the rest of the year, borrowing and lending alike, as instructed by the Government although their current capital has got a spur following amendments to Circular 13.

The general director of a bank in HCMC’s District 1 said that his bank would not lower the lending rate any more between now and the end of the year as its profit up to date was so low compared to the year’s target. In addition, given current deposit rates, mobilization in Vietnam dong at the bank cannot increase much so the possibility of trimming the rate would be low, he added.

Another banker in HCMC said the rate cut would be minimal if any.

After Circular 13 was amended, which effectively means quantitative easing, the amount of current capital has increased as banks can use part of corporate deposits under call terms for lending, a practice banned under the circular.

However, “although there is the possibility of lower lending rates, the reduction will not be substantial,” explained the banker, who serves as deputy director of the HCMC branch of a big bank.

In September, Vietnam Banks Association had meetings with banks in Hanoi and HCMC to encourage them to reduce interest rates under the Government’s requirement. The association encouraged banks to cut mobilization rates to 11% from October 15 from the current 11.2% per year.

Early this month, the association has sent a document asking banks to comply with the requirement, but Duong Thu Huong, the association’s general secretary, told the Daily that banks would look at each other before making any rate cut decision due to fear of losing depositors.

“Banks are very much hesitant over the rate cut as demanded by the association,” Huong said.

In fact, commercial banks have launched a lot of promotion programs to lure depositors. Besides, according to the leader of a joint-stock bank, several lenders even negotiate deposit rates with clients at this time.

However, Huong also said that besides amending the Circular 13, the interest rates are also determined by the country’s inflation rate this year, which usually gains a faster pace towards the year’s end, as seen in the September CPI at 1.31%.

In addition, deposit rates for the U.S. dollar and gold are increasing, making it harder to cut the rate in Vietnam dong. Therefore, Vietnam Bank Association has asked banks to lower their dollar and gold rates also.

Many banks said that their deposits in gold have strongly increased after the interest rates have increased to 1%-2% per year.

According to the third quarter report of the State Bank of Vietnam, lending rates in Vietnam dong for agricultural sector, exporters, small and medium enterprises are around 12%-12.5% at State-owned banks and 12.5%-13.5% at joint-stock banks while rates for other loans are from 13% to 15% per year. However, only banks’ close corporate clients can enjoy those rates while others are charged at least one percentage point higher.

The report also said that mobilization and lending rates could not decrease to the levels asked by the Government (deposit rate at 10% and lending rate at 12%) due to high pressure on inflation and banks’ difficulties in mobilizing fund.

The new report of the National Financial Supervisory Commission said that after changes to Circular 13, the capital flow has got bigger but basically it is still restricted by the loans-to-deposit ratio at 80% for banks.

In 2009, banks’ outstanding loans accounted for 96.93% of total mobilization, and the ratio was 92.96% in the first half this year. Reducing the ratio further to 80% from October 1 has also proved a hard nut to crack for many banks.

Related Articles

• Banks say cutting rates still a challenge
• Sheraton Nha Trang celebrates grand opening
• Grand parade celebrates Hanoi anniversary
• Chambers of commerce join hands for cutting red tape
• Sinus infections nothing to sniff at, say medical experts

Banks expected to reduce interest rates

Commercial banks are expected to lower interest rates on deposits and
loans in compliance with the State Bank of Vietnam's Circular 19, which
took effect on October 1.

The circular, issued on September 27, amended content in Circular 13 on capital-adequacy ratios.

The major adjustment is the redefinition of deposits, which would ease the pressure on banks to mobilise funds.

Because deposits from the State Treasury are counted in the banks'
mobilisation funds for lending, banks would be able to expand the number
of deposits.

Commercial banks' demand deposits from the State Treasury this year were estimated at 57 trillion VND (2.94 billion USD).

That amount is considered to be sufficient to use as a cheap source of
capital, and to balance the high interest rates on mobilised capital.

The circular also allows banks to use 25 percent of
non-term deposits from enterprises as a source of funding for lending.
It can be used because this source of non-term deposit is often stable
at 20 percent to 30 percent.

Three months of loans from other credit institutions can be added to funds for lending, according to the circular.

Small banks will be able to more easily access cheap capital from
larger banks, with the current interbank interest rate ranging from 8 to
9 percent.

After the circular took effect on October 1, the market showed signs of lower interest rates.

For example, Dai A Bank has eased deposit rates by 0.14 percent to 0.2 percent per year.

Customers with deposits in Vietnam dong for a one-month term and US
dollars for one to two months would be entitled to get interest rates of
10.95 percent per year, and 3.75 percent per year, respectively.

Nam A Bank has announced a lending programme of up to 1 trillion VND
(51.5 million USD) for small – and medium – sized enterprises'liquid
capital at interest rates of 13 percent for dong and 5 percent for the
US dollar.

Western Bank has lowered loan rates for
small enterprises by 1 percent, and transaction fees for the first three
months by 30 percent.

An Binh Bank has given priority to small enterprises by offering an annual 1 percent rate lower.

Phuong Dong Bank has cut car loan rates by 0.5 percent.

The Vietnam Banks Association (VNBA) has recently proposed that
commercial banks cut down highest deposit interest rate from 11.2
percent per year to 11 percent.

VNBA has also
suggested that banks slash the demand deposit interest rate from the
common rate of 4.8 percent to ease business expenses, which would lower
lending interest rates.

VNBA said that the deposit
rate for US dollars at commercial banks, at 4.7 percent to 5.2 percent
per year, is an emerging trend. The rates are currently very high in
comparison to the international market.

Therefore,
VNBA has urged commercial banks to reduce US-dollar deposit rates to
create a balance with dong-deposit rates, creating conditions for dong
interest rates to drop.

Le Tham Duong, head of the
business administration department of HCM City University of Banking,
said because the total outstanding loan growth had been quite low, banks
were entering an output race that would lead to the fall of both
deposit and loan interest rates in the near future.

Total trading volume in Vietnamese dong was 65.93 trillion VND (3.38
billion USD) during the final week last month, down 29.55 percent
against the previous week, according to a report issued by the State
Bank of Vietnam.

The dramatic decrease in interbank
trading signals that liquidity at banks has improved after the central
bank loosened capital regulations through the amendment of Circular 13
taking effect last week.

During the past two months, the trading volume hovered around 90-100 trillion VND (4.61-5.12 billion USD).

Average interbank trading increased slightly by 0.13-0.19 percent for
three month loans. Interbank trading has increased on average by
6.77-8.52 percent per year. Interest rates for loans that exceed three
months were down 0.06-0.48 percent to about 10.12-10.55 percent.

During the same period, total trading volume in the US dollar was also
15.37 percent to 2.52 billion USD. Interest rates for the dollar loans
were about 0.33-1.43 percent per year.

As of
September 27, credit growth in the banking industry was 19.27 percent.
Total loan allocation for property was 218 trillion VND (11.18 billion
USD), up 18 percent, loans for securities were up 19.8 percent to reach
15 trillion VND (769.23 million USD), loans for consumers increased by
19.7 percent to 151 trillion VND (7.74 billion USD).

Loans for agricultural and rural development and small and medium enterprises were up about 19-20 percent./.

Related Articles

• Vietnam’s banks asked to lower deposit rates to 11 pct
• Traditional music concert celebrates capital
• Banks scramble for mid-level managers
• Greenback firmer on signs of rising demand
• New decree hopes to protect holders of convertible bonds

Business briefs

• Pledged foreign direct investment into property projects in Vietnam dropped by 12.7 percent in the first nine months from a year earlier, according to figures from the Foreign Investment Agency. Of the total US$12.2 billion committed foreign investment in the first nine months of this year, $8.05 billion has been disbursed.

• Banks have been slow in lowering interest rates because they are investing more in government bonds, said Nguyen Van Giau, the central bank’s governor. Banks can make profits from high yields on government bonds, he said. About VND48 trillion ($2.46 billion) of bonds have been issued so far this year, five to six times the usual amount over the same period in previous years.

• The Asian Development Bank said it has approved a $630 million loan to help reform Vietnam’s state-owned enterprises (SOEs). The multi-tranche facility aims to improve the efficiency of SOEs and enhance corporate governance to spur Vietnam’s economic growth, the Manila-based bank said in a statement.

• Loans in Vietnam by the end of September were estimated to rise 19.5 percent from the end of 2009, in line with an annual target of 25 percent credit growth. The projection was based on expansion of 19.27 percent as of September 27, State Bank of Vietnam Governor Nguyen Van Giau said. “Compared with the 25-percent target for 2010, (such growth) is not low,” he said.

• TNK-BP, BP Plc’s venture with a group of Russian billionaires, will make a proposal to buy BP’s share in an offshore natural gas project in Vietnam. BP, Europe’s largest oil producer by volume, plans to sell $30 billion of assets in 18 months to cover costs linked to the Gulf of Mexico oil spill, the worst in US history. BP said in July it plans to sell interests in the Nam Con Son gas project in Vietnam.

• The State Bank of Vietnam said on Wednesday it would relax compulsory reserve requirements for banks that made significant loans for agriculture or rural development as a way to mobilize funding for the countryside. Banks with loans for the agricultural sector or rural development totaling 70 percent or more of outstanding loans would only be required to hold 5 percent of normal reserve levels, which depend on deposit terms, it said in a statement.

• Commercial banks will reduce deposit rates to as low as 11 percent by October 15 from the current 11.2 percent after the central bank’s recent easing of lending rules, Duong Thu Huong, chairwoman of the Vietnam Banks Association. Banks will have greater scope to lend after the central bank said it would allow them to use 25 percent of non-term deposits made by businesses for loans.

• Vietnam will start planting crops for genetically modified food between 2011 and 2015 with the goal of increasing the planting area of crops like genetically modified corn, cotton and soybeans to 30 to 50 percent of the country’s total by 2020, based on a government directive in 2006.

Related Articles

• Vietnamese company expands business in Laos
• Vietnamese company expands business in Laos
• Business briefs
• PM sets agenda for insolvent shipbuilder
• Foreign sea leases deprive locals of living

Eight banks connect POS network

Two young women withdraw cash at an ATM operated by Vietcombank. Cardholders now find non-cash payments easier as Vietcombank and seven other lenders on Tuesday had their networks connected to points of sale outlets - Photo: Kinh Luan

HANOI –Eight banks on Tuesday started connecting their networks to points of sale outlets accepting local debit cards (POS), creating more convenience for card holders.

The eight banks are Vietcombank, Agribank, Vietinbank, BIDV, Techcombank, VIB, SeABank, and OceanBank.

Card holders of any one of eight banks can use their cards to pay at all the banks’ POS outlets. That will help banks to save costs and widening POS network and reduce pressure on the ATM system, said a statement from State Bank of Vietnam.

POS machines can be found at supermarket checkouts, trade centers, restaurants, hotels, taxis, and hospitals. The connection aims to carry out Vietnam’s target of reducing cash usage in the economy.

The POS connection is the first phase of the Government’s program strengthening payment without cash. Other banks such as Maritime Bank, Eximbank and Saigon Bank for Industry and Trade will join the network in the near future.

According to the State Bank of Vietnam, there are about 27 million card holders, 11,000 ATMs, and 42,000 POS machines nationwide. During 2006-2010, card holders grew by 150% to 200% per year but deposits by cards account for less than 5% of card transactions. Withdrawing cash via ATM accounts for 80% of total card transactions.

Related Articles

• Eight banks connect POS network
• Weightlifter grabs Vietnam’s first Olympic gold at Youth Games
• Assoc insists on power price hike despite protests
• Banks scramble for mid-level managers
• Greenback firmer on signs of rising demand

Financial firms jostle for slice of credit pie

Personal credit is no longer a “big earner” for the banks only, as
financial companies are rushing to cash in on this market, say industry
insiders.

Statistics show that Vietnam is now
home to 17 financial companies, which have been established by domestic
and foreign-invested groups and corporations. These financial companies
provide loans enabling consumers to buy cars and houses, similar to
services provided by the banks.

To improve their
competitiveness, financial firms have continuously released new products
onto the market, based on the business advantages of their parent
companies, expanded their limits on loans, adjusted deadlines for
payments and linked up with the suppliers of consumer goods to serve
their clients better.

For this reason, a large
number of consumers prefer the products provided by financial companies,
although their interest rates are 1.2-1.7 percent higher than those
offered by the banks.

The Prudential Finance
Company, an arm of the Prudential Insurance Group, is well known for its
loans without collateral, based on valid insurance policies. The limit
and duration of the loans are directly proportional to the value and
period of the insurance policies. The company also provides its product
online and by telephone to save time and transaction costs for clients.

Credit for house buyers provided by the PetroVietnam
Finance Corporation (PVFC) is seen as safer than similar products
provided by the banks. When clients sign a loan contract, they also sign
an insurance policy with the life insurance company ACE Life, to keep
ownership of the mortgaged assets. If there are defaults, ACE Life will
pay the remainder of the loan to PVFC.

For the
Hadico Financial Company, under the Hanoi Housing Development and
Investment Corporation, a repayment period of up to 30 years is an
advantage for its loans for house purchases.

Foreign-invested financial firms are also emerging as big rivals to the
banks. Boasting global networks, these companies have teamed up with
major producers to offer consumers non-profit loans to boost
consumption.

Many major banks, including the Asian
Commercial Bank (ACB), the Sai Gon Thuong Tin Commercial Bank
(Sacombank) and the Dong A Bank (DongABank) plan to set up financial
companies to tap into the personal credit market, but none of them have
begun to operate yet.

A number of other banks have
also unveiled their plans to put capital into multinational financial
firms to improve their competitiveness in the personal credit market./.

Related Articles

• Bold moves suggested to make Indochina real single destination
• IFC: Vietnam needs to increase PPP to support economy
• HSBC expands to central region
• VN wishes to beef up ties with Denmark, Canada
• Poor rural children blaze education trail

Vietnam needs to improve corporate governance in banks: US advisor

Photo: Tuoi Tre

Vietnamese banks need to improve corporate governance to reduce the risks to the banking system among other benefits, a seminar in HCMC heard Wednesday

Speaking at the meeting sponsored by the State Bank of Vietnam and US Department of Treasury, Le Thanh An, the US consul in HCM City, said the Treasury had an agreement with the SBV to provide assistance in a number of areas, including corporate governance.

"The recent financial crisis is a compelling reminder of the critical importance of corporate governance and supervision of the banking system. No country's financial sector is perfect, but every country can seek to improve governance to make banking a stable pillar of the economy."

David Hawkins, the US Treasury banking advisor, said good corporate governance would create public trust and confidence in banks and the banking system.

"To have effective corporate governance, the board needs to establish good policies and procedures, goals that promote transparency, and systems to implement them and to control risks, have sufficient audit functions and good management information systems to keep informed of deficiencies and initiate corrective action when problems are noted."

Boards members should be and remain qualified, including through continued training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound judgment about the affairs of the bank.

Under the direction of the board, senior management should ensure that the bank's activities are consistent with its business strategy, risk tolerance, and policies.

Banks should have an independent risk management function including a chief risk officer with sufficient authority, stature, independence, resources, and access to the board.

Risk management information should be tested for accuracy periodically.

The governance of a bank should be adequately transparent to its shareholders, depositors, other stakeholders, and market participants.

The role of the State Bank of Vietnam is to provide guidance to banks for effective corporate governance.

It has to regularly perform a comprehensive evaluation of banks' overall corporate policies and practices, and evaluate their implementation through inspecting internal reports.

The central bank should insist on effective and timely remedial action by banks to address material deficiencies in their corporate governance policies and practices.

 

Related Articles

• City planners seek answer to narrow houses
• Civil servants to enjoy State housing
• IFC: Vietnam needs to increase PPP to support economy
• New regulations out for business invoices
• Thousands await relocation

VN needs to improve corporate governance in banks: US advisor

HCM CITY — Vietnamese banks need to improve corporate governance to reduce the risks to the banking system among other benefits, a seminar in HCM City heard yesterday.

Speaking at the meeting sponsored by the State Bank of Viet Nam and US Department of Treasury, Le Thanh Aân, the US consul in HCM City, said the Treasury had an agreement with the SBV to provide assistance in a number of areas, including corporate governance.

"The recent financial crisis is a compelling reminder of the critical importance of corporate governance and supervision of the banking system. No country's financial sector is perfect, but every country can seek to improve governance to make banking a stable pillar of the economy."

David Hawkins, the US Treasury banking advisor, said good corporate governance would create public trust and confidence in banks and the banking system.

"To have effective corporate governance, the board needs to establish good policies and procedures, goals that promote transparency, and systems to implement them and to control risks, have sufficient audit functions and good management information systems to keep informed of deficiencies and initiate corrective action when problems are noted."

Boards members should be and remain qualified, including through continued training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound judgment about the affairs of the bank.

Under the direction of the board, senior management should ensure that the bank's activities are consistent with its business strategy, risk tolerance, and policies.

Banks should have an independent risk management function including a chief risk officer with sufficient authority, stature, independence, resources, and access to the board.

Risk management information should be tested for accuracy periodically.

The governance of a bank should be adequately transparent to its shareholders, depositors, other stakeholders, and market participants.

The role of the State Bank of Viet Nam is to provide guidance to banks for effective corporate governance.

It has to regularly perform a comprehensive evaluation of banks' overall corporate policies and practices, and evaluate their implementation through inspecting internal reports.

The central bank should insist on effective and timely remedial action by banks to address material deficiencies in their corporate governance policies and practices. — VNS

Related Articles

• Civil servants to enjoy State housing
• IFC: Vietnam needs to increase PPP to support economy
• Herbal medicine industry looks to boost exports
• Herbal medicine industry looks to boost exports
• Industrial production surges past annual target

Vietnam to relax bank lending rules to boost loans

Vietnam’s central bank said it would let commercial banks lend money from a wider array of sources as of Oct. 1 to assuage concerns that new regulations would dampen lending and possibly hurt the economy.

However, a senior government adviser said the measures did not go far enough.

Bankers had voiced concern about the original rules, arguing they would hinder their ability to boost credit and lower interest rates. In response, and under pressure from the government, the central bank issued amendments late on Monday.

These allow banks to lend up to 25 percent of non-term deposits raised from economic institutions instead of keeping them as reserves. Banks can also lend money they have borrowed from the interbank market for terms of three months or longer.

A central feature of the new rules – raising banks’ capital adequacy ratio to 9 percent from 8 percent – remained unchanged.

The benchmark Vietnam Index gained 1.1 percent on the news, but share traders remained wary. Many analysts had flagged the original set of rules as a potential damper on the market and economy, and had hoped for bigger changes.

“The market is unlikely to see a big rally because traders are still cautious and they will look at how commercial banks react to the new circular in the near term,” said Doan Tran Phuong Phi, a broker at Ho Chi Minh City Securities.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, said the amendments would not really help banks expand credit or cut interest rates. “The changes are not large enough to boost lending,” he said.

Central bank Governor Nguyen Van Giau has defended the original rules, saying they would make the banking sector safer. He also warned even stricter rules would take effect from January because of amendments to the law on credit institutions.

Earlier this year the central bank asked banks to restrict their interbank borrowing to less than 20 percent of deposits.

Dong lending rates range from 13 percent to 15.5 percent, although the government wants them cut to 12 percent. Banks promised in May to get nearer that level by the end of September.

Related Articles

• Vietnam to relax bank lending rules to boost loans
• VN needs to improve corporate governance in banks: US advisor
• Eight banks connect POS network
• Banks scramble for mid-level managers
• Chinese diplomat pledges to boost development ties

Central bank eases credit rules

The State Bank of Vietnam has amended regulations on the use of deposits for lending by commercial banks following a request by the government.

The amended Circular 13 issued Monday now allows banks to use up to 25 percent of their non-term deposits for lending. It also allows banks to have their deposits with the State Treasury counted as part of their funds for lending.

Originally the circular banned banks from using the money in non-term accounts to fund loans. According to the Vietnam Banking Association, this regulation created a huge funding pressure as non-term accounts make up 15-20 percent of deposits at local banks.

Banks have welcomed the revised regulations, saying they would help improve liquidity and allow them to boost lending.

The amended circular, however, kept unchanged a provision that requires banks to increase capital adequacy ratio from 8 percent to 9 percent.

Despite some changes, Circular 13 will still take effect on October 1 as planned.

Since it was first announced in May, the circular has faced a lot of criticism from banks, who said the new safety requirements were too strict and difficult to implement by the deadline.

Prime Minister Nguyen Tan Dung last Friday asked the central bank to review the rules and ensure stability for the country’s financial and monetary market.

Related Articles

• Central bank eases credit rules
• Vietnam to relax bank lending rules to boost loans
• VN needs to improve corporate governance in banks: US advisor
• Eight banks connect POS network
• Banks scramble for mid-level managers

Central bank eases credit rules

The State Bank of Vietnam has amended regulations on the use of deposits for lending by commercial banks following a request by the government.

The amended Circular 13 issued Monday now allows banks to use up to 25 percent of their non-term deposits for lending. It also allows banks to have their deposits with the State Treasury counted as part of their funds for lending.

Originally the circular banned banks from using the money in non-term accounts to fund loans. According to the Vietnam Banking Association, this regulation created a huge funding pressure as non-term accounts make up 15-20 percent of deposits at local banks.

Banks have welcomed the revised regulations, saying they would help improve liquidity and allow them to boost lending.

The amended circular, however, kept unchanged a provision that requires banks to increase capital adequacy ratio from 8 percent to 9 percent.

Despite some changes, Circular 13 will still take effect on October 1 as planned.

Since it was first announced in May, the circular has faced a lot of criticism from banks, who said the new safety requirements were too strict and difficult to implement by the deadline.

Prime Minister Nguyen Tan Dung last Friday asked the central bank to review the rules and ensure stability for the country’s financial and monetary market.

Related Articles

• Central bank eases credit rules
• Vietnam to relax bank lending rules to boost loans
• VN needs to improve corporate governance in banks: US advisor
• Eight banks connect POS network
• Banks scramble for mid-level managers

Sept dollar credit growth up strongly in HCMC

HCMC – Outstanding loans in foreign currency, mostly the U.S. dollar, at credit institutions in HCMC by the end of this month are forecast to expand 36% from late last year to VND186.1 trillion, according to central bank figures.

The figures from the central bank’s HCMC branch show September dollar credit growth at commercial banks in the city is seen reaching 6.1% month-on-month, up from the 1% recorded in August.

Banks have reported an 8.5% rise in September dollar mobilization from August after they hiked dollar deposit rates early this month. Meanwhile, the amount of dollars raised in August was down 4% month-on-month.

Therefore, banks in the city may have raised a total of VND181.25 trillion by late this month, up 8.4% from late 2009. So outstanding dollar loans continue surpassing mobilization in September and part of the reason is that foreign banks have ample cheap dollar funds from their mother banks and foreign institutions.

In contrast to the dollar mobilization, HCMC banks’ Vietnam dong fund raising in the first nine months this year has been higher than credit growth. By late September, the volume of dong deposits is projected to amount to VND530.7 trillion, up 21.7% from late last year, and outstanding loans VND463.3 trillion, up 9.4% from late 2009.

Related Articles

• Sept dollar credit growth up strongly in HCMC
• Danang targets double-digit growth for next 5 years
• UNESCAP speeds up green growth roadmap in Asia-Pacific
• Greenback firmer on signs of rising demand
• GDP accelerates to 6.52% in three quarters

Sept dollar credit growth up strongly in HCMC

HCMC – Outstanding loans in foreign currency, mostly the U.S. dollar, at credit institutions in HCMC by the end of this month are forecast to expand 36% from late last year to VND186.1 trillion, according to central bank figures.

The figures from the central bank’s HCMC branch show September dollar credit growth at commercial banks in the city is seen reaching 6.1% month-on-month, up from the 1% recorded in August.

Banks have reported an 8.5% rise in September dollar mobilization from August after they hiked dollar deposit rates early this month. Meanwhile, the amount of dollars raised in August was down 4% month-on-month.

Therefore, banks in the city may have raised a total of VND181.25 trillion by late this month, up 8.4% from late 2009. So outstanding dollar loans continue surpassing mobilization in September and part of the reason is that foreign banks have ample cheap dollar funds from their mother banks and foreign institutions.

In contrast to the dollar mobilization, HCMC banks’ Vietnam dong fund raising in the first nine months this year has been higher than credit growth. By late September, the volume of dong deposits is projected to amount to VND530.7 trillion, up 21.7% from late last year, and outstanding loans VND463.3 trillion, up 9.4% from late 2009.

Related Articles

• Sept dollar credit growth up strongly in HCMC
• Danang targets double-digit growth for next 5 years
• UNESCAP speeds up green growth roadmap in Asia-Pacific
• Greenback firmer on signs of rising demand
• GDP accelerates to 6.52% in three quarters

Central Bank redefines circular

Banks will be allowed to lend up to 25 percent of their non-term deposits.

They will also be allowed to count their deposits at the State
Treasury and loans on a three-month or longer term basis with other
credit institutions as part of their reserves for lending. These
regulations are congruent with Circular No19/2010/TT-NHNN issued by the
State Bank of Vietnam last night to supplement Circular No 13.

The original circular would have restricted banks from issuing loans
from non-term deposits lodged by the State, State entities, the social
insurance fund or commercial credit organisations.

Banks now will also be allowed to lend funds raised from bonds and
deposits certificates. These moves are expected to free up the
inter-bank market and provide more capital to banks.

These regulations will come into effect on October 1.

Other regulations in the Circular No13 are kept unchanged as it
continues to prohibit banks from lending more than 80 percent of their
deposits. It also sets a 250-per-cent risk coefficient for all loans
secured against securities or real estate.

The capital adequacy ratio, CAR, for Vietnam 's banks is lifted to 9 percent – from 8 percent.

The central bank reported last Friday that 10 of 12 banks in Hanoi
have already raised their CAR to 9 percent. The other two would try to
meet the requirement before Friday.

National
Financial Supervisory Council deputy chairman Le Xuan Nghia said in an
economic seminar last week, "It's appropriate that the regulations in
the circular are close to the Basel 3 standards but it is unnecessary
for them to be stricter than Basel 3."

Basel
3 sets CAR at 8 percent and risk coefficient for all loans secured
against securities or real estate at 150 percent.

Deputy chairman Nghia worried that implementation of Circular No 13
would have a detrimental effect on the capital, securities and property
markets.

The Government said the purpose of Circular
13 was to ensure financial market stability and well-managed capital
circulation in the latter part of this year and early next year.

Some banks pledged at a meeting of the Vietnam Banks Association in
HCM City last week to simultaneously cut deposit interest rates 0.4
percentage points to 11 percent as soon as next Friday and no later than
October 15 if the amended circular came into effect.

Circular 13 is intended to address shortcomings in various risk-management provisions.

The Fullbright Economics Teaching Programme's Professor Huynh The Du
argues the changes proposed in the circular are necessary to Vietnam
's financial system.

The 9 percent CAR and a 250
percent risk coefficient would improve financial stability and prevent
banks from entering too deeply into risky lending, he said.

But Nghia said that the solutions to the pivotal problems of Vietnam
's financial market were not confined to a higher CAR but accurate
accounting, financial statements and the valuation of assets.

The Prime Minister first ordered the central bank to review the
Circular 13 which is intended to govern bank reserves about six weeks
ago./.

Related Articles

• Central bank makes little change to Circular 13
• Banks scramble for mid-level managers
• Vietnam surpass Malaysia at Eximbank Cup
• Sept dollar credit growth up strongly in HCMC
• ANZ launches service to high-class clients

Vietnam to relax bank lending rules to boost loans

Photo: Tuoi Tre

HANOI - Vietnam's central bank said it would let commercial banks lend money from a wider array of sources as of Oct. 1 to assuage concerns that new regulations would dampen lending and possibly hurt the economy.

However, a senior government adviser said the measures did not go far enough.

Bankers had voiced concern about the original rules, arguing they would hinder their ability to boost credit and lower interest rates. In response, and under pressure from the government, the central bank issued amendments late on Monday.

These allow banks to lend up to 25 percent of non-term deposits raised from economic institutions instead of keeping them as reserves. Banks can also lend money they have borrowed from the interbank market for terms of three months or longer.

A central feature of the new rules -- raising banks' capital adequacy ratio to 9 percent from 8 percent -- remained unchanged.

The benchmark Vietnam Index gained 1.1 percent on the news, but share traders remained wary. Many analysts had flagged the original set of rules as a potential damper on the market and economy, and had hoped for bigger changes.

"The market is unlikely to see a big rally because traders are still cautious and they will look at how commercial banks react to the new circular in the near term," said Doan Tran Phuong Phi, a broker at Ho Chi Minh City Securities.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, said the amendments would not really help banks expand credit or cut interest rates. "The changes are not large enough to boost lending," he said.

Central bank Governor Nguyen Van Giau has defended the original rules, saying they would make the banking sector safer. He also warned even stricter rules would take effect from January because of amendments to the law on credit institutions.

Earlier this year the central bank asked banks to restrict their interbank borrowing to less than 20 percent of deposits.

Dong lending rates range from 13 percent to 15.5 percent, although the government wants them cut to 12 percent. Banks promised in May to get nearer that level by the end of September.

Related Articles

• Central bank makes little change to Circular 13
• Small firms steered towards higher interest consumer loans
• Central bank holds steady on prime rate
• Banks scramble for mid-level managers
• Vietnam surpass Malaysia at Eximbank Cup

Small banks have trouble with recapitalization

An unidentified bank employee unstraps a stack of Vietnamese banknotes. Several small commercial banks find it hard to meet the chartered capital requirement of at least VND3 trillion by the year-end as their State-owned shareholders may not inject more capital into them as earlier planned - Photo: Le Toan

HCMC – Several small-scale commercial banks are now facing a huge test as how to increase their chartered capital to at least VND3 trillion by the end of this year since State-owned shareholders will unlikely pump more capital into these banks.

Many small banks have relied on State-owned shareholders, and they have built their recapitalization plans on pledges by these shareholders to inject more funds to maintain their stakes. However, a recent decision by the Government to restrict State-owned corporations from investing outside their core business operations and to withdraw their capital from non-core businesses has put many small banks under tenterhooks.

The State Bank of Vietnam has so far approved recapitalization plans by about 16 out of 21 banks with chartered capital less than the required VND3 trillion. However, many of these banks will have to redo their plans.

Nam Viet Commercial Bank (Navibank), for example, must be thinking laboriously now to seek new funds as Vietnam Textile and Garment Group (Vinatex) finds it difficult to contribute more capital as pledged. Vinatex, which holds an 11% stake in Navibank, has not earned the Government’s blessing to continue investing in the bank.

Vu Duc Giang, CEO of Vinatex, told the Daily on Monday that the Government had not permitted the company to contribute more funds into this bank. Furthermore, “in the future, if the Government asks Vinatex to withdraw capital from Navibank, the corporation must do it,” he said on the phone.

It is reported that Navibank has got approval from the central bank to increase capital from VND1 trillion to VND3.5 trillion. To realize the scheme, the bank will issue 98.9 million shares to existing shareholders in the first phase, then sell 148.35 million shares to existing shareholders in the second phase.

However, this capital raising plan will not work if the big shareholder Vinatex does not participate.

Another case is Vietcombank, which is 90% owned by the State. This bank has also invested in other banks such as Gia Dinh Bank and Orient Commercial Bank, and now is rethinking its strategy.

Nguyen Hoa Binh, chairman of Vietcombank, told the Daily that the bank would not invest more capital to maintain its ownership of 19% in Gia Dinh Bank when the bank issues shares to increase capital from VND1 trillion to VND3 trillion.

Binh said for the long term, the bank would not invest more or even divest capital from other commercial banks due to consideration of business efficiency.

It is unlikely that Vietcombank will pump more capital into financial investments as the Government has just injected more funds into the bank to increase its chartered capital by 33% in order that the bank meets the newly required capital adequacy ratio (CAR) of 9% as stated in Circular 13.

Ho Huu Hanh, director of the central bank’s HCMC Branch, said that almost all banks in the city had submitted their fund raising plans to the branch, but the success of those plans would not be ensured following the Government’s decision asking State-owned corporations to narrow down their outside investments.

If banks cannot realize their recapitalization plans by the end of this year, they must merger with each other or get disbanded in the future.

In its decision, the Government has dictated that State-owned corporations obtain approval from the Prime Minister before making decisions whether to continue pumping capital or not. The Prime Minister has assigned the Ministry of Finance to evaluate the effectiveness of State investments at commercial banks.

Related Articles

• Banks scramble for mid-level managers
• Greenback firmer on signs of rising demand
• IFC: Vietnam needs to increase PPP to support economy
• Early birds get the best at floating market
• Mini-condos attract investor attention

Japan bank lobby says new capital rules "harsh"

TOKYO - The new Basel III bank regulations requiring higher capital levels are "harsh", although Japan's banks have no need now to strengthen their capital further, said Masayuki Oku, chairman of the Japanese Bankers Association.

Global regulators, aiming to prevent any repeat of the international credit crisis, earlier this month agreed to force banks to more than triple to 7 percent the amount of top quality capital they must hold to withstand future shocks.

"That's very harsh for Japanese banks," Oku, who is also president of the core commercial unit of Sumitomo Mitsui Financial Group, told a regular news conference on Tuesday.

Still, Japan's three biggest banks -- Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui -- have already boosted their capital levels through a round of capital-raising in anticipation of the tougher new rules.

"We don't expect any capital-raising plans from individual banks in the near future," Oku said.

"Banks will try to expand their business and limit capital raising which could cause share dilution. That is going to be a trend in the industry," he said.

Oku also said that Japan's intervention in currency markets last week to curb a rise in the yen was effective but that the government had waited too long to take action.

"If intervention is done too late it takes a lot of energy and money to adjust the currency level, and I think there could have been better timing for the intervention," he said.

The yen surged to a 15-year high against the dollar last week of 82.87 yen -- much stronger than many Japanese firms' forecasts for around 90 yen -- threatening the outlook for Japan's export-reliant economy.

Related Articles

• Small banks have trouble with recapitalization
• New rules on foreign investment in companies
• Banks scramble for mid-level managers
• Banks further hike gold deposit rates
• HIV increases in remote north