Easing of safety rules sparks lending rush 

Last updated: 10/8/2010 9:00 

A branch of Sacombank in Ho Chi Minh City. Bankers say the competition between commercial lenders for clients is tough.

Local banks are taking advantage of the central bank’s recent relaxation of bank safety regulations to boost lending and meet the year’s credit growth target after a sluggish nine months.

The general director of a Ho Chi Minh City-based lender said the bank had faced difficulties in attracting deposits during the first nine months. Besides, it had to set aside reserves to meet strict safety requirements supposed to take effect this month.

Now that the rules have been amended, his bank wants to focus on lending, after posting a credit growth of only 5 percent over the last nine months, he said.

Do Minh Toan, deputy general director of the Asia Commercial Bank, said the bank will focus on businesses in the agricultural sector who are in need of funds to purchase rice and other crops. These clients can help increase the bank’s credit growth, he said.

Other bankers have said they are targeting corporate clients, especially exporters.

Dam The Thai, deputy general director of the HD Bank, said the competition between banks is getting harsh. His bank will slightly lower its lending rates this month to make sure it can retain and get more customers, he said.

The Vietnam Banks Association has asked members to reduce deposit rates to no more than 11 percent by October 15, according to a statement on the central bank’s website on Monday.

For non-term deposits and deposits of less than three months, the association asked commercial banks to make a bigger reduction to create a “suitable” interest-rate curve to attract long-term funds, according to the statement. Members were also asked to lower dollar-deposit rates and to cut borrowing costs to spur lending, according to the statement.

This call for interest rate cuts came after the State Bank of Vietnam adjusted safety rules last week, allowing banks greater scope to lend. Among the adjustments is permission to use 25 percent of non-term deposits made by businesses for lending, starting October 1.

Economist Le Tham Duong of the Ho Chi Minh City Banking University said dong-denominated loans have expanded at a slow pace so far this year. As a result, local banks will compete for clients in the next months, which will help bring interest rates down.

Duong said to speed up this process, the government should increase money supply and lower the yields on government bonds to less than 10 percent a year. When banks cut back their investments in government bonds, they would pay more attention to lending to businesses, he said.

The Vietnam Banks Association has requested that the central bank cut its refinancing rate, discount rate and interest rates in open market operations to help banks lower their interest rates. The central bank on September 27 set its refinancing rate at 8 percent and its discount rate at 6 percent.

Loans are estimated to have risen 19.5 percent in the January to September period. Vietnam has set an annual target of 25 percent credit growth for this year.

Source: Thanh Nien, Agencies

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