Do you think that the interest rate rose sharply because of the capital shortage?

The usable capital of commercial banks was normal in the first ten days of November. There have been signs of slight decrease of usable capital in recent days, but it still satisfies the payment demand of the national economy.

However, the demand for capital for the disbursement of enterprises always increases towards the year’s end, impacting the usable capital and pushing the interest rate up in the inter-bank market as seen in recent days.

Do you think the interest rate hike is an abnormal thing?

As I said before, this has always been seen in previous years. However, the high demand for capital for disbursement is taking place earlier this year than previous years, in November instead of December as usual.

This shows the impact of economic integration on the national economy. The capital flow in the markets has become more flexible with bigger volume. A task has been put for management authorities: they have to give forecasts about changes in the national economy, at least short-term forecasts.

What has the central bank been doing to stabilise the market?

The State Bank of Vietnam has been taking necessary steps to improve liquidity in the market. The Governor of the State Bank released Instruction No 06 dated October 22, 2007, requesting commercial banks to ensure payment capability and control payment instruments.

We have been closely watching the happenings on the market, so as to take timely actions to interfere in the market. The usable capital situation has returned to normal, and the interest rate has been stabilised.

Could you please tell me the value of bonds the central bank has purchased, and how the interest rate is performing now in the market? Will the VND supply badly affect inflation?

The central bank has injected VND10tril ($625mil) in the market, and the interest rate is staying at 8% per annum. We have concluded that the usable capital situation has returned to normal and the interest rate performance is back on track.

However, the central bank will keep controlling the increase of payment instruments and apply necessary measures to fulfill two targets, curbing inflation and supporting economic development.

The said VND10tril will not worsen the high inflation, since the central bank only provides short-term capital to support immediate payment, while it will have measures to get money back.

Will the high interest rate in the inter-bank market lead to increases in the deposit and lending interest rates offered by commercial banks?

No, I don’t think so. The supply and demand of capital in the market is normal. Banks have fulfilled their plans on mobilising capital and lending for 2007. Commercial banks have good reserves of usable capital that can ensure the payment capability.

Meanwhile, the interest rates in the world’s market are on the decrease, and the central bank is striving for a stable interest rate policy. Therefore, there will be no big changes in deposit and lending interest rates.

Source: TBKTVN.