When asked about the implementation of the ceiling interest rate scheme, most leaders of joint stock banks say that those banks that respect the agreement will suffer a loss, as the agreement is not substantial.

What happened at the meetings of VNBA’s members, and why is the agreement considered ‘unsubstantial’?

A bank official, who attended the meeting, related that at the meeting of northern banks several days ago, the representative of the Bank for Investment and Development of Vietnam (BIDV) expressed the bank’s view, suggesting raising the ceiling interest rate to 12%. The leader of a joint stock bank also shared the same viewpoint with BIDV. However, when voting by showing hands, the banks’ representatives themselves agreed to maintain the ceiling interest rate at 11%.

“It was clear that this was an affected agreement,” he said. Bankers voted to maintain the 11% ceiling interest rate, but they are now still looking for ways to raise deposit interest rates.

The official said that some bankers had to vote for the 11% ceiling interest rate because there was a representative of the State Bank of Vietnam in attendance.

“I think the majority of banks would not have agreed with the 11% ceiling interest rate if they could have voted by ballot,” he said.

In fact, no bank wants to respect the agreement on the 11% ceiling interest rate. Some banks are trying to make separate deals with clients who can provide big capital, while some others are trying to launch promotion campaigns to attract more capital. Techcombank, for example, has launched a promotion programme: those who deposit VND10mil and higher would be entered into a lucky draw to have the chance to win VND1bil.

Meanwhile, foreign banks and some small banks, which are not members of VNBA, and do not have to apply the 11% ceiling interest rate scheme, are offering high interest rates, which has been making VNBA’s members anxious about their capital mobilisation.

Several days after the meeting of the northern banks, a similar meeting of southern banks took place in HCM City. No bank voted for the 11% interest rate. Finally, the banks only reluctantly agreed on the 12% and 6% ceiling interest rates for VND and US$ deposits.

Nevertheless, the 12% ceiling interest rate, once again, was considered the ‘affected agreement’.

The director of a HCM City-based bank said that the 12% ceiling interest rate was set by the State Bank of Vietnam before, when the inflation rate was 6% only. It would be illogical to maintain the same ceiling interest rate with the inflation rate having surged to 11.6%.

He has also warned about the very bad consequences of the artificial ceiling interest rate. This will prompt bankers to dodge regulations, thus disorienting the market.

“VNBA tries to persuade banks to maintain a low ceiling interest rate. It does not understand that depositors, not bankers, will decide how high the interest rates must be,” he said.

Source: VnMedia