According to Giau, in early 2010, 15 banks reportedly had interbank-sourced capital accounting for 50 percent and higher of total capital mobilized from people and economic institutions. Most banks have reduced the percentage to 21 percent, or just a little higher than the 20 percent allowed by SBV.

The State Bank had to apply drastic measures to reduce the percentage. SBV lent its money to commercial banks, so that they could pay back loans in the interbank market. Agribank, once the big debtor in the interbank market, has reduced the volume of capital it borrows in the interbank market from 27 trillion dong to nine trillion dong.

To ensure liquidity for commercial banks, the Governor confirmed that the central bank will regulate open market operation (OMO) in a flexible way.

“SBV now holds 140 trillion dong worth of valuable papers,” he revealed. “Many people think that the credit growth rate in the first six months of the year was low, but the central bank thinks that the 10.52 percent is reasonable.”

He went on to say that in June 2010 alone, the credit growth rate is expected to reach three percent. The market is now bearing influence from factors that both support and do not support interest rate decreases, so it is difficult to reduce rates now. Since deposit interest rates still have not dropped, the margin between deposit and lending interest rates is low.

The Governor made clear that curbing inflation will still be the priority of SBV.

While reducing interest rates remains one of SBV’s biggest interests, it seems that commercial banks do not care. “What we need is profit,” a banks’ general director asserted. “We want the margin between deposit and lending interest rates to become big enough to bring profit to us.”

Currently, many banks agreed to lend money at 12 instead of 14 percent to good clients with feasible business plans. Yet credit has still been growing very slowly.

The growth of outstanding loans in the first half of the year was at 7-8 percent over the end of 2009, partially thanks to the rapid increase of outstanding loans in foreign currencies. The key problem behind slow credit growth was not lending interest rates, but businesses that hesitated to borrow when their products have been selling slowly.

The SBV Governor has stated that the deadline for banks to increase their chartered capital to 3 trillion dong will not be extended. All banks must have 3 trillion dong in chartered capital by the end of 2010.

“The decree on the minimum required chartered capital was promulgated in 2006, which means that banks have had enough time. We will not extend the deadline,” Giau maintained.

According to Giau, there are 22 joint-stock banks and one state-owned bank that still have chartered capital below the minimum level.

Source: Thoi bao Kinh te Saigon