Banks asked to control US dollar credit growth at reasonable level
With supply of US dollars on the forex market good, the US dollar/dong exchange rate at banks have come down to less than 19,000 dong per US dollar. The buying price of US dollar has been down to 18,950 dong, lower 30 dong/US dollar against State Bank of Vietnam (SBV)’s price.
In its reports, SBV said that export companies continued selling a huge amount of US dollars to it and the forex market liquidity remained high. The dong on the interbank market last week dropped by 0.5 percent down to 6.52 percent per annum against the previous weeks.
The dong lending rates have decreased to the lowest level since early in 2010. Banks offered ‘soft’ loans for businesses at the rate of 12-14 percent per annum with the aim to boost credits for the national economy.
Since early this year, the US dollar has been the best option of most enterprises when borrowing loans at banks, given that the US dollar lending rate was cheaper a half than the dong.
According to Le Xuan Nghia-vice head of National Finance Supervision Commission, due to the fluctuations of the forex rate, in order to minimise risks, the majority of US dollar loans are short terms with one year or less.
Do Minh Toan, deputy general director of Asia Commercial Bank said that these US dollar loans, with terms of 6-9 months, will mature by this September and October.
Pham Hong Hai, forex and capital market business director of HSBC Bank (Vietnam) Ltd forecasts that the forex market may see a tension by the end of 2010 when enterprises need to buy US dollars to pay due debts. Also, that time, US dollar demand will increase strongly to serve importing goods for the Tet festival.
According to figures of HCM City Statistics Office, in HCM City, foreign currency outstanding loans of the first five months reached 158.4 trillion dong, accounting for 27.7 percent of Vietnam’s total credit growth, rising 41.5 percent over the same period last year. If this figure is converted into US dollar at 18,950 dong per dollar, banks in the city will lend about $8.337 billion. In the mean time, the imports of HCM City enterprises in the same period also hit $6.9 billion.
In last September and October, HCM City businesses needed over $3 billion to import capital goods. It is supposed that HCM City businesses will import goods with the same value and plus total matured debts of $8.337 billion, which will surely make a very high the US dollar demand on the market.
Good liquidity of the banking market, according to HSBC on Jun 17, was mainly from the support of SBV via injecting capital into open market operations (OMO), forex swaps or re-financing large banks. Although loan rates are decreasing respectively, banks cannot boost the credit growth as expected. Therefore, they decided to invest in government bonds and bills, which make bond yields of auctions fall again, and help dong interest rates, decrease again, attracting companies to prefer borrowing dong loans.
In addition, banks will likely be tighter in offering US dollar loans in near future because the central bank has requested all banks to control the foreign currency credit growth at a reasonable level to ensure the ability of getting back debts and payment safety. Also, SBV requested all banks to control credit limits and duration of loans in US dollar to prevent risks of liquidity. Banks were requested to report to the central bank about the sale and lending of US dollars for import activities.
Category: Finance
