Interbank interest rates see unusual surge
On June 25, the interest rates on the interbank market offered by commercial banks to each other were at 2-3 percent per annum (p.a.) and 1-month term surged up to 9 percent p.a.
Particularly, according to Reuters’ data, on June 25, the interbank overnight interest rate climbed to 7 percent p.a. from the level of 5 percent p.a. in late last week, one week term to 7.5-8 percent p.a. from 5 percent p.a. previously and one month term at 8.5-9 percent p.a. from 6 percent p.a. earlier.
The rise of 2-3 percent from the previous week is considered the strongest pace of the interbank interest rate since the dong deposit interest rate adjustment on June 11, 2012.
Thus, the interest rate of up to 9 percent p.a. for 1-month term on the interbank market has exceeded the deposit interest rate in dong for 1-9 month terms of many commercial banks.
The interbank interest rates on June 25 soared amidst many banks’ reduction of long-term saving interest rates. At the same time, the interest rates for 1- less than 12 month terms did not have significant evolutions.
Reportedly, before the deposit interest rate cap in dong was adjusted down to 9 percent p.a. on June 11, the interest rate on interbank market saw a record low at 1 percent p.a. However, immediately in the first day of applying the dong deposit interest rate cap at 9 percent p.a., the interbank interest rates surged sharply, of which, the overnight interest rate doubled to 3 percent p.a. Then the interbank interest rates ranged around 5-8 percent p.a. before seeing upward paces on June 25.
Not long ago, the State Bank of Vietnam (SBV)’s governor Nguyen Van Binh issued a Circular No 21/TT-NHNN ruling that the interest rates for lending, buying and purchase of valuable papers will be decided and negotiated by credit institutions and branches of foreign banks. However, in case of unusual evolutions of banking operations, the central bank will regulate the interbank lending interest rate for credit institutions. Nevertheless, the Circular No 21 did not specify when banking operations have unusual evolutions.
In another notable evolution, on open market operations (OMO) on June 25, the market continued to freeze when there were no successful transactions. In many sessions, OMO market did not have transactions or reached low transaction volume while Treasury bill issuance activities were also negligible.
Category: Finance
