Vietnam Central Bank Discloses Interbank Trading Values To Clear Information Asymmetry

10-Nov-2011 Intellasia | StoxPlus | 7:01 AM Print This Post

The State Bank of Vietnam unprecedentedly released information on daily interbank trading volume and turnover from mid-October, 2011, in an attempt to reduce the information asymmetry in the local market.

The move followed recent heat in the inter-bank market where public could only heard of sudden roar in interest rate to 20.73 percent without any specific information on the bid and ask.

The central bank for the first time have made the deals transparent through unveiling transaction values which once it promised to do so in 2010

Local residents previously got access to the interbank data with a time lag of 3-4 days without the trading values for different loan terms, making the representativeness of interbank interest rates to general market conditions become ambiguous.

For example, when local banks faced liquidity shortage, the public saw the interbank interest rate unusually soar in long-term interbank rates, especially the 12-month term. The public may obviously be misled if the central bank did not reveal trading values in the interbank market, clearly showing that 12-month loans accounted for an insignificant proportion of daily trading volume.

For example, the average interest rate for 12-month term in the interbank market unusually soared to 20.4 percent on November 3, much higher than those for other terms, mostly standing at 14 percent p.a.. However, trading value of 12-month terms during the day was negligible at VND2 billion out of VND23,000 billion in total. Similarly, when the 12-month rate surged to 20.64 percent p.a. on October 17, the total loans for the term were only VND200 million.

The representativeness of sky-high 12-month interest rate in the market was undoubtedly insignificant. However, its effects on the public could be substantial if the central bank remained to keep the interbank trading values in confidentiality.

 


Category: Finance

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