SBV net injects capital, bank liquidity in tension

19-Apr-2019 Intellasia | Vietnam Finance | 6:38 AM Print This Post

According to the capital market report for the week from April 8th to 12th 2019 of Saigon Securities Incorporation (SSI) 17.001 trillion dong matured and 10.2 trillion dong were sold on bill channel. The Open Market Operation (OMO) channel did not see any new transaction and there were 196 billion dong of maturity. The OMO balance returned to zero for the first time after nearly five months.

Overall, the State Bank of Vietnam (SBV) net pumped 6.606 trillion dong via OMO.

However, according to SSI, the liquidity of commercial banks showed signs of tension, so they must sell a large amount of US dollars to the SBV to improve the source of dong.

The interbank interest rates, hence, inched up by 0.2-0.4 percentage point to 4.37 percent per annum on overnight term and 4.4 percent per annum on one-week term.

Regarding the draft for amending Circular 36, SSI pointed out two biggest changes, including (1) further reducing the ratio of short-term capital used for medium and long-term loans from the current 40 percent to 35 percent (from July 1st 2020) and to 30 percent (from July 1st 2021), or to 37 percent (from July 1st 2020) and to 34 percent (from July 1st 2021) and then to 30 percent (from July 1st 2022); and (2) narrowing the scope of the loans secured by housing assets with application of 50 percent risk factor and increasing risk factor from 100 percent to 150 percent for consumer loans of three billion dong and more.

According to SSI, these are the steps to specify the consistent message sent by the SBV in the recent time and to meet these requirements, commercial banks need to raise their own capital, adjust lending structure, increase mobilisation of medium and long-term capital. “In which, the easiest solution is to increase the mobilisation of medium and long-term capital through interest rate policy a main reason for deposit interest rates to continue being at high levels and may even go up,” said SSI.

Regarding the exchange rate, SSI said that the US dollar/dong remained unchanged at 23,150/23,250 dong per US dollar at banks, while declined by five dong per US dollar on buying rate and stayed the same on selling rate on the free market, reaching 23,195/23,210 dong per US dollar. The reference exchange rate continued to increase by eight dong per US dollar to 22,996 dong per US dollar.

It can be seen that the dong has a relatively high stability compared to the strong fluctuations of other currencies in the region over the past one year, according to SSI.

In the context when the supply and demand of US dollars is still fairly favourable, the dong- US dollar interest rate difference remains high and the international environment does not see much volatility, SSI forecasted that the dong will fluctuate around 23,200 dong per US dollar.

 


Category: Finance, Vietnam

Print This Post