SBV’s statement on new exchange rate raises concerns

06-Jan-2016 Intellasia | TBKTSG | 6:00 AM Print This Post

The big change in the exchange rate, if it is made, would cause many depositors to withdraw dollar deposits before maturity, experts have warned, which would create market chaos.

The Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh, in an interview to Tuoi Tre, said SBV was planning a new foreign exchange policy under which people would have to pay a fee for deposits in foreign currencies, while dollar depositors would receive dong when they get deposits back instead of dollars.

“This is not good news for the market,” the representative of an investment fund told Thoi Bao Kinh Te Sai Gon.

“This would cause worries especially to foreign investors, because they don’t know how much money they have,” he said. “It is because they have to receive dong instead of foreign currencies, while the dong price is defined by the State Bank which is unpredictable.”

“I believe this is not what the investors want,” he maintained, adding that if the central bank makes such a big change with foreign exchange policy, foreign direct investors may leave Vietnam because they are insecure about their money.

Agreeing with the representative from the fund, an analyst warned that Vietnam may face massive money withdrawal not only from foreigners, but from Vietnamese depositors as well.

Meanwhile, those, who have idle money would not deposit dollars at banks. This means that the State Bank won’t be able to mobilise huge capital for economic development.

“If people have dollars, they would keep dollars in their coffers instead of depositing at banks, for which they would have to pay fees,” he said. “Meanwhile, foreign investment funds won’t put their money into banks in Vietnam.”

“I believe foreign direct investors, individual investors, foreign investment funds and people all would be against the policy,” he said.

The message from the Governor of the State Bank about the new foreign exchange policy has caused deep concern in the market. Bankers also think the new policy will not be welcomed.

“I am afraid that the policy will make the dollars flow out of the Vietnamese territory,” a senior executive of a commercial bank warned. “This will make dollarisation even more serious.”

Also, according to the banker, he knows many big investors who have millions of dollars at banks and do not intend to convert dollar into dong.

The investors also deposit dollars at foreign banks, mortgage the dollars to borrow dong at an interest rate of 5 percent and then deposit dong at Vietnamese banks at an interest rate of 6.5 percent. This allows them to have an interest rate margin of 1.5 percent.


Category: Finance, Vietnam

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