The interest rates will surely not decrease. If the biggest problem of 2011 was the weak liquidity, the problem of 2012 and 2013 is the bad debt.
Le Xuan Nghia, Member of the National Advisory Council for Finance and Monetary
Policies, policy makers have no other way than focusing on the task of
restraining the inflation.
“It is impossible to lower the interest rates further. And the State Bank should
think about whether it should maintain the current ceiling deposit interest rate
policy,” Nghia said.
The economist has warned that if the ceiling interest rate scheme is maintained,
this would put the commercial banks, which are now mobilizing capital at higher
interest rates, in high legal risks, and would reduce the transparency of the
banking system operation.
There are two choices for the central bank in terms of the interest rate policy,
either the vigorous enforcement of the ceiling interest rate policy can be
implemented, or the mechanism is removed.
Nghia believes that the central bank made a wise move when removing the ceiling
interest rate on long term (12 months or more) deposits, which paves the way for
the removal of the ceiling interest rate on short term deposits later.
He emphasizes that if the central bank has no measure to ensure that the
regulation on the ceiling interest rates is respected, it would be better to
remove the policy and let the interest rates are decided by the market supply
and demand.
Other experts have agreed that it would be better to re-impose the market rules
for the interest rates instead of administrative orders.
Sharing the same view, Nguyen Thi Mui from Vietinbank said it would be
unreasonable to force different commercial banks with different operation scale,
different targeted clients and different capabilities to apply the same interest
rates.
Currently, the ceiling interest rate policy has been ignored by some commercial
banks which have been paying higher to attract deposits to improve their
liquidity.
However, Nghia has pointed out that not only small banks which lack capital, but
big banks have also been mobilizing capital at the interest rates higher than
the ceiling rate (9 percent per annum), because they fear depositors would leave
them and deposit at the banks which offer higher interest rates.
Nghia believes no state agency would have enough inspectors to supervise the
implementation of the ceiling interest rate policy. He also believes that the
ceiling interest rate policy removal would bring more benefits than harms.
Mui also said she does not think the interest rates would skyrocket after the
ceiling is broken, because the interest rates, which can be seen as the prices
of goods, will have to bear the market rules.
She went on to say that in order to prevent the interest rate escalation and the
massive capital withdrawal, the State Bank should make a statement that it would
only protect depositors, while it does not have the responsibility of protecting
banks from bankruptcy.
If so, depositors would think carefully about what banks they should deposit
their money at. At present, people simply deposit their money at the banks which
offer higher interest rates; because they believe that the State Bank won’t let
any commercial banks go bankrupt.
According to Do Thi Nhung, Director of the Monetary Policy of the State Bank,
the credit has increased by 3.3 percent over the end of 2011. The loans at the
interest rates of below 15 percent account for 90 percent of the total
outstanding loans. Nevertheless, small and medium businesses still find it very
difficult to access bank loans.
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