It is expected that after January 28, 2016, many banks may have their required reserve ratios reduced.

The State Bank has just issued Circular No. 23/2015/TT-NHNN amending and supplementing a number of articles of the regulations on compulsory reserves for credit institutions.Circular 23 takes effect from January 28, 2016.

Part of the capital from the required reserves could be "released" into the market, with a series of commercial banks under consideration.

There are many amendments and supplements, the most prominent of which is the expansion of the subjects that the Governor of the State Bank considers to reduce the required reserve ratio compared to the general regulations.

According to previous regulations, in case a credit institution is placed under special control, the Governor of the State Bank will consider deciding to reduce the required reserve ratio for credit institutions to a minimum of 0%.

Circular 23, which has just been issued, continues to inherit the above mechanism, and at the same time expands it with the regulation: for credit institutions that are implementing approved restructuring plans, credit institutions participating in restructuring weak credit institutions as assigned, the Governor of the State Bank shall consider and decide to reduce the specific required reserve ratio for each credit institution.

With the above regulation, the State Bank continues to have additional mechanisms to support credit institutions in restructuring, especially those that have received or been assigned to participate in restructuring weak banks in recent times.

Currently, the system of credit institutions is implementing the required reserve ratios for VND deposits according to Decision 379/QD-NHNN dated February 24, 2009, and for USD deposits according to Decision 1925/QD-NHNN dated August 26, 2011. That is, for many years the prescribed ratios have not changed, except for some cases where they are reduced if the proportion of loans to the rural agricultural sector is 40% or more.

For VND deposits with no term and less than 12 months, the current required reserve ratio is 3%, for deposits with term of 12 months or more is 1%; for foreign currency deposits, the corresponding rates are 8% and 6%. Only the Bank for Agriculture and Rural Development (Agribank) and some specific credit institutions... are applied lower.

Since 2012, many commercial banks have participated in the restructuring process, dealing with weak banks. Accordingly, the above mechanism opens up the possibility that many members can have their required reserve ratio reduced in the coming time.

With the above expansion mechanism, after January 28, 2016, many banks subject to the new regulations may have their required reserve ratio reduced, as this is in their immediate interest.

For the market, there is a possibility that a source of capital from the required reserve will be “released”. However, its impact (most directly on interest rates) depends on the level of reduction decided by the Governor of the State Bank.

If there is a decision to reduce according to this new policy, the scope of influence is significant, when many members have large market shares or large scale such as Vietcombank, VietinBank, BIDV, Sacombank, PVcomBank, SHB... or even cases where the State Bank has just made compulsory acquisitions.

According to VnEconomy