"Undercurrent" of capital mobilization
According to the report of the State Bank of Vietnam, Nghe An Branch, the mobilized capital of the local banking system as of March 31, 2011 is estimated at 31,150 billion VND, of which short-term mobilized capital accounts for nearly 83% of the total capital; medium and long-term capital accounts for 17.2%, down -9.5% compared to the beginning of the year.
According to the report of the State Bank of Vietnam, Nghe An Branch, the mobilized capital of the local banking system as of March 31, 2011 is estimated at 31,150 billion VND, of which short-term mobilized capital accounts for nearly 83% of the total capital; medium and long-term capital accounts for 17.2%, down -9.5% compared to the beginning of the year.
In the first quarter, short-term capital mobilization increased, while medium and long-term capital mobilization decreased, the reason is that there is not much interest rate gap between short-term deposits and medium and long-term deposits. In fact, in recent years, banks have been pushing the 1-week and 2-week mobilization interest rates to be approximately equal to the 3-4 month deposit interest rates and vice versa, the 12-month and 24-month mobilization interest rates are lower than the short-term periods.
Thus, depositors will choose short-term terms. Meanwhile, short-term debt is estimated to account for 48.9%, medium- and long-term debt accounts for 51.1% of total debt. In fact, the demand for medium- and long-term loans is always high, but banks find it difficult to lend medium- and long-term because they mainly mobilize short-term capital, and cannot lend long-term beyond the limit, which will lead to liquidity risks.
While the State Bank stipulates that credit institutions cannot use more than 30% of short-term capital for medium- and long-term lending, the demand for medium- and long-term capital increases while the supply of medium- and long-term capital decreases, putting pressure on interest rates of commercial banks.
In addition, inflation in the first quarter of the year increased to 6.12%, almost reaching the 7% inflation target set by the National Assembly for the whole year. In particular, the consumer price index (CPI) in March increased by 2.17% compared to February and is expected to increase further in the following months, causing people's inflation expectations to increase, while making deposit interest rates less attractive compared to other investment channels.
Faced with such a situation, to retain customers, banks are forced to increase deposit interest rates, but the deposit interest rate ceiling has been controlled at 14%/year, so joint stock commercial banks, especially small banks, have found every way to "dodge" to attract capital.
At the Conference on the implementation of Resolution 11/NQ-CP of the Government, Mr. Cao Van Hoi - Deputy Director of the State Bank of Nghe An Branch said: "In the first quarter, 6 commercial banks reduced their capital mobilization, including some units that reduced by 20% compared to the beginning of the year. Credit institutions that mobilized capital beyond the ceiling are increasingly more discreet, with large sums of money, interest rate agreements of up to 17%/year. The form of rewarding customers is also more sophisticated, not recorded in the books to avoid inspection and be ready to deal with the State Bank".
Mr. Tran Van Tam - Director of Eximbank Vinh branch said: "There is still an "undercurrent" in capital mobilization, although the banking system has signed a commitment but then everyone does their own thing".
"Eximbank Vinh branch's capital mobilization in the first three months of the first quarter only increased by 1% compared to December 31, 2010. In March 2011 alone, Eximbank reduced its capital by more than VND100 billion due to customers withdrawing capital to invest in real estate. Up to now, Eximbank Vinh's total mobilized capital has reached VND720 billion, but outstanding loans have reached VND1,120 billion. The bank has had to rotate resources within the system to ensure lending in the area," said Mr. Dinh Ngoc Thanh, Deputy Director of Vinh branch.
Currently, the short-term capital ratio of many banks has accounted for 60-70% of total capital, creating term risks in the capital structure. This is the inevitable consequence of the increase in short-term interest rates of commercial banks in recent times.
Mr. Vu Van Thang - Director of Maritimebank Vinh said: After 2 years of officially operating in Nghe An, our bank's total mobilized capital reached 280 billion VND, of which the mobilized capital with a term of 1 month accounted for 70% of the total capital, making it very difficult for us to invest in medium and long-term loans.
Actively mobilizing capital for lending is always a concern for commercial banks, while this year's profit pressure is still set at a high level by banks along with the pressure to increase mandatory charter capital.
Therefore, the competition for capital among commercial banks has not yet ended. That is the reason why the current mobilization interest rate is difficult to comply with as Circular No. 02 of the State Bank stipulates that "credit institutions set the interest rate for capital mobilization in Vietnamese Dong... including promotional expenses in all forms not exceeding 14%/year".
The current deposit interest rate of commercial banks is 14%/year. The highest lending interest rate is over 21%/year. "The State restricts bank output, low deposit - people do not deposit, high lending - customers do not borrow. Low interest rates, customers withdraw money to speculate in the real estate market and are creating a virtual market, a land price bubble pushed up by speculators. With such interest rates, businesses that are doing business really do not dare to borrow capital because production and business are not enough to cover interest payments and a series of other costs" - Mr. Vu Van Thang - Director of Maritimebank Vinh said.
A banking expert said that the current difficult economic situation, along with the after-effects of the economy's long-term capital-intensive growth, makes inflation even more difficult to control.
Quynh Lan
