The Vietnamese government has determined to implement synchronous measures under Resolution 11, having a major impact on financial markets. Many people expect gold and dollars are losing their investment advantages. Currently, most commercial banks have reduced interest rates of gold mobilisation; several banks have reduced the rates to near zero percent and narrowed the long term to only 12 months.
Ceiling control of dollar interest rates
Noticeably, credit organisations have to start implementing Circular No. 09/2011/TT-NHNN laying down the maximum level of mobilisation interest rate in dollars of organizations and individuals in credit organisations on April 13, 2011.
Accordingly, to mobilize capital in US dollars from residents and organizations of non-residents (other than credit organisations), the maximum interest rate is of one percent per year. To mobilize capital in US dollars from resident individuals and non-resident individuals, the maximum interest rate is three percent per year.
The maximum level of interest rates of capital mobilisation, including expenditures for promotion in all forms and methods applicable to interest payment at maturity; with other modes of interest payment, must be converted into the method of payment of interest at maturity corresponding to the maximum mobilisation of capital.
This circular, following the move of closing the foreign exchange free market, was implemented from February 2011. So, banks are forced to reduce the mobilization of foreign currency, which cuts the attraction of the dollar.
In addition, the adjustment of required reserve ratio of foreign currency for credit organisations will also be applied from the next May 1. Accordingly, the required reserve ratio of foreign currency for credit organisations is raised from two percent to six percent for non-term form and less than 12 month form. It is likely that from May 2011 the State bank will have new regulations on foreign exchange status, reducing foreign currency status of banks from 30 percent to 20 percent.
According to Ph.D Le Xuan Nghia, Vice President of Financial Supervisory Commission, the National Government would minimize taking deposits and lending in foreign currency into the banking system. This strategy will be strongly implemented over several years to shift foreign currency from a lending relationship to a trade one, and ending dollarization.
No gold-mobilising will be applied by May 2013
The State bank is currently working to develop the criteria and conditions for commercial banks to be permitted to trade gold in the coming time.
It has been said that the trade of gold bars in the future should be carried out in the official market by the State bank or a company of the central bank who has sole right of gold stamping with the seal of this bank. These enterprises will focus on import – export activities and trade in gold bars along with an agency system with specific conditions and standards.
Noticeably, it is possible that the route of gold-mobilising and lending stop will be considered by the State Bank, to be determined from May 2011 and completed in May 2013.
The planning of the above route and expected period in the next 2 years is aimed to allow commercial banks to finally settle gold mobilisation contracts and gold lending contracts for the last time and now; to avoid affecting the capital structure, credit and liquidity of the system.
So, after a series of measures by the Government and the State Bank of Vietnam (SBV) for foreign currency and gold, according to some domestic and foreign economists, the VND was "coming to the throne" and gradually regaining the people’s trust. In fact, many people have moved from holding dollars or buying gold to holding VND and saving with the much higher interest rate.
Hai Anh
Vietnamese
