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To facilitate lowering interest rates, the SBV may postpone the application of Basel II and amend Circular 36

With the aim of achieving 18-20% credit growth plus the requirement to reduce average lending rates, it seems that the Basel 2 regulation and the draft amendment of Circular 36 on financial security ratios May not be applied immediately.

According to a recent report of Ho Chi Minh Securities Exchange (HSC), many large banks, mainly state-owned banks, have pledged to keep interest rates low and apply special preferential lending packages to counter groups. The impact of recent mass deaths in the central provinces.

 "But so far the value of loans has been modest while interest rates have not fallen sharply yet." Some banks have pledged to keep interest rates unchanged at their current levels for the longest time. Reported.

 

 

 

Monetary policy is loosening

The move strengthens confidence that monetary policy is being loosened and that loosening is an important component of the government-initiated stimulus package.

According to HSC, this may be forced ahead of budget constraints so it is difficult to use fiscal policy to stimulate. And like in other countries, it will be necessary to use monetary policy to stimulate the economy significantly.

This move takes place after the conference of enterprises organized recently by the Prime Minister. At the conference held last Friday between the prime minister and businesses to discuss economic stimulus measures, the new Governor of the State Bank of Vietnam Le Minh Hung has pledged that banks will reduce lending rates to support the joint Karma in some areas. In which, interest rates may be reduced by 0.3-0.5% for short terms and keep interest rates for medium and long term loans below 10%.

Although inflation is rising and some pressure to raise interest rates poses some challenges, the governor said the SBV will keep interest rates stable after the Prime Minister's instructions. Short-term interest rates are now 6-9% while medium to long term rates range from 9-11%.

According to the interest rate survey of HSC at the end of April, the average lending rate was 9.37% (end of March was 9.42%). Short-term interest rates were 8.96% and medium and long-term loans were 10.5%.

On April 29th, some banks such as BIDV and SHB announced a 0.5% cut in short-term interest rates and a commitment to keep interest rates on medium to long-term loans below 10%. On the same day, Vietcombank pledged to keep interest rates on medium and long-term loans below 10% in one year and launched a loan package of VND300 billion. VietinBank is committed to a 1% interest discount on eligible production projects.

State-owned banks also announced support packages for customers affected by mass mortality in four central provinces (Ha Tinh, Quang Binh, Quang Tri and Thua Thien Hue).

 

The obvious drawback is the possibility of lowering interest rates

However, HSC also pointed out that banks have obvious limitations on the ability to reduce interest rates. Banks have limited ability to reduce interest rates as the average NIM of listed banks is low at 2.5-3%; Interest rates are on a rising trend from the beginning of the year with the average lending rate at the end of April increasing by 0.2% over the beginning of the year.

According to BIDV, this year's profit could fall by 400-500 billion dongs if lending interest rates fall. And BIDV considers the maximum interest rate reduction of 1% and only if the SBV supports the commercial bank by loosening the requirements such as the required reserve ratio.

The SBV may postpone the application of new regulations to facilitate commercial banks to reduce interest rates. With the aim of achieving 18-20% credit growth plus the requirement to reduce average lending rates, it seems that the Basel 2 regulation and the draft amendment of Circular 36 on financial security ratios May not be applied immediately.

Meanwhile, recently, many banks have proposed to the SBV delay time for the revised Circular 36. Because if applied early, banks may face difficulties when lending medium and long term.

"If the government wants to loosen its monetary policy it is difficult to tighten regulations at the same time," the report noted.

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