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Vietnam central bank calls for savings rate cap   2008-02-27 - Reuters

Vietnam's central bank has called on commercial banks to avoid raising interest rates on dong deposits above 12 percent in an attempt to stabilise the money market.

 
 
   
Vietnam's central bank has called on commercial banks to avoid raising interest rates on dong deposits above 12 percent in an attempt to stabilise the money market.

The move "is aimed at stopping the transfer of deposits between commercial banks that may cause money market disorder", Nguyen Van Giau, governor of State Bank of Vietnam, said in a document sent to banks and obtained by Reuters on Wednesday.

"This is not a ceiling rate but an instruction to guide the market," a central bank official told Reuters.

Commercial banks have been in heated competition to secure dong deposits as funds in the system tightened.

Last week several banks in Ho Chi Minh City raised rates to between 11.5 percent and 13.92 percent on dong savings of up to three months, prompting a shift in deposits from banks with lower rates.

The week-long Lunar New Year holiday in early February sparked increased demand for cash while the central bank has tightened monetary policy to offset inflation, which is running at 14.1 percent -- its highest in more than 12 years.

The central bank has taken several steps in the past month to combat inflation, including imposing stricter rules for lending against securities and real estate, raising three main interest rates, increasing compulsory reserves and announcing plans for an auction of treasury notes that commercial banks are obliged to buy.

The Vietnam Banking Association said it has asked the central bank to issue the debt in phases rather than on a specific date in order to spread out the impact on market liquidity.


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