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No danger of interest rate race, bank official says   2009-05-23 - VOV

Interest rates on mobilized capital offered by a number of commercial banks have tended to increase slightly over the past months, causing worry that an interest rate race may be on the horizon.


However, leaders from commercial banks have affirmed that an escalating cycle of interest rate hikes will not occur again as it did late last year.


The average interest rate on mobilized capital has increased slightly in recent months. Currently, the interest rates offered by state-run commercial banks range from 6.7-8 percent per year while the rates fixed by joint stock commercial banks stand at 6.9-9.5 percent per year.


On May 16, the interest rates offered by An Binh Joint Stock commercial bank on all terms increased by 0.1-0.9 percent and up to 9.4 percent for 36 month-term. Earlier, some banks such as Sacombank, SHB, and Vietcombank had also adjusted their interest rates slightly upward.


It is noted that most commercial banks have adjusted interest rates on loans with a term of 12 months or longer while interest rates on shorter-term loans remain stable, at 8 percent per year.


Many people now worry that interest rates will skyrocket as they did late last year, reaching nearly 20 percent per year.


General director of Sacombank, Mr Tran Xuan Huy, said that banks have adjusted interest rates to prepare capital for long-term business activities as well as supporting enterprises under the government’s stimulus package.


There will be no interest rate race


Some say that banks are racing to prepare huge amounts of capital for disbursement of the government’s support packages, especially medium-term and long-term programmes.


However, Nguyen Thanh Toai, the Vice Director General of the Asia Commercial Bank, said that banks currently suffer no lack capital which would force them into a race such as the one in 2008. Moreover, he argued, there are already interest rate ceilings to prevent mobilization interest rates from exceeding 10.5 percent.


Mr Huy shared this opinion.


Mr Toan further explained that banks increase their mobilization interest rates in response to increasing demand.


“Also, optimistic business indices in the first quarter have encouraged banks to be bolder in their decisions to raise interest rates,” a director of another commercial bank added.


Another reason behind the rise of mobilization rates is the increasing competitive pressure among banks, who all want to reserve sufficient capital for their long-term goals.


Leaders of commercial banks, in any case, affirm they have sufficient capital at this moment and their move to raise interest rates aims to achieve their long-term goals and serve consumption-loan programmes

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