State Bank takes active role on stabilizing monetary market

The State Bank of Viet Nam yesterday announced in the beginning days of November, the capital of the system of credit organizations continued to increase. Further more the State Bank were committed that  it would inject additional capital with longer terms into the interbank open market system, in a measure aimed at easing upward pressures on interbank interest rates.

The central bank said it would add capital at two-week terms to open market operations while retaining current daily and weekly terms. It also instructed major banks to increase lending to smaller banks and to maintain refinancing and swapping interest rates.The pronouncement immediately helped lower interbank rates from highs of 21-22 per cent to a range of 15-19 per cent per year.

The fever on US dollars and gold on recent days were lesions of state bank on adjusting monetary policies, said National Monetary Policy Consulting Council member Cao Sy Kiem. He also added that State bank should make precise value in advance and Intervening promptly creating a good impact on the market, stabilising the market and preventing negative impacts on enterprises.

The State Bank blamed the current overheating of interbank rates on psychology, as commercial banks needed some time to stabilise liquidity while adjusting to higher deposit interest rates.

Last Thursday, commercial banks began offering interest of up to 14 per cent for Vietnamese dong deposits, up from 12 per cent earlier in the week. Some banks were also paying an additional 0.5-3 per cent as bonus interest on deposits, as well as offering vouchers or gifts. The higher interest contravenes a voluntary agreement entered into banks with the Viet Nam Banking Association last Friday to cap deposit interest rates at no more than 12 per cent

The Vietnamese central bank said it will allow additional gold imports to “continue stabilizing” the domestic market. The bank’s decision on Nov. 9 to allow gold imports “has eased sentiment, and helped stabilize the market and gradually bring domestic prices closer to world prices,” the State Bank of Vietnam said on its website Friday.

The central bank said Nov. 9 it would allow domestic businesses to import the precious metal in “appropriate amounts.” Four out of the eight companies have imported about a third of the quotas, the central bank said in today’s statement.

The amount of imported gold is “not much,” the central bank said. The State Bank of Vietnam will issue more import licenses to “add supply to the market.” The central bank is also continuing to “intervene” in the market by selling dollars to meet demand for imports of essential goods. The foreign-currency market has “moved toward a positive direction” in the past few days, according to the central bank.

Allowing gold imports for two weeks doesn’t add pressure on the foreign currency market, the bank said.In the last months of 2010 and during the Tet Lunar New Year holiday in February, the central bank will ensure that monetary policy is “flexible and cautious,” keep money markets stable and support banks’ liquidity.