16:24 | 03/04/2016 Finance - Banking
Some commercial banks including Sacombank and Vietinbank have recently taken international loans to meet their long-term capital demands.
Illustrative photo (Source: VNA)
Some other domestic banks are also negotiating with international institutions for loans.
Nguoi Lao Dong (Labourers) newspaper quoted Director of the central bank’s Monetary Policy Department Bui Quoc Dung as saying that previously, US dollar holders often deposited short-term tenors and commercial banks capitalised on the capital source to provide long-term loans.
However, after the central bank cut the interest rate of dollar deposits to zero percent, dollar holders have turned to demand deposits. Commercial banks, therefore, have to borrow long-term foreign currency loans from international institutions to offset the funds lent to domestic businesses, Dung said.
Besides this, industry insiders said, commercial banks that used too much short-term capital to provide medium- and long-term loans also had to borrow international loans and then transfer the dollar loans into dong to balance their long-term funds.
With the transfer, banks also expected to make a profit as they forecast the forex rate would not rise beyond 5 percent while they would lend the capital in dong with a long-term interest rate of more than 10 percent per year. Currently, the interest rate on dollar loans from foreign institutions is roughly 2 percent per year, equal to the 6 percent interest in dong.
Tran Ngoc Tho from the HCM City Economics University warned that it would be very hard for banks to forecast the movement of the dollar against the dong under the current foreign exchange policy as the central bank no longer announces a cap for the forex rate yearly but allows the forex rate to change daily.
Only the government can legitimately borrow international loans through the issue of bonds, Tho said./.