In a directive issued on 18/10 regarding banking operations, the State Bank of Vietnam (SBV) explicitly instructed credit institutions to avoid competing to raise deposit interest rates. The SBV emphasized the need to prevent unhealthy competition that could destabilize the money market. Banks must immediately reduce listed savings deposit interest rates for terms of six months or longer by at least 0.5%.
On the lending side, banks are required to lower interest rates by 1.5 to 2 percentage points annually for manufacturing, business, and other priority sectors.
This directive comes as savings interest rates have remained consistently high. Since late April, the highest listed interest rates in the system, excluding large deposits or VIP customers, sharply increased to the 7.6-7.8% per year range. Actual preferential interest rates at many banks ranged from 8.5% to 9.5% per year, often without a minimum deposit requirement or with a minimum of just 100-200 million VND.
The State Bank stated that credit institutions failing to comply with the interest rate reduction will face consequences. These include a review of their remaining credit limits for this year, the assignment of lower targets for next year, or the imposition of higher safety ratios.
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The headquarters of the State Bank of Vietnam in Hanoi. Photo: Giang Huy |
Furthermore, the regulator has urged banks to prioritize capital flows towards manufacturing, business, and key growth drivers such as science and technology, and innovation. Conversely, credit extended to high-risk sectors and customer groups with substantial outstanding debts must be strictly controlled.
The regulatory body emphasized that banks must not compromise lending standards or credit quality to expand loan volumes. Banks are responsible for ensuring a balance between capital mobilization and utilization, managing liquidity risks, and limiting maturity mismatches.
To identify credit concentration risks, banks need to monitor customers who share management, own over 5% of charter capital, share collateral, concentrate capital in the same project, or have common repayment sources.
The State Bank strictly prohibits the creation of credit profiles designed to withdraw loan capital for improper use, circumvent credit limit regulations, or evade regulatory cash flow control.
Credit institutions are required to truthfully reflect credit quality, avoiding the concealment of bad debts or delayed risk recognition. They must enhance the appraisal and valuation of collateral, ensuring it closely aligns with market value. Banks also need to control situations where collateral values are inflated and closely monitor debts at risk of becoming non-performing loans.
Quynh Trang
