Capital abundant at some banks and deficient at other banks

VietNamNet Bridge – While big banks complain that they have excessive capital and have to struggle to look for borrowers, small banks say they cannot arrange enough capital to lend.

Small banks cry about capital shortage

Tran Son Nam, General Director of Trust Bank, complained that in early July, when the interest rate went down to below 11 percent per annum, the volume of capital mobilized from the public dropped by 20 billion dong within only one week. Therefore, the bank has to raise the deposit interest rate again to 11.2 percent in order to retain depositors.

Meanwhile, after cutting the deposit interest rate to 11.2 percent as promised to the Vietnam Banking Association, banks have to raise interest rates for short term deposits in order to attract depositors. As the result, the interest rates of short term and longer term deposits are nearly the same, hovering around 11-11.2 percent per annum.

General Director of Kien Long Bank Truong Hoang Luong also said that despite a lot of efforts, the volume of capital mobilized by the bank has not increased, because the bank cannot compete with big banks. Depositors tend to make deposits at large, prestigious banks, when the interest rates offered by big and small banks are nearly the same.

Big banks worry about capital excess

While small banks complain that they cannot get enough capital, big banks have to brainstorm to seek borrowers who can borrow the banks’ profuse capital.

Nguyen Van Se, Director of the Exchange No. 2 of Vietibank, said as the lending interest rates remain high, very few businesses borrow money these days to expand. Many joint stock companies, which have increased their chartered capital, are trying to pay bank debts before the loans become mature. Therefore, big banks now do not worry about the capital shortage, what worries them is that outstanding loans may decrease.

Pham Huy Hung, General Director of Vietinabnk, admitted that he urges his staff to find borrowers in order to expand credit. Hung said that he gathers executives of the banks regularly to discuss the way to push up credit.

Especially, he told his staff to be more active to look for clients and not to refuse small loans.

Policies need to be flexible

The General Director of a large bank said that previously, when the bank had capital in excess, it could lend capital to small banks. This benefited both lender and borrower. Big banks could lend money for profit, while small banks could borrow money at reasonable interest rates to re-lend to clients, and they did not have to mobilize capital from the public at high interest rates.

However, under the new regulations, the volume capital banks can borrow from other banks must not be higher than 20 percent of the capital volume they can mobilize from the public. As the result, small banks cannot find enough capital, and big banks cannot find borrowers, thus leaving the capital idle.

Therefore, some experts have called to remove the regulation on the maximum volume capital banks can borrow from other banks. They said if the State Bank wants interest rates to go down, it needs to apply flexible policies instead of relying on commercial banks.

In fact, though commercial banks have promised to lower the interest rates, the process of lowering interest rates has been going very slowly.