Central bank to punish banks that trade outside forex band
The central bank said Wednesday that commercial banks could not use derivatives to trade dollar/dong on the interbank market at rates outside the official trading band and it said offenders would be punished.
In an announcement posted on the State Bank of Vietnam’s website, governor Nguyen Van Giau told inspectors to step up monitoring of compliance from Wednesday.
“The State Bank of Vietnam will... handle any violations strictly,” Giau said in the statement.
Last June, the central bank banned the use of third currencies to circumvent a trading band running 3 percent on either side of a midpoint it sets each day. Wednesday the regulator set the reference rate for dong trading at 16,976 per dollar, compared with 16,977 on Tuesday, according to its website.
But bankers say that in practice some traders have been using a range of methods, including currency options and third currencies, to trade dollar/dong outside the band, at rates that many see as more market-oriented.
Interbank trade ground to a halt in June last year when the black market rate shot up to around VND21,000 per dollar. On Wednesday, the unofficial rate was VND17,690, a mere VND200 weaker than interbank bids.
Economists widely expect the dong to lose value this year, although Prime Minister Nguyen Tan Dung has ruled out a devaluation. Last year, the dong fell around 9 percent against the dollar.
Citigroup forecast in January the dong would depreciate to 17,948 per dollar by the end of 2009 – around 2.6 percent below the current interbank rate of VND17,484 – due to a decline in exports, tighter foreign direct investment and lower remittances from Vietnamese abroad.
ANZ forecast last week the dong would fall to as low as 18,500 per dollar by the end of the year due to a drain on foreign exchange reserves.
Governor Giau has said Vietnam’s foreign reserves stood at US$22 billion in early February, slightly up from an estimated $21.9 billion in October. The country’s balance of payments has improved markedly since last year, too.
The trading band was widened in November to 3 percent from 2 percent.
Bad debts below 3.5 pct
The banking system, which is expanding credit to implement the government’s loan subsidy program, remains stable and non-performing loans are less than 3.5 percent of total loans, Giau said.
“The results of credit institutions' operations show that banking activities are fairly stable, deposits and credit are being enlarged, and interest rates are on a downward trend,” Giau told Vietnam News Agency in an interview posted on the central bank’s website Tuesday.
“The bad debt ratio is lower than in 2008,” he said, giving neither loans outstanding nor bad-debt figures.
Non-performing debts were 3.5 percent at the end of 2008, up from 2 percent a year earlier.
Giau added that 85 commercial banks had lent a combined VND144.3 trillion ($8.28 billion) to businesses under the loan subsidy program.
The central bank is aiming to keep credit growth at around 20 percent this year after a rise of 21-22 percent last year.
Central bank to punish banks that trade outside forex band
The central bank said Wednesday that commercial banks could not use derivatives to trade dollar/dong on the interbank market at rates outside the official trading band and it said offenders would be punished.
In an announcement posted on the State Bank of Vietnam’s website, governor Nguyen Van Giau told inspectors to step up monitoring of compliance from Wednesday.
“The State Bank of Vietnam will... handle any violations strictly,” Giau said in the statement.
Last June, the central bank banned the use of third currencies to circumvent a trading band running 3 percent on either side of a midpoint it sets each day. Wednesday the regulator set the reference rate for dong trading at 16,976 per dollar, compared with 16,977 on Tuesday, according to its website.
But bankers say that in practice some traders have been using a range of methods, including currency options and third currencies, to trade dollar/dong outside the band, at rates that many see as more market-oriented.
Interbank trade ground to a halt in June last year when the black market rate shot up to around VND21,000 per dollar. On Wednesday, the unofficial rate was VND17,690, a mere VND200 weaker than interbank bids.
Economists widely expect the dong to lose value this year, although Prime Minister Nguyen Tan Dung has ruled out a devaluation. Last year, the dong fell around 9 percent against the dollar.
Citigroup forecast in January the dong would depreciate to 17,948 per dollar by the end of 2009 – around 2.6 percent below the current interbank rate of VND17,484 – due to a decline in exports, tighter foreign direct investment and lower remittances from Vietnamese abroad.
ANZ forecast last week the dong would fall to as low as 18,500 per dollar by the end of the year due to a drain on foreign exchange reserves.
Governor Giau has said Vietnam’s foreign reserves stood at US$22 billion in early February, slightly up from an estimated $21.9 billion in October. The country’s balance of payments has improved markedly since last year, too.
The trading band was widened in November to 3 percent from 2 percent.
Bad debts below 3.5 pct
The banking system, which is expanding credit to implement the government’s loan subsidy program, remains stable and non-performing loans are less than 3.5 percent of total loans, Giau said.
“The results of credit institutions' operations show that banking activities are fairly stable, deposits and credit are being enlarged, and interest rates are on a downward trend,” Giau told Vietnam News Agency in an interview posted on the central bank’s website Tuesday.
“The bad debt ratio is lower than in 2008,” he said, giving neither loans outstanding nor bad-debt figures.
Non-performing debts were 3.5 percent at the end of 2008, up from 2 percent a year earlier.
Giau added that 85 commercial banks had lent a combined VND144.3 trillion ($8.28 billion) to businesses under the loan subsidy program.
The central bank is aiming to keep credit growth at around 20 percent this year after a rise of 21-22 percent last year.
Source: Thanh Nien