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How Did Lending Rates At Banks Gradually Increase?


Unlike deposit rates, lending rates are often rarely announced by banks. This makes monitoring and evaluating lending interest rates more difficult. However, with the deposit rate going up in the past time, the lending interest rate is hard to stand still.

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Difficult to track lending rates

Difficult to track lending rates

Recently, the interest rate framework of many banks has been continuously increased, in the context of increasing pressure on interest rates, from inflation, exchange rates to liquidity of The system reduced the level of abundance after the operators attracted money from the operators through buying foreign currency channels.

It is noteworthy that the adjustment not only comes from small, medium-sized banks, but even big banks belonging to the state-owned commercial banks group also started to participate. This has pushed deposit rates to a new level and made many people worry that lending rates will rise.

However, if it is easy to keep track of deposit interest rates at banks thanks to banks regularly announcing the deposit interest rate frame on the bank’s electronic home page or quickly update each When changing, the monitoring and evaluation, lending interest rate analysis faced many difficulties due to limited access to information on interest rates.

Many banks still regularly announce specific and clear lending programs and preferential interest rates, however, in fact, these preferential interest rates are only for reference, short-lived in the short term. offer, term of loan package, not to say the lending interest rate of each bank in particular and the market in general.

Although the State Bank has recently had policies and regulations requiring banks to list public lending interest rates openly and transparently on websites, clearly communicating to customers, though However, until now, the provision and updates on banks’ websites are quite limited. If yes, it is only at the level of general information, while the lending interest rate framework of banks is much more complicated than the deposit interest rate framework, from the regulation applied by term, by product, by customer type, risk nature as well as type of collateral.

How did lending rates at banks gradually increase?

How did lending rates at banks gradually increase?

Because of such difficult statistics and access to lending interest rates, the assessment of how the lending interest rate level changes is often delayed, and mainly observes the deposit interest rates to forecast for lending rates. However, another solution to assess lending interest rates at banks may be based on reference base interest rates, which are regularly and regularly updated by banks on the website, for customers to refer and also the way that the media banks soon adjust the lending interest rate to customers who are borrowing from banks.

Basically, the base interest rate is the reference interest rate plus a prescribed margin (depending on the product, loan term, etc.) to determine the lending interest rate for customers. Therefore, when the base interest rate increases, the lending interest rate tends to increase, so the base interest rate observation to assess lending interest rates is reasonable.

It is important to know that the base rate is calculated based on the input parameters such as the average capital cost (mostly fluctuating according to the capital mobilizing interest rate framework and the capital structure of the bank), followed by the factors such as risk of term difference, bank liquidity. Therefore, the lower the average cost of capital for banks, the lower the base rate also tends to be lower than the average market, since the interest rate is also lower.

Also went up recently

However, it is worth noting that at present, many banks apply the main base interest rate, which is the interest rate of 12-month or 13-month savings deposit. Therefore, in recent years, many people have been surprised to see that the 12-month or 13-month term deposit interest rates applied in many banks are pushed up quite well compared to the general deposit interest rate framework. even higher than for longer terms like 18, 24 or 36 months.

Specifically, many banks apply high interest rates from 7.5 to 8.5%, but some only apply to deposits with high value, usually from VND 100 billion or more. Therefore, in fact, very few customers deposit money to enjoy such high interest rates. Obviously, banks have the basis and motivation to limit the decline of interest rate band before the upward trend of deposit interest rates, which may affect profitability ratios as well as profit plans. .

Going back to the story of the lending interest rate level, it was observed that the base rate of many banks has been continuously adjusted up in the last 2 months. As at Sacombank, the base rate is also the adjusted 13-month savings interest rate in August which increased by 0.2% over the previous month, to 7.8%. The same happened in North Asia Bank when it increased by 0.15% to 8%.

Or as in SeABank, the base interest rate applied to 14-month savings deposits also increased from 8.1% to 8.2%. A State-owned commercial bank, VietinBank, also increased the base interest rate, the reference capital according to the 36-month savings interest rate, also increased by 0.1%, to 6.9%. Or before that in July, VPBank also increased the base interest rate by 0.2%, to 7.4%.

In the face of such upward pressure on interest rates threatening macroeconomic stability and limiting economic growth, the Prime Minister asked the State Bank of Vietnam to continue with the Government’s regular meeting in August. operating monetary policy cautiously, flexibly, providing reasonable liquidity for credit institutions, and strictly controlling credit into real estate.

Big bankers continue to cry for money

The leaders of the banks proposed to retain dividends to raise capital, instead of paying the state budget.

To ensure the ratio of capital adequacy ratio (CAR), is an important measure to measure the operational safety of banks (NH) according to Basel II standards, the demand for capital increase of credit institutions is Very large, especially for state-owned commercial banks. If the capital is not urgently raised, the growth rate of big banks will slow down, very difficult for credit growth to serve the economy.

“Lack of capital is a very urgent problem.”

Four state-owned commercial banks, including Vietcombank, VietinBank, BIDV and Agribank, continued to call for lack of capital. Most recently, at the conference related to handling bad debts, Mr. Nghiem Xuan Thanh, Chairman of Vietcombank, said: For state-owned commercial banks, capital increase is more urgent than ever. The reason is that at present, the capital adequacy ratio, although not yet applied under Basel II, has reached an unsafe level. If applied according to the above criteria, this ratio has violated the safety threshold.


Big bankers continue to cry for money

“Increasing capital is one of the urgent tasks of credit institutions, so it is recommended that the Government allow the addition of charter capital for state-owned commercial banks through allowing to retain annual dividends. to increase capital. At the same time, he asked the Government to review the mechanism of both complying with the law to ensure shareholders’ rights and implement it in reality ”- Mr. Thanh suggested.

Not only Vietcombank but also three other big companies, Agribank, VietinBank and BIDV also need to raise capital. According to Trinh Ngoc Khanh, Chairman of Agribank, currently Agribank is a 100% state-owned commercial bank, so the increase of charter capital is based on the state budget. The current charter capital of NH is 30,000 billion dong.

“This is the lowest among the four state-owned commercial banks. This leads to limited financial capacity, low minimum capital adequacy ratio, affecting the implementation of business activities, especially investments in agriculture, farmers and rural areas ”- Mr. Khanh warning.

To overcome this situation, all banks said that they have found many ways such as selling off state capital, restructuring the asset portfolio … but still lack capital.

Referring to this issue, Mr. Nguyen Van Du, Deputy Chief Inspector and Supervisor of the State Bank of the State Inspection and Supervision Agency, affirmed: State-owned commercial banks are facing many difficulties in raising capital. regulations.

“The reason is that the National Assembly’s resolution does not allow the use of budgets to finance commercial banks. The budget to raise capital for these banks is not included in the medium-term investment list, ”said Mr. Du.

There will be 6,000 billion VND if …

There will be 6,000 billion VND if ...

Dr. Nguyen Tri Hieu, a financial specialist from the bank, said that it is necessary to target the safety standards in accordance with Basel II for the Vietnamese banking system. The thing is that to achieve Basel II standards as set out, the key issue is that the State must approve for state-owned banks to retain their profits to increase their charter capital.

This means that instead of cash dividends, banks will be allowed to pay dividends in shares. According to calculations, if the plan retains profits to increase charter capital approved by the State, three banks including VietinBank, Vietcombank and BIDV will have about VND 6,000 billion more to raise capital immediately.

In addition, to increase equity, state-owned banks can issue certificates of deposit with terms of more than five years. Besides, it is necessary to reduce the ownership of state capital in these state-owned banks to 51%.

“Because as long as the State still holds enough capital to dominate the activities but cannot inject capital into these banks, it will be difficult for them to meet the safety ratios according to Basel II. This is like a deadlock, there is no way out ”- Mr. Hieu analyzed.

Meanwhile, Mr. Nguyen Van Du, Deputy Chief of State Inspection and Supervision Agency said that the State Bank has proposed to the Government to improve the financial capacity for state-owned banks, meeting the capital requirements. minimum according to Basel II. At the same time, the State Bank proposed to the Government to approve the guidelines, capital plans and plans to increase capital for state-owned commercial banks in each fiscal year period 2018-2020 and capital raising mechanism to offset the shortage. Expected capital shortage according to each fiscal year of banks in priority order.

Recently, at the conference related to handling bad debts, Deputy Prime Minister Vuong Dinh Hue also acknowledged that raising capital with state-owned banks was urgent and needed to be done immediately. The government is also seeking solutions to raise capital for four banks.

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