The fluctuations in deposit rates at the beginning of this month were an anomaly and things have returned to normal now, says Deputy Prime Minister Vuong Dinh Hue.

However, he said, there must be stricter regulations and controls to ensure that the situation does not recur.

During the “turbulent” period, several commercial banks had issued deposit certificates with annual interest rates from 8.2 to 9.2 per cent for long term deposits and 5.4 to 6.9 per cent for short-term ones in order to attract more capital.

This was a significant increase from the previous average rates of 6.5 to 6.8 per cent in late 2016.

Banks started offering high rates for long-term deposits (for more than a year) because the central bank was looking askance at the use of short-term deposit funds to grant medium to long term loans.

This triggered some anxiety about a shortage of cash and ensuing high borrowing costs.

The central bank allayed such concerns.

“This phenomenon was localised and has been quickly stabilised,” said Le Minh Hung, Governor of the SBV.

The governor also asserted that during the first quarter of 2017, especially during the period that deposit rates spiked, there were domestic and international pressures.

One was the Federal Reserve’s second increase of prime rate on the US dollar in the past three years.

In the first three months of 2017, the SBV was following world market trends and actively adjusting the banking system’s liquidity to ease pressure on interest and exchange rates.

These timely actions helped keep the exchange rate between the US dollar and domestic currency stable.

Hung said that on the whole, commercial interest rates and SBV’s rates would not undergo any significant change and in the coming time, the central bank would keep a close watch on the market situation to ensure interest rate stability and help businesses access the credit they need to develop.

In the first quarter of 2017, money supply into the economy has increased to satisfy the market demand for capital at a reasonable rate and volume, according to the state bank governor.

At the same time, credit flows have increased since January 2017, and core inflation has been stable, showing that current fiscal policies were headed in the right direction.

However, Hue also reminded the SBV to push public investment and increase the efficiency of policy implementation.

The bank must find a solution to keep the impact of global developments on domestic rates to a minimum, he said.

A legal framework to control inflation and other economic tools should also be deployed to ensure a safe and efficient banking system, Hue said. — VNS