Banks should not provide capital for stock market: central bank

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It's wrong for the stock market to depend on short-term funds from banks and measures will be taken to help it attract capital on its own, State Bank of Vietnam Governor Nguyen Van Binh said.

The banking sector is only a short-term monetary market while the stock market is a capital source for the long term. As a result, banks cannot keep providing funds for the stock market, the governor said.

It's unreasonable that banks become the main capital source for the stock market, Binh said in an interview in Dau Tu Chung Khoan (Securities Investment) magazine Friday.

Vietnam's stock market has been struggling this year, with the main VN-Index falling 21 percent. Tightened credit policies have been blamed for the problem.

Binh said local banks tried to boost lending in previous years, causing credit growth to stay high at 30-40 percent, he said.

"As capital demand was high, banks had to attract deposits at all costs, pushing interest rates to very high levels and turning the banking system into a place for capital speculation," Binh said.

"The banking sector is fundamentally wrong when it attracts all the capital in the economy, leaving nothing for the stock market," he said, adding this is why the stock market has depended on monetary policies.

The governor, who took the position late July, said it was  necessary to put the financial market in order.

"There will be measures to control credit growth so that banks will not have to raise funds at all costs. People will consider whether to deposit their money in banks to keep it safe, or to invest it in the capital market," Binh said.

"The stock market will receive more funds and it will ease pressure on the banking system," he added.

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