Vietnam banking group seeks support for small lenders

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The Vietnam Banks Association plans to propose a lower deposit interest rate ceiling of 13.5 percent for large banks, saying it would help small lenders.

All banks in Vietnam are now subject to the same deposit ceiling of 14 percent, which industry insiders say would hurt small banks in the long run as they have to compete head-on with large banks.

Duong Thu Huong, general secretary of the association, said it's necessary to help small banks that are facing liquidity problems. As a result, the association will request the State Bank of Vietnam to impose a new 13.5 percent cap on large banks to create a balance of capital flows in the banking system, she said.

At a meeting of the association on Wednesday, 25 banks and financial intitutions signed an agreement to uphold interest rate ceilings set by the central bank. The State Bank of Vietnam has also capped interest rates on dong deposits that are non-term and those less than a month at 6 percent since October 1.

Several bankers form Maritime Bank, Tien Phong Bank and Bac A said liquidity was now a problem for many banks as their deposits have fallen sharply. Some were worried about the feasibility of another cap just for large banks as it may be difficult for some of them to accept it.

Nguyen Thi Nguyet Thu, deputy general director of Bao Viet Bank, said the central bank should instead order state-owned lenders to keep lending to small banks on the interbank market.

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