The State Bank of Vietnam (SBV) should raise required reserve ratio for big commercial banks, and use additional funds to support liquidity for small banks.

The State Bank of Vietnam (SBV) should raise required reserve ratio for big commercial banks, and use additional funds to support liquidity for small banks, the local online newspaper Ngoi Lao Dong (“Laborer”) quoted Le Xuan Nghia, deputy chairman of the National Finance Supervision Committee, as saying.

It is urgent and important to solve liquidity shortage at small banks, Nghia said, adding that inflation is likely to ease in early Q2/2012, creating a solid foundation for the central bank to trim down interest rates and to remove the deposit rate cap.

However, interest rate reduction will drive local residents to withdraw funds out of banks, forcing many banks into financial difficulty. It requires the Government to stand ready to support short-term liquidity for banks, the newspaper said.

The central bank previously raised required reserve ratios to 10% in 2007, even up to 11% in 2008, compared to current 3-5%.

 

 

Source Sophie/ StoxPlus