The State Bank of Vietnam (SBV) should inject cash to help improve bank liquidity in the short term, Le Xuan Nghia, Deputy Chairman of the National Finance Supervision Committee told the Banking Times.

Besides, the SBV should raise required reserve ratio (RRR) and pay acceptable interest rates on bank reserves to regulate funds from large to small commercial banks as big lenders are currently reluctant to provide loans to small ones without collaterals, forcing cash-strapped banks to push up interest rates to attract funds. The central bank should act as an intermediary in the banking system, Nghia emphasized.

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

In addition, commercial banks which hold large amount of gold should be allowed to trade gold on account. Specifically, they should be permitted to export gold on account to solve their temporary liquidity squeeze.

Given improved liquidity, easing inflation and enhanced public confidence, interest rates will automatically decline, Nghia said.

 

 

Source Sophie/ StoxPlus