ASEAN KEY DESTINATIONS
Vietnamese investors want fewer banks
The Viet Nam Association of Financial Investors (VAFI) has proposed that the State Bank of Viet Nam slash the number of commercial banks by 15 to 20 percent via merger, acquisition or dissolution, saying that the system has too many banks of low financial capacity and inadequate operating standards.
In a comprehensive set of proposals about the nation's banking system sent on Tuesday to newly-appointed Minister of Finance Vuong Dinh Hue and State Bank Governor Nguyen Van Binh, VAFI also said that the central bank should put a freeze on the establishment of new insurance and gold trading enterprises, as the large numbers of these were also tending to undermine the security of the nation's banking system and currency.
VAFI also urged the State Bank to increase the obligatory US dollar reserve ratio imposed on commercial banks, limit deposit interest rates offered on US dollar deposits to no more than 1 percent per year, and limit the number of borrowers eligible to seek bank loans in foreign currencies.
At the same time, VAFI called on the State Bank and Ministry of Finance to create policy incentives to lure idle cash from citizens into banks and the stock market, while discouraging the flow of cash into gold, foreign currencies and real estate - investments which undermined the strength of the national currency.
Gold export and import quotas needed to be removed in order for the domestic gold market to operate more effectively, VAFI said.
VAFI further proposed that the central bank increase the foreign ownership limit on commercial banks from 10 percent of a bank's charter capital to 35 percent.
VAFI general secretary Nguyen Hoa??ng Hai also said that the central bank needed to consider policies aimed at lowering lending interest rates, currently averaging a whopping 20-25 percent per year.
"A lending interest rate of 12 percent per year would be more reasonable as it would help encourage GDP growth while lower the State budget and trade deficits, stabilising the forex market, managing inflation, developing the domestic securities market and hastening the restructuring of State-owned enterprises," Hai said.
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