Vietnam Raises Banks' Recapitalization Rate
The Wall Street Journal, 17 February 2011
Vietnam's central bank Thursday raised its rate for recapitalizing banks by 2 percentage points to 11%, but analysts said the government needs to take more aggressive measures if it hopes to bring inflation back to single digits. The move by the State Bank of Vietnam comes after it devalued the dong last week for the fourth time in 14 months and three months after it last raised the rate for recapitilizing banks by one percentage point in early November, when it also raised its benchmark rate on dong-denominated loans to 9% from 8%.
The recapitalization rate is the rate the central bank charges commercial banks when it pumps more capital into those banks. The central bank didn't offer any explanation for its decision or comment on further possible increases in the policy rate. "The move is aimed at slowing down the credit growth, and ultimately taming inflation," said Le Tham Duong, an economist with the Ho Chi Minh City Banking University. However, he said in the near term the move may push up lending rates among commercial banks.
The central bank is targeting credit growth of 23% this year, down from 27.65% in 2010. Last Friday, the central bank devalued the dong by 8.5% against the dollar, a move that could actually stoke inflationary pressure. The move bucked the broader trend in Asia, where most currencies have been rising due to large trade surpluses and authorities have sought to slow the pace of appreciation to protect their export industries. Vietnam's inflation rate rose to 12.17% on-year in January, from 11.75% in December. The country ran a trade deficit of $1 billion in January, following a deficit of $1.294 billion the previous month. "The timing of the rate hike suggests that February inflation data to be released next week will not be favorable," ANZ Bank wrote in a note. The note continued to say that the move would be insufficient to help achieve Vietnam's target of 7% inflation by the end of 2011, and that further rate increases are expected this year.
Vinashin Plans Business Review After Debt Payment Miss
Bloomberg 18 February 2011
Vietnam Shipbuilding Industry Group, the state-run company known as Vinashin, plans to present a KPMG LLP report on its business to creditors by mid-year after it missed a payment on a dollar-denominated bank loan. “The business review will help us to work out a proper plan for our future,” Vinashin Chairman Nguyen Ngoc Su said in an interview at his office in Hanoi. “It’ll take us about three to four months to complete and then show to the government and our lenders.” Vinashin got a $600 million loan in 2007 from banks led by Credit Suisse Group AG that paid interest of 1.5 percentage point more than the London interbank offered rate, according to data compiled by Bloomberg. While it made a $6.8 million interest payment on Dec. 23, the company missed a Dec. 20 deadline to make a $60 million principal payment and asked lenders for a one-year extension, Su said.
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