Governor Le Duc Thuy made the warning in response to statistics revealing the city banks were drawing far more capital than they were disbursing in loans this year.
Thuy said the discrepancy was unusual, since businesses in HCM City have the nation greatest demand for investment capital.
Thuy said there was no reason for commercial banks to raise their interest rates any higher, describing the trend as unhealthy competition. Pressure to continue raising rates exposes banks and enterprises to undue financial risk, he added.
Capital mobilised by State-owned banks has increased 34 per cent in the first half of the year over the same period last year, while lending is up by just 16 per cent, reported the central bank.
It said banks nation-wide had continued to raise interest rates for fear of losing clients to competitors offering better rates.
However, general director of the Asian Commercial Bank Ly Xuan Hai said higher interest rates on dong deposits simply reflect hikes announced by the US Federal Reserve on the US dollar.
If banks did not offer competitive interest rates on dong deposits, investors would simply invest in dollar-denomination accounts, he argued.
But, the nation commercial banks should be more concerned about improving human resources and management policies rather than hiking interest rates, which he said, were the weakest features of the Vietnamese banking system.
The governor of the central bank also cautioned against speculating on foreign currency exchanges and providing loans to stock mortgagors, citing recent losses at the Bank for Agriculture and Rural Development (Agribank) and the Hai Phong branch of the Industrial and Commercial Bank.
The two banks reported losses of VND500 billion and VND85.6 billion, respectively, from being involved in such cases.
Lending to fund stock market investors is inherently risky, said Thuy, adding the SBV was calling for co-operation to better manage the services, and had not yet issued specific regulations on the issue.
Source: Vietnam News, July 18