Financial Regulatory Forum

Vietnam cuts foreign exchange compulsory reserves

By Reuters Staff
January 18, 2010

HANOI, Jan 18 (Reuters) – Vietnam’s central bank said on Monday it would cut the compulsory reserves banks must keep on non-term foreign currency deposits and on those with terms of up to 12 months to 4 percent from 7 percent.

A central bank statement also said the compulsory reserves on foreign currency deposits with terms longer than 12 months would be cut to 2 percent from 3 percent.

The changes take effect on Feb. 1, the State Bank of Vietnam said.

The lower reserve requirements, the first sign of monetary easing this year by Vietnam’s central bank, means banks will have more dollars to put into circulation since they will have to park smaller amounts in accounts at the central bank.

“This move means the dollar is becoming cheaper,” a dealer at a foreign bank in Hanoi said. “It appears that with this move, the central bank may want to shift credit growth into dollars.”

The central bank has projected credit growth in 2010 of 25 percent, after lending accelerated at an annual rate of 37.73 percent last year versus 23.6 percent the previous year.

The lower reserve requirement would help address a shortage of dollars in the system, after the government ordered seven corporations to sell dollars to banks to help ease the shortage. That followed a devaluation of the dong in November.

Dollar supply could be boosted if the government successfully sells a 10-year sovereign bond worth $1 billion, with roadshows scheduled this week in Hong Kong, London, Boston and New York.

(Reporting by Ho Binh Minh; Editing by Alan Raybould) ((ho.minh@thomsonreuters.com; +844 3825 9623; Reuters Messaging: ho.minh.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •