VietNamNet Bridge – The information about the bank restructuring under which people think that a lot of weak banks would be swallowed or go bankrupted, and the information about the low ceiling deposit insurance compensation of 50 million dong all have made small banks suffer.

Thoi bao Kinh te Vietnam’s reporter on November 8 afternoon received a call from the director of a bank branch in Hanoi. In the conversation, he said that small banks have been in distress because it is very difficult for them to attract deposits at this moment, when the information about the bank restructuring has been spread out.

“People nowadays talk too much about the bank restructuring process, which, according to their understanding, will lead to the collapse of small and weak banks. This has raised doubts about the capability of small banks, thus making it more and more difficult for small banks to seek capital,” he said.

Since all banks now cannot offer the deposit interest rates at the levels higher than six percent per annum for foreign currency deposits, and 14 percent for dong deposits, the capital has been leaving small banks for big banks, because depositors believe that it would be safer to deposit at big banks which will not be swallowed in the bank restructuring.

VnExpress has quoted an executive of a bank which has the chartered capital of 5 trillion dong as saying that since the day the State Bank forced commercial banks to reduce the dong deposit interest rate to 14 percent per annum, the amount of deposits at bank dropped dramatically by 20 percent just after the first few weeks. Meanwhile, there has been nearly no new depositor.

The banker affirmed that the collapse of banks will not occur, quoting the Governor of the State Bank of Vietnam as saying that the central bank will not let the collapse to happen, and that small but effective banks will still play their role in the development of the national economy.

People and clients still have confidence in banks, but they have not prepared psychologically for the information which has been coming rapid fire. Therefore, their confidence would be shaken one day.

Also according to the banker, he heard complaints every day from his staff. They have to explain regularly to depositors why the ceiling deposit insurance compensation is only 50 million dong.

“The draft deposit insurance law is being discussed at the National Assembly’s session. The most concerning point of the draft law is that depositors would get 50 million dong at maximum for compensation, no matter how big their deposits are,” the banker said.

“Besides, the words “bankruptcy”, “shutting down” and “insolvency” have also frightened depositors,” he added.

The spokesman of a small bank in HCM City has also complained that it is really very difficult to attract deposits these days, because in people’s thoughts, small banks always mean weak and unsafe banks, though he affirmed that his bank’s liquidity remains in good condition.

“When depositors have no more confidence, it is really not simple to retain old clients and find new ones,” he said.

While it is very difficult to attract deposits from the public, banks cannot find capital from other sources. The interest rates on the interbank market have jumped to 30-40 percent, the sky high levels.

Meanwhile, some small banks have accused big banks of deliberately coerce smaller banks. The big banks have required collaterals from small banks while lending on the interbank market, the thing that never occurred in the interbank market in the past.

Deputy Chair of Lien Viet Bank has denied the fact that big banks are deliberately coercing small banks. However, he admitted that small banks have been pushed into big difficulties.

“Small banks, especially the ones that face bad rumors about their operation, have been suffering. If the situation cannot be improved, it is very likely that they cannot resist the difficulties,” he said.

C. V