Vietnam: Central bank may limit banks' foreign currency holdings

by **ADMIN** Mon Jul 04, 2011 7:22 am

July 3, 2011
Central bank may limit banks' foreign currency holdings

VietFinanceNews.com - The State Bank of Vietnam will lower the daily cap on banks' holdings of foreign currencies to 20 percent of their registered capital from 30 percent now, according to a draft regulation, the latest step in a drive to eliminate the use of foreign currencies in the Vietnamese economy.

The proposed change will take effect after the central bank completes consultations with banks by July 15.

"The total holdings in foreign currencies among all banks will be limited to 20 percent at the end of (each) day," according to a draft regulation posted on the central bank's website Tuesday.

Since 2002 Vietnam has allowed banks operating in the country, including branches of foreign banks, to hold foreign currency equal to 30 percent of their registered capital.

Authorities have been working to eliminate the use of foreign currencies and boost the dong, part of an effort since February to curb rising inflation and reduce the trade deficit.

The latest step isn't likely to hurt banks because the government has already told them to gradually cut back on transactions denominated in foreign currencies, said Le Tham Duong, an economist at HCM City Banking University.

"The government and the central bank have repeatedly informed the public that they are determined to eliminate the use of foreign currencies in the domestic economy step by step, and there will be no such transactions, including trading and lending, in the future," Duong told Dow Jones Newswires.

Duong said "collecting statistical data from banks isn't easy," so he couldn't provide an estimate of banks' foreign currency holdings.

http://www.vietfinancenews.com/2011/07/central-bank-may-limit-banks-foreign.html