Several members of the National Assembly’s Standing Committee warned against scrapping the central bank’s prime lending rate mechanism and not disclosing information about troubled banks that are placed under special supervision.
A view of the Southern Commercial JS Bank in Ho Chi Minh City. Several members of the NA Standing Committee, discussing amendments to the Law on the State Bank of Vietnam December 17, warned against scrapping the central bank’s prime rate regime. (Photo: SGGP)
Speaking at a meeting convened December 17 to discuss amendments to the Law on the State Bank of Vietnam and Law on Credit Institutions, they said it is not advisable for the central bank to regulate the monetary market using just the rediscount and recapitalization interest rates.
The prime rate is the lowest interest rate that commercial banks charge their most creditworthy borrowers and it is decided by the central bank.
The rediscount interest rate is the rate banks pay the central bank when they borrow for short-term or extraordinary needs and the recapitalization interest rate is the rate the central bank charges them for guaranteed short-term credit.
Phung Quoc Hien, chairman of the NA’s Financial and Budgetary Committee, said: “Considering the country’s current financial situation, I think the prime rate should not be removed.”
He warned that the country could pay dearly for totally freeing the monetary market since it lacks the conditions to do so yet.
Tran The Vuong, head of the NA’s Committee for People’s Aspirations, said: “The prime rate should be maintained to prevent lenders from demanding exorbitant rates from borrowers.”
Other members, including the chairman of the house’s Law Committee, Nguyen Van Thuan, and the head of the NA's Council of Ethnic Minorities, Ksor Phuoc, also called for retaining the prime rate regime.
“If the prime rate is unreasonable or impractical, the central bank governor can consider adjustments to it,” said Mr. Vuong.
Members also slammed a proposed amendment to the Law on Credit Institutions which, ostensibly to prevent a collapse of the financial system, seeks to keep confidential all information about credit institutions put under special control.
They said disclosing such information is vital for retaining public trust in the financial system.
Ha Van Hien, chairman of the NA’s Economic Committee, said the State Bank of Vietnam should decide the timing of the release of such information.
But the head of the Financial and Budgetary Committee, Phung Quoc Hien, called for prudence, warning the release of such information could send depositors rushing to banks to withdraw their money.