State Bank of Vietnam Plans to Liberalize Financial Market
Viet Nam News, (25-07-2005)
HA NOI — The central bank is considering expanding the categories of securities tradable on the open market in order to develop the financial market, a senior bank official said.
State Bank of Viet Nam’s (SBV) deputy governor Nguyen Dong Tien also told a conference held last week to review five years of the open market operation that the SBV would also ask the government to issue more short-term treasury bills for the purpose of expanding securities.
To develop the market further, the bank plans to liberalize the interest rates of treasury bills in the open market with an aim to attract more financial institutions and improve forecasts, the official said.
Open market operations started in Viet Nam in 2000, and the value of transactions has increased 16-fold since. In the first half of this year, SBV organized 68 sessions where paper worth VND52 trillion (US$3.2 billion) was traded.
Not only had the market helped improve the liquidity of credit institutions and banks, but it had also influenced interest rates, the deputy governor said.
Tien said the open market would continue to be an important channel for the State Bank to inject capital into the economy, mop up money in circulation and regulate the reserve funds maintained by commercial banks with it.
In recent months, it has injected more funds into the economy through this route to ward off an imminent interest rate bubble triggered by the rapid economic growth and increasing demand for funds.
The central bank also bought mature paper worth VND51 trillion ($3.2 billion) from domestic commercial banks, to improve their liquidity position.
In the first half, it provided credit institutions, the State Treasury and other financial organisations with around $1.6 billion for mopping up bonds and other paper.
However, the deputy governor admitted that many flaws remained in the open market, particularly the cumbersome procedures and poor infrastructure. — VNS
