From the beginning of the year to this year, the State Bank of Vietnam (SBV) has continuously net-injected money into the market, while the amount withdrawn is not much or not at all. Since the beginning of October alone, SBV has pumped hundreds of trillions of dong into the market. Most recently, in the week from October 31 to November 4, its net injected nearly VND75 trillion ($3 billion) into the banking system.
The injection of money into the market is often understood to have the following purposes: cooling down interest rates; providing capital for businesses; liquidity support; and exchange rate stability.
But in fact, commercial banks have continuously raised interest rates in recent months. Interest rates on transactions between banks in the interbank system also skyrocketed. Even SBV adjusted the operating interest rate twice in October. Thus, the goal of lowering interest rates is completely unrealized.
Credit activities since the beginning of the year have always been tightened. Not only credit in the real estate sector but also credit in other business investment activities. Many businesses, when due to the bank’s debt, after paying money, are suddenly “cut off” by the bank, not allowing re-borrowing. Therefore, many businesses face difficulties and no longer have the capital to operate their production business, leading to closure or layoffs of workers. Thus, the goal of injecting money to support capital for businesses completely failed.
The third goal of liquidity support is also impossible when we clearly see the financial market is paralyzed. Credit institutions do not lend money. The stock market and the real estate market have only sellers, not buyers. The liquidity of the market is completely frozen.
So where is the money going?
Are people’s trust exhausted and they are looking for ways to protect their assets in other ways instead of depositing them in banks?
The fact that people have flocked to withdraw money at SCB in the past time gives us evidence to make these speculations. Certainly not only SCB, although not noisy and massive, but other commercial banks are also under pressure to withdraw money from depositors. The fact that banks race to raise interest rates to retain customers does not seem to be very effective.
Sacombank, because it was confused with SCB, had to issue a notice to prevent people from withdrawing money before the due date. In addition to Saconbank, a number of other banks also voiced similar confusion. But are people really confused, or are they concerned about a system crash, a domino effect?
In addition, commercial banks have taken on too many things in the past time, and now they are holding the bitter fruit of distrust. Most banks have not only performed normal credit operations, but they have also invaded other fields. They became brokers for buying and selling bonds, buying and selling insurance, and even buying and selling real estate. When people bring money to the bank, they will be advised by the bank staff to buy bonds, buy insurance, buy real estate… But the bank is not responsible for the type of bond they broker and when if there is an accident, they shirk responsibility. Similarly, the bank cannot afford to appraise real estate projects but still offers to sell. When the offer is not successful, they find a way to compel, and borrow from the bank forcing clients to buy insurance, when the bank matures, also have to buy insurance.
Once the people did not have faith and sought to protect their own property, how much money was pumped out to be enough?
Commenting on this issue, facebooker Tran Dinh Dai presented funny toad poems:
“Today and yesterday again
The State Bank printed money and pumped it out
The pump they decide to pump out
Inflation galloped all together to stand on the street”
Thoibao.de (Translated)
