Vietnam’s Money Rate Surges Most Since 2010 After Banker Arrest

Vietnam’s overnight money-market rate surged the most since 2010 on concern banks will hoard cash to meet any increase in customer withdrawals after one of the founders of Asia Commercial Bank was arrested this week.

State Bank of Vietnam injected 13 trillion dong ($624 million) into the financial system via its open-market operations today, the biggest amount lent for a seven-day period this year. Governor Nguyen Van Binh said yesterday the monetary authority stands ready to ensure banks have adequate cash after Nguyen Duc Kien, who helped found the nation’s fourth-biggest lender by market value, was arrested on Aug. 20 after he allegedly “conducted business illegally,” according to a central bank statement.

The overnight interbank deposit rate surged 198 basis points to 5.66 percent, the highest level since June and the biggest jump since December 2010, according to data from banks compiled by Bloomberg. The yield on benchmark five-year bonds rose 10 basis points, or 0.1 percentage point, to 9.72 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the biggest increase since July 13 and the highest level in more than two weeks.

“Yields are increasing because of the liquidity situation,” said Nguyen Tan Thang, fixed-income investment director at Ho Chi Minh City Securities Joint-Stock Co. “Banks are not buying, it’s as simple as that.”

Asia Commercial Bank

Asia Commercial Bank borrowed about seven trillion dong from the central bank in open market operations today to “calm” depositors, Deputy Chief Executive Officer Nguyen Thanh Toai said by telephone. Operations at the bank stabilized today after an increase in withdrawal requests yesterday, he said.

Staff at Asia Commercial Bank’s main branch in Ho Chi Minh City today handed customers the text of a central bank statement issued yesterday, which said Kien is no longer involved in the management of the lender. Depositors who requested early withdrawal of term deposits were convinced to leave their funds with the bank, Toai said.

“After we explained the situation, many of these depositors agreed to leave their money in our bank,” he said.

The dong traded at 20,853 per dollar as of 5:20 p.m. in Hanoi, compared with 20,845 yesterday, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.