Vietnam central bank lowers reserve ratio

Just as China raises its reserve ratio for banks, Vietnam has lowered theirs. The State Bank of Vietnam has lowered the mandatory reserve ratio from 7 to 4 per cent for deposits of less than a year, and from 3 to 2 per cent for longer deposits. (China raised its ratio from 5 to 5.5 per cent, effective today.) The Vietnamese change will be effective from February.

The change suggests increased confidence and risk appetite by the Vietnamese central bank, as banks will have a smaller capital buffer in difficult times. The extra cash at banks’ disposal will permit greater lending. The new ratios will not apply to the Bank for Agriculture and Rural Development, Vietnam’s largest bank by assets, for which ratios of 3 and 1 per cent will apply instead.