How much profit banks can lose by lowering the interest rate on required reserves
admin 9-08-2020, 11:01

According to estimates by KB Vietnam, this reduction of interest rates to the total banking system is about 600 billion VND, of which state-owned commercial banks are most affected.

Recently, KB Vietnam Securities published a report assessing the impact of the State Bank of Vietnam (SBV) cutting some interest rates. Specifically, the SBV has lowered the compulsory reserve deposit interest rate by 50 basis points.

According to KB Vietnam, the reduction of compulsory reserve interest rate, though having an impact on the profit sources of credit institutions, is not significant. The reason is that the required reserves of banks are currently low, only about 3% for demand deposits and less than 1 year and 1% for deposits over 1 year.

According to a preliminary estimate by this securities company, the impact of this interest rate reduction on the total banking system is about VND 600 billion, of which the state-owned commercial banks are most affected, about around 60 billion / bank.

How much profit banks can lose by lowering the interest rate on required reserves

Source: KB Vietnam

Specifically, the two banks BIDV and VietinBank can reduce profits by 68 billion and 59 billion per year due to the reduction of the compulsory reserve deposit interest rates. Vietcombank also decreased by about 59.4 billion. Other commercial banks such as MBBank, Techcombank, and VPBank reduced their profits below 20 billion dong.

On the other hand, KB Vietnam assesses this move to help the budget reduce part of costs in the context of budget deficit this year is expected to be high due to the economic support policies of the Government this year under the impact of COVID-19 (including small and medium corporate income tax reduction packages, increasing public investment spending ).

Source: vietnambiz.vn