Last week, the US Federal Reserve executed an emergency half-percentage-point rate cut, a move reflecting growing fears that the COVID-19 outbreak is increasing the risk of recession for global economies.
The Fed reduced the federal funds rate to 1-1.25 per cent in the first rate change between scheduled Fed policy meetings since the 2008 financial crisis.
Across the ocean, Malaysia’s central bank cut its benchmark interest rate by a quarter of a percentage point to 2.50 per cent, while the Reserve Bank of Australia reduced interest rates by 0.25 per cent to a record-low 0.50 per cent on March 4 after the outbreak began to choke key exports, including foreign education and tourism.
Short-term rates in Japan are also in negative territory, with the Bank of Japan offering to lend $4.6 billion of two-week funds to financial firms a few days earlier.
Previously, the Bank of Thailand trimmed the policy rate by 25 basis points at the February 5 meeting to improve financial liquidity and restructure the debt of firms ravaged by the sagging economy.
The Fed’s emergency rate cut would also put pressure on the Bank of Thailand to follow in its footsteps in its upcoming meeting on March 15.
In Vietnam, relief measures are unlikely to be effective without broader confidence-building efforts by the State Bank of Vietnam (SBV) and commercial lenders to demonstrate that these credit unions have put in place measures to limit the financial snags resulting from the epidemic.
The outbreak and subsequent sharp decline in business activity have, in fact, been factored into the SBV’s recent decisions.
In particular, the SBV has asked banks to provide extra support, such as extending loans with the intention of cushioning cash-squeezed businesses.
Soon after the Vietnamese government pushed up lenders’ support for businesses hit hard by the COVID-19, a handful of local banks have actively responded to the appeal with concessionary credit packages.
Privately-held Asia Commercial Joint Stock Bank (ACB) has just launched a major credit package with scale reaching VND25 trillion ($1.1 billion) which will be offering a helping hand to both corporate and retail customers until June 30, while Sacombank has offered a credit package worth VND10 trillion ($434.8 million) with lending rates slashed by 2 per cent per year to customers serving production and business.
Other lenders like Vietcombank, Nam A Bank, and Eximbank are also rolling out a preferential loan package with lower rates than regulated in the banks’ current policy.
However, “The banking sector should do even better,” said Dao Minh Tu, Deputy Governor of the SBV. “We have to be more impactful in helping untie businesses out of difficulties.”
A few days earlier, in line with this synchronised action, the SBV allocated a credit support programme worth VND250 trillion ($10.87 billion) to be developed by more than 10 banks, including the four state-owned commercial giants Vietcombank, BIDV, Agribank, and VietinBank.
Nguyen Quoc Hung, director of the SBV’s Department of Credit, talked about the programme. “Some banks are supporting a VND100-trillion ($434.8 million) credit package, whereas others are building packages worth VND5-20 trillion ($217-870 million). There’s no fixed lending rate but lenders will cut their rates by 0.5-1 per cent, depending on the specific situation for customers affected by the COVID-19.”
Hung also noted that resources used for this credit support programme do not come from the state budget, but from the banks.
Moreover, he stated that many lenders have registered for a complete cutdown of payment fees, remittance fees, and reduce lending rates by 0.5 to 1 per cent on existing debts and new loans.
BIDV has stepped up the supportive package worth VND120 trillion ($5.2 billion). In the meantime, Agribank, MBBank, and ACB have also unveiled their kits of relief measures, which respectively value at VND100 billion ($4.4 million), VND35 trillion ($1.5 billion), and VND15 trillion ($652 million).
On the other hand, other lenders like Vietcombank, HDBank, and VietinBank, have also come up with support measures, and are delivering specific packages.
SBV Governor Le Minh Hung supported the new measures. “With economies and financial markets interconnected, expectations of lower rates or rescheduling debt payments could dampen the fears of companies that are teetering on the edge of trouble,” he said
Source: vir.com.vn