Hanoi (VNA) - A sur✨ge of 5.9 billion USD in overseas foreign currency deposits by local commercial banks in the third quarter of last year was nor🌠mal, said director of the State Bank of Vietnam’s Forecast and Statistics Department, To Huy Vu.

The move was made after the Vietnam Institute for Economic and Policy Research (VEPR) said that Vietnamese deposits overseas, which were previously negligible, surged abnormally by 7.3 billion USD in Q3 2015. The change was mainly because of a 5.9 billion USD surge from local banks’ deposits while the remaining was deposited by other organisations and individuals and was steady. VEPR said the abnormal rise required close monitoring as it could be related to some side effects of the central bank’s foreign exchange policies of dropping the US dollar deposit interest rate to zero percent and limiting the objects of lending in foreign currency. Confirming that commercial banks deposited an addition of 5.9 billion USD in the period, however, Vu said that the surge was normal and not because of the central bank’s policies. Vu attributed the surge to rising forex hoarding in the domestic market following the strong devaluations of the Chinese yuan and the expectation of the Fed’s interest rate hikes in Q3 2015. When foreign currency deposits at local banks spiked amid the reduction of foreign currency credit, it was ordinary banking activity for the banks to deposit foreign currency abroad, he said. “Banks are financial intermediate institutions. It’s totally normal that they increase deposits abroad when their needs at home decrease,” Vu stressed. He said that banks kept just a part of foreign currencies in cash to serve residents’ demand, the rest they could invest if meeting the regulations in law on forex management. Overseas deposits aimed to ensure liability and meet payment demands of businesses and residents, he said. Vu said after the SBV reacted swiftly via exchange rate policies, which again stabilised the market and increased the confidence of residents and businesses, the banks’ overseas deposits increased only 369 million USD in the next quarter. Truong Van Phuoc, Deputy Director of the National Financial Supervisory Committee, told Thoi Bao Kinh Te (Economic Times) said that inflows and outflows of foreign currencies to Vietnam had been considered a normal activity for the past 40 years and that the 7.3 billion USD outflow in Q3 last year was normal also. Online newspaper VietnamNet quoted Nguyen Tu Anh, Director of the Macroeconomic Policy Department under the Central Institute for Economic Management (CIEM), as saying that in the context of weak corporate demands for forex, when banks experience a surplus of forex liquidity while the interest rate on forex deposits has been lowered to zero, domestic banks can optimise their forex holdings by depositing them abroad for profit. “This fact is not worrying at all,” Anh said.-VNA