Previously, banks would often use up most of their short-term funds for financing long-term loans. However, they now actively increase their owner’s equity and seek funding from international financial institutions to ensure long-term capital. Besides, they also accelerate the medium and long-term capital mobilisation when the interest rate level is stable and has been low for many years.
 
LienVietPostBank, for example, late last month decided to issue 20 million convertible bonds at a total value of VND2 trillion, to meet the demand for loans of medium and long-term projects and increase the bank’s capital.
 
Mid last month, the International Finance Corporation (IFC) said it would invest US$200 million in VIB in the form of a loan with a maturity of up to five years.

Customers make transactions at VIB.

Previously, in August, IFC also planned to fund a loan of up to $150 million to ABBank. In 2011, IFC invested about $40.5 million in ABBank via purchasing convertible bonds, which were later converted to 10 percent of the bank’s charter capital.
 
According to experts, obtaining financial support from international financial institutions has helped banks maintain a stable source of foreign capital, especially since foreign currency deposits have declined in the wake of the government’s policy on setting the interest rate cap on US dollar deposits to zero percent per year. With the low-cost dollar funding, banks can convert the dollars back into Vietnamese dong to be lent out at high interest rates, thereby improving their profits.
 
Besides, the funding source can also help banks increase their medium and long-term funds, thereby improving the ratio of using short-term funds for medium and long-term lending. For banks like VIB and VPBank, which offer consumer loans to customers buying cars, houses and installment loans, the need for medium and long-term capital is still very large.

The need for medium and long-term capital to fund consumer loans is still very large.

From last year until now, banks have also actively issued long-term deposit certificates to raise medium and long-term funds.
 
According to industry insiders, with the current low interest rate level, the strategy of issuing valuable papers to mobilise medium and long-term loans is probably appropriate. When the interest rate level rises again, banks will benefit because they have raised a significant source of long-term funds at low cost.
 
In addition to issuing valuable papers and looking for long-term financing, banks have also actively increased their internal financial capacity by raising charter capital as planned. The State Bank of Vietnam (SBV) recently gave its approval for Military Bank to increase charter capital from VND17.13 trillion to VND18.15 trillion, VPBank from VND14.02 trillion to VND15.71 trillion and OCB from VND4 trillion to VND5 trillion.