Vietnam Money-Dong funds in surplus after increase in rates

HANOI, June 16 (Reuters) - Vietnamese banks have more than enough funds to cover compulsory reserves after attracting deposits by raising their interest rates following an official rate increase last week, the central bank said.

The State Bank of Vietnam raised its base rate to 14 percent from 12 percent, effective June 11, and banks increased their rates closer to a ceiling of 21 percent on deposits and loans in the Vietnamese dong VND=, up from the 18 percent in effect since May 19.

"The outstanding deposits of banks at the State Bank against their compulsory reserve level is already in surplus," the central bank said in a market review.

The State Bank of Vietnam requires banks to set aside 11 percent of their deposits of up to 12 months.

It said that it continued offering to buy paper from banks and also lent to small banks to ensure market liquidity.

Partly private Ho Chi Minh City Housing Development Bank said on Monday it was offering 18.5 percent for 12-month dong deposits, up from 15.5 percent, while its 12-month dollar deposit rate rose to 8 percent from 7.5 percent.

The bank's offer is now at the top of the range on the domestic market. Other Vietnamese banks are offering 12-month dong deposit rates at 17.1 percent to 17.6 percent.

On the interbank market, major lenders have kept overnight dong loans since June 9 in a wide range of 10 percent to 17 percent, compared with 10-13 percent in late May.

Foreign banks offered one-year dong loans at up to 21 percent VNIBOR1.

The central bank's review said it would continue intervening in the foreign exchange market to ensure liquidity as Vietnamese importers needed dollars for repayment.

On the onshore foreign exchange market, the dong's spot rate eased to 16,617/16,619 dong per dollar at 0340 GMT on Monday from 16,601 dong on Friday.

The central bank set the official rate at 16,454 dong per dollar on Monday, practically unchanged from 16,456 dong last Friday after a record low of 16,461 dong on June 11, when the authorities effectively devalued the currency by 2 percent.

The dong has now fallen 2.07 percent against the dollar since the end of 2007. The government's stated policy is to allow the dong to rise or fall by up to 2 percent against the dollar in the whole of 2008. (Reporting by Ho Binh Minh; Editing by Alan Raybould)