The State Bank of Vietnam (SBV) recently approved VietinBank’s plan to issue VND10 trillion ($428 million) worth of bonds. VietinBank will decide the interest rate on them.

The bank successfully raised VND450 billion ($19.2 million) last year and VND2.44 trillion ($103.8 million) in 2017 through bonds.

The Asian Commercial Bank (ACB) recently approved a plan to issue 2-year and 3-year bonds worth VND5.5 trillion ($235.3 million), with a maximum interest rate of 6.75 percent. It said it aimed to increase its working capital to meet rising demand for credit.

HDBank earlier had become the first bank in the country this year to successfully raise VND2.5 trillion ($107 million) from bonds.

Since last year, Vietnamese banks have been issuing bonds en masse.

Vietcombank last year raised VND550 billion ($23.44 million) through the issuance of individual bonds at VND100,000 ($4.26) per bond. The bonds mature in six years, and carry a 7.4-percent annual interest rate.

BIDV raised VND1 trillion ($42.8 million) from bonds last year, and also approved the issuance of 400,000 7-year and 10-year bonds to raise VND4 trillion ($170.5 million).

Economist Nguyen Tri Hieu told VnExpress International that the main reason for the rush to issue bonds is that banks have to balance and restructure their capital to comply with regulations on credit safety limits.

A central bank regulation which came into effect this year requires banks to restrict the use of short-term deposits for issuing medium and long-term loans to 40 percent in 2019 from 45 percent in 2018.

Furthermore, as capital mobilization has lagged behind credit growth, banks are pressurized into issuing a large amount of bonds to supplement their capital reserves, Hieu said.

Experts have also said that the issuance of bonds is needed for local banks to meet the Basel II international adequacy ratio (CAR), as most of them have had their charter capital remain unchanged for years.

Interest rates for bonds offered by banks are, on average, 0.8 percentage points higher than those for bank deposits.

Hieu said if bonds at higher interest rates start becoming more attractive than short-term savings, banks will have to hike up deposit rates to raise their own capital, which is often passed onto businesses via increased lending rates.