Instead of borrowing foreign currency from banks, firms have to buy it from banks from October 1 this year (Photo: VNA) Hanoi (VNS/VNA) – Experts suggested firms use more derivative instruments, such as futures and forward contracts, to minimise exchange rate risks when they can no longer borrow the US dollar from commercial banks, starting early this month. According the central bank’s new regulation, banks have been banned from lending in foreign currency to pay for imports since October 1 this year in a bid to limit dollarisation in the local economy. From that date, instead of borrowing foreign currency from banks, firms have to buy it from banks. The regulation applies to both domestic banks and branches of foreign banks in Vietnam’s lending to anyone who is a Vietnamese resident. Previously, importers were allowed to take out loans in foreign currencies to pay for imports if they could prove they can generate enough foreign currency from their production and trading revenues to repay these loans. Can Van Luc, Chief Economist of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said currently, many banks have provided derivative instruments so firms which want to buy foreign currencies… Read full this story
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