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Vietnam banks to have smaller dollar holdings

The State Bank of Vietnam is considering a new rule that requires banks to reduce their dollar holding ratios to 20 percent of their equity from the current 30 percent.

According to a central bank's draft circular, all banks have to report their dollar holding status of the previous day to the State Bank on a daily basis. The central bank governor may consider allowing certain lenders to have more dollar holdings if necessary.

The draft also said branches of foreign banks with equity capital of US$25 million or less can have dollar holdings of up to $5 million.

Vietnam's central bank has taken various measures this year to reduce dollar holdings and give strength to the local currency.

The monetary authority last month ordered lenders to set aside more dollars as reserves. The reserve-requirement ratio on US dollar deposits rose by 1 percentage point to a range between 4 and 7 percent.