When two of the directors of Asia Commercial Bank were arrested 2 weeks ago it brought about a number of responses within they already fragile banking system here in Vietnam.  VNIBOR rates shot up to more than 9% in the overnight market as blind fear gripped the markets, financial stocks were dumped like they were toxic waste and everyone was worried that the top-end of the banking system was going to implode overnight.  (click on the graph to enlarge it)

It looks like the actions taken by the SBV’s Governor Binh to backstop the run on ACB and provide ample liquidity to the market was successful in getting through the initial panic phase so that everyone can catch their breath and assess the situation more rationally.

Last week the short-term VNIBOR rates dropped sharply, restoring a more normal structure to the yield curve so that 1 year rates are in line with the current deposit rate cap.  

By the looks of things, trust has been restored up to 1 month, after that yields refused to budge, indicating that there is still worry about more skeletons coming out of the closet in that time frame.  I’ll continue to look at this as things progress.