The key concern was that no official explanation had been given to banks on the method of setting the daily value of the dong currency, which is widely seen as being overvalued by 15-20 per cent.

Some banks have requested information on the process but received no answer.

In late February the government said it would set the official dong/dollar level by averaging rates from the previous day's interbank transactions.

Under the ruling, dong/dollar exchange deals could be executed within 0.1 per cent of the official rate each day, something officials have privately said would allow the currency to gradually trade downward to a more realistic level.

But since the new de-facto sliding peg regime was introduced the official rate has fallen a mere 15 dong to 13,895 against the US dollar.

The currency has been devalued by around 20 per cent in threedownward adjustments since late 1997.

One banker said some foreign banks had executed a number of large transactions on the interbank market in the past month at the bottom of the 0.1 per cent band but that these had failed to influence the next day's rate.

He added that since these transactions were greater than the central bank's average daily interbank market value, questions were raised over the transparency of calculating the average interbank rate based on deals from the previous day.

John Bentley, a United Nations-sponsored senior legal and investment adviser to Hanoi, said last week that Vietnam should abandon trying to regulate its forex market and float the dong.

"I believe these controls reflect a policy to maintain an over-valued exchange rate, and this is disastrous for the development of the country," he said.

Foreign bankers complained that while dollar liquidity was acceptable, Vietnamese banks -- large state commercial institutions in particular -- were restricting access to thelocal currency.

"We are still in the hands of the willing state-owned banks to give us access to dong funding," one banker said.

He added that some Vietnamese banks were, for the first time, beginning to offer fixed-rate longer term dong funding to customers for periods of around two to three years, but said that foreign banks, which have no access to dong, were being excluded from the trade.

"Foreign banks would like to be able to compete and offer this in the market as well," the banker said.

But the central bank and communist-led government were wary of increased competition from foreign banks, he added.

"There's still a protective element in the whole issue and the best way for the central bank to control the growth of the foreign banks is by controlling funding," the banker said.