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State Bank puts banks under the microscope
The State Bank is setting watchful eye on the local banks’ operations to ensure banking system stability.
With Document No.1255/NHNN-TD dated May 13, 2008, the State Bank requires the commercial banks to submit daily reports to the State Bank on daily operations such as total assets, reserve requirements, capital allotments and short-term capital surplus/shortage predictions. Especially, borrowings from other banks should be specified in details.
Commercial banks are also asked to actively take part in open market operation (OMO), or via refinancing channel to source funds, in case of capital shortages. “The document was designed to address the risk of failures in banking system due to running short of capital and setting stricter controls on local banks,” said a State Bank official.
OMO is an operation which the commercial banks sell or buy the bankable papers such as treasury notes, central bank notes or municipal bonds of Hanoi and Ho Chi Minh City to the central bank. In return, the central bank would pump out or withdraw the cash from commercial banks.
Meanwhile, refinancing is a channel via which the central extends loans to the commercial banks with the bankable notes as collaterals. However, commercial banks are not allowed to use the funds obtained from refinancing channel for credit services, according to the document.
Since the beginning of the year, the issue of some commercial banks pushing credit services despite the State Bank’s call to slow down credit growth has caused trouble to the fight against inflation. With this document, the supervision on commercial banks would be strengthened.
“Though the State Bank has directed to cap credit growth at 30 per cent, some banks’ have exceeded the limit so far,” said a State Bank official “With this new document, the State Bank’s branches in provinces would be officially entitled to supervise the banks’ credit growth and conduct appropriate punishments if needed,” the official said.
Over the first four months of 2008, credit growth has hit 14.73 per cent while consumer price index has increased by 11.6 per cent. Earlier this year, the prime minister assigned the State Bank control the credit growth not exceeding 30 per cent in a bid to curb the consumer price index (CPI) increases.
In 2007, the credit growth of 53 per cent was largely attributed to Vietnam’s CPI record increase of 12.63 per cent.
VNN
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