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SBV’s dollar purchases not a worry: Governor
Governor of the State Bank of Vietnam Nguyen Van Giau talks about the main points of the monetary policies the bank will pursue in the time to come.
Businesses, especially small- and medium-size enterprises, have been complaining for the last few months that they are having difficulty accessing bank loans while lending interest rates are overly high. What has the State Bank done to help settle the difficulties?
The State Bank has made two important decisions on raising the compulsory reserves on VND deposits from 3.6% per annum to 5%, and allowing credit institutions to use the compulsory bonds they bought in the central bank’s issuance on March 17, 2008 in refinancing transactions with the central bank.
The two decisions will help commercial banks improve their liquidity in the last months of the year and reduce capital mobilisation costs, thus helping them lower lending interest rates.
But what should banks do to get capital to the places that really need capital? As far as I know, banks lend to loyal clients, while enterprises weak in financial capability and that really need capital cannot get capital.
Providing capital is a kind of transaction with associated conditions. Enterprises that can meet necessary requirements, for example, they have feasible projects and healthy financial capability, will surely get enough capital from banks.
The government has asked banks to focus lending on production, export, feasible projects and the agriculture sectors. The State Bank will provide figures about the growth of credit given to small- and medium-size enterprises by the end of this month, and I have received a report that the credit growth rate of the sector remains high.
Commercial banks are trying to slash deposit and lending interest rates. What will the State Bank do with the basic interest rate?
The State Bank is keeping the basic interest rate at 14% for October, and this is a suitable decision. In general, when the national economy is stable, and CPI goes down, credit institutions gradually slash interest rates in accordance with the capital supply and demand situation.
The government’s top priority now is to fight inflation, and the basic interest rate policy needs to serve the fight. It is too early to say that we can control inflation because the CPI increases in August and September slowed down. We need more time and more efforts to stabilise inflation, and monetary policies must not diverge from that priority task.
The US financial crisis has spread to many countries. What will the State Bank of Vietnam do to minimise the bad impacts of the crisis on Vietnam?
The State Bank is keeping close watch over the issue. Vietnam has been deeply integrating into the world; therefore, the impacts of the crisis will be very big and inevitable.
Worries have been raised that the financial storm will make the US’ foreign direct investment (FDI) in Vietnam decrease. I think that it is too early now to make such a conclusion, further studies are needed. Wrong forecasts could negatively affect the decisions of investors.
Some experts say that domestic banks have operations (making deposits, trading foreign currencies and funding imports and exports) in ‘dangerous areas’. What will the State Bank do to prevent risks?
In general, all commercial banks have measures to prevent and deal with risks when they expand operations. For example, domestic banks choose to establish relations with the foreign banks which are ranked ‘AAA’, ‘AA’ or ‘A’ by international ranking institutions.
The US has decided to spend a big volume of dollars to stabilise the financial market. Meanwhile, the capital demand is always very high at the end of the year, while the State Bank is trying to buy dollars. How will the said factors affect the VND/US$ exchange rate and the fight against inflation?
There is no need to worry about the State Bank’s purchases of dollars as the central bank will have suitable policies. The top priority task for nowadays still is fighting inflation.
I have heard some people say that when the US pumps dollars in to rescue the finance market, this will cause an oversupply of foreign currencies, which, to some extent, will affect the VND/US$ exchange rate. But I don’t think so. The volume of dollars is just for internal treatment, and I believe that the US agency in charge of monetary policy regulations will take suitable precautions. The bailout should not be understood to mean that the supply of dollars in circulation will increase.
VNN
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