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Monthly Information on Banking Activities (December 2008)
The monthly information on banking activities in December 2008 is as follows:
I. State Bank of Vietnam (SBV) activities
1. Issuance of legal documents on monetary and banking activities
The SBV issued the following regulatory documents:
- Decision No. 33/2008/QD-NHNN dated December 3, 2008 on the lending rate in VND applicable to customers of the local People’s Credit Funds. Under the decision, the lending cap in VND of the local People’s Credit Funds should not exceed 165% of the base interest rate defined by SBV.
- Decision No. 34/2008/QD-NHNN dated December 5, 2008 on the amendment to Decision No. 457/2005/QD-NHNN dated April 19, 2005 on prudent regulations in operations of credit institutions.
- Decision No.35/2008/QĐ-NHNN dated December 16, 2008 on the amendment to Decision No. 05/2007/QĐ-NHNN dated January 30, 2007 on procedures of implementing changes of the People’s Credit Funds.
- Instruction No.06/2008/CT-NHNN dated December 31, 2008 on urging credit institutions to take measures of contributing to the promotion of production and business, goods distribution , prevention of economic downturn , maintenance of economic growth and ensuring of social protection .
2. Management of credit and monetary policies
In order to implement Resolution No 30/2008/NQ-CP of the Government dated December 11, 2008 on urgent measures to actively prevent the economic downturn, to stabilize economic growth, and to secure social protection, the SBV continued to manage an expansionary monetary policy and took measures to facilitate enterprises’ access to bank loans. Following are several actions taken by SBV :
- To lower the base interest rate to 8.5 percent p.a. from 10% p.a. Accordingly, the maximum lending rate applicable to customers of credit institutions declined from 15% p.a. to 12.75% p.a. At the same time, the interest rates for refinancing, rediscounting, reserve requirement and SBV compulsory bills were adjusted in accordance with the reduction of the base interest rate.
- To cut down the reserve requirement ratios in VND for demand deposits and time deposits with term below 12 months to 5% from 10% (for the Vietnam Bank for Agriculture & Rural Development-VBARD, and the Central People’s Credit Fund and cooperative banks, the rates decreased to 2% and 1% respectively); to reduce the reserve requirement ratio in VND with term over 12 months to 1% from 4%; to reduce the reserve requirement ratios in foreign currencies for demand and time deposits with term below 12 months from 9% to 7% (for the VBARD, rural joint-stock commercial banks, the Central People’s Credit Fund and cooperative banks, the rate declined to 6%).
- To depreciate the US$/VND average exchange rate in the inter-bank market to 16,989 VND, starting on December 25, 2008, down by 3.07% as compared to November, 2008. This move contributed to facilitating export, controlling trade deficit, ensuring a sustainable international balance of payments, limiting the expectation of exchange rate hike, hence assisting enterprises to actively develop their stable business plans.
-To require credit institutions: (i) to adjust the interest rates in VND in line with the SBV regulations in order to ensure the capacity of capital mobilization and proactively take measures on prudent and effective operations; (ii) to stipulate specifically and publicize the maximum duration of assessing loan applications of customers, and in cases of refusal, credit institutions should inform customers of the reasons of refusal in writing; and (iii) to strictly implement the regulations of loan classification, asset liquidation and deduction proportion of secured assets for risk provisioning.
- To establish the SBV Special Working Teams in Ho Chi Minh City and Hanoi. These two working teams are mainly responsible for coordinating with professional associations in the two cities to timely resolve difficulties and problems of SMEs in getting access to loans of credit institutions. The two working teams are required to send their weekly reports on the outcomes of their work. These outcomes should also be publicized in the SBV Website.
- Implementing the Prime Minister’s instruction on supporting the purchase of rice, SBV asked SOCBs to provide adequate loans with proper interest rate to the North and South Food Corporations for the purpose of purchase of proper quality rice for export and to reschedule loans for those rice growers and rice trading firms in face of debt repayment difficulties.
3. Strengthening the banking sector
The SBV Governor on December 11, 2008 issued License to permit the Bao Viet Joint-Stock Commercial Bank (BVB) to be established and operate.
The SBV focused on directing the plan of increasing the charter capital of those joint -stock commercial banks failing to meet the minimum level of VND 1000 billion so as to ensure that all these banks should meet the capital requirement as stipulated by the SBV by December 31, 2008. Currently, most of the commercial banks basically have completed the plan of increasing their charter capital while a few others are putting the final touch on the plan to meet this requirement..
The SBV required the SBV municipal and provincial branches to actively coordinate with the relevant authorities in information campaign and raising the public awareness to prevent and timely solve all the illegally mobilizing funds.
4. Modernizing the banking system and developing non-cash payment system
Since November 18, 2008, the Expanded Inter-Bank Payment System has officially been put into operation with a daily amount of more than 2 million settlements. This contributes to improving the quality of settlements and promoting capital flow of the economy. Up to now, the inter-bank electronic payment system has 443 participants belonging to 83 banks and bank branches settling around 35,000 to 45,000 transactions per day on average with the transaction volume of VND 35 trillion per day.
II. Other activities
1. During this month, SBV Governor had a meeting with Mr. James Adams, Vice-President of the World Bank (WB), and hosted a meeting with the National Bank of Cambodia (NBC)’s delegation led by Governor Chea Chanto and singed a Memorandum of Understanding on Exchange of Banking Supervision Information during their visit to Vietnam. SBV Deputy Governor Nguyen Van Binh had a meeting with a delegation of the Agence France Tresor (AFT) led by its Deputy General Director, Mr. Sébastien Boitreaud. SBV Deputy Governor Nguyen Dong Tien, with the company of senior representatives from SBV and the State Treasury, paid working visits to the Bank of France (BoF) and the Bank of Italy (BoI) with the aim of learning from the experiences in conducting auctions of the Government’s bills and bonds and other issues related to the banking activities of these two countries.
2. Under the Government’s authorization, SBV Governor Nguyen Van Giau signed the Financing Agreement and the related legal documents for the World Bank-financed Agriculture Competitiveness Project for Vietnam with the total value of US$ 75 million, and 4 loan agreements and 3 technical assistance projects funded by the Asian Development Bank with the total value of US$ 174.2 million.
On December 30, SBV held a year-end conference at the International Convention Center in Hanoi, under the chairmanship of Governor Nguyen Van Giau, to review banking performance in 2008 and chart out the tasks of the banking sector for 2009. Prime Minister Nguyen Tan Dzung attended and spoke at this conference.
III. Credit and monetary performance
1. After SBV decided to cut down the base interest rate and reserve requirement ratios, both lending and mobilizing rates decreased significantly as compared to the previous month. Specially, the mobilizing rates in VND reduced by 3% - 4.5% p.a., the lending rates in VND reduced by 3.5% - 4% p.a., while the mobilizing rates in USD lowered by 0.5% - 1% p.a., and the lending rates in USD declined by 0.3% - 0.5% p.a.. Most joint-stock commercial banks offered their lending rates in VND close to the maximum rate set by SBV (12.75% p.a.) while the state-owned commercial banks offered the rates of 8.5% to 10% p.a. for priority customers in export, rural development, small and medium enterprises (SMEs) and other sectors.
2. The US$/VND exchange rate was stable and remained at the ceiling rate set by SBV until December 25, when SBV decided to depreciate the US$/VND average exchange rate in the inter-bank market to 16,989 VND, the US$/VND average exchange rates of commercial banks slightly increased, commonly at 17,280-17,400VND/USD. Commercial banks quoted their exchange rates below the ceiling rate prescribed by SBV by VND 100.
The VND/EUR continued to change close to the fluctuation of the Euro in international markets. On December 25, the VND/EUR rate was quoted by commercial banks at 23,863-24,459 VND/EUR, 9.97% higher than that of last month and 1.76% higher than that of end 2007.
3. The total liquidity of December was estimated to be up by 4.37% in comparison with the previous month, and by 16.31% as compared to end 2007.
4. The total deposit outstanding of customers with credit institutions in December was estimated to be up by 3.41% against the previous month, of which the VND-denominated deposit outstanding was estimated to be up by 2.64% and the foreign exchange deposit outstanding up by 5.86%. As compared to end 2007, the total deposit outstanding was up by about 20.46%.
5. The loan outstanding to the economy in December was up by about 1.09% against the previous month, of which the VND deposit outstanding up by about 0.96% and the foreign exchange deposit outstanding up by about 1.60%. As compared to end 2007, the loan outstanding to the economy was up by about 21%.
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