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Monthly Information on Banking Activities (March, 2009)
Monthly information on banking activities (March, 2009) is follows:
I. State Bank of Vietnam (SBV) activities
1. Issuance of legal documents
- The SBV Governor issued on March 2, 2009 Circular No.03/2009/TT-NHNN on regulations for valuable paper mortgaged loans of the SBV for commercial banks.
- The SBV Governor issued on March 13 Circular 04/2009/TT-NHNN on amendment to Circular 02/2009/TT-NHNN dated February 3rd, 2009 on detailed regulations for assisting and supporting the business and productive corporate and individual borrowers in terms of interest rates.
2. Management of credit and monetary policies
Governor Nguyen Van Giau promptly instructed the banking sector to take comprehensive measures in order to prevent economic downturn and maintain social protection and proper economic growth under the guidance of the Government stipulated in Resolution No.30/2008/NQ-CP, Resolution No.30a/2008/NQ-CP, and Decision No.167/2008/QD-TTg.
- The SBV Governor in a timely manner issued Circular 04/2009/TT-NHNN dated March 13, 2009 on amendment to Circular 02/2009/TT-NHNN dated February 3rd, 2009 aiming at adding up to the list of participators of the interest rate support program in line with the practical condition of the economy.
- The SBV Governor decided to raise the trading band of exchange rate to ±5% from ±3%. The decision has facilitated the exchange rate to move more flexibly and fairly, reflect the foreign exchange supply and demand while creating favorable conditions for commercial banks and enterprises to proactively work out their business plans.
- The SBV closely coordinated with the Ministry of Finance in issuing foreign currency-denominated Government bonds in the domestic capital market and guided commercial banks to actively buy Government bonds in foreign currencies. Meanwhile, the SBV instructed the state-owned commercial banks to balance their resources to meet the loan demand of enterprises to purchase rice for export and domestic consumption; and to work closely with Vietnam Electricity to evaluate and provide loans to a number of power projects in line with the guidance of the Prime Minister.
- The SBV guided credit institutions to provide negotiable interest rate loans in line with the directives of the National Assembly and the instructions of the Prime Minister; continued to manage open market operations (OMOs) in a flexible way to supply money in circulation with reasonable interest rates, thereby creating favorable conditions for credit institutions to promote mobilization and lending; required those credit institutions with forex license not to use derivative instruments in USD spot trading excessive of the trading band set by the SBV.
- With the aim of stabilizing the money market and creating favorable conditions for credit institutions to promote mobilization and lending to the economy, SBV decided to maintain the base interest rate at 7% p.a. while reducing the reserve requirement ratios in VND for demand and time deposits with term below 12 months to 3% from 5% (excluding the Vietnam Bank for Agriculture & Rural Development-VBARD, the reserve requirement ratio is reduced to 1% from 2%) in March. Additionally, the SBV continued to manage open market operations (OMOs) in a flexible way to supply money in circulation with reasonable interest rates.
- The SBV issued Decision No.670/QĐ-NHNN to establish an inspection team to monitor the compliance with the regulations on foreign exchange trading for petrol import. Accordingly, the team will inspect the purchasing of foreign currency from the SBV by several commercial banks for supporting petrol import during the period of January 1 – March 3, 2009.
- After 2 months of implementing interest rate support mechanism, the disbursement amount of the interest rate support program of the whole banking industry by March 26, 2009 reached around VND 178,722 billion (an increase of 17.65% in comparison with the previous week). Specifically, the group of state-owned commercial banks and the Central People’s Credit Fund disbursed VND 133,602 billion (an increase of 15.51%); and the group of joint-stock commercial banks, and the group of joint-venture banks, foreign banks branches and wholly foreign-owned banks allocated about VND 37,265 billion (an increase of 17.44%), and VND 7,559 billion (an increase of 67.49%) for this program, respectively. Finance companies, the new participators of the program, have lent VND 296 billion.
As a result, the interest rate mechanism of the Government has enjoyed support from the public. It can be said that this stimulus package, which is appropriate to the domestic economic situation, has been promptly implemented, thereby positively assisting enterprises and individuals to overcome difficulties, reducing commodity price, maintaining business and production, and creating jobs.
3. To continue implementing the Non-Cash Payment Project in the period of 2006-2010 and Orientation towards 2020
The SBV, in March 2009, submitted to the Prime Minister the plan of establishing the Bankcard Switching Center under the coordination of the SBV and the Vietnam National Financial Switching Joint – Stock Company (Banknetvn); and completed the draft Project on integration of the clearing and accounting system of Government bonds with the National Inter-bank Payment System to submit to the SBV Governor and the Minister of Finance for approval by the end of Quarter II in 2009.
4. To enhance international cooperation in the banking sector
The SBV maintained the cooperative relations with such international financial institutions as IMF, WB and ADB; conducted negotiations and signed funding projects with ADB and WB. The SBV also made necessary preparation for the Governor to chair the 2009 IMF/WB Board of Governors’ Meetings.
II. Other Activities
1. Governor Nguyen Van Giau and Deputy Governor Nguyen Dong Tien had meetings SBV provincial branches of Vinh Phuc, Đà Nẵng, Quảng Nam, Quảng Ngãi, Bình Định, Ninh Thuận, Bình Thuận, Hưng Yên, Ninh Bình, Yên Bái, Khánh Hoà, Bắc Giang and Central Highland provinces to review the implementation of Decision No.131 of the Prime Minister.
The SBV Governor met the Director of Citibank Asia-Pacific, Mr. Jay Collins, and Mr. Thng Tien Tan, First Vice Chairman and General Director of the United Overseas Bank Group (UOB) of Singapore.
2. The SBV and the ADB signed the 51-kilometer Ho Chi Minh City-Long Thanh-Dau Giay expressway project with the total cost of USD932.4 million, and a grant agreement to prepare a project of “Developing sustainable rural infrastructure in the northern mountain provinces” which is worth USD 1.2 million.
III. Credit and Monetary development
1. Interest rate:
Lending rates of credit institutions were on the downward trend. Specifically, lending rates in VND were commonly quoted at 8% p.a - 10% p.a; the rate for interest rate support loans ranged from 4.5% to 6% p.a; the interest rates for loans through credit cards and loans for individual demands were 12% - 15% p.a. Lending rates in USD declined by 0.2 - 0.5 percentage point to 6% -8% p.a.
2. Exchange rate:
The exchange rate of USD/VND of commercial banks, by March 24, 2009, remained stable. The inter-bank average rate, on March 24, 2009, increased by 0.05 percentage point as compared to late February, 2009. Since the SBV widened the foreign exchange trading band to ±5% (on March 24, 2009), the exchange rate of USD/VND of commercial banks, by March 31, was on upward trend, commonly at 17,720 – 17,820. The inter-bank average rate reduced by 0.1percentage point as compared to late February, and declined by 0.14percentage point in comparison with that of the period before widening the trading band. The SBV continued to closely monitor the money market to manage the exchange rate and stabilize macro – economy.
The exchange rate of EUR/VND fluctuated in line with the developments of EUR in the international market. On March 31, 2009, the exchange rate of EUR/VND in the domestic market was at 23,256 – 23,740, an increase of 4.59percentage point as compared to the previous week.
3. Total liquidity:
The total liquidity was estimated to increase by 5.55% as compared to late 2008, of which the amount of cash in circulation out of the banking system was up by 16.80%.
4. Fund mobilization:
Fund mobilization of the economy was estimated to be up by 3.4% as compared to end 2008, of which VND and foreign currency deposits increased by 3.34% and 3.6% respectively.
5. Credit to the economy:
Credit to the economy, by Quarter I of 2009, increased by 2.67% in comparison with end 2008, of which VND investment was up by 3.9% and foreign currency investment decreased by 2.24%.
Diem Hang – My Huong
sbv
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