|
Interview with SBV Governor on founding anniversary of banking sector
In implementation of the Government’s urgent measures to prevent economic downturn, maintain economic growth and ensure social protection, the State Bank of Viet Nam (SBV) has been guiding the whole banking sector in a synchronous and decisive effort to implement mechanisms and policies with initial encouraging results. On the 58th anniversary of the foundation of the Vietnamese banking sector, Governor Nguyen Van Giau granted a press interview on such effort and his views on monetary policy management in the coming time. Following is the full text of the interview.
Q: In order to prevent economic downturn, the Government issued Resolution 30/2008/NQ-CP comprising many urgent measures, in which the banking sector plays a very important role. The efforts of the sector have brought positive effects to the economy. Could you please elaborate on the implementation of the banking sector?
A: Since late 2008, the national economy started to face many difficulties attributed to the financial crisis and the world economic recession; the Government issued Resolution 30/2008/NQ-CP on urgent measures to prevent economic downturn, maintain economic growth and ensure social protection. In response to this resolution, SBV has been guiding the decisive and synchronous implementation of the following measures:
- Managing monetary policy instruments in a flexible manner, reducing the base interest rate to enable credit institutions to lower their lending interest rates. Specifically, the VND base interest rate is cut down to 7% per year, the refinancing interest rate to 7% per year, the rediscount interest rate to 5% per year, the reserve requirement ratios to 3% for VND demand deposits and time deposits of less than 12 month and 1% for time deposits of over 12 month.
- Focusing on directing the whole banking sector in prompt and synchronous implementation of the interest support mechanism in line with the Prime Minister’s Decision No. 131/QD-TTg of January 23, 2009, Decision 333/QD-TTg of March 10, 2009, and Decision No 443/QD-TTg of April 4, 2009. Right after the issuance of these Decisions, SBV promptly issued circulars of guidelines and instructions for the whole banking sector.
- Expanding the VND-USD exchange rate band from ±2% to ±3% then ±5% to enable more flexibility in the two-way movement of exchange rates and closely association with the market supply and demand of foreign currencies. At the same time, SBV has also taken measures to revamp the activities in the foreign exchange market along with the supervisions of SBV to prevent violation of regulations on foreign exchange.
- Formulating and implementing the action plan on monetary, credit, and banking resolutions to prevent economic downturn, maintain economic growth and ensure social protection in line with the instructions of the Government in Resolution No 30/2008/ND-CP and Resolution No. 01/ND-CP; setting up working teams to deal with difficulties and obstacles of small and medium enterprises (SMEs) in credit relations in Hanoi and Ho Chi Minh City; maintaining the hotline of SBV to receive and process information, complaint and denunciation from enterprises and the population concerning the implementation of the interest rate support mechanism.
- Issuing the mechanism for negotiable interest rates applicable to credit institutions to meet the demand of personal loans.
- Further supervising closely the money market and banking operations to address arising problems and maintain a prudent banking sector.
With the prompt and synchronous implementation of the above-mentioned solutions, operations of the banking sector and the money market has remained stable in accordance with the intention of stimulus policy and growth support of the Government, thereby fostering confidence of the population in the banking sector with specific results. The total liquidity and credit were controlled at low levels in the period of rising inflation and growth recovery in accordance with the stimulus directive of the Government. By late April, the total loan outstanding to the economy increased by 11.16%, the total liquidity increased by 11.4% against late 2008; the mobilizing and lending rates have substantially lowered against late 2008, the current maximum lending rate is 10.5%; the supply and demand of foreign exchange is balanced and the exchange rate is moving with more flexibility; the operations of credit institutions have become more extensive and safer. Commercial banks ensure short-term payment proportion of more than 100%, strictly comply with the prudent regulations without commercial bank facing difficulties in terms of liquidity.
Q: In order to further prevent economic downturn, on April 4, 2009, the Prime Minister issued Decision 443/QD-TTg and recently Decision No. 497/QD-TTg. This important task was once again assigned to the banking sector. Could you please let me know how the Banking sector has implemented these Decisions, especially Decision No. 497 for the agricultural sector and rural development?
A: Interest rate support is a great directive of the Communist Party and the Government and also the focal task of the banking sector in 2009 to contribute to preventing economic downturn, maintaining economic growth and ensuring social protection. The banking sector has implemented the interest rate support mechanism in a timely, synchronous and decisive manner for institutional and individual borrowers for their production and business in line with Decision No. 131/QD-TTg dated January 23, 2009 and Decision No. 333/QD-TTg of the Prime Minister dated March 10, 2009. After 3 months of implementation, the interest rate support mechanism has effectively supported enterprises and households to reduce the costs of production and maintain business activities and employment while dealing with all problems in a timely manner. The interest rate support mechanism of the Government has therefore been fully supported by the entire society.
For the implementation of Decision No. 443/QD-TTg of the Prime Minister dated April 4, 2009 to achieve the set goal of reduced investment costs, increased fixed assets and productive capacity, increased competitiveness of products, and job creation, SBV issued Circular No. 05/2009/TTg-NHNN dated April 7, 2009 regulating the implementation of interest rate support policy for medium- and long-term loans to make new investments for production and business expansion; at the same time holding various meeting to communicate the said documents to the Chairmen of Board of Directors and Chief Executive Officers of credit institutions. According to Decision 487/QD-TTg dated April 17, 2009, the Prime Minister assigned SBV to lead in coordination with the Ministry of Finance, the Ministry of Industry and Trade, and the Ministry of Agriculture and Rural Development in providing guidelines on interest support loans for procurement of machinery, equipment and material for agricultural production and construction material for rural housing development.
As a result, credit institutions have, at the same time, implemented 3 interest rate support mechanisms under Decision No. 131/QD-TTg, Decision 443/QD-TTg, and Decision No .497/QD-TTg resulting in a heavy workload and large amount of time of business management of commercial banks for interest rate support operations. In order to promptly issue the guidelines for Decision No. 497/QD-TTg to facilitate commercial banks to conduct interest rate support operations institutional and individual borrowers in the rural areas from May 01, 2009, SBV has closely worked with relevant ministries and agencies in the drafting of this Circular; however, in order to provide guidance on this mechanism in accordance with law and avoid overlapping with previously-issued interest rate support mechanisms, SBV has submitted to the Prime Minister some items of substance specified in Decision No. 497/QD-TTg.
Q: SBV has been working very well with ministries, agencies, and local authorities in the implementation of the stimulus package of the Government. Could you please tell more about this issue?
A: Over the past months, the banking sector, from the central down to grassroot levels, has actively implemented the interest rate support mechanism in accordance with law. In addition, the banking sector has been enjoying the attention and guidance on the implementation of the interest rate support mechanism from the central and local levels in the analytical work to make proposals to the Prime Minister on issuance of the interest rate support mechanism and its implementation. The ministries (Ministry of Finance, the Ministry of Industry and Trade, the Ministry of Planning and Investment, and the Ministry Agriculture and Rural Development) have been working closely with SBV in analytical work to advise the Prime Minister on the issuance of solutions to prevent economic downturn.
At the local levels, the Permanent Boards of CPV Provincial Committees have also provided guidance to CPV agencies, associations, and local authorities of various levels in synchronous and effective implementation of the interest rate support policy of the Prime Minister; People’s Committees have held meetings to communicate the interest rate mechanism to participants from the local departments, agencies and enterprises; instruct the SBV local branches to hold briefings with commercial banks to monitor and settle problems relating to interest rate support mechanism in response to the feedback from enterprises, the population and entities; to guide the mass media publicize broadcast and press programs on the interest rate support mechanism; organize working missions with the participation of Directors of SBV municipal and provincial branches to dialogue with the local enterprises to grasp and settle problems relating to the interest rate support mechanism. Such professional associations as the ceramic association, industrial and trade association, SMEs association, etc, have circulated relevant documents to keep them informed of the interest rate support mechanism.
According to the reports from 39 provincial and municipal People’s Committees, the interest rate support mechanism is the right policy of the Government which has been fully supported and effective implemented by local Party Committees and authorities of various levels, fostering confidence of the enterprises and the population in the stimulus measures of the Government to prevent economic downturn. The interest rate support mechanism has so far been disseminated in a transparent manner and operated very well; SBV and commercial banks have discovered no negative indication at all in the implementation of this mechanism. By April 23, 2009 the VND value of interest rate support short-term loans had amounted to VND 254.9 trillion.
Q: Could you please let us know about the view points of SBV on monetary policy management to support the economy and the enterprise community in the coming time?
A: Our forecasts suggest that in the later months of 2009, the economy of Vietnam is likely to face difficulties due to export decline and a slowdown in foreign investment inflow. Therefore, in the coming time, SBV will continue to manage the monetary policy in a proper and careful expansionary orientation to ensure the balance between the stimulus goal of the government and the goal of stabilization of price, interest and exchange rates and a safe and sound system of credit institutions. The monetary policy will be used flexibly and synchronously with the fiscal and trade policies to stabilize the money market, increase liquidity for credit institutions in particular and for the economy in general, and ensure a proper movement of the interest and exchange rates in line with the practical conditions and macro-economic goals.
SBV will continue to work closely with ministries and agencies and local authorities of various levels to promptly and synchronously implement the interest rate support mechanism in line with the instruction of the Prime Minister. Focus and attention will again be placed on the supervision and the implementation of the interest rate support mechanism to minimize negative happenings. In addition, the regular credit mechanism will also be reviewed and revised; credit for the agricultural and rural development and farmers will be expanded. SBV will continue to guide commercial banks to increase capital mobilization to effectively expand credit, allocate capital to projects and credit programs in accordance with the stimulus policy of the Government; at the same time, perform well the task of information and communication for enterprises and the population to properly understand the current operations of the banking sector and mitigate bad impacts due to psychological factors.
Q: Currently, many viewers suggest maintaining the stability of the banking sector to effectively support the economy. Would you have any comment on this and what measures has SBV taken to assist commercial banks?
A: First of all, I totally agree with this suggestion. The banking sector is a special business one based on the confidence of the population and enterprises, so stabilization of the banking sector is always the top priority of the banking sector, not only when the economy is challenged. Over the past months, the global financial system has witnessed many upheavals, in quarter 1 of 2009 alone, up to 23 banks were merged, liquidated or bankrupt. SBV has therefore been closely monitoring the operations of commercial banks, strictly controlling credit growth and credit quality, providing short-term capital to commercial banks when necessary, and renovating the mechanism of interest and exchange rates management to closely align with the market. Most recently, on April 17, 2009, SBV issued Circular No. 07/2009/TT-NHNN regulating the prudent ratios in operations of micro-financial institutions with many rules and standards in accordance with international practices and standards while ensuring safe operations for financial institution of this type.
I would like to affirm that the system of Vietnamese credit institutions has so far been operating in safety and stability. However, this does not mean that the banking sector could neglect their vigilance. In the time to come, SBV will try its best to ensure the safety of the banking sector and pay attention to enhancing safety for the system of credit institutions in the future. The functional units of SBV are actively doing research and improving regulations on banking management, risk management, international standards in prudent banking, and mechanisms to support liquidity in case commercial banks face difficulties in liquidity to better and better align with the international standards and the practical conditions of Vietnam.
sbv
|
