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State Bank law opens door to greater power
Lawmakers are working on giving the central bank more autonomy through a draft State Bank Law.
Nguyen Tuyet Duong, Vice Head of the State Bank’s Legal Department, said under the newly drafted State Bank Law, the bank’s independence would be improved. The draft is scheduled for discussions at the National Assembly’s working sessions in late 2009. The law is expected to be adopted by the National Assembly in early 2010.
Cao Si Kiem, Former State Bank Governor, said that the current State Bank law did not stipulate the most important tasks of controlling the exchange rate and inflation. “In the new State Bank law, these tasks should be clarified and the State Bank’s autonomy should be greater,” said Kiem.
The autonomy of the central bank has become a key issue to lawmakers for the past 10 years. The issue was again high on the agenda of a conference organised by the Economic Committee under the National Assembly in late April. Duong Thu Huong, Vietnam Banking Association’s General Secretary, told VIR with reference to International Monetary Fund’s categorisation, the State Bank’s autonomy would be at its lowest level.
“This should be changed,” said Huong, explaining that the autonomy would enable the central bank to promptly respond to market movements.
So far, the State Bank’s monetary policies such as interest rates and exchange rates have needed the government’s approval before being enforced.
In 2006, with Decision 112/TTg-CP, the Prime Minister approved the master development plan of the State Bank to the year of 2020 which specifies that the State Bank “is independent in setting policies on monetary, interest rate and exchange rate management.” Nguyen Thi Kim Thanh, the Banking Development Strategy Institute’s General Director said the State Bank should be independent in selecting policies toward exchange rates and inflation objectives set by the government or the National Assembly.
“This will enable the State Bank to use indirect measures to reach monetary policy objectives,” she said. “This autonomy level could... improve the transparency in the State Bank’s operations as well as reduce political interventions to the bank’s operations,” Thanh added.
Central banks worldwide are operating with different degrees of autonomy, but performing three primary functions, including formulating and conducting monetary policy, supervising and examining financial institutions, and internal governance.
vietnamnet, vir
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