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Quarterly Information on Banking Activities (QIII/2010)
To closely follow developments of the global and domestic economy, the objectives of socio-economic development in 2010 as set in the Resolutions of the National Assembly and the Government, and the instructions of the Prime Minister, especially Resolution No.18/2010/NQ-CP dated April 6th, 2010 on measures to stabilize macro- economy, curb inflation and strive for economic growth rate of 6.5 %, the State Bank of Vietnam (SBV) actively guided the implementation of monetary and banking measures with the aim of successfully fulfilling the tasks of the banking sector in 2010. Following are the specific results:
1. Managing the monetary policy in an active, flexible and prudent manner in line with the objectives of stabilizing macro- economy, curbing inflation and striving for economic growth rate of 6.5 % in 2010:
- Conducting monetary policy instruments to assist credit institutions to extend credit at a reasonable level and gradually reduce interest rates:
+ Maintaining the base interest and refinancing rates of 8% p.a, re-discount rate of 6% p.a, open market operations (OMOs) interest rates of 7-8% p.a; and the rate of 8% p.a. for overnight inter-bank electronic payment and financing the shortage in the clearing of the SBV for banks.
+ Increasing money supply by the means of OMOs, re-financing and foreign currency swaps.
+ Coordinating with the Vietnam Banks Association to instruct and monitor the implementation of the consensus in gradually reducing the mobilizing and lending rates by credit institutions under the guidance of the Government.
- Taking timely measures to stabilize the foreign exchange market, in particular:
+ Appreciating the average VND/USD inter-bank exchange rate by 2.1 percentage point from August 18, 2010 and keeping the exchange rate stable up to present with the aim of contributing to trade deficit control, restricting foreign currency hoarding by enterprises and individuals and actively reducing the pressure on foreign currency demand.
+ Directing credit institutions to strictly implement the decision to close gold trading floors and conduct the final settlement of overseas gold trading accounts. Up to now, credit institutions already completed the final settlement of overseas gold trading as scheduled; the gold market remained stable and domestic gold price closely followed the movements of the gold price in the world market.
In addition, SBV recommended the Prime Minister to assign the Ministry of Trade and Industry to take the lead and coordinate with relevant ministries and agencies to solve managerial matters of the silver trading floors in the face of inadequate legal texts.
- Implementing Decree No. 41/2010/ND-CP on the credit policy for agricultural and rural development, SBV in coordination with ministries, agencies and local governments held a conference to review the 10-year implementation of Decision No.67/1999/QD-TTg dated March 30th, 1999 on a number of credit policies for agricultural and rural development; formulated plans to effectively carry out Decree No. 41/2010 / ND-CP and promulgated the guidelines related to the tasks as assigned in Decree No. 41.
To support long-term loans for agricultural and rural development, SBV refinanced credit institutions with loans with 9-month term and interest rate of 8% p.a as prescribed in Decree No. 41/2010/ND-CP.
Credit, Monetary and Foreign Exchange development
(i) As of September 16, 2010, the total liquidity, the total deposits, and credit to the economy increased by 18.5%, 21.5%, and 17.81% respectively as compared to end 2009. The liquidity of the banking sector was secured.
(ii) The VND mobilizing and lending rates were on a downward trend, of which the mobilizing rates ranged between 10.59 to 11.2% p.a, down by 0.2 -0.3 percentage points p.a as compared to end Quarter II/2010; the short-term lending rates for the agricultural and rural sector, exporters, and small and medium enterprises were commonly at 12-12.5% p.a applied by the group of state-owned commercial banks and 12.5-13.5% p.a by the group of joint-stock commercial banks, and other rates were 13-15% p.a. The USD mobilizing rates increased by 0.1 - 0.3 percentage points p.a as compared to end Quarter II/2010 and the USD lending rates were almost unchanged.
(iii) The foreign currency demand and supply in the market were generally stable, the amount of foreign currencies bought by the SBV was larger than that sold to credit institutions. Following the SBV decision to appreciate the VND/USD average inter-bank exchange rate to 18,932, the VND/USD exchange rates quoted by commercial banks ranged between 19,480 to 19,500 while the exchange rate in the parallel market moved around the exchange rates of commercial banks.
Basically, monetary, credit and foreign exchange developments in Quarter III were in line with the objectives of stabilizing macro- economy, curbing inflation and striving for economic growth rate of 6.5% in 2010. However, the lending and mobilizing rates could not be reduced to the level directed by the Government, since the pressures of inflation tended to rise and banks were still faced with difficulties in capital mobilization.
2. To ensure safe and sound banking sector
To ensure the safe and sound banking sector, and contribute to macro-economic stability and economic growth promotion, the SBV focused on directing the implementation of the following tasks:
- SBV continued directing and monitoring recapitalization of credit institutions in line with Decree No. 141/2006/ND-CP. The SBV presented to the Prime Minister (PM) reports on issues related to recapitalization of those credit institutions with capital contribution from state-owned economic groups and corporations in order to get the PM’s unified directions on capital contribution of state-owned entities to credit institutions, in order to meet the recapitalization schedule by December 31, 2010. The SBV also submitted and got approval from the PM on the plan of additional charter capital provision to the Mekong Delta Housing Development Bank in accordance with Decree No. 141/2006/ND-CP. Additionally, the SBV requested the Ministry of Finance (MoF) to contribute additional capital of VND 411 billion to the Central People's Credit Fund to increase its charter capital in accordance with Decision No.1563/QD-TTg of the PM dated November 16, 2007; and asked the MoF to make comments on the SBV proposal to provide an additional fund of VND 1,000 billion from the state support fund for the Central People's Credit Fund .
- The SBV allowed the Joint-Stock Commercial Bank for Foreign Trade of Vietnam (VCB) to increase its charter capital by 9.28% to VND 13,224 billion. Simultaneously, the Government approved the VCB’s recapitalization by 33% of its charter capital in 2010 and assigned the SBV to consider and approve the recapitalization plan and buy the total amount of shares issued for the state shareholder.
- About the equitization of the Mekong Delta Housing Development Bank, the SBV submitted to the Prime Minister: (i) to allow the Mekong Delta Housing Development Bank not to be transformed into a limited liability company in line with Decree No. 25/2010/ND-CP in the equitization process, but to accelerate and complete the process of equitization in 2010; (ii) to review and approve the revision of Decision No.313/QD-TTg dated March 24, 2008 on approval of the equitization plan of the Mekong Delta Housing Development Bank, in which SBV is the representative for the state capital at the bank and the timing of determining the enterprise value of the Mekong Delta Housing Development Bank is September 30, 2010 and its charter capital is VND 4,405.286 billion.
- In order to effectively apply regulations on prudent ratios in banking operations, the SBV directed its functional departments to revise Circular No.13/2010/TT-NHNN dated May 20, 2010 for better understanding and implementation by carefully reviewing concepts and methods of calculating the prudential ratios, removing any shortcomings and ensuring the harmony in implementation by credit institutions; and working out plans for dealing with those credit institutions which do not meet the prudent requirements.
- The SBV granted license to the Tinh Thuong Limited Liability Microfinance Institution of the Vietnam Women's Union.
3. Development of non-cash payment:
- Along with the increasing number of bank cards, commercial banks focused on developing a network of card accepting units. Up to now, more than 26 million cards have been issued, with more than 10,000 ATMs and over 40,000 points of sale (POS). However, the use of bank cards to pay for goods and services at POSs remains very limited while ATMs are mainly used for cash withdrawal. In order to boost bank card transactions through POS systems, increase convenience for consumers and reduce the load for the ATM systems, the SBV directed two switching companies, namely Banknetvn and Smartlink, in cooperation with 8 banks to launch the successful POS connection in the capital city of Hanoi with the initial participation of more than 100 goods and services providers such as supermarkets, chains of retail stores, restaurants, hotels, several taxi companies, and hospitals. On the basis of the results of the implementation of Hanoi, the SBV will instruct relevant units to implement the POS connection in Ho Chi Minh City and expand it throughout the country.
- Other modern banking services including the e-wallet service are developed by banks and non-bank institutions. Until now,18 banks are providing the e-wallet service with over 200 POSs.
4. To implement 2 Banking Laws:
Right after the passage by the 12th National Assembly of the Law on the State Bank of Vietnam and the Law on Credit Institutions, the SBV worked out the plan to implement the two Laws with a focus dissemination of the laws and formulating the guiding documents.
5. To conduct other key tasks:
- The SBV in cooperation with relevant ministries and agencies implemented the tasks on anti-money laundering and anti-terrorist financing in order to enhance Vietnam’s credibility in the eyes of regional and international institutions in combating money laundering.
- Under the authorization of the Prime Minister, the SBV Governor joined the Acting Country Director of World Bank (WB) in Vietnam in signing the Financing Agreement and documents related to the 9th Poverty Reduction Support Credit (PRSC 9), and then suggested the Government to request the President to ratify this US$ 150 million Financing Agreement and documents related to PRSC9 and the "Project Preparation Fund Project" worth US$ 100 million financed by the WB.
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