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SBV Governor presents guidance on exchange rate management regime
Governor Nguyen Van Giau of the State Bank of Vietnam (SBV) chaired a meeting in Hanoi on February 11 to discuss the exchange rate management regime in the presence of SBV Deputy Governor Nguyen Van Binh, and leaders of several SBV departments, the Vietnam Banks’ Association (VNBA), state-owned commercial banks, and joint-stock commercial banks.
Governor Nguyen Van Giau affirmed the SBV decision on adjustment of exchange rates on February 11, 2011 as one of the measures to implement Resolution No. 02/NQ-CP of the Government dated September 1, 2011 on key solutions in guiding the implementation of the socio-economic development plan. He said that the adjustment of the inter-bank average exchange rate to 20,693 VND/USD and the narrowing of the trading band for the VND/USD exchange rate to ±1% from ±3% reflect more practically the market supply-demand, improve the liquidity of the market, contribute to restricting the trade deficit and facilitate the implementation of the monetary policy.
He confirms that it is good timing now to adjust the exchange rates as the foreign exchange position of commercial banks is largely positive and the foreign exchange resources are relatively abundant in comparison with the previous adjustments, and that the clearest difference of this adjustment is the formulation of a new foreign exchange management regime with longer term implementation.
Governor Nguyen Van Giau stressed that the SBV will manage exchange rates in a flexible manner with either appreciation or depreciation by market forces depending on the market supply and demand and following the developments of the foreign exchange market. He stated that the SBV will coordinate with VNBA and commercial banks to take necessary measures to develop the foreign exchange market, including the application of anti-risk instruments in accordance with international practices to allow enterprises and banks to operate with higher autonomy and more effective risk management.
The Governor required commercial banks, especially state – owned commercial banks, to strictly comply with SBV’s guidance and regulations on foreign exchange rate regime.
In their discussion, representatives of commercial banks and the VNBA asserted that the SBV adjustment of foreign exchange rate on February 11 is to timely meet the market expectation, resulting in no shock at all if compared with the previous adjustments. They also recommended the SBV to encourage the utilization of derivatives to allow enterprises and commercial banks to operate with higher autonomy and more effective risk management so as to develop a safe and sound foreign exchange market.
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