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SBV Governor issues Directive to implement Resolution No.11/NQ-CP
The Governor of the State Bank of Vietnam (SBV) issued Directive No.01/CT-NHNN on March 1st, 2011 on monetary measures and banking operations to control inflation, stabilize macro-economy and secure social protection. This Directive reflects the efforts of the SBV to implement Resolution 11/NQ-CP of the Government. The Directive requires SBV entities and credit institutions to implement several monetary and banking solutions to carry out such tasks in 2011 as pursuing a tight and prudent monetary policy, and keeping credit growth of below 20% and the total liquidity of about 15%-16%, and interest and exchange rates at reasonable levels.
Accordingly, credit institutions are required to conduct the following tasks:
Firstly, developing and implementing the 2011 operational plan in line with the targeted credit growth of below 20%, and other solutions on monetary and macro-economic policy management of the Government and the SBV; and complying with regulations on monetary, credit, foreign exchange and banking operations. In case where credit institutions set the credit growth target of over 20%, they should report to SBV for consideration on the basis of securing prudent operational ratios of credit institutions and the effects on the credit growth of the entire banking sector.
Secondly, controlling credit growth, while drastically adjusting the credit structure and improving the credit quality, in particular:
- Assigning operational plans to branches and subsidiaries in line with the credit growth target under Resolution No.11/NQ-CP of the Government.
- Providing credit in accordance with applicable regulations; ensuring prudent operational ratios in accordance with SBV stipulations; ensuring sufficient liquidity and priority resources for the productive-business sector, agricultural and rural development, exporters and supporting industries, and small and medium enterprises.
- Reducing the pace and amount of loans for the non-productive sector as compared to 2010, especially the real estate and securities industries so as to keep the total amount of loans for the non-productive sector accounting for 22% of the total loan outstanding by June 30, 2011 and 16% by December 31, 2011. In case where those credit institutions which have not been able to comply with this Directive, will be forced to make their reserve requirement ratios twice higher than the applicable common ratio and to narrow their operational scope in the second half of 2011 and 2012. Additionally, by June 30, 2011 if credit growth exceeds the target as stipulated in Resolution No.11/NQ-CP, SBV will take necessary measures to control credit operations in compliance with law.
- Providing foreign exchange loans in compliance with law and ensuring the recovery of foreign exchange loans; restricting loans for importing non-essential and import-restricted goods as prescribed by the Ministry of Industry and Trade.
- Mobilizing and lending gold in accordance with Circular No.22/2010/TT-NHNN dated October 29, 2010; fiercely reducing mobilization and lending of gold in line with SBV guidance in restricting mobilization and lending of gold by credit institutions in the coming time.
- Cutting down operational costs, applying reasonable lending rates; determining the mobilizing rates in VND and USD in accordance with the SBV regulations; publicizing the mobilizing and lending rates in the websites, branches and transaction offices of credit institutions.
- Setting the VND/USD trading rates in accordance with Decision No.230/QD-NHNN of the SBV Governor dated February 11, 2011; actively improving internal rules and applying necessary measures of risk prevention in foreign exchange trading.
- Making loan rescheduling, loan classification, risk provisioning and anti-risk provisioning utilization in accordance with law.
- Purchasing corporate bonds in accordance with the SBV regulations.
- Closely monitoring bad debts; enhancing internal audit on compliance with law and internal credit procedures, and trying to detect and promptly deal with credit risks.
The departments at the SBV headquarter under their jurisdictions are required to advise the SBV Governor on fulfilling the tasks and objectives of 2011 as follows:
Firstly, proactively, flexibly and efficiently managing monetary policy instruments to regulate the amount of money supply in close comination with supervision of law compliance by credit institutions; revising the mechanism of foreign exchange lending to reduce lending demand; taking measures to reduce the pace and proportion of foreign exchange loans for the non-productive sector in order to control the credit scope and quality in line with Resolution No.11/NQ-CP and to maintain a safe and sound banking sector.
Secondly, flexibly managing refinancing rates and open market operations, and improving the interest rate managing mechanism in line with the 2010 Law on the State Bank of Vietnam; combining with other monetary policy instruments to maintain the reasonable market interest rates in accordance with the inflation target.
Thirdly, using part of money supply under the 2011 plan to refinance those credit institution with lending plans under the ordinary credit mechanism for agricultural and rural development, exporters and small and medium enterprises.
Fourthly, managing the exchange rate and forex market as follows :
- Flexibly managing the exchange rate and forex market in line with movements of the market; enhancing the foreign exchange management by taking necessary measures without delay to ask institutions and individuals, first of all state-owned economic groups and general corporations, to sell their foreign exchange revenues to and to buy foreign exchange from banks in cases of their reasonable demands, hence ensuring the adequate availability of foreign exchange, stabilizing the exchange rate, meeting the requirements of the essential productive and business sectors of the economy, and increasing international reserves.
- Taking verious measures to mitigate dollarization, and gradually changing the local foreign exchange mobilizing-lending relations of credit institutions into the buying-selling ones. To continue conducting measures of management and utilization of foreign currencies, and strict control of both lending and selling foreign currencies for importation of non-essential and non – encouraged commodities set by the Ministry of Industry and Trade.
- Strictly controlling the gold market; closely monitoring and forecasting fluctuations of international gold price, and gold supply and demand in the domestic market, to submit the Decree on gold management and trading to the Government for issuance in the direction of permitting certain major gold importers, eventually doing away with gold bar trading in the parallel market; and coordinating with other ministries and provincial People's Committees to inspect and deal with all cases of speculation, hoarding and manipulation in the gold market.
- Reviewing and promulgating the mechanism of managing overseas capital mobilization of credit institutions, and the utilization abroad of international payment cards by resident card holders.
Fifthly, improving the mechanism of managing operations of credit institutions; revising the regime of administrative penalties against violations in foreign exchange and gold trading in line with the the current condition of the forex market; enhancing supervision of credit extension and application of prudent ratios by credit institutions, in particular :
- Issuing legal documents under its jurisdiction and submit the guidelines to the Government and the Prime Minister for the issuance to implement the 2010 Law on Credit Institutions in line with international practices and standards.
- Issuing the regulations on corporate bond purchase by credit institutions; and counting loan oustanding in corporate bond purchase as part of credit growth rate and prudent ratios of credit institutions.
- In the first half of 2011, focusing supervision on loans for the non-productive areas; and in the second half of 2011, focusing supervision on credit quality and prudent ratios of credit institutions. Conducting supervision on the asset management companies of credit institutions; coordinating with the relevant ministries and agencies to supervise the securities companies of credit institutions; and strictly dealing with all violations and publicizing all incidents of violations of credit institutions on the SBV website.
Sixthly, Improving the mechanism and the quality of information and communication about the monetary policy management and banking operations.
The SBV branches of provinces and the centrally directed cities are required to implement following tasks:
Firstly, promptly implementing Resolution No.11/NQ-CP and this Directive in their locations; monitoring, encouraging and evaluating the implementation of Resolution No. 11 / NQ-CP and this Directive by credit institutions in order to make to monetary and banking proposals to the SBV Governor.
Secondly, coordinating with local specialized departments and professional associations to push forward information and communication about the mechanisms and policies of the Government and the SBV.
Thirdly, developing plans to implement Resolution No.11/NQ-CP and this Directive in their locations with a focus on the following undertakings: Controlling the scope, structure and pace of credit growth of every credit institutions; coordinating with the local specialized departments to enhance supervision and deal with violations of foreign exchange and gold trading of credit and economic institutions and individuals; implementing on – site supervision of lending for the non-productive sector and credit quality of credit institutions in their locations; and reporting the implementation of Resolution No.11/NQ-CP and this Directive to the SBV Governor and the municipal and provincial People's Committees by Friday afternoon.
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