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Quarterly information on banking activities (Q.I, 2011)
I. State Bank of Vietnam activities:
To implement Resolution No.02/NQ-CP of the Government dated January 9, 2011 on key solutions in guiding and managing the implementation of the Socio-Economic Development and the State Budgeting Plan in 2011, the State Bank of Vietnam (SBV) issued the Action Plan of the banking sector for 2011 with 11 sets of tasks and 26 specific undertakings. In particular: (i) increasing the refinancing and overnight rates in the inter-bank electronic payment and the rate of loans to finance short balances in clearing transactions, open market operations (OMOs) interest rates for 7 day term from 9% p.a to 11% p.a; maintaining the base interest of 9% p.a, and re-discount rate of 7%; (ii) Flexibly managing monetary policy instruments (Open market operations “OMOs”, refinancing, and foreign currency swaps) in order to support the liquidity for credit institutions, ensure safe banking operations and maintain a stable money market during the Lunar New Year of the Cat; (iii) adjusting the inter-bank average exchange rate from 18,932 to 20,693 VND/USD applicable on February 11th and narrowing down the trading band for the VND/USD exchange rate to ± 1% from ± 3%.; and (iv) actively developing and synergistically implementing plans and measures to stabilize the money market during the Lunar New Year of the Cat with the aims of ensuring the balance between the supply and demand of goods and services, and stabilizing prices and the market.
In response to the world and domestic economic developments, and the 2011 socio-economic development targets mentioned in Resolutions of the National Assembly and the Government, and the guidance of the Prime Minister, especially Resolution 11/NQ-CP dated February 24, 2011, the SBV implemented assigned tasks under Resolution 11 in a prompt and decisive manner. In particular:
1. Promulgating Plan No.1639/KH-NHNN on March 1st, 2011 on the implementation of Resolution 11/NQ-CP of the Government to define the roadmap and plan for all the assigned tasks.
2. Issuing Directive No.01/CT-NHNN dated March 1st, 2011 on monetary measures and banking operations to control inflation, stabilize macro-economy and secure social protection. The Directive requires credit institutions to implement the operational plan in line with the targeted credit growth of below 20% (In cases where credit institutions set the credit growth target of over 20%, they should report to SBV for guidance); adjusting the credit structure and prioritizing resources for production-business, agricultural and rural development, exporters, supporting industries, and small and medium enterprises; and reducing the pace and amount of loans for the non-productive sector to 22% of the total loan outstanding by June 30, 2011 and 16% by December 31, 2011.
3. Convening a conference on the implementation of Resolution No.11/NQ-CP and Directive No.01/CT-NHNN throughout the banking sector and press conferences in Hanoi and Ho Chi Minh City to enhance the consensus of the whole society on monetary solutions and banking operations in 2011, thereby making an effective contribution to the Government’s measures in containing inflation, stabilizing macro-economy, and securing social protection.
4. Requesting Chairmen of the People's Committees of provinces and the centrally directed cities to direct SBV municipal and provincial branches, credit institutions in their locations and the specialized agencies and departments to conduct several measures aimed at controlling credit growth, adjusting the credit structure and stabilizing the forex and gold markets in each location.
5. Taking several measures to manage the monetary and credit policy, and forex and gold markets. In particular:
- Flexibly managing monetary policy instruments to support the liquidity and stabilize the market: (1) to regulate the amount of money supply in line with the demand of the money market; to flexibly manage OMOs with the reasonable volume and interest rate (the interest rate rose from 10% to 12% p.a); (2) to increase the refinancing, rediscount and overnight rates in the inter-bank electronic payment to 12% p.a each; (3) to reschedule the due loans in support of agricultural and rural areas, and (4) to closely monitor the money market, the liquidity and operations of credit institutions to take timely and proper measures in line with the movements of the market.
- Issuing several legal texts on interest rates, fees and charges, and foreign exchange in accordance with the Law on the State Bank of Vietnam and the Law on Credit Institutions: (1) Circular No.02/2011/TT- NHNN dated March 3, 2011 to keep the VND mobilizing rates of credit institutions not to exceed 14% p.a; (2) Circular No.03/2011/TT-NHNN dated March 8, 2011 to guide the implementation of Decision No.63/2010/QD-TTg of the Prime Minister dated October 15, 2010 on subsidizing policies aimed at reducing post-harvest losses for agricultural and aquatic products; (3) Circular No.04 / 2011/TT-NHNN dated October 3, 2011 to stipulate interest rates applicable to deposit withdrawal of institutions and individuals before the due date; (4) Circular No.05/2011/TT-NHNN to stipulate the lending fees of credit institutions to allow them to collect only fees prescribed by the SBV and specific types of fees as stipulated in the legal documents related to lending operations; and (5) Circular No.07/2011/TT-NHNN dated March 24, 2011 to stipulate foreign currency lending by credit institutions for resident borrowers.
- Conducting measures to manage the foreign exchange and gold markets, and exchange rate: (1) to continue monitoring credit institutions in applying the maximum USD deposit interest rates for economic institutions; (2) to closely monitor and forecast the international gold price fluctuations, and domestic gold supply-demand in order to stabilize the gold price; (3) to closely monitor credit institution in mobilizing and lending gold in line with Circular No.22/2010/TT-NHNN dated October 29, 2010; and (4) to coordinate with other relevant ministries and agencies to inspect and deal with all the cases of speculation, hoarding and illegal trading of gold and foreign currencies.
6. To improve the quality of information and communication of the SBV to raise public awareness and create high consensus of the whole society in monetary policy management and banking operations in 2011, hence contributing to the effective implementation of measures in curbing inflation, stabilizing macro- economy and securing social protection
7. To enhance supervision of credit institutions:
- In order to maintain a safe and sound banking sector, the SBV required credit institutions to provide loans and reschedule loan repayment, make loan classification, provisioning and use of provisions against credit risks in accordance with law; not to conceal bad loans; carry out the internal audit and control, and evaluate the compliance of law and internal regulations on credit in order to promptly tackle credit risks.
- Implementing the Supervisory Plan of 2011, in the first half of the year, the SBV will focus on inspecting loans for the non-productive sector; and in the second half, the SBV will focus on inspecting credit quality and the prudent operational ratios of credit institutions. Moreover, the SBV wil inspect operations of the asset management companies under credit institutions and coordinate with the Ministry of Finance to inspect operations of the securities companies of credit institutions.
8. To direct the implementation of other key tasks:
- To promote non-cash payment: The amount of electronic payment transactions accounts for a relatively large proportion (over 62%) of the total amount of banking payment transactions. Since the launching of the POS connection in Hanoi, Ho Chi Minh City and the city of Danang, payment transactions through POSs have increased significantly. As of end February, 2011, 32 million payment cards had been issued by 50 providers with 230 card brand names, over 11,000 ATMs and over 53,000 POSs/ECDs.
- The SBV required the card issuers to coordinate with public security agencies to take protective measures to ensure smooth operation of ATMs.
- To urgently prepare for the 44th ADB Annual Meeting: sub- committees have basically proceeded with their assigned duties; the Website and official logo of the Meeting have been launched, registration of delegates has been underway...
II. Monetary, credit and foreign exchange performance in the first quarter
- By March 16, the total liquidity, mobilizing fund and credit to the economy were estimated to increase by 2.07%, 1.56% and 3.67% respectively.
- Mobilizing interest rates in VND slightly changed as compared to end 2010, commonly at 13.5-14% p.a, lending interest rates rose by 1-1.5 percentage points and currently at 16.23% p.a, the lending rates were commonly 14-16% p.a for agricultural and rural development and exporters, and 18-22% p.a for the non-productive sector; the average mobilizing and lending rates in USD were 4.65% p.a and 6.83% p.a respectively. The inter-bank interest rates during the closing days before the Lunar New Year were 14% -17% p.a; from early February, the rates were down to 10.5-13% p.a. At the end of the first quarter, the inter- bank interest rates rose and commonly at 16-18% p.a for below 1 month terms, the rate for 1 week term was 18-20% p.a.
- The adjustment of inter-bank average exchange rate and narrowing of trading band together with the implementation of consistent measures of ministries and agencies have contributed to creating positive trends in the forex market, namely stable exchange rate and forex liquidity improvement. Thanks to strict measures of the Ministry of Public Security against illegal foreign currency trading, the parallel market temporarily terminated its operations. By March 24, 2011, the average inter-bank exchange rate was 20,688 VND/USD; commercial banks quoted the exchange rate at 20,885-20,890 VND/ USD.
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