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Monthly information on banking activities (April, 2011)
I- The State Bank of Vietnam activities:
In response to Resolution No.11/NQ-CP of the Government dated February 24, 2011, the State Bank of Vietnam (SBV) took specific measures in April as follows:
1. Managing the monetary, credit and foreign exchange policies:
- To actively control credit operations in line with the directives of the Government, thus contributing to stabilizing the money and forex market, the SBV increased the refinancing interest rate, the overnight rate in the inter-bank electronic payment and the rate of loans to finance short balances in clearing transactions between SBV and commercial banks from 12% p.a to 13% p.a each; and made an adjusted increase of 2 percentage points of the foreign currency reserve requirement ratio applicable in May to credit institutions.
- To ensure a reasonable relationship between the USD mobilizing rates from within and without in order to contribute to stabilizing the money and forex market, the SBV issued Circular No.09/2011/TT-NHNN on April 9 to set the maximum USD deposit interest rates for entities and individuals at credit institutions and foreign bank branches. Accordingly, the maximum USD mobilizing interest rate for resident and non-resident entities (Excluding credit institutions) is 1.0% p.a. The maximum USD mobilizing interest rate for resident and non-resident individuals is 3.0% p.a. The scheme includes all kinds of promotion. Moreover, the SBV requires credit institutions to publicly quote the USD mobilizing rates at their transaction premises. Credit institutions are strictly prohibited to launch promotion programs by cash, interest rates and other forms in violation of law and this Circular. The Financial Supervision Agency and the SBV provincial and municipal branches are responsible for monitoring the implementation of the maximum USD mobilizing interest rates and taking all measures under their jurisdiction to deal with any violations of this Circular.
- To implement Decree No.109/2010/ND-CP of the Government dated November 4, 2010, the SBV issued Circular No.08/2011/TT-NHNN on April 8, specifying regulations on loans for rice exports. Accordingly, commercial banks were required to actively ensure adequate loans for rice exporters on the basis of commercial rice amount for annual exportation.
- Upon the guidance of the Prime Minister (PM) in Notice No.84/TB-VPCP dated April 13, 2011 on foreign exchange and gold trading management, the SBV was urgently making the following draft legal documents: (i) On the basis of the evaluation of the Ministry of Justice, the SBV submitted to the PM for the issuance of a revised decree in place of Decree No.202/2004/ND-CP dated December 10, 2004 on administrative penalties of monetary and banking operations in the direction of introducing strict sanctions against violations in the foreign exchange and gold trading management; (ii) the SBV promptly formulated a draft decree on gold trading management to be consulted with the Gold Association and the relevant ministries and agencies, (iii) the SBV formulated the draft circular on the foreign currency trading by the state-owned economic groups, general corporations and their subsidiaries; (iv) the SBV actively coordinated with the General Customs Department to issue new regulations on the maximum foreign exchange amount to be brought out without declaration by resident travelers at border checkpoints; and (v) the SBV prepared to issue the Circular on termination of gold mobilizing and lending within April, 2011.
- In order to closely control the foreign exchange market, the SBV required SBV municipal and provincial branches to monitor operations of the foreign exchange agents in their locations, and to revoke registration certificates of those gold trading agents having failed to set up foreign exchange counters at their premises or violated the foreign exchange trading regulations, and ask the authorizing credit institutions to cancel the signed contracts of the violating agents and refrain from reissuing registration certificates to the violating agents.
2. Enhancing supervision of operations of credit institutions:
- To strictly control credit operations in 2011 in accordance with Resolution No.11/NQ-CP 01/CT-NHNN of the Government and Directive No.01/CT-NHNN of the SBV, the SBV took the following measures: (1) to require credit institutions and branches of foreign banks to adhere to the credit growth rate of below 20% in 2011 and to reduce the proportion of loans for the non-productive sector. In particular, credit institutions and branches of foreign banks should develop and implement quarterly credit growth plans to be reported to the SBV municipal and provincial branches. (2) to guide the SBV municipal and provincial branches to strictly comply with the regulations on network expansion of credit institutions in 2011 in the direction of temporarily terminating the granting of licenses for their new transaction centers and offices, savings funds, automatic teller machines and transaction counters .
- To implement Decrees No.69/2007/NĐ-CP dated June 26, 2007 and No.109/2007/NĐ-CP dated April 20, 2007 and guidance of the Prime Minister, the SBV issued Circular No.10/2011/TT-NHNN on April 22, 2011 on the selection criteria for foreign and domestic strategic shareholders of the equitized state-owned commercial banks (SOCBs) as the basic references to stipulate the specific criteria in accordance with the scope, feature and strategy of each SOCB.
3. Other key tasks:
- Following the success of connecting the POS systems in Hanoi and Ho Chi Minh City, the SBV directed three card switching entities (Banknetvn, Smartlink and VNBC) to coordinate with 15 commercial banks to successfully pilot the connection of the POS system in the central city of Da Nang, thereby contributing to improving the basic infrastructure for developing electronic payments, promoting non-cash payments and bringing about convenience to people.
- To implement the tasks assigned by the Steering Committee for the 44th ADB Annual Meeting in 2011, the SBV actively coordinated with other ministries and agencies to speed up the preparatory work for the Meeting.
II. Credit and monetary performance
1. Interest rates:
The mobilizing rates slightly changed as compared to the end of the previous month. The VND demand deposit rates for were commonly 3 - 4% p.a; however, several small - scaled commercial banks quoted these rates at 6- 9% p.a. In general, most commercial banks applied the maximum time deposit rate of 14% p.a, with the average rate being 13.41% p.a. The lending rate rose by 1 percentage point p.a against that of end-March, registering the average VND lending rate of 17% p.a, of which the lending rates for short terms were commonly 16 - 17.5% p.a, the rates for rural and agricultural production, and exporters were 14-16% p.a; and the rates for the non- productive sector were 18 - 20% p.a.
The USD mobilizing rates declined by 2% percentage point p.a. In the first half of April, the USD mobilizing rates were on a downward trend due to strict management of credit operations and the parallel forex market. Following the issuance of Circular No. 09/2011/TT-NHNN by the SBV on April 9, 2011, commercial banks cut the maximum USD mobilizing rate down to 3% p.a, resulting in the average USD mobilizing and lending rates of 2.66% p.a and 6.83% p.a respectively.
2. Exchange rate:
The forex market showed more positive signs. The foreign exchange position of the banking sector moved in a positive direction with a gradual reduction of the minus position while commercial banks could buy more and more foreign exchange from entities and individuals. Reportedly, the Vietnam National Petroleum Corporation purchased US$ 898 million for settlement of petrol import. The average inter - bank VND / USD exchange rate by April 29 was 20,698 while commercial banks quoted their exchange rates at 20,495-20,595VND/USD.
3. Fund mobilization:
The total deposit outstanding with credit institutions by April 21 was estimated to decrease by 1.09% as compared to the end of the previous month, of which the deposits in VND were down by 1.84% and foreign currencies up by 1.46%. The total deposit outstanding was up by 0.46% against end 2010.
4. Credit to the economy:
Credit to the economy by April 21 was estimated to increase by 0.11% as compared to the previous month, of which credit amounts in VND and foreign currencies were up by 0.14% and 0.02% respectively. Credit to the economy was estimated to be up by 5.01% in comparison with end 2010.
5. Total liquidity:
The total liquidity by April 21 was estimated to decrease by 0.72% as compared to the end of the previous month, and increased by 0.98% to end 2010, of which the cash in circulation was estimated to be up by 1.45% in comparison with the previous month and up by 4.12% p.a against end 2010.
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