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Monthly information on banking activities (May, 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) conducted several measures as follows:
1. Managing the monetary, credit and foreign exchange policies:
- To actively control credit operations in line with the direction of the Government, contributing to stabilizing the money market, SBV increased the refinancing interest rate, and the overnight rate in the inter-bank electronic payment to 14% from 13% each and the rediscount rate to 13% from 12% from May 1, 2011.
- Flexibly managing open-market operations with the reasonable volume and interest rates (increasing 7-day interest rate to 14%-15% p.a from 13% p.a) in order to control and stabilize the money market.
- Upon the guidance of the Prime Minister, to reduce the dollarization in the economy and limit speculation, thus contributing to stabilizing the forex market, and limiting payment means of gold in circulation, SBV issued Circular No.11/2011/TT-NHNN dated April 29, 2011 stipulating the termination of gold mobilization and loans by credit institutions. Accordingly, credit institutions are not allowed to extend gold loans to customers and other credit institutions (Including the signed gold loan contracts with non-disbursement or partial disbursement), to make gold deposits with other credit institutions, and to conduct trust services, investment and other forms of credit in gold. Credit institutions are not permitted to mobilize gold, with the exception of the issuance of short – term gold-denominated certificates in order to make gold repayment at the request of customers in cases where the amount of gold loan collection and gold inventory are not sufficient to make repayment (The issuance of short-term gold-denominated certificates by credit institutions should be terminated by May 1st , 2012). Credit institutions are not allowed to transfer their past mobilized gold resources into VND and other forms of cash (The amount of those mobilized gold resources, which have already been transferred into cash, should be finally accounted by June 30, 2011 at the latest).
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 required 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, especially for the real estate and securities sectors as compared to 2010. The SBV will not accept and strictly deal with those credit institutions and branches of foreign banks still adhering to the credit growth rate of over 20% in 2011.
- Directing SBV municipal and provincial branches to strictly comply with the regulations on network expansion of credit institutions in 2011 in the direction of (1) only processing the requests of opening transaction offices of credit institutions already submitted to the SBV municipal and provincial branches prior to February 25, 2011; and temporarily terminating the processing of the requests of opening transaction offices of credit institutions to the SBV municipal and provincial branches from February 25, 2011 thereon in accordance with the direction of the Governor on network expansion in 2011; (2) allowing commercial banks and branches of foreign banks to install ATMs in compliance with Decision No. 13/2008/QD-NHNN on operational networks of commercial banks.
- Continuing to proceed with equitization of the Bank for Investment and Development of Vietnam (BIDV) and converting BIDV into a limited liability company (Ltd), and under the direction of the Prime Minister, SBV consulted the Ministry of Finance on several issues related to this process.
3. Developing the banking technology and services:
- To implement the 2010 Law on Credit Institutions and Resolution No.60/NQ-CP of the Government on the simplification of administrative procedures under the SBV’s jurisdiction, the SBV issued Circular No. 12/2011/TT-NHNN on May 17, 2011 on the management and utilization of digital signatures, digital certificates and digital signature certification service in SBV electronic transactions. Accordingly, the entities governed by the Circular are in line with the 2010 Law on Credit Institutions.
- In order to meet the target of successfully connecting card payment network via POSs nationwide by end 2011, the SBV directed the SBV municipal and provincial branches to carry out the inter-network connection of card payment via POSs through card providers and develop POS card payment in their locations, expand the network connections and further promote card payments via POSs in Hanoi, Ho Chi Minh City and Da Nang.
- The SBV coordinated with the International Data Group (IDG) to organize the Banking Vietnam 2011 Expo under the theme of “Infrastructure optimization and banking services diversity” in Hanoi on May 25 – 26. The event included the application and development of information technology – communication conference and banking 2011 Expo.
4. International cooperation in the banking sector:
Vietnam successfully hosted the 44th Annual Meeting of the Asian Development Bank (ADB) in Hanoi during May 3-6.. The Meeting attracted nearly 4,000 delegates, including Prime Ministers and Deputy Prime Ministers from a number of countries, Ministers of Finance, Governors of central banks and senior leaders of international financial institutions, 205 delegates from non-governmental organizations (NGOs) and 464 domestic and foreign media workers.
II. Credit and monetary performance
1. Interest rates:
The average VND lending rate increased by 3 percentage points p.a to 18.3% p.a as compared to end 2010, of which the lending rate of the group of the state - owned commercial banks was 17,3% p.a (the rates for rural and agricultural production, and exporters were 16.6% p.a; and the rates for other sectors were 18.5% p.a); the lending rate of the group of joint – stock commercial banks was 19.7% p.a (The rates for rural and agricultural production, and exporters were 18.7% p.a; and the rates for other sectors were 19.2% p.a). The average difference between VND lending and mobilizing rates was 2.9% p.a. The common USD interest rates were relatively stable.
From mid – May, the lending rates in the inter – bank market were on a downward trend in comparison with the previous month, the overnight lending rate was 13% p.a, the rates for 1 week , and 2 weeks - 1 month were 15% p.a and 18% p.a respectively.
2. Exchange rate:
The foreign exchange market showed more positive signs. The foreign exchange position of the banking sector was improved, the parallel forex market continued to be strictly monitored with marginal transactions. Commercial banks could buy more and more foreign currencies from entities and individuals. Reportedly, the SBV purchased a net amount of US$ 877 million from early this year to May. The buying and selling exchange rates at commercial banks were below the fixed ceiling rate. The average inter – bank VND / USD exchange rate by May 26 was 20,658 while commercial banks quoted their exchange rates at 20,550 - 20,650 VND/USD.
3. Fund mobilization
The total deposit outstanding with credit institutions by May 19 was estimated to increase by 0.56% as compared to the previous month, of which the deposits in VND were up by 1.32% and foreign currencies down by 1.96%. The total deposit outstanding was up by 1.4% against end 2010.
4. Credit to the economy
Credit to the economy by May 19 was estimated to increase by 0.01% as compared to the previous month, of which credit amount in VND was down by 0.64% and foreign currencies up by 2.19%. Credit to the economy was estimated to be up by 6.07% in comparison with end 2010.
5. Total liquidity
The total liquidity by May 19 was estimated to increase by 0.28% as compared to the previous month, and by 1.57% against end 2010, of which the cash in circulation was estimated to be down by 1.37% in comparison with the previous month and up by 2.59% p.a against end 2010.
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