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Monthly information on banking activities (August, 2011)
I- The State Bank of Vietnam activities:
1. Implementation of Resolution No. 11/NQ-CP:
Based on the evaluation of results of the tight and prudent monetary policy management for the first seven months of the year, SBV identified specific issues and measures in the final months of 2011 in order to control growth of the total liquidity, loan outstanding and credit restructure in line with the objectives of inflation control and macro- economic stability in 2011
Accordingly, SBV took the following specific measures:
- Continuing to maintain the refinancing rate of 14%, the rate of 14% for overnight inter-bank electronic payment and re-discount rate of 13% p.a.
- Continuing to purchase foreign currencies to meet the selling demands of credit institutions in order to increase the international reserves, and then recollected the injected domestic currency via open market operations (OMOs).
- Closely monitoring the performance of the money market, and liquidity and credit growth of credit institutions in order to promptly intervene to stabilize and guide the money market.
- Directing 12 large commercial banks to reach concensus on reducing the VND lending interest rates for the business and production sector to 17-19% p.a to regulate the market and promote proper credit growth.
- Issuing new regulations on valuable paper-secured loans of the SBV for commercial banks. Accordingly, those credit institutions wishing to borrow capital resources in accordance with the guidance of SBV’s monetary policy management and having eligible valuable papers belonging to the list of valuable papers to be mortgaged for SBV loans will be processed to be lent by SBV.
- Implementing the guidance of the Prime Minister on ensuring the balance between supply and demand, and stabilizing price of food, SBV required commercial banks to conduct the following tasks: (i) prioritizing capital resources for agricultural production, thus contributing to maintaining and expanding agricultural production to ensure adequate food supply for the market, the balance between food supply and demand, and food price stability, especially prioritized lending for livestock facilities, food production plans and projects in combination with distribution of food for densely populated areas, founding food and vegetable production zones and belts together with effective circulation and distribution,… and (ii) in cases where their clients suffered losses caused by natural disasters and epidemics, commercial banks should reschedule loans and continue lending for the clients to maintain and expand production in accordance with the existing regulations.
- To stabilize the gold and foreign exchange markets, fight against speculation and price manipulation, and protect the interests of the people, the SBV permitted several firms and credit institutions to import gold, and required these importers to promptly sell gold to the market to increase the supply, and reduce the difference between the domestic and global prices. Then, the domestic gold market was restabilized, and the gap between the domestic and global gold prices was narrowed gradually.
Together with measures to stabilize the gold market, SBV conducted several measures to stabilize the foreign exchange market as follows: flexibly managing the average inter-bank exchange rates, closely coordinating with the Ministry of Public Security in controlling illegal sale and purchase of foreign currencies in the parrallel market, and actively providing timely information to calm down concern of the market.
- Continuing to improve the legal documents on foreign exchange management in accordance with the existing condition, SBV issued 3 new regulations on: (i) the undeclared amount of foreign and VND cash brought by travelers at border check points; (ii) the foreign exchange management for medium and long-term overseas loans of the state-owned commercial banks; and (iii) foreign exchange management for the issuance of international bonds. These regulations contributed to strengthening the state management of foreign exchange operations.
2. Performing management and supervision of credit institutions:
- To strengthen the management and ensure safe operations of cooperative credit institutions, SBV required Directors of SBV provincial and municipal branches to enhance regular management and supervision of all the cooperative credit institutions in their locations, strictly deal with violations and only process the requests of operational expanion for the eligible institutions to ensure that these institutions operate in line with their set feature, objectives and orientations.
- Continuing to implement the recapitalization roadmap for state-owned commercial banks, SBV allowed the Joint-Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and the Vietnam Joint-Stock commercial Bank for Industry and Trade (Vietinbank) to increase the charter capital to VND 19,698 billion from VND 17,587 billion and to VND 20,230 billion from VND 16,858 billion respectively. Additionally, SBV proposed the Ministry of Finance to allocate funds for the state shareholders’ purchase of additional shares issued by Vietinbank to maintain the state ownership percentage of 80.31% of its charter capital.
3. Ensuring safe and sound settlements:
- To uniformly implement the connection of POS network and the development of card payment via POS throughout the country, SBV continued to direct and guide SBV municipal and provincial branches to effectively conduct the connection of POS network in their locations with the aim of changing the cash payment habit and promoting the development of non-cash payment in the whole society.
- Dealing with the crimes of using high technology to access information of domestic and foreign cardholders to carry out illegal transactions via online payment services in Vietnam, SBV reqired the payment service providers to strengthen security measures in order to protect their online payment service customers, and carefully select non-banking institutions to act as the intermediary payment service partners.
II. Credit and monetary performance
1. Interest rates:
The VND lending and mobilizing interest rates were relatively stable as compared to end July. The USD mobilizing interest rates showed signs of slight increase and the USD lending interest rates were comparatively stable. The average VND lending rate was around 18.73% p.a (The rates for rural and agricultural production, and exporters were 16 - 21% p.a; the rates for other sectors were 18-22% p.a; and the rates for non-productive sectors were 20-25% p.a). The average USD lending rate was about 6.2% p.a.
The rates in the inter – bank market were considerably lower than the VND mobilizing rates of credit institutions with the overnight lending rate being 10.5 - 11% p.a, and the rates for 1 and 2 weeks 11 - 13% p.a.
2. Exchange rate:
The VND tended to depreciate against USD during the month. The selling exchange rate at commercial banks was adjusted to the fixed ceiling rate. The average inter-bank VND/USD exchange rate by August 24 was 20,628 while commercial banks quoted their exchange rates at 20,830-20,834 VND/USD.
3. Fund mobilization
The total deposit outstanding with credit institutions by August 19 was estimated to increase by 3.04% as compared to the previous month, of which the deposits in VND were up by 3.32% and foreign currencies up by 1.81%. The total deposit outstanding was up by 8.44% against end 2010.
4. Credit to the economy
Credit to the economy by August 19 was estimated to increase by 0.59% as compared to the previous month, of which credit amount in VND was down by 1.05% and foreign currencies up by 0.82%. Credit to the economy was estimated to be up by 8.15% in comparison with end 2010.
5. Total liquidity
The total liquidity by August 19 was estimated to increase by 3.2% as compared to the previous month, and by 7.83% against end 2010, of which the cash in circulation was estimated to be up by 4.22% in comparison with the previous month and up by 4.10% p.a against end 2010.
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