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Monthly information on banking activities (October, 2011)
I- The State Bank of Vietnam activities:
In response to Resolution 11/NQ-CP dated February 24, 2011 of the Government on key solutions to curb inflation, stabilize macro-economy and promote social protection in 2011 and Prime Minister’s directives in the Government’s monthly meeting in September, SBV continued to take measures to pursue a prudent and flexible monetary policy in order to strictly control the money market and support the liquidity of commercial banks. In particular:
- Increasing the refinancing rate to 15% p.a from 14% p.a, the rate for overnight inter-bank electronic payment to 16% p.a from 14% p.a and continuing to maintain the re-discount rate of 13% p.a. SBV decided to pay credit institutions an interest rate of 0.05% p.a (Down from 0.1% p.a) on the excessive amount of reserve requirement in foreign currencies, and an interest rate of 0.05% p.a (Down from 0.1% p.a) to the State Treasury’s foreign currency deposits with the SBV.
- More properly fixing the maximum VND mobilizing interest rates for entities and individuals at credit institutions and foreign bank branches. Accordingly, the maximum mobilizing interest rate for demand and time deposits (Delow 1 month) is 6% p.a, and the maximum mobilizing interest rate for time deposits (Over 1 month) is 14% p.a;
- Closely monitoring the liquidity of the whole banking sector as well as each credit institution, especially certain credit institutions showing signs of shortage of liquidity in order to promptly assist them. SBV increased the number of sessions and varied terms in the Open Market Operation with reasonable volume and interest rate.
- Adjusting the average inter-bank exchange rate in line with the foreign currency demand and supply of the market and SBV’s directives. Additionally, it required credit institutions to strictly control the lending in foreign currencies, especially for payment for imported goods and services that customers do not have revenues in foreign currencies for; reduce the scale and pace of lending in line with the foreign currency mobilizing capacity.
- Continuing to take consistent solutions to stabilize and control the gold market. In particular, SBV allowed a number of eligible commercial banks to transfer part of mobilized and custody gold amount into cash to supplement the gold supply in the domestic market and open overseas gold accounts in order to balance their gold position against the risk of gold price fluctuation; required credit institutions not to provide loans for purchasing gold, place gold-collateralized loans into the asset group with the risk factor of 250% and strictly control the gold-collateralized lending.
Following the issuance by the Government of Decree No. 95/2011/ND-CP revising administrative penalties on foreign exchange and gold trading management, SBV caaried out synergic solutions to promptly implement the Decree, in particular: (i) requiring provincial and municipal People’s Committees, the Ministry of Industry and Trade, the Ministry of Finance, the Ministry of National Defense and the Ministry of Public Security to coordinate the implementation of Decree 95/2011/ND-CP; (ii) requiring credit institutions to publicize Decree No. 95/2011/ND-CP in their entire institutions for strict compliance, and proactively detect violations of regulations on the foreign exchange and gold trading management; (iii) requiring SBV’s entities to receive information from entities and individuals in order to dael with violations of the regulations on the foreign exchange and gold trading management in accordance with law; and coordinating with the relevant specialized entities in supervision of the implementation of the regulations on the foreign exchange and gold trading management; and (iv) enhancing information and communication on forms and administrative penalties of regulations on the foreign exchange and gold trading management.
Ensuring safe banking operations
- SBV continued to take necessary measures to ensure a safe and sound banking sector, in particular: continuing to enhance the monitoring, detect and strictly deal with violations of the ceiling mobilizing interest rate; and strictly supervising operations of each credit institution, especially certain credit instittutions with weak operations in order to take measures for prompt intervention.
- For banking system restructuring in line with the Resolution No.3 of the Party Central Committee, the SBV made public its views and principles of restructuring the bank sector, in particular: (i) the priority objective is to ensure safe and sound operations of credit institutions and the interest of depositors; and (ii) restructuring process is implemented cautiously on the voluntary basis with the appropriate roadmap. At the same time, the SBV would direct the functional units to urgently develop the Restructuring Plan in order to create a safe and sound banking system in accordance with international standards and practices and to become more competative; and better prepare the legal framework for the for the banking sector restructuring.
- Under the guidance of the Prime Minister, the SBV is urgently guiding the funtional units to formulate the Plan on restructuring the Bank for Agriculture and Rural development of Vietnam; and to develop an overall plan to define the requirement of recapitalization for all the state-owned commercial banks
II. Credit and monetary performance
1.Interest rates:
The VND lending and mobilizing interest rates were relatively stable as compared to end September. The USD mobilizing interest rates showed signs of slight increase and the USD lending interest rates were comparatively stable. The rates were as follows:
- The VND mobilizing rates were commonly 3.6% - 6% p.a for demand and below 1 month terms, 14% p.a for over 1 month terms;
- The VND lending rate was around 17% - 19% p.a for rural and agricultural production, and exporters; the rates for other sectors were 18-21% p.a; and the rates for non-productive sectors were 20-25% p.a;
- The USD mobilizing rates were commonly 2% p.a for term deposits by individuals and 0.5% for term deposits by economic institutions;
- The USD lending rate was about 6 % - 7.5% p.a for short terms and 7.5% - 8% for medium and long terms.
The rates in the inter - bank market were at high levels from October 11 to 19, 2011 (the rates were were 16 - 17% p.a for overnight term, 17% - 19% p.a for 1 - 2 week terms, and 20% - 22% p.a for 1 month term; the rates for 6 and 12 month terms rermarkably increased to 17.06% p.a and 20.73% p.a respectively on October 17 - 18, 2011) due to the fact that several commercial banks found it difficult to lend in the inter - bank market. From October 20, the rates in the inter - bank market declined again thanks to the SBV’s timely measures. Currently, the overnight and 1 week terms are 13% - 14% p.a and 14.5% - 15% p.a respectively.
2. Exchange rate:
The average inter-bank VND/USD excchange rate was up by 0.77% as compared to the previous month and by October 27 was at 20,788. The buying and selling exchange rate at commercial banks changed close to the average inter - bank exchange rate, and the selling exchange rate was adjusted to the fixed ceiling rate.
3. The gold market:
The domestic gold price fluctuated in line with the world gold price, and the gap between the domestic and world gold price was increasingly narrowed. The domestic gold price was quoted at VND 45 million per tael on October 27, 2011; it was VND 1 million per tael more expensive than the world price.
4. Fund mobilization
The total deposit outstanding with credit institutions by October 20 was estimated to decrease by 0.74% as compared to the previous month, of which the deposits in VND were down by 1.29% and foreign currencies up by 1.73%. The total deposit outstanding was up by 8.59% against end 2010.
5. Credit to the economy
Credit to the economy by October 20 was estimated to increase by 0.05% as compared to the previous month, of which credit amount in VND was up by 0.05% and foreign currencies up by 0.05%. Credit to the economy was estimated to be up by 8.61% in comparison with end 2010.
6. Total liquidity
The total liquidity by October 20 was estimated to decrease by 0.5% as compared to the previous month, and increased by 7.5% against end 2010, of which the cash in circulation was estimated to be up by 1.09% in comparison with the previous month and up by 0.91% p.a against end 2010.
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