At the discussion sessions within the framework of the Vietnam Business Forum (VPF) 2023, organized on March 19, 2023, representatives from the associations and working groups mentioned several issues and made recommendations in the field of banking operations.
SBV Deputy Governor Pham Tien Dzung speaks at the Forum
Enhancing framework for green finance
Specifically, Ms. Michele Wee, Chief Executive Officer (CEO) of Standard Chartered Bank Vietnam Ltd., Chairwoman of the Banking Working Group (BWG), said that the challenges in 2023 to Vietnam’s economy may come from the external uncertainties (geo-politic and economic shocks, increasing inflation around the world and the monetary tightening, etc.). In the domestic market, the inflation pressures have been increasing, and the negative impacts from the uncertainties in the financial and real estate markets on the asset quality, the liquidity, the credit demand and the control of the banks’ prudent ratios.
Ms. Michele Wee, CEO of Standard Chartered Bank Vietnam Ltd., Chairwoman of the BWG
Regarding Vietnam’s National Digital Transformation Plan and the commitments to sustainable growth, according to the BWG’s Chairwoman, it is necessary for the Government and the State Bank of Vietnam (SBV) to set out clear orientations, especially in the e-Government development and the national digital transformation program. It is also necessary to have the support from the credit institutions, and the donors’ commitments to sustainable finance; the formulation of the strategy for managing environmental and social risks, with the substances of green environment integrated in the process of credit appraisal procedures, as well as the process of managing/controlling ESG risks; the mobilization of capital and resources for sustainable growth in Vietnam.
To accomplish these goals, the BWG recommends that Vietnam need a roadmap to quickly apply green energy and an appropriate green financial framework for projects that can get bank loans through actions such as the development of the transitional financial instruments, the preparation of environmental-social-governance (ESG) reports; the investment portfolio transformation, etc.
In addition, the credit institutions also hope that the Government would promote the development of the financial market and finance the transformation based on some recommendations, such as a more detailed guidance on the definition of ‘green’, the assessment criteria,– the reporting standards, the green bond market development; the mixed financial leverage, etc.
Vietnam also needs to enhance the engagement between the relevant Ministries and the International Partners Group (IPG), as well as the Glasgow Financial Alliance for Net Zero (GFANZ) under the auspices of the cooperation agreement on Just Energy Transition Partnership (JETP) within the resource mobilization plan for Vietnam.
The BWG also made some specific recommendations as follows:
Firstly, Vietnam needs to double its efforts to accelerate the implementation of digitization in association with the e-Government Development Strategy and the digital transformation program towards green growth and climate change.
Secondly, regarding green growth, the finance and banking sector needs to cooperate with the business community towards the implementation of Vietnam's Green Growth Strategy. This process will be accelerated when JETP partners continue to work to facilitate the flow of finance into the private sector.
Thirdly, regarding the real estate/corporate bond market, the signs of weakening in the growth of the corporate bond market have posed a challenge for the real estate businesses in raising capital and could lead to short-term financial system volatilities. Therefore, the Government needs to develop a market recovery plan with the support of the Ministry of Finance and the SBV to ensure the safe and sound operations of the financial system.
Continue to work closely to address related issues
Receiving and responding to comments from the business community, especially from the BWG at the VBF 2023, Mr. Pham Tien Dzung, SBV Deputy Governor, expressed his sincere thanks to the international organizations for their cooperation over the past time, especially on the emerging issues in the monetary policy management, the central bank digital currency development, the anti-money laundering, the payment operations, Fintech, etc.
SBV Deputy Governor Pham Tien Dzung responds to the feedbacks from the business community
Regarding the issues related to the banking sector, the SBV Deputy Governor confirmed that the SBV had received 34 questions from the BWG. Among them, 12 questions have been fully answered; 9 questions which are related to other Ministries and agencies are currently being handled by the SBV in coordination with other Ministries and agencies; and 13 questions are being handled actively by the SBV through direct engagement with the BWG.
About the digital transformation which receives special attention by the BWG, the SBV Deputy Governor affirmed that the banking sector was the first one to issue a Circular on e-KYC. This is the key to digital transformation and digital banking.
About green credit, the SBV Governor has issued a Directive requesting the relevant entities to formulate a legal basis for green credit development, and an action plan of the banking sector to implement the National Strategy on Green Credit.
About the monetary policy management, the SBV has recently issued a Decision on the reduction of the key interest rates and the overnight lending rate by 1% p.a. This was a good sign for the market. Through these key interest rate reductions, many banks have lowered their mobilizing interest rates, thereby enabling reductions of their lending rates, creating favorable conditions for production and business activities.
Regarding the credit operations, the SBV Governor has directed to provide credit for the priority areas, including green credit. Under the direction of the Prime Minister, the SBV would put the best efforts into meeting the bank's capital demands for the economic development activities.
Deputy Governor Pham Tien Dzung receives the Commemorative Medal on the occasion of the 25th VBF anniversary
The SBV Deputy Governor also mentioned the e-contracts and shared that the SBV, Vietnam Banks’ Association (VNBA) and the BWG are currently working with the Ministry of Information and Communications, the National Assembly’s Committee on Science, Technology and Environment to discuss and exchange views about this matter in order to come to a consensus.
Le Hang