According to the agenda of the third session of the 15th National Assembly, in the afternoon of June 8, 2022, the National Assembly (NA) convened a Question-and-Answer (Q&A) session on the third issue group related to the banking sector under the chairmanship of the NA President Vuong Dinh Hue. Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) was responsible for answering the NA Deputies’ questions in this session.
Governor Nguyen Thi Hong answers questions at the Q&A session at the National Assembly
Also attending the Q&A session to clarify the aspects raised by the NA Deputies, there was Deputy Prime Minister Le Minh Khai, the Minister of Planning and Investment, the Minister of Finance, the Minister of Construction, the Minister of Public Security, the Government’s Inspector General; the Auditor General of the State Audit Office of Vietnam; the Chief Justice of the Supreme People's Court of Vietnam; and the Prosecutor General of the Supreme People's Procuracy.
Governor Nguyen Thi Hong answers questions at the 3rd Session of the 15th National Assembly
The banking sector has been contributing to controlling the inflation, maintaining the macro-economic stability, and supporting the economic growth
Governor Nguyen Thi Hong emphasized that the banking sector, over the past years, has obtained encouraging results, contributing to controlling the inflation, maintaining the macro-economic stability and supporting the economic growth, while still ensuring the safe and sound banking operations of the credit institutions. However, there are still many limitations and obstacles that need to be overcome to improve the banking performance in the coming time. Therefore, this Q&A session was an opportunity for the SBV Governor to listen to ideas and comments from the NA Deputies, thereby the Governor and the SBV Board of Management could conduct the policy-making decision-making more effectively, and could contribute further to the socio-economic development.
Creating favorable conditions to tackle with the difficulties of small and medium enterprises (SMEs)
Answering the question about the credit policies and the interest rates applied to SMEs, the SBV Governor shared that the management and reduction of the interest rates in order to remove the difficulties of the enterprises and the people is a central task that the SBV pays much attention to. In fact, over the past time, the SBV has conducted various measures to regulate the monetary policies, helping to reduce the common interest rates. However, in the first five months of 2022, the SBV’s monetary policy management has been put under big pressure caused by the external factors such as the global inflation and the upward trends of interest rates at central banks around the world. Since the beginning of this year, credit has increased at the rate of 8%, with the fastest growth seen after the reopening of production and business activities. This is a relatively high level as compared to the target growth rate of 14% for the entire 2022, reflecting the high pressure, but the SBV has managed to regulate the credit growth effectively and has basically maintained the common interest rates with a small increase of 0.09% in comparison with those of the same time last year.
About the interest rates applied to SMEs, the Governor said that, over the past years, especially during the 2 years of COVID in 2020-2021, the SBV had directed the credit institutions to reduce the lending interest rates for enterprises and the people, with the total reduced interest amount estimated between VND 47,000 to 48,000 billion, and that has reflected the enormous efforts of the banking sector in sharing difficulties with the SMEs.
About the access to credit, the SBV Governor shared that the Government has issued several policy packages, including a law on SMEs. In addition, the Government has promulgated a number of decrees to tackle with the difficulties and initiated multiple support measures for SMEs. Moreover, there is currently a fund for credit guarantees for SMEs in order to facilitate the SMEs’ access to the loans provided by the credit institutions. At the local level, there are also 29 credit guanrantee funds. In the near future, it is necessary to review and evaluate the performance of these funds, and then there are more opportunities for SMEs to get access to loans provided by the credit institutions. On the side of the banking industry, we would coordinate with the relevant Ministries and agencies to conduct appropriate policies and measures to remove more difficulties of the SMEs.
Proactively implementing Resolution 42
Regarding the question about Resolution 42, the SBV Governor replied that, apart from the achieved results, there are still many difficulties and obstacles in the implementation process. However, one important point in Resolution 42 is that it allows lenders to collect collaterals and can sell their NPLs and collaterals at lower or higher prices than the normal values. That is an extremely important point because among the VND 541 trillion classified as NPLs before the birth of Resolution 42, VND 380 trillion was considered recoverable, of which 40% could be collected through voluntary payments by the borrowers. Despite the difficulties and obstacles in the implementation process, the extension of Resolution 42’s effectiveness is expected to further facilitate for NPL resolution.
In the coming time, the SBV would proactive coordinate the implementation of Resolution 42 with the goal of ensuring the prudent banking system, increasing the confidence among depositors.
There would be a legal corridor to control lending activities via apps
Answering the question about a legal corridor to control lending activities via apps or websites, Governor Nguyen Thi Hong shared that the Government had drastically directed and assigned the SBV to take the lead in coordinating with the relevant Ministries and agencies to review the situation and provide recommendations to the Government. According to a survey done by the SBV, in Vietnam, there have been organizations providing P2P lending. The SBV is currently formulating a draft decree to create a legal corridor for this activity, ensuring the safe and sound operations. Based on the best practices in other countries, the SBV would draw out some lessons to minimize any arising risks.
The SBV has been actively implementing Resolution 43
Answering the question about the implementation of Resolution 43 on the 2% support package, Governor Nguyen Thi Hong shared that right after the issuance of Resolution 43 of the NA, the Government immediately issued Resolution No. 11, which assigns the SBV with three main tasks as follows:
The first task is related to the monetary policy management in association with the fiscal policy in order to maintain the macro-economic stability. This had been previously reported to the NA Deputies at the Q&A session of the Minister of Finance.
Secondly, the SBV has been tasked with submitting two draft Decrees for promulgation. One Decree is on preferential credit for the ethnic minorities and people in the mountainous areas, and this has been completed and the Decree has already been promulgated. The SBV is now formulating the guiding Circulars for the implementation. Vietnam Bank for Social Policies has also been preparing all the necessary procedures for proving loans right after the issuance of the relevant guiding Circulars.
Thirdly, regarding the implementation of Decree No.31 on the 2% interest rate support policy, which was enacted on May 20. On the very same day, the SBV had also issued Circular No.03 providing guidance for the implementation of Decree No.31, and had directed all credit institutions to participate in the implementation with the highest sense of responsibility.
In her further report to the NA Deputies, the SBV Governor shared that Decree No.31 already stipulates clearly that the loans that had been signed and disbursed after January 1, 2022, and that belong to the application subjects as stated in Decree No.31, could still benefit from the interest rate support until the end of the effective period of Decree 31, i.e. December 31, 2023. Although the Decree was issued in May, lendings to businesses to recover economic operations had already been implemented since January 1, 2022.
Credit extension must go in parallel with ensuring safety and efficiency
Answering a question about measures to improve the credit performance and NPL resolution, the Governor explained that the SBV has always directed the credit institutions to strictly implement the regulations on lending activities in order to ensure full compliance with the requirements, and to make risk provisioning in order to proactively resolve any arising NPLs. Over the recent time, when many companies have been facing difficulties, the banking system has rescheduled the debts and maintained debt classification, creating conditions for many companies to continue to access banks’ loans. However, the SBV has also required the credit institutions to actively make provisioning for a 3 years’ period, so that there would be sufficient room to deal with any arising bad debts.
Regarding the microfinance, the Governor shared that there are currently four microfinance funds with transaction offices in 24 provinces and cities. However, it is difficult for the microfinance funds to mobilize resources for their lending activities. Therefore, the SBV has conducted a review and evaluation in order to initiate a process of restructuring the system of the credit institutions in general, and to amend and supplement the existing legal documents.
Responding to a question about the bank account management in the face of frauds against people with money in their accounts recently, the SBV Governor shared that receiving deposits is one of the key operations of the banking system. Accordingly, the SBV has promulgated a full and specific set of legal frameworks for account opening and management. Especially, with the development of high technologies, the SBV has also created a premise for digital banking transformation in the future. The SBV has issued a legal document allowing people to open bank accounts via electronic means, using electronic authentication. In fact, when opening an account, an individual has to authenticate their identity.
Regarding the debt recovery by finance companies, SBV Governor Nguyen Thi Hong stated that, on the basis of public opinions, the SBV has reviewed and found that it is necessary to amend the current legal documents, including the SBV's Circular on the provision of loans by finance companies.
Real estate credit must be safe and effective
Answering the question about credit for the real estate sector, the Governor said that the real estate market has many players, and also attracts various investment resources, and credit is just a channel for investment in the real estate market. In the recent years, the SBV has issued a policy requiring that credit expansion must ensure safety and efficiency, with focus on production, business, and controlling the capital flows into potentially risky areas. Therefore, throughout the years, the SBV has promulgated various legal provisions to control such risks. About the provision of loans for investments into real estate, the credit institutions are allowed to make their own decisions and agreements with their customers on the basis of ensuring the safe and sound credit operations.
Regarding the housing needs of low-income citizens, the SBV Governor emphasized that there are currently several policies stipulating the implementation in this area, for example Decree No. 100, which had been implemented and the loans are provided through Vietnam Bank for Social Policies. Moreover, the 2% support package is also applied to loans which are used for social housing projects, or for the workers’ housing projects, or for the rehabilitation of old apartment buildings included in the List of projects made and publicized by the Ministry of Construction.
In addition, Vietnam Bank for Social Policies has also conducted a number of lending programs, housing support, and residential land support for the poor, the policy beneficiaries as well as for the ethnic minorities and people living in mountainous areas.
Communication activities have actively facilitated the access to official credit, while controlling black credit
Answering a question about black credit and the SBV’s solutions, the Governor explained that the SBV has been assigned to enhance the official credit channels. Over the past time, regarding the legal corridors, the SBV has issued a Circular on lending operations by the credit institutions to their customers, including regulations on loans used for daily needs. Currently, the SBV is reviewing to amend the Circular in the direction of applying technologies to lending activities In order to facilitate enterprises’ access to bank loans. Moreover, the SBV has also issued a separate Circular on credit provided by finance companies, with very clear regulations over the debt collection activities or the interest rates. In addition, in the overall management and direction, the SBV always directs the credit institutions to diversify their products and implement preferential lending policies for the remote areas.
An important point is that the SBV has paid a lot of attention to the communication activities so that people in the remote and rural areas can understand about the Government's credit policies and credit for the poor households, the policy beneficiaries, etc. The SBV has also initiated several communication and financial education programs, such as “Smart Money”, “Holding the purse-strings" TV shows, which are broadcast on VTV1 and VTV3 channels; thereby, helping to provide guidance for the people in accessing and using banking products and services.
Controlling and curbing the increase in NPLs in the post-COVID period
Responding to a question about an increasing trend of NPLs caused by the impacts of the COVID-19 pandemic, the Governor shared that in light of many difficulties faced by the businesses and people, it would be difficult for those businesses and people to access new loans if the NPLs increased. Therefore, in March 2020, the SBV had issued a Circular allowing businesses and people to reschedule the debt payments and maintain debt classification. Right after the issuance of this Circular, the SBV had proactively requested the credit institutions to formulate a roadmap for risk provisioning for the rescheduled debts, so that when NPLs arise, they would have sufficient financial resources to resolve.
Credit growth management
Answering a question about the credit management based on the measure of determining the credit ‘room’, or credit limits, the Governor shared that Vietnam’s economy depends a lot on the credit resources provided by the banking system. Currently, Vietnam's credit balance against the GDP is estimated at 124%, the highest ratio in the world according to the World Bank's assessment. According to the Governor, the fact that the economy relies much on credit from the banking system, whenever there is a shock like COVID or big fluctuations in the global economy, it can immediately affect the banking sector and threaten the banking system with insolvency, and then cause negative effects on the whole economy. Therefore, putting the credit growth under control is a necessary measure, and in fact, the SBV has applied it since 2011 and found it effective in the management, thereby helping to maintain the stability of the money market.
Regarding the specific means of determining the credit limits, usually at the beginning of each year, based on the inflation and the GDP targets set by the National Assembly, the SBV will set an oriented target for the whole year, and this target may be adjusted in accordance with the practical situations.
Regarding the allocation of the credit ‘room’ to the credit institutions, the banking industry has conducted this policy in line with the general principles, based on the classification of the credit institutions. Those credit institutions with healthy performance and better governance will be granted higher credit limits.
Concerning the issue of cross-ownership, the Governor shared that the Prime Minister had directed the Ministry of Public Security to connect the citizen data system that contains chip-based citizens’ identity information. Thus, all transactions of an individual with their chip-based identity will be saved. That will help to make all transactions in the economy become more transparent.
Also at this Q&A session, Governor Nguyen Thi Hong answered questions from the NA Deputies about the virtual currencies, electronic money, crypto currencies; confidentiality of personal information and accounts; strengthening the financial capabilities of the State-owned commercial banks; the lending activities of the credit institutions in the field of securities, real estate; the cash payment issue, etc.
Le Hang