In the afternoon of April 25, in Hanoi, the State Bank of Vietnam (SBV) organized a virtual conference on the credit operations and the implementation of Circular No. 02/2023/TT-NHNN dated April 23, 2023 on the rescheduling of debt payment and the maintenance of debt groups by the credit institutions and the foreign bank branches in order to support the customers in difficulties. The Conference was chaired by SBV First Deputy Governor Dao Minh Tu.
First Deputy Governor Dao Minh Tu
Also attending the Conference, there were representatives from the SBV entities, SBV municipal and provincial branches, Vietnam Bank for Social Policies, the Cooperative Bank of Vietnam, commercial banks, foreign bank branches, finance companies, etc.
The Conference was organized in the context that, starting from April 24, 2023, the banking sector has begun the implementation of Circular No. 02/2023/TT-NHNN dated April 23, 2023 on the rescheduling of debt payment and the maintenance of debt groups by the credit institutions and the foreign bank branches in order to support the customers in difficulties, and Circular No.03/2023/TT-NHNN on the termination of the effectiveness of Paragraph 11, Article 4 of Circular No.16/2021/TT-NHNN dated November 10, 2021 regulating the trading of corporate bonds by the credit institutions and the foreign bank branches. These two Circulars are aimed to resolve the difficulties and extend the space for credit operations.
Credit growth at low level due to weak capital absorbability
In his opening speech, First Deputy Governor Dao Minh Tu shared that in 2022 and in the first months of 2023, the general economy and the banking sector in particular have faced many difficulties, such as the sluggish growth in the global economy, the high inflation rates around the world, the case related to Saigon Joint Stock Commercial Bank (SCB), etc., which have negatively affected business and production activities. Besides, there have been disruptions and contractions in Vietnam’s large and traditional import and export markets.
Those contextual situations have caused a lot of pressure and mixed challenges to the credit operations of the banking industry. On one hand, the demand for credit has decreased due to the three weakening growth momentums (the decreasing capital demand for production and business operations, the lower capital demand for consumption, and the slow disbursement of public investment). Moreover, the corporate bond and the stock markets have yet developed nor fulfilled their role as sources of long- and medium-term capital to the economy.
As of April 20, 2023, the volume of credit growth reached over VND 12,230 trillion, an increase of 2.57% as compared to that of the end of 2022, and an increase of 10% as compared to that of the same period in 2022. The credit growth rate was lower than that of the same period in 2022 (6.46%). Apart from the reasons of the declining demand for credit and the banks’ prudent approach in extending credit as mentioned above, another reason was that the real estate market continued to experience difficulties (mainly due to the legal status of the property projects), which has led to the decreases in the credit growth for the real estate sector, resulting in a low overall credit growth.
In order to facilitate the credit operations of the banking industry, the Government has issued Resolution No. 50/NQ-CP dated April 8, 2023, and Resolution No.59/NQ-CP dated April 23, 2023, which have provided the basis for the SBV to issue Circular No. 02/2023/TT-NHNN dated April 23, 2023 on the rescheduling of debt payment and the maintenance of debt groups by the credit institutions and the foreign bank branches in order to support the customers in difficulties, a similar policy with the one implemented during the COVID-19 time, which took effective from April 24, 2023.
An overview of the Conference
The SBV Deputy Governor emphasized that the SBV has used all possible tools for the economic interventions, supporting businesses and the people. In addition, other operational solutions such as the bank-enterprise connection conferences, the programs organized by the local authorities, etc., have been conducted with a view to facilitate the businesses’ access to bank loans. The SBV’s policy actions and the credit institutions’ implementation have been prompt and strong; however it is difficult for the credit to grow without a strong increase in investment.
Ms. Ha Thu Giang, Director General of the Department of Credit for Economic Sectors of the SBV, speaks at the Conference
Reporting on the results of the credit operations in the first months of 2023, Ms. Ha Thu Giang, Director General of the SBV Department of Credit for Economic Sectors, said that, on the basis of the economic growth target of 6.5% for 2023, and the inflation rate target of 4.5% as set by the National Assembly and the Government, the SBV had set the orientation for the credit growth at about 14 to 15% in 2023, with appropriate adjustments in line with the actual developments and situations. In addition, the SBV has proactively conducted several measures, for example: (i) reviewing and improving the regulations related to credit extension operations; (ii) coordinating with Vietnam General Confederation of Labor to implement a consumer finance package worth VND 20,000 billion for workers with preferential interest rates, which is provided by HD Saison Finance Company and SMBC Prosperity Finance and Banking Company; (iii) coordinating with the Ministries, agencies and local authorities to promote the implementation of Bank-Enterprise connection programs, the panel discussions on credit in order to promptly remove difficulties and obstacles in accessing bank loans; (iv) actively implementing the 2% interest rate support program as stated in Decree 31, etc.
Regarding credit for the real estate sector, Ms. Ha Thu Giang shared that the SBV had issued Document No. 2931/NHNN-TD dated April 24, 2023 requesting the credit institutions to continue extending credit to real estate projects with good legal status, especially projects on social and workers’ housing; control credit risks concerning the hi-end real estate segment, and promptly report to the SBV Governor on any difficulties in the credit operations, as well as report to the relevant Ministries, agencies and local authorities on any obstacles related to the procedures and the regulations when implementing those projects, etc.
About the VND 120,000 billion credit program, the SBV had issued Document No. 2308/NHNN-TD dated April 1, 2023 providing guidance for the lending interest rates, the application period of the preferential interest rates, the beneficiaries (customers), etc. This Program has been implemented since April 1, 2023.
Enormous efforts to support people, businesses and the economy
Sharing about possible solutions in the coming time, Ms. Ha Thu Giang informed that the SBV would continue to manage the credit growth in accordance with the objectives and orientations set out in Directive 01 and other documents, policies and solutions to resolve the difficulties, enhance the credit access for the people and businesses, meeting the needs for the economic recovery and development.
Mr. Pham Chi Quang, Director General of the SBV Monetary Policy Department speaks at the Conference.
At the Conference, Mr. Pham Chi Quang, Director General of the SBV Monetary Policy Department, shared that, following the Government’s and the Prime Minister’s policy, over the past months, the SBV has conducted various measures and implemented several monetary operating tools to increase the money supply for the economy and reduce the lending interest rates to support the economic recovery. Accordingly, the interest rates in the inter-bank market have decreased rapidly, enabling the credit institutions to have more room to reduce their mobilizing and lending interest rates. Since the beginning of the year, the exchange rate between the VND against the USD has been stable compared with other currencies in the region, and the SBV has made a net purchase of foreign currencies to supplement its foreign exchange reserves. Thereby, a large amount of VND has been put into circulation, creating liquidity abundance among the credit institution system. In addition, the common mobilizing and lending interest rates have decreased sharply. Specifically, the lending interest rates applied to new loans have decreased by 0.6% p.a. as compared to those of the end of 2022, and are expected to decline further in the coming time.
Mr. Pham Chi Quang also shared that in the morning of April 25, 2023, the Prime Minister had provided concrete directions at a meeting with the four state-owned commercial banks, the relevant Ministries and agencies to discuss a number of solutions to support the economy, the corporate bond and the real estate markets, as well as orientations to reduce the lending interest rates. The four state-owned commercial banks, which account for more than 50% of Vietnam's credit market, had unanimously agreed with the policy of the Government and the SBV on reducing the lending interest rates in the coming time.
With the above orientations and the commitments of the commercial banks, the SBV would continue to conduct many policy actions to allow the commercial banks to reduce their interest rates, as well as to ensure the liquidity for the economy, maintaining a firm public confidence, thereby supporting the economic recovery in the coming time.
Circular 02 has reflected great sense of responsibility of the banking sector
Speaking at the Conference, Ms. Nguyen Thi Kim Oanh, Deputy CEO of Vietcombank, said that Vietcombank is committed to speeding up the implementation of Circular 02 and Circular 03; continuing to innovate the governance and administration mechanisms in order to cut down on the operational costs and to have more space to reduce the lending interest rates in support of the businesses. Other banks such as Agribank, BIDV, Vietinbank,… also agreed with this opinion.
Ms. Michele Wee, CEO of Standard Chartered Bank (Vietnam) Ltd., said that the Banking Working Group (BWG) is committed to implementing successfully the solutions to support the banks’ customers. In addition, the BWG would also collect feedbacks from the relevant stakeholders on Circular 02 and make recommendations to the SBV to ensure the most effective implementation.
Mr. Nguyen Minh Tuan, Director of the SBV - Hanoi branch, shared that the liquidity in Hanoi area is currently abundant, but the capital absorbability of the economy has been slow. Many enterprises have been facing difficulties, so they can hardly meet the banks’ conditions to access their loans. Therefore, Circular 02 has been a “life-saving” policy for many businesses when they all want their debts to be restructured.
Mr. Nguyen Quoc Hung, General Secretary of Vietnam Banks’ Association, affirmed that the issuance of Circular 02 has reflected a great sense of responsibility of the banking sector.
Deputy Governor Dao Minh Tu speaks at the Conference
Toward the end of the conference, SBV First Deputy Governor Dao Minh Tu requested the SBV entities and the commercial banks to focus on the following tasks: focusing their directions and management on the credit operations; sharing difficulties with the businesses and the economy; proactively proposing to the SBV about possible mechanisms, policies, and reporting on any difficulties to be resolved, making recommendations to the competent authorities on any matters related to the mechanisms and policies of the Government; supporting and advising the businesses to overcome the difficulties related to the procedures, the cash flows, the legal status, etc.
For the credit institutions and the foreign bank branches, the SBV Deputy Governor requested them to continue their effective implementation of Directive 01; focus their capital flows on production and business operations and the priority areas in accordance with the Government's policy; continue to strictly control credit for potentially risky areas; create favorable conditions for businesses and people to access banks’ capital, while still maintaining the credit standards; continue to review, improve, and simplify the processes and procedures to access banks’ loans; disseminate the contents of Document No. 2931 (dated April 24, 2023) related to banks’ loans for the real estate sector, as well as the VND 120 trillion credit program (involving four state-owned commercial banks); publicly inform about all feasible projects, and report on any arising problems during the implementation; continue to implement the 2% interest rate support program; promote the bank-enterprise connection programs to support businesses’ access to bank loans; continue to implement the solutions to reduce the operational costs, the common lending interest rates in support of the businesses and the people, etc.
Regarding Circular 02, the SBV Deputy Governor requested the commercial banks to urgently develop their internal regulations for the implementation without complicating the conditions and procedures. Any arising difficulties and obstacles should be reported promptly to the SBV (the Department of Credit for Economic Sectors).
The SBV Deputy Governor also requested the SBV municipal and provincial branches to direct the commercial banks in their jurisdictions to focus on implementing effectively Directive 01, the specific credit programs, and the VND 120 trillion credit package; focus on directing the implementation of Decree 31 on the 2% interest rate support program from the state budget; implement effectively Circular 02; enhance the information and communication, etc.
Among the SBV entities, the Department of Credit for Economic Sectors was requested to continue to oversee the credit operations of the whole banking industry; promptly report on any arising problems; assess the current difficulties and issues related to the credit operations and the implementation of Circular 02. The Monetary Policy Department is tasked to closely monitor the interest rates in the market, the general implementation of the directions of the Prime Minister and the SBV. The Banking Supervision Agency is tasked to closely supervise the implementation of Circular 02; develop inspection and supervision plans, etc.
Le Hang