On April 19, 2024, in Hanoi, the State Bank of Vietnam (SBV) organized a press conference to disseminate information on the results of the monetary policy management and the banking operations in the first quarter of 2024. First Deputy Governor Dao Minh Tu of the SBV chaired this conference.
Also attending the conference, there were representatives from the SBV entities, the SBV branch in Hanoi, and several commercial banks.
The credit for the economy increases by 1.34% against that of the end of 2023
Speaking at the press conference, First Deputy Governor Dao Minh Tu informed that, in the first quarter of 2024, the SBV had continued to manage the monetary policy in a proactive and flexible manner, with close coordination with the fiscal policy and other macroeconomic policies in order to control the inflation, support the economic growth recovery, promptly adapt to the domestic and international market developments, and maintain the stability in the money and the forex markets.
The SBV Deputy Governor mentioned a number of measures implemented by the SBV during the recent months. Specifically, on the interest rate management, the SBV had continued to remain the key interest rates unchanged after 4 downward adjustments in 2023 in the context that the interest rates around the world were still remained at high levels, creating favorable conditions for the credit institutions to access the capital resources from the SBV with low costs. The SBV had also continued to encourage the credit institutions to cut down on their costs in order to reduce the lending interest rates, thereby, the deposit and lending interest rates at the commercial banks had decreased as compared to the end of 2023.
According to the reports on the interest rates submitted by the commercial banks, as of March 31, 2024, the average deposit interest rate and the average lending interest rate for new transactions were at 3.02% p.a. and 6.5% p.a. respectively, recording decreases of 0.5% and 0.6% respectively as compared with the rates of the end of 2023.
In order to enable the credit institutions to provide their credit capital to the economy, on December 31, 2023, the SBV had assigned all of the credit growth targets of 2024 to the credit institutions, and publicly announced its principles for determination of the credit targets so that the credit institutions could proactively implement their credit growth operations. Despite the SBV’s active and synchronous measures, the credit growth rate at the beginning of 2024 had been quite low as compared with the those of the previous years.
An overview of the Press Conference
Therefore, on February 7, 2024, the SBV issued Official Document No. 1088/NHNN-CSTT directing the credit institutions to accelerate the implementation of the solutions directed by the SBV Governor in Directive 01/CT-NHNN dated January 15, 2024 to contribute to promoting the economic growth. Following that, on February 20, 2024, the SBV organized a virtual conference on promoting the banking credit in order to support businesses and enhance the economic growth in 2024. Implementing the Prime Minister’s directions, on March 14, 2024, the SBV took lead and coordinated with the Government Office and other relevant Ministries and agencies in organizing the Conference themed "Implementing the monetary policy management tasks in 2024, focusing on removing difficulties for production and business, promoting growth and maintaining the macroeconomic stability” under the chair of the Prime Minister. This Conference aimed to propose solutions to remove the difficulties, enhance the credit accessibility of businesses and people. As a result, by March 29, the credit growth rate had increased by 1.34% against that of the end of 2023.
To support the banks and enterprises, the Deputy Governor informed that the SBV had allowed the commercial banks to extend the policy of rescheduling the debt payment and maintaining the debt categories by another 6 months, i.e. until the end of this year, in accordance with Circular No. 02/2022/TT-NHNN on rescheduling the debt payment and maintaining the debt categories.
Regarding the exchange rate management, the SBV had managed the exchange rate in a flexible manner, in combination with issuing bills in VND to reduce the Vietnamese Dong liquidity surplus, thereby reducing the short-term pressures on the exchange rate. Basically, the liquidity in the market had been smooth and the legitimate demands for foreign currencies had been fully met; the exchange rate had been fluctuating in accordance with market conditions and the trends of the international currencies against the USD. Up to now, the exchange rate has increased by 4.9%, a relative low depreciation of the VND as compared with other currencies in the region and around the world. According to the Deputy Governor, the SBV is ready to make interventions immediately if the exchange rate experiences any unfavorable developments.
For the gold market, since the beginning of 2024, the international gold price has experienced an upward trend. The main reasons for this increase are: investors’ expectations that the US Federal Reserve (FED) would cut down the interest rates in 2024, causing the US dollar index to decline, while the demands for gold increases; the central banks of several countries have increased their gold purchases; the worrying psychology about the Russia-Ukraine conflict and the tensions in the Middle East, etc. In Vietnam, the average price of the SJC gold bullions has increased in line with the international gold prices. The SBV has been implementing the measures to support the gold market, selling gold bullions to increase the supply to the market by the gold bullion auctions.
In addition, in the first months of 2024, non-cash payments have continued to achieve positive results. Many fundamental operations have been digitized 100%; many Vietnamese banks have conducted over 90% of their transactions via digital channels.
The inspection and supervision of the credit institutions have continued to be focused on and strengthened, ensuring the security and disciplines in the monetary and banking market. The SBV has continued to proactively coordinate with the relevant entities in implementing the assigned tasks in the Action Plan of the banking sector to implement the Scheme on "Restructuring the system of credit institutions in association with NPL resolution in the 2021-2025 period” (Decision No. 689)
The legal frameworks for the money and banking operations have continued to be improved. In order to implement the 2024 Law on Credit Institutions in a timely, consistent, uniform and effective manner, on February 28, 2024, the SBV had submitted to the Prime Minister for consideration, approval and signature the Implementation Plan for the Law on Credit Institutions. In addition, the SBV would also continue to review the existing legal documents in the relevant areas of banking operations in order to amend, supplement, replace them, or issue new legal documents to ensure full consistency with the 2024 Law on Credit Institutions.
Deputy Governor Dao Minh Tu chairs the Conference
At the press conference, the SBV Deputy Governor, together with the representatives of the SBV Departments, answered a number of questions related to the monetary policy management and the banking operations in the coming time.
Regarding the question about the management of the gold market, Mr. Dao Xuan Tuan, Director General of the Forex Management Department, said that the SBV had made thorough preparations for the SJC gold bullion auctions. About the policy on the gold market management, the SBV had submitted to the Prime Minister a report on reviewing the implementation of Decree 24. In the report, the SBV, the relevant Ministries and agencies had proposed to revise Decree 24 to match with the practical situation.
Mr. Tuan also shared that gold crafting companies with export orders are still permitted to import gold material as stipulated in Decree 24. About the domestic gold jewelry and handicraft market, the Forex Management Department would collect and consolidate all comments and assessments, and would report to the SBV leadership for consideration.
“The management role of the gold market does not only belong to the SBV, but it is a shared responsibility of other Ministries and agencies, including the Ministry of Industry and Trade, the Ministry of Finance, etc. Therefore, to develop a healthy and sustainable market, it is necessary to have synchronous and coordinated measures of the relevant Ministries and agencies”, Mr. Tuan emphasized.
Sharing more information about the exchange rate, Mr. Pham Chi Quang, Director General of the Monetary Policy Department, said that over the past time, the exchange rate has been constantly heating, even to the maximum level in multiple sessions recently. The DXY Index has been rising rapidly in the first three months by over 5%, causing a lot of pressures on the local currencies of many countries, not only in Vietnam. Moreover, the import demands have been increasing significantly, especially in oil and gasoline, iron and steel companies, as well as the increased purchases of foreign currencies by other companies, which has contributed to the increases of the exchange rate. In that context, the SBV has managed the exchange rate in a flexible manner, helping to improve the absorbability of shocks, in collaboration with the SBV bill issuance in order to decrease the VND liquidity surplus, thereby reducing the short-term pressures on the exchange rate. Basically, the market liquidity has still been smooth, and the legitimate demands for foreign currencies have been fully met; the exchange rate has been changing in line with the market situations and the trends of other currencies against the USD.
Mr. Quang emphasized that the SBV has been conducting stronger measure to stabilize the forex market. On April 19, 2024, the SBV announced its plan to intervene in the foreign currency market. Accordingly, starting from April 19, the SBV would publicly sell its foreign currency to the credit institutions with negative forex status in order to change their forex status to zero, with the intervention price of 25,450 VND per USD. Right after the SBV’s announcement, there have been positive reactions in the market.
Continuing to regulate the interest rates in line with the market developments
According to the SBV Deputy Governor, in the coming time, the SBV would continue to closely monitor the market developments, the international and domestic economic situations, to manage the monetary policy tools and measures in a flexible and consistent manner in order to control the inflation, contributing to maintaining the macro-economic stability, stabilizing the money and forex markets, focusing on the following:
First, regulating the interest rates in line with the market developments, the macro-economy, the inflation and the monetary policy objectives;
Second, managing the exchange rate in a flexible manner in order to stabilize the forex market; proactively managing the credit growth, contributing to controlling the inflation, maintaining the macro-economic stability, supporting the economic growth, and ensuring a prudent banking system, etc.
Third, continuing to review and improve a number of legal documents related to the credit granting operations to ensure alignment with the 2024 Law on Credit Institutions; reviewing, assessing and proposing to the Government to consider to extend the implementation of Circular No. 02/2022/TT-NHNN on rescheduling the debt payment and maintaining the debt categories.
Forth, coordinating with the relevant Ministries and agencies to implement synchronous and effective measures as stipulated in the Scheme on Cashless Payment Promotion in Vietnam for the 2021-2025 Period; the Plan for Digital Transformation in the banking sector, and the Strategy for the Development of Payment Systems in Vietnam by 2030; continuing to effectively implement the substances as mentioned in the Coordination Plan No. 01/KHPH-BCA-NHNNVN between the SBV and the Ministry of Public Security on implementing the tasks in Scheme 06, in order to promote and enable the commercial banks and the intermediary payment service providers to supply safe and convenient payment products and services, meeting the increasing demands of customers.
Fifth, continuing to implement the assigned tasks related to the Scheme on restructuring the credit institution system in association with the NPL resolution for the 2021-2025 period in accordance with Decision No. 689/QD-TTg; monitoring and supervising the NPL situations of the credit institution system, etc.
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