On August 21st 2018, Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Thi Hong attended Vietnam Economic Forum (ViEF) 2018 in Hanoi. The Forum was an occasion where administrators, professionals and businesses analyzed the overall capital and financial markets in Vietnam, at the same time proposed options and solutions to develop the capital markets for long-term investments.
The event was attended by Deputy Prime Minister Vuong Dinh Hue, SBV Deputy Governor Nguyen Thi Hong, Mr. Nguyen Hoang Anh - Chairman of the State Capital Management Committee, Mr. Ha Huy Tuan - Vice Chairman of the National Financial Supervisory Commission (NFSC), Mr. Tran Van Dung - Chairman of the State Securities Commission (SSC). There were also representatives from the World Bank, the Asian Development Bank (ADB), Mr. Craig Chittick - Australian Ambassador to Vietnam, Mr. Nadav Eshcar - Ambassador of Israel to Vietnam and Laos, Mr. Kim Do-hyun - Ambassador of the Republic of Korea (RoK) to Vietnam, together with representatives from many commercial banks, securities companies, fund management companies, insurance firms, capital, financial and IT experts in Vietnam and abroad.
With the theme "Expanding Viet Nam's capital and finance market - Challenges and solutions", the Forum was a place where experts, administrators and businesses discuss and find solutions for the medium and long-term problems of Vietnam. The Forum consisted of two sessions. In the first session entitled "Restructuring the financial market of Vietnam - from the current situation to policy", the speakers pointed out the realities of the capital markets, the financial models in the world that can be applied in Vietnam, or solutions to develop an effective domestic financial supervision system…
In the second session, the administrators and experts in Vietnam and abroad jointly contributed ideas on how to utilize the idle cash in the private sector to boost the economy; promotion policies and the opportunities to diversify the investment environment...
Deputy Prime Minister Vuong Dinh Hue: Government pays much attention to the capital and financial markets in the context of Industry 4.0
In his opening speech, Deputy PM Vuong Dinh Hue highly appreciated and welcomed the organization of ViEF on Capital – Finance this time. According to the Deputy PM, the Government is currently very interested in three aspects related to promoting enterprise development and improving the investment environment, including removing institutional difficulties to boost the financial market. The Government considers the macroeconomic stability to be a key task, especially in the context that the world economy is changing while the size of Vietnam's economy is still small. The Deputy PM emphasized that the Government has created favorable conditions for the development of all economic sectors and has cut about 50% of the specialized examination conditions, and removed many institutional constraints in order to develop the financial market.
The Deputy PM hoped that the speakers would advise the Government to improve the institutions for developing the capital - financial markets in Vietnam. "We must develop the market in the direction of modernisation toward the international standards, especially with regard to the solutions of capital provision, the solutions to promote the equitisation, divestment and market restructuring processes, and to enhance the absorption capacity of the market participants, and strengthen the finance and banking system in the context of the economic fluctuations," the Deputy PM said. He noted that the Government also pays much attention to the development of the capital and financial markets in the context of Industry 4.0, adding that the Prime Minister will preside over a national conference on this topic in the near future.
Via the Forum, Deputy PM Vuong Dinh Hue wished to listen to the opinions of the experts on the issues of the financial market, the solutions to develop the capital markets for long-term investments and economic development of the country. The Deputy PM also raised a question: “Are banks overwhelmed by the burden of capital mobilization?”
Deputy Governor Nguyen Thi Hong: The banking sector focuses on balancing capital to control risks
In her opening remarks at the session entitled “Restructuring the Capital - Finance Markets in Vietnam”, SBV Deputy Governor Nguyen Thi Hong stated that the financial market has made good progress over the past years, although not as good as expected, but the stock and the monetary markets have grown strongly and become significant sources of capital for the economy.
According to the SBV Deputy Governor, the stock market has recorded many breakthroughs in the recent years with the total market capitalisation surpassing 70 per cent of the country’s GDP in 2017, the credit over GDP ratio is about 130%. The balance of other segments’ capital remains at a low level, such as: The volume of the corporate bond market is low, accounting for just 1.25% of the GDP, the Government bonds (G-bonds) still dominate the bond market at 20% of the GDP (in which the credit institutions hold about 80%). The need to meet the capital demands of businesses, which are mobilizing short-term capital accounts for a large proportion of total mobilized capital (about 70%) whilst the demand for medium- and long-term loans is big, has put a great pressure on the management of the maturity terms of the credit institutions. In addition to the difficulties of balancing in terms of time, in an economy still with strong dollarization like Vietnam’s, the credit institutions also have difficulties in managing the differences of the currencies and the exchange rates.
However, in the recent years, the SBV has paid much attention to controlling these two risks. Firstly, in order to manage the risk of term differences, in the annual management directions, the SBV Governor has instructed the credit institutions to control the risks, particularly the risks of credits for real estate, BOT projects and long-term capital. The interest rate policy also encourages long-term capital to improve the banks’ funding (the interest rate limit is only applicable for the period of <6 months, while for the periods of over 6 months the rates are negotiable, and stipulating the ratio of short-term capital used for medium and long term loans). As for the risk in balancing the currencies, the SBV manages in the direction of controlling inflation, raising the value of the VND, the interest rate and exchange rate policies in the direction of creating profit difference from holding the US dollars, implementing the anti-dollarization roadmap.
At the second session on the digital economy in light of the Industry 4.0, Deputy Governor Nguyen Thi Hong affirmed that the banking sector cannot stand outside the trends of the Industrial Revolution 4.0. Sharing opinions with the experts, Deputy Governor Nguyen Thi Hong reaffirmed: In Vietnam, there are currently 40 Fintech firms, but 60% of them are mainly operating in the payment sector, while other segments such as lending, personal finance management,... are still limited. According to the State Bank of Vietnam (SBV), the potential for Fintech development in Vietnam is great because in Vietnam 60% of the population is under the age of 35, with easy access to technology; there are 24.6 million mobile phone users and 52 million internet users.
Deputy Governor Nguyen Thi Hong said that the SBV has set up the Fintech Steering Committee and has identified key contents for research such as big data, blockchain, and cloud computing,... Right now, due to the lack of a legal framework, the Government has assigned the SBV to coordinate with the ministries and agencies to evaluate and recommend the P2P modality, which is a solution which, if developed, can limit black credits. However, according to the SBV Deputy Governor, in order to have a formal legal framework, it is possibly necessary to study in the direction of a pilot implementation. From the experience of other countries like China shows that at first P2P lendings were first not managed, but later those activities have to be put under a management framework.
VA