SBV Governor Nguyen Thi Hong continues to answer questions by the National Assembly Deputies

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.

Extending the implementation of Resolution No. 42/2017/QH14 has an important meaning

Regarding to the concern of some NA Deputies about extending the implementation of Resolution No. 42/2017/QH14, SBV Governor Nguyen Thi Hong shared that, the implementation of Resolution No. 42/2017/QH14 had made a significant influence in dealing with non-performing loans (NPLs). After the birth of the Resolution, many NPLs had bene basically resolved effectively. The limitations of the Resolution mainly came from the implementation. If this Resolution is not extended, it will be difficult to resolve NPLs, especially in light of the COVID-19 pandemic impacts. In the coming time, the SBV will coordinate with the relevant Ministries and agencies to review and consider the legalization of the NPL resolution.

Banks’ profits over their total assets are not big

Answering the concern about the sharing by the banks with the difficulties of the enterprises, the people and the whole country’s economy, considering that most of the banks still announced high profits over the last 2 years, as well as the SBV’s actions in the coming time, the SBV Governor confirmed that the banks’ profits over their total assets are not big. In the wake of the negative impacts caused by the COVID-19 pandemic, the credit institutions, under the direction of the SBV, have exempted and reduced their lending interest rates for their customers with the total reduced amount reaching VND 47,000 to 48,000 billion.

This is a remarkable number because the banking system itself is just a financial intermediary, and its profits come from the lending interest and other banking services. Therefore, the reduction of the lending interest rates has shown that the credit institutions have really shared with the people’s and the enterprises’ difficulties. Besides, the banking operations must always face with risks and issues related to non-performing loans (NPLs), which arise frequently and inevitably. This is the reason why the credit institutions need to increase their provisioning in order to resolve these NPLs.

Recently, the SBV has issued a Circular allowing the credit institutions to restructure their repayment terms, maintain the debt classification for the borrowing enterprises and people. During the implementation process in the first 5 months of 2022, the credit increased by 8% compared to the target of 14% for the entire year. Thanks to those directions by the SBV, many enterprises have bene able to recover and continue to access banks’ loans.

Regarding to the credit institutions’ profits, the SBV Governor clarified that banks are conditional enterprises, which are established for the objectves of doing business and making profits. Unlike common enterprises, banks often have very big charter capital and asset values. If we look at the banks’ profits and compare them with the banks’ total assets, the profits are no longer very big.

Relating to the management of the gold market, a Deputy raised a question whether the SJC’s monopoly as the only national gold brand could be one of the reasons for the current high prices of SJC gold bars, Governor Nguyen Thi Hong said that, gold price developments in the international market had been very complicated and unpredictable, affected by many factors. The gold prices in Vietnam have been following the global trends, however, due to the decrease in the domestic supply of gold bars and the fluctuations of the global gold prices, Vietnameses gold trading companies are highly concerned of risks and therefore often list their sale prices at a high level. According to the updated data, the people’s demand for gold bars is not really big, and thus the SBV has not yet decided to intervene in this market.

With regard to the question about providing credit for investment and trading in securities, the SBV Governor expressed that, the stock market has many elements that attract various capital sources, including the credit capital. The SBV has issued a legal framework stipulating that when the credit institutions engage in the stock market, they have to ensure that they can control any relevant risks.

Regarding the corporate bonds, the credit institutions are not only the direct buyers of the corporate bonds, but they are also providing credit for individuals and organizations to invest in securities. The SBV has required the credit institutions to maintain the percentage of their credit for this field not exceeding 5% of the total charter capital in order to ensure risk control.

Ensuring the effectiveness of the 2% interest rate support policy

Sharing about the solutions to manage the money flows in the 2% interest rate support policy from the State budget, with the total value of VND 40,000 billion, preventing it from entering risky areas, the SBV Governor explained that, the subjects of this interest rate support package belong to two groups: the first ones are the enterprises and organizations in a number of sectors and fields as prescribed for in Decree 27 of the Government. The second ones are those who have demand for borrowing to invest into social housing or workers’ housing projects. The relevant Ministries and agencies will also engage in the final settlements, along with the State Audit of Vietnam, before the Ministry of Finance settles this loan package. Moreover, the borrowing enterprises must prove their abilities to repay the debts and recover their business, because this loan package is a part of the economic recovery and development program. The SBV has requested that the banks provide the loans to the right subjects so as to ensure the money flows to the right individuals and organizations who really need it.

Credit growth must ensure macro-economic stability

Answering a Deputy’s question about the SBV’s determination of the credit limits, Governor Nguyen Thi Hong explained that Vietnam has its own characteristics. According to the World Bank's assessment, Vietnam is the most dependent country on banks’ resources in the world. This poses many risks, and therefore this tool of applying thecredit limits has been quite effective, especially in preventing an interest rate race and the mobilization of credit at a high level. If each commercial bank could set its own credit limit and reach for it, the macroeconomic stability would not be able to be ensured as currently.

Credit capital for transport projects

Regarding the credit capital for transport projects, the SBV Governor pointed out that the implementation of transport projects is very important, requiring capital from multiple sources, including public investment, foreign capital, private capital, and credit capital from the banking system. Capital demands for transport projects are usually very big, with long maturities, and the main collateral is the right to toll collection. Over the past years, many banks have had difficulties providing loans to transport BOT projects, because the NPL amount in these projects is quite high; many projects' financial plans after time become not as good as in the early stage. In the coming time, the SBV’s policy on the BOT projects will also be the basis for the banks to appraise and provide loans. When an enterprise participates in the construction of some sections, some stages within the whole construction process, the banking system may still provide credit.

The credit institutions have actively exempted and reduced loan interest for customers in difficulties

Since the onset of the COVID-19 pandemic, the credit institutions have exempted and reduced interest rates for their customers with the total amount of VND 47,000 to 48,000 billion. This is a remarkable number because the banking system itself is just a financial intermediary, and its profits come from the lending interest and other banking services. Therefore, the reduction of the lending interest rates has shown that the credit institutions have really shared with the people’s and enterprises’ difficulties. Besides, the banking operations must always face with risks and issues related to NPLs, which arise frequently and inevitably. This is the reason why the credit institutions need to increase their provisioning.

Recently, the SBV has issued a Circular allowing the credit institutions to restructure their repayment terms, maintain the debt classification for the borrowing enterprises and people. Thanks to those directions by the SBV, many enterprises have been able to recover and continue to access banks’ loans.

Concerning the inflation issue, according to the SBV Governor, it is a great pressure ensuring the macro-economic stability while still striving to control the inflation. That requires a harmonious balance of solutions from credit management, interest rates, exchange rates, as well as other tools; everything has to be coordinated synchronously; providing support to remove the difficulties for the enterprises and the people, while still paying very high attention to the inflation situation.

How to maintain the macroeconomic stability and control the inflation when the common interest rates are increasing

Answering this question, the SBV Governor acknowledged that currently the monetary management is also “under high pressure", especially in the context of hiking interest rates around the world. Meanwhile, Vietnam must control the inflation at a stable level, even decrease it. The SBV would harmonize all solutions and tools, including solutions for credit management, exchange rates, etc., in order to aim for the highest goal of maintaining the macroeconomic stability, and for removing the difficulties for the enterprises and the people, while still paying very high attention to the inflation situation.

Concerning the black credit, Governor Nguyen Thi Hong emphasized that this requires the participation of various Ministries and agencies, and the Ministry of Public Security is currently the lead agency. In order to control black credit, the banking industry would strengthen the official capital supply channels for the people. Over the past time, the SBV has issued a full set of policies and legal frameworks for the credit institutions and financial companies to provide loans to individuals, especially in the remote areas. These subjects often have difficulty accessing credit because they belong to a group with difficult conditions, often without any collateral, and thus it is risky to provide them with credit, and normally consumer finance companies can provide loans to this segment with high interest rates to offset the risks when people cannot pay their debts.

Also in this Q&A session at the NA meeting, SBV Governor Nguyen Thi Hong answered many questions about managing the credit growth in the banking industry; operating and managing the domestic gold market; the cash payment management; managing the cross-border money transfers, etc.

LK