The State Bank of Vietnam (SBV) held a meeting with credit institutions on September 9, 2016 to assess monetary market movement over the first eight months, to set up the orientation for regulating banking operations in the next four months of 2016.
The meeting was co-chaired by the SBV Deputy Governor Nguyen Thi Hong and Deputy Governor Nguyen Phuoc Thanh with the attendance of several Heads of SBV entities, including: Monetary Policy Department, Banking Supervision Agency, Foreign Exchange Management Department, Credit Department, Monetary Forecasting and Statistic Department and SBV Operations Centre. Additionally, there were presences of Chairman of Board of Directors, Chairman of the Board members and Chief Executive Officer of credit institutions locating in Hanoi.
Deputy Governor Nguyen Thi Hong and Deputy Governor Nguyen Phuoc Thanh co-chaired the meeting
According to Deputy Governor Nguyen Thi Hong, the Government of Vietnam is demonstrating its extremely high determination with the decisive requirement on ministries, industries and local authorities to implement economic solutions in order to attain the goals of macro-economy, including certain targets of banking sector such as monetary, credit, interest rate, and exchange rate…
Assessing on macro – economic situation as well as monetary and banking operations, Deputy Governor Nguyen Thi Hong said, after the first eight months of 2016, monetary movement and banking operation basically matched with the orientation set by the SBV Governor in Instruction No.01/CT-NHNN on February 23, 2016 and Instruction No.04/CT-NHNN dated May 27, 2016. Since taking office in April 2016, he has drastically directed credit institution system through a number of Documents on guiding and managing banking industry to achieve the key tasks assigned by the Government.
Mr Nguyen Duc Long, Deputy Director General of Monetary Policy Department had a report on monetary market movements and banking activities with notable issues in monetary operation and market upheavals. Economic growth at the end of June 2016 was 5.52%, much lower as compared to that of the same period of last year, that require ministries, sectors and locals and particularly the SBV to make a great effort in the progress of implementing the objectives set by the Government.
Mr Nguyen Duc Long, Deputy Director General of Monetary Policy Department
After significant increasing in the first six months, inflation had been lower in July and August. Up to the end of August, the figure of inflation increased by 2.58% in comparison to December 2015 and by 2.57% as compared to the same period of last year, and the average figure increase was by 1.91% in the first 8 months of 2016. However, inflation was basically stable, fluctuating around 1.41% - 1.9%, and by 1.81% on average of the first eight months. The statistic data shows that, monetary policy management was effective in line with inflation movement in the first 6 month of the year, basically due to the adjustment of medical price and other commodities.
Though export decreased, Vietnam still has trade surplus thanks to reduced import demand. Forex market and exchange rate facilitated SBV to buy foreign currencies to increase state foreign currency reserve. On the basis of macro-economic movement, the SBV conducted synchronous measures on monetary policy management, supporting money market stability as well as facilitate safe and sound credit growth to support economy development.
As for regulating monetary policy tools, basically, over the first 8 months of the year, the SBV closely watched the market movement to manage the monetary policy tools in a proactive, flexible manner, ensuring liquidity to support interbank interest rate toward reducing and easing the tenseness of the interest rates on the primary market.
About interest rates, the directives of the SBV over the past period were to conduct consistent measures with the aim of stabilizing the common mobilizing interest rate to strive for decreasing the lending interest rates, supporting production and business. Therefore, the SBV’s measures over the past time were to try to maintain the key interest rates including prudent ratios which were implemented in the specific time and roadmap in order to reduce the pressure on the market. At the same time, the SBV also issued documents to instruct credit institutions in reviewing and ensuring the liquidity and credit growth at reasonable level; thereby, reducing pressure on term difference and common interest rate. Through reviews, in the first eight months, the mobilizing interest rates were basically stable, slightly increased by 0.2-0.3 percentage point p.a in mid-February and March. From May to now, there have been credit institutions raising and reducing the mobilizing rates, but the common trend is stable. By conducting consistent measures, the common lending interest rates in credit institutions were basically stable. From April, 2016, the state –owned commercial banks and several joint-stock commercial banks reduced the short- term lending interest rates by 0.5 percentage point p.a and adjusted the medium and long – term interest rates to the maximum level of 10% p.a for production and business; at the same time, proactively implemented lending programs with preferential interest rates.
About exchange rate, right from the beginning of 2016, the SBV managed exchange rate under the central mechanism in a flexible manner in close to developments of the domestic forex market as well as developments of USD in the international market. With such management, the exchange rate was relatively stable, credit institutions purchased foreign currencies and sold a large number of foreign currencies to the SBV. The SBV realized that the hoarding of foreign currencies showed positive developments, foreign currency deposits from individuals were on decreasing trend as compared to the previous year.
Mr Le Duc Tho, General Director of Vietinbank.
Mr. Nguyen Hung, General Director of TPBank
At the meeting, leaders of several commercial banks, namely VBARD, BIDV, Vietinbank, Vietcombank, TienPhongBank, VP Bank, etc. raised their voices as being members of the market and asserted to continue sticking to directives and management of the SBV in order to well implement objectives assigned by the Government. Most of them said that monetary policy management of the SBV over the past time is appropriate. About developments in the money market, mobilizing interest rate of the primary market did not decrease when the interest rate of the secondary market was low, the liquidity was abundant. The main reasons were a decrease in market shares of credit institutions, temporarily abundant liquidity; however, the bank loan demand including medium and long term loans made credit institutions compete to mobilize funds; confidence in the market was affected by negative information on banking operations.
Deputy Governor Nguyen Phuoc Thanh
After listening to ideas from leaders of commercial banks, SBV Deputy Nguyen Phuoc Thanh instructed commercial banks to ensure prudent ratios, healthy development and maintain confidence of customers in the banking sector. With the role in managing the banking industry, the SBV monitored the market and promptly intervene when need be, and ensured the safe and sound banking system.
SBV Deputy Governor Nguyen Thi Hong asserted that the SBV acknowledged the operational results of credit institutions over the past time. The SBV will continue flexibly conduct consistent measures of managing monetary policy in consistence with objectives assigned by the Government and orientations set by the SBV Governor.
Le Hang – Thoa Le