Themed “Cooperating with businesses”, the Conference was chaired by Prime Minister Nguyen Xuan Phuc in Ha Noi on May 17. Following is a full text of SBV Governor’s speech.
For the last years, Government has been determining on macroeconomic stabilization, controlling inflation, and facilitating the economic growth in line with the objective set by National Assembly. Basing on macroeconomic policies of the Government, ministries and industries formulated their solutions and strategies with decisive concentration on macroeconomic stabilization and sustainable development of the economy.
The positive achievements obtained by Vietnamese Government in regulating macroeconomy are the important basis for international rating organizations to change their ranking for Vietnam. Particularly, Moody’s Investors Service just confirmed its revision of outlook on Vietnam’s B1 sovereign rating to positive from stable; changed outlook to positive on some ratings for 8 Vietnamese banks on May 3. This achievement has contributed to consolidating the expectation and confidence of global investors and facilitating Vietnamese enterprises to improve their ratings and get access to capital resources of reasonable cost in international financial markets.
Basing on the directions and guidance of the Government, SBV has conducted several solutions in close combination with macroeconomic policies to obtain the objective of managing the inflation at single-digit rate, to stabilize interest and foreign exchange rates, strengthen the confidence in VND, increase the state reserve to the highest level in order to create favorable conditions for enterprises to recover and expand production and business in a challenging periods.
In 2016, to implement Resolution No.35/NQ-CP, SBV issued the Action Plan of Banking system with a number of decisive and synchronous measures to improve business environment, strengthen national competitive capacity and develop enterprises. The whole banking system has conducted numerous important solutions as follows:
1. For credit management, supplying of long, medium and short term lending to business and the economy:
The SBV has conducted synchronous solutions to effectively extend credit for enterprises in line with the objective of managing inflation, ensuring the supply of 70% of demand for investment capital to the economy. Credit structure focused on production and business with the proportions of lending capital reaching to 80% of the total loans, especially for priority sectors and main projects under the guideline of the Government (which accounted for 50% of the total credit), of which the credit for agriculture and rural areas accounted for 19%, credit for SMEs was 22% out of the total lending of the economy.
Medium and long term loans accounted for 53% of the total loans; mobilized capital of medium and long terms accounted for 15% in total mobilized resource that created a big gap of maturities for banking system. However, the capacity of capital supply to the economy is still mainly based on banking system, the SBV allows credit institutions to use 50% of short term capital to provide medium and long term loans to support the economic development and enterprises’ production and business.
For lending in foreign currencies, credit institutions are allowed to lend in foreign currencies to meet the demand for short term borrowing to conduct production and business of exported goods to end 2017; concurrently SBV continues to review the request of credit institutions on providing loans in foreign currencies to enterprises of priority fields as defined by the Government.
Banking system also decisively conduct preferable credit programs with enterprises of specific sectors and industries such as agricultural and rural development in line with Degree No.55/NĐ-CP; lending to encourage high tech and clean agricultural development in line with Resolution No.30/NQ-CP dated March 30, 2017; lending to build fishing boats in line with Degree No.67/2014/NĐ-CP; lending policies to re-cultivate coffee tree in the Central Highlands; lending policies to reduce losses in agricultural production, natural disasters, and to ease difficulties of pig farming…
Thank to these policies, credit activity has achieved numerous positive results. Lending growth reached 18.25% in 2016. In 2017, the lending activity has obtained good growth since the first months. By April 2017, credit grew by 5.76% as compared to end 2016, higher than that of the same period in the recent years; credit in Vietnamese Dong increased by 5.87% and foreign currencies increased by 4.64%.
In the coming time, banking system will continue to focus capital on production, priority fields, of which the first priority will be for effective projects, enterprise and investment plans with technological application for the purpose of production of Vietnamese brand products that are able to compete in regional and global markets. The banking system also focus fund for enterprises of value chain production, high tech agricultural enterprises, clean production, start ups, and SMEs in parallel with making research, innovate funding solutions toward selecting and classifying enterprises in line with the scheme of restructuring production of the Government.
It is the fact that borrowing demand of enterprise is still huge. So banking system has made great efforts to mobilize capital to meet capital demand of the economy, however, a part of resource is still not unlocked in the type of NPLs and unresolved collaterals. The SBV has submitted Government and National Assembly to issued Resolution on NPL resolving in order to recreate a significant capital resource to extend credit for production and business, create conditions for enterprises with NPLs to access new loans to recover their productions and business.
2. About management of interest rate and request for decreasing lending rate from enterprises
From 2016, in the context of inflation on increasing trend, high demand of capital and Government’s bond issuance, pressure on demand for credit loans due to low disbursement of capital for investment, the SBV persistently managed measures properly in order to keep common mobilizing rate stable, decrease lending rate, thereby supporting production and business of enterprises while ensuring the objectives of curbing inflation, stabilizing money and forex market. The common mobilizing and lending interest rates have been stable from 2016 to now, especially from September, 2016, several credit institutions reduced mobilizing and lending rates by 0.3-0.5 percentage point p.a and by 0.5-1 percentage point p.a respectively for loans related to production and business and priority fields. Therefore, the common interest rate currently declined sharply in line with objectives of management, monetary and inflation developments; at the same time, ensuring the harmony of benefits among depositors, credit institutions and borrowers.
In Resolution No. 24/2016/QH14 dated November 8, 2016, the banking sector was assigned to strive to decline average lending rate to the average level of ASEAN-4 group by the year of 2020. In the coming time, the SBV will closely monitor macro-economic developments to manage interest rate stably in accordance with the objective of curbing inflation; continue instructing credit institutions saving cost, improving business and production efficiency for lending rate reduction; especially concerning about preferential rates for priority enterprises, start – up business, high-tech applied enterprises with effective business plans and products having competitiveness in the international market.
3. About management of exchange rate
The SBV has been always cautious about managing exchange rate because any changes in exchange rate can affect many aspects of the economy like inflation, macro-economic stability, overseas lending and payment, confidence in Vietnam dong, operations of export – import enterprises.
In 2016 and in the first months of 2017, the management of exchange rate faced many difficulties due to sharp fluctuations in the international financial market after Brexit event, US Presidential election, Fed interest rate raising. In the domestic market, supply and demand for foreign currencies…, trade deficit was large, USD tended to be appreciated. However, thanks to management of the central exchange rate in a flexible manner in collaboration with other monetary policy instruments, VND/USD exchange rate marginally increased by 1.1-2% averagely, the domestic forex market was more stable. The stable exchange rate contributed to stabilizing macro-economy, supporting export, creating favorable environment for enterprises to proactively formulate and implement business plans, and prevent risks concerning with exchange rate; at the same time, formulate confidence in investors and enterprises. The SBV also bought a large amount of foreign currencies to increase the state forex reserves; achieve initial objective of anti dollarization.
In the coming time, with the directive of anti dollarization in the economy, the SBV will continue managing exchange rate in a stable and flexible manner in order to prevent negative impacts due to fluctuations of exchange rate, ensuring benefits of exporters, and importers; reviewing, considering and resolving demand of short-term loans in foreign currencies for production and business belonging to supporting and high-tech industries, agricultural, export and SMEs.
4. About facilitating enterprises to get access to bank loans
4.1. About legal framework and policy mechanism
The SBV continues to complete legal framework related to monetary and banking activities, facilitating enterprises to get access to bank loans, especially Circular No. 39/2016/TT-NHNN has simplified lending procedures and dossiers; supplemented many regulations to ensure the transparency of lending activities, ensuring borrower’ rights; improved requirements of transparency to ensure safe and sound lending activities of credit institutions. The SBV submitted to the Government and Political Bureau Scheme on restructuring the system of credit institutions in conjunction with NPL resolution for 2016-2020 period; of which Resolution on NPL resolving and Law on revising several articles of Law on Credit Institutions were submitted to the National Assembly for approval. If they are approved early, that National Assembly Resolution will resolve difficulties in legal framework related to NPL and collateral resolution, create mechanism to resolve NPLs consistently and effectively, thereby unlocking a large volume of capital related to NPLs as well as a large number of unresolved collateral, helping credit institutions extend credit to the economy, at the same reducing operational cost for considering further decrease in lending interest rate.
4.2. About lending procedures
Over the past time, the banking reviewed and abolished many administrative procedures to facilitate organizations and individuals in administrative transactions with the SBV and credit institutions credit institutions also actively reformed transaction procedures; publicized information about credit dossiers, services, interest rates and fees; stipulated quality standards for their services; reduced unnecessary lending fees. Service product orders were improved thanks to technological application (internet banking, mobile banking..). According to statistics, the time of transactions and required documents reduce by 20%-40%; a number of procedures/ service product reduced by 45% of signature of customers and banking staff on dossiers, 70-75% of registering time due to online registration…
Moreover, the banking sector continues accelerating the implementation of programs on connecting banks and enterprises with many supporting measures such as new loans, debt reschedule, lending interest rate reduction, credit product diversification, transparent procedures…
Those measures which the banking sector has been implementing reflected the fact that the banking sector always put enterprises higher in relation with its benefits. At the conference connecting banks and enterprises in 13 provinces of Mekong delta region on May 13, 2017, many enterprises raised their voices to share difficulties with the banking sector. They acknowledged the reasons for not getting access to bank loans were their financial capacity, weak management and governance.
In the coming time, the SBV will continue instructing credit institutions to effectively implement measures of tackling with difficulties, facilitating enterprises to get access to bank loans. To continue cooperating with local authorities to enhance the implementation of program on connecting banks and enterprises; closely coordinating with relevant ministries and agencies to resolve all obstacles concerning with collateral to improve operational efficiency of Funds of credit guarantee for enterprises.
5. About enterprises’ recommendations related to banking operations
In the first four months of 2017, the SBV received 17 recommendations sent from enterprises to the system of receiving and answering questions from enterprises and 12 recommendations compiled by VCCI. Up to now, the SBV has sent documents to respond to all those recommendations and the Government publicized these answers on the system of receiving and answering questions from enterprises.
In the coming time, the SBV will accompany with enterprises to receive their ideas and recommendations through direct dialogues and other communication channels in order to promptly resolve difficulties as well as research and revise policy mechanism to support enterprises.
Thank you!
Translated by VMH - LH