On June 11, 2018, the State Bank of Vietnam (SBV) organized a meeting chaired by Deputy Governor Nguyen Thi Hong to announce the results of banking performance in the first six months of 2018.
Ensuring liquidity of credit institutions, stabilizing money and forex market
At the meeting, Mr. Pham Thanh Ha, Director General of the Monetary Policy Department, reported the results of the management of monetary policy in the first six months of 2018 and orientations for the remaining months of the year.
Mr. Pham Thanh Ha, Director General of the Monetary Policy Department, reports results of management of monetary policy in the first six months of 2018 and orientations for the remaining months of the year.
Accordingly, about macro-economic situations in the first five months, Mr. Pham Thanh Ha shared that the domestic economy obtained encouraging results with positive developments, continuous surpluses, the growth rate of 7.38% in the first quarter. The inflation was controlled, the CPI in May, 2018 increased by 1.61% as compared to that of the end of 2017 and by 3.86% in comparison with the same period of 2017; the average core inflation in five months of 2018 rose by 1.34%. The money and forex markets were stable.
About the management of monetary policy and results in the first months of 2018: Directive No.01/CT-NHNN dated January 10, 2018 issued by the SBV Governor provides clear instructions for the whole banking sector to conduct measures of managing the monetary policy, safe and sound banking operations; orientations for the total liquidity to increase by about 16% and credit growth by 17%, with possible adjustments in line with the practical developments.
On the basis of established orientations, since the beginning of 2018, the SBV has managed the monetary policy in an proactive, flexible and prudent manner in close collaboration with the fiscal policy and other macro-economic policies in order to control the inflation within the set target, stabilize the macro-economy, contribute to supporting the economic growth rate at a reasonable level, ensure liquidity of credit institutions, and stabilize the money and forex markets, with some encouraging results as follows:
Managing monetary policy instruments in a consistent and flexible manner in accordance with monetary developments, ensuring liquidity of the banking industry, stabilizing the money and forex markets, and controlling inflation within set target. Accordingly, the SBV has conducted purchase of foreign currencies to supplement the State foreign exchange reserves and neutralize currencies in the open market; refinanced credit institutions with difficulties in liquidity and supported capital resources for credit institutions in the process of NPL resolution; maintained the reserve requirement ratios applied to credit institutions. By May 31, 2017, the total liquidity (M2) increased by 7.03% as compared to that of end of 2017, in line with the targeted orientation of 16% for all of 2018.
Liquidity of credit institutions was ensured and the inter-bank interest rate was stable at low level. The abundant liquidity contributed to reducing the interest rates of the Government bonds, thereby decreasing the cost of mobilizing capital for the state budget; specifically, the interest rates for most terms declined by 0.66 – 1.52 percentage point p.a as compared to end 2017.
The common interest rate was stable, several credit institutions cut down their lending rates for priority sectors: In Directive No.01/CT-NHNN, the SBV Governor instructed credit institutions to review solutions to decline their lending rates in order to share the difficulties with their customers; at the same time, the SBV reduced the listed bid rate for open market operations (OMO) from 5% p.a to 4.75% p.a to support the credit institutions. The common interest rate was basically stable, several credit institutions decreased their lending rates by 0.5 percentage point p.a to the maximum rate of 6% p.a, applicable to applicable to those customers who have good loan-repayment track records and operate in the priority sectors.
About credit management, the SBV conducted measures of controlling the credit scale in accordance with the orientations with flexible adjustments in line with the practical developments, and improvement of credit quality; supported credit institutions to extend effectively credits for production and priority sectors; controlled closely credits for potentially risky areas; facilitated for enterprises and individuals to get access to bank loans. The credit outstandings have increased since the beginning of 2018; by May 31, 2018, the credit rose by 6.16% as compared to end 2017, the common lending interest rate was stable. Credits for priority sectors showed positive developments.
Managing the central exchange rate of the VND against the USD in a flexible manner in conjunction with the flexible adjustments of the purchase of foreign currencies from the credit institutions in line with the international and domestic developments, on the basis of consistent collaboration with other monetary policy instruments. Thereby, the SBV continued to buy foreign currencies to supplement the State foreign exchange reserves and neutralize currencies in the open market, helping ensure stable exchange rates and forex market. The legitimate demands for foreign currencies were met promptly and fully; the system of credit institutions had a net purchase of foreign currencies from institutions and individuals, then sold to the SBV for the State foreign exchange reserves. By June 11, 2018, the central rate of the VND against the USD was 22,567 VND/USD, up by 0.63% in comparison with that in the end of 2017; the VND/USD exchange rate quoted by Vietcombank and the exchange rate in the inter-bank market increased by 0.44% and 0.47% respectively as compared to those in the end of 2017.
About orientations for the management in the coming time, Mr. Pham Thanh Ha said that the SBV would continue to manage the monetary policy in an active and flexible manner, in close collaboration with the fiscal policy and other macro-economic policies in order to control the inflation within the set target; stabilize the macro-economy in order to support the economic growth at a reasonable rate; ensure liquidity of credit institutions and stabilize the money and forex markets, focusing on managing the open market operations in an active and flexible manner in order to ensure liquidity for the banking sector, stabilizing the money market, the foreign exchange market, and controlling inflation; Continuing to refinance credit institutions with appropriate volumes, interest rates and terms to maturity in order to support liquidity, and providing loans under the programs approved by the Government, the Prime Minister; supporting the restructuring of credit institutions and NPL resolution; managing interest rates in line with the macro balance, the inflation and the money market; controlling the credit scale in line with the orientations with flexible adjustments in line with the practical conditions, in parrallel with improving the credit quality, creating favorable conditions for enterprises and individuals to get access to bank loans, focusing on production, priority sectors, and controlling strictly credits for potentially risky areas; ensuring safe and sound banking operations; managing the exchange rates flexibly in line with market movements, the macro and monetary balances, as well as the monetary policy objectives in order to stabilize the forex market and increase the State foreign exchange reserves in times of favorable conditions.
Credit growth
Regarding to the results of credit operations in the first six months of 2018, Mr. Nguyen Van Tan, Deputy Director General of the Credit Department shared that the SBV already set a credit growth target of 17% with proper adjustments in line with the practical conditions; the credit management was focused on production and business, priority sectors to support the economic growth while ensuring the credit quality, and controlling credits for a number of potentially risky areas. Specifically, the SBV has directed credit institutions to develop and implement their credit plans for 2018 in line with the targets of allocated credits; focused capital on priority sectors, including agriculture and rural development, exports, support industries, small and medium enterprises, hi-tech businesses, etc.; implemented effectively credit programs under the Government's and the Prime Minister's directions; controlled strictly credits for potentially risky areas, such as investments in real estate, securities, BT, BOT projects in the transport sector, credits to customers/groups of customers with high outstandings, etc. During the first six months of 2018, the SBV also coordinated with the line ministries and agencies to fine-tune the mechanisms and policies on credits, such as a submission to the Government proposing a new Decree amending and supplementing Decree No.55/2015/ND-CP on credits for agriculture and rural development, a submission to the Prime Minister for the promulgation of Decision No.13/2018/QD-TTg on the criteria, conditions and procedures of approving credit extension beyond the limits of credit institutions for certain customers, the issuance of Circular No.12/2018/TT-NHNN providing guidance for implementing Decree No.17/2018/ND-CP amending Decree No.67/2014/ND-CP on fisheries development policies, etc.
Mr. Nguyen Van Tan, Deputy Director General of the Credit Department
First, the credit activities in the first months of 2018 focused on production and business that are the momentum of the economic growth. Specifically, by the end of May 2018, the outstanding loans provided to agriculture, forestry and fishery sectors increased by 6.8%; outstanding loans for industry and construction sectors rose by 6.83%; for trade and service sectors up by 5.7%.
Second, credit continued to be promoted with focus on priority sectors and significantly increased as compared to the end of 2017. Specifically, credit for agriculture and rural development rose by 5.8%; for exports up by 15.64%; for hi-tech businesses up by 6.29%; for prioritized support industries and for SMEs increased by 5.42% and 2.61% respectively.
Third, the credit programs under the instructions of the Government and the Prime Minister were conducted proactively by credit institutions. The total outstanding loans for hi-tech and clean agriculture reached VND 40,000 billion with 14,723 existing borrowers. The outstanding loans for new fishing vessels building or upgrading in line with Degree 67/2014/ND-CP were VND 10,650 billion. The outstanding loans for mitigating losses in agriculture in line with Decision No.68/2013/QD-CP were VND 4,800 billion; the outstanding loans of the policy credit programs for poor households and other policy clients of Vietnam Bank for Social Policies reached VND 179,048 billion, increased by 4.8% as compared to the end of 2017 with more than 6.7 million existing borrowers.
During the first 6 months of 2018, the SBV branches in the provinces and centrally-controlled cities closely collaborated with the local authorities and organizations to organize more than 300 meetings and dialogues between the commercial banks and the enterprises. Via these programs, the credit institutions have disbursed VND 210,000 billion to over 20,000 enterprises and other borrowers. In addition, the credit institutions have also actively restructured their loan payment maturities, reduced interest rates for nearly 1,900 enterprises and 600 other customers in order to share the difficulties of the borrowers and maintain their production and business.
Fourth, credits provided to risky sectors were closely controlled and have been kept within the strict management of the SBV
In short, credit flows had been managed in line with the SBV guidance, focusing on production, business and priority sectors. Loans provided to potentially risky sectors were under strict control and management.
At the conference, Mr. Tran Van Tan also briefed the audience about the main orientations and measures for the SBV’s credit management in the last six months of 2018. Accordingly, the SBV will continue to manage credit activities with focus on effectively controlling the amount of loans in a reasonable, safe and effective manner, creating favorable conditions for enterprises to access bank loans; concentrating lendings on priority and production sectors in line with the guidance of the Government in order to realize the economic growth and inflation control targets. The SBV will continue to improve the regulations on guiding the implementation of the credit policies of the Government, such as a Circular guiding the implementation of the Government’s Degree amending and supplementing Degree No.55 after this Decree has been signed for issuance; another Circular guiding the implementation of Degree No.34/2018/ND-CP of the Government on the establishment, organization and operations of Credit Guarantee Funds for SMEs; creating better access to bank loans for customers, etc.
Ensuring the information and communication on banking operations
Mr. Nguyen Van Du, Chief of the SBV Office, affirmed that the information and communication on the monetary policy and banking operations were very actively conducted by the SBV. The SBV frequently organized conferences and seminars for the media and press organizations, reporters, researchers, economists and bankers,… to disseminate information and receive the responses of the attendants for adjusting its policies, as well as for improving banking services and products, meeting the demands of economic development objectives. He confirmed, the SBV would continue to consolidate the effectiveness of the information and communication activities.
Mr. Nguyen Van Du, Director General of SBV Office at the meeting
Ms.Le Thi Thuy Sen, Deputy Director General of Communication Department at the meeting
In her remarks to conclude the press conference, Deputy Governor Nguyen Thi Hong reaffirmed that, from now to the end of 2018, the SBV will continue to focus on regulating money policy with the aim of strictly controlling inflation in line within the set target. The Deputy Governor also outlined several main tasks of the banking system as follows:
- Continue to manage the open market operations in a flexible manner in line with the market movements and the liquidity situations of credit institutions to support for a stable money market; manage the interest rates in line with the macro-economic balances, the inflation and the movements of the money market.
Under the conditions that the inflation is controlled at a lower rate than the set target, the money market is stable, and the macro-economic balances are favorable, the SBV will adjust the money policy instruments in order to support the credit institutions to reduce their mobilization interest rates, leading to reduction in the lending interest rates on the basis of maintaining safe and sound performance, and mitigating NPL.
- Manage the exchange rates in flexible manner and in line with the market developments and the macro-economic and money balances. In addition to regulating and managing the scale of credits within the defined targets with certain flexibility in line with the practical conditions, the SBV will also focus on increasing the credit quality, creating favorable conditions for enterprises and individuals to access bank loans; strengthen the restructuring of credit institutions; closely collaborate with ministries and agencies to address the challenges and difficulties in handling with NPL in line with Resolution 42; conduct effective measures to promote non-cash payments; and ensure the security and safety in the payment operations.
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