“The Government of Vietnam (GoV) acknowledges the monetary policy management of the State Bank of Vietnam (SBV) and the banking operations in 2018”, Prime Minister Nguyen Xuan Phuc emphasized at the Conference on dissemination of the banking sector’s tasks in 2019 on January 9, 2019 at the SBV headquarters.
Year 2018 - Success of the State Bank in operating the monetary policy
On behalf of the GoV, the Prime Minister acknowledged, appreciated and complimented the efforts of the SBV and the whole banking sector, including the state-owned commercial banks, the joint-stock commercial banks including foreign commercial banks operating in Vietnam, which have made great contributions to the economic growth.
Upon having listened to all opinions of the SBV's leaders and the commercial banks, Prime Minister Nguyen Xuan Phuc spoke highly of the successful and comprehensive administration of the SBV in all aspects of its management.
According to the Prime Minister, in 2018, the world economic situation was quite complicated, which impacted the monetary policy management of Vietnam. But the Party, the GoV and the Ministries, agencies put the best efforts and successfully accomplished the set-out targets, especially for the key targets, the performance was very good both in quantity and quality. In particular, the macroeconomic platform was well implemented. Another important success was that the inflation controlled at 3.54% in the context of many fluctuations in other countries. In addition, Vietnam’s international creditibility ranking was raised.
“The role of the banking system is very important for every country, in which just like what SBV Governor Le Minh Hung said, many banks have shared the difficulties with the economy and the businesses. Especially in the context of the unsustainable world economy, we have contributed and done many activities to share the difficulties with the economy and the people,” the Prime Minister stressed.
The Prime Minister also agreed with the view of Minister To Lam of the Ministry of Public Security, in the context of the economy still facing many difficulties, attention should be paid to the problems arising during the development process of the banking sector. The GoV has spent lots of time listening to the banking sector, dealing with a number of issues facing the sector. At the same time, the PM highly appreciated that the SBV is a very focused agency on the institutional and legal policies in a comprehensive way.
Overview of the Conference
When assessing specifically results of the monetary policy operations in 2018, according to the Prime Minister, the SBV managed the monetary policy in a proactive, flexible, skillful and efficient manner, in close coordination with the fiscal policy in order to control the inflation, stabilize the macroeconomy, and promote the economic growth, helping to maintain the stability of the monetary market and create an active room for the market adjustments and the fiscal policy to enhance their effectiveness. The SBV also issued regulations and related legal documents to implement the assigned tasks. Besides, in the international context with many complicated developments, the fact that the SBV could still maintain stable foreign reserves, interest rates, exchange rates, create favorable conditions for the business and investment activities, promote growth, especially achieve record high foreign exchangereserves of over 60 billion USD last year was a great success.
"These will continue to be promoted in 2019", the Prime Minister complimented the SBV’s monetary policy management and spoke highly about the net buying of foreign currencies to increase the foreign exchange reserves.
Along with that, many credit institutions, which had poor performance in the previous years, were operating better, more safely and more prudently in 2018. Especially, their financial capabilities continued to be enhanced, the governance and management capacity was steadily improved, getting closer to the international practices. The total assets, the amount of loans, capital mobilization, capital adequacy, lendings, and foreign exchange reserves all made good indicators. The Prime Minister also praised the large state-owned commercial banks that have reached the regional level, affirming their positions, thereby strengthening the whole system. The Prime Minister welcomed the commercial banks that have shared the difficulties with the economy.
Regarding the restructuring of the credit institutions in association with bad debts handling, the current bad debt ratio is 1.89%; this year we managed to handle nearly VND 900 trillion of bad debts, which was a great effort. "The blood clot is now getting smaller, and melting in many places, thank to the macroeconomy and the practical management", the Prime Minister said.
Regarding the black credit, according to the Prime Minister, this is a dangerous crime. The Ministry of Public Security and the SBV have been cooperating closely with the ministries and agencies to deal with this crime.
The Prime Minister assessed that the banking sector has pioneered in the application of the digital technology, the financial technology (Fintech), developing new payment methods, ensuring safety and security of the payment activities, providing more utility products and services for the people and businesses. Many commercial banks made profits from the services as high as 32%, and did not have to rely too much on profits made from the credit market. The Prime Minister also spoke highly of the SBV’s efforts in reforming the administrative procedures with the cut-down of one-third of the business conditions, contributing to significantly improve the credit access index for the people and businesses.
"I compliment the State Bank's Board of Management, and Governor Le Minh Hung personally, whose calmness and wise decisions have ensured smooth banking operations", the Prime Minister said.
Governor Le Minh Hung speaks at the Conference
The Prime Minister also frankly pointed to the shortcomings of the credit institution system in Vietnam, with such limitations as financial capabilities, asset quality, professionalism...
“Recently, banks have performed better but their capabilities are not high, their products and services have not been diversified, the organizational structures are still cumbersome and inappropriate. Our management and administration level is not high, the banking technology has a considerable gap compared to the world,” the Prime Minister said.
In addition, bad debts still exists, the amount of short-term capital used for medium and long-term loans is still quite high, easily leading to system safety risks. Black credit still occurs in many areas, causing instability and loss of people's confidence.
"The banking sector needs to be more proactive in coordinating with the Ministry of Public Security, and at the same time dealing more effectively with black credit. Take Thanh Hoa as an example, there must be strong campaigns to repel black credit ", the Prime Minister stressed.
The Prime Minister expressed his pleasure at the news that the SBV has arranged a credit package of over VND 5,000 billion for Vietnam Bank for Agiculture and Rural Development (Agribank) and Vietnam Bank for Social Policies (VBSP) to address this issue.
The Prime Minister paid special attention to the handling of the people's credit funds (PCFs) over the past time and in the future. According to the Prime Minister, the banking sector should enhance the efforts to regain the people’s confidence; the Banking Supervision Agency must also promote the safety supervision of the whole system.
"(The SBV) has to actively correct any signs of wrongdoings. As in SBV Governor Le Minh Hung’s opening remarks and what Minister To Lam said, the quality of the bank officials is very important. The bankers must also pay attention to this", the Prime Minister affirmed.
The Prime Minister noted that the restructuring of some credit institutions is still slow compared to the set-out targets. Some credit institutions are still facing difficulties. The internal control and inspection should be done in a more timely manner, with strict penalties against violations. The Banking supervision agency has recently been strengthened, but there is still a lot of work to be done. There must be no hole to be exploited and no abetting with the credit institutions like what happened in the past. The inspectors must thoroughly complete the tasks, and must not prolong and affect the organizational safety. The Prime Minister also drew special attention toward the application of technologies in the banking sector.
On implementing the tasks in 2019
The Prime Minister complimented the SBV for having an action plan to implement the Government's Resolutions No. 01 & No. 02, and noted that while facing the risks arising from changes of the world economy, the SBV needs to be vigilant, always monitor the situations, and have flexible and timely solutions to regulate the policies. Emphasizing the desire for Vietnam to rise from a low middle income country to a high middle income and then high income country, the Prime Minister said that the SBV and the credit institutions have the responsibility to contribute to the development of the country, so that the banking sector in 2019 can achieve higher results than those in 2018 and make a real breakthrough. Accordingly, the Prime Minister requested the banking sector to focus on the following tasks:
Firstly, continuing to operate the monetary policy in a flexible, cautious and effective manner; enhancing the resilience to limit the adverse external impacts, harmoniously combining with other macro and fiscal policies, steadily stabilizing the macro-economy, controlling the inflation, and promoting growth. This is a very important objective, requiring a clear vision with science-based, wise and timely management.
Secondly, the SBV needs to come up with solutions for the banking sector in the context of Industry 4.0; what the banking sector should do to pioneer in the Fourth Revolution, creating a push for the whole economy, including the electronic payments; Developing an action plan with the implementation of the strategic contents for each stage; Guiding the monitoring and evaluation of the implementation of the strategies in order to report the Prime Minister; Developing and submitting to the Prime Minister a plan on increasing the charter capital of the commercial banks with more than 50% State ownership by 2020, in order to meet the capital requirements in accordance with Basel II standards and brenchmarks; Further improving the competitiveness and transparency of the management of the credit system in compliance with the international standards and practices; Controlling the credit growth reasonably in association with improving the quality, focusing on the priority areas of development.
Thirdly, enhancing the process of restructuring the system of credit institutions in association with handling with bad debts, striving to fulfill the set objectives and roadmap.
Fourthly, continuing to improve the institutions, enhancing the administrative reform, improving the business & investment environment, increasing the competitiveness, creating favorable conditions for the businesses and the people to easily access banking services.
Fifthly, promoting communication work regarding banking products and services for the people to understand and utilize the banking products and services.
The Prime Minister also evaluated that among the ministries and central agencies, the SBV's communication work has been very efficient and timely. At the same time, the banking sector needs to apply modern technologies, while also paying attention to putting efforts to implement a non-cash payment system, creating a culture of card-based, cashless consumption among the people with appropriate phrases.
Sixthly, regarding the international integration, together with other ministries and agencies, the SBV should proactively negotiate and participate in the negotiations on the relevant contents, assess the impacts of integration on bank credits ...The responsibilities of the commercial banks involved in offshore investments also need to be better controlled.
Seventhly, the SBV should continue to tighten the disciplines, principles and enhance the transparency throughout the banking system; performing well the organization of personnel, improving the quality of staff; fighting self-evolutions, self-transformations through good internal management, inspection and supervision.
Eighthly, during the upcoming Lunar New Year, the SBV must take care of the needs of the people; administer well the facilities; no sending or receiving gifts for management level.
On behalf of the whole banking sector, SBV Governor Le Minh Hung expressed thanks for the compliments and remarks of the Prime Minister regarding the SBV’s monetary policy management and the effective operations of the banking system in 2018. The SBV Governor took note of the PM’s directions and promised that in 2019, all officials, employees of the banking sector would continue to make the best efforts to overcome the shortcomings, limitations and successfully fulfill the Prime Minister's requirements for the banking sector.
VA