Information on monetary policy management and banking activities in first Quarter of 2019

Also attending the conference were representatives from the SBV entities, the SBV branch in Hanoi, commercial banks, Vietnam Bank for Social Policies, Deposit Insurance of Vietnam, etc.

Implementing the Government's direction in Resolution No. 01/NQ-CP dated January 8th, 2019 and the Resolutions of the Government meetings in the first 2 months of this year, the SBV has managed the monetary policy to ensure safe and efficient banking operations. Thus, adhering to the macroeconomic and monetary developments, in the first Quarter of 2019, the SBV has administered the monetary policy in a proactive, flexible, cautious and harmonious manner, in close coordination with the fiscal policy and other macroeconomic policies in order to control the inflation within the set target, support the economic growth, stabilize the monetary and foreign exchange markets.

At the press conference, representatives of the SBV's Board of Management and leaders of some Departments of the SBV answered a number of questions from the journalists and reporters regarding the exchange rate management, orientations of the monetary policy management in the coming time, solutions to develop consumer credit and fight against black credit, non-cash promotion through e-wallet development, improvement of the legal framework for managing peer-to-peer lending (P2P Lending), and some new points in the draft Circular on consumer lendings of financial companies ...

Flexible, synchronous management

Speaking at the press conference, Mr. Pham Thanh Ha - Director General of the Monetary Policy Department said: In the first three months of 2019, the SBV has flexibly and synchronously operated the monetary policy instruments to stabilize the monetary and foreign exchange markets, control inflation within the set target, flexibly manage the monetary policy instruments to regulate the market liquidity in a timely manner with reasonable maturities.

According to Mr. Pham Thanh Ha, the SBV has been administering the interest rates in line with the macroeconomic developments and the monetary market, stabilizing the interest rates and directing the credit institutions to review and balance their finance to apply reasonable lending interest rates. The mobilization and lending interest rates have continued to be stable, with common short-term lending interest rates at 6 to 9%/year, while medium and long term lending interest rates at 9 to 11%/year. Right after the Conference on the banking sector’s tasks in 2019, the state-owned commercial banks proactively reduced their lending interest rates to support the businesses operating in the priority areas under the direction of the Government with a common reduction of about 0.5%/year.

Regarding the credit management, Mr. Tran Van Tan - Deputy Director General of the Credit Department shared: "By March 25th, 2019, credit increased by 2.28%, equivalent to the same period of 2018 (up by 2.78%). Credit for most priority areas increased significantly. Specifically, credit for the support industry increased by 3.44%, accounting for 3.14%; credit for the export sector increased by 5.4%, accounting for 3.12%; credit for the high-tech application enterprises increased by 2.79%; credit for the agriculture and rural areas increased by 2.23% compared to the end of 2018, accounting for about 25% of the total credit outstanding of the economy.”

Particularly for the rice sub-sector, in order to provide timely support for the sale of Winter-Spring crop of 2019, the SBV Governor has directed the SBV branches in 13 provinces in the Mekong Delta region and the commercial banks to concentrate capital, accelerate the disbursement to timely and fully meet the capital needs of the businesses and traders for purchasing rice from the farmers. Especially, the State-owned commercial banks have taken the lead by lowering their short-term lending interest rate to 6%/year to support the businesses to purchase rice. As a result, the credit institutions in the Mekong Delta region have disbursed about VND 10,719 billion to organizations and individuals to purchase over 1.7 million tons of rice in the Winter-Spring crop of 2019, helping farmers to control rice price reduction.

Recently, the SBV has also promptly carried out a solution to help pig farmers who suffered from the African Swine Fever (ASF) outbreak in Vietnam. In addition, other credit programs under the directions of the Government and the Prime Minister, such as credit support to reduce losses in agriculture, lending to encourage clean agriculture, high-tech agriculture, etc. have also been implemented drastically by the credit institutions. Credit for the high-risk sectors has been strictly controlled, in line with the orientations of the SBV.

Mr. Pham Thanh Ha - Director General of the Monetary Policy Department speaks at the Press Conference		Mrs. Le Thi Thuy Sen - Deputy Director General of the Communication Department speaks at the Press Conference
Mr. Tran Van Tan - Deputy Director General of the Credit Department speaks at the Press Conference		Mr. Nghiem Thanh Son - Deputy Director General of the Payment Department speaks at the Press Conference
Mr. Nguyen Trong Du - Deputy Chief Inspector of the Banking Supervision Agency speaks at the Press Conference

Regarding the results of bad debt handling in line with Resolution No. 42, as of January 31st, 2019, it is estimated that the whole system of credit institutions has resolved about VND 204.4 trillion of bad debts, accounting for 40.1% of the total bad debt outstandings determined in Resolution No. 42 (in 2018 alone, about VND 113.4 trillion was resolved).

The solutions for bad debts handling implemented synchronously together with the measures to control and prevent newly arising bad debts have contributed to improving the credit quality and reducing bad debt ratios of the credit institutions. Mr. Nguyen Trong Du - Deputy Chief Inspector of the Banking Supervision Agency also said that recently, the SBV has issued more clarified conditions for collaterals as well as more specific provisions on debts handled by Vietnam Asset Management Company (VAMC).

Regarding payment operations, the Banking industry is also one of the leading industries to actively apply the achievements of the Technology Revolution 4.0, thereby improving service quality, increasing utilities for customers, promoting non-cash payment. The infrastructure and technology for non-cash payments has continued to be strongly invested in, improving the quality and promoting the efficiency; the security and electronic payment safety have continued to receive high attention and be enhanced. Electronic payments via the Internet, mobile devices have achieved remarkable results, attracting a large number of customers to use.

According to Mr. Nghiem Thanh Son - Deputy Director General of the SBV Payment Department, as of December 31st, 2018, the country had 4.2 million e-wallets linked to bank accounts and in 2018, the whole banking system handled 214 million transactions, worth VND 91,000 billion, a reduction of 4.5% compared to 2017.

Furthernore, on the communication activities, Mrs. Le Thi Thuy Sen - Deputy Director General of the Communication Department shared that the SBV has always been actively providing information to the press and promoting the coordination and production of financial education and communication programs, such as "Smart Money", programs for teenagers and adolescents, etc., thereby improving knowledge, reducing risks for customers when accessing the banking products and services, contributing to improving the accessibility to the banking products and services, promoting non-cash payment. In particular, in the coming time, the targets of the SBV's communication activities will be the people in the countryside, the remote and islandic areas, as well as young people,... with a view to introducing the banking products and services, and helping to control black credit.

Closely following the developments to have appropriate solutions

Responding to the reporters' questions related to the new points in the monetary policy management in the first Quarter of 2019, Deputy Governor Nguyen Thi Hong said: "The monetary policy is a short-term policy that must be appropriate to the domestic and international macro-economic situations to make sound adjustments. The new points in the monetary policy management in the first Quarter of 2019 and the remaining months of 2019 will have differences in time, coordination solutions, level of management, etc. However, with the targets and guidelines of the SBV still being consistent with the goal of controlling inflation, the SBV's management solutions will continue to support the economic development, but with close monitoring of the inflation. Credit management is still a key task of the banking sector under the objective of expanding credit in parallel with operational safety.”

On the basis of the objectives set by the National Assembly, the Government as well as the macroeconomic and monetary prospects in the coming months, the SBV will continue to regulate the monetary policy toward the targets of the total payment increase by 13%, credit increase by about 14%, with adjustments in line with the actual situations and developments.

Answering a question about the management of peer-to-peer lending (P2P Lending), Deputy Governor Nguyen Thi Hong shared that the SBV is developing a pilot scheme for this type of business, and it is expected that P2P Lending will be classified as a conditional business industry. According to the Deputy Governor, P2P Lending is a form of current civil and legal transactions, governed by the legal regulations and other relevant legal documents. This form of lending has the advantage of quick disbursement, but also has some unfavorable and negative aspects, which can cause many implications for the participants.

“Regarding this area, the Government has assigned the SBV to take lead in researching and proposing solutions. We have also assigned the SBV functional Departments to consult the management experience of other countries and will propose a pilot scheme for this activity, considering it as a conditional business,” Deputy Governor Nguyen Thi Hong shared. "The management agencies do not prohibit products of new business trends but must ensure strict management."

Referring to what impacts the new developments in the international market will have on the directions of the SBV, Deputy Governor Nguyen Thi Hong said: "Since there is possibility that the US Federal Reserve (Fed) will not raise its USD interest rate in 2019, there seems to be not too much pressure on Vietnam’s monetary policy management. But in the opposite direction, when the world economy decelerates, especially with the situations of the big economies such as the US, China… they will have an impact on exportations and investments in Vietnam. Therefore, the SBV’s management of the monetary policy must follow closely these developments, both positive factors as well as negative aspects, to be able to assess the market situation and come up with appropriate management solutions, and to accomplish the set objectives.”

SBV Deputy Governor Nguyen Thi Hong answers the reporters’ questions

In 2019, the SBV has also issued a roadmap to limit foreign currency credit. This will create a solid basis for the foreign currency market not to be affected by foreign currency lending activities. Recently, throughout its management solutions, the SBV has always created an incentive to keep VND, and the SBV’s solutions have all aimed at narrowing the deposits and lendings in foreign currencies in accordance with the policy of the Government, gradually shifting from the depositing-borrowing relationship to the selling-buying relationship. Especially, in the first 3 months of 2019, with the exchange rates and the foreign currency market being stable, supported by an abundant foreign currency supply, good market liquidity, the system of credit institutions continued to have net purchase of foreign currencies from their customers, and thus, the SBV continued to purchase foreign currencies to supplement the State's foreign exchange reserves.

In particular, the SBV has managed the open market operations to regulate the liquidity of the credit institutions at a reasonable level, stabilize the monetary market, and contribute to the implementation of the monetary policy objectives. The SBV has managed with the compulsory reserve instrument in synchrony with other monetary policy instruments, in line with the monetary market developments and the monetary policy targets. The SBV has also managed the interest rates and the exchange rates in line with the macro balances, the market developments and the monetary policy objectives; synchronously combining the monetary policy instruments to stabilize the foreign currency market.

Credit has been managed in accordance with the orientation parameters, coupled with improving credit quality. The SBV has been closely monitoring the credit growth at each credit institution to guide the credit institutions to focus credit in priority areas and control credit allocation to potentially risky areas; facilitating favorable conditions for businesses and individuals to access credit; controlling lendings in foreign currencies and developing a roadmap for gradually reducing foreign currency lendings.

Regarding the restructuring of the credits institutions, the SBV has identified objectives such as continuing to implement and closely monitoring the restructuring of credit institutions in association with resolution of bad debts; at the same time, controlling and improving the credit quality in combination with enhancement of bad debt handling in line with the market principles; improving the legal frameworks to support bad debt handling and the restructuring of credit institutions. The handling of bad debts must be associated with the implementation of measures to prevent and minimize the newly arising bad debts and to improve the credit quality of the credit institutions; promoting the role of VAMC in dealing with bad debts to keep the non-performing loan outstandings at a safe and sustainable level, etc.

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