On June 5, 2020 in Hanoi, the State Bank of Vietnam (SBV) held a press conference on the banking sector’s performance in the first 6 months of 2020, as well as the orientations and the tasks in the coming time. The conference was chaired by SBV Deputy Governor Nguyen Thi Hong. Also attending the meeting were leaders of the SBV Departments, namely: the Banking Supervision Agency, the Payment Department, the Credit Department, the Monetary Policy Department, the Communication Department, etc.
Operating flexibly and synchronously monetary policy instruments
Following the directions of the National Assembly, the Government and the macroeconomic developments of the domestic and foreign markets, the SBV has operated the monetary policy in a proactive, flexible and prudent manner, in close coordination with the fiscal and other macroeconomic policies in order to control the inflation, stabilize the macro-economy, the money and foreign exchange markets, meanwhile still supporting the economic recovery under the complicated impacts of the Covid-19 pandemic. As of May 29, 2020, total M2 payment instrument increased by 3.4% compared to the end of 2019; the liquidity of the credit institution (CI) system was ensured for smooth operations.
In managing the interest rates, since the beginning of 2020, the SBV has twice reduced the key interest rates, with the total reduction of 1.0-1.5%/year with a view to supporting the liquidity of the credit institutions (Cis), facilitating CIs to access low-cost capital from the SBV; cut down by 0.6-0.75%/year on the interest rate cap for bank deposits of below 6–month terms, and reduced 1%/year on the ceiling interest rate for short-term loans in the priority fields, which currently stands at 5.0%/year, in order to reduce the borrowing costs for businesses and people. Accordingly, the average interest rates in the market have tended to decrease as compared to the beginning of the year.
Regarding the management of the exchange rates, despite the complicated developments in the international market, the domestic exchange rates and foreign currency market has remained quite stable, with liquidity ensured for smooth operations, and the CIs have kept on purchasing net foreign currencies from their customers; all legitimate demands for foreign currencies of the economy have been met fully and promptly. By the end of May 2020, the central rate increased by 0.46%, the interbank exchange rate increased by 0.49% compared to the beginning of the year.
In addition, the SBV has promptly issued Circular 05/2020/TT-NHNN dated May 7, 2020 with a view to specifying the implementation of Resolution No. 42/NQ-CP of the Government and Decision No. 15/2020/QD-TTg of the Prime Minister providing guidance on loans for refinancing with zero interest of the VND 16 trillion package to the Vietnam Bank for Social Policies (VBSP), so that VBSP can provide zero interest loans to employers facing financial difficulties to pay their employees, whose jobs had been suspended due to the pandemic impacts.
Regarding the credit management, the SBV, having closely followed the developments of the Covid-19 pandemic, has controlled the credit level in line with the set targets, ensuring the credit quality, and creating favorable conditions for businesses and people to access credit, in order to quickly restore their production and business operations. Under the impacts of the Covid-19 pandemic, due to low credit demands, by May 29, 2020, the credit increased by 1.96% compared to the end of 2019.
Under the complicated developments of the Covid-19 pandemic, following the Government’s directions, the banking sector has got actively involved at an early stage, and has been highly proactive and flexible with the issuance of Circular 01 on implementing urgent measures to remove the difficulties for borrowers.
Overview of the conference
Following the directions of the Government and the SBV, the CI system has actively implemented various credit programs to support the people and businesses affected by the Covid-19, with significant lending interest rate cuts of 0.5-2.5% per year, some commercial banks even cut down their lending interest rates by 3-4%/year. New loans for production and business operations have been actively deployed by the credit institutions on the basis of their own reviews and sharing with their customers, in compliance with the provisions of applicable laws, the financial capabilities and the capital balances of those CIs; maintaining the health and safety of the banking operations for the coming years.
All CIs, including financial companies and foreign banks, have been strongly involved. By now, the CIs have rescheduled the debt service for nearly 224,000 customers with the outstanding of approximately VND 152 trillion; waived and reduced the interests for more than 326,000 customers with the outstanding of over VND 1,140 trillion; provided new loans with preferential interest rates with the accumulated amount since January 23 for 196,000 customers with the accumulated amount of VND 767 trillion, at the interest rates lower than the common rates of 0.5 to 2.5% compared to pre-Covid-19 time. The VBSP has extended debt service for more than 150,000 customers with the outstanding of over VND 3,800 billion, adjusted the repayment periods for more than 75,000 customers with the outstanding of VND 1,600 billion, and provided new loans to 680,000 customers with the outstanding of over VND 25,000 billion.
In particular, the SBV has directed the CIs to simplify their lending procedures, accelerate the administrative reforms, and promote the solutions to increase accessibility to capital for people and businesses. Recently, the SBV has continued to rank first among the ministries and central government agencies in the 2019 Public Administrative Reform (PAR) index with the highest score of 95.4/100. This was also the 5th consecutive year the SBV has ranked No. 1 on PAR index among the ministries and central government agencies. The cross-cutting objectives of the SBV's PAR are to accelerate PAR in the SBV system, in association with innovating the banking sector’s means of service, which puts the people and businesses at the center, and requires clear developments in improving the business environment in the banking operations.
The restructuring of the credit institutions has achieved important results
According to the information shared at the Conference, the restructuring of the CIs has achieved important results in line with the objectives and the roadmap set out in Project 1058, ensuring the stability and safety of the CI system.
The scale of the CI system has been expanded; the credit quality has been improved. The governance and management capacity of the CIs have been steadily improved to meet up with the international practices, and the transparency of the CIs has been significantly increased. The application of Basel II has continued to be focused on by the CIs in order to meet the international capital safety requirements.
Continuing to improve the legal framework and policies in payment operations
In the payment field, the legal framework for payment operations has continued to be reviewed, amended, and been creating more favorable conditions for the development of non-cash payments. For example, the SBV has submitted to the Prime Minister to issue Directive No. 22/CT-TTg dated May 26, 2020 on promoting the implementation of cashless payment development solutions in Vietnam, which proposed specific tasks for the relevant ministries, agencies and local authorities to further promote non-cash payment operations; promptly promulgated Decision No. 711/QD-NHNN dated April 15, 2020 issuing the Action Plan to implement the Prime Minister's Directive No. 01/CT-TTg of January 14, 2020 on promoting the development of Vietnamese digital businesses ...
Performing the tasks assigned in Directive No. 11/CT-TTg of the Prime Minister, the SBV has promptly issued directions within its jurisdiction on the exemption and reduction of payment service fees for customers in order to support those people and businesses affected by Covid-19. For example, the SBV has promptly issued Circular No. 04/2020/TT-NHNN dated March 31, 2020 amending and supplementing Circular No. 26/2013/TT-NHNN, reducing 50% of the payment transaction fees through the Interbank Electronic Payment System, which is valid from April 1 through December 31, 2020. At the same time, the SBV has issued an official note requesting the banks to reduce the transfer fees through the inter-bank electronic payment system for their customers; promulgated Decision No. 978/QD-NHNN dated May 20, 2020 on refunding the transaction fees for the Vietnam Bank for Social Policies (VBSP) upon the bank’s disbursements of loans in line with Decision No. 15/2020/QD-TTg dated April 24, 2020 of the Prime Minister on the implementation of policies to support people in difficulties due to the Covid-19 pandemic through the inter-bank electronic payment system.
The SBV has also twice directed the National Payment Corporation of Vietnam (NAPAS), the commercial banks and the foreign bank branches to waive and reduce their payment service fees. It is estimated that the total amount of payment service fee waived and reduced by the banks for their customers by the end of 2020 after two fee reductions will reach about VND 1,004 billion.
In addition, the SBV has issued a document instructing the CIs to apply the zero transfer fee policy for all donations in support of the fight against Covid-19, as well as to relieve drought and saltwater intrusion impacts via bank accounts; and waive all payment service fees for beneficiaries of Resolution No. 42 and Decision No. 15/2020/QD-TTg.
In the first months of 2020, although affected by the Covid-19 epidemic, the payment operations have still achieved significant growth compared to the same period of last year.
Financial communication and education programs such as “Smart money”, “Wise money”… have made an important contribution to improving the knowledge and skills in using financial products and services, enhancing the public access to banking services. As a result, non-cash payments have developed robustly. Payments via bank cards, the internet and mobile banking in the first 4 months of 2020 all achieved strong growth compared to the same period of 2019: (i) Domestic payments via bank cards increased by 26.2% in volume and 15.7% in value; (ii) Internet payments increased by 3.2% in volume and 45.7% in value; (iii) Mobile payments increased by 198.8% in volume and 21.9% in value over the same period of 2019. Payment trends in the economy have shifted towards using more non-cash payment instruments. Cashless payments for public services have continued to be widely implemented. The SBV has promptly directed the banks and payment intermediaries to coordinate for the implementation of the electronic payments on the National Public Service Portal.
Deputy Governor Nguyen Thi Hong chaired the press conference
Orientations for the management of the monetary policy and banking operations in the coming time
Answering questions and clarifying issues of the reporters’ concern, Deputy Governor Nguyen Thi Hong shared that following closely the targets set by the National Assembly, the Government, as well as the macro developments of the domestic and foreign markets, the SBV will continue to manage the monetary policy in a proactive and flexible manner in coordination with other macroeconomic policies in order to control the inflation, stabilize the macro economy, the money and the foreign exchange markets, support the economic recovery. Specifically, the SBV will implement the following key tasks:
First, administering flexibly the open market operations, regulating reasonable CIs’ liquidity to stabilize the market;
Second, managing the interest rates and the exchange rates in line with the macro balances, the inflation, the market developments and the monetary policy targets;
Third, controlling the credit level in line with the set criteria; improving the credit quality, and creating favorable conditions for credit capital access; following closely the disease developments in order to adjust the credit criteria for the CIs, fully and promptly meet the capital demands of the economy, ensuring the harmoniously the objectives of controlling the inflation and supporting the recovery of the economic growth;
Fourth, continuing to direct the credit institutions to strongly implement effective measures to remove the difficulties for those customers affected by the Covid-19 epidemic, such as: rescheduling debt service, waiving and reducing the interests in line with Circular 01; reducing the operating costs in order to save more resources for new loans with preferential interest rates to support and accompany the businesses to overcome the difficulties;
Fifth, monitoring and evaluating the impacts of the Covid-19 pandemic on the possibility to achieve the set-out objectives in the Restructuring Plan of CIs, as well as on the system safety in order to propose appropriate management measures and directions; conducting the review and evaluation of the implementation of Project 1058, to make foundation for the formulation of a new Project on restructuring the system of credit institutions during the 2021-2025 period;
Sixth, continuing to develop and supplement the legal corridor for electronic payment operations, meeting the requirements for new business models, products and services on the basis of information technology, focusing on digital banking, digital payment; continuing to study and implement the payment models in the rural and remote areas, linked with the implementation of the National Financial Inclusion Strategy; promoting e-payments in the Government sector and for public services,...;
Accelerating the implementation of the financial communication and education programs to improve the public knowledge and skills in using financial products and services, increasing public access to financial products and services, contributing to the promotion of cashless payments and financial inclusion.
VA