On December 24, 2020, the State Bank of Vietnam (SBV) organized a Press Conference under the chairmanship of First Deputy Governor Dao Minh Tu to disseminate the results of the monetary policy management and the banking operations in 2020, as well as the orientations for 2021.
Also attending the Press Conference there were representatives from the SBV entities, the SBV branch in Hanoi, several commercial banks, Vietnam Bank for Social Policies, Deposit Insurance of Vietnam, etc.
The monetary policy management and banking operations have obtained multiple encouraging results
Speaking at the Press Conference, First Deputy Governor Dao Minh Tu said that 2020 has been the fifth consecutive year in the five-year period in which the SBV's monetary policy management has achieved the set objectives, including maintaining the stability of the currency value and the exchange rates, creating a facilitating business environment for enterprises and individuals. The forex and gold markets have continued to be stable in a positive direction. Especially, in 2020, the SBV has made several adjustments of the key interest rates. These key interest rate adjustments have allowed commercial banks to reduce their interest rates considerably by between 1 to 1.5% p.a. as compared to the common rates early this year, creating conditions for maintaining the stability of the currency value.
According to the First Deputy Governor, one of the remarkable achievements of the banking sector in 2020 has been maintaining the stability of the credit institution system based on the results of the Scheme on restructuring the system of credit institutions. In the second phase of the Scheme, over the past five years, the SBV has drastically conducted multiple measures and policies, making a lot of positive progress in resolving bad debts and improving credit quality.
Moreover, the COVID-19 pandemic has caused a lot of difficulties, but it has also created an opportunity to promote cashless payments with the application of the Industry 4.0 technologies such as digital banking allowing banks to provide various new banking products and services.
The Deputy Governor also shared that the administrative reform of the banking sector over the past years has created a more favorable environment for enterprises and individuals. The SBV has continued to achieve the first rank out of the central Government ministries and agencies in the Public Administration Reform (PAR) Index for the consecutive fifth year.
First Deputy Governor Dao Minh Tu chairs the press conference
According to the reports made at the Press Conference, by December 18, 2020, the M2 total liquidity increased by 12.83% in comparison with that of the end of 2019, and by 14.62% as compared to that of the same period of 2019. The liquidity of the credit institutions system was ensured.
Since the beginning of this year, the SBV has thrice cut down the key interest rates, with the total reduction of 1.5-2.0% p.a.; reduced the cap for the mobilizing interest rates by 0.6-1.0% p.a.; reduced the cap for the lending interest rates by 1.5% p.a. for the priority sectors and fields. Thereby, by November 2020, the common lending interest rates had decreased on average by 1% p.a. as compared to that of the end of 2019; the cap for VND lending interest rate for short-term loans for the priority sectors and fields has been kept at 4.5% p.a.
Due to a decrease in credit demand under the impact of the COVID-19 pandemic, the credit growth has been lower than that of the previous years. By December 21, 2020, the credit had gone up by 10.14% in comparison with that of the end of 2019, and up by 11.62% as compared to that of the same period of 2019.
In order to support the COVID-19 affected customers, the SBV has issued two important documents, namely Circular No. 01/2020/TT-NHNN and Directive 02/CT-NHNN instructing credit institutions to reschedule the debt maturities, waive and reduce interest rates and fees, keep the debt groups unchanged for the COVID-19 affected customers, etc.
By now, the credit institutions have rescheduled debt maturities for about 270,000 borrowers with the loan outstandings of nearly VND 355 trillion; waived and reduced the interest for nearly 590,000 borrowers with the loan outstandings of over VND 1,000 trillion; provided new loans with preferential interest rates with the accumulated amount since January 23, 2020 of nearly VND 2,300 trillion for over 390,000 borrowers, at the interest rates lower than the common rates of between 0.5 to 2.5% as compared to pre-COVID time.
Vietnam Bank for Social Policies (VBSP) has extended debt maturities for nearly 168,000 borrowers with the loan outstandings of VND 4,183 billion; provided new loans to over 2 million borrowers with the loan outstandings of VND 72,531 billion.
It is estimated that the total amount of the banking service fees that the commercial banks have waived and reduced until the end of 2020 after two times of fee reduction has reached over VND 1,004 billion.
Non-cash payments have developed robustly. By the end of October 2020, the number of transactions via mobile banking was over 918.8 million with the total amount of VND 9,600 trillion (up by 123.9% in terms of the number of transactions and by 125.4% in terms of value as compared to those of the same time of 2019). The number of transaction via the internet reached 374 million with the total amount of over 22,200 trillion (up by 8.3% in terms of the number of transactions and by 25.5% in terms of value in comparison with those of the same time of 2019).
Vietnam's Access to Credit index is currently ranked 29th over 190 countries and territories, the second highest in ASEAN (after Brunei Darussalam). This performance result has accomplished the target of going up for at least one rank as set by the Government.
An overview of the Press Conference
The restructuring of the credit institutions system has also achieved significant progress in line with the objectives and roadmap set out in Scheme 1058. The financial capabilities, the governance and operational performance, the operational safety and the transparency indicators of the credit institutions have all been improved significantly and catching up with the international practices and standards. The implementation of Basel II standards has continued to be focused on by the credit institutions in order to meet the international standards on capital adequacy.
Non-performing loans (NPLs) have been managed and drastically handled through various measures, in which the implementation of debt recovery has witnessed very strong attempts by the credit institutions and has gained positive results, proving the correctness and efficiency of Resolution 42. Although by the end of October 2020, the NPL ratio on the internal balance sheets had gone beyond 2%, but this was objectively inevitable and still reflected great efforts of the banking industry during a time when the economy had been heavily affected by the COVID-19 pandemic, and many customers' debt service capabilities had been impacted.
These results have helped raise the outlook rankings for Vietnam's credit institutions in the recent years, and in 2020 14 Vietnamese commercial banks have been listed in the Top 500 largest and strongest banks in the Asia-Pacific, and the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) was ranked 29/500, an increase of 19 ranks as compared to that of 2017. These have been very encouraging results, creating a solid foundation for Vietnam's banking system to develop safely and sustainably in the future.
Orientations for 2021
In answering the correspondents' questions, First Deputy Governor Dao Minh Tu shared that, on the basis of the targets set by the National Assembly and the Government, as well as the macroeconomic and the monetary developments in the domestic and international markets, the SBV would continue to manage the monetary policy in a proactive and flexible manner in line with the fiscal policies and other macroeconomic policies in order to control the inflation, maintain the market stability, support the economic recovery, specifically as follows:
(i) Managing the monetary policy (especially the interest rates and the exchange rates) in a proactive and flexible manner in line with the macro balances, the market developments and the monetary policy objectives, ensuring smooth and stable operations in the money and foreign exchange markets;
(ii) Directing the credit institutions to continue to reduce the operational costs in order to further lower their lending interest rates; simplifying the procedures, and creating favorable conditions for new borrowers to recover their production and business operations without lowering the credit standards; ensuring the credit quality and maintaining the healthy operations of the banking system;
(iii) Continuing to manage the credit towards effective credit expansion; providing more loans to the priority sectors and fields, such as production and business areas; and strictly controlling credit for potential risky areas; improving the credit quality and efficiency;
(iv) Developing and submitting to the Government a draft Master Plan on restructuring the credit institutions for the period of 2021-2025; and directing the credit institutions to proactively develop their own restructuring plans for implementation at the earliest possibility in the coming time;
(v) Continuing to improve the legal frameworks; formulating and implementing the Scheme on Promoting Non-cash Payments in the next phase; enhancing the information and communication on cashless payments; promoting financial education; strengthening measures to protect the consumers' legitimate rights as well as to improve the quality and performance of the payment services, etc.
Le Hang