In the Question-and-Answer (Q&A) session at the National Assembly (NA) meeting on June 8, 2022, Governor Nguyen Thi Hong of the State Bank of Vietnam (SBV) reported to the NA Deputies two aspects related to the monetary policy.
Governor Nguyen Thi Hong
First, about the inflation control, the SBV Governor shared that inflation is currently a global issue; Governments and central banks around the world have been conducting measures in order to control the inflation. In Vietnam, the domestic production depends a lot on the imported materials; therefore, the domestic economy has suffered high pressure of the global inflation. By now, the Government has strongly directed the Ministries and agencies to control the inflation, focusing specially on the close coordination between the fiscal policy and the monetary policy. In the first months of 2022, the inflation in Vietnam had been under good control with an increase of 2.25%. Based on the analysis and assessment, this CPI increase was mainly caused by the rising commodity prices in the global market.
About the management of the SBV, Governor Nguyen Thi Hong recognized that with the implementation of the support packages within the Socio-economic Recovery Program, there can be impacts on the inflation. Therefore, from now till the end of the year, the management of the monetary policy would need to follow closely the macro-economic development, as well as the disbursement progress of the support packages, in order to initiate and conduct appropriate measures in line with the practical situations.
Regarding to the management of the money market in association with other segments of the financial market such as the stock market and the capital market, the SBV Governor affirmed that the money market is one of the segments of the financial market, and is mainly a short-term market under the SBV’s jurisdiction and organization. In the first five months of 2022, the SBV had closely monitored and appropriately regulated the market liquidity in order to initiate appropriate monetary policies, such as those on the interest rates, the exchange rates, etc. The Governor further shared that in the first five months of 2022 the money market was relatively stable, which has received positive recognition by the international community.
However, there had also been several irregularities in the stock market and the corporate bond market over the last 5 months. There are currently a lot of players in the market, including the credit institutions. Over the past months, the Prime Minister had issued a series of documents to direct the Ministries and agencies to enhance the monitoring and control over this field. As the State management agency over the operations of the credit institutions, the SBV has always followed the directions of the Prime Minister, and has issued multiple legal documents to ensure the full compliance of the credit institutions with the legal provisions on securities and banking operations.
“From the perspective of the banking sector, banks are financial intermediaries. When credit institutions engage in this operation, the most important factor is risk control. Because if credit institutions participate in these markets without controlling the relevant risks, they will not be able to recover their investments, so it will also be difficult to meet the requirements for repaying their depositors. The SBV has promulgated specific regulations related to this issue”, said the Governor.
Clarifying this issue, the Governor emphasized that a credit institution participating in the markets has the following roles:
First, in the corporate bond market, a credit institution is an investor. When a credit institution invests in a corporate bond, it is already required by the SBV that the credit institution has to examine and appraise that bond as if it is a credit package in order to ensure the safety of its investment.
Second, a credit institution also assumes the role of a corporate bond issuer. According to the SBV Governor, this operation is considered similar to a normal capital mobilization activity performed by the credit institutions, but this operation creates multiple advantages for the credit institutions in their long-term capital balances because corporate bonds often have long-term maturities. For the common citizens, holding a corporate bond issued by a credit institution is similar to having a deposit in the bank, but the advantage is that the holder can have different options, if that is a convertible bond, it means the holder also own part of the bank’s shares instead of having just a deposit in that bank.
Third, a credit institution also plays the role of a service provider for the companies. The SBV Governor shared that in the process of a bond issuance, all relevant legal corridors had been promulgated and stipulated clearly and specifically by the SBV.
Le Hang