SBV Deputy Governor Pham Thanh Ha: “Continue to work together to remove the difficulties, accelerate the implementation of the interest rate support package”

Controlling inflation and ensuring safety of banking operations are top priorities

Talking about the monetary policy management in general, SBV Deputy Governor Pham Thanh Ha stated that the economic, financial and monetary situations around the world have experienced complicated, unpredictable and risky developments. Several central banks have quickly raised their key interest rates, leading to the risks of recession. In that context, the SBV has used various measures to maintain the stability of the money market and the interest rates. Currently, the domestic inflation is still under control. However, the pressures in 2023 are expected to be significant, and Vietnam cannot ignore this risk. From the perspective of a macro management agency, the SBV would need to be consistent with the goal of controlling the inflation, maintaining the macro-economic stability, and taking cautious steps in the monetary policy management, including managing the credit growth.

Regarding the credit management, the SBV Deputy Governor mentioned that the pressures from the demand for capital flows for the economic recovery are very strong. The capital demand for the economy depends mainly on the banks’ credit resources, while the capital market has not developed in line with the demand. In 2022, the SBV has set a target for the credit growth of about 14%, with possible adjustments in line with the practical developments.

However, according to the SBV Deputy Governor, the banks’ credit capital is only one of the investment capital sources for the economy. Bank credit cannot meet all capital needs of the economy. It is necessary to fully open the capital channels, including stocks, bonds, public investment, and foreign investment resources. In the current context of multiple challenges, the SBV would have to ensure consistent, flexible and harmonious management of all available tools and solutions in order to achieve the most important objectives, which are ensuring the safety of the system, controlling the inflation, maintaining the macro-economic stability. In addition, the operating tools and solutions are normally short-term, and therefore they cannot replace the long-term capital sources, solutions and policies.

Considering the above context, the SBV is determined to continue with the current monetary policy in general, and the credit policy in particular, not ignoring the risks of inflation, and ensuring the safety of the banking operations - which are the top priorities of the SBV.

Accelerating the implementation of the interest rate support package

Talking about the flexible coordination between the fiscal policy and the monetary policy, SBV Deputy Governor Pham Thanh Ha shared that the SBV had identified the implementation of the 2% interest rate support program through the commercial banks with a total package worth VND 40 trillion as one of the key tasks for 2022.

The SBV has coordinated with the relevant Ministries and submitted to the Government for issuance of Decree 31. On the same day, the SBV also issued Circular 03 providing guidance for the commercial banks’ implementation to ensure that this program can reach out to all eligible borrowers. After that, the SBV had collected the requests from the commercial banks and worked with the relevant Ministries on an allocation plan for the VND 40 trillion within 2 years (VND 16 trillion in 2022 and VND 24 trillion in 2023). The SBV has also issued an FAQ document to answer more than 20 common questions often raised by the commercial banks during the implementation process. Besides, the SBV has requested the banks to focus their resources to quickly deploy this support package and ensure that it can reach out to all eligible borrowers. The communication has also received a lot of attention. A lot of conferences and dialogues have been chaired or initiated by the SBV, with the attendance of various commercial banks, in order to disseminate the information to the eligible people and enterprises.

According to the SBV Deputy Governor, the implementation of the support package has not met the expectations, partly because there are still some difficulties and hurdles that need to be addressed in the near future.

The first issue is the subjects of the interest rate support, while another issue is the assessment criteria, which require potential customers to have a business and production plan with prospects of recovery. The SBV has discussed with the relevant Ministries, i.e. the Ministry of Planning and Investment, the Ministry of Justice, the State Audit and the Government Inspectorate, in order to reach an agreement on: Assigning the commercial banks to take lead in assessing their customers’ possibilities of recovery at the time of assessment/appraisal to determine the loan as well as the interest rate support. For customers who are engaged in multiple sectors and fields, they shall take responsibility for self-determining in their loan plan about the scope of utilization of the loan resources for the sector and field subject to the interest rate support.

Explaining more about the reluctance among the lending banks and the borrowers, the SBV Deputy Governor shared that in the past a number of interest rate support programs were deployed but there were certain difficulties in the disbursement, especially the settlement stage, and thus many lending banks may now be reluctant to participate. Those banks will need more time to get ready, build their automated system for the monitoring, settlement, auditing operations. Meanwhile, several commercial banks have proactively contacted potential customers to provide guidance on the procedures and supporting documents, however many customers, especially enterprises, have been also reluctant to access the interest rate support package for fears of stricter compliance, post-implementation inspection and audit requirements.

Talking about possible solutions in the near future, SBV Deputy Governor Pham Thanh Ha informed that the SBV would establish interdisciplinary implementation support missions in order to evaluate and urge the implementation of this policy at a number of commercial banks and their branches in the provinces; organize Bank-Enterprise Connection Conferences in the cities and provinces in order to enhance the information sharing and direct dialogues between the commercial banks and their customers, understanding the businesses’ practical needs for support, the difficulties and obstacles in the process of accessing the support package in order to promptly address and remove them. The SBV would also continue to coordinate with the relevant Ministries and agencies to promptly handle with any arising difficulties faced by the commercial banks and the enterprises.

LK