Ensuring liquidity of credit institutions and stabilizing monetary market

08:21-14/08/2018

The State Bank of Vientam (SBV) has recently submitted to the National Assembly a report on the implementation of resolutions of the National Assembly, which confirmed that the SBV has actively researched, reviewed and drastically implemented the contents related to activities of the banking sector.

Flexible conduct of monetary policy

As per the report, the SBV affirmed the flexible use of monetary policy tools to regulate money supply, support systemic liquidity as well as meet the needs of payment of the economy. In the context of a high level of foreign currency surplus, the SBV bought foreign currencies to supplement the State's foreign exchange reserves and withdrew money on the open market through the issuance of the SBV's bills. This ensured the liquidity of the credit institutions and stabilized the monetary market.

"Under the direction of the Prime Minister, the SBV’s Governor, some commercial banks reduced lending interest rates for the prioritized- sectors. The mobilizing rates were commonly 3-5.5% /year for the term of 6 months to less than 12 months and around 6.5-7.3% /year for the term of over 12 months. The average lending rate of commercial banks was around 6-9% /year for short-term loans,  9-11%/ year for mid-long-term ones.  For customers with healthy financial status and high creditratings, short-term lending rates were only 4-5% /year"the report emphasized.

At the beginning of 2018, right after the banking sector conference held on January 12, 2018, on the basis of review and analysis of macroeconomic factors, the SBV instructed credit institutions to continue reviewing and balancing their financial capability to apply reasonable lending rates in line with mobilizing rates and the risks of loans, reduce operating expenses and improve business efficiency so as to decrease the lending rates for  easingburden on borrowers.

As for the exchange rate policy, the SBV continued to flexibly manage the central exchange rate in line with domesticand foreign market developments, combined with the flexible adjustment of exchange ratesfor buying foreign currencies from credit institutions and synchronous coordination with other monetary policy instruments to enhance the value and position of VND. As a result, exchange rates and the foreign currency market were generally stable, credit institutions were net buyers in foreign currency transactions with their customers, legal demand for foreign currencies was met in a sufficient and timelymanner; and the SBV bought foreign currencies to supplement the State's foreign exchange reserves, raising its foreign exchange reserves to the highest level ever.

Enhancing effectiveness of buying, selling non-performing loans

Implementing the Resolution No. 42/2017 / QH14 dated June 21, 2017 on pilot settlement of bad debts of credit institutions, the SBV revealed that in 2017 and the first quarter of 2018, the SBV issued the Circular No. 09/2017 TT-NHNN dated August 18, 2017 on amending and supplementing Circular 19/2013 / TT-NHNN dated September 6, 2013, which amended and supplemented some contents on buying, selling non-performing loans (NPL) and NPL resolution of Vietnam Asset Management Company (VAMC) in compliancewith Resolution 42. On June 27, 2017, the SBV sent the official letter No. 5051 / NHNN-PC to the Ministry of Justice proposing a list of documents detailing Resolution 42.

"Up to now, relevant ministries and agencies have issued documents guiding the implementation of Resolution 42 according to their assigned competence. However, for the effective implementation of Resolution 42, the Supreme People's Court should issue a Resolution of the Council of Judges of the Supreme People's Court soon to guide the implementation of the provisions of Resolution 42/2017 / QH14 concerning the application of simplified procedures in accordance with the provisions of the 2015 Civil Procedure Code. "- The SBV informed the National Assembly.

The SBV instructed the VAMC to implement solutions to buy NPLs at market prices and raise the financial capacity of the VAMC; issued Decision No. 28 / QD-NHNN dated January 5, 2018 on approving the VAMC's scheme on restructuring and capacity building for the period 2017-2020 and towards 2022. This scheme provided  the organizational form, role, development orientation, operational objectives of the VAMC and proposed solutions regarding mechanism, policies to improve the efficiency of trading and dealing with bad debts, promote bad debt trading, improve the organization structure, and expand the network, develop human resources ...

With the drastic measures taken by the SBV and the efforts of credit institutions to curb and deal with bad debts, especially with the issuance of Resolution 42, in 2017, NPLs continued to be controlled and remained below 3%.

Credit institutions ‘NPL ratio was 1.99%bythe end of December 2017 and2.18% bythe end of March 2018 (down from 2.46% bythe end of 2016). The total amount of NPLs resolved in 2011 was VND 115.54 trillion, mainly due to customers repaying loans, using risk provisions and selling to the VAMC.

According to the SBV, from 2012 to the end of March, 2018, the whole system of credit institutions resolved bad debts of VND 753.5 trillion. In terms of data on bad debt settlement defined by Resolution 42, by the end of March, the whole system resolved NPLs worth VND 100.5 trillion.

Department of Research and International Cooperation