However, Vietnam still overcame difficulties, became a bright spot in the world for COVID-19 epidemic prevention and maintaining positive growth in the context of global recession. In that general achievement, there was a significant contribution of the banking industry. 10 outstanding banking events in the past year are as follows:
1. The banking industry has the first female Governor
In October 2020, Governor of the State Bank of Vietnam (SBV) Le Minh Hung was assigned by the Politburo to be the Chief of the Office of the Party Central Committee. On November 12, the National Assembly voted to approve the appointment of the new Governor of the SBV. Accordingly, the proposal of the Prime Minister on the appointment of Ms. Nguyen Thi Hong as Governor of the SBV for the 2016-2021 term received 467 approval votes (representing 97.08% of the total votes). Ms. Nguyen Thi Hong became the first female Governor of the SBV and the 15th Governor of the Vietnamese banking industry.
Ms. Nguyen Thi Hong, 52 years old, from Hanoi, holds a Master in Development Economics, and has worked in the banking industry since 1991. She used to hold the position of Deputy Director in charge and then Director of Monetary Policy Department, before being appointed by the Prime Minister as Deputy Governor of the SBV in August 2014 and reappointed in August 2019.
2. SBV continuously reduces the operating interest rates
In 2020, the global economy was heavily affected by the COVID-19 epidemic. Most countries had to launch huge bailout packages, and at the same time, aggressively loosen their currencies to support people and businesses.
In Vietnam, the SBV has also cut the operating rates three times, whereas the refinancing rate has decreased by a total of 2% per year, the OMO interest rate has decreased by 1.5% per year, the interest rate ceiling for one month to less than 6 month term deposit decreased by 1% per year, interest rates for priority sectors decreased by 1.5% per year.
With the above reduction, the SBV is one of the central banks with the largest interest rate cutting in the region.
The sharp decline in operating interest rates has resulted in the record drop of interest rates in the market. Currently, the average lending interest rate is 0.6-0.8% lower than the end of 2019, when some banks have decreased rates by 1-2.5% per year; the lending interest rates for the priority areas are about 4.5% per year.
3. Stable exchange rate, record high foreign exchange reserves
Despite the world currency market fluctuating continuously under the impact of the COVID-19 pandemic and the US-China trade war, under the active management of the SBV, the local foreign exchange market and exchange rate remained stable; the VND even appreciated slightly against the USD. Meanwhile, the SBV also bought a large amount of foreign currency to supplement the national foreign exchange reserve fund.
The record trade surplus is considered one reasons for the sharp increase in foreign exchange reserves of Vietnam. According to the General Statistics Office, Vietnam's merchandise trade balance is estimated to have a surplus of 19.1 billion USD in 2020. In addition, despite the impact of the COVID-19 pandemic, foreign direct investment in-flow to Vietnam are still very positive; remittances flow to the country also remained at a relatively high level.
Higher foreign exchange reserves help strengthen national security, prevent external influences, and strengthen confidence of domestic and foreign investors. In addition, a higher level of foreign exchange reserves and a surplus balance of payments are favorable conditions supporting the SBV to maintain stability of the foreign exchange market and exchange rate.
4. Deploying many solutions to support customers
The outbreak of COVID-19 epidemic have had a strong impact on the global economy, including Vietnam. Enterprises face many difficulties, especially industries such as export, tourism, hotels, restaurants, transportation ... In that context, the SBV is one of the pioneering ministries in implementing solutions to support people and businesses.
Accordingly, the SBV has promptly issued Circular No.01/2020/TT-NHNN allowing credit institutions to restructure the repayment period, exempt or reduce interest and fees for customers affected by COVID-19. At the same time, the fees for payment via SBV, CIC credit information fee, NAPAS payment fee ... are also exempted or reduced.
Under the direction of the SBV, banks have simultaneously stepped in to reduce interest rates, exempt or reduce service fees, and restructure debts to share difficulties and accompany customers. Not merely cutting profits, banks also have to reduce all types of costs, including cutting salaries, bonuses for staff and employees and not paying cash dividends.
According to the SBV's statistic, in 2020, credit institutions have restructured repayment terms for 270.000 customers with outstanding loans of nearly 355 trillion VND; exempted, reduced, and lowered interest rates for nearly 590.000 customers with outstanding loans of more than 1 quadrillion VND; offered new loans with preferential interest rates that are 0.5-2.5% per year lower than pre-epidemic interest rates, with a total outstanding loans of nearly 2.3 quadrillion dong.
Although the Vietnam Bank for Social Policies is not subject to debt restructuring under Circular 01, it has extended debt to customers with nearly VND 4,200 billion and lended more than 72 trillion VND.
In addition, the total amount of payment service fees that banks waive or reduce for customers by the end of 2020 is about over 1,000 billion VND.
5. The SBV topped the Par Index for the 5th time in a row
According to the results the PAR Index in 2019, the SBV achieved the highest score of 95.4/100 points and continued to rank first. This is the 5th time in a row that the SBV has ranked No.1 in administrative reform among ministries and ministerial-level agencies.
Besides, according to the Report on Business Environment 2020 announced by the World Bank Group, the credit access index has increased 5 points and 7 levels, ranking 25/190 in the economy (exceeding the set target issued in Resolution No.01/ NQ-CP to increase at least 1 level in 2019), ranking 2nd among ASEAN countries (after Brunei). Meanwhile, the credit information depth index of Vietnam reached a maximum score of 8/8 points.
This is the result of SBV’s consideration of administrative reform as the inevitable and objective trend for the banking sector to integrate and develop equally to banks in the region and the world. Accordingly, the goal of the SBV is to promote 6 areas of administrative reform in the banking system, together with the innovation of service methods of the banking sector that set people and businesses at centre, and clear transformation on the improvement of business environment in banking operations.
6. Many banks have completed 3 pillars of Basel II
If from 2018 to 2019 only 18 commercial banks have been approved by the SBV to apply the minimum capital adequacy standards in accordance with the provisions of Circular No.41/2016/TT-NHNN (Pillar 1 of Basel II), then in 2020, most banks have adopted this standard. Even a series of banks announced the completion of 3 pillars of Basel II such as VIB, Vietcombank, SeABank, VPBank, TPBank, MSB, VietCapitalBank, Shinhan Bank.
The early completion and application of all 3 important pillars of Basel II shows the concentration on risk management to ensure the balance of the three elements "growth - sustainability – quality”. This is an important milestone in improving the capacity of risk management as well as the competitiveness of banks in the financial market. The application of international risk management standards and practices such as Basel is a prerequisite for banks to improve their risk management capacity.
7. 4 State-owned commercial banks get increased capital
The increase of capital for state-owned commercial banks, which has been delayed for many years, has been settled when the Government issued Decree No.121/2020/ND-CP in October 2020. It modifies Clause 2, Article 12 of Decree 91/2015/ ND-CP, which contains provisions: Joint-stock commercial banks with over 50% of charter capital held by the State shall continue to be invested capital by the State to maintain State’s share ratio in the enterprise.
Right after Decree No.121 was issued, BIDV, Vietcombank and VietinBank simultaneously announced their plan to pay dividends in shares. Specifically, VietinBank came up with the plan to issue more than 1 billion shares to pay dividend, which was up to 28.8% in ratio, increased charter capital sharply from 37,234 billion dong to 47,953 billion dong.
Vietcombank paid dividends from 2018 at the rate of 18% and issued up to 6.5% shares to increase capital. Meanwhile, BIDV planned to use more than 2,000 billion VND from accumulated profits to supplement its charter capital - which is already at the highest level in the system.
Agribank has not been equitized yet, but this year, the National Assembly has come to the conclusion to increase its capital by VND 3,500 billion from the State budget in 2019. This amount is exactly equal to the after-tax profit that this bank will submit to the budget in 2020, up to VND 3,500 billion.
8. Strong digital transformation in banks
Digital transformation is a bold imprint of the banking industry in 2020. Many experts assume that although the COVID-19 pandemic posed many negative impacts on the economy, in a certain angle, it is also the catalyst that accelerates the digital transformation of banks faster and stronger than ever.
Accordingly, in the past year, the market has seen a series of banks invest trillions VND in digitalization, new digital banks have been launched such as VCB Digibank, Lienviet24h, Timoplus ... Stronger investment in digitalization helps banks quickly increase the number of customers and revenue from services, reduce dependence on traditional credit.
Another driving force is the strong participation of the SBV when it promulgated regulations on opening online accounts, creating a platform to help banks accelerate digital transformation. By the end of 2020, dozens of banks have applied eKYC (electronic identification) to open accounts such as VPBank, MB, HDBank, VIB, TPBank, Nam A Bank, Viet Capital Bank, MSB, SeABank ...
9. Bancassurance: trillion deals
2020 can be seen as the booming year of major cooperation deals that are worth trillion VND between banks and insurance enterprises. In addition to the great value, the exclusive cooperation period of the deal is also extended to over 15 years.
Most recently, VietinBank and Manulife Vietnam signed an agreement to establish an exclusive partnership for 16 years in the distribution of life insurance via banks. Previously, at the end of June 2020, Bloomberg said that the bancassurance agreement between VietinBank and Manulife could be valued at several hundred million USD, equivalent to trillion dongs.
Another trillion-dong deal was also signed this year between Vietcombank and FWD with an exclusive cooperation agreement for a period of 15 years.
Such form of cooperation not only takes place at the state-owned joint stock commercial banks but also spreads to private joint stock commercial banks. Specifically, ACB has signed an exclusive cooperation agreement to distribute the life insurance products of Sun Life Insurance Vietnam for 15 years.
Previously, a series of exclusive bancassurance contracts were also completed such as the one between Techcombank and Manulife Vietnam (15 years) in 2017. In the same year, AIA Insurance and VPBank signed a 15-year exclusive distribution cooperation agreement; Dai-ichi Vietnam signed an exclusive contract with SHB for 15 years, etc.
According to experts, in the context of credit growth facing many difficulties due to the COVID-19 epidemic, revenue from selling insurance has grown spectacularly and become an important source of income for banks.
10. Banks massively list on the stock market
2020 is the deadline for banks to list shares on the stock exchange under the "Development Strategy of the Vietnam Banking Industry up to 2025, with a vision to 2030" approved by the Prime Minister in August 2018.
Specifically, this year, there are a total of 5 banks that put their shares on UPCoM, namely Nam A Bank, Vietcapital Bank, Saigonbank, PGBank and ABBank; There are 3 banks transferring from UPCoM or HNX to HoSE, such as VIB, ACB and LienVietPostBank. MSB is the only bank that puts listed shares directly to HoSE. In addition, 3 other banks, SHB, OCB and SeABank, have also submitted their listing documents to HoSE ...
The wave of banks’ changing the stock exchange has also contributed to the explosion of "king stocks" this year. For example, the share price of VIB has increased by more than 90%, LPB has increased by 70%, ACB has increased by more than 60%, and SHB doubled ... The price of shares of other banks has also risen sharply, popularly by 20-30%. Vietcombank's VCB increases to approximately 100,000 VND, making this bank the largest company in the market by capitalization, taking the throne of Vingroup.