In 2017: the banking system gained stability and high recognition frominternational experts
In the context of the world economy with many unstable factors and the slow recovery of the international financial system, the SBV has implemented synchronous and flexible monetary policy tools to stabilize the monetary market, contribute to controlling inflation, create favorable conditions for credit institutions to reduce lending interest rates and strengthen creditsupply to the economy, assist the economic growth to reach6.81%, which wasthe highest in 10 years and higher than the target rate of 6.7%. The total liquidity was estimated to increase by 16%, close to the target set at the beginning of the year.
In order to reduce the lending interest rate, somehow support enterprises and economic growth, the SBV has made efforts to administer the monetary policy to ensure liquidity for credit institutions, maintain the interbank interest rate at a reasonable level, contribute to stabilizing and reducing market interest rates. The lending rates at credit institutions decreased by 0.5% per year for prioritized areas; the interest rates were actively reduced through some supporting programs for business development, lower than the SBV ceilingrate (about 0.5-1% per year); the interest rates for some medium and long-term loans to prioritized sectors were decreased to nearly 8% per year; the diversified short-term and medium-term credit packages with preferential interest rates for essentialsectors for the economic development and social security were launched; the short-term lending rates to customers with healthy financial status and high credit ratings were adjusted to 4-5% per year.
Thanks to the comprehensiveimplementation of variousmeasures, the credit resources were well developed and gained positive growth since the beginning of the year, the interest rates were stable and met capital needs for production and business. The credit structure mainly focused on the production and business, in which the credit for some key economic sectors was higher than the overall growth rate of the whole system. It can be said that the credit growth was consistent with the absorption capacity of the economy, positively supported theeconomic growth but did not generate inflation pressureand risks.
Relating to the foreign exchange, the SBV continued to flexibly operate the central rates in accordance with the domestic and foreign market happenings. The exchange rates and foreign currency markets generally showed little fluctuation and the liquidity was stable. In the contextof abundant foreign currency supply, the SBV flexibly adjusted the foreign currency buying rates in line with market developments to purchase foreign currencies and supplement the State foreign exchange reserves. The interest difference between VND and USD was maintained at a reasonable level, the liquidity control of the VND supported both the stabilization of the exchange rate when necessary and interest rates on deposits from individuals and non-bank institutions. The gold market was relatively stable and only fluctuated in a narrow range even when there were complicated movements in international gold prices. Part of the gold capital in the population was initially transformed to serve the socio-economic development.
In 2017, the legal framework for credit institutions restructuringand NPL resolutionwas improved. On July 19th 2017, the Prime Minister issued Decision No.1058/QD-TTg approving the project of "Restructuring the system of credit institutions in association with NPL resolution for the period 2016-2020" (Project No.1058). On June 21st 2017, the National Assembly passed the Resolution No.42/2017/QH14 on piloting NPL resolution (Resolution No.42). The SBV has implemented the Resolution No.42 and the Project No.1058 as well as directives from the Government and the Prime Minister in a drastic and effective manner over the whole system. At the fourth session of the XIV National Assembly meeting, the draft law amending and supplementing a number of articles of the Law on Credit Institutions (effective since January 15th 2015) was officially passed. The passage of this Law is an important, long-term and decisive factor for the effective and feasible implementation of restructuring the credit institution system in association with the NPL resolution, thereby contributing to the economic development in the new periodand overcoming obstacles in restructuring credit institutions in the previous period, building the foundation for the safe and effective development of credit institutions, protecting the legitimate rights of depositors. Along with the enhancement of the legal framework, the stability and security of the system was maintained, the NPLs have been kept under control atbelow 3%.
Administrative reforms and improvement in business environment have also gained important resultsin the monetary and banking sector. The “getting credit” indicator of Vietnam in 2018 was ranked at 29 out of 190 by the World Bank, up03steps, and thus Vietnam was ranked fourth in ASEAN, followingBrunei (ranked 2/190), Malaysia and Cambodia (ranked 20/190). The SBV continued to takethe lead in the Public Administrative Reform Index (PAR INDEX) 2017 for the second consecutive year.
The payment system continued to show positive changes, infrastructure for card payment was improved in terms of quality, the number of customers using electronic payment via the Internet, mobile phones, etc. was increased rapidly. The utilities and safety in electronic payment have contributed to the improvement and promotion of non-cash payment in residential areas.
Based on the success of the banking sector in the past year, many international organizations have recently highly appreciated the stability of the banking system in Vietnam, of which the Moody's raised the rating for Vietnam banking system from "stable" to "positive". Bloomberg also evaluated the Vietnamese dong as one of Asia's most stable currencies. This is a remarkable result of monetary and banking policy implementation in a synchronous and effective manner, contributing significantly to control inflation, stabilize the macro-economy,support economic growth as well as ensure the safe operation of credit institutions.
The year 2018 and key tasks of the banking industry
Based on the policy of the National Assembly, the Government's guidance and the macro-economic and monetary assessments, the SBV will actively and flexibly manage the monetary policy in coordination with the fiscal policy and other macroeconomic policies to stabilize the macro-economic balances and control inflation, support economic growth at reasonable rates in 2018.
One of the priorities of the SBV is the synchronous and flexible management of the monetary policy instruments to stabilize the monetary market, contributing to inflation control, striving to reduce the lending interest rate in line with macroeconomic conditions on the basis of ensuring safe and healthy financial operations.
In addition, the exchange rates will be actively and flexibly adjusted in line with market conditions, macro-economic balances, and monetary policy objectives; the foreign exchange market will be stabilized, the foreign exchange reserves will be raised under favorable market conditions; the role of state management of the gold market will continue to be well excecuted.
Credit will be controlled at a reasonable growth rate, servingto fulfill thetarget of taming inflation, supporting economic growth, improving credit quality.Credit will be actively controlled in some risk-prone sectors. Difficulties and problems relating to mechanisms and policies will be promptly solved to facilitate the credit supplyto supporteconomic development while ensuring operation safety. Credit programs and policies will be continuously implementedin a number of sectors and industries so as to support the effective expansion of credit supply, the credit restructuring and social security.
The restructuring of credit institutions together with NPLs resolution will continue to be promoted by the SBV through the process of completing the legal framework, monetary policy mechanism and banking operations. The SBV will advise the competent authorities on the issuance of policies, regulations and mechanisms to support the restructuring process together with the NPL resolution, the regulations on cross-ownership issues (especially focusing on the documents guiding the Law amending and supplementing a number of articles of the Law on Credit Institutions 2010). The quality and timeline of the assigned tasks under the Action Plan of the banking sector to implement the Project of "Restructuring the system of credit institutions associated with NPL resolutionforthe period of 2016 to 2020” and the Resolution No.42/2017/QH14 on piloting NPL resolution of credit institutions will be concentrated. The effectiveness of banking inspection and supervision will be innovated and enhanced to adapt to practical conditions of Vietnam and in accordance with international standards and practices.
The SBV will continue to improve the legal framework for payment in the economy; efficiently implement the Scheme on development of non-cash payment for the period of 2016 to 2020; develop banking technology and payment services, enhance the efficiency and safety ofthe Vietnam’s banking payment system. Step by step, the basic technical standards for the information technology infrastructure and the professional information system of the banking industry will be developedaccording tointernational practices. Furthermore, the communicationon the payment should be promoted for the implementation of the Scheme on non-cash payment and the Scheme on enhancing accessibility to financial services.
On administrative reforms, the SBV will actively implement all six reforming areasunder the Governmental Resolution No.30c/NQ-CP on the master project of public administration reform from 2011 to 2020, focusing on institutional framework and administrative procedures reforms, improving the quality of civil officials. The construction of electronic government will be pinpointed under the Resolution No.36/NQ-CP.
SBV Deputy Governor Nguyen Thi Hong claimed that in 2018, the credit growth target is expected to reach 17%, lower than the rate of 18.17% in 2017. The credit growth target will be flexibly adjusted according to the market situation. At the same time, the SBV will consider the context, specifically the exchange rates and financial situation of credit institutions in order to propose appropriate measures to reduce lending interest rates.