9:19:42 AM | 2/2/2021
The banking industry greatly contributed to the Vietnamese economy in the 2016-2020 period. The year 2021 will be of great significance as it is expected to advance socio-economic development, and maintain macroeconomic stability and sustainable development. On the advent of the Year of the Buffalo, Vietnam Business Forum has an interview with Mr. Dao Minh Tu, Deputy Governor of the State Bank of Vietnam. Quynh Ngoc reports.
In the 2016-2020 period, the banking industry successfully completed assigned objectives and tasks. Could you please tell us about the outstanding results of the banking industry, as well as the efforts to achieve them?
In the 2015-2020 period, the Vietnamese economy was well-positioned thanks to the effort of more than 30 years of economic reform. However, difficulties increased due to geopolitical conflicts, tense trade conflicts among major countries, complicated developments of the Covid-19 pandemic, natural disasters and climate change. With the resolute engagement of the political system and the consensus of the people and enterprises, the Vietnamese economy obtained important achievements e.g. stable macro foundation, controlled inflation, trade surplus in five consecutive years amid a sharp decline in international trade; high growth of 6.8% a year in the 2016-2019 period and especially nearly 3% in 2020 (being one of few countries achieving positive growth, estimated to be the highest in the region); positive economic restructuring and growth model reform, strengthened confidence in the Vietnamese dong, record foreign exchange reserves, improved national credit ratings, and enhanced national competitiveness.
These economic achievements are outstanding, and importantly contribute to the banking system - the lifeblood of the economy, reflected in the following four main areas:
First, the transmissional effect of monetary policy has been increasingly enhanced. The State Bank of Vietnam (SBV) has consistently and flexibly used monetary policy tools to stabilize the monetary and foreign exchange (forex) markets, helping control inflation in line with the target and supporting sustainable economic growth. The SBV has safely and effectively managed credit, with a focus placed on production and business, controlled credit in potentially risky areas, supported economic growth; consistently reduced interest rates based on macroeconomic stability, supported economic growth, ensured interest balance of borrowers and depositors; stabilized the exchange rate, Vietnamese dong value, monetary market, forex market and gold market.
Second, restructuring credit institutions and settling bad debts made a fundamental breakthrough on the basis of detecting and completing the "bottlenecks" in the current legal framework. By the end of 2020, the stability and safety of the credit institution system was maintained, most credit institutions reached the capital adequacy ratio of 11.65%); financial capacity of credit institutions was strengthened; credit quality was improved, NPL ratio was kept below 3%; the size of the credit institution system continued to be expanded; the governance capacity of credit institutions was gradually improved towards international practices.
Third, the payment system was controlled and operated safely, the development of non-cash payment made great progress. The SBV built and perfected a legal corridor to ensure security and safety in payment activities. Credit institutions researched and applied many new modern technologies such as mobile payment, fingerprint authentication, biometrics and quick response (QR) code. At the same time, banking payment was promoted in public services, making a significant contribution to the limited use of cash in the economy.
Fourth, the administrative reform continued to be given special attention by the SBV in the 2016-2020 period. Thus, in five consecutive years, the SBV ranked first in PAR-Index by the Government's PAR Steering Committee for its strong improvement of the business environment in the banking sector and contributions to national competitiveness.
By nature, banks are also enterprises and not free from the negative effects of the Covid-19 pandemic. However, as the lifeblood of the economy, how did the banking sector comply with Party and the Government guidelines to share difficulties with businesses and people to support economic growth and mitigate the impacts of the pandemic?
2020 went into world history with unprecedented challenges. The Covid-19 pandemic spread across the world, wreaked havoc on social and economic activities of the world, causing many difficulties and consequences for businesses and countries. Following directions of the Government and the Prime Minister, the State Bank of Vietnam proactively implemented many consistent credit solutions to remove difficulties for borrowers affected by Covid-19, specifically:
First, requesting credit institutions to review and evaluate impacts of the pandemic on borrowers, build programs and action scenarios to follow the reality to remove difficulties for customers.
Second, issuing Circular 01/2020/TT-NHNN, effective from March 13, 2020, to create a legal basis for credit institutions to restructure their repayment terms, exempt, reduce interest and fees to help people and businesses to reduce pressures on debt payment to spend the fund for business operations; issuing Directive 02/CT-NHNN dated March 31, 2020 instructing credit institutions to strengthen implementation of solutions to remove difficulties for borrowers affected by the pandemic.
Third, drastically directing credit institutions to focus all resources, accelerate internal procedure reform, reduce the time of reviewing loan applications to improve customers' access to loans.
Fourth, promptly increasing credit growth of efficient credit institutions, expanding good credit into areas serving economic growth.
Fifth, issuing circulars and documents guiding the implementation of zero-rate refinancing loans of VND16 trillion from the SBV to VBSP to lend to financially troubled employers to pay salaries for laid-off employees in the spirit of Resolution 42 of the Government and Decision 15 of the Prime Minister.
Sixth, the SBV leadership cooperated with leaders of Provincial/Municipal People's Committees to organize nearly 20 conferences on banking - business connection in all six key economic regions of the country to grasp opinions of enterprises and trade associations, promptly remove their difficulties and problems in access SBV policies, especially for enterprises active in sectors and fields most affected by the Covid-19 pandemic, priority sectors, and policy beneficiaries.
The early, proactive and decisive engagement of the banking sector produced positive results. Credit growth showed signs of recovery from the second quarter when the demand for credit began to increase. As of December 23, 2020, credit growth was 10.54%. Credit continued to be focused on business areas, priority areas and key projects.
In particular, all credit institutions (including finance companies and foreign banks) strongly joined in, used their internal financial resources through cost reduction, salary reduction, profit reduction and no dividend to support customers. Up to now, the banking industry has restructured repayment terms of VND355 trillion loans for about 270,000 customers affected by the Covid-19 pandemic; exempted and reduced interest rates on VND1,000 trillion for nearly 590,000 customers. Especially, credit institutions have provided new preferential interest rates (lower than commonly by 0.5-2.5% compared to pre-pandemic rates) on VND2,300 trillion for more than 390,000 customers.
Lending employers to pay stoppage salaries for their employees, VBSP disbursed a total of VND20.72 billion for 137 employers to support 5,200 workers.
Solutions adopted by the SBV and the banking sector in recent years, especially solutions to restructure repayment terms, exempting and reducing interests, are implemented by credit institutions' resources, from reducing operating costs, reducing operating profits to helping borrowers in financial trouble to restore and stabilize business operations.
What breakthrough strategic solutions will the banking industry apply in 2021 and the period 2021-2025?
2021 is the first year to implement the socio-economic development plan for the 2021-2025 period - a new stage of development of the country. Given unpredictable world and domestic developments, the banking sector has prepared to be ready to confront any difficulty, with a high sense of responsibility, to fulfill all tasks assigned by the Party, the National Assembly and the Government to ensure its role as the lifeblood of the economy and contribute to macroeconomic stability and sustainable development.
At the same time, in the 2021-2025 period, the banking sector continued to adhere to the goals stated in the Banking Industry Development Strategy aimed to modernize the SBV and develop a system of transparent, competitive, secure and sustainable credit institutions to reach the level of leading countries in the region. Accordingly, the sector is determined to focus on implementing the following key tasks and solutions:
First, improving banking legal institutions, creating a synchronous, convenient and clear legal basis for the administration of monetary policies and banking operations in accordance with market economy laws, economic development requirements and international practices, to meet integration requirements, as well as development trends of the Fourth Industrial Revolution.
Second, further consolidating the SBV’s organizational structure toward simplicity and efficiency in accordance with international practices and standards; drastically carrying out administrative reform, improving the business environment, raising credit ratings and public and business confidence in banking mechanisms, policies and operations.
Third, following movements of domestic and international markets to flexibly use the tools to achieve goals of monetary policy - controlling inflation, stabilizing currency value, macroeconomic stability, increasing credit for the economy and promoting sustainable economic growth; managing credit policies to focus on priority areas under the Government's policy, tightly controlling credit for potentially risky areas; integrating contents of sustainable development, climate change and green growth in credit programs and projects.
Fourth, strengthening the effectiveness and efficiency of banking inspection and supervision systems, especially in high-risk areas and weak credit institutions, ensuring the safety of the banking system; strengthening technology application, focusing on training and improving the quality of human resources for banking inspection and supervision.
Fifth, further restructuring credit institutions and handling bad debts, with the focus on weak credit institutions; further enhancing competitiveness, both in financial and governance capacities, towards international standards and practices; enhancing transparency, compliance and discipline in operations of credit institutions.
Sixth, focusing on building the Noncash Payment Development Project in 2021-2025 in accordance with international practices and developing digital banking in the Industry 4.0 era; building the national payment infrastructure in order to meet increasing consumer needs in the digital economy; strengthening management and supervision of payment systems to ensure security, safety, efficiency and transparency; deploying solutions to promote innovation, creativity, technology application and modern payment methods; promoting the implementation of payment models in rural, remote and isolated areas.
Seventh, effectively implementing the National Comprehensive Financial Strategy to 2025, with a vision to 2030 to achieve the goals of this strategy by the end of 2025.
Eighth, strengthening international cooperation to enhance the position of the Vietnamese banking industry in the international arena; reforming and strengthening communications on information transparency, raising public awareness and understanding of finance, currency and banking operations; implementing other banking activities oriented by the Banking Industry Development Strategy to contribute to the total effect of the sector’s overall performance.
Actively, positively and consistently carrying out the above tasks and solutions, we believe that the banking sector will continue to fulfill its tasks and obtain great achievements in 2021 in particular, and in the 2021-2025 period in general, to actively support the socio-economic development of Vietnam.
Source: Vietnam Business Forum
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