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The
development of the Vietnam banking system has closely linked with
the national cause of revolution and construction.
Before the
August Revolution in 1945, Vietnam was a feudal-colonial country
under the French colonialists’ rule. The banking and credit system
was founded and protected by the French colonialists through the
Indo China bank. Its functioned as both the central bank of the
whole Indochinese region (Vietnam, Laos and Cambodia) and a
commercial bank. The bank was an effective tool for the colonial
policy of the French government and enriched the French
capitalists. Thus, one of the key tasks of the August Revolution
then, was to build an independent and autonomous monetary and
banking system. The task was fulfilled by 1950, when the
anti-French resistance war grew stronger, obtaining many triumphs
in the battled field, and expanding the liberalized region. In
this context, the development required economic and financial
activities to be improved and promoted to meet new demands.
On the basis
of the new economic and financial policy set out in the 2nd
Congress of the Vietnam Workers’ Party (February,1951), President
Ho Chi Minh signed Decision 15/SL on the establishment of the
Vietnam National Bank – Bank of the first people’s democratic
state in Southeast Asia in order to carry out five urgent
missions: issuing banknotes, managing treasury, carrying out
credit policy in order to facilitate production and coordinating
with the trade authorities for monetary management and struggling
against the enemy.
The foundation
of the Vietnam National Bank was the result of the struggle
process to develop an independent, and autonomous monetary and
credit system, marking a new development step, i.e, changing the
quality of the national monetary and credit sector. Pursuant to
Circular 20/VP – TH issued by the General Director of Vietnam
National Bank under authorization of the Prime Minister on January
21st ,1960, the Vietnam National Bank was renamed as the State
Bank of Vietnam, in accordance with the 1946 Constitution of the
Democratic Republic of Vietnam. Following the liberation of the
South in 1975, the takeover of the Republic of Vietnam National
Bank and private capitalist banks was a starting point of banking
activities all over the country under the banking activity regime
of a central planning economy. In July 1976, the country was
officially unified and the Socialist Republic of Vietnam was
founded.
On the basis
of important changes in the revolutionary directives and tasks as
well as the functions, tasks and organizational structure of the
State Bank of Vietnam, the development process of the Vietnam
banking system could be divided into 4 periods as follows:
1. From 1951
to 1954: The Vietnam National Bank was founded and had relatively
independent operations in the financial system, implementing the
first important duties assigned by the Communist Party of Vietnam
and the Government, i.e, issuing banknotes, retrieving poor
quality banknotes, managing state treasury to help increase
revenue and reduce expenditure, unifying fiscal management,
developing banking credit to serve commodity production and
circulation, and enhancing state – owned economic sector and
fighting against the enemy in the monetary field.
2. From 1955
to 1975: The whole country launched the anti-American resistance
war; the North carried out socialist construction and made great
efforts to support the revolutionary liberation of the South; all
socio-economic activities had to move along with new demands. In
this period, the Vietnam National Bank carried out the following
principal tasks:
- Reinforce
the money market, stabilize prices, contain inflation and create
favourable conditions for the economic recovery.
- Promote the
provision of credit for food production, enhance the recovery and
development of agriculture, industry and trade, thus contributing
to the implementation of the two strategic tasks, namely the
development of the socialist economy of the North and liberation
of the South.
3. From 1975
to 1985: This is the ten-year postwar economic recovery after the
liberation and reunification of the country. As such, Vietnam
built up the new banking system under the new government,
establishing a country – wide unified banking system and
liquidating the banking system of the previous government in the
South. Accordingly, the Vietnam National Bank of the government of
the Republic of Vietnam (in the South) was nationalized and
unified with the system of the State Bank of Vietnam, carrying out
together the task of currency unification in the country. It
issued new kinds of banknotes of the Socialist Republic of Vietnam
and revoke the old banknotes in both the South and the North in
1978. In the late 1980s, basically, the state banking system did
not implement the market – oriented monetary, but still served as
a budget tool. Changes in the quality of the banking system
operations, the gradual move to market – based operations only
started since late 1980s.
4. From 1986
up to now:
Since 1986,
many important events have happened, marking the significant
“benchmarks” as follow:
+ From 1986 to
1990: the state management function was gradually separated from
the commercial credit and monetary functions. The new mechanism of
banking operations was built up and gradually improved. In May
1990, the Ordinance on the State Bank of Vietnam and ordinance on
banking, credit co-operatives and finance companies, were enacted,
thereby officially changing the operation mechanism of the banking
system of Vietnam from one-tier to two – tier system, in which
each tier’s roles and responsibilities are clearly defined as
follows:
- SBV
implements the state management of currency trading, credit,
payment, foreign exchange and banking; implements the task of a
central bank, the only bank authorized to issue banknote; and acts
as the bank of banks, and the bank of the state. The central bank
is the agency that organizes the management of monetary policy,
taking the task of stablizing currency value as the main objective
and govern specific management policies of the system of
commercial banks.
- The tier of
commercial banks in currency circulation, credit, payment, foreign
exchange and banking services in the whole national economy
comprises banks and non-bank financial institutions.
Together with
the process of reforming operational mechanism of the banking
system, a series of second- tier specialized commercial banks with
many different ownership forms such as: state-owned commercial
banks, joint-stock banks, joint-venture banks, representative
offices or branches of foreign banks, credit co-operatives,
people’s credit funds, finance companies,…In this period, 4 big
state-owned commercial banks were established: 1) Vietnam Bank for
Agriculture and Rural Development (Agribank); 2) Bank for
Investment and Development of Vietnam (BIDV) ; 3) Industrial
Commercial Bank of Vietnam (Incombank); 4) Foreign Trade Bank of
Vietnam (Vietcombank).
+ From 1991 up
to now: To implement the CPV's directions and policies during the
period of modernization and industrialization, Vietnam’s banking
system has been continuously reformed and improved to ensure its
important role in national construction and economic development
in the new millennium. The following benchmarks have direct links
with and enhance the strong reform of banking activities.
1993:
Normalizing credit relations with international monetary
organizations (IMF, WB, ADB)
1995:
Resolution on removing sales tax on banking activities was passed
by the National Assembly; the bank for the Poor was founded.
1997: The Law
on the State Bank of Vietnam and the Law on Credit institutions
were passed by the 10th National Assembly of the Socialist
Republic of Vietnam (dated 2/12/1997) and became effective from
1/10/1998; the Mekong Delta Housing Development Bank was
established (Decision No 769/TTg dated 18/9/1997).
1999: The
Deposit Insurance of Vietnam was established (on 9/11/1999)
2000:
Financial and organizational restructure of the state-owned
commercial banks and joint - stock commercial banks.
2002: offered VND denominated lending rate of credit institutions were
liberalized - The last step to completely liberalize the credit
market's interest rates.
2003:
Comprehensive Operational restructure of commercial banks in line
with international standards; the Vietnam Bank for Social Policies
was set up as the successor to the Bank for the Poor in order to
separate policy credit from commercial credit according to market
mechanism; and starting to revise the Law on the State Bank of
Vietnam.
At present,
the State Bank of Vietnam is implementing the roles and
responsibilities stipulated in Decree 178/2007/NĐ-CP dated
December 03, 2007 and Decree 96/NĐ-CP dated
August 26, 2008 by the
Government on functions, roles and responsibilities and structure
of Ministries, ministerial agencies as follows:
1. To submit to
the Government bills, draft resolutions of the National
Assembly, draft ordinances and draft resolutions of the
Standing Committee of the National Assembly; and draft decrees
of the Government in accordance with the approved annual law –
making plans of the State Bank ; and projects and schemes
assigned by the Government and the Prime Minister.
2. To submit to
the Prime Minister the development strategies and schemes,
long-term, five-year and annual plans; national targeted
programs, action plans and important projects in the banking
sector; and draft decisions, instructions and other legal
documents under the jurisdiction of the Prime Minister in line
with law.
3. To promulgate
circulars, decisions and directives under the jurisdiction of
the State Bank.
4. To direct,
guide, inspect and conduct the implementation of the approved
legal documents, strategies, plans and important projects
under the jurisdiction of the State Bank; and to publicize,
disseminate and educate all the legal documents related to the
areas under the State management of the State Bank.
5. To formulate
the national monetary plans for the Government to submit to
the National Assembly for approval; to utilize interest rates,
exchange rates, reserve requirement, open market operations
and other instruments in order to implement the national
monetary policies; and to submit to the Government schemes on
the development of the banking industry and credit
institutions;
6. To grant and
revoke licenses to or from credit institutions with the
exceptional cases as decided by the Prime Minister; to grant
and revoke banking licenses to or from other institutions; to
make decision on the dissolution, renaming, separation or
merging of credit institutions; and to make guidelines on the
conditions of establishment and operation of credit
institutions.
7. To monitor and
supervise banking activities; to control credit activities;
and to handle all violations in the monetary and banking
activities in accordance with law.
8. In regard to
foreign exchange management:
a) To manage the
current transactions, capital transactions and foreign
exchange spending in the Vietnamese territory in accordance
with law;
b) To manage the
State foreign exchange reserves; and to control international
reserves;
c) To determine
the exchange rates of Vietnam dong versus foreign currencies;
to develop foreign currency market; and to develop foreign
exchange mechanism to be submitted to the Prime Minister for
approval.
9. In regard to
the development of the international payment balance:
a) To collect,
consolidate, compile, forecast and monitor the formulation and
implementation of the international payment balance; and to
make reports on the implementation of the international
payment balance in line with law;
b) To act as the
lead entity in providing data of Vietnam’s international
payment balance to domestic and foreign institutions in
compliance with law.
10. In regard to
the management of the borrowing and repayment of foreign
loans by resident economic and credit institutions and
individuals in accordance with law:
a) To conduct
State management of the borrowing and repayment of foreign
loans by the enterprises and other institutions of the public
sector; to monitor the borrowing and repayment of foreign
loans by the private sector; to guide and supervise the
guaranty for foreign debts by commercial banks and other
institutions which are allowed to provide guaranty in line
with law;
b) To take the
lead and co-ordinate with the relevant authorities to develop
the annual quota of foreign commercial loans by the
enterprises and other institutions of the public sector and
forecast the annual level of foreign loans by the private
sector for consolidation by the Ministry of Finance to be
submitted to the Prime Minister for approval;
c) To take the
lead and coordinate with the Ministry of Finance to manage the
annual quota of foreign commercial loans by other enterprises
and institutions approved by the Prime Minister;
d) To consolidate
the annual borrowing and repayment of foreign loans by
enterprises and other institutions of the public and private
sectors to be reported to the Prime Minister with C.C.
reports to the Ministry of Finance for annual consolidation of
foreign borrowing and repayment of the whole country;
đ) To guide and
conduct registration of foreign loans by enterprises and
other institutions of the public and private sectors
(including the Government-guaranteed loans);
e) To control cash
flows related to the borrowing and repayment of foreign
loans for compiling the international payment balance,
managing monetary policies and controlling foreign exchange;
g) To set up the
early warning system for debt risks of the corporate sector;
h) To conduct
other tasks and powers of managing the borrowing and repayment
of foreign loans in compliance with law.
11. In regard to
the lending and recovery of foreign debts of the Government
and economic and credit institutions:
a) To co-ordinate
with the Ministry of Finance to submit to the Prime Minister
for decision on the amount, borrowing sources, types,
beneficiaries and mechanism of lending and recovery of
foreign debts of the Government;
b) To stipulate
the conditions, beneficiaries, forms and mechanism of lending
and recovery of foreign loans for resident credit
institutions;
c) To stipulate
the conditions and procedures of granting licenses and submit
to the Prime Minister to decide the choice of resident
economic institutions to lend and recover foreign loans;
d) To conduct
other tasks and powers of lending and recovering foreign loans
in accordance with law.
12. In regard to
negotiating, signing and joining international monetary and
banking treaties :
a) To co-ordinate
with the relevant authorities for preparing, negotiating,
signing or joining international treaties on ODA with the
World Bank (WB), the Asian Development Bank (ADB), the
International Monetary Fund (IMF) under the authorization of
the Government;
b) To
periodically compile and inform the Ministry of Finance, the
Ministry of Planning and Investment, and the relevant agencies
about the disbursement and payment via the accounts of ODA
programs and projects with commercial banks.
13. To represent
the Socialist Republic of Vietnam at international banking
and monetary institutions under the authorization of the
President or the Government:
a) To conduct the
functions of a member of the International Monetary Fund (IMF),
the World Bank (WB), the Asian Development Bank (ADB), the
International Investment Bank (IIB), and the International
Bank for Economic Cooperation (IBEC);
b) To take the
lead in coordinating with the relevant ministries to implement
the constitutions and policies of IMF, WB, ADB, IIB, IBEC and
the programs for macro- economic stabilization financed by IMF,
WB and ADB in Vietnam ; to provide periodical and unexpected
data as stipulated by the aforesaid institutions; to make
recommendations of policies and measures to the Government for
promotion of the relations with the aforesaid institutions.
14. In regard to
the implementation of the functions of the Central Bank:
a) To make
arrangement for minting, preservation and transportation of
money; and to carry out the operations of issuance,
withdrawal, replacement and destruction of money;
b) To carry out
refinancing in order to provide short-term credit and payment
instruments for the economy;
c) To regulate the
money market; and to carry out the open-market operations;
d) To organize the
payment system via banks; to conduct state management of
payment activities; to provide payment services; and to pursue
the policy of encouraging and strengthening non-cash payment
under the approval of the relevant authorities;
đ) To act as an
agent for, and provide banking services to the State Treasury;
e) To develop the
banking information system and provide banking information
services; to manage credit information organizations; and to
conduct credit rating for Vietnamese enterprises;
g) To perform
other functions of the Central Bank.
15. To make
decision on and carry out investment projects under its
authority; to evaluate and inspect the implementation of
investment projects in the banking field in accordance with
law;
16. To manage its
allocated financial resources and assets as stipulated by law;
and to use part of the revenue from foreign exchange,
monetary and banking operations in service of its own
professional activities in accordance with law;
17. To promote
international cooperation in the monetary and banking field in
accordance with law;
18. To organize
and conduct scientific and technological research and
application and environmental protection in the banking field
in accordance with the law;
19. To make
decision on specific directions and measures and guide the
implementation of operational mechanism of public-service
institutions in the monetary and banking field; and to perform
the State management over operations of non-productive
entities under its jurisdiction in accordance with law;
20. To act as the
owner of the state capital in the state-owned enterprises :
a) To submit the
plan on establishing, restructuring and divesting the
state-owned enterprises under the management of the State
Bank to the Prime Minister for approval and guide the
implementation of the approved plan;
b) To approve
under its authority or submit to the Prime Minister for
approval the charters of the enterprises operating in the
banking field;
c) To submit to
the Prime Minister for appointment, or to appoint under its
authority the members of the Board of Directors, General
Directors and Deputy General Directors of the State-owned
Credit Institutions and other State-owned enterprises under
its management;
21. To guide and
monitor activities of associations and non-governmental
organizations operating in the fields under the management of
the State Bank; and to handle or to make recommendations to
the relevant authorities to handle violations committed by
associations and non-governmental organizations in compliance
with law.
22. To inspect,
investigate, and handle the complains and denunciations and
violations related to banking and monetary field under its
jurisdiction ; to fight against corruption, red tape,
bureaucracy and negative doings; and to conduct thrift and
anti-waste in line with law.
23. To make
decision on and guide the implementation of the administrative
reform program of the State Bank in line with the objectives
and agenda of the Government’s administrative reform program
and the direction of the Prime Minister; to make decision on
and guide the renovation of the working modality, office
modernization and IT application in service of daily
operations of the State Bank;
24. To manage
ranks and grades of specialized staff and officials in the
banking field:
a) To organize
upgrading-civil service exams; and to promulgate professional
criteria for staff in accordance with law;
b) To develop
professional criteria of civil servants in the banking sector
for the Ministry of Home Affairs to issue;
25. To manage the
organizational apparatus and staff; to employ, train, promote,
relieve, move and rotate and to apply the regime of pension,
reward, penalties, salaries and other regimes for the staff
under the management of the State Bank.
26. To submit to
the Prime Minister for issuance of the regulations on wage
policies, recruitment and employment of civil servants in
accordance with the special characteristics of the State Bank;
27. To perform
other tasks as well as powers assigned by the Government
and/or the Prime Minister in line with law.
During the 50
years of development, the banking system has contributed to the
achievements of the revolution and national security and
development.
To acknowledge
the remarkable contributions of the banking sector to the two
resistance wars, the Communist Party and the Government have
awarded many noble titles to collectives and individuals serving
in the banking system. On the occasion of the 45th banking
anniversary in 1996, a Ho Chi Minh Order was bestowed on the
banking sector. 94 individuals were awarded the Ho Chi Minh Order
or Independence Orders of the 1st, 2nd and 3rd classes. In the 4th
festival of patriotic emulation of the banking sector in September
2000, banking collectives and individuals were given “Hero of
Labour” titles, orders and certificates of merit for their
achievements in the process of Doi Moi (reform)
Up to
now, the banking system has become a decisive and active factor in
the process of completely renovating the national economy towards
modernization and industrialization as well as operating under the
socialist-orientated market macro-management. Vietnam’s currency
civilization has gradually been recognized through value
stability, diversity in non – cash payment method, and constant
improvement of management technology as well as modern business
technology for best serving the public. As an important factor of
socio – economic development strategy of the country in the new
period of challenges and trends of international integration and
globalization, the State Bank of Vietnam will surely impress the
Communist Party, domestic customers and international business
colleagues with its strong growth and rapidly modernized directed
changes in accordance with international standard as well as
continous improvement of remarkable banking traditions.
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