Press Release on results of monetary policy management and banking operations in 2015, and orientations for 2016
On the basis of Resolution of National Assembly and the Government, and the tasks of the banking sector in Instructions No.01/CT-NHNN dated January 27, 2015 on implementing monetary policy, ensuring safe and sound banking operations, and economic developments in 2015, the SBV has been conducting consistent measures of managing monetary policy in order to curb inflation, stabilize macro-economy, support economic growth at the reasonable level and ensure prudent system of credit institutions.
1. The results of monetary policy management and banking operations in 2015
Firstly, money supply has been regulated in appropriate manner in line with the objectives of supporting exchange rate and forex market, controlling inflation while ensuring the harmony of reducing interest rate, ensuring reasonable credit growth and supporting credit institutions to invest in Government’s bonds and resolve NPLs. By December 21, 2015, the total liquidity increased by 13.55% as compared to end 2014 in accordance with macro-economy and SBV’s managing measures. The common interest rate decreased; however, the capital mobilization increased by 13.59% (by December 21, 2015) as compared to end of the previous year, thereby facilitating credit institutions to provide funds to the economy.
Secondly, the common interest rate continues to decrease by 0.2-0.5 percentage point p.a, contributed to actively supporting business and production as well as stabilizing money and forex market. In 2015, the SBV maintains stable key interest rates and the maximum VND mobilizing rate in collaboration with reducing the maximum USD interest rate, ensuring the reasonable difference between VND and USD interest rates. In order to create conditions for interest rate reduction, the SBV continues to stabilize the maximum VND interest rate for short – term loans, credit institutions decrease the lending interest rate in comparison with the ceiling interest rate on the basis of capital demand of the market. The SBV regulates the liquidity of credit institutions reasonably in order to create conditions for reducing the common interest rates, reducing lending interest rates for several credit programs to about 6.5%-6.6% p.a; continues to require credit institutions to decrease lending interest rates by 0.3-0.5 percentage point p.a as compared to end 2014 (lending interest rate for short, and medium and long – terms declined by 0.3 and 0.3 – 0.5 percentage point p.a), thereby reducing the common interest rate by 50% as compared to end 2011; the mobilizing interest rate reduces by 0.2-05 percentage point p.a and is currently at relatively low level; the confidence in VND is strengthened.
Thirdly, exchange rate and forex market continues to be stable, the confidence in VND is improved, dollarization condition continues to decline, the legistimate demand for foreign currencies of organizations and individuals are promptly met. The encouraging results in forex market reflect management of monetary policies in an active manner, the flexibility of exchange rate management. Particularly, the average inter-bank VND/USD exchange rate adjusted by +3% and the band of exchange rate extended from +/- 1% to +/- 3% in order to promptly cope with negative impacts from the international financial market combining with appropriately adjusting VND interest rate in the inter-bank market, selling and buying foreign currencies to make intervention in the market, promulgating regulations to prevent the hoarding and speculation of foreign currencies. The SBV’s measures are highly appreciated by the Government and international institutions.
Fourthly, credit growth rate of the banking sector increased higher than that of the previous year, thereby supporting for the achievement of economic growth exceeding the target level set for 2015 which is the key year of implementing socio – economic plan for 2011-2015 period in accordance with capital absorption of the economy as well as credit safety and quality. By December 21, 2015, credit to the economy increased by 17.17% as compared to early 2015, higher than the level of 2011-2014; with that developments, it is estimated that credit of the whole year will be 18%. Credit structure continues to shift towards focusing on the priority areas (credit for high-tech field and agriculture and rural development is estimated to increase by 44.78% and 10.8% respectively..). Credit programs and policies for the poor and other policy objectives in line with instructions of the Government and the Prime Minister continues to be strengthened, thereby contributing to socio-economic development.
Fifthly, VND liquidity of credit institutions continues to be ensured and abundant for meeting capital demand of the economy, the money market is stable thanks to consistent measures of money supply in collaboration with liquidity supporting instruments, credit institutions to concentrate on resolving NPLs, restructuring the assets, and focus on risk management and prudent banking sector.
Sixthly, the gold market is stable, gold supply and demand in the market are relative balanced, the domestic gold price is not impacted by developments of international gold price and USD appreciation. In 2015, the international gold price sometimes fluctuated remarkable while the domestic gold market was basically stable with balanced supply and demand. The gold market is able to regulate in line with supply and demand rules, the SBV does not need to utilize foreign currencies to import gold for intervention, stabilizing gold bullion market, the goldization continues to be prevented, thereby contributing to maintaining the stability of the exchange rate, forex market and macro-economy.
Seventhly, non-cash payment and banking services and technology continue to be developed strongly in accordance with payment trend in the world and the region.
Eighthly, after four year implement ting the Scheme on restructuring the system of credit institutions in the context of negative factors (instable macro-economy, slowly economic growth, fluctuated real estate market…) with the enormous efforts of the whole banking sector, main objectives of the Scheme are basically obtained. The safety and stability of the system of credit institutions are maintained and improved. The specific results in restructuring the system of credit institutions have been improving the confidence of customers, investors and the public in policies and measures of restructuring credit institutions.
Measures of resolving NPLs (especially through VAMC) greatly contribute to improving credit quality and reducing the NPL ratio out of the total loan outstanding. By November 30, 2015, about 99.6% of NPLs (the data is estimated for the whole 2015) was resolved and credit quality was improved; NPLs ratio has decreased to 2.72% reaching the NPL target of below 3%. With the application of new standards about loan classification, and removing two types of statistics on NPLs (statistics according to credit institutions’ report and results of SBV’s monitoring), the statistics on NPLs of credit institutions will be more transparent. Together with the active implementation of measures on restructuring the system of credit institutions, the results in resolving NPLs greatly contribute to improving liquidity, reducing the common interest rate in order to support and resolve difficulties in production and business, and enhancing economic growth.
In general, despite many difficulties and challenges, in 2015 the SBV has managed monetary policies in an active and flexible manner on the basis of the Government’s directives and in line with the remarkable changes in practical situations. The obtained results reflect the success in managing monetary policies in 2015. Thereby, monetary policies greatly contribute to maintaining the stability of macro-economy, curbing inflation at low level of 1-2%, marking the longest stable period of inflation over the past decade, at the same time, support the economic growth at the level of over 6.5% (the highest level over the past five years). 2015 marks the consecutive fourth year that the banking sector well accomplishes the tasks assigned by the Party, the State and the Government, contributing to successfully implementing Plan on socio-economic development for 2011 – 2015 period.
2. Orientation of monetary policy management and banking operations in 2016
On the basis of objectives set by the National Assembly and the Government, the SBV determines the objectives and the major measures on monetary policy management in 2015 as follows: " manage the monetary policy in a proactive and flexible manner in close association with the fiscal policy to control inflation (below 5%), stabilize macro-economy, support economic growth at a reasonable level (about 6.7%). Manage the interest rate and exchange rates in consistence with macro-economic and monetary developments, inflation, domestic and international money market. Credit outstanding increase reasonably in close with improving credit quality. Proactively implementing measures of managing forex and gold markets; continue to reduce dollarization and goldization in the economy; enhance non-cash payment;
The SBV will continue to ensure the roadmap of restructuring credit institutions and resolving NPLs in accordance with the Scheme approved by the Government, enhance the banking inspection and supervision; continue to conduct consistent measures of resolving NPLs and improving credit quality in line with the Scheme as approved in Decision No.843/QD – TTg dated May 31, 2015, of which accelerating the NPL resolution in accordance market mechanism; researching and completing the model of VAMC…
The State Bank of Vietnam
Translated by TLH