Major tasks for the banking sector in 2018

In the concluding remarks at the Conference, the SBV Governor stressed that “The tasks set out for the banking sector in 2018, beside the advantages, there are also many difficulties. During the online conference with the provinces and cities recently, the Government identified that Vietnam's economy in 2018 would continue to enjoy certain favorable factors. For example, the optimistic outlooks of the global economic growth and trade in 2018 will create favorable conditions to boost Vietnam's exports, as well as Vietnam’s economic growth; the macroeconomic stability has continued, resulting in a high growth rate in 2017; the reforms of the institutions and the administrative procedures, the improvements in the investment and business environment, the reduction in the costs of production and doing business, etc. are all good signals and will promote efficiency, support better the investment - business activities and stimulate consumption in Vietnam. However, the global and domestic economy is still facing many difficulties and obstacles. Especially the riser of protectionism can hinder the recovery of global trade, negatively affecting Vietnam's export growth; the explosion of the global stock market in 2017 poses threats of a sudden downturn in the global financial market; and the monetary policies of the Fed, the Band of England, the People’s Bank of China and the unpredictable fluctuations of the dollar will pose big challenges for Vietnam's monetary policy management in 2018. The realization of the inflation control target of around 4% may also face challenges; the major divestments and big sales of shares may disturb the stability of the macro-economy, the monetary and foreign exchange markets; and the psychological factors when there are sensitive information about the banking activities and some legal cases are creating big challenges in the SBV management to stabilize the currency market.”

Governor Le Minh Hung of the State Bank of Vietnam addresses the Conference

In the context of the above-mentioned advantages and disadvantages, in order to achieve the goals of stabilizing the foreign exchange market, controlling inflation below 4%, a high economic growth rate of 6.7%, and a successful implementation of the restructuring plan for non-performing loan (NPL) settlement in 2018, following strictly the directions of the Party, the National Assembly and the Government, right after this Conference, the SBV will lay out into specifics the objectives, tasks and solutions in the SBV’s Directive 01 of 2018 on implementing the key tasks and solutions of the banking sector in 2018.

The basic implementation contents are as follows:

Firstly, the SBV continues to manage the monetary policy in an active, flexible and effective manner, closely coordinating with the fiscal policy and other macroeconomic policies to control the inflation (the target is about 4% on average), stabilize the monetary and financial system, stabilize the macro economy, and contribute to the economic growth at a sustainable level (6.7%); ensuring the liquidity of credit institutions, stabilizing the monetary and foreign exchange markets. In 2018, the total liquidity is targeted to increase by 16%, credit to increase by 17%, with certain adjustment dependent on the actual development and situations.

Secondly, the SBV will strengthen the inspection, supervision, examination and strict controls of the operations of the credit institution system, enhance the efficiency and responsibility of the internal controls and audits, continue to implement effectively the restructuring of credit institutions in combination with the fundamental settlement of the NPLs and dealing with weak credit institutions in forms consistent with the market mechanism on the principle of prudence, assuring the interests of depositors and maintaining the stability and safety of the system; Strengthening the financial situation and enhancing the management capacity of the credit institutions in accordance with the law and in line with the international practices; and further enhancing the important role of the Vietnam Asset Management Company (VAMC) in NPL handling.

Thirdly, continue to promote the development of non-cash payments; improving step by step the legal framework for the operations of the payment systems, and applying new and modern payment instruments on the basis of advanced technologies; ensuring security and safety in the electronic payment and card payment.

Fourthly, continue to promote the communication activities to actively communicate, provide information, disseminate and educate about the policies of the State Bank and the banking operations; enhancing the communication on payment activities to promote the development of non-cash payments; and strengthening the community-based financial education programs to increase public confidence in the banking system.

Specific tasks and solutions:

(1) On the management and implementation of the monetary, credit and foreign exchange policies:

- The SBV's advisory units shall monitor closely the macroeconomic and monetary developments in order to proactively and flexibly manage the monetary policy instruments in a synchronous manner, providing liquidity support to credit institutions in order to stabilize the monetary and foreign exchange markets, stabilize the interest rates and exchange rates, and create favorable conditions for the efforts of reducing the lending interest rates. These units shall strictly control the credit growth and credit quality of the whole system, as well as each credit institution in line with the objectives and orientations, consistent with the objectives for economic growth and macroeconomic developments; concentrating credit capital on the production domains, especially on the prioritized areas under the Government's directions; coordinating with the ministries, government agencies and local authorities in removing the difficulties and obstacles in the process of implementing the credit programs in specific sectors and areas, especially in the agriculture and rural sector in accordance with Decree No. 55/2015/ND-CP; providing loans to encourage the development of hi-tech agriculture, organic agriculture in line with Resolution No. 30/NQ-CP, etc.; strengthening the coordination with the local authorities in stepping up the linkage between banks and businesses in order to create favorable conditions for the people and businesses to access capital; controlling credits for risky areas such as the investments into real estate, securities, transports (BT, BOT projects), consumer credits of financial companies...

- The credit institutions shall develop and implement business plans for 2018 in line with the monetary, credit and banking policies of the Government and the SBV; Making sure all of the institutions in the system strictly comply with the regulations of the SBV, especially with regard to the mobilizing and lending interest rates, the lending fees, the credit growth targets, etc.; strictly monitoring the credit growth on potentially risky areas, especially the real estate, transports (BT, BOT projects), proactively reviewing to focus investment capital on effective and feasible projects, ensuring to limit the new formation of bad debts.

(2) Intensifying the inspection, supervision, examination and internal controls to prevent violations of the laws in the banking sector

- The units under the SBV shall focus on improving the legal framework on the management policies, banking inspection and supervision, the regulations on banking operation safety, the regulations on governance and management, the regulations on risk management of CIs, the regulations on information public disclosure and transparency, etc., aiming at stricter, safer operations and in accordance with the international practices and standards, in order to form higher standards and safety conditions in the banking operations, especially concentrating resources on the elaboration and promulgation of legal documents guiding the implementation of Law No.17/2017/QH14 amending and supplementing a number of articles of the Law on Credit Institutions, as early as the Law on the amendments and supplements takes effect, creating a sound legal basis for the operations of credit institutions as well as the State management in the banking sector.

- The focus of the inspection and supervision in 2018 is to focus on the potentially risky sectors, in which irregularities may arise easily, for early detection and warning of the risks in the banking operations; penalizing strictly any violations, especially the violations that have been warned by SBV; closely monitoring the observance and implementation of Directive No.07/CT-NHNN dated October 11, 2017, and the warnings issued by the SBV on strengthening the prevention and combating against law violations in the monetary and banking activities.

Consolidating and improving the organizational and personnel structure of the Banking Inspection and Supervision Agency; strengthening the professional capabilities, operational skills, the sense of responsibility, the working attitude of the banking inspectors and supervisors in order to enhance the effectiveness and efficiency of the inspection activities.

- The SBV branches shall focus on improving the quality of the inspection and supervision activities of credit institutions in their localities for timely detection and handling in accordance with their powers, or promptly advising the local authorities and/or the SBV Governor to deal strictly with the violations in compliance with the legal provisions on the law violations in the monetary and banking activities; strengthening the inspection, examination and supervision of the operations of the system of the People’s Credit Funds (CPFs).

- The CIs shall seriously and strictly implement Directive 07/CT-NHNN of the SBV on strengthening the prevention, control and combat against law violations in the monetary and banking activities; tightening the disciplines and the sense of law observance in the system to ensure that officials and employees comply with the regulations and the internal procedures as well as legal provisions and to minimize ethical risks in the banking operations; reviewing internal regulations / procedures to detect gaps that could be misused to promptly carry out corrective measures and adjustment solutions, especially with regard to the regulations on taking deposits, savings, providing loans, mortgages, collaterals by certificates of deposits (CDs)/ savings cards, the management of savings cards/CDs; preventing the illegal collusion between a/the leader(s) and the staff with a view to taking advantage of their positions, powers, the familiarity with and proximity to customers, and the system’s loopholes to defraud and appropriate the customers’ assets.

Consolidating the organizational model, raising the efficiency of the internal governance, administration and the internal control and audit systems; Improving staff quality from recruitment to training; Enhancing the communication and education to raise awareness, knowledge of the laws and the code of ethics for banking officials; Reviewing, issuing and strictly enforcing internal regulations on the rotation of staff, especially the leadership positions and the positions in which violations may arise; Strictly abiding by the regulations on the use and appointment of holders of leading, managerial and executive posts at CIs (especially those at state-owned commercial banks) as stipulated in the Law on Credit Institutions, the Anti-Corruption Law and other relevant regulations on the personnel assignment.

(3) Regarding the restructuring of credit institutions and the handling of bad debts

- the SBV units shall focus on instructing credit institutions to effectively implement the Scheme "Restructuring the credit institution system in association with NPL settlement during the period of 2016-2020"; Closely reviewing and monitoring the progress and the implementation results of the restructuring plan in association with the handling of bad debts of credit institutions up to 2020; in particular, the implementation of measures to improve the financial capabilities, the credit quality, transforming the business model, governance, management, competitiveness enhancement and solutions for bad debt settlement, especially those solutions mentioned in Resolution No. 42 of the National Assembly.

- Credit institutions shall organize the drastic and effective implementation of the contents and solutions in the restructuring plan in association with the NPL settlement by 2020, which has been approved, and ensure the implementation strictly in line with the set roadmap; Working out plans and accelerating the application of Basel II standards, the principles of conventional risk management in line with the international practices and standards, in parallel with stepping up the application of information technology and increasing the transparency, publicity in the operations; Organizing the comprehensive implementation of the measures prescribed in Resolution No. 42/2017/QH14 to speed up the settlement of bad debts and the collaterals of the debts, ensuring the fulfillment of the NPL settlement objectives approved in the plans.

(4) Development of non-cash payments; Improving the legal framework for payment operations; Ensuring security, safety in electronic payment, card payment

- The SBV units shall review and update the legal documents on the security, safety and confidentiality of information related to electronic and card payments in line with the development situations, apply advance technology, knowledge of cybercrime situations in the banking sector to find solutions for ensuring security and safety in the payment activities, intermediary payment activities; Implementing the Prime Minister's Decision No. 1255 /QD-TTg dated August 21, 2007, which focuses on reviewing, studying and proposing amendments and supplements, promulgation of new legal documents on e-money; Coordinating with the ministries and agencies in advising the Government on the management of operations related to virtual property and crypto-currencies in Vietnam.

- The credit institutions shall strictly and drastically implement the documents and regulations of the State Bank of Vietnam and the relevant laws on payment operations and intermediary payment activities; Promoting the communication, warnings and instructions so that customers become well aware of the processes and transaction procedures, the types of risks, the fraudulent tricks in electronic and card payments; Actively monitoring, timely responding and handling any law violations in accordance with the regulations, with a view to ensuring the legal rights and legitimate interests of customers with regard to arising matters related to the payment activities.

(5) Strictly and drastically implementing solutions to improve the business environment in the banking sector; Tightening the administrative disciplines, and improving the efficiency of the operations of the SBV units:

- Continue to implement drastically and comprehensively the Public Administrative Reform (PAR) tasks in various fields and effectively conducting the tasks and solutions under the Banking Sector Action Plan with a view to contributing to the improvement of the business environment, enhancing the national competitiveness, supporting and developing the enterprises in line with the Government’s Resolutions No. 19/NQ-CP and No. 35/NQ-CP. In which, the SBV’s units and credit institutions shall focus on reforming the administrative procedures with regard to the relationships between the SBV and the credit institutions, between the credit institutions and the enterprises, in order to ensure the process modernization, shorten the processing time and save expenses for the people and the enterprises.

- Enhance the responsibility of the units’ leadership in directing and inspecting the implementation of the administrative disciplines and rules; Strictly adhering to regulations on personal responsibilities and associated responsibilities of the leaders of the units which still have officials, public servants and employees committing acts of harassment, causing trouble and difficulties for the people and the enterprises.

(6) Effectively implement the assigned tasks in all areas, while focusing on a number of key tasks, such as:

- Improve the quality of money forecasts and statistics to effectively serve the directions and management of the State Bank of Vietnam; Ensuring the security and safety of the payment activities, the treasury and banking services, preventing risks which can affect the banking sector’s prestige, as well as the legitimate interests of the customers and the credit institutions; Performing well the role of the representative for the State and the Government of Vietnam at the financial and monetary institutions, helping to raise Vietnam's position in the international platform and promoting the integration process of the banking system; …

Representatives attend the Conference at SBV headquarter

“The Directive of the SBV Governor is a very important document, which guide the orientations and implementation of the key tasks for 2018 throughout the banking sector. Therefore, I request the units in the whole sector to seriously and thoroughly communicate the contents of the Directive to all the staff in the system, and the heads of the units are responsible before the Governor, the SBV Board of Management, for the implementation results of their units. The functional departments of the SBV will supervise the implementation and shall conduct regular reviews. Those units that are stagnant, have not seriously implemented the Directive will be penalized as appropriate,” SBV Governor Le Minh Hung emphasized.

In terms of communication, all of the tasks were successfully implemented in 2017. In 2018, in order to better carry out the communication activities and raise the people's confidence in the SBV's management policies and banking operations, all departments, units of the SBV headquarters and branches, and the credit institutions shall need to promptly perform the communication tasks and closely coordinate with the Communications Department to carry out successfully the communication activities of the Banking sector.

Regarding the recommendations of the credit institutions at the conference, the SBV Governor asked the SBV Office to report to the Board of Management, the Deputy Governors in charge to assign the functional units to handle with the specific issues.

On the matter of ensuring safe, effective and transparent banking activities during the Lunar New Year holiday in 2018, the credit institutions should pay close attention to and concentrate on directing the implementation of the following: Ensuring payment operations, cash payments at ATMs; No presentation of Tet gifts, Tet flowers to the leaders at all levels; the local officials must not get to Hanoi to present Tet gifts to the leaders; No wasteful and extravagant parties, giving or receiving Tet gifts for the purpose of personal interests; Right after the Tet holiday, all of the officials must get back and seriously concentrate on their work.

VA