Banking sector’s achievements in the first 6 months of 2019: Helping to raise national credit ratings

Reasonable lending rates, effective credit growth

According to Mr. Pham Thanh Ha, Director General of the SBV Monetary Policy Department, in the context of increasing pressure to raise the interest rates, the SBV has been managing the interest rates in line with the macroeconomic developments and the monetary market, stabilizing the operating interest rates; directing the credit institutions to review, balance finance, reduce costs with a view to applying reasonable lending interest rates, trying to reduce the lending rates when the conditions become more favorable on the basis of financial security.

The central exchange rate has continued to be flexibly managed by the SBV, in line with the domestic and foreign market developments, the macro-economy and monetary balances, as well as the monetary policy objectives. The SBV has also synchronously coordinated the monetary policy instruments, taking advantage of favorable market conditions to purchase a large amount of foreign currencies to supplement the State's foreign exchange reserves. The market is relatively stable, the developments of the exchange rate has closely followed the market conditions; the liquidity has been guaranteed; the foreign currency transactions have been going on smoothly; the legitimate foreign currency needs have been fully and promptly met.

In credit activities, according to Mr. Nguyen Quoc Hung, Director General of the SBV Credit Department, the SBV has instructed the credit institutions to focus credit on production and business, especially the priority areas, creating favorable conditions for businesses and the people to access credit; improving the credit quality; strictly controlling credit in the potentially risky areas (such as real estate, securities, BOT, BT projects in transport infrastructure,...).

Always putting the businesses and the people at the center, the Banking sector has been strongly implementing the Government's resolutions on administrative reforms, improving the business environment in the fields of monetary, banking operations, supporting the businesses. All administrative procedure reforms are essentially solutions to increase access to credit and banking monetary services for the businesses and the people in the whole process, conditions and procedures for borrowing and providing banking services; The viewpoint and focus of the SBV have been to regulate the monetary policy and promote the administrative reforms to ensure the dual targets of promoting the development of the enterprise system, serving the people, as well as minimizing the risks in the banking operations, contributing to macroeconomic stability, creating a positive and sustainable business environment.

Thanks to the drastic implementation of the above-mentioned measures, credit increased from the beginning of the year. According to the Director General of the Credit Department, by May 31st, 2019, the credit outstanding of the economy increased by 5.74% compared to the end of 2018. Credit for most priority areas has increased significantly, such as: Credit for export sector increased by 13%; Credit for high-tech application enterprises increased by 14.33%; Credit for small and medium enterprises increased 5.04%; Credit for agriculture and rural areas increased by 5%; Credit for the support industries increased by 4.11%. Meanwhile credit for the risky sectors has been strictly controlled in line with the orientations of the SBV.

According to the results of the Public Administrative Reform (PAR) Index in 2018, the SBV achieved the highest score of 90.57/100 points and continued to take the first position in the rankings. This is the fourth consecutive year that the SBV has ranked No.1 in the administrative reform among the ministries and ministerial-level agencies.

Overview of the meeting

Removing difficulties for agricultural production, drastically repelling black credit

Over the last months, the banking sector also actively implemented solutions to resolve the difficulties for the agricultural producers; provide timely support to reduce losses in agriculture; provide loans to encourage organic agriculture, high-tech agriculture; help the people to overcome the damages caused by natural disasters and diseases.

In order to timely support the sale of the Winter-Spring rice crop in 2019, under the direction of the SBV at the Conference on lending to promote rice production and sale in the Mekong Delta, the State-owned commercial banks have pioneered to lower the short-term lending interest rate to 6%/year to support the enterprises to purchase rice. According to Mr. Nguyen Quoc Hung, Director General of the Credit Department, by present, the credit institutions in the Mekong Delta have disbursed about VND 10,719 billion to organizations and individuals in order to purchase over 1.7 million tons of rice in the Winter-Spring crop of 2019, contributing to limiting the rice price reduction to support the farmers. .

The SBV has also promptly implemented a solution to support swine farmers affected by the outbreak of African swine fever (ASF), and to support pepper growers in Gia Lai as their pepper trees keep dying.

Regarding the policy beneficiaries and poor households, on February 22nd, 2019, the SBV Governor, cum Acting Chairman of Vietnam Bank for Social Policies (VBSP), signed for issuance Decision No.12/QD-HĐQT to raise the maximum loan amount and the maximum lending term for poor households. Accordingly, from March 1st, 2019, VBSP raised the maximum loan amount for poor households from VND 50 million/household to VND 100 million/household, extending the lending term from 60 months to a maximum of 120 months. The lending programs that apply the same maximum loan amount and lending term as for poor households, such as lendings to near-poor households, households that have just got out of poverty, and ethnic minority areas, are also allowed to apply this new loan limits.

Following the direction of the Prime Minister on repelling black credit, the SBV Governor in many Directives has requested the credit institutions to accelerate the implementation of the measures to resolve the difficulties and create favorable conditions for organizations and citizens to access credit; and have appropriate credit solutions to meet the legitimate needs of the people, contributing to limiting black credit.

The SBV has continuously held conferences on solutions to expand credit for production and consumption in order to limit black credit, and at the same time has conduct fact-finding surveys in some provinces.

There have also been several breakthroughs in the lending policies in agriculture and rural areas, such as: raising the loan amount without a collateral for individuals and households engaged in agricultural production and residing outside rural areas from VND 50 million to VND 100 million; for individuals and households residing in rural areas from VND 100 million to VND 200 million, in order to promptly meet the demand for capital of the people, contributing to restricting the people from looking for other capital sources; expanding loans without collateral assets for enterprises that have not been granted with the certificate of high-tech agricultural enterprises.

In particular, the SBV has also instructed the credit institutions to enhance the administrative reforms, simplify the procedures for borrowing; list the procedures publicly and provide full guidance for the people when borrowing; diversify the credit products in line with production and consumption activities of the people; promote the implementation of the Bank-Enterprise Connection Program with a view to resolving the difficulties and obstacles for the enterprises in accessing credit capital. In addition, the SBV has coordinated with the Ministry of Public Security and the relevant ministries, agencies, the local authorities and the socio-political organizations to promote communication activities so that the people can fully receive the information on the credit policies and programs, how to access loans; at the same time the people are also alerted about the tricks of the loan sharks, as well as the heavy consequences that black credit causes. The SBV has also been conducting financial education programs in order to improve the people’s knowledge of banking and finance, increase the accessibility to banking products and services, and help people stay away from illegal credit flows.

Furthermore, the SBV has encouraged the commercial banks to develop mobile banking models in the disadvantaged areas, making it more convenient for the banks’ customers to access capital and other banking services; to consider debt rescheduling and adjust debt repayment periods when people have to face difficulties due to plausible reasons and cannot pay debts on time; to help the people to have more access to bank credit, and not having to borrow with high interests from the loan sharks.

With the above-mentioned positive measures, the banking sector has basically met the capital demands for production and business, the legitimate living needs of the people in a timely manner.

Maintaining and controlling bad debts at a safe level

With the strong attention, close directions and guidance of the Party, the National Assembly and the Government, on the basis of the solutions specified in Decision No.1058 and the operational status of the system of credit institutions, the SBV has drastically directed the credit institutions to improve the restructuring plans in association with bad debt handling. The restructuring results of the credit institutions in association with bad debt handling have created an important basis to maintain the stability and safety of the system of credit institutions. The legal framework for monetary and banking operations has been supplemented and improved. The financial capabilities of the credit institutions have continued to be strengthened, and the credit quality is enhanced; the scale of the credit institution system has continued to grow; the capabilities of operational management, inspection, internal audit and risk management of the credit institutions have been gradually improved; the credit institutions have proactively improved their asset quality, controlled credit quality, and limited the generation of new bad debts.

According to the SBV Banking Supervision Agency, after nearly two years of implementation, Resolution No. 42 has achieved important initial results in maintaining and controlling NPLs at a safe level, creating favorable conditions for the restructuring and handling of bad debts of the credit institutions.

The bad debt handling of the entire credit system after Resolution No. 42 came into effect has achieved positive results. On average from August 15th, 2017 to March 2019, the whole system handled about VND 5.8 trillion/month, higher than the average bad debt handling result between 2012 and 2017 (VND 4.0 trillion) before Resolution No. 42 took effect. At the same time, bad debt settlement result determined under Resolution No. 42 in the form of customers repaying debts has tended to increase, partly reflecting the customers' improved debt repayment awareness when credit institutions, VAMC has the right to seize their property in line with Resolution No. 42.

Improving accessibility to financial services

In order to promote non-cash payments and improve the ability to access financial services for the people in line with the Government's policy, beside improving the legal framework and policies on payments, the SBV has directed payment service providers, intermediary payment service providers to research and apply new and modern technologies to payment products and services to ensure convenience, safety, security and reasonable costs; actively implement the Project on promoting payment through banks for the collection of charges for public services, contributing to diversify the collection and payment channels to create many utilities and advantages for businesses and the people.

In addition, the SBV has also promoted the communication, knowledge dissemination, awareness raising in order to change the people’s behaviors and ways of paying for consumption expenses, thereby improving the accessibility to banking products for the people, encouraging the use of non-cash payment methods. The SBV has actively built up the content and coordinated with the media to conduct the financial education programs, which have received high evaluation from the public, such as "Smart money", "Smart-kids", the contest "Correct understanding about money" , "Wise money" ...

As a result, payment activities in the economy have achieved positive results: Many business performance targets have high growth rates (compared to the same period in 2018); the legal framework has continued to be improved; the payment infrastructure has met the requirements from the economic development, the application of new technologies to create modern and convenient payment facilities and services; the safety and security have always been respected and given top priority; the legitimate rights of the customers have always been attended to and protected.

At the meeting, Mr. Pham Tien Dzung, Director General of the Payment Department shared that in the first quarter of 2019, the number of domestic payment transactions via bank cards increased 18.45% compared to the same period of 2018, with a total transaction amount of over VND 171 trillion ... According to PwC's recent 2019 Global Consumer Survey, Vietnam is the fastest growing market for mobile payment and Vietnam's increase is the most impressive among the 6 Southeast Asian countries participating in the global survey.

It can be said that the results in the management of the monetary policy and the banking operations have significantly contributed to the increase in the national credit rating of Vietnam. In May 2018, Fitch ratings raised Vietnam's credit rating from BB- to BB; then raised Vietnam’s prospects from "Positive" to "Stable" and continued to maintain BB rating (May 5/2019); Moody’s also raised Vietnam’s credit rating from B1 to BA3 (August 2018); In particular, the S&P, for the first time after 9 years, has adjusted Vietnam's credit rating from BB- to BB (April 2019). S&P had very high evaluation of the important role of the SBV in operating the monetary policy in line with the fiscal policies and other policies for economic development to support sustainable economic growth.

Recently, the Government had a meeting with the International Monetary Fund (IMF) to assess Vietnam's economy, identify the opportunities and challenges in the coming time and make policy recommendations. In that meeting, the IMF expressed high evaluation for the SBV's efforts in regulating the monetary policy, which has been very successful in using the central exchange rate mechanism and implement skillful exchange rate interventions to stabilize the exchange rate and the foreign exchange market, increase foreign exchange reserves in favorable conditions. Simultaneously, the IMF also welcomed the SBV's continued efforts to maintain the macroeconomic and financial stability through lowering the credit growth ceiling for the credit institutions and strictly controlling credit in risky areas.

VA