Increase the initiative for monetary policy

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Transactions at BIDV.

On May 8, in Hanoi, Saigon Times coordinated with the State Bank to hold the Vietnam Banking Overview Forum 2019 with the theme ‘For the development of the banking sector’.

At the forum, experts highly appreciated the successes in operating monetary policy and banking, including bright points in interest rates, exchange rates, restructuring activities and dealing with bad debt.

Addressing at the forum, Deputy Governor of the State Bank (SBV) Nguyen Thi Hong said that the State Bank will direct monetary policy in a proactive, flexible, and cautious manner, and in harmony with fiscal and other macro-economic policies to curb inflation, maintain macro-economic stability, and fuel economic growth. In particular, credit increased by 14%, adjusted in accordance with the actual situation.

In addition, in the restructuring of credit institutions and dealing with bad debt, the State Bank aims to control and improve credit quality in association with handling bad debt under market principles; perfecting the legal framework to support bad debt handling and restructuring credit institutions. In payments, the State Bank continues to improve the legal framework, mechanisms and policies for the development of non-cash payments.

Former Vice Director of the Central Institute for Economic Management Vo Tri Thanh lauded macro-economic,interest and foreign exchange rate stability as bright spots in the banking sector in the last year, although the exchange rate was under great pressure from both inside and outside the country.

The brightest point of the State Bank was to direct monetary policy smartly, pump money properly; coordinate with the Ministry of Finance in issuing government bonds smoothly.

According to him, the central bank has met liquidity and inter-bank interest rates in a sensible manner to stabilize exchange rates without causing fluctuations in interest rates in the market. Since 2012, the SBV has three basic tasks: issue a stable monetary policy to fuel growth; deal with bad debts; restructure the banks up to the best practices in accordance with Basel II. But the most difficult thing is to make the banking sector healthy and meet the practices.

However, experts at the forum all said that difficulties and challenges for the banking sector in particular and the macro economy in general are still very large and difficult to predict.

According to Dr. Vo Tri Thanh, the State Bank still faces challenges, in which interest rates are difficult to decrease, depending on many external factors. So, if the SBV isunsure, it will lead to two problems: interest rates are difficult to reduce and the financial system will be affected in medium and long term. Moreover, Money Supply (M2), credit is both managed by volume and aims the interest rate. The exchange rate is within a certain range, although it is much more flexible thanks to policy.

In particular, he also said that the banking sector is still a bit slower than Fintech and the digital economy. Vietnam is very keen to develop non-cash payments, but there are not many positive signs, while India does this very quickly with a developed payment system. This is also a tool against illegal “black credit”, ensuring a comprehensive financial commitment, people have the right to access financial services at the most affordable price.

Agreeing with these challenges, Mr. Nguyen Tu Anh, Deputy Director of the Monetary Policy Department, said that Vietnam still has capital inflows due to a stable macro economy, with a good evaluation on the market. It is thanks to SBV's initiative in operating and adjusting the central exchange rate to widen the amplitude of volatile markets. The SBV has been proactive and ready to adjust with tools to reassure market sentiment.

“The SBV is smarter. The three things that the SBV needs to do: increase initiative; stabilize expectations; combine with a sensitive manner in using smooth, flexible, clever monetary tools,” Mr. Vo Tri Thanh said.