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Monthly Information on Banking Activities (February, 2009)   2009-03-06 - SBV

I- State Bank of Vietnam (SBV) activities

1. Issuance of legal documents

The SBV Governor issued on February 3, 2009 Circular No. 02/2009/TT-NHNN to provide guidelines on the implementation of the interest rate support scheme for the business and productive corporate and individual borrowers.

2. Management of credit and monetary policies

In February, Governor Nguyen Van Giau instructed the banking sector to take comprehensive measures in order to prevent economic downturn and maintain social protection and proper economic growth under the guidance of the Government and the Prime Minister on the basis of Decree No.01/ND-CP dated January 9, 2009, Resolution No.30/2008/NQ-CP dated December 11, 2008, Resolution No.30a/2008/NQ-CP dated December 27, 2008 and Decision No.167/2008/QD-TTg dated December 12, 2008.

- The SBV Governor issued the SBV’s Action Plan to carry out monetary, credit and banking solutions in a timely and effective manner. The plan focuses on nine specific measures, including (i) To extend credit in an effective manner and in line with law, to apply proper interest rates, and to tackle all problems related to loan repayment and access to bank credit by institutions and individuals, (ii) To continue the renovation of the credit extension policy vis-à-vis agricultural and rural areas, poor households and other policy-based beneficiaries to contribute to maintaining social protection, (iii) Making recommendations on and implementing the interest rate support and fund-mobilizing mechanism for the investment demand stimulus project, (iv) Managing the monetary policy instruments and interest and exchange rates in a flexible and prudent way in line with the purpose of demand stimulus, promotion of production and export, macro-economic stability and maintenance of a safe and sound banking industry, (v) Enhancing supervision and ensuring a safe and sound banking sector, (vi) Improving the quality of macro-economic and monetary statistics, analysis and forecast, (vii) Improving the quality of and enhancing non-cash payment; and developing and diversifying advanced banking services, (viii) Promoting international cooperation in the banking industry, and (ix) Promoting information and communication in the banking sector.

- The SBV Governor issued Circular No. 02/TT-NHNN dated February 3 to guide the implementation of interest rate assistance in compliance with Decision No. 131 of the Prime Minister; and established the Interest Rate Support Working Team to implement Decision No. 131/QĐ-TTg of the Prime Minister. SBV Deputy Governor Nguyen Dong Tien was appointed Head of the Working Team with members being the representatives from the Ministry of Finance and several SBV departments.

- The SBV Governor convened two conferences on credit operations and the implementation of Decision No.131/QĐ-TTg of the Prime Minister dated January 23, 2009 in Ho Chi Minh City and Hanoi on February 4-5 respectively. In these conferences, the Governor directed (i) the banking sector should consider Decision 131 as the key task of 2009, (ii) commercial banks need to issue their guidlines of all SBV’s legal documents related to the implementation of the Decision 131, (iii) the SBV departments should carry out their assignments in a prompt manner in order to create the most favourable conditions for credit institutions to implement the interest rate support program, and (iv) the Interest Rate Support Working Team takes the lead in cooperating with other ministries and agencies to monitor the implementation of Decision 131, thereby promptly coping with any difficulties, issues and wrongdoings arising from this operation.

- SBV closely monitored and supervised all credit institutions in carrying out the interest rate support program. The SBV Governor had several meetings with commercial banks in the North and credit institutions located in Ho Chi Minh City (HCMC) with the aim of reviewing the performance and discussing to tackle any arising problems related to interest rate support scheme after 20 days of implementation in response to Decision No.131 of the Prime Minister.

Generally, all commercial banks promptly implemented the Government’s interest rate support policy. According to the credit institutions’ registions, the loans outstanding of interesr rate support program reached nearly VND 400,000 billion in February and March of 2009. In February, 85 commcercial banks and bank branches disbursed over VND 93,000 billion, including VND 72,600 billion by state-owned commercial banks, VND 18,854 billion by joint-stock commercial banks, and an amount of VND 1,543 billion by foreign banks and joint-venture banks have. SBV decided to maintain the base interesr rate at 7% p.a. while reducing the reserve requirement levels in March with the aim of stabilizing the macro-economy and creating favourable conditions for credit institutions to extend their mobilization and credits to the whole economy.

3. Ensuring the safety and development of commercial banks:

Up to now, there are only 3 commercial joint-stock banks in the process of completion of raising their charter capital to VND1000billion in line with Decision No.141/2006/ND-CP of the Government dated November 22, 2006 on legal capital of credit institutions. In order to facilitate these commercial banks to complete the procedures of raising charter capital, the SBV request the State Securities Committee to assist them in completing procedures and issuing stocks to the public.

4. Developing non-cash payment services

The SBV, in February 2009, allowed the Vietunion Online Services Corporation to pilot Payoo electronic wallet service through companies providing payment services. It is the second one to pilot this new service.

5. Promoting communication and information about banking operations:

- In order to contribute to effectively implementing interest rate support policy of the Government, the SBV required the whole banking sector to promote communication and information with the aim of helping the public better know about the policy and regulations on interest rate assistance of the Government and the directions of the SBV.

- Responding to the domestic market rumor that there was a shortage of US dollar or USD would be appreciated, the SBV Governor timely made an interview with the Government’s Website to affirming : “ the Government currently has no plan to adjust the exchange rate of VND against the US dollar. The SBV is still able to balance the demand and supply of the foreign exchange market.”

II- Credit and monetary performance in February, 2009

1- Interest rate:

After SBV decided to cut down the base interest rate to 7% p.a from 8.5% p.a, interest rates offered by credit institutions are as follows:

- VND interest rates: the mobilizing rates in VND reduced by 0.5-1.5% p.a. whilst the lending rate declined by 2.5-4% p.a. in comparision with the previous year. However, from mid February, some commercial banks increased the mobilizing rates by 0.3-1 percentatge point p.a. The common mobilizing rates in VND ranged from 6.99% -7.84% p.a. while the lending rates were at 8-10.5% p.a. The lending rates for interest rate support loans were 4-6% p.a; and 12-14% p.a for loans of consumer demand and credit card loans.

- USD interest rates: the mobilizing rates in USD reduced by 0.2-0.5 percentage point p.a. while the lending rate reduced by 0.2-1.5 percentage point p.a. as compared to later 2008. The common mobilizing rates in USD were 2.2-3.5% p.a and the lending rates at 5.7-7.4% p.a.; commercial banks offered the lending rate at 4% p.a. for the customers who had committed to sell foreign currencies to the banks.

2- Exchange rate:

The supply of foreign currencies moved in a positive trend, thereby the exchange rate in the official market was relatively stable. On February 25, the average exchange rate in the inter-bank market was 16,973 VND/USD, down against the previous month. Commercial banks quoted their exchange rate at the ceiling rate prescribed by SBV. However, due to psychological factor, the trading band of the exchange rate in the paralel market from February 20- 24 was relatively wide, at 17,700-17,730VND/USD.

The VND/EUR continued to change close to the fluctuation of the Euro in international markets. On February 25 , the exchange rate in the official market was at 22,456-22,876VND/EUR, down by 8,06% against the previous month. The exchange rate in the paralel market changed closely to the fluctuation of the exchange rate in the official market.

3- The total liquidity:

The total liqudity of February was estimated to be up by 0.48% in comparision with the previous month, higher than the rate of end 2008, of which the amount of cash in circulation outside the banking system declined by 4.32% against the previous month and up by 17.67% against later 2008.

4- The total deposit outstanding:

The total deposit outstanding of customers with credit institutions in February was estimated to be by up 1.62% against the previous month, of which the VND-denominated deposit outstanding was estimated to be up by 0.23% and the foreign exchange deposit outstanding up by 1.13% in comparion with later 2008.

5- The loan outstanding to the economy:

The loan outstanding to the economy in February was estimated to up by 0.23% against the previous month and 0.54% against later 2008, of which the VND deposit outstanding estimated to be up 1.35% and the foreign exchange deposit outstanding down by 2.69% compared to later 2008.

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