SBV Governor Le Minh Hung addresses the event (Photo: VietnamPlus)

 

Hanoi (VNA) - Leaders of the State Bank of Vietnam (SBV) and commercial banks have asked the government to promptly handle capital increase for State-owned commercial banks.

The SBV held a conference in Hanoi on banking tasks this year. The event was attended by Prime Minister Nguyen Xuan Phuc, Minister of Public Security To Lam, and leaders of the SBV and credit institutions.

At the event, leaders of the SBV and commercial banks asked the PM to promptly handle capital increase for State-owned commercial banks, an imperative issue.                                                                                   

More than 6 billion USD purchased to raise forex reserves

In his opening speech, SBV Governor Le Minh Hung said in 2018, the SBV use monetary policy tools in a concerted and flexible manner to keep the monetary and foreign exchange market stable, helping keep inflation below the ceiling target of 4 percent. At the end of the year, total means of payment recorded a year-on-year rise of about 12.5 percent.

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As the foreign exchange rate and the forex market had been managed well, the SBV purchased a large amount of foreign currency to raise its forex reserves.

The SBV net purchased more than 6 billion USD to raise its reserves, especially on January 7-8, a huge amount of foreign currencies were purchased, thereby the reference exchange rate and forex market were stable.

The daily reference exchange rate of VND/USD went up by 1.7-1.8 percent and the inter-bank interest rate rose 2.16 percent. In fact, the value of Vietnamese dong was stabilised while other currencies saw devaluation.

In addition, interest rates were kept stable while those in the global market increased.

Apart from those remarkable achievements, the SBV Governor also mentioned challenges for the banking sector in 2019.

The sector needs to improve the effectiveness of banking inspection and supervision, especially remote supervision, in order to ensure operation quality and strictly deal with law violations in the banking system.

At the same time, credit institutions must spare no efforts to restructure and settle bad debt. The Government’s resolution has set the targets of reducing bad debt on balance sheets declined to 2 percent while potential bad debts and debts sold to debt collection agencies of credit institutions should be brought to under 5 percent. Those goals are huge challenges to the sector.

In 2019, the SBV sets the credit growth target at 14 percent. “The 14 percent figure will be flexibly adjusted in accordance with the macroeconomic situation. Higher growth may be considered for credit institutions applying Basel II standards,” Hung stated.

He also noted that total means of payment is projected to rise by 13 percent. The SBV will work to enhance bad debt management and settlements in line with the market mechanism, lower bad debt to under 2 percent. It will also promote cashless payments and ensure payment safety and security.

The SBV focused on increasing capital for State-owned commercial banks, saying it was a necessary move and asked the Ministry of Justice and relevant agencies to team up in handling bad debts.

 

Illustrative image (Photo: VNA)

 

Striving to increase chartered capital

At the event, Chairman of the Vietnam Bank for Agriculture and Rural Development (Agribank) Trinh Ngoc Khanh briefed participants on the bank’s activities in 2018. In the year, Agribank recorded total asset growth of 1.2 quadrillion VND (51.67 billion USD).

Khanh noted that Agribank still had to deal with some lawsuits, along with false rumours on its bankruptcy, making many people withdraw money from their bank accounts.

The bank had set up a risk prevention fund of more than 20 trillion VND (852.84 million USD), which is enough to buy bad debts. “We now declare war with ‘black credit’ crimes, bolster group loans, and consider extension of overdraft,” he said.

Meanwhile, Chairman of the Bank for Foreign Trade of Vietnam (Vietcombank) Nghiem Xuan Thanh said his bank also recorded efficient business operation in 2018 as pre-tax profit hit a record high of 18 trillion VND (773 million USD), surging 63 percent against 2017 even though the bank had not used up the credit quota allocated by the central bank.

This was thanks to the bank’s solid credit strategy, and Vietcombank’s non-performing loans accounted for only 0.97 percent of outstanding loans by the end of 2018 – the lowest level among local banks, he explained.

High profit was also attributed to the decline of risk prevention fund, thanks to the bank’s success in controlling bad debt quality. Bad debt coverage rate of Vietcombank hit 190 percent.

Additionally, the bank switched to non-credit sources, which accounted for more than 30 percent of last year’s turnover, therefore its profit was no longer dependent on traditional credit, Thanh said.

On potential new government policies, the Vietcombank chairman asked for permission to use shares to pay dividends, thus helping raise capital to ensure capital adequacy ratio (CAR).

He also sought approval for State-owned banks to raise capital from funds for supporting businesses and increase caps for foreign ownership, while maintaining the Government’s ownership of State-owned banks at a minimum of 65 percent. As Vietcombank still has room for foreign investors, the bank continues to issue shares for foreign investors.

Chairman of the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) Le Duc Tho requested for permission to raise its chartered capital as this was a pressing issue.

As demand for capital is projected to increase strongly, many fields will be affected if charter capital is not raised, he stated.

At the conference, Vietnamese and foreign participants spoke highly of activities of the banking sector in the previous year, notably in raising the sector’s reputation and addressing various challenging issues.-VNA