The State Bank of Vietnam will continue to closely monitor themonetary market and the banking sector to discover violations and helpbanks deal with liquidity-related problems, the bank said.
These efforts are aimed at ensuring the smooth operation of themonetary market and safeguarding the interests of depositors as well ascredit institutions and the banking sector as a whole.
In its announcement on Oct.18, the central bank also said thedomestic monetary market was more stable, with a decrease in interestrates and greater transparency in deposit mobilisation and lending.
Interest on dong deposits is 14 percent or less, and on loans to production sectors, 19 percent.
The central bank is using monetary policy tools to bring downinterest rates, curb money supply, and stabilise forex rates. This isalso expected to ensure banking sector liquidity remains stable.
The central bank admitted that in the past the pace of credit growthat some banks was so quick that it resulted in an imbalance betweenavailability and use of funds.
To stop this, thebank said it is determined to scrupulously implement the Government'sResolution 11 on containing inflation, stabilising the economy, andguaranteeing social security.
Several monetary tightening measures have been applied, which caused temporary liquidity problems for some banks.
They include reducing loans to non – production sectors to 16 percentfor the year, curbing overall credit growth to 20 percent, cappingdeposit interest rates at 14 percent, and raising basic interest ratessuch as re-financing rate.
In adevelopment strategy unveiled on the same day by the central bank, theconsolidation and restructure of the banking system will be major tasksover the next five years.
The central bank saidalthough some progress has been made in the banking system over the pastyear, the sector is still lacking competitiveness, financial ability,proper management, up to date technology and skilled human resources,causing instability and latent risks.
The centralbank has been looking at addressing these limitations to develop thesystem safely, healthily and effectively, based on large scaleoperations and advanced banking administration and technologicalsystems.
Accordingly, four basic principles for the restructuring process have been identified.
First, the sector will develop a diversified banking system inownership, scale and type to meet the diversified demands of the economyin both urban and remote areas.
Regarding scale,there will be a variety of banks, ranging from those that can operateand compete on a regional scale, to small and medium sized banks andnon-banking credit organisations to meet the demands of all the people.
The most important thing is that existing banksoperate safely, healthily and effectively, not their scale, said StateBank Governor Nguyen Van Binh.
Second, the sector will improve a safe and secure banking system.
Third, mergers and consolidation among banks will be implementedunder a voluntary basis and ensure the interests of depositors as wellas the economic rights and obligations of shareholders.
Fourth, the restructure of the banking system would be implemented in various reasonable forms, measures and schedules.
The SBV said that mergers and consolidation tend to improvecompetitiveness and will bring added value to banks, including largeroperating scale, increased reputation and lower operating costs.
By the end of 2010, Vietnam's banking system had one developmentbank, one social policy bank, five State-owned and State-investedcommercial banks, 37 joint stock commercial banks, 50 branches offoreign banks, five wholly foreign-invested banks, five joint venturebanks, 18 financial firms, 12 financial leasing companies and onepeople's central credit fund. /.
These efforts are aimed at ensuring the smooth operation of themonetary market and safeguarding the interests of depositors as well ascredit institutions and the banking sector as a whole.
In its announcement on Oct.18, the central bank also said thedomestic monetary market was more stable, with a decrease in interestrates and greater transparency in deposit mobilisation and lending.
Interest on dong deposits is 14 percent or less, and on loans to production sectors, 19 percent.
The central bank is using monetary policy tools to bring downinterest rates, curb money supply, and stabilise forex rates. This isalso expected to ensure banking sector liquidity remains stable.
The central bank admitted that in the past the pace of credit growthat some banks was so quick that it resulted in an imbalance betweenavailability and use of funds.
To stop this, thebank said it is determined to scrupulously implement the Government'sResolution 11 on containing inflation, stabilising the economy, andguaranteeing social security.
Several monetary tightening measures have been applied, which caused temporary liquidity problems for some banks.
They include reducing loans to non – production sectors to 16 percentfor the year, curbing overall credit growth to 20 percent, cappingdeposit interest rates at 14 percent, and raising basic interest ratessuch as re-financing rate.
In adevelopment strategy unveiled on the same day by the central bank, theconsolidation and restructure of the banking system will be major tasksover the next five years.
The central bank saidalthough some progress has been made in the banking system over the pastyear, the sector is still lacking competitiveness, financial ability,proper management, up to date technology and skilled human resources,causing instability and latent risks.
The centralbank has been looking at addressing these limitations to develop thesystem safely, healthily and effectively, based on large scaleoperations and advanced banking administration and technologicalsystems.
Accordingly, four basic principles for the restructuring process have been identified.
First, the sector will develop a diversified banking system inownership, scale and type to meet the diversified demands of the economyin both urban and remote areas.
Regarding scale,there will be a variety of banks, ranging from those that can operateand compete on a regional scale, to small and medium sized banks andnon-banking credit organisations to meet the demands of all the people.
The most important thing is that existing banksoperate safely, healthily and effectively, not their scale, said StateBank Governor Nguyen Van Binh.
Second, the sector will improve a safe and secure banking system.
Third, mergers and consolidation among banks will be implementedunder a voluntary basis and ensure the interests of depositors as wellas the economic rights and obligations of shareholders.
Fourth, the restructure of the banking system would be implemented in various reasonable forms, measures and schedules.
The SBV said that mergers and consolidation tend to improvecompetitiveness and will bring added value to banks, including largeroperating scale, increased reputation and lower operating costs.
By the end of 2010, Vietnam's banking system had one developmentbank, one social policy bank, five State-owned and State-investedcommercial banks, 37 joint stock commercial banks, 50 branches offoreign banks, five wholly foreign-invested banks, five joint venturebanks, 18 financial firms, 12 financial leasing companies and onepeople's central credit fund. /.
