REVIEW
of
FINANCE -
Feb. 2018
39
always the top priority.
Thirdly,
SBV controls credit growth through
the capital needs, capital supply capacity and risk-
taking ability of bank system in short, medium
and long term analysis.
Proposing but can not controlling credit growth
in typical period such as 2006-2008 period and
2010 have left unexpected consequences for bank
system and the economy. If Vietnam hope to have
credit growth towards macro-economic stability
(both ensuring enough capital for investment
and consumption demand and not causing
inflation, bad debt), SBV should determine and
manage credit growth speed for long term period
and annually give the target of credit growth
which is close medium and long term objectives,
combining with the adjustment consistence with
actual conditions.
The level of credit growth shouldbedetermined
appropriately and harmoniously in the
relationship of the overall resource allocation and
associated to the allocation of credit capital with
market signals and limited the intervention of the
Government. The proportion allocation through
market mechanisms must be raised gradually
matching the level of economic development;
determining an appropriate financial structure
has the effect of promoting the economy
sustainability. Therefore, credit capital resource
should also be defined in close and harmonious
relationship with other capital resource such
as State investment capital to development,
foreign investment capital, investment capital
from enterprise owners. In particular SBV should
collaborate tightly with the Ministry of Planning
and Investment, the Ministry of Finance to
determine the scale of credit capital in order to
meet the social-economic objective in the 5-year
plan of social-economic development.
References:
1. The State bank of Vietnam (2017), Directive No.01/CT-NHNN dated 10
Jan 2017;
2. The State bank of Vietnam (2017), Information about the management
of monetary police and banking operation in 2017;
3. The State bank of Vietnam (2017), Decision No.2730/QD-NHNN about
the announce of central interest rate of VND to USD, cross interest rate of
VND to other foreign currencies;
4. Websites: sbv.gov.vn, mof.gov.vn, tapchitaichinh.vn.
completion between commercial banks. Therefore,
the process of interest rate liberalization should
be based on the achieved results of the process
of restructuring commercial bank system as well
as SBV’s regulation capacity to the behaviors of
commercial bank.
Secondly,
the implementation process plays an
important role in deciding the success of interest
rate liberalization.
When the interest rate cap is intervened tightly
and commercial banks can adjust lending rate in
order to attract customer, they will have to: (i)
Implementing improvement operation measures
to minimize cost then reducing lending rate to be
more competitive, (ii) Valuating the loan to the
basis of risk and giving the appropriate offset for
risk; (iii) Developing other competitive factors
on service quality rather than focusing on price
(interest rate).
To limit the situation of unstable capital
mobilization when implementing the elimination
of mobilizing interest rate cap, SBV can prioritize
the implementation of interest rate liberalization
to the deposits of large customers, of SOEs before
applying for the deposit of individuals. Actual
interest rate liberalization in some countries
shows that interest rate liberalization usually
leads to an increase in excessive of credit, affecting
to macro-economic stability. With the context that
Vietnam’s economy is sill in adjustment period,
the good condition to ensure that the interest
rate liberalization does not lead to consequence
as the previous period is moderating economic
growth. However, SBV should perform the role of
monitoring mobilization and credit happenings
in the market and has intervention measures on
time to ensure that the macro stability objective is
FIGURE 4: CREDIT GROWTH 2012 - 2017 (%)
Source: National Financial Supervision Comission
